COMMUNIST EXPORTS OF PETROLEUM TO THE FREE WORLD IN 1967 AND PROSPECTS FOR 1968-70

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001500220052-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 16
• Document Creation Date: December 16, 2016
• Document Release Date: December 27, 2004
• Sequence Number: 52
• Publication Date: May 1, 1968
• Content Type: IM

 Approved For Release 2005/01/11 : 6(-O3/ ~WAVAR 9W-IOM-1 f
DIRECTORATE OF
INTELLIGENCE
Secret
Intelligence Memorandum
Communist Exports of Petroleum to the Free World
in 1967 and Prospects for 1968-70
Secret
ER IM 68-50
May 1968
copy No
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WARNING
Thiss document contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 794, of the US Code, as amended.
Its transmission or revelation of its contents to or re-
ceipt by an unauthorized person is prohibited by law.
GROUP 1
E.clud.d from nulonrolie
downgrading and
Ldnlauificarion
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
May 1968
Communist Exports of Petroleum to the Free World
in 1967 and Prospects for 1968-70
Summary
Exports of petroleum from the USSR and the
Communist countries of Eastern Europe to the Free
World in 1967 amounted to about 51 million tons,*
with an estimated value of $610 million. ** This
was an increase of almost 6 percent over 1966 and
was the smallest annual increase in sales to the
Free World since 1955, when the Communist countries
first became net exporters of oil.
Most of the oil exported from Communist countries
to the Free World in 1967 originated in the USSR,
which emphasized sales to the industrialized coun-
tries of Western Europe to earn convertible curren-
cies for the purchase of Western equipment and
technology. Sales to these countries increased by
more than 5 million tons in 19 6 7 , or by 18 percent
above 1966. Shipments to less developed nations
of the Free World went down 22 percent, the
second successive year of decline. Rising demand
in the USSR limited the growth in the amount of
* Tonnages are given in metric tons.
AZZ references to exports of petroleum from
Communist countries refer to exports from the USSR
and the Communist countries of Eastern Europe --
Bulgaria, Czechoslovakia, East Germany, Hungary,
Poland, and Rumania.
Note: This memorandum was produced solely by CIA.
It was prepared by the Office of Economic Research.
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oil available for export, and there was little
Soviet interest in goods that the less developed
nations offer in exchange for oil. Moreover,
closure of the Suez Canal as a result of the Arab-
Israeli crisis made it difficult for the USSR to
supply certain markets east of Suez and elsewhere.
In 1968, approximately 55 million tons of pe-
troleum may be exported from Communist countries
to the Free World, about 8 percent more than in
1967. Some 48 million tons of Soviet petroleum --
30 million tons of crude oil and 18 million tons
of refined products -- probably will be available
for export to the Free World. In addition, the
Free World probably will continue to receive about
7 million tons of products from the Communist coun-
tries of Eastern Europe.
During 1968-70, rising demands for oil in the
Communist countries will militate against any sub-
stantial increase in the availability of petroleum
for export. It is doubtful that exports of oil
from these countries to the Free World will increase
at an annual rate of more than 8 percent. If, as is
expected, demand for oil in the Free World (ex-
cluding the United States) increases at an annual
rate of about 10 percent, the share of that demand
satisfied by imports from Communist countries will
decline..
It is unlikely that Eastern Europe will import
large quantities of oil from countries other than
the USSR during 1968-70. The Friendship pipeline
is being expanded to facilitate movement of great-
er amounts of crude oil from the USSR into Eastern
Europe. Although some Easteii European Communist
countries are seeking to diversify their sources
of supply by negotiating with oil-producing coun-
tries of the Middle East, thus far no oil from that
area has been delivered. The amount of non-Soviet
oil that the Eastern European countries will im-
port may be partially determined by the quantity
of Eastern European goods that oil-producing
countries of the Free World will accept in exchange.
Probably no more than 5 million to 7 million tons
of oil from the Free World will be imported into
Eastern Europe in 1970.
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Origin and Composition
1. In 1967 the USSR and the Communist countries
of Eastern Europe exported about 51 million tons of
petroleum to the Free World, approximately 6 percent
more than in 1966. Of this total, the USSR supplied
nearly 44 million tons -- almost 27 million tons of
crude oil and 17 million tons of petroleum products.
The Communist countries of Eastern Europe furnished
the remaining 7 million tons, all petroleum products.
The growth in exports o:E petroleum from Communist
countries to the Free World since 1955 is shown in
Figure 1.
MILLION
METRIC TONS
COMMUNIST COUNTRIES EXPORTS OF PETROLEUM
TO THE FREE WORLD, 1955-70
1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970
*The USSR and Eastern Europe
58933 4-68 CIA
2. The increase in exports of petroleum from
Communist countries to the Free World in 1967 was
the smallest annual increase in such exports since
1955, when the USSR became a net exhorter of oil.
During the past decade the, production of crude oil
has outpaced the expansion of refining capacity in
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the USSR, thereby making possible increased ex-
ports of oil and the earning of significant amounts
of foreign exchange. In 1967, however, two new
refineries with a total combined capacity of 12
million tons per year were fully utilized for the
first time. As a result, the crude oil charge to
Soviet refineries rose at a higher rate than usual,
and a greater share of crude oil production was
used to satisfy the growing domestic demand for
petroleum products.
3. Refining capacity in the Free World, es-
pecially in Western Europe, has been expanding, and
demand for imports of petroleum products is not
rising nearly as rapidly as is demand for crude
oil. This lack of Free World interest in imported
petroleum products, coupled with the growing demand
for petroleum products in Communist countries, has
caused the rate of increase in Communist exports
of products to slow considerably. In 1967, Communist
exports of petroleum products to the Free World were
only about 700,000 tons greater than in 1966, an
increase of about 3 percent (see Table 1). This is
in marked contrast to the previous five years, when
the average annual increase in Communist exports of
petroleum products was approximately 12 percent.
Markets
4. All of the increase in Communist sales of
petroleum to the Free World in 1967 was in exports
to the developed countries, primarily to Western
Europe; exports to the less developed countries de-
clined for the second consecutive year. Soviet
deliveries to the developed countries rose from
about 33 million tons in' 1966 to more than 37 mil-
lion tons in 1967 and represented about two-thirds
of the value of total Soviet exports of oil to the
Free World. Soviet sales to the less developed
countries were nearly 2 million tons less than in
1966. Exports of petroleum products from Eastern
Europe to the developed countries in 1967 were
about 5 percent higher than in 1966, whereas ex-
ports to the less developed countries were 10 per-
cent lower. The allocation of exports of petroleum
from Communist countries is indicated in the
following tabulation:
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Importing Area
From
the
USSR
From
Eastern
Europe
Total
From
the
USSR
From
Eastern
Europe
Total
Developed countries
32.8
5.7
38.5
37.3
6.0
43.3
Less developed
countries
8.5
1.0
9.5
6.6
0.9
7.5
Total
41.3
6.7
48.0
43.9
6.9
50.8
5. In 1967 the USSR was able to increase earn-
ings of hard currency by expanding sales to the
industrialized countries. The rate of increase in
sales to five Western European nations -- Italy,
West Germany, Sweden, France, and Norway -- was more
than three times the overall rate of increase in
Soviet ea~~orts to the Free World. The extent to
which the increase in exports to industrialized
countries of Western Europe resulted from the Arab-
Israeli crisis cannot be determined, because the
pattern of annual growth in exports to these coun-
tries has been so erratic in past years. It appears
probable, however, that the reduction in exports to
the less developed countries stemmed, at least in
part, from Soviet unwillingness to tie up tankers
on long voyages to such countries as India, Ceylon,
and Burma after the Suez Canal was closed. Reduction
also resulted from changes in import policies of
some of the less developed countries. For example,
Ghana, in an effort to secure crude oil at lower
prices, switched from the USSR to Western suppliers.
Its contract with the Western suppliers, which
originally ran from September 1967 to February 1968,
has been renewed through August 1968. Consequently,
Soviet sales to Ghana in 1968 will be smaller than
they have been. Argentina cut imports of Soviet
petroleum products in half in 1967 as a result of
an increase in its own production of crude oil that
enabled domestic refineries to meet a larger share
of the demand for petroleum products by processing
the indigenous crude oil.
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 Composition, Origin, and Destination of Communist Exports of Petroleum
1966-67
Million Metric Tons
1966
1967
From
From
Eastern
From the USSR
Eastern
Europe
From the USSR
Europe
To Other T
th
Total
Total
o
e To the
Communist F
to the
To Other
To the
To the
to the
Total
ree Free
Countries a World World
Free
World
T
t
l
Communist
Free
a/
Free
Free
o
a
Countries
World
Wo
ld
W
_
r
orld
?'
Crude oil
Petroleum
50.3
25-5 24.8 0
24.8
54.0
27.1
26.9
0
26.9
products
23.3
6.8 16.5 6.7 J
23.2
24.7
7.7
17.0
6.9 W
23.9
Total
73.6
32.3 41.3
67
48
0
8
-
.
7
.7
34.8
43
9
6
8
.
.9
50.
a. Including the Communist countries of Eastern Europe, Cuba, Yugoslavia, Communist China, North
Vietnam, North Korea, and Mongolia. For details of Soviet exports to these countries, see the
tabulation on p. 15.
b. About half of the total was supplied by Rumania, the only Eastern European Communist country
with an exportable surplus from indigenous supplies. Other Eastern European countries derive most
of their capability to export petroleum products from refining imported Soviet crude oil.
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6. During 1967, about 41 million tons of
petroleum were exported from Communist countries
to Western Europe. This amount represented an
increase of more than 5 million tons over the
level of 1966 and constituted about 81 percent of
total Communist exports of oil to the Free World.
These exports to Western Europe represented about 9
percent of that area's rising total demand, an only
slightly larger share than the 8 percent recorded
during 1964-66. Italy, West Germany, and Finland
received significantly larger amounts of oil from
Communist countries in 1967 than in 1966. They
imported half of all the oil sold by Communist
countries to the Free World in 1967 (see Table 2).
The United States imported two tanker loads of
low-sulfur fuel oil from Rumania, the first oil
that it had purchased from a Communist country since
19 59 .
7. Oil from Communist countries in 1967 con-
stituted more than half of the petroleum consumed
in Somalia, Finland, Iceland, Afghanistan, Ghana,
Ceylon, and Yemen, but, except in the case of
Finland, the quantities were not large. About 7.5
million tons of oil were exported from the Com-
munist countries to less developed countries, 2
million tons less than in 1966. Sales by Com-
munist countries to Argentina, Brazil, Burma, Ceylon,
Ghana, and Greece were lower than in 1966.
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 Communist Exports of Petroleum to the Free World J
1967
Petroleum Products
Destination
Crude Oil
from
the USSR
From
the USSR
From the
Eastern European
Communist Countri
T
t
Total
Percent of
Recipient's
es
o
al
Petroleum
Demand
co
Total
26,875
16,996
6,937
23
933
808
50
8 J
M
,
,
n -
Western Europe
21.965
i'R -inn
r- M C
, ., ,,, .-
L- _
'
Belgium
France
0
700
450
1
100
120
570
570
3
11 ,
,
00
900
2,000
3,700
6
Neth
l
d
7
350
1,050
11,650
18
er
an
s
West G
0
50
0
50
50
Negl.
ermany
4,070
1,250
1,6oo
2
850
6
920
Denmark
G
*
0
50
5
90
,
640
,
640
7
5
reece
Icel
d
670
6
0
175
825
1,495
28
an
N
0
450
0
450
450
82
orway
T
k
*
0
480
20
500
500
8
ur
ey
0
70
200
270
270
5
a. Preliminary estimates derived primarily from information on tanker movements and from Free
World import data.
b. An asterisk indicates a less developed country; all others are developed countries.
c. If the demand of countries that do not import petroleum from Communist countries is included,
the. share of Communist oil in Free World demand, excluding that of the United States, is between
5 and 6 percent, as it has been for several years.
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Prospects for 1968-70
11. No substantial change is anticipated in the
annual rate of increase or in the composition of
exports of oil from Communist countries to the
Free World through 1970. Soviet plans call for an
increase of 21 million tons in the production of
crude oil in 1968. With the past record of over-
fulfillment, it is probable that the increase will
approximate 22 million tons. Plans also call for
the crude oil charged to refineries in 1968 to be
15 million tons more than in 1967. Thus the amount
of Soviet crude oil available for export will be
7 million tons greater in 1968 than in 1967. Of
this additional crude oil, at least 4 million tons
are already committed to other Communist countries,
and less than 3 million tons will be available for
export to the Free World. Total exports of pe-
troleum from Communist countries to the Free World
in 1968 may reach 55 million tons, 8 percent more
than in 1967. Included in this estimate of total
exports are 30 million tons of crude oil and 18
million tons of petroleum products from the USSR
and 7 million tons of products from the Eastern
European Communist countries. It is expected that
exports of petroleum from Communist countries to
the Free World during 1969-70 will increase at an
annual rate of 6 to 8 percent.
12. The trend of exporting available oil to
hard currency countries, in preference to less
developed countries that offer nonessential goods
in exchange, probably will continue. Formation in
1967 of a Soviet-Belgian marketing company, Nafta
S.A., in Antwerp and attempts by Nafta (GB), Ltd.,
to market petroleum products directly in the United
Kingdom tend to strengthen this opinion.
13. During the period 1968-70 the demand for
petroleum in the Free World, excluding the United
States, will increase at a rate of about 10 percent.
If exports of petroleum from Communist countries to
the Free World increase at a rate of only 6 to 8
percent, the Communist countries will not be able
to maintain their present 5 to 6 percent share in
the Free World market.
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14. The ability of the Soviet Union to expand
exports of oil to the Free World will be limited
by production, by the growing demand for petroleum
within the USSR, and by Soviet commitments to supply
larger quantities of oil to other Communist countries,
especially those of Eastern Europe. Soviet exports
to other Communist countries during 1966 and 1967
are shown in the following tabulation:
Crude
Petroleum
Crude
Petroleum
Importing Area
Oil
Products
Total
Oil
Products
Total
Eastern Europa
21.0
4.3
25.3
22.7
5.0
27.7
C'ib i
:f.8
1.2
5.0
3.8
1.4
5.2
Yugoslavia
0.7
0.5
1.2
0.6
0.5
1.1
Communist China
0
Nagl.
Nagl.
0
Negl.
Nogl.
North Vietnam
0
0.2
0.2
0
0.2
0.2
North Korea
0
0.4
0.4
0
0.4
0.4
Mongolia
0
0.2
0.2
0
0.2
0.2
Total
25.6
0.8
32.3
27.1
7.7
34.8
In 1967, when the USSR produced 288 million tons
of crude oil, it exported almost 79 million tons
of petroleum. Of this amount, about 35 million
tons were shipped to other Communist countries, in-
cluding 28 million tons to Eastern Europe. The
Soviet plan for production of crude oil in 1970 is
about 35U million tons. In that year the USSR may
export 100 million to 105 million tons of crude
oil and petroleum products -- 45 million to 50
million tons to other Communist countries and about
55 million to the Free World. It is anticipated
that through 1970, Soviet exports to Communist
countries other than those in Eastern Europe will
remain at about the same level as during the past
two years. Plans and agreements already exist
whereby the Communist countries of Eastern Europe
will import nearly 35 million tons of crude oil
from the USSR in 1970. It is estimated that in
that year these countries will also produce about
18 million tons of crude oil, import about 5 mil-
lion tons of petroleum products from the USSR, and
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procure perhaps 5 million to 7 million tons of
crude oil from other sources. About half of this
non-Soviet oil probably will. be imported by Rumania,
which until the present has always met its own needs
for crude oil and has been a net exporter of pe-
troleum products.
15. The above plans and estimates of imports by
Eastern European Communist countries are compatible
with plans for expansion of pipeline and refining
facilities. The Friendship crude oil pipeline
system, which links Eastern Europe to the oilfields
of the Urals-Volga region in the USSR, is being
expanded to facilitate increased deliveries. This
system is now operating near its capacity as
originally designed, about 8 million to 9 million
tons through the northern branch to Poland and East
Germany and 9 million tons through the southern
branch to Czechoslovakia and Hungary. A second
line, parallel to the first, is to be laid through-
out the entire system which eventually will have
an annual capacity of about 47 million tons. This
capacity probably will not be fully attained until
the mid-1970's. The laying of the second line has
been completed within Czechoslovakia, and work is
in progress in the USSR. Larger pipe has been laid
on the second strand than was used for the first,
and the combined capacity of the southern branch
probably will be about 22 million to 23 million
tons per year when all pumping stations are installed.
No such quantity of imported oil is yet required by
Czechoslovakia and Hungary, and on the basis of
plans for expansion of refining capacity it does not
appear that the new portion of the southern line
will be fully utilized until about 1975. By 1970,
however, the capacities of refineries served by the
southern branch of the line are to be expanded by
about 7 million tons and the capacities of refiner-
ies served by the northern branch by 6 million to
8 million tons. Czechoslovakia and Poland have
agreed to provide equipment for Soviet industry in
return for increased deliveries of Soviet oil after
19 70 .
16. Bulgaria, which now receives nearly 4
million tons of petroleum from the USSR by sea,
plans by 1970 to add 3 million tons of refining
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capacity and to increase its annual imports of
petroleum by at least 3 million tons. The re-
maining Eastern European Communist country, Rumania,
plans to add at least 3 million tons of refining
capacity by 1970. Indigenous production of crude
oil is not expected to increase rapidly enough to
utilize this new capacity fully, and Rumania has
been exploring possibilities for obtaining oil from
the Middle East. It has concluded an agreement to
import 3.5 million tons of crude oil from Iran dur-
ing the period 1968-70 and has engaged in discussions
with Saudi Arabia and Kuwait. Other Eastern European
countries, in an effort to diversify sources of
supply, also have made or are seeking to make ar-
rangements with Iran for crude oil during 1968-70.
To date, none of the Eastern European countries has
taken delivery of any Iranian oil, probably because
of the prohibitive transport costs caused by the
closing of the Suez Canal. The quantity of non-
Soviet oil that Eastern Europe can obtain may also
be limited, in part, by the willingness of Free
World countries to accept Eastern European goods in
exchange.
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