(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP97R00694R000400400001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 33
• Document Creation Date: January 12, 2017
• Document Release Date: August 27, 2010
• Sequence Number: 1
• Publication Date: January 1, 1985
• Content Type: REPORT

Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Intelligence
Directorate of
Secret-
Purchases
The Changing Patterns of
Third World Warship
An Intelligence Assessment
Secret
GI 85-10012
January 1985
Copy 2 6 7
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Secret
Notice to recipients of Intelligence Assessment: The Changing Patterns of Third
World Warship Purchases, GI 85-10012, 9.riX1
January 1985. 25X1
Please substitute the attached revisions of appendixes A and B for the original
versions. (The regional totals are revised in appendix A and are newly provided in
appendix B.)
266
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97ROO694ROO0400400001-2
Secret
Appendix A
Warship Inventories of Third World Countries, 1984
Major Missile
Subma-
Mine
Total
Major
Missile
Subma-
Mine
Total
Warships Boats
rines
Warfare
Warships Boats
rives
Warfare
Ships
Ships
Latin
104
48
43
14
209
Persian Gulf
12
67
0
21
100
America
Bahrain
0
2
0
0
2
Argentina
17
0
5
0
22
Iran
10
11
0
5
26
Brazil
19
0
8
0
27
Iraq
0
12
0
8
20
Chile
15
2
5
0
22
Kuwait
0
8
0
0
8
Colombia
7
0
4
0
11
Oman
0
5
0
0
5
Cuba
2
34
4
12
52
Qatar 0
3
0
0
3
Ecuador
8
3
2
0
13
Saudi Arabia 2
10
0
4
16
Mexico
9
0
0
0
9
United Arab
0
6
0
0
6
Nicaragua
0
0
0
2
2
Emirates
Peru
16
6
12
0
34
North Yemen 0
2
0
0
2
Uruguay
3
0
0
0
3
South Yemen 0
8
0
4
12
Venezuela
8
3
3
0
14
South Asia
44
22
14
23
103
Sub-Saharan
5
28
3
9
45
Bangladesh
3
2
0
0
5
Africa
India
33
16
8
17
74
Angola
0
4
0
0
4
Pakistan
8
4
6
6
24
Cameroon
0
1
0
0
1
Southeast
45
38
3
22
108
Ethiopia
0
3
0
0
3
Asia
Gabon
0
1
0
0
1
Brunei
0
3
0
0
3
Ivory Coast
0
2
0
0
2
Burma
2
0
0
0
2
Nigeria
3
6
0
1
10
Indonesia
14
4
3
4
25
Somalia
0
2
0
0
2
Malaysia
4
8
0
0
12
South Africa
2
9
3
8
22
Philippines
17
3
0
0
20
North Africa
29
140
29
22
220
Singapore
0
6
0
2
8
and Levant
Thailand
6
6
0
10
22
Algeria
6
18
2
2
28
Vietnam
2
8
0
6
16
Egypt
10
28
18
12
68
East Asia
56
69
21
22
168
Israel
0
30
3
0
33
North Korea
4
22
19
0
45
Libya
9
37
6
4
56
South Korea 22
9
0
8
39
Morocco
1
4
0
0
5
Taiwan 30
38
2
14
84
Syria
2
20
0
4
26
Tunisia
1
3
0
0
4
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97ROO694ROO0400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Secret
Appendix B
Warship Purchases by Third World Countries, 1975-84
Major Missile Subma- Mine Total Major Missile Subma- Mine Total
Warships Boats rines Warfare Warships Boats rives Warfare
Ships Ships
Latin
49
21
12
4
86
Persian Gulf 19
43
0
7
69
America
Bahrain 0
2
0
0
2
Argentina
16
0
4
0
20
Iran 1
0
0
0
1
Brazil
0
0
2
0
2
Iraq 10
0
0
2
12
Chile
2
2
2
0
6
Kuwait 0
8
0
0
8
Colombia
5
0
0
0
5
Oman 0
4
0
0
4
Cuba
2
13
4
2
21
Qatar 0
3
0
0
3
Ecuador
8
0
0
0
8
Saudi Arabia 8
10
0
4
22
Mexico
2
0
0
0
2
United Arab 0
6
0
0
6
Nicaragua
0
0
0
2
2
Emirates
Venezuela
6
0
0
0
6
South Yemen 0
8
0
1
9
Sub-Saharan
3
29
0
1
33
South Asia 20
16
11
9
56
Africa
Bangladesh 3
4
0
0
7
Angola
0
4
0
0
4
India 11
8
8
9
36
Cameroon
0
1
0
0
1
Pakistan 6
4
3
0
13
Ethiopia
0
3
0
0
3
Southeast 27
34
2
12
75
Gabon
0
1
0
0
1
Asia
Ivory Coast
0
2
0
0
2
Brunei 0
3
0
0
3
Nigeria
3
6
0
1
10
Malaysia 3
4
0
4
11
Somalia
0
2
0
0
2
Indonesia 7
16
2
2
27
South Africa
0
10
0
0
10
Philippines 13
0
0
0
13
North Africa 16
46
6
6
74
Thailand 2
3
0
0
5
and Levant
Vietnam 2
8
0
6
16
Algeria
10
9
2
2
23
East Asia 15
4
11
0
30
Egypt
4
12
4
0
20
North Korea 0
4
11
0
15
Israel
0
12
0
0
12
South Korea 10
0
0
0
10
Libya
1
0
0
4
5
Taiwan
5
0
0
0
5
Morocco
1
4
0
0
5
Syria
0
6
0
0
6
Tunisia
0
3
0
0
3
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Secret
Appendix A
Warship Inventories of Third World Countries, 1984
Major Missile
Subma-
Mine
Total
Major
Missile
Subma-
Mine
Total
Warships Boats
rines
Warfare
Warships Boats
rives
Warfare
Ships
Ships
Latin
104
48
43
14
209
Persian Gulf 12
67
0
21
100
America
Bahrain 0
2
0
0
2
Argentina
17
0
5
0
22
Iran 10
11
0
5
26
Brazil
19
0
8
0
27
Iraq 0
12
0
8
20
Chile
15
2
5
0
22
Kuwait 0
8
0
0
8
Colombia
7
0
4
0
11
Oman 0
5
0
0
5
Cuba
2
34
4
12
52
Qatar 0
3
0
0
3
Ecuador
8
3
2
0
13
Saudi Arabia 2
10
0
4
16
Mexico
9
0
0
0
9
United Arab 0
6
0
0
6
Nicaragua
0
0
0
2
2
Emirates
Peru
16
6
12
0
34
North Yemen 0
2
0
0
2
Uruguay
3
0
0
0
3
South Yemen 0
8
0
4
12
Venezuela
8
3
3
0
14
South Asia 44
22
14
23
103
Sub-Saharan
5
28
3
9
45
Bangladesh 3
2
0
0
5
Africa
India 33
16
8
17
74
Angola
0
4
0
0
4
Pakistan 8
4
6
6
24
Cameroon
0
1
0
0
1
Southeast 45
38
3
22
108
Ethiopia
0
3
0
0
3
Asia
Gabon
0
1
0
0
1
Brunei 0
3
0
0
3
Ivory Coast
0
2
0
0
2
Burma 2
0
0
0
2
Nigeria
3
6
0
1
10
Indonesia 14
4
3
4
25
Somalia
0
2
0
0
2
Malaysia 4
8
0
0
12
South Africa
2
9
3
8
22
Philippines 17
3
0
0
20
North Africa
29
140
29
22
220
Singapore 0
6
0
2
8
and Levant
Thailand 6
6
0
10
22
Algeria
6
18
2
2
28
Vietnam 2
8
0
6
16
Egypt
10
28
18
12
68
East Asia 56
69
21
22
168
Israel
0
30
3
0
33
North Korea 4
22
19
0
45
Libya
9
37
6
4
56
South Korea 22
9
0
8
39
Morocco
1
4
0
0
5
Taiwan 30
38
2
14
84
Syria
2
20
0
4
26
Tunisia
1
3
0
0
4
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Secret
Appendix B
Warship Purchases by Third World Countries, 1975-84
Major
Missile
Subma-
Mine Total
Major
Missile
Subma-
Mine Total
Warships
Boats
rines
Warfare
Warships
Boats
rives
Warfare
Ships
Ships
Latin
49
21
12
4
86
America
Bahrain
0
2
0
0
2
Argentina
16
0
4
0
20
Iran
1
0
0
0
1
Kuwait
0
8
0
0
8
Oman
0
4
0
0
4
Mexico
2
0
0
0
2
United Arab
0
6
0
0
6
Nicaragua
0
0
0
2
2
Emirates
Peru
8
6
0
0
14
North Yemen 0
2
0
0
2
Venezuela
6
0
0
0
6
South Yemen 0
8
0
1
9
Sub-Saharan
3
29
0
1
33
South Asia
20
16
11
9
56
Africa
Bangladesh
3
4
0
0
7
Angola
0
4
0
0
4
India
11
8
8
9
36
Cameroon
0
1
0
0
1
Pakistan
6
4
3
0
13
Ethiopia
0
3
0
0
3
Southeast
27
34
2
12
75
Gabon
0
1
0
0
1
Asia
Ivory Coast
0
2
0
0
2
Brunei
0
3
0
0
3
Nigeria
3
6
0
1
10
Malaysia
3
4
0
4
11
North Africa 16
46
6
6
74
Thailand
2
3
0
0
5
and Levant
Vietnam
2
8
0
6
16
Algeria
10
9
2
2
23
East Asia
15
4
11
0
30
Egypt
4
12
4
0
20
North Korea 0
4
11
0
15
Israel
0
12
0
0
12
South Korea 10
0
0
0
10
Taiwan
5
0
0
0
5
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Directorate of Secret
Intelligence
Purchases
The Changing Patterns of
Third World Warship
Office of Global Issues. Comments and queries are
welcome and may be directed to the Chief,
International Security Issues Division, OGI, on
This paper was prepared b~
Secret
GI 85-10012
January 1985
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Secret
The Changing Patterns of
Third World Warshi
Purchase
Key Judgments Third World countries are on the verge of completing a vast expansion of
Information available their warship inventories. In the past 10 years, their navies have expanded
as of 5 October 1984 by more than 70 percent to almost 1,000 vessels. The growth in numbers
was used in this report.
will slow dramatically in the next 10 years as these countries limit
purchases to about 300 warships, largely replacements for older ships. This
slowdown will represent a 30-percent decline in the size of the Third World
warship market.
The slowdown will have a significant impact on the producers of naval
vessels and equipment:
? The Soviets' share of the market will increase although their sales will re-
main concentrated in a handful of countries. In the last decade Moscow
exported more than 100 warships-more than any single supplier.
? Third World suppliers will gain a slightly larger share of the market by
offering simple, inexpensive ships to developing navies.
? West European yards will be the big losers in this shrinking market as
high wages erode their competitiveness. West European yards, however,
should be able to dominate submarine and mine warfare ship sales. West
European equipment manufacturers will also be helped by a strong
demand for sensor, weapon, and propulsion systems for new and used
ships.
The implications of the future Third World warship market for the United
States are mixed. On the negative side, the desire of most Allied
governments to maintain a national shipbuilding capacity in an era of
declining foreign sales will force them to pay higher prices for indigenously
produced warships, which will place an additional strain on already limited
defense budgets. On the positive side, we expect the demand for US
propulsion, weapon, and sensor systems and naval training to remain strong
over the next 10 years. Gains in these areas will help sustain US influence
in Third World navies even though the United States will sell few if any
warships to Third World countries during the next decade.
iii Secret
GI 85-10012
January 1985
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Secret
Key Judgments
Scope Note
The Decade of Expansion, 1975-84 1
Major Warships 4
Mine Warfare Ships 5
Some Broader Implications 11
A. Warship Inventories of Third World Countries, 1984
B. Warship Purchases by Third World Countries, 1975-84
D. Projected Third World Warship Purchases, 1985-94
E. Projected Third World Warship Construction, 1985-94
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Secret
The Changing Patterns of
Third World Warship
Purchase
Scope Note This assessment reviews the Third World demand for warships during the
last 10 years; projects sales into the next decade; and assesses their
significance for Western, Third World, and Communist shipbuilders and
naval equipment manufacturers.
25X1
25X1
Assessments of the markets for armored vehicles, military helicop- 25X1
ters, and tactical missiles are planned. This line of research complements
our earlier work on the arms sales prospects of France, Italy, the United
Kingdom, West Germany, and other West European and Third World
suppliers. F--~ 25X1
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
The Third World warship market is serviced by
shipbuilders, equipment manufacturers, and navies
disposing of surplus ships. Shipbuilding is a labor-
intensive, heavy construction enterprise characterized
by high unit costs. The first frigate in a class
typically costs $450 million, making the fabrication
of prototypes prohibitively expensive for most coun-
tries. Economies of scale usually begin with the third
vessel, after which labor and materials for the hull
and superstructure account for about 30 percent of
the value of a ship.
West European shipbuilders depend heavily on for-
eign sales to complement domestic orders. US and
Soviet yards are far less dependent on foreign sales
because of continuing large orders from their respec-
tive navies. Moreover, the warships they design are
too sophisticated and expensive for the export mar-
ket. Shipyards in the Third World have lower labor
costs as their principal advantage, but rely heavily on
licensing agreements and technical assistance from
West European shipbuilders. Only India, Brazil, and
South Korea have begun to produce locally designed
major warships, while Israel, Singapore, and South
Korea have manufactured missile boats for export.
Most of the sensor, propulsion, and weapons systems that
make up 70 percent of the value of a modern naval
combatant are produced by a small number of Western
naval equipment manufacturers. Few of these firms are
owned and operated by shipyards, and many produce
similar systems for aircraft and land vehicles. Some have
achieved de facto monopolies-Oto Melera and Bofors in
naval guns, General Electric in gas turbine engines, Motor
Turbine Union in diesel engines, and Aerospatiale and
McDonnell-Douglas in antiship missiles. In addition to
providing equipment for new warships, such firms service a
steady number of refits of older ships. A warship usually
undergoes at least four major refits in its normal lifespan,
after which it may be purchased by a Third World country
and modernized several more times.
Western Europe and the United States have been the
major sources of used warships. The rapid expansion
of Allied navies during the Second World War and in
the immediate postwar years laid the basis for a large
used-warship market for emerging Third World na-
vies 30 years later. The low and deliberately conces-
sionary prices of these ships-less than $500,000 was
the price of a US World War II destroyer-increased
demand and inflated the size of the potential warship
market.
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Secret
The Changing Patterns of
Third World Warship
Purchases
Introduction
Third World' countries are on the verge of complet-
ing a vast expansion of their warship inventories. In
the past 10 years, their navies have expanded by 70
percent to almost 1,000 vessels.' The completion of
this period of growth will usher in a decade of
consolidation in which Third World navies will grow
at a much slower pace. This more gradual expansion
of Third World warship inventories has significant
implications for the financial and economic well-being
of shipbuilders and naval equipment manufacturers in
developed and less developed countries.
The Decade of Expansion, 1975-84
We estimate that Third World countries purchased
more than 400 warships' in the last 10 years, spend-
ing over $10 billion on them. The average price of a
new frigate or submarine ran well over $100 million,
while missile boats and mine warfare ships each cost
about $10 million and $40 million, respectively. Al-
most two-thirds of these vessels were newly construct-
ed, and the remainder were surplus ships retired from
the navies of developed countries.
Missile Boats. Third World purchases were heavily
influenced by the availability of modern missile
boats-surface combatants displacing less than 500
tons and armed with antiship missiles such as the
French Exocet, US Harpoon, and Soviet Styx. Atta-
che reporting indicates that countries like Peru came
to regard these fast and powerful combatants as the
most valuable ships in their fleets. Moreover, low
Table 1
Third World Warship Purchases
by Region, 1975-84
Major
Warships
Missile
Boats
Subma-
rines
Mine
Warfare
Ships
Total
Latin
America
49
21
12
4
86
Sub-Saharan
Africa
3
29
0
1
33
North Africa
and Levant
16
46
6
6
74
Persian Gulf
19
43
0
7
69
South Asia
20
16
11
9
56
Southeast
Asia
27
34
2
12
75
operating costs and small crew requirements made
missile boats attractive purchases. About 200 were
sold to 34 countries, most of them for use in the
Persian Gulf, Mediterranean Sea, or Southeast Asian
waters (table 1), for example:
? Saudi Arabia bought 10 boats armed with Harpoon
missiles from the United States in 1976.
? Egypt ordered six missile boats armed with Otomat
antiship missiles from Britain in 1977.
? Vietnam acquired eight Osa-Il-class boats armed
with SSN-2C antiship missiles from the Soviet
' For the purposes of this assessment, the term "Third World"
includes all members of the Nonaligned Movement and the Group
of 77, except Yugoslavia because of its European location. It also
includes Israel, South Africa, Taiwan, and Thailand because of
their importance in regional military balances. Not included are all
members of NATO and the Warsaw Pact, neutral and nonaligned
European countries-Albania, Austria, Finland, Ireland, Switzer-
land, and Sweden-as well as Australia, China, Japan, and New
Zealand.
countries and appendix B for purchases by country, 1975-84.
' Other naval vessels not listed in this report such as patrol boats,
landing craft, and fisheries vessels-were also purchased. They are
not included in this assessment because they represent a less
important economic market and military threat. F____]
Union in 1979-81.
Major Warships. The demand for major warships-
corvettes, frigates, and other surface combatants dis-
placing more than 500 tons-was also strong. Most
sales supplied replacements for older ships rather than
expanding existing fleets. Several South American
25X1
25X1
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
countries-Peru, Venezuela, Colombia, and Argenti-
na-embarked on ambitious naval modernization pro-
grams, replacing aging World War II-era ex-US
destroyers with modern frigates of West European
design. At the same time, three Asian navies-South
Korean, Taiwanese, and Philippine- received 25
surplus US warships. Perhaps the most publicized
Third World major warship purchases were those
made by oil-exporting countries aspiring to build blue-
water navies capable of performing more than coastal
operations, for example:
in 1980 as part o a naval package worth
billion.
? Iraq ordered six frigates from Italy in 1981 for $1.8
billion.
? Nigeria bought two corvettes from Britain and one
frigate from West Germany in 1975-77 for a total
of $281 million.
Submarines. Sales of diesel-electric submarines were
more limited than those of major warships, in terms of
both numbers and recipients. South American coun-
tries were the biggest buyers-Argentina, Brazil, and
Chile all ordered West German submarines. Another
notable buyer was India which purchased a total of
eight, four of them from the Soviet Union. Indonesia
was the only country in Southeast Asia to purchase
submarines, and none were sold to Persian Gulf
nations.
Mine Warfare Ships. Minehunters and minesweepers
were in less demand, with the total number of these
ships in Third World inventories actually declining-
a result of the low priority assigned to mine warfare
ships. For example,
The use of US
helicopters to neutralize mines in Vietnamese and
Egyptian waters in the early 1970s probably contrib-
uted to low sales by spreading the belief among Third
World military planners that only the great powers
can clear modern magnetic and acoustic mines.
Changing Market Forces
Changes in the market forces that led to this surge in
warship purchases already are pointing to a decline in
Six Third World countries that purchased 20 or
more warships accounted for more than one-third of
the market.
? Indonesia bought 27 ships from an assortment of
suppliers including West Germany, the Nether-
lands, South Korea, and Yugoslavia.
? Algeria purchased 23 warships, the majority of
which came from the USSR, which also loaned
Algiers two submarines.
? Argentina ordered 16 surface combatants and four
submarines from France, West Germany, and the
United States.
Another three countries-Cuba, North Korea, and
Vietnam-signed agreements for 15 or more vessels,
while 36 other Third World countries each bought
fewer than 15 warships (see figure 1).
the number of ships that will be sold to Third World
countries during the next decade:
? Financial ability. Naval expenditures rose sharply
during the 1970s and early 1980s on the strength of
rising oil revenues and easy credit.' Declining oil
revenues and tight credit since then have led to a
period of austerity that is reducing Third World
naval spending. According to attache and Embassy
reports, for example, Chile has declined a British
offer to sell the aircraft carrier HMS Hermes
' Naval expenditures, however, remained far behind those of other
services. We estimate that Third World air forces spent $50 billion
on jet combat aircraft over roughly the same period.
25X1
25X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Secret
because of funding problems, while Iraq has de-
ferred payment on and acceptance of six warships
purchased from Italy in 1981. In our judgment,
current financial problems facing Third World
countries will have a greater effect on naval pro-
curement plans than those of the other services
because of the limited contributions warships can
make to fighting insurgencies and territorial incur-
sions by neighboring states. In the Philippines, for
instance, the lack of an external threat and a
growing insurgency have given the Army and Air
Force priority in the defense budget, according to a
defense attache report.
? The supply of surplus ships. More than 130 used
warships-mostly ships retired from Dutch, British,
Soviet, and US Navies-entered the market in
1975-84 (figure 1). Most were sold at bargain prices.
The United Kingdom, for example, sold three
Tribal-class frigates to Indonesia for $45 million
earlier this year, and the United States sold a
Gearing-class destroyer to Pakistan for less than $1
million in 1983. We estimate that the surplus ship
market will decline by 30 percent to fewer than 100
ships in the next 10 years. According to US Navy
officials, the United States no longer has large
numbers of World War II and Korean war warships
ready for disposal. Commitments to a 600-ship navy
probably will preclude the early retirement of many
vessels. We estimate that West European navies will
retire about 90 major warships, 40 submarines, and
80 mine warfare vessels in the next 10 years. Most
will be too expensive to modernize and will be
scrapped, but we estimate that about one-third of
these ships will be sold to the Third World.
? Expanding territorial claims. During the past de-
cade, many Third World countries made overlap-
ping and expansionist claims to territorial waters
and oceanic economic zones. These claims and the
ongoing Law of the Sea Conference provided ample
justification for navies looking to expand their mis-
sions and inventories. The claims now seem to have
reached their limit, and multilateral negotiations
are at a standstill, changing the political environ-
ment in which Third World navies rapidly
expanded.
Figure 1
Third World Warship
Purchases, 1975-84
? Modernization cycles. Naval modernization pro-
grams in many Third World countries are now
nearing completion, giving way to a natural pause in
new orders. With equipment replacement cycles at a
low ebb, Third World countries would not be plac-
ing as many new orders as they did in the previous
10 years even if they did not face restrictive finan-
cial considerations. The next wave of modernization
programs will not occur until the mid-1990s.F 25X1
The Decade Ahead
On the basis of these trends,
we believe Third
World countries will be in the market for about 300
warships over the next decade, down 30 percent from
the 400-ship level of the last 10 years (figure 2 and
table 2).
25X1
25X1
we assumed they 25X1
would replace warships on a 1-for-1 basis at the end of
their normal lifetimes-about 20 years for missile
boats and 45 years for major warships, submarines,
and mine warfare ships. Although our estimates of
Third World warship purchases in the later years of
the decade are necessarily speculative, we believe that
our projection represents a best case scenario for the
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Figure 2
Third World Warship
Markets, 1975-84 and 1985-94
Major
warships
Missile
boats
Mine
warfare
ships
future of the market.' In this scenario, Third World
naval inventories will grow more slowly over the next
10 years than during the previous decade (figure 3).
Major Warships. Frigate and corvette purchases by
Third World countries will probably decline by more
than 50 percent to about 60 for the 1985-94 period.
Only India and Taiwan plan to purchase 10 or more
major surface combatants, although financial prob-
lems could limit actual purchases. A small number of
other countries, including Israel and Singapore, plan
to complement their largely missile-boat navies with
small corvettes capable of carrying helicopters, which
will be used to provide targeting information for long-
range antiship missiles.
' See appendix C for variables that could reduce this projection,
appendix D for details on anticipated purchases by country. and
appendix E for anticipated construction by Third World countries.
Table 2
Anticipated Third World Warship Purchases
by Region, 1985-94 a
Major
Warships
Missile
Boats
Subma-
rines
Mine
Warfare
Ships
Total
Total
62
144
49
45
300
Latin
America
7
29
6
4
46
Sub-Saharan
Africa
0
16
0
0
16
North Africa
and Levant
15
42
10
8
75
Persian Gulf
2
16
2
13
33
South Asia
10
30
8
8
56
Southeast
Asia
13
11
11
12
47
Missile Boats. Third World navies will probably buy
about 150 missile boats, largely as replacements for
those acquired in the 1960s. Many will be Soviet in
origin; Algeria, Cuba, Egypt, Syria, and India will be
the biggest markets. Even so, the total number of
missile boats purchased in the next decade will decline
by about 25 percent compared with purchases in the
previous 10 years. Because they are the least expen-
sive warships available, Third World demand already
has been saturated and Third World navies are
planning to graduate to larger vessels.
Submarines. Sales of these warships will probably
approach 50 units, estimated largely on the basis of
planned purchases by countries such as Indonesia,
Malaysia, and Thailand. Vietnam will probably fol-
low with its first submarine acquisition. Algeria,
Egypt, India, and Israel will also be looking for
submarines as replacements for their aging inven-
tories.
We believe there is also a slight chance that one or
more Third World countries will buy nuclear-powered
submarines in the next 10 years. Prestige, plans for
long-range submarine operations, and the desire to
eventually possess a sea-based nuclear deterrent are
25X1
25X1
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Secret
Figure 3
Third World Navies,
1974-1994
0 1974
1984
1994
Major
warships
Missile
boats
Mine
warfare
ships
motivations for what would probably be a very expen-
sive purchase. France and the USSR are the most
likely suppliers of these warships. A recent French
export catalogue contains an entry for the nuclear-
powered Rubis-class attack submarine, and an atta-
che report speculates that France may already have
offered the ship to Third World countries in order to
reduce unit production costs for its own Navy.
Figure 4. French Rubis-class
nuclear powered attack subma-
rine as pictured in recent
French arms export catalog.
Mine Warfare Ships. We anticipate that about 40
minehunters and minesweepers will be sold through-
out the Third World, mostly as replacements for
aging British- and Soviet-made vessels. We believe
that the demand for mine warfare ships could increase
further as a result of the recent use of offensive
mining in regional conflicts. Minings in Nicaraguan
coastal waters and the Red Sea and Iranian threats to
mine the Persian Gulf have pointed to the effective
use of sea mines as a harassment tactic. West Europe-
an countries-the Netherlands, the United Kingdom,
France, and Italy-took advantage of the Red Sea
crisis to send mine warfare ships to that area, in part
to demonstrate their capabilities to potential custom-
ers throughout the world. Efforts by the United States
to rebuild its oceanic and coastal mine warfare forces
could further stimulate the market.
Outlook for Suppliers
Third World warship purchases in the next decade
will favor Third World and Communist suppliers
marketing warships with limited capabilities and low
price tags. West European shipyards will join their
US counterparts as passive spectators except in the
sale of minesweepers and submarines. Western equip-
ment manufacturers will make out better, servicing
25X1
25X1
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Figure 5
Third World Warship
Purchases by Supplier,
1975-84
Soviet
West European
Major
warships
Missile
boats
Mine
warfare
ships
outfitting new ships
the shipbuilding industry, like other heavy industries,
will become increasingly concentrated in countries
with lower wages, leaving a small and specialized
national capacity in the developed countries of the
West.
Third World Suppliers. The established Third World
warship manufacturers-Brazil, India, Israel, South
Korea, and Singapore-will play a larger role in the
international warship market than we foresee. In the
last decade they were limited to selling missile boats
designed in the West (figure 5). We anticipate that
they will broaden their offerings to include small
corvettes and frigates with simple and low-cost de-
Sig ns.
for example, the Niteroi-class corvette is a first-
rate design with good weapons integration. Several
Third World warship designs-the South Korean
Ulsan, the proposed Israeli Saar 5, and the new
Brazilian corvette-will probably be popular with
many navies wanting to move to warships larger than
Other
US
missile boats (table 3). These ships combine limited
manning requirements with the high degree of fire-
power of missile boats. The Israeli and Brazilian
designs also carry helicopters for beyond-the-horizon
targeting of long-range antiship missiles.
Some Third World suppliers will be increasing their
export efforts as financial problems force them to sell
ships under construction for their own navies
Financial or operational reasons could also force these
countries to sell part of their current inventories.
Argentina has announced already that it will sell part
of its Navy as well as warships being constructed
under West German license and use the proceeds to
reduce the Navy's foreign debt. According to press
reports, two British-designed Type 42 destroyers are
at the top of the disposal list because the Argentines
lack spare parts to keep them running. Buenos Aires
recently received from the German builder of its two
25X1
25X1
25X1
2bAl
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97ROO694ROO0400400001-2
Secret
Table 3
Frigates and Corvettes Available to
Third World Countries
Country Class Displace- Speed Range Guns Missiles Heli- Propul- Number Number Price
of Origin ment (knots) (nm) Number/ copters- sion in Crew Sold (million
(metric Caliber SAMs SSMs US $)
tons) (mm)
E-71
2,283
29
6,000
1/100
Gas tur-
160
???a
85-
bine and
1984
diesel
NA
1,900
29
4,000
1/115
Gas tur-
120
... b
NA
2/40
bine and
diesel
Jianghu
2,000
NA
4,000
2/100
Diesel
195
2
NA
12/37
F2000
2,610
30
8,000
1/100
Diesel
179
4
NA
4/40
MEK0360
3,600
30
6,500
1/12
Gas tur-
198
6
167-
8/40
bine
1978
FS1500
1,850
27
7,000
1/76
Diesel
90
6
_
63-
4/30
1980
SAAR 5
1,000
42
4,500
2/30 ?
? Gas tur-
45
... b
250-
1/CIWSc
bine and
1984
diesel
Lupo
2,500
35
3,550
1/127
Gas tur-
185
16
85-
4/40
bine and
1975
diesel
Maestrate
3,040
32
6,000
1/127
Gas tur-
232
....
NA
4/40
bine and
diesel
M
2,650
28
4,000
1/76 ? ?
? Gas tur-
80
....
NA
1/CIWS
bine and
diesel
Ulsan
1,940
35
NA
2/76
Gas tur-
123
....
135-
8/30
bine and
1984
diesel
F 30
1,480
26
4,000
1/76
Diesel
116
2
133-
2/40
1983
1/CIWS
Koni
1,900
27
1,800
3/76
Gas tur-
110
4
43-
4/30
bine and
1983
diesel
Nanuchka
770
32
2,500
2/57
Diesel
70
7
20-
II
1983
Petya II
1,100
35
4,000
4/76
Gas tur-
98
16
18-
bine and
1983
diesel
Type 22
2,700
30
4,500
11115
?
Gas tur-
290
? ? a
170-
4/30
bine
1984
2/20
bine and
diesel
130-
1984
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97ROO694ROO0400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Table 3
Frigates and Corvettes Available to
Third World Countries (continued)
Country
Class
Displace-
Speed
Range
Guns Missiles Heli-
Propul-
Number
Number
Price
of Origin
ment
(knots)
(nm)
Number/ copters-
sion
in Crew
Sold
(million
(metric
tons)
Caliber SAMs SSMs
(mm)
US $)
United
FFG-7
3,585
29
4,500
1/76
Gas tur-
185
???
300-
States
1 /CIWS
bine
1984
3,000
1/76
87
2
72-
2/40
1983
Commer-
cial export
design
1,715
32
5,000
1/76 ? ? ?
1/CIWS
Gas tur-
bine and
diesel
78
??.
NA
Offered.
n Design stage.
Close-in weapon system.
Type 209 submarines permission to sell them. We China. China will share many of the advantages of
believe Iran will probably sell its inventory of US- Third World suppliers in marketing less sophisticated
made ships purchased by the Shah because of spare- warships al-
parts problems and replace them with warships from though Chinese warships incorporate 1950s Soviet
another supplier. technology, they are reliable and affordable. Egypt's
recent purchase of four Chinese-built Romeo-class
In the near term, Third World suppliers will not be submarines and two frigates is China's largest naval
able to offer sophisticated indigenously designed sur- sale to date. Cairo will probably equip the ships with
face ships, submarines, or mine warfare ships,F___-] Western systems and use them to train its inexperi-
enced Navy Thailand
is also considering the purchase of Chinese subma-
rines before attempting to operate more expensive and
complex West European boats, according to an atta-
che report.
While inexperience and funding problems will plague
these efforts in the short run, we believe Third World
construction capabilities will steadily progress.F_
The Soviet Union. Soviet activity in the market will
remain concentrated in a few countries. In the last
decade, Moscow sold or gave away more warships-
120-than any other single supplier. The number of
customers it serviced, however, was small. Only
Marxist Third World countries-Angola, Cuba, Ethi-
opia, South Yemen, and Vietnam-and a handful of
regular Soviet arms customers-Algeria, India, Lib-
ya, and Syria-obtained Soviet vessels. Algeria, In-
dia, and Libya also bought ships from the West, but
25X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Secret
Soviet ships have been substantially less expensive. At
$70-110 million each, Soviet frigates and corvettes
are $30-40 million cheaper than available Western
models and attractive to cash-poor countries like
India. They are not highly regarded by such Soviet
customers as Iraq, however, which purchased frigates
from Italy.
Our analysis suggests that Soviet sales will probably
remain about the same. Several key Soviet naval
customers will make large purchases in the next 10
years, but many Western customers have completed
their modernization programs. We project that Cuba,
Syria, and India will acquire a total of approximately
80 warships in the next 10 years, largely to replace
older vessels. Soviet concessionary prices and political
influence with these countries all but guarantee that
the majority of their new warships will be Soviet built,
although attache reports indicate that Moscow is
concerned by Western naval sales to a few of its key
clients.
The USSR is presently making a major attempt to
lure India away from West German submarine pro-
ducers by promising a total replacement of India's
Foxtrot fleet with new Kilo-class diesel submarines, as
well as delivery of three Kresta-class cruisers, three
Kashin-class destroyers, missile boats, and additional
minesweepers New
Delhi has announced plans to acquire more than a
dozen new Soviet warships by the end of the decade,
but it will probably continue to use the threat of West
European naval purchases to squeeze Moscow. Alge-
ria is also playing this game, indicating its displeasure
with the performance of Soviet submarines by enter-
taining Western bids for the overhaul of Soviet war-
ships and for new corvettes and minesweepers. F--]
Western Europe. West European suppliers will suffer
the most from the changes in Third World warship
purchasing patterns. In addition to the decline in the
size of the total market, West European shipyards will
lose sales because their competitive position relative to
Third World shipbuilders is deteriorating. As a result,
we expect warship sales to Third World countries by
West European shipbuilders to decline by one-third to
one-half compared to the 1975-84 period, when they
were the primary suppliers of warships to the Third
Figure 7. West German-built TR1700 subma-
rine, the ARA Santa Cruz, recently delivered to
World. The commanding position West European
shipyards achieved during that period largely reflects
the advanced designs and attractive financing pack-
ages they offered, plus the diversified arms procure-
ment policies of Third World countries. Those factors
remain but will not be sufficient to reverse the erosion
of their market position.
The market losses we see ahead for the West Europe-
ans will not be evenly distributed. West European
equipment manufacturers, for example, will continue
to enjoy a large measure of success. We believe the
demand for sensors, weapon, and propulsion systems
for ships being built or refitted in Third World yards
will remain strong throughout the coming decade.
New products-such as vertical missile launchers,
heavier close-in weapon systems, and supersonic anti-
ship missiles-will also begin to make their way into
Third World naval inventories early in the 1990s.
West European shipyards, on the other hand, face a
troubled future. They probably will continue to domi-
nate sales of diesel submarines and mine warfare
ships, in which they have a technological edge over all
other suppliers. West European firms are far ahead of
their US and Soviet competitors in nonnuclear sub-
marine propulsion and glass-reinforced-plastic hull
construction for mine warfare ships,
West European suppliers will also
have a competitive advantage over Third World sup-
pliers in their ability to provide credit, follow-on
25X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Aside from specialized warships-submarines and
mine warfare ships in particular-West European
shipyards will have a hard time selling in the Third
World. The competitiveness of West European ship-
yards building missile boats and major combatants is
already deteriorating because of higher labor costs
relative to Third World producers. The loss of Third
World sales, moreover, will aggravate the problem by
creating additional excess shipyard capacity. In the
last 10 years, warship sales to the Third World helped
West European yards overcome a shortage of com-
mercial orders, but now the financial support that
foreign military orders provided is disappearing.
According to US Embassy and defense attache re-
porting, West European governments are attempting
to cope with the problem by making the following
changes in their national industries:
? Paring employment. In France and West Germany,
shipyard employment has been allowed to decline by
25 percent since 1975, and steeper reductions are
being considered. Italy plans to drop its shipyard
work force from 22,000 to 17,000 over the next few
years, and German Government projections foresee
the loss of an additional 9,000 jobs. Work forces in
Dutch shipyards have dropped from 50,000 to
30,000 in the last 10 years and continue to decline.
Spanish shipyard managers also believe that they
will have to cut employment if new orders cannot be
found.
? Reorganization. Mergers and divestitures have been
commonplace in the West European shipbuilding
industry. Ten years ago, 117 individual Dutch com-
panies formed Rijn Schleide Verolme (RSV), a
conglomerate designed to compete with Far Eastern
shipbuilders. So much government aid was required
to start up RSV that the government quickly ac-
quired 46 percent of the stock. When RSV went
bankrupt in 1983 because of poor investment deci-
sions, The Hague broke up the firm into small yards
but continues to tinker with mergers. Elsewhere, the
Thatcher government plans to "privatize" British
Shipbuilding by selling government shares in the
national yards, while Rome has tabled a drastic
reorganization of Italy's entire naval industry that
would specialize the yards to avoid duplication.
? Domestic orders. The Hague has moved forward
plans to build M-class frigates for the Dutch Navy
in lieu of placing foreign orders.
this reprogramming of funds is
coinciding with efforts to dispose of the Van-Speijk-
-class frigates "to the highest bidder."
? Marketing consortiums. Shipyards have joined with
naval equipment manufacturers to offer customers a
wider variety of designs, equipment options, and
financing packages. Italian shipbuilders formed two
consortiums in 1980, and private French yards
joined to form France Navale in 1982. Negotiations
continue between British shipbuilders and two UK
equipment associations to form a marketing
consortium.
? Direct subsidies. National shipyards in France,
Britain, and Spain receive financial support through
defense budgets, and those in Italy and Germany
25X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Secret
receive funds through national holding companies
and direct subsidies. The Dutch parliament recently
authorized compensation to the Wilton-Fijenoord
Shipyard after additional ship sales to Taiwan were
prohibited. Since 1977, Dutch shipyards have re-
ceived more than $1.5 billion in subsidies and soft
loans.
United States. The US share of the Third World
warship market will also decline, but, because of its
traditional role as a supplier of older ships, the effects
of its declining role will not be as severe as those for
the West Europeans. The US role in the market in the
last decade was limited to transferring surplus de-
stroyers and submarines built in the 1940s and 1950s.
Most of these warships were sold at rockbottom
prices-less than $5 million each, including refits and
training. US shipyards were less than competitive in
the international market, primarily because of higher
labor costs. Many US yards offered ship designs
suited to Third World needs, but the high costs of
building prototypes put them at a substantial disad-
vantage with West European competitors whose na-
vies purchased ships similar to those sold to the Third
World. While lacking foreign orders, US yards were
kept relatively busy building sophisticated warships
for the US Navy. The sale of two corvettes to
Thailand in 1982 was a notable exception.
The US ability to provide used vessels will virtually
disappear in the next 10 years because of the lack of
surplus warship inventories. The high cost and sophis-
tication of US-built warships, plus the inability of US
yards to offer customers more than paper designs of
ships to meet their needs, will continue to keep US
competitiveness in new ships low
US shipyards will continue to sell in the
foreign market only on an occasional basis
While US shipyards will not
sell much in the foreign market, US naval equipment
manufacturers will continue to sell propulsion, sensor,
and weapon systems. The increase in refits that we
project probably will help to maintain US naval
equipment sales through the next 10 years.
Some Broader Implications
The implications of the future warship market for the
United States are largely political rather than eco-
nomic because US shipbuilders have played a limited
role in supplying Third World navies. The effect of
the market on NATO defense budgets is the primary
threat to US interests. Specifically, we believe that
the West Europeans' response to the declining market
will distort their contributions to NATO defense
programs. Instead of disbanding inefficient producers
in their shipbuilding industries, West European gov-
ernments will be inclined to subsidize inefficient
producers with direct payments and accelerated naval
modernization programs. The latter route would ab-
sorb a large portion of their already limited defense
budgets, leaving less for defense programs that might
be of more importance to the United States.
As for Third World influence, we do not expect that 25X1
US influence with Third World navies will necessarily
decline as the US role in the warship market shrinks.
A major contributing factor will be the strong Third
World demand for US-supplied weapons, sensors, and
engines. Many Third World navies, moreover, partic-
ularly those in Latin America and the Far East that
have traditionally looked to the United States as a
model for their structure and operations, will continue
to ask for US assistance in training their officers and 25X1
enlisted men and in developing sound doctrine and
tactics for the deployment of their ships. Argentine
naval officers, for example, believe that resumed
access to US technology and training could double the
readiness and proficiency of their forces in three
years If 25X1 K1
this pattern is repeated elsewhere, US influence in
Third World navies and naval industries will remain 25X1
healthy even if US warship sales decline as much as 25X1
we anticipate. 25X1
25X1
We believe the anticipated hiatus in massive new
purchases will present many Third World navies with
an opportunity to address the serious problems that 25X1
plague them today. Shortages of trained personnel,
critical gaps in doctrine and tactics, and inadequate
maintenance procedures may be corrected if funds not
spent on new ships are diverted to operations and
25X1
25X1
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
maintenance. Increases in training exercises and in
the number of days at sea will be important contribu-
tions to the improvement of Third World naval
capabilities
Any improvement in Third World naval capabilities
will have mixed implications for the United States.
While specific threats and opportunities will be very
scenario dependent, the United States may be able to
count on greater assistance from friendly Third World
naval forces when conducting realistic training exer-
cises and normal operations. Conversely, unfriendly
Third World naval forces generally will pose a greater
threat to US and NATO out-of-area operations re-
quiring large naval deployments, particularly those
designed to meet potential attacks by missile boats
and modern conventional submarines
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Secret
Appendix A
Warship Inventories of Third World Countries, 1984
Major Missile Subma- Mine Total Major Missile Subma- Mine Total
Warships Boats rines Warfare Warships Boats rives Warfare
Ships Ships
Latin 49 21 12 4 86 Persian Gulf 19 43 0 7 69
4 22 19 0 45
22 9 0 8 39
30 38 2 14 84
25X1
25X1
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Secret
Appendix B
Warship Purchases by Third World Countries, 1975-84
Major Missile Subma-
Warships Boats rines
Mine Total
Warfare
Ships
Major Missile Subma- Mine Total
Warships Boats rives Warfare
Ships
Latin
America
0 2 0 0 2
16 0 4
0 20
25X1
1 0 0 0 1
0 0 2
0 2
10 0 0 2 12
2 2 2
0 6
25X1
25X1
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Secret
Appendix C
While global austerity and the completion of sched-
uled modernization programs will be the principal
factors decreasing the size of the Third World war-
ship market over the next 10 years, several factors
could further reduce the size of the market. We
believe that an increase in the number of refits,
substitution of aircraft and coastal defense systems
for warships, and an expansion of Third World indige-
nous shipbuilding programs could reduce to fewer
than 300 the number of vessels we expect to be sold
An increase in the number of Third World countries
building their own warships is another factor that
could reduce the export market. Several countries-
India, Indonesia, Pakistan, and Argentina-are trying
to use license production agreements with Western
shipbuilders as a steppingstone to an indigenous capa-
bility. Still others are taking initial steps to develop a
naval industry
before 1995.
An increase in the number of refits would be the most
likely cause of a more precipitous decline in the Third
World warship market than we anticipate.
more than 150 Third World
warships are wort modernizing at present. Many
Third World countries have refit programs under
way; for example:
? Algeria is installing new engines in its Soviet-built
Osa missile boats and Nanuchka corvettes.
? Taiwan is adding indigenously built antiship missile
systems to eight of its ex-US destroyers.
? Peru is spending $120 million to have its light
cruiser, the Alimirante Grau, modernized in the
Netherlands.
Under tighter financial conditions, many Third World
governments will approve an increased number of
refits instead of authorizing new naval construction.
In many cases, these refits will take longer to com-
plete because of budgetary problems, delaying new
purchases even further. Financial constraints will also
prevent some countries from purchasing as many new
sensor, weapon, and propulsion systems as they would
like; for example:
? Indonesia plans to refit its Pattimura-class frigates
instead of replacing them, but money is available
only for engine overhauls, and no work will be done
on weapon or electrical systems.
? Nigeria began refitting a corvette in 1981 but has
not finished the job because of a lack of funds.
? Brazil wants antiship missiles for some of its patrol
boats but will wait at least one more year because of
budgetary problems.
Iraq is having personnel trained in shipyard man-
agement and construction techniques by CNR of
Italy.
? South Africa is building a 12,000-ton supply ship as
a prelude to the construction of corvettes and
frigates.
? Nigeria is building a dockyard for repairs and refits.
25X1
:25X1
We doubt that many, if any, of these prospective
shipbuilders will be able to move in the next 10 years
from the licensed assembly of foreign-designed war-
ships to the construction of locally designed warships,
largely because of the costs involved.' Taiwan, for
example, recently decided to abandon plans to design
and build a guided-missile patrol frigate because it 25X1
was prohibitively expensive
We believe other Third World states will 25X1
reach similar conclusions. 25X1
The use of alternative platforms for coastal reconnais-
sance and defense could also reduce the demand for 25X1
warships but only slightly. Many maritime surveil-
lance missions are performed more efficiently by
aircraft than warships. Indonesia, for example, has
purchased three Boeing 737 aircraft equipped with
side-looking airborne radars, which allow them to
conduct maritime reconnaissance missions in a frac-
tion of the time several dozen ships could perform
them. 25X1
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
countries purchasing aircraft equipped with early
warning radars will be able to use them to monitor
maritime traffic along their coasts, reducing the
number of ships needed to perform this task.
Coastal defense systems, employing the same antiship
missile systems found on warships, could reduce mis-
sile boat sales. Such systems possess many of the
capabilities of missile boats operating close to shore
and, if mobile, are more difficult than missile boats
for enemy warships and aircraft to locate and attack.
Argentina's use of an improvised land-based Exocet
launcher to hit but not sink a British destroyer
shelling the Falklands has been noted by professional
commentators as an example of the value of modern
coastal defense systems armed with antiship missiles.
Only a small number of countries have acquired these
systems:
? Syria has Soviet-supplied SSC-l and SSC-3 coastal
missile systems.
? Qatar has purchased two Exocet coastal defense
missile units from France.
? Egypt has received land-based Otomat antiship
missile launchers from France.
We believe sales of these systems will continue to be
limited to the littoral states with closed seas or to
countries that are situated astride strategic water-
ways. Tight money situations will combine with paro-
chial service interests to limit sales. Navies will prefer
ships to coastal missile launchers, and armies will
prefer to spend money on ground force weapons.
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
OMI Cl
Appendix D
Projected Third World Warship
Purchases, 1985-94
Latin America
Argentina and Brazil will look for replacements for
their aircraft carriers in the next 10 years. Chile will
attempt to acquire its own aircraft carrier and several
other surface combatants. Cuba will be the largest
naval customer in the region, expecting to replace
more than a dozen missile boats and to add three
more submarines to its fleet (table D-1). If Nicaragua
follows the pattern of other Soviet clients, it will
acquire several missile boats by the 1990s.
Table D-1
Project Warship Purchases by
Latin American Countries
Major Missile Subma- Mine Total
Warships Boats rines Warfare
Ships
North Africa and Levant
Missile boat replacements will make Algeria, Egypt,
and Syria among the biggest Third World customers
in the next decade (table D-3). Syria may also receive
its first submarines, while Algeria and Egypt may
replace some of their Soviet submarines, possibly with
West European models. Israel also is in the market for
submarines
Table D-3
Project Warship Purchases by
North African and Levantine Countries
Major Missile Subma- Mine Total
Warships Boats rines Warfare
Ships
25X1
25X1
2 12 2 4 20
3 0 4 0 7-- 25X1
Persian Gulf
Sub-Saharan Africa Both Iran and Iraq will need replacements for missile
This region will remain a small market (table D-2). boats lost in the war. Tehran will also be seeking to
Most sales will involve replacing older missile boats replace its US-built ships with vessels it can maintain.
with newer models. 0 We expect Saudi Arabia and the smaller Gulf states
to be in the market for mine warfare ships (table D-4).
Table D-2
Projected Warship Purchases by
Sub-Saharan African Countries
Major Missile Subma- Mine Total
Warships Boats rines Warfare
Ships
Riyadh may also expand its fleet into submarine
operations.
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Secret Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Table D-4
Projected Warship Purchases by
Persian Gulf Countries
Major Missile Subma- Mine Total
Warships Boats rines Warfare
Ships
Total 2 16 2 13 33
~2--__ 6 0 0 8
South Asia
India will remain the largest warship purchaser in the
Third World, ordering more than 40 ships in the next
decade (table D-5). Most of these ships will be Soviet
major warships and submarines, but India will also
purchase about 20 missile boats from an undeter-
mined supplier. Pakistan and Bangladesh can be
expected to purchase additional Chinese-made missile
boats.
Table D-5
Projected Warship Purchases by
South Asian Countries
Major Missile Subma- Mine Total
Warships Boats rines Warfare
Ships
Total 10 30 8 8 56
0 - 4 0 0 4
Southeast Asia
An arms race in submarines is likely to characterize
the Southeast Asian naval market in the next decade.
Malaysia and Thailand are actively discussing offers
from Western Europe and China, and we expect that
the Soviet Union would provide Vietnam with subma-
rines if those warships became common throughout
ASEAN (Association of Southeast Asian Nations)
navies. Although not presently in the market for
submarines, Singapore is developing a requirement
for six 500-ton corvettes (table D-6).
Table D-6
Projected Warship Purchases by
Southeast Asian Countries
Major Missile Subma- Mine Total
Warships Boats rines Warfare
Ships
East Asia
Taiwan, as previously noted, has decided not to build
its own frigates and is now in the market for more
than a dozen vessels to replace its aging destroyers
(table D-7). South Korea will meet most of its needs
with domestic production but is negotiating with West
Germany and France for the licensed production of
submarines.
Table D-7
Projected Warship Purchases by
East Asian Countries
Major Missile Subma- Mine Total
Warships Boats rines Warfare
Ships
0 27
0 15
0 12
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
secret
Appendix E
Projected Third World Warship
Construction, 1985-94 a
Major Missile Subma- Mine Total
Warships Boats rines Warfare
Ships
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
 Secret Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2
Secret
Sanitized Copy Approved for Release 2011/06/04: CIA-RDP97R00694R000400400001-2