Created: 11/30/1955

OCR scan of the original document, errors are possible






CENTRAL INTELLIGENCE AGENCY Office of Research and Reports'



theurmr economic campaign

he near east and south asia

Summary and Conclusions

Recent events suggeGt that, earlier this year, Moscowrogram of economic penetration of the Near East and South Asian countries. In recent months the Soviet Bloc has novederies of modest and vague offers of technical aid and economic credits to the threshold of more substantial economic ventures. Whileapparently has been chosen to spearhead the arms program in the Arab world,"the economic penetration of southern and southeastern Asia appears toino-Soyiet Bloc-wide effort.

Although"high-level coordination of the over-all program isa degree of competition among the Satellites has developed at lower levels. .The range of Communist activity was indicated by Soviet Ambassador. Solod in Cairo, who stated: "We will send economic missions, scientific missions, agriculturalnd any other kind of mission you can imagine that will help those countries."

In comparison with US aid to underdeveloped countries, theprogram of the Sino-Soviet Bloc will, on the whole, be quite modest. -However, tho manner in which it is being offered, the terms of repayment,and the skill in selecting the countries and projects involved clearly indicate that the Bloc is seeking to gain tbepolitical advantage. Some of the deals and offers have the effect of fostering increased dependence on the Bloc'and ofthese countries through the long-term presence of Bloc personnel.

I. Nature of the CcmtnuniBt. Program.

Receptivity to Sino-Sovlet Bloc economic overtures tocountries has increasedesult of the recent scries

of trips throughout tho Bloc by high-level government officials from these countries. Technical experts as veil ae diplomats have generally been impressed vith Soviet technology and the "sincere" vlllingness of Communist technicians to participate in local development schemes.caevhat typical comment. Major General Sokehy, prominent Indian scientist who recently returnedonth tour of Czechoslovakia and the USSRlan to make India self-sufficient in essential drugs vith Soviet aid, noted: "It has taken the developed and advancedears to reach their present state under the capitalist system. Russia,ifferent pattern of society, has come up to their level within the short span ofears. imilar pattern, China is making very rapid progress."

These underdeveloped countries, involved ln ambitious development projects and often burdened vith unsalable agricultural surpluses,eady market for these surpluses In the Sino-Sovlet Bloc in exchange for capital equipment and, more recently, arms. Easy credit terms offered by the Communists are an additional important factor in making it difficult for such countries to refuse Bloc credits. Most Communist offers Involve low interest ratesercent) andovor extended periods of time in local currencies and local products. Tho Communist program, attractive as It is to underdeveloped countries, seems assured of continued and growing reception. Theie an account of the more Important Bloc contracts, offors,ctivities ln specific underdeveloped countries.

A- India.

The Soviet bid to buildillion-ton capacity steel mill in Bhilai is the most ambitious Casnunist project undertaken ln the Free World to date. Under the terms of the contract algnedoscow will submit detailed plans this December, at which time Hew Delhi can accept or reject the offer. From the Soviet side there is every evidence that Moscow Intends toodern plant, newly designed from the ground up. Reports that the USSR is attempting to pass off used equipment are belied by reports that'Moscow has ordered Soviet machine building plants to druw up new plane. India's new Iron and Steel Ministry has reportedly sent its top project officers to Bhilai, and construction of living quarters at the site la apparently nearing completion. Barring some defect in the Soviet plans and this seems unlikelyt will be difficult for Hew Delhi to reject the offer. Theillion credit on easy payment tcrmu of

nothing down andqual payments In local currency ater-cent interest are not likely to be duplicated ln Western money. Krishnamaehari, Indian Union Minister of Commerce and Industry has stated that the Soviet steel mill would bo built and that hewan Impressed with Soviet technology and technique.

While the steel mill is still subject to final Indian approval, the Soviet Bloc is actively engaged in several construction projects n India. On5 the Indian government announced that Moscow isiamond mining plant for the Panna Diamondrivate Indian company. The fact that the government made thesuggests that there is governmental Involvement in the deal. Since the Bloc has no Indigenous source of industrial diamonds, it ishat Moscow would accept payment for the project in diamonds. It is estimated that the cost.of-the project will exceedillion.

Since early spring* the USSR has also offered to supply Indiaement plant and with aid in the constructionoda ash plantoal washing plant.

Seven Soviet experts arrived with Premier Bulganin and Party Secretary Khrushchev in mid-November to advise New Delhi onand development of the oil industry. The USSR has offered to supply equipment as well as technical assistance in India's vast mineral development program. The offer includes settinglant toBftnufacture oil prospecting equipaent.

Edition, India hasoviet offer, made through

UKESCO, to aid inechnological Institute lnassistance wiU involve sendingoviet exports to instructinstitute and provides forndians to receive advancedSoviet

Following Nehru's visit to Czechoslovakia ints efforts to gain an economic foothold in India. an Czechoslovak trade delegation led by ForeignDvorak arrived in India with proposals to participates second Five Year Plan, which begins pointed out that Czechoslovak capital investment Inwas unlikely since Prague considered this tantamountinterference, be stated that technical assistance andwould be

The Indian press reported onovember that Czechoslovakia offered todllion-ton steel plant costingto be paidycar periodov interest rato. onovember, Czechoslovak Foreign Trade Minister Dvorak denied these reports and noted thntfitovember meeting'with Indian Indus, try and Commerce. arlshnamacharl, Czechoslovakia offered to supply only equipment for Indian steel plants.

ctober, Prime Minister Nehruzechoslovak giftfcln-engihc sports plane.

Hungary Isopper wire plant at Patlala in The plant willapacityounds of wirebe operated, at least initially, by Hungarians. Budapest isoffers toementaustic sodaa soda ash plant. According to onctober report, tbehave offered to build on arms factory In India in exchangegoods including red mudtitanium. All

of these activities are in the nature of longer term capital credits' and are in addition to the regular trade agreement signedarch.

To date, India has contracted for6 million ofconstruction projects. The contracts Cor the Panna diamond

cine and tho steel mill, vhlch seem certain to be signed in the very near future, would bring the total Coamunist credits In India to over


The Soviet Bloc penetrated Indian planning circlesn reaction to en Indian request for experts, the USSReam of high-level economists and mathematicians,ormer COSPIAN member, to the Indian Statistical Institute inoland sent one of its top economic planners, Oscar Lunge.


The Communist advisors have left, but Poland's Oscar Langi* reportedly will return In addition to Soviet, Czechoslovak, and Polish' offers to assist' in Indian economic planning, the East Germans have recently stated that they were interested in participating in theond Five Plan.

- It .

India's second Five Year Plan places heavy emphasis on the rapid development of Industry. In terms of Indian resources, however, tho plan is overly ambitious, and there have been hints that New Delhi will5 billion in US aid.

In his speech ofovember welcoming Soviet Premier Bulganln and Communist Party Chief Khrushchev to New Delhi, Indian Prime Minister Nehru said: "We Intend to reconstruct our country on the basis of the socialist path selected by In this respect, we consider that we canreat deal on tho basis of the great achievements of the Soviet" Moscow's plans for India were suggested by Bulganln, who said: 'Ve are prepared to share with you our experience Inng Industrial enterprises, power stations, and hydrblnstallatlons, ln tho use of atomic energy for peaceful purposes, and other achievements. At present, all the requisite conditions have been created for theof trade and economic cooperation between the Soviet Union and India on the basis of real equality of rights and mutual profit."

B. Afghanistan.

Growing economic links with the Slno-Soviet Bloc andDaud'a anti-Pakistan policy make Afghanistan mostto Soviet blandishments. DuringPragueredit and the ussron credit to Under Czechoslovak credit, one cement plant is under construe-

tion, while negotiations are being carried onlaBo 'factory,riquette plant. Czechoslovakia reportedly has given another creditillion and mayurtherillion. Under Soviet credit, gasoline and grain storagelour mill and bakery, and roadbullding projects are completed or are in the final stages of construction. asoline pipeline Into Afghanistan from the Soviet border still Is under discussion.

Although the Soviet interest rate is unknown, the Czechoslovaks have extended credit et an interest rateercent, repayable ln Afghan exports. (The US Export-Import Bank loans for the large Helmand Valley Irrigation and power project havo been2 percent.)

In5 thereoviet technicians reported In Afghanistan. Reports persist of more Soviet offers,ospital, university teachers and equipment, and water systems. The USSRhas offered to take over the Uelaand Valley project, finish construction, and pay off the US loan.

irect result of Afghanistan's quarrel with Pakistan, improvement of roads leading to the USSR is being rushed,ew Oxub River port is being developed. Increasing amounts of Freefghan trade reportedly are now being shipped through theore quickly and at the same cost or less than by the old route through Pakistan. Afghanistan has asked the US firm of International Harvester to ship trucks through the USSR. In addition. Bloc arms probably under theillion cash deal with Czechoslovakiaare being delivered.

acceleration of Slno-Soviet Bloc activities In the Near East, and particularly Egypt, leaves no doubt that this area isrime target for Soviet penetration and neutralization. Although there have been offers of credits ond technical assistance to several Arab countries, apparently Egypt has been given first priority.

Soviet Ambassador Solad lo Caino first indicated In Late Hoy that Moscow vould supply Egypt with arms ln exchange for cotton. Reports received in October and November suggest that the total Egyptian arms purchases from the USSR, Czechoslovakia, and Poland may0 million. Repayment is to be in Egyptian goods spreaderiod of Beveral years.

the purchase of Soviet Bloc arms and the use of Bloc

technicians will obviously provide opportunities for short-termEgypt's driving ambition to construct'the3 billion Sadd-el-Aali project (the Aswan High Dam complex) and the frustration which Egypt feels that she has experienced ln trying to obtain Western finance provide'the USSR an opportunity for even longer range

Following the public announcement ln October of the Soviet offer to build the Aswan High Das, the Egyptian ambassador ln Washington said that the USSR hadyear loan for an unspecified amountercent Interest payable ln Egyptian cotton and rice. The estimated cost of the dam is approximately tkQO million. 5 million would have to be imported. By providingand technical assistance, the USSR could create at Aswan anmonument to Soviet industry in the Middle East.

In addition to the arms deal and the offer to supply the equip-nent for the Aswan High Dam, countries of the Soviet Bloc are known to have signed contracts for capital construction projects worthillion. If Egypt accepts the Soviet offer for the Aswan High Dam, total Bloc credits to Egypt wouldillion.

Additional Bloc Activity.

The Communists are making new offers for arms and capitalalmost daily in other Free World countries. Syria is on the verge ofontract for Soviet Bloc arms which mayillion. Jordan, Yemen, and Saudi Arabia reportedly have sought or have been offered Bloc arms.

The Sino-Sovlet Bloc has used trade to encourage neutralist sentiment in Egypt and Burma during tbe past year by contracting toarge part of their cotton and rice surpluses. These mounting surpluses hadajor economic problem in both countries.

Sino-Soviet Bloc trade vith the Near and Middle Bast hassubstantially this yearfor example, Soviet trade alone grewercent for theonths of this year comparedike period last year. This growth occurred despite the continuing contraction of Soviet trade with the Free World generally.

II. Size of Effort.

The estimated value of Communist credits;to Free World countries may well reach $UO0 million vithin theThis figurein-cludes known contracts for arms, firm deals for notnilitary credits and projects, and only firm Ccoraunlst offers which seem most likely to be accepted. It does not include additional reported credits about which the outcome is in same doubt. Should Egypt accept the Soviet offer of5 million worth of goods and services to help with tbe Aswan High Dam project, the total of Ccemunist credits granted for arms and construction projects would then be0 million.

Besides arms deals, contracts have been signed and work is actually under way on projects using Bloc credits, personnel, and equipment to the amount3 million.

* See the Appendix, p.elow.




Signed Contracts Including Projects Under Construction

Known Offers Which SeemBe Accepted

Czechoslovakia Czechoslovakia Hungary

Suspension bridge Thermal plant Cement plant Wire plant

0.6 a/



mining equipment Coal washing plant. Steel mill


a y


total India


storage tank


flour mill.


of credit




deal Estimated total Afghanistan

Known Signed Contracts Including Projects Under Construction

Known Offers Which SeemBe Accepted


Hungary East Germany


/ 3 a/

Shoe factory Bridge

Transformer dis-trihution station


Arms dealigh Damtotal

Sugar ft/

Estimated total

Sugar refining plant

East Gercany Cement plant

3 Bui gar 11



Hydroelectric turbines and generators Power plant

5 */

offer fromotal

may be accepted only if Western financing falls to materialize.

Known Signed Contracta IncludingConstruction

Known Offers Which SeemBe Accepted


Ciechoslovakla Ciechoslovakla

Sugar refining

plant Radio factory Pharmaceutical


3 6

Estimated total Indonesia 6

plant Electric power plants

Czechoslovakia East Germany

East Qermany Hungary

mill. Macaroni factory Brick factory Thread factory Electrical materials plant

Spinning mill equipment Power plant

2 a/

1.2 %









Original document.

Comment about this article, ask questions, or add new information about this topic: