ECONOMIC INTELLIGENCE WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001500140027-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 21, 2016
• Document Release Date: November 13, 2008
• Sequence Number: 27
• Publication Date: August 16, 1973
• Content Type: REPORT

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25X1
Secret
[.O Ccpy
",' ,o DS
H q.
Economic Intelligence NVeekly
On file Department of Agriculture release instructions apply.
Secret
State Dept. review completed
CIA No. 7752/73
16 August 1973
Copy No. 161
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SECRET
Page
U,,S Bari on Ferrous Scrap Exports Upsets Argentina
Further Boost in Soviet Gold Production
USSR Reportedly Out of Free Market for Sugar
West African. Drought Recovery Effort
Worldwide Grain Developments
Position of US Oil Companies in Middle East Erodes The firms'
slipping position is reducing US leverage in the event of an oil
embargo in the Middle East.
International Monetary Developments Rapidly rising sales to the
European Commmunity could induce the Europe.ns to impose tighter
controls to protect their markets.
Comparative Indicators
Recent Data Concerning Dome ;'sic and External
Economic A-::iiy
Note: Comments and queries or. the contents of this publication are welcomed.
i
i
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ECONOMIC INTELLIGENCE WEEKLY
US Ban on Ferrous Scrap Exports Upsets Argentina
Argentina, seeking licenses to import 300,000 tons of ferrous scrap
from the United States during the remainder of 1973, has been frustrated
by US restrictions. Argentina has rapidly expanded its scrap remelting
capacity, and failure to obtain needed imports could result in some plant
shutdowns and steel shortages. The United States traditionally has been
Argentina's sole source of scrap imports, which were scheduled to reach
about 600,000 tons this year, compared with 462,000 tons in 1972
Further Boost in Soviet Gold Production
The Soviets are building a large ore processing plant that will produce
an estimated 25 tons of gold annually (worth about $75 million at current
market prices) when it rea,,hes full capacity in 1975. The plant, located
at Zou in Armenia, will be the largest gold producer in the USSR after
the Muruntau facility. Total Soviet gold production, which amounted to
225 tons in 1972, will jump to at least 350 tons by 1975. By that time,
the USSR could sell 300 tons annually without depleting its reserve.
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USSR Reportedly Out of Free Market for Sugar
After purchasing roughly 1.2 million tons of sugar in the free market
for delivery during 1972 and 1973, the USSR will not buy sugar in that
market for 1974, Rumors of the statement,
together with optimistic production prospects t6r Western Europe, caused
the world sugar price to drop from 10 cents per pound late last week to
slightly less than 9 cents on Tuesday. Soviet raw sugar production from
the 1973/74 beet crop is tentatively estimated at 9-1/2 million tons, up
by more than one million tons over last year. This output and anticipated
imports from Cuba of 1.6 million tons would make imports from the free
market unnecessary for 1974.
West African Drought Recovery Effort
The Permanent Interstate Committee, formed in March 1973 by the
drought-stricken African countries to coordinate the various recovery
programs, is off to a shaky start. In its first real test, the PIC apparently
was unable to develop a satisfactory program for review of existing aid
projects and had to postpone its next meeting to 30 August. Members of
the PIC - Mauritania, Mali, Niger, Upper Volta, Chad, and Senegal -
obviously prefer to work out aid programs on a bilateral basis.
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16 August 1973
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CARRYOVER STOCKS" OF GRAIN
BY MAJOR EXPORTERS
WHEAT
53.4
FEED GRAINS
57.5
3o.U
i973 1974
EST ,ROJ
UNITED
STATES
UNITED
STATES
1971 1972 1973 1974
1ST rAaJ
'/1s o' 1 July In. r, ~ dl; .. , of I Ocr -.t , for US lrod g,;,rrrg
and n.; ..t I July fn? nn n(ho?v
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Worldwide Grain Developments
Outlook for Wo;ld Grains
If current USDA predictions of a 6% gain in world grain production
and unchanged import demand are borne out, US carryover stocks of wheat
and feed grains at the end of the 1973/74 marketing year will be the lowest
in two decades. As a result, prices probably will at least remain at the
present record highs.
Notwithstanding an expected 6% increase in world wheat output this
year and a 7 million ton decline in world import demand, carryover stocks
of the major exporters will be further reduced by mid-1974. Export
pressure on US wheat supplies is exceeding all predictions and driving prices
to new highs. By 27 July, anticipated sales reported by US grain brokers
for FY 1974 totaled more than the projected export availability of about
30 million tons. Although the brokers' data may be inflated (by up to
25% by some estimates), clearly an unusually large share of the 1973 wheat
crop already has been committed.
This unprecedented foreign demand for US wheat: primarily stems
from :
? Uncertainty over prospects for the Argentine and Australian
harvests, to begin in December;
? Suspension of wheat exports by the EC;
? Canada's inability to export at FY 1973 levels;
? Substitution of wheat for rice in Asia and the Far East; and
? Argentna's inability to meet current export commitments
from last winter's crop.
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World output of feed grain is forecast to go up 6% in 1973, compared
with a 9% rise in import demand in FY 1974. As in the case of wheat,
a further decline in world carryover stocks will be required to cover the
supply deficit. In early August USDA predicted a 2 million ton increase
in US exports, assuming a record corn harvest and a drawdown in stocks.
US exporters' commitments reported to the Department of Commerce for
the 1973/74 marketing year suggest that US corn sales may exceed the
anticipated volume before the current year's harvest begins. This strong
demand, coupled with a 5.5 million ton downward revision on 9 August
in the expected US corn crop, has pushed prices to new highs. Continuation
of this upward pressure on supplies and prices to the end of 1973 will
depend largely on the final size of corn harvests in the United States and
southern hemisphere as well as non-grain feed crops in the USSR and
Europe.
Adverse weather, crop disease, and war have reduced export
availabilities of rice ,1 1973 far below import req'aiic nients, placing added
pressure on world supplies of other food grain. I tocks have been sharply
reduced, and prices have skyrocketed. To safeguard domestic markets, some
countries (Burma and the EC) have embargoed rice exports and, in June,
Thailand Began severely limiting exports until the November harvest.
Widespread relief in 1974 would require a substantial increase in output
this November-December in the major producing countries of Asia and the
Far Fast. If current forecasts of a bumper US crop hold, export availability
should increase in 1974.
Argentina's Wheat Export Curtailment
Argentina's ban on wheat exports, resulting from its 500,000 ton
overestimate of last winter's harvest, has left unfilled commitments of
450,000 to~is to Brazil, 100,000 to Chile, and 60,000 to Uruguay. Moreover,
these countries must contract an additional 800,000 tons for delivery by
December'to meet their projected i 973 requirements. Following Argentina's
successful tender for 470,000 tons of US wheat, the government authorized
use of domestic stocks to meet some of its outstanding commitments,
including 70,000 tons for Chile and 50,000 for Uruguay. Argentina is
expected to delay shipment of the remaining commitment to Brazil until
the 1973/74 harvest.
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Bangladesh Rice Prospects
Prospects for the summer rice harvest have brightened, leading Dacca
to raise its production estimate to 3 million tons. A 20% fall in rice prices
from the record levels of April also suggests an improving food situation.
The UN and US missions in Dacca agree that the good summer harvest
and scheduled foodgrain imports should provide Bangladesh with sufficient
food to get through the critical October-November period that precedes
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16 August ; 973
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Ownership of Major Producing Countries' Oil Output
Production
Exports
(Thousand
(Percent)
Barrels per Day)
By US
By Other
Foreign
By State Oil
To the
Companies
Companies
Companies
Total
United States
Saudi Arabia
97
3
Negl.
5,800
190
Kuwait
48
52
Negl.
3,200
50
Abu Zaby
14
86
....
1,100
60
Iraq
11
22
67
1,400
10
Iran
35
60
5
4,600
150
Libya
85
10
5
2,200
100
Nigeria
28
72
Negl.
1,700
240
Venezuela
73
25
2
2,900
1,500
Indonesia
89
1
10
900
160
Total
60
34
6
23,800
2,460
1975 (Estimated)
Saudi Arabia1
73
2
25
9,300
2,400
Kuwaiti
36
39
25
3,300
200
Abu Zabyr
10
65
25
1,900
100
Iraq2
8
16
76
2,600
100
Irani
31
54
15
6,600
1,000
Libya4
42
5
53
2,700
200
Nigeria
18
47
35
2,500
600
Venezuela
73
25
2
3,200
1,700
Indonesia
89
1
10
1,400
300
Total
47
26
27
33,500
6,600
1. Participation agreements call for a 25% government share for Saudi Arabia, Kuwait, and Abu
Zaby by 1975. Current negotiations indicate that this arrangement may be changed.
2. Assuming that Iraq will get a 25% share in the fields not already nationalized.
3. Iran technically owns all its oil and sells it back to the companies under long-term contracts.
The data show the expected allocation of output.
4. Assuming that Libya has 51% participation in the foreign-owned operations.
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Position of US Oil Companies in Middle East Erodes
The prepor, lerant position of US oil compan ;es in the Middle East
is being steadily eroded. Libya's 51% nationalization of Occidental
Petroleum comes on the heels of the seizure of Bunker Hunt and
undoubtedly will be followed by similar measures against other US
operators. Discussions now under way in Kuwait and Saudi Arabia probably
will result in speeding up the timetable for national control of production
in the Persian Gulf area.
The oil firms' slipping position is reducing US leverage in the event
T -3
of an oil embargo in the Middle East. In 1972,
companies controlled
almost two-thirds of OPEC production, and only a small share of this went
to the United States. By 1975, US companies at best will control less than
half of OPEC production, less than half of which will be exported to the
US market. Under these conditions, an embargo by a major producer such
as Saudi Arabia would be serious. Apart from the companies' desire to
maintain sales positions in lucrative foreign markets - a factor that restricts
the firms' freedom of action - the reduced US control of other Middle
East oil sources would make diversion of large quantities of OPEC oil from
Europe and Japan to the United States difficult.
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THE 1UROPI AN CURRENCY BAND, 1973
- I'I RCI'N'I' CIIA\'(I I;ROM (., NT1tAl. RATE
V
2i ill 11 21 28 1 II IN 25 _ I(, 2S ill h li
MAY IN X1`1. AI'(;
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International Monetary Developments
The dollar rose sharply during the past week on international money
markets. It reached a value of 2.46 marks on 15 August, the best showing
since 29 June and a gain of 3% since 8 August. The rally, propelled by
rising dollar and Eurodollar interest rates, has produced growing confidence
in the dollar.
The dollar's rise has enabled major central banks to sell some of the
dollars they acquired in previous intervention. The Bundesbank was able
to sell in the open market last week about $150 million acquired from
expenditures of US military forces. The decision by the West Germans to
sell dollars at this juncture reflects their concern that too quick a dollar
recovery could be a source of future exchange market instability.
The price of gold has continued to fall, reaching $95 an ounce on
Tuesday. Swiss banks offered larger-than-usual quantities of gold on
9-10 August in London and Zurich, an action that suggests profit-taking
by small holders. There is no firm evidence of large-scale unloading by
speculators, and gold sales by. South Africa and the USSR apparently have
remained relatively constant. Most of the gold buying in tho last month
has been for commercial use; in contrast, between late May and mid-July
speculative purchases overshadowed commercial buying.
10
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DOMESTIC ECONOMIC INDICATORS
Average Annual Avurant Annual
Growth Rate Since Growth Role Since
Percent Change
Percent Change
Latest from Previous 1 Year 3 Months Latest from Previous I year 3 Months
Period period 1970 Earlier Earlier Period Period 1970 Earlier Earlier
GNP'
WHOLESALE PRICES
(Constant Market Prices)
United States
73 11
0.6
5.1
8.4
Previous (Industrial)
Ouarter
2.5 United States
Jul 73
0
5
7
8
3
Japan
73 I
3.6
9.8
16.0
15.2 Japan
Jul73
2.0
.
15
7
.
17
8
West Germany
73 I
5.4
4.7
5.8
23.U West Germany
Jun 73
0.6
.
6
7
.
6
8
France
73 I
2.0
5.5
3.8
8.2 France
Apr 73
0.8
.
12
0
.
20
2
United Kingdom
73 I
1.5
3.2
7.1
6.2 United Kingdom
Jun 73
0
1
.
6
2
.
3
7
Italy
73 1
0.8
3.1
5.2
3.4 Italy
May 73
.
9
1
.
13
8
.
20
0
Canada
73 I
2.9
6.3
8.0
12.1 Canada
Jun 73
.
1.8
.
18.1
.
15.8
United States
Jun 73
9.6
8.1 United States
Jun 73
5
9 8
3
Japan
Jun 73
19.4
13.0 Japan
May 73
.
11
1
.
29
1
West Germany
May 73
7.8
-4.3 West Germany
Jul 73
.
7
5
.
9
4
France
May 73
10.6
10.7 France
Jun 73
.
7
4
.
10
0
United Kingdom
Jun 73
10.4
-1.4 United Kingdom
Jun i3
.
9
3
.
13
3
Italy
May 73
8.8
51.7 Italy
Jun 73
.
11
4
.
14
5
Canada
May 73
10.3
7.5 Canada
Jul 73
.
7.7
.
10.4
RETAIL SALES'
(Current Prices)
United States
Jul 73
3.3
11.8
14.2 16.5 United States
Jul 73
0.4 7
8 6
7 10
8
Japan
Mar 73
4.0
12.9
24.8 I 45.2 Japan
May 73
-0.6
.
19.0
.
30
5
.
28
8
West Germany
Jun 73
-1.3
9.3
10.0
11.8 West Germany
May 73
-4.2
10.2
.
8.4
.
-13
6
France
Mar 73
4.1
6.3
7.0
6.7 France
Mar 73
1.2
12
7
10.4
.
-2.1
United Kingdom
Apr 73
-7.2
9.6
11.2
-3.0 United Kingdom
Apr 73
2
2
.
12
2
13
1
19
1
Italy
Feb 73
9.0
11.5
18.8
24.1 Italy
Feb 73
.
2
1
.
20
1
.
18
7
.
21
5
Canada
May 7
-3.0
10.5
10.5
1.6 Canada
May 73
.
2.3
.
14.1
.
17.5
.
20.3
United States
Japan
West Germany
France
United Kingdom
Canada
Euro?OGIIars
Percent Rate of Interest
12 Months 3 Months I Month
Representative Rates Latest Earlier Earlier Earlier
Prime finance paper
Aug 10
8.50
4.50
6.75
8.13
Call money
Aug 4
7.50
4.25
6.00
7.25
Interbank loans (3 months)
Aug 10
14.75
4.62
NA
14.25
Call monay
Aug 3
8.75
3.75
7.44
9.00
Local authority deposits
Aug 3
11.89
4.55
7.52
5.18
Finance paper
Aug 10
7.88
5.00
5.88
7.50
Three-month deposits
Aug 10
11.56
5.44
8.38
9.75
'Seasonally Adjusted
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EXTERNAL EC:7NOMIC INDICATORS
Average Annual
Growth Rate Since
Percent Change
Latest horn Previous
Period Period 1970
EXPORT PRICES
(USSI
United States I Jun 73
Japan Jun 73
West Germany Apr 73
France Mar 13
United Kingdom I Jun 73
Italy Mar 73
Canada Apr 73
1.6
1.4
0.9
6.9
3.1
0.9
3.5
EXPORT PRICES
(National Currency)
United States Jun 73 1.6
Japan Jun 73 1.5
We3t Germany ; Apr 73 0.7
France at 73 1.5
United, Kingdom Jun 73 1.2
Italy Mar 73 0.9
Canada i Apr 73 3.6
IMPORT PRICES
(National Currency)
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
I Jun 73 11 0.4
Jun 73 3.2
Apr 73 1.3
Mar 73 1.9
Jun 73 1.7
Mcr 13 3.4
Mar 73 3.4
1 Year 3 Months
Earlier Earlier
EXPORTS'
(I.o.h.)
6.7
12.0
10.9
12.8
11.2
8.1
6.0
14.0
22.4
13.0
20.8
11.8
8.1
12.5
IMPORTS'
(I o.b.)
6.7
1.3
1.2
4.9
8.6
4.9
4.8
9.7
3.8
0.3
2.5
11.4
7.5
4.0
14.0
6.4
1.3
8.3
10.8
6.5
13.0
16.4
18.4
7.2
0.4
28.4
14.0
8.2
25.0 United States
23.7 Japan
84.5 West Germany
70.4 France
34.1 United Kingdom
30.4 Italy
32.8 Canada
25.0 United States
17.9 Japan
4.2 West Germany
12.3 France
15.1 United Kingdom
24.1 Italy
33.4 Canada
Latest
Period Million US S
Jun 73
Jul 73
Jun 13
Jul 73
Jul 73
Jun 73
Jun 73
5,778
3.115
5,088
3,309
2,482
1,937
2,106
Jan-Jun
Jan-Jul
Jan Jun
Jan-Jul
Jan-Jul
Jan-Jun
Jan-Jun
32,289
19,753
29.916
20,292
16,117
9.479
11,958
22,986
15,359
22,498
14,824
13,541
9,888
9.700
Latest
Period Million US S
a-Jun 33.099 25,114
Jun 73 I 5,193 I n
Jul 73 2,685 Jan-Jul 16,480 10,126
Jun 13 4,03E I Jan-Jun 23.408 18,305
Jul 13 3,126 Jan-Jul 19,492 14,276
Jul 73 , 2,883 Jan-Jul 18,407 13,978
Jun 73 2,212 Jan-Jun 10.720 8,092
I Jut 73 1,994 1 Jan-Jun 11,110 9,982
TRADE BALANCE'
(f.o.b./f.o.b.)
latest
Period Million US S
32.4 United States
21.9 Japan
5.3 West Germany
-16.3 France
34.7 United Kingdom
35.9 Italy
18.4 Canada
Jun 13
Jul 73
Jun 73
Jul 73
Jul 73
Jun 73
Jun 73
-15
429
1,050
183
-402
-275
112
OFFICIAL RESERVES Latest Period
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
Er.d of June 1970
Jun 73 14.0 18.3
Jul 73 15.2 4.1
Jul 73 40.9 8.8
73 10.4 4.4
Jul l 73 6.6 2.8
Apr 73 6.4 4.7
Jul 73 5.8 . 4.3
EXCHANGE RATES (Spot Rate)
I Year 3 Months
Earlier Earlier
13.3
15.9
24.8
9.9
6.1
6.5
8.2
14.0 Japanivenl
16.8 West Germany Mark)
30.6 France IFroncl
IPm'nd
11.5 United Kingdomslerling
6.1 Italy (Lira)
5.8 Canada IDatlarl
5.9
Cumulative IMiltmn US S)
1973 1977
Jan-Jun
Jan-Jul
Jan-Jun
Jan-Jul
Jan-Jul
Jan-Jun
Jan-Jun
-810
3,273
6,507
801
-2.289
-1,241
B48
-2,128
5,233
4,193
549
-436
776
618
0.0038
0.4149
0.2370
2.4765
0.0017
0.9966
38.64
65.04
17.38
-11.26
8.06
8.04
As of to Aug 73
'Seasonally Adjusted
16 Aug 73
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
Dec 6R
-19.28
23.47
32.73
-10.92
-33.13
-19.03
3.95
16.11
33.71
20.37
-4.95
0.58
-0.12
-0.87
17.17
7.53
0.83
-2.26
-0.11
0.69
-2.56
-2.35
-1.30
0
-0.20
RATES
Percent Change I,mn
IRO Uc
-9.69
9.47
15.67
2.30
-18.97
-17.80
-2.58
19 `Aar 73 3 Aug 73
-2.89 0.73
-2.58 1.17
10.62 -1.01
-0.14 -0.67
-4.59 -0.03
-1044 1.93
-0.92 0.05
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