SOVIET CUTBACKS OF METALS AND MINERAL EXPORTS: AN UPDATE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP08S01350R000200530001-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 12
• Document Creation Date: December 22, 2016
• Document Release Date: March 7, 2012
• Sequence Number: 1
• Publication Date: May 1, 1985
• Content Type: MEMO

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Central Intelligence igence Agency
DIRECTORATE OF INTELLIGENCE
May 1985
Soviet Cutbacks of Metals
and Mineral Exports: An Update
Summary
In October 1984 we reported that the USSR had sharply reduced supplies to
Western markets of selected minerals and strategic and precious metals in
1980-83 carpared with export levels of the 1970s (see table 1). Moreover, we
deduced that Soviet sales of most of these 25X1
camTodities had been or may have been further reduced in 1984. This
conclusion was based on incanplete trade statistics
that indicated Soviet export
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intentions for the year as a whole. In the event, there were further export
declines in 1984 of only 4 of the 11 raw materials for which trade statistics
are available. Nevertheless, the more recent data reinforce our original
judgment that the cutbacks for the 4 cannodities and the lack of resurgence in
exports of several other minerals and metals are part of a longer-term
trend. The evidence is yet too fragmentary for us to be able to draw any
general conclusion about sales of these commodities in 1985. 25X1
Recent analysis supports our original hypothesis that multiple
influences--rather than a co rehensive policy--were responsible for the
cutbacks. In particular, danestic production of 25X1
several minerals and metals has not met internal or CENA demand and that
exports were reduced to close the gap. On the other hand, export availability
of gold, platinum, palladium, and diamonds--all important hard currency
earners--has been primarily affected by soft market conditions and the
Soviets' overall favorable trade position. Indeed, sane of the earlier
reports of expected cutbacks in 1984 may have been the result of Soviet
attempts to manipulate the markets. 25X1
This memorandum was prepared by
the Econanic Performance Division, National Issues Group,
Office of Soviet Analysis. Ccrnnents and queries are welcane and ma be
addressed to Acting Chief, Economic Performance Division, Sc'_____________
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1984 Revisited
In our original memorandum, we reported that exports to hard
currency markets of selected minerals and strategic and precious
metals fell in the early 1980s compared to levels of the 1970s
and that deliveries declined even further in 1984.1 We could not
establish, however, that the USSR had curbed exports as part of a
comprehensive economic or military policy and we proposed several
alternative explanations including (a) an improved hard currency
position, (b) soft market prices in the West, (c) Soviet attempts
to manipulate prices, (d) slower growth of domestic production,
(e) increased domestic requirements, and (f) rising demand in
other CEMA countries. Although exports of these commodities in
1984 generally remained well below sales in the 1970s, deliveries
did not decline across the board
trade statistics indicate that exports to
the West of several metals including aluminum, gold, and rhodium
remained roughly constant in 1984 relative to 1983 levels, albeit
well below sales in the 1970s. Indeed, exports of some items--
platinum, palladium, iron ore, refined copper, and coal--rose
from 1983 to 1984 (see table 2). On the other hand, exports of
chromium ore and titanium fell to the lowest level since at least
the 1960s.
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We still do not believe the cutbacks observed since the
1970s are part of a single, comprehensive policy such as a stepup
in a stockpiling program to deal with production bottlenecks or
to enhance mobilization readiness. We believe our original
hypothesis that multiple influences are involved remains valid.
In particular, domestic 25X1
production of several minerals and metals has not met Soviet
domestic or CEMA demand and that hard currency exports were
reduced to close the gap. On the other hand, export availablity
of gold, platinum, palladium and diamonds--all important hard-
currency earners--has been primarily affected by soft market
conditions and the Soviets' overall favorable trade position.
Exports of these commodities accounted for roughly 5 percent of
Soviet hard currency earnings in 1983. The Soviets seem to set
hard currency earnings targets, selling only enough to meet these
goals.
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We have not been able to detect any major changes in Soviet
precious metals (gold and platinum group metals) and diamond
export trends since late 1984. The volume of precious metals
sales remains at a lower level than in the 1970s, but this is
probably the result of the sharp improvement in the Soviet hard
currency position since 1981 and relatively low prices in today's
metals markets.
o Gold sales in 1984 were roughl
in line with 1983
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o Despite Soviet announcements that less metal would be
available, the Soviets increased exports of platinum and
palladium in 1984. In early 1985, the USSR introduced a
new and complex methodology for pricing palladium
exports with the intent of boosting prices of such
exports,
the new pricing system does not signs y
tightening of Soviet palladium supply.
Unlike platinum and palladium, the prices of some minor
platinum group metals, including rhodium, have dramatically
increased recently. According to a US metals journal, rhodium
from the USSR continues to be in short supply. Western metals
traders have blamed Eastern Europe's growing rhodium requirements
for chemical production for straining the Soviet supply, which
has never been plentiful.
Moscow may currently be withholding
supplies of platinum group metals in anticipation of a market
upturn if the European Community imposes pollution control
regulations that would increase demand for these metals. Such
rumors in the past have raised prices--in the Soviets' favor.
Indeed, the Soviets may have deliberately misled Western traders
in late 1983 and 1984 for just this purpose.
Traditionally, exports of other conrnodites have generally
been more volatile than those of precious metals and diamonds,
largely because exports to the West are a residual claimant once
domestic and client state needs are satisfied. The loss of these
markets would not seriously impair hard currency earnings
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ability, and meeting domestic and-CEMA obligations apparently
takes precedence.2
although the quantity of
scandium oxide exported in 1984 dropped off substantially from
1983 levels, sales have not ceased entirely. At the same time,
sales of chromium ore and beryllium-copper alloys are apparently
being cut further. In 1984, the Soviets reportedly reneged on
several contracts for the export of chromium ore.
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halted all sales of beryllium-copper alloy in early 1985 for the
first time since late 1983. 25X1
We believe that domestic production problems and supply
bottlenecks probably are responsible for the cutback in chromium
ore and beryllium-copper alloy exports to the West. The Soviets
continue to wrestle with chromium ore production problems caused
by the exhaustion of existing ore bodies and slower-than-expected
development of new deposits. 25X1
domestic production of beryllium does not 25X1
meet internal demand. The Soviets lost a source of supply in
1981 when China stopped exporting beryllium ore to the USSR.
In contrast to most of the commodities we looked at, Soviet
nickel exports are higher now than they were in the 1970s.
during the past year the
Soviets have shifted nickel sales directly to end users.
2 Soviet actions, however, could encourage Western buyers to seek more
reliable suppliers of these camiodities and possibly reduce future Soviet
access to Western markets.
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expect Soviet nickel exports to increase
substantially this year-3 The reduction in titanium exports in
the Soviets 25X1
are expected to reenter the scrap market in 1985, they have not
yet done so presumably because of low prices. 25X1
3 We do not believe any Cuban nickel will be involved. The Soviets claim
that all nickel imports frcm Cuba are shipped directly to a plant on the Kola
Peninsula whereas Soviet exports of nickel to the West originate at a plant in
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Commodities Examined
Platinum group metals
(platinum,
palladium, and
rhodium)
Iron ore
Manganese ore
Unwrought aluminuma
Refined copper
Unwrought nickela
Unwrought titaniuma
Beryllium-Copper alloys
Neodymium
Phosphate rock
a Not included in original analysis.
Major Uses
Jewelry, store of value,
electronics
Automotive (catalytic
converters), jewelry,
chemical fertilizers,
glass, electronics.
Jewelry, mining, abrasives
Stainless and special
alloy steels
Steel
Steel
Aerospace, vehicle engine
components, construction,
packaging
Electronics, construction
Stainless steels,
chemicals, electronics
Aerospace, steel,
chemical processing
equipment, marine appli-
cations
Petroleum production,
lamps
Petroleum refining,
glass, electronics,
lasers,-steel
Boiler and furnace fuel,
metallurgy
Chemical fertilizers
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Table 2
USSR:
Exports to the West of Selected Minerals and Metals
Thousand
metric to
ns, exce
pt where
noted
1971-75 1976-78
(annual average)
1979
1980
1981
1982
1983
1984
Go 1 dab
152
354
220
80
200
100
55-60
60-80
P l at i nun and
palladiunac
70
61
59
39
40
45
45
52
Rhodiumad
NA
1.0
1.1
0.6
0.5
0.7
1.0
1.0
Chraniun ore
806
396
352
132
144
108
98
32
Iron Ore
4,293
3,923
1,891 1
,070
900
831
846
1,120f
Manganese ore
198
71
0
0
0
0
0
0
Unwrought
aluninun
482
577
155
146
141
205
185
177
Refined copper
67.0
37.0
7.3
5.8
6.4e
14.3
16.1
34.5
Unwrought
nickel
19
15
28
32
26
31
30
31
Unwrought
titaniun
4.8
2.8
4.0
3.5
1.5
1.2
1.0
0.6
Coal
10,200
9,933
10,100 7
,100
3,600 3
,300
5,000e
4,256f
a Metric tons.
b CIA estimate.
C We have revised this series to include West German import data along with that available
fran US and Japanese official trade books. These countries normally account for 90 percent
of total Soviet exports of these metals.
d Only data on US and Japanese imports fran the Soviet Union are available because most
countries do not report rhodium as a separate conrnodity in their trade statistics.
e Revised.
f January-September.
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Distribution for "Cutbacks of Soviet Mineral and
Metal Exports: An Update"
Internal Distribution
Copy: 1 Deputy Director for Intelligence (7E47 HQ)
2 SA/DCI (7E12 HQ)
3 Vice Chairman, NIC (7E47 HQ)
4 NIO/Economics (7E47 HQ)
5 NIO/USSR (7E47 HQ)
6 NIO/Warning (7E47 HQ)
7 NIO/Europe (7E47 HQ)
8 D/SOVA (4E58 HQ)
9 DD/SOVA (4E58 HQ)
10 D/OGI (3G03 HQ)
11 Ch, Product Evaluation Staff (7G15 HQ)
12 Ch, Collection Requirements & Evaluation Staff (3E63 HQ)
13 Senior Review Panel (5G00 HQ)
14 D/CPAS (7G15 HQ)
15 OCR/DSD (6E47 HQ)
16 D/EURA (5G44 HQ)
17 D/OSWR (5G15 HQ)
18 DDO/SE (5B02 HQ)
19-23 CPAS/IMD/CB (7G15 HQ)
24 DDI Registry (7E47 HQ)
25 CPAS/CSG (7F30 HQ)
26 C/SOVA/NIG (5E66 HQ)
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36 C/SOVA/DEIG/DID (4E31 HQ)
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38 C/SOVA/RIG (5E25 HQ)
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External Distribution
44 Manny Rubio, Director, White House Situation Room
45 Robert Gallagher, Deputy Chief, Office of Intelligence
Liaison Department of Commerce (3520 Main Commerce)
46 Lionel Olmer, Under Secretary for International Trade,
Department of Commerce (3850 Main Commerce)
47 Franklin J. Vargo, Deputy Assistant Secretary,
International Economic Policy, Department of Commerce
(3865 Main Commerce)
48 Jack Brougher, Jr., International Trade Administration,
Department of Commerce (3415 Main Commerce)
49 Susanne Lotarski, Director, Office of USSR and Eastern
Europe, Department of Commerce (3410 Main Commerce)
50 Richard DeLauer, Under Secretary for Research and
Engineering, Department of Defense (3E1006 Pentagon)
51 Fred C. Ikle, Under Secretary for Policy, Department of
Defense (4E830 Pentagon)
52 Richard N. Perle, Assistant Secretary for International
Security Policy, Department of Defense (4E838 Pentagon)
53 Ronald S. Lauder, Deputy Assistant Secretary for European
and NATO Policy, Department of Defense (4D822 Pentagon)
54 Dr. Stephen D. Bryen, Deputy Assistant Secretary for
International Economic Trade and Security Policy, Department
of Defense (4C767 Pentagon)
55 Andrew W. Marshall, Director Net Assessment, Department of
Defense (3A930 Pentagon)
56 Paula J. Dobriansky, European and Soviet Affairs, National
Security Council (368 EOB)
57 John Lenczowski, Director, European and Soviet Affairs,
National Security Council (368 EOB)
58 Ambassador Jack Matlock, Jr., Senior Director, European and
Soviet Affairs, National Security Council (368 EOB)
59 Roger W. Robinson, Jr., Senior Director and Special
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60 Douglas R. Mulholland, Special Assistant to the Secretary
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62 Thomas W. Simons, Director, Office of Soviet Union Affairs,
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64 John Danylyk, Chief, INR/EC/CER, Department of State (8662
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65 Avis Bohlen, Policy Planning Council, Department of State
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66 Donald B. Kursch, Deputy Director for Economic Affairs,
EUR/SOV, Department of State (4223 State)
67 W. Allen Wallis, Under Secretary of State for Economic
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70 Herman J. Cohen, M/DGP, Department of State (6216 State)
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