Created: 10/4/1978

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SUBJECT! Information on Soviet Grain Requirements

The attached5 was forwardedBartholomew, National Security Council,East-West viaNIO/USSR/Eastern


Attachment As Stated


National Intelligence Ofliccu

Reg Bartholomew National Security Council Europe, USSR and East-West, Old]

Mr. Bartholomew:

Attached is the neno you requested

on the likely Soviet position

regarding grain purchases. It was prepared largely byave added some concluding political judgments.

Assistant to tne National Intelligence Officer for USSR-EE

If there are any questions, please


ilRochy Deal

Dai* la^niWt l>

National Security Council International Economicsld]





SUBJECT: Intorraation on Soviet Grain Requirements

Based on conditions through lata August, it appears likely-that the USSR willecord grain crop moraillion tons. Unless the Soviet crop is considerably in excess of that figure, we expect the USSR to purchaseoillion tons (currontly valued5 toillion) for delivery during the marketing year fron8 to9 This estioace is based on Soviet plans for expanding tha livestock sector.

Moscow should have little difficulty in financing In ports ofoillion tons of grain from the West in tha current crop year. Although facedard currency trade deficit of perhaps S- billion8 and rising debt service8he USSR nonetheless appears to betrong balance of payments position. By7 Che USSR had sharply cut lea hard currency current account deficit and increased its foreign exchange holdings to record ljvels. Moreover, Moscow has available toubstantial volume of Western long-term governsent-backed credits toarge part of its non-grain

We believe lt unlikely Lhe Soviets will feel compelled to coae to the US for moraillion tons because of any lack of grain outside the US. Under tht tcms/che US-USSR Long-Tern Grain Agreement, Moscow Is committed to buy atillion tons of US cocn and wheat annually and may purchase as ouchillion tons without prior consultation.

a. The relatively high level of vorld supplies this year Increases Soviet flexibility in planning and executing their grain buying program. Thc situation is most pronounced with wheat; Canadian and EC wheat suppliescurrent production plus carryoverrc estimated to be up, and conditions in Argentina and Australia indicate sharp increases in their upcoming November/Uecenber wheat harvest compared with last year. Coarse gra^ln supplies* ara also up. Argentine corn exports to the USSR inould be at least as auchillion cons equal to last year.

* Corn, barley, oats.


'i (Th<3)


r.HtlRiatc, asusiiiU. ill ionnon-US wheat and illion tons of coarsehe easily available for export to the Sovlut Unionmainly Argentina, Canada, Australia, ond tho EC* "Wo5

0 million cons of grain could bo supplied from allurces. In sum, without disrupting lons-term trading patterns between non-US suppliers and non-Soviet buyers, if thc Soviets wereggressively seek additional aaounts of grain, perhaps even at premium prices, large additional quantities from non-US suppliers would be available. Toaximumons of non-US grain has been ordered by the USSR for delivery in

In recent discussions with US grain exporters, the Soviets have stated that, because of the way that the US has dealt with the dissident trials, the USSR i* actively seeking alternative grain suppliers. Although the US could lose some share of its wheat market to other exporters, the same does not appear to hold true for corn.

In sum, while the Soviots have some modest economic incentives to make excess grainm the US (the potential savings on logistical costs and resources and their preference for more rather than less corn in the coarse grainhey have no major economic compulsion to do so, since sufficiant grain Is available elsewhere. Thc dominant factors in their minds will therefore be political. On this ground, we believe the Soviets will Indeed wish to channel at least the bulk of their purchasesilllon tons outside the US, both for the reason they have statedtheir resentment over US human rights policiesand becauseiversify sources in order to dramatize to the US the limits of US econoaicleverage.

At the same time, we also believe that the Soviets have not yet made up their minds whether or not to purchase sone grain from the USillion tons, largely because the bilateral political relationship is now in flux, and because there have recently been some slight signs of

a Soviet desire to case bilateral tensions. It is conceivable that the Soviets nay eventually consider it politically expedient to make some odditional purchases, if only to strengthen those forces in the US seen an favoring increased economic ties with the USSR. It is likely, however, that flny decision on this point will be deferred for sorap time, and will bo shaped by their perception of the direction in which the overall political relationship moves this fall.


* However, the mix of coarse grains would contain less corn than the Soviets

wouldsince the proportion of the world's exportable corn which is

available outsides much smaller than is the case with other grains.



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