SINO-SOVIET BLOC ECONOMIC ACTIVITIES IN UNDERDEVELOPED AREAS 1 JANUARY-30 JUNE 1962

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP92B01090R000400010014-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 57
• Document Creation Date: December 19, 2016
• Document Release Date: January 25, 2006
• Sequence Number: 14
• Publication Date: August 31, 1962
• Content Type: REPORT

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ECONOMIC INTELLIGENCE REPORT
SINO-SOVIET B:L (I )C ECONOMIC AC's Im
IN UNE-.2 DEVELOPED AREA`
1 JANUARY-30 JUNE 1962
JC R14-S13
31 ;Augur, 1962
ECONOMIC 11-41FELLIGENCE COMMIT
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SINO-SOVIET BLOC ECONOMIC ACTIVITIES
IN UNDERDEVELOPED AREAS
1 JANUARY-30 JUNE 1962
EIC R14-S13
ECONOMIC INTELLIGENCE COMMITTEE
SECRET
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ECONOMIC INTELLIGENCE REPORT
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S-E-C-R-E-T
The reports on Sino-Soviet Bloc economic activities in und.e1~de-
veloped areas in the EIC-R14 series provide periodic summaries and
analytical interpretations of significant developments in the -_ronoui_c
relations of Bloc countries with underdeveloped countries of the Fre
World. These developments are reported on a current, factual basis in
the Biweekly Reports in the EIC-WGR-l series, under the same title.
This report, covering the 6 months from 1 January through 3? Jur,
1962, constitutes the thirteenth periodic supplement to EIC-R14. the
background report on Sino-Soviet Bloc Postwar Economic Activities in
Underdeveloped Areas, E August 1956, SECRET. The present supp1Bement
relates noteworthy noneconomic activities, including military aid, t,
the economic operations of the Bloc in underdeveloped countries in order
to place the economic aspects in the perspective of the over-ail pro-
grams of the Bloc in these countries. This report was prepared by a
Working Group of the Economic Intelligence Committee, including-, rep-
resentatives of the Department of State, the Army, the Navy, the Air
Force, Commerce, and Agriculture; the Agency for International .?evel?p-
ment; the Office of the Secretary of Defense; the National Sec:uity
Agency; and the Central Intelligence Agency. It was approved the
Economic Intelligence Committee on 14 August 1962.
For purposes of this report, the term underdeveloped areas incluies
the following Free World countries: (1) all independent countries it
Latin America; (2) all countries in the Middle East, including :ypru,,,
Greece, the Syrian Arab Republic, Turkey, and the United Arab Republic
(Egypt); (3) all countries in Africa except the Republic of South Af-ica_
(4) all countries in South and Southeast Asia (including Afghafi._stan
and Pakistan); and (5) Iceland, Portugal, Spain, and Yugoslavia.
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CONTENTS
Pa ;e
Summary . . . . . . . . . . . . . . . . . . . . . . . . . .
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SINO-SOVIET BLOC ECONOMIC ACTIVITIES IN UNDERDEVELOPED AREAS
1 JANUARY - 30 JUNE 1962
Summary
Patterns and Prospects
The growing Bloc presence in the less developed areas has been m: ,rkei_
by changes in both the scope and the character of the Bloc poli_t.icoe-..!onon
offensive. Over the past year the offensive has evidenced sigziificaiit
shifts in the levels of extensions and drawings and in the con,.,entra.ion
of aid. A dramatic expansion in Bloc training of nationals from undrerde.
veloped countries as well as recent technical innovations in the Sov"_et
aid program further suggests the continuing dynamics of the B1)(, 's t,rus
into these areas.
A sharp drop in Bloc extensions of economic aid occurred during the
first half of 1962, when new extensions totaled $300 million.-" The c_e-
cline in new extensions by the European Satellites and Communist China
was particularly drastic, the latter extending no new aid so far in ;962.
Soviet extensions, which ran at about $800 million a year in 1()159 an!
1960, in 1961 declined to a little more than $500 million and 7rt the
first half of 1962 continued at about the same rate ($250 million
through June). Drawings against earlier Bloc credits, however, eon-
tinued to increase, reaching a 6-month total of $225 million.
This drop in extensions has been accompanied, on the one han.^, by
a growing number of official Soviet statements emphasizing the limite
to Soviet aid capabilities and, on the other, by new Soviet offers, Ego
far unaccepted, of at least $900 million in economic aid. In recent
Soviet pronouncements on foreign aid, greater stress has been laid on
the "sacrifices" which economic aid has cost the Soviet economy and c3u
the need for developing countries to rely chiefly on their own intern-al
resources for economic progress. In spite of this apparent shift. ia
the official Soviet position on foreign aid, however, the evidence dc-s
not appear to suggest a lessening of interest on the part of the USSF..
in its foreign aid program.
Almost 80 percent of total Bloc extensions since mid-1961 have be.-.n
awarded to Cuba, Afghanistan, and a half-dozen countries in Afr a.
In Cuba, $457 million in Bloc economic development credits, purci-.ases
* Dollar values in this report are in terms of current US dollars.
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of more than 80 percent of the Cuban sugar crop, and possible credits to
finance commodity imports on current account indicate the Blocs willing-
ness to give large-scale support to its "socialist bridgehead" in the
Western Hemisphere. In Afghanistan the USSR made available another $300
million in economic credits, making total Soviet aid to Afghan economic
development more than $500 million. With both economic and military
assistance the USSR seeks to preempt all foreign influence on the de-
velopment of this isolated and strategically located neighbor.
The third major area which has been the recipient of a large share
of Bloc economic aid during the past year is Africa, particularly West
Africa. In the large number of small African countries, generally un-
stable politically and with bleak economic prospects, the Bloc can en-
hance its influence and prestige with smaller foreign aid outlays than
are required in such countries as India and the United Arab Republic
(UAR).
The continued scrutiny of the aid program which must occur at
various levels of the Bloc hierarchy, particularly that of the USSR,
has led recently to significant changes in the procedures and tech-
niques of Bloc aid. For the most part, these changes appear to reflect
a developing sophistication and flexibility in the conduct of an effec-
tive aid program as well as the desire to maximize the politicoeconomic
return per ruble of aid extended. The progress of development programs
in most underdeveloped countries is often slowed by the inability or un-
willingness of the recipient government to allocate sufficient domestic
resources to development projects. In some of the countries receiving
Soviet assistance the USSR has found it necessary to provide commodities
for sale in their domestic markets in order to raise the local currency
portions of project development costs. Another recent innovation in the
Soviet aid program has appeared in India, where the USSR agreed to train
Indian engineers on the job before their departure for further training
in the USSR. India and the USSR also agreed-to the Soviet-sponsored
training of Ceylonese engineers at the Bhilai steel ;plant in India. In
both cases the training costs are reduced fur the recipient country, as
is the length of time its trainees would have to spend in the Bloc.
Another recent feature of the Soviet offensive has been the intensifica-
tion of the efforts of the USSR to extend its international air routes
in Africa and Latin America. Although most of the new routes do not
appear to be economically feasible, they undoubtedly are viewed by
Soviet leaders as a means for enhancing Soviet prestige in the less
developed areas.
Economic and Military Aid
The Bloc extended about $300 million in economic aid to underde-
veloped countries during the first half of {962, the lowest level of
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new extensions for any 6-month period since the first half of 1959.
Drawings against earlier lines of credit, however, reached their
highest 6-month total. Extensions by the USSR during this period a;)-
proximated the level of its aid for the first half of 1961. Euurope.Ln
Satellite extensions, however, amounted to only 40 percent of the
volume of aid provided during the comparable period in 1961, and the
Chinese Communists extended no new aid during the first half of 196.
By the end of June 1962 the cumulative total of Bloc economic
credits and grants amounted to nearly $4.9 billion.* Almost three-
fourths of this total was extended by the USSR, with the major sham
of aid (70 percent) being allocated to the Middle East and Asia.
Drawings on Bloc credits and grants during the first half of 1962
totaled about $225 million, an increase of 45 percent over the ?-:recE.d-
ing 6-month period. By the end of June 1962, about 25 percent Of total
Bloc economic aid had been drawn. Of the total drawn, the USSR accc_zntei
for about 73 percent. Repayments of Bloc economic credits are estimi,ted
to total about $165 million, or about 14 percent of the amount drawn.
More than three-fourths of the total repayments were by India, Indonesia
the UAR, and Yugoslavia.
The USSR concluded new military aid agreements with Indonesia, 14rocs(
and Syria during the first half of 1962. The Indonesian agreement a.' -one
amounts to about $70 million. The size of the Syrian agreement is n
involvement in the country and to try, cautiously and tentatively, to dig
velop countervailing relations with the West. Economic assistance -was
received from several Western countries, but new credits totaling about
$15 million were extended by the USSR and Bulgaria. Guinea's trade wits
the Bloc continued to expand and in 1961 accounted for about one-third
of Guinea's total trade.
Ghanaian and Malian relations with the Bloc, already intimate a-id
extensive, progressed further. Bloc penetration of vital sectors o
the economy offered possibilities for influencing the course of eco-iomi
development in these countries. Bloc influence proceeded rapidly i:l
Mali because of Malian preoccupation with curtailing French influence
and eliminating internal opposition to the regime. The USSR extended a
credit of $11 million to Mali. In Ghana, in spite of continuet ind.! ca-
tions that military aid might be accepted from the Bloc, the -ritern:l
security forces remained free of Bloc influence, although in the fi-old
of mass organizations and economic cooperation the Bloc role expandk:d.
There were no significant developments in Ethiopia's relations with.
the Bloc. About $2 million has been drawn on the $100 millionn3ovi,t
credit extended in 1959. Delays continued to prevent initiation of con-
struction of the oil refinery at Assab.
In Morocco the Bloc apparently gained entry into the army, ol1owin
the signing of a $4 million military aid agreement. Morocco received at
economic credit from Poland totaling about $5 million. The USSR coLiplete
a survey of a shipyard at Tangier and reportedly offered to undertae tre
project.
In Tunisia, Sudan, and the Somali Republic, limited progress wa: ma4e
by the Bloc in implementing economic aid programs already negotiate(:. In,
Bloc for the first time established cooperative relations with some_oftn=_
relatively pro-Western states belonging to the UAM (Union of Africar and
Malagasy States). Trade, cultural, and technical assistance agreements
were concluded with Niger, Dahomey, and Senegal. The two latter cotntrie:
also agreed to exchange ambassadors with Bloc countries.
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Limited Bloc advances were made in Nigeria, where Soviet and Czecho-
slovak embassies were established. Czechoslovakia extended a credit of
undetermined size for construction of industrial plants. No significant
Bloc effort was made in newly independent Tanganyika, however, nor were
standing Soviet military and economic aid offers taken up by the Congo
Republic (Leopoldville).
The USSR made rapid strides in the civil aviation field and concluded
agreements to establish Aeroflot routes in the East (Cairo-Khartoum)
and in the West (Rabat-Conakry-Bamako-Accra), although it has not yet
succeeded in negotiating a transverse link across middle Africa. The
Czechoslovak airline increased its service on its existing West African
run.
Although the Bloc continued to expand its training of Africans, some
student dissatisfaction and defections occurred, primarily in Soviet in-
stitutions. However, even if only a small proportion of African students
are converted in the Bloc, a substantial working nucleus of loyal Com-
munist agents probably is being created for future use in African coun-
tries, including present Western dependencies.
On the international political scene as it concerned Africa, the
Bloc took extreme demagogic positions demanding precipitate and uncon-
ditional independence for African populations in such controversial or
sensitive areas as Rwanda, Burundi, the Federation of Rhodesia and
Nyasaland, South-West Africa, Angola, Mozambique, and the Republic of
South Africa, sometimes outdistancing even the most radical African
states in the simplicity and vehemence of its demands.
Asia
The Sino-Soviet Bloc made substantial gains in its economic and
military aid program to several different Asian countries during the
first 6 months of 1962. In most instances, skillful Bloc exploitation
of domestic difficulties or political frictions with neighboring coun-
tries increased the receptivity of local governments to Bloc overtures.
Soviet economic and military ties with Afghanistan and Indonesia in-
creased markedly during the review period.
Strong Soviet support for Afghanistan in its dispute with Pakistan
and a new Soviet credit of $89 million increased Afghanistan's dependence
on the Bloc. The USSR gained entrance into new fields, such as education,
geological survey, and housing -- areas where it had previously had little
influence. The new Soviet credit increased the total of Soviet Bloc
credits and grants to Afghanistan to more than one-half billion dollars,
much of it on extremely favorable terms. Work continued on a number of
different projects, and a new cultural agreement, an agreement on coopera-
tion and training in meteorology, and the institution of Russian-language
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training in. Afghanistan typified the continued increase of the Bloc's
presence in this strategic country connecting the USSR with the Indian
subcontinent.
India's relations with the Soviet Bloc were characterized by a con-
tinued guarded expansion on the part of the Indian Government. Relation-
with Communist China experienced a precipitous decline as a result of col_--
tinued military clashes with Peiping along India's northern frontier.
Among the more important developments during the period were the purchas
of helicopters and transport planes from the USSR, a Soviet contract to
provide India with jet aircraft engines, and a Soviet offer to supply
India with two squadrons of MIG-21 jet fighters together with the manu-
facturing facilities to produce more of these aircraft. The Soviet-
constructed Bhilai steel mill and the Rumanian-constructed Gauhati -oil
refinery both went into production, although the latter was forced to
close down shortly afterward because of a change in the grade of crude
oil produced in the Gauhati fields. India's trade with the Bloc in-
creased by about 30 percent in 1961, although trade with Communist China
fell off sharply and was expected to fall further during 1962.
Although the implementation of Soviet Bloc projects in Ceylon con-
tinued at a slow pace, Moscow was in a position to expand its influence
in that country as a result of Ceylon's political instability, domestic
financial problems, and balance-of-payments difficulties. A number of
key Ceylonese leaders stated their belief that the techniques of econom -
development followed in the Bloc might be adopted advantageously Jr, Ceyl:o.
Several state corporations have been created to expand the functions of
the public sector. Ceylon's trade with the Bloc declined sharply ii l99 .
but is expected to increase rapidly during 1962 as a result of contracts
which call for the USSR and the European Satellites to take about 5) peg-
cent of Ceylon's output of raw rubber and almost all of its sheet rabbe^.
The Bloc also will provide about one-fourth of Ceylon's petroleum requi^_-
ments, with Bloc POL products being distributed through a newly forned
government-owned corporation.
Developments in Nepal saw a leveling off in Soviet activity and in-
creased ties with Communist China. Although the Soviet hospital near
Katmandu was nearing completion, the USSR announced that work on all
projects would be suspended if Nepal failed to meet local currency post..
Toward this end the USSR extended a credit of $3 million to Nepal to pu
chase Soviet commodities to be sold in Nepal. The USSR completed tie s-z-?-
vey of the part of the east-west highway for which it was responsible b r
refused to agree to undertake a survey of the rest of the highway. On .:..
other hand, work continued on all Chinese Communist projects during the
period, and the number of Chinese Communist technicians increased. Pei:): _ti
also delivered the first of three gift aircraft to the Nepalese Govlavii-
debt to the USSR.
Tito made some purchases of military hardware from the US,:$R, in.elud:i
tanks and artillery, for the first time since the 1948 break. Yugolav
sources denied, however, that these purchases represented any change in
Belgrade's policy of independence from the Bloc, claiming that they wer( designed to help Yugoslavia conserve its severely limited supply of hare
currency.
Agreements were signed by Yugoslavia with Rumania and Bulgaria or t >
construction of a major hydroelectric combine at the Danube's Iron (:atee
and for a long-discussed highway linking Belgrade and Sofia via Dmitrov-
grad. A major rail link with Hungary was opened with the finishing of
reconstruction of a Danube River bridge in May. Yugoslav shipyards were,
working on 9 small tankers and 12 freighters for the USSR, to oe delivers:'.
by 1965.
No Bloc technicians were known to be active in Yugoslavia during the
reporting period. There was, however, a series of exchanges of observers
with several Bloc countries, including parliamentary delegations, tr3.de
union officials, and journalists. Belgrade granted the USSR landing
rights at the new Surcin airfield near the capital for the Soviet ciril
air carrier Aeroflot on its newly established Moscow-Accra run beginz ing
in August.
There was no change in Bloc relations with Iceland, Spain, and P~}rtu-
gal. The trade of all three countries with the Bloc in 1961 experienced
a small decline from the levels achieved in 1960.
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ECONO,IT..C INTELLIGENCE REPOR
SINO-SOVIET R 00 ECONOMIC ACT
IN UN -I a FI EVELOPED AREA 3
1 JANUARY-30 JUNE 1962
itJN AAR1(
(The complete text of =Dais r port has been published ser arr:
EIS-: R4-S13
31 August 1962
ECONOMIC INTELLIGENCE COM. M I-
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SINO-SOVIET BLOC ECONOMIC ACTIVITIES IN UNDERDEVELOPED AELAS
1 JANUARY - 30 JUNE 1962
Summary*
Patterns and Prospects
The growing Bloc presence in the less developed areas has been nark
by changes in both the scope and the character of the Bloc poaiticofcon?n
offensive. Over the past year the offensive has evidenced significznt
shifts in the levels of extensions and drawings and in the coneentri:tioa
of aid.** A dramatic expansion in Bloc training of nationals from indet-
developed countries as well as recent technical innovations in the Eovit:t
aid program further suggests the continuing dynamics of the Bloc's thrust
into these areas.
A sharp drop in Bloc extensions of economic aid occurred ia_-ing the
first half of 1962, when new extensions totaled $300 million.01", U ! de-
cline in new extensions by the European Satellites and Communist Crdria
was particularly drastic, the latter extending no new aid so fa_ in 19
Soviet extensions, which ran at about $800 million a year in 19'-,9 a1
1960, in 1961 declined to a little more than $500 million and Li the
first half of 1962 continued at about the same rate ($250 mill.ic)n
through June). Drawings against earlier Bloc credits, however, con.
tinued to increase, reaching a 6-month total of $225 million.
This drop in extensions has been accompanied, on the one hand, by a
growing number of official Soviet statements emphasizing the limits -o
Soviet aid capabilities and, on the other, by new Soviet offers. So `ar
unaccepted, of at least $900 million in economic aid. In recent Soviet
pronouncements on foreign aid, greater stress has been laid on .rte " acr
fices" which economic aid has cost the Soviet economy and on tier neei fo-?
developing countries to rely chiefly on their own internal rescol_rces for
economic progress. In spite of this apparent shift in the official 'iovifA
position on foreign aid, however, the evidence does not appear to surest
a lessening of interest on the part of the USSR in its foreign aid pe-ogr?i
Almost 80 percent of total Bloc extensions since mid-1961 lave been
awarded to Cuba, Afghanistan, and a half-dozen countries in Africa.
In Cuba, $457 million in Bloc economic development credits, purciase..
* Figures 1, 2, and 3 from the full text of the report are includr,i
in this summary following p. 15.
For details, see the summary table, p. 1E+, below.
Dollar values in this report are in terms of current US dollars-
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of more than 80 percent of the Cuban sugar crop, and possible credits to
finance commodity imports on current account indicate the Bloc-Is willing-
ness to give large-scale support to its "socialist bridgehead" in the
Western Hemisphere. In Afghanistan the USSR made available another $300
million in economic credits, making total Soviet aid to Afghan economic
development more than $500 million. With both economic and military
assistance the USSR seeks to preempt all foreign influence on the de-
velopment of this isolated and strategically located neighbor.
The third major area which has been the recipient of a large share
of Bloc economic aid during the past year is Africa, particularly West
Africa. In the large number of small African countries, generally un-
stable politically and with bleak economic prospects, the Bloc can en-
hance its influence and prestige with smaller foreign aid outlays than
are required in such countries as India and the United. Arab Republic
(UAR).
The continued scrutiny of the aid program which must occur at
various levels of the Bloc hierarchy, particularly that of the USSR,
has led recently to significant changes in the procedures and tech-
niques of Bloc aid. For the most part, these changes appear to reflect
a developing sophistication and flexibility in the conduct of an effec-
tive aid program as well as the desire to maximize the politicoeconomic
return per ruble of aid extended. The progress of development programs
in most underdeveloped countries is often slowed by the inability or un-
willingness of the recipient government to allocate sufficient domestic
resources to development projects. In some of the countries receiving
Soviet assistance the USSR has found it necessary to provide commodities
for sale in their domestic markets in order to raise the local currency
portions of project development costs. Another recent; innovation in the
Soviet aid program has appeared in India, where the USSR agreed to train
Indian engineers on the job before their departure for further training
in the USSR. India and the USSR also agreed to the Soviet-sponsored
training of Ceylonese engineers at the Bhilai steel plant in India. In
both cases the training costs are reduced for the recipient country, as
is the length of time its trainees would have to spend in the Bloc.
Another recent feature of the Soviet offensive has been the intensifica-
tion of the efforts of the USSR to extend its international air routes
in Africa and Latin America. Although most of the new routes do not
appear to be economically feasible, they undoubtedly are viewed by
Soviet leaders as a means for enhancing Soviet prestige in the less
developed areas.
Economic and Military Aid
The Bloc extended about $300 million in economic aid to underde-
veloped countries during the first half of 1962, the lowest level of
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new extensions for any 6-month period since the first half of 1959.
Drawings against earlier lines of credit, however, reached their
highest 6-month total. Extensions by the USSR during this period a--
proximated the level of its aid for the first half of 1961. Eu ropemn
Satellite extensions, however, amounted to only 40 percent of the
volume of aid provided during the comparable period in 1961, and th
Chinese Communists extended no new aid during the first half of 196'.
By the end of June 1962 the cumulative total of Bloc economic
credits and grants amounted to nearly $4.9 billion.* Almost f,kiree-
fourths of this total was extended by the USSR, with the major sharee
of aid (70 percent) being allocated to the Middle East and Asia..
Drawings on Bloc credits and grants during the first half of 19f,2
totaled about $225 million, an increase of 45 percent over the precEd-
ing 6-month period. By the end of June 1962, about 25 percent of total
Bloc economic aid had been drawn. Of the total drawn, the USSR accc,unted
for about 73 percent. Repayments of Bloc economic credits are estimated
to total about $165 million, or about 14 percent of the amount irawr.
More than three-fourths of the total repayments were by India, Indoresiai
the UAR, and Yugoslavia.
The USSR concluded new military aid agreements with Indonesia, Moroe
and Syria during the first half of 1962. The Indonesian agreement alone
amounts to about $70 million. The size of the Syrian agreement is nit
known, but it may be as high as $40 million. The Soviet-Moroccan militarf"
agreement totals about $4 million.
The aggregate value of military supplies and equipment whi(Lh has beeei
and will be provided under Bloc agreements with 12 underdeveloped conlntp?f
now totals more than $2.5 billion. Indonesia is the major recipient, ac
counting for about $1 billion. About $1.8 billion of total Bloc mils_tar'=
aid is being financed under credit. About $655 million is estimated to
have been repaid on Bloc military credits. Indonesia and the UAR pra,vidf=i-
about three-fourths of total repayments.
Technical Assistance
During the first half of 1962, about 12,000 Bloc technicians of all
types were present in underdeveloped countries. The number of military
technicians increased by more than 40 percent above the previous ha]'-
year, compared with a rise of only 14 percent in economic technicians.
* All figures concerning the Bloc's aid program through 1961 have been
audited. The result of the audit plus subsequent receipt of addition-al
information have necessitated a revision of some of the figures presented
in previous issues of this report.
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Of about 9,600 economic technicians present in 28 underdeveloped coun-
tries, nearly half were employed in Afghanistan, Cuba, and Guinea.
More than 2,500 Bloc military technicians were present in 11 un-
derdeveloped countries during the first 6 months of 1962. More than
three-fourths of the total were located in Cuba, Indonesia, Iraq, and
the UAR. Indonesia and the UAR accounted for about 85 percent of the
increase during the 6-month period, reflecting a large-scale implementa-
tion of military agreements concluded earlier.
During the period under review, about 5,300 nationals from underde-
veloped countries undertook training at academic, technical, or military
training centers in the Bloc. Of the total, more than 2,860 students
undertook academic and technical training programs. That 2,1+60 military
personnel undertook training programs in the Bloc during this period is
a reflection of the rapid implementation of military aid agreements con-
cluded during the past year.
This large increase in the number of students and trainees raises to
almost 27,000 the number who have had some training in the Bloc since
1955. More than 17,000 were engaged in academic and technical training
courses. The total of 10,000 personnel who have undertaken military
training approximates the number of academic students for the first time.
Trade
TTe trend of Bloc trade with the underdeveloped countries was charac-
terized by the large increase in trade with Cuba and the declining level
of commodity prices. The value of trade between the two areas during
1961 amounted to $3.1- billion, an increase of about 20 percent above the
1960 level. The rise was almost entirely due to an increase of $600 mil-
lion in Bloc-Cuban trade. If Cuban trade is excluded, Bloc trade with
the underdeveloped countries for 1961 would register a small decline.
To some extent the decline in the value of trade between the two
areas was due to a declining trend in commodity prices. These declines
were particularly significant for some of the major commodities imported
by the Bloc from the underdeveloped countries -- for example, cocoa,
cotton, rubber, and tobacco. Whereas the value of Bloc imports from
Indonesia and Malaya declined somewhat, the volume of rubber imported
from these countries rose about 30 percent. The value of Bloc imports
of cocoa from Ghana declined about 55 percent, but the volume of these
imports fell only 1+0 percent.
'Trade between the Bloc and Africa and the Far East rose about 8 per-
cent and 1+ percent, respectively. Trade with the Middle East declined
slightly as a result of a 10-percent drop in the Bloc's total trade with
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Greece, Turkey, and the UAR. Trade with the underdeveloped countries o -
Europe declined almost 15 percent owing to a sharp drop in trade wit--;h
Yugoslavia.
Latin America
Economic relations between the countries of the Sino-Soviet Blo an(
Latin America did not expand greatly during the first 6 months of 1(+62.
Except for Cuba, where the Communist countries found it necessary tcc
shore up the sagging Cuban economy, the Bloc was content to await the
development of the Alliance for Progress. Moscow concentrated on pz?opa-
ganda efforts designed to discredit-the Alliance as a "Yankee tool cf
neocolonialism," and Latin American countries, for their part, were re-
luctant to move toward closer economic ties with the Bloc at a time whet
the Alliance is at a critical proving stage. In two South American cour-
tries, however, there were important breakthroughs by the Bloc which coulc
lead to an increase in its influence in those areas.
In Bolivia the issue of whether or not to accept previous offere of
Soviet Bloc aid continued to be hotly debated. In general, the governmea
of President Paz favored postponing acceptance of such aid in ue hope
that Bolivia's aspirations might be realized through the Alliance for
Progress. Pressure on the government from leftist labor groups, however,
finally brought about the signing of a contract for Bolivia's first Bloc
aid project. Czechoslovakia was awarded a contract to construct an cnt-
mony smelter in the city of Oruro. A credit of $1.9 million was extendei
to cover the foreign exchange costs of the project. Although the Soviet
Ambassador to Mexico in a visit to La Paz urged closer Bolivian eeors._imic
and diplomatic ties with the USSR, no further moves were made in the
direction of accepting the $150 million offer of developmental aid m-jde
by the USSR more than a year ago.
Brazil's resumption of diplomatic relations with the USSR late i:i
1961 opened the way to a significant increase in economic contracts Je-
tween those two countries. A trade protocol was signed at the end or
April which set a goal for trade during 1962 at $80 million, twice t;ie
amount of their total trade in 1961. To stimulate interest in buyin,
from the USSR as well as to depict the technical advances and :unproved
living standards of the Communist countries, a large trade and indus-
trial fair was held in Rio during the month of May and was visited by
about one-half million Brazilians. Czechoslovakia continued its com-
mercial activity in the Brazilian Northeast, assigning a commercial
attache' to the city of Recife, where a special effort is being made :o
sell Czechoslovak commodities. There were discussions of possible B_oc
credits held with several state and local government officials, but ap-
parently no agreements were concluded during the first 6 months of 1362.
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In the case of Cuba, an extremely disappointing sugar harvest left
that country largely dependent on the Soviet Bloc. The Castro regime
had expected a rising level of sugar sales in 1962 to bring some im-
provement in an increasingly bleak economic picture. The program of
industrialization, to be accomplished with Bloc help in the amount of
nearly one-half billion dollars in credits, had not progressed very
far. Moreover, the efforts of Bloc technicians to aid the Cubans in
operating the various nationalized industries had not been sufficient
to prevent the gradual deterioration resulting from the lack of spare
parts and inept managerial coordination by the regime. Thus Cuba con-
tinued to be dependent on foreign trade earnings for most of its indus-
trial goods and a great part of its foodstuffs. The decrease in poten-
tial foreign exchange earnings resulting from the low sugar yield, added
to the decline in domestic output in nearly every sector, threatened
Cuba with even greater shortages of consumer goods and raw materials and
compelled it to seek additional help from Moscow.
Accordingly, in March the Cubans began to seek adjustments in their
trade protocols with Bloc countries. The original agreements with the
Bloc had set total trade for 1962 at more than $1 billion, an increase
of about $200 million above 1961. In spite of Cuba's inability even to
meet its sugar commitments to the Bloc, the revised protocols showed no
diminution in the total volume of Cuban imports from those countries and
even showed a rise in the case of the USSR. Thus it would appear that the
USSR has agreed to carry some Cuban purchases on credit during Cuba's
present economic difficulties. Early in 1962 the USSR also extended an
additional credit of $100 million for Cuba's industrial development,
bringing the total Bloc commitment to $457 million. There were indica-
tions, however, that Moscow might have imposed sterner conditions on the
Cubans in exchange for aid. Soviet and European Satellite officials com-
plained of Cuban inefficiency and bungled attempts at socialist planning.
At least two technical delegations traveled to Cuba, apparently to impose
some reforms on the Cuban administrative mechanism.
Early in the year, Cuba received 6 submarine chasers and 12 motor
torpedo boats. Around the end of the period under review, there were in-
dications that increased deliveries of military equipment were to begin.
Although there were at least two substantial sales of Argentine wheat
to Communist China during the period of this report, trade with the Bloc
continued at a low level. Construction equipment and machinery under the
Soviet line of credit were delivered. Argentina's trade agreement with
the USSR -- the last of its bilateral agreements with Bloc countries --
was denounced shortly after the ouster of President Frondizi by anti-
Communist military groups, with Argentina still in a creditor position.
Uruguay, another Latin American country whose trade with the Bloc has
fallen off considerably in recent years, succeeded in obtaining an order
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for 15,000 tons* of beef from the USSR (valued at about $7 million) at
another from East Germany for 2,000 tons, at a time when Uruguay's mean-
industry is suffering from reduced sales to Western European frkev-s.
Czechoslovakia also purchased 800 tons of Uruguayan beef, paying f)r iE
with industrial alcohol transshipped from Cuba.
Soviet interest in purchasing 60,000 tons of copper and efnifa ricf
copper products from Chile was revived in February, but agreement of
military equipment, by an increase in the number of economic and mi:-_itaal
technicians, and by a series of commercial agreements which further pre--
empted markets formerly held by Western firms. By continuing to su;::apori
Kassem on the Kuwait issue, the USSR secured such political dividends as
fewer restrictions on the Iraqi Communist Party and the appointment of
more Communists and fellow travelers to positions in the Kassem govern-
ment.
* Unless otherwise indicated, tonnages are given in metric tons through4
out this report.
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Continued instability in the Syrian Government following a military
coup early in 1962 acted to limit increases in Bloc economic activity in
the Syrian Arab Republic, although work on several projects continued.
The weakness in the government, however, did give the 'local Communist
Party some opportunity to reassert itself after a period of severe re-
pression which it had undergone during previous months. A Syrian mili-
tary mission which had visited Moscow in February apparently obtained
Soviet agreement to provide more military aid. The details of the agree-
ment are not known, but it may be as high as $40 million.
In the UAR, Nasser's determination to maintain a balanced course be-
tween East and West prompted him to continue seeking economic assistance
from both sides. Czechoslovakia extended a new credit of about $57 mil-
lion for the UAR's development program. Progress continued on various
Bloc aid projects in Egypt. The USSR pressed forward with the implemen-
tation of the Aswan Dam. UAR press announcements expressed confidence
that the High Dam would be completed as scheduled in 1964. The USSR
stepped up the pace of deliveries of military equipment to the UAR.
Deliveries are expected to include MIG-21's and guided missiles. Early
in 1962 the USSR delivered two destroyers and a submarine. UAR-Bloc
trade in 1961 experienced a sharp decline as a result of the UAR's poor
cotton harvest.
In Yemen, Bloc economic activity remained at a virtual standstill.
The primary Bloc objective continued to be to obtain some kind of foot-
hold so as to be able to exert political and economic influence in this
strategic area near the Red Sea when the time seems propitious. The
first half of 1962 was marked by the absence of any new Bloc credits, by
Chinese Communist delay in the building of a textile plant, and by criti-
cism of the quality of the Soviet-constructed port facilities at Al
Hudaydah. Probably the most significant Bloc activity in Yemen was the
increased influence over the local press and certain trade circles through
bribery.
Elsewhere in the Middle East,.Moscow continued to be unsuccessful in
its efforts, begun more than 2 years ago, to persuade Turkey to accept
an offer of about $500 million in aid credits. In Iran, Moscow continued,
also unsuccessfully, to press for a nonaggression treaty. In Cyprus, how-
ever, Cypriot apprehensions regarding the Common Market enabled the Bloc
to negotiate a number of bilateral trade agreements which, together with
an agreement concluded with Moscow in 1961, involved potential trade of
about $14 million, double the value of Cypriot-Bloc trade in 1961. Greek
trade with the Bloc in 1961 continued its upward trend, with the Bloc ac-
counting for 20 percent of Greece's exports and 10 percent of its imports.
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Africa
Bloc influence in Africa, although marked by a variety of rconflf -It-
ing trends, continued to expand. The solid front presented by the Africi3
countries associated with the French community was broken as several coul
tries in this group signed their first trade, cultural, and teertnic81 as-
sistance agreements with the Bloc. New economic credits were extend>d tt
Guinea, Mali, and Morocco. The new Soviet aid to Guinea offset, somewhat
the strained relations which existed between the two countries early in
1962.
Toward the end of 1961, Guinea began to move to limit additional Blo:._
involvement in the country and to try, cautiously and tentatively, to d
velop countervailing relations with the West. Economic assistance was
received from several Western countries, but new credits totaling ab.)ut
$15 million were extended by the USSR and Bulgaria. Guinea's trade "rith
the Bloc continued to expand and in 1961 accounted for about ore-this'd
of Guinea's total trade.
Ghanaian and Malian relations with the Bloc, already intimate anA
extensive, progressed further. Bloc penetration of vital sectors of
the economy offered possibilities for influencing the course of econ m.Lc
development in these countries. Bloc influence proceeded rapid?y in
Mali because of Malian preoccupation with curtailing French in7laenc- '
and eliminating internal opposition to the regime. The USSR extender a
credit of $11 million to Mali. In (Tana, in spite of continued indi,a-
tions that military aid might be accepted from the Bloc, the internalL
security forces remained free of Bloc influence, although in the field
of mass organizations and economic cooperation the Bloc role expander:..
There were no significant developments in Ethiopia's relations with
the Bloc. About $2 million has been drawn on the $100 million Sovie:l.
credit extended in 1959. Delays continued to prevent initiation of con-
struction of the oil refinery at Assab.
In Morocco the Bloc apparently gained entry into the army, f:_tllocing
the signing of a $1i million military aid agreement. Morocco received an
economic credit from Poland totaling about $5 million. The USSR completei
a survey of a shipyard at Tangier and reportedly offered to undertake the
project.
In Tunisia, Sudan, and the Somali Republic, limited progress was made
by the Bloc in implementing economic aid programs already negotiated. The
Bloc for the first time established cooperative relations with some C,f th
relatively pro-Western states belonging to the UAM (Union of African ':nd
Malagasy States). Trade, cultured, and technical assistance agreements
were concluded with Niger, Dahomey, and Senegal. The two latter cour-trie3
also agreed to exchange ambassadors with Bloc countries.
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Limited Bloc advances were made in Nigeria, where Soviet and Czecho-
slovak embassies were established. Czechoslovakia extended a credit of
undetermined size for construction of industrial plants. No significant
Bloc effort was made in newly independent Tanganyika, however, nor were
standing Soviet military and economic aid offers taken up by the Congo
Republic (Leopoldville).
The USSR made rapid strides in the civil aviation field and concluded
agreements to establish Aeroflot routes in the East (Cairo-Khartoum)
and in the West (Rabat-Conakry-Bamako-Accra), although it has not yet
succeeded in negotiating a transverse link across middle Africa. The
Czechoslovak airline increased its service on its existing West African
run.
Although the Bloc continued to expand its training of Africans, some
student dissatisfaction and defections occurred, primarily in Soviet in-
stitutions. However, even if only a small proportion of African students
are converted in the Bloc, a substantial working nucleus of loyal Com-
munist agents probably is being created for future use in African coun-
tries, including present Western dependencies.
On the international political scene as it concerned Africa, the
Bloc took extreme demagogic positions demanding precipitate and uncon-
ditional independence for African populations in such controversial or
sensitive areas as Rwanda, Burundi, the Federation of Rhodesia and
Nyasaland, South-West Africa, Angola, Mozambique, and the Republic of
South Africa, sometimes outdistancing even the most radical African
states in the simplicity and vehemence of its demands.
Asia
The Sino-Soviet Bloc made substantial gains in its economic and
military aid program to several different Asian countries during the
first 6 months of 1962. In most instances, skillful Bloc exploitation
of domestic difficulties or political frictions with neighboring coun-
tries increased the receptivity of local governments to Bloc overtures.
Soviet economic and military ties with Afghanistan and Indonesia in-
creased markedly during the review period.
Gtrong Soviet support for Afghanistan in its dispute with Pakistan
and a new Soviet credit of $89 million increased Afghanistan's dependence
on the Bloc. The USSR gained entrance into new fields, such as education,
geological survey, and housing -- areas where it had previously had little
influence. The new Soviet credit increased the total of Soviet Bloc
credits and grants to Afghanistan to more than one-half billion dollars,
much of it on extremely favorable terms. Work continued on a number of
different projects, and a new cultural agreement, an, agreement on coopera-
tion and training in meteorology, and the institution of Russian-language
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training in Afghanistan typified the continued increase of the Bloc's
presence in this strategic country connecting the USSR with the Ind=.an
subcontinent.
India's relations with the Soviet Bloc were characterized by a (on
tinued guarded expansion on the part of the Indian Government. Relz.tior?
with Communist China experienced a precipitous decline as a result cf ccr
tinued military clashes with Peiping along India's northern frontier.
Among the more important developments during the period were the purcha.?
of helicopters and transport planes from the USSR, a Soviet contract to
provide India with jet aircraft engines, and a Soviet offer to supp3y
India with two squadrons of MIG-21 jet fighters together with the mEnu
facturing facilities to produce more of these aircraft. The Soviet
constructed Bhilai steel mill and the Rumanian-constructed Gauhati cil
refinery both went into production, although the latter was forced to
close down shortly afterward because of a change in the grade of crt:.de
oil produced in the Gauhati fields. India's trade with the Bloc in-
creased by about 30 percent in 1961, although trade with Communist (hire
fell off sharply and was expected to fall further during 1962.
Although the implementation of Soviet Bloc projects in Ceylon con-
tinued at a slow pace, Moscow was in a position to expand its influ?nce
in that country as a result of Ceylon's political instability, dome#tic
financial problems, and balance-of-payments difficulties. A number of
key Ceylonese leaders stated their belief that the techniques of eccnomi2
development followed in the Bloc might be adopted advantageously in Ceyl
Several state corporations have been created to expand the functions of
the public sector. Ceylon's trade with the Bloc declined sharply it 191
but is expected to increase rapidly during 1962 as a result of contracts-
which call for the USSR and the European Satellites to take about 5( per-
cent of Ceylon's output of raw rubber and almost all of its sheet rubber.
The Bloc also will provide about one-fourth of Ceylon's petroleum require-
ments,, with Bloc POL products being distributed through a newly formed
government-owned corporation.
Developments in Nepal saw a leveling off in Soviet activity and in-
creased ties with Communist China. Although the Soviet hospital near
Katmandu was nearing completion, the USSR announced that work on all
projects would be suspended if Nepal failed to meet local currency costs.
Toward this end the USSR extended a credit of $3 million to Nepal to pur-
chase Soviet commodities to be sold in Nepal. The USSR completed the sur-
vey of the part of the east-west highway for which it was responsible but
refused to agree to undertake a survey of the rest of the highway. On tbs:
other hand, work continued on all Chinese Communist projects during the
period, and the number of Chinese Communist technicians increased. Peivi.
also delivered the first of three gift aircraft to the Nepalese Governme}i
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A new Soviet military aid agreement with Indonesia highlighted the
accelerating tempo of Soviet military aid to that country. In the wake
of increasing tension between Djakarta and The Hague over West New
Guinea, Soviet deliveries included Tu-16 jet medium bombers, MIG-21 jet
fighters, submarines, ground-to-air and air-to-ground missiles, and a
wide range of other equipment. These weapons were accompanied by in-
creased numbers of Soviet military technicians and an expanded military
training program for Indonesian personnel. By 30 June the value of Bloc
military aid to Indonesia was estimated to be more than $1 billion. In
the economic field, efforts were made to speed up implementation of a
number of Bloc projects, and contracts were concluded for several new
projects, including a Czechoslovak mineral survey and Rumanian oil ex-
ploration. The completion, late in June, of a Soviet-constructed stadium
in Djakarta, to be used for the Asian Games beginning in August, was re-
garded as an important achievement.
Although no new Bloc credits were extended to Burma during the first
half of 1962, a military takeover of that country's government and sub-
sequent developments resulted in a number of anti-Western and pro-Bloc
statements and actions by the Burmese leadership and indications that
Bloc rather than Western aid will henceforth be considered preferable.
Implementation of projects under the Chinese Communist credit of $84+ mil-
lion continued, and it seemed likely that Communist China would dominate
future foreign aid programs in Burma. Burma's trade with the Bloc rose
sharply in 1961 and is expected to increase further in 1962.
In Cambodia, work continued on implementation of Bloc projects, along
with public official statements which described aid from the Bloc as more
disinterested than aid from the West. Although there were no new Bloc
credits, Czechoslgvakia conducted a trade fair, and the USSR made rapid
progress in constructing a technological institute.
Soviet Bloc economic activity in Pakistan during the first half of
1962 continued to be minimal. The arrival of additional technicians for
the Soviet oil exploration project increased the total number there to
about 80, but adverse reaction to reports of planned Soviet military aid
to India largely negated any pressures for further economic ties with
Moscow.
Europe
:Economic relations between Yugoslavia and the Soviet Bloc during the
first 6 months of 1962 reflected the expanding cooperation which developed
in political relations between Belgrade and Moscow. This increased cor-
diality did not characterize relations with Albania and Communist China,
whose inimical ideological stance toward the Belgrade "revisionists" was
reflected in a continued absence of large-scale trade with them. Although
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trade between Yugoslavia and the Bloc in 1961 declined about 12 percent,
agreements signed in 1962 presage an increase in trade between the two
areas. Annual protocols to existing long-term trade agreements were
signed with all the European members of the Bloc plus Communist China,
with most of these countries (Communist China and Albania being excep-
tions) calling for some increase in exchange levels. A 3-year agreement
concluded with the USSR envisages a "considerable increase" in trade fox
1963-65. Negotiations also were initiated for limited Yugoslav member-
ship in the Council for Mutual Economic Assistance (CEMA), for reinstate
ment of the Soviet credits originally extended in 1956 but subsequently
canceled by the USSR, and for deferment of installments due on Yugoslavs
debt to the USSR.
Tito made some purchases of military hardware from the USSR, includia,
tanks and artillery, for the first time since the 19+8 break. `,ugoilav
sources denied, however, that these purchases represented any 21-ange in
Belgrade's policy of independence from the Bloc, claiming that they were
designed to help Yugoslavia conserve its severely limited suppi;,: of lard
currency.
Agreements were signed by Yugoslavia with Rumania and Bulgaria for t iv_,
construction of a major hydroelectric combine at the Danube's Iron Gates
and for a long-discussed highway linking Belgrade and Sofia via Dmit-ov-
grad. A major rail link with Hungary was opened with the finishing s)f
reconstruction of a Danube River bridge in May. Yugoslav shipyards ,sere
working on 9 small tankers and 12 freighters for the USSR, to be delLver.
by 1965.
No Bloc technicians were known to be active in Yugoslavia luring the
reporting period. There was, however, a series of exchanges of observer:,
with several Bloc countries, including parliamentary delegations, trade
union officials, and journalists. Belgrade granted the USSR landing
rights at the new Surcin airfield near the capital for the Soviet civil
air carrier Aeroflot on its newly established Moscow-Accra run Leginaing
in August.
There was no change in Bloc relations with Iceland, Spain, and Pt)rtu.
gal. The trade of all three countries with the Bloc in 1961 experie-ced
a small decline from the levels achieved in 1960.
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Million
US dollars
,200 -
1,200-
BLOC
BLOC ECONOMIC CREDITS AND GRANTS TO UNDERDEVELOPED COUNTRIES
Extensions and Drawings, by Year, 1954-62
Mallon
us soi0s
5,000t
4,000
3,000
2,000--
,000
1,000
1,000--
BLOC
BLOC ECONOMIC CREDITS AND GRANTS TO UNDERDEVELOPED COUNTRIES
Extensions and Drawings, Cumulative, 1954-62
1954 1955 1956 1957 1958 1959 1960 1961 1962
1954 1955 1956 1957 1958 1959 1960 1961 196`
*Extrapolated using January -June 1962 data.
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r 4
SINO-SOVIET BLOC, ECONOMIC ACTIVITII
IN UNDERDEVELOPED AREAS
1 JANUARY-10 JUNE 1962
August 1962
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SINO-SOVIET BLOC ECONOMIC ACTIVITIES
IN UNDERDEVELOPED AREAS
1 JANUARY-30 JUNE 1962
August. 1962
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FOREWORD
For purposes of this report, the term underdeveloped area; includes
the following Free World countries: (1) all independent countries ?_n
Latin America; (2) all countries in the Middle East, including Cyprus,
Greece, the Syrian Arab Republic, Turkey, and the United Arab Fepub_ic
(Egypt); (3) all countries in Africa except the Republic of South
Africa; (4) all countries in South and Southeast Asia (including
Afghanistan and Pakistan); and (5) Iceland, Portugal, Spain, and Ywo-
slavia.
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CONTENTS
Summary . . . . . . . . . . . . . . . . .
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SINO-SOVIET BLOC ECONOMIC ACTIVITIES IN UNDERDEVELOPED AREAS
1 JANUARY-_ 30 JUNE 1 2
Summary
Patterns and Prospects
The growing Bloc presence in the less developed areas has een mark-
by changes in both the scope and the character of the Bloc poLiticoecan r!
offensive. Over the past year the offensive has evidenced significant
shifts in the levels of extensions and drawings and in the concentr-tio.-i
of aid. A dramatic expansion in Bloc training of nationals from un7erd-
veloped countries as well as recent technical innovations in ;lie Soviet
aid program further suggests the continuing dynamics of the Bloc's bhrulc.
into these areas.
A sharp drop in Bloc extensions of economic aid occurred Wiring the
first half of 1962, when new extensions totaled $300 million.- The de-
cline in new extensions by the European Satellites and Communist Ch_na
was particularly drastic, the latter extending no new aid so i'ar in 196,,,.
Soviet extensions, which ran at about $800 million a year in 1959 and
1960, in 1961 declined to a little more than $500 million and _n tho
first half of 1962 continued at about the same rate ($250 million
through June). Drawings against earlier Bloc credits,- however, con-
tinued to increase, reaching a 6-month total of $225 million.
This drop in extensions has been accompanied, on the one :and, by
a growing number of official Soviet statements emphasizing the limits
to Soviet aid capabilities and, on the other, by new Soviet offers, so
far unaccepted, of at least $900 million in economic aid. In recent
Soviet pronouncements on foreign aid., greater stress has been laid c_n
the "sacrifices" which economic aid has cost the Soviet economy and on
the need for developing countries to rely chiefly on their owr: internal
resources for economic progress. In spite of this apparent shift in
the official Soviet position on foreign aid, however, the evidence des
not appear to suggest a lessening of interest on the part of the USER
in its foreign aid program.
Almost 80 percent of total Bloc extensions since mid-1961 have bE~en
awarded to Cuba, Afghanistan, and a half-dozen countries in Africa.
In Cuba, $457 million'in Bloc economic development credits, purc:chase3
Dollar values in this report are in terms of current US dollars.
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of more than 80 percent of the Cuban sugar crop, and possible credits to
finance commodity imports on current account indicate the Bloc's willing-
ness to give large-scale support to its "socialist bridgehead" in the
Western Hemisphere. In Afghanistan the USSR made available another $300
million in economic credits, making total Soviet aid to Afghan economic
development more than $500 million. With both economic and military
assistance the USSR seeks to preempt all foreign influence on the de-
velopment of this isolated and strategically located neighbor.
The third major area which has been the recipient of a large share
of Bloc economic aid during the past year is Africa, particularly West
Africa. In the large number of small African countries, generally un-
stable politically and with bleak economic prospects, the Bloc can en-
hance its influence and prestige with smaller foreign aid outlays than
are required in such countries as India and the United. Arab Republic
(UAR).
The continued scrutiny of the aid program which must occur at
various levels of the Bloc hierarchy, particularly that of the USSR,
has led recently to significant changes in the procedures and tech-
niques of Bloc aid. For the most part, these changes appear to reflect
a developing sophistication and flexibility in the conduct of an effec-
tive aid program as well as the desire to maximize the politicoeconomic
return per ruble of aid extended. The progress of development programs
in most underdeveloped countries is often slowed by the inability or un-
willingness of the recipient government to allocate sufficient domestic
resources to development projects. In some of the countries receiving
Soviet assistance the USSR has found it necessary to provide commodities
for sale in their domestic markets in order to raise the local currency
portions of project development costs. Another recent inncvat:Ien in the
Soviet aid program has appeared in India, where the USSR agreed to train
Indian engineers on the job before their departure for further training
in the USSR. India and the USSR also agreed to the Soviet-sponsored
training of Ceylonese engineers at the Bhila3 steel plant in India. In
both cases the training costs are reduced for the recipient country, as
is the length of time its trainees would have to spend in the Bloc.
Another recent feature of the Soviet offensive has been the intensifica-
tion of the efforts of the USSR to extend its international air routes
in Africa and Latin America. Although most of the new routes do not
appear to be economically feasible, they undoubtedly are viewed by
Soviet leaders as a means for enhancing Soviet prestige in the less
developed areas.
Economic and Military Aid
The Bloc extended about $300 million in economic aid to underde-
veloped countries during the first half of 1962, the lowest level of
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new extensions for any 6-month period since the first half of 1959.
Drawings against earlier lines of credit, however, reached their
highest 6-month total. Extensions by the USSR during this period a-,-
proximated the level of its aid for the first half of 1961. Europe?.n
Satellite extensions, however, amounted to only 40 percent of the
volume of aid provided during the comparable period in 1961, and the
Chinese Communists extended no new aid during the first half of 196rocc
and Syria during the first half of 1962. The Indonesian agreement a'.one
amounts to about $70 million. The size of the Syrian agreement is n,t
known, but it may be as high as $40 million. The Soviet-Moroccan mi-!itazl
agreement totals about $4 million.
The aggregate value of military supplies and equipment which has been-
and will be provided under Bloc agreements with 12 underdeveloped contxia
now totals more than $2.5 billion. Indonesia is the major recipient. ac-
counting for about $1 billion. About $1.8 billion of total Bloc military
aid is being financed under credit. About $655 million is estimated to
have been repaid on Bloc military credits. Indonesia and the TJAR provided
about three-fourths of total repayments.
Technical Assistance
During the first half of 1962, about 12,000 Bloc technicians of ail
types were present in underdeveloped countries. The number of mi1ita-y
technicians increased by more than 40 percent above the previous calf--
year, compared with a rise of only 14 percent in economic technicians,
* All figures concerning the Bloc's aid program through 1961 have been
audited. The result of the audit plus subsequent receipt of add.ationr,;1
information have necessitated a revision of some of the figures presented
in previous issues of this report.
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Of about 9,600 economic technicians present in 28 underdeveloped coun-
tries, nearly half were employed in Afghanistan, Cuba, and Guinea.
More than 2,500 Bloc military technicians were present in 11 un-
derdeveloped countries during the first 6 months of 1962. More than
three-fourths of the total were located in Cuba, Indonesia, Iraq, and
the UAR. Indonesia and the UAR accounted for about 85 percent of the
increase during the 6-month period, reflecting a large-scale implementa-
tion of military agreements concluded earlier.
During the period under review, about 5,300 nationals from underde-
veloped countries undertook training at academic, technical, or military
training centers in the Bloc. Of the total, more than 2,860 students
undertook academic and technical training programs. That 2,460 military
personnel undertook training programs in the Bloc during this period is
a reflection of the rapid implementation of military aid agreements con-
cluded during the past year.
large increase in the number of students and trainees raises to
almost 27,000 the number who have had some training in the Bloc since
1955. More than 17,000 were engaged in academic and technical training
courses. The total of 10,000 personnel who have undertaken military
training approximates the number of academic students for the first time.
'I rade
Tt;e trend of Bloc trade with the underdeveloped countries was charac-
terized by the large increase in trade with Cuba and the declining level
of commodity prices. The value of trade between the two areas during
1961 amounted to $3.4 billion, an increase of about 20 percent above the
1960 level. The rise was almost entirely due to an increase of $600 mil-
lion in Bloc-Cuban trade. If Cuban trade is excluded, Bloc trade with
the underdeveloped countries for 1961 would register a small decline.
To some extent the decline in the value of trade between the two
areas was due to a declining trend in commodity prices. These declines
were particularly significant for some of the major commodities imported
by t:ie Bloc from the underdeveloped countries -- for example, cocoa,
cotton, rubber, and tobacco. Whereas the value of Bloc imports from
Indonesia and Malaya declined somewhat, the volume of rubber imported
from these countries rose about 30 percent. The value of Bloc imports
of cocoa from Ghana declined about 55 percent, but the volume of these
imports fell only 40 percent.
Trade between the Bloc and Africa and the Far East rose about 8 per-
cent and 4 percent, respectively. Trade with the Middle East declined
sligntiy as a result of a 10-percent drop izi the Bloc's total trade with
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Greece, Turkey, and the UAR. Trade with the underdeveloped countries of
Europe declined almost 15 percent owing to a sharp drop in trade wits
Yugoslavia.
Latin America
Economic relations between the countries of the Sino-Soviet Bloc and
Latin America did not expand greatly during the first 6 months ~f 1(9')2.
Except for Cuba, where the Communist countries found it necessary tc
shore up the sagging Cuban economy, the Bloc was content to await tr.--,
development of the Alliance for Progress. Moscow concentrated :n pr,-:pa-
ganda efforts designed to discredit the Alliance as a "Yankee tool cC
neocolonialism," and Latin American countries, for their part, were _-e-
luctant to move toward closer economic ties with the Bloc at a time when
the Alliance is at a critical proving stage. In two South American --oun
tries, however, there were important breakthroughs by the Bloc which coA..U_
lead to an increase in its influence in those areas.
In Bolivia the issue of whether or not to accept previous :).fens of
Soviet Bloc aid continued to be hotly debated. In general, the governmen7
of President Paz favored postponing acceptance of such aid in t;},-, ho)e
that Bolivia's aspirations might be realized through the Alliance fo
Progress. Pressure on the government from leftist labor groups, howeever.
finally brought about the signing of a contract for Bolivia's (first 31oe
aid project. Czechoslovakia was awarded a contract to construct an-anti,
mony smelter in the city of Oruro. A credit of $1.9 million w. exteendec_
to cover the foreign exchange costs of the project. Although the So-riet
Ambassador to Mexico in a visit to La Paz urged closer Bolivian economic
and diplomatic ties with the USSR, no further moves were made in the
direction of accepting the $150 million offer of developmental aid m-.de
by the USSR more than a year ago.
Brazil's resumption of diplomatic relations with the USSR late iii
1961 opened the way to a significant increase in economic contracts cce-
tween those two countries. A trade protocol was signed at the end o:'
April which set a goal for trade during 1962 at $80 million, twice tr:e
amount of their total trade in 1961. To stimulate interest in buyinz;
from the USSR as well as to depict the technical advances and improved
living standards of the Communist countries, a large trade and indus
trial fair was held in Rio during the month of May and was visited b
about one-half million Brazilians. Czechoslovakia continued its com-
mercial activity in the Brazilian Northeast, assigning a commercial
attachd to the city of Recife, where a special effort is being made to
sell Czechoslovak commodities. There were discussions of possible Bioc
credits held with several state and local government officials, cut a.:p-
parently no agreements were concluded during the first 6 months Df 1=,62.
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In the case of Cuba, an extremely disappointing sugar harvest left
that country largely dependent on the Soviet Bloc. The Castro regime
had expected a rising level of sugar sales in 1962 to bring some im-
provement in an increasingly bleak economic picture. The program of
industrialization, to be accomplished with Bloc help in the amount of
nearly one-half billion dollars in credits, had not progressed very
far. Moreover, the efforts of Bloc technicians to aid the Cubans in
operating the various nationalized industries had not been sufficient
to prevent the gradual deterioration resulting from the lack of spare
parts and inept managerial coordination by the regime. Thus Cuba con-
tinued to be dependent on foreign trade earnings for most of its indus-
trial goods and a great part of its foodstuff 3. The decrease in poten-
tial foreign exchange earnings resulting from the low sugar yield, added
to the decline in domestic output in nearly every sector, threatened
Cuba with even greater shortages of consumer goods and raw materials and
compelled it to seek additional help from Moscow.
Accordingly, in March the Cubans began to seek adjustments in their
trade protocols with Bloc countries. The original agreements with the
Bloc had set total trade for 1962 at more than $1 billion, an increase
of about $200 million above 1961. In spite of Cuba's inability even to
meet its sugar commitments to the Bloc, the revised protocols showed no
diminution in the total volume of Cuban imports from those countries and
even showed a rise in the case of the USSR. Thus it would appear that the
USSR has agreed to carry some Cuban purchases on credit during Cuba's
present economic difficulties. Early in 1962 the USSR also extended an
additional credit of $100 million for Cuba's industrial development,
bringing the total Bloc commitment to $457 million. There were indica-
tions, however, that Moscow might have imposed sterner conditions on the
Cubans in exchange for aid. Soviet and European Satellite officials com-
plained of Cuban inefficiency and bungled attempts at socialist planning.
At least two technical delegations traveled to Cuba, apparently to impose
some reforms on the Cuban administrative mechanism.
Early in the year, Cuba received 6 submarine chasers and 12 motor
torpedo boats. Around the end of the period under review, there were in-
dications that increased deliveries of military equipment were to begin.
Although there were at least two substantial sales of Argentine wheat
to Communist China during the period of this report, trade with the Bloc
continued at a low level. Construction equipment and machinery under the
Soviet line of credit were delivered. Argentina's trade agreement with
the USSR -- the last of its bilateral agreements with Bloc countries --
was denounced shortly after the ouster of President Prondizi by anti-
Communist military groups, with Argentina still in a creditor-position.
Uruguay, another Latin American country whose trade with the Bloc has
fallen off considerably in recent years, succeeded in obtaining an order
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for 15,000 tons* of beef from the USSR (valued at about $7 million) anc
another from East Germany for 2,000 tons, at a time when Uruguay's meat
industry is suffering from reduced sales to Western European markets.
Czechoslovakia also purchased 800 tons of Uruguayan beef, paying fcr it
with industrial alcohol transshipped from Cuba.
Soviet interest in purchasing 60,000 tons of copper and semifalrieat-0
copper products from Chile was revived in February, but agreement eppearr<
to stall over the list of goods which the USSR would send to Chile in ex-
change for the copper, as well as the type of copper products :cceptabla
to the USSR. The possibility of Soviet assistance for construction of a
copper smelter or a petroleum refinery in Chile was injected into the
negotiations. Poland was more successful in arranging a barter a;reeme"
with the Chileans, concluding an agreement for the exchange of 2 million
liters of Chilean wine for 1,500 tons of Polish butter and 5,000 tons of
fish meal.
A number of overtures were made by both sides toward the develoomenn
of economic relations between British Guiana and the Bloc. CzechosLova~
contracted to purchase from British Guiana 3,000 tons of rice valuei at
$1 million. Czechoslovakia and East Germany offered to construct a lar
number of small manufacturing enterprises.
Middle East
The over-all position of the Sino-Soviet Bloc in the Middle Eas1 du:..--
ing the first 6 months of 1962 remained relatively unchanged in spie o:'
an upsurge in military aid activities and the signing of a number of new
commercial agreements with Cyprus. Only in Iraq was the Bloc succe3sfu
in significantly expanding its political and economic influence in .3.
Middle Eastern country.
A new military agreement was concluded with Syria, and de..iverits o7
military equipment under earlier agreements with Iraq and the TT
AR w.>re
increased. Iraq's dependence on the USSR was marked by a definite -.rpsw:x
in the implementation of various economic projects and in deliveries; of
military equipment, by an increase in the number of economic and miJitai
technicians, and by a series of commercial agreements which further pre-
empted markets formerly held by Western firms. By continuing to su}~pori
Kassem on the Kuwait issue, the USSR secured such political dividenrLs a?
fewer restrictions on the Iraqi Communist Party and the appointment of
more Communists and fellow travelers to positions in the Kassem govern
ment.
* Unless otherwise indicated, tonnages are given in metric tons thxougr-
out this report.
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Continued instability in the Syrian Government following a military
coup early in 1962 acted to limit increases in Bloc economic activity
in the Syrian Arab Republic, although work on several projects continued.
The weakness in the government, however, did give the local Communist
Party some opportunity to reassert itself after a period of severe re-
pression which it had undergone during previous months. A Syrian mili-
tary mission which had visited Moscow in February apparently obtained
Soviet agreement to provide more military aid.
In ,he UAR, Nasser's determination to maintain a balanced course
between East and Nest prompted him to continue seeking economic assist-
ance from both sides. Czechoslovakia extended a new credit of about
$7 million for the UAR's development program. Progress continued on
various Bloc aid projects in Sgypt. The USSR pressed forward with the
implementation of the Aswan Dam. PAR press announcements expressed
confidence that the High Dam would be completed as scheduled in 1964.
The USSi*" stepped up the pace of deliveries of military equipment to
the UAR. Deliveries are expected to include MIG-21's and guided mis-
siles. UAR-Bloc trade in 1961 experienced a sharp decline as a result
of the IiA's poor cotton harvest.
In Yemen, Bloc economic activity remained at a virtual standstill.
The primary Bloc objective continued to be to obtain some kind of foot-
hold so as to be able to exert political and economic influence in
this strategic area near the Red Sea when the time seems propitious.
The first half of 1962 was marked by the absence of any new Bloc credits,
by Chinese Communist delay in the building of a textile plant, and by
criticism of the quality of the Soviet-constructed port; facilities at
Al Hudayd.ah. Probably the most significant Bloc activity in Yemen was
the increased influence over the local press and certain trade circles
through; bribery.
Ele`~here in the Middle East, Moscow continued to be unsuccessful
in its efforts, begun more than '_ years ago, to persuade Turkey to
accept an offer of about $;00 million in aid credits. in Iran, Moscow
continued{, also unsuccessfully, to press for a nonaggression treaty.
In Cypu;;, however, Cypriot apprehensions regarding the Common Market
eriable,'. he Bloc to negotiate a number of bilateral trade agreements
which, together with an agreement concluded with Moscow in 1961, in-
volved potential trade of about $14 million, double the value of
:`yprioi.-!loc trade in 1961. Greek trade with the Bloc in 1961 con-
tinued i1,s upward trend, with the Bloc accounting for 20 percent of
Greece's e ports and 10 percent of its imports.
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Africa
Bloc influence in Africa, although marked by a variety of c:,,nflic
ing trends, continued to exi)and. The solid front presented by the Af-'icai_-
countries associated with the French community was broken as several ~oun=-
tries in this group signed, their first trade, cultural, and technical as-
sistance agreements with the Bloc. New economic credits were e:x-tendeh to
Guinea, Mali, and Morocco. The new Soviet aid to Guinea offset ~mew'_at_
the strained relations which existed between the two countries early n
1962.
Toward the end of 1961, Guinea began to move to limit additlcnal floe
involvement in the country and to try, cautiously and tentative: , to de-
velop countervailing relations with the West. Economic assistance wa:
received from several Western countries, but new credits totaling abo
$15 million were extended by the USSR and Bulgaria. Guinea's trade w-th
the Bloc continued to expand and in 1961 accounted for about one-this.
of Guinea's total trade.
Ghanaian and Malian relations with the Bloc, already intimate and
extensive, progressed further. Bloc penetration of vital sectors oz
the economy offered possibilities for influencing the course of economic
development in these countries. Bloc influence proceeded rapidly in
Mali because of Malian preoccupation with curtailing French influence
and eliminating internal opposition to the regime. The USSR extended :a
credit of $11 million to Mali. In Ghana, in spite of continued indict-
tions that military aid might be accepted from the Bloc, the internal
security forces remained free of Bloc influence, although in the f'ielf:
of mass organizations and economic cooperation the Bloc role expanded.
There were no significant developments in Ethiopia's relaticn:> wit_l
the Bloc. About $2 million has been drawn on the $100 million o iet
credit extended in 1959. Delays continued to prevent initiation of cci-
struction of the oil refinery at Assab.
In Morocco the Bloc apparently gained entry into the army, follow-
ing the signing of a military aid agreement. Morocco received an eco-
nomic credit from Poland totaling about $5 million. The USSR ccnoleted
a survey of a shipyard at Tangier and reportedly offered to undertake
the project.
In Tunisia, Sudan , and the Somali Republic, limited progress was n. .de
by the Bloc in implementing economic aid program: already neg;otia_ed. The
Bloc for the first time established cooperative relations with none of the
relatively pro-Western states belonging to the UAM (Union of A.fri.:an a-.:d
Malagasy States). Trade, cultural, and technical assistance agreement3
were concluded with Niger, Dul_omey, and Senegal. The two latter
countries
also agreed to exchange ambassadors with Bloc countries.
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Limited Bloc advances were made in Nigeria, where Soviet and Czecho-
slovak embassies were established. Czechoslovakia extended a credit of
undetermined size for construction of industrial plants. No significant
Bloc effort was made in newly independent Tanganyika, however, nor were
standing Soviet military and economic aid offers taken up by the Congo
Republic (Leopoldville).
The USSR made rapid strides in the civil aviation field and concluded
agreo:ments to establish Aeroflot routes in the East (Cairo-Khartoum)
and in the West (Rabat-Conakry-Bamako-Accra), although it has not yet
succeeded in negotiating a transverse link across middle Africa. The
Czechoslovak airline increased its service on its existing West African
Although the Bloc continued to expand its training of Africans, some
student dissatisfaction and defections occurred, primarily in Soviet in-
stitutions. However, even if only a small proportion. of African students
are converted in the Bloc, a substantial working nucleus of loyal Com-
munist agents probably is being created for future use in African coun-
tries, including present Western dependencies.
On the international political scene as it concerned Africa, the
Bloc took extreme demagogic positions demanding precipitate and uncon-
ditional independence for African populations in such controversial or
sensitive areas as Rwanda, Burundi, the Federation of Rhodesia and
Nyasaland, South-West Africa, Angola, Mozambique, and the Republic of
South Africa, sometimes outdistancing even the most radical African
states in the simplicity and vehemence of its demands.
The Sino-Soviet Bloc made substantial gains in its economic and
military aid program to several different Asian countries during the
first 6 months of 1962. In most instances, skillful Bloc exploitation
of domestic difficulties or political frictions with neighboring coun-
tries increased the receptivity of local governments to Bloc overtures.
Soviet economic and military ties with Afghanistan and Indonesia in-
creased markedly during the review period.
itrong Soviet support for Afghanistan in its dispute with Pakistan
and new Soviet credits of about $105 million increased Afghanistan's
dependence on the Bloc. The USSR gained entrance into new fields, such
as education, geological survey, and housing -- areas where it had
previously had little influence. The new Soviet credits increased the
total of Soviet Bloc credits and grants to Afghanistan to more than
one-half' billion dollars, much of it on extremely favorable terms. Work
continued on a number of different projects, and a new cultural agree-
ment, an agreement on cooperation and training in meteorology, and the
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institution of Russian-language training in Afghanistan typified the
continued increase of the Bloc's presence in this strategic country
connecting the USSR with the Indian subcontinent.
India's relations with the Soviet Bloc were characterized b a can-
tinued guarded expansion on the part of the Indian Government. Relation:
with Communist China experienced a precipitous decline as a result cc col_
tinued military clashes with Peiping along India's northern frontier.
Among the more important developments during the period were the purthas-
of helicopters and transport planes from the USSR, a Soviet contract to
provide India with jet aircraft engines, and a Soviet offer to supplj
India with two squadrons of MIG-21 jet fighters together with t}e macu-
facturing facilities to produce more of these aircraft. The Soviet-
constructed Bhilai steel mill and the Rumanian-constructed Gauhati o_1
refinery both went into production, although the latter was forced t:,
close down shortly afterward because of a change in the grade c_ crude
oil produced in the Gauhati fields. India's trade with the Bloc in-
creased by about 30 percent in 1961, although trade with Communist Gina
fell off sharply and was expected to fall further during 1962.
Although the implementation of Soviet Bloc projects in Ceylon cot_-
tinued at a slow pace, Moscow was in a position to expand its influeice
in that country as a result of Ceylon's political instability, domestic
financial problems, and balance-of-payments difficulties. A number rf
key Ceylonese leaders stated their belief that the techniques of ecoromic
development followed in the Bloc might be adopted advantageously in Ceylc,
Several state corporations have been created to expand the functions of
the public sector. Ceylon's trade with the Bloc declined sharr.L-yr in 7.961
but is expected to increase rapidly during 1962 as a result of contracts
which call for the USSR and the European Satellites to take aboux, 50 per-
cent of Ceylon's output of raw rubber and almost all of its sheet rubber,
The Bloc also will provide about one-fourth of Ceylon's petroleum regzire-
ments, with Bloc POL products being distributed through a newly "ormel
government-owned corporation.
Developments in Nepal saw a leveling off in Soviet activity and ii-
creased ties with Communist China. Although the Soviet hospita-L near
Katmandu was nearing completion, the USSR announced that work on all
projects would be suspended if Nepal failed to meet local currency eo.,ts.
Toward this end the USSR extended a credit of $3 million to Nepu to Jur-
chase Soviet commodities to be sold in Nepal. The USSR completed the survey of the part of the east-west highway for which it was responsible but
refused to agree to undertake a survey of the rest of the highway. 0_rc the=
other hand, work continued on all Chinese Communist projects during tie
period, and the number of Chinese Communist technicians increased. Pt ipiri
also delivered the first of three gift aircraft to the Nepalese Governmmeni.
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A new Soviet military aid agreement with Indonesia highlighted the
accelerating tempo of Soviet military aid to that country. In the wake
of increasing tension between Djakarta and The Hague over West New
Guinea, Soviet deliveries included Tu-16 jet medium bombers, MIG-21 jet
fighter?s}, submarines, ground-to-air and air-to-ground missiles, and a
wide range of other equipment. These weapons were accompanied by in-
creased numbers of Soviet military technicians and an expanded military
training program for Indonesian personnel. By 30 June the value of Bloc
military aid to Indonesia was estimated to be more than $1 billion. In
the economic field, efforts were made to speed up implementation of a
number of Bloc projects, and contracts were concluded for several new
projects, including a Czechoslovak mineral survey and Rumanian oil ex-
ploration. The completion, late in June, of a Soviet-constructed stadium
in Dja.karl.ta, to be used for the Asian Games beginning in August, was re-
garded as an important achievement.
Although no new Bloc credits were extended to Burma, during the first
half of 1962, a military takeover of that country's government and sub-
sequent developments resulted in a number of anti-Western and pro-Bloc
statements and actions by the Burmese leadership and indications that
Bloc rather than Western aid will henceforth be considered preferable.
Implementation of projects under the Chinese Communist credit of $84 mil-
lion continued, and it seemed likely that Communist China would dominate
future foreign aid programs in Burma. Burma's trade with the Bloc rose
sharply in 1961 and is expected to increase further in 1962.
In Cambodia, work continued on implementation of Bloc projects, along
with public official statements which described aid from the Bloc as more
disinterested than aid from the West. Although there were no new Bloc
creditss, Czechoslovakia conducted a trade fair, and the USSR made rapid
progress in constructing a technological institute.
Soviet Bloc economic activity in Pakistan during the first half of
1962 continued to be minimal. The arrival of additional technicians for
the Soviet oil exploration project increased the total number there to
about u0, but adverse reaction to reports of planned Soviet military aid
to India largely negated any pressures for further economic ties with
Moscow.
Europe
Economic relations between Yugoslavia and the Soviet Bloc during the
first +) months of 1962 reflected the expanding cooperation which developed
in political relations between Belgrade and Moscow. This increased cor-
diality did not characterize relations with Albania and Communist China,
whose inimical ideological stance toward the Belgrade "revisionists" was
reflected in a continued absence of large-scat_e trade with them. Although
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trade between Yugoslavia and the Bloc in 1961 declined about 12 pe:?cen:;--
agreements signed in 1962 presage an increase in trade between the two
areas. Annual protocols to existing long-term trade agreements we:ce
signed with all the European members of the Bloc plus Communist China.
with most of these countries (Communist China and Albania being ext.ep
tions) calling for some increase in exchange levels. A 3-year agr{.emeiL*.
concluded with the USSR envisages a "considerable increase" in trade ?tr
1963-65. Negotiations also were initiated for limited Yugoslav mezbena
ship in the Council for Mutual Economic Assistance (CEMA), for reinste.o-
ment of the Soviet credits originally extended in 1956 but subseput.ntl:
canceled by the USSR, and for deferment of installments due T YugOsl ^rt t
debt to the USSR.
Tito made some purchases of military hardware from the USSR, r.ucl1t iE-
tanks and artillery, for the first time since the 19+8 break. Yugosla-
sources denied, however, that these purchases represented any change ir_.
Belgrade's. policy of independence from the Bloc, claiming that then wen.'c
designed to help Yugoslavia conserve its severely limited sulply o' ha.-
(-currency.
Agreements were signed by Yugoslavia with Rumania and Bi1garia for #
construction of a major hydroelectric combine at the Danube',.; Iron Gatt>t
and for a long-discussed highway linking Belgrade and Sofia via Dm.trov-
grad. A major rail link with Hungary was opened with the finishir of
reconstruction of a Danube River bridge in May. Yugoslav shipyard.; were
working on 9 small tankers and 12 freighters for the USSR, to be df~livur,
by 1965.
No.Bloc technicians were known to be active in Yugoslavia during tie
reporting period. There was, however, a series of exchanges cf ob~;ervoi
with several Bloc countries, including parliamentary delegations, trade
union officials, and journalists. Belgrade granted the USSR landixg
rights at the new Surcin airfield near the capital for the Soviet j:ivil
air carrier Aeroflot on its newly established Moscow-Accra run begnnir;a
in August.
There was no change in Bloc relations with Iceland, Spain, and Portw_
gal. The trade of all three countries with the Bloc in 1961 exper enetc
a small decline from the levels achieved in 1960.
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