SUPPORT FOR THE PRESIDENT'S TRIP: IMPLICATIONS OF CURRENT EAST EUROPEAN GRAIN CROP FORECAST

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01142A000700160001-4
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 10
• Document Creation Date: December 16, 2016
• Document Release Date: December 8, 2004
• Sequence Number: 1
• Publication Date: July 23, 1975
• Content Type: MF

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of'ten''l Intelligence
NIO # 1722/75
23 July 1975
MFRANDUM FOR: Mr. Colby
SUBJECT . Support for the President's
Trip: Implications of Current
East European Grain Crop
Forecast
Bill,
Floods and drought have reduced OER's
Eastern Europe grain crop forecast by alncst
10% in the last month. So far the policy
implication is that the various countries
involved will manage without increasing US
or other Western grain imports, but weather
(or politics) ma yet this season change
all that. So in OER has
pulled together a mini estimate as back-up
for the President's discussions with East
European leaders in Warsaw, Helsinki,
Bucharest and Belgrade.
25X1
Nationi_Intelligence Officer
for USSR/FE
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- 2 -
ME2 ORANDUM FOR. Mr. Colby
23 July 1975
SUBJECT Support for the President's
Trip: Implications of Current
East European Grain Crop Forecast
Distribution:
Original -- Addressee
1--DDCI
1 -- D/DCI/NIO
1 -- Exec.Reg.
1 -- NIO/EC
2 NIO/USSR
1 -- NIO/RI
1 - DDI (Mr.Proctor)
1 - D/OER (Mr. Ernest)
1 - D/OCI (Mr. Parmenter)
1 - OER/U Q
1 .- OER/EE
NIO/USSR/,
25X1
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of Genf Intelligence
23 July 1975
MEMRANDUM FOR: Mr. Denis Clift
Mr. Robert Gates
NSC Staff
SUBJECT . East European Grain Situation:
Implications for the President'
Trip
Denis and Bob,
Here is a free-will offering on the
current outlook for the Eastern European grain
crop, and our best guess on grain import in-1-
plications. We were moved by t1Ye recenL, flood/
drought combinations in the area to think the
estimate might be of use in connection with
the President's trip and discussions with
East European leaders. I of CIA's
Office of Economic Research wrote the piece.
I also call to your attention a piece
on the current overall Eastern European
economic situation, published this morning
in OER' s Economic Intelli gence, Weekly. A
copy is attached.
National Intelligence Officer
for USSR/LE
25X1
25X1
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mov
23 July 1975
MENJRANDUM FOR: Mr. Denis Clift,
Mr. Robert Gates
NSC Staff
SUBJECT East European Grain Situation:
Implications for the President's
Trip
Distribution:
Original - Addressees
1-
1 -
1 -
1 -
1 -
2 -
1 -
1 -
1 -
1 -
1 -
1 -
NIO/USSR,4
DCI
DDCI
D/DCI/NIO
Exec.Rog.
NIO/EC
NIO/USSR
NIO/RI
DDI
DDI/D/OER
DDI/D/OCI
DDI/OER/U
DDI/OER/EE
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of Central intoiiiigenco
23 July 1975
MFMOPPNDUM FOR: Mr. Helmut Sonnenfeldt
Counselor of the Department
of State
SUBJECT . East European Grain Site aticr.:
Implications for the President's
Trip
Hal,
Here is a free-will offering on the
current outlook for the Eastern E_ ropean crrai n
crop, and our best guess on gain isnx>rt irrr-
plicaLi.ons. We were moved by the recent flcoci/
cirought combinations in the area to think the
estimate might be of use in connection with
the President's trip and discussions with
East European leaders . of CIA's
Office of Economic Researc wrote the piece.
I also call to your attention a piece
on the current overall Eastern European
economic situation, published this morning
in OER's Economic Intelligence Wookly. AJ
Naciony. nte_ igencc Officer
for USStP/E
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cc s ; M r . Hy and
1,:r. Hartrnan
25X1
25X1
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23 July 1975
MEMOEANDUM FOR: Mr. Helmut Sonnenfeldt
SUBJECT . East European Grain Situation:
Implications for the President's
Trip
Distribution:
Original. - Addressee
1_ - Wm. Hyland/State
1 - Arthur Hartman/State
I - John Armi.tage/State
1_ - Nicholas Andrews/State
1_ - DCI
1.-DDCI
1 - D/DCI/NIO
1 - Exec.Eeg.
1_ - NIO/EC
2. - NIO/USSR
1 - NIO/RI
1 - DDI
I.. - DDI/D/OER
1 - DDI/D/OCI
1 - DDI/OEE/U
1 - DDI/OEF./EE
NIO/USSR,4
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,%W
EASTERN EUROPE: ECONOMIC SITUATION REPORT
Poor crop weather in July in Eastern Europe portends a disappointing
agricultural performance in 1975 and an almost certain slowdown in economic
growth. The various Communist regimes had already been braced for a difficult
year because of prolonged Western recession and the substantial rise in the price
of Soviet raw materials.
Agriculture: Floods in the South, Drought in the North
The East European governments had been counting on a grain crop even greater
than the record 90 million tons of 1974. However, rains, floods, and drought
combined forces in early July to dim these hopes. With the harvest under way,
torrential rains and flooding hit Romania, Yugoslavia, Hungary, and Czechoslovakia,
causing considerable damage to grains. Meanwhile, grain crops in East Germany
and fodder crops in Poland were threatened by drought. We have lowered our
estimate of the region's grain crop to 86 million tons.
Impact of Western Recession
Recession among major non-Communist countries has held back Eastern
Europe's export sales in 1975, with the decline in volume being hidden by price
increases and revaluations of currencies.
Yugoslavia purchased three-fourths of its imports from the West in 1974 and,
with its more open and less centrally planned economy, is particularly vulnerable
to economic developments in the West. Exports to its major Western markets
declined in the first quarter compared with a year earlier while imports continued
to increase rapidly. Belgrade imposed import restrictions in June. It has requested
debt rescheduling on a selective basis, being able so far to finance only two-thirds
of the hard currency requirements we estimate for 1975. Growth of industrial
production slackened in late spring as a result of earlier import restrictions and
deliberate efforts to rein in new investment. In spite of government efforts to
curb imports and investment, inflation is still running at 25%. A unique factor
in the inflation problem in Yugoslavia is the ability of local worker councils to
press for higher wages.
Romania, as an exporter of petroleum and a beneficiary of higher world prices,
continued its rapid industrial growth through the first quarter. Growth of exports
to the West was about the same as in 1974 but, like the others, Romania was
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having difficulty in marketing such goods as textiles and chemicals in the West.
Also, Romania is no longer self-sufficient in crude oil and will require increasing
imports to utilize its refining capacity. Bucharest in July imposed price increases
for various consumer goods and services, ranging from 25% for natural gas to 103%
for heating oil.
Poland, with the advantage of growing foreign demand for raw materials such
as coal and sulfur, has been less affected than the others by world economic
problems. Prices for its exports to the West actually increased more in 1974 than
prices for its imports. Warsaw is having little difficulty in obtaining Western credits,
having secured at least $2.6 billion so far in 1975. The largest deal is the $1.7
billion in government-guaranteed credits from France arranged during Giscard
D'Estaing's visit to Warsaw in June. The regime is still managing to satisfy consumer
demand sufficiently to avoid widespread discontent. Adverse consumer reaction
to scattered meat shortages last winter and again in June underline the continuing
pressure on the regime to step up supplies of quality goods.
Hungary, which purchased less than half of its imports from the West in 1974,
already has lowered its goals for economic growth and levels of consumption for
the next five years. Poor in mineral resources, Hungary is more heavily dependent
on trade for its economic progress than are the other East European countries.
Exports to the West declined in the first quarter and continued to decline in April
and May. The government has been tightening restrictions on imports. Hungary
was the only East European country to reduce orders for Western machinery and
equipment in January-May 1975 compared with a year earlier.
Bulgaria, Czechoslovakia, and East Germany are less dependent on Western
imports and have generally been less affected by the recession.
Eastern Europe: Imports from the Non-Communist Countries
Percent of Total imports
27
24
21
56
48
53
46
79 74 77
1970 73 74 1970 73 74 1970 73 74 1970 73 74 1970 73 74 1970 73 74 1970 73 74
Bulgaria Czechoslovakia East Hungary Poland Romania Yugoslavia
Germany
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Eastern Europe: Trade with the West'
Imports
Exports
Jan-Mar
Jan-Mar
Jan-Mar
Jan-Mar
1973
1974
1974
19752
1973
1974
1974
19752
Total
10,521
15,311
3,080
4,421
7,828
9,485
2,110
2,337
Bulgaria
408
717
122
243
299
325
83
89
Czecho-
slovakia
1,118
1,417
289
385
963
1,139
238
299
East
Germany
1,580
2,020
414
559
1,413
1,819
396
457
Hungary
929
1,526
308
461
939
1,115
235
233
Poland
2,605
3,723
778
1,084
1,589
2,029
489
543
Romania
1,164
1,809
362
581
919
1,187
237
306
Yugo-
slavia
2,717
4,099
807
1,108
1,706
1,871
432
410
1. Austria, France, Italy, Japan, Sweden, Switzerland, United Kingdom, United States, and West Germany.
Data are from Western sources.
2. Preliminary estimates.
Eastern Europe: Trade with the United States'
Imports
Exports
Jan-Mar
Jan-Mar
Jan-Mar
Jan-Mar
1973
1974
1974
1975
1973
1974
1974
1975
Total
839
1,130
302
374
471
807
178
192
Bulgaria
6
22
2
11
5
8
6
9
Czecho-
slovakia
72
49
13
12
35
46
8
11
East
Germany
28
21
6
2
10
14
3
3
Hungary
33
56
20
30
16
75
7
13
Poland
349
395
104
141
182
266
68
69
Romania
116
277
72
74
56
130
28
18
Yugo-
slavia
235
310
85
104
167
268
58
69
1. US data.
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Trade with the United States is dominated by Poland and Yugoslavia, the
only countries having Export-Import Bank financing and most-favored-nation status.
Romania found its access to Export-Import credits suspended under the 1974 US
Trade Act; a Romanian-US trade agreement now awaits legislative action in the
Congress.
The stiff price increases for Soviet oil and other raw materials in early 1975
have had their greatest impact on Hungary, Czechoslovakia, and East Germany.
Poland with its coal and Romania with its oil have been less affected. Bulgaria
has fallen in between. Yugoslavia had been paying world market prices for its Soviet
raw materials and has not been affected by the price hikes. The impact on the
hardest hit countries has been mitigated - at least in 1975 - by various Soviet
concessions. For instance, the Hungarians have benefited from Soviet long-term
credits and above-plan deliveries of vital raw materials.
Near-Term Prospects
We expect the East European regimes to search for additional financing in
Western money markets while dampening consumption at home. Indebtedness to
the West is high and growing, although not yet a serious problem (except in
Yugoslavia). Poland alone may avoid an economic slowdown this year.
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