SOVIET ASSISTANCE TO CUBA AND FOUR OTHER CLIENT STATES

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85B00652R000100050038-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 21, 2016
• Document Release Date: May 27, 2008
• Sequence Number: 38
• Publication Date: May 2, 1983
• Content Type: MEMO

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T-RAN S MI1`TAL SLIP
ROY P410.
BUILDING
Hdqs.
FROM: l Director
of African and Latin American Analysis
R~OA~NO. BUILDING Hdqs.
31"4
FORM . NO.
2A II REPLACES FORM 36-8 (47)
STAT
STAT
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^
Directorate of Intelligence
Office of African and Latin American Analysis
2 May 1983
NOTE FOR: Deputy Director for Intelligence
Attached is the revised package responding
to the DCI's memo of 25 April 1983. We have
recrafted the covering memo according to your
specifications and adjusted the country pro-
files to highlight 1982 Soviet aid deliveries.
Attachment:
As stated
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Central Intelligence Agency
Office of the Deputy Director for Intelligence
NOTE FOR: Director of Central Intelligence
The attached responds to the questions you
raised in your 25 April memorandum. Your ques-
tions were based on the
same. This memorandum provides an explanation
of our estimate that Soviet support for Cuba
.is over $5 billion per year. In addition,
economic surveys of the five countries you
listed in your memorandum have been included.
{ Robert M. a ,'es
Deputy Director forW telligence
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2 May 1983
.MEMORANDUM
SUBJECT: Soviet Assistance to Cuba and Four Other Client States
We estimate Soviet aid to Cuba increased substantially from the 1980
level ($3.2 billion) to $4.5 billion in 1981 and $5.3 billion in 1982 due to:
--,the large increase in trade subsidies, the major component of aid.*
-- the 80 percent increase in the Cuban soft-currency trade deficit with
Moscow over the two years as Soviet exports to Cuba increased more than
its imports from Cuba.
-- the escalation of military aid in both 1981 and 1982 to levels that
were more than twice the 1980 level, a reflection of the two-year old
Cuban military modernization program.
In comparison to the deliveries to Cuba, total Soviet economic and
military aid deliveries to four other selected Soviet client states (Angola,
Ethiopia, Mozambique, and Vietnam) fell off marginally in 1981 and 1982 ($1.7
billion and $1.8 billion respectively) from the 1980 level ($2.1 billion).
This is largely the result of Moscow's role in 1980 in reequipping Hanoi's
armed forces following the border war between Vietnam and China and the return
of military assistance to normal levels thereafter. Notably, Soviet economic
assistance deliveries to Angola and Mozambique remained at fairly low levels
during this three-year period despite the increased economic problems
experienced by these Soviet clients.
*Subsidies are provided for Cuban sugar exports and petroleum imports.
The values are calculated as the difference between the average world market
price and the price the Soviet Union pays (or charges, in the case of oil).
The sugar subsidy increased 22 percent in 1981 and 90 percent in 1982 due to
the sharp decline in world market prices over the period, the maintenance of
Soviet prices at 40-42 cents a pound, and the increase in Cuban sugar exports
to Moscow. The oil subsidy remained about the same at $1.4 billion as world
market oil prices and Soviet deliveries to Cuba stabilized.
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Total Soviet aid deliveries to each of these four client states and to
Cuba since 1980 stand as follows:*
Million US $
1982
1981
1980
Angola
185
91
140
Economic
5
17
3
Military
180
74
137
Cuba
5,290
4,500
3,250
Economic
4,700
3,900
2,995
Military
590
600
255
Ethiopia
344
275
520
Economic
234
80
63
Military
110
195
457
Mozambique
76
30
38
Economic
16
3
4
Military
60
27
34
Vietnam
1,221
1,322
1,370
Economic
950
950**
415
Military
271
372
955
Attached are surveys of the economic situations in each of the five
countries, their vulnerabilities, and Soviet economic and military aid to
each.
*Excludes other Warsaw Pact donors. See attached tables for a detailed
breakdown of Soviet assistance to these five client states since 1975.
**Reflects increases in prices the USSR charged Vietnam for oil.
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N 25X1
The Economic Situation
Luanda has been unable to reverse the steady economic decline that
started when Portugal granted the country independence in 1975. Once an
agricultural exporter, the country now has to import 90 percent of its food.
Even so, food shortages are widespread in urban areas. Moreover, Angola's
rail system has come to a standstill because of attacks by antigovernment
insurgents. Manufacturing has dropped sharply from pre-independence levels,
and even the most basic manufactured items are not available. Unemployment is
high, even by LDC standards. Until last year, however, Angola's domestic
poverty was camouflaged by sharp increases in world oil prices--petroleum
contributes 80 percent of Angola's export earnings.
Soviet Assistance
In 1982, the Soviets delivered $5 million of economic assistance and $180
.million of military assistance to Luanda that we were able to identify. With
these deliveries, total identifiable Soviet aid deliveries to Angola since
1976 rose to $806 million ($32 million of economic assistance and $774 million
in military aid).*
Economic Aid. Total Soviet economic aid pledges to Angola over the past
seven years far exceed actual deliveries ($439 million in
million in actual deliveries
Soviet aid to Angola is not
very concessional -1 year repayments at up to market rates and hard currency
Military Aid. The Soviet Union and its allies supply virtually all of
Angola's military hardware and ammunition. The USSR itself has provided
Angola with $774 million in military equipment since 1976, much of it on
favorable financial terms. The bulk of the Soviet equipment was delivered in
the mid- to late 1970s. It included old and unsophisticated tanks and other
ground force equipment as well as more advanced air defense equipment such as
MIG-21 fighters, SA-3 missiles, air defense radars, and antiaircraft guns. A
new surge of deliveries since mid-1982 has included late-model medium tanks
and APCs, multiple rocket launchers, OSA missile patrol boats, MIG-21s, and
SA-8 missiles. At present there are 1000 to 1500 Soviet military personnel in
*See attached tables for detailed breakdowns of Soviet assistance to
Angola.
25X1
25X1
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Angola, serving in a variety of advisory, technical and instructional
positions. The Soviets share these duties with personnel from several allied
countries, most significantly Cuba and East Germany.
Vulnerabilities
The recent plunge in oil prices has placed Angola in an almost impossible'
situation. The government is virtually bankrupt. It had been earning about
$2.2 billion per year from oil revenue, but knowledgeable press sources report
that about $2 billion of that went to Cuba and other Soviet bloc governments
in payment for their military and technical assistance. Because of declining
oil revenue--expected to drop to below $1.5 billion in 1983--Luanda has
fallen behind in its payments and will be unable to meet these obligations in
full.
The government's oil-related financial problems, the overall deterio-
ration of the economy, and Soviet stinginess with nonmilitary aid are major
factors behind the dos Santos government's interest in a Namibia settlement
SECRET
25X1
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The Economic Situation
The Cuban economy, in our judgment, is facing its most difficult period
since Fidel Castro took power in 1959. Plungin sugar sales (the result of
low world prices and recent heavy rains at home)), the weakening position of
other hard currency exports, and continued lender wariness, all point to
serious foreign exchange stringencies and declining national output in 1983.
As a result, hard-currency imports will have to be reduced, affecting the
domestic transport, construction, and power sectors and retarding development
of exports. In addition, for at least the next 12 to 18 months, Cuba's
already austere standard of living will slip even further as consumer goods
become scarcer and public health declines because of pharmaceutical and
sanitary equipment shortages.
Soviet Assistance
In 1982, the Soviets delivered an estimated $4.7 billion of economic
assistance and $590 million of military assistance to Havana. With these
deliveries, total estimated Soviet aid to Cuba since 1961 rose to nearly $32
billion ($28.4 billion of economic assistance and $3.4'billion in military
aid).*
Economic Aid. Since the mid-1970s, Soviet aid to Cuba has consisted
primarily of trade subsidies. In 1982, for example, Moscow paid the
equivalent in transferable rubles of about 42 cents per pound for its Cuban
sugar imports or nearly five times the current world market price. In
addition, it charged Havana only about $16 per barrel for its oil imports or
half the OPEC benchmark price. This form of aid is non-repayable, and totals
almost $20 billion since 1961.
Moscow also permits the Castro government to run soft-currency trade
deficits with the USSR and provides funds for specific development projects.
This aid has totaled about $8.4 billion since 1961. It is repayable, but the
Cubans claim it is financed for 15 to 17 years with a five year grace period
and no interest charges. In practice, most of it probably will be excused.
Military Aid. Soviet military deliveries to Cuba in 1982 continued to
support the major modernization program that has been underway in the Cuban
armed forces since the mid-1970s. Moscow sent Cuba some
*See attached tables for detailed breakdowns of Soviet assistance to
Cuba.
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military goods last year--worth $590 million--down from 25X1
shipped in 1981 (worth $600 million). Aircraft, air defense equipment, arms
and naval vessels accounted for of the total. The remaining 25X1
was comprised of trucks u ozers a ec ronics vans and other 25X1
military-associated equipment. 25X1
Soviet arms to Cuba provide a visible and concrete affirmation of
Moscow's support for Castro's regime, and are partially a response to his
pleas for more effecive weapons to defend against the threat of a US military
reaction to his operations in Central America. Besides giving Cuba's armed
forces greater stature in the region, these arms provide Havana a limited
capability to intervene on behalf of other leftist governments and provide
support to revolutionary movements.
Vulnerabilities
Cuba would be adversely affected by a reduction in Soviet economic
assistance, particularly in light of its current serious foreign exchange
constraints. Havana is especially vulnerable in the area of subsidized oil
deliveries which account for 95 percent of its oil needs or over 75 percent of
its total energy requirements. A reduction in these deliveries of over 10
percent would force Havana to spend precious hard currency for oil imports to
maintain economic activity.
Decreases in the price paid for sugar, increases in the price charged for
oil, or the discontinuation of trade deficit financing would limit Cuba's
ability to import from Moscow. This, in turn, would have reverberations
throughout the Cuban economy as Havana depends on the Soviet Union for.-60 to
70 percent of its total imports, including consumer, capital and intermediate
goods.
-2-
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25X1
The Economic Situation
After two years of 5- to 6-percent real growth in 1978-79, the first
.expansion in per capita income since the 1974 revolution, the economy has
stagnated. Food production, the centerpiece of Mengistu's ambitious
development program, has been particularly disappointing. Drought and the
government's strong emphasis on collectivization have eliminated Ethiopia from
the ranks of net food grain exporters. Coffee exports, which traditionally
account for nearly 60 percent of total export revenue--have been hit by
several years of low world prices. Coffee production is also showing the
impact of government tampering with producer prices and the transport and tax
hikes that retard planting and harvesting alike. The decline in coffee sales
since 1980 has been the primary factor in Addis Ababa's steadily rising
current account deficits.
Soviet Assistance
In 1982, Moscow delivered to Ethiopia an estimated $110 million in
military equipment and $234 million in economic goods that we can identify.
Economic aid was substantially greater than for previous years, and, in our
judgment, reflects stepped-up activity in oil exploration, the only project of
any significance to have advanced beyond the feasibility stage. Last year's
deliveries increased total identifiable Soviet disbursements to the Mengistu
regime to $2.6 billion,. including $2.2 billion in military aid and $400
million in economic assistance.*
Economic Aid
Despite last year's increase in outlays, Soviet economic aid to Ethiopia
has been disappointing. Since 1975, disbursements have totaled about $400
million, compared with $540 million in commitments. Moreover, Western aid
during the same period totaled nearly $1.2 billion. With the exception of the
oil exploration project, development assistance has involved little more than
signing protocols totaling $300 million for a power and irrigation project and
a cement plant, and sending several hundred economic and technical advisers.
Only petroleum subsidies--Moscow has supplied all of Ethiopia's oil needs
since 1980--have kept Soviet economic deliveries to Ethiopia far above those
for other African clients.
*See the attached table for a breakdown by year of Soviet military and
economic deliveries.
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Military Aid
Soviet military involvement in Ethiopia, on the other hand, has increased
sharply since late 1976. Moscow has agreed to supply
military equipment, helping to fill the vacuum created by the deterioration in
US-Ethiopian ties after the 1974 revolution. About $2.2 billion worth of
military arms already has been delivered. The Soviets now have an estimated
1,700 military advisers in Ethiopia. In addition, Cuba has 9.000 to 11.000
.troops and advisers)
25X1
25X1
Vulnerabilities
Although we see signs of growing concern within the Ethiopian government
about the deteriorating economy, does not suggest that 25X1
economic conditions alone will spark a move to oust Mengistu or persuade him
to move closer to the West. Therefore, he is unlikely to make the political
concessions needed to attract significant amounts of Western-funds. At the
same time, we do not expect him to cut himself off from the West and lose
access to his main source of economic assistance. 25X1
Of far more importance to Mengistu is the need to keep Soviet money and
equipment flowing to the military in order to deal with various insurgencies
and to keep the Somalis at bay. Repayments in hard currency to the Soviets
for military equipment are to rise substantially next year at a time of
foreign exchange problems for Addis Ababa. This could become an irritant in
Soviet-Ethiopian relations, but we believe that Moscow will continue to show
considerable flexibility in dealing with the problem so as not to,jeopardize
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MOZAMBIQUE
The Economic Situation
Mozambique is making scant headway in filling the economic void left when
.all but about 10,000 of the over 200,000 Portuguese who were in the country
emigrated shortly after independence in 1975. GDP is no more than about three
fourths of pre-independence levels, according to our estimates. Sketchy data
indicate that production of key export crops--cashew nuts, sugar, and cotton--
totals only about half of pre-independence levels, manufacturing output is
less than half of capacity, and construction has nearly halted. Prospects for
economic recovery anytime soon are poor. The NRM campaign in our view
severely dampens any chance for a pickup in badly needed foreign investment
and is causing some aid projects to be scuttled. Drought over the past
several years has ruined crops. Moreover, problems caused by. shortages of
technical skills and management talent and by the snarled personal and market
incentives of the socialist system will continue to keep productivity low.
Soviet Assistance
In 1982, the. USSR delivered $16 million of economic assistance and $60
million of military assistance to Mozambique that we were able to identify.
With these deliveries, total identifiable Soviet aid deliveries to Mozambique
since 1975 rose to $330 million ($40 million in economic assistance and $290
million in military assistance).*
Economic Assistance. Aid from the Soviet Union probably will not
contribute significantly to economic recovery. The $40 million in economic
aid the Soviet Union has disbursed over the past eight years represents less
than five percent of the total aid received'by Maputo during this period. The
USSR has promised $140 million more in assistance, mostly for. small projects
such as schools, technical aid to state farms, geological prospecting, and
mining. Moscow also has plans to develop agriculture in the Limpopo valley,
to construct a railroad, and to build hydropower projects, which could result
in substantial trade credits over the next few years.
Military Assistance. The USSR has been the primary source of military
aid to President Machel's regime since 1975. The $290 million of military
equipment the Soviets had delivered by the end of 1982 includes air defense
weapons, tanks, APCs, MIG-17 fighters, small arms, and ammunition. The.
*See attached tables for detailed breakdowns of Soviet assistance to
Mozambique.
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Soviets have made several new deliveries of heavy equipment since last
summer. Among the items delivered have been advanced BMP infantry fighting
vehicles and, in recent weeks, MIG-21 fighters. At present there are some 500
Soviet military advisers in Mozambique.
Vulnerabilities
Although food production is the economy's most vulnerable area, the
Machel government probably would also be receptive to offers of foreign aid or
investment in manufacturing, mining, and transportation. Mozambique will
continue to have to rely on foreign donors, including the US, to make up food`-~=
25X1
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VIETNAM
The Economy
The Vietnamese economy improved slightly during 1981 and
1982. Good weather and incentive programs introduced in rural
areas raised output by roughly 1 million tons a year to 16.2
million tons in 1982. Because the USSR reduced grain aid by
roughly the same amount, however, net food supplies in Vietnam
have stagnated. Industrial output also benefited from incentive
programs and began stabilizing in 1981 after declining during
1978-80. Most of the improvement has been in light industry.
With about $1 billion in annual economic aid from the USSR and an
estimated $100-200 million of currency and consumer goods sent
home annually by overseas Vietnamese, Vietnam now has sufficient
food and daily necessities, although the standard of living
remains quite low.
Soviet Aid
the USSR delivered $950
million in economic and $270 million in military aid in 1982.
The mix of economic aid appears to have shifted from commodities
to the construction of capital industries as Vietnamese
agricultural and light industrial production has improved. Since
1975, identifiable Soviet aid to Vietnam has totalled more than
$7 billion, about 60 percent of which has been economic aid. I 25X1
Economic assistance. Data Hanoi provides indicate
that Soviet economic assistance is primarily in the form of
grain--some 300,000 tons a year--and oil products--about 30,000
b/d--for which Vietnam pays about half the world price. Other
aid includes hard currency loans to buy raw materials and
equipment for factories in the south which are equipped mostly
with Western machinery, industrial raw materials and semifinished
products, fertilizer, and some consumer goods. The Soviets are
also building some 40 industrial projects, including the Da River
hydroelectric project slated to have a 1400 MW capacity in the
1990s, thermal power plants, coal mines, and engineering shops.
In addition, the Soviets are conducting offshore oil exploration
and exploitation through a joint-venture company with Hanoi
Recent Western press reports indicate that the COMECON
countries will soon reduce their economic aid to Vietnam by 20
percent, resulting in a loss of about $30 million a year from
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Eastern Europe and presumably much more from the Soviet Union.
East European,
governments recognize aid to
Vietnam as a long-term commitment and that increases are
inevitable.
Military Assistance. Soviet military assistance has dropped
to about $300 million a year since'the completion of Vietnam's
military buildup against China in 1979-80. The Soviets have
supplied Fitter SU-22 attack aircraft, Hind attack and Hormone
antisubmarine warfare helicopters, as well as Styx, Sepal, and
Scud surface-to-surface missiles. All of this equipment is
deployed along Vietnam's northern border. As a result of Soviet
deliveries, the balance,of military power has shifted
dramatically in Vietnam's favor. We estimate that Vietnam's
forces have a three-to-one armor and an almost two-to-one
artillery superiority over Chinese forces now located along the
border. The Soviets also supply weapons, ammunition, and fuel
for-Vietnamese forces in Kampuchea.
Vulnerabilities of the Vietnamese Economy
Vietnam's food supply remains vulnerable to weather.
Unusually bad weather in 1978 and 1979, for example, resulted in
a shortfall that required imports of 1.5 million tons of Soviet-
supplied grain. Nevertheless, irrigation systems have not been
improved since 1979.
Vietnam is totally dependent on imported oil, which is
crucial to the irrigation and transportation systems as well as
to power generation in the central provinces. Between,1975 and
1982, Vietnam obtained almost $1 billion in loans from Middle
East and African countries to buy oil. These loans dried up
because of Vietnam's inability to repay, forcing Hanoi to turn to
the Soviets for more than 90 percent of its oil.
Hanoi is also concerned that the private sector in the south
may run out of control. Leadership speeches often refer to the
dilemma of how to collectivize the Mekong Delta peasants without
reducing the 5 million tons of grain a year that they contribute
to the economy. Although collectivization has been stepped up
over the past year, Hanoi will be quick to abandon the program if
production shows signs of declining.
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25X1
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USSR: Economic and Military Agrcgrpents with
Selected LDCs, 1975-82
25X1
(Million US $)
Total
1982
1981
1980
1979
1978
1977
1976
1975
ANGOLA
1,221
500
157
13
33
28
49
441
(2)
Economic
439
400
Neg1
2
11
26
Military
782
100
157
13
33
26
38
415.
(2)
CUBA
24,526
5,290
4,500
3,250
3,336
3,256
2,050
1,723
1,121
Economic
22,205
4,700
3,900
2,995
3,105
2,970
1,980
1,505
1,050
Military
2,321
590
600
255
231
286
70
218
71
ETHIOPIA
4,480
180
1,762
315
94
752
1,125
250
2
Economic
544
170
62
189
94
2
25
..
2
Military
3,936
10
1,700
126
750
-1,100
250
MOZAMBIQUE
494
5
45
46
152
38
Economic
178
5
45
67
..
5
42
14
Military
316
(3)
..
..
141
..
41
110
24
VIETNAM
6,838
1,146
1,146
1,334
1,724
335
513
337
303
Economic
4,045
950
950
415
570
335
290
305
230
Military
2,793
196
196
919
1,154
..
223
32
73
(1) Excludes other Warsaw Pact donors.
(2) About $100 million in Soviet arms assistance provided to MPLA prior to Angola's
independence is excluded.
(3) We believe a new, large military agreement was probably signed during the last year;
as yet no information on the value and content has been disclosed.
SECRET 25X1
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 SECRET
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USSR: Economic and Military Assistance Deliveries
to Selected LDCs, 1975-82c1)
(Million US $)
Total
1982
1981
1980
1979
1978
1977
1976
1975
ANGOLA
806
185
91
140
102
144
79
65
Economic
32
5
17
3
3
1
2
1
Military
774
180
74
137
99
143
77
64
CUBA
24,526
5,290
4,500
3,250
3,367
3,286
2,076
1,636
1,121
Economic
22,205
4,700
3,900
2,995
3,105
2,970
1,980
1,505
1,050
Military
2,321
590
600
255
262
316
96
131
71
ETHIOPIA
2,654
344
275
520
189
1,018
302
3
3
Economic
408
234
80
63
6
18
2
3
2
Military
2,246
110
195
457
183
1,0-00
300
Negl
1
MOZAMBIQUE
330
76
30
38
37
95
21
10
23
Economic
40
16
3
4
2
4
3
8
Military
290
60
27
34
35
91
18
2
23
V I ETNAM
6,989
1,221
1,322
1,370
1,734
400
302
337
303
Economic
4,045
950
950
415
570
335
290
305
230
Military
2,944
271
372
955
1,164
65
12
32
73
(1) Excludes other Warsaw Pact donors.
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Soviet Military and Economic Assistance
to Selected LDCs, 1975?82*
? ANGOLA
? CUBA
E ETHIOPIA
? MOZAMBIQUE
? VIETNAM
0.4
0.04
MILITARY ASSISTANCE'1*
ECONOMIC ASSISTANCE'
? DOES NOT INCLUDE ASSISTANCE FROM OTHER WARSAW PACT COUNTRIES.
?@ SIXTEEN PERCENT (16%) OF TOTAL SOVIET MILITARY AID
COMMITMENTS TO THE THIRD WORLD.
000 SEVENTY-ONE PERCENT (71%) OF TOTAL SOVIET ECONOMIC AID
COMMITMENTS TO THE THIRD WORLD.
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