SOVIETS ENTER WEST EUROPE'S NATURAL GAS MARKET

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP08S01350R000601900004-8
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 4
• Document Creation Date: December 27, 2016
• Document Release Date: March 7, 2012
• Sequence Number: 4
• Publication Date: December 19, 1969
• Content Type: REPORT

Declassified in Part - Sanitized Copy Approved for Release 2012/03/07: CIA-RDP08SO135OR000601900004-8
SOVIETS ENTER WEST EUROP
Moscow has made a major break-
through in sales of natural gas to
Western Europe after several years
of off-and-on negotiations. Long-
term agreements have been reached
with Italy and West Germany on the
exchange of gas for large-diameter
steel pipe, and further discus-
sions with France are planned.
The USSR and Italy signed an
agreement on 10 December involving
the delivery of Soviet natural gas
beginning in 1973. Deliveries are
expected to total more than 100
billion cubic meters over a 20-
year period. The USSR will re-
ceive a credit of some $200 mil-
lion from Italy for the purchase
of pipe and other equipment needed
for the expansion of Soviet natu-
ral gas pipeline systems.
details on the pce of So-
viet gas are not yet cl r, Mos-
cow apparently lowered its price
to Italy below that already agreed
on for sales to Austria and West
Germany.
Earlier this month, Moscow
concluded a 20-year agreement with
a West German firm for the delivery
of natural gas to Bavaria. A fi-
nal contract is expected to be
concluded in January specifying
Soviet deliveries of gas beginning
with 500 million cubic meters
in late 1973 and increasing to a
maximum level of three billion
cubic meters annually within six
years. Deliveries of Soviet gas,
even at peak level, however, will
supply less than 10 percent of
Germany's annual energy consump-
tion.
NATURAL GAS MARKET
The USSR and France also have
agreed in principle to conclude
a similar gas-pipe deal. Although
many matters, including price and
quantity must be worked out before
final accord is reached, recent
press reports indicate that de-
liveries of Soviet natural gas to
France would start around 1977
and eventually reach a peak de-
livery rate of about 2.5 billion
cubic meters annually. In ex-
change, the Soviets would receive
credits amounting to $180-200 mil-
lion for the purchase of steel
pipe. The pipeline through West
Germany would facilitate delivery
to major French consuming areas.
These deals are particularly
advantageous to the USSR because
they provide Moscow with Western
credits for the early delivery of
pipe and other equipment needed
to spur the lagging construction
of oil and gas pipeline networks-'
from Siberia and Central Asia.
By the time Soviet deliveries to
West Europe begin in the early
1970s, natural gas imports from
Iran scheduled to begin next year
and increased flows from Afghanis-
tan will more than offset gas ex-
ports to Western Europe. Moreover,
these deals come at a time when
Soviet hard-currency earnings from
;petroleum deliveries to the West
appear to be leveling off.
9.x1
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 Declassified in Part - Sanitized Copy Approved for Release 2012/03/07: CIA-RDP08SO135OR000601900004-8
GOVERNMENT CHANGE CONSIDERED IN ITALY
Recent bomb explosions in
Milan and Rome and the resulting
casualties have increased specu-
lation about an early change in
government. The minority Chris-
tian Democratic government, in-
stalled last August, had been in-
tended to serve until regional
and local elections could give a
new reading on popular attitudes
toward the various political par-
ties. These elections are now
expected to take place in March
or April.
In reaction to the explo-
sions, Prime Minister Rumor on
15 December met with the secre-
taries of the Christian Demo-
cratic, Socialist, Unitary Social-
ist, and Republican parties that
made up the center-left coali-
tions of recent years. This was
the first time the party secre-
taries had met since the Social-
ists divided into two political
parties last July. The leader-
ship of the four parties agreed
to look into Rumor's proposal that
they return to a coalition.
An atmosphere of instability
has surrounded the Rumor govern-
ment, fostered by the continua-
tion of a series of short strikes.
Although several of the most im-
portant labor contracts have now
been signed, the metalworkers'
federations have not yet come to
an agreement with management ex-
cept in the state-owned sector.
The strike pattern this year has
led to a greater total loss of
output than in the disruptive ne-
gotiations of 1962-63 although
losses in time worked are less.
Labor productivity increases in
recent years, however, appear to
be sufficient to permit substan-
tial wage raises of 25-30 percent
over the next three years with
only marginal effect on Italy's
competitive position in world
markets.
Another factor in the uncer-
tainty surrounding the Rumor govern-
ment has been a continuing discus-
sion of the possibility that the
Communist Party may gain a greater
role in Italian political life.
Such speculation is central to
differences between the two So-
cialist parties. Recently a dis-
agreement among Italian Communists,
which resulted in the ouster,of
"new left" leaders, highlighted
the preference of one important
faction of the party for follow-
ing Soviet direction, while an-
other prefers revolutionary ac-
tion. Both positions are repug-
nant to most Italian non-Communist
leaders, and discussion of their
working more closely with the Com-
munists has thus been curtailed
for the time being.
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25X1
treaty with Germany that perma-
nently fixes its borders.
Moreover, while already ac-
knowledging the existence of two
German states, and indeed calling
for binding agreements with East
Germany, Brandt maintains that re-
lations between the two Germanies
have a special quality and that
Bonn cannot give full recognition
under international law. Al-
though disappointed at the ini-
tial Soviet stand, Bonn officials
are-hopeful that further probes
will reveal some give in the So-
viet position. They will be par-
ticularly anxious to discover to
what extent progress in talks
with one East European state de-
pends on progress in negotiations
with others, as the latest Soviet
position suggests. In any event,
even should the Moscow talks on
renunciation of force progress
very slowly, Bonn will hope for
a tolerant Soviet attitude toward
its anticipated early bilateral
political talks with the Poles
and possibly with the East Ger-
mans.
Reaction to the new aide-
memoire presented to the USSR by
the three Western Allies this
week may shed light on how coop-
erative the USSR will be. The
Western proposal of talks aimed
at easing the situation in Berlin
complements the current West Ger-
man drive to improve relations
with the USSR and Eastern Europe.
Moreover, both Bonn and Washing-
ton tend to regard concrete steps
to improve the situation in Ber-
lin or to improve all-German re-
lations as essential to their
participation in the Soviet-pro-
posed European security conference.
East German Attitudes
Meanwhile, the East Germans
have moved to engage Bonn in direct
talks. The parliament on 17 Decem-
ber authorized both the State Coun-
cil and the government to take the
necessary measures for "conduct-
ing relations" with West Germany.
The following day a letter ad-
dressed from Ulbricht, Chairman
of the State Council, to President
Heinemann was delivered in Bonn.
This message presumably discussed
the initiation of talks. Another
letter from Premier Stoph to
Brandt may be in the offing.
The parliament's resolution
did not mention preconditions for
beginning talks, nor did Ulbricht
in his long speech on 13 December.
The East Germans have indicated,
however, that they want negotia-
tions to result in agreements
that are valid under international
law. Ulbricht and other East Ger-
man leaders have also rejected
the idea that East-West German
relations can be of some special
type.
Because Bonn and Pankow seem
far apart concerning the possible
legal nature of eventual agree-
ments, no early breakthrough
should be anticipated even if
high-level talks do begin.
With Poland and other East-
ern states about to follow Mos-
cow's example in negotiating bi-
laterally with the Federal Re-
public, the East German actions
probably are defensive in nature.
During his speech, Ulbricht took
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 Declassified in Part - Sanitized Copy Approved for Release 2012/03/07: CIA-RDP08S01350R000601900004-8
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Declassified in Part - Sanitized Copy Approved for Release 2012/03/07: CIA-RDP08S01350R000601900004-8