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June 7, 1985
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Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Directorate of Intelligence International Economic & Energy Weekly ~-- DI lEEW 85-023 7 June 1985 Copy 8 3 3 0 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Secret International Economic & Energy Weekly iii Synopsis 1 Perspective-Indian Economy on the Eve of Rajiv Gandhi's Visit 9 Venezuela: Adjusting to the Depressed Oil Market 17 Key Debtor LDCs: Exports Decline This Year Energy International Finance Global and Regional Developments National Developments 25X1 25X1 25X1 25X1 25X1 25X1 25X1 25X1 25X1 25X1 Comments and queries regarding this publication are welcome. They may be directed to irectorate orlntelligence i Secret D/ IEEW 85-023 7 June /985 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Synopsis International Economic & Energy Weekly 1 Perspective-Indian Economy on the Eve of Rajiv Gandhi's Visit Prime Minister Rajiv Gandhi will probably highlight India's long-term economic achievements and recent policy reforms to attract US business interest in supplying advanced technology. One of India's major economic success stories has been the Green Revolution in agriculture-the adoption of high-yielding seed varieties (HYVs), chemical fertilizers, and expanded irrigation. 9 Venezuela: Adjusting to the Depressed Oil Market Venezuela's economy is stagnating as the oil boom fades, and Caracas is responding by retrenching on imports, ambitious development projects, and oil exploration. With no rebound likely in the oil market in 1985, austerity will continue. The Tunisian Government has been increasingly unable to meet rising expectations created by rapid economic development during the 1970s and one of the highest adult-literacy rates in Africa. We believe that exports for 12 key LDC debtors will decline this year following the sharp rebound in 1984. This could force these governments to squeeze imports, hurting chances for continuing economic recovery in these 12 countries over the second half of this year. iii Secret DI IEEW 85-01.? 7 June 1985 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Secret Perspective International Economic & Energy Weekly Indian Economy on the Eve of Rajiv Gandhi's Visit industry more productive. Prime Minister Rajiv Gandhi during his visit to the United States next week will probably highlight India's long-term economic achievements and recent policy reforms. Wary of India's coming balance-of-payments strains, Gandhi's team can be expected to argue for US support for Indian borrowing from multilateral institutions to bolster his liberalized policies. Gandhi also hopes to attract US business interest in supplying advanced technology to make Indian sector increasingly politicized by dependence on subsidies. Agriculture has been a major success story. Largely because of the Green Revolution, the danger of widespread famine has been eliminated, and New Delhi has become an intermittent exporter of foodgrains. Nonetheless, Gandhi is facing some important challenges. The Green Revolution has not yet reached vast areas of the country, and one-third of the population remains undernourished because they cannot afford an adequate diet. Gandhi will have to grapple both with the economic costs and the political implications of a farm cooperation with US and other Western business. Rajiv Gandhi's policies have accelerated a cautious economic liberalizaton under way since 1980. India's extensive industrial base has developed during decades of protection from domestic and international competition. Returns on this substantial investment, however, have been poor, and capacity utilization is low. Driven by his interest in technology and productivity, Gandhi has further eased government restrictions on private production and investment, especially for the electronics industry. Personal and corporate tax rates have been lowered and imports of sophisticated technology are encouraged. He has also pushed the bureaucracy to expedite decisions that affect business, although he has made it clear that he intends for the government to retain con- trol of the economy. These moves have fueled optimism among corporate leaders, who are now actively planning new investments and seeking increased import bill, the result of an increase in domestic crude oil production. Gandhi's policy reforms are supported by a temporarily buoyant economy. Ample stocks of foodgrains provide a cushion even if this summer's monsoon rains are poor. Foreign exchange reserves are now adequate, largely because of past financial support from the International Monetary Fund and a lower oil Foreign payments strains are likely to increase significantly before the end of the decade. Expansion of the economy will require faster growth in imports of fertilizer, petroleum, and capital goods, while payments to the IMF and military suppliers are already scheduled to rise sharply. New Delhi is unlikely to seek relief through a substantial increase in commercial borrowing. Gandhi 1 Secret D! /EEW 85-023 7 June /985 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 has not abandoned New Delhi's traditional emphasis on self-reliance, which implies a willingness to sacrifice opportunities, for growth in order to reduce In- dia's vulnerability to changes in the policies of other countries. Gandhi will likely cite India's political stability as a feature that should be at- tractive to foreign business. New .Delhi's management of explosive social.: . tensions within a democratic framework has been a formidable achievement. As the country becomes more economically interdependent, however, growing caste and religious violence threaten to have a greater impact on the national economy. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Secret India: The Continued Success of the Green Revolution' One of India's major economic success stories has been the Green Revolution in agriculture-the adoption of high-yielding seed varieties (HYVs), chemical fertilizers, and expanded irrigation. India has been able to achieve foodgrain self-sufficiency, export wheat, and improve rural incomes because of the Green Revolution. The high cost of the new farm technologies have caused agricultural subsi- dies to soar, however, and led farmers to join independent farm "unions" to lobby for higher commodity prices and more input cost supports. Because 65 percent of India's population is em- ployed in agriculture, we judge that providing incentives for increased crop production while keep- ing growing subsidies in check will be a major challenge for Prime Minister Rajiv Gandhi's ad- ministration. Rising Production Since the mid-1960s, when the Green Revolution farm technologies were first introduced, foodgrain production has risen over 50 percent. The rapid spread of the new techniques, increased irrigation, and a dramatic rise in chemical fertilizer consump- tion have been major factors leading to record crops over the past two years. Wheat, to which HYVs were first adapted, has led the way. As a result, the economic impact favored the wheat- growing north. The new surge in production in- creased national stocks and stimulated exports of nearly 1 million metric tons of wheat to the USSR, Romania, and the World Food Program. however, has been plagued by unreliable irrigation, highly fragmented landholdings, a poor transporta- tion network, and limited access~to agricultural credit and technical services. Even so, official Indian data suggest that the extension of high- yielding rice varieties since the early 1970s has been brisk-a rate over twice as fast as that in south India, the country's other major ricegrowing region. Higher yielding varieties of commercial crops such as cotton and peanuts have also shown promise; for example; since the late 19~60s hybrids have boosted average yields, 43 percent for cotton and 12 percent for peanuts India's major oilseed crop. With the emphasis on irrigated crops considerably less effort has been devoted to developing improved varieties for India's vast rain-fed areas-nearly 70 percent of the cultivated land-leading to stagnant yields for certain coarse grains and protien-rich beans. Higher Costs, Higher Subsidies Although the Green Revolution has been successful in raising agricultural production, it also has been expensive. The new farm technologies require in- creased use of costly inputs such as chemical fertilizers, hybrid seeds, and pesticides, as well as diesel fuel and electricity to power irrigation pumps. Rising production costs, combined with sluggish commodity prices, have hit hardest at India's economically vulnerable and increasingly politically active small and middle-sized land hold- Rice, India's major foodgrain, initially suffered from the lack of effective high-yield varieties suit- able to Indian tastes and production conditions. Now, however, more areas are being cultivated with high-yielding varieties of rice than of wheat. In our view, the greatest potential for increased rice production is in the eastern states. This region, ers. Beginning in the 1960s, New Delhi initiated an extensive subsidy system to control production costs, stimulate production, and keep food prices in Secret DI IEEW 85-023 7 June 1985 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Percentage of Cultivated Land in High-Yielding Variety (HYV) Foodgrains in India, 1980-81 Pakistan 1 ~?Tamil~Q "}) Niatlu' f Nepal Arunachal Pradesh ~ j THIMP~i4U Sikkim * ~. ," ~ ) ~ Assam' '~..: Meghala a I ~./~~~ ?no? late Miz am . Burma ISLAMABGD ~ ,tlKashmic cne~d 9 n7 . ~.`; Arabian Sea LAKSHADWEEP (India) t3~~.. S ~~ ~~ i Dadra and Nayar Haveli ~ QrISSa S Maharashtra r . ~'~ .~'1.L?~~ f .? e ~C~ Z Pradesh less than 10 10 to 20 30 to 40 40 and above R i C e Major crop-growing area -?- State or union territory boundary ANDAMAN ?l~ ISLANDS a (India) ? `? >. o NICOBAR? ISLANDS o (India) Q Boundary representation is not necessarily authoritative. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Secret Keys to Success The success ojthe Green Revolution in increasing foodgrain production was, in our view, the result of investment in irrigation, appropriate agricultural price policies, research, and the maintenance of privately owned and operated family farms: ? Since the late 1960s, increased public and private investment has nearly doubled India's gross irri- gated area, significantly enhancing the potential for agricultural growth. ? Agricultural policies that emphasized appropri- ate commodity support prices, production subsi- dies, and agricultural research-developed with US assistance-have enabled farmers to reduce risk and speed up adoption of high-yielding varieties. ? Private initiative on the part of India's numerous small farmers, who were quick to respond to incentives; accelerated the spread of the Green Revolution. check. Over the past few years, higher farm pro- duction and food storage costs have become an increasing burden-on Indian finances. The FY 1985/86 budget projects food and fertilizer subsi- dies alone-state governments subsidize irrigation rates, power, rural credit and development pro- grams-at over $2 billion, a sum nearly equal to the estimated overall budget deficit. Press reports indicate that Gandhi's new agricul- ture policy probaly' will call for a reduction of some farm subsidies, but, because~New Delhi is reluctant to antagonize farmers, we judge that a sustained reduction will be politically difficult. In 1984-an election year-the federal government contributed to the subsidy problem by raising average real foodgrain procurement prices over 7 percent and allowing fertilizer subsidies to double. There are no plans to roll back these subsidies in the FY 1985/86 budget. Richer But Less Stable Villages Contrary to initial fears of many Indian and West- ern academics, the Green Revolution appears actu- ally to have strengthened the economic position of small farmers and rural laborers. One major reason is that over 90 percent of those owning irrigated land-a precondition for the adoption of high- yielding varieties-are small farmers with less than 10 acres in holdings...Recent academic studies also suggest that higher real wages and a near doubling of employmenf opportunities have xaised farm la- bor income in areas"affected~by the Green Revolu- caste violence. Nonetheless, we believe that .the`"rapid"~economic change has had a somewhat destabilizing effect on the village "community," which provides the bed- rock of India's social, political, and economic sys- tem. Because the new hybrid varieties are much more costly and productive, farmers have had to seek credit, markets, and labor beyond the village. In our view, these changes have loosened tradition- al social and economic ties and increased competi- tion for resources. In some cases, these pressures have led to localized outbreaks of communal or Unbalanced growth between regions has also in- creased tensions and fueled support for local politi- cal parties. One of the complaints in predominately Sikh Punjab is the perception by many Sikhs that their state's wealth, due in large part to HYV agriculture, was being "exploited" by the federal government. As a result, the rural-based Sikh Akali Dal Party accused New Delhi of not giving Punjab its fair share of state industrial investment and adequate prices for its farm produce. One of the major outgrowths of the Green Revolu- tion has been the advent of the independent farm "union" movement-organizations largely com- posed of small and medium-sized landholders. As 25X1 25X1 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 India: Agricultural Indicators zso zoo But risiag Real Input Costs have slowed Real Farm Income Growth.b n Estimated. b1974/7s-1983/84. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Secret cultivation costs rose and farm profits narrowed, more farmers in states most affected by the Green Revolution have joined farm "unions" that now exist in eight of 22 states. In our view, farm unions have been increasingly successful in wresting concessions from both state and national governments. Since 1980 press and US Embassy reporting indicate that union-inspired protests have resulted in higher procurement prices, lower electricity and irrigation rates, and the post- ponement of overdue loans. Farm group pressure contributed to New Delhi's decision in 1981 to accept a more generous parity method for comput- ing agricultural procurement prices. According to press reports, Rajiv Gandhi has recently conceded to a major farm union demand to restructure the Agricultural Prices Commission by allowing farm representatives to participate, for the first time, in The Green Revolution is shifting trade patterns with the United States. Higher foodgrain produc- tion has already ended commercial foodgrain im- ports and, provided there are no major droughts, the prospects for future large US grain exports to India are dim. Progress in oilseed production is likely to be slow, however, and India will continue to be a potential market for US producers for several years. As domestic agriculture develops, market and investment opportunities for US agro- industries such as food processing, pesticide, chemi- cal fertilizers, and farm machinery are also likely 25X1 25X1 the setting of national procurement prices. We judge that continued expansion of farm produc- tion will be one of the major goals of Gandhi's new administration. Indian planners estimate that agri- culture will have to grow at 4 percent per year- near the average of the past five years-to sustain a projected GNP growth rate of 5 percent over the current Five-Year Plan (1985-90). Because crop yields are still relatively low, we judge that more efficient use of improved farm technologies, im- provements in rain-fed farming, and favorable weather could boost production near anticipated levels. Although New Delhi is likely to stress reducing agricultural subsidies, any sharp cutbacks would jeopardize efforts to increase agricultural growth and provoke protests from politically active farm- ers. We judge that farmers will use unions, farm cooperatives, and political parties to lobby success- fully at the state and national level for higher prices and subsidized credit. We also expect these farm groups to take a more active role in shaping agricultural policy while pressing for reduced im- ports and increased farm exports. to increase. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Secret Venezuela: Adjusting to the Depressed Oil Market Venezuela's economy is stagnating as the oil boom fades and Caracas is responding by retrenching on imports, ambitious development projects, and oil exploration. Austerity is bringing fiscal and current account surpluses, but unemployment and idle ca- pacity are rising. With no rebound likely in the oil markets in 1985, austerity will continue. Fiscal policies are likely to remain tight, and Caracas will again post a current account surplus. Despite some planned stimulation, we believe economic growth will be nil in 1985. A sharp fall in oil prices-while not currently expected-would likely cause an eco- nomic plunge. More likely, the economy will con- tinue to limp along and President Lusinchi will be able to deal with domestic discontent. Oil dominates Venezuela's economy, generating ,93 percent of export receipts in 1984 and almost 25 percent of total economic activity. The government oil monopoly, Petroleos de Venezuela (PDVSA), controls the oil sector, providing 65 percent of Venezuela, a charter member of OPEC, typically seeks cooperation and compliance among mem- bers. In 1984, however, Caracas sharply criticized OPEC cuts in Venezuela's production quota. ~Nev- ertheless, the criticism has quieted recently, and we expect Venezuela to remain in OPEC and emphasize production monitoring to minimize cheating-and help support prices. We expect Venezuela to havelurther disagree- ments with OPEC in 1985; however. OPEC has talked about including condensates and gas liquids in production quotas and setting price guidelines on refined products. Caracas, with a large percent- age of its exports in products, is unlikely to accept OPEC price controls on these. OPEC could also impose J'urther production cuts in 1985, and seri- ous resistance could arise in Venezuela as revenues public revenue. The government exercises a strong role in the economy. The oil boom led to a major expansion of the public sector, which now accounts for more than 40 percent of economic activity. The govern- ment is using oil revenues to support economic diversification by direct investment in steel and aluminum industries. Moreover, to stem the decline in living standards, Caracas has directed private firms to raise .employment and provide additional worker benefits. The current administration has continued to control imports, prices, wages, interest rates, and foreign exchange to buffer the domestic economy from oil price fluctuations. Adjusting to Fading Prosperity Venezuela faced steady downward pressure on oil revenues since 1980, as world prices fell and OPEC and currency reserves decline. established production quotas. total oil production-including condensates and gas liquids-has slipped from 2.5 million b/d in the late 1970s to 1.9 million b/d in 1984, although the average revenue received for Venezuelan crude.has dropped 20 percent to $26.74 per barrel. Oil expert revenues declined from a $19 billion peak in 1981 to only $14.8 billion in 1984. Caracas last year began adjusting domestic spend-. ing and investment to the falloff in revenues. To protect the nation's ability to repay debt and to Secret DI /EEW 85-023 7 June 1985 25X1 25X1 25X1 25X1 25X1 25X1 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Venezuela: Balance of Payments Billion US ~ 1982 1983 1984 Current account -4.2 4.4 4.4 Trade balance 2.9 8.3 8.7 Exports (f.o.b.) 16.5 14.7 15.9 Imports (f.o.b.) 13.6 6.4 7.2 Services balance -6.5 -3:7 -4.1 Unilateral transactions (net) -0.6 -0.2 -0.2 Capital account 3.9 -3.4 -2.2 .. Private sector (net) -3.9 -2.7 -0.8 Public sector (net) 7.8 -0.7 -1.4 Errors and omissions -2.4 -0.3 -0.1 Changes in reserves -2.7 0.7 2.1 25X1 prevent inflation, President Lusinchi ordered public spending cut 10 percent, raised domestic oil prod- uct prices, maintained strict .import controls, and refused labor demands for wage increases. ~~ Lusinchi's austerity policies led to a decline in real GDP of 2 percent in 1984 and a rise in unemploy- ment to 15 percent, according to the US Embassy. The external accounts were more favorable. With a tight cap on imports, Caracas registered a $4.4 billion current account surplus. Official reserves now total $13.5 billion, and Caracas paid $1.7 billion on debt principal in 1984. Success in cutting public spending and the lack. of public investment produced a fiscal surplus equal to 5 percent of GDP. This put downward pressure on Venezuela's economy because the budget surplus- held in sterile Central Bank accounts-is not avail- able for new lending. The sharp cut in oil exploration and development activities underlies the plunge in domestic invest- ment. Most other industries suffer from low demand caused by de- clining real incomes, and the US .Embassy reports that private domestic investment has declined for the sixth year in a row. On the basis of various sources, because of concern over extensive govern- ment controls, new foreign direct investment is largely reinvestments .forced by Venezuela's profit repatriation laws. The declining standard of living-per capita in- come has fallen 20 percent since 1980-is causing labor and middle-class-discontent. The US Embas- sy reports that business leaders are clamoring for wage restraint and relaxation of price controls. The Lusinchi administration promised last September to move toward decontrol of prices, but now is 25X1 25X1 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 retreating in the face of labor demands for wage improvements and protection from inflation. With strong ties to labor, the Lusinchi administration began eying a fiscal stimulus package late in the year to reverse the rising unemployment rate. Although the world oil market remains weak, Venezuela will be.less seriously affected than most other OPEC producers. We estimate that current crude production is 1.6 million b/d-half are heavier types, which the Venezuelans do not con- sider to be subject to OPEC price guidelines. Currently, PDVSA is selling its heavier crudes with little difficulty. In addition, prices for heavier crudes are strengthening as world refineries adapt to process these cheaper inputs. As a result, OPEC dropped prices for-light crudes by over $1.00 per barrel in February, Vene- zuela's average export price only declined by 50 cents. Venezuela also is producing more conden- sates and gas liquids, which are not included in OPEC production quotas. One-third of petroleum exports are refined products, which, while facing weak markets in 1985, are also not price controlled by OPEC. According .to US Embassy reports, PDVSA as- sumes that OPEC quotas will remain in effect through 1985, reducing export volume to 1.4 mil- lion b/d compared with 1.5 million b/d in 1984. PDVSA is optimistic that prices will remain about the same as last year. Caracas has drawn up a conservative budget that aims to maintain a fiscal surplus, but in February the government an- nounced a $500 million public works package, equal to 2 percent of GDP, to help reflate the economy in late 1985. Looking Ahead Despite the fiscal stimulus, we foresee continued recession in 1985 as oil revenues again constrain the economy. We expect oil revenues of $13.7 billion, a drop of 7 percent compared with last year. To protect the payments position, import controls will remain tight, and Venezuela probably will post a $2 billion current account surplus. Nonetheless, Caracas will need to draw down reserves by $2 billion to settle private-sector interest arrears-key to finalizing the multiyear rescheduling agree- ment-and to continue interest and principal pay- ments on public'sector debt. With another;~year of economic stagnation, unem- . ployment will rise to around 18 percent. We believe labor demands for large wage increases will be successfully resisted, and inflation will remain be- ' low 15 percent. Business demands for full removal' of price controls will also be resisted, but at the ' expense of reviving investment in 1985. Venezuela will probably restrain imports and control the economy with a heavy hand. Caracas will likely continue.to repay both interest and principal on its debt, but it remains,a poor candidate for absorbing increased US exports or new investment opportuni- If oil prices fell to $22 per barrel or OPEC cut Venezuela's quota again by 200,000 b/d, we be- lieve oil revenues would fall to $1 1=12 billion. Instead of a surplus, we believe the current account would register a $1 billion deficit and reserves would probably drop by $3-4 billion.. Venezuela's ability to repay debt and. interest could be seriously hurt, jeopardizing the $21 billion public-sector debt rescheduling now nearing final agreement. More- over, we believe real GDP would drop by 4 percent, causing unemployment to rise to 25 percent. The Lusinchi administration might then be unable to resist severe pressure, from both labor and business, to stimulate the economy. 25X1 25X1 25X1 25X1 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 r /SIS OI/ BOd ~ nnc fink/ oilfie/d ~ Miskai ~ ytVAIIETTA Isola Malta Pelagie (ftaly) lnternationa/ Court oflustice proposed boundary Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Secret Tunisia: Economic Strains and Social Tensions The Tunisian Government has been increasingly unable to meet rising expectations created by rapid economic development during the 1970s and one of the highest adult-literacy rates in A#'rica. Social tensions erupted in nationwide riots in January 1984 following government efforts to reduce bur- densome food price supports. Particularly ominous for the government is the growing wealth disparity between regions and social classes and the alien- ation of Tunisian youth. President Bourguiba's upcoming visit to the United States probably will be used to elicit greater financial aid for Tunisia's ailing economy and~security assurances in the event of domestic turmoil or foreign aggression. Tunisia suffers from a growing economic disparity between the prosperous coastal cities and the im- poverished interior. Coastal areas have benefited from the development of tourism, commerce, and the oil industry, while the south and the west have suffered from the government's neglect of agricul- ture. Average income in the south is as much as 40 percent below that of the coastal cities. This economic imbalance has prompted a growing migration to urban areas. About 55 percent of the population now lives in -urban centers compared with only 45 percent in 1970; if unchecked, 75 percent of the population -will live in urban centers by .the turn of the century with one-half in Tunis. Unskilled, rural: migrants.often remain unemployed or restricted io menial labor: Migrants played a major role in last year's riots, and they remain a pool of idle, disillusioned poor who could again vent their frustrations in violence. the south. About 70 percent of the population is under 26, and this group is hardest hit by unem- ployment. Even college graduates often cannot find employment commensurate with their education. Few of the young join the ruling Destourian Party, but a growing number are attracted to conservative Islamic groups. The economy began to slow in the late 1970s when Tunisia's main sources of foreign exchange earn- ings-petroleum, tourism, phosphates, and worker remittances-languished as a result of the interna- tional recession. Real GDP growth has averaged 4 percent annually since 1979-two-thirds of the level of the previous four years-and has barely been sufficient to absorb the 3.8-percent annual increase in the nation's labor force. Reduced de- mand for Tunisian labor in Western Europe and wealthy Arab states has helped push unemploy- ment to 20 percent in urban areas, according to official Tunisian estimates. We believe, however, that the actual level of unemployment is closer to 30 percent. Stagnating foreign exchange earnings have serious- ly weakened Tunisia's international payments posi- tion. The current account deficit last year of $1 billion was up 65 percent over the 1983 level because of the soft oil market, a poor harvest, and a sharp rise in domestic consumption. Tunis has financed the steadily rising current account deficits with overseas loans and now has an external debt of about $4.6 billion-55 percent of GDP. Debt ser- vice payments consume about one-fourth of re- ceipts from. exports. of. goods and services. Foreign exchange .reserves of $225 million cover only one Political and generational differences exacerbate regional economic disparities. President Bourgui- ba's secular, pro-Western government is dominated by members of the social elite from the French- speaking coastal cities and has little popularity in month of imports. Secret DI IEEW 85-023 7 June 1985 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Tunisia: Economic Indicators, 1980-85 GDP Growth Percent Trade With the United States Million US $ Consumer Price Growth Percent Financial Exchange Reservesb Million US $ a Projected. b End of period, excluding gold. 25X1 Prime Minister Mzalt pushed through a barebones budget this year to halt the escalating government deficit and stem foreign borrowing needs. He has announced plans to tighten the collection of taxes and tariffs and reduce government food subsidies. These measures, however, will greatly complicate government efforts to keep peace with organized labor. Labor problems this spring have been sub- dued because of ongoing wage negotiations with the government. Union leadership may not be able to maintain the calm, however, if Tunis holds the line on wages and goes ahead with food price increases. Agriculture remains a bottleneck to the economy. Government neglect and pricing policies favoring imported grain over domestic production have led to poor performance in this sector. Agriculture employs one-third of the population but accounts for only 15 percent of GDP. Food imports already meet about 50 percent of demand. Agricultural output probably will lag population growth during the next several years, adding to the foreign pay- ments deficit. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Secret Petroleum is a mainstay of the economy, account- ingfor 53 percent of export earnings, about 21 percent oJgovernment revenues, and 16 percent of GDP in 1984. We estimate that production is currently averaging about 115,000 b/d..Declining reservoir pressures and limited success with sec- ondary recovery techniques in the main oi(fields- A1 Burmah and Ashtart-will cause production Jrom thesefields to continue to decline. Production Jrom oil and gas fields still under development- Tazerka, Miskar, and Isisfields-should allow production to remain near current levels for sever- al years, but the IIS Embassy estimates that the rapid growth in domestic consumption will cut into net oil export volume. Tunisia could become a net oil importer by the end of this decade, according to industry estimates. The boundary dispute and political tensions be- tween Tunisia and Libya have been major obsta- cles to development of promising ojJshorefields. Tunis has yet to accept the International Court of Justice ruling delimiting the ojJshore boundary between these two states. A second hearing on this dispute is in progress. Bourguiba's advanced age-82-and chronic health problems have dulled his political acumen causing him to spend less time directing public policy. His continuing grasp on power, however, frustrates efforts to ameliorate Tunisia's pressing social and economic problems. The government is increasingly being viewed by the growing number of educated youth and unemployed as a tool of the elite that is dangerously out of touch with the needs of the population. of popularity complicates his prospects for consoli- dating power after Bourguiba leaves office. ~~ 25X1 We believe that Tunisia's financial position will continue to remain weak for the rest of the decade. Oil revenues will decline as export volumes fall- more so if energy prices decline. Government ef- forts to boost exports of Tunisian textiles and agricultural products will be hampered by West European quotas. With aid prospects limited, addi- tional international borrowing will be necessary to meet the expectations of the burgeoning population and to finance military modernization and econom- ic development goals. The gap between consump- tion and production of foodstuffs will increase unless politically sensitive food subsidies are trimmed and price controls are eliminated. This, however, would again push inflation to double-digit levels and risk consumer unrest. Pressure from organized labor to maintain consum- er subsidies will frustrate government efforts to keep spending in line with revenue. Radical ele- ments in Tunisian society increasingly will try to capitalize on the declining standard of living and periodic labor unrest to organize and gain conces- sions from the regime. The government will be more pressed than in January 1984 to put down widespread unrest when it recurs and will increas- ingly have to rely on repression to remain in power. Bourguiba's death almost certainly will aggravate the situation as the military's support of Mzali is less certain, in our opinion. Implications for the United States Bourguiba sees his ~~isit to the United States as a very personal one, highlighting the longstanding close ties Tunisia has had with Washington. He will seek Washington's reassurances of protection Uncertainty over Bourguiba's longevity contributes to government infighting in anticipation of the post-Bourguiba period. Mzali's efforts to ensure his position as Bourguiba's successor have eroded his popularity and respect for the regime. Mzali's lack 25X1 25X1 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Current account balance -443 -489 -691 -634 -1,049 -710 Trade balance - 1,078 - 1,070 - 1,292 - 1,182 -1,550 - 1,180 Exports (f.o.b.) 1,804 2,110 1,625 1,574 1,450 1,390 Petroleum 1,345 1,308 910 835 770 730 Imports (f.o.b.) 2,882 3,180 2,917 2,756 3,000 2,570 Foodstuffs 390 428 357 425 395 300 Services (net) 620 563 560 531 ~ 486 450 Of which: in the event of domestic turmoil or external aggres- sion. He may also pursue additional financial assis- tance=including military debt relief-to help ease mounting social and security pressures as a mea- sure of. US appreciation for Tunisia's consistent support for US policies. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Secret Key Debtor LDCs: Exports Decline This Year' We believe that exports for 12 key LDC debtors Key Debtor LDCs: Export Growth, 1976-85 will decline this year following the sharp rebound in 1984.2 Among nonoil exporters, only Chile is likely to record faster export growth this year; Bolivia and Brazil face export declines. Colombia and Indone- Percent sia should do the best among oil exporters in the zs group. Slowing export growth, combined with high- _ er debt service payments, could force these govern- 20 ments to squeeze imports, hurting chances for is continuing economic recovery in these 12 countries over the second half of this year. Reduced export to growth could also put strains on their debt servicing capacity. s Contributing Factors The projected slowdown in OECD economic -io growth likely will trim OECD import demand. On the basis of OECD projections, real GNP in the -ts 1976-soy st az s3 sa ssb industrialized countries will rise about 3 percent in a peerage annual. 1985, only two-thirds as fast as last year. In b projected. addition, continued slack oil sales will hold down overall export gains for the oil exporters. Increasing developing country protectionism and loss of LDC 305825685 export incentives because of budget cuts also will limit export prospects of several key debtors, espe- last year's 16-percent increase. Only Chile is ex- cially Brazil. Real exchange rates for the key pected to show faster gains, and Bolivia and Brazil debtors are expected to show little change, on face the possibility of an export drop. average--compared with a 3-percent. appreciation in 1984 that cut into their competitiveness. Among individual countries: Smaller Gains for Nonoil Exporters ? Argentine grain exports are likely to suffer from stiff competition and weak prices; beef exports face competition from subsidized EC sales. Over- all export growth in 1985 is likely to be only one- For nonoil exporters as a group, we estimate export fourth of last year's pace. growth will average about 1 percent compared with ' This article is based on a forthcoming research paper. ~~ 'The group includes Argentina, Bolivia, Brazil, Chile, Colombia, Indonesia, Malaysia, Mexico, Nigeria, Peru, the Philippines, and Secret D! /EEW 85-023 7 June 1985 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 ? Brazil's export performance probably will be far less robust than last year's. Exports of manufac- tures, such as footware and steel, are likely to decline, and sales of commodities could stagnate. Increased protectionism and reduced export in- centives, b~ecalise ~of budgetary constraints:.and GATT commitments, could also dampen exports. ? Chile's copper export earnings should increase this year as production rises 2 to 6 percent and prices recover. In addition, exports of iron ore should also rise. ? The Philippines should benefit from recovery in the coconut oil and timber markets. Slower Export Growth for Oil Exporters Export earnings for the oil-exporting key debtors are likely to drop 1 percent in 1985, compared with a 10-percent gain last year. Overproduction and weak demand continue to depress oil prices. Growth in nonoil exports is also likely to slow from last year's pace. Colombia, Indonesia, Malaysia, and Nigeria should record modest to large export gains, and Mexico, Peru, and Venezuela probably will suffer export declines: Colombia's export prospects should be bolstered by higher coal sales, and coffee exports should recover after a decline last year because of bad weather. ? Indonesia and Malaysia face slowdowns in ex- ports of rubber, timber, and palm oil. Oil earn- ings are expected to show little change. ? The US economy's slowdown and the overvalued :peso likely will lead to a drop in Mexican manu- factures exports: Oil export earnings are also likely to decline. ? Because of a desperate need for foreign exchange, Nigeria is likely to maintain high oil production, but soft prices will cut the growth in export earnings. Key Debtor LDC Exports, 1983-85 Percent Change Brazil 21.9 26.9 26.5 23 -1 Chile 3.8 3.7 4.0 - 3 8 Colombia 3.0 3.0 3.2 -2 8 Indonesia 16.0 17.1 17.8 7 4' Malaysia 13.8 16.3 16.7 18 2 Mexico 21.4 24.1 22.5 13 -7 Nigeria 11.6 12.2 12.4 5 2 Peru 3.0 3.2 3.1 7 - 3 ? Peru's export earnings this year could drop by 3 percent because of weak prices for traditional exports and lack of export financing. Implications Declines in export growth could exacerbate debt servicing difficulties for most of these countries. Argentina's debt situation remains bleak: it contin- ues negotiating with the IMF, and bank creditors have not yet committed the $4.2 billion that they agreed in principle to provide. Similarly, Brazil continues its IMF negotiations, and concern about its foreign exchange earnings capacity supports speculation -that Brazil will need new money by late 1985. Peru and Bolivia remain in grave debt situa- tions, and a fall in export growth will make their 25X1 25X1 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Secret condition worse. Colombia, Mexico, and Venezuela are doing relatively better with external debt ar- rangements, and the decline in export growth for Mexico and Venezuela will not pressure them greatly. The Philippines recently signed a financial package with creditors that includes trade credits, so export growth declines will not have as much impact. Overall, the expected export slowdown likely will constrain import growth and dim pros- pects for continuing economic recovery in the sec- ond half of this year. Brazil's trade surplus could decline by as much as $2 billion from last year's level. Chile and Colombia will have little room for import gains, because increased exports could be offset by higher debt service payments. Export declines imply continued austerity in Bolivia and Peru. Slowing export growth could imperil Mexi- co's fledgling economic recovery and dash Nigerian hopes for renewed real GNP growth. In addition, reduced export gains probably will slow the growth of real income in Indonesia and Malaysia. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Secret Energy Australian-Japanese Representatives of eight Japanese utilities have initialed a contract with six Gas Sales Agreement Australian suppliers to import 6 million metric tons of liquefied natural gas (LNG) annually for 19 years beginning in 1989. At current prices, the gas would be worth about $1.6 billion per year. If government approvals can be ob- tained and financial terms arranged by the end of July, construction of liquefaction and loading facilities could begin in Australia by the end of the year. Japan signed a letter of intent in 1981, but financial difficultiesamong the Australian backers, together with downward revisions in Japanese energy demand, delayed the initial 1986 start-up date. Australian LNG is expected to cover about 15 percent of Japanese LNG demand after 1990. Tokyo now has sufficient supplies tentatively lined up to meet about three-fourths of its natural gas requirements through 2000. European Coal Imports Coal imports by the European Community in 1984 rose 30 percent over year- Rise in 1984 earlier levels to a record 80 million metric tons, partly offsetting the 72- million-ton drop in EC coal production. The UK coal strike accounted for 67 million tons of the decline in EC output, and led to UK coal imports of nearly 9. million tons, more than twice the amount imported in 1983. Fuel oil was widely substituted for coal during the UK strike. Other EC coal consumers in- creased coal imports by one-fourth, as a result of the greater use of coal for power generation. Australian shipments to EC buyers nearly doubled to more than 15 million tons, while imports from South Africa rose 26 percent to 20 million tons. Imports from Poland rose 50 percent to 15 million tons. Of the major suppliers, only the United States=whose exports remained flat at 24 million tons-failed to benefit. Aramco Encouraging Aramco is trying to cut its payroll by increasing retirement benefits for Saudi Early Retirement employees who retire early. The company's manpower has stayed about the same in recent years even though liftings have declined by two-thirds. Under Aramco's new retirement formula, the "typical" retirement benefit will be increased by 7 percent, according to the US consulate in Dhahran. If this does not induce a sufficient number of Saudis to retire voluntarily, Aramco intends to force 500 to 600 older employees to take early retirement. Saudi employees are currently eligible for full retirement at 60=counted in shorter Saudi lunar years-and may retire as early as 50 with 60 percent of full benefits. 21 Secret DI IEEW 85-023 ~ June /985 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 West German Bank West German banks in general have kept their international lending within Exposure to Major conservative limits, according to Bundesbank data-which for the first time Debtor Countries includes activities of foreign subsidiaries.. These subsidiaries-about half are in Luxemburg-accounted for almost one-third of total West German bank international lending. At the end of 1984, West German banks held $35 billion or 8.7 percent _of total Western bank exposure to the 25 largest debtor nations. West German banks, however, account for a large share of Western bank lending to Turkey (33.1 percent),, Israel (26.2 percent), Poland (25.6 percent), and the USSR (19.5 percent). IMF Relaxes Growing concern over the recent appreciation of the Philippine peso led the Philippine Austerity IMF last week-at Manila's request-to relax the money supply growth target set late last year. The peso appreciated 6 percent against the US dollar and nearly 15 percent. on atrade-weighted basis since last November, causing a $120 million slippage in exports according to our estimate. Manila will now be permitted to expand reserve money, which determines the total credit available in the economy, by 15 percent this year rather than the original ceiling of 11 percent. The new limit allows the Central Bank-the only major buyer of foreign exchange over the past year-to accelerate foreign exchange pur- chases. In a related move, Manila last week raised the limit on foreign exchange assets ,commercial banks may hold. We judge these moves will weaken the peso, halting the slide in the country's export performance but threatening, to rekindle inflation, currently running at only a 5 percent annual Global and Regional, Developments OECD Call for The recent OECD Secretariat's Economic Outlook stresses the need for more Economic Stimulus stimulative economic policies in Western .Europe to stem unemployment, now averaging 10 percent and rising. The report argues that recent declines in the US dollar and US interest rates enable West European governments to take immediate action to lower interest rates further and boost growth above the 2.3,percent now projected through 1986. Moreover, the Secretariat also calls for "appropriately designed" tax cuts to revive domestic damand and invest- ment. The Secretariat bases its unusually direct warning on its forecast of less than 3-percent US GNP growth through 1986. that would mean a slowing of US demand .for West European products. US imports have accounted for almost half of West European GNP growth since the recovery began. If their economies fail to perk up soon, the-West European leaders-particularly those in France, West Germany, and the United Kingdom facing elections beginning in 1986-may have to consider tax cuts or other stimulus. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Secret GATT Debate on Nicaragua's attempt to protest the US.trade embargo in GATT has met with Nicaraguan Embargo little success. During the GATT Council debate last week, representatives of most of the 34 countries participating criticized the embargo but urged a bilateral solution. The EC, Japan, Canada, and Australia supported the US legal position that GATT is not the proper forum for this issue. Some Latin American and Asian countries appealed to the United States to end the embargo, but all African and ASEAN countries were silent. Only Cuba fully supported Nicaragua's proposal to condemn US actions and initiate GATT's dispute settlement procedures. Although Nicaragua has succeeded in drawing attention to, and gaining some support for, its position, the lack of immediate action by the GATT Council, means that debate in this forum is likely to be deferred. EC Development Aid The European Community will give Nicaragua $5.1 million in development for Nicaragua assistance to improve facilities for storing and exporting food products. EC Commissioner Cheysson and Nicaraguan Vice President Ramirez signed the agreement last week in Brussels at the end of Ramirez's four-nation European tour. Both officials used the occasion to criticize the US embargo-and Cheysson contended that the sanctions conflicted with the EC's economic philosophy. According to Cheysson, Nicaragua has received more than $25 million in EC financial and technical assistance since 1979. The funds for the new projects almost certainly were not triggered by the US embargo and do not represent a new aid commitment. The funds were approved last year as part of the Community's ongoing aid program for developing countries. Cheysson's comments reflect his personal views and do not constitute official EC policy. Many EC members, however, strongly oppose the US trade action and are likely to make marginal increases in imports of Nicaraguan foodstuffs. Tropical Timber The International Tropical Timber Agreement (ITTA) entered into force on 1 Agreement April 1985 following eight years of negotiations as part of UNCTAD's Integrated Commodities Program. Unlike agreements on cofTee, sugar, tin, and rubber, the pact contains no provisions for controlling market supplies or stabilizing prices. Its objective is to provide a framework for cooperation between producing and consuming countries to promote expansion and diversification of trade in tropical timber. Only coffee and sugar among the nonoil commodities generate greater export earnings for LDCs. The ITTA is also the first pact to link trade with national policies aimed at conservation of tropical forest resources. All of the major producers have signed the accord, in- cluding Indonesia, Brazil, and Malaysia, which together account for more than two-thirds of the estimated $7 billion a year global trade in tropical timber. Major consumer signatories include Japan, the EC, and the United States, which together account for about 90 percent of annual global imports of these products. The first meeting is scheduled for 17-28 June in Geneva. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 National Developments Developed Countries .25X6 West German Plans Bonn apparently has decided on some form of fiscal stimulation in light of the for Fiscal Stimulus setback suffered last month by Chancellor Kohl's Christian Democrats in a key state election. Much of the blame for the defeat has been placed on the lack of progress on unemployment. The magnitude and form of the measures, currently under intense debate, will be announced at the end of June. The Free Democrats and the Christian Social Union junior partners in the coalition- are calling for compressing the 1986-88 tax cut into a single step in 1986. Oth- er proposals center on spurs to investment in construction and for environmen- tal protection. We expect that whatever is enacted will be modest enough to al- low the government to claim that it is not abandoning its longstanding policy of budget deficit reduction and primary reliance on private-sector initiatives. Italian Wage The Communists, shaken by losses in recent local elections, are beginning to Indexing Referendum worry that their referendum on wage indexing will be defeated on 9 June, seriously eroding. their claims to speak for the working man. Last year Prime Minister Craxi pushed through a cut in the quarterly inflation adjustment, roughly equal to 4 percent and the referendum seeks to rescind that cut. The governing parties, management, and moderate labor unions oppose the referen- dum, because it might trigger a new round of inflation. Even in the Communist-dominated trade union, most non-Communist members oppose it. Many political leaders also worry that the referendum may set a dangerous precedent for economic decision making. Some Communist leaders would prefer to drop the initiative-launched by former party leader Berlinguer about a year ago-despite current indications that it would pass. Last week, however, representatives of government, management, and unions apparently gave up attempts to negotiate a settlement that would have averted the Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Secret referendum. Reducing wage indexing is widely considered one of the most significant accomplishments of Craxi's two-year administration, and Craxi has said that he will resign if the cut is restored. British Industry Seeks British industry and research organizations are reportedly actively negotiating Role in SDI Research contracts to participate in SDI research, even before London formally replies to Washington's invitation. According to press reports, Logica, a leading computer company, hopes to win a $200,000 software contract probably for directing laser guns. At the same time, Edinburgh's Heriot-Watt University expects to receive a grant of $150,000 to work with a US company to produce prototypes of optical computing devices. Industry observers believe the British could also make major contributions in the fields of battle management and conventional missiles. Most firms would prefer to sign direct contracts with the Pentagon, rather than subcontracting for US companies. It appears likely that London will eventually decide in favor of the US proposal, primarily to enhance Britain's technological development. In any case, Prime Minister Thatcher would probably encourage private firms to use their own resources to participate. French Arms For the French arms export program, 1984 was an excellent year. Despite Sales in 1984 some controversy over the total, we believe a figure of about $6.9 billion is ac- curate. The 1984 sales total, however, did not match France's record achievements in 1980 or 1982 ($8.2 billion and $7.5 billion, respectively). This impressive performance may fade over the next few years; over half the 1984 total sales came from one deal-an air defense system for Saudi Arabia. This level of sales in a tight arms market, however, is indicative of France's aggressiveness and skill as an arms dealer. We expect stiff competition for future US sales efforts, especially in the aerospace markets. Spanish Labor Reform Government, union, and business leaders will meet this month to discuss modifying Spanish dismissal regulations to conform with EC practices. Although government officials are convinced that rigid labor laws are a serious impediment to lowering the 22-percent unemployment rate, Madrid had to defer action last year to obtain a wage agreement. Business leaders particular- ly want the elimination of a government commission that must approve dismissals and that usually grants even higher severance payments than required by law. This move is opposed by the Socialist UGT trade union, which is already angered by plans to cut pension benefits and fears that labor flexibility will translate into job losses. Abolishment of the commission, however, probably would have little impact because the continuing difficulty and expense in dismissing workers-severance can be as high as three and a half years' salary-will continue to discourage hiring. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Less Developed Countries Mexican-Nicaraguan Mexico's public pledge last week to strengthen economic ties to Nicaragua Economic Cooperation probably does not portend a return to ,significant levels of assistance and will not reverse the Sandinistas' dependence on Soviet oil. Mexico City has agreed to supply Managua with 320,000 barrels of oil-about a 25-day supply- . under terms of the existing Mexican-Venezuelan agreement. Mexico also expressed willingness to provide an additiona1410,000 barrels under conditions yet to be negotiated. Meanwhile, representatives of the two countries are meeting to renegotiate Nicaragua's $600 million debt to Mexico-about $500 million is for oil. Mexican officials have indicated that a joint commis- sion is preparing an export program that could enable Managua to reduce the debt. Nicaragua's deepening financial crisis and .the limited potential of the new export program probably will prevent Managua from reducing its debt to Mexico in the near term. Mexico has little need for most of Nicaragua's major . exports. Mexico City's actions, coming on the eve of President de la Madrid's visit to five, West European countries, may be designed to demonstrate that Mexico is not abandoning Managua or bowing to US pressures. Brazilian Military Brazil won the competition to sell a new trainer aircraft to Britain's RAF, Aircraft Sale beating out its main rival, the Swiss Pilatus PC-9, and other competitors from . the United Kingdom and Australia. Britain ordered 130 Tucanos worth about $130 million, with an option for 15 more. Brazil won the sale by offering the lowest price, including a UK-produced engine and, most important, licensing assembly of the aircraft in economically depressed Belfast. The Swiss are upset over the sale but could not match the concessionary terms offered by Brazil. This is the third time the Tucano has beaten the Pilatus in a head-to-head competition (Egypt and Honduras were the others), and the RAF sale is expected to open up other sales, according to military reporting. Chile's Export Chile is seeking to push forest products-now less than 10 percent of total ex- Divers4fication ports-ahead of minerals and fishery products as the country's primary export earner. According to government plans, forest products exports that totaled $385 million last year will be raised to the $2 billion level by the mid-1990s. Santiago has begun aggressively marketing softwood logs, lumber, and pulp in Latin America, the Far East, and Western Europe. These products compete directly with US forest products. For Chile to succeed, $2 billion in new investments for infrastructure improvements will be required with much of the funding from foreign borrowing. Santiago will have to achieve sufficient political stability to provide a favorable climate for domestic and foreign investment. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Secret would worsen, forcing Addis Ababa to cut non-food-aid imports further. Ethiopian Coffee Transportation problems resulting from the diversion of trucks to famine relief Export Problems activities probably will hold Ethiopia's coffee exports-which usually account for over three-fifths of export earnings-below its International Coffee Organization (ICO) quota this year. Other factors contributing to the shortfall include a late harvest caused by drought in the southern regions, a shortage of pickers, and smuggling: Shipments for the first half of the October/September coffee year were 50 percent below the same period last year. Although Addis Ababa has stated it plans to fill the ICO quota, we believe that trucks will con- tinue to be diverted to food distribution and the government's resettlement program. As a result, Ethiopia's already serious foreign exchange shortage dependent on foreign largess for the near term: Troubled Comoran The Comoran economy, beset by a worsening trade position, burgeoning debt, Economy and longstanding structural deficiencies is deteriorating. Real growth rates during 1981-84 declined from 7.4 percent to 3.3 percent as major construction projects-financed by foreign aid-were completed and growth in the domi- nant agricultural sector lagged. At the same time, depressed world prices for copra and spices-which account for 99 percent of export earnings-have contributed to burdensome current account deficits. The government has relied on concessional loans and some supplier's credits to close the gap, and external debt equaled 116 percent of GDP in 1984, compared with 38 percent in 1980. Unexpectedly low levels of grant aid and the government's unwilling- ness to cut spending have hit the budget; total government outlays are now five times domestic revenues and the budget deficit accounts for 18 percent of GDP. A 3-percent population growth rate, primitive farming techniques, lack of natural resources, and insufficient infrastructure will keep the Comoros Sri Lankan The Tamil insurgency and capricious government economic policies are taking Insurgency Hurts atoll on Sri Lanka's efforts to woo foreign investors. In 1978 the Jayewardene Foreign Investment regime began a program of economic liberalization that initially attracted foreign investment and helped. diversify its plantation-based export economy. Over the past two years, however, foreign investment and joint-venture approvals have declined by 25 and 45 percent, respectively. According to the US Embassy, the government's control of market access and production quotas have added to a deteriorating business climate. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Indonesia's Aid Foreign aid donors met in The Hague this week to: review Indonesia's Donors' Meeting economic performance and to make..this year's aid pledges. The World Bank's latest report praises Jakarta's austerity program for avoiding a foreign debt crisis acid cutting the .current account deficit from 8.4 percent of GDP to 2.4 percent: in fiscal year 1984/85. Nonetheless, the Bank estimates that Jakarta will need about $5.2 billion in foreign borrowing annually in the medium term. Only about half :the amount will be supplied. by commercial sources, requiring aid contributions totaling about $2:5 billion annually in each of the next three .years: The donors. have indicated a willingness to adhere closely to the Bank's recommendations but will-continue to watch Jakarta's progress on followup reforms to~improve the economy's efficiency. South Korean Real GNP growth slowed to 4 percent in the first quarter compared with first Economy Slows .quarter 1984-following 7.5-percent. growth for full year 1984-due largely to a decline in' exports. The 8-percent fall in foreign sales in January-March was broad based, reflecting weaker global demand and increased protectionism abroad. projecting 5.0- to 5.5-percent growth for the year, compared with the government's 7.5-percent target. Seoul, which has maintained a tight monetary and fiscal stance to drive inflation below 3 percent, may ease its austere policies to stimulate domestic . demand. The Chun government will proceed cautiously, however, because of foreign payments concerns: the current account deficit in the first quarter exceeded .the government's $500 million target for all of 1985. Brunei Closes Door The Brunei Government announced last week that, beginning next year, it will on Chinese Labor no longer renew work permits and employment licenses for expatriate Hong Kong and Taiwanese residents. This is the latest in a series of moves against the large Chinese minority, which dominates the country's private sector. Following independence last year, the government imposed strict citizenship requirements that effectively exclude nearly 90.percent of the country's 60,000. Chinese. Without citizenship their access to education is limited and they are denied government employment-which constitutes nearly half of total em- ployment in Brunei. These discriminatory. policies have resulted in a steady .emigration of Chinese managerial and technical personnel to Singapore and Canada over the last year that, if it continues; will impair the functioning of the country's vital oil and natural gas industries. Romanian-Soviet: Soviet trade officials in Bucharest told US Embassy officers that in 1986-90 Energy Cooperation the Romanians are to provide equipment and about 2,000 workers for a gasfield project in Turkmeniya, contribute some financing and equipment for the Yamburg gas pipeline, and construct the 183-kilometer portion in Romania of a Soviet gas pipeline to Greece and Turkey. Romania also is to provide equipment and labor to help the Soviets explore for oil and gas in the 25X1 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Secret Caspian Sea and Siberia; the Soviets are already laying a pipeline to Romanian offshore deposits in the Black Sea. The Soviets will pay for the expanded Romanian cooperation by providing oil, gas, and other raw materi- als. The Soviet officials, however, expressed skepticism that Romania can meet its commitments. President Ceausescu has been pushing Moscow for more cooperation on energy and increased bilateral trade. The Soviets have given a small concession by shifting the oil trade from a barter to a clearing account basis, thus nominally increasing the planned trade level. Much of Romania's best equipment, which was to have been bartered for oil, however, is now included under the clearing account. In addition, Bucharest has been reluctant to provide labor to the USSR; both countries have shortages of skilled labor. Although overall trade is likely to increase, growth will probably fall short of plans, given Romania's economic difficulties and ambitious targets for exports to the West. Bucharest was only able to provide the Soviets with enough hard goods last year to obtain about half the oil the Soviets had agreed to provide. Poland's Economic A party meeting last week endorsed major changes in the economic reform Reform Corverence program that would increase the role of the central government. The decision is a retreat from the 1982 reforms that allowed firms more responsibility in ar- eas ranging from wages to production. At the conference Deputy Premier .Messner said that the government would not return to strict centralized management, but would maintain and even broaden the state's role in planning and implementing economic strategy. Premier Jaruzelski paid lipservice to reform-most likely to impress Western creditors and the IMF-but endorsed Messner's statements and compared Polish reform to policy changes in other socialist countries, especially the USSR. Other speakers confirmed rumors that reform opponents had gained strength in the past year, because of poor performance by some sectors experimenting with reform and the growing belief that economic recovery demands discipline, not decentralization. Pros- . pects for reform-even before the conference-were dim largely because of the regime's reluctance to take politically difficult steps such as linking wage increases to productivity gains. Moreover, officials are concerned about losing power, and managers are hesitant to take on increased responsibility. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 25X1 Sino-Japanese Friction China's complaints about its growing trade imbalance with Japan-$1.4 Over Trade and billion in first quarter 1985 compared with $2.2 billion for all of 1984-may Technology Transfer be designed to press Tokyo to increase imports of Chinese goods and transfer production technology. Beijing has stepped up its charges that Japanese firms are unwilling to invest in and to transfer production technolo y to China and has linked future imports to technology transfer. China's Acrylic Fiber Plans with China because of Bonn's willingness to transfer technology. A more long-term bilateral concern is technology transfer. China's State Council last week issued new regulations aimed at stepping up technology imports, and Beijing has exempted purchases of advanced technology from recent measures to curtail imports by provincial authorities. Moreover, Beijing seems willing to overlook West Germany's nearly $300 million trade surplus China's textile industry for the next five years will focus on expanding acrylic fiber capacity. Domestic capacity, now estimated at about 60,000 metric tons, will be almost tripled by 1990. A 50,000-ton plant is already under construction in Daqing. Import substitution-particularly with the prospect of rising prices-is proba- bly the motive for this planned expansion. China is a major importer of acrylic fiber-80,000 tons in 1983, 120,000 tons in 1984, and perhaps 200,000 tons this year. Beijing expects imports of all synthetic fibers to increase by 20 to 25 percent this year. 25X1 I 25X1 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Secret China Buys $1 SO China signed a contract last week with Italy for $150 million worth of coal ex- Million Worth of Coal traction equipment. The deal will be financed under a $500 million low Equipment From Italy interest export credit Rome recently provided for the development of south- western China's coal mines, railways, and port facilities. Italy is also providing technical assistance. The contract is among China's largest for coal equipment and comes on the heels of a $126 million loan from the World Bank to build coal facilities. Beijing hopes to utilize foreign equipment and technology to expand coal output by the year 2000 to 1,200 million metric tons, a 55-percent increase over current production. 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Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Economic & Energy Indicators Industrial Production Gross National Product Consumer Prices Money Supply Unemployment Rate Foreign Trade Current Account Balance Export Prices in US $ Import Prices in US $ Exchange Rate Trends Money Market Rates Agricultural Prices Industrial Materials Prices World Crude Oil Production, Excluding Natural Gas Liquids 8 Big Seven: Inland ,Oil Consumption 9 Big Seven: Crude Oil Imports 9 OPEC: Crude Oil Official Sales Price 10 OPEC: Average Crude Oil Official Sales Price (Chart) 11 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Percent changefrom previous period seasonally ad)usted at an annual rate Annual Dec United States 2.6 -8.1 6.4 10.7 0 Japan 1.0 0.4 3.5 11.1 -7.7 West Germany -2.3 -3.2 0.3 3.3 -13.5 France -2.6 -1.5 1.1 2.6 -24.1 United Kingdom -3.9 2.1 3.9 0.9 8.5 Italy -1.6 -3.1 -3.2 3.1 6.5 'Jan .Feb Mar Apr 2.2 1.5 3.7 -2.9 -2.0 9.4 - 21.4 -1.2 0 -17.1 74.0 20.2 -2.3 -37.9 . 158.1 Gross National Product a Percent change from previous period seasonally ad)usted at an annual rate Annual 2d Qtr 3d Qtr 4th Qtr 1st Qtr United States 2.5 -2.1 3.7 6.8 7.1 1.6 4.2 1.4 Japan 4.1 3.4 3.1 5.7 7.6 2.6 9.6 West Germany -0.2 -1.0 1.3 2.6 -7.4 9.8 5.8 France 0.2 2.0 0.7 1.6 -1.7 4.7 -0.2 United Kingdom -0.9 1.5 3.4 1.6 -5.6 -1.4 13.2 Italy 0.2 -0.5 -0.4 2.6 2.7 4.4 -2.3 Canada 3.3 -4.4 3.3 4.7 3.2 6.6 2.3 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Money Supply, M-18 Percent change.(rom previous period seasonally adJusted at an annual rate 7.1 6.6 11.2 6.9 10.9 9.4 15.3 5.8 6.3 3.7 7.1 3.0 2.9 1.1.5 -8.1 11.0 64.8 e Based on amounts in national currency units. b Including M1-A and M1-B. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Foreign Trade e Billion us S, Lo.b. 1981 1982 1983 1984 1985 1st Qtr Jan Feb Mar United States b Exports 233.5 212.3 200.7 217.6 55.7 19.4 17.9 18.4 Imports 261.0 244.0 258.2 325.6 84.4 28.3 28.0 28.1 Balance -27.5 -31.6 '57.5 -107.9 -28.7 -8.9 -10.1 -9.7 Japan Exports 149.6 138.3 145.5 168.2 40.1 14.1 13.2 1'2.8 Imports 129.5 119.7 ?114.1 124.1 28.7 9.6 9.7 9.4 Balance 20.1 18.6 31.5 44.1 11.5 4.6 3.5 3.4 West Germany Exports 175.4 176.4 169.4 172.0 40.7 14.2 13.6 13.0 Imports ~ 163.4 155.3 152.9 153.1 36.3 12.9 11.9 11.5 Balance 11.9 21.1 16.6 18.8 4.5 1.4 1.7 1.5 France Exports 106.3 96.4 95.1 97.5 22.5 7.1 7.6 7.9 Imports 115.6 110.5 101.0 100.3 23.6 7.5 8.2 8.0 . Balance -9.3 -14.0 -5.9 -2.8 -1.1 -0.4 -0.6 -0.1 United Kingdom Exports 102.5 97.1 92.1 93.7 22.6 7.4 7.6 7.7 Imports 94.6 93.0 93.8 99.2 24.0 7.5 7.9 8.7 Balance 7.9 4.1 -1.8 -5.5 -1.4 -0.1 -0.3 -I.0 Italy Exports 75.4 74.0 72.8 73.6 5.7 6.1 Imports 91.2 86.7 80.6 84.3 6.9 7.3 Balance -15.9 -12.8 -7.8 -10.7 -1.2 -1.1 Canada Exports 70.5 68.5 73.7 86.8 21.9 7.3 7.1 7.5 Imports 64.4 54.1 59.3 70.8 17.9 6.2 5.8 5.9 Balance 6.1 14.4 14.4 16.1 4.0 1.0 1.3 1.6 e Seasonally adjusted. n Imports are customs values. Imports are c.i.f. United States 6.3 -9.2 -41.6 -101.7 ----_ ' Japan 4.8 6.9 20.8 35.0 6.8 0.8 2.5 3.5 West Germany -6.8 3.5 4.1 5.9 1.1 -0.3 0.7 0.8 France -4.7 -12.1 -4.6 -0.5 United Kingdom 15.3 9.6 3.7 0.1 0 0.4 0.1 - 0.5 Italy ~ -8.6 -5.7 0.6 Canada -5.0 2.1 1.4 1.5 a Seasonally adjusted; converted to US dollars at current market rates of exchange. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Exchange Rate Trends Percent change from previous period at an annual rate 1981 1982 1983 1984 1985 , 1st Qtr Jan Feb Mar Apt Trade-Weighted United States 10.5 10.6 5.8 9.1 34.3 40.0 Japan 9.3 -5.7 10.4 6.2 3.1 -3.0 West Germany -2.1 7.0 5.8 1.0 -5.1 5:7 France -5.1 -6.1 -4.7 -2.1 4.2 -3.7 United Kingdom 2.5 -2.1 -5.0 -2.5 -27.3 0.4 Italy -9.2 -5.1 -1.6 -3.1 9.4 -10:6 Canada 0.3 0.2 2.3 -2.3 8.5 -13.4 Dollar Cost of Foreign Currency Japan '" 2.7' " -12:8 '" 4:5' '' ` "" '""" "' -19:6' ' ' -33.5 -32.5 9.6 25.5 West Germany -24.6 -7.2 -5.2 -11.5 -28.0 -26.3 -58.7 -0.8 54.2 France -28.7 -20.8 -15.9 -14.7 -26.7 -26.1 -54.7 -1.0 55.4 United Kingdom -13.2 -13.4 -13.3 -11.9 -28.6 -28.9 -28.9 41.1 212.0 Italy -32.8 -18.8 -12.3 -15.6 -30.3 -25.0 ~ -66.8 '-29.4 46.4 Canada -2.5 -2.9 0.1 -5.1 -10.5 -1.8 -28.2 -31.5 14.7 Money Market Rstes ~ `.. Percent 1981 1982 1983 1984 1985 . Ist~Qtr ~ - Jan Feb Mar Apr United States 90-day certificates of deposit, secondary market 16.24 12.49 9.23 10.56 8.76 8.30 8.84 9.13 8.61 Japan loans and discounts (2 months) 7.79 7.23 NA 6.66 6.55 6.56 6.55 6.54 NA West Germany interbank loans (3 months) 12.19 8.82 5.78 5.96 6.12 5.84 6.17 6.35 5.98 France interbank money market (3 months) 15.47 14.68 12.51 11.74 10.64 10.47 10.70 10.76 10.58 United Kingdom sterling interbank loans (3 months) 13.85 12.24 10.12 9.91 12.98 11.74 13.56 13.63 12.67 Italy Milan interbank loans (3 months) 20.13 20.15 18.16 15.91 15.78 15.38 16.00 15.96 15.37 Canada finance paper (3 months) 18.46 14.48 9.53 11.30 10.59 9.83 10.59 11.35 NA Eurodollars 3-month deposits 16.87 13.25 9.69 10.86 9.04 8.50 9.19 9.43 8.86 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 --~""~"~ Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Cocoa (? per pound) Coffee ($ per pound) Com (US # 3 yellow, c.i.f. Rotterdam $ per metric ton) Cotton (Memphis middling 1 1/16 inch, $ per pound) Palm Oil (United Kingdom 5% bulk, c.i.f., $ per metric ton) US (No. 2, milled, 4% c.i.f. Rotterdam) Thai SWR (100% grade B c.i.f. Rotterdam) Soybeans (US # 2 yellow, c.i.f. Rotterdam $ per metric ton) Soybean Oil (Dutch, f.o.b. ex-mil. $ per metric ton) Soybean Meal (US, c.i.f. Rotterdam $ per metric ton) Sugar (World raw cane, f.o.b. Caribbean Ports, spot prices ?/Ib.) Tea Average Auction (London) (US ? per pound)' Wheat (US # 2. DNS Rotterdam c.i.f. $ per metric ton) Food Index e (1975 =100) 522 573 362 339 310 254 256 250 241 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Aluminum (? per pound) Major US producer 71.6 77.3 76.0 77.7 81.0 81.0 81.0 81.0 81.0 LME cash 80.8 57.4 44.9 65.1 56.8 49.2 50.0 49.5 49.8 Chrome Ore (South Africa chemical grade, $ per metric ton) 55.0 53.0 50.9 50.0 50.0 49.9 50.0 50.0 50.0 Copper a (bar, ? per pound) 98.7 79.0 67.1 72.0 62.4 62.1 63.5 62:2 66.6 Gold ($ per troy ounce) 612.1 460.0 375.5 424.4 360.0 300.0 302.1 295.3 326.7 Lead a (? per pound) 41.1 32.9 24.7 19.2 20.0 17.2 17.2 15.7 17.3 Manganese Ore (48% Mn, $ per long ton) 78.5 82.1 79.9 73.3 69.8 69.6 69.8 69.4 68.4 Nickel ($ per pound) Cathode major producer 3.5 3.5 3.2 3.2 3.2 3.2 3.2 3.2 3.2 LME Cash 3.0 2.7 2.2 2.1 2.2 2.2 2.2 2.3 2.4 Platinum ($ per troy ounce) Major producer 439.5 475.0 475.0 475.0 475.0 475.0 475.0 475.0 475.0 Metals week, New York dealers' price 677.0 446.0 326.7 422.6 358.2 269.3 276.4- 256.3 286.7 Rubber (? per pound) Synthetic n 40.6 47.5 45.7 44.0 44.4 46.6 47.7 45.0 NA Natural ~ 73.8 56.8 45.4 56.2 49.6 42.0 42.0 42.0 42.0 Silver ($ per troy ounce) 20.7 10.5 7.9 11.4 8.1 5.9 6.1 5.7 6.4 Steel Scrap a ($ per long ton) 91.2 92.0 63.1 73.2 86.4 83.7 82.0 86.8 NA Tina (? per pound) 761.3 641.4 581.6 590.9 556.6 501.1 499.0 499.7 533.3 Tungsten Ore (contained metal, $ per metric ton) 18,219 18,097 13,426 10,177 10,243 11,515 11,568 12,025 11,792 US Steel (finished steel, composite, $ per long ton) 486.2 543.5 567.3 590.2 611.61 617.83 617.83 617.83 NA Zinc a (? per pound) 34.4 38.4 33.7 34.7 41.5 40.0 40.0 ~ 41.1 41.4 Lumber Index ~ (1975 =100) 167 159 140 190 176 177 180 182 NA Industrial Materials Index r 184 166 142 152 138 123.2 122.7 122.0 125.8 a Approximates world market price freouently used by major world producers and traders, although only small quantities of these metals are actually traded on the LME. e S-type styrene, US export price. Quoted on New York market. a Average of No. 1 heavy melting steel scrap and No. 2 bundles delivered to consumers at Pittsburgh, Philadelphia, and Chicago. e This index is compiled by using the average of 11 types of lumber whose prices are regarded as bellwethers of US lumber construction costs. rThe industrial materials index is compiled by The Economist for IS raw materials which enter international trade. Commodities are weighted by 3-year moving averages of imports into industrialized countries. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 World Crude Oil Production Excluding Natural Gas Liquids 1980 1981 1982 1983 19840 1985 Annual 3d Qtr 4th Qtr Jan Feb World 59,463 55,827 .53,014 : 52,588 .53,827 .. 53,195 53,661 . Non-Communist countries 45,243 41,602 38,810 38,228 39,257 38,711 38,952. Developed countries 12,859 12,886 13,276 13,864 : 14,302. 14,216 14,618 United States 8,597 8,572 8,658 8,680 8,735 8,776 8,807. 8,737 8,911 .. Canada 1,424 1,285 1,270 1,356 1,411 .1,397 .. 1,448 United Kingdom .1,619 1,811 2,094 2,299 2,535. 2,451 2,646 ? 2,815 Norway 528 501 518 614 :700 681 764 .695 "Other '' 691 ~ ' 717 736 915 921 ~ ` 911 ` '" 953 " 1,014' Non-OPEC LDCs 5,443 6,036 6,633 6,823 7,515 7,565 _ 7,704 7,179. Mexico 1,936 2,321 2,746 2,666 2,746 2,724 2,723 2,644 Egypt 595 598 665 689 827 833 890 890 Other 2,912 3,117 3,222 3,468 3,942 4,008 4,091, ~ 3,645, . , OPEC ~ 26,941 22,680 18,901 17,541 17,440 16,930 16,630 14,846 16,391 Algeria 1,020 803 701 699 638 650 633 600 600 Ecuador 204 211 211 236 253 261 253 260 270 Gabon 175 151 154 157 152 157 150 150 150 Indonesia 1,576 1,604 1,324 1,385 :1,466 . 1,400 1,411 1,160 1,190 Iran 1,662 1,381 2,282 , .2,492 2,187 2,002 2,299 1,400 2,100 Iraq 2,514 993 972 ~ " 922 .,,1,203 1,249 1,233 1,250 1,250 Kuwait a 1,389 947 663 881 912 933 ~ 834 900 900 Libya 1,830 1,137 1;183 ~ 1,076 ' "1,073 T;027 1-,000 1,000 1,000 ' Neutral Zone ~ 544 370 317 390 ~ ~ 410 386 ?380. 420 450 Nigeria 2,058 1,445 1,298 1,241 1,393 1,232 1,600 1,400 1,700 Qatar ~ 471 405 '328 295 399 440 317 345 290 Saudi Arabian 9,631 9,625 6,327 4,867 4;444 4,338 3,699 :3,300 3,800 UAE 1,702 1,500 1,248 1,119 _ 1,097. 1,012_, 1,056, 1,106_ 1,106 Venezuela 2,165 2,108 1,893 1,781 1,813 1,843 1,765 1,555 1,585 Communist countries 14,220 14,225 14,204 14,360 14,570 14,484 14,709 14,210 USSR 11,700 11,790 11,750 11,820 11,870 11,864 12,067 11,400 China 2,113 2,024 2,044 2,120 2,280 2,200 2,222 2,390 Other 407 411 410 420 420 420 420 420 e Preliminary. n Excluding Neutral Zone production, which is shown separately. Production is shared equally between Saudi Arabia and Kuwait. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Big Seven: Inland Oil Consumption Thousand b/d 1980 1981 1982 1983 1984 1985 ? ? Annual Oct Nov Dec Jan Feb Mar United States a 17,006 16,058 15,296 15,184 15,708 15,631 15,602 15,353 16,142 15,975 15,909 Japan 4,674 4,444 4,204 ?4,193 4;349 3,880 4,373 5,029 4,683 West Germany 2,356 2,120 2,024 2,009 -2,012 1,902 2,076 1,856 2,162 ' France 1,965 1,744 1,632 1,594 1,531 1,587 1,530 1,577 2,024 1,713 1,503 United Kingdom 1,422 1,325 1,345 1,290 1,624 1,835 1,996 1,870 1,903 Italy n 1,602 1,705 1,618 1,594 1,513 1,502 1,560 1,558 1,763 1,809 1,573 Canada 1,730 1,617 1,454 1,354 1,348 1,410 1,423 1,311 1,363 1,374 e Including bunkers, refinery fuel, and losses. n Principal products only prior to 1981. Big Seven: Crude Oil Imports Thousand b/d Annual Oct Nov Dec Jan Feb Mar United States 5,220 4,406 ~ 3,488 3,329 3,402 3,751 3,552 3,126 2,700 2,126 2,670 Japan 4,373 3,919 3,657 3,567 3,664 3,405 3,489 :3,722 3,194 4,053 West Germany 1,953- . 1,591 1,451 1,307 1,335 . 1,060 1,366 1,328 1,360 France 2,182 ,1,804 1,596 1,429 1,395 1,346 1,325 1,502 1,494 1,538 United Kingdom 893 736 565 456 482 506 478 486 489 Italy 1,860 1,816 1,710 1,532 1,416 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Algeria 42? API 0.10% sulfur 19.65 37.59 39.58 35.79 31.30 30.50 30.15 30.50 30.50 29.50 Ecuador 28? API 0.93% sulfur 22.41 34.42 34.50 32.96 27.59 27.50 26.82 27.50 26.50 26.50 Gabon 29? API 1.26 % sulfur 18.20 31.09 34.83 34.00 29.82 29.00 28.35 29.00 28.00 28.00 Indonesia 35? API 0.09% sulfur 18.35 30.55 35.00 34.92 29.95 29.53 28.88 29.53 28.53 28.53 Iran Light 34? API 1.35% sulfur 19.45 34.54 36.60 31.05 28.61 28.00 28.38 29.11 28.05 28.05 Heavy 31 ? API 1.60% sulfur 18.49 33.60 35.57 29.15 27.44 27.10 27.41 27.55 27.35 27.35 Iraq ~ 35? API 1.95% sulfur 18.56 30.30 36.66 34.86 30.32 29.43 28.78 29.43 28.43 28.43 Kuwait 31 ? API 2.50% sulfur 18.48 29.84 35.08 32.30 27.68 27.30 27.30 27.30 27.30 27.30 Libya 40? API 0.22% sulfur 21.16 36.07 40.08 35.69 30.91 30.40 30.40 30.40 30.40 30.40 Nigeria 34? API 0.16% sulfur 20.86 35.50 38.48 35.64 30.22 29.12 28.24 27.90 28.37 28.37 Qatar 40? API 1.17% sulfur 19.72 31.76 37.12 34.56 29.95 29.49 28.48 29.24 28.10 28.10 Saudi Arabia Berri 39? API 1.16% sulfur 19.33 30.19 34.04 34.68 29.96 29.52 28.48 29.27 28.11 28.11 Light 34? API 1.70% sulfur 17.26 28.67 32.50 34.00 29.46 29.00 28.32 29.00 28.00 28.00 Medium 31 ? API 2.40% sulfur 16.79 28.12 31.84 32.40 27.86 27.40 27.48 27.65 27.40 27.40 Heavy 27? API 2.85% sulfur 16.41 27.67 31.13 31.00 26.46 26.00 26.50 26.50 26.50 26.50 UAE 39? API 0.75% sulfur 19.81 31.57 36.42 34.74 30.38 29.56 28.52 29.31 28.15 28.15 Venezuela 26? API 1.52% sulfur 17.22 28.44 32.88 32.88 28.69 27.88 27.69 27.88 27.60 27.60 e F.o.b. prices set by the government for direct sales and, in most cases, for the producing company buy-back oil. n Weighted by the volume of production. Beginning in 1981 the price of Kirkuk (Mediterranean) is used in calculating the OPEC average official sales price. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5 OPEC: Average Crude Oil Sales Price 11.29 11.02 11.77 12.88 12.93 .-. n r-1 29.31 28.70 lO I I I I I I I I I I I I L I I I la ~I 1973 74 75 76 77 78 79 80 81 82 83 84 Annual average o ~ ~ ~ ~ i ~ i ~ ~ r., ~ ~ i I q _ m ^ ono ~ ~ ~ ao 0 2 8.59 28 09 28 0 6 28.1 0 N ~ oN ' o ' j I ',. ~~~ Vii, I1 ~ it j ~ I ( i l ! I I ~ I I ~% i i j 11 o f ~ ~ i ~ ~ ~ I ~ i i ~ lid i i ' . . CI, i ~ I ~ ~ I i I ', ~ ~ I i, I ~ i i i i ' ~ ~ ~ . I '~ ' ~ ~ ~ i I ~ ~ I I ~, I i I I . ~~ ~ ~ ~ i I j I II 111 IV 1 ^ I^ IV 1 II 111 IV 1 II III IV I II ^I IV 1 II 111 IV I J F M A 1979 1980 1981 1982 1983 1984 1985 The 1973 price is derived from posted prices, not official sales prices. Sanitized Copy Approved for Release 2011/07/01 :CIA-RDP88-007988000100110006-5