COMMUNIST AID ACTIVITIES IN NON-COMMUNIST LESS DEVELOPED COUNTRIES, 1979 AND 19

Created: 10/1/1980

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Communist Aid Activities in Non-Communist Less Developed Countries, 9

Research Paper

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National

MIKTH

Communist Aid Activities in Non-Communist Less Developed9

A Research Paper

Research for this report was completed on IS

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6 For information on obtaining additional copies, see the inside of front cover.

Communist Aid Activities in Non-Communist Less Developed9

ommunist economic and military aid programs continued as a

major means of penetrating the military establishments and influencing the governments of key Third World countries Arms sales reboundedive-year low88 billion last year, and new economic aid commitments stood6 billion.

The Arab states accounted for nearlyercent of4 billion of Soviet contracts for military hardware Soviet military deliveries jose6 billion. The high dollar values for orders and deliveries reflect the greater sophistication of the equipment being supplied to LDCs, the higher ruble price tags and the increased value of the ruble in terms of dollars.

In contrast to the rise in Soviet sales last year. East European arms salesa sis-year low0 million, and China garnered0 millionorders. The Cuban technical and troop contingent, especiallySub-Siharan Africa, made up two-thirds of0 Communist

military personnel in (be Third World

Communist countries followed the9 billion of economic aid commitments to LDCs8till6 billion of new pledges9 (seeast European aid0 million went mostly to five countries in all major regions, and Chinese aid5 million was allocated largely to Burundi.

NOTE: Within the aid context, toe term* ixtmloms. coounttmtius. and arttmtnii refer to pledges to provide goods andither on deferred payment icrms or as graots.onsidered to have been eatended whan accords are initialed andormal declarator, of intestc For tcomomU aid. credits tih repayment terms of Tive yean or more ate .acluced Where terms are tno-a, the credit, are designated as "trade (redm" if esrscet^tioaksa tkaoears. For asWiavyll sales arefor can or proved sndcr cxccUts or rraaU The icrrmu<efer to Ibe delivery of roods or tbe use of semees.

The terms Uis dtvtloped ammritf and the Third World include tbeountries of Africa except the Republic of Southll countries of East Asia except Hong Konj andalta, Portugal, and Spain inll countries in Latin America except Cuba;ll countrie, in the Middle East and South Asia except Israel. Kampucheaaos.and Vietnam, which became Comrnuninre reported on for prior-yean for historical reasons

m

Communist economic aid disbursement! fell0 millioneven-year low. because of slower drawdowns of Chinese and East European aid. Deliveries of Soviet aid continued at0 million level of the past four years.man reduction in the number of Chinese in Sub-Sahuran Africa, the number of nonmiliiary personnel stationed abroad remained, largely because of the increase in Soviet technicians in Iraq and Afghanistan.

In theearshe Soviet Union has responded to aidinountries,8 billion of economic aidillion of military aid. The USSR has0 LDC nationalseveloping countries at Soviet academic institutions,0 in technical skills, and0 in military skills. Eastern Europe has supplemented the Soviet effort0 billion of economic aid extensions andillion of military commitments, supplying large numbers ofand military technicians.

These long-term military and economic aid programs have enabled the USSR to forward important strategic, geopolitical, and commercialat lowin the Middle East, North Africa, and South Asia.

Having earlier supplied outmoded weapons, the USSR in recent years hasillingness and ability to deliver sizable quantities of modern aircraft and ground equipmentast schedule to favored clients. The aid programs have given Moscow strategic bases, establishedon Soviet sources for military and industrial equipment, earned much-needed hard currency from military hardware and technical services, built up trade relations with the LDCs, and penetrated the military power structures in key Third World nations.

The Chinese, in their separate and sometimes competing effort, have mounted an inexpensive, down-to-earth economic aid program that fits the needs of the poorest LDCs.

Contents

I'age

MilitiryaadBconornic Aid to LDCs in

Milita ^Transactions Bounce Back in

Economic AgiwmcnU:ContinuintSlrongin

Perspective onears of Communiat

Military Aidof Soviet Influence _

The Economicersistent Penetration

"II Lf tall II

Quarter Century of Communist Aid: Regional

Table*

Military Agreements With Major Noo-Cotnmunist LDCs 5

onunuriiat Countries: Military TechniciansLDCs

Military Technicians in Non-Communist LDCs,

USSR: Economic Aid Agreements With Major Non-Communisl 7

Communot Countries: EmocaaMc TcrhmriirtJLDCs

Students From Non-Contmunist LDCs

Communist Countries

Ccanstrjaja: Military Aid to NoenOxiimuriai

Countnca Soviei Military Relations With9 14

A-3. Communitt Military Technicians in9 Communist Training of LDC Miliury Personnel in Communist

Countriea: Economic Aid to Non-Communist

Countries: Economic Aid Extended to Non-Communist 18

LDCa

EcoocanscTecaaakaaja aa Non-Cocnmuriui9 tl

Students From Non-Communist LDCs Being Trained in 23

Communiit Countries as of9

A-9

Civilian Trade WithO

10.

Europe Civilian Trade Wuh Non-Communisi LDCs

Civilian Trade With Non-Communist LDCa

East and North Africa: Communist Economic Aid Commitments

Communist Economic Aid CommiimenU

Communist Economic Aid Commitments

Communist Economic Aid Commitments

Communist Economic Aid Commitments

Communist Economic Aid Commitments

Communist Economic Aid Commitments

Africa: Communist Economic Aid Commitments

Countries: Aid Agreements With Nco-Communist LDCs

of Soviet Economic Technicians in9

Sectoral Distribution of Aid to Non-Communist

East and North Africa: Communist Miliary and Ecoikwik

Asia Communist Military and

Africa: Communist Military and Economic

America: Communist Miliury and Economic

Asia: Communist Military and Economic

Communist Aid Activities in Non-Communist Less Developed9

and Kcoaoroic AidCs9

Military Transactions Bounce Back9 Large ordersandful of Arab customers pushed Soviet sales ol military hardware to the Third World toillionp5 billionoviet arms deliveries climbed to an alltimc high6 billion. In contrast. Cast European arms sales fellix-yearillion)nd China garnered onlyillion in new orders.

Arab States: The Big Buyers. Brisk Soviet sales9 were largely the product of beightened political unrest across North Africa and the Middle East. The Arab slates accounted for nearlyercent of Soviet arms sales. Moscow concluded major new arms agreements with Iraq for2 tanks andighter aircraft. Syria also arranged for new arms

More Expensive Equipment. The dollar value of Soviet arms trade over tbe last several years has been driven up by substantially higher ruble prices for Soviet equipment, the increased value of tbe ruble in terms of

the dollar, and Moscow's willingness to supplyadvanced weapon systems on short noiice. Inbe USSR supplied mostly post-World War II types of equipment: in recent years, Moscow has been replacing the older equipment with more sophisticated, expensive weapons

High Profile Military Presence. Cubans made up two-thirds of0 Communist military advisers, instructors, technical personnel, and"troops posted in the Third Worldoviet personnel abroad (excluding Soviet invasion troops in Afghanistan) grew by one-third as Moscow beefed up the number of technicians to Afghanistan in anticipation of its late-year invasion.

Almost three-fourths of the total Communistabroad were in Sub-Saharan Africa,0 Cuban troops atill stationed in Angola and Ethiopia. The regioneavier concentration of technicians per dollar of equipment delivered compared with the Middle East-North Africa and Sooth Asia because of Ihe sizable combat contingents in Angola and Ethiopia.

ank

i Fighrr

ontinuing Strong9

Communist countries followed the9 billion of economic aid pledges to LDCs8till6 billion of new commitmentshe USSR accounted for two-thirds of the total. Eastem Europe for nearlyercent, and China for the remainder.

Most of the Soviet aid was extended to cover Turkishexpansion of the Soviet-built Aliaga refinery, constructionam on the Arpacay River, and.uclear5 Soviea-Turkish framework agreement. (Moscow has been increasing; iu use of Vomer term framework agreementsuh terms are subsequently nego-liaicd for each individual contract) Other Soviet aid commitments9 were to Ethiopiaillion) andar below the large-scale industrial assistance expected by each country. The aid lo Ethiopia feaiured agricultural development; Afghanistan received wheatrant.

Eastern0 million in new9 included:0 million to Jamaica for an alumina plant,illion to Pakistan for eight merchant ships, lo be delivered in the; andillion to Nigeria for machinery and equipment.

China5 million of new assistance, lis smallest commitment of economic aidChina itselfillion ofcredits from Argentina and Brazil. The only

substantial extension in Sub-Saharan Africaillion credit to Burundi.

Disburse meats Dec lime. Communist economicseven-ycar low in absolute terms and leuercent of global economic aid disbursements. South Asianaccounted for more than one-half of0 million in Soviet disbursements9 because of heavy support for Afghanistan's Marxist regimeteel mill project in Pakistan. Middle East recipients accounted for most of the remainder.

he USSR established the Research Institute of Economic and Technical Cooperation within the Soviet aid organization, the State Committee forEconomic Relationshe new institute is charged with improving tbe impkrnentation of aid projects as well as with the marketing and after-sales service of Soviet machinery and equipment provided under the aid program.

Marketing Communnt Technical Skills.ommunist economic technicians wereinDCSustaining tbe overall high level* setast Europeanshend the Cubans and Chinese0ncrease in the number of East Europeanspercent gain in Soviet personnel9 roughly offset the0 reduction in China's African contingent. The number of Cubans in Angola droppedast year, balanced by sharply increased numbers in Latin America

Nearly twc>thirds of ihe Soviet technicians worked in Middle East and North African countries, with employment on development projects outnumbering administrative Job* three to one (seen Sub-Saharan Africa almost as many Soviets were employed as teachers and doctors as on project wort.

A* many as one-half of the Communist technicians in LDCs were under commercial contracts.ast Europeans and Soviets in Libya, working, largely on public works andn Sub-Saharan Africa, mostly in Angola and on an oil Pipeline inn Iraq andubans in Iraq and Libya; and several thousand Communist doctors, teachers, and administratorselsewhere under various contracts. About one-half of the East Europeans were in Libya alone90 worked for other major oil-producing countries, while only0 Soviets worked for oil-producing nations.

Chinese technical services impose the smallest drain on LDC economies because no hard currency payments are required. LDCs pay only the focal subsistence coats (the equivalent of aboutear) for bousmg. food, and transportation.9 the PRC set up the China Civil Engineering Con*:ruction Corporation (CCECC1 to sell its technical services to developed country contractors, especially for work in tbe Third World. The Chinese arc0 annually for skilled laborers, and up toor other skilled personnel.

Student Programs: Academic and Technical. Theof morefghan students into Soviet and East European academic institutions9 pushed Communist training programs to record heights.0 Third World students departing for study during the year brought the cumulative total of LDC academic traineeshe Communist countries have greatly expanded their facilities for foreign nationals over the past five years.tudents went to the USSRo Eastern Europe: it yea rend, more0 were studying in Communist universities. Aboutercent were from Sub-Saharan Africa andercent from South Ana The Chinese, whose own educational system has been racked with conflictrc now hostingew hundred LDC students.

figure 2

Eaaptoynent of Soviet Economic Technicians la Non-Communist9

Communist countries alsoechnical personnel for project-related training, bringing thenumberame from Arab countries and South Asia, where the major Communist projects are located. As an adjunct to tbe academic and technical programs. Communisthave trainedDC nationals in on-site facilities and have provided atfor academic and technical training in the LDCs.

Perspective oaears of Comxnunrit Aid

Miblary-

of Soviet lafleeace

In theears since Moscow's first consignment of military goods toihe USSR hasillion of militaryloDCs. withercent going to nine key target countries. Eastern Europe has provided an addi3 billion, largely to major Soviet clients, and

illion, mostly to Pakrstan sod selected African nations.

The USSR, originally willing to lupply arms to almost any LDC at tow prices and on good repayment terms, parlayed its0 million Egyptian dealcar program by the. Ten years later Moscow was selling LDCsillion worth of arms annually. Soviet military aid wasattractive to newly independent countries that hoped to modernize their outmoded colonial armsThe USSR offered fast delivery, freemaintenance services, and such financialas large discounts off list prices,year deferred paymentsercent interest, and accept-ance of local goods in repayment. (These conditions have been largely eliminated except as political concessions.)

At the sun the Soviets exploited Arab-Israeli tensions, Yemen's conflict with the United Kingdom over Aden. Afghanistan's border dispute with Pakistan, the India-Pakistan crisis, and Indonesia's territorial conflict with the Netherlands and Malaysia In addition torig ihe large new financial returns from military sales. Ihe Kremlin has continued to give overriding weight to potitkal/mihtaryin aiding nationalist movements in Angola and elsewhere in Africa, in plucking Ethiopia out of the Western camp (albeit at the loss ofnd in makingripe for takeover.

Top priority has gone to Arab countries in the Middle East andraq, and Syria, and later Libya. Algeria, and South Yemen. Afghanistan hasmaller but steady buyerndia and Indonesia' became big buyers in the; and Ethiopia isnly major new arms customer

Vpwmri Tremdin Military SmUs. The rapid growth in Soviet arms sales has been stimulated by three major developments73 Middle East wars, which triggered unprecedented Soviet supplyto the Arab belligerents; the opening ofmodern weapons arsenal to LDCseaction to Israel's deep penetration raids of Egyptnd the emphasis on raising commerciarand financialfrom arms sales following the rise in oil prices.

Moscow's willingness to sell its most modern weapons set the stage for full-scale Soviet competition with Western suppliers in the lucrative Middle East arms market. Moscow no longer could be identifiedeller of last resort purveying outmoded, reconditioned equipment0 million arms deal with Ecypt0 provided advancedndurface-to-air

' Tbe cater from Ear*ana!Sadati opelwon of Serve* (room? andcompleted soon after ihc)he WO nulIMn Soviet ironadonrsia endrdith thr abortive Communiit coup in5

missiles (previously deployed only in the USSR and Eastern Europe)oldiers lo min them This deployment was ihe fim important example of the Soviets providing combat units to operate modem equipment in Third World countries. From the. the Cubans, often acting as surrogates for the Soviets, entered into active combat.

Eiealaiion of Arms Sales. Higher prices, more complex weapons, and Arab oil wealth sent Soviet sales soaring to more than SU billion. giving the USSR one-fourth of the world arms market and second rank behind the United Statesupplier (see

Because of the3 War. Arab orders for Soviet arms escalated and were five times as greats. The Soviet policy of greatly expanding hard currency earnings from arms tale* affected even politically prized customers, such as Ethiopia. Four major Arab clients accounted for more thanercent of the total sales. Sales to India and Ethiopia together accounted for anotherercent of the total.

Moscow's sales of expensive late-modelwhich sometimes predated exports of this equipment to CEMArecently included sales ofndet fighters,ransports. SA-9missile systems,2 tanks.

These advanced weapons have required more extensive training and maintenancearger number of Soviet and East European military technical admen The few hundred advisers sent to Egypt, Syria. Afghanistan, and Indonesia in thead grown toy the, posted inDCs; ihe number had more than doubledears later and went up sharply again9 to0 persons (seehe USSR provided most of the supporting services needed for assemblingtraining LDC personnel in use and maintenance, and advising LDC commanders.5 large numbers of Cuban troops have been used for combat in Angola and Ethiopia and for training of local combat units (see

Table 1

US 1

Military Agreemeatsn-Communist LDCs

.

Successes and Failures. Moscow's failures arc well known. The debacles in Indonesiajnd Egypt, ia particular, caused severe politic! embarrassment and eoonomic loss to the USSR. Even so. id the case of Egypt- Moscow could take comfortelationship of nearlyears that had given it cloutorld power, had established its bona fides in the Third World, and hadase for spreading Soviet influence in the Middle East and North Africa.

Among the successes of the military assistance pro-gram, Moscow can number the obtaining of base rights in several countries; the use of port facilities in Syria and Ethiopia; ihe use of airports in Mali and Guinea during its venture into Angola; and use of facilities in South Yemen (and previoasly in Somalia) for naval and air intelligence operations.5 when the USSR was denied port and repair privileges for its Mediterranean fleet in Egypt Moscow gamed access to facilities in Algeria and Tunisia. After beingfrom Red Sea naval and air reconnaissance facilities at Berbersoscow transferredto Aden and later Ethiopia.

Moscow also has profiled economically from its arms sales program;

0 and in every yearrms exports kept the USSR's trade with LDCs out of the rod

Moscow has expanded its hard currency receipts from arms salesesult of convertible currency requirements for payments on almost all orders in recent years.

Table :

ol Perm* Table .>

Ot fflwcl

Military Technicians in Non-Communist'

LDCs sometimes have become disenchanted with heavy-banded Soviet methods, the customer list continues to grow. Sales have increased as theof fast delivery,ree technicaland access to advanced equipment havedrawbacks in tbe program.

From time to time. Moscow has withheld vital spare parts, technical services, and ordnance to exactor punish Third World clients, causing mayor clients to diversify sources of arms to reduceon the USSR.

Tbe Economicersistent Penetration Effort In theears since the USSR extended smaltcredits to Afghanistan for municipal works. Moscow hasumulative SIS billion of aid toountries and has built up nonmilitnry trade with the LDCs toa two-way figure ofillion.

Commitments have moved up erratically, recently averaging aboutear and peaking in

Neera

Sob-Sahara*

Ulin

' Mir-nrtimof number pmcm (or one anntJi or nor* Naamars are Meaded to

MiddleJon

Figure i

4

US 1

Economic Aid Agreements With Major Non-Communal LDC Client* 1

steel mill set the stage for large industrialespecially to Algeria and Egypt for steel mills. Egypt for building Moscow's sbenspiece. ihe Aswan Dam: India loublic sector industrial bate; Afghanistan for agriculture and road developmentas pipeline to the Soviet border: and Iraq and Syria for assistanceide range of industrial projects.

omsenwtism: rtpairimt ihe demege.he Soviet bureaucracy had begun to question the program'series of difficulties- sjch as the buildup of large unallocated credits, long delays in completing projects, and Soviet failures to establish viable programs in Africa andopposition to the program at home. The fall of Khrushchev andore conservative aid policy resulted in the elimination of unallocated umbrella credits, more care in conducting feasibility studies,oretailoring of projectsC needs. Thoughin approach, the new policy was accompanied by an increase in economic aid commitments. Moscow

extended more trade-related credits with shorter repayment periods, higher interest rates, and downpaymcnti.

Middle Eastern countries were still the favored clients, and Moscow continued its overtures to India. The Soviets initiated new aid projects in the neighboring states of Iran, Pakistan, andmembers at that time of the Wesicm-spoosored Central Treaty Organizationf iheillion of aid extendedboutercent went toin North Africa, the Middle East, and South Asia, largely for heavy industry (seeoviet commitments in this period7 billion for

steel mills or their expansion and an3 billion for other heavy industrial plants.

Even0 additional African states became Soviet clientsverage annual commitments fell byercent and Africa's share of the total Soviet aid package fell even more. Meanwhile, the USSR extended trade credits to five latin Americanin hopes of balancing its larger imports from these countries.

The Sew Prmgmssism. Despite the loss of much of the early political dynamism of its program, Moscow still considers economic aid as an important instrument for expanding Soviet influence in the Third World. The average annual value of aid extensions has risen substantially in ihc second half of. The Soviets have been focusing on projects and countries that promise the greatest returns, for example, raw materials needed by the Soviet economy. This hadrowth of Soviet commercial ventures abroad and broader long-range programs to dovetail with Mosoow's economic plans. As earlyhe USSR had taken steps to supplement CEMA resources with various LDC raw materials. The new emphasis on CEMA requirements is apparent in Soviet-LDC (and East European-LDC) joint economic committees that try lo synchronize LDC production plans with Moscow's.'

At the same time. Moscow has pressed for broad long-term cooperation agreements, such asyearwith Iran5 that is lo involveillion of development programs on both sides of the border. This kind of framework agreement represents an important new development in tbe Kremlin's approach to economic aid. Tbe openended. noobinding' supposedly willirmer base for long-term planning by clieni countries, while increasing Moscow's assurance of stable trade and supplyin the future. Theillion frameworkwiih Morocco8 for exploiting Moroccan

lackib o. ik. tacts. conafceat* iW tad ofSc-v*C* It writvta onlrWwaHe contractu!cooTirrncrJ.unding forhc roil thatfundi ur ali-xaied

phosphates is the most recent accord. The USSR is toillion tons ofear00 andillion tons in the followingears.

The escalation in commiimentsnder the framework agreements results from the great size of multiycar pledges, which tend to bunch commitments and prolong the period of drawdown Aid deliveries0 million annually, not much higher than in theyear period Atoscow's largest traditional aidAfghanistan. Egypt. India, Iran. Iraq. Pakistan, Syria, and Turkey, which together accounted forercent-had receivedercent of2 billion lota! of aid deliveries.

Slow implementation has continued to plague the aid program; in9 the USSR established the Scientific Research Institutepecial research arm of the State Committee for Foreign Economic(GKES) to look at aid problem* Thestaff will study Soviet economic aid programs inof the largest recipient countries and will assess new aid opportunities, especially in the energy and metallurgical fields. The staff also is talked with improving the methodology for evaluating progress in the aid program.

Program Return: Moscowtmce Sheet. In the quarter century of its aid program, Moscow has recruited few adherents to its ideology The Soviet program has suffered the difficulties plaguing most aid programs in ihe Third World. In some cases important Soviet aid dienu have switched allegiance to tbe West The Kremlin nonetheless must view the returns from its program as satisfactory, possibly even good, in relation to cost. Economic aid hasegligible drain on Soviet domestic resources, even considering thai aid requirements must be wedged into an already overcommitted economy. Aid disbursemenls areat ihe equivalent of less lhan onc-tenlhercent of Soviet GNP

Soviet aid provides onlyercent of worldwide official development assistance to the Third World. It was nevero compete wiih other aid programslobal scale. Rather, il was designed to compete in

a few target areas, often through project assistance not available from other donors. In general, Moscow has succeeded in maximizing the poiilical impact of its comparatively small effort; for example, it has gained considerable recognitionandful of highlylarge industrial projects, notably in India. Egypt, and Syria.

Another important spinoff from the aid programs has been the rapid expansion in Sovict-LDC trade. The programs opened new markets for Soviet capital goods; machinery and equipment exports now account for one-half of Moscow's civilian exports to the Third World. Soviel-LDC two-way trade amountedillionompared0 millionhe share of LDCs in Soviet global trade rose to almostercent. Meanwhile, annual receipts from Soviet project assistance include these important commodities:

illion cubic meters of natural gas transported through Soviet-built pipelines in Afghanistan and Iran (natural gas deliveries have recently been inter-rupted by ihe turmoil in the area).

f crude oil from Syrian and Iraqi national oil industries which the USSR helped to create.

illion tons of bauxite from Guinea's Kindia deposits, and aluminaoviet-built plant in Turkey.

LDCs have grumbled about delays in construction, and Moscow's failure to cover local costs and to provide turnkey projects; they nonetheless continue to accept Soviet proffers of economic assistance. Most, but not all. Soviet economic programs have managed toLDC political change, discontent with the progress of the program, weaknesses ineneral insufficiency of local labor skills and material resources.

Other Returns. The USSR has earned large amounts of hard currency from the technical services provided along with the aid program and, more recently, from commercial contracts.hese earnings soared to0ear because of the rise in salaries LDCs were charged for administrators,doctors, and technicians, and the contract workers whose skills Moscow has begun to market.

Soviet educational programs have added considerable numbers to the ranks of professional andDCs. Returning students, however,have not greatly increased Soviet influence in the countries to which they return; Tew seem to have changed their political persuasions after four to five years of residence in the USSR; indeed, some have become intensely anti-Communist.andful of these Soviet-trained individuals have attained cabinet-level status, mostly because ibey compete with the better trained and more numerous professionals who were educated in the WesL

The Kremlin seems to sec its educational program for LDCsote favorable light. It has continued to expand the number of places for LDC0t increasing costear per student at present, compared with0; in most instances, the Soviets pick up the lab. Aboutercent of0 academic students have come from Sub-Saharan Africa; anotherercent from the Middle East (especially Syria. Iraq. Egypt, andnd nearlyercent from South Asia (largely Afghanistan. India, and Bangladesh).

Eastern Europe: Long-Term Support for Moscow's Economic Ainu, The economic aid programs of the East European nations are complementary to the Soviet effort. The USSR, without assuming formal control over its partners' programs, strongly influences the selection of targets and the timing of commitments.

East European nations have8 billion of economic assistance toDCs; the USSR hasaid to all but seven of these, The eight largest Soviet recipients that accounted forercent of the USSR's commitmentseceived one-half of Eastern Europe's.

The first East European economic assistancezech credit to Afghanistanhich followedew months the initial Soviet extension of aid to the same country. Inut of the S4 countriesaid from both the USSR and Eastern Europe, the credits were extended withinonths of each other. In most instances, Eastern Europe's aid was in supportoviet area offensive (such as in Africa in the late

Cocaairies: Economic Technicians in .No*-CommaLDC* 1

and)omprehensive Soviet-assisted development effort (such as India's and Egypt's).

In the early period. East Europeans also subcontracted goods and services for Soviet aid projects, especially in the Middle East. The practice apparently continuesan East European country specializes in the manufacture of equipment needed for an industrial project. East Europeandirectly or on Sovietbeen typical in major aid efforts, such as in Iran, where the USSRasic steel mill

and East Germany the rolling mill and in India, where the Czechsoundry forge and the Soviets the heavy machine building plant.

The establishment of the International Bank ofCooperation (theank) in4irst step toward coordinatingconomic assistance lo LDCs. The Intemational Inrotment BankB) am set up under CEMA bank auspices4 and providedpecial ruble fund worth about SI billion, however, this new organization has yet to finance us first LDC aid project.

:o

Number of ftrwn. in lhcilh assistance lo key Middlestales, often at more concessional terms.

cause of the frugal living style of their technicians and workers.

Aboutoercent of total Chinese aid has been extended as grants, the remainder in interest-freewith at leastears for repayment, afteroears grace. The Chinese programs, with theirOn simple constructor! projects and lightfacilities, arc implemented faster than tbe Soviet heavy industry projccii. The Chinese providemedical servicesost of onlyonth per Chinese (for localhese costs are mostly covered by Chinese commodities provided under credit.

tatistical Tables

US 1

< ommiumfMilitary Aidttt-ToMimrSl

e

ajm

US S

Countries:

Soviet Military Rctatiom With LDCs'

A-3

m

.rater of RMM

Military Iwhwcuru in LDGl

aa*J

Earopr

Yemen

Yemen

Communis! Training of LDC Military Personnel inualries '

Europe

TM

Yemen

i txii

i ft.'

Yemen

Syria

IJ10

Laaka

Communist Countries: Economic Aid to Non-Communist LDCs'

US S

>

IIS 5

Cottnlrics: Economicended to Non-Commtimsi EDO 1

19

Europe

Earope

in

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Ira ii

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Table(coniinuedi

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<wrMc AM Fx (ended lo Noo-CommoniU IDCs'

Comraunst Economic Technician* In Non-Commonist

Toul USSR Chin* Cub* mm Uatem

*

200

Yemen

Yemen

Aata

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Academic Students FromBeing Trained inecember

Europe

Volta

335

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Rica

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Rtfvublit

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Salvador

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East

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USSR: Civilian Trade With Non-Commumst LDCs

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TableUS 5

Eastern Europe: Civilian Tradeommunist LDCs1

j

BLANK PAGE

f

Appendix B

A Quarter Century of Communist Aid: Regional Developments

Middle Last-North Africa

Moscow's Middle Eastern aid offensive of theas Ihe USSR's fim important challenge to Western interests in the Third World. Sovietto provide supportrab militaryand to undertake large industrial ventures, often turned down by the West, gave the USSR and its European allies entree into several strategically located Arab states.

At9 the Middle East-North Africanremained the principal target of European Communist penetration, having received commitments

illion of economic aidillion of military aid from the USSR and Eastern Europe. These amounts representedercent of the Soviet-East European economic aid commitmenl to Ihe Third World andercent of military aid. LDCs in the area also accounted for more than one-half of CEMA trade with LDCs

Fouodatiotts of thehe USSR hadoothold in Ihe Middle East-North African area and influence in regional political affairs by3of Soviet-East European military commitments7 billion of economic aid commitments.

4

Middle East and North Africa: Communist' Military and EconomicS-79

imilvy

economic

cinci" c

Even so. Ihe expansion of Soviet and East European nonmilitary trade with the region did not match the more than quadrupling of Western trade. TheCommunist market share fellittle moreercenthe most pronouncedafter Egypt, was in the share in Iraq's trade, down fromercent3 loercenty9 the USSR and Czechoslovakia had lost Egypt as their major source of raw cotton, and Moscow was forced lo abandon the repair base for itsfleet at the Alexandria shipyard.

At the same time, massive framework agreements with Turkey. Morocco. Algeria, and Iraq were expanding the Soviet Union's long-term connection with theEast and North Africa.4 billion ofaid committed to these countriesillion from the USSR9 billion from Eastern Europe) accounted for nearly one-third of all Soviet and East European aid pledged to LDCs in the first quarter century of the aid program.

Moscow's Favorite Partners: The Radical Arabs Algeria. The Algerian-Soviet relationship hascentercd on military aid. which3 had made Algeria the strongest power in the Maghreb. Practically all of the country's defense equipment has been supplied by Moscow-mncluding some of the latest and most costly equipment exported by the USSR. The Algerian-Moroccan dispute over Western Sahara in theriggered an even closer relationship with the USSR,uge increase in commitments of Soviet arms. Algeria has moved up to fourth place among Moscow's Third World arms clients.

Economicesser Response,f European Communist aid has been important to the development of Algeria's public sector industry. Moscow's hand was most visible duringlgerianentrally directed program of heavy industrial investment, Despite the general failure of the plan. Soviet-East European aid provided Algeria with its only steel mill: an expanded program ofprospecting and exploitation; and assistance for agricultural and tight industrial development.

ramework agreement signedhe USSR will build an alumina complex,ower plant and raileavy machinery and

TableUS I

AlKcria: Communist Economic Aid Commitments '

S

Europe

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electricalam and irrigation works; asteel mill in western Algeria, to process iron ore from Gara Djibilet: and oil refineries. The USSR already has0 million to the aluminum plant.

Lackluster Trade Performance. Outpaced by the expansion of Algeria's trade with the West. Soviet trade bottomed out0 millionoviet equipment and building materials being exchanged Tor Algerian wine. East European trade was double the Soviet,0 million; oil was Eastern Europe's major import.

Iraq: The USSR's Largest Arms Bayer. Soviet military aid to Iraq has outrun economic aid nearlynd has made Baghdad the USSR's largest arms buyer. The Communist military supply program hasihe Iraqi militaryounieiinsurgency force after the8 couparge, well-equipped military establishment capable of sizable modern military operations.

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relations blossomed2 withriendship Treaty, and were strengthened two years later when Iraq was admitted to observer statusMA. Relations have faltered periodically,because of differencesiddle Eastand. most recently, the USSR's invasion of Afghanistan. The recent worsening of politicalcomesime when Iraq's oil wealth gives it greater independence of action. The economichas become less important to Baghdad as its wealth has multiplied, and Iraq itself has become an important asd donor.

Until the, when Iraq began to diversify its supplier base. Communist coon tries bad supplied nearly all of Iraq's weapons and military training. The initial agreement8 was followedy pacts for aircraft and ground equipment for infantry divisions and an armored brigade to quell the Kurdish rebellion. By7 (the Arab-lsraeli war).had provided aircraft, light and medium tanks, armored personnel carriers, and naval craft. Although Iraq's war losses were small, latc-modcl fighlerwere airlifted to Iraq as part of an overall Arab rcsupply operation. Deliveries since3 war have brought in the most modern Soviet military equipment ever supplied an LDC.

A Profitable Partntr. Recurring political strainsMoscow puts high priority on goodwith Iraq. The Soviets earn hard currency from sales of arms and machinery and equipment to Iraq; Iraqi supplies of crude oil enable Moscow lo sell more oil in ihe West.

Moscow's most important contribution (wilh the help of Hungary. Romania, and Crahosiovakia) underillion of economic development credits to Iraq was in the establishment and support of an Iraqi national petroleum industry in the. The USSR filled the gap left b> tbe withdrawal of Western technicians and provided an outlet for Iraqi oil when Baghdad's traditional markets in tbe West were in disarray5 million of Soviet creditsillion from Easternraq was sbk to explore and exploit highly productive areas of the North Rumaila. Nahr Umar. and Luhais fields in southern Iraq, build new pipelines, ando refinery capacity.

Eastern Europe5 million for lightfood-processing plants, and transportationbut ii has nol been as successful as Moscow in pulling down profitable commercial contracts in Iraq In (he, the USSR btd on and wonillion of commercial contracts for four major irrigation and power projects. Soviet interest had already focused on

pcwer and water development1illion line of credit. TheW Nasiriyab power plant will be the largest thermal plant in the Middle East when it reaches capacity operation.

ommunist trade with Iraq reflected the expanded commercial relations. Two-way trade had doubled comparedo nearly S3 billion, the Soviets accounting6 billion. The USSR,fell from top rank to fourth placerading partner, its share of Iraq's trade falling fromercentercent.

Syria: Moscow's Longstatding Araboviet credit to Syria for arms purchasesxtended through Czechoslovakia, had grownultibillion dollar program byy the time of the first Arab-Israeli waroviet arms aidlarge quantities of modern fighter aircraft, tanks, and personnel carriers. In the wake of theof the Soviet military mission from Egypt.expanded the range of weapons supplied to Syria and increased its technical advisory contingent.

TableUS S

Syria: Communist Economic Aid Commitments

Toinl

Total

Europe

Communist Presence In Syria. Communist aid was Syria's only sustained source of economic assistancehen OPEC governments began to extend nearly SIear for balancc-of-payments support.

Syria has signed8 billion of economicwith Communist countries. East European countries have assumed responsibility for oil refineries.

a phosphaie plant, land reclamation, power, and light industrial plants, while Moscow's showpiece was the Euphrates Dam. The USSR also contributed to oil development, improvement of the railroads, and expansion of ports.

ower station at the haif-biilion-dotlar Euphrates Dam (completed inSyria's electric power capacity, accordinghe Syrians, and producesercent of Syria'sPcwcrlines arc being strung the full length ofecent Syrian order for SO East German transformer stations will help in power distribution. Irrigation and reclamation projects associated with the dam eventually willectares of land available for cultivation.

9 Soviet and Syrian railroad construction teams hadilometers of the Damascus-Horns railroad: Syria's national oil industry, established largely with Soviet and East European aid. hada net exporter.

Iran: The Faltering Oil Giant

any ofoviet economicwho had left8 were back in place and work had resumed on most projects begun before the revolution. The military supply relationship remained dormant. Perhaps Moscow's greatest concern was the reduced delivery of Iranian gas to its Asian Republics.

Economic Program Paramount. In contrast to the Communist connections with most other Middle East* era countries, the connection with Iran turned onnot military, aid. Iran, the Third World'slargest arms buyer, placed lessercent of its orders in Communist countries since7 and never hosted moreommunist military ad-iscr..

The economic relationship also was low key.only slightly to Iran's economic development. Moscow's first development credit to Iran,rovided assistanceam on the boundary river Aras. The damotal generating capacity0 kW of electricity and sufficient waterectares of land on each side of the border.

TableUS S

Iran: Communist Economic Aid Commitments

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Km Europe

After3 credits, tbe USSR extendedillion of aid. Eastern5 million. The Soviets built Iran's first steelroject turned down byinterests. Tbe plant became oneran's largest industrial enterprises,0 Iranianand accounting forercent of Iran's steelSoviet aid improved port facilities and transport links with the USSR, provided grain storage facilities, contributed to the development of Iranian fisheries, increased Iran's electric power and irrigation facilities, and made possible the annual export ofillion cubic meters of natural gas which previously had been flared.0 million of annual earnings from the gas was more than enough to service Tehran's military and economic debt to the USSR. The East European(largely Czech and Romanian) emphasized agro-industrial operations.

The quadrupling of world oil pricesin an upsurge in Communist commercialwithoint commission for long-term planning was establishedear economic cooperation agreement signed to3 billion development effort on both sides of the Soviet-Iranian border under commercial and credit arrangements. Tbe next year Iran awarded moreillion dollars worth of commercial contracts to the USSR for powereavy machinery complex at Kerman. and other projects.

The largest project to fall by the wayside when Khomeini took power wasilomctcr IGAT-II pipeline to the Soviet border, which was to have deliveredillion cubic meters of gas annually from fields in southern Iran. Underyear trilateral accord, the USSR would supply Soviet gas to Western

Europe and wouldoughly equivalent amount of Iranian gas for domestic use,illion cubic meters of gasee.

Although Iran was the largest Third World market for Soviet goodsrade with the USSR never amounted to moreercent of Iran's total trade. East European trade with Iran moved up toillion dollarsore than one-third of Iran's nonoil and nongas exports going to these countries. East European countries were harder hit than the Soviets by the turmoil in Iran because of dependence on Iranian crude oil.

Tbe Middle Eastern Moderates

ew Soviet techniciansmall volume of trade were all that remained9elationship that had brought Egyptillion of Soviet aid for public sector development andillion of military equipment.

The importance of Soviet aid to Ihe Egyptian economy started declininghen Egypt began to receive annual cash payments from Arab Slates of0 million. This was the first substantial non-Communist assistance Egypt had receivedecade.

Sadat's expulsion of Soviet military technicians2eries of actions that culminated in Egypt's unilateral abrogation of the Friendship Treaty6 and Cairo's cotton embargohe dispute over repayment of Egypt's military debt finally destroyed the connection. The Communist legacy4 billion debt, vast stores of military equipment,oviet-backed economic development program in midstream. For the Soviets, the crumbling of the relationshipajor foreign policy selback.

A Public Sector Showpiece. The Communist program, which accounted forercent of Egyptian capital investment in, was rcsponsiWe for half of Egypt's installed power capacity, all of Egypt'scapacity, and three-fourths of the capacity at Egypt's only steel mill. Despite the breach in Soviet-Egyptian relations, work has continued under outstanding credits.oviet technicians

Tableus I

egypt: communist economic aid (commitments

Eurcc*

in Egypt9 worked on the fourth blast furnace at the Helwan steelton expansion of the Nag Hammadialuminum plant, rural electrification and the Suez and Aswan power plants, and cement and pharmaceutical plants.

Soviet-Egyptian trade had declined after the cotton embargo and Egypt's refusal to maintain the large traditional trade surplus used to service its debts.share of Egyptian exports fell to less thanercent8 from theercent the USSR had claimed in every year0gyptian imports from the USSR fell from approximately one-fourth of Egypt's imports to little more thanercent.

Eastern Europe Not Hard Hit. Except forwhich had joined with the USSR in thembargo, and Bulgaria, with whom Egypt severed relationsgypt has maintained economic relations with other European Communist countries. Eastern Europe implemented ongoing aid forprojects, dicscl equipment, and other machinery purchases, and0 million of credits to0 million extendedhe East Europeans also agreed to continue agriculturalement plant, prefab housing factories, and chemical plants.

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South Asia

Moscow forged its earliest links in the Third World with South Asianew million dollars to Afghanistan4 for small projects marked the first Soviet aid venture into the Third World8 million creditteel mill in India5 the second. Because of their location, both of thesehave remained major recipients of Sovietand military aid. Pakistan has recently been added to the list of big recipients ofj;d

The USSR extended about two-thirds of4 billion of Communist economic aid andercent of4 billion of military aid to South Asian countries byhina and Eastern Europenearly equal amounts of the remaining economic commitment.

Figure 5

lassic Case of Sorlet Penetration. The USSR's invasion of Afghanistan in9 was the culmination ofears of growing Soviet economic and military penetration of this border state. Despite Kabul's earlier determination to associatewith the oonaltgned nations, the USSR hadAfghanistan's largest source of economic and military assistance, an important influence on cultural and educational programs, and its principal trading partner. Moscow's deep interest in Afghanistan stemmed from Afghanistan's location on the Soviet bonier andassageway to the Indian subcontinent and tbe Middle East.

Upgrading Afghan military forces beginning6 and0 million in Soviet credits for Kabul's first five-year economic development plan were initial steps

Asia: Communist1 Military and Economic

Jalalabad Power mJ Irrigation Fnjmi iVSSRi

Moscow'sillion economic and militaryTbe Soviet economicgave theominant role in Afghan economicsupplemented by5 million of East Eu-ropcan credits, largely forillion of Chinese credits, forcnpital. and light industrial plants. Soviet aid was provided on more generous terms than allowed any other LDC.

Duringyear program. Soviet aid had provided about one-half of Kabul's import requirements for projects included in its first four economicplans. Aid to Afghanistan has been supported with large contingents of Soviet and East9 before the invasion.fghan students had been trained in Soviet academic institutionsn technical institutions. Moscow's position as Afghanistan'said donor also made it the principal trading partner. After the. Afghan gas exports brought balance to the civilian8 when sharply expanded imports of food andillion trade deficit

A Soviet-Built Military Establishment. The USSR is Afghanistan's sole source of arms, notmall amount of equipment from Czechoslovakia Poorand troop training and the lack of trainedand maintenance personnel bad required continuing Soviet advisory, training, and maintenance services. Before9 mtervention. the Sovietin Afghanistan were spread through the armed forces at every level of command

India: Close Relations Weather Political Change. The Soviet-Indian relationship has endured political change in New Delhi and Moscow and disagreements over the content of the aid program and itsover the pastears.

From the first Soviet credit tothe Bhilai steel mill inrealized that India'sinublic sector heavy industrial complex coincided with its own willingness and ability lo supply equipment and technology. As in Afghani-sun. Soviet commitments to India were geared to economic plan periods. More than one-half of3 billion Soviet cornmiirnenl and even more of Eastern Europe's was allocated to large industrial complexes.

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East European program reinforced the Soviet heavy industry pattern.esult of the industrial capacity created by Cocnmunist assistance, India was able to supply two-thirds of the equipment required to buik)illwo-iori Boaaro Mod mill out of docnes-tk capacity. In addition. Moscow has placed several hundred million dollars of orders with Soviet-built plants in 'India for equipping plants in other LDCs. Soviet aid also generated rapid increases in trade, bringing the two-way trade levelillion0 million annual surplus in India's favor hasNew Delhi to service its economic and military debts to the USSR on schedule.

0 million credit in7 on the mostrepayment terms ever offered India by theear antortiziuoo,ear grace periodercent interest)eviulization ofrelations which had waned after the large credits extendedxceptillion-ion Soviet emergency wheat shipmento new credits were furnishedeliveries droppedrickle, and debt service remaineda net outflow of resources. Soviet-buitl plants operated at partial capacity during the period because ofeconomic problems, and shifts in India'splan reduced New Delhi's need for the project aid provided with Soviet assistance.

Deliveries, which bottomed outtrong upward course8 as work began onrnajoropper refinery and an aluminaas the expansion andof the Bokaro and Bhilai steelhe USSR agreed to7 billion blast-furnace complex, the financial details for which were not spelled out.

Pakistan: Support From Both China and thr USSR. New economic commitments to Pakistan from0 million) and0 million)9 brought total Communist aid pledges to Islamabad toillion. Until the provision of large Soviet creditsillion-too steel mill beginninghina had been the largest, most active Communist donor.

Tbe Chinese-Pakistaniroduct ofevents tn thend unending political andivalry between Pakistan and India, bat been supported by the strong pro-Chinese bias among Pakistan's ruling elite. The Chinese, viewing Pakistan much as the Soviets had viewed Egypt, had made Pakistan their largest recipient of economic andaid, with extensions totaling more thanercent of their economic commitments to LDCs and nearlyercent of their military commitments.

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interest in Pakistan surfaced4 with aideavy industrial complex. Beijing's only such assistancehird World nation. It was reaffirmed in the0 Chinese laboreri worked on the Karakoram road built by China through the Himalayas to link the two countries.

Soviet and East European military aid has not been important for Pakistan. Here again the Chinesewas apparent. Even though Beijing provided only aboutillion dollars worth of military equipment in the pastears. China had rallied with rapid delivery of arms in periods of crisis, whennations withdrew their support for politicalThe small Chinese share made an important contribution to the buildingilitary establishment in Pakistan and remains the backbone of Pakistan's air and ground force inventories The dollar valuethe extensive volume of aid supplied because of the relatively unsophisticated character of the hardware.

Sub-Saharan Africa

The In If-billion dollars of Soviet economic aid toountries in Sub-Saharan Africa after theirin thendnd the SIillion from Eastern Europe) failed to win theof the new nations on the continent. The new states continued to rely on the larger Westernand tbe simplerillion) Chinese program.

The Communist military program in the region had morebillion of Soviet-East European arms agreement* with Sub-Saharan AfricaT9 (compared0 million)0 Cuban and European Communist military personnel. The Tint sustained Soviet military foray into Sub-Saharan Africa came5 with supplies and personnel furnished to Angola after the MPl.AIt was followed by the shift in Soviet support from Somalia to Ethiopia

Implementation of the2 billion economic program bogged down from the beginning and caused Moscow to cut the sire and change the bind of its commit menu. Instead of the usual heavy industrial program, Soviet projects beganeaturein agriculture, geological exploration, medical services, and help in establishing light industries.Moscow in most instances would not provide the turnkey projects and the funding of local costs that were needed by most African states.

Guinea and Ethiopia have been the largest Sub-Saharan African recipients of Soviet economicGuinea because of the0 million project for exploiting bauxite (which the USSR takes asand Ethiopia becauseline of credit (still not fully drawn) and additional protect aid since the renewal ofillion

illion of European Communistaid was pledged to Sub-Saharan Africaigeria received almost all of Eastern Europe'i new pledges.

After the early spurt of assistance in. Soviet project aidecondary role in theoscow concentrated instead on training and technical assistance; by90 Sub-Saharan African nationals had gone to (he USSR and0 to Easternfor advanced academic training. Soviet and East European technicians were posted loinprovide administrative, health, andservices. The number of personnel assigned to Africa rose especially fast in the past few years because of Moscow's new inierests in Angola and Mozambique and us growing commercial relations with Nigeria

he USSR formalized its rcUuonship with the new government ofearTreaty, military supplies, and the provisionoviet officers who occupy key positions in the military command and control structure. The East Europeans have provided ground forces equipmentmall contingent of technicians, among whom the East Germans have major responsibility for security and intelligence functions. The most important support has come fromombat troops who are supporting the government against insurgents, and advising and instructing Angola's regular military and guerrilla forces.

The Communists have not yet addressed tbe economic problems of Angola. The USSR has extended only minlsculc amounts of aid for fisheries and agriculture, and Eastern0 rmlhon for agricultural and marine development has hardly been tipped. Nor haveommunist economic technicians now in Angola been able to fill the gap left byortuguese who departed at independence.

Mozambique has relied almost exclusively on the USSR and Eastern Europe to maintain its military establishment since its independence from Portugalnly small amounts or0 million of Soviet-East European economic aid committed5 has been delivered.an contingent of civilian technicalercent of whom were

Tableus S

Sub-Saharaa Africa: Communist Economic Aid Commitments1

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Cubansas not been able lo stem the decline of the formerly prosperous agricultural sector.

The drive into the Horn of Africa was one of Moscow's earliest efforts in Sub-Saharan Africa. Until laic inwas the principal Sub-Saharan African recipient of Soviet aid, mostly military. The USSR-Somalia relationship began lateith anfor ground, air, and naval equipment which grew to total Soviet support of Somalia's militaryn return the USSR was given naval facilities at Bcr-beta on the strategic Gulf of Aden. The Soviets also used Somali airfields for reconnaissance operations over the Indian Ocean-Mogadishu's refusal to moderate its position on the Ogadcn late6 ledoviet embargo onand spare parts deliveries; abrogation of4 Friendship Treaty and the expulsion of Soviet and Cuban military personnel: and the termination of Soviet airbase and naval base rights, in

The decision to back Ethiopia and modernize and expand its arms inventories far beyond Somalia's level reflected the Soviet judgment (hal Ethiopia was (he greater strategic prize. In three yean, the USSREthiopia with more military equipment (han it

provided Somalia during iheiryearIn return. Ethiopiayear Friendship Treaty in

In addition to providing weapons. Moscow has begun to modernize Ethiopia's military facilities and train its nationals Soviet military personnel9 provided instruction and helped to maintain equipment. Cuban troops had assumed the major foreign combat role whent its peak in tbe Ogadcnince then their number has droppednd they areupport role.

China. The Sino-Soviet competition in Sub-Saharan Africa was short-lived. Beijing could not match Soviet arms supplies, (either in amount ornd Moscow lost interest in economic aidrief flurry of activity in the. Tanzania'sof Soviet weapons4 coded China'ssupplier position in Tanzania, which hadfor one-thud of0 million arms aid to Sub-Saharan Africa.

Beijing hat gotten exceptionally good political mileage out of4 billion economic aid program in Africa. The competition with Moscow began with China's aid to Guineahe year of the Sino-Soviet rift and the starthinese challenge to Soviet domination of the world Communiit movement. Beijing competed with Soviet eoooorruc aid to Sub-Saharan Africa, notolUr-fo*-dollar basis, but with an effective labor-intensive program tailored to the skills andof the region. After tbe initial burst of activity. Beijing curtailed its aid program as China wrestled with interna) political problems. Chinese aid was revivified0 million credit for the Tan-2am Railroad broke all previous Chinese records and set the stage forillion in aid to Sub-Saharan Africa, spread amongountries for light industry and agricultural assistance. Tbe Chinese won high marks for the low costs of their projects, their relevance to the immediate needs of the population, and the spartan lifestyle of their technicians and workers.

illion Chinese commitment inBeUine's smallest lo Sub-Sahara since the CulturalIhe concentration of Beijing's limited resources on its own domestic developmeni.

Latinmet i. li

Latin American countries have moved slowly in accepting Communist aid. Exceptrief flurry of activity in Chile during the Ailendc) and the noteworthy Soviet-Peruvian military sales connection, trade has remained the single mostelement in Latin America's relations with the Communists.

Political changes in Central America and9 gave the Communists opportunitiesreakthrough Cuba took the lead by establishing close relations with the new Grcnadian and Nicaraguan regimes and providing some technical and military aid. Jamaica also received some aid and remains dose to the Castro regime. Cuban activity was overshadowed0 million in Hungarian credits to Jamaica for an alumina plant, the largest single Communist economic development credit ever extendedatin American country. Implementation of this project, however, probably will not take place in the near future because of questions about its viability.

Figure 7

Latin America: Communist' Military and Economic

Thetadt-Orieuted Crtdit Program. Other than the credits to Chile and Peruhe nearlyillion of Communist economic creditsto Latin American countries8 have been largdy traderequiring down-payments, and repayable over five toears, often at near-commercial interest rates. Moscow etierided the first such credit to Argentinaillion credit on whichillion was ever drawn. Since then the Soviets have extendedillion dollars of trade credits, about one-half for power development especially in Argentina, Brazil, Colombia, and Uruguay

The poor drawing record on Soviet credits (aboutercent) has done little to correct the. trade imbalance for which they were intended. The same is tree off East European credits extended tomachinery and equipmentin Argentina. Brazil, Chile (never implemented because of poiilicalnd Colombia. Asa consequence,

East European nations made0 million of hard currency settlements8 to pay for large food purchases.

East European countries have had some successhowever, in concluding long-term bartersuch as the Polish S3year agreement to exchange coal for Brazilian iron ore and0 million agreement to cichange oil,and metal products for Brazilian iron ore.

A Prot'mm of Rectal Vintage. ByS Latin American countries had received economicfrom Communist countries, twice the numberecade before. Even though tbe amounts extended still represent less thanercent of the entire Communist aid program, and drawings lessercent. Soviet, interest has remained high, especially in hydroelectric power development Soviet bids to build massive power projects in Argentina and Brazil could involve credits of up toillion each.

Sizable groups of Communist technical personnel went to Latin America as early0 in connection with equipment sales or development projects; the largest group at that time was the hundred East European technicians who went to Brazil to build thermal and hydroelectric power plants.. Chileoviet technicians for administrative and planning services associated with0 million of aidby tbe USSR. Tbe Dumber present9ecause of tbe influx of Cubans into tbe Caribbean.

east aiii

East Asian noa-Communist countries have been wary of accepting military or economic assistance from Communist countries in recent years because of some unsatisfactory earlier experiences and concerns over Soviet and Chinese intentions. Thailand finally signed an economic agreement with China8 and the Philippines accepted small credits from East European countries at around the same time.

Most of the arrangements have been confined to trade. The USSR and Eastern Europe depend on East Asian countries for MOOillion of rubber and other tropical products annually, while China sells consumer goods in the extensive East Asian markets to help balance its trade deficits with the. for example. Chita ran an annual hard currency surplus0illion with the area.'

' Chinese trade wiih Hong Kong it no) included in uk wimiw-

Indonesia, Burma, and Cambodia ranked high on Communist aid recipient lists at the very beginning of the Communistajor Soviet aid recipient, Burma and Cambodia as Chinese After Indonesia accepted large amounts of Soviet aid (especially military) in the,reak in relations, which cut off practically all Soviet assistance to Djakarta. At (he same time. China was expelled from Burma.

Ihe Hniary. Indonesia was Moscow's first bigfailure: Djakarta ended all Communist military and economic programs after the abortive Communist coupndonesia'sears of Soviet and East European aid commitments left Djakarta with half-compleiedugeeteriorating military equipment with no spare parts, in the care of poorly trained personnel, andillion dollars of debts to the Soviets and East Europeans.

Figure 8

East Asia: Communist1 Military and Economic

conomic

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economic

Moscow had hoped lo use Indonesia (the largest and potentially the richest East Asian country) to promote its political and strategic interests in East Asia Soviet and East European assistance to Indonesia amounted to nearlyercent of European Communistto the Third Worldjakarta's military orders from the USSR and Eastern Europe almost equaled Communist military assistance to Egypt, the largest recipient of Communist aid at that lime5 rrwderaSc-net weapems gaveone of the best equipped military forces in Southeast Asia and allowed it to escalate the confrontation with Malaysia over Irian.

Burma and Cambodia (later Kampuchea) were the centers of China's early interest in the Third World. China dominated Cornmunisi aid to Burma throughillion economic assistance program for light industry and public works. Burma canceled the aid programollowing political disagreements and suspicions over the role of China's technicians. Rangoon withdrew its students from China, dismissedhinese technicians in Burma, and suspended trade relations. At the same time, tbe small programs of other Communist countries in Burma slowed, not recoveringhen Ciechcalovakia0 million credit for automotive supplies and equipment.

Sino-Burmese relations had begun to revive1 with the signingrade agreement,1 credits that had expired. Cambodia. China's largest aid client in tbe, received moreillion of light industrial project aid commitments. Except for someospital, small amounts of reused military equipment, and village development schemes, the Soviet-East European program was never of anyin Cambodia.

Original document.

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