SINO-SOVIET BLOC ECONOMIC OFFENSIVE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP62S00545A000100100022-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 6
• Document Creation Date: December 12, 2016
• Document Release Date: September 16, 1998
• Sequence Number: 22
• Publication Date: April 27, 1959
• Content Type: MEMO

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Sino-Soviet Bloc Economic Offensive
27 April 1959
It is a pleasure to have the opportunity to speak to you
briefly on the subject of the Sino-Soviet Bloc economic offensive.
I am particularly happy to see some old friends in this distinguished
group, because this Brookings Institution series has become famous
for "no holds barred sessions."
To save time, I intend to confine these opening remarks n to
the Soviet Union itself. I propose to hit some highlights in
three aspects of our subject:
First, Soviet trade with the West,
Secondly, The penetration program in underdeveloped areas, and
Finally, Some estimates of the future, which inevitably must
lead to estimating Soviet economic growth.
Volume of trade generated annually by Soviet economy increasing
rapidly
1. Exports at rate of $4.5 billion a year.
2. In constant prices, exports in 1957 six times larger
than in 1938 (volume of trade of Industrial West, by comparison,
less than doubled during same period).
3. As a trading nation, USSR now ranks sixth in world
compared with 16th in 1938.
Magnitude of Soviet trade must be qualified
1. Three-fourths of USSR trade is with Sino-Soviet Bloc.
2. Exports during past 4 years have been consistently about
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Trade with Free World a4VMLAL
1. Relatively small current n volume of Soviet imports from
West (about $1.2 billion) understates contribution to domestic
economy because of gains derived from importing machinery and
equipment for use as prototypes and for supplementing domestic
production in certain key areas.
2. Present knowledge about Soviet priorities during Seven-
Year Plan suggest Soviet interest in (1) chemical equipment,
(2) electronic and automation equipment, and (3) equipment for
the ferrous metal industry.
3. Although denial of certain pieces of western equipment,
particularly in the.field of petro-chemicals, would retard growth
of key industry, we may take Khrushchev at his word when he boasted
that the fulfillment and overfulfiliment of the Seven-Year Plan
could be accomplished through "our own efforts, our own resources."
4. Motivation behind current import drive is implicit in
Khrushchev's frank admission that through imports from industrial
West, "the Soviet Union could be given the opportunity of quicker
fulfillment of its program ..... without wasting time....."
5. Because of import requirements, Soviet leaders will
exert every effort to expand exports.
a. Bulk of Soviet exports to West will be traditional
raw materials, fuels and semi-manufactures.
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b. Petroleum, non-ferrous and ferrous metals news-
print, wood pulp, asbestos and timber should become increasingly
prominent.
6. Difficulty in expanding exports may lead to:
a. Sales of Soviet gold - with increasing costs of
mining gold., it is anticipated that USSR will intensify
efforts to substitute merchandise exports as earners of
foreign exchange rather than rely on heavy exports of gold.
b. Price cutting to gain entry into major western
markets; aluminum and tin sales in 1957-58 are cases in
point.
c. A concerted effort to secure long-term credits
from western nations to finance growing imports.
In Summary
The motives of current Soviet foreign economic policy
In the Industrial West, may be simply stated, that is to utilize
economic contacts with the Free World to keep abreast of western
technology and to hasten an economic growth the die aim
of which is to "overtake and surpas " the capitalist West.
4U 44 k444,
Now to move to the penetration program in underdeveloped
countries.
The Communist bloc trade and aid programs moved into high
gear last year. The equivalent of over one billion dollars in
new credits were extended.
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-1+-
In the four year period ending in 1958, total Bloc extentions
of credits and grants amounted to about $2.5 billions. This
has been, of course, far smaller than our own economic and military
aid program.
However, the Soviet program is centered on a few key countries.
In Afghanistan, Ceylon, Egypt; Syria, Iraq and Indonesia, Bloc
economic aid exceeds our own.
In Burma, Cambodia, and India, while less than ours, Bloc
Aid is quite substantial.
Bloc trade with underdeveloped areas shows a similar con-
centration. The Bloc now is a major trading partner of Afghanistan,
Egypt, Syria, Iceland, Turkey and Yugoslavia.
Further, the Bloc today is trading with many countries where
it never did much, if any, business before. In South America,
this includes Argentina, Brazil and Uruguay.
Over 4,O0O Bloc technicians have been sent out to assist
the development of nations of the Free World. About 70 percent
of these are engaged in economic activities. The rest are re-
organizing local military establishments and teaching bloc military
dqctrine to Indigenous personnel. 44444;,&a*_
The Bloc also has a well-developed program for training
students from underdeveloped countries. About 3,200 students,
technicians and military specialists have now received such training
behind the Iron Curtain.
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The Soviet policy of economic penetration fits like a glove
into their world-wide campaign of subversion.
The Communist world, in dealing with the former colonial
areas and newly emerging nations of the world, has appealing slogans
to export and vulnerable economic conditions to exploit.
The cost of all the Bloc economic and military aid has been
small indeed. By combining the Soviet assistance programs to Bloc
countries and A underdeveloped countries and taking into account
repayments on Soviet loans, it is possible to estimate the net
burden (drawings on credits minus repayments) under given conditions
of the entire Soviet foreign assistance program.
1. In 1958 the net burden from all Soviet foreign
assistance was about $600 million, less than four-tenths of
one percent of Sovet GNP.
2. Well over half of what the Bloc imports from
underdeveloped countries consists of foodstuffs and other
30 percent is crude materials. There is no overall surplus
of food or fibers in the Bloc. The European Satellite countries,
for example, are deficient in both. Consequently, the Bloc
can use to good advantage much of exportable surpluses of
the underdeveloped countries, which we would find economically
difficult and politically impossible to do. Burden then is
slight.
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What of the future
1. For the seven years ending in 1965 the economic expansion
of the USSR, measured by GNP, is planned to average between six
and seven percent annually. What will the U.S. rate be? Possibly
about three and one-half percent.
1,
2. By 1965 the USSR, without ar x on overall internal
availabilities appreciably greater than at the present, will
have the capability of maintaining an assistance program in the
underdeveloped areas of the Free World that approaches in magnitude
that of the U.S. today.
3. It seems certain that Gomanunist competition is going to
get rougher, not easier, in the future. As Soviet capabilities
grow, their activities in the free world will increase. For them,
it is a cheap investment in disorder.
4+. I read this into Khrushchev's statement of intention,
made nine months ago.
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