SOVIET BLOC ECONOMIC WARFARE CAPABILITIES AND COURSES OF ACTION (NIE 10-54)

Created: 3/9/1954

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NATIONAL INTELLIGENCE ESTIMATE

SOVIET BLOC ECONOMIC WARFARE CAPABILITIES AND COURSES OF ACTION

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SOVIET BLOC ECONOMIC WARFARE CAPABILITIES AND COURSES OF ACTION

THE PROBLEM

To,estimate Soviet Bloc capabilities in the field of economic warfare, Uieof the Free World to Bloc economic warfare measures, and probable Bloc courses of action,

DEFINITION

Economic warfare ls defined in this estimate as the use of economic measures to alter the reLative power positions and alignments of opposing nations or groups of nations. This can be done by affecting either the relative economic strength of the nations in the two groups or reducing the size and effectiveness of the opposing group by causing political defections or, what is more Likely, dissensions. This estimate will consider only those Bloc economic measures designed to:

a. Improve thc Bloc's political position in the non-Communist world;

ncrease the dependence of non-Communist countries on Bloc trade;

non-Communist support for controls on exports of strategic goodsBloc; and

the economic strength of the non-Communist world.

CONCLUSIONS

economic warfare capabilities of the Soviet Bloc Lie primarily In its ability to weaken the political cohesion within the non-Communist world by: (a) offers to increase trade; (b) actual increases in trade; and (c) threats to cut off trade where it has been built up.

Thc Soviet Bloc has very limitedfor undermining the economic or military strength of the non-Communist world by denying goods and servicesthe non-Communist world obtains from the Soviet Blocery small range and quantity of imports. Denial of these goods wouldegligible

' The USSR, Communlit China. North Korea, ond the Eastern European Satellites.

effect on thc non-Communist world's over-all economic capabilities and none on its military capabilities.

ncreased trade could be exploited by the Bloc to create the Impression that Its intentions are peaceful and that it desires to cooperate with the non-Communist world. If vigorously pushed andby Communistloc program to expand trade with the non-Communist world could result in aweakening of prevailing hostile atU-tudes toward the Bloc. At the same time Bloc offers of increased trade, even if not resulting in any considerable increase of trade, could be used to aggravate thcof some non-Cornmunist

countries with the existing export control system and even to weaken Uie system itself.

hc Bloc could almost certainlyits external trade to, say, two or three times2 level withoutretarding its progress toward self-sufficiency" Such an Increase in theof trade could easily be made acceptable to tlie non-Communist world and trade with the Bloc would still bemall percentage of the total trade of non-Communist countries.

ven with such increases, Blocwarfare could not by itself be the decisive factor in determining theof non-Communist states on major issues in the struggle between the Free World and the Bloc. In certain countries whose trade with the Bloc is, or could be, of considerable importance to theirstability, Bloc economic warfare could add to local Communist strength, intensify existing neutralist tendencies, cause disagreement with some Western policies, and make US leadership more difficult to exert Examples of countries where the Bloc might expect to achieve such objectives are Finland, Austria, Italy, Egypt, Japan, India, Iran,and Chile. However, even in these countries trade relations with thc Bloc will be of only secondary importance for their over-all foreign policy.

hc Bloc's economic policies will be tied directly to its over-all policies bothand foreign, and willigh degree of opportunism and flexibility. For the present, this method ofeconomic policy is resulting in well-publicized offers to increase trade,in selected areas with moderate actual increases. During the next few

years thc Bloc will probably attempt to exploit economic warfare bpportAmities associated with increased trade offers. Such'a policy would hold out political gains that could be obtained at no net economic cost to the Bloc We do not believe, however, that the Bloc willeconomic warfare measuresa large scale increase in total external tradearge expansion of external trade would increasingly involve changes in the economy of the Bloc which Bloc leaders would be progressively less willing to accept.

The Bloc will probably continue to use gold to pay for an excess of imports, and this may be done in connection withwarfare efforts utilizing trade. Wc do not believe that the Bloc will make extensive use of currency or gold price manipulation, or commodity dumping, as economic warfare techniques.

There are many opportunities for Bloc economic warfare utilizing economic aid and technical assistance, and the Bloc will probably make further gestures of assistance to underdeveloped areas where it would expect to obtain the maximum propaganda benefits from suchIt is unlikely, however, that the Bloc will carry out substantial programs of this type exceptelective basis.

Soviet Bloc economic warfare measures could be effectively countered without significant strain upon the over-allresources of the non-Communist world, if prompt agreement on counter-measures could be obtained. However, disagreements as to the seriousness of the threat of Bloc economic warfare, and as to countermeasures, could producepolitical strains within the non-Communlst world.

TRAOE POLICY AND ORGANIZATION

Traditional Bloc Trade Policies and Organization

otlet- policy makers have ln the past given highest priority to the development of industrial and economic strength and to the achievement of economic self-sufficiency.trade since the mid-thlrtlcs has been low, relative to output and resources. Such external trade as the Soviet Union hasin has been strictly controlled so as toaximum contribution to theof Soviet strength and to the reduction of economic dependence upon outside sources of supply. This trade has .generally consisted of exports of industrial raw materials and foodstuffs, often at great hardsliip to thepopulation, in exchange for imports of strategic raw materials and machinery and other Industrial products useful for theof Industrial self-sufficiency.

economic warfare efforts in thenot been extensive. They have, forpart, been confined to measurescertain selected countriesIceland, and Tinlandandattempts to weaken and tonon-Communist export controls.

8 Soviet external trade has been administeredtate monopoly. State trading corporations, directly controlled'by Moscow, have generally been organized to handle Soviet imports or exports of particular commodities, but in some cases to handle all tradearticular area.

Satellite foreign trade has been similarly administered by state monopolies. Theof the Council of Economic Mutual Assistance tnepresenting the USSR and its East European Satellites, was an important step in consolidating thecountries Into an economic bloc. There has been increasingly detailed pi.inning and direction of Satellite trade from Moscow.

concentrationery high proportion of the trade of Bloc countries within the Bloc. The Increase In both the relative and absoluteof this trade has been particularly marked since World War II. The volume of trade among countries now composing the Bloc increased by six to eight times77 itercent of their total external trade and2ercent. Onlyercent of the Soviet Union's total external trade andercent of external trade of the Satellites (Including that of Communist China) was with theworld

China's trade with the restBloc would have increased in anyto thc Communist policy of seekingdependence on trade withcountries. However, the Koreanstimulated this tendency, bothexport controls applied byand China's need for economicMSfataacc from Russia.

Trends in Trade between the Bloc and Non-Communist Countries

The peak of Soviet foreign tradeeither in physical volume or in rubles at current prices) came during the years of the first Five-Ycarhen the USSR was importing large amounts of industrial equipment from thc West These imports gradually decreased as domesticgrew.

As postwar reconstruction progressed, trade between the Soviet Bloc and the non-Communist world (measured In constant prices) partially recovered, and8 it had reached about half8 level of trade between the same areas.ith the economic consolidation of the Bloc and the Imposition of non-Communist trade controls, it began to decline and2 had fallen to about one-third of8 level. This trade was almost certainly less3 than

Soviet trade policy, with its rigorousover the Satellites, has resulted in the

loc interest in purchasing non-strategic commodities from non-Commun^jL countries

has until recently been slight, ln accordance with Bloc economic policies calling for the greatest feasible degree of self-sufficiency. Moreover, lt is probable that for the same reason Bloc demand for imports of strategic goods would, on Uie whole, have remained low in relation to the pre-World War II level, even ln the absence of non-Communist exportThese controls have, however,Bloc imports of strategic goods and thus contributed to the decline of Bloc trade with non-Communist countries and to the modification of the pattern of that trade. Non Communist export controls havereater effect upon the external trade ofChina than upon the trade of the remainder ot the Soviet Bloc, but they have not been the most important cause of China's rapid integration into the Bloc trading area.

Recent Developments

lthough there is no evidence that Bloc leaders have abandoned their emphasis upon industrial expansion, military preparedness, and self-sufficiency, the followingsince3olicy of increasing trade with the non-Communlst world:

a. Bloc countries have recently madeotters and have signed agreements totheir trade with non-Communlstincluding several countries with which they had no previous trade agreements.* For example. Bloc countries have recently shown increased interest in trade with Latin America. South Asia. Egypt. Greece, and other parts of the non-Communist world. Trade agreements recently concluded for the first time between Bloc and non-Bloc countries include those between Bulgaria and India, and between thc USSR and Argentina. The recent agreement between the USSR and France is the first

See Schedules I, IX, and inummary of data on recent trade agreements and other trade arrangements between (be USSR and non-Com-

* smaU Proportion of total Soviet trade with the non-Communlst

UndCr 5Uchand

n some of these agreements increased Imports of non-Bloc consumer goods have been accepted by the Bloc, while capital goods,metals, petroleum, and increasedof primary goods have been allotted for export. The Bloc has already made some shipments of goods of this type. Tradebetween Bloc countries and certain Latin American countries are good examples of this development

c The Bloc has recently demonstrated greater willingness to use multilateral trading techniques and to balance certain accounts ln transferable currencies. For example, the USSR lias been selling gold for sterling to support purchases from the sterling area and other countries. With Finland the USSR has agreed to settle Its expected deficit partially hi non-Bloc currencies.

II. BLOC ECONOMIC WARFARE

BY MEANS OFrade is potentially the most important instrument of economic warfare available to the Bloc. It ls Impossible, however, for the Bloc to wage economic warfare of seriousagainst the non-Communist world solely by shutting off Bloc exports of strategic commodities, since the non-Communlst world does not depend upon the Bloc for such goods. Economic warfare through trade mustbe conducted by the Bloc mainly in three ways: (a) by offering to engage in increased trade with certain non-Communlst countries; (b) by building up trade with certain non-Communlst countries toevel as totate of dependence upon theof that trade; and (c) by cutting of! or by threatening to cut off trade with non-Communist countries.1 By these means thc Bloc may seek to achieve such objectives as weakening of non-Communlst export controls and reducing support for Western defense By Increasing trade, or promising to increase trade, the Bloc might also In certain countries and especially In certain groups encourage more favorable political attitudes and enhance the influence of local Commu-

SeeProbable Economic Meets oftTSev-eranec of Easl-Weal63

nisls. Where trade agreements resulted In the establishment of permanent Bloc trade missions In non-Communist countries, these missions could be used for purposes of political warfare.

he Bloc has recently made severalto .use Increased trade or promises of Increased trade for what appear to bewarfare purposes. At the MoscowConference lnn attempt was made lo use offers of Increased trade to create dissatisfaction with Western, andwith US, controls on exports to the Bloc. Communist China has bartered rice for rubber from Ceylon on terms more favorable than Ceylon could have obtained elsewhere, thus creating dissatisfaction in Indonesia and Malaya with export controls. Attractive trade offers made by China to Japan have been made conditional upon Japanese agreement to ship strategic commodities. New Bloc trade agreements with Finland, Iceland, Iran, Argentina, and India are almost certainlyto some extent by the desire to Improve the political position ot the Bloc in theseand may have been drawn up with the object in mind of creating dependence upon certain kinds and levels of trade with lhe Bloc AH of these moves, except the Moscow Economic Conference, were also of directadvantage to the Bloc.

Bloc Capabilities for Engaging in Increased Trade wiih the Non-Communist World

Trade between the countries nowthe Soviet Bloc and the rest of the world was2 at about one-third of8 level (measured in constanthis reduction took place despite substantialIn world production and trade.2 the Bloc gross national product was about one-third greater thann the same period the external trade of non-Bloc countries Increased byercent, and intra-Bloc trade increased six to eight limes.

We believe that there are economically advantageous opportunities for substantially increased trade between thc Soviet Hloe and thc non-Communist world. oubling, say.

of2 level of such trade an the courseear or two would almost"certainlyet economic gain to the Bloc and probably hot significantly affect Blocoubling of this trade would Increase Soviet Bloc Imports5 billion, or no moreercent of Bloc gross national product, and exports3 billion. In view of'thesmall magnitudes involved, Bloc leaders would probably not encounter any greatIn disposing of the additional Imports or in making the additional exports available. In their efforts to do so, they would enjoy the advantage ot complete controlarge economy with great resources. Moreover, the economic impact on the Bloc programsoubling of trade with the non-Communist world would be even less than Indicated if part of the increase were accomplished by some rerouting ot current lntra-Bloc trade through non -Communist trade channels.

loc leaders would probably encounter some obstacles lo the expansion of trade with the non-Bloc world. Thc goods whichEuropean countries would be most willing to import from the Bloc, In order to saveare by and large agricultural products and raw materials. Before Worlduch items were traditionally exported from Eastern Europearge scale in exchange for manufactured goods It is unlikely,that the Bloc could restore this trade pattern. Industrialization has proceededIn the USSK and in some of the Satellites, while the output of Bloc agricultural products and raw materials has lagged behind therequirements ot Uie Bloc Itself. Any substantial future increase ln external trade will probably have to involve increased Bloc exports of manufactured goods. Blocto increase its exports of manufactured goods to lhe non-Cornmunist world woulddifficulties, at leastime, in the designing, production, and merchandizing of such goods In competition with WesternEven Czechoslovakia and Eastwould be hampered Initially in such trade by the loss of former commercialwith the West. In addition, the Bloc's past trading pracUces have givenoor reputaUon.

i If T

A doubling of2 level of Bloc trade with the non-Communist world, in anywhich auch an Increase would be likely to assume, would entail some temporaryof the Bloc's progress toward self-sufficiency. However, by stockpiling and maintaining standby capacity the Bloc could lessen its vulnerability to subsequentof imports from the West By carefully choosing exports and Imports, the Bloc could probably also minimize any possible disruptive effect which Increased trade would have on Bloc economic programs. Furthermore,ot trade could help thc Bloc to realize its Immediate program for Increasing the availability of consumer goods and ultimately contribute to the achievement ofat higher levels ot output.

Bloc could probably expand itstrade to more than twicereatly retarding progressdisrupting basicignificant reallocation ofa further expansion of externalIncreasingly involve changes inof tlie Bloc wliich Bloc leadersprogressively less willing to accept.

Recepiivily of the Non-Communist World io Bloc Trode Offers

igh degree of receptivitynon-Communist countries toincreased trade with the Soviet Blocof thc widespread belief that suchhelp to:

or alleviate balance ofdifficulties;

historically profitable trade

larger and more diversifiedand sources of supply, and In someprotection from the uncertainties otmarket;

terms of trade; and

political relations with theso postpone or avoid war. (Thewant to trade with both worlds asof their independence.)

eceptivity to Bloc trade offers will vary greatly from country to country and willaa much on political as on purely eco-nomic factors. Most receptive to Bloc trade offers would be those countries which: (a) find It difficult to satisfy their economic needs within the trading area of thc non-Communist world; and (b) distrust the leadership of the Western Powers or leaneutralist position on issues between the Soviet Bloc and the non-Communist world.eneralrecession In the US or ln theworldhole would almostincrease non-Bloc Interest In trade wtth the Bloc, dissatisfaction with controls onto the Bloc, and vulnerability to Bloc economic warfare measures.

balance, we believe that an attemptleaders tooubling of theof trade with the non-Communistprobably succeed. It would meetfavorable public response in manycountries, and would almostIn net economic gain for the

Consequences to fhe Non-Communist

World of Bloc Economic Warfare by Means of Trade

most immediately effectivemeasures which the Bloc is likelywould be directed at theexport control system. The Sovietput pressure on the export controland cause International and Internalin the non-Communist world byoffers of increased trade or byof small magnitude. If onestate yields to Blocundermine thc export control system,of other states to similarwill increase, and the Bloc will findeasier to obtain strategicwell as to cause dissension In theworld over export controls.

I the total external trade carried onthe Soviet Bloc nnd the non^CbmmunlSl

onntp

ft

2 were doubled or tripled. It would still bemall percentage of the total trade of the non-Communlst countries. However, li such an increase ln trade were largely concentrated upon thosecountries which are most vulnerable to economic warfare measures, It would cause an important proportion of the foreign trade of those countries to be carried on with the Bloc. Thc economic stability of those countries might thus become dependent upon aof this trade. Under suchthc governments and peoples of those countries might become disposed to Improve their political relations with the Soviet Bloc,onsequent weakening of the cohesive-ness of the non-Communlst world. Bloccould also exert pressure upon theof those countries by reducing, or threatening to reduce, the flow of trade.

uch Bloc economic warfare measures against Individual non-Communlst countries could be effectively countered withoutstrain upon the over-all economicof the non-Communist world. disagreements as to the seriousness of the threat of Bloc economic warfare, and as to countermeasures. could produce significant strains within Ihe non-Communist world. On tlie other hand. If It could be made apparent to non-Communist countries that the Soviet Bloc was seeking to use trade to weaken their economies and might eventually use it topolitical and economic concessions, the net result might be an increase incohesion and reduced receptivity to Bloc trade offers.

Economic Warfare Againsi Western

Europe by Means of2 trade with thc Soviet Blocfor lessercent of the total international trade of the countries ofEurope. Those countries which2 had moreercent of their total trade with the Bloc are listed below with imports from the Bloc and exports to the Bloc shown as percent of total trade:

Exports

3 a

e

5

TRADE WITH THE BLOC AS PERCENT OFNTERNATIONAL TRADE OF CERTAIN WESTFRv EUROPEAN2

Imports

Country

. Denmark .

Italy

Norway Switzerland

Because of special circumstances Finland and Austria carryarge percentage of their trade with thc Bloc They are therefore vulnerable to economic pressures. Italy, which carriesuch smaller proportion of its total trade with the Bloc, ls alsobecause of widespread unemployment, especially ln industries producing strategic goods, and because of local Communist strength.

Western European countries are generally receptive to Soviet Bloc offers of increased trade. Thereidespread and frequently exaggerated belief ln thc possibilities forof trade with tho Bloc.

Western European countriesexport marketing problems because currencies or high in specific Industries. Finland,Italy, for example, have manyof metal products who areInterested In Bloc markets and whoexpected to become more interested Iffor their products diminishes tnmarkets. The Soviet Bloc hasbrought pressure to bear on Italy lnto force Italy to relax Its export con-and to create discord between ItalyUS. Poland and Czechoslovakia havedeliveries of coal to Italy and haverestoration of the former volume ofeondiUonal upon the export of

Bloc Economic Warfare by Means of Trade wiih lhe non-Communist Far Easi

he non-Communist countries of the Far East are not now heavily dependent upon

8

with the Soviet Bloc. Current trade between those countries and the Bloc amounts toercent of their totaltrade. Four-fifths of their trade with the Bloc is with Communist China and one-filth with the European Soviet Bloc. Most non-Communist countries of thisrc highly receptive to Bloc offers ofrade, and thereidespread feeling that the existing export control system ls

Japan offers an important target for Bloc economic warfare by means of increased trade. Many Japanese look upon Increased trade with the Blocanacea for their current and prospective economic difficulties, and as an essential to the development of apolitical position Ln Asia, These hopes, however, arc based on what we believe to be overoptimistic estimates of the possibilities of expanding trade with the Chinese mainland. We do not believe that Japan's annual trade with Communist China, even wllh the removal of present restrictions, and with an intensive trade promotion effort on the part of the Bloc, could amount to more0 million each way. This wouldne-third Increase in Japan's current level of lolal exports. Trade on this scale would by no meansanacea, but It would contribute substantially toward easing Japan's economic problems.

More concrete and attractive Communist trade overtures lo Japan can be expected to increase agitation in Japan for the relaxation and ultimate removal of restrictions on trade with the Soviet Bloc. Such overtures would almost certainly strengthen neutralist groups in Japan and those forces that are determined to reassert Japan's independent position in respect to world problems.

Some of the other Southeast Asianwould be targets for Bloc economicprincipally because they might hope to find in the Bloc additional export outlets for their surplus stocks of rubber and rice.in Burma and Indonesia, trade with the Bloc ls viewedesirable step toward the relaxation of international tensions In Asia. There may be some skepticism about the practical possibilitiesatisfactory

trading relationship with the Bloc In view of past failure of publicized Bloc offers of trade and assistance to materialize. However,has recentlyrade agreement with Communist China which may result ln some shipments of rubber, and BurmaIs negotiating trade agreements with both Communist China and the USSR. Finally Communist China can apply some economic pressure on the UK by manipulating its trade with Hong Kong.

Bloc Economic Warfare by Means of Trade with South Asia

oviet Bloc trade with South Asianwith the exception of Ceylon, has not shown any considerable upward trend. the past three years, trade with tho Bloc has made up lessercent of India's total trade. India signed an agreement with the USSR in December and would probably welcome the opportunity to demonstrate Its neutralism by Increased trade with tho Bloc. However, the agreement makes no specific commitments as to imports and exports, and may not lead to any significant expansion of present trade volume. In the case ofthe importance of Bloc trade declinedrincipally because of lower (hip-men Is of raw cotton to China One percent of Pakistan's imports3 came from the Bloc andercent of exports were sold there, compared withercentince the conclusion of the rubber-rice barter agreement with China, Ceylon's trade with the Bloc has risen to aboutercent ofandercent of exports and Is ofimportance to Ceylon. Thoof most of the countries of South Asia depend heavily upon the volume and price of theirand Jute in Pakistan, tea and rubber In Ceylon, and jute, cotton textiles, and tea in India. Any ofler from the Bloc to buy steadily more of theseat favorable prices would be attractive to thc countries of the area. However, thcof tea for export in Communist China, and the fact that China is continuing to expand its output of raw cotton and jute, are likely to limit the Bloc's^wlilingness to absorb

these particular goods from South Asia In quantity andontinuing basis.

bas always conducted apart of its trade with theowing mainly to larger purchasesthis trade has increasedIn addition, under an agreementinhe USSR isloan to Afghanistan valued at S3 Vzls supplying technicians for theof grain storage and otherBloc moves may be aimed atassistance to Afghanistan.

Bloc Economic Warfare by Means of Trade with fhe Middlo East

Bloc trade has become increasinglytoercent of Egypt's total Imports andercent of exports In the first halfarticularly in view of the recent decline in UK purchases of cotton. Bloc trade has also been significant for Iran (aboutercent of total foreign trade2 and somewhat lessecause itarket for the agricultural products of Iran's northern provinces, provides essentialand decreases the pressure on Iran's limited foreign exchange. Iran's total trade Li low, however, compared with the period when oil was being exported. The rest of the Middle East has had very little trade with the Bloc.

The countries of the Middle East, except Turkey, would probably be highly vulnerable to Bloc economic warfare carried on by means of trade. There Is wide dissatisfaction with the area's general economic and politicalupon the West, and strongtendencies with respect to the conflict between thc Soviel Bloc and the Free World. There is no Indication that any government In the area would wittingly accept Communist influence or domination, but several, notably Egypt, Syria, and Israel, might enter into far-reaching agreements with the Bloc for the sake of direct economic benefits and in the hope of securing further advantage byoff thc Bloc against thc West.

Bloc Economic Warfare by Means of Trade with Lalin America

trade of Latin Americanthe Soviet Bloc2 probablylessercent of the totalof those countries, butand lower prices forespecially in the US, has arousedInterest ln the possibility oftrade with the Bloc. Special Impetusto this Interest In3rade agreement betweenand the USSR. The agreement,concluded by the USSR with acountry, Included provision fordeliveryillion of capitalonumber of otherBrazil, Chile, and Uruguay, appearexpanded trade with the Bloc as ato their current need for exportand for non-dollar sources ofand Industrial raw materials.countries, the question of trade withLs an Issue which is being exploitedand,esser extent, bynationalists. If the Soviet BlocIn substantially increasing its tradeAmerica, this developmenttin Americanthe US and strengthen CommunistIn certain Latin American countries.

Probable Courses of Action

the next few years thcof Soviel Bloc leaders will probablyan attempt to expand trade withworld. This effort will ofyield economic warfare opportunities.will probably exploit theseif it estimates that economicconditions in thcIncrease receptivity to Bloc trade andare increasing evidences of conflictnon-Communist world over the questionwith thc Bloc. However, we do notthat the Bloc will make largeof resources or modify other programsto seek economic warfareBloc leaders will continuejo be wary

of dependence upon trade wtth the outside world, and will take steps to protect Uie Dloc against Uie efTects of sudden loss of such trade.

III. UTILIZATION OF ECONOMIC AID AND TECHNICAL ASSISTANCE FOR ECONOMIC WARFARE PURPOSES

are many opportunlUes forwarfare by utilizing grants,technical assistance or promises of The Bloc hasew gestureskind. Including technical assistanceand Afghanistan and the recentto lend Finland the equivalent of Such opportunlUes are greatestunderdeveloped areas wheresentiment or "neutralism" lsandlocal Communist partiesenough to make capital out ofmoves.

Bloc will probably make furtherof assistance to underdevelopedwill seek to exploit their propagandathe utmost. However, there is as yetUiat thc Bloc is willing toaid programs. The exportsln such programs might seriouslyln the next few years with thefor Increasing the availabilitygoods and for industrialand greater self-sufficiency. Bloc leaders probably realize theof competing with Uie US in thissome countries, moreover. Bloc leadersUiat present bad economica favorable setting for Uie growthInfluence.

IV. BLOC ECONOMIC WARFARE UTILIZING GOLD AND MANIPULATION OF CURRENCY AND COMMODITY MARKETS

he Bloc gold reserves, which areatoillion, and Its current gold producUon (variously estimated at00 million) constitute an economicpotential. Since the death of Stalin, Bloc leaders mayhanged conception of the potential usefulness of gold to the Bloc. They may now be less anxious to build up gold

10

stocks and may even be willing to draw on them. An obvious use of gold would be ln connecUon with an effort to Increase trade with the non-Communlst world. The sale of Bloc gold to finance an excess of Imports would enable the Bloc to gain some of theof increased trade with selected non-Communlst countriesalancedof commodities with each country.

he Bloc's gold stock might also be used in connection with attempts to manipulate currency markets In Uie non-Communlst world in order to achieve economic warfare objectives. Practically all countries, however, have currency controls, stabilization funds, and olher means of protecting their currencies against such manipulation. Bloc efforts to manipulate tho price of gold Incountries would not have much effect since nearly all gold sales in' and between these countries take placerice regulated under the articles of the InternationalFund, to which most non-Communist countries adhere. In the few minor countries where currency or gold price manipulation might be attempted with some expectation of success Uie economic warfare gains would be so small or uncertain Uiat wo do not believe the Bloc will undertake such measures.

recent years Bloc gold sales have runestimated annual ratehey0 million, withIn the latter part of thereleases seem to be explained bypayments considcraUons anda shortage of sterling in the Blocas yet no evidence Uiat gold sales arewith an economic warfare effort.

Bloc Is not likely to attempteconomic warfare objectives bycommodity markets in theworld. The Bloc hasew commodities, notablychromite, and tungsten. The Bloclarge quantities of theseUie market at lower than presentthereby creating distress amongproducers. None of thesehowever, accounts for enougtrefcountry's earnings toeri-

ous eflect upon the economy of that country. Neither would disturbances In these markets affect over-all non-Communist Industrial or military potential. Such disturbance would cause Ill-will toward the Bloc inproducer countries and thus handicap the Bloc's efforts to gain strength ln those

countries. Bloc supplies of petroleum, which the Bloc is now selling in thftnon-Communist world, are not now large enough to upset the petroleum market seriously. In the case of other coramodlUes, the Bloc could disrupt markets only by offering goods for sale at the expense of Internal requirements.

SCHEDULE I

CURRENT USSR EXPORT COMMITMENTS TO THE NON-COMMUNIST WORID;

-

Value

and

Products

oil

tons

to

products

tons

to4

oil

tons) "

to4

Germany

oil

million

signed

oil

tons

to4

products

tons

4

oil

tons

to4

oil

tons

to4

products

tons

to4

products

tons

4

oil

tons

33

oil

tons

to4

and products

specified)

year TA.

products

reported)

4

tons

4

products

4

products

tons

offer

oil

tons

barter offer

Grain

Denmark

Finland

France

Italy

Norway

Sweden

grains wheat grains com

hard wheat

grains

corn

0 tons

0 tons

ons

iio.coo0 tons

to4 TA. to4 TA. to4 TA. to. to44 TA. to4

Finland

France

Greece

Italy

Japan

Argentina

anthracite

coal and coke

anthracite

anthracite

anthracite

Sakhalin coal

coal

ons

ons

to. to4 TA. to4 TA. to. to4 Barter deals.4

USSR EXPORT COMMITMENTS (Cont'd)

QOtKTtrr OK COMMfTMPfT AKO EXfCTATIOW

Belgium' Belgium Finland France Italy Norway Sweden West Germany

fcrrc-manganese manganese ore manganese ore manganese ore manganese ore manganese ore manganese ore manganese and chrome ore

00000 tons

. to. to 31

4444444

Belgium

France

Italy

Norway

Sweden

West Oermany

chrome ore chrome ore chrome ore chrome ore chrome ore (see manganese ore above)

0000 tons

. to4 T. A. to. to4

West Germany

rade Aereemcnt, annual unks* otherwise specified.

'This quota deleted IBxports ot petroleum products had occurred by Uien and may eon-Unue.

quota addedebruaryhis quota deletedebruary :iit

SCHEDULE II

CURRENT USSR IMPORT COMMITMENTS FROM THE NON-COMMUNIST WORLD;

SELECTED PRODUCTS

oa Value Commitment akp ExpnunoK

Belglum

Belgium

Belgium

Denmark

Denmark

Finland

Finland

Finland

Finland

Finland

Finland

Finland

Finland

France

Italy

Italy

Italy

Italy

Sweden

Sweden

UK

West Germany Japan

Netherlands'

refrigerator ships cargo ships floating cranes refrigerator ships ship repairs ice breakerons ocean

tons ocean trawlers ocean tugs fishing vessels lake barges floating cranes cargo ships cargo ships refrigerator ships tugs

floating cranes trawlers

refrigerator ships trawlers

fish cannery vessels ship repairs

0

5 million

5

5

14

6

3

20

0

5 million

A.toSIA. to 31

4444444

TA. to44 TA. to4 TA. to44 TA to4 TA. to4 Long-termong-term8 Long-term8 Long-term8 TA. to4 TA. to4 Contract

Barter deal4 Barter deals

Power Equipment

Belgium

Italy

Sweden

Equipment tor Food Processing and other Light Industries

Belgium

Denmark

Sweden

Equipment toilowatts

ilowatt

Power station equip.

nits

7 million kroner

illion.

8 million kroner

TA. to4

TA.A. to4

TA. to4 TA. to4 TA. to

USSR IMPORT COMMITMENTS (Confd)

Quantity oa Valo* Commitmint and En-nuno*

Lard, and Cheese

New

ons

ons

TA.3 contracts333 contract TA. to4 TA.3.4

Denmark

Iceland

Iceland

Iceland

Norway

Netherlands

Sweden

UK

herring

herring

herring

herring

frozen fish

herring

herring

herring

herring

tons

0 tons

00ons

0 tons

o4 TA. to4 TA.3 contract TA.. to3 contracts TA. to3 contract

Denmark

Netherlands

Argentina

Argentina

Argentina

Uruguay

Union of South

Africa New Zealand Australia

beef pork meat

preserved meat pork mutton meat

meat meat meat

ons

0 (not reported)

ontract TA. to3 contract TA.3 contract

3 contract

and Fibers

Belgium Belgium Belgium Belgium Belgium

rayon fiber artificial silk yarn wool

woolen materials hosieries

illionillionillion rubles

T.A. to. to. to. to4 TA.

USSR IMPORT COMMITMENTS Vainc Commithewt amp Sxmkatioh

TcxrUcs and Fibers (confrnued;

France

silk yam

tons

to4

silk cloth

million meters

to4

cloth

meters

4

tons

to4

cloth

tons

to4

tons

to4

fiber cloth

million meters

to4

meters

meters

fiber

tons

4

million

contract

tons

4

wool

reported)

to4

wool

reported)

4

wool

reported)

contracts

reported)

contracts

Zealand

reported)

contracts

4

Belgium France Iran

sheet lead lead

lead and zinc ore

ons (not reported)

o4 TA. lo4 TA. to4 TA. to4

often require moreear for construction, so that delivery will come after the expiraUon date of trade agreement under which commitments are made.

Italian commitments were made at the time when the current annual agreement expiringas signed, but they fall under the lone-term rather than the annual agreement.

'A number ot different kinds ot ships for the USSB are under construction In Dutch shipyards, somea long-termagreement and others outside it. There ts no current annual agreement; It Is not clear what new commitments were made

SCHEDULE III

CURRENT USSR TRADE AGREEMENTS WITH NON-COMMUNIST COUNTRIES

Dotation

Estimatedast Agreehekt

Tsade

TUHNOVIK

4

protocol to long-term agreement o(ast protocol1

14

of noncornmodity provision ofast renewal0

4

to tradeofirst proposed decrease since war In level of trade

ears4

Soviet loan% interest

Finns can obtain non-Bloc currencies

3 years3

iUion (first year's quotas)

First postwar trade

4

illion (may be exaggerated)

First postwar trade

115

First trade agreement since7 (date of signature)

4

million2 protocol without change; capital goods for USSR8 trade agreement agreed on at same time

4

Norwegianquota, increased Soviet manganese and chrome quota^

CURRENT USSR TRADE AGREEMENTS WITH NON-COMMUNIST COUNTRIES (Confd)

and Ddaahoh

Valux or Lastayr

Tram

TVtXQVTT

4

E9Wt

increase In trade3 decrease

Payments agreement signedrade agreement may be signed soon, would be first postwar

4 trade agreement now signed

4 (not confirmed)

ears from4

illion3 trade agreement

Trade agreement value2 trade not

Soviet loan% interest

million USSR probably became Iran's largesto word on value ofrade

Little Is known of this

trade agreementist of products; may not have definite quotas

for construction of 2

wheatlourakery Inusing Sovietand technicians

5 years3

million Trade agreement without quotas signed after failure to concludeague offer of Soviet technical aidaccepted inof letters

544

Includes Soviet creditillion for capital goods purchases

Annual; date unknown

"flankersists products without quotas

Original document.

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