USSR: FIRST HARD CURRENCY PAYMENTS SURPLUS IN A DECADE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001600010041-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 8
• Document Creation Date: December 22, 2016
• Document Release Date: October 1, 2009
• Sequence Number: 41
• Publication Date: July 1, 1968
• Content Type: IM

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Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
USSR: First Hard Currency Payments Surplus
in a Decade
Secret
ER IM 68-92
July 1968
copy N?- - 41
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WARNING
This 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-
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
July 1968
USSR:
First Hard Currency Payments Surplus
in a Decade
Summary
The marked improvement in the Soviet hard cur-
rency payments position in 1967 resulted in the first
surplus in a decade. Among the contributing factors
were a decline of more than $300 million in imports
of wheat from Canada and Argentina, a $100 million
drop in imports from other overseas hard currency
countries, and a general increase in exports. The
need for extensive short-term borrowing in 1966 to
avoid selling gold was thus obviated in 1967, and the
USSR was able to increase its reserves of gold by
about $150 million to a level of almost $1.3 billion.
The outlook for 1968 is unclear. It is possible
that the USSR will again finish the year with a sur-
plus but there is a greater likelihood of some
deterioration in the Soviet hard currency payments
position. With $250 million to $300 million in wheat
still scheduled to be imported from Canada during
the 1968/69 crop year, such imports may rise substan-
tially above the reduced 1967 level. Moreover,
imports of machinery and equipment probably will in-
crease as deliveries take place on major contracts
signed in the past two years,. The cost of the addi-
tional imports of machinery and equipment, however,
will not be offset by medium-term and long-term
credit because of increasing repayments on earlier
credits.
Note: This memorandum was produced solely by CIA.
It was prepared by the Office of Economic Research.
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Hard Currency Trade
1. The USSR generated a surplus of about $90
million in its hard currency commodity trade in
1967 (see Table 1). This trade surplus, the first
in a decade, resulted from a decline in imports as
well as an increase in exports. The $150 million
drop in imports, the first such decline in a number
of years, coupled with a rise of more than $200 mil-
lion in exports, resulted in a modest 2-percent rise
in total hard currency trade.
Soviet Hard Currency Trade
1959-67
Million US $
Year
Exports
Imports
Turnover
Balance
1959
566
591
1,157
-25
1960
744
1,017
1,761
-273
1961
866
1,060
1,926
-194
1962
917
1,181
2,098
-264
1963
960
1,278
2,238
-318
1964
1,011
1,545
2,556
-534
1965
1,326
1,544
2,870
-218
1966
1,482
1,746
3,228
-264
1967
1,691
1,600
3,291
+91
2. A major factor contributing to the favorable
hard currency position in 1967 was the decline in
imports of wheat -- chiefly from Canada and Argen-
tina -- from approximately $500 million in 1966 tc
about $150 million in 1967. In addition, imports of
natural rubber from Southeast Asia fell in value by
about $50 million. In all, there was a drop of
approximately $400 million in imports from overseas
hard currency countries -- Canada, Argentina, Malaya,
Japan, and others (see Table 2) -- while the USSR in-
creased its exports to overseas countries, Japan in
particular, by approximately $150 million. This
favorable swing in Soviet hard currency trade of about
$550 million was only partly offset by a reduction in
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the Soviet surplus with Western Europe of some $200
million. The substantial rise in imports from
Western Europe reflected, among other things, an
increase in imports of machinery and equipment of
about $100 million and of manufactured consumer
goods. Oil evidently accointed for most of the
increase in exports to Western Europe.
Distribution of Soviet Hard Currency Trade
with Western Europe and Overseas Countries
19u6-67
Million US $
Geographic Area
Exports
Imports
Turnover
Balance
Western Europe
1,094
755
1,?49
+339
Overseas areas
388
991
1,379
-603
Total
1,482
1_,746
3, 228
-264
Western Europe
1,163
1,015
2,178
+148
Overseas areas
528
585
1,113
-57
Totc.Z
1,691
1,600
3, 291
+91
Payments Developments
3. The Soviet short-term position showed a
marked improvement beginning in mid-1967 and continu-
ing throughout the year. This was in marked contrast
to 1966, when the USSR borrowed extensively on the
short term to finance its deficits and to avoid sell-
ing gold. The Soviet medium-term and long-term
position, however, evidently changed little in 1967;
the Soviet net credit position -- new drawings of
about $275 million less repayments and interest of
roughly $175 million -- was on the order of plus
$100 million, or about the same as in 1966. These
credits help to finance Soviet imports of machinery
and equipment, which increased from $560 million in
1966 to about $650 million in 1967.
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4. Other major elements in the Soviet balance
of payments also showed improvement in 1967. Hard
currency payments for freight and insurance declined
sharply, the net deficit falling from about $50 mil-
lion in 1966 to approximately $20 million in 1967.
Hard currency receipts from tourism rose in 1967,
perhaps amounting to about $50 million. Other ele-
ments in the Soviet hard currency balance were
roughly offsetting, so that the Soviet payments posi-
tion as a whole was even more favorable than for
trade alone. The strengthened payments position
obviated the necessity for the USSR to sell gold,
although it is doubtful whether the USSR would have
sold much gold even had it sustained a payments
deficit. Estimated sales of $5 million* in 1967 were
the smallest of any year since the USSR began selling
gold in the postwar period. The USSR added about
$150 million to its gold reserves, bringing them to
a level of almost $1.3 billion by the end of 1967.
Outlook for 1968
5. The sharp improvement in the Soviet hard
currency payments position probably will not be
repeated in 1968. The USSR is still obligated to
import $250 million to $300 million in wheat from
Canada during the 1968/69 crop year. This is in
addition to the $110 million in wheat imported during
the first half of 1968 -- almost as much as was Lought
during all of 1967. Moreover, there will almost
surely be a rise in imports of machinery and equip-
ment as deliveries are made on a number of large
plant contracts signed in earlier years. Some ship-
ments for the Soviet Fiat plant will also begin in
late 1968. Data on Soviet trade with Western Europe
in early 1968 indicate that imports will rise well
above the 1967 level.
6. On the export side, it is doubtful whether
the USSR can sustain the 13-percent growth rate
achieved in the past two years. The rate of growth
in exports of oil -- the major Soviet foreign exchange
earner -- to Western Europe will be somewhat less than
the 18-percent grcuth registered in 1967. The outlook
for other major Soviet export commodities is unclear,
This estimate excludes small sales of gold coin
and the $10 million gold loan to Hungary.
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but if 1967 trends are indicative, prospects are
not bright: traditional exports such as lumber,
cotton, and nonferrous metals increased little, if
at all, in 1967. Preliminary 1968 data, in fact,
indicate a continuation of these trends.
7. No significant change is expected in othe
elements of the balance of payments. The USSR will
continue to draw on medium-term and long-term credits
as in the past; on a net basis, such drawings may
even be somewhat lower than in 1967 in spite of
increased imports of machinery and equipment. Expen-
ditures for transportation will again be reduced,
but the reduction will not be as great as in 1967.
The remaining elements are not expected to register
any major change. There will probably be some over-
all deterioration in the Soviet payments position,
although hard currency payments and receipts will be
roughly in balance. No gold sales are expected, and
so the USSR will be able to add another $150 million
to its reserves, bringing them to a level of about
$1.4 billion.
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