BLOC MERCHANT SHIPPING CARTEL IN ASIA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01003A001100270003-7
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 5
• Document Creation Date: November 16, 2016
• Document Release Date: March 28, 2000
• Sequence Number: 3
• Publication Date: December 1, 1961
• Content Type: REQ

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S-E-C-R-E-T
AREA: BLOC/FREE WORLD
RD-C-61-0270
SUBJECT: Bloc Merchant Shipping Cartel In Asia
1 December 1.961
REQUIREMENTS (Individually Classified)
1. Reporting is desired urgently on any new moves whatsoever made by
any Sino-Soviet Bloc nation concerning shipping services in Southeast Asia.
This includes not only new agreements or discussions concerning agreements with
South and Southeast Asian countries but also any plans, discussions or announce-
ments made in the Bloc countries. (S)
2. Evidences of rate-cutting by any Bloc ships anywhere in the territory
from the Red Sea to the Far East may be among the best clues to the implementation
of this possible cartel. (C)
3. An effort should be made to identify the companies acting as agents for
Bloc shipping companies (except Polish) in Asian ports, particularly Karachi,
Bombay, Calcutta, Singapore, Belawan, Djakarta, Bangkok and Sihanoukville
(Kampot). All Polish Ocean Lines agents in these ports are known and all Bloc
agents in Rangoon are known. (C)
11. Any change in agents, or plans to change should be reported. (C)
5. All calls of Bloc ships at any port lying between the Red Sea and
Communist China should be reported in greater detail than at present. Infor-
mation on calls should include whenever possible cargo loaded and discharged
at the port in question, the origin and destination of the cargo, advertise-
ments of Bloc ship calls (in the press or by circular), and rates (or rebates)
offered compared to Conference rates. (C)
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ATTACHMENT To RD-C-61-0270
BLOC MERCHANT SHIPPING CARTEL IN ASIA
Since 1960, the Bloc has undertaken a series of moves in Southeast Asia
which may culminate in a wide and intense shipping offensive in the area.
Apparently, the main purpose of the offensive will be economic penetration, but
harassment of the established Western liner services in the area also seems to
be a consideration.
In an article published in April 1960, Dr. M. Schelzel, Director of the
Institute of Sea Shipping of the Rostock University, made a strong and unequivocal
statement of Bloc intentions to "oppose the imperialist shipping monopoly," and
to provide coordinated shipping services," in principle" on a bilateral basis,
to the emergining national states. Several such bilateral shipping agreements
now have been concluded, and, because most of these newer nations have no fleets
as yet, Bloc ships are in a position to monopolize the trade.
Although the CEMA Transportation Commission was discussing Bloc efforts in
the field of ocean transportation as early as August 1957 and Bloc press releases
since then have reiterated the intent to pool merchant ships under the coordinated
control of CEMA, the only concerted actions taken until 1960 seemed to be special
services provided by ship-owning and ship-building CEMA members to other members.
In June 1961, however, West German shipping circles reported that the Soviet Bloc
was discussing plans for setting up a Central Shipping Bureau with extensive powers
including assignment of Bloc tonnage. It was also reported at this time that the
CEMA Shipping Commission would devote itself to a greater extent to the problems
of a common shipping line. These reports were officially confirmed by an East
German publication in July 1961.
In 1959, only the USSR and Poland had ships calling regularly in Southeast
Asia. The agent for the Soviet Black Sea Steamship Company in Rangoon is Steel
Brothers and the agent for the Polish Ocean Lines (PLO) and Sinofracht is
Heilgers (Burma) Ltd. In May 1960 the East German shipping company, VEB Deutsche
Seereederei (VDS) put the 10,000-ton freighter Halle into Rangoon, giving the
agency to the Burma Agents Corporation on a one-time basis. At that time Burma
Agents Corporation was already handling Czechoslovak and Rumanian chartered ships.
Between May and August 1960 the VDS was planning scheduled services in
Southeast Asia and was inquiring into the shipping market both through the Burma
Agents Corporation in Burma and through SOGEMAR, its agent in Antwerp.*
* At that time SOGEMAR represented PLO, Chipolbrok (the Chinese Polish Shipbrokers
Corp.), the Czechoslovak Ocean Shipping Company, and the VDS. In the spring of 1961
all of these agencies were turned over to PSAL Soc. Am. de Transports Internationales
except the agency for VDS. i
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SOGEMAR sent a representative to Rangoon in July to talk with Heilgers Ltd.,
which was interested in the East German agency. The Burma Agents Corporation,
however, which also operates an export/import business, was awarded the agency.
Between May and December 1960 eight East German ships called at Rangoon and so
far as is known they were all handled by the Burma Agents Corporation.
During the week of 11-17 September 1960 the Commercial Counselor of the
Soviet Embassy in Rangoon, S.A. Krylov, called meetings of all Sino-Soviet Bloc
commercial representatives in Rangoon to discuss the merging of all Bloc merchant
shipping operations in the area. Rangoon was selected as headquarters for the
cartel and Burma Agents Corporation was asked to take the general agency for it.
The plans included exploitation of the area between the Red Sea and the Far East,
with fleets pooled in effect into one line with coordinated schedules. Any port
would be served even if cargo potential was uneconomical and freight rates would
be cut as necessary to secure the trade and to drive out the established Western
liner operators.
Although it was understood by Burma Agents Corporation that Communist China
was not at that time an active participant in the cartel, it was believed that
it would join in January 1961. This cartel was to be strictly a political move
and while the Burma Agents Corporation continued to handle Bloc ships in purely
commercial business, it apparently did not desire to become involved in a politi-
cally motivated Bloc cartel.
During the week of the Bloc conferences in Rangoon, the VDS placed advertise-
ments in the local newspapers announcing the beginning of regular service with
monthly sailings between Rangoon and the UK/Continent, with the Burma Agents
Corporation as agent. It was reported that the VDS had been refused admittance
to the Bay of Bengal Homeward Conference and was planning to begin a rate war.
The East German ships did call as reported, loading substantial quantitites of
cargo at lower than conference rates. By December 1960 a freight rate war was
in progress. The Conference in London had approached and apparently threatened
the VDS in Berlin to meet Conference rates. At the same time the Burma Exporters
Association in Rangoon asked the Conference membership to lower its rates to a
par with the VDS rates. Subsequent reports were vague and conflicting concerning
any agreement between the VDS and the Conference. However, East German ships con-
tinued to call in the area between February and June 1961, loaded substantial
amounts of cargo, and the Conference lowered its rates several times to match
the persistently lower VDS rates. Since June 1961 four of the East German ships
formerly on the Far East run have been switched to the Cuban, Canadian and
South American runs. Three other ships which could have called at Rangoon home-
bound have not done so. Since July the Conference has raised its rates from the
low levels reached in May 1961, but only to between 65 and 75 percent of the rates
in effect prior to the freight rate war.
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Meanwhile the Soviet Commercial Counsellor in Rangoon, Krylov, was replaced
in December 1960 by Nikolai S. Savinov. Mr. Savinov was reportedly a former
Sovfracht* employee, and probably still works for this agency. He reportedly
arrived in the Burma area two or three months earlier for the express purpose
of handling preparations for the Bloc shipping cartel.
Concurrent with the activities discussed above, other members of the Bloc
were taking steps apparently related to the overall program for Bloc domination
of merchant shipping in Asiatic waters. Between January and August 1961 the
first Czechoslovak ship and the second Rumanian ship called at Rangoon and. were
handled by Burma Agents Corporation. Prior to 1961, only Czechoslovak and.
Rumanian chartered ships called at Rangoon. In July 1960 the Czechoslovak ship,
the Kladno, (12,500 GRT), the first Bloc ship to call at Cambodia, called at
Sihanoukville to discharge cargo from Czechoslovakia.
In December 1960 Prince Sihanouk announced the formation of a Czechoslovak-
Cambodian shipping company (Khmero-Czech Shipping Company) operating between
Sihanoukville and Europe, and a Communist Chinese-Cambodian shipping company
(Sino-Khmero Shipping Company) operating between Sihanoukville and Communist
China. A Czech delegation arrived in Phnom Penh, 28 January 1961 to discuss
Czech aid proposals, among them the joint shipping company. Chinese shipping
technicians were in Phnom Penh in April 1961. In July 1961 it was announced
that the Sino-Khmero Shipping Company would be financed half by Cambodia and
half by China and that the company would operate two 1,500 ton ships with a
projected annual capacity of 150,000 tons of cargo. Inasmuch as this would
mean at least 50 trips a year for each ship, fully loaded each way, either
the total tonnage figure is incorrect or more ships will be operated by the
company. In 1961 two shipments have been noted going to and from Haiphong
and China, one of them on a Cambodian ship, and there probably have been other
such shipments.
In January 1961 the Thai Under-Secretary for Economic Affairs announced
to the press that Polish ships had been invited to resume calls at Bangkok.
In November 1959 Polish service to Bangkok ceased when the Thai government
closed its ports to all Bloc ships except those from Bloc countries with whom
Thailand had established diplomatic relations. The Thai invitation to Polish
ships in 1961 is somewhat unorthodox inasmuch as there are still no diplomatic
relations between Thailand and Poland. The Thai announcement said that the
invitation to Polish ships was a measure against high freight rates, a problem
which has been a matter of concern to the Thai Export Promotion Committee since
the Conference to Europe raised rates 15 percent in September 1960. The Polish
ships have offered space at rates 20 percent less than Conference rates and the
Thai Under-Secretary said that negotiations are going on with other non-Conference
lines to serve Bangkok but would not identify those lines. Polish ships have
Soviet ship chartering agency and freight broker.
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called at Bangkok regularly throughout 1961. Furthermore at least two East
German ships, which had previously called at Rangoon, called at Bangkok in
October and November 1961 lifting cargo for Europe. Rates offered are not
known.
Although China is still using a substantial number of chartered Western
ships to carry its own domestic coastal traffic, in the spring of 1961 Communist
China sent its first ships into international trade other than to North Vietnam
and Hong Kong, thus confirming the reports of the 11-17 September 1960 meeting
at the Soviet Embassy. On the second trip of the Heping, Hong Kong reported
that the freight rates quoted were 30 to 40 percent below Conference rates and
that local shippers estimated that only the Japanese lines could withstand such
competition on a large scale. To date there are three Chinese ships (5,500-
6,000 DWT) operating on the line between China and Ceylon, calling at least
at Indonesia, Burma and North Vietnam enroute. It is not known whether rates
have been cut from these territories also.
In August 1961, it was reported that the Soviets were still anxious to
start a cartel in Asia. Present planning is that 12 to 15 Soviet ships will
operate between the Black Sea as the western terminal, and Bangkok or Singapore
as the 'eastern terminal, with calls at all Southeast Asia countries and the
'Persian Gulf and Red Sea. Soviet officials have stated that China was planning
eventually to place 15 to 20 ships into the cartel, with the same terminals and
route as at present and to expand the service to include Cambodia and the
British Pacific Isles. The Satellite ships will operate on the entire route--
China to the Red Sea--but plans are not firm as to the number of ships. Soviet
officials have reiterated the plan to make calls regardless of the lack of
profitable amounts of cargo and to cut rates persistently below Conference
rates. They hoped to have an agency established in time to put Soviet ships
on the run in January 1962 and to have the entire cartel in operation by June 1962.
Polish Ocean Lines officials have expressed reluctance to go along with
a cartel because they felt they were already doing quite well commercially
in the area. The Polish official said, however, that if Moscow insisted Warsaw
probably would have to comply.
If Burma Agents Corporation refuses: to accept the general agency, the
Bloc will have to make other arrangements, probably with some other small shipping
firm or shipbroker, possibly with Heilgers (Burma) Ltd. The latter is already
handling Polish ships and the Chinese-chartered and Chinese-owned ships.
Heilgers also attempted to secure the agency for Soviet-chartered and Soviet-
owned ships in. 195+ but lost out to Steel Brothers, and again in 1960 they
lost to Burma Agents Corporation in the attempt to secure the East German Line
agency.
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