SINO-SOVIET BLOC ECONOMIC ACTIVITIES IN UNDERDEVELOPED AREAS 1 JANUARY-30 JUNE 1961

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP92B01090R000400010012-0
• Release Decision: RIPPUB
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• Document Page Count: 51
• Document Creation Date: December 19, 2016
• Document Release Date: January 25, 2006
• Sequence Number: 12
• Publication Date: August 31, 1961
• Content Type: REPORT

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SECRET
ECONOMI- INTELLIGENCE REPORT
SINO - SOVIET BLOC ECONOMIC AC` "
IN UND:EDEVELOPED AREAS
1 JANUARY - 30 JUNE 1961
EIC RA-S11
31 Augist 1961
ECONOMIC INTELLIGENCE COMM
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SECRET
ECONOMIC INTELLIGENCE REPORT
SINO - SOVIET BLOC ECONOMIC ACTIVITIES
IN UNDERDEVELOPED AREAS
1 JANUARY - 30 JUNE 1961
EIC R14-S11
ECONOMIC INTELLIGENCE COMMITTEE
SECRET
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The reports on Sino-Soviet Bloc economic activities in underdeveloped
areas in the EIC-R14 series provide periodic summaries and anal,.tierl
interpretations of significant developments in the economic relatioi.s
of Bloc countries with underdeveloped countries of the Free World.
These developments are reported on a current, factual basis in the
Biweekly Reports in the EIC-WGR-1 series, under the same title.
This report, covering the 6 months from 1 January through C Jure
1961, constitutes the eleventh periodic supplement to EIC-R14, the
background report on Sino-Soviet Bloc Postwar Economic Activities ii.
Underdeveloped Areas, 8 August 195 , SECRET. The present supplement-
relates noteworthy noneconomic activities, including military aid, to
the economic operations of the Bloc in underdeveloped countries in crder
to place the economic aspects in the perspective of the over-all pro-
grams of the Bloc in these countries. This report was prepared by i.
Working Group of the Economic Intelligence Committee, including repe-
sentatives of the Departments of State, the Army, the Navy, the Air
Force, Commerce, and Agriculture; the International Cooperation Admin-
istration; the Office of the Secretary of Defense; the National Securit3
Agency; and the Central Intelligence Agency. It was approved by the
Economic Intelligence Committee on 15 August 1961.
For purposes of this report, the term underdeveloped areas includes
the following Free World countries: (1) all independent countries in
Latin America; (2) all countries in the Middle East, including Afgh {ni-
stan, Cyprus, Greece, Pakistan, Turkey, and the United Arab Republic
(Egypt and Syria); (3) all independent countries in Africa except tie
Republic of South Africa; (1.) all countries in South and Southeast
Asia; and (5) Iceland, Portugal, Spain, and Yugoslavia.
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CONTENTS
Sununary . . . . . . . . . . . . . . . . . . . . . . . . . .
V
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SINO-SOVIET BLOC ECONOMIC ACTIVITIES IN UNDERDEVELOPED AILEAS
1 JANUARY - 30 JUNE 1961
Summary
Patterns and Prospects
Efforts to extend Bloc influence in underdeveloped areas continued
to grow in scope and magnitude during the first half of 1961. As i1
the past several years, financial and technical assistance programs
were correlated with trade promotion, propaganda, cultural, and politi-
cal activities. Although relations with underdeveloped countries ii
Asia and the Middle East received due attention, emphasis was placed
on consolidating gains in key African and Latin American states and on
expanding contacts with other countries in these areas. Moreover, I
number of countries -- in particular Brazil, Pakistan, and Thailand --
that in the past had shown little interest in Bloc aid evidenced a
growing inclination to give Bloc offers more serious consideration.
New economic credits and grants during the first 6 months of 1901
were extended at an annual rate above the average for the past 5 years
but below the level recorded in 1960. Expenditures under existing
economic credits and grants rose sharply during the first half of L)61,
reaching an annual rate substantially above that for any previous year.
This increase was, in large measure, the result of an acceleration in
the implementation of Soviet aid programs in the United Arab Republic
(UAR) and India. The progress of preliminary survey work on projects
covered by large Soviet lines of credit and the number of countries
recently offered extensive economic assistance by the USSR and Czec1.o-
slovakia point to a considerable expansion of Bloc economic aid activity
in the months ahead.
During the first 6 months of 1961, Peiping employed economic aid
agreements as one means of mending its political fences and promoting
its influence in Southeast Asia. With the establishment of new lines
of credit to Burma and Indonesia, Communist China increased the amount
of economic aid that it has extended to countries outside of the Bloc
by about 50 percent. Peiping announced early in May that the mate
Council had established a Bureau for Economic Relations with Foreign
Countries. The new agency, which presumably will administer the for-
eign aid and technical assistance programs of Communist China, appar-
ently will have functions similar to those of the Soviet State Committee
for Foreign Economic Relations.
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The USSR has continued the use of arms diplomacy to expand its in-
fluence in underdeveloped areas. A major new agreement was signed with
Indonesia in January and expanded in June 1961, and deliveries of equip-
ment under existing pacts with the UAR and Cuba were accelerated during
the first 6 months of the year. Guinea, Ghana, Morocco, and the Al-
gerian rebels also received arms from the USSR. Moscow sought to use
Ghana and Guinea as funnels through which to channel arms to other
African countries. In the future, this tactic probably will be tried
with greater frequency and in other areas -- especially in Latin America,
where Cuba could serve as a relay point.
Bloc trade with underdeveloped countries in 1961 gives every indi-
cation of continuing the pace evidenced in 1960, when it increased
20 percent above the year before. In 1961, as in 1960, Latin America --
particularly Cuba -- is likely to account for the major portion of the
total growth in Bloc trade with all underdeveloped areas.
On the ideological front, the newly established Soviet agency
Novosti (news) appears destined to play an important role. Combining
the functions of a press and an information agency, Novosti will open
branches in foreign countries to disseminate Soviet propaganda. In
addition to its own staff, Novosti will contract with foreign press,
radio, and television organizations as well as with private individuals
to assist in furthering its mission. Prominent among the officials of
the council that will run the new organization is an expert on under-
developed countries.
Economic and Militaa Aid
The Bloc extended nearly $465 millions in economic aid to under-
developed countries in the first 6 months of 1961, nearly all in the
form of credits. Thus, since 1954, approximately $4+ billion in economic
aid has been extended to 24+ underdeveloped countries, about 95 percent
of it in the form of credits and the rest in the form of grants.
Drawings for development projects are estimated to be about $155
million for the first half of 1961. By midyear, only 22 percent of the
$4 billion extended for economic purposes had been drawn. Thus more
than $3 billion remains to help finance the foreign exchange costs of
development projects planned or already underway.
The only major military aid agreement signed during the period was
one between the USSR and Indonesia for $250 million worth of supplies
and equipment. The USSR applied a discount on certain items that re-
duced the selling price to $187 million, all of which is to be financed
* All dollar values in this report are given in terms of US dollars.
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by a long-term credit. A protocol to the basic agreement added $75
million worth of items, bringing the total value of this agreement as
amended to $325 million.
By midyear 1961 the Bloc had entered into agreements to provide
10 underdeveloped countries with about $1.9 billion worth of military
supplies, equipment, and training. As of 30 June 1961, all except
about $600 million worth of military items had been delivered. Some
of the agreements called for partial payments to be made upon delivery,
and some provided for discounts. When the down payments are deducted
from the estimated value of the items, the amount of financial aid ex-
tended for military purposes since September 1955 totals about $1.8
billion. When the discounts also are deducted, the credit financing
provided amounts to approximately $1.3 billion. Thus by midyear 196L,
total aid extended by the Bloc for economic and military purposes was
approximately $5.9 billion.*
Technical Assistance
About 9,700 Bloc technicians -- 8,200 economic and 1,500 military were present in underdeveloped countries for 1 month or longer during
the first half of 1961. This figure may be compared with 7,900 Bloc
technicians -- 6,500 economic and 1,400 military -- present in the list
half of 1960.
The number of nationals from underdeveloped countries studying i1
the Bloc also has continued to increase rapidly. New arrivals in 196_1
total 3,200 -- 900 academic students, 1,600 technical trainees, and
700 military officers and men. Thus by midyear those persons from
underdeveloped countries who had received or were receiving instruc-
tion in the Bloc numbered more than'14,800 -- 4,900 at academic, 4,6)0
at technical, and 5,300 at military training centers.
Trade
During 1960, Bloc trade with underdeveloped countries recovered
from the 1959 lull to resume its rise at the 20-percent rate which hid
characterized the average annual growth since 1955. Bloc exports anti
imports expanded at about the same rate to register a trade turnover
of $2.7 billion. The increase of $450 million above 1959 resulted
primarily from a growth in volume of commodities exchanged rather than
from price changes or seasonal variations.
* In this report an extension of the definition of Bloc military aid
has been introduced: the scope of financial aid is no longer limite+i
to credits and grants but now considers discounts as well. For further
details, see p. 19, below, and Table 17, p. 113, below.
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Cuba alone accounted for nearly half of the over-all increase, as
the volume of exports to the Castro regime mounted rapidly from July
through December. The rest of the increase in trade was fairly evenly
shared by the Middle East, Africa, and the underdeveloped countries of
Europe. Only in Asia did Bloc trade remain at the same level as in
1959.
Commerce with the industrial countries of the Free World continues
to account for a preponderant share of the trade of underdeveloped
countries. In 1960, however, this commerce grew at a somewhat slower
pace than trade with the Bloc. As a result, the share of the Bloc in
the trade of underdeveloped, countries increased from 7 percent in 1959
to 8 percent in 1960.
During the first half of 1961 the Bloc concentrated its Latin
American efforts in Cuba and Brazil, continuing to consolidate its
position in the former and to broaden considerably its relations with
Brazil. Chile and Ecuador received more attention than in recent years,
while apparently there was a shift of interest away from Argentina and
Uruguay.
Cuba's economic relations with the Bloc continued to expand, and
the two sides appeared to be adjusting to their new relationship in
which the Communist world has assumed the primary burden of supporting
the Cuban economy. During the first half of 1961 the Bloc accounted
for about two-thirds of Cuba's total trade and by the end of the
year may account for three--fourths. The much-vaunted economic assist-
ance program proceeded at a slower pace, although it became more and
more evident that Cuba's economic planning assumes extensive Bloc sup-
port. The Bloc has extended to Cuba long-term economic credits total-
ing $357 million, including $142 million extended during the first 6
months of 1961. In addition, Cuba has received considerable military
equipment under undisclosed arrangements. Bloc military and economic
technicians continue to play important roles in Cuba, and the first
sizable groups of Cubans have gone to the Bloc for technical training.
Since the inauguration of Brazilian President Quadros in January
1961, the Sino-Soviet Bloc has devoted increasing attention to Brazil.
With Quadros' ascent to power the Bloc has tried to exploit further the
Brazilian belief that the Communist camp can provide an expanding mar-
ket for Brazil's exports. Thus, when Brazilian economic delegations
visited the Eastern European capitals, the host regimes proved to be
extremely cooperative in negotiating trade and payments agreements which
sometimes stated unrealistically high trade goals. Quadros, on his
part, has given extensive publicity to his every move toward increased
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economic relations with the Bloc. Brazilian trade delegations to East-
ern Europe signed trade and payments agreements with Albania, Bulgaria,
Rumania, Hungary, and East Germany and trade protocols with Czechoslo-
vakia, the USSR, and Poland. In addition, technical cooperation ag-?ee-
ments were signed with Poland, Bulgaria, Rumania, Hungary, and possiLbly
others. Should the trade goals reported in the new agreements; be f-il-
filled'. Bloc trade with Brazil will increase to about 15 percent of
Brazil's present level of foreign trade. Communist China also has
shown considerable interest in increasing its economic relations wi`=;h
Brazil, but no concrete results of the negotiations have been announced.
The Bloc continued to account for about 5 percent of Argentina',:
total trade, a proportion now considered normal. Uruguay's trade with
the Bloc continued its sharp decline, heightened by the rejection o V a
longstanding Soviet offer to buy substantial quantities of Uruguayan-
wool only if Uruguay continued to purchase Soviet petroleum. The
intense publicity concerning Bloc interest in Bolivia noted in late
1960 and early 1961 recently has subsided. Little progress has beer.
made to date in negotiations on the vague Soviet credit offers to
Bolivia, but that country's government has announced that a delegation
will visit the USSR to discuss the offer.
The Bloc evinced some interest in extending its economic relations
with Ecuador and Chile. In late 1960 and the first half of 1961, trade
representatives from most Bloc countries visited Chile, but the Chileans
felt that only the Poles had a serious interest in trade expansion.
Ecuador assumed somewhat more importance, as it signed a previously
negotiated $1.5 million barter agreement with Czechoslovakia; the USSR
reportedly made vague offers of development credits; and Ecuador con-
sidered sending an economic mission to Eastern Europe.
Middle East
In the Middle East the Bloc continued to maintain strong economj participation in the key
economic planning function.
Although the Bloc's large aid programs in Iraq continued to have
a significant impact on the country's industry, communications, and
national defense establishment, some Western influence has survived,
and the Iraqi Government has taken further steps to suppress the local
Communist Party. No new credit arrangements were negotiated during
the review period, but a large number of contracts were executed
against existing Bloc credits. Deliveries of military equipment and
supplies increased and included 60 T-54+ tanks, 16 MIG-19 aircraft,
trucks, and torpedo boats. It is estimated that 765 Bloc technicians
were in Iraq in early 1961, and it is estimated that about 400 Iraqis
initiated training of all types in Bloc countries during the same period.
The value of Iraq's imports from the Bloc doubled in 1960 and accounted
for 10 percent of total imports. The Bloc's share of Iraq's nonpetro-
leum exports, however, fell off slightly in 1960 to 14 percent of the
total.
Although the Yemeni Government is attempting to maintain some
balance between the influence of the Bloc and of the West, the com-
pletion of the Soviet-built deep-water port at Al Hudaydah and the
near-completion by Communist China of an asphalt-surfaced highway have
made a deep and favorable impression on the Yemenis. These projects
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have stimulated foreign and domestic commerce and have caused the
business community to attribute its new prosperity to Bloc aid effi.rts.
No new assistance agreements have been concluded, but there have been
indications that the USSR and Communist China have offered to cons?.ruct
additional highway facilities. Closer trade ties with the Bloc appear
to have developed: Yemen now obtains all of its sugar imports from the
Bloc, and the USSR buys 50 percent of Yemen's coffee exports and l(0
percent of its hides exports under a barter agreement.
Disparaging remarks about the UAR made by Khrushchev in May 19 1
touched off a propaganda war between the UAR and the USSR. Although
there has been some tendency toward a reduction of trade between tie
two areas, the UAR nevertheless has continued to maintain strong eco-
nomic ties with the Bloc. New credits were extended to the UAR by
East Germany and Czechoslovakia, and the USSR delivered a substantial
number of MIG-19 jet fighters. In the Egyptian Region, implementation
continued on Bloc economic aid projects, including work on the diver-
sion canal and the coffer dams of the Aswan High Dam. Many of the
Bloc projects in the Syrian Region are still in the planning stage,
but two dams in the Ghab reclamation project and a topographic survey
of Syria were completed.
The UAR faces a growing dilemma in its trade relations with the
Bloc. Although importers are becoming more reluctant to take Bloc
goods, the government is encouraging the importation of Bloc goods to
utilize the trade receipts resulting from large Bloc purchases of cot-
ton. Criticism of Bloc trading practices is growing, especially in
the cotton-marketing circles. Nevertheless, trade of both regions of
the UAR with the Bloc remained at high levels in 1960. About 45 per-
cent of Egypt's exports and 23 percent of Syria's were to the Bloc.
The Bloc's share of their imports, however, fell off somewhat, from
30 percent to 25 percent for Egypt and from 11 percent to 9 percent
for Syria.
Africa
During the first half of 1961 the Bloc negotiated initial aid aad
trade agreements with several of the newly independent African statas
and was busy implementing earlier agreements with a number of other3.
Similarity of views on developments in the Congo made some of the
countries more receptive to economic cooperation with the Bloc. and
all seemed interested in balancing their relations between the West
and the Bloc as an expression of their neutrality in foreign relations.
The latter attitude generally operated to the advantage of the Bloc,
since the influence of the West was preponderant in all of the coun-
tries except Guinea. Soviet President Leonid I. Brezhnev's 2-week
tour of three African countries in February emphasized the importan2e
which the USSR is giving to this area.
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The Somali Republic and Mali joined the growing list of African
recipients of Bloc aid, while additional aid was extended to Ghana and
Guinea. Prime Minister Abdirascid led an official Somali delegation
to the USSR and Czechoslovakia in late May and early June. In the
USSR he accepted two credits, one totaling $44.5 million for industrial
and agricultural development and another for $7.8 million to finance
commodity purchases. Somali concluded a $4.2 million credit agreement
and a trade and technical cooperation agreement with Czechoslovakia.
An exchange of a series of official missions between Mali and the USSR
resulted in a long-term Soviet credit of $44.4 million and Czechoslovak
credits totaling $12.5 million. Bloc credits totaling $35 million were
extended to Ghana, and the USSR agreed to construct a $6 million hos-
pital in Guinea. The USSR agreed in principle to construct three dams
in Tunisia and to assist in the establishment of an engineering school
at the University of Tunis.*
:implementation of the previous credits as well as technical assist-
ance to Guinea and Ghana proceeded at a growing pace. The number of
Bloc technicians in Guinea increased from about 400 at the end of 1960
to 1,215 by June 1961. In Ghana the number rose from 120 to 205. About
250 students and trainees from both countries initiated various types
of training programs in the Bloc. In addition, 3,000 Ghanaians were
being processed for technical training in the Bloc. The 12 MIG-17 jet
fighters and 2 MIG-15 trainer aircraft accepted by Morocco from the
USSR last November arrived, along with 40 Soviet technicians. The
Bloc appears to have adopted a more cautious attitude in Ethiopia in
view of the abortive 1960 coup, and little progress was made in uti-
lizing the $100 million Soviet credit extended to Ethiopia in 1959.
Trade with the Bloc has continued to grow. Mali arranged in
February to sell in 1961 nearly all of its principal crop, peanuts,
to the USSR and Czechoslovakia. Bloc trade with Guinea, accounting
for 44 percent of Guinea's imports in 1960 and 23 percent of its ex-
ports, continued to grow in 1961. Ghana's trade with the Bloc in-
creased but still accounted for only 4 percent of Ghana's imports and
7 percent of total exports. Bloc shipments of military items were at
a substantial level as deliveries of arms and ammunition were made to
Guinea and Mali and to Morocco for the Algerian rebels.
Bloc economic efforts in Asia continued to be directed primarily
toward the major countries of India, Burma, and Indonesia during the
first 6 months of 1961. Political and economic instability in some
* In early August 1961 the USSR extended a credit of $28 million to
Tunisia, most of it for these projects.
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of the minor countries of the area continues to provide opportunities
for Bloc economic advances but at the same time creates obstacles of
varying importance that hinder Bloc attempts to exploit those oppar-
tunities.
Indonesia continued expanding its military potential with the
assistance of the Bloc, signing in January and in June contracts or
additional air and ground force equipment and services from -1 'he USSR.
The January agreement involved goods, services, and training amou3it-
ing to $250 million, of which $187 million was covered by Soviet
credits. In addition, $75 million in military assistance wa;> addSJT
reportedly made vague offers of development credits; and Ecuac.oc co-L-
sidered sending an economic mission to Eastern Europe.
Middle East
In the Middle East the Bloc continued to maintain strong f=conom c
ties with Afghanistan, Iraq, the United Arab Republic (UAR), and Yerien.
The Soviet conclusion of an agreement to assist Pakistan in pet.role:m
exploration marked an important advance in a country that had previaush
avoided such ties with the Bloc. Except for moderate increases in -radh
with Greece and Cyprus, the Bloc did not expand significantly its e(o-
nomic relations with other Middle Eastern countries during the firs-
half of 1961.
The USSR sought, through a combination of aid, diplomacy, aid
propaganda, to take advantage of a rise in popular restlessness and
of neutralist sentiment in Pakistan. After several months of n~_go-
tiations, Pakistan concluded its first agreement for economic assist-
ance from the USSR in March 1961. The agreement provides for a $30
million line of credit to finance the cost of Soviet technicians
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and equipment required for a 5-year petroleum exploration program in
Pakistan. Pakistan's exports to the Bloc declined somewhat during the
latter half of 1960, but dependence on Communist China as a market for
raw cotton exports continued to be large.
Bloc countries were alert to every opportunity to portray satis-
faction with the neutralist position of Afghanistan and its government.
In addition to cultural and diplomatic initiatives designed to achieve
this objective, the USSR continued to give high priority to the imple-
mentation of its massive program of economic assistance in Afghanistan.
No new major Bloc grants or credits were announced, but agreement in
principle for additional Soviet assistance in support of the Afghan
Second Five Year Plan (1961-66) appears to have been reached. Afghan
officials estimate such future Soviet assistance to be about $300 mil-
lion, but the precise magnitude and form remain to be determined. The
future role of Soviet assistance in Afghan economic development proba-
bly has been strengthened by the major role played by Soviet advisers
in the formulation of the Afghan Second Plan. Although Afghanistan's
high regard for Bloc economic aid and Soviet political support on the
Pushtunistan issue :remained unmistakably firm, the Afghans had an al-
most invariable propensity to balance as best they could all signifi-
cant foreign policy moves by encouraging closer ties with the Western
countries. In line with this policy, the Afghan Government actively
sought increased US assistance as well as US participation in the key
economic planning function.
Although the Bloc's large aid programs in Iraq continued to have
a significant impact on the country's industry, communications, and
national defense establis:ment, some Western influence has survived,
and the Iraqi Government has taken further steps to suppress the local
Communist Party. No new credit arrangements were negotiated during
the review period, but a large number of contracts were executed
against existing Bloc credits. Deliveries of military equipment and
supplies increased and included 60 T-54 tanks, 16 MIG-19 aircraft,
trucks, and torpedo boats. It is estimated that 765 Bloc technicians
were in Iraq in early 1961, and it is estimated that about 400 Iraqis
initiated training of all types in Bloc countries during the same period.
The value of Iraq's imports from the Bloc doubled in 1960 and accounted
for 10 percent of total imports. The Bloc'3 share of Iraq's nonpetro-
leum exports, however, fell off slightly in 1960 to 14 percent of the
total.
Although the Yemeni Government is attempting to maintain some
balance between the influence of the Bloc and of the West, the com-
pletion of the Soviet-built deep-water port at Al Hudaydah and the
near-completion by Communist China of an asphalt-surfaced highway have
made a deep and favorable impression. on the Yemenis. These projects
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have stimulated foreign and domestic commerce and have caused he
business community to attribute its new prosperity to Bloc aid efforts.
No new assistance agreements have been concluded, but there have be-_n
indications that the USSR and Communist China have offered to construct
additional highway facilities. Closer trade ties with the Bloc apF-.,ar
to have developed: Yemen now obtains all of its sugar imports fron. the
Bloc, and the USSR buys 50 percent of Yemen's coffee exports sxld lC
percent of its hides exports under a barter agreement.
Disparaging remarks about the UAR made by Khrushchev in Mar 196i
touched off a propaganda war between the UAR and the USSR. Althoug_
there has been some tendency toward a reduction of trade between th
two areas, the UAR nevertheless has continued to maintain strong ec -
nomic ties with the Bloc. New credits were extended to the UAJ by
East Germany and Czechoslovakia, and the USSR delivered a subsr,antitl
number of MIG-19 jet fighters. In the Egyptian Region, Implementation
continued on Bloc economic aid projects, including work on the dive---
sion canal and the coffer dams of the Aswan High Dam. Many of the
Bloc projects in the Syrian Region are still in the planning stage,
but two dams in the Ghab reclamation project and a topographic survey
of Syria were completed.
The UAR faces a growing dilemma in its trade relations with the
Bloc. Although importers are becoming more reluctant to take Bloc
goods, the government is encouraging the importation of Bloc ;-;cods ,o
utilize the trade receipts resulting from large Bloc purchases of ant-
ton. Criticism of Bloc trading practices is growing, especially in
the cotton-marketing circles. Nevertheless, trade of both reg,L.ons )f
the UAR with the Bloc remained at high levels in 1960. About 45 pe?-
cent of Egypt's exports and 23 percent of Syria's were to the bloc.
The Bloc's share of their imports, however, fell off somewhat, from
30 percent to 25 percent for Egypt and from 11 percent to 9 percent
for Syria.
Africa
During the first half of 1961 the Bloc negotiated initial aid and
trade agreements with several of the newly independent African. stat,s
and was busy implementing earlier agreements with a number of other .
Similarity of views on developments in the Congo made some of the
countries more receptive to economic cooperation with the Bloc, and
all seemed interested in balancing their relations between the West
and the Bloc as an expression of their neutrality in foreign relations.
The latter attitude generally operated to the advantage of the Bloc;
since the influence of the West was preponderant in all of the .noun
tries except Guinea. Soviet President Leonid I. Brezhnev's 2-week
tour of three African countries in February emphasized the importance
which the USSR is giving to this area.
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The Somali Republic and Mali joined the growing :List of African
recipients of Bloc aid, while additional aid was extended to Ghana and
Guinea. Prime Minister Abdirascid led an official Somali delegation
to the USSR and Czechoslovakia in late May and early June. In the
USSR he accepted two credits, one totaling $44.5 million for industrial
and agricultural development and another for $7.8 million to finance
commodity purchases. Somali concluded a $4.2 million credit agreement
and a trade and technical cooperation agreement with Czechoslovakia.
An exchange of a series of official missions between Mali and the USSR
resulted in a long-term Soviet credit of $1+4.1+ million and Czechoslovak
credits totaling $12.5 million. Bloc credits totaling $35 million were
extended to Ghana, and the USSR agreed to construct a $6 million hos-
pital in Guinea. The USSR agreed in principle to construct three dams
in Tunisia and to assist in the establishment of an engineering school
at the University of Tunis.*
Implementation of the previous credits as well as technical assist-
ance to Guinea and Ghana proceeded at a growing pace. The number of
Bloc technicians in Guinea increased from about 400 at the end of 1960
to 1,215 by June 1961. In Ghana the number rose from 120 to 205. About
250 students and trainees from both countries initiated various types
of training programs in the Bloc. In addition, 3,000 Ghanaians were
being processed for technical training in the Bloc. The 12 MIG-17 jet
fighters and 2 MIG-15 trainer aircraft accepted by Morocco from the
USSR last November arrived, along with 40 Scviet technicians. The
Bloc appears to have adopted a more cautious attitude in Ethiopia in
view of the abortive 1960 coup, and little progress was made in uti-
lizing the $100 million Soviet credit extended to Ethiopia in 1959.
Trade with the Bloc has continued to grow. Mali arranged in
February to sell in 1961 nearly all of its principal crop, peanuts,
to the USSR and Czechoslovakia. Bloc trade with Guinea, accounting
for 1+4 percent of Guinea's imports in 1960 and 23 percent of its ex-
ports, continued to grow in 1961. Ghana's trade with the Bloc in-
creased but still accounted for only 4 percent of Ghana's imports and
7 percent of total exports. Bloc shipments of military items were at
a substantial level as deliveries of arms and ammunition were made to
Guinea and Mali and to Morocco for the Algerian rebels.
Asia
Bloc economic efforts in Asia continued to be directed primarily
toward the major countries of India, Burma, and Indonesia during the
first 6 months of 1961. Political and economic instability in some
* In early August 1961 the USSR extended a credit of $28 million to
Tunisia, most of it for these projects.
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of the minor countries of the area continues to provide opportunities
for Bloc economic advances but at the same time creates obstacii_s D!
varying importance that hinder Bloc attempts to exploit those oopor-
tunities.
Indonesia continued expanding its military potential with the
assistance of the Bloc, signing in January and in June contracts for
additional air and ground force equipment and services from the USSE.
The January agreement involved goods, services, and training -mount-
ing to $250 million, of which $187 million was covered by Soviet
credits. In addition, $75 million in military assistance was added.
to the January agreement when the protocol was signed in June. The
amount of credit agreed upon under the June protocol is estimated to
be $50 million. Communist China revived a credit offer of $3' mil-
lion -- dormant for 4 years -- and seemed to be enjoying markedly ir-
proved relations with Indonesia. Peiping was on the itinerary of
President Sukarno when, in the spring of 1961, he traveled extensively
throughout the Bloc. Large numbers of Indonesians have been sent to
Bloc countries for training, primarily military, but inside Indonesia
the Bloc has been unable to move rapidly on its promises of economic
assistance. More than 4+5 percent of economic credit extensions rempin
unobligated by specific contract, and many of those projects that are
already under construction are not being completed in a style that -
commands respect. Bloc military assistance efforts, however, nave
encountered no apparent frustrations and, because of the sensitivities
of Indonesians in the critical dispute over West New Guinea, provide
the Bloc with a strong foundation for influence in Indonesia.
Burma has improved relations with Communist China to such a degree
that China is now the prime Bloc influence in Burma. An extremely
cordial visit to Burma by Premier Chou En-lai resulted in Chinas
extending in January 1961 a credit of $84 million for economi: and
technical assistance. A new payments agreement, which is intended
to avoid the pitfalls that made earlier pacts unworkable, also -gas
signed during this visit. Although Soviet and European Satellite
countries continued working on the minor but eye-catching projects
promised in the past, they entered on no new commitments during the
first 6 months of 1961.
In Cambodia the USSR, Communist China, and Czechoslovakia sent
technical delegations to negotiate the specific projects to be over,-:.d
under the more general assistance commitments of 1960. A definite
offer was made by the USSR to construct a $40 million dam in Cambodia,
presumably on credit, and further studies were being conducted by
Soviet advisers on other potential projects for river development.
Negotiations with Czechoslovakia were inconclusive. Arrangemenn.s were__
made for Communist China to assist the Cambodian transportation industry.-
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but it appeared likely that a large part of the Chinese grant of 1960
would be used to complete the cement plant already being built. Cam-
bodia's trade with the Bloc more than doubled during 1960, compared
with 1959, and appears to be rising additionally in 1961. Persistent
deficits in trade, however, have aroused some anxieties among Cambodian
officials lest it become necessary to use hard Western currencies to
settle clearing accounts.
Lnd:ia's policy of nonalignment continues to be in evidence, in
spite o the substantial Bloc assistance already received. No new
large credits were extended to India during the 6-month period, but
agreements were signed for the utilization. of earlier credits. Most
significant were agreements which earmark about $66 million for the
devElopment o= the public sector's petroleum industry. India signed
contracts for delivery of additional aircraft and is expected to in-
creaa.se the rate of utilization of Bloc credits during the year.
Cn Ceylon, political, social, and economic instability have pro-
vided a favorable atmosphere for the Bloc to develop closer inter-
governmental ties. Nevertheless, the instability that has provided
opportunities also has further entangled the ever-present bureau-
cratic snarls and has hindered Bloc efforts to make specific inroads.
Progress under Soviet assistance commitments has been slow, and few
projects have gone beyond the planning stage. Communist China has
not yet offered acceptable terms for a contract to carry out its com-
mitmrment to build a textile mill in Ceylon.
The failure of the neutralist government of King Mahendra in Nepal
to act: decisively against the active Communist leaders in the country
has been matched by an inability to eliminate the obstacles that have
hindered the expansion of economic relations with the Bloc. Shortages
of :local currencies, poor weather, delivery tieups, and governmental
lassitude have created obstacles which, in spite of Bloc attempts to
produce action, have prevented the USSR and Communist China from ad-
vancing as far as the preliminary construction stage of any of their
project commitments, with the exception of a 50-bed. Soviet hospital.
The Bloc continued its active propaganda and cultural programs in
Nepal, programs made more effective by conducting them through the
local Communist Party.
A _though Thailand has few economic contacts with the Bloc, the
USSR has placed considerable pressure on the government to alter
its past policy. This pressure appears to have had some impact,
and the Government of Thailand has indicated that it may seriously
consider forthcoming offers of Bloc economic assistance.
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Europe
Ebonomic relations between the Bloc and the underdeveloped .-oun-
tries of Europe showed few important changes during the first - monrns
of 1961. Yugoslav trade with the Bloc appeared to be at about .he
same level as in 1960 and appeared to account for 25 to 30 percent cf
total trade. Long-term (19)-1-65) trade agreements have now bee signed.:
by Yugoslavia with most of the important Bloc countries. As to the
others, negotiations. have been underway for several months with Hungary,
but long-term agreements are not contemplated with Albania and -omnu-
nist China.
Iceland has continued to diminish its dependence on trade with the
Bloc. In 1960 this trade was less than 25 percent of total trade it
contrast to about 30 percent in 1959. This trend probably hay'
tinued during 1961. A key part of the effort to reduce this depend
ence has been a price stabilization program, whose success, however.
has been placed in jeopardy by a series of Communist-inspired s-rikcs
and wage disputes. Should the stabilization program break down be-
cause of the crippling effects of excessive wage hikes, the Ice andM,
Government may be unable to avoid a.return to import restrictio:s.
Such an eventuality would open opportunities for Bloc trade offers end
probably also make the Icelandic Government more receptive to o'fere
of loans or grants.
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 EXTENSIONS AND DRAWINGS, BY YEAR, 1954-61*
SECRET
Million
US dollars
1,200 -
1955 1956 1957
SECRET
M411.,
US donors Bloc Economic Credits and Grants to Underdeveloped Countries
5,000 Extensions and Drawings, Cumulative, 1954-61 *
4,000--
3,000--
2,000--
1,000
0L
1954 1955 _ 1956 1957 1958 1959 1960 1961
*January June 1961 of an annual ote.
31872 8-81
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SECRET
SINO-SOVIET BLDC ECONOMIC ACTIVITIE'
IN UNIX aEVELOPED AREAS
1 JANUARY-30 JUNE 1961
Ai gust 1961
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SECRET
SINO-SOVIET BLOC ECONOMIC ACTIVITIES
IN UNDERDEVELOPED AREAS
1 JANUARY-30 JUNE 1961
August 1961
SECRET
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The reports on Sino-Soviet Bloc economic activities in underdevelopec
areas in this series provide periodic summaries and analytical inter-
pretations of significant developments in the economic relations of
Bloc countries with underdeveloped countries of the Free World. Thee
developments are reported on a current, factual basis in the Biweekly
Reports under the same title.
This report, covering the 6 months from 1 January through ;0 June
1961, constitutes the eleventh periodic supplement to the background
report on Sino-Soviet Bloc Postwar Economic Activities in Underdevel !eed
Areas, 8 August 195 6,, SECRET. The present supplement relates note-
worthy noneconomic activities, including military aid, to the econom_e
operations of the Bloc in underdeveloped countries in order to place
the economic aspects in the perspective of the over-all programs of the
Bloc in these countries.
For purposes of this report, the term underdeveloped areas includes
the following Free World countries: (1) all independent countries in
Latin America; (2) all countries in the Middle East, including Afghani-
stan, Cyprus, Greece, Pakistan, Turkey, and the United Arab Republic
(Egypt and Syria); (3) all independent countries in Africa except th4>
Republic of South Africa; (4+) all countries in South and Southeast
Asia; and (5) Iceland, Portugal, Spain, and Yugoslavia.
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?agf
Summary . . . . . . . . . . . . . . . . . . . . . . . . . .
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SINO-SOVIET BLOC ECONOMIC ACTIVITIES IN UNDERDEVELOPED AREAS
1 JANUARY - 30 JUNE 1961
Summary
Patterns and Prospects
Efforts to extend Bloc influence in underdeveloped areas continued
to grow in scope and magnitude during the first half of 1961. As in
the past several years, financial and technical assistance programs
were correlated with trade promotion, propaganda, cultural, and poli-;i-
cal activities. Although relations with underdeveloped countries in
Asia and the Middle East received due attention, emphasis was placed
on consolidating gains in key African and Latin American state and -n
expanding contacts with other countries in these areas. Moreover, a
number of countries that in the past had shown little interest in Blc
aid evidenced a growing inclination to give Bloc offers more serious
consideration.
New economic credits and grants during the first 6 months of 196=_
were extended at an annual rate above the average for the past r yea-?s
but below the level recorded in 1960. Expenditures under existing
economic credits and grants rose sharply during the first half of 1991,
reaching an annual rate substantially above that for any previous year.
This increase was, in large measure, the result of an acceleration is
the implementation of Soviet aid programs in the United Arab Republic
(UAR) and India. The progress of preliminary survey work on project:
covered by large Soviet lines of credit and the number of countries
recently offered extensive economic assistance by the USSR and Czecho-
slovakia point to a considerable expansion of Bloc economic aid acti'-ity
in the months ahead.
During the first 6 months of 1961, Peiping employed economic aid
agreements as one means of mending its political fences and promoting;
its influence in Southeast Asia. With the establishment of new line.
of credit to Burma and Indonesia, Communist China increased the amou1t
of economic aid that it has extended to countries outside of the Blot
by about 50 percent. Peiping announced early in May that the State
Council had established a Bureau for Economic Relations with Foreign
Countries. The new agency, which presumably will administer the for-
eign aid and technical assistance programs of Communist China, appar-
ently will have functions similar to those of the Soviet State Committee
for Foreign Economic Relations.
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The USSR has continued the use of arms diplomacy to expand its in-
fluence in underdeveloped areas. A major new agreement was signed with
Indonesia, and deliveries of equipment under existing pacts with the
UAR and Cuba were accelerated during the first 6 months of the year.
Guinea, Ghana, Morocco, and the Algerian rebels also received arms
from the USSR. Moscow sought to use Ghana and Guinea as funnels
through which to channel arms to other African countries. In the
future, this tactic probably will be tried with greater frequency and
in other areas -- especially in Latin America, where Cuba could serve
as a relay point.
131.oc trade with underdeveloped countries in 1961 gives every indi-
cation of continuing the pace evidenced in 1960, when it increased
20 percent above the year before. In 1961, as in 1960, Latin America --
particularly Cuba Cuba -- is likely to account for the major portion of the
total growth in Bloc trade with all underdeveloped areas.
On. the ideological front, the newly established Soviet agency
Novosti (news) appears destined to play an important role. Combining
the functions of a press and an information agency, Novosti will open
branches in foreign countries to disseminate Soviet propaganda. In
addition to its own staff, Novosti will contract with foreign press,
radio, and television organizations as well as with private individuals
to assist in furthering its mission. Prominent among the officials of
the council that will run the new organization is an expert on under-
developed countries.
Economic and Military Aid
I''lie Bloc extended nearly $465 million* in economic aid to under-
developed countries in the first 6 months of 1961, nearly all in the
forty of credits. Thus, since 1954, approximately $4 billion in economic
aid has been extended to 2L underdeveloped countries, about 95 percent
of it in the form of credits and the rest in the form of grants.
Drawings for development projects are estimated to be about $155
million for the first half of 1961. By midyear, only 22 percent of the
$)+ billion extended for economic purposes had been drawn. Thus more
than $3 billion remains to help finance the foreign exchange costs of
development projects planned or already underway.
Ph.e only major military aid agreement signed during the period was
one between the USSR and Indonesia for more than $300 million worth
of supplies and equipment. An agreement also was signed with Mali,
but the amount is not known.
Al dollar values in this report are given in terms of US dollars.
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By midyear 1961 the Bloc had entered into agreements to provide
10 underdeveloped countries with about $1.9 billion worth of militar
supplies, equipment, and training. As of 30 June 1961, all except
about $600 million worth of military items had been delivered. Some
of the agreements called for partial payments to be made upon deliver,-V,
and some provided for discounts. When the down payments are deducted
from the estimated value of the items, the amount of financial aid [x-
tended for military purposes since September 1955 totals about $i.b
billion. When the discounts also are deducted, the credit finarcing
provided amounts to approximately $1.3 billion. Thus by midyear 196:_,
total aid extended by the Bloc for economic and military purposes wa
approximately $5.9 billion.*
Technical Assistance
About 9,700 Bloc technicians -- 8,200 economic and 1,500 militar' --
were present in underdeveloped countries for 1 month or longer durin
the first half of 1961. This figure may be compared with 7,900 Bloc
technicians -- 6,500 economic and 1,400 military -- present in the t:Lst
half of 1960.
The number of nationals from underdeveloped countries studying ill
the Bloc also has continued to increase rapidly. New arrivals in 191
total 3,200 -- 900 academic students, 1,600 technical trainees, and
700 military officers and men. Thus by midyear those persons from
underdeveloped countries who had received or were receiving instruc-
tion in the Bloc numbered more than 14,800 -- 4,900 at academic, 4,6.)0
at technical, and 5,300 at military training centers.
Trade
During 1960, Bloc trade with underdeveloped countries recovered
from the 1959 lull to resume its rise at the 20-percent rate which i d
characterized the average annual growth since 1955. Bloc exports an.
imports expanded at about the same rate to register a trade turnover
of $2.7 billion. The increase of $450 million above 1959 resulted
primarily from a growth in volume of commodities exchanged rather ti-.n
from price changes or seasonal variations.
* In this report an extension of the definition of Bloc military ai+i
has been introduced: the scope of financial aid is no longer limite;A.
to credits and grants but now considers discounts as well.
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Cuba alone accounted for nearly half of the over-all increase, as
the volume of exports to the Castro regime mounted rapidly from July
through December. The rest of the increase in trade was fairly evenly
shared by the Middle East, Africa, and the underdeveloped countries of
Europe. Only in Asia did Bloc trade remain at the same level as in
1959.
Commerce with the industrial countries of the Free World continues
to account for a preponderant share of the trade of underdeveloped
countries. In 1960, however, this commerce grew at, a somewhat slower
pace than trade with the Bloc. As a result:, the share of the Bloc in
the trade of underdeveloped countries increased from 7 percent in 1959
to b percent in 1960.
During the first half of 1961 the Bloc concentrated its Latin
American efforts in Cuba and Brazil, continuing to consolidate its
position in the former and to broaden considerably its relations with
Brazil. Chile and Ecuador received more attention than in recent years,
while apparently there was a shift of interest away from Argentina and
Uruguay.
Ci.iba' s economic relations with the Bloc: continued to expand, and
the two sides appeared to be adjusting to their new relationship in
which the Communist world. has assumed the primary burden of supporting
the Cuban economy. During the first half of 1961 the Bloc accounted
for about two-thirds of Cuba's total trade and by the end of the
year may account for three-fourths. The much-vaunted economic assist-
ance program proceeded a, a slower pace, although it became more and
more evident that Cuba's economic planning assumes extensive Bloc sup-
port. The Bloc has extended to Cuba long-term economic credits total-
ing $357 million, including $142 million extended during the first 6
months of 1961. In addition, Cuba has received considerable military
equipment under undisclosed arrangements. Bloc military and economic
technicians continue to play important roles in Cuba, and the first
sizable groups of Cubans have gone to the Bloc for technical training.
Since the inauguration of Brazilian President Quadros in January
1961., the Sino-Soviet Bloc has devoted increasing attention to Brazil.
With Quadros' ascent to power the Bloc has tried to exploit further the
Brazilian belief that the Communist camp can provide an expanding mar-
ket for Brazil's exports. Thus, when Brazilian economic delegations
visited the Eastern European capitals, the host regimes proved to be
extremely cooperative in negotiating trade and payments agreements which
sometimes stated unrealistically high trade goals. Quadros, on his
part, has given extensive publicity to his every move toward increased
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economic relations with the Bloc. Brazilian trade delegations to Easb.-
ern Europe signed trade and payments agreements with Albania, Bulgaria,
Rumania, Hungary, and East Germany and trade protocols with Czechoslo-
vakia, the USSR, and Poland. In addition, technical cooperation agree-
ments were signed with Poland, Bulgaria, Rumania, Hungary, and possibly
others. Should the trade goals reported in the new agreements be ful-
filled, Bloc trade with Brazil will increase to about 15 percent of
Brazil's present level of foreign trade. Communist China also has
shown considerable interest in increasing its economic relations with
Brazil, but no concrete results of the negotiations have been announced.
The Bloc continued to account for about 5 percent of Argentina's
total trade, a proportion now considered normal. Uruguay's trade witr
the Bloc continued its sharp decline, heightened by the rejection of a
longstanding Soviet offer to buy substantial quantities of Uruguayan
wool only if Uruguay continued to purchase Soviet petroleum. The
intense publicity concerning Bloc interest in Bolivia noted in late
1960 and early 1961 recently has subsided. Little progress has been
made to date in negotiations on the vague Soviet credit offers to
Bolivia, but that country's government has announced that a delegaticri
will visit the USSR to discuss the offer.
The Bloc evinced some interest in extending its economic relations
with Ecuador and Chile. In late 1960 and the first half of 1961, trade
representatives from most Bloc countries visited Chile, but the 'hilcans
felt that only the Poles had a serious interest in trade expansion.
Ecuador assumed somewhat more importance, as it signed a previously
negotiated $1.5 million barter agreement with Czechoslovakia; the USSR
reportedly made vague offers of development credits; and Ecuador con-
sidered sending an economic mission to Eastern Europe.
In the Middle East the Bloc continued to maintain strong economic
ties with Afghanistan, Iraq, the United Arab Republic (UAR), and Yemen.
The Soviet conclusion of an agreement to assist Pakistan in petroleum
exploration marked an important advance in a country that had previously
avoided such ties with the Bloc. Except for moderate increases in trade
with Greece and Cyprus, the Bloc did not expand significantly its eco-
nomic relations with other Middle Eastern countries during the first
half of 1961.
The USSR sought, through a combination of aid, diplomacy, and
propaganda, to take advantage of a rise in popular restlessness and
of neutralist sentiment in Pakistan. After several months of nego-
tiations, Pakistan concluded its first agreement for economic assist-
ance from the USSR in March 1961. The agreement provides for a $30
million line of credit to finance the cost of Soviet technicians
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and equipment required for a 5-year petroleum exploration program in
Pakistan. Pakistan's exports to the Bloc declined somewhat during the
latter half of 1960, but dependence on Communist China as a market for
raw cotton exports continued to be large.
Bloc countries were alert to every opportunity to portray satis-
faction with the neutralist position of Afghanistan and its government.
In addition to cultural and diplomatic initiatives designed to achieve
this objective, the USSR continued to give high priority to the imple-
mentation of its massive program of economic assistance in Afghanistan.
No new major Bloc grants or credits were announced, but agreement in
principle for additional Soviet assistance in support of the Afghan
Second Five Year Plan (1961-66) appears to have been reached. Afghan
officials estimate such future Soviet assistance to be about $300 mil-
lion, but the precise magnitude and form remain to be determined. The
future role of Soviet assistance in Afghan economic development proba-
bly has been strengthened by the major role played by Soviet advisers
in the formulation of the Afghan Second Plan. Although Afghanistan's
high regard for Bloc economic aid and Soviet political support on the
Pushtunistan issue remained unmistakably firm, the Afghans had an al-
most invariable propensity to balance as best they could all signifi-
cant foreign policy moves by encouraging closer ties with the Western
countries. In line with this policy, the Afghan Government actively
sought increased US assistance as well as US participation in the key
economic planning function.
Although the Bloc's large aid programs in Iraq continued to have
a significant impact on the country's industry, communications, and
national defense establishment, some Western influence has survived,
and the Iraqi Government has taken further steps to suppress the local
Communist Party. No new credit arrangements were negotiated during
the review period, but a large number of contracts were executed
against existing Bloc credits. It is estimated that 765 Bloc tech-
nicians were in Iraq in early 1961, and it is estimated that about
400 Iraqis initiated training of all types in Bloc countries during
the same period. The value of Iraq's imports from the Bloc doubled
in 1960 and accounted for 10 percent of total imports. The Bloc's
share of Iraq's nonpetroleum exports, however, fell off slightly in
1960 to 14 percent of the total.
Although the Yemeni Government is attempting to maintain some
balance between the influence of the Bloc and of the West, the com-
pletion of the Soviet-built deep-water port at Al Hudaydah and the
near-completion by Communist China of an asphalt-surfaced highway have
made a deep and favorable impression on the Yemenis. These projects
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have stimulated foreign and domestic commerce and have caused the
business community to attribute its new prosperity to Bloc aid efforts.
No new assistance agreements have been concluded, but there have beet
indications that the USSR and Communist China have offered to constrt,ct
additional highway facilities. Closer trade ties with the Bloc appet.r
to have developed: Yemen now obtains all of its sugar imports from the
Bloc, and the USSR buys 50 percent of Yemen's coffee exports and 100
percent of its hides exports under a barter agreement.
Disparaging remarks about the UAR made by Khrushchev in May :961
touched off a propaganda war between the UAR and the USSR. Although
there has been some tendency toward a reduction of trade between the
two areas, the UAR nevertheless has continued to maintain strong eco-
nomic ties with the Bloc. In the Egyptian Region, implementation
continued on Bloc economic aid projects, including work on the diver-
sion canal and the coffer dams of the Aswan High Dam. Many of the
Bloc projects in the Syrian Region are still in the planning stage,
but two dams in the Ghab reclamation project and a topographic surve-,
of Syria were completed.
The UAR faces a growing dilemma in its trade relations with the
Bloc. Although importers are becoming more reluctant to take Bloc
goods, the government is encouraging the importation of Bloc goods tf)
utilize the trade receipts resulting from large Bloc purchases of co--
ton. Criticism of Bloc trading practices'_is growing, especially in
the cotton-marketing circles. Nevertheless, trade of both regions o'
the UAR with the Bloc remained at high levels in 1960. About 4per-
cent of Egypt's exports and 23 percent of Syria's were to the Bloc.
The Bloc's share of their imports, however, fell off somewhat, from
30 percent to 25 percent for Egypt and from 11 percent to 9 percent
for Syria.
Africa
During the first half of 1961 the Bloc negotiated initial aid andd
trade agreements with several of the newly independent African state
and was busy implementing earlier agreements with a number of others,
Similarity of views on developments in the Congo made some of the
countries more receptive to economic cooperation with the Bloc, and
all seemed interested in balancing their relations between the West
and the Bloc as an expression of their neutrality in foreign relations.
The latter attitude generally operated to the advantage of the JLoc,
since the influence of the West was preponderant in all of the coun-
tries except Guinea. Soviet President Leonid I. Brezhnev's 2-week
tour of three African countries in February emphasized the importanc-
which the USSR is giving to this area.
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The Somali Republic and Mali joined the growing list of African
recipients of Bloc aid, while additional aid was extended to Ghana and
Guinea. Prime Minister Abdirascid led an official Somali delegation
to the USSR and Czechoslovakia in late May and early June. In the
USSR he accepted two credits, one totaling $44.5 million for industrial
and agricultural development and another for $7.8 million to finance
commodity purchases. Somali concluded a $11-.2 million credit agreement
and a trade and technical cooperation agreement with Czechoslovakia.
An exchange of a series of official missions between Mali and the USSR
resulted in a long-term Soviet credit of $1A.4 million and Czechoslovak
credits totaling $12.5 million. Bloc credits totaling $35 million were
extended to Ghana, and the USSR agreed to construct a $6 million hos-
pital in Guinea. The USSR agreed in principle to construct three dams
in Tunisia and to assist in the establishment of an engineering school
at the University of Tunis.*
Implementation of the previous credits as well as technical assist-
ance to Guinea and Ghana proceeded at a growing pace. The number of
Bloc technicians in Guinea increased from about 400 at the end of 1960
to 1,215 by June 1961. In Ghana the number rose from 120 to 205. About
250 students and trainees from both countries initiated various types
of training programs in the Bloc. In addition, 3,000 Ghanaians were
being processed for technical training in the Bloc. The 12 MIG-17 jet
fighters and 2 MIG-15 trainer aircraft accepted by Morocco from the
USSR last November arrived, along with 4+0 Soviet technicians. The
Bloc appears to have adopted a more cautious attitude in Ethiopia in
view of the abortive 1960 coup, and little progress was made in uti-
lizing the $100 million Soviet credit extended to Ethiopia in 1959.
Trade with the Bloc has continued to grow. Mali arranged in
February to sell in 1961 nearly all of its principal crop, peanuts,
to the USSR and Czechoslovakia. Bloc trade with Guinea, accounting
for 44 percent of Guinea's imports in 1960 and 23 percent of its ex-
ports, continued to grow in 1961. Ghana's trade with the Bloc in-
creased but still accounted for only 4 percent of Ghana's imports and
7 percent of total exports. Bloc shipments of military items were at
a substantial level as deliveries of arms and ammunition were made to
Guinea and Mali and to Morocco for the Algerian rebels.
Asia
3i.oc economic efforts in Asia continued to be directed primarily
toward the major countries of India, Burma, and Indonesia during the
first 6 months of 1961. Political and economic instability in some
*__In early August 1961 the USSR extended a credit of $28 million to
Tunisia, most of it for these projects.
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of the minor countries of the area continues to provide opportunities:
for Bloc economic advances but at the same time creates obstacles of
varying importance that hinder Bloc attempts to exploit those oppor-
tunities.
Indonesia continued expanding its military potential with the
assistance of the Bloc, signing agreements for more than $300 million
worth of supplies and equipment. Communist China revived a credit
offer of $30 million -- dormant for 4+ years -- and seemed to be en-
joying markedly improved relations with Indonesia. Peiping was on the
itinerary of President Sukarno when, in the spring of 1961, he trave.ed
extensively throughout the Bloc. Large numbers of Indonesians have been
sent to Bloc countries for training, primarily military, but inside
Indonesia the Bloc has been unable to move rapidly on its promises o
economic assistance. More than 4+5 percent of economic credit extens-.ons
remain unobligated by specific contract, and many of those projects 6;hat
are already under construction are not being completed in a style twit
commands respect. Bloc military assistance efforts, however, have eui-
countered no apparent frustrations and, because of the sensitivities of
Indonesians in the critical dispute over West New Guinea, provide thi=
Bloc with a strong foundation for influence in Indonesia.
Burma has improved relations with Communist China to such a degree
that China is now the prime Bloc influence in Burma. An extremely
cordial visit to Burma by Premier Chou En-lai resulted in China's ex-
tending in January 1961 a credit of $84 million for economic and tech-
nical assistance. A new payments agreement, which is intended to avoid
the pitfalls that made earlier pacts unworkable, also was signed during
this visit. Although Soviet and European Satellite countries onti1Xied
working on the minor but eye-catching projects promised in the past,
they entered on no new commitments during the first 6 months of 1961
In Cambodia the USSR, Communist China, and Czechoslovakia ,sent t='ch-
nical delegations to negotiate the specific projects to be covered under
the more general assistance commitments of 1960. A definite offer tat=s
made by the USSR to construct a $40 million dam in Cambodia, presumaF)ly
on credit, and further studies were being conducted by Soviet advise.--s
on other potential projects for river development. Negotiations with
Czechoslovakia were inconclusive. Arrangements were made for Communist
China to assist the Cambodian transportation industry, but it appeared
likely that a large part of the Chinese grant of 1960 would be used ;o
complete the cement plant already being built. Cambodia's trade with
the Bloc more than doubled during 1960, compared with 1959, and appears
to be rising additionally in 1961. Persistent deficits in trade, ho,r-
ever, have aroused some anxieties among Cambodian officials lest it "be-
come necessary to use hard Western currencies to settle clearing acc=)unt;_
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India's policy of nonalignment continues to be in evidence, in
spite of the substantial Bloc assistance already received. No new
large credits were extended to India during; the 6-month period, but
agreements were signed for the utilization of earlier credits. Most
significant were agreements which earmark about $66 million for the
development of the public sector's petroleum industry. India signed
contracts for delivery of additional aircraft and is expected to in-
crease the rate of utilization of Bloc credits during the year.
In Ceylon, political, social, and economic instability have pro-
vided a favorable atmosphere for the Bloc to develop closer inter-
governmental ties. Nevertheless, the instability that has provided
opportunities also has further entangled the ever-present bureau-
cratic snarls and has hindered Bloc efforts to make specific inroads.
Progress under Soviet assistance commitments has been slow, and few
projects have gone beyond the planning stage. Communist China has
not yet offered acceptable terms for a contract to carry out its com-
mitment to build a textile mill in Ceylon.
The failure of the neutralist government of King Mahendra in Nepal
to act decisively against the active Communist leaders in the country
has been matched by an inability to eliminate the obstacles that have
hindered the expansion of economic relations with the Bloc. Shortages
of local currencies, poor weather, delivery tieups, and governmental
lassitude have created obstacles which, in spite of Bloc attempts to
produce action, have prevented the USSR and Communist China from ad-
vancing as far as the preliminary construction stage of any of their
project commitments, with the exception of a 50-bed. Soviet hospital.
The Bloc continued its active propaganda and cultural programs in
Nepal, programs made more effective by conducting them through the
local Communist Party.
Although Thailand has few economic contacts with the Bloc, the
USSR has placed considerable pressure on the government to alter
its past policy. This pressure appears to have had. some impact,
and the Government of Thailand has indicated that it may seriously
consider forthcoming offers of Bloc economic assistance.
Europe
Economic relations between the Bloc and the underdeveloped coun-
tries of Europe showed few important changes during the first 6 months
of 19bl. Yugoslav trade with the Bloc appeared to be at about the
same level as in 1960 and appeared to account for 25 to 30 percent of
total trade. Long-term (1961-65) trade agreements have now been signed
by Yugoslavia with most of the important Bloc countries. As to the
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others, negotiations have been underway for several months with Hungary,
but long-term agreements are not contemplated with Albania and Commu-
nist China.
Iceland has continued to diminish its dependence on trade with the
Bloc. In 1960 this trade was less then 25 percent of total trade in
contrast to about 30 percent in 1959. This trend probably has con-
tinued during 1961.
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