SINO-SOVIET BLOC ECONOMIC ACTIVITES IN UNDERDEVELOPED AREAS

Created: 3/4/1957

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BIWEEKLY REPORT

SINO-SOVIET BLOC ECONOMIC ACTIVITIES

IN UNDERDEVELOPED AREAS

7

PREPARED BY THE WORKING GROUP ON SINO-SOVIET BLOC ECONOMIC ACTIVITIES IN UNDERDEVELOPED AREAS

ECONOMIC INTELLIGENCE COMMITTEE

7

Summary o: Events87

The moat important Sino-Soviet Bloc activities in underdeveloped countries of the Free World during the6 were the deliberate Soviet delays in implementing credits for economicin Yugoslavia and the internal pro-Communist pressures on the government of Laos to accept Chinese Communist military and economic aid.

The desire of the USSR to postponeointast German credit5 million to Yugoslavia for the construction of an aluminum project and Soviet intimations that other scheduled credits also would be delayed imply that the ideological controversy between the USSR and Yugoslavia has seriously disrupted their economic Apparently an economic blockade will not be imposed onhowever,umber of economic agreements have recently been acted upon. These include an agreement on the paTtial utilization of credits previously extended to Yugoslavia for the purchase of raw materials and industrial and agricultural equipment, the signingrotocol covering trade7 between the two nations, and the delivery by the USSR of the first of sixircraft ordered by The planned purchaseoviet nuclear reactor by Yugoslavia has, however, met with dolays.

The government of Laos is being pressed by the Communist Pathet Lao to requestillion in economic and military aid from Communist China. ignificant fraction of the proposed aid would go toward the development of Pathet Lao military and political cadres. Although the proposal is being discussed by Lao government officials, the Prime Minister ia reported to believe that the proposal has no chance of being accepted.

Also in the Far East the Soviet Ambassador to Indonesia isfor Indonesian action in rogard tomillion economic and technological agreement signed with the USSR in

In the Middle East and Africa the Czechoslovak Embassy in Cairo has announced that air service between Cairo and Prague will begin soon, and the Ethiopian government is reported to haveoviet offer to train Ethiopian hospital personnel in Addis Ababa.

In Latin America, Brazil is toetric tons of standard-gauge rails valued atillion from Polandesult of an agreement signedolish firmrazilian bank in

ONTENTS

PaBe

I. Far

for Chinese Communist Aid to Laos

Credit

II. Middle East and

s

Air

Offer to

America (Brazilian Purchases of Polish Rail

by Yugoslavia of Soviet Retreat

on Economic

of Soviet

in Purchase of Soviet Nuclear Reactor .

Protocol with USSR7

- Ui

SINO-SOVIET BLOC ECONOMIC ACTIVITIES IN UNDERDEVELOPED AREAS*

I. Far East.

A. Proposal for Chinese Com muni it Aid to Laos.

Souphanouvong. the leader of the pro-Communist Pathet Lao, has asked the government of Laos to carry out its promise to accept aid from Communist countriesondition for Pathet Laoto participateoalition government. In an unpublicized agreementovember between Prime Minister Souvanna Phouma and Souphanouvong which is scheduled to become part of any ovar-all settlement reached between the Pathet Lao and the government, Souvanna agreed to accept the principle that economic and cultural aid would be accepted from any source as long as there were no "conditions. " Although Souvanna has stated that Souphanouvong did notpecific proposal but meroly said that the Chinesewere willing to provide factories, hospitals, and schools, several reports have been received which state that Souphanouvong asked Souvanna to request the Chinese Communists to provideor military and economic aid. According to those reports this sum wouldear and would be divided asillion for support of the Royalillion for the Pathet Lao military and political cadres,illion foraid.

* Although the main emphasis of the Biweekly ia on economicof the Sino-Soviet Bloc in underdeveloped areas of the Free World, significant Bloc activities of this nature in areas not consideredalso will be discussed.

** Unless otherwise specified, all dollar values in this report are in terms of US dollars.

If Souphanouvong haspecific proposal for aid of this magnitude, it seems obvious that he could have done so only with the approval of the Chinese Communists, and the proposal illustrates the puppet character of the Pathet Lao. The Chinese Communists have previously offered economic aid tout this is the first report

to mention military aid.

Although an attempt is apparently being made to keep secret the proposal for substantial Chinese Communist aid, it is being fairly widely discussed in Lao government circles. There seems to be little doubt that the Crown would oppose the acceptance of Chinese Communist aid, and the reaction of the Cabinet and Assembly may increase the opposition to the proposed political settlement in the face of thesePathet Lao demands. Nevertheless, with the example ofapparent succesa in accepting aid from both non-Communist and Communist sources, some members of the government may be tempted to support the acceptance of aid from Communist China, at least for economic purposes. Souvanna is reported to believe that the proposal for Chinese Communist aid has no chance for acceptance by either the Crown or the Cabinet,

Soviet-Indonesian Credit Agreement.

the Soviet AmbassadorIT line Minis ler All and the foreign Ministry in mid-January for action onmillion Economic and Technical Aid Agreement signed in Soviet persistence irritated Foreign Ministry officials, and in earlyote was sent to the Soviet Embassy stating that the agreement still had to be approved by Parliament. The Ministry added that approval would be facilitated by Soviet assurance that Soviet or Chinese experts sent to Indonesia would be ordered to have no political contact with Indonesians. This is the first indication that Chinese experts might be utilized under the Soviet agreement. As ofebruary the Soviet aid agreement had not been submitted to Parliament, presumably because of fear of increased Moslem opposition to Ali's tottering Cabinet.

See the Biweekly Report of

II. Middle East and Africa.

A. Czechoslovak-Egyptian Air Service.

A spokesman for the Czechoslovak Embassy in Cairo declared onebruary that air service between Cairo and Prague would be opened shortly. He said that the Czechoslovak government hadlights and plans toery large jet planes on this line.

Although this is the first report of Czechoslovak interest in civil aviation in Egypt, the USSR reportedly indicated such an interest in At that time, discussions were in progressan exchange of civil aviation personnel and tho establishmentonstop commercial air service between Cairo and Moscow. Thereportedly contemplated were the same high-speed jets recently employed inour runs from Moscow to Lone

B Soviet Offer to Ethiopia.

ion

The Ethiopian governmont has reportedlyoviet offer tochool to train personnel in connection with the Russian Hospital in Addis Ababa, which has been in existence for moreears. The offer includes an addition to the hospital, for which the Ethiopians wouldontribution. Implemestati of this offer would result in an increase in the Soviet staff at the

"* >juvici staii at the

Whl*lbetween Althoughoviet offer5 toecond hospftal inreportedly accepted an offer6 by CaechoaleJw. tohospital in Addis

-atln America (Brazilian Purchases of Polish Rail Equipm*^i

In6 the National Economic Development Bank in Rio de Jameroolish commercial creditor the purchase of rails and railroad equipment. The credit bears

6-percent interest. Payment is to be made as follows: ays after registration of the obligation and theonths afterof each shipment, jsj

Accordingeport of? in the CommunistJmprenaa Popular, the Polish firm Centrozap. under the terms of this credit agreement with the Brazilian bank, will furnishetric tons of standard-gauge rails. These rails arcillion and are to be furnished

IV. Europe (Yugoslavia).

A- Complaint by Yugoslavia of Soviet Retreat on

Yugoslavia's Foreign Minister charged onebruary that the USSR was seriously delaying implementation of credits for economic development promised The major item involved was the aluminum project scheduled under the joint Soviet-East German credit5 million, which the USSR desires to postpone Moscow reportedly had also intimated that investment fundsertilizer plant and an electric power plant (underillion Soviet credit Ofould not be immediately forthcoming. BWSBBBBBBBBBBBBBBBBBB

The Russians were said to have stated that other pressing economic commitments made it impossible to carry out their promises to Yugoslavia, but this claim the Yugoslavs privately deridedpretext."igh Yugoslav official, attached to the atomic energy mission whichrotocol with the USSRebruary,in Moscow untilebruaryain effort to get the USSR to alter its stand on the aluminum project.|

f the Yugoslav Foreign OfficeJthat the timing of the aluminum credit wasstiUhe USSR hadear delay which the Yugoslavs hoped to whittle downears. This official added that.

despite the delays in "majoreliveries wore still being scheduled undermillion investment credit and that theilHoncredit for raw materials was being utilised as scheduled.

The official Yugoslav news agency, in announcing the signingoviet-Yugoslav trade protocollso reported thathad been reached on Yugoslav utilization of Soviet credits Agreement was reached on the useillion ofil-lion credit for raw materials Underillion portion (agreed onrotocolfmillion investment credit, Yugoslavia would use aboutillion to purchase

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Cumulative evidence indicates that the Russians are indeed stalling on their economic aid commitments to Yugoalavia, particularly for large-scale projects. Although Moscow claims economic necessity as the reason for retrenchment, the motivation is also doubtlesssince the action coincides with the bitter ideological controversy between the two countrias.

B. Delivery of Soviet Aircraft.

Onanuary the USSR delivered the first of sixlanes ordered by Yugoslavia under the $nO-million-creditsigned in The remaining five propeller-driven aircraft are scheduled for delivery during theonths. LASSIFIED)

Before thes are used on scheduled runs, Yugoslav pilots will receive transition training for operating this type offrom Soviet pilots. The Soviet pilots arc expected to remain in Yugoslavia after thes are in regular service, however,on internal routes until the Yugoslav pilots are thoroughly familiar with the aircraft. Also,eeks of operational training in the USSR will be given tougoslav pilots, mechanica, and technicians who were scheduled to leave Belgrade onebruary.

A Yugoslav Foreign Office source confided that thewith the Russians culminatingrotocol on atomicsignedebruary had been fruitless in respect tooviet nuclear reactor (presumably on a The Russians and Yugoslavs allegedly failed to geta price for the reactor, and it was finally agreed that aSoviet offer would be madeYugoslav

official subsequentlythe USSR

had agreed to include purchase7 Soviet-Yugoslav commercial agreement, provided the Yugoslavs accepted the Soviet desire to postpone the aluminum credit.

D. Trade Protocol with USSR

eeks ofrade protocolhe USSR and Yugoslavia was signed onebruary. Neither the planned level of trade nor the commodity lists were announced. Agreements6 were for total trade0 million, and it is probable that this level was attained by the end of the year. Yugoslav officials have commented both publicly and privately that thefor7 protocol were carried on in an "icy" atmosphere. Yugoslavia now has trade agreements7 with the entire Bloc except East Germany and Czechoslovakia. ugoslav officialthat the6 trade agreement between the Yugoslav and East German Chambers of Commerce has been extended until Jlzechoslovak trade delegation ar rived in Belgrade onebruary to begin negotiations7 protocol.

Although procrastinating on their economic aid commitments and onuclear reactor, the USSR apparently does not choose to impose an economic blockade on Yugoslavia. To what degree the Bloc will honor7 trade commitments will probably depend on the extent to which political relations with Yugoslavia deteriorate.

Original document.

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