THE EMERGING ROLE OF THE SOVIET MERCHANT FLEET IN WORLD SHIPPING

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R00603A002400130001-4
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 8
• Document Creation Date: December 16, 2016
• Document Release Date: November 5, 2004
• Sequence Number: 1
• Publication Date: April 1, 1977
• Content Type: IM

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Confidential
Intelligence
The Emerging Role of the Soviet Merchant
Fleet in World Shipping
Confidential
NI IIM 77-011
April 1977
Copy N2 224
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IDENTI
CONTENTS
Page
SUMMARY ........................................................ 1
DISCUSSION ...................................................... 5
1. FLEET GROWTH AND ITS MOTIVATION ..................... 5
II. THE SOVIET MERCHANT FLEET TODAY .................... 5
Size and World Standing ..................................... 5
Persistent Deficiencies ........................................ 6
Role in Soviet Trade ........................................ 7
Activity in the Cross Trades ................................. 10
Liner Operations ............................................ 10
Impact on Western Shipowners ............................... 14
III. PLANNED EXPANSION OF THE FLEET THROUGH 1980 ...... 14
Plan Details ................................................ 14
Impact of Expansion on Western Fleets ....................... 16
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CONFIDENTIAL
THE EMERGING ROLE OF THE SOVIET MERCHANT
FLEET IN WORLD SHIPPING
SUMMARY '
Since the early 1960s, Moscow has aggressively expanded its
maritime assets, nearly quadrupling the size of its merchant fleet and
making it one of the 10 largest in the world. However, with less than 3
percent of world tonnage, the Soviet fleet is overshadowed by those of
leading shipowning countries like Japan, whose fleet is four times
larger. Soviet fleet expansion has permitted some penetration of
shipping markets formerly monopolized by Western shipowners, but
Soviet competition has been limited by persistent deficiencies in the
quality of their fleet and its large role in the domestic and foreign trade
of the USSR.
Long-standing qualitative deficiencies afflict the fleet's two largest
components. In the liner fleet, 98 percent of the tonnage consists of
outmoded general purpose freighters. Such ships are not competitive on
major international liner routes where faster and more specialized
container and roll-on/roll-off (ro/ro) ships of Western fleets predomi-
nate. Because of shallow drafts in most Soviet ports, Soviet tankers
average only 17,000 deadweight tons (DWT), less than one-third the
world average.
Despite a rapid increase in the carriage of cross trade 2 goods
between foreign ports, the Soviet fleet is still predominantly employed
in the carriage of Soviet trade. Shipments by the fleet in 1975 were
divided as follows: Soviet exports and imports, 45 percent; USSR
internal trade, 40 percent; and cross trades, 15 percent.
Three motives account for most of the fleet's current operations:
- the desire to maintain a fleet nucleus capable of carrying all
internal seaborne trade and most vital imports and of
providing routine support for the Soviet military,
I This Intelligence Memorandum was prepared under the auspices of the NIO for Economics. It was
drafted by in CIA's Office of Economic Research. The paper was not formally
coordinated, but benefited from an interagency discussion with representatives from the Departments of
State, Treasury, Defense, Commerce, Transportation, Navy, and Justice, the Defense Intelligence Agency,
and the Federal Maritime Commission.
2 Cross trade cargoes are those carried between two countries by ships of a third country.
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CONFIDENTIAL
- the need to possess sufficient tonnage to meet foreign aid
commitments made in pursuit of international political goals,
and
the need to use the fleet as a major earner and conserver of
foreign exchange.
The first and second motives each required 27 percent of fleet tonnage
in 1975; the third occupied 46 percent of the fleet. The heavy
allocation of tonnage for balance of payments purposes reflects the
fleet's contribution of 6 percent to the country's gross hard currency
income, a figure surpassed only by the oil, timber, and goldmining
industries. This hard currency is earned in the carriage both of Soviet
exports and of cross trade cargoes. Although it is not observable in
day-to-day fleet operations, the desire to possess a contingency
capability for large-scale overseas deployment and supply of military
forces has also influenced fleet expansion.
Although Soviet ships carry more cross trade cargo as tramp ships
under foreign charter than they do as liners,4 the Soviet fleet's greatest
impact on US and other Western shipowners derives from its cross
trading activity in the liner trades. This occurs because most Soviet
cargo lines (a) operate outside the Western-dominated system of cartels
or "conferences"5 that set rates charged by member lines on the world's
key trade routes and (b) undercut conference rates. Because of the
inferior service it provides on most routes due to heavy reliance on
general purpose ships, the fleet must cut rates to attract cargoes. Cut
rates in liner services linking the US with Japan and Europe have won a
3 percent share of that trade for Soviet ships at the expense of US and
other Western competitors. Low rates for container shipments between
Japan and Europe via the Trans-Siberian Landbridge have similarly
taken 8 percent of business away from Western container-ship operators
on that route. Under prodding from the US Federal Maritime
Commission, the Soviets have taken limited steps to abate their rate
cutting in US trade-moving to eliminate all rates lower than those
charged by other carriers on the North Pacific and arranging to place
seven of their North Atlantic lines in conferences.
Soviet cross trade activity on the more competitive tramp charter
market, often involving back-haul cargoes carried by ships returning
from the delivery of bulk Soviet exports, evokes few complaints from
" As used in this memorandum, the term "tramp" refers to ships outside of scheduled liner service
carrying bulk and other goods in shipload lots under charter.
' Liners are ships in scheduled services that offer a prescribed number of sailings per month for general
cargo on given trade routes.
A conference is an association of liner owners operating in a given direction on a given trade route.
The conference sets rates charged by its members and allots sailings among them. Other companies
operating on the same route are referred to as "outsiders" or "independents."
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Western owners. The volume of cross trade cargo carried by Soviet
tramps is still less than the volume of Soviet exports and imports carried
on chartered foreign ships.
Planned deliveries of 4.6 million DWT to the Soviet merchant fleet
under the 1976-80 Five Year Plan will upgrade a small portion of the
Soviet liner fleet with modern ro/ro vessels and full container ships.
With greatest emphasis on ro/ro ships, some of which are up to the
highest Western standards, Soviet competition with Western operators
on some routes will be much more serious, but the number of lines
affected will be small.
The heaviest deliveries under the new plan will consist of tankers
and dry bulk carriers for the Soviet tramp fleet. By permitting Soviet
ships to carry a higher percentage of the country's imports and exports,
acquisition of these ships will benefit the USSR's hard currency balance
of payments. It will also take a large volume of business away from
non-US Western shipowners currently engaged in Soviet trade. The role
of US ships in bilateral trade with the USSR will presumably not be
affected because it is determined by the cargo sharing provisions of the
recently bolstered US/Soviet Maritime Agreement.
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