ARMS SALES TO THE THIRD WORLD, 1977

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80T00702A000400060007-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 20
• Document Creation Date: December 15, 2016
• Document Release Date: March 3, 2004
• Sequence Number: 7
• Publication Date: October 1, 1978
• Content Type: IS

'Appr6Ve1d' For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
* OSD REVIEW COMPLETED
;Approved For Release 2004/05105,: CIA-RDP80T00702A000400060007-4
 25X1 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
Arms Sales to the Third World, 1977
Central Intelligence Agency
National Foreign Assessment Center
Key Judgments
Arms sales to the Third World' reached an estimated $22.4 billion in
1977 as sizable orders by Iran and other Middle East clients reversed a two-
year slump. In terms of constant US dollars (with Soviet sales being valued
on a comparable basis), 1977 sales, although still 10 percent less than 1974
sales, were about 10 percent above the 1975-76 level.
Billion US $
Billion 1976 Us $
Constant Prices
1.974
........
21.3
25.6
1975
........
19.5
21.1
1976
......
19.5
20.9
1977
........
22.4
22.9
On the buyers' side, Iran and Saudi Arabia continued to dominate the
market in 1977, purchasing about 45 percent of the arms sold to Third World
countries. Algeria, Iraq, Ethiopia, India, and Argentina accounted for
another 20 percent.
As for suppliers, the USSR, France, and West Germany substantially
increased their Third World arms sales in 1977, in both absolute and
percentage terms. The United States, while retaining its lead as the single
largest supplier, saw its market share decline by 8 percentage points. US sales
are characterized by proportionately larger support and associated services
provided clients. In the support category, US sales in constant prices
surpassed those of the USSR (the second-largest arms supplier) by 75
percent; in services, the ratio was 8 to 1. As for weapon systems, the spread
between US and Soviet sales was narrower, with US sales only 12 percent
higher.
For the purpose of this report, the Third World refers to the following: (1) all countries of Africa except
South Africa; (2) all countries of East Asia except Hong Kong and Japan, and Cambodia, Laos, and
Vietnam, which became Communist in 1975; (3) Greece and Turkey in Europe; (4) all countries in the
Middle East and South Asia; and (5) all countries in Latin America except Cuba.
25X1
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
Deliveries of military items to the Third World continued their rise of
recent years, in both current prices and constant prices (with Soviet deliveries
valued comparably):
1974
7.9 9.8
1975
8.9 10.3
1976 .......
11.7 12.7
1977 .....
13.8 14.1
Once again the USSR responded more quickly than other suppliers in
following up sales with deliveries. At the end of 1977 the backlog of Soviet
orders stood at about $5 billion, while the backlog of other suppliers had
mounted to $45 billion, including $30 billion for the United States (fiscal year
data). The five top Third World recipients of foreign arms in 1977 were Iran
($2.7 billion), Saudi Arabia ($2.0 billion), Israel ($1.1 billion), Iraq ($1.0
billion), and Libya ($0.8 billion).
Looking ahead for the next several years, we expect the Third World
arms market to level off and drift downward: (a) the leading clients have
huge backlogs of orders and, in some instances, find it hard to digest the
existing flow of arms; and (b) a number of Third World countries face
increasing financial problems-for example, in managing their debts and
marketing their raw materials at good prices. We note that the USSR and
West European suppliersare taking vigorous steps to maintain sales in what
may well prove to be a stagnating market.
ii
SECRET
25X1
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
This report describes the sale and delivery of foreign military equipment
and services to the Third World in 1977. It identifies trends in the
distribution of arms transfers by supplier, recipient, and type of weaponry,
and it looks briefly at near-term prospects for the Third World arms market.
The report describes some of the complications in assigning dollar values to
these arms flows and attempts to eliminate some of the differences in
estimating sales for various suppliers. We have refined our estimates of the
costs to LDCs of Communist-supplied support items and have expanded our
definition of arms sold by Communist countries to include the same
categories covered in US Department of Defense sales data. We recognize
that West European sales remain somewhat understated, because we do not
always have full reporting, particularly for support and associated services.
To increase the comparability of our estimates of military sales and
deliveries of the various suppliers, we have made the following specific
adjustments:
? US fiscal year data were adjusted to a calendar year basis for
comparability with other supplier data, which are for calendar years.
US calendar year data, however, are not broken out by recipient.
? Soviet data are given both in actual export prices and US cost
equivalents, with the latter measure providing a basis for direct
comparison of US and Soviet military aid.' The revised data are not
broken out by recipient.
? Coverage of Communist military sales and deliveries was expanded to
include associated technical services and military-related construction
and more comprehensive estimates of support costs. This broader
coverage, however, applies only to total sales; the breakdown by
recipient is in accord with the narrower definitions used in earlier
publications.
The adjustments in coverage and the use of US costs increase our estimates of
Communist military sales and deliveries for earlier years-as presented in
previous reports in this series-by about one-third.
The data described in this paper thus encompass the categories of arms
sales and deliveries that in the United States would be grouped under the
Hi
SECRET
25X1
25X1
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
Military Assistance Program (MAP), Foreign Military Sales (FMS), and
commercial transactions. Included are:
? Weapon systems (and initial spare parts), including small arms.
? Support: (a) items such as trucks and other general purpose vehicles
and equipment, communication systems, and radars; (b) maintenance
support, including spare parts, supplies, tools for servicing and repair of
weapon systems, and overhauls and repairs in the supplier country; and
(c) ammunition, bombs, mines, grenades, and military explosives.
? Associated services, such as training, technical assistance, and con-
struction of military facilities.
The data on US sales and deliveries used in this paper were provided by
the Defense Security Assistance Agency and the Office of Munitions Control.
For some purposes, the data have been converted to calendar years and are
expressed in 1976 dollars; in these cases the data do not match actual US
budget authorizations, appropriations, or outlays.
iv
SECRET
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
Arms Sales to the Third World, 1977
Recovery of Sales in 1977
In a pronounced rebound from a two-year
slump, world arms sales to the Third World in
1977 reached $22.4 billion (see table 1). The
comeback reflected (a) record sales of modern
aircraft to Iran, (b) renewed orders by other
large Middle Eastern clients, and (c) the general
willingness of Western and Communist suppliers
to sell.
In constant dollars (and with Soviet sales
valued at US costs), French, West German, and
Soviet sales in the Third World market reached
near-record :heights in. 1977, while British sales
fell off from their 1976 peak, and US sales
continued to slip (see table 2). Market shares in
1977 (in 1976 dollars) were as follows:
Total ..................... _......... 100
United States .............. 45
USSR .............................. 26
France .......................... 11
United Kingdom ........ 6
West Germany ............ 4
Other ............................ 8
The reduction in US sales in 1977 was not a
direct consequence of the US arms restraint
policy announced in May 1977, nor did the new
policy appreciably affect the volume of arms
Table 1
Third World: Arms Purchases, by Supplier
Total . ............................................. 82,600
Non-Communist ........................ 64,360
United States 8 42,600
(42,860)'
France ...................................... 7,925
United Kingdom .................. 5,025
West Germany 3,245
Other ....................................... 5,565
21,250 19,465 19,455 22,430
15,480 16,335 14,925 17,620
10,350 10,435 10,925 10,895
(11,400)' (8,340) (12,205)' (10,910)'
2,390 2,365 615 2,550
765 1,165 1,565 1,530
705 990 425 1,125
1,270 1,380 1,395 1,520
Communist' 18,240 5,770 3,130 4,530 4,810
Of which:
USSR' .................................. 14,540 4,685 2,295 3,190 4,370
Because of rounding, components may not add to the totals shown.
2 Including Greece and Turkey and excluding Spain and Portugal.
Fiscal year data adjusted to a calendar year basis, which cannot be broken out by recipient.
1 Fiscal year data.
' Including Cuban, North Korean, Vietnamese, and Yugoslavian sales.
25X1
25X1
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
Third World Arms Sales
Suppliers
United
States
Recipients
Saudi
Arabia
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
1974-77 1974 1975 1976 1977
Total. ......... ......... ......_.._._,......_.. 90,475 25,645 21,055 20,865 22,915
Non-Communist ....................... 66,030 17,860 16,740 14,925 16,510
Of which:
United States 9 44,285 12,090 11,000 10,925 10,275
France ......... ..... ............. .. 8,060 2,725 2,250 615 2,475
United Kingdom ............... 4,950 925 1,155 1,565 1,305
West Germany ._..........._... 3,240 825 1,010 425 985
Communist 24,445 7,785 4,315 5,940 6,405
Of which:
USSR I ............... 19,810 6,355 3,180 4,355 5,925
Because of rounding, components may not add to the totals shown.
E Including Greece and Turkey and excluding Spain and Portugal.
Fiscal year data adjusted to a calendar year basis.
Including Cuban, North Korean, Vietnamese, and Yugoslavian sales.
Valued at what it would have cost LDCs to buy Soviet military equipment in the United States, using
prices charged by the US Department of Defense for US military exports. Services, not usually included in
estimates of Soviet military exports, have been included.
sales by other countries. The policy came too late
to affect US sales patterns markedly for 1977; at
the same time, the Soviets and the West Eu-
ropean suppliers had previously been making an
even more determined effort to build up their
shares of the LDC market. The Third World,
which now accounts for about 75 percent of
global arms trade, has been helping West Euro-
pean armament industries keep their order books
full and maintain the momentum of recent levels
of production. In terms of actual weapon sys-
tems, LDCs account for a somewhat smaller
share of the world market, primarily because US
sales are heavily weighted by support and associ-
ated services (60 percent in 1977).
The Supply Picture
Despite Washington's policy of reducing arms
sales to the Third World, the United States
continued as the largest single LDC arms sup-
plier in '1977. Hefty Iranian orders, totaling
about $6 billion, kept US sales high in the face of
a 70-percent decline in sales to Saudi Arabia and
a fall in orders from several other large clients,
such as Israel, Taiwan, and Jordan (see table 3).
Although US arms sales (in 1976 prices) were
73 percent above Soviet arms sales last year, the
value of the weapon systems sold by the United
States exceeded such sales by the Soviets by just
12 percent. This situation represents a decrease
from the US-Soviet ratio in 1974-76 of al-
most 21/2 to 1 in total arms sales and a US lead
over the USSR of 35 percent in weapons
systems.
In terms of physical units of equipment, the
USSR in 1974-77 sold and delivered to LDtCs
more fighter aircraft, tanks, and artillery pieces
and antiaircraft guns than did the United Stales
(see table 4). The Soviets also provided ships of
greater aggregrate value, although fewer in num-
ber. The United States in this four-year period
provided many more trainer and transport air-
craft, helicopters, armored personnel carriers,
and self-propelled artillery pieces than the So-
viets provided.
The largest differences between US and Soviet
sales occur in the support and associated services
categories. In 1977, US sales included 75 percent
more support than did Soviet sales; US personnel
services (technical assistance and training LUC
armed forces) outran Soviet services 4 to 1;
and US military-related construction services,
72 to 1.
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
Million US $
1974-77 1974 1975 19762 1977
Total ..._._ ....................... .......... 42,858 11,402 8,338 12,208 10,912
]last Asia and Pacific . ....... . 5,801 1,637 1,459 1,390 1,315
Taiwan .......... _ ......... ........... 889 129 192 368 200
Philippines .............. ......... 230 23 54 71 82
South Korea ....... _... _......... 1,966 199 337 714 716
South Vietnam .......... ........... 1,302 759 543 0 0
Thailand ....... ........... .......... 380 53 45 154 128
Other ........................ .......... 1,034 474 288 83 189
Middle East and South Asia .... 13,5,861 9,486 6,619 10,394 9,362
Greece .......... 1,115 487 219 159 250
Iran ............................. .......... :.4,458 4,192 2,545 1,796 5,925
Israel .............. ..._....... ......... 5,333 2,482 888 1,205 758
Jordan ........ 947 106 147 521 173
Saudi Arabia .._...... ... __ . 11,784 2,035 1,997 5,907 1,845
Turkey ..................... ........ 476 109 94 135 138
Other ............ ..... ....... ..... 1,748 75 729 671 273
Sub-Saharan Africa ..... ..... 453 30 42 263 118
Ethiopia 200 1.8 34 146 2
Zaire _ _ ........ 29 1 2 14 1.2
Other .............. ........... _........ 224 11 6 103 104
Latin America ........... _ ......... 743 249 218 159 11.7
Brazil ............. ..... ...__ 181 75 31 56 19
Peru ............................ ......... 114 43 24 29 18
Other _........... ._..... ..._ .......... 448 131 163 74 80
Fiscal year data.
Including five quarters, because of the change in the beginning of US Government fiscal year.
United Stares and USSR: Supply of Selected Weapon Systems
to the Third World, 1974-77
Sales Deliveries
United States USSR United States USSR
Aircraft
Jet fighters ...... ..__.....,. ...... ....... _..__ ...... 1,092 1,846 1,352 1,376
Trainers . _........... _....... 196 9 229 8
Transports ........... ...... __........... .. ............ 227 69 92 58
helicopters .................... 506 311 471 247
Ships
Patrol boats and landing craft ......_ 282 114 216 88'
Land armaments
Tanks ..__............ __._.__. 2,168 5,634 2,246 3,955
APCs and armored reconnaissance vehicles 7,658 6,012 6,209 4,513
Antiaircraft guns and artillery ...... ...._ 649 4,047 424 3,044
Self-propelled guns ...... 1,896 92 1,763 83
' Including other naval vessels such as destroyer escorts and minesweepers.
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
Again in 1977 a few large sales dominated the
Soviets military supply picture. Sales to four
traditionally large clients (Algeria, India, Libya,
and Syria) and massive new support to Ethiopia
pushed Soviet weapon sales to a near-record $4.4
billion L ---------- ----- this total 25X1
includes a revise estimate or suppor item and
introduces an estimate for associated services
Calculated on a US cost-of-produc- 25X1
tion basis, t e sales would be valued at nearly S6
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
billion in 1976 prices. Only in 1974, when Mos-
cow was restocking Middle East inventories, did
the USSR post higher sales. As before, Soviet
decisions to supply arms to LDCs were motivated
by political considerations; the substantial hard
currency earnings from the sales (an estimated
$1.5 billion in 1977) were a highly attractive
secondary consideration.
25X1
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
25X1
LDC in a single year, and its $1.4 billion order
for F-16 fighter aircraft was its largest single
arms agreement. ([ran is the first LDC customer
most LDCs that were not involved in confronta-
tion situations and had moved into the lead as
the largest Third World buyer in 1973. Since
then, Tehran has bought $19.2 billion worth of
weapons or almost one-fourth of total Third
World arms purchases in 1974-77. Saudi Arabia
had a later start than Iran, trailing the Iranians
in arms purchases in every year except 1976.
More than any other LDC, the Saudis have
focused on infrastructure and logistic support,
rather than weapons themselves. Thus about 80
percent of Saudi arms purchases in 1974-77 have
been for military infrastructure (such as base
construction, air fields, roads, vehicle mainten-
ance facilities, and warehouses) and technical
services such as training in the operation and
maintenance of weapons systems.
In 1977, Iranian arms purchases, which had
slipped in 1976, shot up to $6.8 billion, as Iran
once more bought advanced aircraft. Its 1977
purchases were the largest ever recorded for an 25X1
for the advanced F-16.) Tehran
purchased advanced aircratt missiles an
ra ar from the United States, and ordered four
support ships from the United Kingdom. Despite
these massive orders and sustained technical
support, Iran remains dependent on foreign tech-
nical assistance; in the past several years, it has
Iran .................... _................. _.- _.....
19,213
5,167
3,642
3,563
6,841
Saudi Arabia
.__..._.......... _.........
14,359
3,072
2,424
6,102
2,761
Israel .............
.................... _..........
5,369
2,498
908
1,205
758
Iraq ._ ...........
..._........................._.
4,824
1,291
528
1,412
1,593
Libya ........................ _..................-
4,134
2,625
519
331
659
Syria ..........................................
2,674
880
690
145
959
South Korea .... ......... ...._......... ...
2,074
223
384
739
728
Algeria ._...._ .............. .......
1,853
260
778
15
800
Greece .................................... .....
1,796
876
414
200
306
Egypt
1,008
22
221
463
302
' Including fiscal year data for the United States and prices for Communist aid, which we estimate were
actually charged clients. It does not include support and services, which we could not allocate by client.
The Market
As for recipients, Iran and Saudi Arabia
accounted for 43 percent of LDC arms purchases
in 1977, up from their 27-percent market share
in 1973 (see table 7). Iran had begun to modern-
ize and build its arms inventories earlier than
25X1
25X1
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
25X1
25X1
301
expended $850 million a year for these services
in the United States alone. The United States,
with an 87-percent share of the Iranian market,
remained the largest supplier in 1977, while
West European countries, especially Italy, con-
tinued to make headway.
In 1977, practically all of Saudi Arabia's $2.8
billion worth of contracts were for logistic sup-
port and services, with continuing dependence on
outside sources-especially the United States-
for most services.
French inroads into the Saudi market have been
reported recently. Possible French sales of ad-
vanced aircraft in 1978 and US sales of the F-15,
approved in 1978, may point to an increasing
Saudi interest in expanding the military hard-
ware component of its arms procurement.
Altogether, other North African and Middle
Eastern states bought $6 billion worth of arms in
1977. Most of these orders were placed by the
radical Arab states in the USSR.
Middle East countries also received the largest
share of 1977 deliveries (see table 8).1
Third World: Arms Deliveries, by Recipient'
Iran ...................__............. . .. .... 6,640 885 1,185 1,895 2,675
Saudi Arabia .... ............ ._ . ..... 4,460 510 530 1,370 2,050
Israel ...... ........................... ..... 3,842 1,052 715 945 1,130
Iraq .............. _........ _ ............ 3,055 645 565 825 1,020
Syria ...... .......................... ..... 2,225 1,025 320 460 420
Libya .................................... ......... 2,320 235 475 780 830
Greece .... ..... ..... ..._..._.._.. _....... 1,250 105 255 425 465
South Korea ._.... .... ...... .. ..... 1,025 140 255 360 270
India ............................. 1,080 185 170 285 440
Egypt 815 155 355 160 145
Ethiopia _ ............._ 534 10 34 55 435
Argentina ............. ._ ....... .. ... 1.60 40 30 50 40
' Including fiscal year data for the United States and prices for Communist aid, which we estimate were
actually charged clients. It does not include support and services, which we could not allocate by client.
25X1
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
Moscow dominated arms transactions in sub-
Saharan Africa for the third consecutive year.
Its heavy military support to the victorious
MPLA in Angola, which captured headlines in
1975, and its subsequent help to established
governments and insurgent groups throughout
sub-Saharan Africa underscored Moscow's new
commitment to the region. Rising international
criticism did not deter the USSR from further
military adventures on the continent in 1977 or
from signing $840 million worth of new agree-
ments, six times the 1975 level.
The record-setting transactions reflected a
major shift in Soviet policy in the Horn, where
Moscow abandoned its former client Somalia in
favor of Ethiopia. The Soviet-Ethiopian accords
moved Addis Ababa into third place among
Soviet arms recipients in 1977 and accounted for
15 percent of the USSR's weapons sales to the
Third World. The sales provide Ethiopia with a
substantial arsenal of modern equipment, includ-
ing MIG-23s and naval and ground equipment.
Growing concerns over national security also
intensified demands for arms from southern Af-
rican countries, which had never before account-
ed for more than 5 percent of global LDC
weapons purchases. Tanzania, for example, or-
dered
Soviet medium tanks, field guns, surface-to-air
missiles, radar, and other equipment.
France and the United Kingdom have domi-
nated the Free World share of the sub-Saharan
market, with France chalking up 12 percent of
sales in 1977, mainly to Nigeria and the Ivory
Coast.
Latin America, never a leading arms market,
still made record purchases of $1.4 billion in
1977. As in most recent years, Argentina, Peru,
and Ecuador were the principal buyers; West
Germany (for the first time) and France were
the chief suppliers. Latin American countries,
which had begun to shift their procurement to
Western Europe from the United States in the
late 1960s, bought less than 10 percent of their
arms from the United States, while 70 percent
came from West Germany and France in 1977.
In South Asia, India continued its long de-
pendence on the USSR with record purchases of
Soviet weapons and arms manufacturing facili-
ties in 1977. The agreements included India's
largest single arms accord with the USSR, F_
Record Deliveries
Deliveries to Third World clients have grown
more rapidly than sales in the past several years,
as suppliers have worked off accumulated orders
(see table 9). Deliveries of $13.8 billion in 1977
were 76 percent above deliveries in 1974; in
contrast, sales in 1977 were slightly less than 6
percent above sales in 1974. For the 1974-77
period as a whole, deliveries totaled about $42
billion. We estimate outstanding orders at the
end of 1977 at about $50 billion, up 10 percent
from the previous year.
The spread between US and Soviet deliveries
was narrower than for sales. There are two
principal reasons for the higher Soviet-US ratio
for deliveries than for sales: (a) the average lead
time between sales and deliveries is much longer
in US programs (about three years) than the
Soviets' (12 to 18 months) and (b) US sales data
reflect built-in inflation allowances-not con-
tained in Soviet estimates-for expected cost
increases in the period between sale and delivery
of items. Because of faster delivery schedules,
Soviet sales and deliveries have run more closely
together, with about 80 percent of total commit-
ments delivered at the end of 1977. The US
backlog is estimated at about $30 billion (fiscal
year data).
In 1977, US deliveries (in 1976 dollars) com-
prised 44 percent of total arms delivered to
25X1
25X1
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
LDCs; Soviet deliveries (in US costs) were 31
percent, and French deliveries, 6 percent (see
table 10). Deliveries of Soviet weapon systems
were especially impressive, actually surpassing
US deliveries in three of the past four years. In
1977 their value exceeded the value of US
deliveries by more than 10 percent. The USSR
delivered more fighters and tanks, while the
United States shipped a larger number of jet
trainers and helicopters. The United States also
maintained an overwhelming lead in armored
personnel carriers and armored vehicles. The
widest spread between US and Soviet deliveries,
however, was in the services category. As in the
Third World: Arms Deliveries, by Supplier
Total ' .......................... _.... ......... 42,350
Non-Communist .... .__.. ......... 29,065
United States z ....... ........... 19,645
(20,600)'
France ................... .......... 2,345
United Kingdom .. ......... 1,955
West Germany ...... ......... 1,585
Other ....... _ .............. ........ 3.540
Communist' ....._..._.... _...... Of which:
7,865 8,900 11,740 13,845
5,015 6,215 8,090 9,745
3,465 4,385 5,240 6,555
(4,135) (4,575)- (5,215)- (6,680) 9
405 360 685 890
410 340 505 700
185 315 530 550
545 820 1,125 1,050
USSR' ..................... ........... 11,085 2,625 2,135 2,805 3,520
Including Greece and Turkey and excluding Spain and Portugal.
Fiscal year data adjusted to a calendar year basis, which cannot be broken out by recipient.
' Fiscal year data.
Includes deliveries by Cuba, North Korea, Vietnam, and Yugoslavia.
25X1
Third World: Real Arms Deliveries, by Supplier
Million 1976 US $
1974-77 1974 1975 1976 1977
Total .................................... .......... 46,880 9,810 10,300 12,700 14,070
Non-Communist ......... ........ 29,430 5,795 6480 8,090 9,065
Of which:
United States ....... ......... 20,100 4,050 4,630 5,240 6,180
France ...................... ........ 2,355 465 340 685 865
United Kingdom .... ....... _. 1,930 495 335 505 595
West Germany ....... .. ...... 1,555 220 325 530 480
Communist: 17,450 4,015 3,820 4,610 5,005
Of which:
USSR ............... ..... ..... 14,775 3,720 3,070 3,610 4,375
Fiscal year data adjusted to a calendar year basis, which cannot be broken out by recipient.
2 Including deliveries by Cuba, North Korea, Vietnam, and Yugoslavia.
Valued at what it would have cost L_DCs to buy Soviet military equipment in the United States, using
prices charged by the US Department of Defense for US military exports. Services, not usually included in
estimates of Soviet military exports, have been included.
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
case of sales, the United States included a much
larger services component in deliveries than the
USSR-a ratio of 5 to 1 in 1977.
Among the recipients of arms delivered in
1977, seven of the top 10 were Middle Eastern
and North African countries. Again, Iran and
Saudi Arabia led the way. Prominent shipments
to the Middle East included:
First-time deliveries to LDCs in 1977 included
Soviet SU-22 fighter-bombers to Peru and US
delivery of 16 F-5E fighters to Chile. MIG-21
Bis aircraft to Ethiopia were the first such jet
fighters provided sub-Saharan Africa. The
USSR also delivered three IL-38 antisubmarine
and maritime reconnaissance aircraft and two
Nanuchka-class guided-missile patrol boats to
India, not only the first of these craft exported to
the Third World but also the first patrol boat to
carry the SS--N-4 short-range missile system.
Supply Prospects, 1978-80
We foresee no significant change in the will-
ingness of suppliers to sell a full range of
weapons and support to LDCs in the next
several years. Indeed, competition probably will
heighten as market opportunities fall off to
around $20 billion (in 1976 dollars) a year. The
French and British, each capable of producing a
complete array of conventional military equip-
ment, will press their sales campaigns to main-
tain full order books. The Soviets will sell where
they see an appreciable political payoff. Sales by
these major suppliers will be supplemented by
the West Germans, who specialize in naval
equipment and armored vehicles; the Italians, in
naval equipment; Belgium, in ordnance: and
Brazil and Argentina, in small arms and
armored cars.
Even though arms exports represent a small
share of Western Europe's total exports, rising
costs, domestic economic problems, and large
trade imbalances will continue as incentives to
expand sales of weapons.
For the USSR, arms sales to LDCs are the
most direct and fastest means of asserting and
maintaining a presence in the Third World. as
illustrated by the most recent Soviet political-
military ventures in Africa. On occasion, Mos-
cow has withheld arms as a political weapon and
in some cases may have turned sales down
because of Soviet or East European defense
requirements. Security and technological consid-
erations also have inhibited sales of certain wean-
ons, such as IRBMs and ICBMs.
Paris rarely has refused to sell arms for politi-
cal reasons. The French Government has few
inhibitions about exporting arms, in part because
of a desire to hold down unit costs for the French
military by extending production runs. The gov-
ernment maintains strict control over all aspects
of arms production and sales and itself directly
produces one-fourth of the industry's output;
nationalized industries account for another one-
fourth. Foreign military sales are considered
important enough to have been assigned priority
on occasion over France's own requirements. that
is, the delivery of new equipment to French
forces may be postponed to fill a priority need of'
a foreign client. In recent years, French arms
sales have accounted for about 5 percent of its
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
exports and twice that share of its finished
industrial exports. Not only does the French
Government wish to maintain its political influ-
ence and market share in traditional areas of the
Third World, but also it is sensitive to the need to
maintain employment in the weapons industry
where militant leftwing labor groups are espe-
cially influential. About 300,000 workers are
employed in the French armaments industry.
Successive British Governments have actively
promoted arms exports within carefully formu-
lated political and financial guidelines. As a
general rule, they have forbidden sales to coun-
tries engaged in military hostilities and have
denied arms to countries with highly repressive
political systems, such as rightwing dictatorships.
In the case of South Africa and Rhodesia, for
example, even economic benefits were not al-
lowed to override political considerations. In
weighing foreign arms sales, British Government
and industry officials pay close attention to
domestic economic and defense needs, even
though the arms industry is a relatively small
employer, with only about 300,000 workers
(about I percent of the total work force). Arms
exports account for slightly less than 3.5 percent
of total British exports.
Until recently, West Germany's arms export
policy has been the most restrictive among major
suppliers. Pressures from business interests and
labor groups to liberalize controls have resulted
in minor policy concessions, which have contrib-
uted to the recent expansion of Bonn's Third
The author of this paper is I -]Office of
Economic Research. Comments and queries are
welcome and should be directed to
25X1
World arms sales. In the past two years, Bonn
increasingly has succumbed to pressure for
larger sales. In April 1975 the brief ban on
delivery of militar hardware to Greece and
Turkey was lifted,
Economic considerations-such as slack in its
steel and shipbuilding industries and a high rate
of unemployment-are leading to a reconsider-
ation of the remaining export restrictions. The
Germans are especially concerned about main-
taining employment in the arms industry, which
reportedly employs about 240,000 workers. Arms
exports now account for less than 1 percent of
total West German exports.
We expect other smaller suppliers (such as
Brazil, Argentina, and Italy) whose arms pro-
duction is largely dependent on licensing ar-
rangements to try to expand their shares of the
shrinking market. The only probable constraint
would be limitations on transfers of equipment
produced under license, especially those pro-
duced under arrangements with US companies.
Questions that might arise over the security
aspects of proposed sales could easily become
muddled by the economic importance of the
transaction to the would-be seller.
25X1
25X1
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
 iveret Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
CIA-RDP80TO0-7 02AOO0400060007-4
 25X1 Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4
Next 1 Page(s) In Document Exempt
Approved For Release 2004/05/05 : CIA-RDP80T00702A000400060007-4