KHRUSHCHEV'S ECONOMIC OFFENSIVE AND ITS CRITICS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01003A001600130001-9
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 15
• Document Creation Date: December 9, 2016
• Document Release Date: June 29, 2000
• Sequence Number: 1
• Publication Date: May 6, 1963
• Content Type: BRIEF

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CONFIDENTIAL
Current Support Brief
KHRUSHCHEV'S ECONOMIC OFFENSIVE AND ITS CRITICS
CIA/RR CB 63-42
6 May 1963
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
CONFIDENTIAL
GROUP 1
Excluded from automatic
downgrading and
declassification
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This material, contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 1.8, USC, Secs. 793 and 794, the trans-
mission o:r revelation of which in any manner
to an unauthorized person is prohibited by law.
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The sharp decline in new Soviet economic aid extensions -- from
annual commitments of more than $800 million in 1959 and in 1960 to
less than $275 million in 1962 and to only about $35 million thus far
this year -- has cast some doubt on the future course of Moscow's
foreign aid program in underdeveloped areas of the Free World.
However, the rapid pace of implementation of credits previously ex-
tended -- drawings, which were relatively small during the early years
of the program, have risen rapidly in recent years to a peak of $400
million in 1962 -- suggests that the lag in new extensions may be less
attributable to immediate problems of resource allocation than to some
longer range reevaluation of the foreign lending program itself. Evidence
of internal problems over the allocation of resources for commitments by
the USSR in heavy industry, consumer welfare, military and space pro-
grams,, and support for its Bloc partners, coupled with some disappointing
results of the program in Africa, Iraq, and elsewhere, might well have
generated a political issue over foreign aid entirely incommensurate with
the economic costs of the program and created a favorable atmosphere for
the expression of an increasingly vocal "anti-give-away" sentiment among
Communist Party elements both at home and abroad.
That Khrushchev's policy of trade and aid has not gone uncontested
is perhaps best reflected in the frequency with which the leadership re-
cently has been obliged to seek the public forum to defend it. Although
the specific sources of contention are still matters for speculation and
have not yet become the subject of public debate, it seems probable that
such differences, and the repeated efforts to quell them, would not have
arisen unless the current program was being seriously questioned.
1. "Anti-Party" and "Anti-Give-Away"
Perhaps the clearest intimation of differences over Soviet foreign
economic policy was provided by M. A. Saburov's speech of 4 February
1959 at the 21st Congress of the Communist Party of the Soviet Union
(CPSU). Pravda's failure to print the speech -- indeed the elimination
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by Pravda of any reference to Saburov's statement in its publication of
the full texts of every other speech delivered at the Congress -- was
perhaps indicative of Khrushchev's reluctance to give much publicity
to any opposition to the regime's program of economic assistance to
underdeveloped countries, when he himself had declared at the Con-
gress that "the Soviet Union and other socialist countries ... are ex-
tending and will continue to extend economic assistance to them. " Ex-
cept for a brief Tass summary, Saburov's speech appeared for the first
time some months later in the stenographic report of the Congress. In
it he charged the "anti-Party" group, of which he was an admitted par-
ticipant, with "having opposed or tried in every way to obstruct the
adoption of decisions on important problems of foreign policy. " Saburov
continued:
In particular, it opposed the Central Committee's
policy in such important problems as the necessity of
developing our economic ties with the People's Demo-
cracies and extending aid to these countries, to say
nothing of our aiding the poorly developed and de-
pendent countries of Asia and the Near East. J
Although the specific sources of contention are still matters for
speculation, it seems likely that opposition has been directed at the
"new look" in Soviet foreign economic policy -- the dramatic entry of
the USSR into the foreign lending field. The explicit connection by
Saburov of the "anti-Party" group with such opposition suggests that
Khrushchev's trade and aid program may have caused some concern
among more conservative Party elements who, aware of equipment
needs at home, question the economic "profitability" of any large-
scale export of capital resources that might slow the pace of domestic
capital formation in exchange for foodstuffs and consumer goods which
are of relatively low priority on an orthodox Soviet planner's preference
scale.
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The Soviet leadership has sought repeatedly to reply to such objec-
tions on the basis of the wider perspectives of "proletarian interna-
tionalist duty, " explaining that Soviet aid was not designed to be very
"profitable" from the commercial point of view. "If one approaches
the matter from this commercial side only, it would be profitable for
the USSR to build new factories in its own country with these funds and
then export the finished products. " 2/ In a similar vein, Khrushchev has
given the following explanation:
Although the Soviet Union and other socialist coun-
tries consider it their duty to help underdeveloped
countries and to extend trade and all other forms of
economic relations with them in every way, naturally,
in their case we cannot say that our economic relations
are based on mutual advantage. Generally speaking, from
the commercial point of view, our economic and technical
assistance to underdeveloped countries is even unprofit-
able for us.
In spite of more recent protestations of the necessity to extend
economic aid even at the cost of considerable self-sacrifice, reports
from Moscow allude to recurrent evidences of popular disinterest in
foreign aid and even the letters -to -the -editor columns of Pravda ap-
parently have been employed to encourage lagging public support for
the program. 4/ In a recent conversation with a US official a Soviet
diplomat admitted (a) that there was strong opposition in the USSR to
foreign aid; (b) that many people felt that for the amount of money ex-
pended on the Aswan Dam, for example, "seven or eight" projects of
similar magnitude could be completed in the USSR; and (c) that the
Egyptians "are not worth it. " He also asserted that such attitudes
would have a definite impact on Soviet foreign aid programs in the
future. 5/
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2. External Communist Opposition
The development of the Sino-Albanian dispute with the USSR follow-
ing the 22d Party Congress has provided additional insight into Albanian
objections and motivations on the subject of foreign aid. Scarcely had
the Congress concluded its sessions, when Radio Prague, on 30 October
1961, charged the Tirana regime with attempting to tell the USSR,
Czechoslovakia, and other socialist countries whom they should assist
and whom they should not. The Albanians were accused further of
predicating their opposition to foreign aid on a "basically incorrect"
view of the international situation in that "they strongly opposed assist-
ance to young Asian and African countries ... that are not members of
the socialist camp, as strengthening a potential enemy. " One week
later the Czech publication Prace (5 November 1961), reporting a meet-
ing between economists and trade unionists, reproduced the following
comment:
The Albanian leaders have strange ideas about
socialist internationalism. Among other things they
want us, for instance, primarily and first of all to
assist only the needy countries of the socialist camp
and then some time in the future -- when these countries
no longer need assistance -- to help the other underde-
veloped countries. Assistance to underdeveloped coun-
tries, however, is an integral part of our concept of
internationalism.
A similar theme was expounded in a major article on Soviet-Albanian
relations by Konstantinov in Kommunist in which Moscow made explicit
Albanian (and, by the clearest implication, Chinese) objections to large-
scale Bloc aid to underdeveloped countries. The author reminded his
readers that Albania "received from the USSR and other socialist coun-
tries aid and credits worth hundreds of millions of rubles" but that,
ultimately, it began to make "inordinate demands" on the USSR and
other socialist countries, "rather peculiarly interpreting the interna-
tionalist principle of brotherly cooperation and mutual aid as a one-
sided responsibility of other socialist countries to satisfy all their
- 4 -
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economic demands. " Indeed, Konstantinov continues, this "nationalist
narrow-mindedness and egotism of Hoxha and Shehu also found expres-
sion in their resentment of the aid rendered by the Soviet Union and
other socialist countries to underdeveloped countries of Asia and
Africa. " Obviously, ..he continued, the Albanian leaders "do not under-
stand the role of the neutral countries in the struggle for peace, " nor
do they understand that aid to such countries extends the "anti-imperialist
front. " 6/
More recently, in December 1962, Pravda reiterated its charges
against "dogmatists and sectarians" who seek to "ignore the significance
of economic aid by Socialist countries to underdeveloped states and to
distort the results of this aid. " In apparent reply to Chinese allegations
that indiscriminate Bloc aid to a "national bourgeois" government serves
only to consolidate that government's position and hinders rather than
assists revolutionary prospects in these countries, Pravda maintained:
"Only people [who are] unable to assess the nature of the changes wrought
on the world by the rise of the socialist system argue that any country
liberated from the colonial yoke whose power is not in the hands of the
working class will necessarily follow the capitalist path and therefore
strengthen the position of world capitalism. " What such people ignore,
the article in Pravda alleged, are the active encouragement of the forces
of socialism in these countries rendered by the effective assistance and
example of the socialist countries and the deep contradictions that exist
between the "national bourgeoisie" and "imperialism. " 7/
An undercurrent of resentment against the alleged burden of foreign
economic assistance is evident in other countries of Eastern Europe. An
article in a recent journal of the Hungarian Communist Party addressed
itself to "comrades in our Party who do not understand the necessity of
aid to young national states. " Although apparently denying the claims
of "some" that the Bloc has an obligation to increase such aid "even at
the expense of their own economies" (ostensibly the position of Khrushchev
as expressed in the quotations already cited), on grounds that such ex-
tremism would cause the socialist countries to "fall behind in the com-
petition with imperialism, ... lead to a shift in power relationships to
the benefit of imperialism, ... and [thus] ... greatly endanger the inde-
pendence of the weakly developed countries, " the author appealed for a
wider understanding of the political implications of Bloc aid. 8/
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In Czechoslovakia, whose commitment to foreign aid (either on a
per capita basis or as a percentage of gross national product) is the
highest in the Bloc and where shortages of foodstuffs and consumer
goods have already caused some worker dissatisfaction, there are
persistent reports of popular resentment against foreign aid, and
particularly aid to Cuba. Indeed it has been reliably reported that
President Novotny has made a strong plea to Khrushchev (reportedly
rejected by the Soviet Premier) that Czechoslovak commitments of aid
to developing countries be reduced in view of the state of the Czecho-
slovak economy.
3. Tentative Conclusions
Latent opposition to the ambitious Soviet foreign lending program
is only a peripheral issue in the USSR and apparently a reflection of
more fundamental internal Communist debates over resource allocation
and questions of world Communist strategy generally. Nevertheless,
this opposition may encompass the common interests shared by those
who are inclined toward traditional priority development of heavy indus-
try, by those who oppose any diminution of conventional military forces,
and by those who favor a more aggressive posture toward the West as
well as by the public at large for whom often-promised improvement in
the standard of living must once again be postponed because of increas-
ing strains on the nation's resources. Moreover, such dissident voices
can find ample encouragement among Chinese, Albanian, and other
foreign Communist leaders, who generally distrust national bourgeois
governments in underdeveloped countries and who give only nominal
support to the idea of economic aid as a significant factor in the national
liberation struggle.
There is no firm evidence that the current Soviet leadership has
revised any of its fundamental assumptions with respect to its policies
in underdeveloped areas. It has sought, in fact, to reassert with in-
creased vigor the true militancy of its doctrine of coexistence and the
implicit connection of that doctrine with the wider political objectives
of the national liberation movement. However, in view of the modest
political gains that can be directly attributed to foreign aid, economic
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stringencies within the Bloc, and the recurrent evidences of opposition
to the program among Communist Party elements both at home and
abroad, Khrushchev himself may have come to a realization of the limited
potential of the economic offensive as a factor of Communist strategy in
underdeveloped areas. The decline in new aid extensions may have coin-
cided with a more critical appraisal by the Soviet leadership of its aid
policy -- an appraisal in which the politico-strategic returns commen-
surate with foreign aid resources expended are subject to a more rig-
orous calculation.
Some modifications in Soviet aid policy may already be in evidence.
There has been a perceptible hardening of the Soviet line toward some
"bourgeois nationalist" leaders together with demands that underdeveloped
countries either rely more on their own resources or seek more aid from
the West and the UN. Moreover, in contrast to the preeminent role that
hitherto has been accorded the Bloc aid program, recent Soviet propa-
ganda has emphasized trade rather than aid as the more decisive factor
in securing and maintaining the "economic independence" of new states.
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25X1A
Analyst:
1. Vneocherednoy XXI s"ezd KPSS, Moscow, 1959, pt II, p. 290.
U.
2. Pravda, 9 May 58. U.
3. Ibid. , 13 Jul 58. U.
4. Ibid. , 16 Sep 62. U.
5. State. Memo of conversation, 1 Mar 63. OFF USE.
6. Kommunist, no 17, Nov 61 , p. 47. U.
7. Pravda, 26 Dec 62. U.
8. Partelet, Budapest, Mar 62. U.
9. State, Prague. Airgram A-418, 8 Feb 63. C.
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CONFIDENTIAL
CONFIDENTIAL
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