AID AND TRADE ACTIVITIES OF COMMUNIST COUNTRIES IN LESS DEVELOPED AREAS OF THE FREE WORLD 1 JANUARY - 30 JUNE 1964

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP92B01090R000400010018-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 62
• Document Creation Date: December 19, 2016
• Document Release Date: January 25, 2006
• Sequence Number: 18
• Publication Date: August 1, 1964
• Content Type: REPORT

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AID AND TRADE: A TIVITIES OF COM ~41.
COUNTRIES IN LESS DEVELOPED ARE
OF THE FREE WORLD
I JANUABB kAr - 30 JUNE 1964
August 1964
ECONOMIC INTELLIGENCE COMMIT
cif the
UNITED STI DES INTELLIGENCE BOARD
SE
ur
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SECRET
AID AND TRADE ACTIVITIES OF COMMUNIST
COUNTRIES IN LESS DEVELOPED AREAS
OF THE FREE WORLD
1 JANUARY - 30 JUNE 1964
EIC R14-517
August 1964
ECONOMIC INTELLIGENCE COMMITTEE
SECRET
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H'OREWORD
The EIC-Rl4 series provides periodic summaries and analyticvaL in-
terpretations of significant developments in the economic and m Lita-y
relations of Communist countries with less developed countries cf th,
Free World. These developments are reported on a current, factual
basis in the Biweekly Reports in the EIC-WGR-1 series.
This report, covering the 6 months from 1 January through ._;( Jun
1964, constitutes the seventeenth periodic supplement to EIC-R1_1+, th
initial report on Sino-Soviet Bloc Postwar Economic Activities :_o Uner-
developed Areas, 8 August 1956, SECRET. The present supplement upda.es
the previous semiannual report and includes the more significant develop.
ments during the reporting period. It also relates noteworthy nonec.)nom_c
activities, including military aid, to economic operations of the Cori-
munist countries in less developed areas. Data have been reviL;ed to in-
clude new information, and figures in the current supplement supersete
those in previous issues. This report was prepared by the Dep,,_in-tmen,
of State and the Central Intelligence Agency. The draft was reviewe
tary assistance to the Somali Republic, Kenya's traditional enem,
would not be used against Kenya. The USSR quickly recognized thce rebel
Zanzibar regime of Rashid Karume after his successful rebellion rain;;t
the Sultan of Zanzibar and furnished arms for the new Zanzibar z~rmy.
The USSR began limited arms delivery to the Somali Republic under tree
military aid agreement of 1963, while renewing an offer of military
equipment to Ethiopia.
In other parts of Africa the USSR continued to encounter dif'1icu.l
ties in implementing credits extended in earlier years. The slow pace
of developing new projects and the inefficiency of many African tech-
nicians reduced the impact of Soviet economic aid in a number of West
African countries, particularly in Guinea and Mali.
Chinese activity also concentrated on East Africa and Algeria.
Little has materialized in the Somali Republic other than partial
transfer of a 1963 Chinese pledge of $3 million for budgetary supoortr
During his trip to Africa, in spite of the fact that Ghana has made
no drawings on the $19.6 million 1961 Chinese credit, Chou En-lai
promised Ghana an additional credit of $22.4 million. The agreo;nent
was signed in July 1964. Chinese economic aid and technical assi.tanc?e
appear to have been implemented effectively in Guinea and Mali. Most
projects have been implemented by small groups of Chinese technic_ans
who mingled unostentatiously among the local populace. The Chinese
continued to display increasing attention to East Africa. I.:itia:ly,
Peiping had agreed to furnish Zanzibar with a credit of $14 mil-1-Jon
and a $0.5 million budgetary ?;rant. Later, a $28 million credit grid
a $3.0 million grant were exteended_ to the recently formed United
Republic of Tanganyika and Zanzibar (URTZ). Kenya received a lnng-
term, interest-free credit of $15.2 million and a $2.8 million grant
for budgetary support. The Chinese reportedly offered Sudan an
economic credit of $47.6 million.
Other Communist countries continued economic activities at al)cu.t
the same level as in 1963. Czechoslovakia showed interest in infor-
mation programs in Tanganyika and Kenya. Poland discussed expanding
its shipping operations in West Africa, in cooperation with East Ger-
many. After the Zanzibar coup of 26 January 1964, East Germany
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Launched an economic penetration drive in Zanzibar and has committed
itself to the extension of an estimated $6.5 million in credits. Its
unwillingness to reduce its embassy on Zanzibar to a consulate was em-
barrassing to the recently created union with Tanganyika.
>oriet interest in India continued unabated as indicated in the
announcement of assistance to India in building the first stage of the
Bokaro steel mill. In addition to the Bskaro mill, which will cost the
USSR an estimated minimum of $200 million, the USSR indicated a willing-
ness t:a provide unspecified assistance for India's Fourth Five Year
Plan (L966-71). India and the USSR reached an understanding on the
provision of Soviet surface-to-air missile (SAM) systems for the defense
of New Delhi and Calcutta, and the MIG-21 production facilities to be
built with Soviet assistance were moving forward. Czechoslovakia also
extended an $84 million credit to India for use in heavy industrial
pro,'Jects .
d modest rise in activity in two of India's neighbors, Pakistan
and ]Nepal, apparently was related to Sino-Soviet competition in the
area. Pakistan, which has been the object of economic and political
overtures from Communist China, received an $11 million credit from
the USSR, to be used :Largely for the purchase of agricultural equip-
ment:. The USSR and Communist China will each build separate links in
the proposed East-West highway in Nepal, and both countries also agreed
to undertake several minor aid projects. The Chinese commitment re-
places the proposed paper mill and cement plant removed earlier as
projects under its 1960 grant. The USSR extended a grant, estimated
at .x,10.5 million, to cover the costs of the road and an agricultural
implements plant.
The Soviet aid program in Afghanistan continued to be implemented
at an impressive pace, but no new commitments were announced except
for an agreement for the delivery of $20 million worth of military
spare parts.
I{r Southeast Asia, developments in the economic field were largely
overshadowed by political. factors. The Ne Win regime in Burma by mid-
1961+ had moved far toward the establishment of an authoritarian socialist
system, and Burma now looks to the Communist countries as an important
source of economic assistance. The implementation of the $84 million
Chinese Communist credit continued to lag, however, and although the
Sov'i.et-assisted Kyetmauktaung Dam is making satisfactory progress, there
have been continued difficulties with Soviet and Czechoslovak agricul-
tural tractors. In Cambodia the Communist countries responded to Prince
Sit ariouk's renunciation of US aid at the end of 1963 with gifts of
mi]D ary equipment and statements of political support, but neither
the USSR nor Communist China appeared inclined to come forward with a
comprehensive aid program. By mid-1964, Sihanouk had swung back to his
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quasi-neutralist position and was cultivating the French as a s rce
of aid. Indonesia's major concern continued to be its confrontation
with Malaysia. It was learned that an agreement was concluded with
the USSR in November 1963 for the delivery of $55 million in Soviet
military equipment and spare parts. Slow progress continued to be
made on Soviet-assisted economic projects, but deliveries under i,redits
extended by the East European Commmunist countries accelerated 11 the
first half of the year.
Latin America
No new Communist aid was extended to Latin American nat=ions cica.r--
ing the first half of 196)4, F+lthough there were reports of offer-,
to a number of countries. ("ommuiiist China made several importan'.
purchases in Latin America, including 1.5 million tons of grain
from Mexico and Argentina, possibly $28 million worth of cotton !'ron
Mexico, and quantities of copper and nitrates from Chile.
The range of possibilities for economic activities by the Gommun>t
countries in Latin America was narrowed by the fall of Brazil's left-
leaning President Goulart on 1 April. Brazilian receptivity tc (---o-
nomic initiatives by Communist countries seems to have declined., Inc_
while keeping channels open for possible aid offers from the Ea.t.,
Brazil apparently will continue to depend on the West for assistance
in dealing with its serious economic problems. Credits totaLinf-;tip-
proximately $180 million extended in the past by East European coun-
tries apparently remain unused. Brazil's trade with the Communise, ark-a
increased by 21 percent in 1963 above the previous year, in .spite of
the fact that the USSR was forced by a crop failure to renege on a
large volume of wheat promised for delivery during 1963-64.
In Bolivia, internal political pressures continued to exist f:)r
the acceptance of previously offered Communist aid. But far-left
forces, the source of much of this pressure, have now been effec-
tively isolated by the government. The government delayed action on
a Czechoslovak offer to finance an antimony smelter but extended,a
feeler on the possibility of Soviet financing for a tin smelter.
The Middle East continued as an important target of the Communist;
offensive during the first half of 1961+. It received about 140 pee-cent
of the total new economic aid extended by Communist countries,
thirds of total military aid rxtended, and substantial numbers o:' nicians. During Khrushchev's May visit to the UAR to attend the -re-
monies marking the completion of the first stage of the Aswan High
Dam, he announced the extension of a $280 million credit for the LIL~t's
Second Five Year Plan (1965-70). This brought the total of Communist
economic assistance to the UAR extended since 1955 to more than b.i.1--
lion.
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Additional commitments of economic aid were made to Yemen in the
first 0 months of 1964 by both the USSR and Communist China following
President Sallal's visits to these countries early this year. The
USSR extended +:economic assistance totaling at least $21 million and
possibly as much as $72 million for Yemen's fishing industry, land
reclamation, a cement plant, and a road. Cor.ffnunist China extended
$28 million for roadbuilding and a textile plant. The USSR also pro-
vided 'J'10 million in military assistance.
hk 'Arif Goverment in Iraq continued to follow a "correct" policy
toward the Communist countries in the context of nonalignment. Some
Iraqi Communists were released from prison, and it was reported that
the treatment of local Communists and the possibility of expanding
Soviet aid to Iraq were discussed by Khrushchev and 'Arif when they met
in the UAR in May. A military assistance agreement with the USSR pro-
vide:i. or a $',.g million purchase by Iraq of 18 MIG-21PF all-weather
interc::pLers, wrununition, and spare parts. Of the total cost of the
equipment, $21. million is available to Iraq as a result of the canceled
surface-to-air missile program. The USSR agreed to apply a one-third
discount on the remaining $38 million worth of equipment.
TCCealignments in the Ba'athist leadership in Syria did not affect
Syria's relations with the Communist countries or its attitude toward
Communist assistance. Work progressed on Soviet projects in Syria
under the October 1957 credit. Deliveries of military equipment were
heavy. Czechoslovakia extended a credit of $5.2 million to Syria for
the construction of a sugar refinery. Syrian exports to the Communist
countries reached a new high in 1963 and accounted for about 23 percent
of Syria's exports.
The Communist countries sought to take advantage of the crisis in
Cyprus by expressing their support for President Makarios and the Greek
Cypriot majority but stopped short of supporting the enosis objectives
of certain Greek Cypriot elements. They also are reported to have made
offers of economic assistance to Cyprus. Although the Greek Cypriots
actively sought military equipment from "friendly countries," as of
midyear none was forthcom:Lng directly from the USSR. Cyprus granted
civi.L air rights to the USSR, Hungary, and East Germany.
Soviet-Turkish relations were affected adversely early in the year
by Soviet propaganda in support of the Greek Cypriots. Moscow subse-
quently adopted a more persuasive approach by renewing its offers of
large-scale economic aid when it recognized that Cyprus offered an
opportunity to exploit Turkey's growing disillusionment with NATO.
Ir.-au maintained good relations with Eastern Europe and the USSR
during the period. It received a new $15 million credit from Poland
and offers of credits from Hungary and Czechoslovakia. Iran and the
USSR, after protracted negotiations, signed their first payments agree-
merit ats well as a new 3-year trade agreement. Survey work was begun on
the joint Soviet-Iranian Aras River project under the Soviet credit of
July {963.
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.,SECRET
AID aA -,D TRADE ACTIVITIES
OF CC !MJN1ST COUNTRIES
IN LE:% %, DEVELOPED AREAS
OF THE FREE WORLD
1 JAIN UAPY . 30 JUNE 1964
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SECRET
AID AND TRADE ACTIVITIES
OF COMMUNIST COUNTRIES
IN LESS DEVELOPED AREAS
OF THE FREE WORLD
1 JANUARY-30 JUNE 1964
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FOREWORD
This series provides periodic summaries and analytical interpreta-
tions of significant developments in the economic and military relations
of Communist countries with less developed countries of the Free WorLd.
These developments are reported on a current, factual basis in biweekly
reports under the same title.
This report, covering the 6 months from 1 January through-0 June
1964, constitutes the seventeenth periodic supplement to a report on
Sino-Soviet Bloc Postwar Economic Activities in Underdeveloped Areas,
August 1956, SECRET. The present supplement updates the previous
semiannual report and includes the more significant developments dur-
ing the reporting period. It also relates noteworthy noneconomic
activities, including military aid, to economic operations of the
Communist countries in less developed areas. Data have been revised
to include new information, and figures in the current supplement stner-
sede those in previous issues.
In this report the term Communist countries refers primarily to
the following countries that extend aid to less developed areas: thf-
USSR, Communist China, and the following countries of Eastern Europe --
Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, and Rumania.
For certain limited purposes the term also may include Albania, Cuba,
Mongolia, North Korea, and North Vietnam, none of which is normally
a donor of aid. The term does not include Yugoslavia.
The term less developed countries of the Free World includes the
following: (~ all countries of Africa except the Republic of South
Africa; (2) all countries in South and Southeast Asia; (3) Iceland,
Portugal, and Spain; (4) all countries in Latin America except Cuba;
and (5) all countries in the Middle East, including Cyprus, Greece,
the Syrian Arab Republic, Turkey, and the United Arab Republic.
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CONTENTS
Summary . . .
I. Communist Activities in Less Developed Areas, by Type of
Activity . . . . . . . . . . . . . . . . . . . . . . . .
A. Current Economic Trends . . . . . . . . . . . . . . . 9
B. Economic Assistance . . . . . . . . . . . . . . . . . 10
1. Credits and Grants . . . . . . . . . . . . . . . 10
2. Technical Assistance . . . . . . . . . . . . . . 14
a. Economic Technicians . . . . . . . . . . . . 14
b. Academic Students and Technical
Trainees . . . . . . . . . . . . . . . . . . 15
Military Assistance . . . . . . . . . . . . . . . . 16
1. Credits and Grants . . . . . . . . . . . . . . . 16
2. Technical Assistance . . . . . . . . . . . . . . 17
a. Military Technicians . . . . . . . . . . . . 17
b. Military Trainees from Less Developed
Countries . . . . . . . . . . . . . . . . . 17
D D. Trade . . . . . . . . . . . . . . . . . . . . . . . 18
1. Value of Trade, 1963 . . . . . . . . . . . . .
2. Direction of Trade, 1963 . . . . . . . . . . . .
18
19
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aid committed during the period. Virtually all of the new Soviet eco-
nomic aid was concentrates in three countries: a $128 million credit
to Algeria for a steel-producing complex; a credit expected to amount
to at least $200 million to India for the first stage of the Bokaro
steel mill, on which the Indians hope to begin construction in 1965;
and a line of credit of $280 million to the UAR to be utilized during
its Second Five Year Plan (1965-70) for, among other projects, a steel
combine and a hydroelectric powerplant. The USSR also made small eco-
nomic aid commitments to Kenya, Nepal, Pakistan, Tunisia, and Yemen.
Additional Soviet aid for India's Fourth Five Year Plan scheduled to
begin in 1966 appears to be likely.
The future impact of the new aid extensions on the Soviet
economy is Likely to be relatively small. Drawings on credits extended
to developing countries through mid-1964 are expected to continue to
increase over the next several years and may reach a total of $450 mil-
lion to $500 million annually during the period 1966-68. The burden
such deliveries might impose on the Soviet economy, however, should be
mitigated to some extent by a growing level of repayments. Repayments
are estimated at more than $200 million annually assuming that recipient
nations meet their obligations on schedule. Thus net annual outlays
of $250 million to $300 million in the 1966-68 period could be at ap-
proximately the same level as current net outlays under the program.
Moreover, much of the new assistance is for steel mill projects, and
the recent decreased emphasis on expansion of the Soviet steel industry
could enable the USSR to provide metallurgical equipment more easily
than equipment for certain other industries, such as chemicals. A
possible difficulty might arise in providing basic oxygen steelmaking
facilities and advanced types of steel rolling and finishing equipment
presently specified by India for the Bokaro steel combine. The USSR
has not yet demonstrated full competence in the manufacture of these
types of equipment and has lagged in completing such projects for its
own steel industry.
Eastern European countries also substantially increased
their new aid undertakings above 1963 levels with extensions of $129
million in the first half of 1964. Czechoslovakia's $84 million
credit to India was the largest long-term credit that has been extended
by an Eastern European nation to a less developed country. Additional
small credits totaling about $45 million were extended to Algeria,
Indonesia, Iran, Syria, Yemen, and Zanzibar by several of the Eastern
European countries.
Communist China also increased its aid commitments during
the first 6 months of the year. Extensions of new economic aid totaled
about $92 million as against Chinese aid commitments of almost $90 mil-
lion for the entire year of 1963. The geographic distribution of
Chinese aid also has exhibited a marked change in the past 18 months.
Before 1963, more than 75 percent of all China's economic aid had been
allocated to Asian countries. Since that time, however, the major part
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ECONOMIC CREDITS AND GRANTS
EXTENDED BY COMMUNIST COUNTRIES
EXTENSIONS AND DRAWINGS, BY YEAR
00 111API
4NUi l+t go##
??~^Y i i i 1 ~ i
1964
Jan-June
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of Chinese aid has gone to Africa and the Middle East, a fact largel;r
motivated by Peiping's determination to rival the Soviet presence in
these areas. Chinese aid. extensions to Kenya and Yemen followed Sov_et
commitments to those countries, and Chinese credits to the United
Republic of Tanganyika and Zanzibar were coincident with Soviet inter-est
in this country.
Deliveries of goods and services under Communist aid pro-
grams during the first 6 months of 1964 totaled $271 million, bringing
aggregate drawings on Communist credits extended since 1954 to appro_:i-
mately $1.9 billion. The modest increase over the $265 million drawn
in the second half of 1963 reflects primarily the failure of drawing;
on Soviet credits to maintain their previous momentum. Only $196 mi'
lion was drawn on Soviet credits and grants in the first half of 196=,
compared with about $215 million in the last 6 months of 1963. As in
the past, implementation oof projects in many countries continued to lag
mainly because of the dearth of local resources. Drawings on creditf
extended by Eastern European countries were expanded to $65 million
during the review period, largely because of the acceleration of de-
liveries to India, the UAR, and Indonesia. Drawings of $9 million om
Chinese Communist credits were slightly lower than in the last half cf
1963.
By the end of 1963 an estimated total of $130 million was
scheduled to have been repaid on the principal of Soviet economic
credits. In addition, $40 million in interest payments also was due.
With increased drawings on Soviet credits extended through mid-l964
anticipated in the next few years, repayments of principal and interest
on these credits are expected to accelerate to more than $200 million
annually toward the end of the 1960's if aid recipients meet their
obligations on schedule.
As the burden of these repayments increases and heavier
repayments are due on military deliveries as well as for economic
credits extended by countries other than the USSR, less developed
countries are expected to experience increasing difficulties in meet-
ing their obligations. In the first half of 1964, Czechoslovakia was
obliged to extend the repayment period on Indonesian military in-
debtedness. This followed the rescheduling in 1963 of Indonesian
debts to the USSR and Poland for military deliveries. New overtures
have been made recently by the Indonesians to obtain further conces-
sions from the USSR on the repayment of Soviet loans.
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2. Technical Assistance
a. Economic Technicians
In spite of the reduced rate of drawings on Communist
credits during the first half of 1964, the number of economic technicians
employed in less developed countries increased by 12 percent above the
previous 6-month period to about 13,365 (see Table 7*). The succes-
sive increases in the number of Communist technicians in less developed
countries noted since the program began in 1954 reflect the dimensions
of the "human resources gap" in less developed countries.
The expanding Communist aid programs in Algeria, Nepal,
and the UAR accounted for most of the increase in Communist technicians
in less developed countries during the period under review. The number
of technicians in Algeria rose by about 650 as both project and non-
project activity increased. In Nepal, nearly 700 Chinese technicians
and laborers arrived to push construction of the Katmandu-Kodari Road.
The number of Soviet technicians in the UAR during the period increased
by approximately 345. Nearly one-third of them were assigned to the
Aswan Dam, increasing the number employed on this project during the
first half of the year to 2,000. Technicians from Communist countries
also were noted for the first time in Kenya and the United Republic
of Tanganyika and Zanzibar.
About 60 percent of all economic technicians present
in less developed countries were employed in five countries -- Afghan-
istan, Algeria, Guinea, India, and the UAR. Iraq and Yemen, major
areas of assignment for Communist economic technicians in the last half
of 1963, .each reduced by almost half the number they employed during
the last 6 months of 1963. The sharp drop in Iraq reflects the con-
tinued decline since early 1963 in Soviet economic aid activities in
that country. In Yemen a large number of technicians departed subse-
quent to the completion of an airfield built by the USSR late in 1963.
Toward the end of the current period, however, the number of technicians
in Yemen began to increase again as the first group of Soviet personnel
arrived to begin implementation of projects under new aid agreements.
Of particular significance during the period was the
large increase in administrative and advisory personnel from Communist
countries, who were serving as economic planners and advisers to
government officials at various ministerial levels. The number of
technicians engaged in these activities rose to at least 400 in the
first half of 1964, or nearly double the number employed during the
previous 6-month period. They were largely concentrated in African
countries, especially Algeria, Ghana, Guinea, Mali, and Zanzibar.
* P. 62, below.
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b. Academic Students and Technical Trainees
About 250 nationals from less developed countries en-
rolled in Communist academic institutions during the first 6 months of
1964, bringing the total number of personnel being trained at the ernd
of June 196+ to almost 13,000 (see Table 9*). More than 15,000 stu-
dents have accepted Communist offers of higher education since 1956.
Most of these have come from Africa and the Middle East. In the first
half of 1964, the 135 students from Africa again accounted for ,he
largest part of the increase in new students. Almost the same number
of African students, however, terminated their programs in Communist
countries to seek educational opportunities in the West.
The first sizable group of academic students, number-
ing about 420, completed their educational programs in Communist coui-
tries. Most of them had been trained in the USSR and Czechoslovakia
in medicine and engineering. Of the 13,000 students from less de-
veloped countries studying in Communist countries at the end of June,
the USSR accommodated more than 60 percent of the total: Czechoslo-
vakia, East Germany, and Bulgaria together accounted for 25 percent.
Only 300 students from less developed countries were reported to be
enrolled in universities in Communist China.
In January the USSR responded sharply to demons=tra-
tions by African students by issuing a decree which imposed severe
restrictions on activities by foreign students, made criminal offenses
liable to prosecution under Soviet law, and carried the penalty of
possible deportation for "abuse of hospitality." Moreover, Communist
authorities, for some time dissatisfied with the low level of academ_c
preparedness of many applicants from Afro-Asian countries, indicated
that future scholarship recipients would be expected to comply more
rigidly with established minimum educational qualifications. Such
efforts, if enforced, could make study in the USSR less attractive to
many potential students from developing countries.
About 1,650 nationals from less developed countries
initiated technical training programs in Communist countries during
the period, far exceeding the number going in any previous half-year
period. This brought the total number of technical trainees in Com-
munist countries up to 2,915 during the first half of 196+ (see
Table 8**). To date, a total of about 8,500 personnel from develop-
ing countries have undertaken technical training in Communist coun-
tries. Three countries - - Algeria, India, and the UAR -- accounted
for more than 90 percent of the increase in the first 6 months of l9f).
About 1,000 trainees departed for the USSR for training related to the
future operation and maintenance of the Aswan High Dam. Several groups
of technical personnel from India were scheduled for training in connec-
tion with their eventual employment in the pharmaceutical and heavy
P. 66, below.
P. 64, below.
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electrical plants which the USSR currently is constructing in India.
The Algerians undertook training programs at Soviet agricultural and
textile factories.
C. Military Assistance*
1. Credits and Grants
Communist countries are known to have extended approximately
$71 million of military assistance to less developed countries during
the first half of 1964. This brings the cumulative total of such Com-
munist military aid extended between 1955 and the end of June 1964 to
$3.3 billion (see Table 2). Soviet agreements with Afghanistan, Cam-
bodia, Iraq, and Yemen were completed during the review period, and
four other countries were reported to be negotiating for additional
assistance from Communist nations. Modest grants of equipment were
made to Cambodia by Czechoslovakia and Communist China and to Zanzibar
by the USSR and Communist China.
These new commitments represent a decline from the level
of military aid extended in the second half of 1963 when approximately
$180 million was promised to less developed countries. It continues
the declining trend which began in 1962 following the peak year of 1961,
when a record of almost $850 million in military assistance was ex-
tended to less developed countries. Nevertheless, it is anticipated
that substantial amounts of military aid may be added to the obliga-
tions undertaken in the first half of the year if negotiations with
India, Indonesia, Syria, and the UAR result in firm agreements.
India is proceeding with plans to construct an integrated
MIG-21 complex and hopes to conclude agreements for these with the
USSR later this year. Negotiations also are underway for additional
equipment for SAM sites in India. Although no new military aid agree-
ment was reached between the USSR and the UAR during Khrushchev's
visit in May, Khrushchev assured Nasser that the USSR would provide
Military Aid Extended by Communist Countries
to Less Developed Countries of the Free World
September 1955 - June 1964
Million Current US $
Estimated minimum value
3,448
Less downpayments
121
Amount of aid
3,327
Credits
1,956
Discounts and grants
1,371
For further details on Communist military assistance to less de-
veloped countries, see the chart, Figure 3, following p. 16.
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whatever arms the UAR might need. Vice-President Amer has ac-opted an
invitation to visit Moscow, at which time Egyptian military require-
ments probably will be discussed.
Deliveries of military equipment under earlier agreements
continued at high levels, especially to Algeria, Indonesia, and the
UAR. Although no new military aid agreement was announced foilowin
Algerian Premier Ben Bella's visit to the USSR in May, sizable de-
liveries of land armaments, including 145 tanks and armored vehicles,
were noted in the first 'half of 1964. Indonesian requirements for
increased transport and patrol craft were reflected in the deliveries
of at least 9 major ships from the USSR. These ships included 2 de-
stroyers, 2 minesweepers, 2 transports, 2 frigates, and a tanker.
Shipments of electronic equipment, vehicles, auxiliary equipment, a33d
spare parts also continued. The USSR delivered at least 40 MIG-21
jet fighters as well as armor and artillery to the UAR. Missiles fcr
the Komar-class patrol boats were observed for the first time in late
May, and increased quantities of SAM equipment also were received re-
cently as part of an effort to establish some of the Egyptian SAM
sites in operational readiness.
In Indonesia, contract negotiations were underway with the
USSR to implement the $55 million military agreement of November- 1963.
Although details on financing are not yet available, it is probable
that part of this new military credit may come from unused economic
credits provided for under the 1960 agreement. In June, Czechoslova,ia
finally agreed to reschedule Indonesian repayments of military credits.
2. Technical Assistance
a. Military Technicians
Approximately 3,215 military technicians from Communist
nations were in less developed countries during the first half of 19f'4,
approximately 14 percent more than the number present in the last hQLf
of 1963. The number of Communist military technicians increased in
Algeria, Indonesia, Syria, and the UAR, whereas the number in Iraq and
Yemen decreased markedly because of the completion of some military
construction projects. The remaining contingents of Communist mili-
tary technicians remained at relatively the same levels as in the pre-
vious 6-month period. If new military assistance results from the
negotiations currently underway with several countries, the number of
Communist technicians in these countries may be expected to increase
further.
b. Military Trainees from Less Developed Countries
During the first 6 months of 1964, about 740 national.-,
from less developed countries enrolled in military programs in the US;'R
and Eastern Europe. This figure may be compared with almost 1,1300
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students who departed for military training in Communist countries dur-
ing the last half of 1963. As of the end of June 1964, approximately
2,830 military trainees were training at Communist military institutions.
To date, approximately 16,755 military personnel from less developed
countries have been sent to Communist countries for training; more than
80 percent of these have been trained in the USSR. Approximately 45
percent of these trainees have been from Indonesia. Iraq, the Syrian
Arab Republic, and the UAR have accounted for an additional one-third
of the military personnel trained in the Communist countries.
D. Trade
The spring of 1964 was highlighted by Communist participation
in the United Nations Conference on Trade and Development (UNCTAD) which
opened in Geneva on 23 March. In general, the speeches by the Communist
delegates contained relatively mild recitations of familiar Communist
arguments and high-sounding declarations of good intentions. Perhaps
betraying some sensitivity to the relatively low level of the USSR's
current trade with less developed countries, the Soviet delegate esti-
mated that Soviet trade with less developed countries would increase
by more than 8 times by 1980 and attain a value of more than $11 bil-
lion. In particular, he said that the USSR would increase its pur-
chases of cotton, jute, and wool as well as products of mining indus-
tries, raw materials for the chemical industry, and manufactured goods.
At the same time, the Communist countries strongly resisted recommenda-
tions that would have the effect of improving the terms and conditions
of their aid and trade with less developed countries.
1. Value of Trade, 1963
Trade turnover between Communist countries, excluding
Cuba,* and less developed countries of the Free World amounted to
almost $2.8 billion** in 1963, an increase of 11 percent above the
1962 level compared with 9 percent in 1962 over 1961. Soviet trade
with the area in 1963 totaled $1,037 million, that of Eastern Europe
$1,220 million, and that of Communist China $445 million.***
* Cuba's trade with less developed countries in 1963 amounted to
$121 million, about 9 percent above the 1962 level. As in the past,
Cuba's trade with developing countries was largely with Morocco, Spain,
Chile, and the UAR. (For data on Cuba's exports to and imports from
individual less developed countries, see Tables 12 and 13, pp. 77 and
79, respectively, below.)
** The value figures presented in this section are based primarily
on trade statistics as reported by the less developed countries. Be-
cause of differences in reporting methods, these figures differ sub-
stantially from those on the same trade as reported by official Com-
munist sources. Unless otherwise noted, the data in this section exclude
Cuba.
*x For data on Communist exports to and imports from indi sdualiless
developed countries, see Tables 10 and 11, pp. 69 and 73, P y,
below.
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The less developed countries' share of total Communist
trade in 1963 was about 7 percent, the same as in previous years.
Similarly, the Communist area's share in the aggregate trade of less
developed countries remained at roughly 5 percent. In spite of these
relatively low ratios, the share of Communist trade in the total trace
of certain less developed countries continued to be significant. For
example, Communist countries supplied about one-half of Afghanistan's
imports, one-fourth of Mali's and Guinea's, and roughly one-fifth of
the imports of Burma, Cambodia, Iceland, and Iraq. The Communist area
also provided a sizable market for several less developed countries:
it absorbed more than two-fifths of the exports of the UAR and between
20 and 30 percent of the exports of Sudan, Greece, Iraq, Iran, lauinea,
Afghanistan, and Syria. Communist countries continued to purchase
sizable portions of the major hard currency exports of some less de-
veloped countries. For example, they purchased almost one-fifth of
Ghana's total exports of cocoa beans in 1963, one-third of Sudan's
cotton exports, and roughly 70 percent of the 1963/64 Syrian cotton
crop and more than half the cotton crop of the UAR.*
2. Direction of Trade, 1963
The trade of the Communist countries continued to be con-
centrated on a small number of partners, reflecting, in part, a trade
momentum generated by disbursements under Communist economic credits,
the largest portion of which has gone to a limited number of less de-
veloped countries. Almost half of Soviet trade turnover with the less
developed countries in 1963 was accounted for by Afghanistan, India,
Indonesia, and the UAR, all major recipients of Soviet aid. The cor-
relation between trade and drawings is less positive for the Eastern
European countries. In 1963, almost three-fifths of East European trade
with less developed countries was conducted with only seven countries --
Argentina, Brazil, Spain, Greece, Turkey, India, and the UAR; oilly the
last two figure prominently in the East European aid program. As in
previous years, Communist China's trade continued to be accounted for
mainly by its Asian neighbors -- Burma, Ceylon, Indonesia, and Malaya and the UAR.
By area, Asia accounted for the largest share of Communis
countries' trade with less developed areas -- about 41 percent, the
same share as in 1962. Trade with the area increased about 10 percent
during the year, largely because of a 13-percent increase in Communist
exports: Ceylon and Malaya and Singapore accounted for the major
portion of this gain. A smaller increase of 7 percent was recorded
in Communist imports from the area.
Africa continued to account for 13 percent of total Com-
munist trade with less developed countries in 1963, the same share it
* For data on the Communist share of the exports and imports of indi-
vidual less developed countries in 1963, see Table 14, p. 81, below.
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held in 1962. Total Communist trade with Africa increased by 13 per-
cent: as a result of a 40-percent increase in Communist purchases from
the area. This increase was accounted for largely by increased imports
from Ghana, Morocco, Sudan, Tanganyika, and Uganda. Communist exports
to the area declined by 5 percent.
Latin America's share in total Communist trade with less
developed countries fell slightly from 12 percent in 1962 to 11 percent
in 1963. As a result of the relatively stable level of both exports
and imports in 1963, trade between the Communist area and Latin America
was only slightly below the $299 million level of 1962. Argentina and
Brazil continued to be the two most important Latin American countries
trading with the Communist area, accounting for more than four-fifths
of the Latin American total. A 27-percent decline in Argentina's
trade with the Communist countries in 1963 was compensated for by a
21-percent increase in Brazil's trade with the USSR and Eastern Europe.
Communist trade with the less developed countries of the
Middle last increased 12 percent, while the share of this area in total
Communist trade with less developed countries remained at 31 percent,
the same as in 1962. Although Communist exports to this area increased
only 2.' percent, imports rose by almost one-fourth, reflecting primarily
increased Communist purchases from the UAR. In spite of this increase,
however, the Communist area accounted for 53 percent of the UAR's cotton
exports in the 1963/64 season compared with more than 68 percent in
l962/63, reflecting the success of Egypt's efforts to sell more of its
cotton for hard currency.
Although Communist trade with the less developed countries
of Europe increased by more than 50 percent, it still amounted to only
$12; million, or less than 5 percent of total Communist trade with all
less; developed countries. The increase was due primarily to a rise in
Soviet and East European trade with Spain.
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