CURRENT SURVEY OF USSR FOREIGN TRADE TACTICS WITH THE FREE WORLD SINCE 1952 (CS

Created: 7/27/1954

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SUBJECT: Current Survey of USSR Foreignctics with the Free World*

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Summary

Shortly after Stalin'9hift in Soviet foreign trade tactlce with the Free World was noted. Under the Kalenkov rcgine Soviet trade activities appear to have heen designed to persuade the Free World that the USSR ls ready to expand trade with non-CcasBuaiat countries end le even willing to increaae inporte of non-strategic gocda (foodstuffs and textiles). Soviet tactics along these linee have heen witnessed in international meetings, bilateral trade negotiatione, radio propaganda and offioial speeches. Although the Soviets can muster some evidence that their indicated willingness to procure non-strategic goods is booed on tbe domeaticoole program primary Soviet concerno be an attempt to haston the relaxation of Free World trade controls. Because trade agreements and known ordersontinuing deelre on the part of the USSR to secure Free World, capital goodside variety, it eppeara that in the foreeeeable future the USSR doea notto increase consumers' goods Uuports at the expense of capital gocut procurement. Furthermore, increased Soviet exports of specific conncdities, inter alia precious metals and petroleum. Could point up the inability of the Sovieta to market traditional exports andto reach andreatly expended level of trade with the Pree World.

trade tactics are considered to be thosoaotivitiea engaged in by the ussr ia order to acooKpliah its tonediatetrade objectives. These objectives, though related to the long-range policy objectives of economic self-sufficiency andadvaatage, veer and shift from time to tto! depending upon current economic, political, and military expediencies. Because of this eultlple approach by the ussr to its International objectlvea, trede tactics nay be evidenced in anyultitude of Soviet

Soviet trade tactics with the Free World2 may be divided into four periods; January-March, April-September,nd ivision conveniently dlatlagulahes four periods; pro-Modenkov, interregnum, attempt to implement the nev approach to the Free World and current.

dECBEZ

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By and large, Soviet tactics during the period3 were unspectacular though Bone ninor shifti in tactics over previous periods were noted even berore Stalin's deatharch. In January, for instance, the Soviets unexpectedly announced that they wouldin the Seat-West trade conferences of the Economic Commission for Europe (ECS) even though on invitation for then to participate wasthe previous fall, l/ Aleo in January the USSR accepted Iran's decision to terminate the Joint Soylet-Iranian Caspian Sea Fishery, although previously it had sought to continue the coapeny'sa February, Stalin granted an interview to tbe Argentine Ambassadorhich undoubtedly paved the way for later Soviet-Argentice relations. Nevertheless, overall Soviet trade tactics with the Free Worldassive approach. Trade turnover (exports plus imports) between tho USSR end the Free World,million, decreased to represeat but fifty percent by value of the2 first quartern million.

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he so-called interregnum period, vae notable for the emergence of Moscow's aev approach to the Free World. Soviet tactics shiftedore or less passive role to aa extremely active one. Soviet cordiality was witaessed at international meetings andgestures were made by the Soviets in spheres which they had previously approached with intrsnslgeance.

During this period, the frequency of Soviet radio propagandaadvocating East-Vest trade inereaeed sharply. Reaching an average of thirty peruly) broadeasta continued to average more than twenty-four per week through September. This cocipared to an average of only two ccnnentarlea per week from January through April, kj

Soviet negotiations with Free World countries la the trade pact field also indicated tactical shifts. The USSRillingness to expand trade by signing trade paets with acse nations for the first time or for the first timeumber of years including agreements with France, Greece, Iceland and Argentina. In some instance& tbe planned value of trade between tha USSR end particular Westorn countriesrade level whichi would exceed the planned or actual value of such trade In these trade pacts, tbe Soviet Ualon negotiated for increased imports of consumer goods especially food aad textiles, and also appeared willing to export larger quantities of petroleum, coal, manganeae and chrome to the Free World.

Apparently designed to creato aa atmosphere of diminishedtension, the Soviet line at the Geneva ECE trade consultations la April end the international eepect of Halenkov'e August speech to the Supreme Soviet were la accord with overall Soviet tactica. At Geneva, Soviet repreaaatativee announced that the USSR during the following twelve months could increase itso tbe Free World by more than fifteentatement which at this time appears not to have been borne out In fact. In bis speech to tbe Supreme Soviet, Kalaakov stressed the importance of strengthening relatioae between the USSR end

neighboring states, pointed out that the number of states with which the Soviet Union entertained trade relations was growing that business circles in the Free World countries were striving to remove discriminatory measures restricting international trede. 6/

Also significant during the April-September period was theof the Kremlin's apparent desire to increase petroleum exports to tbe Free World. Trade pacts negotiated in July and August with Argentine, France, Greece, sad Iceland included quotas0 tbouaand tons of petroleum products to be shipped by tbe USSR to thoee countriea by the end/ If carried out, the value of theae ahlpaent* would be more than three tines the estimated value of total petroleum exports to all Free World countries from the USSR/

Ccto'cer-Decer^er

Soviet trade tactics during the last quarter3 were notable for -several reasons. An increase in trade between the USSR end tbe Free World vas evidenced. Certain conscdities not ordinarily exported by the Soviets in large quantities, petroleum, platinum, and silver appeared on Western markets, and unusually large shipments of gold flowed from the Soviet Union to the Free World. peech, Soviet Trade Minister, Mikoyan, pointed out the role to be played by foreign trade in the domestic consumer goods program.

During the laat quarter3 Soviet trade with the Free World spurted to surpass tbe2 period but not sufficiently to bring tbe year's level up to that Soviet imports from the Free World during October-December -verts valued49 million On the same basis tbe value of the Soviet Union's exports stood0 million compared2 million xa large part this Increased trade can be viewed as the result of the Soviets' nev trade tactics gaining momentum. During this period the relatively large number of trade pacts coneludad after Stalin's death coiomenced to be implemented. Trade appeared especially active between the USSR and those West European countries which *iad previously negotiated to export foodstuffs to the USSR.

In his report to the All-Union Conference of Trade Workers onctober, Mikoyaa indicated that the USSR was to import four billion rubles worth of consumer gcoda abroad Of this amount one-third3 million (at tha official rate of exchange) was to come from the Free World. Relating this Indicatedillion) to the subsequent3 Soviet import figure from the Freeillion) would mean that almost eighty percent of USSR'a total imports from the Free World would haveof consumer goods. However, because the percentage of total Soviet inporto from the Free World accounted for by consumer goods during tha yeas been eatimated as3espectively end because there appeara to have been no evidenceadical ahlft la the commodity compoeltior. of Soviet imports from the Free Worldigh percentage of consumer goodsillion) vas highly improbable even thoughcommodity trade statistics3 are not yet available.

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Therefore, Mlkoyaa'o statement nov appears to have been purposefully miB-leading, extremely optimistic or, perhaps, baaed on en exchange rate other than the official one (four rublea to one US dollar).

The volume of Soviot Union's exports of petroleum products toWorld vaa about eighty percent greater3 thanto W9 thousand tonshousand tons, approximately seventy-five percent of all USSR exports ofto tbe Free World took place ln tbe last aix months of theabout fifty percent occurred in the last quarter aloae.market conditions sotvitbatandlng, such sn abrupt increaseexports could be interpreted as the resulthange intactlcB because tbe availability of many types of petroleum forie not subject to seasonal

During the laat quarter3 unusually large shipments of gold flowed from the USES to tbe Free World. esult, an estimate of3 Soli shipments to the Free World from the USSR amounted to00 million, it/ This comperesstimated annual average shipments of0 million. In pert, these large exports of Soviet gold vere apparently made in order to offset an accruing trade deficit unfavorable to tha USSR. However, because of the large volume of goods exported by the USSR to the Free World couatries in the last quarter of tbe year, an estimate of the USSR's trade deficit with that area approximated only iMo alllicn. Therefore,0 million* worth of Soviet gold was exchanged directly for Western exchange, primarily sterling end other hard currencies, which could be used by the USSRariety of purposes including payment for clandestine trade transactions, financing comaunlet crganlzatloue aad activities, and the estshlishmentoreign exchange reserve.

3 the USSR0 troy ounces of platinum, valued8 million to tbe United Kingdom. These factB are slgaificsnt for several reasons. Platinum, in certain forms,trategic commodity,he first year7 that the USSR exported platinum to the United Kingdom. Moreover, the indicated amount sold to the United Kingdomough estimate of the total annual platinum production la the Soviet5 thousand troy

January-April lffit

During tbe first four months^ major Soviet trade tacticsaspecta of bilateral concentration. Increased trade activities were noted between the USSR and the United Kingdom andesser extent, Vest Germany. In February, en exceptionally large trade offer was made to British bualnesa men by the Soviet Foreign Trade Minister. Soviet radio broadcaeta od East-West trade increased after the turn or tbe year and averaged more than thirty-five ooaaaatarlOB per week betveea January-April. Also noted during this period was tho coatlnuatioa of Soviet gold

- Plus or minuB net additions or oubstractions for other balance of pay-aento items.

- It -

nnnn: in-

JJJJrexporta, Increased ship prcwurement by the USSR, and an

In" kForeign Trad. Minister

Kabeaovroup of Eritiahist or item* apeei-ficd for importba United Kir^doa in tbe year,i/

illion). IT this trade offer were carried cut its sior.i'l-cence can be grasped by reolllzlns that Soviet import, from Britain during eech of theould5 <Mllion or about three and one-half time,2 postwar peak5 million, lg/

On the one head, larding relaxation of Tree World trade controls and the high pitch of Brit island other) busine.smea's enthusiasm to

SEESht m or

acviec-Brltiah trade. On the other hand, excepting gold end other

precious metaloubt is presently oast on the USSR's ability

5 exPftnded imports from Britain. Soviet grain shipments to the United Kingdom2 accounted for about sixty percent of total Soviet exports to that nation. However,3 Britain iapcrted coa-siuerably less grain from tbe USSR. Furthermore, considering the favorable world grain supply, aa effective demand for Soviet grain by theoes not appear forthcoming. In the absence-ofemand, Moscow would undoubtedly attompt to substitute other products such as petroleum in place of grain. Here again, the USSR'a success would be more conditioned by Free World demand than by domesticfor export.

Total trade turnover between the USSR and Britain through the firat quarterillion, repreaentedinor increase over the3illion. However, because recenttiatlonB have included goods requiring relatively long productionoasible ultimate deliveries would not yet bo reflected ln trade .totletics.

Events in tbe last quarter3 and* indicated anof trade between the USSR and Weat Germany. Vest Germany doe. notrade and payments agreement with the USSR but there appeara to be strong demand for eoro type of auch agreement. Following pre. llminory trade talks lnroup of Germannd bankers prepared to go to Moscow to continue trade talks and to lnveatl-Catc the ramificationa for establishing some type of tradingowever, recent iafomatloa indicates that tbe planned visit has been cancelled by the intervention of

Cloaor international relations with West Gencany would be adven-tagcoua to the USSR. The Soviets might procure deolrod equipment, buolneoo animosities between Weat German end other Free World nations could develop, aad the increased economic statuB of West Oermany night be looked on suspiciously by other Weat European aations to theof Western leteraatlonsl cooperation.

3 an abrupt increase in propaganda on East-Weet trade waa noted in 6ovlet radio broadcasts. Tbe overage nuaber of ccenaeatarleo per week on thlB aubjoct Jumped from alxteeo ot the beginning of January

to thirty-two by tho end of the month, then reached and maintained an average of fifty-eight throughout February. primary targets of these broadcaata appear tc have been the Free world export control pro,'p-ara, Kabanov'a offer to British businessmen and economic relatione between Middle and Far Eaotern countries with other Free World countries.

The level of Soviet gold shipments to the Free World in the first four monthsndicated continued heavy sales. For the period Soviet sales ere estimated to have beenillion0 million. Therefore, the activity in Soviet gold sales to the Free World, noted duringontinued at least through the first four months

in March, the bulk market price for platinum droppedo $Ch per troy ounce. The reappearance of Soviet platinum on'the world mnrkot was listedontributing The inclusion of this commodity in several trade pact* concluded by the USSR with Free World countries inpoint* up the Soviet's attempt to substitute certain commodities for traditional exports in order to balance trade.

Under trade agreements signed during the period Julybe USSR negotiated to import morehips from Free World Refrigerator and cargo ships bulk large in tho types of vessels Desired by the USSR. If these imported vee*els were to supplement those ships produced domestioally, it would seem to Indicate that the Soviet Union intends to increase Its international trade end/or improve its balance of payments position through invisible items. This of course doea not preclude the possibility that the finviots are attempting to clear domestic facilities for stratogicand to "indirectly produce" other items through import.

Soviet offers of technical assistance were originally made lest July. Economic and Social Council (ECOSCC) session la Genevaualified offer of four million rubles, and later in4 at the tenth meeting of. Economic Commission for Asia and the Far East {SCAPE) Inubsequent events Imply that the typo of technical assistance planned by the USSR involves the sending of Soviet technician* abroad rather than outright grants of money. The3 Soviet trade agreement with India and the4 agreement with Afghanistan both include aspects of technical asslstanee. The possibility of some typo of technical assistance to Egypt also was indicated during

Aside from an attempt to woo underdeveloped countries towards the Cctrenunist camp, it appears that the Soviet technical assistance procremasically designed to serveropaganda platform particularly tt future International meetings, end to enhance the prestige of the USSR both at home and abroad.

In3 the USSR mode Its first postwar loanon-Bloc country in the formhirty million dollar credit tohis was followed in45 million credit JO/0 thousand credit to On February4 the USSR grantedillion loan which, unlike the previous loane, was not for epecifio Soviet good* but rather an account on which Finland could drew gold dollars or any other agreed upon

The Argentineen loan nay be -sievedorollary to the signing of tho Soviet-Argentina trade agreement. Nevertheless, the loan Ge irony, th* United Kingdom, and the United States all in competition to supply capital goods to Argentina on credit. The Finnish loan agreement appears aa the culminationong aeries of negotiations designed to convert Finland's clearing ruble accountsore readily spendable form. Consequently the lean is better viewedccpromiae between Finland's desire to convert her ruble balance* and the USSR's reluctance to make them convertible.

1.

Ibid.

Ibid.

*. Jem-OctIntelligence Problems Seriee Ip.ev

C Eval: RR-l.

, Unpublished date, supplied by FBIS

C, RR-l.

5.

USSR and Eastern Europe,val! RR-2.

7.

Ibid.

Constructed primarily from "Value Series" information prepared by the International Economic Analysis Division, Bureau of Foreign Ccnncrce, Department of Commerce, -.

Eval! pfl-b.

11.

12.

13.

m.

15. Ibid.

16.

17.

13. ard of Trade, Eval: RR-3.

Op.onstructed primarily from "Value Series" informationby the International Economic Analysis Division, Bureau of Foreign Commerce, Department of Commerce, C.

The Financial Tines, London,U, Eval: RR-2.

, RR-2.

'oce Problems Series Ip. 9,

9 Nov , Eval: , Unpublished Data.

Original document.

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