COMMENTS ON THE REPORTED CONTRACT FOR SALE OF SOVIET FERROSILIEON TO THE US

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00287R000900190001-4
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 6
• Document Creation Date: December 22, 2016
• Document Release Date: July 26, 2010
• Sequence Number: 1
• Publication Date: October 3, 1983
• Content Type: MEMO

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CONFIDENTIAL
Central IntdlI nce Army
DIRECTORATE OF INTELLIGENCE
3 October 1983
MEMORANDUM FOR: Mr. David A. Peterson
Director
Office of Intelligence Liaison
Office of the Secretary
Department of Commerce
SUBJECT : Comments on the Reported Contract for
Sale of Soviet Ferrosilicon to the US
If
1. In response to your request of 16 September 1983 for our
views on the sale of Soviet ferrosilicon to the US, we have
prepared answers to each of your questions (see Attachment).
Analysis of Soviet ferrosilicon production and trade shows that
the Soviets probably contracted to sell ferrosilicon to the US as
a result of large recent increases in domestic ferrosilicon
production.
2. If we can be of any further assistance to you on this or
any related matter, please contact
Director
Soviet Analysis
Attachments:
QA's
Tables (2)
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CONFIDENTIAL
SUBJECT: Conments on the Reported Contract for Sale of
Soviet Ferrosilicon to the US
Distribution:
Original & 1 - Addressee
1 - ExDir/DCI
1 - SA/A/DCI
1 - DDI Action Staff
1 - DDI
2 - OD/SOVA
1 - Chairman/NIC
1 - NIO/E
1 - NIO/USSR-EE
1 - NIO-at-Large (HH)
1 - DC/PES/DDI
5 - CPAS/IMC/CB
1 - DDO~
1 - SOYA/PS
1 - SOVA/ES
1 - Ch/D/DI
1 - Ch/D/EA
1 - Ch/D/PA
1 - Ch /CS
1 - Ch/D/SF
1 - Ch/D/TF
1 - D/SE
2 - SOYA/SE/I
SOVA/SE/I:I I(3 Oct 83)
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Question: Why is the sale being made at this time? 25X1
Answer: The current reported sale of ferrosilicon to the US
probably is being made as a result of a domestic surplus created
by a relatively large increase in Soviet ferrosilicon production
capacity over the last two years. The Bureau of Mines estimates
that the Soviets were the world's largest producers of
ferrosilicon in 1980, producing about 695,000 short tons, which
was nearly 20 percent of world production for that year. The
Soviet press claims that a total of 180,000 metric tons of
production capacity was added at the Yermak plant in Kazakstan in
1981 and 1982. This represents about a 25 percent increase in
total Soviet ferrosilicon production capacity during the last two
years.
Question: Why is the cost of the Soviet ferrosilicon so cheap
compared to that available from US and other foreign sources?
Answer: We have not been able to confirm the terms of the
reported contract, nor do we know the Soviet motives for selling
ferrosilicon at the reported price. Nonetheless, a limited
examination of Soviet trading transactions shows that making a
profit on exports is only one of several factors that determine
Soviet trading motives. Other economic factors include hard
currency requirements and competitive pricing to establish a
market share. In any event, the Soviets have a lot of price
flexibility in commodity trade when they perceive that it is to
their advantage. Further, the Soviets do not generally plan
domestic production levels of commodities for export in response
Question: What is ctual cost to the Soviets of the
ferrosilicon?
Answer: We have no data on the actual cost to the Soviets of
producing ferrosilicon. However, as noted above, the Soviet
prices of exhorts are not necessarily related to production
Question: Is the USSR likely to be a major ferrosilicon exporter
to the US in the future? What entities of ferrosilicon can the
USSR export annually? L 7
Answer: The Soviets traditionally have run large trade deficits
with the United States in part because of their grain purchase
activities and because they have been unsuccessful in penetrating
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CONFIDENTIAL
the US market for many types of goods. The Soviets may view the
US as a potential future market for ferrosilicon and try to
increase exports as a way to help reduce the trade deficit.
A forecast of Soviet ferrosilicon exports to the US
depends on many factors including world market conditions, Soviet
production and domestic consumption. Unfortunately, we do not
have enough information to accurately forecast these factors.
However, official Soviet trade statistics show that the Soviets
have been net exporters of ferrosilicon since at least 1970
(tables 1 and 2). Based on the increased production capacity
noted above, we expect Moscow will continue export~ng
ferrosilicon at or somewhat above current levels.
Question: Is SOYA aware of any other Soviet sales to the US of
critical materials at below market prices?
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Answer:
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there are examples of the Soviets undercutting market prices of
various commodities in Europe. For example, the EEC recently
imposed a 7 percent duty on Soviet imports of nickel, because the
Soviets were dumping large amounts of nickel on the European
market. We believe that Soviet motives for undercutting European
nickel prices were related to a large excess domestic supply
created by an increase in domestic production capacity. In
another example, from 1978 to 1981, the Soviets undercut Western
coal prices when it was to their advantage. Unlike nickel,
however, Soviet coal production has been a problem in the Soviet
Union and the Soviets have experienced domestic shortages for
several years.
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I I .
Table 1: Reported Soviet Ferrosilicon Exportsl, 1970-82
1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982
World total
Quantity (mt)
Dollars (thous)
Rubles (thous)
1. Total Oxmunist
124,900 124,000 139,300 148,400 151,420 154,492 160,246
12,642 12,903 15,244 18,321 30,112 34,011 30,061 32,531 30,820 36,128 28,395 44,299 48,600
11,389 11,624 12,598 13,571 22,812 24,468 22,602 23,920 20,966 23,613 18,438 31,870 35,200
Quantity (mt) 26,700 27,200 32,600 37,059 35,235 33,508 32,932
Dollars (thous) 2,520 2,571 3,405 4,479 5,881 5,755 5,516 5,156 6,594 11,926 7,295 13,126 13,000
Rubles (thous) 2,270 2,316 2,814 3,318 4,455 4,140 4,147 3,791 4,486 7,795 4,737 9,443 9,400
Romania
Quantity (mt) 26,700 27,200 32,600 37,059 35,235 33,508 32,932
Dollars (thous) 2,520 2,571 3,405 4,479 5,881, 5,755 5,516 5,156 6,594 11,926 7,295 13,126 13,000
Rubles (thous) 2,270 2,316 2,814 3,318 4,455 4,140 4,147 3,791 4,486 7,795 4,737 9,443 9,400
II. Developed
Countries
Quantity (mt) 26,908 27,248 30,863 27,779 25,646 26,861 31,742
Ibilars (thous) 3,384 3,427 3,623 3,893 9,417 8,951 7,402 7,862 6,154 5,228 4,696 5,138 6,400
Rubles (thous) 3,048 3,088 2,994 2,883 7,134 6,440 5,566 5,781 4,186 3,417 3,050 3,696 4,600
Austria
Quantity (mt) 4,239 3,155 3,668 5,066 4,084 3,235 4,798
Dollars (thous) 581 389 593 944 1,061 1,186 1,170 1,015 1,055 894 1,383 1,322 1,800
Rubles (thous) 523 350 490 699 804 853 880 746 718 584, 898 951 1,300
Australia
Quantity (mt) 1,572
Dollars (thous) 309
Rubles (thous) 234
United Kingdom
Quantity (mt) 9,600 9,614 13,199 12,375 6,103 11,634 12,377
Dollars (thous) 1,030 1,261 1,493 1,574 2,647 3,859 2,643 2,462 2,256 1,143 156
Rubles (thous) 928 1,136 1,234 1,166 2,005 2,776 1,987 1,810 1,535 747 101
West Germany
Qauntity (mt) 9,500 10,200 8,600 7,085 10,074 8,294 10,647
Dollars (thous) 1,371 1,215 846 921 4,244 2,659 2,568 2,656 2,173 1,016 420 2,252 2,500
Rubles (thous) 1,235 1,095 699 682 3,215 1,913 1,931 1,953 1,478 664 273 1,620 1,800
Finland
Quantity (mt) 3,569 4,279 5,396 3,253 3,813 3,698 3,920
Dollars (thous) 402 563 691 454 1,156 1,248 1,021 1,730 669 2,176 2,738 1,564 2,100
Rubles (thous) 362 507 571 336 876 898 768 1,272 455 1,422 1,778 1,125 1,500
1 Ruble and quantity values are from official Soviet trade statistics; the Soviets stopped publishing ferrosilicon trade quantities
after 1976. The dollar figures cited were calculated by nultiplying published Soviet ruble trade data values by the ruble-dollar
exchange rate for each year. Thus, ruble and dollar figures are not adjusted for inflation.
SOVM-83-10176
3 October 1983
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Table 2s Reported Soviet Ferrosilieon Inports, 1970-19821
1970 1971 1972 1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
Nbrld Total
Dollars (thous)
105 316 294 292
355
409
469
290
951
958
876
831
not reported
Rubles (thous)
95 285 243 216
269
294
353
213
647
626
569
598
not reported
1 Ruble values are fran official Soviet trade statistics; the dollar figures cited were calculated by multiplying published Soviet ruble trade
data values by the ruble-dollar exchange rate for each year. Ruble and dollar figures are not adjusted for inflation.
SOVM-83-10176
3 Ocbaber 1981
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