TERMS OF COMMUNIST ECONOMIC AID, 1975 (ER M 76-1015)

Created: 3/5/1976

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Elmer Closer, Chief, Economic Data Branch, Statistics and Reports Division, AID

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Terms of CommuniGt Economic5

Almost all Communist aid still is provided under long term credits and Chinese aid continues to be the most concessionary. The only major change since our5 memorandum is that the Soviets are providing fewer loans under their traditional terms Ofears

Moscow signed several large "framework" agreements5 that did not limit the amount of crodit available or define the terms of repayment. Instead, tho agreements called for terms for each projoct to be negotiated separately. For example, the July "framework" agreement with Turkey provided for expanding the Soviet-built steel and aluminum plants and constructing thermal power-plants. Turkey has estimated the cost of these projects at more thanbut the USSR has deferred commitments to individual projects until final studies are completed and' has indicated it will sign agreementsroject-by-project basis. We.believe that terms will vary among projects and for certain kinds of equipment and that on the average they may be somewhat harder than the traditional Soviet aid terms.

At the other extreme, Afghanistan7 million of creditsist of development projects that we suspect will carry softer terms than those provided other clients. Historically AfghanistanMoscow's first aid clienthas been provided highly concessional aid. credits extended to Afghanistan71 wore interest free and allowed repayment overears5 yoar grace.

Terms provided under most Eastern European aid commitments were not made public Major credits probably still0 year repayment periods, but interest rates may have doubled from1 rates charged in previous years. The largest East European credits5 were to Latin America, where East European countries are the principal Communist aid donors. Most of this aid has been associated with equipment 'sales, often- allowed under trade agreements and arranged under supplier-type agreements.

Among all Communist countries, China has always provided the largest share of grant aid. 5 the grant portion of China's aid shot up to, compared with. Nepalf China"'s grant aidoad; theor oil subsidies; and the remainder went to Africa for emergency relief. China also2 million of credits" Mostly to Africa, all interest-free,ears for repaymeat5 years of grace. These terms are roughly comparable to those traditionally allowed under Chinese credits,otable exception is the Tan-Zara Railroad on which there is year repayment period0 year grace.

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