SURVEY OF SOVIET FOREIGN TRADE ACTIVITIES SINCE 1952 (RR IM-398)

Created: 9/29/1954

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INTELLIGENCE MEMORANDUM

SURVEY OF SOVIET FOREIGN TRADE ACTIVITIES2

CIA HISTORICAL REVIEW

RELEASE AS SANITIZED 4

AFFECTING _TUE

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this material cohta national defense of the unit meaning of the espion

IITED BY LAW.

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CENTRAL INTELLIGENCE AGENCY Office of Research and Reports

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I.

II. International Meetings.

III. Bilateral

eptember

IV. Radio

V. Trade

VI. Level of Soviet-Free World

A.

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Page

K. Trade.

Appendixes

Appendix A. Gaps in

Appendix B. Sources and Evaluation or

Tables

Trade Pacts with Free World Countries, January-

3

Trade Pacts with Free World Countries, April-

3 18

Trade Pacts with Free World Countries, October-

December

Soviet Trade Pacts with Free World COuutries,

5- Free World Exports to

6. Free World Imports Trom

7- Possible Soviet Exports and Actual Blcc Exports

oi" Petroleum and Petroleum Products to Selected Free

World Countries,

Following Page

Frequency of Soviei radio Propaganda uu Threeinternational Economict ions, 12

CIA/RR

SURVEY. Oy SOVIET FOREIGN TRADE ACTIVITIES

Summary

Stalin's deathefinite ehift Id Soviet foreign trade tactics. Tne Soviet trade tactics vere relatively unspectacular ln the first quarter 'Although some minor tactical shifts were noted before the nev regime took pover, over-all Soviet trade tacticsassive approach. Trade turnover between the USSR and the Free World in this period decreased to aboutercent of that of the2 period.

In the period immediately following Stalin's death,he USSRev approach to the Free World, and trade tactics received considerably more emphasis. Soviet cordiality vas noted at international meetings, and conciliatory gestures vere made by the Russians in spheres vhich they had previously approached vith Intransigence. Thc frequency Of Soviet radio propaganda advocating East-West trade increased sharply, as did Soviet negotiation vith Free World countries in thc trade pacthese tactics vere consistent vith the international aspects Of Malenkov'e speech to the Supreme Soviet Innd vtth Indications that the USSR vas vllling to import Free World consumer goods. The apparent interest of the USSR in increasing petroleum exports to the Free World also first became evident in this period.

Although the nev regime vas apparently interested In convincing the Free World that Its trade tactics were intended to promote mutual understanding, international cooperation, and vorld economicloser examination of specific activities reveals less altruistic motives. It appears that the motives actuating Soviet trade tactics since Stalin's deathhe actual procurement of materials and equipment, and to some extent consumerhe undermining of cooperation. Including trade and controls, among Free-World nations by promoting interest in the possibility of increased

" The estimates and conclusions contained in this report represent th' best judgmml of thc responsible analyst as of.

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East-Went trade,he achievement of greater economic political penetration in vulnerable and underdeveloped regions.

Soviet trade tactics continued to be cousLsteot vitb these purposes during tbc last quarter The sharp rise io Soviet-Free World trade during thi* period vas undoubtedly ao attenpt by the USSR to implement its previously expressed desire to increase trade with tbe Free World. From the Soviet point of view, partial Implementation would serve Uie immediate economic interests of the DSSR, and of course vould have definite propaganda advantages both at borne and abroad. Apparently in anticipationalance -of-trade problem la connection with its Increased trade, the USSR exported comparatively large quantities of petroleum, gold, and platinum in the last quarter The appearance of these commodities in Western markets aroused considerable interest. The USSR thus was afforded an opportunity not only to minimize its trade deficit with the Free World but also to encourage interested Western businessmen to consider the USSR's indicated desire to stimulate East-West trade to be Legitimate and to their advantage.

Bilateral approaches to key Western European nations were significant features of Soviet trade tactics during the first four months- The UKrime target of Soviet trade overtures. Increased trade activity was also witnessed between tbe USSR and West Germany. Io January, exceptionally large Soviet offers of trade were made to British businessmen. The trade enthusiasm which thc offer aroused in British and other Western businessmen declined somewhat when Soviet and other Bloc delegates to thc East-West trade consultations in April seemed unprepared to discuss specific ways of actually increasing trade. Nevertheless, the sharp rise in trace between the USSR and Free-World countries during the lost quarter3 continued io the first quarterI*. Other developments noted ioave been Uit contloued export of Soviet gold aod platinum, and an effort by the USSR to procure an increased number of ships from Western nations. oviet program of technical assistance and "loons" to non-Communist countries apparently has also emerged.

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1- Introduction.

In this memorandum Soviet foreign trade tactics arc considered to be those activities engaged lo by the USSR in order tD accomplish its immediate international trade objectives. Although related to the long-range objectives of economic self-sufficiency and political advantage, these immediate objectives sometimes shift quickly In response to current considerations of economic, political, and military expediency. Because the USSR approaches its international objectivesariety of means, trade tactics may be evidenced in anyultitude of Soviet activities.

This memorandum brings together ia one document informationthe major aspects of Soviet trade tactics Soviet activities which would be most significant in assessing the Soviet trade tactics with the Free World2 were selected. Each activity is treated chronologically,eriods roughlyto the annual quarters are distinguished. ivision also conveniently distinguishesenerally discernible eras of Soviet trade tactics: (l) the pre-Maleokovhe period during vhich the new approach washe period of early Implementation,he current developments.

II. International Mcotings.

International economic conferences have provided ooe of the indications of shifts in Soviet trade tactics in the periodyore conciliatory tone andreater willingness to participate in such discussions, the USSR has attempted to achieve greater flexibility in promoting its economic and political interests.

pattern of Soviet participation io international meetings during the first quarter3 did not reflect any definite trend in Soviet trade tactics. At meetings in the latter part of the period, Soviet delegates evidenced greater cordiality, but their specific proposals made no sharp break with the past. Consequently tbe change in attitude may be viewed either as an attempt to maintain the status quo in the uncertain period following Stalin's death or, with present hindsight, as an indication of the tactical changes to come. Available information does not conclusively establish the correctness of either inrnrolnr%n

After ignoring an invitation to participateeneral East-West trade conference under tlie auspices of the United Nations Economic Commission for Europe (ECE) the preceding fall, the USSR unexpectedly announced coanuary that it was willing to take part. The meeting was finally set forpril. At the ninth session of the United Nations Economic Commission for Asia and the far East (ECAFE) which met in4 February, thc USSR encountered sharp opposition. oviet resolution attributing Aaia's low economic level to "theof foreign monopolies and colonial powers" was voted downond brought rebuffs from Asian representatives, who charged that the USSR had done nothing to help the

During thc second regional trade conference sponsored by the ECAFE in Manila,arch, the USSR again suggested in general terms, as at the Moscow Economic Conference inne exchange of Soviet manufactured goods for Asian raw materials and foodstuffs. The USSR also offered to conclude deals in local currencies. At the eighth session of the UNECE which opened at Genevaarch the USSR simply repeated earlier assurances of its support of East-West trade. 2J

B.

At the ECE East-West trade meeting, which was inhe moderation of Soviet representatives became more clearly discernible. Soviet Dice delegationsusinesslike attitude, and held attacks on the USinimum. echnical conference on minerals held bypril, Soviet delegates displayed objectivity and cordiality. 3/

Moscow broke precedent byelegate to the ECE meeting of timber specialists in Geneva,uly. The Soviet representative was friendly, sociable, and maintained an objective attitude'during the deliberations. Onuly for the first time since the inauguration of the UN Technical Assistance Programhe USSR announced that it was ready toillion rubles and thc services of Soviet technicians to the program. At the Economic and Social Council (ECOSOC) and Trusteeship Council meetings in July, Soviet Bloc delegates adhered to the traditional Soviet position. They were strongly critical of the administration of trust territories and blamed the lack of East-West trade on the

* Footnote references In arable numerals are to sources listed In Appendix B.

US. Their tone, however, wan relatively moderate and they did not engage in invective against thc US. */

C.

During the third quarteroscow continued to ohow ostensible interest in cooperation with noo-Connnuoist countriesumber of fields, including possible membership in certain specialized UN agencies. In the latter instances, however, Soviet overtures wcro accompanied by conditions and reservations which indicated that the Kremlin sought to use these agencies to further its longstanding objectives.

By November,n-ruble contribution which the USSR had offered to the UN Technical Assistance Program in July had been subjected to so many restrictions that Its form was unacceptable to the receiving agency. ovember tbe Soviet UN delegates in'New York informed thc UN, aside from other previous technical limitations, thatillion rubles were not convertible and had to be utilized within the USSR for facilities, training programs, or purchase of equipment. 5/

At the conference for the pledging of technical assistance onndovember, representatives of the entire Soviet Bloc appeared for the first time slnco the inauguration of the program.The USSR persisted lo its conditional pledge andontribution dependent on the handling of the li million rubles pledged ovember respectively the USSR expressed Interest In Joining the International Labornd the UN Educational, Social,and Cultural Organizationut Its overtures were hedged. 6/

D.

At the ECAFE meeting held in9nd at an earlier meeting of the EC APE Committee on Trade and Induatry, the USSR declared that it wao ready to consider requests from Asian countries for technical assistance. Soviet delegates also issued Invitations tooutheast Asian and Far Eastern countries to send representatives to the USSR to study Soviet industrial andmethods and to discuss expansion of trade. 7/

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At the* ninth session of thearch, Soviet delegates augmented their nov customary "businesslike and generally cooperative" attitude with indications that they would participate more fully in the commission's future activities. The USSR announced that it wouldermanent delegation to ECE in Geneva and sendto the meetings of all specialized ECE committees. At theoint Soviet-British resolution calling for the revival of the ECE's Committee on Trade Development and looking for the removal of "obstacles" to East-West trade was adopted unanimously. At the ECCSOG meetings which opened onoviet attempt to move debate on "removal of obstacles" to East-West trade to the top of the agenda was rejected. 8/

The Soviet press announced that onndarch the Council of Mutual Economic Assistance (CEMA) met in Moscow, with theof all European Satellites attending. This session was the firet official Soviet reportEMA meeting since thc organization was set up in- 9/

By its increased participation in international meetings, thc USSR achieved somewhat greuter tactical flexibility in its economic relations with other nations without making major concessions.

III. Bilateral Tactics.

Even before the death of Stalin, the USSRore conciliatory line in some of its direct contacts with Free World nations. Thc number of Soviet overtures increased after the Malenkov regime came to power.

A.

During the first quarteroscow made overtures to pave the way for future economic and political relations with Japan, Argentina, and Iran. In addition the Kremlin attempted to enhance Soviet prestige abroad by making several monetary donations.

A Japanese news agencyanuaryoviet official ln Tokyo who had implied that thc USSR might be willing to open formal negotiations with the Japanese government for the resumption of prewar Japanese fishing rights iu the waters off the Soviet Kamchatkaonth later, Stalin decided to grant an interviewebruary to the new Argentine Ambassador Bravo, shortly after the latter's arrival in Moscow. Soviet propaganda media gave wide

publicity lo the meeting,which marked an uc-sual Soviet gesture toward tbe Peron government. U/ Meanwhile, Moscow accepted Iran's decision to terminate the Joint Soviet-Iranian Caspian Sea Fishery whenyear concession expired onanuary,even though it had previously sought to obtain on Later, however, Soviet-Iranian negotiations for liquidation of the Joint Sea Fishery's installations were stalled after only one meetiag because of the obseoceoviet

Ooebruary tbe USSR0 gift to tbc Netherlands National Disaster Fund, and onebruary thc Soviet Ambassador in Teheran'at the disposal of the Iranian Ministry of Foreign Affairs for assistance to earth-

V USS",also- on0 to nritlsh flood relief, ikf

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Meshed with other tactics, Soviet bilateral tactics free, Aoril through3 also reflected the general conciliatory apnroach prevalent during that period. Moscow's attention was directed toward many areas including the Near East.

pril the Soviet Ambassador in Teheran informed Irao that the USSR was willing to proceed with negotiations for the liquidation ,of the former joint Caspian onths later, according to the Iranian press. Foreign Minister Molotov onuoe made an offer to tbe Iranian Ambassador to discuss the settlement of long-standing border questions. This offer followed reportsimilar approach to Premier Mossadcq by Ambassador Sadchikoy onune. Iran's purported reply in Julyequest formillion in gold and dollars which the USSR had owed to Iran since World War II. uly, Molotov reportedly told tbe Iranian Ambassador that Tor the time being tbe USSR was limiting its offer to theof the border disputes. Meanwhile, onuly, Ambassador SadclUkov was replaced by Anatoli Lavrenti, who in the postwar period hasey trouble-shooterbe

Onay the USSR officially informed Turkey that the Soviet government had renounced its territorial claims against Eastern Turkey and deemed it possible to settle thc question of Soviet security In the Straits area under conditions that would be equally acceptable IC both countries. The USSRune offered toongstanding

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conflict over use of the waters controlledovtet-built dam across the Aras Later,ugust the USSRixedwith Turkey to provide water from the Soviet-built dam despite Turkey's rejectionoviet note onuly protesting the coming visits of US and UK warships to the

Io June the Israeli. Foreign Minister extended feelers through the Satellites on the possibility of resuming diplomatic relations with the USSR. Accordingurkish source, Moscow made recognition contingent on two conditions: ledge by Israel not to Join any anti-Soviet alliance, and punishment of those responsible for bombing the Soviet Legation Onuly, Moscow resumed relations with Israelonth break. . Auramcv, former Soviet Ambassador to Sweden, vas appointedugust as Minister to

The USSR informed Yugoslaviaune that it wished to send an Ambassador to that country. peech on Ik June Tito announced that Yugoslavia would acceed to the Soviet Onuly the USSR sent on Ambassador to Yugoslavia as the first step lo normalizing relations with that country since the Cominform break. Thc new envoy is Vasilly

Molotov Informed the British Ambassador in Moscow onune thAt the USSR was prepared to extend the USSR-UK fishing agreement, which was to expireuly, for another year. Also onune the Soviet Ambassador to the UK, Malik> sought out the US Ambassador and questioned him about trade prospects between US and UK and expressed his own belief ln "thoroughly liberal trade

The Soviet Mission io Tokyo announced oniftor flood relief. Io an interview with Soviet Foreign Minister Molotov, four days later, Ikuo Oyama, foremost Japanese participant in the World Peace Movement and Stalin Peace Prize Winner, reportedly was told that concrete steps vould be taken by tbe USSR to reestablish normal diplomatic relations with Japan, that cultural and economic relations could be established without watting for formal diplomatic relations, and that the return of Japanese "war criminals" held by the USSR could be arranged. 2h/

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an agreement signed* the USSR grantedtand-by loanillion0 million). Finland may draw on the loan account at its discretion for the purpose of improving its exchange position. Withdrawals may take placeear period io any currency, including gold and US dollars. The amounts borrowed must be repaid in the same media withinears, with interest set

At Soviet request, the Egyptian Legation in Moscow and the Soviet Legation in Cairo were raised to embassy status onarch. Shortly afterwards, onarch, Egypt waspecific offer of Soviet technical assistance. There were also reportsimilar offer being made to

OnMarch the Soviet Ambassador to Afghanistan contributed*ot flood Another contribution0 was made by the USSRprilund for Iraq flood

The Soviet delegation which was in the process of negotiating frontier and financial problems with Iron switchedreasonable" attituderief trip to Moscow by Ambassador

The USSR announced io April that it would discontinue Australian wool purchases os of the end of the month in retaliation against the Petrov

Thus the USSR has attempted to ease its relations with surrounding Free World countries, especially in the period sinoe tbe death of Stalin. It has shown particular interest in improving Its

economic and political position in the near and middle EaBt and in

IV. Radio

Japan.

Propaganda.

Soviet radio propaganda2 has graphically illustrated the changing pattern of Soviet trade tactics ond has identified some of the principal political and economic targets.

A- 3

Until shortly after Stalin's death Soviet radio propaganda on trade relations between the Soviet Bloc aod the Free World, as shown in the accompanyingemainedow level. This neglectrend which extended back intond which might bc explained by the position which Stalin had taken in his Bolshevik article, "Economic Problems of Socialism in thet In this article Stalin had asserted that the West's economic blockade resulted only Io the strengthening of the Blccime when Western economies were beginning to disintegrate. He also warned of the danger inherent in economic relations with countries whose economies were unplanned and anarchistic.

During the period immediately following Stalin's death there was an increase in the frequency of radio commentaries on lntra-

r0dQ* By July' hcwver' Propaganda on lotra-Bloc trade had fallen off to an average of about oneeek.

B.

Ztt6QificaQt that ineeks after Stalin'sfrequency of radio commentary by Soviet propagandists onof East-West trade increased suddenly. Reaching an average ofer week in the. perioduly,to average more thaner week through September. average from January through April had been only 2 *

alk which was broadcast by the USSR, Near Eastern Service, onorisrominent Soviet economist whose viewsconomics and socialist theory are frequently beamed abroad, quoted Leninist theory as supporting economic relations between the socialist and capitalist states. Leontyev said:

Lenin stressed that the Soviet Socialist State was ready to trade with capitalist states, and that the capitalist states would benefit in the courseecades, sufficient experience has been collected for trade and mutually profitable relations between the Soviet Union and the capitalist states.

Following p. .

:

The timing of increased Bast-Hest trade propaganda and the fact that Leninist theory was brought in to support it suggest that Stalin's opposition was the prime factor in restricting suchduringonths preceding his death.

At the same time that the East-West trade theme was being given more frequent airing by the Soviet propagandists, commentaries on Western economic rivalry and intra-Soviet Bloc trade declined and leveled off ot the low average ofer week.

The trends which were noted during April-September generally persisted throughout October-December. The frequency of Soviet radio commentaries on the subject of East-West trade, although decreasing somewhat, remained at the rathor high level of abouter week from October through the end of the year. Commentaries on Western economic rivalry averageder week and those on intra-Sovlet Bloc trade onlyer week.

At the turn of the year an abrupt Increase io Soviet propa-"ganda on East-West trade was noted in radiobroadcasts, 'lhe average number of ccanentaries per week on this subject Jumped fromt the beginning ofU toy the end of the month, then reached and maintained on average ofhroughout February.

A large port of the increased volume during late January and early February was related to Molotov's statements at the Berlin Conference of Foreign Ministers and merely paraphrased his remarks. The central theme of these broadcasts was that ecoocaic realities were breaking down the artificial barriers constructed by the US against increased trade between the two camps. Several commentators stated that Western business circles had learned that rearmament and the arms race could not solve economic problems and that the only real solution lay in an extension of East-West

In earlyarge delegation of British businessmen visited Moscow. tatecent made to them by Minister of Foreign. Kabanov to the effect lhat "given appropriate conditions" the USSRtould import from the UK over thcears goods amountingotaL vaiucillion pounds

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given wide publicity Oa tbc Soviet airways. This attention was apparently an attempt to offer firm evidence of the USSR's sincere intention of implementing Increased East-West trade.

A primary target of Soviet radio propaganda during" appears to have been the Western export control program. Kabanov's offer to the British and contracts resulting therefrom (many of which cannot be implemented under present CCCOM restrictions) were used to focus the attention of Western businessmen on what East-West trade could amount to "under normal conditions." In its broadcasts to the West, the Soviet radio also blamed the US for restrictions that prevented an expansion of trade which it was claimed could boost the economic well-being of Western nations. peech beamed io English to the UK on'< for example, "Our Observer" said,

"There are still serious obstacles for trade between the West European countries on the one hand and the Soviet Union aod the People's Democracies on the other. The way is still blocked by US restrictions andi/

On l'ik, an interview with the Soviet econcoiist Vinogradov (probably tbe same Vinogradov who is on important official with the Administration for Trade with Western nations) vas beamed in English to the UK. Ia reply to the question "Would you say that this US policy is harmful to the Western countries?" Vinogradov replied,

ertainly would. hink the benefits to the Western countries of trade with the USSR, China and tbe People's Democracies couldrade with tbe USSR and Other Communist countriesommercial necessity for Britain, and more than that, trade cooperation can bring about political cooperation. Trade achievements can lead to friendlier relations."

Vinogradov then went on to point out that many difficulties experienced by British, French, Belgian, and other manufacturers would be much less if they were free to select their

Other major aims Of Soviet propagandists during the period January-Mayappeared to be the economic alienation of the Middle and Far Eastern countries from Western nations and the strengthening of their ecco^ciic ties with the USSR. ebruary meeting of tbe UN Economic Ccciimission for Asia and the Far East (ECAFK) was widely

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exploited from thlfi angle. Asian listeners, ln particular, were told that trade wLth thc USSR, CommuniGt China, and the European People's Democracies offered the one sure road to emancipation of the Asiun nations from the predatory trade policies of the Western powers, especially the In their bid to draw the Asian countries closer to the USSR, the Russians voiced their willingness to aid the economic development of these countries through technical assistance and by the development of tradeasis of equality and mutual benefit,asis of stable prices and of payments ln the currency of the country/

A loan and offer of technical assistance given to Afghanistan for the constructionakery and groin elevators, an invitation toozen Asian countries to send representatives to the USSR at Soviet expense to witness developments in Soviet Industry and agriculture, as well as thc trade agreements with India and Ceylon, were all utilized as radio broadcastpparently they were cited by the Russians to foster thc impression that thecountries "now have in the Soviet Union, the Chinese People's Republic, and the European People's Democracies,artners ready, not coly by word,but by deed to give sincere and effective assistance to the underdeveloped countries in the development of their industry and agriculture, and in raising the standard of living of the

These combined themes made up the bulk of Soviet broadcasts on East-West trade, which averaged more thaner week from the first of the year through the end of April. Although the overage frequency of these commentaries dropped to abouter week during* May, no change in content was noticed. Over the period January-May, tbe frequency of commentary upon Western economic rivalry and intra-Bloc trade remained low, the latter disappearing almost completely.

V. Trade Pacts.

Soviet attempts to negotiate trade pacts with Free World countries Increased sharply after the death of Stalin.

A.

Although the USSR concluded several trade pacts with Free World countries during the first quartera shown inost such trade negotiations were bogged down. Trade and barter agreements

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were signed with Finland and Egypt respectively, but Sovietwith Sweden, France, und Norway moved slowly. Sweden refused to accept Soviet wheat or mane and thc USSR was unwilling to liquidate sizable holdings, of Swedish currency. UQ/ France was waitingoviet response to Its January proposalimited barter/ Soviet talks with Norway bad encountered their annual difficulties over quotas of nonferrous metals. The USSR wanted more aluminum, and objected to thc volume of Norway's request for manganese -ore on the grounds that it exceeded Norway's domestic

Certain developments notwlthutandlng, tbe relative inactivity in Soviet-Free World trade pact relatione during this period stood in sharp contrast to thc Increased activity evidenced after Stalin's deatharch. Such inactivity tends to support the contention that the emergence of the new trade tactics toward the West which were adopted by the Halenkov regimeirect result of thc new regime and therefore divorced from and uneovtsiooed by Stalin.

B.

HlgbLtghted by the April ECE East-West trade consultations,onth period following Stalin's death witnessed the most outstanding developments in that phase of Soviet trade tactics which 1ms since become Known as Moscow's new approach to the West. It wasfield of trade pacts that the Kremlin decided to launch this new approach. Trade pacts completed between the USSR and non-Communist countries during the period were unprecedented both inand in type.

During the ECE trade consultations in Geneva, the Soviet representative pointed out that during the nextonths the USSR could Increase exports to the West by more thanercent. Imports sought by the Russians were Mentioned as ships, metals, and industrial equipaent, but the delegate also indicated that the USSR would be willing to import consumer goods, such as herring, fats, cork, textiles, and citrus

At subsequent trade negotiations with non-Communist countries I* uupects of Soviet trade tactics emerged, (l) The USSRillingness to expand trade by signing trade pacts with scene nations for thc first time, or for the first timeumber ofn many instances the planned vuluc of trade between the USSR and

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particular countries exceeded tlie planned or actual value of such trade hc USSR-negotiated for increased imports orgoods (especially food and textiles), ('i) The USSR appeared willing to export larger quantities of petroleum, coal, manganese, and

Trade pacts coocluded by the USSR either for the first time in the postwar period or for the first time in several years included, as shown ingreements with France, Greece, Iceland, and Argentina. The agreement with France followed Increasingly evident attempts of the USSR to concentrate on that country in an effort to split the Western coalition. Holotov's unusual visit to thc French embassy for the July lU celebration preceded by one day thc signing of the first trade agreement between the two countrieshe same month witnessed thc arrival tn Paris of the new Soviet.

The first postwar agreement between Greece and the USSR, signed onuly, was preceded the week before by the appolnbr-eot. Sergeev as the first Soviet Ambassador to Greece. 5U/ Trade relations with Greece pointed up Moscow's Increasing concern in the Balkans. Thc agreement concluded with Icelandugust not only paved the way Tor the resumption of trade relations, virtually nonexistent between the nations for the previous five years, but also enabled the USSR to plant the seeds of future discontent between Iceland and her allies. By exporting to Iceland almost all "of that country's requirements for petroleum, economic difficulties of previous Western suppliers would, of course, be increased.

The trade agreement concluded with Argentinaugust was unique in several aspects. It provided for the extensionarge credit by the USSR to Argentina and included provisions for thc export of Soviet capital equipment and the Import of consumer goods. Political and economic entrance into Latin America wasajor consideration Influencing the Soviet decision to make this new approach to Argentina.

Planned increases Over previous periods in the volume of trade were indicated during April-September lo newly concluded trade pacts between the USSR and Denmark, France, Greece, Iceland, Norway, Iran, and Argentina. otable exception was evidenced in tbe Soviet-Swedish trade agreementpril in which planned trade turnover3 was set at less than hair of2 actual turnover. This

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decrease, however/ reunited primarily from the termination of deliveries under1 credit agreement andailure to renew quotas for thc exchange or Soviet grains and Swedish

Following up Its line at thc April ECE meeting, the USSR negotiated with Western countries for procurement of consumer goods, especially food and textiles. Trade pacts signed during April-September made provision for Soviet Imports of Danish meat, butter, and floh; French textiles; Greek tobacco and rice; Icelandic fish; Dutch butter, fish, and cheese; Norwegian fish; British fish and textiles; and Argentine wool, cheese, and meat. Although Moscow and Western observers played up the consumer goods aspect of theseSoviet interest in Western strategic goods continued to bo Indicated. With thc possible exception of Argentina and Iceland, the countries from which the consumer goods were to be imported also served as the areas of supply for such Important Items as nonferrous metals, various types of vessels, and heavy industrial equipment.

C.

Trade pacts signed during the last quarter3 brought thc total number of such Soviet-West agreements concluded during thc year to more than double the number signedontinuation of the Soviet tactic of negotiating for imports of foodstuffs and consumer industrialraw materials, as witnessed during the second and third quarters, was evidenced io trade agreements concluded with Italy aod India, and'in contracts signed with the Netherlands, Denmark, and Israel as shown in Table Other Soviet procurement activities during the period, however, continued to reflect Soviet interest in the acquisition of non-consumer goods from the Free World.

Important developments were evidenced in the USSR's trade agreements with Finland and India. Under the terms of'tsigned onoviet trade with Finland was scheduledecrease Lower pricesoviet refusal to accept asuantity of Finnish metal products as3 were the main reasons for the decline. In trade between the two0 million trade surplus in favor of Finland was anticipated under the agreement. Of thisillion was to be liquidated by Finnish trade with Satellite countrlea under the various trilateral trade Much speculation was prevalent during that period concerning the possibility that ln order to liquidate thc

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remaining imbalanceillion, Finland would enter into some type of trilateral trading arrangements which would include other Free World countries. TO dateowever, nothing concrete has materialized along these lines. Also witnessed during the last quarternd undoubtedly related to Finland's trade surplus with the USSR, was the possibilityoviet tactical reverse in that the USSR was allegedly permitting the Finns toons of Soviet wheat 5g/ and unspecified amounts of Soviet petroleum to Brazil. 6o/

ear trade and payments agreement signed3 between thc USSR and India was significant for two reasons. It was the first such agreement between the countries, previous trade having been governedarter system, and it provided for technical assistance In the form of installation and operation of Sovietin India by Soviet technicians.

D.

Through tbe fourth monthU the USSR signed more trade pacts with the Free World than ln the3 period. As shown inrade agreements with Egypt aod Lebanon were signed for the first time, protocols to previous agreements werewith Belgium and the Netherlands, and annual renewals werewith Norway and Sweden. oan agreement, the USSR alsomillion credit to Afghanistan for the purchase of -equipment for the construction of grainlour mill,aking factory. Thc agreements with Belgium, the Netherlands, and the Scandinavian countries allarger trade turnovork than Thus the negotiations with these countries continue to reflect the "increased trade" emphasis in current Soviet trade tactics. Furthermore, all ofgreements involve theof foodstuffs or textiles by the USSR, thus apparently continuing another feature of post-Stalin trade tactics. Nevertheless, as in the previous periods, these recent agreements, with European countries are not divorced from Western supply of capital goods, as is pointed up by the inclusion of ships, dock installations, cranes, and dredgers.

Soviet trade negotiations have thus been adapted to several purposes. Trade pacts were used to provide an entry into areas with which the USSR had limited previous contact. By emphasizing the

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possibility of expanding trade, an attempt was made to encourage Western disunity by appealing to thc economic interests of individual nations. In addition, trade agreements were used by the USSRasic for advancing Soviet propaganda.

VI. Level of Soviet-Free World Trade.

The relatively low level of Soviet Free World trade, planned and carried out under Stalin duringontrasted sharply with the present regime's new trade approach to the Free World. Because of the time lag, the increased trade negotiations carried out during the period after Stalin's death were not reflected in actual trade until the last quarter

A.

In terms of current value, as shown in TableSoviet Imports from the Free World during the first quarter3 declinedillion from $llfl million during the2 period.

With several exceptionsnamely, the Netherlands, Iran, Greece, and Finlandthis decline encompassed Soviet trade with all Free

World countries and was especially evidenced in Soviet imports from the UK which decreased to lessillionillion in thc comparable period.

The value of Soviet exports to the Free World in tbe first quarterillion compared3 million for the2 period,ecline of uboutercent. This decline is shown in* Though exports to Finland and West Germany showed increuses, Soviet exports- to almost all other Western countries were below the level Exports to the UK declinedillionillion during the3 periods.

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B. g.

the periodhe value of Soviet Imports from the free World7 million compared0 million Although Soviet Imports during the period represented onlyercent of tho2 period, an increase in trade activity during thc third quarter tended to reduce the large differential noted during the first quarter when3 level reached onlyercent of the previous year. By the end of the period, imports from Denmark, the Netherlands, Norway, and Pakistan bad increased substantiallyut those from the OX and Finland were down.

2. Exports.

, Soviet expdrta to the Free World during the periodillion2 or about AB 10 of Importe, increased activity was noted In third-quarter Soviot exports to certain countries. to Belgium, the Netherlnnde, Finland, and Japan registered increasesut exports to UK, Sweden, Egypt, and Iran

continued below the level2 C. October-December1. Imports.

Soviet importe froa the Free World during the last quarter3 -ere valued atil Hero compared9 millionith several exceptions, notably the UK, Sweden, Pakistan, and Iran Soviet imports from the Free World, particularly West European countries and Australia, surpassed the comparable previous year's trade by large margins.

2. Exports.

The value of Soviet exports to the Free World ln the last quarter3 stood0 million compared2 millionu in the case of imports, though not of the same magnitude, an increase over the comparable period2 was noted In Soviet exports to Western European nations during the last quarter In this

period, Soviet exports toK olso finally reflected an increase2 period.

As shown innduring tbe last quarteroviet trade with the Free World spurted to surpasseriod, but not sufficiently to bring the year's level up to that. Increased trade during the last three months3 can be viewed as the result of the new Soviet trade tactics gaining momentum. During this period the relatively large number of trade pacts concluded after Stalin's death commenced to be Implemented. Trade was especially active between the USSR and those West European countries which previously had negotiated to export foodstuffs to the USSR. Thus, Danish exports to the USSR during the last quarteralmost entirely of meat, dairy, and other food products. Dutch exports bulked large in butter; and the major Norwegianundoubtedly consisted of herring, hardened fats, and staple fibers.

D. . &i/

Preliminary trade dataU indicate that the expansion of trade between the USSR and the Free World ln the last quarter3 continued through the first quarterU. The value of Soviet trade turnover with the Free World during theonths%0harp increase over3 levelmillion and almost comparable to2 level3 million.evelopment certainly presages even larger trade increases during the remainder of the year.

1. Imports.

During theonthsU Soviet imports from the Free World amounted0 million comparednd $lkl million for the respective periods3 Very large increases were registered, over the3 period in Soviet trade with Denmark, the Netherlands, Australia, and Hew Zealand. On the other hand, Soviet imports from the UK, Sweden, Iran, and Pakistan were down compared

'-

2. Exports.

Soviet exports to toe Free World during the first quartertood0 Billion comparedillion2 million32 respectively. arge inc reuse over3 period was evidencedn the USSR's trade with France, tbe Beands, Denmark, and Sweden. USSR exports to the UK and Finland also increased

VII. Other Aspects of Special Interest.

In the period from3 toertain aspects of Soviet trade tactics developed which appear worthy of separate mention. These developments are discussed below by subject.

A. Ministerial Reorganization.

was one of the fields ln which the new Soviet leadership Introduced broad organizational changes. he day after Stalin's death, it was announced that the Ministry of Foreign Trade and the Ministry of Trade had" been merged. The new Ministry of Foreign and Domestic Trade was headed by Anastasember of the Party Presidium ormer Minister of Foreign . Kabanov, former Chairman of the Statefor the Material Technical Supply of the Economyas named First Deputy Minister. . Kumykln. Zhavoronkov, displaced Ministers of Foreign and Domestic trade respectively, remained on as Deputy Ministers.

2.

Thc merger of the trade ministries lasted about six months. On Septembernddditional ministerial changes were announced by the Soviet government. The Ministry of Foreign and Domestic Trade was once again divided intoomponent parts. Mlkoyan was appointed Minister of Domestic Trade, and Kabanov was olevated lo the post of Minister of Foreign Trade. The appointmenterson of Mikoyoc's experience tended to emphasize tbc role of domestic trade and therefore the role of domestic production in the announced Increase in the availability of consumer goods.

-

ong speech to toe Supreme Soviet of the USSRalenkov sounded the keynote to thc dcu Soviet trade policy. ection dealing with the International situation he stressed the Importance of strengthening relations between the USSR and neighboring states. He also pointed out that tbe number of states with which the USSR entertained trade relations was growing, and indicated that business circles in .Free World countries were striving to remove discriminatory measures restricting international The speech, therefore, was consistent with the Soviet trade tactics which were then prevalent. It gavo the Kremlin un opportunity to advertise Its tactics and at the same time to help promote their successful Impat ton.

C. Petroleum Exports.

One of the outstanding features of Soviet foreign trade tactics during tbe latter half3 was thc abrupt Increase in the shipment of petroleum aod petroleum products to the West as well as increased offers to ship these products.

During July and3 the DSSR negotiated trade pacts which included unusually high quotas for Soviet export of petroleum aod petroleum products. Agreements with Argentina, France, Greece, and Iceland, as indicated inncluded quotas;;ons, respectively. These quotasillion tons, or moreimes the estimated totaL petroleum exporte to the Free World from the USSR

It is estimated that actual volume or Soviet exports of petroleum products to the Free World wus aboutercent greater3 thanmounting toone andons, respectively. At the same time Soviet Bloc exports of petroleum to the Free World increased about percent,ons2ons It ir. estimated that approximatelyercent of3 Soviet exporte of petroleum products to Free World countries occurred in theooths of the year, and that aboutercent took place ln the last quarter market conditions notwithstanding, such an abrupt Increase lo

ollows

-

Table 7

Soviet Exports aad Actual Bloc Exports of Petroleum and Petroleum Products to Selected Free World

Free World Cwintrles

Argent1oa Belgium Denmark Egypt Finland France Greece Iceland India Israel Italy Japan Sveden Turkey West Germany UK

Total for Indicated selected countries Estimated total to all Free World Countries Footnotes forollow on p. Uq,

Volume

;cc

OG 3^

koo

ko

/

500

223

too

Shlpmooto

Delivery^Period

I.

*

4-

of Actual3

1

1

Bloc

2-.

17

&

b

L5!a

petroleum exports could be interpreted aa the resulthange in Soviet trade tactics because the availability of many types of petroleum for export is not subject to seasonal variations.

Concurrent vith the Increase in actual exports, the USSR made overtures to continue petroleum exportsigh levelU.resents data on possible and actual exports of petroleum and petroleum products to the Free World. In examining Tableowever, it must be borne tn mind that offers and trade agreement quotas are not contracts. The USSR is not, therefore, firmlyto export petroleum products in the amounts specified and, in fact, probably will not. It should be further pointed out that although most of the agreements with and offers to the Free World have been made by the USSR, it is estimated that lees thanercent of the shipments actually originate in the USSR. Nevertheless, It is readily apparent that Sincehe USSR hasar greater eagerness to export these products.

D. Soviet Gold Shipments.

1.

A sharp rise in the volume of Soviet gold exports was another feature of the new trade tactics. During the last quarternusually large shipments of gold moved from the USSR to theorld. These shipments brought3 Soviot gold exports to the Free World to ao estimated total of0 million0 million. In value terms this amount would hovearge increase over estimated average annual sales of0 million.

In part, these large exports of Soviet gold were"apparently made in order to offset an accruing trade deficit unfavorable to the USSR. Because of the large volume of goods exported by the USSR to Western countries in the lost quarter of the year, however, the3 Soviet trade deficit with that area approximatedillion illion0 million" worth of Soviet gold wac therefore exchanged directly for Western currencies or credits which could be used by the USSRariety or purposes including payment for clandestine trade transactions,

* Plus or minus net additions or subtractions for other balance-of-payments .items.

- 41

financing Communist organizations and activities, andoreign exchange reserve.

2.

The level of Soviet gold shipments to the Free World in theonths4 indicated continued heavy sales. For this period, Soviet sales are estimated to have beenillion0 million.

Offers and subsequent sales of large amounts of Soviet gold to the Free World should not be unexpected. The USSR hastoillingness to increase commcdity imports even though it appears to be having difficulties in finding exportacceptable to the Free World. Therefore, the activity in Soviet gold sales to the Free World, noted during the latter partontinued at least through the first four months

E. Soviet Platinum Sales.

1.

The rising gold sales were paralleledarked increase in the amount, of Soviet platinum appearing in Free World markets. ^ioV95? USSB0 troy ounces of platinum, valuedo the These facts are significant for several reasons. Platinum, in certain rorms,trategic commodity,3 vos the first year7 that the USSR exported platinum to the UK. Moreover, the indicated amount sold to the UKough estimate of thc total annual platinum production in the0royig-/

2. U.

bulk market price Tor platinum dropped

er troy ounce. The reappearance of Soviet platinum on the world market In substantial quantities was listedactor contributing to the fall in Thus the large shipments of Soviet platinum to the UK witnessed3 and the appearance of that commodity lo several trade pacts concluded by thc USSR with Free World countries4 point up the Russians' attempt to substitute certain commodities for traditional exports in order to balance trade.

-

F. Trade Minister's Report.

Ibe value of recent Soviet offerings of petroleum, gold, aod platinum hasefinite break with the previous export pattern of the USSR, and suggests an increased Interest in securing goods in Free World markets. The widely publicized consumer goods program and the continuing Soviet commitments to heavy industry and defense production are at least partially responsible for this interest.

In 8oviet decrees and speeches during the last quarterthe role of foreign trade io the domestic consumer goodsof the USSR received only secondary attention, with the possible exception of Mikoyao's report at the All-Union Conference of Trade Workers on Mlkoyan stated: Jl/

A few words oust be said about the import of consumer goods. During recent years we have been making use of this additional source of supply for the population. Raving bo-come better off we can now allow Ourselves to import such foodstuff as rice, citrus fruits, bananas, pineapples, herring, ond such manufactured goods as high standard woolens and silk fabrics, furniture and certain other goods supplementing our range. These goods are in good demand by the population. Although we areillion rubles worth of consumer goods from abroad this year, two-thirds of this sum will be spent on goods from thc People's In turn we are exporting certain consumer goods of which wcufficiency, and are helping the People's Democracies.

Here thenirect statement regarding foreign trade. Thereomplication, however, whichompleteof what was meant, namely, that tbe type of rubles was not specified. If official rublesS dollar) were meant then consumer goods Imported3 "ere valued atillion, two-thirds of which were to come from Soviet Bloc countries and the remainder 3 millionrom the Free World. If this3 Soviet Import figure for consumer goods from the Freeillion) is related to the subsequent3 total importil6 million) frcm that area, almostercent of total Soviet imports from the Free World would have consisted of consumer

-

goods. Though complete commodity trade statistics for the3 are not yet available,igh percentage of consumer goods imports* appears out of the question.

It has been estimated that2 the percentage of total Soviet imports from thc Free World accounted for by conoumer goods wasndercent In view of these estimates, ana because there has been no evidenceadical shift in the commodity composition of Soviet imports from the Free World, Mikoyan's statement now appears to have beenmisleading, extremely optimistic, or perhaps based on an exchange rate othero 1.

C. Soviet Ship Procurements.

One indication of continuing Soviet interest in items other than consumer goods was thc effort to increase thc number of ships which would be imported by the USSR from Western European nations. Under trade agreements signed during the period from3 to, the USSR planned to importhips (excluding un unknown ship quota fron thc HetherLands). The USSR signed contracts with the UK and West Germany for the purchase ofdditional lb* quota for ships in the ' Soviet-Finnish trade agreement was essentially the same us in3 agreement jkj but tbc order Torhips from Sweden was the first Soviet order for vessels from that country since the expiration of6 credit agreement Although nofor French vessels were negotiated between the nationshe Soviet-Franco trade agreement of3 provided for the USSR to import The renewal3 of the Soviet-Italian agreement providedist of goods which included the delivery of shlp6 to the The agreement signed with Belgium inU provided for the delivery of refrigerator and cargo ahlps to the USSR. JQ/ Innder3 Danish-USSR tradeefrigerator ships were contracted for delivery to thend iohe Soviets were reportedly ready to contract for the constructiondditional such

* Based on the definition of "consumer goods" as used in.

to. .

H. USSR-UK Trade negotiations.

Recent Soviet overtures havearticularly strong interest in encouraging trade with certain key Western European countries. The important part played by the UK in current Soviet trade tactics is indicated by tbe large number of negotiations which the USSR has carried on vith British businessmenU. It Is claijned thatepresentatives ofBritish firms have visited Moscov since the beginning of the year. These firms ore mainly engaged in the production of pover station, forge, and press equipment; machine tools; and equipment for the textile and food industries and for shipbuilding. 8l/

Moscow's overtures of Increased trade to the UK (British businessmen) reached their climaxU. On that date Soviet Foreign Trade Minister Kabanovroup of Britishst of items specified for import from the UK in the- The total value of these goods was estimated toillionhich wouldillionillion) per year.

An extract from Minister Kabanov's statement

Given proper conditions in respect of normalization of Anglo-Soviet trade, Soviet Foreign Trade Organizations might place orders for ships and equipment to7 forillion rubles including: illion rubles; powerillion rubles; forging and press equipment and machine0 million rubles; -textile and food industrialillion rubles; and miscellaneousillion rubles; as well as purchase within the same period of raw materials, food and industrial goods for an approximate amountillion rubles, thusotalillion rubles, orOO million sterling.

It is evident in the above quotation that the usual Soviet hedges were present"Given the proper Trade Organizations might place orders. Indefiniteness was also indicated in thc very general description of the last-mentioned

* Emphasis inserted by analyst.

-

category. Raw materials, food, and industrial consumer goods, although accountingillion rubles or one-third of the total value of Indicated trade, are not broken down in terms of value of of relative importance. Furthermore, in subsequent comments pertaining to the implementation of this particular trade offer, the Russians haverepeated the qualifying phrasegiven the establishment of the necessary These necessary conditions are never fully spelled out but most certainly Imply the removal of Western trade controls.

If this trade offer were carried out, its significance could be grasped by realizing that Soviet imports from the UK during each of theould5 million or aboutimes2 postwar peak5 million. Moreover, the normally exported goode which the USSR otated It would ship to the UKo pay for imports would have to Increase more,

ercent by valuehen Soviet exports to the UK totaled

illion.

Unless gold and other precious metal exports from USSR can be Increased, it is presently doubtful whether the USSR can directly balance expanded imports from the UK. Soviet grain shipments to the UK2 accounted for aboutercent of total Soviet exports to that nation. Partially becauseoviet supply problem vhlch Incorporates the domestic conoumer goods program, ond also because trade in Britain has been returned to private hands, the ability of the USSR to satisfy any large potential demand by the British for Soviet grain ln the near future presently appears doubtful. Faced withituation, Moscow would undoubtedly attempt to substitute other products, such as petroleum, in place of groin. Soviet success lnenture vould be conditioned more by Western demand than by Soviet domestic availability.

Onpril, 6ir Greville S. Maglnness, President of the Associated British Machine Tool Makersnd president of the Russo-Britlsh Chamber of ccmnerce, stated that firm orders to the value of2 million had been placed in Britain by the USSR since the beginning Ue neglected to mention, hovever, that of this total value probably only half would be free froa strategic trade controls. Because of Sir Greville's position his statement on Soviet-British trade vould undoubtedly reflect optimism. Nevertheless, impending relaxation of Western tradecoupled vith the high pitch of British businessmen's enthusiasm for increasing trade with the USSR, does set the stageossible expansion of trade between the nations.

- U6 -

Soviet imports from the UK during the first quarter ofwere valuedillion, comparedillion during the3 period; and Soviet exports to the UKillion in the'i period,illionThue,total trade turnover between the countries through theonths of the current year representedinor Increase Because recent trade negotiations have Included many goods which require relatively long production periods, however, ultimate deliveries would not yet be reflected in trade statistics.

I. USSR-West German Trade Relatione.

A very important aspect of Soviet trade tactics with the Free World has emerged lo tbe form of increasing activity in the USSR's trade relations with West Germany. Highly industrialized. West Germanyotential supplier of industrial and technical equipment to the USSR. Moreover, increasing competition between Western nations for world markets enhances the susceptibility of Western businessmen to Soviet trade stimuli. The increased trade turnover between the USSR and West Germany, indicated inndherefore will probably continue and could reach major proportions.

ituation could be advantageous to the USSR. Tbe USSR might procure desired equipment, and the likelihood of business animosities developing between West Germany and other "Western nations would be enhanced. In addition, there wouldtrong possibility that any sharp Improvement in the economic or political status of West Germany might arouse the suspicions of other Western European nations to the detriment of programs for Western international cooperation.

Events in the last quarter3 andk indicated an expansion of trade between the USSR and West Germany. Inoreign Office official stated that West Germany had decided to proceed with final contracts forf theishing vessels which the USSR had requested to be built. 8U/ At thc end oft was revealed that tbe items the USSR agreed to exchange for the West German vessels consisted ofanganese and onrorae ore,ixed petroleumnd timber,

Tbe first slilp Is scheduled to be delivered ln5 and the last In An order for five more vesselsloating fishery processing factory equipped with cannery machinery may also be eohaluded.

A Hamburg businessman returned from Moscow ln early'i after havingontract with tho USSR. Heons of naphthalene valued0 in exchange for delivery to the USSR of aniline dyes,citric; and calcium The arrangementarter transaction because neither party was willing to pay in free dollars, pounds, or Swiss francs. Botes made by this businessman indicated that Sovietfor imports were merchant ships, fishing vcoceln, dredges,ons of lead. In exchange, tho Soviets were ready to offer gold, silver, platinum, palladium, and iridium. Thefelt that the USSR was also able to deliver chrome and manganese ores, timber, vegetable oil cakes, drugs, and castor

Io the latter part orirect barter agreement was concludedrankfurt grain trading firm and Soviet export agencies. Thc agreement provided0 tone of Russian bread grain was to be supplied in exchange for German shoe leather. The price of the mission grain was reported to be below tne world market level. This Frankfurt grain trading firm has so far received0 tons of Russian grain under other similar barter

Although West Germany does notrade and payments agreement with thc USSR, theretrong demand for some such type of agreement. German-Soviet talks were held recently in Geneva to explore toe posBibilltlofl of putting tradeirm legal basis. Following the preliminary trade talks inroup of German Industrialists and honkers, representing the "Eaeteru Trade Committee of Germanrepared to go to Moscow to continue trade talks and to investigate the ramifications for eetaolishiog some type of trading

Soviet Technical and Financial Assistance and Loans.

Soviet offers of technical assistance were originally made last JulyK Economic and Social Council (ECOSCC) session io Genevaualified offer of li million rubles, and later inU at the tenth meeting of the UN Economic Commiselon for

- k8 -

Asia and the Far East (ECAFE) io Ceylon. Subsequent events imply that the type of technical assistance planned by the USSR involves the sending of Soviet technicians abroad rather than outright grants of money. The3 Soviet trade agreement with India and theU agreement with Afghanistan both Include aspects of technical assistance. The possibility of some type of Soviet technical assistance to Egypt also was indicated during

It appears that the technical assistance program of the USSR aside from attempting to woo underdeveloped countries toward the Ccnzmintst camp is basically designed to serveropagandafor International meetings, nod to enhance the prestige of the USSR both at home and abroad.

Io3 the USSRredit In the amount,illion to Argentina. This credit was followed inUmillioo0 credit to Afghaolotan. U the USSR grantedillIon loan which, unlike the previousas not for specific Soviet goods but rather an accounthich Finland could draw gold dollars or any other foreign currency agreed upon. This grant was apparently the first gold or convertible currency loan made by the USSRestern country.

The Argentine credit may be viewedorollary to the signing of the Soviet-Argentine trade agreement. Because the agreement itself would assist the USSR In any planned economic penetration of Latin America, the extension of the loan contains implications other than economic expediency. Furthermore, the Soviet grant puts the USSR io competition with Germany, the UK, and the US in supplying capital goods to Argentina on credit.

The Finnish loan agreement appears to be the culminationong series of negotiations designed to convert Finland's clearing ruble accountsore readily spendable form. Consequently, the Soviet loan to Finland is better viewedompromise between Finland's desire to convert her ruble balances and the USSR's reluctance to make them convertible.

- U9 -

K. Trade consultations.

, Soviet trade tactics have continued to reflect political as well as economic overtones. At the ECE-sponeored East-West trade consultations hold in Geneva from April toh, the Russians left the Free World delegates uncertain as to Soviet Following the concerted build-up given to East-West trade possibilities by Soviet press and radio services, many representatives from the' Free World approached the meetings full of optimism. By thc close of the consultations, however, optimism over the immediate prospects of increasing East-West trade was dampened considerably.

Beginning with multilateral discussions of the broader obstacles to trade, consultations followed the pattern established at last year's meeting. During this year's multilateral talks, the Soviet delegate disappointed West European proponents of East-West trade development when he appeared completely unprepared to offer any constructive suggestions despite the fact that at earlier plenary sessions the USSR had recommended the discussion of specific structural problems Impeding an increase in trade. The major structural problems were considered to be the differences between Soviet Bloc and Free World trading organizations and techniques, and the new trade patterns which had developed since World War II.

One of the few positive actionshe part of the Soviet delegate was his support for discussionossible Bast-West clearing arrangement. During thc subsequent discussion, however, although he did appear attentive, he offered nothing constructive. Concerning the possibilityultilateral clearing, itorking group would be formed to consider the problem when and if toe ECE Committee on Trade Development meets inb-

The Russians also aroused great consternation among the Free World experts when they failed to transact any substantial business during this year's bilateral talks. In fact, fewer possibilities for trade were developed at these talks than at last year's meetings. Discussions of problems arising under existing agreements andwere inconclusive. Soviet Bloc representatives apparently were not prepared to discuss suggestions that thc level or Eust-West trade could be raised if their countries would export more goods the price and quality of unich could compete with Free World products.

-

BLANK PAGE

APPENDIX A

GAPS IN INTELLIGENCE

Information used for this memorandum revealed two major gaps in intelligence: tbe lack of firm values for Soviet exports of precious metals and tbe unavailability of current commodity trade statistics.

Estimates of Soviet exports of precious metals are available, but the range is large. "

The unavailability of current commodity trade statistics for Soviet trade with the Free World Is and will undoubtedly continue toajor gap in intelligence. This is because of the nature of the subject. The USSR publishes no complete trade statistics for commodity turnover

BLANK PAGE

APPENDIX B

SOURCES AND. EVALUATION OF SOURCES

1. Evaluation of Sources.

Per tbe purposes of this report, which Is intended to vu.caai.eM and trends in recent Soviet trade tactics, the statist!

elJeVed tD

vas takenariety of sources, errors in specific details may

have occurred, but not toegree as to impair the over-all nrruraey of the report.

2. Sources.

Evaluations, folloving the classification entry and designated Eva.., have the folloving significance;

-

Source of Information

Doc

ocumentary

Confirmed by other sources

-

reliable

Probably true

-

reliable

Possibly true

-

reliable

Doubtful

-

usually reliable

Probubly false

-

reliable

Cannot be Judged

-

be Judged

refers to original documents of foreign governments and organizations; copies or translations of such documentstaff officer; or information extracted from such documentstaff officer, all of which may carry the field evaluation "Documentary."

Evaluations not otherwise designated are those appearing on the cited document; Ihosc designated "RR" are by the author of this report. No "RR" evaluation In given when the author agrees with the evaluation on thc cited document.

1. T'

Original document.

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