AID AND TRADE ACTIVITIES OF COMMUNIST COUNTRIES IN LESS DEVELOPED AREAS OF THE FREE WORLD 1 JANAURY - 30 JUNE 1965

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP92B01090R000400010020-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 64
• Document Creation Date: December 19, 2016
• Document Release Date: January 25, 2006
• Sequence Number: 20
• Publication Date: August 1, 1965
• Content Type: REPORT

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AID ..AND TRAD;~ AC.'T~~'ITIES OF CC)~~
COUNTRIES ~~ L~~~~ DEVELOPED j~Ls
C>F '~I3E F.EE WORLD
1 JANUa R~ ~ 3? JUNE 19
Elt 'f~ 14-5~ 9
..ECONOMIC IIATEl.~-.~GEt~ICE C~M~~A ~?
- of ~f~e
UNI~'~R ` ~ATE~ Ifs ELl.1GENCE BOARD
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AID AND TRADE ACTIVITIES OF COMMUNIS'~
COUNTRIES IN LESS DEVELOPED AREAS
OF THE FREE WORLD
1 JANUARY - 30 JUNE 1965
EIC 814-S19
ECONOMIC II\1TELLIGENCE COMMITTEE
SECRET
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The EIC-R14 series provides periodic summaries and analyticaa in-
terpretations of significant developments in the economic relat:i~~ns
and military aid activities of Communist countries with less devf~lope~i.
countries of the Free World. These developments are reported on a
current, factual basis in tYie Biweekly Reports in the EIC-WGR-.i :er:ie .
This report, covering tt~E 6 months from 1 January through _; ~ June
1865, constitutes the nineteenth periodic supplement to EIC-Rl~+, the
initial report on Sino-Soviet Bloc Postwar Economic Activit_ie_s i,
Underdeveloped Areas, b ~ August l~-SECRET. The present suppiE~: !en t
updates the previous semiannual report and includes the more sif;~iifi-
cant developments during t~hr reporting period. It also relates .rite-
worthy noneconomic activities, including military aid, to economic
operations of the Communist countries in less developed areas. ~~ata
have been revised to include new information, and figures in the currant
supplement supersede those in previous issues. This report was ~re-
pared by the Department of ,_;tate and the Central Intelligence Ar;~_ncy.
The draft was reviewed and. coordinated by a Working Group of the Eco+
nomic Intelligence Committee, which includes representatives of the
Department of State, the Dei'ense Intelligence Agency, the Depart:uen~s
of Commerce and Agriculture, the Agency for International Develo-~ment,
the National Security Ager..cy, and the Central Intelligence Agenc;7. 1' e
final report was approved by the Economic Intelligence Committee on
12 August 1865.
In this report the term Communist countries refers primaril;~ to tle
following countries that extend aid to less developed countries ~f tY^_
Free World: the USSR, Corr?nunist China, and the following countries c'
Eastern Europe -- Bulgaria,, Czechoslovakia, East Germany, Hunga}~,r,
Poland, and Rumania. For certai~i limited purposes the term als,~ ma;T
include Albania, Cuba, Mongo]_ia, North Korea, and North Vietnam, none of
which is normally a donor of aid. Yugoslavia is not included.
The term less developed countries of the Free World include. the
following: (1 all countries of Africa except the Republic of k3~:?uth
Africa; (2) all countries in South and Southeast Asia; (3) Icela~id,
Portugal, and Spain; (~+) s,ll countries in Latin America except ~;-_aba;
and (5) all countries in the Middle East, including Cyprus, treeae,
Syria, Turkey, and the United Arab Republic.
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CONTEIV`I'S
Summary .
A.
B.
Credits and Grants
Technical Assistance
1. Economic Technici~~
Apps ndix
Statistical Appendix
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AID AND TRAI>E ACTIVITIES OF COMMiJTTIST COUNI'RIP~S
IN LESS DEVELOPED AREAS OF THE FREE WORLD
1_ ~TANUAdZY - 30 JUNE 19 5
summary
New Communist economics aid undertakings in less developed countries
continued at a relatively 1-~igkr level during the first half of 1.96> see
Figure 1). Communist economic credits and grants extended. du~ ng 'the
period totaled US X458 mil.-lion, bringing to almost $7 billion ~.;he a~~gr~e-.?
gate of economic assistance extended by all Communist countries sine
early 1954 (see Figure 2). The USSR may have agreed to contrik}ute , de,~-
veloped countries do not include in their trade returns those m~aorts re-
ceived under long-term economic credits whereas the Communist c.~n_ntri~~s
report as exports all goods furnished on credit, with the result, that the
value of this trade according; to Communist sources exceeds the value ~e-
ported by less developed countries.
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with a :L7-percent gain recorded in 1963 over 1962. The growth of trade
in 196+ was due almost entirely to increases in Eastern European and
Chir7~~se Communist trade with the less developed countries. Soviet trade
with these countries held steady at about the $1.1 billion 1eve1 of 1963.
As a result, the Soviet snare of Communist trade with the less de-
veloped countries fell to 3~ percent compared with 37 percent in 1863.
Within the Communist area the countries of Eastern Europe continued to
be the most important trading partners for less developed countries,
accaunt:ing for !+5 percent of total Communist trade with less developed
countries. The largest percentage increase in trade between the Com-
munist and less developed countries was recorded by Communist China,
whose trade with these countries amounted to X680 million -- an in-
crease of ~+0 percent above that of 1963.~-
The failure of Soviet trade with the less developed countries
to 7?eflect any noticeable increase was due primarily to a leveling off
of irnpo:rts by the USSR, resulting largely f nom a reduction of g1,~+00
tons~--~ (roughly $50 million) in its purchases of Malaysian rubber -- a
reduction not compensated for by increased Soviet purchases of rubber
elsewriere in the less developed world. Soviet exports to these coun-
tries irr 196+ increased by only 6 percent, compared with a 15-percent
gain in 1863. This slackening in the growth of Soviet exports was due
prin~ar?ily to absolute dec7_ines in exports to Brazil, Spain, and Sudan.
The iJSSl3's exports to its major marzets in the less developed areas --
Afghanistan, Tndia, and the. UAR -- however, continued to expand.
The share of the less developed countries in total Communist
trade in 1q6~+ was ~~ percent, the same share as in 1863, whereas the
Comrrrunist area`s share in the aggregate trade of the less developed
countries remained at 5 percent, the same share as in previous years.
Tn spite of these relativE:ly low ratios, the Communist area continued
to occuL~y a p~~-:onaF~rant sY?:are of the trade of certain .less developed
cc>urtr~e~s. 'I l r' Cor~mrunist area. supplied. between one-fourth and. one-half
oi' ?,~F .mport?a c,1' Ai'~hani.tan, Cambodia, Guinea, and. Ma.1i and absorbed
;~Ert~. Err one-f i. h =~~n~ ttivc-i fifths of the exp. arts of Afghanistan, Greece,
Muir; ~a, itilali, ~`dria, and. 1;1ie i~AR and. the non.petroleura exports oi' lrarr
and _7?a~~ . Mo:r: ~;vF x?, Cor~rrunist countries cgn.tinued to purchase sizab:Le
Y~ori i_c:ns of tl~rose :products which are the mayor earners of convertible
cum r.c,y for sur~.e 1_ess de iF:loped countries. 'T'hey purchased. 15 percent of
Ghar,r3' s total. exports of c~ccoa beans in 196'+, 56 percent of the UAR' s ex-
Y>orts poi' cotton during thF= period 1 August l.qr~~+ through 21 June 19e5, and
c;5 I ~r.c~t
penetration of a key sector. Uganda signed a $3 million grant _and a=
economic and_ technical cooperation agreement with Communist China
which includes an intere:~t-free credit of ~12 million. Uganda still had
not drawn on a Soviet credit of $15.6 million extended last December,
and in general none of th.e aid programs envisaged under credit
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agreements with Communist countries reacYred the implementation stage.
Soviet advisers were assigned to the Ministry of Cormnerce and Industry
and the Peonomic Planning Ministry.
Soviet economic aid activities in Afghanistan continued at a
high level during the period, including new credits and an adjustment
of debt payment schedules that served to deepen Afghanistan's economic
dependence on the USSR. In an effort to ease .Afghanistan's current
foreign exchange and budgetary problems, the USSR discussed deferment
for 27 years of repayment of $16.7 rnillion in debts due in 1965-67;
extended a $16.7 million long-term credit to cover the maintenance
costs of the Salang Pass road and tunnel and the Kabul grain silo and
the construction of three bridges; promised to meet all costs for the
Soviet teaching staff at the Soviet-built polytechnic school; and
agreed to accept natural gas from the Shibargan gasfield as payment
for developing the field and constructing a pipeline to the USSR.
~IThe USSR and Afghanistan also signed an $11.1 million commodity
credit agreement to generate. local currency for Soviet aid. projects.
Delivery under the credit will be made over a :period of 2 years and
repayrr~en.t -- in the form of cotton, wool, and other agricultural prod-
ucts -- over 10 years at 2 percent interest. A protocol signed to the
basic grade and payments agreement of 1950 was significant in that for
the third consecutive year Afghanistan resisted Soviet efforts to in-
clude in the protocol Afghanistan's major foreign exchange earners,
karaku]_ skins and wool carpets.
'IThe Chinese Commmunist credit offer of 'November 19E~4, which had
been accepted in principle, was formally signed at the enii of March.
The $2~ million credit provides for a 10-year grace period, no interest,
and 20 years for repayment. Further discussions are to be held to
determine the specific projects to be financed. under the credit.
Afghan-Soviet military ties were also strengthened when an $80
milliari protocol was signed in January to an agreement negotiated in
July 1g64. The USSR will deliver 24 MIG-21's, 60 T-54A tanks, and fire-
fighting equipment and spares at a 7S percent discount with the $20 mil-
lion balance to be paid over 15 years at 2 percent interest starting in
1968. The 12 SA-2 SAM's delivered in July 1964 remained in storage,
and tYiere was no indication of activity designed to make the SAM's opera-
tional.
During the first half of 1865, Burma continued to follow a
policy of strict neutrality, concentrating primarily on internal prob-
lems. Frequent visits by hi.~.-ranking Chinese Communists, including
three by Chou En-lai, failed to elicit from Ne Win a more pro-Peiping
stance. Chinese aid activities were confined mainly to the start of
construction at a Chinese Corrnnunist industrial, project and a modest
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increase in the number of Chinese technicians. In March 1965 a prc~o-
col was signed to the Chinese ~~ million credit, which provi_d
in his breaking relations with the United States in May. Theme wer~a
no new extensions of Communist military or economic aid duri.n5 the-
period, but an agreement was signed in June providing for a small rn un-
ber of Chinese Communist military technicians to be sent to CaYr~bodi~, t
install a small arms repair workshop and activity on Chinese ~conom~c
aid projects increased. In March a cultural and scientific c~~opera-,ion
agreement was signed with Communist China which reportedly pr:at-ides for
the employment of 100 science instructors for technical schools in ,;am-
bodia and for scholarships for Cambodian students.
Conditions in Ceylon during the first half of 1965 were higs~-
lighted by a deteriorating; economic situation and a change in g;over~i-
ment. Following the defeat of the Bandaranike government, opuurtun -
ties for an immediate expansion of Communist influence within the
country diminished. Whereas the Bandaranike government actively
courted the local Communist Party and sought support from Communist
countries for its foreign policies, the election of Dudley Ser~snaya_e
has resulted in closer ties with Western countries. The Senariayake
government is actively seeking-Western economic assistance arr~l s.p-
pears willing to attempt to meet the conditions required for such
aid. These conditions include the imposition of economic refolfns grid
the settlement of the oil compensation dispute. During the Bar~dara~iike
regime, deteriorating economic conditions, created in part by incre