SINO-SOVIET POLICY AND ITS PROBABLE EFFECTS IN UNDERDEVELOPED AREAS (NIE 100-3-

Created: 4/24/1956

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NATIONAL INTELLIGENCE ESTIMATE NUMBER 6

SINO-SOVIET POLICY AND ITS PROBABLE EFFECTS IN UNDERDEVELOPED AREAS

CIA HISTORICAL REVIEW

RELEASE IN FULL

by the

DIRECTOR OF Cr-VTBAI. ism LL IO EXCE

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SINO-SOVIET POLICY AND ITS PROBABLE EFFECTS IN UNDERDEVELOPED AREAS

THE PROBLEM

To define the nature of and probable developments in Sino-Soviet Bloc foreign policy with particular respect to underdevelopedo estimate Bloc capabilities toolicy of expanding economic relations with these areas; and tothe susceptibility of underdeveloped areas Lo these policies.

CONCLUSIONS

new Sino-Soviet Bloc policy, which has been pushed with increasing vigor since the springarks theof the Blocormidablewith the West in thc political, economic, and cultural spheres forand influence among thenations. The Blocefender of peace androponent of mutually beneficialwith the outside world.

A key element of the current Blochas been an unprecedented effort toide range of economicwith underdeveloped countries. The Bloc is exploiting two basicin the underdeveloped areas (a) the large extent to which the economicof most underdeveloped nations depends on the production and export of

'As used herein, "ur.derdcveloped" or "former colonial areas" Is Intended to encompass SouUi-east Asia. South Asia, the Middle East. North Afrlea. Tropical Africa, and Latin America.

raw materials and foodstuffs, and (b) the desire of most governments of thecountries to acceleratedevelopment while simultaneously increasing welfare services and

Within the past year, there hasarked increase in Bloc trade with these areas. The Bloc is ofTering capital equipment and technical services infor bulk purchases of rawand foodstuffs. It also has offered some low interest, medium and long term credits to finance the export of capital goods and arms.

We are unable to estimate withthe extent to which the Bloc will be willing or able to expand its economic dealings with Lhe underdeveloped areas. It has the capability toide range of capital goods and know-how and hastage of economicin which the exchange of capital goods for raw materials and foodstuffs

will tend to resultet economic gain.t appears likely that total Bloc trade (including arms) with thecountries will be aroundillion annually (about double5 (lgure). )

If Bloc economic programs continue to expand at lhc present rate and follow thc present general pattern of concentration, they will alleviate some of the immediate economic difficultiesumber ofnations, particularly Burma, Afghanistan. Argentina, and Turkey. Bloc trade and credit will probably notubstantial degree ofdevelopment in any of thecountries with the possibleof Burma andumber of underdeveloped countries, inew activities constitute anpart of their economies, maya degree of economic dependence on thc Bloc out of proportion to theof their trade with the Bloc. However, the total political effect of the new Bloc policies toward underdeveloped countries is not necessarily proportional to thc extent of economic relations with these countries. )

In general. Bloc tactics are already having important political effects in the Arab-Asian area. The image of the Blocrincipal proponent of peace andandenefactor of the underdeveloped nations has becomelo many people in this area.neutralist tendencies have beenand several states now aligned with the West have begun to weigh the benefitsore "independent" posture. The availability of Bloc assistance has led some nations to believe that they are nowtronger position to bargain with the

West for aid. Thc availability of Bloc aid has contributed to the acerbatlon of the Arab-Israeli conflict. US concern with the Bloc threat in neutralist areas has led to cries of neglect from Pakistan and the Philippines. Several of the nations aligned with the West have becomeimpressed with Bloc protestations of peace to become critical of US emphasis on military aid and have called foreconomic support. Bloc tactics have also contributed to the mounting pressures against the maintenance of Weslern trade controls.

If the Bloc continues its present tactics over the next few years, present political trends in thc underdeveloped countries are likely to be accentuated. Inthe appeal of neutralism willgrow in Asia and the cornmitments of Thailand and the Baghdad Pactto regional security arrangements will probably be weakened. Issuesthc West and the Bloc will probably be further blurred in thc minds of the leaders of many of the underdeveloped nations. There will probably be lessover tho threat of major war or Communism and greater concern over regional and local Issues.

However, there will still be .important limitations on the Bloc's ability toor manipulate the policies of the underdeveloped nations. With theexception of Afghanistan, trade with the Bloc will probably remainsmaller than trade withstates. Moreover, the experience of the US in the postwar period liasthat close economic relations with the underdeveloped areas canource of friction as well as political gain.

01 Ii T

the people and leaders ol some underdeveloped states may distrust the US more than the USSR, the leaders of even the neutralist states have had to contend with Communist challenges to power and they will be watchfulto their own lights of theof dealing with the Bloc. If the Bloc should make early attempts tothe growing economic dependence of Burma, Egypt, or Afghanistan topoUtical actions contrary to theor interests of local leaders, these governments would probably react by attempting to reduce or break off their arrangements with the Bloc, particularly if Western nations made known their willingness to assist the nation involved through the readjustment period. These considerations will probably cause the Bloc to proceed with caution and toefforts to gain the good will and confidence of key indigenous groups and leaders.

eighing general Bloc assets and limitations, wc believe lhat the Bloc's abilily to influence developments in the Arab-Asian area is likely to increaseover thc next few years. By associating itself with these nations on colonial issues, by expanding economic relations, and by exploiting otherand poliUcal conditions, the Bloc may be able to increase Communist influ-

ence and to weaken significantly the role of the West in the area. Although there is no substantial immediate danger that the underdeveloped countries will be drawn formally into the Bloc through these tactics, over the longer term annumber of Arab-Asian countries may reach the point, already reachedew, where their foreign policies parallel or actually support the Bloc on most key issues.ew cases the way maybe prepared for actualtake-overs through coercion orsubversion.

f present Bloc policies are continued, many of the underdeveloped countries will probably come increasingly to regard the USSR and Communist China asmembers of the international community. The underdevelopedwill probably enter into suchor political relations with the Bloc as appear, on balance, to further their own national interests. Nonetheless, they will continue in varying degrees to be responsive to the West because of long established personal, cultural, military, economic, and political ties. The lasting political effects of the new Bloc policies on underdeveloped countries will depend heavily upon the degree to wliich the West is genuinely interested in their problems, understands their motives, and responds to their needs.

DISCUSSION

RECENT EVOLUTION OF

SINO-SOVIET POLICY

Sino-Soviet Bloc has sought withvigor and confidence, especiallyspringo portray the Bloc asof peace androponentbeneficial political, economic, and

cultural relations with the outsideide range of diplomatic and propaganda moves has been aimed at reducingof tbe likelihood of general war, and at disassociating from Bloc policy the stigma of subversive violence, militarism, and aggrcs sion which was largely responsible for the con-

l

measure of free world unity in the postwar years. The Bloc is also attempting to present thc current world struggle as one of peaceful competition between theand weakening forces of Capitalism and the increasingly strong and "progressive" forces of "Socialism."

It has become increasingly evident that the new policy proceeds primarily from adevelopment by the Communist leadershipasic reappraisal of thc world situation. The Communists have apparently concluded that (a) under present circumslances the hazards of major war are so great thatpressure or local aggression whichsignificant risks ofar cannotart of rational policy, and (b> Free World alliances and lhe uncommitted areas arc more vulnerable to various forms of political and economic inducements than lo violence and threats of force. Theseprobably provide the basis for theof doctrine ath Congress of the Soviet Communist Party on lheof war, the role of violence uirevolution, and the admissibility of alternative routes to socialism. Thethat the conditions on which Communist policies are now based will not fundamentally change in thc foreseeable future, plus thc pains taken to provide thc new policy with adequate doctrinal underpinning, indicate that current Communist tactics are likely to continue for some time to come.

Moreover, since the death of Slalin, Soviel leaders have also been reappraising theirsituation. In this reappraisal, they probably recognized that Soviet economichad reached the stage at which an expansion of trade, especially withareas, would help to meet growing Bloc needs for agricultural and olher raw materials. At lhc same lime, they recognized that an expansion of trade could be aninstrument of thc new policy of

H. The present phase of Bloc policy islo cultivate conditions in the free world which will permit expansion ofinfluence. An initial objective of Bloc

leaders is to convince members of the Western alliances that the new Communist policy has eliminated the danger of Communistthus removing the prime motivation of those alliances. They hope that, thusof their rationale, the alliances will falter In their joint military efforts andbe dissolved. The Communists also hope that their current posture will lessen Western and increase Communist influence in the underdeveloped nations. Current Communist tactics arc designed to advance Communist long term objectives withoutrisk of major war.

II. BLOC TACTICS IN UNDERDEVELOPED AREAS

The underdeveloped areas of the world which are now being wooed by thc Communist Bloc containercent of the world'sandercent of the population outside thc Sino-Soviet Bloc. Parts of the arearim the southern borders of the Bloc, flank lhe sea route from Gibraltar toand contain important western defense InstallaUons Although Lhe areas producemall percentage ot the world'soutput, they account forf world trade. Through trade some of the underdeveloped countries play important rules in the economy of the free world.

Although there arc wide variations insocial, and political conditions within this vast area. Uie general atmosphere is one of political Instability derivingomplex pjocess of rapid economic and cultural change. Nationalist feeling is intense and reaction against foreign influence oris strong. Increasing awareness ot social inequalities, poverty, and economic backward ness is causing unrest and ferment, and thereidespread desire for an Increase in the standard of living. In many areas, there are oppressive or weak political regimes which are increasingly Incapable of coping wiih the complex problems confronting them. From these common problems and on the basis of race andense of identity has developed among many of these nations and they lend to stand together in blocs on many international issues.

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Tactics

The Slno-Sovlet Bloc is wooing thcareas by identifying itself with anti-colonial and nationalist aspirations. Nearly all of the underdeveloped countries have at some time in their history come under tlie domination of one or another of the Western Powers. Even those countries which have been led by experience, ideology, or common interest to align themselves with the West are prone to be suspicious of Western intentions. In contrast, the USSR and Communist China, although hampered in some areas by thclr past support of armed Communist rebellion, are now freeonsiderable degree of the odium of imperialism. The Soviet record of imperialism In the Baltic states, Easternand Asia is not well understood in the underdeveloped areas.ew of the underdeveloped countries have experienced direct tlireats from thc Bloc and the Bloc's virulent propaganda attacks on Westernhave led some of them to believe that relations with the Bloc can actounterweight to Western influence or the threat of encroachment.

The Sino-Soviet Bloc is attempting to cultivate friendly relations with existingincluding some formerly labeled as "reactionary" in Communist propaganda, by expressing sympathy with their special national interests. In particular thc Bloc has offered support or encouragement tothat arc involved in local conflicts, in struggles for independence, or in irrcdenlisl issues, especially where the opposing party is aligned with thc West. Thc Sino-Soviet Bloconsiderable degree of maneuverability in these situations because, unlike the US, it is free of commitments to lhe colonial powers, and because Uie Soviet record of imperialism is noi well understood.

Thc Bloc has also intensified Its efforts to identity US policy with danger of war and lhe USSR with thc hope of peace; it stresses lhat present world conditions, particularly tbe growth of Soviet strength, give prospects of lasting normalization of international Most of the underdeveloped nations

reat fear of major war and they desire to remain aloof from international power struggles and to devote their energies todevelopment and local affairs. They tend to be critical of US efforts to extend the area of military cooperation and to beto Bloc protestations of peaceful intent.

The Bloc is emphasizing the slmllarily of Its past and present economic problems with those of the underdeveloped areas. Thehave proclaimed the success of their systems in rapidly transforming their own backward countries Into Industrial powers through socialist organization and the full mobilization of domestic resources. The appeal of Communist experience Isstrong tn Asia where many members of the educated elite have been conditioned to think along Marxist lines. Furthermore, In many countries the traditions of individual freedom and democratic principles are weak and thus do not serve as an effective barrier to the acceptance of authoritarian systems. Even where the Communist cost in human suffering Ls recognized, thereemptation to believe that appropriate elements of the system could be ulilized without serious damage to political and human freedom. The private enterprise system tends to be associated with thcand exploitation of colonial rule. Throughout most of thearge measure of state control of the economy is accepted as both desirable and essential.

Thc Communists are attempting to play down the antidemocratic aspects of theirBy presenting Iheir doctrine as the embodiment of progressive social change. Ihey hope to gain the support of other advocates of social change, particularly the SocialistTheir aim is to end the isolation of the Communist parties and loasis for "united fronts" with Socialists and

An Important element of the Bloc's appeal hi the underdeveloped areas is its relativefrom the taint of discrimination against colored races which is reinforced in some minds by the fact that one of the two major partners in the Bloconwhite nation. By

I1

Western racial barriers in colonial areas and in some parts of the US are bitterly resented by many Asians and Africans.

Economic Tactics

A key clement of the current Bloc policy has been an unprecedented effort toide range of economic relations withcountries. This economichas Included new and expandedodest and selective credit program,rowing emphasis on the training andof technicians and advisors. The Bloc is exploiting two basic conditions in theareas (a) the large extent to which the economic livelihood of mostnations depends on the production and export of raw materials and foodstuffs, and (b) the dr&lre of most governments of the underdeveloped countries to acceleratedevelopment while simultaneouslywelfare services and consumption.

The underdeveloped countries, even under the most favorable economic conditions,and in world markets, lack thcto carryapid program of economic development. They generally lack sufficient trained personnel to: (a) plan andevelopment program;heir monetary and fiscal systems to channel Internal resources to essentialand (c) install and operate modern transport and manufacturing equipment Few of the underdeveloped countries have sutnci<-nl capital resources for the volume of Investment which must be made concurrently in all basic sectors of the economy. Suchinvestment is essential to break the depressive effects of growing populations and Increasing consumer requirements and toa margin for additional investment and growth In particular, their export earning capacity Is Inadequate to finance imports of capital equipment while maintaining theImport of consumer goods necessary to restrict inflationary tendencies and allayunrest. Progress In development on the basis of domestic resources alone would at best be slow, even if stern and authoritarian measuies were taken lo restrict consumption and to channel all available resources into

capital investment In many countries also, there Is an unwillingness to take the internal measures necessary to carry out effectiveprograms.

he underdeveloped countries have not been able to obtain sufficient development capital from the West. Moreover,4 their own capabilities for capital formation have been reducedesult of the ending of thc international boom In the demand for food and some raw materials which followed World War II and which was revived andby the Korean War. In particular, agricultural prices are under pressure andstocks arc growing burdensome. Non-Communist markets are unable to absorb all these stocks and some Western countries are in fact burdened with surpluses of the same commodities.

2H. The USSR, as the world's secondpower, and thc European Satellites have tho capability ofide range of capita) goods and know-how to theareas. Thus, tho Bloc Istrong position to exploit these conditions. Within thc last year it has made increasing efforts to promote trade in Southeast Asia, South Asia, the Near East, Africa, and in Latin America. Further, the Bloc is now offering capital equipment ln exchange for bulk purchases of raw materials and foodslufTs In selectedThe Bloc has also offered capital goods and technical services for economicas well as arms, on the basis of low-Interest medium and long term credits,In local currencies or commodities. The Bloc has demonstrated considerable flexibility in meeting local conditions and has generallyillingness to conclude iiRreemcnts without time consuming negotiations It has occasionally supported locally popularof marginal economic Importance. The Bloc has not required expressedondition of trade or credit agreements, but it has suggestedumber of caseseutralist position wouldbeneficial economic relations.

rom the Bloc point of view, thesetacUcsational basis ofadvantage. Thc exchange of capital

goods for raw materials and foodstuffs will tend to resultet economic gain rather than tourden upon the BlocThe costs of capital goods In the Bloc have declined as production has expanded, as skills have developed, and as additional capital investment has been applied. During the same time, however, thc costs of food and some raw materials have risen with increasing requirements, and the exhaustion of low-cost production opportunities.

4 both the European Satellites and the USSR became for the first time netof food, and such imports are likely to continue to expand in view of the high costs of additional production within the Bloc, the growth in population and standards of living, and continuing shift in relative costs In favor

of industrial production. The other side of this picture is the emergence of the Satellites as net exporters of capital goods to non-Bloc countrieslthough the Soviet Union isubstantial net Importer of capital goods from non-Bloc countries. Its exports of such goods, though still small in volume, have rapidly Increased In the last three years. In addition, the total value of Bloc trade with non-Bloc countries has risen from the postwar low ofillion3 to an4 billion

esult of new trade agreements,in quotas under agreements already in force, and credits, the volume of Bloc trade (including arms shipments) with thecountries has increasedin the past two years.

Slno-Soriot Bloc Trade with Nan-BlocS5

(Million of currentIncreases)

Underdeveloped areas

Nearfrica

East*

America

Non-Bloc

& Canada

& New

Kong

49

Europe

All data are based on official statistics leased by Free World countries. Slno-Sovict Bloc Import and export data were extracted directly from Free World export and Import data respecUvely. Ordinarily. Free World export data are presented on an FOB basis and importsIF basis. All figures have been rounded to lhe nearest million.

'Data5 have been partly estimated by annual ratine of Informationasigures for the Near East and Africa probably arc somewhat low.

'Excluding Japan and Hone Kong but Including India.

espite recent increases, the Bloc stillelatively small share of thc total trade of most underdeveloped nations. Only eight of these countries conducted more than fiveof their total trade with the Bloc

Percent of total trade with the Bloc

(prelim.)

a

G

a

Bloc's trade with underdeveloped countries will almost certainlyore substantial gain6 thanf particular importance for the short run, Bloc trade will probably increase significantly with those counlries which the Bloc hason as being the most promising initial targets of opportunity, namely, India, Burma, Egypt, Indonesia, Afghanistan, and Turkey. In thc case of Burma, the USSR has recently agreed to* tons of riceover the next four years or an amount equivalent to about one-sixth of5 total exports. Similar arrangements in lesser amounts with the Satellites and Communist China may raise Burmese Irade with the Bloc lo about one-third of its total trade.the Bloc supplied only seven percenl ol Egypt's importsloc purchases accounted forercent of Egypt's exports. Egypl's tolal trade with the Bloc will probably increase considerably6esult of additional Bloc purchases of cotton and Lhe delivery of Bloc goods and arms.

In addilion, Lhe credits already extended by the Bloc to underdeveloped countries will lead lo an increase in Bloc trade wllh the area. The program of Bloc credits to underdeveloped countries Ls modest in scope, and totaled0 million as of' Of this total. Egypt (involving primarilyfghanistan, and India received medium and long term credits totaling0 million.

'In itijs Burmaillion tons ol rim-andillion tons. 'This total excludes Yugoslavia and Finland.

3

Minimum Known Credit; and Possible Creditsby the Slno-Sovlet llloc todiinlrlesTHf millions of US $

I6

Recipient Anas

Excluding URSR

Bloc

East

Kill

and SouUieaat

tun India

America

TOTAL

B '

tabic was compiled fromepresent minimum estimates and do not include projects lor which no value estimates are available.

In addition, thc Blocillion In credits to6 million to Iceland,9 million to Yugoslavia.

At the mlnUnura an5 million In Bloc credit offers are under activein the underdeveloped countries. To date thc USSR has concentrated its credits in South and Southeast Asia while the Satellites have taken the lead in extending credits to the Middle East

uture Trends in Bloc Economic Tactics. Wc believe lhat the Bloc will seek to expand substantially both its credits and Its trade with underdeveloped countries, whileevery effort to live up to coirunllmenls made. In so doing the Bloc will seek tosignificant economic relationsreater number of underdeveloped countries, but will probably continue to weight its efforts quantitativelyelatively fewparticularly those wherein It sees the prospects for greatest political success. The distribution of Bloc trade will also be affectedesser degree by growing needs for selected strategic raw materials; for example, bauxite and industrial diamonds.

Tho Bloc Is almost certainly not motivated to undertake foreign economic programs of such magnitude and content as to stimulate substantial economic development in any country except possibly In certain peripheral areas such as Burma and Afghanistan. In the latter countries the Bloc may desire to develop showcase samples of the benefits of closewith the Bloc. Inumber of other factors mayimiting effect on the scope of the Bloc's economic program in the next few years. In their dealings with some underdeveloped countries, the Bloc will encounter administrative anddifficulties. The extension of the Bloc program will also depend to some extent on how successfully the Bloc can compete with Western enterprise and technology in these areas. Moreover, the Bloc will probably wish to avoid over-extending ilsclf In the early stages of the program In view of tho political Importance it will attach to fulfilling ItsFinally, in some cases, the USSR must weigh its economic commitmentsthc Bloc against the requirements for economic development within the Bloc

We arc unable to estimate with precision thc extent to which the Bloc will be willing or able to expand its economic dealings with thc underdeveloped areas.l appears likely that total Bloc trade (including arms) with the underdeveloped countries will be aroundillion annually (about doublebo reachevel wouldate of Increase about equal to that of total Bloc trade with non-Bloc countriesnd below5 rate of Increase with the underdeveloped areas alone. In any event, it Is clear that the Bloc will increasingly offer serious and continuing competition to the Westarket andource of capital and technical assistance

III. PROBABLE EFFECTS OF BLOC TACTICS

he new Bloc policy marks the emergence of the Blocormidable competitor with the West, In the political, economic, andspheres, for position and Influence among ninny of Uie underdeveloped nations. The Bloc nowosture of peace, an attitude of sympathetic understanding of thc

needs and aspirations of the underdeveloped areas,ystem of cultural and political values attractive to many of Asia'sand political elites. It points to the impressive record of Soviet industrial growthodel for the economic development of backward areas. In addition, the BloeItself ax being capable of supplyinggoods, credits, and technical assistance. Although Uie ultimate objectives of the Bloc remain unchanged, its immediate objectives are probably merely to Increase theof neutralism and to expand Bloc

Economic Effects

The Bloc has already made significant progress in expanding its economic relationsumber of countries, most notably Burma, India, Egypt, Turkey, andThe reasons for this success have varied from country to country. For Instance. Burma was receptive to Bloc orders largely because of Its Inability to dispose of Its large rice surplus In Western markets. India was able to obtain certain capital equipment Irom the Bloc on more attractive terms than were available In the West; Egypt could not obtain the arms it desired from Western sources, and Afghanistan wanted to bolster its positionis Pakistan,

The receptivity of other countries to Bloc offers will be conditioned by similar factors. Countries which are aligned with the West or have close economic ties with Westernor receive substantial aid from the US. will wish to avoid Jeopardizing these relations. However, even these countries are likely to increase their trade with the Bloc, particularly if lhe neutralist states appear to be profiting Irom Increased relations with the Blocand Iran have already done so because of internal economic difficulties and Pakistan. Cambodia, Greece, Thailand,tin American states, and the Philippines will probably Investigate the posslbUltles fortrade with the Bloc. In some cases tlie primary motive will be to Increase export markets, but In others Uie purpose may be to elicit Hdditlonal support and attention from the US.

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equal opportunities and creditthere Is little desire amongcountries for Bloc trade Into Free World trade. On the contrary. Western trade provides foreign exchange usable in other markets while most deals with the Bloc arearter basis. Thus the basic appeal of the Bloc market isource ofearnings not available in the Free World which can be used to obtain capital goods from the Bloc. In view of this, receptivity to Bloc trade offers would probably weaken if thc Bloc were to re-export major quantities of bulk commodities bought from the underdeveloped countries.

However, if the Bloc lives up to itsdelivers the goods, and is discreet in its meddling in the internal affairs of other states, most of the underdeveloped countries will increasingly accept Bloc overtures at face value. There will probablyradual, and in some cases substantial, increase in the level of normal trade, in dependence on Sovietand in the extent to which the various countries will be willing to morlgage their futures through long term credit from the Bloc. Moreover, the readiness of neutralist and independent states to purchase arms from the Bloc will probably Increase.

f the Bloc economic programs shouldto expand al thc present rate andthe present general pattern ofthey will alleviate some ot the Immediate economic difficultiesumber ofnations, for example, Burma,Argentina, and Turkey. In these countries, and possibly several others. Bloc purchases couldtabilizing effect on export prices, and could assist in maintaining income and employment in keyumber of underdeveloped countries, inew activities constitute an Important part of their economies, mayegree of economic dependence on the Bloc out ofto lhe percentage of their trade with lhe Bloc. At the same lime, however. Bloc trade and credit will probably notubstantial degree of economic development in any of lhe underdeveloped countries with the possible exception of Burma and Afghanistan.

This is so primarily because the magnitude of capital required generally far exceeds that likely to be accumulated on the basis ofestimated Bloc trade and credits.

Polilical Effects

The total political effect of the new Bloc policies toward underdeveloped countries is not necessarily proportional to the extent ot economic relations with these countries.ew casesigh proportion of trade with the Bloc may not beby any substantial shill in orientation and internal politics. However, in otherthc reverse may be truee.,thc economic relationship may be small in percentage or quantity terms, thc shift in political alignment may be significant.

In general. Bloc tactics are alreadyimportant political effects in the Arab-Asian area. The Image of the Bloc as aproponent of peace and disarmament andenefactor of the underdeveloped nations has become credible to many people in this area. Existing neutralist tendencies have been reinforced and several slates now aligned with the West have begun to weigh lhc benefitsore "independent" posture. The availability of Bloc assistance has led some nations la believe that they are nowtronger position to bargain with the West for aid. The availability of Bloc aid hasto the acerbalion of lhe Arab-Israeli conflict. US concern with the Bloc threat in neutralist areas has led to cries of neglect from Pakistan and the Philippines. Several of the nations aligned with the West have become sufficiently impressed with Blocof peace to become critical of US emphasis on military aid and have called for increased economic support. Bloc tactics have also contributed to the mounting pressures against the maintenance of Western trade controls.

the Bloc continues Its presentthe nexl few years, presentin the underdeveloped countriesto be accentuated. In particular,of neutralism will probably growand the commitments of Thailand and

the Baghdad Pact nations to regional security arrangements will probably be weakened. Issues dividing the West and the Bloc will probably be further blurred in the minds of the leaders of many of the underdeveloped nations. There will probably be lessover thc threat of major war orand greater concern over regional and local issues.

The new Bloc diplomacy and its economic programs will provide the Bloc Increasedfor Influencing governmentand intellectual leaders by directcontacts. Because socialism Is regarded favorably in many underdeveloped countries, especially In Asia, thc psychological andeffects of Bloc economic policies may be more profound Ihan has been the case with Western aid programs. Althoughas an open polilical force is notin most countries of the area, the postwar generation of young intellectuals may Ignore the history' of Communism, accept the present line of propaganda, andlose sense of identification with Communist China and the USSR. At the same Ume, the new look In Soviet diplomacy, the denigration of Stalin who has been identified with the excesses of Communism, and Communist overtures to the world socialist movement may help to increase the influence of the local Communist parties. In Indonesia, Syria, and other countries of the Middle East and Africa, Uie nationalists too frequently feel that they can cooperate with the Communists as long as it suits theirand then drop them. The danger lies in thc progress which lhe Communists may make in infiltration of the ranks of the armies, the bureaucracy, and intellectual circles during the period of cooperation.

However, there will still be important limitations on the Bloc's ability to influence or manipulate thc policies of thenations. With thc possible exception of Afghanistan, trade with the Bloc will probably remain considerably smaller than trade with non-Communist states. Moreover, theof the US in the postwar period has demonstrated that close economic relations with the underdeveloped areas can be a

source of friction as well as political gain.Uie people and leaders of somestates may distrust the US more than the USSR, the leaders of even thestates have had to contend withchallenges to power and they will be watchful according to their own lights of the consequences of dealing with the Bloc. If Uie Bloc should make early attempts tothe growing economic dependence of Burma, Egypt, or Afghanistan to obtainactions contrary to the desires orof local leaders, these governments would probably react by attempting to reduce or break off their arrangements with the Bloc, particularly if Western nations made known their willingness to assist the nation involved through the readjustment period. These considerations will probably cause the Bloc to proceed with caution and to emphasize efforts to gain Uie good will and confidence of key indigenous groups and leaders.

t the same time, important factors will work against an increase in the strength of domestic Communist movements. Offers of cooperation by local Communists have been rejected by the nationalist movements in North Africa and in Asia and Latin America. The local Communists probably will not be able to escape completely from the distrust surrounding their motives which derives from many instances of open conflict with local nationalists, it is possible that the transition to peaceful, united front tactics in some cases will reduce the vitality of the indigenousparties and subject them tointernal disputes.ajor pari of any credit for economic progress derived from Bloc assistance is likely to be taken by thc nationalist, non-Communist governments of the underdeveloped naUons. To the extent lhal there is economic progress. It will tend to alleviate certain chronic grievancesexploited by the domestic Communists, and to provide construcUve employment for the young intellectuals who In allcountries are the most dissatisfied with existing conditions and form lhe primaryof Communist propaganda.

WW-

th? extent that it takes sides In the quarrels of other nations, the Bloc will tend to alienate one side or the other and reduce Its influence abroad. The Soviet Union has already found it awkward toosition in the conflicts between the French and thc North Africans. While seeming to favor the Arabs against the Israelis. It has so farfrom going anything like all the way in doing so. It may find It expedient In the future not to repeat the firm stand it took on Kashmir and Push tunis tan in December. Almost inevitably, as it is drawn deeper Into the affairs ol other peoples, thc Soviet Union will find lhal it is disappointing at least as many hopes as it is fulfilling.

Weighing general Bloc assets andand apart from the major variablesbelow, it seems that the Bloc's ability to Influence developments in the Arab-Asian area is likely lo increase significantly over the next few years By associating itself with these nations on colonial issues, by expanding economic relations, and by exploiting other psychological and political conditions, the Bloc may be able to weaken significantly the role of thc West in the area. Although there Is no substantial immediate danger lhat the underdeveloped countries will be drawn Into thc Bloc through these tactics, over the longer term an Increasing number of Arab-Asian countries may reach thc point, already reachedew. where their foreign policies parallel or actually support the Bloc on most key issuesew cases the way maybe piepared for actual Communist take-overs through coercion or internal

Effectommunist Take-over. If the Communists were to take-over anycountry, the effect on over-allInfluence would vary according to the particular circumstances involved. If agovernment were overthrown by violence or subversion, the image of respectability which the Bloc is striving so assiduously to build up would be seriously Impaired. This effect would be much less markedase where the regime unseated by thcwasestern puppet or otherwise unrepresentative of nationalist groups, or if Communists came to power by apparently legitimate electoral processes. In lime, thc reaction of other governments would probably be determined largely by thc manner in which the new Coinmunist-domlnaledconducted itself with respect to affairs of interest to thc various non-Communist states.

Effects of US and Western Policies. If present Bloc policies arc continued, many of thc underdeveloped countries will probably come increasingly to regard the USSR and Communist China as acceptable members of the international community. Thecountries will probably enter into such economic or political relations with tbe Bloc as appear, on balance, to further their own national interests Nonetheless, they wilt continue In varying degrees to be responsive to the West because of long establishedcultural, military, economic, andtics. The lasting political effects of the new Bloc policies on underdeveloped countries will depend heavily upon the degree to which thc Weal Is genuinely Interested in theirunderstands their motives, and responds to their needs.

Appendix A

Sine-Soviet Bloc Credits to Non-Bloc6

Recipient Country

Middle East

Known Possible Known Possible Credits Credits Credits Credits

Arms

Ceramics factory

hird class RR cars

Steel bridge for the Is-

maklla' long

ide

Footgear factory

GDR Power Installations

Construction of shipyard at Alexandria, plans, equipment andbeing provided

Hungary Bridge at Helwan on theeters long andeters wide,construction, and installation

Seven swing bridges over the Nile; design,and installationiesel RRhird class coachesirst class coachesnits each Thermoelectric0 KW

USSK

Aswan Dam; designs, equipment, and

Equipmentuclearlab

Poland

Enamel-wareR box cars

est)

3.2

U

est)

est)

est)

minimum totajjor Egypt1

Confd)

Contracts1

D TJ

Known Possible Known Possible Credits Credits Credits Credits

Czech.

Refrigeration plant; dally

capacity olons Plywood factory including

power station Sugar refinery

0 0

oo

GDR Equipment for anjr Ir:ir.

Preparation of plans for

0.2

est)

u

reconstruction of the He-Jaz RR rumiing through Syria. Jordan, and Saudi Arabia Reconstruction of the He-jaz RR

0.0

Czech. Textile factory

0.0

u

Estimated minimum total for Jordan *

Stadium

V

1.0

U

TJ

1 0

Czech. Several installationsplants forpaper, sugarshoes, and electric power

for cement plant

USSR pinning machines

U

0.0

General economic assistance

Estimated minimum tolal for Lebanon *

0.0

plant

Survey and reconstruction of Hejaz RR

Estimated minimum total for Saudi Arabia

Syria

Czech. Arms (principally tanks)

Sugar refinery Including distillery, power plant, and other auxiliary unit

Two cement plants

China factory

Construction of Damascus International Airport

plant; tons

daily capacity

o.o

6 0

1.7

1.3

'

1

Cont'd)

Country

Offers -

Contracts

Known Possible Known Possible Credits Credits Credits Credits

East

Syria (Cont'd)

GDR (Cont'd)

Cotton spinningpindles; Including dye works

Dry-cell battery plant equipment

Munitions plant to makem shells andcasings

Three flour mills

Poland Preparation of plans for reconstruction of the He-jaz RR running irom(Syria) to(Saudi Arabia) via Ma'an (Jordan) Reconstruction of Hejaz RR

USSR Cement plant;ons

Czech., Oil refinery; annual capac-

of one million Ions.

Rumania Equipment and tcch-oans to be provided. Each haseparate bid.

est)

minimum total for Syria "

Yemen

USSR

Industrial plants andassistance

Estimated minimum total for Middle East0

and Southeast Asia Afghanistan USSR

POL storage Unks Sllos, flour mill, bakery Road paving In0 million creditInallocated by Afghan Gov't as follows: Road and bridgeEducation Health Police

Industrial equipment and technical services Arms

Miscellaneous

0

15

Cont'd)

Bloc Country

South and Southeast Asia

Known Possible Known Possible Credits Credits Credits Credits

(Cont'd)

USSH (Cont'd)

Underpartial utilization of0 million loan will include:

Construction of 2stations

Three motor repair shops

Motor road across the Hindu Kush

Irrigation works

Physical and chemical laboratory

Construction of airfield at Bagram]

Reconstruction ofat Kabul

Preparation of afactory

Poland Materials and technicians for improvement ofsupply in Kabul and Qandahar

Hungary Miscellaneous factories,brick and glass plants

Cement plant; capacity00 tons per year

M Iscellancous Industrial projects. Including: Slaughter house Dried fruit packing plant Anns

minimum total

Steel mill at Bhitai;of one million ingot tons per year; USSR made designs and isequipment and

Steel nle plant in Calcutta Equipment for theindustryhree-year period Expansion of diamond ore processing facilities, ca-

U

u

Cont'd)

Recipient Country

Contracts

Known Possible Known Possible Credits Credits Credits Credits

and Southeast Asia

USSR (Cont'd)

India

(Cont'd)

pacity to0 tons ot ore per day Expansion of Hindustan

OUR

aircraft plant Atomic reactor for research

Raw film manufacturing

plant Power plant Sugar refineries Textile plant Cement plants Plywood plant Sheetmetal plant

Czech.

ForgeR cars Camera factory; Czech, providing equipment and technicians Cement plant at Cherra-punjl, capacityons per day Hosiery mill; Czech, equipment and techniciansocomotives Suspension bridge andropeway Thermal electric powerat Cherrapunji Road construction Motor repair shop Sugar factory

Czech., Lignite processing plant CDR

Hungary ocomotives

Wire and cable plant

Czech., Punjab hydroelectric proj-Hungary W turbine generators

Poland Equipment and technical assistance in thcof bridges and ships

Estimated minimum total for India "

(est)

5.0

U

est)

4.2

est)

'."

U

U

U U

est)

u

U

U

est)

U

Cont'd)

Bloc

Recipient

Known Possible Known Possible Credits Credits Credits Credits

South and Southeast Asia

Indonesia ODR Sugar factory; capacity of

ons of sugartons of spirits

Copra processing plant

Rumania Cement plant;0

(est)

Rumania, Each offered assistance In

oil fields in

No. Sumatra. Rumanian technicians madeinnd have offered both equipment

and technical

Czech. Canvas

Hungary Hydroelectric power

Poland, Each have offered capital

Estimated minimum total for

Estimated minimum total far

South and Southeast Asia0 0

Europe

Gold loan (accepted In

Feb.

Gold loan (accepted

Estimated minimum total for

Three small hydroelectric

units; Czech, loand

ement plant; each provide equipment.

USSR ons per(est)

Estimated minimum total for

Cement(est)

Porcelain

Hungary Flour mill; pneumatic;

daily capacity, 50

e it I'i'f

Bloc Country

Offers

Cont'd) Projects

Contracts

Known Possible Known Possible Credits Credits Credits Credits

Turkey (Cont'd)

USSR Textile plant

Czech. R passenger cars Estimated .rnjnjmumtotaj jpr Turkey"

credit in gold or convertible cur-

Yugoslavia USSR no of

freely rency

Line of credit for Soviet raw materials

Line of credit for capital goods

Development of copper mines at MAJDANPfeK The following projects have been specified asplanned or in progress.

Soviet equipment and technical aid: Nuclear reactor Nitric mineral fertilizer

S

lant (annual capac-tyons) Superphosphate plant (annual capacityulphuric acid) Thermoelectric power

0 KW) Three lead and zinc mines reconstruction and expansion Jet aircraft factory

Hungary Train manufacturing plant Grain elevator technicians and equipmenttotal0 tons

Czech. Line of credit for capital goods

Grain elevatorequipment;ons

Poland Line of credit lor capital equipment Railway rolling stock

Cont'd)

Bloc

Known Possible Known Possible Credits Credits Credits Credits

Europe

Yugoslavia Poland Machines for industry

Mining equipment

Intimated minimum total for

Estimated minimum total for Europe

Latin America

Argentina USSR Line of

Complete railroadsystem and

plant; prepa-

ration of plants andprovision of Line of credit projectscontractedauto and

DlsUllcry: capacitygallons per day (planes, tanks,minimum total for Argentinafc 0 _U_ V

Shoe manufacturing

Estimated minjmiim total for

Shoe manufacturing

Poland Food products mfg. plant (such as macaroni and

Sugar

Complete installations of

textile

Machine tools, petroleum

exploration equipment.

mining equipment, and

plants and

trained

rn.it'-ii ii-.iiMfJiiiJii rn'aii0

Cont'd)

. Bloc

Recipient

Known Possible Known Possible Credits Credits Credits Credits

Latin America

Plastics plant

USSR Tractor factory equipment

and tractor

Estimated minimum total for

Uruguay USSR Electrification systems for

railroads and electric(supervised by

Soviet

Estimated minimum total for U

Estimated minimum total for Latin

Africa

Sugar

USSR Hospital; equipped and

staffed by

Estimated mhuffum total for U

Estimated minimum total for

Footnotes logross)

have been rounded to the nearest tenthillion. Where estimates of value were made thc abbreviation (csU appears. Where values arc unknown and there was insufficient data on which to base an estimate theppears.

"Docs not Include those projects the values of which arr unknown.

Total costillion to be shared Dy Syria, Jordan, and Saudi Arabia.

Includesf RR cost.

' No amount ts Included for the RR because of current Saudi Arabian opposition to Soviet Blocand eiiglncvrS. Items, therefore, do not add lo total.

21

Original document.

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