THE RATIONALIZATION OF THE SOVIET BLOC IRON AND STEEL INDUSTRY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00810A007400370003-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 4
• Document Creation Date: December 21, 2016
• Document Release Date: May 30, 2008
• Sequence Number: 3
• Publication Date: July 18, 1955
• Content Type: REPORT

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CENTRAL INTELLIGENCE AGENCY
This material contains information affecting the National Defense of the United States within the meaning of the Ispionage Laws, Title
18, U.B.C. Sep. 799 and 794, the transmission or revelation of which in any manner to an unauthorised person is prohibited by law.
S-E-C-R.E-T
COUNTRY USSR/Sotriet Bloc
REPORT
The Rationalization of the Soviet DATE DISTR. 18 J'u],y 1955
MOO and Steel.' Industry
DATE OF INFO.
PLACE ACQUIRED
DATE ACQUIRED
NO. OF PAGES k
REQUIREMENT NO. RD
REFERENCES
This is UNEVALUATED Information
1. At the beginning of April 1955, an iron and steel conference was held in
kosodW, attended by representatives of the USSR,, Poland,Csechoalavakia,
'y, and Rmslltaia. The chairman of the conference, who played a
dominating role tbreeaghatt, w.a the deputy director of the Soviet Research
Institute for Iran and Steel. Poland was represented by three technical
exerts, Cslahoslovakia by two.. Stmgsry by one. The role Rieenantan delegate
'as a nonentity who contributed little or nothing to the work of the confer.
ences
2. The objectives of the conference were to discuss the state of the iron and
steel industry in the participating countries; the problems facing the in-
Autry and their solution; future planning; and coordination empng the
participating countries.
3.
Frost the point of view of the Satellite participants,, by far the emit 3a-
portent aspect of the conference was the stress placed by the Soviet cbairamn
an the need for a v estplete reorganization of the technical direction of the
iron and. steel industry. The cbairmn sg4de the following points concerning
the reerginizat ion:
as The Crmtetttuni.st policy of replacing existing technicians by mien chosen
primrily for political rather than technical qualifications had serious
diaadriantages:
(1)
'The new esen bad neither the technical qualifications nor the
er}erience required for the sound develop ant of the industry.
On thie other band, the deposed technicians bad been driven into
a role of passive resistance. Orders issued f eeet abate were
carried out blindly and to the letter, althoughi the etperidineed
technicians often knew that they were not only impractiaable
but oat illy harmful to the industry. Nobody dared criticize for
fear of accusations of disobedience and sabotage.
9 x x
(Note: Washington distribution indicated by "X"; Field distribution by "#".)
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(2) The desire of the new men to prove their ability led to un-
realistic planning, nonsensical attempts at overproduction,
wholesale falsification of statistics, and competition and
rivalry between individual iron and steel works. Under these
cdreunmstances, the real technicians and the workers lost all
pride in their works. They could only look with contempt at
the objectives set then and the still more absurd attempts to
prove that they had been achieved.
These policies must cease. The technical direction of the industry at
all important levels must be entrusted to the real technicians, whose
concern would be the development of the industry along sound technical
lines, rather than the pursuit of propagandist programs. To this end,
technicians must be given the maximum possible freedom from political
and other extraneous controlso
b. Planning in the future should be realistic and based primarily on the
capacities of the individual works. There should be no further attempts
to achieve impossible programs for propaganda purposes. Forced pro-
ductiom ahd, in particular, demands for, record figures, with the in-
evitable stoppage for reptirs, must cease. The primary objective should
be a steady, continuous level of production, An end must also be put
to the practice of false statistics. True statistics., even if they
show a setback, are of infinitely greater value, than false ones reflect-
ing unreal progress. In particular, the inclusion of rejects in pro-
duction statistics must cease. It is more important for the percentage
of rejects to drop.
c. Objective criticism is not only healthy but essential. It will not be
offered by politicians, who have no understanding of the technical
problems involved, nor can it always be expected from the employees of
individual works. It is most likely to be expressed by competent out-
siders, and the most constructive and objective criticise can be expected
from Western experts. For this reason, invitations to Western experts
to visit Eastern iron and steel works as guests of their managements
should be encouraged. The Western experts should be given every oppor-
tunity to inspect the works and to investigate their methods and labor
conditions. A technical article in a serious Western technical magazine,
giving a Western expert's experiences of a visit to the East, will
provide the best and most objective criticism The managements of
individual works should count on visits from Western experts by the end
of 1953 and should take the necessary preliminary steps to prepare for
them. It is hoped that these visits will lead to invitations to Eastern
technicians to Visit Western iron and steel works.
Coordination among the Satellites
b. For the past several years, the USSR stressed the importance of close coordi-
nation ameong the iron and steel industries of Hungary, Poland., and Czebho-
slovakia. Ruaania was excluded from this action. Elaborate machinery was
not up to secure this coordination; mixed comissions were formed and regular
conferences held. Little headway was made, mainly because dele-
gations were invariably headed by politicians and because of the bureau-
cratic nature of the machinery. However, personal contact among the
experienced engineers, who are again in control in the countries concerned, and
who aft- experts, colleagues, and, in many cases, respected friends, makes
coordination comparatively simple.
5? The Soviet chairman of the Moscow conference underlined the importance of
achieving the required coordination by these personal contacts between experts,
who could mot whenever the occasion dssanded, without the bureaucratic need
of convening conferences, and who would discuss and settle their problems on
a technical, rather than political, basis. in furtherance of this coordi-
nation, there is a considerable exehange of experts between the countries
concerned. This is not a new devs1.o nt; but the real cooperation which
exists between tJo visiting and how experts, who have been freed from
political and other extraneous influences, is new.
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6. There is also a marked change in the attitude of the Soviets toward visiting
technicians. Formerly, visitors were shown very little, and their opinions
were seldom sought on what they had seen. Today,the Soviets are prepared
to disclose their more secret processes and are intensely interested in the
reactions and opinions of visiting technicians. As an example of this changed
attitude, Bela Simon, one of the best steel experts in Hungary, has just
been invited to visit the Magnitogorsk Factory, where he is to inspect the
manufacture of special steels,, in particular a new titanium steel, the manu-
facture of which the Soviets have hitherto kept a jealously guarded secret.2
Hungary
7. The directives issued by the Soviet chairman of the Moscow Conference are in
line with developments which started in Hungary at the beginning of 1955
Soviet experts, investigating the Hungarian iron and steel industry, have
been repeatedly exasperated by the false statistics given to them by the
"political" directors, and by the latter's lack of any real technical know-
ledge. The Soviets have come to rely increasingly on the advice and opinions
of the deposed technicians and have exerted pressure to bring about their
reinstatement.
8. Consequently,, during the period January to may 1955, control of the Hun-
garian iron and steel industry has been gradually passing back into the hands
of the older, experienced engineers. Political upstarts., such as Janos
Sebestyen and Mihaly Hamor, have been removed. The former has been appointed
Deputy Minister in the Ministry of Power,, and the latter is now employed by
one Of the Foreign Trade undertakings.
9.
13.
This development has led to iwmed.iapte improvements in the industry. The
former rivalry between Dioegyor and. Sztalirvaros, which had harmful effects
on the industry as a whole prior to January 1955, has ended. These works
are no longer headed by men motivated by personal and political considerations.
Today,, the works are in the hands of former colleagues and friends, members
of an exclusive, small circle of "old guard" iron and steel engineers, far
more concerned to assist than `b o A'6. with one another
The reinstatement of old guard technicians does not mean that political
control does not exist any more, but that the technical and political aspects
are entirely separate. The technicians have a free hand in production and
all technical questions and need fear no outside political interference.
This free hand extends to the selection of personnel, so far as technical
qualifications are concerned. The political organs will be wary of exercis-
ing control, as it is now possibile that they will be held responsible for
unwarranted interference.
The reinstated technicians believe that they are entitled to the credit for
ousting the political newcomers.ln their opinion, the development resulted
from their united front,, their refusal to co-operate with the new men, and
their passive resistance through disinterested subservience. Recent in-
dications that their passive resistance might become more active nay w, they
believe, have hastened the development0
The extent to which the old guard technicians have gained the upper band
today is proved by the nusiber of so-called political undesirables who have
been reinstated. For exa ple, Engineer Weigl (fnu),, who was pushed very
much into the background as a recruit of his former fanatical Nazi sys rpathies,
is today head of the Martin Purmwe Department of Diosgyor.
Hungarian Steel Production
The actual production figures in Hungary today, t.e.,excluding rejects, have
reached, if not surpassed, the peak of the prewar level. Figures for blast
furnace products are approximately:
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Diosgyor 2 x 250 tons per day: 15-18,000 tons per month
N d 30,000 tons per month
Sztalinvaros 700 tons per day: 20,000 tons per month
The introduction of more realistic planning may temporarily lower pro-
duction programs in the immediate future. However, actual production
is already on the increase and is likely to rise considerably as rejects
drop. The technicians who have been reinstated are determined to prove
what they can achieve, if not subjected to external interference, and so
to insure that the new trend will be maintained.
Iron ore 8uflies
14. Recently, the quality of the iron, ore imported into Hungry from the USSR
has greatly improved. It comes from Krivoy Rog., is carefully selected, and
no longer mixed with dust. This has been a contributing factor to the
improved steel production. Soviet iron ore is shipped to Hungary mainly
by rail., and transshipped at Zahony, where special arrangements have been
made for the purpose. Despite the freight changes, the cost of the ore
is 10-15 percent below that of prewar imports
15. The Soviet chairman announced that, in the future, the Yugoslav iron and
steel industry would import part of its ore requirements from the USSR.
Ccx*wents
1. This may be a reference.to the Central Scientific Research Institute
of Steel Production Planning,
2. This is presumably the Stalin Steel Combine at Magnitogorsk.
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