THE EMERGING ROLE OF THE SOVIET MERCHANT FLEET IN WORLD SHIPPING (NI IIM 77-011

Created: 4/1/1977

OCR scan of the original document, errors are possible

Interagency Intelligence Memorandum

The Emerging Role of the Soviet Merchant Fleet in World Shipping 'T

Declassified and Approved lor Release by the Central intelligence Agency Date: zoo I

CONTENTS

1

DISCUSSION

L FLEET GROWTH AND ITS

II. THE SOVIET MERCHANT FLEET TODAY

Size and World

Persistent Deficiencies

Role in Soviet Trade

Activity In tbe Cross Trade*

Line* Opciatloru

Impact on Western Shipowner*

III. PLANNED EXPANSION OF THE FLEET0

Plan Detalb

Impact of Expansion on Western Fleets

in

-gONftPEHHAL.

THE EMERGING ROLE OF THE SOVIET MERCHANT FLEET IN WORLD SHIPPING

SUMMARY 1

Since the, Moscow has aggressively expanded its maritime assets, nearly quadrupling the size of its merchant fleet and making it one of theargest in the world. However, with lessercent of world tonnage, the Soviet fleet is overshadowed by those' of leading shipowning countries like Japan, whose fleet is four times' larger. Soviet fleet expansion has permitted some penetration of shipping markets formerly monopolized by Western shipowners, but Soviet competition has been limited by persistent deficiencies In the quality of their fleet and its large role in the domestic and foreign trade of the USSR.

Long-standing qualitative deficiencies afflict the fleet's two largest components. In the liner fleet,ercent of the tonnage consists of outmoded general purpose freighters. Such ships are not competitive on major international liner routes where faster and more specialized container and roll-on/roll-off (ro/ro) ships of Western fleetsBecause of shallow drafts in most Soviet ports, Soviet tankers average0 deadweight tonsess than one-third the world average.

apid increase In the carriage of cross trade1 goods between foreign ports, the Soviet fleet fs still predominantly employed In the carriage of Soviet trade. Shipments by the fleet5 were divided as follows: Soviet exports and imports,ercent; USSR internal trade,ercent; and cross trades,ercent

Three motives account for most of the fleet's current operations:

1 TIJiie'per Memorandum pirpaied vod& the luipica ol iht NIO (or Economic! IIKcaeairo. The pap*oi

coonJlniteS. bul bmdued from aa Inleiaconcyducvnfea wiih roproaUitixi from lh* Dopanmenu ot State. Trcuuiy, Dcferae, Cocnnxror. Transportation. Navy, and Jwtke. tat Defeon: IntdUjence Agency, and Ihc federal Maritime Conunlvlon.

* Ciob trade cargoaarried between two coanirierhird country

the desire toleet nucleus capable of carrying all internal seaborne trade and most vital imports and of providing routine support for the Soviet military,

need to possess sufficient tonnage to meet foreign aid commitments made in pursuit of international political goals, and

need to use the fleetajor earner and conserver of foreign exchange,

The first and second motives each requiredercent of fleet tonnagehe third occupiedercent of the fleet. The heavy allocation of tonnage for balance of payments purposes reflects the fleet's contributionercent to the country's gross hard currencyigure surpassed only by the oil, timber, and goldminlng industries. This hard currency Is earned in the carriage both of Soviet exports and of cross trade cargoes. Although It Is not observable in day-to-day fleet operations, the desire toontingency capability for large-scale overseas deployment and supply of military forces has also influenced fleet expansion.

Although Soviet ships carry more cross trade cargo as tramp ships1 under foreign charter than they do ashe Soviet fleet's greatest impact on US and other Western shipowners derives from its cross trading activity in the liner trades. This occurs because most Soviet cargo lines (a) operate outside the Western-dominated system of cartels orhat set rates charged by member lines on the world's key trade routes and (b) undercut conference rates. Because of the inferior service it provides on most routes due to heavy reliance on general purpose ships, the fleet must cut rates to attract cargoes. Cut rates in liner services linking the US with Japan and Europe haveercent share of that trade for Soviet ships at the expense of US and other Western competitors. Low rates lor container shipments between japan and Europe via the Trans-Siberian Landbridgc have similarlyercent of business away from Western container-ship operators on that route. Under prodding from the US Federal Maritime Commission, the Soviets have taken limited steps to abate their rate cutting In USto eliminate all rates lower than those charged by other carriers on the North Pacific and arranging to place seven of their North Atlantic lines in conferences.

Soviet cross trade activity on the more competitive tramp charter market, often involving back-haul cargoes carried by ships returning from the delivery of bulk Soviet exports, evokes few complaints from

' Ai uwd Ul iKaamp" ntm lo il-lpi cmtrid* ot KhoUltdktalk utd otheratl anda ibacUr

' Im thbjaewibed aaii-tnw ol tailing! pa month in

naajS on given trade num.

oobnacc ta aa amcUtion ot linerpeotlnf awrtiea."ad* tnU

TWMi rta thfgri by Hiand aHoU aaSJjajj imn(OrW caaaaaatK.

?

ojwiti.iir on tha Mine mittto ai "outiidni"

Westcmie volume of cross trade cargo carried by Soviet tramps is still less than the volume of Soviet exports and imports carried on chartered foreign ships.

Planned deliveriesillion DWT to the Soviet merchant fleet underive Year Plan willmall portion of the Soviet liner fleet with modern ro/ro vessels and full container ships. With greatest emphasis on ro/ro ships, some of which are up to the highest Western standards, Soviet competition with Western operators on some routes will be much more serious, but tbe number of lines affected will be small.

The heaviest deliveries under the new plan will consist of tankers and dry bulk carriers for the Soviet tramp fleet By permitting Soviet ships toigher percentage of the country's imports and exports, acquisition of these ships will benefit the USSR's hard currency balance of payments. It will alsoarge volume of business away from non-US Western shipowners currently engaged In Soviet trade. The role of US ships in bilateral trade with the USSR will presumably not be affected because It Is determined by the cargo sharing provisions of the recently bolstered US/Soviet Maritime Agreement.

3

<OMriOCflTtM-

DISCUSSION

FLEET GROWTH AND ITS MOTIVATION

L Soviets' efforts lo restore and expand their merchant fleet showed steady growth during (he yeanWorld War II. but the volume of annual ship deliveries remained low until the. The upturn in deliveries stemmedurge In the volume of Soviet seaborne foreign trade which grewecordercent9 and similar percentagn0. To counter Ihc resultant Increase In its dependence on foreign ihips In International trade, the USSR undertook the most ambitious shipprogram in Iti history. Yearly deliveries roseeadweight tons (DWT)1 lo an all-time highillion DWT4 and averaged moreWTausing fleet tonnage lo nearly triple.emporary cutback1eliveries are again close to their historic, high.

t. Four key motives arc discernible in Soviet merchant fleet expansion:

of basic economic and security needsational merchant fleet capable of carrying all Soviet coastal cargoes and vital Imports and meeting the routine peacetime demands of the Soviet armed forces,

acquisitionerchant fleet Urge enough lo assure carriage of all economic and military aid cargoes to Communis! and Third World client countries In Soviet bottoms,

development of the merchant fleetajor earner and conserver of foreign exchange, and

creationuge contingCDCy capability within the merchant fleet for overseas deploy-mcnt and resuppJy of Soviet mililary forces.

Most requirements for the first motive had been met prior2 when the USSR began to accelerate Its fleet expansion. Before the end of, the second motive had also been largelyIhc full-time commitment ofillion DWT to Cuba and North Vietnam as the result of US efforts to keep Western ships from trading with those countries. Once the needs of Its aid program were covered, the

USSR stepped up (he efforts already underway to acquire ships for the earning and saving of foreign exchange.

3 With the exception of support for ipedahtts sent to fulfill aid commitments In various couniries and troops deployed to Cuba at the time of the missile crisishe Soviet merchant fleet has not been called upon lo fulfill lis obvious military contingency role. Nevertheless, the acquisition of all (ha freighters and tankers used In providing military and economic assistance and at least some of the ships of these types carrying export and cross trade cargo to earn foreign exchange was probably motivatedoncern for military contingencies as well as for the economic and polillcal needs these ships serve. This is (rue also of the roll-on/roll-off (ro/ro) ships Moscow began adding to (he fleet

II. THE SOVIET MERCHANT FLEET TODAY Sire and World Standing

he latest speed-up in deliveries brought the number of ships in ihe Soviet merchant fleetnd Its tonnage3 million DWT at the endt that site. It ranked ninth in the world with lessercent of Iota] tonnage (seendespite Its having almost quadrupled in capacityhe Soviet merchant marine continues to be overshadowed in terms of quality and capacity by the fleets of leading shlpowning nations such as Japan, the UK. and Norway.

mber of lalttnn pee

ry cargobackbone of the Sovietfor nearlyillion DWT.ercent of total tonnage. Ofillion DWT orercent of fleet capacity were vessels suitable for liner* service (seeenera) purpose dry cargo ships are the most common vessels in this category, accountingillion DWT. At (he endull container and ro/ro ships made upercent of the Soviet liner fleet; none were as large or as fast as (heir Western counterparts.

' Sd-luW .ervicc. that offerprescribed no mootf. to, general cargo on given trade route).

l.U. I

t

WORLD- TONNACES.3

Pctcenl irf

World

Libert*'

Vailed

franc. M

30

USSB IS

Uaktd SUM 16

.

1 TV IWi of UberU ind I'ir.imj artlloats, owmd by US. Creek owrscai CbtWM. and other fo.eljr, tW USut km more lhanrdllfeo DWT uadW'tae Libra.batatkoa -rWer at ftruaravu flat art al Uatt IS rndbor.arMy ot other lorolfr. flan Total US-ownedi* *umdsillion DWT.

' FjcWlftiB rrdlRon DWT of otaotrie savata-mral-rrmard loanafi in the loon fleet

Tible 3

SO VICT MERCHANT FLEET COMPOSITIONoceaiber IS73

To.il

Dry

type.

General purpose

Full cenUUiM

Roll-rtt/rollflU

rUtrtcoratar

Timber earner

Balk carrlai

Combinationulk canter

TaaUr

iso

110

4

TVoound

of

[ r,

i .

ii

Tanken comprised the second largest component of the Soviet fleet, accountingillion DWT orercent of capacity. Timber carriers formed the next largest segmentotal capacityillion DWT andrccnt of total tonnage, followed by dry bulk carriersillion DWTercent of total tonnage.

Persistent Dofidortdoi

he greatest qualitative weaknesses of the Soviet fleet are the small average site of its ships and the large number of older genera! purpose dry cargo ships In its big liner fleet Because of the shallow depths at most Sovietof which can handle dry cargo ships Larger0 DWT or tankers0

average sixe ot Soviet ships hu always been well below world standards, raising operating costs and contributing to fleet inefficiency.

Onhe average Soviet shipWT comjiaredorld average0 DWT.

Soviet (ankers0odd average0 DWT; Soviet dry bulk carriers0 DWT comparedorld average0 DWT; and Soviet timber carriers andships were also undeniied

Soviet ship sires were dose to world standards only in their general purpose liner fleet and small ro/ro and refrigerator fleets.

& The preponderance of outmoded general purpose vesseli in the Soviet llneiajor hindrance In Soviet efforts to expand into other countries' liner trades. Although such ships are well suited for coastal deliveries to Soviet Far Eastern and Northern Sea Route ports and for trade with manyhey are not competitive on major international routes such as the North Pacific, the North Atlantic, and Europe-Far East, where the raster and more efficient container and ro/ro ships of Western fleets predominate.

Rota in Soviet Trade

he chief mission of the Soviet merchant fleet is the carriage of Soviet cargo in domestic andional trade Domestic trading activities, in which the Soviet fleetomplete monopoly, consist largely of bulk cargo movements in the Black Sea. Caspian, and Far Eastern basins and (he delivery of general cargo to remote ports In the Far East and along tbe Northern Sea Route. Domestic cargo movement totaled aroundillion tonsboutercent of the total cargo carried by the fleet (see Table 4)

The pattern of Soviet seaborne foreignhe most Important determinont of the employment of the Soviet merchant fleet in international trade,oviet seaborne foreign tradeillion torn, of which Soviet ships carriedillion tons.ercent of the total In addition, the Soviet fleet movedillion tons of cross trade cargoes tor foreign shippers between noo-Soviet ports, bringing total cargo handled by the Soviet fleet in international tradeillion tons.

Because exports make upercent of Soviet seaborne foreign trade, the chief role of the USSR'she delivery of exports. Theost remunerative activity is the movement of Soviet oil, coat ond other bulk commodities to Western Europe and Japan. The carriage of Soviet exports0 million5 percent of fleet hard currency earnings.

Hard currency earnings by the Soviet fleet55ercent of the total for the country. The fleet's contribution to the hard currency balance of payments was greater than that of any single manufacturing industry and was exceeded only by the oil goldmining, and timber industrfct (see Tablene of the advantages the merchant fleet has as an earner of hardhat its hard currency operating costs ore low. Most of the capital il requires, for example, consists of ships which the USSR obtain! either for rubles from Its own shipyards or by payment through clearing accounts fram East European and Finnish builders.

The fleet also aids the Soviet balance of payments by earning clearing credits In the export of oil. phosphates, and other bulk goods to Warsaw Pact trading partners In carrying these cargoes, tbe USSR

T.We 5

SOVIET HAHD CUBRENCT EARNINGS IN

CoM

fjpoiti

Civd* oil end peiioleurn

Wood -Ad wood

diarnondi

Caal and

Met.b

Corian

MuivUcturei and oiha

Sarvira-

Ocean thippMf

often enable* Iti Communist customers to avoid ipending hard currency on chartered Westernnalysis of the employment of the current fleet on the basis of motives underlying its operations reveals thatercent of fleet capacity is being used to bolster tbe country's foreign exchange position. That portion of the fleet not earning or saving foreign exchange falls into two segments, each containing aboutercent of total tonnage. One carries coastal trade and vita! Imports and provides routine support to the Soviet military, the other fulfills thepolitical goals of Moscow's foreign aidiam The precise functions performed by various Soviet merchant ship types In fulfilling the three motives revealed in current fleet employment are outlined in Table 6

Activity in tho Cross Trades

leet hard currency earnings not attributable to the carriage of exports stem largely from participation in cross trades linking foreign ports. Soviet carriage of cross trade cargoes has more than quadrupled since the. Tonnages grewillion3 toillion0 and more thanillionS. Initially. Soviet ships carried cross trade cargoes onlyramp basis when they were returning to the USSR after the delivery of exports or when chartered out to foreign snippets for the winter months when the icing of northern ports reduces Soviet shipping needs Tbe volume of cross trade cargoes carried by Soviet tramp ships is still much greater than that carried by Soviet liner services (weome of the tramp cargoes carried in the cross trades duringflour moving to Cuba and Middle Eastern oil moving to Eastern Europe, forcarried for Communist and LDC trading partners with payment through soft currency clearing accounts. Otheras Persian Gulf oil and Philippine copra moving to Western Europe on Soviet ships returning to their home ports after delivering Soviethard currency.

svpnrml by (be Sorter Merchant Fleet In Ferelfa5

Soviet Trade Crosi Trade

Tori!

Million Metric Torn

Trump

tinor Operations

y the. Soviet liners had beguny cross trade cargoes and. for the first time, Soviet liner services were initiated whose primary purpose was cross trading to eatn foreign exchange. The Soviet Union controls the third largest liner fleet In the world, exceeded only by Greece and Japan.he USSR hadnternational cargo lines, all handling only Soviet traffic- Byhe total number of Soviet lines had risen toengaged largely or entirely In ihe cross trades (seehe greatest boost to Soviet cross trade liner activity resulted from the improvement in shipping relations with the United States after the signing of (he US/Soviet Maritime Agreementhe USSR currently operates at least eight liner services in the transpacific and transatlantic trades of the United States. Twoihirds of the cargo carried coosists of manufactured goods in US trade with other non-Communist countries, generating hard currencyrevenue for the USSR. US/Soviet bilateral liner trade totaledons Inpercent carried by Soviet ships.ercent by US ships, andeicenl by third-flag ships (see

nother stimulus to Soviet liner operations has been tbe development of tbe Trans-Siberian Land-bridge) for the movement of container cargo between the Far East and Europe. Cargoes moving In both directiom on the TSLBons5 and accounted for at leastercent of the cross

T.U. 7

USSHi INTERN ATTONAL CAHCO LINESPfllL 1BTB

Lme, Operated Unilaleeally byCeu-panle.

cargoes carried by Soviet linen. Westbound cargoes la thistwo-thirds of themove on Soviet container ships from Japan. Hong Kong, and the Philippines to tbe Soviet Far Eastern ports of Nakhodka and Vladivostok (seehey then move across the USSR by rail, tome for further overland shipment to destinations In Europe and Iran and others to be picked up by Soviet container mips in Baltic and Black Sea ports for seaborne delivery to Western Europe. At leastSoviet cargo line* In the West and three In ihe Far East carry TSLB containers. Rates for container shipments between Europe and the Far East on through bills of lading via the TSLB are as much asercent below conference rates charged by Western container lines offering services by sea between these two areas.

IS. In managing its international linei services, the USSR has preferred to operate as an independent outside ibe conferencehe Soviets choose to do this because tbey lack ships fast and modem enough to compete In terms of service, the principal form of competition between conference members. While they remain outside of conferences, the Soviets are not bound by their rate structures and can therefore compete more effectively by Uvwering their rates. Ianly six Soviet cargo line* were affiliated with conferences and only one hadonferencebe Soviets do Join conferences when their shipsrade lhat Inn noi beenwhen they feel that their revenue* will be maximized by accepting higher conference rateseiling on their participation.

Cortlerencea are organizatiortt ot rtoarmhlp companiescargo line* ort given trade routes. They ret the rate) charged by member lino and allot titling! among them. Nonconfereoce lines often operate on the lame route! ase "outMden."

Steamship Company (FESCO) has been negotiating wilh conference lines but appears reluctant to place additional lines in confer ones at this time. In the meantime. FESCO representatives In the US have changed the way that commodities are classified in their liner tariffs on file with the FMC so they can align their rates with those ol other Independents.

oviet failure to observe the cargo-sharing provisions of2 US/Soviet Maritime Agreement hasreater Impact on the US fleet than rate cutting. Since the agreement went into effect at the endoviet foot-dragging has deprived US ships of the opportunity to carry moreillion tons of cargo to which they are entitled, with losses amounting to moreillion. Protocols to the US/Sbviet Maritime Agreement signed in Moscow at the end of March by representatives of the Maritime Administration and the Soviet Ministry of the Maritime Fleet as the resultS effort to assure Soviet compliance with the agreement should end Soviet abuses and assure US shipowners of future opportunities to make up for past undcroarrying in US/Soviet trade.

oviet tramp activity In the cross

trades has

caused little concern among Western shipowners. Ships In trampcarrying bulk cargoes in shiploadin competitive markets where charter rates fluctuate fteely and business goes lo (he shipowner with the lowest rate. The world tanker and bulk carrier fleets and charter markets are too large for the small Soviet fleets to have any measurable influence on rates.

ill. PLANNED EXPANSION Of THE FLEET0

ike other independents. Soviet line* outride the conference system undercut conference ratesrates are traditionallyoercent below conference rates. Soviet rate discounts on certain commodities in certain trades are far greater thanercent.

Impact on Western Shipowners

impact of Soviet shipping operationsshipowners has been greatest in the linerthough the USSR's tramp ships carry sixcross trade cargo. The expansion of Sovietinto the cross trades at lowhas taken business away from thetinea that dominate these trades.for the Western lines contend that the Soviets.to attract business, charge rates that areassertion that Is Impossible tolack of dsla.

Soviets have undeniably made inroadsrate cutting. In the lucrative US liner tradesNorth Atlantic and North fticific, they3 percent of the tonnagen theEurope-Far East container trade.rales on the Tiara-Siberian Landbridgeasercent below conferenceercent share of business from

Plan Details

t the end ofive Year Plan, the Soviet merchant fleet will probably exceedillionn increase ofillion DWThe largest block of newmillionbe added to the tanker fleet, raising its size toillion DWT,ercent of total fleet

* TV USSR hai announced IB4 tnilUoq DWT aiut ih Liaaedata of wrlteraraati much bather (haa aay prevtMaV eafcMtd. Tbe tower tana* war rtuboUr ftbrtcalod1 to

counter eiitC'raled forecaitt of Soviet fleet (rowth by WeO

f Soviet rate cutllnf la th* liner trader. The

offtrial Sonet larftt bar xUlrtool lo their akrrehanl tiedtbe tUm, wm toweredJTUoa DWT w>aOkoa DWT i" dm laleat venlon of ihe Plan

hile Moscow continues to deny that its liner fleet is engaging in unfair competitive practices by culling rates. Its policy on rate cutting and conference membership Is changing-eeting between the leaden of the Soviet Ministry of the Maritime Fleet and the US Federal Maritime Commission (FMC) Inhe Soviets agreed to raise their liner rales In US trade at least as high as those of other nonconference Operators and to seek membership in all appropriate coherence* In US trade. Soviet officials met with representatives of major conferences operating on the North Atlantic in early September and agreed to haveSoviet tine operating between the US East Coast and Atlantic and Bailie ports Inthe sevenon this important route. The Soviet company will |oln five as full members and. subfect to FMC approval, will Join the other twopecial agreement permitting them to charge lower rates as long as their equipment and services remain Inferior.

o steps have been taken to enroll other independent Soviet tines on the North Atlantic In conferences. On the North Pacific, the Far East

It

-conripciinrvi.

capaot. The lirver fleei willWT of new shipi. but it will not expand ai scrapping! of aging general purpose liners will probably match new additions-esult, its share of fleet tonnage will diop fromercent56 petccnt

of bull dry cargo ships willpercent of total newthis component of the Soviet fleet willatillion DWT onecemberto the USSR's new fleet ofbulk carriers will also augment theto move bulk dry cargo. Tonnage incategory Is planned to double fromal the end5WT atsee.

tanker deliveries will raisetanker size byercent00fill less than half theaverage. Half of the new tonnage will0 DWT. including Soviet-builttankersWT. tankers offrom England's Swan Hunter Yard,tonnen from Bulgaria. No existing Sovietcan handle shfps this latge. Moscowscheduled port Improvements tolargerthe Baltic at Ventspils (up to

SHIP TYPES PLANNED COR DELIVERY TO THE SOVIET MERCHANT FLEET im-as

DWT

Total

Liner

Cer-mt

Fa* rawtakm

Barge

Timber earner

Bull

Combination oil/dry bulk

nd on Ihc Black Sea al Novorossiysk (upWT) and Crigoryevskiy liman (upo significant Increaiea In average ship sires are anticipated for the USSR's fleets of liners and combination carrien,

he most modern ship types planned for delivery during0 Plan will upgrade the Sen/let liner fleet These Include ro/ro ships, full container ships, and barge carriers, the most advanced concepts for expediting the movement of general cargo by sea. Ro/ro ships are expected to Increase by moreWT. full conUlnenhimWT. and barge carrien0 DWT. Il Is llkdy that tire Soviets are stressing ro/ros because of their unique suitability for arms shipments and mililary sealifts as well as for commercial vehicle deliveries. Total tonnage In these three specialized categories willercentWT5 toWTut their share of total Soviet liner tonnage will rise onlyercent (see

Table 10

PLANNED SOVIET MERCHANT FLEET COMPOSITION

DWT and up"

9 DWT

Lea0 DWT

Ma.matl number ol combination carrier!

ewaar

Combination eel/dry bulk carrieninimum figure)

separated out hum the Urge tanker category. Carta- claw* ol eeaall Wk oarrvm -we malted (roan go-oral

purprne lo dry bulk carrien.

T.bk II

soviet carco LINES TONNACE ai of 31

dwr

S4

crmlll ftulpok

frtajhtars 01

Fan fulMiovnd.

m 3

ST J

Baitcarrier all I

mong ship classes for liner use slated for delivery under the current plan, three new classes of ro/roPolish-built Skulptor Koncnkov. the Finnish-built Magrutorgorsk. and the Soviet-built Kapitanfavorably In terms of size, speed, and flexibility with their best WesternThis it not true, however, of the one modern container-ship class the Soviets willEast Ccrman-built Khudozhnik Saryan. These ships arc slower and smaller than the leading daises in non-CommunbT container fleets Barge carriers slated for acquisition9 andFinnish-built Yulius Fuchik-dass and the Soviet-builtbased on the world-leading US Seabee and LASH (lighter aboard ship) designs with adaptation for colls al the mouths of the Danube and Soviet Atctlc rivers. Most ofWT of general purpose ships intended for the Soviet liner fleet will come from four classes of ships of leas0 DWT in production priorll of which can carry containers.

lmpoct of Expansion on Western Fleets

he USSR's limited puns for modemlution of its liner fleet0 will in crease Soviet potential for competition In sdeotedt the same time. Moscow's buildup of its tanker and dry bulk fleets will reduce (he volume of charter business available to Western shipowners in Soviet trade

he greatest Impact on Western liner operators from planned improvements in the Soviet liner fleet will result from the USSR's decision to stress ro/roa rather than container carriers. With ships comparable to or better than those of Wettem owners, the Soviet

o fleet will be used In US trade with Europe and the Far East. It could provide serious competition for Western ro/ro opeiaton on those routes and take business away from Western container-ship operators aswdt

The USSR's0 container-ship fleetWT will be small by Western stanclards. accounting for less than one quarter the tonnage of any of the three leading container fleets InUS. Japanese, and British. Its abilityompete will be little enhanced, because most of the vessels lo be added under the Plan belong to the0 DWT KhudoihnlV Saryan class. While bigger and better than container carriers previously acquired by (he USSR, they sue Inferior to most of their Western counterparts in tbe lucrative North Atlantic and North Pacific (radci.

The degree of injury to Western liner operators from Improvements to the Soviet to/to arid container-ship fleets will depend in part on the success of efforts currently underway by the US and other OECD govemrnents to induce the USSR to moderate Its rate cutting practices and enter conferences. At present, the outlook for Western owners is better on the North Atlantic, where Soviet lines employing their best ro/ros are scheduled to become conference members, than on the North Pacific, where the one Soviet line employing modern container ships will probably remain Independent until itarger share of the trade. In general, thb issue remains unresolved.

The0 DWT barge carrier fleet, while less than one-tenth the leading US fleetWT. will be equivalent to today's second-ranking Norwegian fleet. Because of the great potential for barge carriers In Soviet domestic and foreign trade, aersuWtioo of thesenlikdy to result In Increased cross trade coin petition. Their chief employment will be In seMdng Soviet seaports linked with major river systems used for barge traffic such as Ihe Danube, the Volga, and the larger Siberian rivers.

the USSR completes planned additions toport capacity in the Soviet Far East,fordbrtdge cargoes willWith steps to speed up the movementcontainers also planned, the Westernlines operating between Europe and (heof them USlosebusiness to (he Landbridge. .

tramp operations, the greatest impactshipowners will stem from new Soviet

tankers, dry bulk carriers, aad combination carriers. These ships will take business away from Western vessels formerly chartered to carry Soviet imports and caporU. They will add to the USSR's hard currency revenues and reduce expenditures on chartered foreign grain carriers.

inally, there will be some increase in Soviet tramp participation in crosson backhaul voyages. With ship sires in the Soviet bulk fleets up. it will become easier for Soviet tramps to obtain cross trade charters, adding to the Soviets' competitive stance in these trades.

17

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