BRIEFING TO THE STATE DEPARTMENT POLICY PLANNING STAFF

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP71T00730R000100010007-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 9, 2016
• Document Release Date: April 8, 1999
• Sequence Number: 7
• Publication Date: November 25, 1958
• Content Type: MEMO

UP.RFT
Approved For Release 2000/09/01 :
- 073OR000100010007-4
BRIEFING TO THE STATE DEPARTMENT POLICY PLANNING STAFF
Bloc Economic Penetration
I. How might these ca abilities--described by Mr. G. --be em toed
in the cold was ?
II. Outlines of the Economic Offensive
A. Chart covering credits
1. Drawings have been small- -$700 4- m. out of $2 B.
2. Focus on Egypt, Syria. Yemen, Afghanistan, India,
Indonesia, and Yugoslavia
3. Arms--over 500 million dollars- -favorable prices
4. Aswan Dam, 100 million; Argentina, 100 million
B. Trade
1. Concentration on the Middle East and Southeast Asia--same
politically vulnerable countries
2. Roughly double since 1957. Dependence on Bloc trade --
Afghan. , 40%; Egypt, 36616; Iceland, 33%; Syria. 12%6 and
growing
C. Technicians
1. Similar geographic focus to trade and aid--sizable increase
over 1956--l, 100 military
2. Over 2, 000 students and military trainees to the Bloc--
CIA participants in briefing:
25X1A9a
DAD/RR
D/A
Approved For Release 2000/09/01 : CIA-RDP71TOO 0 DD/I 25X1A
25 November 195
25X1A
 Approved For Release 2000/09/0$UfkIP71T00730R000100010007-4
over 7001 Indians training in Soviet steel works--these
obviously minimum figures
3. Trained in language and customs--noses clean
D. Other Activities- -trade fairs, commercial advertising,
trade missions, conducted tours of the Bloc industrial
installations
III. Characteristics of the Economic Offensive
A. Generally speaking, program characterized by:
1. Focus on politically vulnerable areas and exploitation of
local conflicts through arms shipments
2. Close integration of economic moves with. other instruments
of foreign policy
3. Brief periods of negotiation, flexibility in meeting
demands, and, where necessary, prompt delivery
4. Integration of aid and technical assistance offers with
arrangements to meet principal import needs and above a all
offers to take exportable surpluses--fish from Iceland,
rubber from Ceylon, cotton from Egypt
5. Willingness to pave streets of Kabul--impact projects
Flexibility in correcting sources of dissatisfaction
7. Attractive trade and aid terms--Z l/296--12 years--
often repayment after the project in operation
Approved For Release 2000/09/01 : CIA-R&571 T00730R000100010007-4
SECRET
 Approved For Release 2000/09/01 : 8WW 5 T1 T00730R000100010007-4
Propaganda value of "no strings" impression (Yugo
exception)--not tied to military pacts
9. Weakened suspicion that Bloc espionage and subversive
activity are associated with Bloc trade and aid--
representatives and technicians stick to knitting--some
exceptions (Bank of China)
B. Question of capabilities
1. Credits, not grants--time preference
2. Repayment will often be in commodities involving high
cost production within the Bloc--cotton, wool, meat
Deliveries (drawings small percentage of GNP)
Exports spread over number of sectors of economy--
(i? e. , have not attempted to export several steel mills)
4. In summary--within fairly broad limits--have capability
to do what political opportunity dictates. Mistake to
look for solace in limited Bloc capabilities.
C. Future Elements of the Bloc Economic Offensive
1. We can expect an intensification of this offensive as new
political opportunities appearr -particularly in Latin
America and Africa
2. Can look for more emphasis on the use of technicians--
supported by growing educational program for engineers
Approved For Release 2000/09/01 : CIA-RDP71 T00730R000100010007-4
EUET
 Approved For Release 2000/09/01 : CIUT00730R000100010007-4
and technicians and recent increases in the number of
Bloc technicians in the underdeveloped countires in the
ast half-year
Bloc will have problems as program becomes larger and
more complex, particularly will have problem of "dropping
the other shoe." It is one thing to reduce Western
ueence; it's another thing to achieve a measure of
Soviet domination. So far, for example, not successful
in helping the Communist Party in many places--opposition
of Nehru, Nasser, and Frondizi. May attempt to gain a
more dominant position through subtle manipulation of
trade and credits in future. This very tricky and could
redound to Soviet disadvantage throughout the area.
IV. CoMpetition and "Dumping"
A. As another measure in the cold war, many have suggested that
the Soviets will intensify their so-called "dumping" activity.
We believe there are many mistaken notions about Soviet
efforts to disrupt Western markets (tin, aluminum, asbestos,
wood pulp). History of Soviet pricing in international
commodity markets indicates they price according to market
situation, e.g.. in sellers'' market, have sold aluminum
above market price.
Approved For Release 2000/09/01 : CIA-RDP? 00730R000100010007-4
SECRET
 Approved For Release 2000/09/01 : CIA-R9fA9WRFT
730R000100010007-4
B. Do this to acquire foreign exchange to buy Western goods.
Have had foreign exchange shortage as reflected by their
sales of gold over the past few years.
C. Essentially Soviets have exported items which are:
Surplus to planned need; or
items with relatively low production costs.
D. In looking at the future, our concern should probably be more
over Soviet competition than dumping.
1. Generally speaking, when the Soviets have sold below
Western prices recently, they have sold either in
commodity markets characterized by limited competition
and artificially high prices or in markets where they have
a relative cost advantage.
Every evidence that this competition will increase, however
gradually, in the future, perhaps to detriment of trading
nations which are allies of the West.
V. Selling the Soviet System
As a final point, we believe the Bloc will use its economic
capabilities to help sell their politico-economic system. They are doing
this through propaganda associated with (a) the rapid economic development
of the USSR and Communist China, and (b) through the economic offensive.
In addition to using regular propaganda and information media, the Soviets
Approved For Release 2000/09/01 : CIA-RDP71 T00730R000100010007-4
SECRET
 Approved For Release 2000/09/01 : CIA ~10730R000100010007-4
are pressing this effort through (a) training within the Bloc, (b) conducted
tours around the Soviet economy, and (c) the export of the Soviet planners
and teachers to assist these countries in the direction of their economic
activity.
It is clear from the pronouncements of prominent persons in the
underdeveloped countries that this is having effect; how much, we can't
say, but this is an arena where we can expect more intensive activity
on the part of the Bloc.
In summary. we can look for the Soviets to use their economic
capabilities in the cold war to.
(a) Intensify the economic offensive;
(b) To gradually increase trade competition with the West; and
(c) To sell the Soviet system.
ORR /CIA
25 November 1958
Approved For Release 2000/09/01: I)ECIfTOO0100010007-4