Document Type: 
Document Number (FOIA) /ESDN (CREST): 
Release Decision: 
Original Classification: 
Document Page Count: 
Document Creation Date: 
December 19, 2016
Document Release Date: 
July 29, 2005
Sequence Number: 
Case Number: 
Publication Date: 
April 11, 1974
Content Type: 
PDF icon CIA-RDP85T00875R001900020067-3.pdf289.58 KB
11.) It. Approved For Release 2005/08dQ,:~,~~85T00875R001900020 OE~P STAT 11 April 1974 t MEA ORANDUM FOR: Mr. rlrmer E. Glaser Agency for InterrtaLional Development SUBJECT : ReP-itY.MMt Terms f= Coninmunist Aid to LDCs Attached is the briefing paper you requested in your letter to Mr. Maurice 2,rnst on 8 April .1974 on repayrient terns for Corununist economic aid to less developed countries. Attachmen? As stated Distribution: (S-6082) Orig & l'- Addressee 1--D/OER (11 Apr 74) Approved For Release 2005/08/22 : CIA-RDP85T00875R001900020067-3 Approved For Release 2005/08/22 CIA-RDP85T00875R001900020067-3 !R aymen t Terms for Communist- _Economic ic1 t' Less Dev.~l_oj ed Countries (154-;'3) J 1. During 1954-73, the Communist countries extended some $16.5 billion'of economic aid to less developed-countries (LDCs). Almost all of the aid was provided as credits with fixed terms of repayment. 1/ Less than 5%, or about $750 million, was grant aid. The People's Republic of China (PRC) provided v'- :?,ut $450 million as grants, almost two-thirds to Cambodia, Nepal, and Pakistan. 2/ The USSR provided grants of $280 million, one half of which was to Afghanistan, largely for road construction. East European countries provided only negligible grant assistance. 2. The terms of repayment of Communist economic credits to the LDCs have changed little during the 20 years of the program. Chinese repayment terms always have been the most liberal, usually interest-free and requiring repayment over 10 years after 5-10 year grace periods. In some cases, China permitted longer repayment periods. On its $400 million credit extended in 1970 for the Tan-Zam Railroad, Peking allowed 30 years after a 10 year grace. New Chinese aid extended in 1973, for the most part, allowed 10 years for repayment after a 10 year grace pel-iod. I. Includes credits w:it amortization periods of five years or more. 2. Includes credits extended to Pakistan during 1964-68 that were converted to grants in 1972. Approved For Release 2005/08/22 : CIA-RDP85T00875R001900020067-3 Approved For Release 2005/08/22 CFA-RDP85T00875R001900020067-3 3. Most Soviet credits continue to call for repaymennt- over. 12 years beginning one year after project- completion and carry interest of 2.5%-3%. These terms usually are applied to project- type aid administered by the Soviet State Committee on Foreign Economic Relations. About 70% of the $8.7 billion of Soviet aid extended since 1954 has carried these terms. 4. Moscow has allowed longer repayment periods on about $1.3 billion of its aid. Nearly $400 million extended to Afghanistan is repayable over 19-25 years with grace periods of 8-25 years. Algeria, Turkey, and Yemen (San'a) received more than $685 million of credits calling for repayment over 15 years. 5. About 15% of total Soviet aid consists of supplier-type credits provided by the Soviet Ministry of Foreign Trade. Th..??',: credits, which Moscow calls "commercial credits", sometimes arc allocated by recipient governments to private companies. They allow 5-10 years for repayment, carry interest of 3%-3.5%, and-require downpayments of up to 25%. Except for Chile, almost all Soviet aid to Latin America has consisted of such credits. The first major Soviet credit of this type was a $100 million extension to Argentina in 1958. 3/ During 1.964-67, the USSR extended some $775 million of these credits, more than two-thirds to Egy:r., India, and Pakistan. Since 1968, Latin American countries have received about $90 million of the 5-10 years credits, Iraq approximately $140 million, and Egypt, about $95 million. This 3. O1nis C_0z7tz t'7as reduced to the amount drawn ($29 million) when it expired in 1961. -2- Approved For Release 2005/08/22: CIA-RDP85T00875R001900020067-3 Approved For Release 2005/08~!22i:,`CIA-RD,P85T00875R001900020067-3 type of aid has not reduc..:.:c1 Soviet project aissistance, as is sometimes assumed, but in fact has declined as a percent of total new aid extended, from almost 30% during 1964--67 to about 15% in 1968-73.. No supplier-type credits were extended during 1973, although a 2 million ton grain sale to India in October (valued at $350 million) allowed only 5 years for repayment (probably in grain) after*a 2 year grace period. The credit was interest 6. East European aid almost always carries harder terms than Soviet or Chinese aid. Dowanpayments often are required, repayments usually are made over 5-8 years, and interest normally is set at 3%-3.5%, although it has ranged up to 7%. These aid terms have been softening in recent years, however, as a number of 10 and 1.2 year credits have been extended, often with 2.5% interest. In 1971 about 450)- of Eastern Europe's aid to Latin American countries carried 12 year repayment periods and in 1972-73, more than one-half of the aid provided allowed 10-12 years for repayment. Czechoslovakia's $100 million credit to India in 1973 allowed a 3 year grace after which repayments are to be stretched over 12 years for equipment deliveries. For component deliveries, the credit allowed a 1 year grace with 10 years for repayment. Interest for both categories of aid was set at 2.5%. These are the most lenient terms Czechoslovakia is known ever to have extended. Poland's $100 million credits to Algeria and Iran-in 1973 are believed to have carried. 12 yc.:ars for repayment and 2 1/2% interest, compared with Warsaw's usual 8-10 y;iars, 3%-3..5%` terms. Approved For Release 2005/08/22 _q4--RDP85T00875R001900020067-3 Approved For Release 2005/08/22,:..9IA-RDP85T00875R001900020067-3 7. Most Corimunis-t- credits allow r~- _ayment in the local currency or goods of the aid recipient. The exceptions to this rule generally app: ).y to countries, such' as Indonesia, that do not have clearing agreements with Communist countries. Goods used for repayment often are the output of Communist assisted plants. Some of these arrangements are highly advantageous to donor count.ries, such as Iran's and Afghanistan's repayments to the USSR in natural gas, Iraq'.s repayments to Moscow and certain East European countries in crude oil, Guinea's repayments in bauxite, and the dozen or so countries that pay for Soviet fisheries assistance by allowing the use of their. shore facilities and extending port rights to the Soviet fishing fleet. CIA/OER 11 Apr 74 Approved For Release 2005108/22 CIA-RDP85T00875R001900020067-3