SOVIET ECONOMIC PENETRATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80M01009A001502510014-1
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 9
• Document Creation Date: December 23, 2016
• Document Release Date: April 29, 2013
• Sequence Number: 14
• Publication Date: May 7, 1958
• Content Type: REPORT

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411tr May 1958
SOVIET ECONOMIC PENETRATION
Soviet economic penetration program a new challenge to West,
particularly to United States. "Peaceful coexistence", with em-
phasis on trade and development aid to underdeveloped countries
part of more subtle Khrushchev policies,
Goals of international communism remain world domination,
Soviet propaganda, however, pictures USSR as wanting peace, United
States as wanting war. Khrushchev's remark, "To the slogan which
says, 'let us arm', we reply with the slogan, 'let us trade."
In Soviet penetration of less developed countries, trade and sub-
version go together. However, Soviet Bloc aid of over $2 billions
in past three years not limited to countries where there is high
probability of early acceptance of Communist doctrine,
Despite Nasser's repeated crackdowns on Communist elements in
Egypt, and more recently within other nations, Soviets continue to
deliver goods under $175,000,000 development program signed last
year. Current Nasser visit to Soviet Union could result in further
assistance.
Same reduction in Communist influence is true in Syria since
formation of United Arab Republic two months ago, However, USSR goes
ahead with $170,000,000 economic aid program and $100,0001000 addi-
tional arms agreement.
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? Many ot examples, Afghanistan, for instance. Alen.
USSR has extended considerable assistance to other Bloc coun-
tries. Since early 1956 about $1.3 billions in credits plus small
amount in grants. This is in addition to Free World penetration pro-
gram,
-Pmet.e.
Small burden on USSR. Not koss than of 1% of GNP per year,
When Soviet spokesmen declare they are willing to provide anything
the underdeveloped countries request that is within the capability
of the USSR, they are not necessarily making an empty gesture, Could
double present size of foreign assistance program without serious
strain,
Bloc aid offers made to Turkey; Iran far in excess of what has
been accepted,
and Lybia have
In Africa, offers to the Sudan,-Morocco? Tunisia
not been accepted to date, despite internal pressure
for economic development and a growing need for foreign assistance
to carry out such programs. Only 16 Free World countries have ac-
cepted Bloc credits; 95% has gone to 9 countries. This is detailed
in summary tabulation distributed to you.
Over 400 non-military students from underdeveloped countries now
studying in the Bloc, USSR announced in the UN that it was willing
to receive 1,000 students and trainees. Students now largely from
Egypt, Syria, Indonesia, Sudan, Yemen. Each year, over 4,000 over-
seas Chinese go to Communist China to dtudy,
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?
Characteristics of Bloc Programs
A. Usually prescribed on an integrated basis:
1. Line of credit
2. Technical assistance and training
3. Increased trade opportunities.
Has great appeal, particularly if underdeveloped
country is having difficulty in marketing its ex-
portable products at adequate prices.
In contrast, US program more isolated. In particu-
lar, trade usually a matter outside scope of re-
sponsibilities of mutual security officers.
B. Almost entirely a credit program
1. Interest rates 21%.
2. Repayment usually begins after project is in
operation. Output of plant helps to pay for
loan.
3. Amortization period 12 years.
US interest rates higher. However, Development Loan
Fund repayment in 40 years, 30 years for Ex-Im. Bank,
much longer terms than USSR.
C. Generally covers only Foreign Exchange Costs.
D. Usually related to Industrial Development
Sugar mills, cement plants, etc. Not for sanitation,
sewage, housing, etc.
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E. Independent of Military Pacts.
No free world underdeveloped cOuntry receiving bloc
military or economic assistance is a member of a
bloc military alliance. This practice disarms many.
USSR government well set up to wage economic and
political warfare. No budgetary controls when it
comes to'diverting funds to particularly urgent.
national policies. Can move quickly when they
sense an opportunity. Only Battle Act is battle
against free enterprise.
Other part of Soviet program is increased trade,
not only in underdeveloped countries, but in Western
Europe. About 70 percent of USSR's increase in non-
bloc trade in 1957 was With industrial .nations of
Western Europe'.
Continued expansion expected. Agreement between
Germany and USSR reached a few days ago calls for
a doubling of trade by 1960.
Soviet capabilities to export petroleum and metals--
aluminum, tin, zinc and ferro-alloys--is increasing.
The USSR is already a supplier in a few traditional
western metal markets. Over the years, the USSR
may well become a major source of many such indus-
trial necessities to Western Europe.
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1 A
Their long-rung petroleum development plans, Khrushchev's
1972 goals, point up the possibilities of such a
development.
The USSR plans to build, at an ice-free port in the
Lithuanian SSR, a major oil depot which could supply
the petroleum deficient countries of northern Europe
expeditiously from the oil-rich Ural-Volga area. A
large refinery is being built at Polotsk (300 miles
east of the proposed depot) as are pipelines to
Polotsk from the Ural-Volga region, but no plans have
yet been announced for a pipeline to connect Polotsk
to the new Baltic base. (See map)
Present petroleum demand in non-bloc northern Europe
is about 85 million tons and is expected to increase
to about 145 million by 1965. Production approaching
the USSR's 350-400 goal for 1972 would permit it to
supply a substantial part of this demand by 1965.
The new depot could also serve north European bloc
countries.
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1111
Soviet economic base, upon which they are developing their
economic penetration program, is growing rapidly. By 1962, total
Soviet output expected to be 50 percent of our own. Rate of growth
about twice that of the U.S.
With Gross National Product of about $170 billions, USSR now
able to devote about as much to national policy purposes--defense,
economic aid, etc. as is the United States. Does this by holding
consumption at low level.
Fast rate of growth of producers goods provides base for a
rising level of exports to underdeveloped areas. Output of machine
tools, for example, now about double that of our own.
Means that trade and aid offensive is not a flash in the pan.
Probably Soviets will increase their efforts, not diminish them.
Peaceful coexistence more than a tactical maneuver. Trade and
development program along-term battleground area in itself.
As this challenge is based largely on economic and industrial
growth of Soviet Union, it is one which very directly concerns
business leaders of our country.
This is not a task for government alone. It is by our business
leaders recognizing the problem, properly analyzing it, and seizing
time by the forelock, that the challenge can be met.
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IP
6 M4Y 1958
SinoSoviet Bloc Credits. and Grioits.-1171.11ts___121ankass
The following data indicates the extent and distribution of Sino
Soviet Bloc credits and grants to Free World underdeveloped eountriere.
In the period 1 January .1954 through 30. April 1953 the Sino-Sovi4
Bloc extended over ,$2.0 billion in credits and rants? of which about
4400 million was for the purchase of arms. During 1957 an estimated
1,600 Moe-industrial, agricultural and other professional specialists
were.morking in the underdeveloped countries.
Since-1955 the Soviet Bloc has undertaken approximately 10
industrial projects in th underdeveloped countries sf the Free World.
It isestimated that at least 30 percent of these projects have been. -
completed and are currently in operation, 40 percent are in various
stages f e nstruction? and about 12 percent are still in the surrey
stage. 'Status of the balance cannot be determined from available
information-. Bloc industrial projects constructed or in ration .
In the underdeveloped countries include not only complete installations?
such an bridges, cement plants, 'sugar refineries _glass and textile
factories but also the undertaking-of petroleum exploration progrs
various phases of. electrification projects and the supply of capital
eqPiPment. Yhny Of the industrial facilities which have been. completed
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are being operated by Bloc specialists who are training local
personnel to take over management and operation of the plants at some
Dater
11010212.1I
. (See tables below)
Afghanistan
Burma,
Cambodia
Ceylon -
Egypt
Iceland
India
indonesia
Nepal
Syria
Turkey
Yemen
Yugoslavia
Latin Ameriezra.
TMAI.
Sino-Soviet Bloc Credits and Grants to
Free World Countrlee
1 January 1954-30 April 1958
Total Sino
Soviet Bloc
161
42
22
60 3o
505 175
5
302 268
120 a/ 100
13
294 223
10 10
60 plus No
464 348
8
Europatan
USSR Satellites
No breakdown
38
2,0661j
4
330
5
34
9
71
breakdown
116
8
alif7=yb7;ubstautially larger.
k/ Includes small eredits or grants to other nations.
14111.12 US
Communist
China
available
4
22
26
11
13
val./able
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Cou_
Me:mast=
Argentina
Bolivia
Brazil
Burma
Cambodia
Ceylon
Chile
Egypt
Greece
India
Inflame
Iran
Mexico
ParaitusY
Syria
Sudan
Turkey
Yemen
Yugoslavia
TOTAL
in Free World UnderdeveloCountrispj, 1957
Total Sino-
Soviet Bloc
Other
USSR Bloc
455 42o 35
50 50
fil .9,/
at./
50 10
, 30 15 15
55 Ey
i a/
3
10
280
105
5
50
310
5
5
180
100
5
100
2,./
.a_./
Pi, '
5/
no no
10
10
15
1/
15
55
20
35
1,600
795
805
277Fgrim lees believed te be present during the period.
C
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