SPECIAL SURVEY OF SELECT SOVIET BLOC ECONOMIC ACTIVITIES IN CERTAIN FREE WORLD COUNTRIES (SEPTEMBER 1955)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01049A001300020004-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 75
• Document Creation Date: December 9, 2016
• Document Release Date: April 24, 2001
• Sequence Number: 4
• Publication Date: September 22, 1955
• Content Type: SUMMARY

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NOT IULEASAHtE TO
FOREIGN NA TION LS
CON2IIWD COMM
CIA INTEP I L USE ONLY
SPECIAL SURVE3C. Cl ' SELECT SOVIET IILOG ECONOMIC ACTIN
IN OM TA IN FREE ", ( D C OUNTFEES (SEPTEIm R 1955)
CIA/ItR .r.2
(C R Project )422,9&1)
22 September 1955
WARNIIB
THIS 1 .TMIAL GOM lII1S TTY TJATION ArnCTI1n
TIE TIATIONAL DIEFE14SE OF THE U11IT LD STATES
'WIT111I1 TO LIEAI'Ifl OF THE ESPIONAGE IA'c S V
TITLE 18,: USC SEGs, 793 A JR, 79 j, THE T U IB-
D' SIO}1 OH RELATION OF U ICH IN ANY LAM M
TO AN UNAU`t~fIOIZIM PERSON TS MOM= EY LAW.
GENTRAL INTE,LLIGI IUE AGENCY
O floe of Research and Reports
CIA LIT L USE ONLY
TOOT R LEASAM TO
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TABLE OF CONTENTS
Aare:
INTRODUC TION
1
SUMMARY AND CONCLUSIONS
3
COUNTRIES
EUROPE
Finland
5
Iceland
9
Italy
11
Norway
13
Sweden
14
Yugoslavia
16
NEAR EAST AND AFRICA
Egypt
1.9
Greece
25
Iran
27
Israel
30
Lebanon
31
Saudi Arabia
33
Sudan
35
Syria
36
Turkey
38
SOUTH ASIA
Afghanistan
41
Ceylon
45
India
47
Pakistan
53
FAR EAST
Burma
55
Japan
59
Indone aia
61
L&TIN ANERICA
Argentina
65
Brazil
68
Chile
69
Cuba
70
TABLES
I Sino-Soviet Plant Installations in Free World
71
Il Free Uorld Countries' Trade with Sino-Soviet Bloc
73
MAP
74
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INTRODUCTION
1. At the outset it should be admitted that in any particular instance,
and frequently in a whole series of instances, it is difficult to distin-
guish between economic penetration of a Free World economy and normal
commercial relations.
2. It is only when the totality of a Free World country*s economic
relations with the Sino-Soviet Bloc is considered in the context of its
domestic economic needs that anything resembling an identifiable picture
of economic penetration may emerge.
3. This survey represents an initial step in assembling a picture
based on selected aspects of Soviet Bloc economic relations with Free World
countries. The aspects selected are some of those which are likely to be
found where the Bloc intends to penetrate the economy of a country. Logical
next steps would be research-in-depth on those countries which appear to
be primary targets for Bloc economic penetration.
4. Certain cautions should be observed in evaluating the results of
this survey. First, in such a scanning effort as this,, information appears
more plentiful on the more recent Sino-Soviet Bloc overtures to the Free
World, thus directing attention to the Middle East and Asia and away from
Western Europe and Japan. Second, Bloc overtures to countries in the
neutral camp or those relatively uncommitted politically are naturally more
noticeable. The resulting geographical bias in favor of underdeveloped
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countries is inherent in the "survey-without-research" approach necessitated
by the operational requirements.
Nonetheless, the survey has been useful in gaining a first approximation
of SinooSoviet Bloc efforts at economic penetration. This approximation is
adjudged adequate for operational programing purposes.
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SUMMARY AND CONCLUSIONS
1. Soviet Bloc countries, especially the USSR, East Germany, Czech-
oslovakia, and Hungary, have greatly expanded their offerings of capital
equipment and technical aid to certain Free World countries. The most
extensive bloc programs are with Afghanistan, India and Indonesia; stronger
economic relations are fast developing with Yugoslavia and Egypt; in
addition to Egypt, other Arab states, notably Syria and Lebanon, have been
the object of recent concerted trade activities.
2, liewed by quantitative standards, the Bloc offers are not sig-,
nificarrt. But some of the proposed means of repayment are of considerable
interest. In addition to the more conventional means, the Bloc accepts
repayment in kind and in the profits of the enterprises for which Bloc
equipment and technical aid are provided. The Bloc countries display
an acute opportunism in seeking to purchase surplus goods, especially
agricultural commodities. Also, the Bloc seems eager to bid on projects
when negotiations with Western companies have broken down. Terms offered
by Bloc countries are generally as favorable as, and sometimes more
favorable than, those available from free world sources.
3. Under the pressure for rapid industrialization and ?nprovement
in consumer welfare, capital hungry countries of Asia and the Middle East
.are eager to secure the maximum possible in loans and assistance. Some
of these countries have made a special effort to develop loan agreements
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with a variety of countries, both Bloc and Free World, so as not to be
beholden to any one in particular and also to maximize their credit poten-
tial. Other countries, faced with some of the same agricultural surpluses
found elsewhere in the Free World, have actively sought an expansion of
trade with the Bloc in order to relieve the resultant pressures on their
domestic economies. In still other instances, assistance has been sought
from the Bloc to design, build, and train technical personnel to operate
Industrial installations ranging from a steel mill to atomic energy plants.
Because of the large number of such inquiries and the relatively small
number of completed project negotiations it is as yet not quite clear
whether the inquiries represent bona fide attempts to consummate deals
with the Bloc. There is at least some evidence to suggest that certain
Western countries view their success in getting Bloc offers as a leverage
on the U.S. for larger aid committments.
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MUNED
Finnish Foreign Trade
(M4. lions of Dollars)
IMPORTS
EXPKDRTS
Total
From
Soviet Bloc
Percent
Total
To
Soviet Bloc
Percent
1947
345
49
14.3
409
127
1
31
1948
488
93
19.0
502
160
.
31.8
1949
1
410
80
19.5
474
155
8
32
950
1
1
388
0
0
18.0
392
81
.
20
7
95
676
1
8
16.0
866
148
.
17.1
1952
792
154
19.4
718
184
25.6
1953
530
182
34.4
572
179
4
31
1954
661
190
28.7
681
190
.
2709
9
large reparation payments by Finland to the USSR had the effect of
gearing the Finnish economy to Soviet requirements. With the end of
reparations trade with the USSR and the Bloc continued to increase because
the Soviet Bloc provided the only market for the products of these high-cost
industries. The percentage of Finnish trade with the Soviet Bloc decreased
from about 33% in 1953 to 2.8% in 1954. This has resulted from an increase
in trade with the Free World rather than from a decrease in trade with the
Bloc. About three-fourth's of Finland's exports to the Bloc have gone to
the USSRs but imports have been widely distributed,
Im Trades Agreements with the Bloc Countries
The Soviet-Finnish long-term trade agreements, concluded in June 1950
and July 19549 have tightened FinlandQs economic dependence on the USSR.
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The USSR is currently supplying a significant percentage of Finland's
petroleum requirements,, even though meeting with competition from western
oil companies. The USSR supplies a considerable percentage of Finland's
requirements of graip,sugar and cotton. These agreements have not always
successfully provided a market for Finnish products. Under the 1954 agree-
ment Finnish exports of metal industry products--an export item relying
almost entirely on the Soviet market-were out 10% on the ground that
prices were too high. Using the same pretext in 1955, the Soviets sharply
curtailed the import of prefabricated houses, another commodity which
relies almost exclusively on the USSR for its export outlet. The quota
for prefabricated houses was reduced to 250,000 sq. meters in spite of the
fact that the long-term agreement called for USSR imports of 600,000 sqo
meters of housing annually.
Finland has concluded,trade agreements with all the Sino-Soviet
countries except Albania. Since 1950 trilateral agreements have been
concluded with Satellite countries to compensate for a surplus in Finnish
exports to the USSR.
IIo Loans and Technical Assistance
In February 1954 the USSR granted a Finland gold loan amounting to
$10 million, with 2j% interest repayable in ten years. As of early May 1955
$5.0 million was drawn from the USSR to support currency reserves of the
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Bank of Finland. It is believed that the balance will be used for pro-
ductive purposes chosen by the Bank. In January 1955 the USSR granted
a second gold loan under the same terms as the first loan. The second
loan has been allocated to a state-owned woodworking company, the Finnish
Board of Forestry, two state-owned power companies, the State Railway
public works agencies and for other productive purposes. The funds will
primarily be used for the purchase of western machinery and equipment.
The USSR submitted an offer to construct an oil refinery in Finland.
The contract, however, was placed with an American firm which has had
experience in construction projects for the leading oil companies. Two
Russian proposals had been previously rejected by Finland on technical
grounds.
III. .scscelllaneowa
In July 1954, for the first time in Finnish-Soviet trade relations,
a political appendix was signed by the USSR and Finland and attached to
the long-term economic agreement. This appendix appears to reaffirm some
of the principles of the 1948 Soviet-Finnish Treaty of Friendship. .n
August 1955 a Soviet Finnish Scientific and Technical Cooperation Agreo.-
ment was signed. This agreement provides for the mutual exchange of per-
sonnel and information and establishes a joint commission. to administer
the program.
The resale of Finnish property acquired by the USSR to Finnish
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interests has been in progress since 1953. It has resulted in the return
of about 20 firma out of an original 90 held. Most of those firms remaining
in Russian hands are small with the exception of the company which dis-
tributos Soviet petroleum. Negotiations are in progress for the possible
transfor of a wood processing firm.
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ICELAND
:1celandic Foreign Trade
Thousands of Dollars)
IMPORTS
..
~.
.
EXPORTS
-
.~
_..
Year
Total
From
Soviet Bloc
_
Percent
Total
-
To
Soviet Bloc
.
Percent
1951
56,731
3,885
6.8
44,615
3,508
7.9
1952
55,863
3,722
6.7
39,377
2,786
701
1953
6',789
5,808
8.6
43,281
8,565
19.8
1.954
69,406
12,685
18.3
51,,939
12,947
24.9
Icelandic exports are restricted almost completely to fish and fish
products* The 1952 British boycott of Icelandic fish forced Iceland to
seek