ECONOMIC INTELLIGENCE WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001500140006-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 10
• Document Creation Date: December 21, 2016
• Document Release Date: November 17, 2008
• Sequence Number: 6
• Publication Date: March 22, 1973
• Content Type: REPORT

Approved For Release 2008/11/17: CIA-RDP85T00875RO01500140006-1
Secret
25X1
Secret
CIA No. 7361/73
22 March 1973
State Dept. review completed
Copy No. 14 a
Approved For Release 2008/11/17: CIA-RDP85T00875RO01500140006-1
 Approved For Release 2008/11/17: CIA-RDP85T00875RO01500140006-1
Approved For Release 2008/11/17: CIA-RDP85T00875RO01500140006-1
 Approved For Release 2008/11/17: CIA-RDP85T00875R001500140006-1
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CONTENTS
Bolivia Encourages Foreign Oil Exploration
Poland Seeks Advanced US Ship Technology
Czech Interest in Closer Economic Ties with the United States
Soviets Boost Gold Production The 1.5% increase in 1972 was due to
the opening of the huge new plant at Muruntau.
International Monetary Developments The dollar has fluctuated in a
narrow range so far this week; only limited central bank
interventions have taken place.
Middle East Dollars and the Currency Crises There is no hard
evidence that Middle East dollar sales were a major factor in the
recent monetary crises.
Note: Comments and uerics on the contents of this ublication are welcomed. They may be directed
to
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22 March 1973
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ECONOMIC INTELLIGENCE WEEKLY
Notes
Bolivia Encourages Foreign Oil Exploration
The contract recently awarded to Union Oil's Bolivian subsidiary to
explore the Amazon basin is expected to lead to similar agreements with
other companies, including Occidental Petroleum. Investor interest in the
area has increased as a result of successive major discoveries in the Amazon
regions of Colombia, Ecuador, and Peru The government has attempted
to improve the investment climate by beginning to compensate Gulf Oil
and other firms for earlier nationalizations and by allowing foreign
companies to conclude operations contracts with the state oil company
Poland Seeks Advanced US Ship Technology
Poland would become the first Communist country to build
lighter-aboard-ship (LASH) vessels under a pending licensing arrangement
with a US firm. These high-speed vessels are designed to carry cargo-laden
lighters that can be quickly dispatched to and from shore, permitting greatly
reduced turnaround times. Introduced during the last three years, LASH
vessels have been used on selected scheduled runs mostly between the United
States and Western Europe. If Poland produces the ships, markets could
be found in the USSR and the West.
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Czech Interest in Closer Economic Ties with the United Stakes
Czechoslovakia is urging the United States to complete current consular
negotiations and to move ahead with negotiations on postwar property and
gold claims. Prague also has indicated it would like to break the pattern
of acquiring US technology through West German subsidiaries, by dealing
directly with US firms. Czechoslovak officials have stated that, for political
reasons, they would rather not increase economic ties with West Germany.
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Soviets Boost Gold Production
Soviet gold production reached an estimated 255 tons last year and
Moscow is acting to boost production further.
? Output in 1972 was 35 tons greater than in 1971.
O Most of the increase came from a huge new plant under
construction at Muruntau in Central Asia.
? Total gold production should reach about 330 tans by 1975,
when Muruntau reaches full capacity production of 90 tons
annually.
? The reserves at Muruntau probably can support this rate of
output through the end of the century at a cost of about $40
per ounce.
Construction of three other gold plants in Central Asia and Armenia is
bring pushed vigorously, and one plant may now be operational.
? Output from these plants probably will not add substantially
to production until after 1975.
During 1973-75 the Soviets could sell 750 tons of gold on the
international free market without reducing the present size of their gold
reserves of about 1,800 tons.
? Assuming a price range of $65 to $82 per ounce, this volume
of sales would represent about $1.6 billion to $2 billion.
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International Monetary Developments
In the first three days of official trading on foreign exchange markets
since 2 March, the dollar fluctuated in a narrow range against other major
currencies. Only limited central bank intervention has taken place so far.
? Japan sold some $50 million on Monday to keep the dollar's
value from rising too fast, as seasonal trade factors produced
an increased dollar demand.
? With the mark the weakest currency in the European band this
week, the Bundesbank has sold $10 million to $15 million in
Belgian francs and a smaller amount of Swedish and Danish
crowns to keep the mark within the band. The mark had been
the most overbought currency during the recent crisis and has
appreciated more than any European currency, except for the
Swiss franc.
Several European nations have instituted new controls to discourage capital
inflows.
? The Benelux countries, following the examples of West
Germany and Switzerland, imposed interest charges on
non-resident commercial bank deposits.
? France stopped payment of interest on non-resident deposits.
It also prohibited commercial banks from increasing their net
foreign exchange liabilities to non-residents and from debiting
non-resident accounts for the purchase of French securities, and
it imposed a 100% reserve requirement on new foreign deposits.
The generally light trading activity so far indicates that most traders
are taking a wait-and-see attitude. The traders who speculated in marks
and other strong currencies may well hold off repurchasing substantial
quantities of dollars until they get a clearer picture of payments trends.
Preliminary analysis of balance-of-payments prospects in Japan and Western
Europe suggests that pressures will build for further appreciation of the
yen and mark and a depreciation of sterling.
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Middle East Dollars and the Currency Crises
Although Middle East currency flows are widely rumored to have been
a major factor precipitating the recent foreign exchange crises, there is no
hard evidence of massive dollar sales. Of the estimated $13 billion
exchanged from late January to early March, official and private Middle
East sales for gold and foreign exchange totaled no more than $1.5 billion,
and probably were substantially less.
There is little reason to suppose that any Middle East nation was
intentionally seeking to weaken the dollar. Money managers in the Middle
East, as elsewhere, do make some attempt to protect the value of their
assets in a period of currency uncertainty. But they have, in fact, been
slower than US multinational corporations, including the large oil
companies, to desert the dollar. Consequently, their losses have been
proportionately greater. The fact that reported Middle East sales of dollars
have extended over several weeks and involved various countries belies the
contention that sales were motivated by a desire to weaken the dollar or
precipitate a monetary crisis.
There are indications that official and private Middle East dollar holders
are preparing to pursue a more aggressive portfolio management policy
which could cause problems for the dollar in. the future. This, however,
is a result rather than a cause of the February 1973 dollar devaluation
and the dollar's continued weakness. US and European banks are aggressively
soliciting Middle East business, arguing that they can more effectively
manage and protect Middle East foreign exchange assets. Some Middle East
interests already have hired Western s ecialists to this end.
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