COMMUNIST AID TO THIRD WORLD OIL INDUSTRIES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01098A000100120001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 33
• Document Creation Date: November 16, 2016
• Document Release Date: February 11, 2000
• Sequence Number: 1
• Publication Date: June 1, 1973
• Content Type: REPORT

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No Foreign Diuem
Communist Aid to Third World Oil Industries
Secret
ER RP 73-12
June 1973
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WARNING
This document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or re- elation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.
declassifimtion sch~?dule of EC. 11652
exemption category 5E{1 !2',111
Automatically declassified on
Dote Impossible to Uefe?m no
Class hed by 015319
Exempt from general
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o
COMMUNIST AID TO THIRD WORLD OIL INDUSTRIES
Summary
1. From 1956 through May 1973, the European
Communist countries have provided US $1.3 billion
worth of aid for the petroleum industries of the
less developed countries. Initially, this aid was
part of the overall Communist effort to expand re-
lations with the Third World. In the early years,
assistance generally was confined to countries of
little interest to Western oil companies. For ex-
ample, Afghanistan, India, and Syria were the first
to welcome such assistance on a large scale. More
recently the Soviets have sought to become involved
with the major producers in large measure to help
meet growing Communist requirements for oil and gas
imports.
2. The Communist countries did not gain entry into
any major oil producing country until the mid-1960s.
By then the major producing countries had begun to
press the Western oil companies for more favorable
participatory and financial arrangements. Moreover,
they had either formed or strengthened existing
national oil organizations and enhanced their bar-
gaining positions by forming international organiza-
tions of major producers.
3. Opportunities for Communist participation
increased further when Western-owned assets and
concessions were nationalized. By 1971, for ex-
ample, Algiers had nationalized natural gas con-
cessions and all oil pipelines and refineries and
had obtained a 51% interest in French oil companies
operating in Algeria. Libya and Iraq nationalized
additional Western investments during 1971-73. Many
such countries were not reluctant to accept a Com-
munist presence in their oil industries because of
major economic and military agreements already con-
cluded. This publication examines the growth of
Communist aid to LDC oil industries. Text and
Appendix tables provide detailed statistical data
on relevant aid and trade.
Note: Comments and queries regarding this publica-
tion are welcomed. They may be directed to - 25X1A
of the Office of Economic Research, Code
143, Extension 6716.
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No Foreign Dissem
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Discussion
Magnitude and Direction
4. From 1956 through May 1973, Communist coun-
tries extended an estimated $1.3 billion worth of
petroleum development aid to 27 less developed
countries* (see Table 1). About one-half has been
committed since the beginning of 1966. More than
75% has been provided by the USSR. Almost 90% has
gone to Middle Eastern and South Asian countries.
More than 45% has been channeled to India and Iraq
and another 35% to Afghanistan, Egypt, Iran, and
Syria. About one-half of the aid extended has been
drawn.
5. Approximately 85% of Eastern Europe's
assistance has come from Romania ($149 million) and
Czechoslovakia ($99 million). Bulgaria, East Ger-
many, and Hungary together have provided about
$40 million, all to Iraq. Poland extended its first
such aid in 1973, about $1 million to Yemen (Aden)
for an oil survey.
Character of Communist Aid
6. More than 55% of Communist petroleum aid
has been allocated for oil exploration and pro-
duction**(see Table 2). Practically all the re-
mainder has gone for transportation and refining
facilities. More than one-half of East European
aid has been for refineries. Among the East European
countries, Romania has the most diversified program,
being the world's third largest manufacturer and
the second largest (although a distant second to the
United States) exporter of petroleum equipment.
* Throughout this publication, the terms Zess
developed countries (LDCs) and Third WorZd countries
are used interchangeably to mean the following: (1)
all countries of Africa except the Republic of South
Africa, (2) all countries of East Asia except Hong
Kong and Japan, (3) all countries in Latin America
except Cuba, and (4) all countries in the Middle
East and South Asia.
** For a listing of Soviet and Eastern Europe
projects, see Appendix Tables A-1 and A-2.
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Soviet and East European Aid Extended
to Third World Oil Industries, by Country and Areal
1956 -May 1973
Total
1,275
987
288
Africa
41
29
12
Algeria
12
12
....
Ethiopia
12
12
.?.?
Ghana
1
....
1
Mali
2
2
? . ? ?
Morocco
2
1
1
Nigeria
4
....
4
Somalia
2
2
??.?
Sudan
3
????
3
Tunisia
3
....
3
East Asia
30
....
30
Indonesia
30
....
30
Latin America
80
64
16
Argentina
46
43
3
Bolivia
1
1
Brazil
13
5
8
Chile
20
15
6
Middle East
647
438
209
Egypt
135
87
48
Iran
81
77
4
Iraq
299
196
104
Jordan
2
2
????
Syria
101
50
51
Turkey
24
24
....
Yemen (Aden)
3
1
2
Yemen (San'a)
1
1
South Asia
478
456
21
Afghanistan
137
137
....
Bangladesh
27
27
...
India
290
269
21
Pakistan
23
23
....
Sri Lanka
1
1
1. Because of rounding, components may not add to the totals shown.
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Soviet and East European Aid
to Third World Oil Industries,
by Type of Activity
1956 -May 1973
Total Aid
USSR
Eastern
Europe
Million
US $
Percent
of Total
Million
US $
Percent
of Total
Million
US $
Percent
of Total
Total
1,275
100
987
100
288
100
Production
369
29
292
30
77
27
Exploration
354
28
297
30
57
20
Refining
305
24
151
15
154
53
Transportation
233
18
233
24
Others
14
1
14
1
..
1. Including construction of oil storage tanks, technical training, and research.
7. Soviet and East European. aid often are
complementary, although not necessarily by design.
Oil produced from Soviet-developed fields in Syria
is transported to a Czechoslovak-built refinery
at Homs. A refinery being built by Prague at Basra,
Iraq, will be supplied with crude from oilfields at
North Rumaylah, developed with Soviet aid.
Natural Gas
8. Soviet aid worth at least $125 million has
been used to build natural gas pipelines and re-
lated facilities in Afghanistan and Iran; gas that
is not locally consumed is exported to the USSR.
In the early 1960s, Soviet technicians found gas
deposits in northern Afghanistan estimated at more
than 8.8 trillion cubic feet. In 1963, Moscow ex-
tended a $39 million credit for Pipelines from these
fields to the USSR and to Soviet-built electric
power and chemical fertilizer plants in Afghanistan.
The project was completed in 1967. By 1970, Kabul
was pumping annually 88 billion cubic feet of gas
to the USSR valued at $14 million. A second pipe-
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line under construction will raise throughput to
the USSR to 140 billion cubic feet by 1974.
9. The Soviets have assisted in building a
690-mile gas pipeline from southern Iran to the
USSR. The gas, a by-product of oil production, had
been flared off as waste. In 1966 the USSR extended
$77 million in credits v tap technical
and equipment for a pipeline to
most of the gas to the USSR.*, The pipeline was
completed in October 1970, and gas deliveries began
shortly afterward. By 1975 the USSR will be re-
ceiving about 350 billion cubic feet annually from
Iran and by 1985 will have imported $1 billion worth
of Iranian natural gas. The two countries also
are discussing construction of a second gas pipeline
to the USSR.
10. Moscow is purchasing gas from Afghanistan
and Iran at a delivered price of $0.16-$0.19 per
1,000 cubic feet, compared with the $0.34-$0.37 per
1,000 cubic feet it is charging its West European
customers for Soviet gas. Although these imports
represented less than 5% of some 7.8 trillion cubic
feet produced in the USSR in 1972, they are convenient
supplements to dwindling supplies in areas of the
USSR adjacent to the two countries. These deliveries
save the cost of bringing gas into the area from
more distant fields in Soviet Central Asia and free
more Soviet gas for sale in Western Europe.
Technical Assistance
11. Communist technicians in the LDCs explore
for oil; assemble equipment; supervise construction
of pipelines, storage tanks, and processing facili-
ties; serve as advisers to state oil organizations;
and train local technicians and engineers. Although
most are employed on projects financed with economic
aid credits, some are hired under individual con-
tracts on a commercial basis.
Soviet participation amounted to about 11% of
the project's total cost of $700 million. Some
$245 million of Western credits financed the pur-
chase of pipe and auxiliary equipment from France,
Japan, and the United Kingdom. Iran provided the
balance.
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12. The number of Communist oil technicians
in aid-receiving countries has risen steadily, to
nearly 2,000 in 1972. Some 60% were geologists
and engineers working on exploration teams; the
rest were mostly training LDC technicians or build-
ing refineries. The majority of the technicians
were in Algeria (700), Iraq (480), Afghanistan (130),
Egypt (115), Syria (115), Turkey (100), and India
(85).
13. LDC technical personnel generally are
trained on the job. More specialized training is
provided,at-vocational training centers in the LDCs.
More advanced training is being carried out at a
large petroleum institute built in Algeria; other
such institutes are being planned for Nigeria and
possibly Iraq. An estimated 1,100 LDC technicians
have been trained at oilfields and refineries in
Eastern Europe and the USSR, and an estimated
425 petroleum engineers have graduated from
Communist technical institutes.
14. Soviet technical personnel, while competent,
are criticized for their narrow specialization and
the excessive administrative support associated
with their employment. Criticism of Soviet equip-
ment is more widespread, and Soviet oil technology
is considered to lag considerably behind that of
the West. For instance, Soviet aid to India in
offshore drilling in the Gulf of Cambay was halted
after reaching 4,900 feet, the limit of Soviet
equipment. India's most promising structures are
believed to be below 15,000 feet.
15. Moscow's refineries supplied under aid,
although generally adequate, are limited in the
variety of products they can produce. They contain
distillation units that produce many basic products
but lack the more complex secondary units that yield
higher quality fuels. This factor contributed to
Ethiopian acceptance of an Italian offer to modernize
and expand the Soviet-built Assab refinery to meet
Ethiopia's needs for jet fuel and high-octane gaso-
line. Moscow itself may have recognized these
problems. Soviet officials are considering pur-
chasing US equipment to be used in LDCs.
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Major Programs
India
16. India, the first LDC to receive Communist
aid for petroleum development, relied heavily on
the USSR to help establish a national oil industry.
Since 1956, Moscow has provided nearly $270 million
in credits and Romania another $21 million. The
comprehensive Soviet program has included surveys,
exploration, production, design and construction of
refineries, pipelines, storage facilities, and
training technicians in both India and the USSR
(see Figures 1 and 2). Widespread oil exploration
Figure 1. Soviet "Christmas Tree" at a
Well Head in Cambay
Figure 2. Soviet-Built Refinery at
Barauni
was begun in the late 1950s. Strikes subsequently
were made in the Punjab area of northern India,
along the Anklesvar and Cambay coasts of western
India, and in the Assam region of eastern India.
In 1972 these areas produced one-half of India's
crude oil production of 7.5 million metric tons.
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17. Three Communist-built refineries account
for nearly 30% of India's refinery capacity of 24
million tons. India's first public sector refinery
was a 1 million-ton plant built by Romania at
Gauhati (in the Assam region) and completed in 1962.
Two refineries, each with a capacity of million auni
tons, subsequently were built by These
(in eastern India) and Koyali (near Cambay).
plants refine only domestic crude. Moscow, however,
plans to expand Koyali's capacity to 6 milli
and provide equipment capable of refining imported
crude. New Delhi is building a 2.5 million-ton
refinery at Haldia (near Calcutta). Romania and
France are building different parts of the facility.
18. About 85 Communist technicians were in India
in 1972, most of them Soviets engaged in explora-
tion, production,-and construction of refineries.
The rest were Romanians working on the Haldia
refinery. As estimated 3,500 Indian geologists and
oil technicians have been trained in India since
1956, and about 200 were trained in the USSR and
Romania.
Ira
19. Iraq is the first major producer to accept
a comprehensive Communist aid program in the petroleum
sector. Baghdad readily accepted this kind of
assistance because Moscow already was its its chief
pri-
foreign source of development capital and
mary arms supplier. About $300 million of petroluem
aid has been extended since 1969, nearly two-thirds
by the USSR. Soviet aid includes development
planning; exploration; development of new oilfields;
construction of refineries, pipelines, and storage
facilities; and training of Iraqi technicians. The
two countries also have discussed forming a joint
company to transport oil by chartering foreign
tankers.
20. Communist involvement developed several
years after Baghdad had established a state-run
oil company. Direct public involvement began in
1961. Iraq reclaimed almost all concessions granted
to the Iraq Petroleum Company (IPC), including the
North Rumaylah oilfields in southern Iraq, where
oil had been discovered but production had not be-
8
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gun. Three years later, Baghdad created the Iraq
National Oil Company (INOC). After years of pro-
tracted negotiations with IPC over compensation
for nationalized concessions and related IPC un-
willingness to expand oil production, Baghdad
accepted an offer of Soviet aid in 1969. In June
1972, Baghdad nationalized IPC's assets at Kirkuk
in northern Iraq.
21. Soviet exploration and development have been
confined largely to North Rumaylah, which contains
about one-half of Iraq's total proved reserves.
Moscow has committed about $120 million for the
development of this and nearby fields. Bulgaria,
East Germany, Hungary, and Romania have committed
at least another $50 million. Initial production
of some 5 million tons (about 6% of Iraq's current
annual production) began in 1972. Production is
expected to rise to 18 million tons (about 16% of
planned production in that year) when the second
stage of development is completed in 1974.
22. The USSR is constructing pipelines in Iraq,
one of which will connect the North Rumaylah fields
to a 1.5 million-ton refinery Moscow is building
in Mosul. Oil from these tieids also will be
pumped to a 3.5 million-ton refinery that Czecho-
slovakia is building at Basra. When completed, these
refineries will double Iraq's current capacity to
10 million tons annually.
23. Baghdad plans to invest some $1.4 billion
in the petroleum sector during the 1970s. Available
Communist credits represent more than 20% of that
amount, most of which are scheduled to be used by
1975. With its predilection for Communist, particu-
larly Soviet, assistance of all kinds, Baghdad no
doubt is counting on expanded Communist participa-
tion in the petroleum sector.
Algeria and Libya
24. Algeria and Libya are the only other major
producers where Communist countries have developed
some presence in the oil industry. Soviet geolo-
gists and engineers initiated exploration activities
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AIger_i-j in 196'3 .rid have I-,men engaged in research
n oil ant eras prodnction si r,rA 1966. About 200
Tiets are worki nc1 ,? rt tha f mld and as advisers to
11- 1 star-- nwnecd, pc troln,im r?o