SINO-SOVIET BLOC ECONOMIC ACTIVITIES IN UNDERDEVELOPED AREAS 1 JULY-31 DECEMBER 1962

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP92B01090R000400010015-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 54
• Document Creation Date: December 19, 2016
• Document Release Date: January 25, 2006
• Sequence Number: 15
• Publication Date: February 1, 1963
• Content Type: REPORT

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SECRET
ECONOMIIC INTELLIGENCE REPORT
SINO-SOVIET B11+ C EC' ONOMIC ACT
.
,j
IN UNDE:fl V r` OP PfD. AREAS
JULY.- 3 1 DECEMBER 1962
ECONOMIC
N
ETC R14 S14
February 1963
ELLIGENCE COM/,+1
SI RE
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SECRET
ECONOMIC INTELLIGENCE REPORT
SINO-SOVIET BLOC ECONOMIC ACTIVITIES
IN UNDERDEVELOPED AREAS
1 JULY - 31 DECEMBER 1962
EIC R14-S14
ECONOMIC INTELLIGENCE COMMITTEE
SECRET
I I
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The reports on Sino-Soviet Bloc economic activities in underdevE-
loped areas in the EIC-R14 series provide periodic summaries and an-
alytical interpretations of significant developments in the economic
relations of Bloc countries with underdeveloped countries of the Frce
World. These developments are reported on a current, factual basis
in the Biweekly Reports in the EIC-WGR-l series, under the same title.
This report, covering the 6 months from 1 July through 31 Decemter
1962, constitutes the fourteenth periodic supplement to EIC-Ri4, the
background report on Sino-Soviet Bloc Postwar Economic Activities ir
Underdeveloped Areas, 8 August 195 , SECRET. The present supplemen?
relates noteworthy noneconomic activities, including military aid, ?o
the economic operations of the Bloc in underdeveloped countries in
order to place the economic aspects in the perspective of the over-Eli
programs of the Bloc in these countries. This report was prepared ty
a Working Group of the Economic Intelligence Committee, including rep-
resentatives of the Departments of State, the Army, the Navy, the Air
Force, Commerce, and Agriculture; the Agency for International Develop-
ment; the Office of the Secretary of Defense; the National Security
Agency; and the Central Intelligence Agency. It was approved by the
Economic Intelligence Committee on 12 February 1963.
For the purposes of this report, the term underdeveloped areas :u-
cludes the following countries of the Free World: (1) all independ?nt
countries in Latin America; (2) all countries in the Middle East, in-
cluding Cyprus, Greece, the Syrian Arab Republic, Turkey, and the Urited
Arab Republic (Egypt); (3) all countries in Africa except the Republic
of South Africa; (4) all countries in South and Southeast Asia; and
(5) Iceland, Portugal, Spain, and Yugoslavia.
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CONTENTS
Summary . . . . . . . . . . . . . .
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SINO-SOVIET BLOC ECONOMIC ACTIVITIES IN UNDERDEVELOPED AREAS
1 JULY 31 DECEMBER 1962
Summary*
The decline in new Bloc economic aid extensions to underdeveloped
countries since late 1961, particularly evident in the case of the USSR,
continued into the second half of 1962. New credit extensions by Bloc
countries during the latter period amounted to only $210 million, Wing-
ing the total for the year to $520 million, roughly half the annual ex-
tensions in 1960 and 1961 and the lowest annual commitment since 19`=7.
By the end of 1962, Bloc economic assistance commitments totaled $5.1
billion. Only 27 percent, or $1.4 billion, of this amount thus far has
been drawn. Drawings, which were relatively small during the early
years of the program, have risen rapidly in recent years and amounted
to a peak of almost $400 million in 1962.
It is not possible to state with confidence the extent to which the
reduction in new aid commitments is the result of (1) a decision by the
USSR to lighten the burden of its ovn aid program in view of domestic
economic difficulties and of the substantial backlog of unfulfilled
commitments, (2) the adoption of a more selective approach, anad,/or
(3) dwindling opportunities in newly emergent countries for agreemerts
of the kind the USSR wishes to enter into. In this context it might
be noted that the Soviet leadership has denied that there was any "cut-
back" in its own aid program, pointing particularly to the increased
expenditures represented by drawings under previous aid commitments.
For the immediate future the over-all Bloc economic assistance
effort can be expected to continue at least at its present magnitude
of about a half-billion dollars per year. If competing internal Bloc
economic demands and political pressures make more imperative an effort
to achieve maximum influence with minimum expenditure of tight invest-
ment goods, then devices other than project aid for economic d.evelor-
ment -- technical assistance, academic training, and military assistance
programs -- can be expected to assume greater prominence. Over the
longer run, Bloc aid may be expected to vary in accordance with the
opportunities that arise, with the resources available, and -- perhaps
most important -- with the evolving strategy of the Bloc with respect
to underdeveloped countries.
* See the chart, Figure 1, following p. 12.
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Economic and Military Aid
The value of new economic credits furnished by the Bloc in the
second half of 1962 declined by almost one-third from the previous
6-month period. The European Satellites accounted for the major share
of new Bloc aid for the first time since mid-1957, with a record level
of almost $180 million of new credit extensions. The value of new aid
extended by the USSR dropped precipitously, to $26 million. More than
40 percent of the economic aid extended by the Bloc in the second half
of 1962 went to the traditionally large aid recipients -- Cuba, India,
and the United Arab Republic WAR). The addition of Algeria and Laos
brought the total number of countries receiving Bloc economic assist-
ance to 31.
During the second half of 1962 the USSR concluded new military aid
agreements with India and possibly Yugoslavia and Yemen, bringing mini-
mum total Bloc military aid extensions to underdeveloped countries to
approximately $2.9 billion. Deliveries of military equipment to Cuba,*
Ghana, Indonesia, Iraq, and the UAR under previous agreements were
accelerated during the period, raising drawings on Bloc arms aid to at
least 85 percent of the total known extensions.
Of the 16,900 Bloc technicians in underdeveloped countries during
the last half of 1962, 12,000 were economic technicians and 4,900 were
military personnel. Reflecting the accelerated pace of Bloc military
aid deliveries in recent years, the number of Bloc military technicians
almost doubled during the period under review compared with an increase
of only 25 percent in Bloc economic technicians. More than half the
number of Bloc military personnel were located in Cuba and Indonesia,
and almost three-fourths of the Bloc economic technicians were concen-
trated in the six countries of Cuba, India, Iraq, the UAR, Guinea, and
Afghanistan.
During the last 6 months of 1962, about 8,050 nationals from under-
developed countries enrolled in training programs in the Bloc -- the
largest such increase since the inception of the program. Approximately
6,750 initiated academic and technical training, and almost 1,300 en-
rolled in Bloc military training programs. Reflecting the pattern of
recent years, Indonesia and Cuba supplied most of the military trainees,
Cuba and the UAR the bulk of the technical trainees, and Africa the
largest share of academic trainees.
This report includes a preliminary estimate of Bloc military aid
activities in Cuba.
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Sino-Soviet Bloc trade turnover with underdeveloped countries dsrikA,
the first 6 months of 1962 reflected a trend evident since 1960 -- -amel
a rapid acceleration of Bloc trade with Cuba and a more moderate inrrea.Ep
in aggregate trade with all other underdeveloped countries. The 27
percent increase in Bloc trade with underdeveloped countries in 196:
over 1960 was small in comparison with the quadrupling of Bloc trade wits
Cuba during the same period. Similarly, during the first half of lc62,
Bloc trade with all underdeveloped countries, including Cuba, increased
about 18 percent, rising to almost $1.9 billion, whereas Bloc trade with
Cuba alone increased almost 60 percent.
As a result of the increase in Bloc-Cuban trade, Bloc trade with Latt:
America in the first half of 1962 increased about 43 percent compared wit
the first half of 1961. Elsewhere in Latin America, trade remained rela-
tively stable with the exception of a moderate increase in Bloc-Bra27.ilian
trade. Bloc trade with both Asia and Africa showed increases of 12 and
25 percent, respectively, whereas trade with the Middle East declinei
slightly, reflecting a decrease in Bloc trade with the UAR. Trade with
the underdeveloped countries of Europe remained relatively stable, al-
though Bloc-Yugoslav trade declined about 4 percnt.
The year 1961 brought; some variations from former patterns in tip
commodity composition of Bloc trade with underdeveloped countries.
Largely because of a sizable increase of Cuban sugar imports, 31oc
imports of food products from underdeveloped countries doubled over
the previous year and accounted for more than two-fifths of all Bloc
imports from underdeveloped countries. Imports of cacao declined in
1961, reflecting primarily a sharp decrease in Bloc imports of Ghana Lan
cacao. Bloc imports of coffee continued to increase. The large pro-
portion of crude materials in total Bloc imports, more than 40 perce t,
continued to be dominated. by rubber and cotton.
Among Bloc exports to underdeveloped countries, the share represented
by machinery and transport equipment continued to increase, ac-c.unti:tg
for almost one-fourth of all Bloc exports in 1961. Manufactures goo:{s
remained the second most important category of Bloc exports to underti_e-
veloped countries -- about 29 percent -- although their share in Blot-
exports declined from 41 to 29 percent compared with the previous year.
Petroleum and petroleum products continued to comprise an impor.:ant part
of Bloc exports, with Soviet exports of these products accounting for
about 15 percent of the total Soviet exports to underdeveloped countries.
Latin America
During the latter half of 1962, Bloc economic activities in Latir
America were concentrated largely on two different fronts. In Cuba
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the USSR was interested in improving that country's economic situation
in support of its roles as a Communist outpost in the Western Hemisphere
and, for a time, as a Soviet military base. Elsewhere in Latin America
the USSR emphasized a more normal development of economic relations by
expanding trade and by granting development aid credits, particularly in
Brazil.
The major Soviet effort in Cuba during the period was directed toward
a substantial military buildup. It is believed that, at the height of
this buildup, 22,000 or more Soviet military were in Cuba. Only a few
thousand of these personnel departed when the weapons and equipment
associated with the offensive missiles systems and the I1-28 jet bombers
were removed.
It is not yet possible to determine what effect the missile crisis
has had on the attitudes of the Cubans themselves regarding long-term
relations with the Bloc. Castro suffered a serious personal affront,
first by being made to appear a tool of Soviet militarism in consenting
to the dangerous move into Cuba and then by being excluded from the
high-level East-West negotiations that vitally affected Cuba's future
and that finally resulted in the withdrawal of the very weapons for
which he had compromised his independence. Castro may react by adopt-
ing a more independent political posture in regard to the USSR and
attempting to recapture leadership of the revolutionary left within
this hemisphere, much of which was estranged by his apparent subservi-
ence to Moscow.
Nevertheless, there is little that Castro can do to achieve eco-
nomic independence from the Bloc, however much he may desire to reassert
himself. With its growing import needs and its steadily declining ex-
port capacity, Cuba is falling increasingly into debt in its trade with
the Bloc. During 1962 its imports from the Bloc exceeded its exports
by about $225 million. Bloc willingness to countenance this trade
imbalance constituted its most important form of aid to Cuba, amounting
to an ad hoc balance-of-payments loan. Next in terms of importance to
the operation of the Cuban economy was the substantial number of Bloc
technicians who were made available to Cuba to fill the gap left by the
outflow of skilled technicians and managerial personnel alienated by
the regime.
Soviet plans apparently envisage Cuba's increasing its capacity to
feed itself and provide its own most basic necessities rather than
pressing ahead rapidly toward industrialization. Thus such projects
as a new fishing port and training programs to develop Cuba's fishing
industry and longer range irrigation and power projects appear to have
been receiving emphasis.
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In Brazil, chronic weaknesses in the export sector of the econony,
financial difficulties with Western lenders, and skyrocketing =-iflai?ion
prompted a new look at the possibilities of expanding economic relation[
with the Bloc on the part of both the left-leaning Goulart government
and the members of the business community. Brazil has just about eD_-
hausted its credit in Western financial quarters and, as a resujt, -.s
particularly susceptible to Bloc offers of credit and barter exchan;e o-
goods.
A $70 million credit agreement signed with Poland represented an
important innovation in Brazil's economic relations with the Bloc. Al-
most half the value of the credit was allocated for the construction of
a 200,000-kilowatt (kw) thermal electric powerplant and for the purrhas?
of 50,000 tons of railroad rails. Talks were underway concerning u*:ilil,&.
tion of the balance, possibly for an aluminum refinery and a helicopter
assembly plant. It also was rumored that Brazil was close to an agree-
ment with the USSR for the construction of a $1 billion hydroelectric
project in the south and for a large-scale industrialization program in
the depressed Northeast.
The Brazilian Government has itself taken a series of moves designee
to foster an expansion in Brazil-Bloc trade. At the top of the list.
was a campaign to secure ratification of the numerous trade treatief
signed early in 1961 with most Bloc countries. The government also was
exploring the possibility of obtaining a multilateral payments clearing
arrangement with Bloc countries such as was granted to Cuba so that
credits to Brazil with the account of one Bloc country might be used to
pay debts owed to another. Finally, negotiations were in progress it
the year's end with the USSR on a broad new trade and payments agreement
to replace the agreement which expired in December.
Bloc activity in Bolivia continued to be spearheaded by Czechoslo-
vakia. Although a contract with Czechoslovakia for an antimony smelter
was again stalled, the Czechoslovaks were pressing for acceptance of an
even more attractive proposal that involved free technical assistance
in developing Bolivia's sources of hydroelectric energy. Included 4n
the offer were the preparation of an over-all plan for a power system,
preparatory studies and surveys, the preparation of final engineering
plans, and the establishment of a technical training center. Bolivia
was not receptive to this offer, and no official action was taken.
After more than 2 years of negotiations, Chile finally sign-d a
contract to sell a small amount of copper to the USSR. Several sales
by both government and private enterprises in Chile raised the uotai
value of copper sales to the Bloc during the period to more than,
$3 million. Weakening foreign trade prospects in markets of the Free
World also stimulated Chilean interest in bilateral barter exchanges
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with the Bloc. A barter deal was concluded with Poland of 2 million
liters of Chilean wine and 5,000 tons of fishmeal in exchange for
1,500 tons of Polish butter.
The last half of 1962 witnessed the continued consolidation of
Soviet Bloc positions in the Middle East and was highlighted by further
deliveries of military aid, exploitation of the revolt in Yemen, and
renewed attention to the Aswan High Dam project. In the Syrian Arab
Republic, however, a reported Soviet offer to construct a dam on the
Euphrates River was countered during the first few days of 1963 by an
announcement that the West German Government had agreed to provide
the financing and that France also may participate.
Before the recent revolt in Iraq, Bloc influence and possibilities
for further gains were stronger in that country than in any other area
of the Middle East. In Baghdad the Soviet Enbassy maintained constant
contact with Kassem's government and armed forces. Iraq sided with
the USSR on all important international issues, and the USSR continued
its support for Iraq's claim to Kuwait. Important deliveries of Soviet
Bloc military equipment continued, bringing the total. value of all such
equipment delivered to Iraq since 1958 to $3l0 million. Implementation
of the 1959 economic aid agreement also was accelerated, and during the
latter part of the year Kassem dedicated a number of new factories which
had been built under Soviet aid.
In. the UAR, Nasser continued to maintain a balanced course between
East and West, and there was a slight shift toward more friendly rela-
tions with the United States. This shift stemmed from early US recog-
nition of the republican government in Yemen and the need for types of
economic aid not available from the Soviet Bloc. Soviet military aid
continued to be substantial, and deliveries of equipment increased
sharply. The major Bloc activity continued to be work on the Aswan
High Dam. Increased concern that work was falling behind schedule re-
sulted in vigorous efforts to speed up construction, including the
replacement of both the Soviet and the UAR directors, the employment
of some Western equipment as a result of Egyptian dissatisfaction with
some of that furnished by the USSR, and a great increase in the number
of Egyptian and Soviet personnel assigned to the project. The UAR also
received small credits from Hungary and Poland during October.
Although the Bloc continued to maintain its presence in the Syrian
Arab Republic through slow progress on various projects, the announce-
ment during the first few days of 1963 that construction of the Euphrates
Dam would be financed by West Germany and possibly France constituted a
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setback. Politically and militarily toe Bloc made some progress. _ro-
Communist and anti-Western elements which previously had been firmly
suppressed by Nasser became increasingly vocal during 1962. Deliveries
of military equipment and the establishment of military training prcgrans
were accelerated. Arms deliveries during the period under revi