SOME ASPECTS OF RECENT SOVIET GRAIN PURCHASES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700040018-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 16
• Document Creation Date: December 20, 2016
• Document Release Date: March 28, 2006
• Sequence Number: 18
• Publication Date: August 1, 1972
• Content Type: IM

 Apps `~r0ev/*PY04/19 : CIA-RDP85'1 79I Ot1700040018c~rr'
DIRECTORATE OF
INTELLIGENCE
Secret
Intelligence .Memorandum
Some Aspects of Recent Soviet Grain Purchases
CIA
BLij-PiEnT SERVICES BRANCH
FL s COPY
Secret
ER IM 72-135
August 1972
Approved R 00 85T00875R001700040~T8-7
 25X1 Approved For Release 2006/04/19 : CIA-RDP85T00875R001700040018-7
Approved For Release 2006/04/19 : CIA-RDP85T00875R001700040018-7
 Approved For Release 2006/04/19 : CIA-RDP85T00875R001700040018-7
SECRET
Page
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Summary and Conclusions . . . . . . . . . . . . . . . . . . . . I
Discussion . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Policy Changes . . . . . . . . . . . . . . . . . . . . . . . . 3
The 1972 Harvest and Agricultural Imports . . . . . . . . . . . . 4
Financing Hard Currency Costs . . . . . . . . . . . . . . . . . 7
Gold Sales . . . . . . . . . . . . . . . . . . . . . . . . 8
European Loans . . . . . . . . . . . . . . . . . . . . . . . 8
Trade Adjustments . . . . . . . . . . . . . . . . . . . . . 9
Transportation Considerations . . . . . . . . . . . . . . . . 10
Capability of Soviet Ports to Receive Grain Imports . . . . . . . 12
1. Soviet Agricultural Commodity Trade . . . . . . . . . . . . . 3
2. USSR: Production, Exports, arid Imports of Grain . . . . . . . . 5
3. Soviet Grain Purchases . . . . . . . . . . . . . . . . . . . . 7
D'r
Approved For Release 2006/04/19y G%-kDP85T00875R001700040018-7t
 Approved For Release 2006/04/19 : CIA-RDP85T00875R001700040018-7
SECRET
CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
August 1972
INTELLIGENCE MEMORANDUM
SOME ASPECTS OF RECENT SOVIET GRAIN PURCHA.-jES
Introduction
1. Poor harvest prospects this year and a change in Soviet agricultural
policy are forcing the Soviets to import record quantities of grain and
soybeans. This memorandum examines the reasons for such massive imports,
the ability of the USSR to finance the purchases, and the Soviet capability
to handle a grain lift of this magnitude.
Summary and Conclusions
2. This year's poor harvest, a result of severe winter weather and
summer drought, is forcing the Soviets to import record quantities of grain.
So far they have bought about 25.2 million metric tons of grain and
soybeans worth almost US $1.6 billion, mainly from the United States,
for delivery in fiscal year (FY) 1973. This is three times the quantity
imported in FY 1972 and more than twice the amounts bought after the
disastrous harvests of 1963 and 1965. A disappointing harvest of other major
crops such as sugar beets could drive the soviets into other world markets.
The USSR has been a net importer of agricultural commodities over the
last two decades, and net agricultural imports could double in FY 1973
over FY 1972.
3. The massive grain imports this year are mainly a result of poor
harvest prospects but also reflect a recent change in agricultural and
consumer policy. Brezhnev's livestock program, aimed at improving the
Soviet diet, has required large increases in grain supply which have exceeded
Note: This memorandum was prepared by the Office of Economic
Research.
Approved For Release 2006(04/1 5E6 - 85T00875R001700040018-7
 Approved For Release 2006/04/19 : CIkFT A-RDP85TOO875ROO1700040018-7
Soviet grain production, even in good years. In FY 1972, after two bumper
harvests, the Soviets purchased 7.8 million tons of grain on the world
market.
4. The USSR should have no major difficulty raising the funds to
pay for grain imports. US Government credits will cover up to $500 million
in purchases. The remaining $1 billion or so could be financed by gold
sales alone or by a combination of gold sales and borrowing on the
Eurodollar market. Soviet gold reserves ($2.1 billion at $38 an ounce) are
at the highest level in years; and, with South African sales down sharply,
the gold market can absorb larger Soviet sales in the first half of FY 1973
at a price near $65 an ounce. Actually, Moscow is likely also to curb
unessential imports somewhat and to push exports harder, altho>!gh the
hard currency savings from these adjustments are limited - probably less
than $400 million.
5. Although the grain imported this year will be more than double
the record 10.4 million tons in FY 1964, the USSR should have no
difficulty transporting the grain - either by using its own ships or by
chartering ncn-Communist ships. With more than 5 million deadweight tons
(DWT) of shipping lai 1 up around the world with enough capacity to ship
more than 25 million tons a year from US Gulf ports to the Baltic Sea,
voyage charter rates are the lowest since mid-1963. Thus, Soviet costs for
chartering would not be excessive. Soviet port facilities also should be able
to handle this size of grain lift without major problems. The major ports
have all been improved since the last large lift, and several other ports are
now available, giving the USSR a capability of handling 30 million to
36 million tons of grain over a one-year period.
6. A poor harvest this year is forcing the Soviets to import record
quantities of grain. They have bought about 25.2 million tons of grain and
soybeans worth almost $1.6 billion, mainly from the United States, fo:
delivery in FY 1973. Additional purchases of grain and vegetable oil are
possible, and purchases of sugar from the world market seem likely in view
of the prospects for a poor Soviet sugar beet harvest.
7. During most of the last two decades, the USSR has been a net
importer of agricultural commodities. Major exports have been grain, refined
sugar, sunflower seed and oil, and cotton -- mainly to client states in Eastern
Europe - while imports have been distributed over a wide variety of farm
products - largely from hard currency countries and the less developed
countries (LDCs) - see Table 1. This year's record grain purchases and
f pproved For Release 2006/04131F,( 4~P85T00875R001700040018-7
 Approved For Release 2006/04/19 : CIA-RDP85T00875R001700040018-7
SECRET
Soviet Agricultural Commodity Trade a/
Million US $
Net Agricultural Exports b/
Year
Agri-
cultural
Exports
Agri-
cultural
Imports
Total
To
Eastern
Europe
To Hard
Currency
Countries
1962
1,324
1,224
100
537
-153
1963
1,278
1,465
-187
451
-261
1964
970
2,040
-1,070
283
-850
1965
1,102
2,193
-1,091
236
-714
1966
1,295
2,156
-861
291
-648
1967
1,622
1,929
-307
290
-308
1968
1,596
1,853
-257
283
-265
1969
1,610
1,996
-386
168
-267
1970
1,480
2,578
-1,098
179
-795
1971
1,580
2,725
-1,145
220
-342
1972
c/
1,650
3,800
-2,150
N.A.
N.A.
a. Calendar years.
b. A minus sign denotes net imports.
c. Estimated.
expected imports of sugar and vegetable oil could double net agricultural
imports in FY 1973 over FY 1972.
Policy Changes
8. The purchase of record amounts of grain for delivery in FY 1973
reflects in part the prospects for a decline in Soviet grain output, and in
part the increased demand resulting from a recent change in agricultural
and consumer policy. Traditionally, the USSR has been a net Exporter of
grain, importing large quantities only when forced to by bard harvests such
as in 1963 and 1965. However, Brezhnev's recent program to provide much
larger quantities of meat and other livestock products to the consumer has
upset the fragile balance the country has maintained between the amount
of grain grown and the amount consumed.
9. The expansion of livestock herds and increased feed rations per
animal, coupled with continued inefficiency in converting feed to liveweight,
have greatly raised Soviet requirements for grain. While the annual use of
Approved For Release 2006/04/19 : C~5T00875R001700040018-7 3
 Approved For Release 2006/04/1?EEJ 1f 85T00875RO01700040018-7
grain for food purposes has remained the same over the past decade, the
use of grai^ as livestock feed rose by roughly 40% between 1968 and 1971.
Even in FY 1972 after a second consecutive bumper harvest, the USSR,
in an effort to maintain the forward momentum of its livestock program,
purchased 7.8 million tons of grain worth nearly one-half billion dollars.
Moreover, this year the Soviets apparently had decidod to continue large
purchases from the West on a long-term basis even before the bad weather
damaged the winter grain crop. By February they had bought 3.5 million
tons of wheat from Canada for delivery in FY 1973. In May they agreed
to buy at least $750 million worth of US grain over a three-year period
and at least $200 million worth in the first year.
The 1972 Harvest and Agricultural Imports
10. This year's harvest of usable grain is estimated to be at least 16
million torts below the record of 148 million to 150 million tons harvested
in 1970-71 (see Table 2). The relatively poor harvest prospects are a result
of severe winter weather and summer drought.(1) One-third of the winter
grain crop was lost to a January cold wave. A successful drive to replant
with spring grains was launched, gut insufficient soil moisture in some of
the major grain regions dashed any hopes of matching the 1971 bumper
harvest. Moreover, high temperatures and heavy rains during the harvest
of early maturing grains contributed to a sharp decline in production in
key areas. And, too, because of lateness in ripe ling of grain in the important
New Lands area of Siberia and Kazakhstan, there is a possibility of
above-normal losses in September and early October. Thus, if weather
conditions continue to delay the harvest, even the current prospects may
not be attainable.
11. The Soviet grain problem is compounded by the fact that other
important agr..ultural products such as livestock feed and potatoes are
suffering from the adverse weather. Production of forage crops - a key
element in Brezhnev's campaign to increase meat supplies - will be down
considerably this year.(2) This shortfall will necessitate an increased use
of grain for feed. In addition, the continuation of the drought in August
thr t had earlier affected the grain harvest *,n the European USSR has reduced
the potato crop, the other important starchy staple in the Russian diet.
This development coming after the major grain purchases of July and early
August may further complicate the regime's pars for sustaining livestock
production at recent levels by using imported grain as livestock feed.
2. Important forage crops, the production of which is believed to be below the average
for 1970 and 1971, include silage (9% of total feed units in 1970), green chop (9%),
potatoe3 (3%), hay (11%), straw (6%), and pasture (23%).
25X1
Approved For Release 2006/04/' a 85T00875R001700040018-7
 Approved For Release 2006/04/19 :ft?j5 T00875RO01700040018-7
Table 2
USSR: Production, Exports, and Imports of Grain
Trade a/
Calendar
Usable
Fiscal
Net
Year
Grain b/
Year C/
Exports
Im
orts Y
E
-
p
xams
1963
92,000
1964
5,330
10,351
-5,021
1964
120,000
1965
4,322
2,950
1,362
1965
100,000
1966
4,362
9,526
-5,164
1966
140,000
1967
5,389
5,679
-290
1967
122,000
1968
6,466
2,593
3,873
1968
135,000
1969
7,133
1,827
5,306
1969
128,000
1970
7,421
2,092
5,329
1970
150,000
1971
8,260
3,224
5,036
1971
148,000
1972
8,000 e/
7,790
1972
132,000 e/
1973
8,000 e/
24,200
-16,200
b. Estimate. Net u able grain is estimated as the officially
claimed gross output minus excess moisture, unripe and damaged
kernels, weed seeds and other extraneous materials, post-
harvest losses incurred in loading and unloading grain between
the grain harvesting combine and storage facilities, and sus-
pected biases in the official reporting of grain production.
c. Data are an average of two calendar years, except for im-
ports in FYs 1964-66 and FYs 1972-73. Data are for fiscal
years ending 30 June of the stated year.
d. Including purchases on Soviet account for shipment to East
European countries and other client states.
e. Preliminary estimate.
a. Including flour converted 1.nto equivalent grain
using a 72% extraction rate) and groats
Approved For Release 2006/04/16FXR9 85T00875R001700040018-7 5
Thousand Metric Tons
 Approved For Release 2006/04/1 g85T00875R001700040018-7
12. Prospects are uncertain for the sunflower seed and sugar beet
crops, but they have suffered from the same weather conditions that
afflicted the grain crop. Moreover, these late maturing crops are now
threatened by a continuation of hot, dry weather throughout August.
Although the area planted to sunflowers is larger than last year, decreased
yields should drop the harvest to the depressed level of production of 1971.
A recent Soviet press article claimed that this shortfall would restrict the
USSR's ability to export sunflower seed and oil. The 1972 sugar beet crop
is expected to be no greater than the poor harvest of last year and about
three-quarters of the record crop of 1968.
13. In addition to their domestic requirements, the Soviets are usually
committed to export about 7 million to 9 million tons of grain to their
client states, mainly Eastern Europe. Eastern Europe traditionally has
imported grain and other raw materials from the Soviets in payment for
exports of machinery and other industrial items, thereby saving their foreign
exchange for pu-chases of Western machinery. Soviet exports to these client
states in Eastern Europe are more a function of Soviet policy than of the
flexibility of these countries in secu!ing their own supplies from the West.
14. To fill the gap between domestic production and total
requirements for food, livestock feed, and exports to client states, the Soviet
Union has purchased large quantities of grain on the international market.
Total grain contracts with all countries for delivery during FY 1973 now
total 24.2 million tons (see Table 3) worth almost $1.5 billion, three times
the quantity imported in FY 1972 and more than twice the amounts bought
after the disastrous harvests of 1963 and 1965. A recent contract for
I million tons of soybeans, to be used for livestock feed and vegetable
oil, brings total purchases of grain and soybeans to about $1.6 billion. These
imports of grain and soybeans will be largely from the United States -
17.5 million tons - with the remainder from Canada, France, Australia,
and Sweden. Most will go directly to the Soviet Union but some will go
to its client states to cover export commitments. 25X1
15. The disappointing harvest of forage crops, sugar beets, and
sunflower seed could drive the Soviets into additional purchases of grain
and into other international markets. As in FY i972, the mediocre sugar
beet harvest in the USSR coupled with a disastrous harvest in Cuba(3) could
lead to large sugar imports from non-Communist countries in FY 1973.
Additional purchases of soybeans and vegetable oil could be used to offset
a poor sunflower seed crop. Moreover, if the forage crops suffer from further
3. Imports from Cuba have accounted for up to one-fifth of total Soviet output of
refined sugar.
Approved For Release 2006/04/'f11r`q&RFR&85T00875R001700040018-7
 Approved For Release 2006/04/19 :SEC;45T00875R001700040018-7
Table 3
Soviet Grain Purchases
Million Metric Tons
Expected Deliveries a/
.'Commodity and Origin FY 1972 b/ FY 1973 b/
4.52 17.60
United States -- 11.10
Canada 3.52 5.00
Australia 0.50 1.00
France 0.50 0.50
Baxley and oats 1.15 1.60
United States 0.80 0.40 c/
Canada (barley) -- 0.20
France (barley) 0.25 0.50
Finland (oats) 0.05 ?--
Sweden 0.05 0.50
Corn and grain sorghums 2.12 5.00
United States 1.96 5.00
Other 0.16
Total 7.79 24.20
a.
Not al deliveries will be
made
to
the USSR.
b.
Data are for fiscal years
ending
30
June of
the
stated year.
c.
From the previous year's contract.
drought conditions during August and September, the Soviets may be forced
to spend even more for foreign grain to prevent distress slaughtering of
livestock.
16. The almost $1.6 billion in Soviet grain and soybean imports during
FY 1973 will necessitate major hard currency outlays by the USSR. Even
if the USSR utilizes all of the $500 million in three-year credits of the
Commodity Credit Corporation (CCC) available from the United States, the
Approved For Release 2006/04/19 W-Rd 5T00875R001700040018-7 7
 Approved For Release 2006/04/1 ES?M5T00875R001700040018-7
Soviets must raise more than $1 billion in additional hard currency during
FY 1973 to pay for the balance of these imports and for whatever hard
currency costs are incurred for ship chartering. The Soviets could raise these
funds from gold sales alone or from a combination of gold sales and
borrowing from the Eurodollar market. In the past, however, Moscow, when
faced with exceptional hard currency needs, has also made cuts in imports
and efforts to raise exports, and there are signs that it will do so again
this time.
Gold Sales
17. The Soviets are almost certain to increase substantially their gold
sales and could, if they wished, finance the entire grain import requirement
in this manner. They have sold only small quantities of gold in recent years,
and as a result their gold reserves have steadily increased, reaching 1,750
tons(4) by the end of 1971. With their reserves now above the 1963 level
and with production - estimated at 275 tons in 1972 - continually
increasing, the USSR is in a good position to re-enter the world market
as a major seller of gold. Market conditions for Soviet gold sales will be
most favorable during the first half of FY 1973 because South African
sales during this period are expected to be far below normal levels while
basic private demand is rising steadily. Ignoring possible speculative demand,
which could raise or lower the gold price, the USSR probably, could market
up to 200 tons of gold during the first half of FY 1973 without causing
the free market price to fall substantially below the mid-1972 level of $65
per troy ounce. Sales of 200 tons at $65 per ounce would earn the USSR
$418 million, an amount sufficient to cover the major portion of any hard
cut;ency demands arising from the grain and soybean deliveries during this
period.
18. The gold market should soften considerably in the second half
of FY 1973 if, as expected, South African sales recover to more normal
levels. This could mean a decline in prices even in the absence of larger
Soviet sales. With non-Soviet free market supply about 1,200 tons a year
(600 tons per half-year) every 60-tor, sale of Soviet gold in January-June
1973 would tend to lower the price further, by about 10%.(% Even so,
the USSR could sell gold far in excess of its annual output in the course
of FY 1973 at prices far above the official parity, thereby covering its
hard currency costs.
European Loans
19. Although current conditions in the free gold market would argue
for substantial Soviet gold sales, at least during the first half of FY 1973,
4. Valued at $2.1 billion at $38 per troy ounce.
S. The elasticity of demand for gold is believed to be about unity.
8
Approved For Release 2006/041~11~ lkRDP85T00875R001700040018-7
 Approved For Release 2006/04/19 : CIA-RDP85T00875R001700040018-7
SECRET
the USSR is not necessarily limited to this course of action and more likely
will meet its hard currency obligations through a combination of gold sales
and short-term and medium-term credits. The Soviets, acting through their
banks in Western Europe, have dealt extensively in the Eurocurrency market
and could utilize their banks to raise some $200 million to $250 million
in short-term Eurocurrency loans. In addition, because the USSR has been
a net lender of up to an estimated $300 million to $400 million to its
banks in the West, a combination of short-term loans and Soviet drawdowns
on existing deposits could provide the USSR with $500 million to $650
million in hard currency during the next 12 months. The Soviets also have
access to funds of the International Bank for Economic Cooperation (IBEC)
of the Council for Mutual Economic Assistance (CEMA), including the $160
million in medium-term Eurodollar credits recently raised by IBEC. Since
some of the imported grain undoubtedly is destined for consumption in
Eastern Europe, the USSR should be in a position to utilize such funds
for grain payments. If necessary, the USSR could also help cover its hard
currency needs through the formation of consortium loans similar to the
one formed,in 1964 by Moscow Narodny Bank with British banks which
provided $112 million in medium-term credits to cover the cost of grain
purchases from Australia.
Trade Adjustments
20. Although Moscow could handle the financing of its grain
purchases entirely with gold sales and new borrowing, it is likely also to
make adjustments in its imports and ex orts.
in previous periods of increased hard currency needs, notably in 1963-66,
Moscow has held down imports and pushed exports harder, and it would
be consistent with its usual approach to include such adjustments in the
present situation, even though it probably considers the currency problems
to be temporary.
21. The easiest adjustment in imports would involve curbs in hard
currency purchases of manu'actured consumer goods which have been
remaining slightly below $400 million and the possible substitution of
additional purchases from Eastern Europe. Soviet imports of machinery and
equipment and other items mainly covered by medium-term and long-term
credits a.,e not likely to be much affected, although there could be some
cutback in cash purchases. For example, the USSR may now be less willing
to pay cash to obtain US state-of-the-art technology, opting instead for
slightly less desirable but similar equipment produced in Europe and
Approved For Release 2006/04/19 :S T00875R001700040018-7 9
 Approved For Release 2006/0,YPC. ftlDP85T00875R001700040018-7
financed by long-term credits. The hard currency problem could increase
Soviet interest in entering into further cooperative agreements with the West
(for example, natural gas and petroleum development), with such agreements
all the more likely as sources of large, new Soviet hard currency ear:iings.
22. The USSR could increase its hard currency exports specifically
of diamonds, platinum, and platinum group metals on short notice, but
only to a small extent. The best prospects for increased hard currency
exports, however, are from expanded sales of Soviet crude oil to the West.
Together, the adjustments in exports and imports probably will be less than
$400 million.
Transportation Considerations
23. The current Soviet grain and soybean purchases (which exceed
25 million tons) are more than double the record 10.4 million tons that
moved in FY 1964. About 23 million tons will go to Soviet ports, 1 million
tons will go directly to the USSR's clients in Eastern Europe (via Hamburg
and East German and Polish Baltic ports), and a slightly smaller quantity
to Cuba. Most shipments to the USSR will move to ports on the Black
and Baltic seas; the remainder, probably less than 2 million tons, will go
to the Soviet Far East.
24. The USSR should have no difficulty arranging for the movement
of grain cargoes either on its own ships or, when they are unavailable or
ineligible to participate, on chartered ships from non-Communist countries.
Soviet ships will be utilized most heavily in the movement of grain and
flour from countries other than the United States because these sales are
believed to be on an f.o.b. basis,(6) making the USSR responsible for
transportation. Non-Soviet ships, most of them chartered from hard
currency countries, probably will play a major role in the sizable - at least
17.5 million tons - lift from the United States, where most of the sales
have been c.i.f. or c.a.f.,(7) requiring the seller to arrange all shipping. If
some US grain is sold on an f.o.b. basis, participation by Soviet ships in
that movement would be restricted if present US policy which Lars the
carriage of government-financed cargoes by ships that have called in Cuban
and North Vietnamese ports during recent years remains in effect. About
7.5 million tons of wheat - or some 45% of Soviet grain purchases from
the United States - may be financed by CCC credits. Another restriction
to use of Soviet ships in this trade is the threat of a boycott by the
International Longshoremen's Association (ILA), but this threat may be
receding.
6. Free on board, terms of sale under which the buyer must provide shipping space
from the port of the seller, and shipping charges are excluded from the sales price.
7. Costs, insurance, and freight and costs and freight, terms of sale under which the
seller provides shipping to a port of discharge designated by the buyer, and shipping
costs are included in the sales price.
Approved For Release 2006/0 V01rC /rFJDP85T00875R001700040018-7
 Approved For Release 2006/04/19 : ft"5T00875R001700040018-7
25. Until recently, opportunities for Soviet ships to move grain from
US ports have also been limited by the long-standing threat of the ILA
to boycott all Soviet ships attempting to load or discharge cargo in US
ports on the Great Lakes and the eastern and Gulf coasts. Developments
during the past month, however, may portend a change. On 3 August, for
example, members of an ILA local in Baltimore willingly participated in
the offloading from a Soviet freighter of a gift hydrofoil for the President;
more recently the head of a Memphis trading firm announced that soybeans
sold to the USSR will be loaded on Soviet cargo ships in Chicago with
the compliance of an ILA local there. Thus, a new pattern seems to be
emerging, one in which longshoremen, spurred by prospects of sizable
financial benefits from the handling of grain and other cargoes in US-Soviet
trade, are moving away from their boycott threat. In the past the ILA's
refusal to handle Soviet shipping was not particularly costly to the
membership, because only a handful of Soviet ships would have been
involved. Now, the s^enario is totally different. Beyond the grain lift, which
could involve relatively large numbers of Soviet ships for at least three years,
there are longer range prospects for a general increase in US-Soviet trade.
When translated into practical considerations these conditions can only mean
substantial financial gains for the union.
26. By the end of 1972 the capacity of the Soviet merchant fleet
should reach 13 million DWT, almost twice its size at the height of the
FY 1964 lift in which its vessels carried more than 3 million tons of grain.
It should, therefore, be capable of a major contribution to the present
movement even though most Soviet merchant ships are already fully
occupied in the movement of Soviet domestic and foreign trade cargoes.
Because exports outweigh imports by 9 to 1 in the USSR's overseas trade,
many Soviet ships will be able to carry grain imports with little deviation
fr',-n their routine operating patterns.
27. The situation on the world charter market for dry cargo ships
and tankers presently is advantageous for the Soviets. Ships laid up around
the world because of the current depression in freight rates total more than
5 million DWT, capacity sufficient to move more than 25 million tons a
year from US Gulf pug is to the Baltic Sea. From the end of 1971 to the
present, voyage charter rates for dry cargo tonnage have been at their lowest
levels since mid-1963, immediately before the rate boost set off by Soviet
grain purchases in that year. Market response thus far to chartering by
international trading companies for grain shipments from the United States
to the USSR and to news releases on additional purchases from the United
States has been slight. Record deliveries of new tonnage to the world fleet
in 1971 and the fact that both the dry cargo and tanker markets are
depressed at the same time may prevent a dramatic escalation of rates such
as that in the second half of 1963 when charter rates in the grain trade
Approved For Release 2006/04/1 %:-:~ff 1 5T00875R001700040018-7
11
 Approved For Release 2006/04 jq1p--DP85T00875R001700040018-7
rose by almost 50%. As a result, hard currency costs for the USSR would
not be an unreasonable burden if extensive chartering is necessary, and it
could be handled within the financing methods discussed above.
Capability of Soviet Ports to Receive Grain Imports
28. Assuming reasonable scheduling, the Soviet ports should be able
to handle up to 30 million to 36 million tons of grain imports over a
one-year period without serious delay. The pattern of deliveries should be
similar to that in the FY 1964 lift when 75% of the tonnage to the USSR
was discharged in ports on the Black (mainly Odessa and Novorossiysk)
and Baltic (Leningrad) sea., --^d the remainder went to the Soviet Far East
(mainly Nakhodka). Facilities at the four main ports mentioned above have
an estimated capacity of well over 2 million tons a month. In addition,
at least five other lesser ports have been used in the past for substantial
grain imports on both Western and Communist vessels. Another seven closed
ports have also been used for this purpose by Soviet vessels only, for a
total of at least 16 different ports which might be used.
29. On the basis of incomplete data, the maximum observed monthly
rate for total grain imports during the crisis of FY 1964 amounted to a
little more than a million tons. Peak weekly rates observed at each port
indicated minimum total capacities of about 1.6 million tons per month,
and noon-Communist ships that visited these ports reported no undue delays.
In faci, substantial sums were collected by the Soviets for
less-than-contract-time turnaround of foreign ships.
30 The ports involved have experienced considerable expansion and
moderiaization since FY 1964, and capacity may have increased by 30%
to 50%. Depths in the grain harbor at Odessa, for example, have been
increased to accommodate ships drawing as much as 38 feet, and at least
35 portable: pneumatic grain unloaders have been added. Additional
deepwater moorings are also available at Novorossiysk, and Nakhodka has
been improved and berthing space there extended. The growing new port
of Ilichevsk, a minor participant in the FY 1964 operation, is now reported
to have a greater capacity than its neighbor, Odessa. In addition, adequate
port storage probably is available for whatever amounts are not loaded
directly into rail cars and moved to interior points. As demonstrated in
the past, priority, both in unloading and in supplementary transport,
probably will be given to grain imports.
approved For Release 2006/04~j3PIPDP85T00875R001700040018-7