CA PROPAGANDA PERSPECTIVES SOVIET FOREIGN AID: THE SITUATION IN INDIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01194A000400080001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 35
• Document Creation Date: November 11, 2016
• Document Release Date: July 9, 1998
• Sequence Number: 1
• Publication Date: July 29, 1970
• Content Type: REPORT

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August 1970
SOVIET FOREIGN AID
(Some Facts)
According to Andrey Sakharov, Soviet physicist and critic of the state
of affairs in the USSR, Soviet citizens know little about their country's
economic and military aid to underdeveloped countries. The Soviet press ig-
nores the subject. In contrast, the Soviets have spared no effort to impress
the world that their aid is abundant and generous, with the result that
opinion polls in developing countries equate Soviet aid approximately to
that from Western countries. To dispel some of the myths created by this
two-way distortion of reality, it is useful to take a look at some generali-
ties concerning the Soviet aid program:
Soviet Foreign Aid Objectives
Khrushchev described the goals and methods of the Soviet foreign aid
program of the mid-1950s to the mid-1960s when he announced: "For the de-
velopment of their independent national economy, as for the improvement of
their people's standard of living, these (underdeveloped) nations may draw
on the successes of the Socialist world system.... Today, they no longer
need plead with their former oppressors for modern industrial equipment.
Such equipment is available to them in the socialist countries, with no
political or military strings attached." Subsequently Soviet spokesmen called
their foreign aid an expression of "peaceful economic competition" and a fac-
tor in the "buildup of the national economy in the underdeveloped nations or
in the latter's struggle against imperialism."
More recent statements made in the USSR imply that in the future, Soviet
aid will increasingly hinge on how closely a given country is judged to be
following a "socialist path" in its foreign and domestic relations. The fol-
lowing appeared in Kommunist, authoritative political journal of the CPSU
Central Committee, in November 1968:
"National liberation of nations can be achieved only in close
alliance and brotherly solidarity with the international Com-
munist movement, when the less-developed nation is guaranteed
aid and support from socialist states."
This and other Soviet pronouncements of a similar vein suggest that the So-
viet foreign aid program, which has never been large, will become even
smaller and will increasingly be directed toward politically-favored regimes.
Quantity of Soviet Aid
Total Soviet economic aid delivered from 1954 through 1969, according to
official Soviet figures, has been about $3 billion, or less than half of the
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total of $6.8 billion pledged to 38 non-Communist countries during this same
period. During the beginning of this period, total pledges of aid were four
times greater than actual deliveries. This imbalance brought unfavorable
publicity to the Soviet program and, as a consequence, in recent years pledges
and deliveries have been brought more nearly into balance. Military aid
valued at $4 billion has been delivered to more than half of these countries.
However, the total of military aid pledged, between $5 and $6 billion worth,
remains less than that for economic aid because of the shorter delivery time
for weapons, ammunition, and planes, and for the dispatch of military in-
structors.
USSR Compared with Other Aid Donors
As the world's third ranking industrial power, the USSR has a vast for-
eign aid potential. Nevertheless, in comparison with the performance record
of other aid donors, the Soviet program is unimpressive. Between 1954 and
1968 Soviet economic aid pledged to the Third World equalled only one-eighth
that pledged by the U.S.A. while Soviet aid actually delivered fell below
one-eighth of that delivered by the U.S.A. Between 1965 and 1968, the Sovi-
ets slipped to fourth place in the total value of new aid commitments, trail-
ing other donors whose economic potential was far less than theirs.
The USSR is one of the few advanced industrial countries which refuses to
subscribe to the United Nations annual target for aid donors of one percent
of their gross national product (GNP). In fact, the Soviet "burden" has
never been greater than 8/100 of one percent of GNP. In 1968 the following
percentages of GNP were registered for "industrially advanced" aid donors:
France
.72
U.S.A.
.39
United Kingdom
.37
West Germany
.37
Japan
.32
USSR
.04
Unlike aid from the industrial West, over half of which has been pro-
vided as outright grants, virtually all Soviet assistance has been in the
form of credits. Well over three-quarters of Western aid has been repay-
able over 25 years or more -- about double the 12-15 year repayment period
allowed by the USSR. Moreover, while roughly between 25 to 30 percent of
official aid from Western countries is not tied to procurement in the donor
country, all Soviet aid is tied to the purchase of Soviet goods and services,
Recently Soviet "aid" has taken on more and more the appearance of "com-
mercial credits." Since the mid-1960s Soviet aid extensions have become even
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less concessional than previously. Interest rates, standardized at about 205
percent, have risen while repayment periods have been shortened and often
down payments of up to 25 percent have been required.
Quality of Soviet Aid
The effectiveness of Soviet economic aid is difficult to measure overall
because of differences between countries receiving aid. However, some general-
ities apply over-all: projects have required one and a half to two times as
much time as planned for completion; final costs often are double the estimated.
costs. Production difficulties have been experienced at new plants, and pro-
duction equipment has been found to be out of date. The products of completed
Soviet aid projects have generally fallen short of quality standards in the
non-Communist countries. In some instances, faulty estimates of demand have
led to the production in Soviet-built plants of ridiculously high inventories
of unsold products.
Often the creation of new manufacturing facilities through the Soviet
aid programs has had positive effects. Some foreign exchange funds have been
saved as countries have produced items which had formerly been imported. A
risk factor is that in the process of repayment, the country receiving aid
may have to rechannel its future trade to the USSR and its ruble trade zone.
When this happens, as is illustrated by Czechoslovakia, production standards
are lowered and, over time, the country decreases its ability to sell goods
in non-Communist markets.
From the Soviets' standpoint their foreign aid program may be considered
a successful undertaking. It has cost them little (economic aid has amounted
to about .05 percent of their GNP, or one-twentieth of the share proposed by
the UN for developed countries). They have scored evident political successes
(most notably in Egypt). The Soviets have obtained increased amounts of raw
materials and foods from the less developed countries. They have provided
those countries with machinery and equipment of such poor quality that most
of it was unsaleable at world market prices. Moreover, according to Soviet
statistics many of those products have been surplus in the USSR during the
past several years.
Strategically, the Soviets have expanded their presence in both hemi-
spheres and, as a consequence, also their opportunities for economic, military
and political penetration. Adding to the strategic significance of Soviet aid
is the nature of a number of projects included under economic aid. For example,
roads and railroads built in countries bordering the USSR could be used for
Soviet military purposes. Ports and shipping facilities, as well as fishing
installations, have been financed in a number of countries by Soviet aid;
these facilities could be used for emergency purposes by Soviet naval vessels
and the far-flung Soviet fishing fleet, conceded by many to be an auxiliary
of the Soviet Navy.
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'~ August 1970
SOVIET FOREIGN AID: THE SITUATION IN INDIA
India has been allocated 25 percent of total Soviet aid pledged to the
third world since 1954.
The first Soviet economic aid to India involved the construction of the
Bhilai Steel Works, agreement for which was signed in 1955. The Soviets'
program has been extended to a total of 40 projects. The first Soviet offer
of military aid was accepted in 1960, when the Indians contracted for
$31,500,000 worth of transport aircraft and communications equipment.
The amount of Soviet economic aid delivered to India in the past 15
years has totaled 87 million, or a bit more than half of the pledged sum
of $1,612 million. Soviet military aid totaled $600 to $700 million through
1967 and had probably increased to about one billion dollars by 1970. In
spite of Soviet claims that their aid to India has been large relative to
India's economy, the opposite it true: Soviet foreign aid delivered during
1955-69, on a yearly average, has amounted to about one-seven-hundredth of
Indian gross national product.
Economic Aid
A comparison of the scope of Soviet economic aid to India with that from
other countries as of 1966 is given in Peter Sager's book Moscow's Hand in
India. Sager found, on questioning them, that most Indians believed that
Soviet aid, while not quite exceeding American aid, was increasing faster and
was then only just behind the latter. The facts were quite different: at
that time Soviet economic aid pledged to India amounted to only 16.5 percent
of U.S. aid to India. The comparison is even less favorable to the Soviets
when account is taken only of aid actually delivered, and of the fact that
virtually all of the Soviet aid must be repaid whereas over a fifth of U.S.
aid is non-repayable. Similarly only a limited number of Indians were aware
that, besides the U.S., West Germany and the United Kingdom had, by mid-1965,
actually delivered more economic aid to India than had the USSR.
One reason for these erroneous Indian opinions was that Soviet aid has
focused on impressive projects in heavy industry. (See the attached listing
of the major projects.) More than half of the amount expended has gone for
two steel mills; one, the Bhilai Steel Works, has been completed, and the
other, the Bokaro Steel Works, is still under construction. Substantial
shares have gone for factories to produce machinery and equipment, electric
power plants, and petroleum refineries. Another possible reason for the in-
flated Indian opinions about Soviet aid is that the construction stage of
the projects has been stretched out, thus attracting inordinate attention.
Indian expectations from Soviet aid were from the beginning understand-
ably high as Soviet technological prestige in the 1950s was enhanced by
achievements in thermonuclear weapons, jet aircraft, and space vehicles.
However, the results over the years have sorely disappointed the Indians.
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The first disappointments came from the inordinately long construction
times of the projects. The Bhilai Steel Works, even though it was a show-
piece and was given the highest priority by the Soviets, took five years to
build (nine months longer than scheduled). The Neyveli electric power plant,
the first stage of which had a capacity of 250,000 kilowatts, took from
August 1959 to May 1964, a total of 57 months vs. the plan of 36 months.
The Barauni. Oil Refinery, planned to be built in 21 months, took twice that
long. (The Indians thus have known for some time what a Soviet official ,.,
meant when he confided to a Yugoslav visitor in 1969 that Soviet plants
take so long to build that they are obsolete by the time they're completed.)
The largest project currently under construction, the Bokaro Steel Works,
is estimated by Indian MP's to be three years behind schedule.
Soviet aid projects also cost more than planned. The Neyveli power
plant,fbr example, cost a quarter more than planned. The Barauni Oil Re-
finery cost almost twice as much as planned. And the Bokaro Steel Works,
it is estimated, will cost 10 billion rupees, or more than half again the
envisaged 5.9 billion rupees.
Besides the excessive time and cost of construction, the Indians are
critical of the economic planning that has gone into Soviet aid projects.
The Bokaro Steel Works has been a particular focus of such criticism, as is
abundantly clear in the attached articles concerning that project. Bokaro
suffers in comparison with the earlier project at Bhilai. The latter was
built to produce structural steel and rails and thus was relatively simple
in design. The Soviets assigned some of their top engineers to Bhilai,
and gave high priority to the development of plans and the delivery of equip-
ment. This effort resulted in the project being completed only nine months
late (almost unheard of in the USSR) and, because of Soviet subsidies, at a
cost only about 20 percent in excess of estimate.
Bokaro, in contrast, enjoys none of those advantages. It is to produce
much more complex steel products, such as cold rolled sheet, galvanized steel,
and tinplate. (The Soviets are having trouble at home in the production of
these types of steel, as witness their purchases from Western Europe of cold
rolled steel and their contracting with the British for the construction of
a tinplate mill in the USSR.) The Soviet project officials apparently were
unable to get a high enough priority assigned to the Bokaro project. Some
of the equipment was delivered far too early and will have to be stored (and
payments for it will have to be made) for several years prior to being in-
stalled. There is no sign that the Soviets are making efforts to hold down
costs. The Soviets have unaccountably revised the project so that fewer
Indian manufactures and more Soviet manufactures will be used in construction.
Indian parliamentary reports on the Soviet-aided pharmaceutical and sur-
gical instrument plants at Rishikesh, Hyderabad and Madras and on the mining
and heavy machinery plants at Durgapur and Ranchi reveal them to be technical
and commercial failures. Basic Soviet planning failed to "take into account
the local atmospheric conditions" in designing the pharmaceutical plants.
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As a result, at one plant the rusting of equipment led to a 40 percent rejection
rate of the plant's production of antibiotics because of impurities.. The
Durgapur machine plant, having reached only 11 percent of its targeted capa-
city, has incurred an aggregate loss of 200 million rupees. (Additional de-
tails are given in the attached press clips.)
In an assessment of Soviet economic aid worked out by some Indian analysts,
they conclude that the project approach worked poorly, and should be changed
in accordance with India's changing needs, They find that complete new steel
mills and electric power plants, even under the Soviet aid program, are too
costly for India. They would prefer selected items of industrial equipment,
as well as industrial raw materials and fertilizer. There is no indication
that the Soviets would accept such radical changes in their aid program.
Military Aid
Soviet military aid, similarly, has not measured up to expectations.
Starting modestly in November 1960, when the first Indian-Soviet arms aid
agreement for air transport and military communication equipment valued at
$31.5 million was signed, the program grew to a total magnitude of a billion
dollars by the end of the decade. Its scope has expanded to include super-
sonic aircraft, an air defense system, and submarines. From the Indians'
standpoint such aid was desirable for the defense of their long borders and
coastline. Moreover, most of Soviet military aid was offered at prices lower
than those of Western countries and could be repaid in Indian rupees. From
the Soviets' standpoint the program was attractive because it considerably
increased their influence in India, helped bulwark India's defenses against
China, and was inexpensive in that it involved mainly weapons systems no
longer being produced for Warsaw Pact forces in exchange for Indian currency.
India became the first non-Communist country to acquire the know-how to
manufacture the Soviet MIG-21, under an agreement of October 1962. An air-
frame plant at Nasik and a jet engine plant at Koraput were under construction
in 1963 and production was to begin in 1965, according to New Delhi's Overseas
Hindustan Times of 24 October 1963. In addition, a complementary electronics
plant was built at Hyderabad, The Indians planned at first to assemble air-
craft and engines with components shipped from the USSR; by 1970 they were
to manufacture all the basic components from Indian raw materials.
Prime Minister Nehru regarded the MIG-21 as a sturdy, comparatively un-
sophisticated airplane, one for which the Soviets could establish the manu-
facturing capacity in India in a relatively short time. Progress at the MIG-
21 complex casts doubt, however, on this conclusion. The Indian Ministry of
Defense indicated in a 1970 announcement that it wasn't until 1968-69 that
the Koraput Plant had begun production of MIG engines and the Nasik Plant
had begun manufacture of MIG airframes "from raw materials." Both of these
production dates exceeded the originally anticipated dates by two years or
more. A 1970 statement on Air Force Day by Indian Defense Minister Mr. Swaran
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Singh that "efforts are now directed towards minimizing our dependence on
foreign supply for all military equipment" strongly suggests that the Soviets
are still supplying the bulk or at least half of the components. In the final
outcome, India m ay find it would have been cheaper to purchase the aircraft.
Spare parts for the Soviet-made MIG-21 components are another problem.
Indian Members of Parliament complain that an inordinately large number of
MIG aircraft have been grounded because they lacked adequate spare parts.
Under terms of a naval aid agreement negotiated in 1965, during India's
war with Pakistan, the Soviets agreed to provide India with four submarines,
and a total of a half dozen or so destroyer escort ships of the PETYA-class
and naval patrol craft. Deliveries of these warships lagged through 1967,
after which they were stepped up in apparent response to Britain's announced
military withdrawal from the region east of the Suez, and as Britain and the
U.S. continued to be reluctant to meet Indian requests for warships. In a
companion development, the Soviets have participated in the construction of
the large naval yard of Visakhapatnam on India's east coast.
While it is too early to tell how the Soviet-built ships will withstand
the Indian Ocean climate with its high temperatures and humidity, there is
some evidence that the Indians have grounds for complaints about the naval
side of Soviet military aid. Some delays in delivery were experienced. The
costs of training Indian crews in the USSR have been high, $350 per month
per man payable in hard currency. And the costs of maintaining Soviet naval
officers in India are high because of the luxurious living standards that
the Soviets insist upon. (See the attached press clips.) As with Soviet
aircraft, the spare parts problem with naval vessels is aggravating, and
ships have been tied up for repairs for what appear to be inordinately long
periods.
The Soviet involvement with Vishakhapatnam Naval Yard has stirred wide
conjecture that the Soviets may be contemplating setting up a base for their own
navy there. However, the Soviets, are well aware of Indian antipathy to the idea
of foreign bases in the Indian Ocean, and for political reasons have not
sought base rights to date. Nevertheless, if the Soviets felt the need to
service or base their own naval vessels in the Indian Ocean they could readily
use Vishakhapatnam where the facilities are compatible with Soviet-built
ships and the base personnel are largely Soviet-trained.
On balance, Soviet aid has provided the Indians with the means for ex-
panding industry and equipping their armed forces. The costs, however, have
been largely deferred, and repayment of India's debt has become a growing
problem. In 1970 and later years, for instance, repayments will exceed
Soviet economic aid by a significant amount, thus acting as a net monetary
drain on the Indian economy. But the drain on the economy will undoubtedly
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be far greater, in that there will be no economic return on the military
aid, and limited return on the economic aid because a large share of the
Soviet projects are incomplete and those that have been completed are
yielding unsatisfactory results.
Principal Soviet Aid Projects in India
Bhilai Steel Mill
Bokaro Steel Mill
Heavy Machine Building Plant at Ranchi
Coal Mining Machinery Plant at Durgapur
Heavy Electrical Machinery Plant at Hardwar
Electric Power Station in Neyveli
Electric Power Plant at Korba
Electric Power Plant at Singraul
Hydroelectric Power Plant on Bhakra River
Petroleum Refinery at Barauni
Petroleum Refinery at Koyali
Antibiotics Plant at Uttar Pradesh
Synthetic Drugs Plant at Sanatgar
Surgical Instruments Plant at Avadi
MIG-21 Airframe Plant at Nasik
Supersonic Jet Engine Plant at Koraput
Aircraft Electronics Plant at Hyderabad
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HANDELSBLATT, Duesseldorf
11 November 1968
The USSR has employed extensive propaganda at a cost of 70 million
rupees to date (37 million German marks) to convinze the man on the street
that it has extended to India more credits, loans; and developmental assist-
ance than has any other country in the world. Better-informed circles know,
however, that even in aid promised the Soviet Union lags behind the U.S.,
and that even in this area the U.S. aid is six times that of the Soviets.
During the period April 1951-May 1968, aid promised by the U.S. amounted to
63.61 billion rupees (33.9 billion German marks) as compared with only 10.32
billion rupees (5.5 billion German marks) which the USSR promised by way of
credits. An even more crass contrast is evident when the actual sums de-
livered are compared. .'he actually-delivered aid payments made by the Soviet
Union amount to only 5.46 billion rupees (Z.9 billion German marks), as com-
pared with U.S. aid payments made in the amount of 58._47 billion rupees
(31.16 billion German marks). Thus the U.S. has made ten times the funds
available that the USSR has furnished. Unfortunately this is known to only
a few well-informed persons in India. The same limited number of persons
know that with respect to actually-rendered aid, the Soviet Union stands in
fourth place, behind West Germany and Great Britain.
During the above-mentioned time period, the FRG and Great Britain
promised India aid in the amount of 8.02 billion rupees (4.27 billion German
marks) and 6.2 billion rupees (33.05 billion German marks). But the ratio
between promised aid and actual aid made available is unusually high with
respect to both countries. West Germany has already paid out 6.88 billion
rupees (3.68 billion German marks), while Great Britain has made available
5.53 billion rupees (2.95 billion German marks). Although the FRG stands
in third place with res? ect to aid promised, it stands in second place, be-
hind the U.S., in actual aid delivered.
It is worthy of note that a vast discrepancy between aid promised and
aid actually delivered exists only in the case of the Soviet Union and the
bloc countries. The other Western countries and even the Far East can demoi-
strate much better results in this regard. For example, Czechoslovakia
promised aid in the amount of 990 million rupees (528 million German marks),
but actually delivered less than half that amount, i.e.-, 440 million rupees
(234.5 million German marks). Yugoslavia promised 940 million rupees but
paid only one-quarter the amount (260 million rupees). The same was true of
Poland, which promised 650 million rupees (346.5 million German marks) but
made only one-third that amount (210 million rupees) available. These coun-
tries were exceeded by Hungary and Bulgaria, which promised 250 million and
11 million rupees respectively but have made no payments whatever to India
up to now.
The Soviet and Soviet Bloc propaganda, which deals only with the
promised amounts of aid, has achieved astonishing successes among the Indian
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pople. A poll taken in 1966 by the Indian Institute of Public Opinion
?:owed that 89 percent of the individuals questioned knew that India was re-
ceiving developmental assistance from the U.S.; 79 percent knew that the
Soviet Union was also giving developmental assistance, whereas only 30 per-
cent had heard of West German developmental assistance in spite of the fact
that the FRG had rendered more assistance than had the USSR.
In the field of foreign trade, too, which involves primarily an ex-
chnnge of goods, and payments in rupees, the Soviet Union and the Soviet Bloc
states are operating securely for their own benefit. The volume of trade be-
tween the Soviet Union and India in the past two decades has increased 300
times. The USSR has so engineered the exchange -- apparently deliberately
- - that a considerable credit balance in favor of India has resulted, in
order that India can be forced to accept unwanted goods of inferior quality
at exorbitant prices. Evidence of this fact lies in the most recent effort
by the Soviet Union to purchase railroad cars and steel from India and to pay
for them by delivering e.ircraft to India which are labeled by Indian experts
as unfit for use by India. An increase in Indian imports from the Soviet
Union in order to effect a trade balance served as the topic of negotiations
which took place in Moscow at the beginning of October between the deputy
chairman of the Indian Planning Commission and the competent Soviet minis-
ters. On that occasion, the Indian delegation also raised the issue of finan-
cial assistance because it had not yet been possible for India to make full
use of the credits of 300 million rubles which the Soviets had promised.
BALTIMORE SUN
2 April 1968
Indian And Soviet Navies Seem
cou'l-thnig Cooperation
By ,1D:1.11 CLYMER
[Neon Delhi Bureau of The Sun)
Cochin, India, April 1-The
Indian Navy is acquiring at
least three Soviet destroyer es-
corts of the Petya class and the
first two crews have gone to the
U.S.S.R. f training, authorita-
tive source:: disclosed today.
Meanwhile India is consider-
ing a So%ict request for "techni-
cal i,:cilities" for its ships in In-
ciian norts. While this term has
r,a' spelled out in great de-
of drydocks and repair
dian Ocean. Admiral Nikolai
Gorshkov, Soviet naval chief of
!staff, suggested combined ma.
neuvers when he asked for tech-
nical facilities during a visit to
India in February, the sources
said.
While the escort deal, and a
submarine purchase which
preceded it, have been in the
works for some time, all these
moves have, gained increased
attention as a result of the Brit-
ish decision to withdraw from
bases east of Suez.
While Adm. A. K. H. Phatter-
ji, chief of the Indian naval
s. staff, was apparently talking
J inL;?scrcis:s Possible 'grandly last month in an unau-
:;ossihie future Cie-
rapidly groping
3ct:4een tl: kco na
eserci es is 'ie In-i
thorized boast that the Indian
Navy would "fill the vacuum"
created by the British with-
drawal, the long-neglected In-
dian Navy apparently hopes to
become the strongest naval
power in the area.
While three Soviet ships
steamed from Madras to Bom-
bay today for the second stop of
a goodwill visit, Adm. N. N.
Amelko, commander-in chief of
the Soviet Pacific Fleet, met
Swaran Singh, Indian Defense
Minister, in New Delhi.
Details Of Talks Not Given
No details of his talks with
Singh or with Admiral Chatterij,
last night and today were re-
vealed.
There are some important
policy problems for India con-
nected with the growing Soviet
naval ties. Regardless of New
Delhi's efforts to insist that a
Chinese submarine threat-or
Pakistan's arrangements to buy
three French Daphne-class sub-,
CPYRGHT
marines pose a danger to its se-
curity, these fears are met with)
American and British skepti-
cism.
The British, who once were,
the Indian Navy's only supplier
and tutor, look dubiously on the
Soviet role.
Currently helping India build
Leander-class frigates (more
than twice the size of the de-
stroyer escorts), the British in-
sisted the U.S.S.R. Navy would'
not be welcome at Bombay's
Mazagon docks, where the pro-,
ject is under way and the first;
;frigate will be launched in Octo-
,bcr..It will be completed in'
1971.
The United States, which has
;never had any involvement with
the Indian Navy, comes into the
problem through the Conte and
Symington amendments to this
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CPYRGHT
c::; foreign aid bill.
T'rr Conte proviso particularly
?; i : ci require the Administra-
lion to cut foreign aid to India
by the amount it spends on new[
types of sophisticated weapons;
ordered from abroad after Jan-
uary 2 of the yeai.
Arid the hard bargaining of
the Soviet navy-it insists that
agreements provide 3,500 calo-
ries per day for Soviet officers
assigned to India-has made th,
terms seem extravagant.
It is not because the Indian
Navy's hopes are modest, but
because the British presence it-
Iself has been spread so thin
east of the Persian . Gulf and
I west of Singapore that no va
Icuum is being newly created.',
CURRENT, BOMBAY
25 October 1969
Eye On Indian Ocean
The U.S.S.R. seems to be
more than casually interested in
establishing, a fl^et presence in
the Indian Ocean, too, though it
is a long way from Soviet ports.
especially with the Suez Canal
closed.
For that reason, repair facili-
ties are essential, though Brit-
ish reports that the Soviet
Union has asked for something
as formal as "bases" are dis-
counted here.
Facilities For Subs, Escorts
Already the Soviet Union has
helped India develop naval fa-
cilities at Visakhapatnam, mid-
way up India's East Coast.
These facilities are expected to
provide servicing for the sub-
marines and escorts the
U.S.S.R. is supplying.
But the naval cooperation has
not always gone smoothly. The
arrival in Bombay of the first of
four of the SF-class attack
submarines India is buying
from the U.S.S.R. originally ex-
pected this month, has been de-
layed and is now not anticipated
before June.
It is understood that the sub-
marine suffered damage and
flooding during recent trials
near Riga, and the two coun.
tries' admirals are reported to
be disputing who should pay the
repair bill.
Delay In Escort Delivery
And the destroyer escort deal
has also apparently met some
delays. But two of the 1,050-ton,
30-knot escorts are now e:;pec:-
ed before the end of the year,
and the third early next. year,
Two Indian crews are now in
the - U.S.S.R. undergoing six-
month training periods {for;
which the Soviet Union charges)
$350 per month per man, pay-
able in hard currency, not in ru-
bles or rupees).
The third escort crew is ex-
pected to go to the chief Soviet
Far East naval port of. Vladi-
vostok in July.
The naval tie seems less oner-
ous than it once did. Officials in
New Delhi have found British
representatives able to act
more quickly and to make mi-
nor decisions with less refer-
ence to London than the Rus-
sians must make to Moscow.
CPYRGHT
Rl1rdai -steel Plaa3==?-w~ -~~Al1~aA? ~nwA! AafA~
00 r
DO. Ila
y
EIZ3 Cj u D P r , L C,- 2
K-T
From Our M.P. Correspondent
L?a
BIIILAI: The expansion of the Soviet-aided Blrilai
Steel Plant from 2.5 million tonne-capacity to 3.2 million
tonne-capacity will now be delayed by nearly a year. The
reason is the delay by the Soviet Union in supplying cer-
tain ecruipincnt, particularly Refractories, for the expan-
sion of the Plant.
That the Plant has come up
with the USSR aid and assist-
'lnce, is a well known fact. The
USSR assured a supply of Re-
fractories for the Blast Fur-
nace No. G being brought up to
3.2-million-tonne c p icity by
1]eccmbe.r this year. With this
supply, the commissioning of
the Blast Furnace No. 6, enab-
ling the Plant to raise its pro-
duction would have been pos-
sible by September 1970.
The USSR authorities have
suddenly informed the Incliazt
authorities that the equipment
nrcaut for the )last Furnace
No. 6 would now be delayed
and their supplies could be ex-
pected only by September 1970.
The delay in the supply' will
thus delay the increase of the
Plant's production capacity by
nearly a year, which means a
loss of several crores of Rupees
to the public exchequok in
India.
The reason for the ,non-
supply of the Refractories in
time, could not be and was not
non-avai]ability of the material
asked for by India. Thenon-
supply, according to these-sour-
ces had to do something with
the change in the attitude of
the USSR. towards India.
R .
fly
Elm so `)BV
EX Ierae;;..- tt;;d that of the
1};It;1tc r.cctor-Tatrt Iron and
S1(c:1 Ccr.rtp^r;y fend the 11ui,.011
7r,)Il find fit(; 1 Cnnlpany-ls far
.,hc,rt Of priat,e Soviet or;an1wtioii for
dolnu this job .ncl the G61 has
nominatec1 the ?SL. Both of them
niut work ',within the framework
of the, inter-governrn-ttal axree-
me^it.
"There.'o:., 'f Bokaro Stcel should
want to place a turn-key job up to
the bla;t furnace complex stage,
let us sn"V. on fll-C. Tiaahpromex-
pa.-t cannot vllbl" ly for?et her res..
Ponsibllitlrs M the matter. We can
only do it with the consent and
np.zrnval of 'rjaz.hpromexport be-
caitCe their responsibility for the
working of the entire plant still re-
maln5."
If thls interpretation of the fn:cr-
novernmental agreement of Mr N.
N. Warichoo !s correct, Bokaro has
to he considcrrd n turn-key job'
T 111.1z would become clear from s
careful stuciv of the relevant do-
ctnnents and statements made by
Soviet rcnrrsetttntires.
F inal say
Bokaro is n turn-key job-but
writ.h a difference. In all turn-key
jobs, the parties nnde..rtaking them
have the final say in all decisions re-
latin to them as also hill respon-
slbillty with suitable penalties for
failure to comply v;ith the terms
of the contract in regard to perfor-
mance. In this case as with most
r agreements.
oviets, whilst eetaIning the final
v in all the decisions. even the
ucial ones, have seen to It that
eir responsibilities are of the bar-
1 minimum. limited only to giving
grantees that the equipment they
nniv fully conforms to the DPR.
?i t this Is the case in all Soviet-
ded projects with such rare ex-
rPnttnYle ae Rh+`ni -ehm,l.4 I
ous to any one Who is acel:a .?rc;
with the IDPL:s plant.q and ;i1i
Dort thereon by the Commit`e.> on
Public Undertakings. In fact e.v"sv
one of the deficiencies pointed :'n
by the committee in regard to I7?I,
ere manifest in the BSL, ct?h!ch i
litergll.v fn11o rtntt in for fool .'ni
of the AnHhln&ics ntant of Rishikesh.
-(To be concluded)
Search fignt on
Bokaro-Il
By K. V. SUMIAUNYAM
amplest; 0114A 01 WN me o y
which the Soviets have acquired
powers unrelated to their responsibi-
lities in the construction of Bokaro
Is through having. the Government of
India agree to the stipulation that:
"except where otherwise provided the
:DPR shall be worked out according
to USSR norms, standards and re-
gulations." The stipulation extends
even to the dimensions of refrac-
tories.
Both Houses of Parliament were
told that it was necessary to ac-
,cep- this stipulation as the Soviet
organisations were required to give
performance guarantees In respect
.of the designs and equipment and
that the question of loss on this
account did not arise as all items
of machinery and equipment that
could be manufactured within the
country were to be obtained from
Indian sources. I am afraid the Mi-
nister of Steel was not correctly
brieqfed.
It is surprising that those who
briefed the Minister should be un-
aware that by agreeing to this mop-
atrdus stipulation they have enab-
led the Russians - to send us their
standard equipment such as the
100-tonne LD cmrvertors and 5.5
Million-tonne slabbing mill and hot
strip mill with effects on both capi-
tal and operating costs of Bokaro.
Do not these higher capital and
operating costs, either because the
LD- convertors are of smaller size
than are available from other sour-
ces or because the rolling mills have
excessive inbuilt capacity (5.5 mil-
lion tonnes) whidh they may not
attain even after ten years, re-
present losses directly attributable
to 0-,, accoDting Russian standards?
Revelations
At the meeting on December 10.
1969 to discuss the quality of steel
Mr V. L. Agre, Chief Design F,n-
gineer of the Soviets at Bokaro,
made some extraordinary revelations.
The minutes of the meeting
should act as an eye-opener even
to those blinded by propaganda and.
make them see that Soviet welding
techrOIO.Jy Is behind even that of
India and far behind countries like
Great Britain. West . Germany,
Japan and USA and that Soviet LD
convertor practice is to such a
stage of development that they have
far less confidence in the LD steel
CPYRGHT
CPYRGHT
produced In their own country than
we have in the LD steel produced
In Rourkela. And, the entire steel
production at Bokaro will be iron,
LD convertors provided by the
USSR!
Another meeting held on Decem-
ber 19, 1069 did little to, resolve
this controversy as the Soviets did
not agree to deviate from their spe-
cifications already given in them
design drawing as, in their view,
killed quality steel for some of the
important structures is very essen.
tial.
A reference has been made to the
design Organisation in the USSR
to reconsider the use of killed steel
in view of the modiflcations for IS:
226 quality of steel. The Board of
Directors has also approved sending
a small delegation to the. USSR
for finally deciding this issue with
Soviet designers. And that is the
most Interesting end to this con-
troversy for the present at least.
Effect of delays
?t The effect of there delays which
'Still continue on the progress of
Bokaro can easily be gauged. Need
there be any doubt that the aclop=
tion of Soviet norms and stan-
dards has been the cause not only
of these delays but also of the los-
ses arising therefrom?
I It may be remembered that only
a few months ago Mr N. N. Wan-
choo as Chairman of BSL had sta-
ted in public that every day's delay
In the comtnissioning of Bokaro
cost the nation Rs two crores. The
Minister himself told the Ra ya
Sabha on March 17, 1070 that the
loss on this account was estimated
at Rs 25 lakhs a month and that
the delays were caused by factors
beyond the control of the manage-
ment, such as non-availability of
steel plater, of killed qusflty fnr
the fabrication of structurs}s, fail-
ure of indigenous manufacturers to
supply refractories in time, labour
troubles and so on.
It is not clear how labour trou-
bles constitute a factor beyond the
control of the project authorities
unless there "has been gross mis-
management. Be that as it may,
the two other reasons are undoubt-
edly due to our agreeing to Rus-
sian standards,
Since ,64 per, cent of the equip.
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ment, 37 per cent of the struc-
tural and a large percentage of the
refractories are to be procured from
India, it may be asked whether the
indigenous manufacturers are ex-
empt from guarantees because they
have to manufacture them not to
Indian, but Russian, standards. Will
the Ru.:;ians allow us to manufac-
ture them to Indian norms, or, will
they forge the guarantees in re-
turn for our agreeing to manu-
facture them to their norms?
Need for probe
As regards refractories, not much
need be said except that a thorough
inquiry by a high-level committee
unconnected with the Ministry of
Steel and Heavy Engineering, BSL
and the Soviet organisations Jn
India can bring out the whole sor-
did story of the artificial shortage
that wa created to provide plausi-
ble excuses for delays of Bokarc
due to other causes and lneidentall3
to enable imports from the USSR.
It is necessary, however, to note
here that the import content of
refractories has been the highest
in Soviet-aided steel plants whe-
ther at the million-tonne stage or
MARCH OF THE NATION, Bombay
9 May 1970
during expansion as compared to
Rourkela, Durgapur, TISCO and
IISCO, which fact ought to pro-
vide the starting point for any
such inquiry.
The matter of the supply of
*efractories has also figured dur-
ing question hour in Parliament.
The Minister of Steel stated that
the domestic refractory Industry is
unable to cater fully to the re-
quirements of the steel industry for
silica bricks needed for coke ovens
and for high-grog fire-clay bricks
needed for the blast furnaces be-
cause many of the refractories
producers are not equipped with
facilities for production of these
Items and those who have the
necessary facilities are fully book-
ed with orders and that an exa-
mination whether any of the closed
refractory units in the private sec-
for can be taken over in the pub-
lic sector is In hand.
Why were these units closed?
Closure of units
especially that of the Asian Re-
fractories built with Polish colla-
boration and that of Assam Silmi-
nite built with West German colla-
A MARCH SPECIAL
ust before Mrs Indira Gandhi inaugurated dril-
ling operations at the Soviet-aided Aliabet Oil
Exploration Project MARCH of the NATION
stated categorically that the project was doomed to
On March 21, 1970, this piper
wrote: "If one looks behind the
gorgeous facade of the project,
one will find total incompete8ce,
crippling red tape, and rampant
corruption".
The same, issue of MARCH
said that at Aliabet there was
"no planning, no organisation,
no nothing", that the drilling
rig had not even been properly
"bedded", that its location was
faulty, and that technicians on
the s pot feared for their very
hues because they had been or-
dered to continue work in wea-
ther ccinditioiis that were extreme-
ly hazardous.
MARCH of the NATION had
also cited chapter and verse to
prove that the ent"re project was
ridden from top to bottom by
graft, that exorbitant prices were
being charged for equipment and
materials. that bribes had to Ile
given before bills were paid, and
that the Soviet technicians who
were supervising the project
were woefully behind the times
in oil technology and at complete
loggerheads with Indian personnel.
SENSELESS BRAGGING
As for Dr Trigun i Sen, this
paper had exposed the fact that
by making grandiose commit-
ments to have.tbe project in ope-'
boration? On another occasion the
Minister of steel stated In the Lok
Sabha that permissible relaxations
in inspection procedure for sup-
plies from indigenous sources are
being allowed without affecting the
quality of refractories, of course
after orders for imports of 22,000
tonnes have been placed and rur-
ther orders for another 24,063 ton-
nes have been finalised, both with,
USSR.
Why had these efforts at relaxa-
tions to await repeated complaints
from indigenous manufacturers and
the appointment of a committee by
BSL under the chairmanship of
the Director of Central Glass and
Ceramic Research Institute, Cal-
cutta?
have the were
final sayo in the allowed accept-
ance or rejection of refractories
from indigenous sources If they are
merely consultants and the respon-
sibility for the construction of the
Bokaro Steel Plant is that of
BSL as the Minister of Steel stated
in Parliament? Lastly, why were
all these efforts to await the final-
isation of the orders for the im
Port of over 46,000 tonnes of re-
fractories from the USSR?
CPYRGHT
ration' by a set time, he was
plying ducks and drakes w(th
the lives of the men on the shot
to bring his foolhardy boasts to
fulfilment.
Despite the warnings of this
naner, Mrs Gandhi merrily went
ahead with the inauguration. She
pressed the button, or cut the
tape, or whatever it was, and the
drilling rig, , supposed to be yet
another monument to Indo-Soviet
co-operation, went into action,
FIZZLED OUT
For twenty minutes or so every-
thing went according to plan and
Mrs Gandhi, her pleasant duty
done, retired from the scene.
Possibly the Lady does not
know it even itioday, but the un-
pleasant truth is that 20 minutes
after drilling commenced . the
p ove or a ea a IA- -4
 C~YRGHT
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machine broke clown - when it
was supposed to have gone on
more or less indefinitely until it
struck oil,
This paper takes a particular
pleasure in saying "we told you
so" - for the simple reason that
Aliabet was so completely un-
practicable from the very start,
so beset with ineffic'euey and
technological bungles, that ,it
should never have been launched
in the first place.
CLEAR WARNING
It is no use pretending that
these tliints just "hapocried".
They would NOT have happen-
ed if the Minister had known is
job and allowed technically
qualified people to get on with
theirs, instead of tumbling over
himself to oblige the Russians and
to meet impossible political
demands.
According to a UNI report
which has been featured adertu-
ately only in s ecialised financial
journals, the offshore drilling in
the Gulf of Cambay suffered a
setback "following some unexpect-
ed local difficulties."
The bunglers of A1'ahet can't
get off quite that easy.
Difficulties there certainly were,
but these were hardly "unex-
necled". III fact they were clear-
ly foreseen by a host of on-site
technicians, given in detail by
MARCH of the NATION, and
ignored only because of the wil-
ful obtuseness of the Oil Minis-
try.
SHAMEFUL MESS
The following UNI despatch,
from the Economic Times of
April 21, mikes sorry reading
and should make the Oil Minis-
try thoroughly ashamed of itself
- if such a thing is at all possi-
ble for a limb of our presept
socialist government.
NEFV DEI.III o India's first
offshore oil drilling venture in
the Gulf of Cambay is report-
ed to have suffered a set-hack
following some unexpected local
difficulties.
According to reliable reports
reaching here, drilling opera-
tions from the platform erected
in the Culf, 40 lam. from Bhav-
natrar port, had to he tempo-
rarily suspen*led for two or
three clays to nut right some of
on back page
from front page
The drilling, which begpn
after, the Prime Minister, Mrs
Indira Gandhi spudded thew 11
on March 19, is reported to be
extremely slow. The Oil and
NatuaI Gas Commission (ONGC)
had expected drilling of the ep-
tire well (about 1,500 to 2,000
metres) to be completed befo;e
the onslaught of monsoon.
But drilling so far is report-
ed to be about 100 metres onjy
At the present rate the ONGC
will not be able to complete
more than 500 to 600 metres
by May before the monsoon
starts.
It is, therefore, now consider-
ed inevitable that, drilling has
to be continued after the mon-
soon in September or October.
Conditions in the Gulf of
Cambay are such that it is. im-
possible for drilling operations
to be continued during the
monsoon.
SPUTNIKS DA, OIL NYET
As March of the NATION has
pointed out several times during
the past few months, the Soviet
Union simply does not have the
requisite oil technology for ex-
ploration in the Gulf of Cambay.
It is more than a decade be-
hind the rest of the world and
was given the franchise for ex-
ploration simply because Delhi
wanted to burn another joss-
stick before Moscow's altar. It
was given the franchise, more-
over, over the head of rival
offers to explore oil without any
risk on India's part.
By going ahead with the
Soviet project, India is paying
heavily simply in order that tine
Soviets can catch up with the
rest of the world.
MORE TO COME
One would think that Dr Tri-
guna Sen would be satisfied with
a single monumental blunder,
but apparently Aliabet is not
e ough, and he must go in for
further losses.
According to the Special Be-,
presentative of the Financial
Express of April 30, "The Union
Government is in a quandary-
since its oil venture on the Per-
sian Gulf proved to be a net.
liability."
According - to this paper, ours
oil ventures in the Persian Gulf`.
are likely to land us in 50 laklhs
hq;ses every year.
As the paper puts it someww-",
charitably : "What is more par:;-
doxical is that this is so in spite
of the fact that oil has been
found and the total production
from the field will be above ?r0
million tons annually."
This Persian Gulf venture, inci-
dentally, is in partnership with
ENI of Italy and Philips Petro-
leum of America. In this case
the trouble is not with techno-
logy at all, since oil has been
discovered; it is apparently the
financial deal concluded by the
Government of India that has
led to the loss despite oil being
discovered.
As the Financial Express says:
"It is really unheard of to lose
in the oil business after oil is
struck in commercial quantities."
"Unheard of"? Maybe else-
where, certainly not in socialist
India !
And what is the Government's
reaction to these damning indict-
ments of its ineptitude?
Mr D. R. Chavan, Minister for
State for Petroleum and Chemi-
cals, bragged in the Rajya Sabha
the other day that the Union
Government had given Rs 199.06
crores to the Oil and Natural
Gas Commission as loans and
capital and added, with obvious
satisfaction : "There have been
no complaints about the work of
ONGC, which is a fully autono-
mous body and is now produ-
c?ing 3.7 million tons of crude
oii."
There is hope yet, of course.
One of these clays, perhaps ten
years or twenty years from now,
the Russian rig will finally str,ke
oil in the Gulf of Cambay and
all India's troubles will be over.
That will be the clay ...
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 Approved For Release 1999/09/02 : CIA-RDP79-01194A000400080001-4
MARCH OF THE NATION, Bombay
9 May 1970
Ii
CPYRGHT
From Our Special Correspondent
NEW DELHI : This week in the Lok Sabha Prime
Minister Indira Gandhi was caught on the wrong-
foot on the Bokaro issue. It seems she had been
making "untenable statements based on wrong as-
sumptions" not only to her Party men, but also to
Parliament.
During her budget speech on
March 17, Mrs Gandhi told the
Lok Sabha: "Mr Masani has
alleged - I believe the word he
used was 'brutal pressure' - that
Indian consultancy has been
pushed out of the job of consul-
tancy it, Bokaro which had been
promised to them. He has fur-
ther alleged that the CEDB is
nothing but a cover and a facade
for the Soviet consultancy or-
ganisation, Cipromex. There .is
no question whatsoever of our
acting under pressure, whether
Suvict or Swatantra."
BOAST BACKFIRES
These brave words have back-
fired, for it has now been irrefut-
ably established that Dastur
and Co were indeed pushed out
of Bokaro under open, unabash-
ed Soviet pressure, and not be-
cause Mrs Gandhi wanted to
create a Public Sector designing
department or anything else.
The refutation of Mrs Gandhi's
"untenable assertion" has come
from former Steel Secretary
N. N. Wanchoo and present
Steel Secretary R. C. Dutt in
testimony before the Committee
for Public Undertakings, which
placed its 68th report on Bokaro
Steel Ltd before Parliament a
tew days ago.
The Chairman of Bokaro,
Mr N. N. Waaichoo, stated :
"Dr Daslur wanted to bo the
principal consultant for the
project. The Soviet authorities
who gave 200 million roubles
were not willing to accept thil.
"They stated this to the
Minister and to me, and they
said this at all levels. They said
that they must remain in full
physical authority of the project
although they would associate
Dcsturco".
The present Secretary, with
veiled contempt for Dasturco
-
;-erhaps because he is Indian and
not foreign? - has stated :
"My own feeling is that after
1964, there was a change in em-
phasis so far as the Government
is concerned in regard to Das-
turco; but we are still continuing
to have Dr Dastur with highest
consideration.
"Having accepted Russian
assistance in this matter and
having all their experience apd
expertise, I think that Govern-
ment rightly felt it was not pro.
per to go beyond what they
(Russians) actually accepted in
rcgnrd to Dasturco."
PROOF OF PRESSURE
It will thus be seen that while
Wanchoo was at least honest
enough to accept Soviet pressure
at all levels as having been the
cause for keeping out Dasturco,
his successor tried to make a
virtue of necessity by implying
that the Russians were the re-
positories of all wisdom in regard
to steel technology, and by
attempting justifying the exclu-
sion of Dasturco except to the
extent that the Soviet would
tolerate them.
The Committee on Public
Undertakings (COPU) says that
Dasturco were not associated jn
the discussions which Bokaro
officials had with Soviet collatw-
rators after July 1984, although
they were general consultants to
the Ministry.
The Committee adds that they
were anxious to find out why
Dasturco was kept out of the
negotiations in August, 1964 and
thereafter.
But all that they could get by
way of explanation from the
Chairman of Bokaro and the
Secretary of the Ministry was
that the Russians were not willing
to accept Desturco as principal
consultants.
These statements of both the
Chairman of Bokaro and the
Secretary of the Ministry were
clearly designed to mislead COPU
because, what actually happened
as a result of the discussions
during August, 1964, and there-
after was that the Government'
of India was made to give the
design assignment for Bokaro to
the Soviets on October 13, 1964,
even before the inter-Government
agreement was signed _ under
which a contract had to Tie
entered into between the BSL
and the Soviet organisation fpr
the preparation of the draft
project report.
It only means that, long before
the contract for the DPR and its
terms were settled, the design
assignment for the DPR was
given to the ?oviets,
INCONVENIENT EXPERTS?
Why was this done? The study
of the assignment itself makes it
clear that if its contents were
known to the public - to say
nothing of the Ministry's own
consultants, Dasturco, who were
kept out of the discussions -
the Russians could not have got
away with the conditions they
wanted to impose.
These conditions, it should be
emphasised, were such that it was
possible for them to give us
whatever they chose to give
even obsolete or second hand
plants, and receive payment re-
gardless of the quality of w1,at
they gave in the form of know-
how or equipment.
An illustration makes this
point clear.
The blast furnaces are the
first and the rolling mills the
last components to be commis-
sioned in any steel plant. The
first stage of Bokaro involves
production of 1.7 million tons
and the second stage 4 million
tons leading ultimately, by some
unknown date, to- the 5.5 million
The rolling mill equiy,me;it,
which represents more than 40
per cent of the cost of a steel
plant, was designed for 5.5
million tons, and it was this roll-
ing mill, not the blast furnace
equipment, that was first supp-
lied,. soon after deliveries began.
In this connection, COPU
says : "it is also surprising ti;at
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CPYRGHT
In respect of equipment supply,
tllc contract with the USSR
stipulated only an overall period
of fifty months for the supply of
equipment from the date of
signing the contract, and did not
include a phased delivery sche-
dule.
PAYING PADDED BILLS
"The result was that while on
the one and the supplies were
deficient to the extent of 10,OQ0
tonnes for the first blast furnace
complex, a large number of
items for rolling; mills required
much later had already been
supplied."
't'he result of this defect in
the contract in regard to )roper
scheduling of supply of equip-
nlvnt was that for the rolling
mill equipment we will he pay-
ing principal and interest therepn
within a month of its despatch
from the USSR.
But the project will start yield-
ing returns only after the first
stage is completed - and that
too only a fraction of its capacity,
its full capacity being realised
only in the unknown futurc,
alter a minimum lapse of 15
years.
COPLJ d-d not, however, say
AMEN at the end of this devasta-
ting; repnrt. The last word alas
yet to bo said.
HINDUSTANI TIMES, New Delhi
26 April 1970
ussian pall
or viii!'
6aa ai'ies
New Dslt?i, April 25 (UTNt)
[Eleven Swatautra Wipe have pro
`tested against the abnormal etno-
luments" paid to Russian tecerni.?
clans in-Soviet-aided projects and
demanded an investigation into
the functioning of these unite.
In a joint letter to Prime MinL:.
ter Indira Gandhi they said that
aorne 943 Russian technicians were
employed in 13 projects and their
"aggregate emoluments amounted
to Rr, 12.5 crores"; the per capita
monthly salary v:ori:inz out to .Rs
,35,000, three and a', half times
higher than thst. of even Or, T're,
'silent
They" also a!'er } rt ci ti is i t~el
04 r,alarv s^^re; rt :n^r.on;:.Ile
Viewed agein.'I 111) If,ccrs by 'Lila
projects during ti~~ tart three
years.--IM-87 to 19 & Gt;---amo: nt.
ng to Rs 105 crores. Only three
out of the 13 undertakings showed
profit",
The sJunntor;ea to the letter are,
Mr N. Shivappa, ?fr R.' R. Singh
Deo, Mr R. K. Amin, Mr D. Amat,
Role Venkstanpa Nalk, Mr G. C.
Naik, Mr S. P. Ramsmoorthy, Mr
K. P. Sf;tgh Deo, Mr D. N. D.
Mr M. K. Nani
ra. 11111, - ;.1- ' ..t .
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Arms for the Third World
by: Wynfred Joshua and Stephen P. Gibert
(EXCERPTS)
Receptivity to Rt;ssian arm, aid overtures also facilitated the estahlts t-
iuunt of Srn it:t military aid ties with India. Before the first Soviet; Indian
toms aid w-'rccntcnt in November 1960. India filled its defense require-
ments ill western nations-mostly in Britain. Anxious to reinforce its
cxuumitnlent to non-alignment in international relations, India wanted
to rcducc its dependence on the west for arms and diversify its supply
sources. Equally important, India regarded Pakistan as a major threat
to its position on the Asian subcontinent and sought to acquire modern
ccluiprnent to match the weaponry Pakistan received from the United
Stings. According to Indian spokesmen, only the United States and the
Soviet Union were able to furnish the heavy transport aircraft and heli-
coptcrs suited to India's high altitude and climatic conditions.'' When
the Soviet Union proposed to meet Indian demands for considerably less
cost than the United States, and when Moscow, unlike Washington, was
prcpared to receive payment in Indian currency or commodities, India
dceiclcd to accept the Soviet offer.'--, The arrangement reportedly cov-
ered some 531.5 million in Soviet aid and included eight An-12 and
twventy-four 11-14 transport planes, ten Mi-4 helicopters, and equipment
for the development of communications in India's northern border
zone. ";
From a Soviet point of view, the estahlishntent of a Russian military.
assistance presence in India was in part a response to American arms
aid diplomacy in the SI:A'FO area. The Soviet Union wanted to oltset
11:5. weapons a,icl, to Pakistan and to counter American efforts to
trcn,~titen the northern tier. "Taking advantage of Indian concern over
Pakistan's defense buildup, Moscow moved to add New Delhi to its arms
acid recipients. By diminishing India's reliance on western military
cyuipntent and technology. Moscow hoped to undermine western in-
Ilucnee in India and to link New Delhi store intimately with Moscow.
Soviet tram aid further served to identify Soviet policy with India's na-
Iion;ilist aspirations. 'the 1962 accords sought particularly to underscore
this point. In early 1902, and again in the summer of that year, India
received new credits to finance additional helicopters and transport
craft.'? More importantly, the Soviet Union agreed at the same time to
hcfp India build two production facilities. ']'lie Iirst would produce and
asticn;hlc 1liC,-2Is; the second would manufacture engines for a super-
sonic jet under developntcnt in India.'" The Soviet Union also pledged
t, deliver a mtmhcr of MiG-21 jets which India claimed it needed to
counter Pakistan's acquisition of F-104 fighters from the United States."'
'Thus Anterican military aid to Pakistan again facilitated a Soviet mili-
tary aid initiative in India.
'' Scc rile dcfcmc of the Indian-Soviet arms accord by Defense Minister V. K.
..rishna Mellon. iiiculu.%(,n Times (New Delhi), April 13, 1961.
c /rri..thm .Srir/lee Monitor, October 15, 1960; Tunes of India, October 4, .1960.
Tunes of liana, October 4. 1960: New York Tiirre.c. April 2, 1961.
N, n' York Tirane, February 1, 1962: Christian Science Monitor. August 24,
96-'.
.V 'irk 7 imec. August IS, 1965 ibid., August 24, 1962. In September 1961
the InJi:ur ,ncuuncnt had purchased six Soviet jet engines for the HF-24. Because
of India's di~saliafaction with the pcrforn1 cc of Soviet engines, however, the
,uzrecmcnt to m:muf;rcturc engines for the IIF--24 did not materialize.
' 11imbist,,z Times, June 24, 1962.
CPYRGHT
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!)urin,1. I95`,' it spite of earlier declarations of mutual friendship,
Sin' -Indi:m relations hct,,rrr to deteriorate. While the reasons for mutual
discnclrintnicnt were complex. a major point of contention was India's
stresti on neutralism rather than anti-colonialism, i.e., the anti-American
valiant of neutralism that China insisted that neutrals follow. China
also claimed certain areas of India's Flimalayatn border region.' Chinese
forays into Ladakh Province at India's northern border in 1959 created
further friction between the two countries.
In addition China deeply resented lkloscow's attitude in the Sino-
Indian border clashes. The Sovie-t Union, careful to avoid jeopardizing
Soviet-Indian relations, but reluctant to offend China, adopted a neutral
position in a conflict between its communist ally and a non-communist
power. r
The outbreak of the Sino-lndian border war in October 1962 placed
Moscow in all even more difficult position, particularly with respect to
its nilitary aid program to India. In the summer of 1962 the Russians
had made new aid coimnitments, providing for the supply of MiG-11s
and the establishment of MiG-21 factories. Continued Soviet arms aid
to India risked serious damage to the already precarious Sino-Soviet
relationship at a time when the Russians needed solid communist back-
ing against the west it) the Cuban missile crisis. Accordingly, Moscow
initially endorsed a Chinese cease-fire proposal.'?" But the Soviet Union
also feared that cancellation of its pending arms aid commitments io
India would be interpreted as support for Peking, against New Delhi,
which might drive the latter into an a!ignnrcnt with the west. The prompt
US. response to India's appeal for military aid against the Chinese had,
iii fact, touched off demands in various Indian circles for a reassessment
of India's non-ali,i ntrient policy. Soviet vacillation with respect to the
Soviet-Indian MiG transactions suggested the dilemma the Russians
faced.
Soviet sources first indicated that the MiG agreements with India
would he shelved, " BBy December 1962 the Russians had shifted their
position and announced that it few MiG-2]s would be sent as samples
alnd that the licensing arrangements for the production of MiGs in India
werc still in elfcct.~"" In the first half of 1963 six MiG-21 fighters and a
iitinihcr of Mi-4 helicopters arrived in India. Negotiations in 1963 and
eairly I964 led to Soviet awreements for the delivery of An-12 cargo
phriics and air-to-air missiles for the Mi(i fighters and for the establish-
?-y u, cusscu in William E.
(iriit tfi, iii,' .Sino-Arri'icf Rif! (Cambridge: M.I. t . Press, 1963)? ph?
'I he ('pros c did not make their resentment public until 1963 when they
called he Sm ict p ,sition in the Sino-Indian border dispute a "betrayal of pro-
let;iri,m inlern,ctiunalism."_ See Arthur Stein, "India and the USSR: The
post-11 I'crrod." ;Iluur .S'gu,tv, vol. 7, no. 3 (March 1967). p. 169.
" l'rrn'Ja, October 25. 1962. It is not certain whether the Cuban confrontation
and the Chinese crossing of the Indian border were isolated developments. The
Psnssi:ms r fated Chinese claims that they knew of the Chinese action beforehand.
Ong, i i..5. cliokir suggests that the Romans had not expected India's defeat, which
forcrd them to take a position in favor of India and to cut oft' Soviet military,
supplies to China. See Arthur Stein, "India and the USSR," p. 31.
" it u.rlrin,tron !'uo(, October 30
1962
For a di
i
,
.
scuss
on of the negotiations on
the \li(i deals, see I:ui C. ('. Graham, 77re Indo-,Bonet AI1G Deal and Its Inter-
,urrional Reperrnssionc, Rand Corporation P-2842 (Santa Monica, Cal.: Rand
Corporation, I961). For the Indian positian in the MiG deals, see Selig S.
f}nrrison, "l',ouhlcd India and Her Neighbors," Foreign Affairs, vol, 43, no. 2
Il;rnuruT 1965), p. 325,
'New York 7'i1nes, December 2, 1962,
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uiC,lt of a $40 million SA-2 anti-aircraft missile complex in India,"
Bmid-I964 Soviet military sales totalled some $140 trillion."'= But the
RL,sians refused to modify the MiG fighter by adding all-weather and
night capabilities to meet Indian requirements for an interceptor at the
Ilimalayan border. The implementation of the licensing accord also
continued to encounter delays.
'['lie abatement of Sino-Indian tensions helped the Soviet Union out
of the awkward position of aiding a communist nation's adversary.
Moreover, the widening Sino-Sovict split accentuated Russian interest in
bolstering India as a counterweight to China on the Asian continent.
In September 1964 the Soviet Union extended a credit to India for
some $300 million in arms aid, including forty-four MiG-21 jets, twenty
helicopters, and seventy PT-76 tanks."; Moscow finally undertook to
m ake the necessary financial and technical arrangements for building
MiG--21 s in India.--,' The Russians further consented to make the re-
quired improvements for turning the MiG into an all-weather and night-
flying interceptor. Tile September 1964 accord indicated that Moscow
was prepared to revert to its earlier policy of extending substantial arms
aid to India in order to contain both the United States and China in
south Asia.
The eruption of the Indian-Pakistani border war of September 1965
once more placed the Soviet Union's carefully balanced policy in South
Asia in jeopardy.
It mart' be recalled that in the course of 1963 the Soviet Union had
initiated a policy of intrusion directed at countries closely identified or
formally aligned with the west. As part of this intrusion policy''" the
Soviet Union had also started to try improving its relations with
Pakistan. A modest economic aid agreement in August 1963 and a
commercial loan to Pakistan in July 1964 were the first steps in this
direction. A major obstacle to a Soviet-Pakistani rapprochement re-
trained the Indo-Pakistani conflict over Kashmir, in which Moscow had
taken New Delhi's side. 'IThe Russians, therefore, began to moderate
their previous categorical support of India on the Kashmir issue.r'c'
Pakistan had gradually retreated from its alignment with the west in
protest over what it regarded as Washington's increasingly pro-Indian
polies American efforts to help shore up the Indian defense forces
after the Situ-Indian border war of 1962 had intensified the concern in
"' Ibid., August 2, 1963: ibid., May 13, 1964; Washington Post, May 9, 1964;
t.sian Recorder, April 1-7. 1964, p. 5747.
Neiv York '11me', .September 13. 1964.
Washington Post, September 16. 1964; New York Times, September 22. 1964.
rlccordiug to Indian reports, the plants were expected to be in operation by
I'Itcti -69. lli,rda ii eeklp Review, March 28, 1966. The plants were still under
Construction in 1968.
Soviet intrusion efforts are more fully discussed in Chapter 2 of this study.
"'I he gradual Soviet switch on Kashmir has been analyzed in Sheldon W.
Simon, "The Kashmir Dispute in Sino-Soviet Perspective," Asian Survey, vol. 7,
no. 3 1 \larch 1967). pp. 170-87,
"' for a presentation of Pakistani views on U.S. policy toward India and
Pakistan, see Khurshid II der, "Recent -trends in the Foreign Policy of Pakistan,"
7 /tr lr ,old Today, vol. 22, no. I I (November 1966), pp. 482-91.
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Pakistan over the reliability of U.1. support in its dispute with India
over Kashntir. In consequence, Pakistan's leaders had begun to culti-
vate relations with the Chinese, whose support could be expected, and
with the Russians. Inevitably, relations with Washington suffered. Tile
United States, moreover, was reluctant to contribute to an Indo-
Pakistani arras race and delayed a Pakistani request to replace its F-86
fighter-bomber fleet with more up-to-date craft.
When the Indo-Pakistani border fighting broke out in September
1965 and the United States promptly suspended all defense deliveries to
the two feuding states, Pakistan accepted a Chinese offer to replace some
of its depleted assets with MiG-19 jets, 11-28 bombers, and T-59
tanks.-' The Russians, unwilling to alienate either the Indians or the
Pakistanis, refrained front taking sides and urged a peaceful settlement
of the conflict.'" Moscow furthermore could ill afford to have a war at
its southern border ill. which the Chinese threatened to become in-
voivcd.'" 'I his partly explains why the Soviet Union assumed the role of
peace-maker at the Tashkent Conference of January 1966. Although
the perennial Kashmir problem remained unsolved, the Russians suc-
ceeded in obtaining an agreement between India and Pakistan for a
return to the status duo ante helium.
Soviet actions did not imply a reversal of Moscow's policy toward
India. Ill contrast to the United States, the Soviet Union did not halt its
military acid to India during the uar,'tr In fact, while the lighting was still
in progress the. Russians agreed to supply India with four submarines,
Pctya class destroyer escorts, and naval p;itrol craft.''-' At approximately
the swine tune the Indians were also permitted to buy a large number of
tanks from the Soviet Union and ('ieeIioslovakia.",t Although Pakistan's
leaders, who recognized their vulnerability in relying on Washington for
ants ;lid, approached Moscow illJune 1966 for military aid, the Rus-
siaus postponed action on Pakistan's request to avoid arousing Indian
hostilit`.
Soviet uneasiness over ('hinese inroads in Pakistan, however, progres-
sively intensified. In an effort to counter Chinese influence, Moscow
supplied some twelve Mi-6 helicopters to Pakistan in the second half of
1967. A small group of Pakistaniairnten was sent to the Soviet Union
for training. The total value of Soviet arms aid to Pakistan was re-
"'1110 agreement with China NN?;ls rclx,rted to he worth between $30 million and
S-1(t Million. Nci ) oik Times. September S. 1967.
" Pravda, August 24, 1965: ibid., September 12, 1965.
`? Soviet %%Iitings have emphasized from time to time the strategic location of
kashmir: see S. 'itkoyaa. "Kashmir: labloko Ruzdora," Litcratur,taio Gozera
(Moscow). October 28, I91,5. as cited in R. Vaidvanath, "Sonic Recent trends in
Soviet Pelicic, toward lacks and Pakistan," ILrreriariorral .Studies (New Delhi); vol.
7, no. 3 (January 1966), p. 4,44. The Russians warned the Chinese against any
intcnention on behalf of 1'akistan. Pravda, September 22, 1965; ibid.. September
23, Ions.
" lice quc,lion of sec pending Soviet military aid to India during the fighting
actually did not arks. As one observer noted, it was a fortunate coincidence that
the weapons on order were not ready for delivery. Zafar Inn an, "Soviet Asian
Policy 'Iod;i ('orucvii'orri_t' Bering, vol_ 209, no. 1 (July 1966), p. 14.
indium l'.rhr ss, September 7. 1965. Reports of the inclusion of destroyer
escort, wcrc not publicized until lc)bti. Sc,.' Sin (Baltimore), April 2, 1968.
Subsequent news r?eicaucs revealed that India was allowed to purchase more
than five hundred Soviet and Czech t:mks. New York Tinuu. June 1. 1967.
" Ibid., September S. 1967. I'aki,tan also received some military trucks. In
view of the !incited ,tcpply of materiel Pakistan received, the actual dollar value of
ntiilitary aid w;:s probably half the reported estimate of $10 million.
"' il'u. hi~t,wr>i Post, August 6, 1967.
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porfe,I to be about s lo million.- 'I-o reassure India, Soviet officials
stress,?d that they would not make any lethal weapons available t
Pakistan.'`, A more important gesture to allay Indian fears was the con-
clusion of act;otiations with New Delhi in the latter part of 1967 for the
delivery of scale one hundred Su-7 tighter-bombers,") which would in-
crease the ground attack capability of the Indian air force. With the
Su-7 agreement, cumulative Soviet arms aid to India totalled between
$6O0 million and S700 million.'; '['lie decision to aid India's enemy i
its defense needs nonetheless represented a distinct change in Moscow'
south Asian policy and underscored its growing concern over Chines
influence at its southern border.
'111c di ribution of Soviet military aid in South and Southeast Asia
shows 'tiat Indonesia, India, and Afghanistan were the countries to
whir Russian leaders attached the greatest importance. Indonesia re-
c cd by far the largest share of the Soviet arms aid dollar in the
region. While aid to Afghanistan in absolute dollar amounts was rela-
tively limited, in relation to the size of the defense budget of a recipient,
Afghanistan had received more aid than any. other recipient-6-4 The
transfer of' highly sophisticated weapons systems to these three recipients
further underlines their significance in Soviet policy. Each acquired the
MiG-21 jet; in fact, Indonesia was the first country outside the bloc to
receive the MiG-21. India, although receiving less total aid than Indo-
nesia, appeared to be the most privileged recipient among the three
states, in that India was the only one to obtain a licensing agreement to
produ,:e and assemble MiG-21s at home. All three acquired batteries
of SA--2 Guideline missiles. Indonesia and India were the only two
countrics, other than Egypt, which were able to negotiate agreements for
submarines.
Each of the three major recipients in South and Southeast Asia de-
voted a substantial share of their aid credits to strengthening their air
forces. By the cud of 1967 the Indonesian air force had acquired at
(cast eighteen MiG-2]s and twelve MiG-19s equipped with air-to-air
guided missiles, about one hundred older type MiGs, twenty-five Tu-16
bombers armed with air-to-surface missiles, 11-28 bombers, An-2, An-
]2, and I1-14 cargo craft, and Mi-4 and Mi-6 helicopters. The Indian
air force included as a minimum sixty MiG-21s, fifty 11-14 and An-12
transport planes, and sixty Mi-4 helicopters. A few of the Su-7 fighter-
bontbers had already arrived in late 1967. Afghanistan had received an
undisclosed number of MiG-21s, more than one hundred MiG-17s, a
small force of MiG-15s, two squadrons of 11-28 bombers, and various
transports, trainers, and helicopters."" The aircraft types indicate that
all three recipients had acquired defensive as well as offensive systems.
Sovict bloc additions to the Indonesian navy similarly showed that
Djakarta had been allowed to select ships with both defensive and
"' f his estimate is based on the successkc arms deals, as reported in the press,
from the first agreement in November 1960. The 11)67 agreement for about one
hun,,,cd Su-7s has been estimated at approximately '100 million since the Su-7
usually rusts around $I million (IT'ashin,Llon i'mt, January 25, 1968).
In 1065, for cxa iiple. Afghanistan's defense Imdget was only $23 million.
U.S. Arms Control and Disarmament Agency, World-]fide Military Expenditures
and ltrl,,ted Dater, Research Report 67-6 (Washington, 1967), p. 10.
"' 1)at,r derived from Institute for Strategic Studies. Military Balance, pp. 42-43;
Wood, Middle Lust. p. 12; and reports from Indonesian. Indian, and U.S. news-
1);1lMrrs.
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'1 ahlc 4-1. I tiutatcd Si ict llloc Arms Aid to South and Southeast Asia 1956 through 1967
(In Millions of U.S. I)edIars)
AIglianist:ul...... .. .. _............. $260
pakist,ut ............. 5 to 10
L... . ...... _ . .... _. _.. .............. 600 to 700
Insure is 1.200
Lac.:.. ...... -3 to 5
('anibucli;+ 5 to 10
Iistiniatcd Total: S2,185
tiourees: I:,Iinr.ues inn' I';rkititan. India, and Indonesia are derived front sOUrees docun rated
n ;}rc% I>o;,c,. li,tint;rtes for Laos and Cambodia are based on costs of equipment reported
in the pie-, were calculated on the basis of approximate costs of comparable U.S.
equipment .11111 assunlc(I to include support equipment for aircraft, tools, and spare parts.
i h, cstiiu,itc Ii>r A('ghanisum is similarly ba icd an equipment costs and on a comparison of
I1I911: ceunonn( aid with total bloc aid to Afghanist to as reported in the New York Times,
'slay 28, 1967.
The Indian navy in 1967 did not show muctt evidence of Soviet ilt-
fluc11CC. The first Indian-Soviet naval aid agreement had been nego-
tiatcd as recently as 1965. Only two submarines were ready and some
patrol craft had arrived in India by the end of 1967.J1 Further Soviet
penetration of India's naval establishment is likely to he encouraged by
Britain's withdrawal from the region cast of Suez and by continued
British and U.S. reluctance to meet Indian rc(luests for warships.
Each of the key recipients also obtained Sovict.help in modernizing it'
ground forces, although in Indonesia the army receive([ only a relatively
small sharc of the weapons deliverieti to that country. The Indonesian
army iicquired only PT-76 tanks, armored personnel carriers, jeeps,
anti-aircraft guns, artillery, and light 11-111S.7 1 The relative lack of armor
for the army reflected partly the environment and partly Indonesian
army doctrine emphasizing the signifi ance of guerrilla warfare. There
were also strong indications that Indonesia deliberately limited re-
(lu(-sl.s for army cyuipn)cnt. i J.'quipntcnt the Indian army received in
lllacknlan, cd.. 1-i,,Jinn.; Ships, pp. 137-42.
()ac rc:lmm is that the ii ival revolt in early 1965 seriously undermined the
rife tivcnrss Of the ln.loncsian navy.
lllackni in, 1 if lrlitrc Slips. p. 137.
,\'r}r York '/ ime.s, April 17, 1967; institute for Strategic Studies, Strategie
Survey 1907 (London, 19611), p. 33.
institute for Strategic Studies. hlililarv Balance, p. 43,
Sukarno wanted to build up the air force and the navy to offset the powers of
the tinny. The former tudoitcsian Artily Chief of Stair and Minister of Defense
(;cncial Nasution and his aides, who negotiated most of the various arms deals,
'sere careful to avoid too much dependence on Soviet military aid where the
itnlv was concerned, and were prepared to make the larger share of Soviet credits
:i tiLihle to the air force ;tad the navy. interested above all in consolidating their
1>usc?r in Java, the army leaders (lid not regard the air force and the navy with
the Ivpe of wcapnns each acquired as threats to the achievement of this ohjective.
Nasnlion could with impunity reserve only a limited share of the aid credits for
the ;acquiition of :irmy materiel because: (1) the cost of army materiel was small
compared to that of air and naval craft; (2) when Soviet arms aid began, the
:only already had a fair amount of small arms and some capability for producing
shall arms, while the other services had virtually no capability at all; and (3)
L.S. ntilit;try aid was primarily chatlncled to the army. Nasution's efforts to keep
the mnly free from aver-reliance on the Soviet Union were reflected in his
emphasizing "hcrdiknri" or self-reliance mission and in his rcgt:esting arms work-
shops from the R issians. See Indc,ru'sian Herald, May 5, 1905; ibid.. May 25. 1965.
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eIuded more Man live humlrcd light ( I'I'-76) and medium tanks with
;i mru and t)e',n m guns. The eighty-thousand-man Afghan army, like
the Al`;han air farce, was aituelst c C,,lpons and counted, among others, some one hundred
medium 'I? -54 and light I'1?-76 tanks.'
:u thcr cast, Moscow has made considerable progress toward replac-
ng western military in}luence with its own. The Soviet Union has be-
?onre India's largest source of military supplies and has succeeded in
creating Bruited arms aid tics with Pakistan. Yet Soviet military aid
policies in these Countries turned out to he extremely vulnerable to pres-
sures caused by actual and potential changes in the political-military
po cr constellation on the Asian subcontinent. The potential threat of
China in south Asia and the regional conflict between India and
Pakistani circumscribed the Soviet Union's frecdum of maneuver in its
aid policies. The Russian dilemma resulting from the Sino-Indian border
wai in Oct her 1962 caused delays and obstacles in Soviet-Indian arms
aid discussions. When the negotiations were finally resolved in favor of
India, it served as a warning to China to restrain its ambitions in the
rcgi