SOVIET BLOC ECONOMIC PENETRATION OF UNDERDEVELOPED COUNTRIES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01149A000400110003-8
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: December 12, 2016
• Document Release Date: July 20, 1998
• Sequence Number: 3
• Publication Date: April 1, 1955
• Content Type: REPORT

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CIA/RR MP - 120
SOVIET BLOC ECONOMIC PENETRATION
OF UNDERDEVELOPED COUNTRIES
1. Soviet Bloc economic penetration of underdeveloped coun-
tries has increased steadily over the past two years and can
be expected to continue to increase in 1955. While the
magnitude of the Bloc effort is still small in money terms
and in comparison to U. S. aid to underdeveloped countries,
the skill with which the Soviet program has been developed
is resulting in significant political gains with relative-
ly small economic costs. The type of assistance offered
by,the Bloc and the relative ease of payment have had great
appeal to countries seeking to industrialize and to diver-
sify their economies. The several methods of economic
penetration by the Soviet Bloc are briefly considered
below.
U S-DLOC PARTICIPATION IN
a LA" V "'?- FREE WORLD TRADE FAIRS
co
25 in 1952, 40 in 1953 10 0~
and 53 in 1.954. In o
1955, ' it is likely that 1950-aa 1952 1953 1954 +935
(expected)
Bloc countries will
participate in at least
65 Fairs. Despite Sov-
iet statements to the contrary, Soviet and other Bloc exhib-
its have served more to impress the non-sophisticated visitor
than to attract prospective buyers. In this field the Bloc
countries have achieved a large measure of success.
? A. Sales 'of Soviet goods completed at these Fairs
have been negligible. For example, Soviet
sales at, the Milan Fair are estimated at about
one-tenth of the cost of staging the exhibits--
even then sales were of customary Soviet exports
such as caviar, furs, etc.
15 Fairs in 1950-51 to %20 5 01
me popu ar as a vehicle
to present "socialist 70
progress" to the masses "60
in underdeveloped coun- W50
tries. Bloc exhibitions 4o
in the Free World have X30
climbed from a modest
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Propaganda-wise, Bloc exhibits have paid off well.
USSR popular prestige has increased, and in many
countries the man in the street has been convinced
that USSR is a great industrial nation dedicated
to improving the national welfare of the people.
1. Bloc countries have generally refused to dis-
play their products side by side with the
products of other countries whereby vintage
of machinery design is obvious, but have
gone in for lavish national displays which
convince the local population of the "abun-
dance" of goods in the Bloc.
III. Since October 1951, the USSR has steadily increased
its propaganda to the free world, stating it is prepared
to offer technical assistance, plant and equipment, and
credit to underdeveloped countries. Only in 1954, however,
did some tangible results of these offers begin to appear.
To date, Afghanistan and India are the principal recipients
of such aid,
A. Afghanistan, in 1954, accepted $6.2 million in
loans and credits from USSR for installations in
the northern provinces. Construction of impor-
tant gasoline storage facilities and a gasoline
pipeline will offer continuing opportunities for
Soviet penetration. In addition, two grain ware-
houses, highways, a flour mill, and a bakery are
in process of construction. These projects and
others currently under consideration provide ready
cover for the presence of the 500-600 Soviet
nationals currently reported to be in Afghanistan.
Czechoslovakia concluded a $5 million credit in
1954 for machinery and other products, and, as
a result, on 14 Feb 1955 a contract was concluded
.for Czech construction of a $1.5 million cement
plant. During early 1955, Hungary and Rumania
also made offers of economic assistance.
B. The USSR and Satellites are giving and continuing
to offer considerable aid to India.
1. On 2 Feb 55, the USSR agreed to build a
1 million ton steel plant in Central India
and to this end offered a 12-year, 21%,
$91.4 million credit for construction.
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Should the Indians accept final Soviet plans
to be tendered in November, the plant is to
be completed by the end of 1959.
2. Contracts have been concluded or are being
negotiated for a large number of plants
covering a wide range of industrial activity
with the USSR and Satellites.
3. Three mining engineers were sent to study
layout and equipment for a diamond mine,
and offered machinery and technicians in
exchange for diamonds.
4. Four Soviet engineering professors were
assigned to the National Institute of
Physics under the UN Technical Aid Program,
The Bloc successfully penetrated Indian
planning circles. In reaction to the
Indian request for experts, the USSR sent
a team of high-level economists and mathe-
maticians, including a former GOSPLAN
member, to the Indian Statistical Institute
in November 1954. Poland sent one of its
top economic planners, Oscar Lange. These
men reportedly have taken part, on the
highest levels, in the Indian planning
for their forthcoming five year plan.
C. In addition, there is a coordinated Bloc effort
to increase its participation in the economies
of other Free World underdeveloped countries.
Negotiations for technical assistance, plant
and equipment, and credit are being concluded
in Burma, Indonesia, and Iceland. There are an
increasing number of similar Bloc activities
being initiated in numerous other underdeveloped
countries. (See map)
IV. Besides direct negotiations with underdeveloped coun-
tries, the Soviets have pledged 12 million rubles (3 million
dollars) to the UN Technical Assistance Administration since
1953. Though no expenditures have yet been made, the 1955
program includes projects in Chile, Ceylon, Ecuador, India
and Pakistan, and will cost almost one and one-quarter
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million dollars.
A. Santiago radio reported an announcement by the
Chilean representative to the UN on 22 March
that Chile has accepted Russian technical aid
amounting to $200,000 through the UN Technical
Assistance Fund. Presumably the Chileans will
purchase medical equipment for the University
of Chile and other institutes. It is interest-
ing to note that a number of Chileans, including
the President of the Chamber of Deputies, have
been to the USSR during the past year and have
reported favourably on the Soviet way of life.
Because of the nature of Soviet contribution, the aid can
be expended only in USSR exports of goods and services
or by the training of foreign nationals in the USSR.
The great need for technical assistance in Free world
underdeveloped countries and their keen desire for indus-
trialization make these Soviet aid overtures through the
UN very appealing.
V. Soviet Bloc trade with the underdeveloped areas has
been steadily increasing and the Bloc has exhibited a
growing interest in exporting industrial equipment in ex-
.change for primary raw materials and.foodstuffs.
RECORDED USSR-FREE WORLD TRADE TURNOVER
19)2-54
1952 1953,, 1954
'ICELAND, PAKISTAN, BURMA, INDONESIA, ARGENTINA, URUGUAY, INDIA.
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A. For example, in an attempt to promote lagging
Soviet exports under the Argentine trade agree-
ment, the Soviet Union is setting; up an exhibit
in Buenos Aires to begin in early May. A
member of Soviet experts can be expected to
accompany the exhibit in an attempt to over-
come Argentine reluctance in purchasing Soviet
capital goods, While the Bloc share of Latin
American trade is currently very small., there
are indications that it will continue to grow.
B. Another example--Soviet trade turnover with
Iceland has increased from virtually nothing
in 1952 to over $7 million in 1953, and over
$14.5 million in 1954. It is important to
note that the USSR in 1954 exported approxi-
mately 230,000 tons of petroleum to Iceland,
which represented over 70% of total Icelandic
POL imports. This year Soviet petroleum
exports, according to the trade agreement,
will almost displace imports from other sources.
The USSR has replaced the UK as Iceland's
second trading partner, the US being number one.
Consequently, Iceland is becoming increasingly
dependent upon the capriciousness of the USSR
as a buyer and a seller.
C. The Soviet Union, dedicated to a policy of
economic self-sufficiency, considers foreign
trade with the non-Communist world as a transi-
tory phenomenon and an anathema to a planned
economy. It is within this autarkical concept
that the development of Soviet foreign trade
must be considered. For example, the vast ex-
pansion of Soviet agriculture into the new
lands regardless of economic cost, will result
only in agricultural products costing consid-
erably more than the similar goods obtained
through international trade. The success of
the agricultural program, however, will further
reduce the economic necessity for importing
such goods from the underdeveloped countries of
the Free World. Such a development would sig-
nificantly increase the ability of the Soviet
Union to utilize foreign trade as a weapon of
economic penetration and to bring to bear on
the governments and economies of the underdevel-
oped countries all the pressures concomitant with
this ability.
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