USSR: ECONOMIC DENIAL SITUATION REPORT #8

Created: 3/11/1980

OCR scan of the original document, errors are possible

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CENTRAL INTELLIGENCE AGENCY NATIONAL FOREIGN ASSESSMENT CENTER

0 USSRl ECONOMIC DENIAL SITUATION REPORTey Points

Cralm Ne can confirm anone of Soviet grain purchases during t'.ie past week, bringing the totalanuaryillion tons for

delivery byeptember

grain board has]Indicated that direct shipments towill be in accord with the understandingGeneral Goodpaster's visit, r

Eastern Europe*, Hungary apparently has bowedreluctantly to Soviet pressures toons of grain from its harvest this year. If necessary, Budapest may compensate for shipments to the Soviets by Importing Nest European barley.

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Western Negotiations! Unresolved questions on

repayment terms are holding up implementation of the new

French-Soviet credit pact. President Glscard apparently

continue! toight rain on Franco-Soviet

matters. hree-month hiatus, Moscow has renewed

talks with the French firm Pechlney as an alternate

supplier for0 million Sayansk aluminum smelter.

Aid to Pakistani Only Japan among themembership has come forward with anabove levels of previous years. Bonnit will not0 assistanceset prior to the invasion of Afghanistan* .

This memorandum was prepared4 by the Office of Economic Research with contributions by the Office of Political Analysis. Comments and queries about: this reportshould be directed to!]-

! TOP^MCBET

-IMi" II T

Grain Activity

During the1 past week we have been able to confirm the Soviet purchase of anons of Argentine wheat. At the same time, we now estimate deliveries of Canadian grain to the USSR during the year ending oneptemberillion tons, compared withillion-ton figure we reported last week. Confirmed grain purchasesanuary from all sources for; delivery byeptember now standillion tons. Unconfirmed purchases, mostly involving Argentine grain, are currently estlea ted at

illion tona.

;Argentina's grain board has told

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ehat direct shipmentsn accord with understandings 'reached during General Goodpaster's visit3 million tons ofillion tons of sorghum,illion tons of soybeans. Traders put new Argentine sales'to the Sovietsillion tons ofillion tons ofillion tons of sorghum,illion tons of soybeans. Trade estimates that additional Argentine corn and sorghum will go to the OSSR are supported by the high premium prices still demanded for Argentine grain (see chart).

A team of Soviet veterinarians arrived in Brazilarch to determine the extent of African Swine Fever (ASf). The findings concerning possible ASP contamination of Braslllan shipment of soybeans, sovbean meal, and other products #re expected toajor factor in determining the sice of Brazll/DSSR trade In these products. The Soviets may already have contracted for some Braslllan soybeans and soybean meal.

Brasilia may link grain and soybean salesoviet agreement to provide Brazil with oil, f- |

rne uaaK scxxi seems co

reeuaURg.co commit oil eo brazil. (

n.

JgCRET

gaatern Europe

Hungary apparently haa bowedreluctantlyto Soviet pressure to provide the USSRons of grain (mainly wheat)hreefold increaso9 and) well above tne previous high ofons. Hungary plans to provide the grain fron Its own crop whichaccording to early indications will be large.

Hungary could supplyons even if ite harvest falls below expectations by taking part ofillion tons of wheat It normally feeds to Its own livestock or by diverting whoat It ordinarily sells to other countries. Hungary has Indicated that lt could compensate for exports to the OSSR by impotting cheap barley from Western Europe. Overloaded rail transport facilities evidently represent the major obstacle to reachingon target, although shipping part of the grain via the Danube could relieve some of the strain. PH

million ton grain deficit will reduce meat availability byercent. We believe, however, that the impact will be substantially less, In part because of Soviet adjustments following the embargo. ikely diversion ofillion tons of grain, additional slaughter of hogs and poultry, and an average harvest this year, weercent decline In meat availability. astad harvest together with the American grain embargoood harvest this year imperative. Because of the grain/meatarty Central Committee Plenum devoted to agriculture may; be held in March.

franco-Soviet Credit

Two unresolved issues concerning credit maturity are holding up implementation of the new French-Soviet credit pact (SXTREPeported that the two countries had reached agreement in principle on new credits). Neacow apparently is willing toepayment period ofonthscompared with its initial demand foronth maturitybut the French still find this period too long. In return for concessions on the repayment period, the Soviets evidently are demanding that repayments begin only after installation of Imported equipment and not after shipment. The French, however, object to financing Soviet construction delays In this fashion. French credit negotiators, who are traveling to Moscow this week, have received explicit orders not to yield to the Soviets on this Issue. The credit pact will runears,ith the terms subject to review In September

President Gis card apparently continues to exercise tight and direct? control over the pace and substance of the Franco-Soviet negotiations. French Foreign Trade Minister Deniau reportedly hasecondary role in the credit talks. jXn dealing with the Soviets, the foreign trade bureaucracy may haveofter line than waa acceptable to Giacard. i i

Commercial Negotiations

hree-month hiatus, Moscow has renewed talks withrench firm,milllon aluminum smelter at Sayanak. Kloeckner, the West Germai firm that is also competing for the contract,roposal based on Soviet technology as a

:substitute for Alcoa technology. Kloeckner made substantial progress In talks with the Soviets in early February but later rejected Soviet efforts to change

I terms already agreed upon. Consoquently, Moscow has now

! turned to Parisamove! the Germans view as s

!bargaining ploy. (

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The Olymplcst Alternative Games

The progress that 'the Steering Committee on lternative GameB Is expected to make atarch meeting in Geneva probably will not elicit greater west

set? siurcr

European support! for an Olympic boycott. Prime Minister Thatcher hopes that Brltisn Olympic Association opposition to an Olympic boycott will soften if British athletes can compete elsewhere. At present, however, it appearsritish team will qq to Moscow regardless of the government's stand

Wast Germany has refused to attend the meeting even aa an observer.'file government probably feels that early Identification with the Steering Committee would advance Bonn's positivebut cautiousboycott position too quickly. Italy and Prance, which increasingly seem prepared to boycott Moscow if the Soviets do not leave Afghanistan, areimilar position. Vfhilei West European support for an Olympic boycott is slowlyovement toward setting up alternative games is not likely to push governments tooycott much before theay deadline for national acceptance of invitations to Moscow.

Update on Western Aid

rescheduling by the creditor.

i Western nations have been slow to ante up for new aid programs, partly because of Islamabad's unwillingnessliability to demonstrate its need for aid to prospective donors. Only Japan among the members of the "Pakistan Aid Consortium" (established0 to facilitate the flow of Western economic aid) has actually committed itself to aid much beyond the levels of previous years. Tokyo this past week decided to boost its economic aid7 million, comparedillion last! year. Of theilliononcessional yenjcreditillionrant. Zla had hinted earlier that he0 million from the Japanese. Disbursement will likely favor rapid delivery of commodities:rather than longer-term projects. Tokyo is holding back on Zia'e requestillion In debt relief pendingja' decision on debt United States,jPakistan's largest

West Germany has reaffirmed that it will not0 assistance beyondillion set prior to the invasion of Afghanistan, which alreadypercent gain over9 level. West Germany favors rescheduling within am IMP/IBRD forum ofillion in debt payments owsd to Bonn. Lats last month Prance said it couldillion0 to its

illion program "Ifbutthat Pakistan had noi; yet drawn on the The Netherlands has designated Pakistan asdeveloping country" but is reluctant toamounts of new aid because Pakistan isabsorbingillion cor/mitted last,1

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The following table lists (a) the quantities of non-OS grain, excluding rice, potentially available for delivery to the USSR0 and0 beyond those contracted foranuary andreports of post-embargo sales to the

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US Tons)

New Sain toR

Exporter

OrainAvailable :.

2

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Africa ,

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1.2

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estimates of available grain includes the quantities of non-US!grain that either have not been sold as yet or that might become available to the USSR through swapping or shifting of contracts, transshipment, and re-exports

total

rumored sales and sale" under negotiation.

flour sales to USSR or Vietnam.

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Selected Grain Prices

USSparton

SORGHUM

300

Brazil

'AroamJna

.flBD n

100

> 10 fiWMMTfl* 20

Original document.

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