SOVIET WHEAT FOR THE UAR

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T01003A002300130001-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 14
• Document Creation Date: December 9, 2016
• Document Release Date: January 18, 2000
• Sequence Number: 1
• Publication Date: July 1, 1965
• Content Type: BRIEF

For Release 2000/08/29: c : 9T01003AO02300130001-1
INTELLIGENCE BRIEF
SOVIET WHEAT FOR THE UAR
DIRECTORATE OF INTELLIGENCE
Office of Research and Reports
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11 22
GROUP I
Excluded from automatic
o
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WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
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 Approved For Release 2000/08/29 -iGIc RDP79T01003A002300130001-1
The USSR has agreed to provide 300, 000 metric tons (mt) of wheat to
the United Arab Republic (UAR). Both the timing and the nature of the
announcement have served to attract a great deal of favorable publicity
in Cairo and to divert attention from the recent US agreement to release
410, 000 mt under P. L. 480. Wheat from the US and the USSR will re-
lieve a shortage that had threatened to become critical, and Egyptian
requirements through November will now be met: with little immediate
outlay of hard currency. Neither arrangement provides a long-term
solution to the UAR's continuing requirements, however, and purchases
from other sources will be costly. Egyptian officials recently have
negotiated options or contracts for a total of 800, 000 mt of wheat from
Argentina, Australia, and Mexico. Deliveries under these three agree-
ments would cost about $55 million, payable over a period of 12 to 18
months in hard currency or exports. The UAR probably will postpone
such outlays as long as possible, awaiting developments in US policy
on future aid.
1. Background
On 24 June the Cairo press announced with considerable fanfare that
ships carrying wheat from Canada to the USSR were being diverted. im-
mediately to Alexandria and that the USSR intended to provide 300, 000 mt
of wheat to the UAR. This dramatic announcement completely over-
shadowed the release on 22 June by the US of $37 million worth of wheat
and other foods under P. L. 480. The US decision was not mentioned by
Cairo news media until 26 June, following the announcement of an agree-
ment to purchase wheat from Mexico. The first Soviet ship carrying
wheat arrived on 27 June; the initial. shipment of the newly authorized
US wheat cannot arrive until the end of July at the earliest. Cairo's
first account of the Soviet transaction emphasized that the wheat was
needed to "foil strong pressure on the part of the US Congress'' and to
provide for an unexpected increase in consumption. Evidence indicates,
however, that the wheat supply situation in the UAR was not immediately
critical and that the emergency diversion of Soviet ships was not impera-
tive. In recent negotiations with Argentina, Egyptian trade officials
stated that late summer deliveries would be satisfactory, and the subse-
quent release of US wheat and flour probably shifted the critical point to
some time in October.
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2. Wheat Supply Situation in the UAR
Wheat and flour imported by the UAR, almost all of which is consumed
in the cities, satisfies about 90 percent of the country's urban bread re-
quirements. In 1964, monthly urban requirements for wheat:'- averaged
about 190, 000 mt; with the Egyptian population continuing to increase, some
further small rise in wheat needs probably has occurred At the beginning
of 1965 the Ministry of Supply reportedly had about 165, 000 mt in stock for
urban distribution. During the first quarter of the year, imports totaled
340, 000 mt, all from the US and West Europe; the second-quarter aggre-
gate, excluding the Soviet shipments, probably was between 600, 000 and
650, 000 mt. At a monthly rate of 190, 000 mt, consumption from January
through June 1965 would total 1 14 million mt -- about equal to the total
amount available from stocks and imports. The immediate pressure, how-
ever, probably was relieved by the domestic harvest in May and June.
The new crop will provide about 300, 000 mt of wheat for the cities, some
170, 000 mt of which probably arrived by the end of June. Unless the
normal pattern of distribution of the domestic crop has been disrupted
or contracted imports have failed to materialize, the immediate situation,
therefore, apparently is not critical. The probable supply position as of
1 July, excluding Soviet deliveries, is shown in Table 1.
In early June the emergence of serious shortages by August appeared
likely. Anticipated additions to supply in July and August totaled about
200, 000 mt (130, 000 mt from domestic sources and 70, 000 mt from
France under an existing commitment). Thus only 360, 000 mt (200, 000 mt
of new supply plus 160, 000 mt in stocks) would be available, while normal
consumption would require 380, 000 mt in the 2-month period.
Despite strenuous efforts, no acceptable alternative to P. L. 480
had been found, although Nasser and other senior Egyptians had stated
several times that they did not expect US shipments to continue. For
the past few months, trade teams have been negotiating with Australia,
Argentina, and other countries for large amounts of wheat under long-
term credit Australia agreed only to sell 100, 000 mt under a short-
term suppliers credit, but no purchases had beer. concluded as of early
June. UAR officials apparently settled for an option to buy 300, 000 mt
from Argentina during the next 6 months under normal commercial
credit terms
Including wheat flour converted into its wheat equivalent at the rate
of 1 rr,t of flour to 1 389 mt of wheat
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Estimated Wheat Availability in the Urban Centers of the UAR
January-June 1965
Thousand Metric Tons
Supply on hand (1 Jan 65)
165
Imports (Jan-Mar 65)
3)+0
Imports (Apr-Jun 65)
625
Available from domestic
sources (May and Jun)
170
Total additions to supply (Jan-Jun 65)
1,135
Total availability (Jan-Jun 65)
1,300
Total consumption (Jan-Jun 65) a/
1,1.40
Indicated supply (1 Jul 65)
160
a. At the rate of 190,000 mt per month.
Nasser used the opportunity presented by the visit of Soviet Deputy
Premier Novikov in early June to make a personal plea for emergency
wheat assistance. Despite the fact that the USSR was itself. continuing
to import wheat,it agreed to provide the grain as requested, and approval
was conveyed to Nasser in a personal letter from Soviet Premier Kosygin.
Moscow's decision to acquiesce preceded the announcement of US inten-
tion to ship $37 million worth of food, including about 410, 000 mt of wheat,
but the Soviet agreement was not made public for several days.
3. Financing of Recent Wheat Purchases
Financial conditions governing the arrangement with the USSR have
not been announced, but the cost of both the wheat and the shipping
charges apparently can be handled under existing trade and payments
agreements without any immediate impact on the UAR's foreign exchange
position. The first ships to arrive were actually loaded in Australia
rather than Canada. Australian wheat sells for about $58 per ton, and
the going price for Canadian wheat is $66 per ton. The Soviet wheat
package, therefore, is worth $17 million to $20 million, plus shipping
charges. Inasmuch as much of the wheat for the USSR is carried in
Soviet bottoms, however, the shipping charges probably will be handled
as a debit on the trade account.
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As of 1 January 1965 the UAR already owed the USSR the Egyptian
pound equivalent of $50 million under a swing credit on their trade and
payments agreement; the USSR expected the total swing credit to in-
crease to about $190 million by 1970, as Egyptian obligations (imports
plus debt repayments) continue to mount faster than exports can be
increased. With the USSR apparently not anxious to press for repayment
in hard currency, at least at present, the net effect of financing the wheat
transactions under the trade agreement would be to add about $21 million
to $22 million to the Egyptian debt, payable to the USSR in Egyptian
pounds -- $17 million to $20 million of which the USSR must pay to Canada
and Australia in sterling.
The combined shipments from the US and the USSR probably will
provide enough wheat to satisfy requirements until about the end of
November or mid-December and will necessitate little cash outlay.
Wheat for future needs, however, is available from other countries
only under fairly stringent terms. Acquisition of the full 400, 000 mt
purportedly purchased from Mexico would cover requirements for
more than 2 months, and a similar period could be covered by exercis-
ing options in Australia and Argentina. Full implementation of existing
agreements thus could cover normal consumption through the first
quarter of 1966 (see Table 2!. The cost, however, would be high; at
the most recent quoted prices for each source of supply, the total price
of the agreements with Australia, Argentina, and Mexico would be about
$46 million plus about $9 million in shipping costs. The UAR thus would
be required to pay some $55 million within an 18-month period in either
hard currency or goods, and it probably will postpone commitments for
such outlays as long as possible in the hope of a new F. L. 480 agree-
ment with the US.
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Analyst.
25X1A
ONE
OR R
25X1A
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SECRET
 Analyst: I:/NE 25X1A
/29: CIA-RDP79T01003A6Q230M QQ 1
CONTROL RECORD FOR SUPPLEMENTAL DISTRIBUTION
CIA/RR CB 65-40 SECRE"""'" VT r htt'URT
July 1965
COPY
NO. (S)
D/ORR
DD/ORR
Destroyed (incomplete co
White House Staff
Ch/R/AG to
i NE
for Sec. Freeman
St/P
175-179
191-193
7 July 65 / 7 July 65
 CO
NO.'
pn
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1A00230013000
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 W.. SECRET
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St/A/DS Distribution of Current Support Brief No. 65-4O,
for t VAR --- July 1945 SZCRET)
Copy No.
Recipient
O/DDI, Room 7E32, Hq. 25X1A
2 O/DDI,
5 SA/RR
6 Ch/E
7-8 ONE
9 - 14 St/CS
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28 - 34 D/R (1 each branch)
35 MRA
36 - 40 D/P (1 each branch)
41 - 46 D/F (1 each branch)
47 St/PS
48 - 53 D/I (1 each branch)
54 - 55 D/GG
56 - 57 D/GC
58 D/GC /X
59 - 64 RID/SS/DS, Unit 4, Room 1B4004, Hq.
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70 FIB/SR/CR, Room 1G27, Hq.
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77 DDI/CGS, Room 7G00, Hq.
78 - 79 DDI/CGS/HR, Room 7G00, Hq.
80 DDI/RS, Room 4G39, Hq.
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Copy No.
Recipient
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89 25X1A
25X1A
NSAL, Room 3W136, Ft. Meade via 0B31, Hq. )
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i
v
a SDS/DD/OCR)
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1
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110 - 121 State, INR Communications Center, Room 6527, State
Dept. Bldg.
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12 July 1965
MEMORANDUM FOR: Chief, Dissemination Control Branch, DD/CR
FROM Chief, Publications Staff, ORR
SUBJECT . Transmittal of Material
It is requested that the attached copies of CIA/RR
SOviet Wheat for TZAR, July 1965, Secret, be forwarded an o110,... CB 65-40
'-
State, INR Communications Center,
Room 6527, State Dept. Bldg.
Suggested distribution for
Embassies in Moscow, London, Ankara,
Athens, Cairo, Damascus, Nicosia, Tehran,
Be hdad, Tel Aviv, Beirut, Amen.. Jidda,
Ottawa, Magadiscio, and Algiers
25X1A
Attachments:
Copies #195 - #210 of CS 65-4o
eel CGS/
Tha ;
b,
this memorandum has been completai*
Date: /3
6S
IiRUHV 1
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