SOVIET GOLD POLICY AND USE OF GOLD AS INTERNATIONAL PAYMENTS (IP 404)

Created: 11/27/1957

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MEMORANDUM FOR: Director. Special t'rojects Staff

Office of the Special Asaiaian: for Intelligence Department of State. C.

reiervca. acuj exporte of soviet gold

(a) state teletype rcqucat ol Zib) orr/cia memo7 to

sps/stete. subject: soviet gold produ^tloi reserves, and exports

!. in rcapoaec to your teletype oft, you were adviacd on t.t by thla Office that tha attached reportrogress.

2. Our eatlmata. from collateral data, of0 million worth sf Soviet gold exporte during7ellmate for the aamc Dcrlodmillion which was baead on an analyalo of

I, The moat recent renewal of Soviet gold aalee io late Octoberlyettmatedillion, appears toamiliar pattern of Soviet gold sales In recent years. Such salesoo. were concentrated in two major parloda January-Matad November-December. Available Information Indicates thai large Soviet gold exporta daring7 may approximate or exceed the extraordinarily Urge aalee earlier this year.

4. The estimates of postwar Soviet gold productionof prewar cellmates based on wha: is known aboutv.rloua goldarea* The estimate9 productionsources would also allow

rough estimate7 production In ihe range. million0 million0 million).

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SOVIET GOLD POLICY AND USE OF GOLD AS INTERNATIONAL PAYMENTS

leaders believe that the USSR must accumulateforeign exchange reserves "in order to have the possibilityabroad eseryjHihg^necessary for the security, thethe invincibility, and the independence ofheir/ socialistreserves "actund of world money, which can be transformed

on the world market into means of production and articles of consumption needed by the socialist state."

The specific current uses of gold in Soviet foreign tradeo cover routine deficits in the Soviet balance of payments with Free Worldo finance emergency purchases abroad when an unexpected contingency threatens to dislocate the internal economic plan,o make gold loans to other members of the Bloc and selected Free World countries. The USSR thus uses gold systematicallyeans of international payment. That Soviet gold sales to the Free World are related to foreign trade imbalances is demonstrated by the fact that the substantial trade deficits3 and anticipated deficits4 brought forth peak postwar Soviet gold deliveries during this period, {see attached table).

Soviet leaders believe that their gold reserves must be maintained at levels which allow them flexibility in international transactions. The minimum level of gold reserves and the rationale for determining the level are not known. There have been no announcements on the size of gold reserves since before World War II. However, Soviet gold reserves are estimated currently at roughly USillion and are being augmented from new production of5 million per year. The USSR is the Becond largest producer of gold in the world (after South Africa which0 millionnd holds the second largest reserve (after. whichillions at the end.

In relation to Soviet imports (approximatelyillionhe' gold reserve is extremely large. Peak post-war sales of gold to the Free) amounted to lessercent of estimated Soviet total gold reserves. These reserves arc not solely determined by the routine requirements of international payments. With respect to foreign transactions, two additional reasons are suggested in statements by Sovietarge reserves would ensure the means for acquiring any goods which the USSR might need in conditions of famine, industrial dislocation.

economic sanctions by foreign nations, natural catastrophe, or war,uring an economic depression in capitalistic countries these reserves would ensure imports on the most advantageous terms. hird reason might be suggested: arge gold reserve provides the potential for financing subversive activities as well as for supporting economic activity for political purposes,o finance activities in the underdeveloped areas; to disrupt Free World commercialhile these reserves have not been generally employed in the current Bloc economic penetration effort, theyotential asset for this program.

5. The internal USSR monetary uses of gold are not known. Soviet writers on gold policy have not clarified this issue. While some writers have stated that Soviet currencyoldercent by value) others have claimed that gold has oo domestic monetary significance. Whether or not the USSR has demonetized gold, the size of the current reserve gives thereat deal of potential flexibility in international economic activities.

- SECRET

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