The OSSR?js mm GaraenEy Payments PosfiBfjji
K 9
CJtXONfOQ
.Ml aivulW- eta*
The USSR's. Hard Cwmm Payments Position
Tti*ard Currency Payments Position
KeyUSSR had remarkable success in slashing Iu hard currency debt Last
year, following an increase ofillionhe paymcoU torn-
mainly to sharply Increased oilnot last long.
however,ramatic ond uriexpccted Imprcrvcmerti in Soviet export prospects. Although the Soviets will probably not run into serious payments problems in tbe near fulurc, they couldtheir ha^ds full sorting out import needs.
After reducing growth of iu hard currency debt. the USSR was hit1oaring agricultural import bill, soft oil prices in its Western markets, and the need to increase aid to Poland. Although iu hard currency position is still reU livelydebt service ratio is lessid not take lightly the turnaround in its fortunesaradoxically. Soviet willingness to depend on ecunccnic lies with the West has declined as Moscow's domestic difficulties have mounted and economic growth has slowed
2 the USSR cut iu hard currency trade deficit to SI Jwith S4 billioay strongly pushing oil exportsimports. Agricultural imports (cU substantially due both tois the volume of grain purchased and tower prices for orost
agricultural ccirnmodtties. However, most of this decline was off act by stetpped-up imports of Wesiern nutchtnery and equipment and steelunderwritten by Western frovcrruncnt-backedckltveries began for the Siberia-to-Western Europe gas pipeline.
Moscow's lucccss. however, was purchased at considerable cost.2 tbe volume of oil exports sold for hard currency was increased by reducing exports to Eastern Europe, importing increased quantities of OPEC oil for resale In the West, and holding down domestic oil cemsurnrxion nod/or drawing down oil inventories. On the import ride, Moaexyws arapnxem decision to limit grain purcliases Is being felt by the Soviet consumer in terms of per capiu availabilily of meal and dairy products. Earlier efforts to curb debt growth resultedharp decline In the volume of Western machinery and equipment imported.
One of the serious problems racing the Soviet leadership ins re-cmerging hard currency shortages, which could limit importsime of increasing economic stringency. The USSR's hard currency prostiects are poor. Not only are oil prices likely to remain soft for the next few years, but revenues from other key export earners such as gasperhaps, gold
aodare licked to oil prices, may also be afTectcd. Although energy prices could recover later la tbe decade, the USSR may not betrong position to benefit. Domestic oil production shortfalls could resultargo dodine In oil exports and force the USSR to hold down imports paid for In hard currency or to negotiate loans from the West.'
Our projections indicateanother round of tpiraliog ailhard currency purchasing- power will at best remain levelil exports are expected to return to tbe downward trend, and expected real increases In gas exports may fall abort of covering tho decline in oil exports. In this drcumitaocc the USSR willifficult time achieving moreodest real growth in hardimports in the second half of the decade, unless it is willing toharp increase in its debt burden.'
Hard currency imports are important for easing food shortages, raising energy production, sustaining technological advances and prodtictivity. and making up for unexpected shortfalls of key products- Within tbe turrits of hard currency ova ilability. worid supplies, and political considerations, Moscow's priorities are probably aimed aC (I) obtaining sufficient grain and other >gricultural productsaintain consumption of Quality foods at least near currenturchasing tbe necessary industrialoperate productive plan! at plannedmporting machinery and technology to meet targets for mvatmcot in energy and otber priority sector*.!
If forced to chccac, the Soviets would be hard pressed to decide whether to concentrate import cuts In the nonagricoltural or agricultural areas, Despite tbc recent rencacd emphasis on agricultural aclf-stiffrctcocy, annual importsillion tecs of grainillion tons of oilseeds and oilseed meal will be needed to support livestock expansion plans during the next several years, eveneturn to normal harvests. Agricultural imports will depend portly on domestic production but also on tbe extent of the leadershfp'i commitment to maintain or increase per capita consumption of quality foods.illion-ton decline in grain imports and the ilight decline In per capita meet consumption the Soviets permittedowever, indicate thai the present leadership is not willing lo Increase Imports of farm products Indefinitely.
Purchases of Wen tern itccl aad other industrial inputs, meanwhile, will also noed priority. Not only will Imports of largo-diametcr itccJ pipe remain critical for tho conatniction of oil and gasut the Soviets probably will continue toleast for the next fewamounts of cold rolled sheet steel, tin pUto, and specialty steels.we expect that Moscow will emphasize equipment purchases for dcrvoloplng energy resources. Finally, the stepped-up Investment allocations for Industries supporting tho Food Program are likely to give tboearger share In Imports of Western machinery.
The Aodraxrv admirustration willange of economic policy alternatives if Import constraint) prove too severe. Western credits arca relativelyof financing substantialSoviet hard currency imports Even so, Soviet debt mflruigancm policy would have lo becorne less conservative, and Westernoold probably have to provide encouragement and insoraoce lo private (coders loarge increase In lending. While Sovietow reU lively low, lo the kmger term the USSR may Ond It tecrcasingiy attractive to try to augment hard currency imports by expanding gas exports to Western Europe. The new export pipeline now being built, when completed, will have rabstantial capacity to carry additional Soviet gas to Western Europe. If needed, ibe USSR would be more than willing to build additional pipelines to supply gas for Western Europe.
BLANK PAGE
Content*
Pat*
Key
DerreJcccMaU During
Other HariCttrrerxy
Weakening1 aad
Tba iHymesM Poriuon
Reaction tn
The Coat to
B*i yoeau
ExpectIn the
Hard Currency
Import Prioritlea
Scmci
Hard Currency Trade
Tables
Soviet Hard Currency Debt
Orowth of Hart Ctrrrtocy O0 Eajwrt*
Orowth of Hard Carreocy Trace
til
Table*
1.
EilimaJed Hard Citronc. 3alsncc cJ Paymrcli
Eslimaled Hard Currency Deal to the Went
Hard Currency Purchasing Power
Hird Currency Financing Roqulrectecti Under Alternative Scenarios
Hard Currency Irnrorts
Hard Currency I'acorU
Price Trends in Hard Currency Tndn
Bijwuof refrolecjn and Natural Ott for Hard Currency
Ecrejpaveal Orders Placed With lurd Currency Trading Partners
Eidmatcd Measures ol ihe Hard Currency Debt Borden
for Estimating*
Estimated Debt oo Western Ooverninent and Oovcirament-Backed Credits
Ihe USSR'* Hard Currency Payments Position
The USSR he* moved vigorously aloceo deal -i'.tdeteriorating bard currency1 position caused by toft energy prices and weak demand for Soviethii paper provides an estimate or theard currency paymenu potltion and revJewi the itcps Moscow has taken to strengthen thiiIt also anilyies the outlook for Scries hard currency earnings through the rest of the decade and discusses the cations available to the USSR in view of the likely needurbwth
DetesOncaeaaa
The USSR hasced on its economic relation! with the West io espand its resource base, raise the technological level of its industry, relieve industrial bcikoecks. Increase domestic food supplies, andtbe burden of defense. This policy reached its reno.'i ia tbe catty and, as postwargains evaporated aod Moscow turned to the West for eouipment and technology to spur itsand for grain to offset shortfall! in its tnefficieni form sector
t
CJpectailoo! were licnilarty high In the West, where butincttmcn booed to sell eouipment and technology from underemployed capital goods industries and torge aod growing market in the USSR for cortsatoer goods. The MitbeiroS decision to gwe full mpooet lo the Brethnev program for upgrading the Soviet diet was an added sign that more attention would be given to ibe consumer, who would In lum require large Soviet imparts of Western agricultural toods. For Its part, ihe West viewed the USSR as an important new source of energy supplies as *ctlupplier of Umber,and metals, diamonds, and other raw materials.
ued, nAnwaUSSR'i***
ard nnm)"us ana CoomimhtW*
At aeectnu lhat part rfSoviiiviimrm<>W> CmmW aainwtxtthixj cvfTH)n In" pbioIci*
Because of increasing reliance on the West forand grain, the USSR Incurred large trade deficits In lhc. Concern over ihese deficits aod the rapidly rising hard currency debt led Moscow7 to begin lo limit growth In Imports from lhc Weal. The main impact was on Imports of machinery and equipmeni. which in real terms fell an esiimaicdcrccritseen| Moscow was greatly aided during its efforts to narrow Uie trade gap by good harvests78eduction lo agriculturalul the dominant factor was spiraling world oil prices9hich resulted in large increment! io tbe value of oil exports in spite of falling volume.9or cxantplc, nearlyofillion rise in hard ctirrcocy coouDcclity capon earnings was due to increased prices for oil (seeond figureith these iicndi in tbe Irade accounts,9 tbe hard currency trade deficit bad droppedI billion as compared wiihear56 (see table 11
fu^orri I'urchases from the West rose nearlyin value terms0occring the share in total Sevier imports fromo JB percent. In volume terms, bo ana, hard currency imports increased onlyand were rouahlyercent of uxal importsu/cbsso offerrous metal products, and farmdominated Soviet imports
Import! of Weston equipment and technology- have undoubtedly helped Moscow deal with some critical problems, even tboogb these imports account for letsercent of the machinery and equipenent component of Soviet fiied Investment, and many of them have been difficult for Ibe USSR to assimilate. In, ttnpotted chemical equiprnent. account ing for about one'third of all Western machinery
rcrctmcd 1ft the Sovtcllar (ft)or doubling the output of ammouit. rotioeen feitiliirr. aod plank* aorl for more lhan tripling tvathetk fiber production lo ibeorhalfoviet *rrtitvjrda output wai from Wecera plants
Nor era VI the So-icu bat acoxt^JtiVriear proa:ram of CDodernitatlon andta tbe motor vehicle Irdour* wtUaoutThepUat for rr-ntptr.
half of all Soviet pataerigei can. and tht Kama Hirer duct plant account* forilmllar thare of Sortel bcaiy truck output Mrxeorw. lhc Soviets bate impurtnl large- numbeis if Walcm compute' iiitroii an] minicomputer?
Imports from Ibe Weal alto havery role la lupponJof the eoeegy aoctor. Soviet deficiencies in drilling, pitaping. and pipeline crxniiuction cqcip-tneni ted the USSR lobout ii biUioe worth of Oil and (at eqalprneot la. teWeai Germany aod Japaa prvvidcdall ibe Urtfc-etlameter pipe oerrded forprrxtrne ecetitruejieri
I" the cuae of agHentioral unp.it> Soviet Lardra In Imponi pimped from an average ofillioneato II millionearndillionear9 end moBO (rain purdnte* coupled -Hiticoed Iropotii ol meat, augtt. nnd vegetable oil
TabWl
USSR: IjtUMtfd Hard Caareuey
of Pay
Milikm Ui i
i
Tr**.
411
415
-UK
IU16 IMI1 !Ut4 W
%iia
ll**l
-ie*I -lAW -Ull -iM* ,OM
ICIS*
im hjw nw
flAlkfiaalaUilULrj
fa**
7*M
0,w, lartAUi ud SOD
JOB
-hq
7(0
-JJ4
til
-ivo
1DM
-IK
low
4JOD
1QO0
too
0 0
tOOO
LSS1
IMS
0
UM
a.
Ogatas!
Nrlarrori
-HI
121
I3S0
MOO
OO
-4TJ -UH -lltl SI7 -UM M0
oiora UctaMLl.oaopxa *LDG. amahaat i)n I. Tha*tn baaed oa um rraenad iibotiatil LDCi fOm ll Hxbn-or.
kkSMSaal LOCU Ta. won-or
k) cn mm Ml atfM of laatM otoru ofa
oarraacrWClVU-f fctWflabl MUM* -Ul
RcOotti bar* t
LDC* lo fta*ac* Soviei vasalo
lis* luv- of lar aorana
foulmports io moreS9 biQkxL, locoaminj forpercent of hard currcocy merchandise Impxta. Without Wcatcrn Brain. Soviet ccaxramen sroald ool hani bad the uxroaae In nwei asosornprJoQ ibty rttOlttd hi the. and ihere aroald hivehsrp drop In per capiu coecMrnption of meal In lhcnsteadeveling ofl
ioavo. Prion uacreasca have accoaatod for more ihaaof tbe tcafokd rbe ks So-ies hard currency exporta0 (ace fur*reKauae capon pncea grew on average taooe as fast us tarponbe leecna of trade improved at an average annul raleercent (ace ta We Bl ia ajgumdlio*nog price* lor oil accoa otcd for more than ease-half of Ihe rlac In total export* and increased gai
In anoihei unauf Su< ici hard currencyil)peneni0 andanof c>ear9 folloviodeclineercent
Tte volume of oil eipoil) (oude oil and petroleumo hand currency trading partnersI1 and dropped0 Itee lablcIn appendli B) at domeillc ouipulipcied off (Crude oil accoonu for jji:ooe-baif of Sonet oil eipotu to hard currencyeauli of ihe much renter Increase iniwreoirxnlrdd0 and IvSOi thaaptKa of oc.-voil eagntla flee* lhan fi-efsidi the value ofotal Soviet hard currency ciporu climbed foot i8 pencil0 totrcccidrnes, al remained al leti thanercent of total real hard currency taporu
Tbe annual volume of natural gai ciporti. vrhxb ci imbed fromillion cubic meirri0 loubic meterseveled off at an annual average of abouiillion cubic metcri9be volume of eaporti ofand *ood producu and nodi itagnaied throughout mucb of the period,aalei of ferroui metali and agncul-toral products rote moderately duringefore laUraga the carejbor ind equipment ihoriagea have limited ibcofi mint come from iocreancgly remote nil "hilt rn.'j OOmcitKfor lamber ami paper products Mil caused tccntri dorneaik tirorutc* of thear prodiKii iatt several ipjn
Cociracal etoom get" dramatically iaaccount for1 cercent of toul hardMow of the growih mulled fromooder *blchflrmi providedeturn for future rveduci cipunaWestern help hai alky-ed the IfSSR toleading ammonia ei2 mil-
lion loni "ere eipontdtther cbeinlcali are no* ai Urge Neverthclcvv Western thealreadyegun lo wrye mi.o| ulri nt. In then mar
achinery anflainlinpled tn real terms1 -Jv and then declinedai sales to liao fell Iraq hai. in_ fact. been the largest customer foi Ihe USSR'sand equipment.0 trans potonaccounted forercent of Soviet hardeaptxts of machinery and equipment, with automobiles alone accounting forercent and trucks, helicopters, and other ite.iu intended foruse an estimatederceni
Moit Soviei machineryt veil tuiied to Wei tern markets, nor it it backs loppedeveloped network for service or spare parti. While the Soviets can mats-produce, at Ic* cost, limple machinery and equipment iueh as ilandard machinend have enjoyed some tuccesi In caponing such productshc West, the market for ihese producu hai bceo ilagnant in recent years and comperiiion from newly industrial-ited countries ia growing. In audition, given ibe growing ithiigcodcs in sleel and othermalcrial suppliesthe USSR, Soviet machine builders are barely able to rneet ibe demands of tbe dornestk economy.
C>JWr (YaW Cmrrtivrioce ibcs, (liable earnings from sales of gold end arms bave permitted the USSR to limit its esc of Western credits,microti earnings oa Soviet ai'eU in Western baaks and from invKiblet and iransfert have uiually off tot interest payDtcnu on ibe debt. Cold traditionally hat ranked as one of Ibe USSR't (op hard currency earners.cumulativenetting Moscow SI5amount equal to aboutercent of Soviet hard Cocixncy outlays in ihc decade Tbe USSRold inventory oforn, worthillion at -he Uie3 price of about SUO per ounce
Beginning ia the, the USSRupplier of military equipment to tbe LDC*.mosi of the busmen coming from tbe Arab countries Wc eiilmalc thai total hard Cotrency aalei iiv0 million at the beginning of Ibe decade tovbouiillion0 Thtie etporu ire believed
entirely of majorytlcim
tuCb is flgbtcis.lea, and tanks. Miliiaiy ules Included In Ibe data for ci;>ottaO conain primarily ofoUtopters, spates, and olbcr luppcut ileitis
Whea all of ibe bacd currency curreni account licmi Inre added up and net flnartdngaken Into account, the Identified receipt! cicecdtjjpcxillurci (by an average ofillionhii calculated residual, "errors indmp'tcs that wo have not taken Into account all Soviet< currency outlayt. Apart from ihe likdibood that estimating eirora ere lubstaotlil, the rciidcal reflect! tbe eadnilon from ihe accounu (because of substantia' Information gaps) of the USSR*;
currency assistance to other Communist countries.
- Nei outlays in hard currency trade with the other Cccnmortist countries,
Net credit! granted to LDC* to finance Soviet sites of machinery and ojoipocct. Including military eoatpcncsL
Nettbortto ibe
West to finance talcs of oil and other commodftica.
currency expeasdllurc* to support Communist parties and tcrrortst actMtie* in tbe West
We have been able to estimate valcci for only part of the hems believed to be included in "Vrron and
a tbeof hard currency aiatsianec to Wind, such assistance may hare totaled SJOO million b sad dose tr iiI. The USSRQ0 cnjlboo deficit1 ia Iu bard currency trade with Hungary, tbe only East European country thai provides rufOoeot data to enable ai to cuke locft aa estimate. Soviet hard currency(mainly sugar) from Cuba totaled MOO million10 millionitImated drawing! oo Soviet bard currcocy credit! covering ulei of machinery and equipment toC* averaged about SMOearK
la Mi iihiM iaalwe vilWanaevmHHCtWvii npiumviiiSSIt't. eoiavit**fi tfpinwl id bf
-T. ,f IfclW ti^Vll ii iTVff-i] lilt Ii
atif-i. II IfKrf
reoaymevj to the USSR nveiagrd in riiimaied HISear, yielding net ir edits1ear The amount ouUlandlng at anyay tcioj- OD credit* for oil aold to developed Western comcould have been as high as II0p fromillion9 If the mcn tersoi am aaaoeaed. If1 soft weald demand forced lb* USSR to offer more favor, able credit termi for oil, the amount outstanding could tare been luUunlially higher
D*te. Soviet net hard currency debt rose0 million at the end1 toillion at the endS (too labiaotermlnedo curb the rise in net debt resultedrop1 billioa by Ibe end0 About tbieo-fifthi of the increase In the USSR's cross debt1 originated in private torrowieg from cooiroerdal (tanks and other commercial sources Much of Use iocreaae in the Soviet ccoiiDcrcaal debt In tbeas the result of large iyad*ated leseial pcu-pote loans Becacse of Iu wish to bead down Us debt and avoid preraUig bigb interest rites, ibe USSR has sot engaged ia toe* tseorvwiogben it cosv-acaidairdoaea iciacoc large credit
Soviet debt oo Western oflkiel and6 has groan cnoredebt arising from commercialIvo-fiiths of total grots deJjt Siote tbelarge purchase* of Western technology. Moaoow hi, used olTiclal andcredm to finance ooe-thlrd of in irnraxtstyoiimieci. and laigodurnetrr pipe fromAnnual Soviet drawiogi oa tovcio.-otntjexttped ficen an average cfo seaily II1 butbeld ataverageSHior. a
yeub* volume of *c* oxrunitownrsa peak of I* bClaan*billioneflecting fatting Soviet ordersmatblocry and njulpmenlin
apcendii Bl Sabtsditcd Interest rates and the long
*t ibirt in maifiiT w
tlull* I'mKii
.
unties tlucbed to rnott government-backed exed-iucDc.bdertbJy helped Moico* to conservebard cunetKy. Tbc interest rate tubildy. record kvd inihe older ofOcavortKreul raid io most Western countriescrceotaEc Dointt more (bin those eturted oa oflVcUJ ten. ay
SofT<icn( informal ion is not available tocitimateof Use USSR's bard Corrency debtWestern creditor. As ofheowed JSJ0to US bank* (Inand foreign branches and net ofin (bore0 millionbeOtnL2 mill ion on lend-lease
ed that, uw II Marcn , net liabiUlle* to Oernno baaka and Iheir foreign beaocfac* wereS
eslimate
Soviet oeTdebt to Bnuto tanksE billleei as
> . . attorrnon. tbr USSR
rad 4aa<d
w t HU
w itt-U,oted oura
trj.it. ih irssn-wth Wl
im ta^ lihrot htot
Debt rite reveals littleountry'a ability to meel iu fmtnoitl obligations and to tusiaic needed imports To provide perspective on the USSR't titua-iron, teveral indie*ton of ihe hard currency debt have beenof whichthat ibe Soviet position rerctiat quite auruicable (tee* inpceodutiwj ibe rsiio of rcpaytnenu oo medium- and long-term debt pluionebt to merchandise caponsthat, after rtsiai to aboutcroentT8 following heavy burrowing in the previous (wo yean, (far debt rea-rsce ratio fell toercent0 but rote1 rweent1 etexporu ttagnated. Thtl ratio itill coettparcs ei tretnelj ftvorably. bovrever. with1 debtraiioa for moit Eut European eoomrics. wfarch we estimate as taeorlng bctvreenercent for CmhoslovaH* lo aboutercent for Bulgaria. Hungary, and Romania.ercent for But Genua-ny.g percent for Poland. Soviet debt torvveeKirereal bard currency receipts wai_
The maturity rtrweturt of Soviet medium- and long-term debt li also fairly comfortable from tbc USSR't viewpoint Ultimate* Indicate Ihat. of lotal grori debt at ihe endabout two-fifth. -ouW fall due by ihe endhe weight of ihort term debt ha*
risenfiomerceni or gross debt6 to nearly JO percent1 bocauic of heavy uio of short-term grain cicdili Althougharge short-term debt doe* not present an immediate problem lor Moscow, it could II Woilern banks were to balk al reepioau to roll It over.
Two additional Iodic*tort reflect the impact of new borrowings ind debt lervtce paytnenu upon aImpor. capacity. Tha net transferdra-lax* lea* icpaymcnts ol* principal *ndibowi ibe locreaao (or reduction)easli of tMrrowlai Tbeeavy be*vcf*fag16ct Inward reaoarocearly J*ear bai carried with ii the coat of tiring debt service.olicy of slowing down newdaringwith tbe decitioa lo prepay aooieurodollareliminated the inwardnd resulted la an ouiwtrd flow of aboul Si* bUl'na1 tbe trcod wu reverted wiiboet inward tiaosfor0 uullion. Wc also calculate lhai poriioo of newpercent into service exatiog debt io order tothe est cot la whicholling over tit debt .
aad RetNSPchaoM11 lawPartili*Aflcr facMirtg id hard currcocy debt downite USSR wu bit1ising agttculiatal Import bin. oofi oil price* In tbe West, and tbe need to provide bard currcocy aascsuncc to Pot* ad The dcfVcSt on
- bandit* Irade4 bilUon. coanparodtDioac Ublche gap wouldbeen eveo higher had Mcaexrw not puahedetulalytdtnmoJnudunery aeajthe last halfor the yeara abole. tbe Soviet* managed to miiouia the value of ofl etporu at0 leveltKe rite offset the drop In volume
The vt'oe ol machinery Impottt fell by IS percenthile Importi of ticcl other than pipebyrtceot, and purchases ol chemicali levered off In real icnni. lhc culbacks were even larger At the lame lime, however, unporu ofroodi Increaacd by more than
ipe imports rose by more than onc-fiftb. The largo lo the agricultural bill resulted mainlyump in grain imports toillion torn *" "
The unfavorable developments ia the fust half1 forced Moscow to draw down its asset* la Western banks by an unprecedented SS billion. To ease its financial situation and rebuild its assess, the USSR borrowedon shotl-lcimforaold saUuntlal amounts of gold in the second half of the year. By tbe end of tbe year,were bach up4 billioa and the grot* bard currency debt hid climbed toillioa.
oscow continued its efforts to improve its payments positionyushing eel exports and bedding down imports, the USSR slashed its hardc deficitillion, or one-third of theillion deficit incurredxports were upercent, with about four-fifths of4 billioa rise coating from the sharp jump in oil ilia. Tbe volomc of oil exports2 for hxrd cut racy probably wuigher thanbe USSR exjorted to bard CXtrreDCy citi-tomcrs1 (toeo appcodii BL Even -itb prices aboutercent below1 level, the Sovietsrcoooooed increase in oil earnings, and total bard currency cochandiic esjsxts for the yearlUot
Tbe Soviets reduced importsercent corripased with those1 by paring purchases of Western grain, dsemivtii, and tscertubttlar itcd. Compared withyeartt hard currency grainfell offnlQIoo tooa to an estimated Jo million tons. Average price* paid for grain declined by roughlyercent, wttb tbe encavthty volume ihippol falling iiibttiotlally after May
The estimated volume of agricultural itapocts atber lhan grain iocreascd tubitaotUlly. on tbe other band, due mainlyharp rise hi purchase* of Western sugar. Oceanic of overall lowerotal Soviet hard currency expenditure! on agrienl'ural products
fell by ib eiilrmtolercent. Panial-yeai Weetoru indc data teggeai thatofid ofother then pips alto fell Import! of tnichloeeyequipment and of tiool pipe, however. reo*an eturna tod i6 billion1 billion,del Ivories began foe ibeSlborla-lo-Weatero Europe gu plpolloc Total hard currency ioipori*ULuo.0 Bullion1
Soviet trade data Indicate that doUrerJca ofrjitena io hard currency LDC cautctnartThis, together with the taproveineni ia
tba undo i- it. ioouM haw allowed tba USSRa entreat account turpi oi of rnoramail deficitI. It Uthat raoch of the ran la area deliver leiSyria fwUcfa, la tho caae ofotuudcreda hard cemncy ctrirntner) oa credit and thairtCTtacot (oal bard currency Inflows. Inmay havo earned aboutillion from
ofoert of (old.
Tbe lrriptc*inaeui In lo current acroeci cod two eoeraedrobabl* fallbard Oareaer eaaaat-tnce tomaytoukd ai rnaea ai SIMoaCOweduce lay the end?t> hard cwrirncr debt fefJ by ao0 rnUlioo, lo UOU bfHJon. Tbe ansooat outran Odin, oa Wratero prrti oiixnt-bactxd credira roac0 million toflbce asea of pinepmeol for the Siberia -to- Wecero Europe pipeline begae.
From Baal for Interna tiooal Sctttancnu (BIS) dau.tatfnule that the USSR's commercial debt do> dtoedihly IIfQlonin too by the end of the year. Al of tfali dedtoe probably occarrcd in that abort -terraagi oe rnediaeo- aod *mc-terra banhcrcdio are eatimaied alillioo or abcari the ttnse as itftruwoti. Moacow* anet* La Westernwhich fell by SIffioaoary toa recordf SI0 billion by the end
rwoacow ha* had totntaarUal price for tbe Improvement la III bard currency pcalOoo1 Increaae lo oil ciporu for hard Currencyachieved laig ely by cutting bad
otpotia lo fUaicrn I'o rope, Incroaalag import* for reulo In batd euneoey tnatkota, and holding down Soviet domcatic oil consumption and/or dra "tog down oil Invent- la1 .the USSR decidedighly tubal-dtxed etpceti of crude oil toast OenrtaBy.ngary. (Orlgteally, Mcacow had prom lied to roalnula oil eiporta toait European alUe* ai0 lordt the tame time, Poland apparently redaocd ll* trnporu ofa acidly of oil prodocta froan that USSR a* It* dceaerje rfpjlremeotj wera down becaaac iu indut-irial ptaat waa open dag way bokrar capacity.ajor rhare of2 lacrcaac la ofl cxporu to hard currency cocaine* came from the reduction In cipcrti to Eastern Eorope la addition, the Sorter* areto have rubataollaBy bicrtaacd oil Unpcca for tale in the -1 pu rcLaof Ubyu erodeia payment for am*to in2 from an rationhla brought total oQ importa2 to an estimated. Althoogh pan of thli oil weoi to aoft concocy tx>aoirie* such ai Finland, moit of Uie additional Imparled oil prctam-aWy waa used to Sovieto hud
corrtocyrie*
Since Soviet oil prodoctloo increased byhe tnrsrabrnaic VeveUog off of total tact oil oporti eaptW either very Utileoo the ceder ofercentdnrrirsrk cal coenrnpttoarawdown of oil ttocts.of ihe frojweocy of npocrs of fori abrartagc* Ca tbe USSR ia lb* pan few years, we believe that Inventories have boea taut. Ii dorsaranSc ofl enr-fnp-tsoo did grow. the USSR probaWyaaasadlagty dlfTkui to obtainerceoi rite la IrdustrUI prodwetkoa andrereeni locreaafl In ONP realltrvl for the year without making remarkable tutdVi la mnaervtOon or Intcrfuci anInillotion, or both. We do not beiieve, however, thai tbe SoMeti rnade neb ttridc* loheet period. On the contrary, realme autmpa to impose comervaUoe ihroogb rationing very likely trcM down prod-cikm In Induitry and orher eectori of ibe"
In addition.bai foxubaumial impom of grain and nonagricultural commodities Import! of machinery aod equipmeni declined In volume by mote lhanerceni. Conilnued impoti am clearly would interfere with regime effontmprove produciiviiy. Thepparent dcciiton to limit Imporu of grain will be fell by the Soviet consumermu of cer capiu availability of meat and dairy ptoduCU.'
rtalaacv-of-Pijaaaarti Prospects In spite of the substantial help the USSR received from hard currency imporu Inoor outlook for Soviei exporu luggeats ibai ibe USSR will be compelled io Until severely the growth of bard currency imporu In. Although the USSR could obtain acene additional relief by fartherthe screws on Eastern Eureese, aa it did last year with oil.ourse would be peiliiically difficult for Mcuor-w. giveii the ccooomic problemi already confront.hai area. In limiting or cutting imports. Moscow faces hard decisions regarding who it borne should bear tbeSoviei consumer, the inn nam for nsore investment, or industrial maoagers who need mtermediateas steel and chemical fccdatccax v.
Expmrt Trtudi Im im* ItSOi. Theoviet hard currency oil capons recorded7 pre*abty will oc4 last long. Oil productionast year wasercent above ibe level inOutput ii eipetted tolittle if any growih through told-decade before starting io decline Tbe ability of East Koropean or Soviei consumeis to absorb further cou io oil tupplka It one of the critical factors determining the level to which oilill fall.probably Kxi given some thought to making runner cuts in oil deliveries to Eastern Europe, ft apparently la Isolding off for the time being
utbacks In ddtverica of Soviet oil wouldlow io ibe fan Europeans, who could ill afTord lo buy oil on the world market or from the Sovieu for hard eurreaiey. Although) tbe East Eoropoanibe paying close io world market prices for Soviet oil. ihey will continue io obtain thl< oil mostly In.
cichangc for soft gcoda. that is. goods not readily salable in Western markeu. Attempts to bold down oilin.,. within the Soviei Union also are likely to fall abort of plana, especially since extensive substitution and coescrvaiioo depend oo large invat-menu."
Natural got offers the only bopc for sharply increased Sennet ci ports over the near few years. Deliveries through ihe Siberia-to-Watcrn Europe gas pipeline now under constructioa should beginmall scalend (be linei^ Deal fullouple of years later. The thup increase expected in earnings from natural gas exports, bow. ever, probably will fall abort In real terms of covering the decline la oil exports, even if Western demand is higher than we now foresee. However, although the Sovieu have their heads fall for the lime being juggling consiruaioo schedules for ibeera Europe aod other domestic gas pipelines, ihey would certainly agree toecond orhird line if they fdt the West Europeans would buy more gas.
Commodity exporu Other than oil, gas. and gold, meanwhile, are likely io abow Utile, if any. earlyf tbe thousand! of products and services oo ihe Soviet export list,ew offer much dunce for increased bard currency earnings during.umber of industria(for example, nocfer-rous metals andomestic prod jction isand domestic reonlremerttt arc ruing, sooect-inj the exporublr surplus. PUtinurn-grocp metals, nickd. andeniliter offer the greatestforamensioo. Chances are poor that the Sovieu will be able to boost tbeir hard currency oarningi from tales of tstachlncry. Sale* of limber, diamonds, and cotton arc expected to rectum aubiUniial bui noi to increase much becauseof ihcae goodi is leveling off or. in tbe case of limber, declining
i
Wc calculate thai earning* from canons oihor than oil. gee, arms, aed gold could Ineroato ai boil br roughlyear In realU estimate auuraca that Soviet planner* are willing and ablencxeaio La notnd allocation! of labor to sustain an capon pushroad front. It alio aisamet that Western demand will bo robust enough toa Urge volume of Soviet talcs. Because of these factors, woore realistic real growth rale for these escorts Isercent per year. Although Moscow could ttoq-up goldcould tellear without dipping Intowould have to bo Careful not to push too bard oo tbe market because of tbe effect on prices.
Tbe outlook for Soviet export earnings it colored ia tbe ibort term by weakness lo Western markets. World rail prices may tesnaiq toftew years. The roughlyarrel drop to prico already'experienced by Use USSR in IW) couM reduce bard currency carningi from oil tales by about IU billion.ccnunood soft oQ prl-es could alto impact vocrdy oa Soviet earnings from ether sources. In tbe case of natural gat. the SJ.J5 per millioo Btu that Italy agreed in3 to pay the Sovicu was coojhrj JUS besow the base price negotiated2oreover. Moscow may cam ten hard currency from arms talcs because of large declines in oil earning* in the Middle Fast.'
Higher oil price* would oocc more yield windfall profits foe tbc USSR. Increased oil revenue* mightbeip the Middle Eastern countries to increase their purchase* of Soviet arma for hardpun in Soviet oil earnings probably would much rjvorelrd tbe likely slowrJowo In Western demand foe Soviet nooeoergy commodity eapotts because of Increased competition from LDCs and oeviy lodortrlalirrd coootrtes. >
ChtTCWtJ Av/ecrforu. Ai thisoresee little if anyIn tbe real value of the USSR'* bard currency porchadng poweruch depends on oil ptkereat deal more ancertainty attaches to our estimate* for thehalf rl the decade than to thoae fot the QCll iben yean
We have made projections on the baiia of Our etti-matci of Soviet etport capabUllie* to tuggcsi the magnitude of tho hard currency constraints facing ihe_ USSR llirough tbe real of tbe decade. With the helperlc* of itandard accenting Identities, we have calculated troods lo Soviet financing reduircmenu on the bask of specified value* for key earnings Items such a* the volume and price of oil aod gu cipoeu and sales of arms and gold
The key uuknowa la the calculation It, of course. Soviei hard currency oil exports, which we haveecline annuallyear on average tobout ooctrJf2 level. This asrarnci that:
Soviet oil production average*5ear4S aod about
Domestic requirements forainno higher
Oil imports.
Oil cancel* to Communist countries remain at? level ofS.
Oil export* for toft currency to ooc-Communist eouotrk* (OUtntj Finland and India) remain at? level of roughly.
Because of soft demand in Western Europe for oil, nominal twice* are projectedevd offod rise with the rate erf bfltlioa for ibe rest of (he decade. Wc estimate thai gu expeeu fee hard currency will rise toOlroo cubk racier*er yea,5 and toilUoo m'0 as ga* tales to Western Europe rove. This atmrne*est Eareoeao demand for gu* rafcfci op mbstantiatly *erd that contracts fot gat coming through tbe oew pipe, line are not acaled back tupMfksnily. Altrroagb aorne forccasteri are projecting mocbCexaxod foe gaa. we believe it likely that thb demand wiQ pick opIn the second halt of the decade aa ccooomk
<tr tOTT* CIA OflfliaHilla IttStVo><tt
.itown imi taaaata
Ai:nmytlous Underlying limed Current)Projeetlons
extern rite2 and decline by an overateear.
Gat etpaeufrom existing pipeline! drop from on average of IB billion cubit meitnear$ billionear. Deltveriei through the Stbetia-io-Weiiern Europe pipeline riseillion m' In IW to
Heal men-ait, memesgeeit greyeai.
AddldmmeJ rami menu redei Kit an extraordinaryillion1 before dropping offear
KemJ net eat alugs free* IwrltiHetriad ingearcJ
GaU unlet riteorn1earearepending om the need for nek
Reed Impeett art II) held contianl. allowed itear
Real unrecorded ett-ndltwrts terrors and omltsio-t) art held const ant ol IJJ billion
Nominal gat petal for gas piped through existing lines drop from SIO per thousand m'2 {equalI3 per million Blu) lo3 before rising4 and SI98J3hey then rite with ihe rate of Inflation. The nominal price of gas going (Krough ihe new Siberia-to-Weit-em Europe pipeline startt0 J9 per thousand m'4 and then rites wilh ihe rolelatlon.'
The nominal gold price risesroy ounce133 end then rises wiih the role of Inflation.'
Dmlngtuplpellme Western gorernment-baeked credits art held atear In teal terms.
Drawings on credits foe tkc ptpeUae0 million5 billion7 btlUonnd II billion$
Nominal that-term commercial debt remains at the1 levelillion
Drawings an commtrdal medium- nnd long-term
credits vary to fill the ammtal financial gap.
average annual rate of about
Interest rates run at an II perceni.
overall anmaal laflatiem rate applying to all I'-dr except oil anSerrem1ercent
SmmdmeJ ait orient drop from an averaget for the tmtM of erwde oil and petroleum prodmeu rtfcmrd ra hard currency countrtet134 and then rite -ith the ratr eg" Inflation.
The trerege maturitys eight yean on nonpipellne official credits.eerthree-yeoi grace period) on crrdtti lor pipeline eoydprotm. and fiveon medium- and lonsr-term commeixtcj credits.
naivety in Western Europe ptclue allow thenee of gu, meanwhile, la increase by IS perceni ai conlrecti under tho Siberia-to- Wctiern Europo pi pel toeio be filled and then rue with ibe rale ol* Inflation. In ill, (be tu project will add in average of ibouiillion annually in nominal lerma lo Soviei bard currency cartiing*. Nctcninal earnings from oilowever, will be aboutear lower on average lhan if (he volume of col export! had remained at3 level.
la ourbe volume of projected |iict equal to the amounts: (I) currently contracted for through exhttngtt.lv to be pur-cilased through ihe ocw export lino. In fid. ihe USSR probably could tell tubus niially more gat lhan thri ihooid Eurocoan cuilomen lock additionalbca-TbeUSSR hasillion m1 of surpiui capacity available now in existing lines aod could increase thii amount ntarhodly by adding to Czecho-ikcvikiin transit capacity
As noted earlier, we allow commodity exports other than ecergy. mm aad gold to rise byear in real terms from2 level oflllien. Even iha assumption may be loo optimts-lic Tbe vcJume'ca* tbcae export! wu lower0 thanod farther all-ajtage occurredhe volume of wood aod wood prodoci exports fell by more than halfeal expert! of ancfcioery and ojaiccncnt leveled offV-8I. sad islea of ferrous metals and agricultural product! fdl sharply
Otves our essuaiptioo! regarding the volume and relative prices of tbe USSR'i hard currency export! andmaul gold talcehard currency catrehailng power would it beat remain level0 ai ihowa tohere nominal earttlagseen deflated by the assentedn Irnportercent)erceni pe* year ibereafter
Uunj ibeiee esllmaied financing re crulreenenu loulauln the volume of Impom al1 levelncrcaie Import volume by 1
i*#u$ I
USSR: Hard Currency IVrctuiLna Power
w- - v
lot li
dwl
It 1
Hi
imutB-
*
uda <uitoxv
0
wctpo.
percent per years ibown in tablebe USSR's debt remains Quite manageableJ in both cues and0 in tbe case where real imporu are held coosUnL If real imporu riieear,0 the debt tervicc ratio would approachevel the Soviet! would probably deem too high unless they modified their proem coniervilive attitude toward borrowing
Our projections ire highly sensitive io the volume* of oil. gan. and gold void Eachf oil totd would increase annual purciuuiag power by an average of roughlyillioa. using tbe real price* we hate assumed. Each iddilxxulf mini el gas tend would yieldS mill-on to real terms And for each addiuonalons of gold sold, real bard currencyould rise3 million
e have usumcd lhat export ranee* except for oil. gas, and gold a* notedimport pticci move together. Because of the decline in real oil. gaa, and gold price*oviet term* of trade deteriorate la that year but Improve4S because of the rise in real gubey theno change through lb* rest of tbe decade Tbe liiuauon could be far different, however,attle among the wortd'a major eel producers met priocs and
T
Cwm ci 1
USSR: Hart Orrrtocy
Uodtf 'i[CTUaU
Sconacioa
lev Cceiual
Ow-i*
t;rw-.
wo
-nyatti
i
oMin
Cna-a
im
Ml"
n>UO
*
market share) toxicireality. And, although it ii unclear where prices rerulilai from tuchstruggle would ultuutcly satle, the USSR would dailyajor knee If rxsca fell by SSband.ough role of thumb, every St fall in the price of oil costs the USSR MM million in hardssuming volume remains tbe tame. On the ceher hand, tbe USSRaw matcriaU supplier could derive acme oear-lerm benefitoost in Weiicru ccoooadc growtb ratei ihit couldeduction io global energy prieca. Oo balance, bow-ever, ihe USSRbe bun far more than it would be beJpedecline In oil prieca.
Ceaactaeio.
candor, lea lly. ai Soviet domeatiC dilTicuttia mountod ccooocnic growthMc-scow euu been leu willing to rely on economK lica with the Wat. Averuon io lb* rapid growth of hard currency debt in ibe rrud-lvTOi ledharpjy dower growth in real1 percentyear1 compared -ith more thanearW6 -and rcitrainu on new borrowing Wen em tradefollowing tbe Afghanbun im-oilon almotinl, dampened ihe enibuilcim ol piinnen fo. eely-ing on Imporu from tbe Wat Meanwhile tbe Polutl cniii hai reinforced the potllion of those opooii-ig
much dependence onadc
In remarks io the Supreme Soviei intale Planning Committee Chairman Baybakovlhat the volume of noa -Ccmmuoiir-eountry trade would grow byear. Thit cmith juitear. Proviilocal ettirruue* indicate that ihe five-year plan for trade with non-Communiii couniria ii ahead ofwith the tharji rue in impoiu1 and Ineiporu2
Imparl Priarlilu. Tiehether Mcaoow itosition to forgo the bencfiu that would accrue lo the economy from expanding ill trade with (be Wai during lhc remainder of. Within the limits of hard cutrency avaiUbilhy. world luppUea, and political coruuderaiadox. tbeiaimum wantmport sufficient quantities of firm prcducu to keep per capiu cceuumption of Quality foodi near pracnturchaae necessaryon teruli. and (IT buy enough macfaioery and tcebnology to moet pnorityoals.
Although Moscow ts likdy to place great emphasis oo increasing agricultural setf-iufTiocQcy. imporuillion tons of graiaitlioa tons of oilseeds and alsccd meal will be needed annually to support livestock crpaan'oo pUns during tbe ocit several years even with normal harvests. Tbe Sovieu could reduce iverag-eimports to lets than tbe pruiectcd level in the unlikely eventlans IO increase the share of roughage in tbe average feed* ration are lehieved.lam io increase feed efficiency ore met. Imporu of otba farm
i We oil, oral, andon dorncetie prodoetsdo but also onwhich the leadership is committed.percent decline
in pa capita meat ecatsuoiption the Sm-ioU permitted iaimporu oft cut back dightly from the1 level despite ougnaiing domes-liethat tbe present toadoot willing to increase imporu of farm producu indefinltdy.
A reduction in the value of farm imporu would allow it lean modaale ioaeotei in non agriculturalir hates of Western tteel and otba induitrial
ingulf will continue to be given priority to keep productive capodiyully it posilble. Imports of Urgo-dU motor nool pipe will remain criii-cal for the coratructloo of oil and gai plpldoea. We estimatee SovJeU will eccd to Import atillion toot of Modear duringost of about IJabout tbey the, Mew* should be able to tower annual pipe Imports because of iocreascd domes tic production. The Sonets are well along Jo building near ttcel plants lo produce large-diameter pipe, We expect thcae fadllilei to become caxrational duringlan peeled. _
In addJUoet, tbe Soviets will cooiinue toleast foe tbc oext fewarnounU of cold rolled ibect tied for the rnachloe-bolhlltig. autoeoobile. and cconinvcr dorabro* Industries Un plain for canning tod pactagtnan and various types of high-quality products for ttse to trinxformcn and electric motors.hese ptoducii are expected toreanaio atear on6hen ibe NoToltpetsa. metallurgical punt is expected to go into full operation. If tbc Soviets decided to Import from Ihe West iron ore, cofcioj coal, aod terap metal in tbe arnouati necessary to meet5 at eelan eddillorxal SI billion coo Id be added to ibc aonoxl impcet bill
lo reviewing tbc USSR's aucfainery and equipment re-BlraBCUts. we expect thai Moscow will continue lo (rie priority to import lag equlpencot necessary for ekr-eiopirtg coergy reaourcea. Tbe allocation of Soviet tttveflrnerrleavily skewed toward energyorarfcciLug otber aecton that are also lerujortnnt to eceoxnic development Alibougboo early lo know whatoviet Investment plan will loo* Uie, energy devctoprncnt will In all llkdihood eooiiooe lo receivearge extent, ihe Current Soviet energyriven by anoo the pan of tbe leadership thai ll may have lo accept an oil prodoelloo dedlrw In ihe. In addition to heavy emphasis on West Slbetlan oil and gas. tbe cisjoe elements of Soviet energy policy loci ode locrcated aubililotlon of gat for dl. conaerva. Hon. and rnodetnliallon of induiulal facilities Ihe energy acctots. Including aarodalcd Infratlmcinre.
tchedukd to rcceivr more lhan one-half of the ineremenl In lotal IflraiEirniITim
will have io rite alill funher in ihc second half
ofnless tout inveatmeni growth U
created aharply
Our analytic ol Soviei equipment menu fa duringand ibe continuing problem! io the oil Induiiry Indicate ihat requlrcmecu inill center on Western equipmeni aod technology for deeper drilling, fluid lllX and well completion and tenidng. In addition, ibowill need tophbti-caicd exploration equipment, offihore drilling plat-fdrnu, and lecondary dl refining technology. Becauseriticalaintaining local Soviet energy production growth In thb decade, coniinued Imporu or pipdarcrt. turbines and ccmreesarxrt, and other gasexpldutton equipmeni will be crxestary. Western equipmeni and technology will be especially crucial fotour" gu deposits, iueh ai those at Astrakhan and Teogtr
Tbe recent grcally increased cmphasb oa the Food Ptosis-ii suggests that agriculture and Ihe foodare also likely totpocial ancniida over ibe iwxt fewhxi program give* lop priority to upgrading capital stock in all phases of food pcoduo-tioo Investment allocation! have been sharply In-crcaird for industries that produce machinery for fuming and aoimal husbandry, fertilircr. ogtuproeai for food rxeceetiag. and norige aod uancpotuuoaovietof Agriculture and trade
i'l" have indicated that Imports will play an imponaat role ia thb feed-ceil led Inrettnieot rjeo-gram. Soviet officii Iteipeein'. tntcrctt inWcrtoB farm machinery, toad Osnstroctaoa equipment, feed proocnfag and paciajtngtoeage fidlhiesishiWc prodaca. Irtsreaslag Irnporuvcis^v: acid from the Wen foe ptedudcg pbosocuic fertilira are1iewed ii IrnponanL lo addition, Movo* has ibowo renewed Interest In completing factoiies lhalpeopoved or luned loilh Western awlsinnce- These Include ibe Cheboksary irtctor plant, grain combine rntnufaesuilru; faaHliea nt Taranrorj.ltughtci how'meat packing ptant nool Moscow that wpvW ecrverototype for future tooiliuclioo
A* in recent years, Import* nf Western machlnciy for other tocioo of the economy probably will auflor II hard air ran cy coruiralnii continue. Moscow probably will iry to conu'ooe lu Imporu of necessary ipare parti aad otbor aalcteoaoce Hems, forcnalader of tba cvrreat five-year period, at kan. (beplan calli for Incrcated emphasis on rcaovatloai and roedorn "rationihoeapcnsoof new construction. Modernisationo bo directed particularly at Ubor-Intensive Cuxlllary processes, lucfa ashandlinx, kadiej and unloading, and warc-hou*-iag. which abaorb cnora thaa oaa third of the USSR's IndaiUuI wort force.
Ths need to curb the growih of hard curreocy imporu eeancaime whoo (lower domcatlcaking reaoureo allocation ded-ttons cnore difficult year by year. Although they may try. Soviet leaden probably nlculate they cannot count oa tbe East Earopean countries for much bdp. AJihoogb It could provide more coeaanier goodt and arange of Induitrial andodi.
In'-: 0 provide.t limited by Iu own cooctomjc.
procJcrm
The pcaslbiliaes for eapaading Soviet hardIn Ibe latter part of tbe decade andgreater. Apart from ibe possibility tbal oilagain rue, (beconcern West
European Imporu of Soviet natural gai and both Soviet and Western pratcka concerning use of and acocn to Western credits. Tbe Andropov admleutnlion, faced wiii ac-rere rcoooouc difficulties, ts likely toide range of rcoooenic policy aluma-
- -1 - tepi" Imporu froen ihe Weat'c (mprovceneau la prudactivfty and tech-neoogy
o Increase hard currcocy Imporu would beipand gas eagoru lo Western Europe well beyond presently contnaed ansou-nta When ibe esrtort pipo-lioe aow briegompleted. Ithave enough capacity for additional Soviet gai dctlrerica Unlest
sourcea are developed. West Europe in gai demand ahoold be lufTlcioni lo eovcreliveries In theand. And even II alternative sources ire developed, the USSR could offer gas at lubatintlally lower price than those projected for new Norwegian gas.rofit, andreat deal of hard curreocy.M Sovieu have amnio gas reserves to Justify ooe or several addltloeal gaa ptprlinea of the size of theub constraint will tc what Wesiern Europe aod. oomuch stnallcr scale, Japan need end arc willing to buy
Western crediuotontlal source of aubetantial sddltional Soviet hard currencyut ooly If Soviet debt policy becomes lea coiiscmtKc and Wcatem govcrumenU provide eocouragcavool and laiunnce to the lenders. Tbo Soviei debt pcautioo is currently easilya ratio of debt service to bard currency earning! of IJprobably wfU remain ao at leastocid. if it wuhed, increase the debt service ratio subsuoiially before Ii reached rreasbkaocne IcveU
Tbe main impact of an Increase In Sovietearnings ia* crediu would probably beof Western machinery and cquipcoccit.declined substantially in recent yean.af Western rruchlnery aodmainly of equipment tor tbe cnl. gas,coctaDargical Industries. Tbe main purpose ofu to alVrlate severe borjlcaochseels aad key lodostritl oaaterisla. Alocreaae ta hard carrcacy receives couldgrowth inmachinery aal eejcepmec:
UrgelgeuTicaauly afreet the tccaSeraixatioo process. By the tameurther decline in imporu of enactsloery and rcjuipmeni woaJd enakz it ereo more difficult lo reduce thef bottJeoecas that have been hampering Soviei economic growih
BLANK PAGE
BLANK PAGE
r
titUUcil Table
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appendix C
Kstlmattns Soviet HardDebt
the ussr ctoca not lokaao information rc-lerdiruj iu 'iiun-.ulionii (ha west,of so-hot indobiccnou must rtly on western financial reporting. such reporting, however. contin-aes to be servoutly deficient in both scope ind quality of coverage. tali paucity of data hai neceaiiiatcdndra aauumptior* in ealculiiioj the tutelar* aad dm of soviethe wett. setaataaary of lac rneiaodoto-gj aaed lo estimating soviet debt.
data
we ue ai the barii of oar wtirnaua cf sonet commercial debt reporting by ibe bin* (orsettlemeataoa the ia*etifty pcaiticaa of western cotnoierdal banksb lhc ussr. tbe bis scrfo* it adjusted to icoouateported bank loading supported by ojitcial creditand japarresc bank prjtilioni reportedbe bis bet not broken out wiih respect to the ussrj) auutaa bank potfuooi not reported to the biset sovietfn-it tbe bis reportings) soviet prootbsory note* held in the west but not (octoded io bts reporting,i botrowing by ihe iirterns-tkcni banks of tbe council for maiual economic- (ccmak which western hanks indode in (heir poolkm relative to the ussr
fromdau on oftictally backedstbnate ihai portion of bank leading thatounted ander our esurruies of officii ly sarjported debt. since wc lack aatborvtauv* trtroranatioa on iberrtount of double counting, out rati ante* arc aubyectide 'sogv of error for example, la iw we allowed0 mill too in double couailag to esti-metleg tbe ussr'a debt we beikve that the total probably ranged between isooon and si bill km
in the eate of borrovrlng by cbma'i intemsilonsl banks. western bank* indode ibdr position*b tbe internaank 'c- feunuemcEC) and the interntllonsl irivciimeni (lank (iib|
mkkodojoty for fstlmsdng soviet debt
ofrkiil art tacBJautn* lirarrgrta**NATO
Sort*r toS-tlraUni. AnruM. ul Japan
ouimaiad br unoa! driaiiKi buad an mn^dny. nMpaioa. ii>1
baak hbM USSR a* ntanai io tbc Bul
far IcUrBJ'Jcai) SaOcewUCBBi
r for Ifll-J*
"rtin. ilMK tn- DaKb
ussr-fan Earspcu niidaal ft*rnn quint) ib
Sfffict praBBaary aotta bead ta Oat Wen bet oat fodnocA Ie
repwdastnttcttrs
Nat sarinewiatat tta, milaa arm
Membran
ir BtS
m USSRoral to Use
tfS
S-tn.and Dm* Stat kUhOJOotVnn (ta USSR-Ba. bwranva*mmIS
rait-**
to their position with lhc ussr. usingCH balancee estimate that portron of we*tern bank net aract* wkb the ussr -that actuallydlog to the two lotcms-tionale tubtractmounta fromweitem bank cuim*be ussr to derive the petitionbe ussr alone. ,
USSR; EitUntcd Mm* oa Weareen Goreraioent
ud
m
CeaucJuoaet
Dc*
Total
J
regard is doable counting. apparently neither the BIS nor those. It ml!ur wi in WcsWa bulk report-it proceetare* canthat poruon of umu ibai oscmbcr hanli report to tbe BISacked by-credit foeranteca. Reporting procedara and ootmaniooa appear to vary by coaatry We bate assaulted lhat caTanbOy rapecrted creditsctuible share ofang tialan oo tbe USSK. Tatar* are badkatioo*ortion of oftkctaOy aaqpccatad crediu bead by French and*eported to the BIS. aa an all officially aaajportod oomterbni crediu held by British beaks and all ctTVully gwaraateed US credits. To data, theaf UK Icauu not dettorrtleatcd In poands untie* has bawaa minimal, aad US banks hate not mjaaaiad official credit toarsctcea oa ibeir loaaa to the USSR
batata* Oak* aVacfcaal by Woaaan "i i il Asanas! NATO reporting on official crediu aad oa avwrtnoetrt -guaranteed Wen eraocnma-nrnb* primary data aoorc* tor callthe official [ontoe of Soviet debt. Aluscaigh the NATO reporting doe* not provide separata totals for each lender,referred to lhat nude available by
the OECD because It contains morereporting by member aerrerrucerits. ftocaaae of lag* ia tha OECD reporting,raw sram tnacbiarry and pipe trad* dau tohe NATO data for coemnea cavtaMe NATO. Tbe acparate coti/naloa for the NATO prajp. Japan, Austria, Taiili* aad Swt-rxrUnd ar* thee cnanblned to derive total WeaaCra governmentdebt (sec table C- Jl
From un aforterictitnacd statisticale bare derived say* ccenmltmeau of gtsaragfxod credau. drawings on tboa*nUUoding undrawn Otxn-mItinen:i. COUUodlng detX. and totalStOCCmanumber of dmptifylni eiauirrrainea In coenpetlag tbese totals, weO-prrceoi range of error to oar ceumatr* The utformatioa on eeanmrt-eaeerti apparearUy rcfarv en pan, ao afters af Weatoro credit for epectiV projects. The esrtaaate of Sovietf| by totalby ih4laflatrd to tbe exbrart tbal Weatera eementtmefiu have not been matcbed by Scwiat orders foru[pment, pipe, or other prod nets that have yet lo be delivered..
NATO CwiMa Tbe NATO Economic Dlroc-tortta axoc canton of reporting on cdTkial credito ihe USSR Vrx proved lo to verra deteeralnloj the hard cctfteocy debt position of tho USSR. ThiieUee oa cat* collected by NATO from mem dot coenliie* oahe NATO report provide* Information both on officially guaranteed supplier aod buyer credit* a* vreU a* direct |oveniraeai oxport erodlu. NATO'*otreprint of Individual mora be* coon try roporti. but anI'Jon of these report*erie* of table* withysli that hignlighu ley aapocti of the Soviet debt and finance position.
from (be NATO and OBCD data, rgimeooopoaed) new comtnlaaont* of guaren-toodotal Soviet cxpoaan (debt aad no-drawnrawinjr on com raitebt retrlco peyracrits. NATO dee* not reporttotal for Soviet debt on drawn commitroenti from memberurthermore, debt cannot be directly competed from repotted dab* been to the NATO iu tUtlcx areb,andre bxtoded bt the total* reported by NATO. '
Ton, are matt also dccapittlhte tbe NATO total, which require* making an arxumption about average term* of Wortern credit* expended to the USSR. Beanie NATO doe* not report lending byember country cor dors It resort average Intctcat rates aad cut artre have had toric* of average credit term* to applyhe iigrcgal-ed data. To tats data arc applyveragea tartly of eight yean with repayment of patncipil la ejaxin tba barSj ofon the terras of tadMdaai croLu to the USSR. wterocot tamal bluest rate lor aediu committedercent for those committed. TA percent9ercenthen used to decupluHre the NATOexcept for ibe4hese terms yielddebt service total that closely arxtraairaate* the Ihrurcs reported by NATO.
he average credite axnpoic dlroctij far the NATO tkn*ew eoeotnllrrrenu of principal.f principal,otal
etpoaan on principal. Appllcstioo of tlie avctagr
credit term* against eatluuted drawing* ia turnrepayment schedule* for both principal andeatnnlnx. value lor the debt series by computing the level of debt thatamed creditpublished daU oa debt aertioae coo srxtxted ta* debt lerlo* by addlag cunuUiive draw-bgt through each year to theO base valoe aod (ubtnctmi extend* lire rrpeyTacets of prindpaLeatunaled debt from the decapltaUxed expo-iare total* yielded undraam ccrnmltmeata
Thtelm*lea of Soviet draw-lax* on credit* from major avwereroont loader* outside NATO (Japan. Sweden. BwltterUnd, and Aeatrta) were derived by apotytog to Import* of machinery and ojuipciont frontcountries the ratio of import* of machinery *nd equliaaeiit from the NATO oouotriei to the drawinf* reported by NATO. Repaynxiiti of principal andn drawn credit* were oorapotodthe same averse* terms applied to tbe NATO drawing* series. OBCDhe bath for data on new commitment* fromteris. Swickx-laad. aad Japan.
The coranoted tarda! value for each ox ttao* debt seriei wm* crvatracted to coolorm with debt service esrimatrs1 and reported owimlttr>eoO. Tbe debt estlmatrja for subso^ocm year* werebe ixoe way a* thoae for the NATO group- Uadrawa oxmchinent* from Austria. Sweden. Swiuxriand. and Japan are calcalitad by nbtraOrat total debt from total finxwclal dxlmireported to OECD1
Original document.
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