(Classified)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-01203A000200170004-2
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 6
• Document Creation Date: December 27, 2016
• Document Release Date: May 30, 2013
• Sequence Number: 4
• Content Type: REPORT

Declassified and Approved For Release 2013/05/30: CIA-RDP79-01203A000200170004-2
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COPY -75177Er.e.-RQ.F.4L. C OLP Y
Export of Capital Equipment by the Soviet
Bloc to .b Developed Countries
94969=6,M9469.???94. ?4994"rit..?,49,42??9
Conclusions
The countries of the Soviet bloc will not be able in the near future
to enter the world nerket for capital goods on a scale at all comparable to
that of the United Kingdom, United States of America and Western Germany.
Ebwever? if it were decided by Nbscow to concentrate attention on one or two
kay under-developed countries the Soviet Bice could probably provide goods
ma technical aid on a significant scale and on favourable terms. The recent
Soviet offer to erect a steel plant in India nay be an example of this policy.
Prewar Situation
Before the war, the USSR itself exported virtually no capital goods, and,
although an importer thereof, was tending to become self-sufficient in them.
The States which are now Satellites although industrially undoveloped as a
whole, nevertheless had a few very large undertakings such as Skoda of Pilsen,
Wittkowitz of Mbravska Ostrava, and Ganz and Manfred Weiss of Budapest which
were of world repute.
3.In 1937 - the last favourable pre-war year - the dollar value of exports
og capital goods from what are now Soviet bloc countries compared as follows
with these from western countries:
?
Million Dollars
U.S.S.R.
Nil
Czechoslovakia
6o .0
Poland
3.2
Hungary
5.3
E. Germany
9 ? 41
756.0
U.K.
454.0
Germany
480.o (1936
figure)
Post War Developments
4. Although, in the immediate post-war perice? producers in Central and
/Eastern
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Eastern Europe sought their former foreign merkets, by 1949 Moscow's policy
ef forcing the growth of heavy industry in her Satellites tended to direct
their output away fram the free world towards the U.S.S.R. in the first place,
and, secondly, towards the Satellites themselves and China. As for the U.S.S.R.,
her exports had traditionally consisted of raw materials and foodstuffs and
her imports of capital equipment. It was only at the Moscow economic oon-
ference in 1952 that the U.S.S.R. for the first time publicly proclaimed her
readiness to export capital equipment.
5. Soviet bloc experts since the war have found their readiest markets in
those under-developed countries where not only is there genuine economic need
for them but also wide-spread anti-Western feeling of one kind or another
which ensures a particularly sympathetic hearing for the Bloc's offers. The
biggest sales are being made in South and South-East Asia, South America and
the Middle East. In Asia the Bloc has made its biggest effort in India; the
U.S Czechoslovakia, Eastern Germany, Hungary and Deland have all con-
cluded trade agreements with her and all these agreements provide for exports
of capital equipment. These four Satellites, though not the U.S.S.R. herself,
have also paid considerable attention to Indonesia. The U.S.S.R., on the other
hand, bas exported a fairly substantial quantity of capital goods to Afghanistan
and has, as a result, become that country's major trading partner; so far,
Czechoslovakia is the only Satellite to penetrate this market. Bloc activities
in the field of capital goods in other Asian countries are still very much in
the exploratory stages. In South America the main target has been Argentina.
Considerable attention has also been paid to Uruguay, and the possibilities of
Brazil and Chile as markets have been investigated. No serious attempts have
been made to open up trade with the more northerly Republics of South America
or with those of Central America, which are all much more directly susceptible
to United States influence. In the Middle East the Bloc has made its greatest
efforts in Persia and Egypt. Exports of capital equipment by Czechoslovakia,
Eastern Germany, Hungary and Poland are also included in the trade agreements
which these countries have concluded with Turkey and Israel. Attempts to
develop this kind of trade with the other Middle Eastern states have so far
been spasmodic and on a small scale.
6. Outside these under-developed countries, the only narkets which Soviet
bloc exports of this kind have entered with' any success are in Finland, Nerway
and Iceland. Sc far these exports have consisted almost entirely of Russian
motor vehicles. The U.S.S.R. bas been able to secure this foothold because
of her dominance of the Finnish economy and her importance to Norway and
Iceland as a buyer of the major part of their fish exports.
7./It
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7. le impoastg.ble t.t) r,a1(q4ulata the faLL rene, and queny or ;.73ovii;!%,
hi= p1tJe vidrame available suazIsts that, the
ewla 6Te,ua1ly delivemd are only a small part ct tbseiieo. in
venta. Exports made tr,, dal& seem to have c1ted mainly or trtInsporq
neat srd ther railwAy m'ateriaa, pmtcr venifties et all
kir,40) and agr1culturs2 mactlosryKmtably trri.gUrs it textile madhltzery).
el4trital and raifto equipment, macs,We mining and oil-drillng
Qvipvolm and prAnting mat:hinary heviJ a/a4::) been aent,
f!? 5:141,aition tc iDdividual item ivf cmpital equilanent.j the 131,w, Ina vlso
oiTereAi ,on bacasions >sf.G.Pnd entire :pLant,a. For- exampleUw.--?fhealovaLia
tAmatruct a lead-r,AinIns plant k7? TtrIzily fm4 Sasrn
o!Arly year i bliAjd a cotUri-spInning mi.1 there.. C2p7;11a7,6v,lai taw
4.; build a cemPnt plL.-2ft in Arghan:Ltitart a*d it; reported 7,o eas.vo dca-
? dered are,!Alng an eur4,!=b1:!,.e assumAx nt in ArewitinEi,? Tb g hal;
.1714ie imilar offers tr. PiaiR; tier sogges%,annair1ut textAle
0,-,w.ltanns and ieq.ta.a.stiene. mat publint t'?rtis kLgi
a reqemt me 41,- India that abs ticwo.t u
? .7,1..ks there, T,7a U.S.S.H? did laael 1,tart 'in)rif, la JuAy
th7i. 3 year ors the WA trliV IC 1JI1'4 Mite itli3 Z4-1. i.,14.1:1 1,5 CCM:,
d_esplte 'the putI2liAty ac;?mrdeki theri, there ls ev10,ewe ;rly
pmgress having bextrA mda tpmili pr tb(4,!se przijec.,.%a.
eonnibie Future
2. In spite pt.' the rnmedd 9(4'Jst-wer gtrovill or basic *nd. gx:.drf, woduc-
tIon ticwougut ta* bam, it is stil abort or capita. 1:1! vntern stureaxda.
.e litAlqpng ot entii;raoAo-cy stall4tica ta the pr4,11.1.Em capt%A:%. ectolts
this derivienvy ,alo be i10,1111q10Kx!khy stalstIcs pr stae).
? - Olat:v major ctomwowmt.
(Arrput in Kelati,c,1 14,;, 'eopulatilm
Ltt or liedd
.1.k..)rtf t or T,c01.5), 011.1.11,c415) iturtit;
tit
1-?.$3
"flungary ? :,'
'.0a$41T4 .i.(.).i26gi'. ob 1.
r.jher SoAelAites
.,--. :.,,'',dyi.74...,.ny i..1.,..4, ii-i3.:;?:i? 71.7,--," ti
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10. It will be seen that only Czechoslovakia can compare with the United
Kinedem or Western Germany in the amount of steel per bead of population,
but she is a small country whose steel output accounts for only 7 per cent
of the bloc total. Even the steel output of U.S.S.R.-, of 38 million tons -
the seoond highest in the world . provides per head of population little oore
than half that of the Uhited Kingdom and under one third of that of the United
States of America, which ahe aspires to surpass as an industrial power.
11. Thus it is hard to escape the conclusion that the countries of the
Soviet bloc will not be able in the near future to enter the world market
for capital goods on a scale at all comparable to that of the United Kimgdam,
the United States of America and Western Germany.
12. Given freedom of action, Czechoslovakia might try to do ao on a cale
that would be important rram her own point of view; but as long as economic
planning is co-ordinated among the countries of the eastern bloc, as there is
every indication that it will be, Czechoslovakia's exportable surpluses of
capital geoids are liable to be absorbed by her partners in the Soviet bloc.
Rungary, too, could export marginal quantities of some items, while some of
the East German undertakinge might try to re-estehlish themselves in their
old overseas markets.
13. In the case of the U.S.S.R., political considerations night to some extent
predeminate over economic. It is difficult at the =cent to see her exporting
capital egeipment consistently on a scale comparable with the United Kin4tee
but as her development proceeds, the economic cost will be more easily afforded.
14. It is tentatively suggested that the European .satellites - principally
Czechoslovakia, East Germany, Poland and Hungary - could, between them, export
yearly to all destinations, including the U.S.S.R. and other satellites, $40c
millions of capital goods. What proportion could be spared for the free world
Is bard to say, but it night be considerably less than half - say $150 millions.
15. The U.S.S.R. could f she those, export in the near future double this
amount to the free world without unduly disrupting her own development preeramme,
making a bloc total of $450 millions yearly. Very much more than the foregoing
eculd be exported if the Soviet output of conventional armaments were to be
:seriously curtailed, which does notes yet appear 'likely.
16. Against the above tentative figures, it should be borne in mind that, in
1953, the United States of America exported $5,581 millions, the United Kingdom
637 millions and western Germany $10673 millions. Thus, from the point of
siew of the western exporter of capital goods, the threat of Soviet bloc come
petition does not appear to be very great.
/Possible
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ItAsible Significance to Under-Developed CountrieS
17. Before dismissing the threat, however, it is important for its possible
aignificanee to be examieed from the standpoint of the under-developed eountries.
an 1953 imports of capital goeds from western Europe, the United States of
Americe and Canada into under- developed African ad Asiatic oountries were
as followa:-
Million Dollars.
Belgian Congo
110
French Overseas Territories
349
Egypt
74
lean
30
Saudi Arabia
58
Iraq
49
Rhodesia
68
India
282
'Pakistan
94
Indo-China
74
Indonesia
120
Thailand
69
Burma and Ceylon
57
TUrkey
176
NalaYa
86
Total 1,696
LU, It will be seen that, in most cases, the above imports were individually
small in relation to the exports from the main exporting countries. This could
beve important political implications, for if it were decided by Moscow to
eencentrate attention on one or two keyeliporting countries, the bloc could
xobably provide all that these particeler countries could absorb.
19.
One of the reasons why the capital imports of individual under-developed
leuntries are so small is the inability of the would-be importers to find the
eecesaary meara of payment, while nationalism ban rendered themunattractive
to foreign investors. Where the private enterprises of the west would be
eeluctant to risk their resources the State-controlled enterprises of the
Weal backed by an official policy of trouble-making, could offer attractive-
_ enema, the real costof which would largely be borne by the Soviet bloc
eitizens.
?e73es of Goods which might be offered.
M. The types of capital goods which the Bloc could export to the free world
fall into four main categories:-
(a)/Beavy
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Heavy engineering products such as rolling mills, foundry and forging
equipment, presses etc... could be exported by the U.S.S.R. and Czechoslovakia,
end some of the smaller items by Eastern Germany. Total exports in this
eategory are not likely to exceed $150-200 million yearly. At the same time-
Western control on strategic exports may limit Soviet Bloc exports by reducing
a possible source of replacement through. imports.
fu) The export of medium engineering products such as processing plant, mining
muchinery and cranes is not likely to be increased while the present priority
accorded to agriculture prevails - surplus capacity being convertible to the
production of agricultural equipment. Eastern Germany tends to specialise in
processing plant and mining machinery and Hungary in electrical eqyipment
ebile Czechoslovakia and the U.S.S.R. can export small quantities of all products
under this heading.
(c) The export of transport eqpipment, particularly railway rolling stock, is
likely to increase from the U.S.S.R., but Hungary and Poland could also supply
eignificant numbers of railway wagons, and small numbers of diesel loeomotives
eould be made available by HUngary. The export of Czech motor vehicles is likely
to Increase.
(d) In the field of production eqpipnent? all countries of the bloc will be
able to supply simple manhine tools, but more ooMplex and heavier types will
b,a available from the U.S.S.R., Czechoslovakia, Eastern Germany and Hungary.
ision instruments have in the past been exported by Eastern-Germany and
this activity is likely to continue on an increasing scale.
!iechnical aid.
ae,wa,rwascoua.amamae,c...va
L. Although it seems unlikely that many technicians can be spared from the
Soviet Bloc, it should be remembered that the Soviet training programme is a
formidable one, and that the impact of even a few Soviet technicians on the
trader-developed countries might be considerable and out of proportion to the
nuMbers involved. Furthermore, considerable aid is being made available in
the form of literature and through a-number of training sehemes. Under these
sehemes, young people are sent mainly to the U.S.S.R. and Czechoslovakia for
technical education and works training. The scope of this type of aid could
Le widen ee and, Judging from the available information, the backward countries
at great store by it.
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