ECONOMIC INTELLIGENCE WEEKLY REPORT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001500140001-6
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 13
• Document Creation Date: December 20, 2016
• Document Release Date: March 21, 2006
• Sequence Number: 1
• Publication Date: February 15, 1973
• Content Type: REPORT

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Top Secret
DIRECTORATE OF
INTELLIGENCE
Economic Intelligence Weekly Report
Top Secret
D
15 February 1973
Copy No.
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Economic Notes . . . . . . . . . . . . . . . . . . . . . . . . I
Weather Conditions Endanger Crops in the USSR
and Eastern Europe . . . . . . . . . . . . . . . . . . . . . 1
Worsening Food Situation in India Foreshadows
Additional Purchases of Grain . . . . . . . . . . . . . . . . . 1
China Buys Second Whole Plant on Credit . . . . . . . . . . . . 1
Chile Needs Wheat . . . . . . . . . . . . . . . . . . . . . . 2
A Floor Under Copper Prices? . . . . . . . . . . . . . . . . . 2
OECD's Current Account Predictions Now Questionable . . . . . . 2
Review Articles . . . . . . . . . . . . . . . . . . . . . . . . . 3
Yugoslavia's top economic policymaker is in Washington
for economic discussions . . . . . . . . . . . . . . . . . . . 3
Foreign reaction to the US dollar devaluation has
been almost completely favorable . . . . . . . . . . . . . . . 5
Slower rate of increase in Soviet oil and gas output
emphasizes the need for Western equipment . . . . . . . . . . . 7
Japan probably will drastically alter or disband
recent export controls . . . . . . . . . . . . . . . . . . . . 8
Publications of Interest . . . . . . . . . . . . . . . . . . . . . 9
Note: This report was prepared by the Office of Economic Research.
Questions regarding its contents may be directed to OER
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Weather Conditions Endanger Crops in the USSR and Eastern Europe
Eastern Europe and the USSR together.
A lack of protective snow cover is threating prospects for winter grain
harvests in the USSR and the East European countries of Hungary, East
Germany, Czechoslovakia, and Poland. In the USSR a combination of
winterkill and the 20% shortfall in last fall's planting may reduce the winter
grain area to the lowest total in years. Soil moisture levels in the other
four countries are 25% or more below normal. If the Soviets fail to meet
a record high spring seeding schedule and if growing conditions for winter
sown grains fail to improve substantially in both the USSR and Eastern
Europe, the area as a whole may again require massive imports of grain
in fiscal year 1974. As a result of crop shortfalls in 1972, net imports
of grain in fiscal year 1973 will reach a record 27-1/2 million tons for
Worsening Food Situation in India Foreshadows Additional
Purchases of Grain
India will be able to remain out of the market only under ideal
conditions - a record spring harvest combined with favorable monsoon rains
next summer. So far, in December and January, India has bought 2 million
metric tons of grain on commercial terms, mainly from the United States,
Canada, and Argentina. These purchases have used up the equivalent of
one-fifth of India's foreign exchange reserves of approximately $1 billion.
Because of the high and rising price of grain and the deletion of inventories
worldwide, India may decide to ask for large amounts of US grain on
concessionary terms. Otherwise, New Delhi would be forced into a heavy
drawdown of foreign exchange reserves and/or tighter import restriction .
I
China Buys Second Whole Plant on Credit
A willingness to accept medium-term credits for whole plant purchase;
will increase China's prospective import demand. A Japanese firm has just
concluded negotiations with the Chinese for a $30 million ethylene plant,
China's second such purchase from Japan in recent weeks. Both purchases
are being financed on five-year terms by a combination of Japanese
Export-Import Bank and commercial credits. At Chinese insistence, the
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second contract was quoted in Chinese currency. With the yen now floating,
the contract currency could become point of contention in future plant
negotiations between China and Japan. F77 I
Santiago sees the United States and Canada as the only possible sources
for the balance of Chile's 1973 wheat import needs. A poor harvest has
raised import requirements to about 1.3 million metric tons. Contracts have
been signed for about half this amount. Efforts to buy another
600,000 tons to 700,000 tons will intensify pressure on world wheat prices.
Since a severe import squeeze is shaping up, Chile will be looking for credits
to finance these wheat purchases, estimated to cost $60 million to
$70 million.
A Floor Under Copper Prices?
Chilean President Allende claimed last week that CIPEC (an association
that includes Chile, Peru, Zambia, and Zaire and supplies about 60% of
the world's primary copper exports) had agreed on a minimum copper
export price of 53 cents a pound. Even if such a step has been taken,
there is no immediate problem, since the London Metal Exchange price
is hovering around 54 cents. Should the market soften, holding a 53-cent
price would require stockpiling or production cutbacks, actions that member
countries have been unwilling to take since CIPEC's formation five yea
ago.
OECD's Current Account Predictions Now Questionable
Forecasts by the Organization for Economic Cooperation and
Development of a moderately improved US current account balance and
less robust balances for japan and the enlarged European Community this
year probably are now somewhat optimistic, because the dollar's devaluation
initially will have the opposite effects. Prior to the devaluation, the OECD
had expected that the US deficit would drop by $2.7 billion to $5.8 billion
this year, while the Japanese surplus would decrease by about $1 billion
to $5.75 billion. The United Kingdom was expected to have a $1.2 billion
deficit, which would help reduce the enlarged EC's current account surplus
to $4 billion from the $5.9 billion registered last year.
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Yugoslav Economic Policyrnaker Visits the United States*
Jakov Sirotkovic, Vice President of Yugoslavia's Federal Executive
Council and the architect of Yugoslavia's current economic policy, is in
Washington this week. In talks with representatives from the International
Monetary Fund (IMF) and the Int,.?.