BACKGROUND - - BLOC TRADE AND AID

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R00890A000700100005-4
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 6
• Document Creation Date: December 14, 2016
• Document Release Date: June 4, 2003
• Sequence Number: 5
• Publication Date: October 23, 1956
• Content Type: BRIEF

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BACKGROUND--BLOC "TRADE AND AID"
1. The Communist Bloc campaign to expand relations with the Free
World by economic means was initiated in 1951 and consists largely of
"trade and aid" programs. This Bloc effort gained momentum in 1954,
with the purchase from underdeveloped countries of large quantities
of surplus foodstuffs and raw materials, and has since been bolstered
by Bloc offers of long-term credits and loans. When the Council was
last briefed (Nov '55) the total--exclusive of arms deals--was below
$50 million. Today, the total of all loans--including arms loans--to
non-Bloc countries is $1.2 billion, three-quarters of it for economic
development. More than half of these credits have been extended during
the first nine months of 1956.
2. The USSR itself has granted the majority of these loans and
credits. Its total for non-Bloc economic development comes to some
$650 million, of which $400 million was provided during 1956. The
European Satellites have also advanced some $225 million in development
credits to non-Bloc nations, almost all of it this year. Communist
China, a relative newcomer to the field, has been the first Bloc country
to make outright grants to non-Communist countries: $22.4 million to
Cambodia this June and $12.5 million to Nepal this October. The rest
of the Bloc total of $1.2 billion is made up of loans and credits
for arms. Since late 1955, the Bloc has extended to Egypt and other
Arab States, and to Afghanistan, over $300 million in credits for
military purchases. Half of this amount was contracted for during 1956.
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3. The following details are presented under these two separate
headings, Economic Development and Military Aid.
Economic Development, The Soviet Bloc's loans and credits
for non-Bloc economic development embrace a wide range of capital
equipment exports, plant installations and technical assistance.
The USSR, itself, has created a, special agency to supervise its
portion of this program.
Bloc economic aid agreements with three non-Communist
countries--India, Afghanistan, Indonesia,--and with Yugoslavia,
all concluded this year, account for $850 million of the Bloc's
total $900 million economic aid loans and credits. With the
exception of this year's Soviet extension of a $100 million "open"
line of credit to Indonesia, Bloc loans,have been designed to
provide specific capital equipment or finance local construction
projects desired by recipients, including necessary technical
assistance by Bloc specialists, and the training--at home, or in
the Bloc--of local operating personnel.
The other agreements provide for a variety of development
projects including an aluminum complex (Yugoslavia), a steel
mill (India.), highway construction (Afghanistan), as well as
such generally useful items as cement plants, agar mills, textile,
fertilizer, and ceramic plants, mineral extraction and processing,
and power facilities.
From the USSR's viewpoint, at least, the export of much of
the equipment provided for in these agreements provides a desirable
outlet for the products of its growing heavy industries. These
agreements, in many cases, additionally provide for return to the
USSR of useful raw materials--example. trial diamonds from
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India--or foodstuffs which the Bloc does not produce as plentifully
as it does industrial goods.
In comparison with Free World credit offerings to underdeveloped
nations, both the Bloc's interest charges (ranging from 2% to 2.5%)
and repayment periods (extending up to 30 years) are more favorable.
Bloc willingness to accept local commodities and local currencies
in repayment is a, further attraction.
Military Aid. Bloc military assistance to the Near and Middle
East, since its beginning in mid-1955, has involved sales authorized
and regulated.by the USSR, although actual negotiations and
contracts have usually been with Czechoslovakia (recently, Poland
has negotiated a few such contracts),
These arms sales now total more than $300 million. Repayment
schedules, calling for exports from recipients over a period of
years, make it certain that the Bloc will have a major role in
the foreign trade of these countries in the future.
The first of these arms deals--with Egypt in mid-1955--ended
up with contracts valued at $160 million. During 1956, additional
sales have raised Egypt's obligation for Bloc arms to at least
$250 million.
Syria, which was first approached by the USSR in early 1955,
concluded its first Bloc deal in December of that year. Since
then, Syrian contracts with the Bloc, worth at least $35 million,
have been concluded. Active negotiations are continuing and
Syrian purchases of Bloc arms and military equipment may now
total $45 million.
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Additional offers of Bloc arms have been made to other
Middle East countries. An arrangement to provide arms to Yemen
has apparently been concluded.
4. For specific projects, and the loans involved, see attached
table.
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SING-SOVIET BLOC AID TO NONBLOC COUNTRIES
(millions of US dollars)
RECIPIENT
1955 1956
TOTAL
AMOUNT
SOURCE MAJOR PROJECTS OR EQUIPMENT
YUGOSLAVIA
194.0 87.5
281.5
USSR Aluminum Plant, Mining. Equipment
87.5
87.5
East Germany Aluminum Plant
75.0
75.0
Czechoslovakia Unspecified Capital Goods
20.0
2010
Poland Transportation Equipment,
Minin
M
hi
9V:o 270.0
V`.o
g
ac
nery
EGYPT
160.0 90.0
250.0
USSR, Czech, Poland Arms, Military Equipment,
1.2
102
Czechoslovakia Ceramics Plant
10 91.2
251.2
AFGHANISTAN
6.8 100.0
106.8
USSR Road Construction, Hydroelectric
15.0 10.6
25.6
Station, Irrigation Work, Airfield
Construction-
Czechoslovakia Cement Plant, Ceramic Plant
25.0
25.0
USSR, Czech Arms, Military Equipment
21.$ 135
~S7>T
115.5
115.5
USSR Steel Mill, Diamond Mining
6.3
6.3
East Germany Film Factory
1.9
1.9
Czechoslovakia Sugar Factory
123.7
123.7
INDONESIA
100.0
100.0
USSR Line of Credit
1.9
7.9
East Germany Sugar Factory
4.4
4.4
Czechoslovakia Tire Factory
7.9 104.4
112.3
35.0
35.0
USSR, Czech, Poland Arms, Military Equipment
CAMBODIA
22.4
22.4
Communist China Grant for cement plant, irrigation
work4
textile facto
FINLAND
20.0
,
ry
20.0 USSR Gold Loans
ARGENTINA
19.0
19.0 USSR Transportation Equipment
NEPAL
12.5
12.5 Communist China Grant for General Economic
1.7
Development
1.7 Soviet Bloc Hydroelectric Plants
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