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Declassified and Approved For Release 2013/05/30: CIA-RDP79-01203A000200170004-2 smi.4 Niro Nme 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 S-E- -E-T Declassified and Approved For Release 2013/05/30: CIA-RDP79-01203A000200170004-2 Declassified and Approved ForRelease2013/05/30 : CIA-RDP79-01203A000200170004-2 Skid ,s..0 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 - 2 - narlacsifiRd and Approved For Release 2013/05/30: CIA-RDP79-01203A000200170004-2 Declassified and Approved ForRelease2013/05/30 : CIA-RDP79-01203A000200170004-2 New' Now, %ire ,Awad 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 Declassified and Approved For Release 2013/05/30: CIA-RDP79-01203A000200170004-2 Declassified and Approved For Release 2013/05/30: CIA-RDP79-01203A000200170004-2 %kr, isms; %ad sed SCR-ET 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 ? 4 . S-E-C-R-E-T ?w-S emc. Declassified and Approved For Release 2013/05/30: CIA-RDP79-01203A000200170004-2 Declassified and Approved For Release 2013/05/30: CIA-RDP79-01203A000200170004-2 SeEeC-R-E-T 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 SCRoET Declassified and Approved For Release 2013/05/30: CIA-RDP79-01203A000200170004-2 , Declassified and Approved For Release 2013/05/30: CIA-RDP79-01203A000200170004-2 %god %ftr# S-E-C-R-E-T 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. - 6.. S-E-C-R-E-T Declassified and Approved For Release 2013/05/30: CIA-RDP79-01203A000200170004-2