COMMUNIST AID TO LESS DEVELOPED COUNTRIES OF THE FREE WORLD, 1974

Created: 6/1/1975

OCR scan of the original document, errors are possible

Intelligence Report

Communist Aid to Less Developed Countries of tbe Free4

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Foreword

Beginning with this report. Ihe annual assessment of significant developments in the economic and military aid activities of Communist countries with less developed areas of the Free World will be issued by the Office of Economic Research, CIA. This review was previously covered in the4 report series. Aid and Trade Activities of Communist Countries in Less Developed Areas of the Free World, prepared under the aegis of the Subcommittee on International Trade and Aid of the Economic Intelligence Committee, USIB. The subcommittee was abolished

The handbook will be issued

This report updates analytical interpretation and revises data in previousHighlights of trade developments4 also are included. StatisticalCommunist-LDC economic and military aid relationships4 wereseparate coverandbookommunist Aid to Lessof the Free World, March

docs not contain Communist-LDC trade data, aucn imormauon

separately as it becomes availableupplement to the monthly reports on Communist Aid and Trade Activities in Less Developed Countries.

In this report the term Communist countries refers to the USSR, the People's Republic of China, and the following countries of Easternulgaria, Czechoslovakia, East Germany, Hungary, Poland, and Romania.

The term less developed countries of the Free World includes the following: (I) all countries of Africa except the Republic of Southll countries of East Asia except Hong Kong andalta, Greece, Portugal, and Spain inll countries in Latin America except Cuba; and (S) all countries in the Near East and South Asia.

The term extension refersommitment to provide goods and services either on deferred payment terms or as grants. Assistance is considered to have been extended when accords are initialed andormal declaration of intent The term drawings refers to the delivery of goods or the use of services. The estimates made of Communist military aid are the aggregate value (at list price) of agreements, where known, or are derived through the use of analogous prices minus downpayments and cash sales.

The substance of this report has been coordinated with the Bureau of Intelligence and Research of the Department of State, the Defense Intelligence Agency, snd the Agency for International Development.

Aidess Developed Countries of the Free4

KEY FINDINGS

New Communist military and economic aid to the less developed countries (LDCs) of the Free World dropped to7 billionts lowest level in three years (seen spite of the reduced program, there was

Communist Aid to Less DevelopedI

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no apparent change in Communist aid policy. Programs under way continued it roughly the same pace as in most recent years, and the number of Communist military and economic personnel stationedCs increased.

Most of Ihc decline4 waa in military aid, which dropped sharplyabnormally high crisis levelsilitary aid, always morethan economic aid,malleremonstratedextent of the Soviet and East European commitment to Ihe Middle East.itecord year; for Syria, second onlyeflecting theSoviet-Egyptian political relations, Egypt received no new military aid.to Iraq and Syria accounted for moref the USSR'sillion of new assistance. Iraq and Syria also had theof Communis! military advisers. Most significantly, Moscow'sof equipment to Iraq and Syria surpassed in sophistication theto any other LDC. Thc3 jet fighters, shipped toSyria have not even been provided lo Warsaw Pact countries. Alsoovertones. Inn was Ihe only other country toargefor ground forces equipmenl, military

support, and engineering equipment.

Moscow and Eastern Europe continued to use economic aid lo protect their commercial and long-term economic interests. Again4 the formation of joint industrial and commercial ventures with LDCs increased, and joint committees for economic cooperation were operatingumber of LDCs as coordinating and aid planning bodies. New Soviet and East European commitments42 billion, about thc same as3elowecords. The failure to furnish large blocks of new aid reflected mostly Ihe continuing slow draw down on existing aid. Although drawings against unused economic creditsew high0 million, Ihey were propelled5 million Soviet grain shipment to India, Otherwise, drawings would have approximated recent annual levels.

The commercial motivation for economic aid was highlighted by the large Communist credits to Argentina, intended lo correct the imbalance in Soviet and Easl European trade with Argentina. Soviet and East European equipment sales under these credits could nse to as much0 million over lhe next several years.

Other major Soviet and East European economic aid wenl largely to ongoing projects, such as Moscow's newillion) to Pakistanteel mill

being built0 million of Soviet aid extendedn an unusual move. Moscow agreed to provide one-half ofillion budget support credits to Bangladesh in hard currency.

was to its chief militaryakistan.

0 million of new economic aid4ignificant drop from5 million annual commitments since tbe Cultural Revolution. Although still pursuing an active aid program in Africa, Peking reduced its new economic aid pledges, mostly becauseack of opportunities and because outflows still were heavy for completing the Tan-Zam Railroad, China's largest single aid project in the Third World. Nevertheless. Peking's area of interest was unchanged, and exceptillion credit to Laos, its major effort continued on the African continent. Peking's two majoranzania andgain took the China's total aid. Its only significant miliiary commitment

lions share

1

The Shares of Communist Economic Aid Extended to Less Developed4

ByLDC Area

DISCUSSION

Economic Aid Extensions

I. Communis! countries pledged more4 billion in new economic aid to the LDCselow last year's amount and downromevels (seeommunist economic credits to LDCs naveillion since the beginning of the program, less than one-half of which has been drawn.

Table 1

Communist Economic Aid Extended to Selected LDCs,US $

Asia

America

SO

East and

Asia

All donors, except the countries of Eastern Europe, reduced their pledgeshe USSR and East European countries offered about thc same amounts, together accounting for moref total new aid. Chinese aidar cry from the0 million extended0 when Peking again began lo offer large amounts of aid to LDCs and significantly below0 million average of the four-year.

Table :

Communist Economic Aid Extensions

Million Current US S

613

S4

563

Because ofrounding, component) may nor add to tbe toult tfiown.

onverted from foreign cunearier that have appreciatedn lelauoai io tbe USnflaiioo of price* mw hive reduced thereat value of the Ud even lurthet.

Argentina, Syria, Pakistan, and Bangladesh, in that order, were the major recipients of Communist economic credits getting three-fourths of the total. The USSR and Eastern Europe gave almost equal amounts to Argentina; East European countries dominated in aid to Syria and Bangladesh; and Moscow provided for all the assistance to Pakistan.

The USSR remained the top Communist donor. Although Moscow channeled Us aid tolients, threergentina, Pakistan, and Syria -predominated. Argentina, now the largest claimant for Soviet aid to Latin America,5 million credit to develop electric power facilities. Moscowike amount to Pakistan to1 credits for the constructionteel mill. Following President Asad's visit in April. Moscowinimumillion in new credits to Syria. Part was to complete the second stage of the Soviet-built Euphratesort,extile mill. Moscow offered Egyptillion In new aid, all for mine clearing in the Gulf of Suez. Other small amounts were spreadandful of LDCs in need of emergency relief and balance-of-paymcnts support,illion in hard currency to Bangladesh.oscow's hard currency transfers to all client states had totaledillion.

Romania, Czechoslovakia, and Poland were the biggest donors among East European countries, accounting for three-fourths of all pledges.0 million. Bucharest's program was the largest; Prague and Warsaw each0 million. Argentina and Guinea were the major recipients of Romanian aid. Bucharest alsoillion to Bangladesh and SI0 million each to Mauritania, Sri Lanka, and Lebanon, the first Communist aid to that country. All of Poland's aid went

to Argentina; Czechoslovakia centered its program entirely on Syria. Credits by Bulgaria. East Germany, and Hungary5 million rounded off the East European effort. Sofia's share, moreillion, wen! largely to Syria.

all of Peking's economic aid package went toillion credit to Laos0 grant to Sri Lanka.credit constituted Peking's first formal aid agreement with theA sizeable chunk is earmarked for roado linkbuilt road in northern Laos with the existing Laotian road network.the new credits to Africa supplemented Chinese programs already underreceived the largestillion, mainly to expand amill and to construct spur lines to thc Tan-Zam Railroad.illion toillion to Mauritania,o Kenya and Upper Volta.

Drawings

Drawings by LDCs0 million4 because of shipments against the large Soviet grain credit to India signed ino significant changes in magnitude occurred in drawings against Chinese and East European aid. If the Soviet grain were excluded, total drawings4 against Communist credits would approximate the annual average; for the USSR, drawings would be somewhat below thc average for the same period (sec

The apparent static character of LDC drawings activity has become an accepted principle of the Soviet aid program. Deliveries to major clients fluctuate in cadence with stages in construction of heavy industrial plants. India's dull performance during the past five yean, however, has created an extra drag on the Soviet program. As the largest recipient of Soviet assistance, India has yet to0 million of9 billion in pledges.0 million of project aid has not been allocated to specific uses. Project aid deliveries have droppedeak5 million4 toillion annually

East European deliveries fluctuate less dramatically. They are made up largely of orders for machinery and equipment which are easier to manage than Soviet heavy industrial plants.

rawings on Chinese credits fell moderatelyeliveries to Tanzania for the Tan-Zam Railroad droppedillion,0 million

3

Communist Economic Aid Drawn by LeaCountries

Million Current US S

Europe

4

91

70

Became of rounding, compooenti may not add to the to tab rhown.

he railroad, Peking's largest single project in the LDCs, is nearing completion.illion of the0 million credit for the railroad remains and that amount should be drawn

Repayments

II. Despite Soviet rescheduling. LDC economic aid repayments to Communist countries4 probably were somewhat higher than0 million estimatedfghanistan, Ghana, Somalia, and South Yemen, whose debts were rescheduled, mainly received extensions of previously allowed moratoria. Requests for rescheduling byndia, andmong the USSR's largest debtors -were not acted upon. Moscow in an unusual move, canceled some outstandingor Southillion, and for Somaliaillion. The USSR usually handles LDC debt servicing problems by extending repayment terms, often after long grace periods.

May include mom economic debt, although theie payment! are made.

Probably include) military debt ai well ts wme debt on commercial account

Technicians

II The Communist presence in Third World countries expandeds the number of non-military technicians stationed in the LDCshinese technicians still predominate, reflecting Wong's continued heavy commitments to Africa (seend

Table 4

Communist Economic Technicians in Lea Developed Countries'

Pmona

Asia

East and

Asia*

ettimaiei of Ihc nam fed af penon* presenteriod of one month or more. Numben arc rounded to the netrat fM.

Including laborers in tome countries, especially In TanUPia. Zambia, and Somali*.

J. 0 Chawseorted working on ihc Karakoiamiiiiun.

of the East European technicians detailed to LDCs wereAlgeria and Libya. Algeria also received the largest share of Sovietthan one-half of Soviet and East European personnel in LDCslgeria, Libya, Egypt, Syria, and Iraq. Anf Soviet andpersonnel were detailed to aid projects in Afghanistan, Bangladesh,Iran.

than three-fifths of the Chinese technicians in LDCs wereZambia and Tanzania in construction activity related to the Tan-ZamChinese withdrewechnicians4 as construction was winOf the remaining personnel,0 were used to lay tracko complete ancillary rail facilities in Tanzania. Elsewhere inupped lis contingents in Cameroon, Mauritania, Rwanda, and Sierra Leone

Communist Technicians

in the Lass Developed4

under agreements to develop agricultural and transportation facilities. Large groups also were sent to both North and South Yemen.

IS. LDCs contractedinimum0 million in Soviet and East European serviceshey also paid for in-country support. Moreover, East European countries require hard currency payment for their technicians. Peking on the other hand usually requires LDCs to pay only the local costs for technicians, and these are financed by commodity import credits.

Technical Training

0 LDC personnel have gone to Communist countries for technical training4 (secepartures were upainly because of an expanded East European program.

Technical Trim horn irm Onatocaaal Couafriea Departing tor Tr Ui Comranun CoauHrtM*

W4,

local USSR Europe China Toul USSR Eorope China Total USSR lump* China

Fa*

and

4JH0

IS

lthough the USSR consistently receives the largest share of new trainees, it also continues to emphasize in-country technical training at project sites, vocational schools, secondary and university-level institutes, and on-the-joboscow, for example, has establishedecondary and higher education institutes ineveloping countries that can train0 students annually. Moreover, the Soviets have built or arc building atocational (raining facilities. Moscow sendsoviet instructors to LDCs each year to staff training facilities.

3. MareatkiUed wot Un have been trained al Sovki project

hc Soviet effort to develop technical education facilities in LDCs is particularly significant in North African and Near Eastern countries. Moscow's help has led to the construction of more thanducational establishments in Arab countries. Sixty-eight of these were operational by the end4 (mainly in Egypt, Algeria, and Iraq) and training had been providedew agreement with Iran calls for construction ofew industrial training centers, including two technological instituteseacher training school.

hina carries onmall program in technicalrainees inears. Peking believes that the relatively simple skills required to implement Chinese-supported projects are better acquired through in-country, on-the-job Gaining rather than at Chinese domestic facilities.

Academic Students

0 students from LDCs have gone lo Communist countries for academic study. Data on new students4 and those in residence at Communist academic institutions at yearend are shown in Table 6.

The USSR repeatedly trains more foreign students than any other Communist country. It offers studies in morepecialities at moreniversities. East European countries alsoood sized effort. The Chinese program is intentionally kept small and selective. Since the Cultural Revolution, China has accepted only Tanzanian and Zambian students, except4 when the enrollee base was broadened toandful of students from Ethiopia, Sudan. Iran, and Sri Lanka.

Table 6

Aodfuiic Studesls from Lett Developed CouMriMoairomUK Cow (thi1

Prram

Asa

Ean and

Asa

S

Nui-bea ue itmrdidt* wi Ot. Son* of iftc1 Mhohith* iMi

JSS

IS

Third World students stress science and engineering training relevant to indigenous development needs. Africans outnumber all others on the student list, nearly two-rhirds in residence at Soviet institutions,

Inrague permanently closed the University ofovember, which had administered training for all foreigners in Czechoslovakia. The closure signals decreasing emphasis on socio-political tjaining/indoctrination rather than the termination of academic training for Third World students. The University had only language, international relations, and economics faculties-Students seeking faulting in other disciplines were sent to schools elsewhere in Czechoslovakia. Administrative responsibility for students now will be assumed by the university at which they are enrolled.

Military Aid Extensions

COrnmunist countries pledged more3 billion in new military aid to LDCsrom last year's record performance (seerab states remained the centerpiece of Communist arms diplomacyhe USSR was the top donor; Syria and Iraq, the ranking clients,| of all new Soviet aid. Moscow offered no new aid toramatic turnaround from last year, when Cairomillion (seelthough new credits to Syria were off sharply, the military aid package4 was sufficient to keep rebuilding and modernization programs on track. Damascus was especially pleased with the terms of the new accords that permitted liberal deferment of payments. Iraq, whose very large purchases were needed to rebuild inventories depleted in the Kurdish war, has no repayment problems, as burgeoning oil revenues are generating large current account surpluses.

Moscow had nine other LDC clients for arms aid. Iran topped the list as itmillion accord for ground forces and engineering equipment. Major new Soviet agreements with Tanzania and Uganda signaled the introduction of surface-to-air missiles to Black Africa,

notable Soviet-LDC arms developments4 included:

Shipment of supersonic fighters and surface-to-air missiles to Somalia;

Two new African clients, Guinea-Bissau and the Central African Republic;

Table S

Military Aid Extendedess Developed Countries'

Soviel Military Aid Extended to Major Arab Slates

Because ot" round int. components may nut add totals shown.

Million US S

Total Egypt Iraq

Syria

A | illion order by Mc-rocco;

Significant cash deals with Libya ( illion) and

Nigeria (j nd

New accords with Peru and Sri Lanka.

European countries offeredillion in military aid to nine

LDCslo Iraq, nearly all from Bulgaria and Romania.

During an early December visit to India, the Czech Prime Minister signed a

aid agreement to provide Delhi with tanks, armored personnel carriers,

trainer/attack aircraft, and engineering equipment The East European effort also included smaller accords with Egypt, Lebanon, Syria, and Tanzania.

continuedinor actor in Communist military aid.its support for Pakistan with amillion accord and added twoNepaland] million).

Deliveries

rawings against outstanding military3lummeted from thc1 billions Moscow's deliveries lo Egypt dipped to only| million. Nonetheless, military deliveries were the second highest on record (sec.

Table 10

Military Aid Drawn by Lets Developed Countries1

Soviet Military Deliveries to Major Arab States

Current US S

791

Tolal

Egypt

Iraq

Syria

ecause of rounding, component* may not add to the totals shown.

early all the arms came from the USSR, with Syria and Iraq thc principal recipients. The level and mix of Soviet weapon shipments to Damascus has upgraded Syria's ground forces so thai they almost certainly are better equipped now than at the beginning of the3 war. Syria also became thc first LDC to receive thclogger. Some of the most modern equipment exported by Moscow, including Osa-II guided missile patrol boats andircraft, were sent to Iraq. In addition, Baghdad received its firstocket launchers.

n other Near East developments, Moscow for the first time in three years resumed shipments of limited quantities of military equipment lo North Yemen. Deliveries to Iran (i illion) continued, although behind schedule.

oviet deliveries to India (Sp hiUlion) fell to their lowest levellthough shipments declined steadily, the drop does nothift in Soviet-Indian military aid programs. Rather, old agreements are nearly completed and Moscow has not yel begun Io implement new agreements. Elsewhere in South Asia, Afghanistan continued to receive record quantities of Soviet arms, particularly armored vehicles.

oviet deliveries toncreased over previous years. Somalia alone took moref the total as Mogadiscio received its firstndurface-to-air missile equipment. Peru was thc only Latin

American recipient, gettingillion worth of tanks and ground forces equipment. AbouSoviet tanks have been shipped to Peru3 agreement.

The bulk of East European arms deliveries4 went to ArabreceivedSyria and Egypt most of the rest

d Romania provided most of the equipment supplied Iraq; Czechoslovakia carried most of the Syrian load. Chinese deliveries were directed mainly to Pakistan, although token shipments went to Nepal and Zaire.

Training

0 LDC military personnel have been trained in Communist countriesata on new trainees and those in training at the end4 are shown in

TaMell

Military Prooanrl from Led Developed Countries Trained In COmmufltR Countriei1

Departure

fttujAI

Total USSR Eeropc China Total USSR Eia-opc Chan Total

ISO

150

Africa East Asia Latin

America Near East and

South Aaa 1 0 0

90

60

30

?0

30

to

Dan ntei <ou*cMUmtea oUunun mtatio!paiotudi^itinioiiiuat,NuaiBtiiitiwmm in iM

he USSR bears the brunt of LDC military training, handlingf all traineesear East and South Asian countries remained the largest users of Communist military trairiingith Africanistant second. The number of Indian trainees, all in the USSR, nearly tripled, and the Iraqi and Nigerian contingents doubled. Moscow also accepted new trainees from Tanzania. These increases more than offset reductions in trairiing complements from the Congo, Guinea, Egypt, and Syria. There were no Egyptian military trainees in any Communist country at the end

Regional Overview Africa

countries0 million in new economicconomic pledges were down more than onc-lhirdillion; new military aid zoomed to more5 million. Thethe main donor. Its contribution spearheaded0 million in newLast year Moscow's military credits to Africa were negligible.the top donor of new economic credits, although its offering5 millioni shown in Figurehereew economic aid, led by Guinea, Tanzania, Zambia, and Mauritania inTanzania, Somalia, and Morocco topped the new military aid listeight clients.

Algeria

The Communist-Algerian aid program was lacklusterlthough Algeria continued to host the largest contingent of Soviet aid personnel in (he Third World. Beyond Ihe fact lhat no new economic or mililary aid was pledged, effective use by Algeria of existing credits remained slow. Soviet-supported projects were plagued by equipment breakdowns and shortages of spare parts.

In May the Chairman of the Soviet State Committee for Foreign Economic Relations went to Algiers to discuss upgrading project performance. The meeting resultedew protocol lo expedite several projects in Algeria's second four-year development. They include:

expansion of Soviet-bwlt facilities al the El Hadjar steel complex.

geological prospecting; and

development of agricultural, water, and energy resources.

These programs will be financed0 million in outstanding credits

uring the year, protocols also were signed with Bulgaria, Hungary, Poland, and Romania that entail aid to agriculture, light industry, communications, school construction, and oil and gas development Algeria so far has failed lo use most of Ihe more0 million in credits received from East European donors

During thezech-built powcrplant at Skikda probably was completed, and Polandilot shipyard at Oran to train Algerian workers.

One of the few bright spots was the dramatic expansion of Communist-Algerian trade. Protocols4 callrunimurn turnover5 million, and long-term trade accords signed with Bulgaria. Romania, and the USSRI billion turnover with these countries alone

As for miliiary relations. Moscow resumed fighter aircraft deliveries -r-hree-year hiatus. Although Soviet Defense Minister Grcchko visited Algeria late in May and an Algerian military delegation went to Moscow in July, no new military agreements were signed.

Ethiopia

China again dominated Communist-Ethiopian aid relationshipseking expanded work on mineral surveys and water distribution systems and began construction on the Waldiya-Woreta road.ile highway that will link agriculturally rich provinces with the port of Assab should be completed by the end

Moscow showed few aid initiatives. Teachers were sent to the Bahr-Dar Polytechnic Institute, technicians made Iheir annual run to overhaul the Soviet-built Assab oil refinery,ew technicians were posted temporarily at the Ambo research laboratory.

Other major Communist aid consisted of drought relief. China0 metric tons of wheat in February and Moscowons in July.

Guinea

African countries, Guinea received the largestillion from Romania. Most of this money will be used tobauxite mining and processing industry, although some will go to ironconstructionractor plantlastics factory, andRomania alsoractors.

he Soviet-supported bauxite project at Kindia is still the largest Communist aid investment in Guinea. By the end of the year,illion of theillion credit was unused. Money spent on developing the

bauxite mine,ail line, and upgrading port facilities at Conakry Finally paid off as the first shipments of bauxite began in June and were regularized in October. Moscow will receive moreillion tons of bauxite annually for the nextears, half as debt repayment.

New Soviet aid4 consisted mainlyrant shipment0 tons of flour in May. Among Communist countries, the USSR not only offered the most economic technicians but also took the most students for academic training.

Chinese aid focused heavily on the agricultural sector. Technicians were sent to assist rice, sugar cane, and other crop cultivation programs and to complete an agricultural implements plant atchool at Kankan, and an irrigation dam near Dabola. Pekingons of rice in May as grant aid.

Chinese and Soviet military aid programs were beset with problems. Guinea complained that deliveries of spare parts for the Shanghai*class motor gunboats were behind schedule and that Chinese personnel were neither maintaining the craft nor training Guinean technicians properly. In October, Guinea sent IS students to the USSR for marine diesel maintenance training because of inadequate training received in China. Moscow had its own problems too.illion of military equipment was delivered, but little progress was made on Soviet constructionaval facility on Tamara Island for Guinean forces.

Mauritania

New Communist economic aid to Mauritaniaingle year highillionTuna was the leading donor, followed by Romania.

illion Chinese aid package was earmarked mainly for constructioneep water port at Nouakchott and tomile segment of thc Nema-Nouakchott highway.eking had pledged moreillion, part of which was to be used for port construction. China rounded off4 activities by sending Chinese technicians to supervise the experimental rice farm at Rosso and byons each of rice and com as grant

aid.

ucharest undertook its initial aid relationship with Mauritania,illion to coverteel works survey at Maudhibou and mineral and

petroleum exploration. Romania also entered agreements to form joint companies to develop the livestock and fishing industries. Soviet aid consisted onlyon shipment of com as grant aid.

Libya

During Prime Minister Jallud's visit to Moscow inoviet-Libyan trade agreement was signedoint inter-govemmental committee to coordinate economic, oil, and trade issues was set up. These developments underscored Libya's intention to go ahead with Soviet projects that have been under consideration for some time. The joint committee met in July and again in October to identify general areas of cooperation and to review project possibilities. Soviet development assistance is being considered for mineral prospecting, iron and steel development, electric power, oil and gas, port development, and agriculture.

Libya remained the major Third World beneficiary of East European technical assistance. The East European presence will continue to grow under long-term barter agreements concluded4 specifying the exchange of oil for equipment and services. Romania is to provide an oil refinery and technical services for petroleum development, agriculture, and housingI billion deal concluded in February. Czechoslovakia and Poland also signed long-term agreements to provide machinery, equipment, and technicians in return for oil. Bulgaria and Hungary entered short-term contracts to import oil in exchange for machinery and equipment. Price disputes may have precluded fulfillment of these East European agreements, which called for imports totaling.

In December, Libya was considering proposals to finance expansion of the Hungarian food processing industry. This would be the first Libyan assistanceommunist country.

Tripoli also concluded two arms agreements with Moscow to bring its arms inventory qualitatively more in line with those of Syria and Egypt, Prime Minister Jallud signed the first of these agreements during his Moscow visit. This agreement, valuedinimum of f^ covered ground forces equipment and thendurface-to-air missileoviet delegation to Tripoli reportedlyecond agreement in December fori 3 Floggers,

linders,ubmarines, all of which would be new to the Libyan inventory. This second agreement may be worth as much asi "Tnillion. Libya is only the second Third World country to order theIraq has Blinders) and the fourth to order the

military deliveries4ecordmillion and

included moremedium tanks, as well as severalndissile units, the first in Libya's inventory. As in the past, payment for the Soviet equipment was cash on delivery.

Morocco

Moscow remains the major Communist aid donor to Morocco. Even though no new economic pledges surfacedmillion in new military credits was extended. Moscow did move to intensify its involvement in Moroccan economicyear agreement signed in December specified Soviet aid to develop phosphate deposits at Miskala. The USSR is to supply thc machinery and equipment for an open castailroad, road networks, and port installations, presumably under existing credits. Under the agreement, Morocco willillion tons of phosphates annually00 and up toillion tons each year for tile nextoears.

Soviet project assistance was keyed to starting constructionillion dam on the Loukkos River, hailed as one of the most important projects under Morocco's new five-year plan. Construction of the hydropower plant at Ait Adel neared completion. Soviet-assisted power projects already in operation account for at least one-third of Morocco's total power supply. Work also was initiated on port storage facilities at Casablanca and Agadir,3wo-year contract was signed in June for Soviet geologists to resume mineral surveys in north Morocco and to continue prospecting in other areas- Shale oil development also has been mentioned for possible Soviet financing.ive-year agreement signed in March calls0 mfllion trade turnover.

As for East European assistance. Romania continued work on copper mining and processing projects and agreed to participate in urban development programs. Poland delivered locomotives, presumably under an existing credit. Earlyarsaw plans to start equipment deliveriesulfuric acid plant -its largest project in the Third World. In line3 plans, Morocco signed trade agreements that ended barter arrangements with Bulgaria, Czechoslovakia, Hungary, and Poland. China entered the Moroccan aid scene by sending its first survey team to study plansports complex.

As for military aid, Moscow concluded two arms accords with Morocco. The firstommercial deal covering some I Irons of ammunition, the second

rruTuon agreement for equipment, including air-defense missiles. Deliveries under this accord are to be spread over three years, with repayment in Moroccan goods.

Somalia

Somalia received onlyillion in new economic creditslthough it was the second-ranking African recipient of new Communist military aid

Moscow continued to dominate Communist aid to Somalia. It provided nearly aH of the new economic aid that was used for budgetary support,4 million oil subsidy. Moscow reduced Somalia's economic debt byillionoviet-Somali Treaty of Friendship.

Soviet project aid focused on equipment deliveries for the hydroelectric power and irrigation project at Fanolc underillion credit extendednilateral fishing agreement was signed,oint Somali-Soviet fishing company started operations. In December, Moscow agreed toons of com early5 as grant aid.

Construction of the Belet Ucn-Burao road, the principal project under9 million credit extendeds in full swing. The road may be completedn February, the Hargeisa water supply project built with Chinese aid was put into operation. Later in the year the Chinese finished workigarette and match factory. Work both on the Hammar Hospital and on agricultural projectsrant shipmentons of sorghum rounded off the Chinese effort.

East European activity was small. Bulgarian technicians worked on tin deposits2 agreement, and East Germany sent equipment as part of0 credit extended0 for prison reform.

iillion military accord signed with Moscowj called for deliveries ofircraft,urface-to-air missiles, and ground forces equipment. Equipment began arriving in Mogadiscio shortly thereafter asnd SA-2s, the first in the SomaJian inventory, were delivered. The Soviets also stepped up Iheir training programs and continued to provide advisers and technical skills for military construction projects in Somalia.

Sudan

No new initiatives occurred in Communist-Sudanese economic aidlthough Moscow did resume military deliveries. Peking still has the most active economic aid program, and during the year project assistance continued on the Wad Medani-Gedaref road, the conference hall in Khartoum, and the textile mill at Hasahaisa, allillion line of credit extendedeking also assisted in chrome prospecting and inishing industry on Lake An Nubah as part1 credit thatillion for development projects. This credit also provided for the construction of paper factories that the Chinese reportedly agreed to in September.

The only Soviet projects to move forward were the Red Sea Hills geological survey, hospital construction, and the saw mill at Wau. All are funded by unused credits, some of which go backears.

Romania's aid was keyed to1 credits forspindle textile mill on the outskirts of Khartoum and an assembly hall at Omdurman.

wo-year hiatus, Moscow resumed its military shipments withmiUion worth of ground forces equipment. Deliveries probably were arranged during discussions held in Khartoum in January and fell8 military accord. Peking's military program consisted solely of maintaining an in-country training mission.

Tanzania

Bulgaria

anzaniaO million in new Communist aidf thisillion was economic aid, all supplied by China. Military aid, also about

came from the USSR

he new Chinese aid will be used to develop iron ore deposits in Chunya and coal deposits in Tukuyu and tohunya-Tukuyu rail line that will be extended to the Tan-Zam Railroad. The Tan-Zam is already in limited service between Dar es Salaam and Mwenzo just inside the Zambian border. Most ofhinese technicians in Tanzania are working on projects related to the Tan-Zam Railroad and on training.

also maintained project assistance for tbe state farm at Mbirali andew pharmaceuticals plant to be completedhinese technicians were also active in Zanzibar, where they finished the sugar mill at Nahonda and continuedaw mill at Temba.

The inertia of Moscow's economic aid to Tanzania continuedess than S3 millionillion line of credit extended6 has been used, and there is nothing topeedup. Not much more can be said for East European efforts, although Bulgaria did agree toannery under an2 credit.

equipment will be the most sophisticated in Tanzania's

didark in military aid as it agreedto deliver fmillion worthI jet fighters.urface-to-air

missiles, and

largely Chinese-supplied arms inventory. In addition. Bulgaria concluded its first arms accord with Tanzania covering anti-tank weapons.

eking continues toan military training and construction force in Tanzania and has agreed to extend its training misMon for two more years. China may have agreed to supply Tanzania with additional small arms, artillery, and ammunition, but no deliveries were detected

Zambia

New Communist economic aid to Zambia4 consistedillion project assistance credit from China3 million credit from the USSR for tbe purchase of twoivil air transports. About one-third of the Chinese credit is for construction of the Serenje-Samfya road; the rest is for as yet unidentified technical and agricultural projects.

Work on the Tan-Zam Railroad acceleratednly aboutiles remain to be installed, and (he line should reach its western terminus of Kapiri Mposhiassenger and freight service between Dar es Salaam and Mpika should begin in the fall and the entire line will be fully operationalhe Chinese will turn the railroad over to Uie Tanzanians and Zambians only after at least six months of tnal operations. Peking still needs to deliver additional locomotives, freight cars, and passenger cars and to complete construction of sidings and signal facilities.

Other African Countries

The USSR sentillion worth of grain as grant aid to ten drought-stricken African countries. China offered similar aid valued atillion to four countries. East European countries also sent token amounts. Except for Ethiopia and Somalia, all recipients were in West Africa.

The Central African Republic signed its first military aid agreement with the USSR in the first halfhe initial delivery underaccord

was airlifted to Bangui during October. It was followed by the delivery of small quantities of ground forces equipment unloaded in the ports of Douala, Cameroon, and Brazzaville, Congo, where it was transshipped by barge.

hina continued work in Congo at the dam and hydroelectric complex on the Bouenza River andimestone crushing factory. Congo drew S4 million0 Chinese credit for budgetary support. The USSR worked on the veterinary laboratory forrant was made

Communist countries improved their relations with Ghana, with China making the greatest gains.hina reactivated some projects provided inredits;4 the Chinese began to plan technical assistance for several of them. The USSR also has offered to review somerojects. East European countries discussed possible futurei ting their activities largely to signing new agreements. In the military field. Ghana signed an 3rms agreement with Bulgaria, its firstommunist country in more than nine years. The accordmall quantity of small arms and ammunition.

Guinea-Bissau became the newest recipient of Soviet militaryisitoviet military delegation in November lo assess the military needs of thc newly established government ledilitary aid agreement. An accord was expected, as Moscow was the major arms supplier to the National Liberation Government prior to independence. The first delivery of equipment arrived in December and consisted of shop-van trucks and ammunition. The cargo was offloaded at Conakry Port, then trucked to Bissau.

The USSR was active in Mali, exploiting the Kalana gold fields, conducting geological surveys, and providing agricultural technical assistance. The Chinese began workecond sugar refinery at Scribala and were active in several small projects. The Chinese still have not acceded to Mali's major aid request to construct the Manantali Dam on the Senegal River. They dideam to restudy the project, however.

ekingS million economic aid accord with Niger in July and later in the year sent some agricultural technicians to work at rice farms. China is thc only Communist country offering development assistance to Niger.

There was no appreciable increase in Soviet or Chinese economic aid to Nigeria, despite President Gowon's visit to both countries. Peking sent agricultural development teams to five Nigerian states, but itow profile. The USSR continued mineral prospecting at Kaduna, and equipment and staff were sent to the oil training facility at Warn. Trade agreements were signed with Hungary, Czecholsovakia, and Eastilitary agreement was signed with Moscow for|ircraft, as well as radar and associated ground support equipment. The Nigerians are expected to pay cash on delivery. Nigeria disdained Western equipment, supposedly to show appreciation for Soviet support during thc Nigerian civil war.

An August visit to China by Rwanda's Foreign Minister usheredew period of cooperation. Work on the Kigali-Rusumo road, China's largest project, was inaugurated officially one month after his return. Rwanda agreed to5 million worth of Chinese goods to pay for local costs of development projects, and Chinarevious decision not toement plant. There was no change in economic relations with Moscow.

Infficials from Togoew protocol with China that reportedly established procedures for utilizingillion line of credit extendedess than SI million of this credit has been drawn so far.

Tunisia and China signed their first development protocol to use portionsillion credit extended by Pekingrojects include constructionmiIcoad,olling stock assembly plant to use Chinese components. Tunisia has used the credit so far only to finance local costshinese medical team in Tunisia.

Uganda signed its first arms accord with Moscowhc agreement coverset fighters, the first in Uganda's inventory. Ugandan air force personnel have already left foramiliarization training in the USSR. Moscow previously supplied some4 tanks, and some miscellaneous ground forces equipment.

zechoslovakia, following Moscow's lead, revitalized its military aid program in Uganda. An agreement formillion worth of armored personnel carriers and support equipment was concluded and deliveries have been completed.

Zaire's use0 million line of credit extended by Peking3 was rruramal Several shipments of agricultural equipment were received, and Chinese technicians were active at experimental farms. Planning is under way toonference hall in Kinshasa, and China expects toechnicians and workers to start the project in

Zaire, seeking to diversify its sources of supply, became one of China's newest military aid clients.signed in December, calls for the delivery5 of [Tjtanks, antiaircraft guns andccps, and smallresident Mobutu also is negotiating with Romania for training and delivery of small arms and ammunition.

East Asia

Communist countries gave only small amounts of aid to East Asian countries4 (secaos received its first aid2 as Chinaillion for commodity support and road construction. Vtentiane also was negotiating an agreement with Moscow, but nothing materialized by the end of the year. Burma reportedly drewillion against anillion line of credit for commodity support extended by Peking in

On the political front, China established diplomatic relations with Malaysia in May, signed its first governmental agreement with the Philippines in October, andhai trade delegation soon after Bangkok lifted its ban on trade with China in December.

Indonesian-Communist relations focused on the USSR and Fastcrn Europe. Jakarta, ending an eight-year freeze in formal relations with the USSR,rade agreement in March.

Indonesia

formally sounded out prospects for obtaining Communista decline in Western aid. While critical of the harsh terms ofin the past. Indonesia can now afford Ihe less concessional terms of suchof increased oil revenues.

Jakarta ended an eight-year freeze in formal economic relations with the USSR,ne-year trade agreement int that time, aid was discussed for Indonesia's new five-year plan, culminatingeneral economic and technical assistance agreement, signed in December. The USSR is expected to subject Indonesian project requestshorough review before making specific commitments.

Aid to Indonesia's development plan also was discussed with East European countries, and Jakarta reportedly submitted project proposals to most of them. However, the major activity with Eastern Europe was in trade, as Jakarta concluded new trade agreements with Hungary, East Germany, Romania, and Poland and will sign similar agreements with Bulgaria and Czechoslovakia early

Laos

Pekingillion credit to Laos in October, the first Communist assistance to that country inecade. The credit is mainly for commodity procurement and road construction and is repayable overears, followingears'hinese team arrived in Laos at the end of December to study the road project.

At yearend, Vientianeelegation to Moscow to negotiate the renewal of an2 Soviet aid agreement for constructionospitalydroelectric powerplant. Vientiane expects Moscow to match Peking's contribution to Laotian development.

Philippines

relations were moving toward normalizationrade agreement was signed that called for sizable, long-termoil shipments to the Philippines. Manila originally planned to concludewith Moscow and Peking simultaneously, but in October awas signed in Peking for initial petroleum shipmentsprices. Chinese oil moved almost immediately, and in Novemberdelegation to China drafted several contracts to sell agriculturalmetals. There were intermittent trade discussions withraft trade agreement submitted by Moscow3 still wasat yearend, despite favorable recommendation by thcof Foreign Affairs.

he USSR, however, did gain initial entry in the Philippine merchant shipping industry,illion joint shipping company in late July. Earlier in the year, Moscow offered shipping serviceselow existing rates in return for bunkering facilities near Manila, but no action was taken on this initiative.

Malaysia

alaysia's relations with the Communist world4 were highlighted by the May decision to recognize China. Previously, Burma and Laos were the only non-Communist East Asian LDCs with diplomatic ties in Peking. At the end of the year, Malaysia was awaiting the findingsoviet feasibility study on tho Tcmbeling hydroelectric project. The USSR is favored to be awarded the contract for the project. In December, Moscow agreed to assist development of the fishing industry. The terms were not disclosed. Malaysia also approved Soviet plans tooint shipping company to transport increasing amounts of rubber the USSR intends to buy directly from Malaysia. Moscow currently buys most of its Malaysian rubber on the London market.

Thailand

During the year, Bangkok drafted its first trade agreements with Czechoslovakia, Hungary, Poland, and Romania and announced that the level of trade with the USSR4 would double thathailand requested Bucharest to assist in power engineering, iron and steel, machine building, and extractive industry projects. Romania previously had sent technicians for geological exploration.

Contacts between Bangkok and Peking should increase In the wake of the repeal of Thai legislation that9 prohibited trade with China. New measures already havetate agency to administer all trade with Communist countries. Although Peking has questioned the workability of such an arrangement. Thai officials were in China in December to negotiate purchases of petroleum, newsprint, fertilizer, and agricultural equipment.

Europe

alta is still the only non-Communist European country to receive Communist aid. Drawingsillion credit extended by Chinaowever, amount to only S6lass factory built under this credit was

completednd abouthinese technicians arrived to start constructionon-capacity drydock.

Communist economic relations with Greece remained stable4 as the Karamanlis government came to power. Moscow continued to deliver equipment forillion Philippi power project, eveninal decision on completing the plant is pending. Work moved ahead onillion Polish-built Oresfias sugar refinery scheduled for completionoland put another sugar plant on stream at Xanthi in February. Both Bulgaria and Romania signed agreements4 to set up joint ventures with Greek firms for processing animalajor export to Communist nations.

Since the April revolution, Portugal has accepted and encouraged Communist moves to normalize trade and diplomatic relations. The signingrade agreement with the USSR calling for the exchange of Soviet steel and oil for Portuguese cork, almonds, and consumer goods was among Lisbon's more significant moves.

Spain also continued to expand trade with Communist countriesalf-year data show that trade turnover rose0 million,E. above thc corresponding halfoland and Romania were the principal trading partners, supplying sugar and lumber in exchange for Spain's iron and steel products.

Latin America

Latin America2 million in new economic aid from Communist countriesrgentina, the largest single recipient of new Communist pledges among all LDCs, took moref the total. Guyana, Colombia, and Bolivia, in that order, shared the remainder. Peru was the only recipient of new military pledges (seelthough Moscow was courting Bolivia and Ecuador.

The Communist thrust was shared almost equally by Moscow and its East European allies. China offered no new aid. Other notable developments in Latin American-Communist economic relations included:

Soviet inroads in the coveted power generating equipmenl field with the conclusionillion contract with Argentina;

diplomatic relations established between Peking and Brasilia during the visithinese trade delegation in mid-August; and

joint venture rnanufactiiring arrangements between East European countries and Peru, Argentina, Chile, Mexico, and Ecuador.

Argentina

ix-year hiatus, Communist economic aid to Argentina was resumedith new pledges of5 nvillion, Argentina garnered more aid than any other LDC.

Moscow extended an open-ended credit in February for electric power project assistance. Data4alue5 rrullion. Our most recent information, however, indicates that contractual arrangements4 totaledrullion, exclusiveownpayment, all for the Salto Grande hydroelectric project. Additional contracts have been signed5 for several other power projects.

Credits extended by Czechoslovakia, Hungary, Poland, and Romania were as follows:

In late February, Czechoslovakia provided anyear credit, mainly for electric power development.illion in equipment for powerplants is expected to come under the credit Prague and Buenos Aires agreed tooint company to produce power generating equipment for sale in Argentina and other Latin American countries.

Hungaryillion for capital equipment purchases.

Poland0 rnillion credit, partially repayable in goods overears. Part is to be used tooal purification plant and to purchase mining equipment for the Rio Turbio power project. Warsaw also is expected to supply fish processing equipmentoint fishing enterprise with Buenos Aires.

Romania0 million in credits, its largest aid pledgeor mining, petroleum, and communications equipment Argentina's first purchases underyear creditillion in oil drilling equipment for delivery over the next two years.

Argentina's trade with Communist nations, particularly withsurgedoscow0 million worth of meat,

com, wheal, and wool, more than3 purchases. Peking brought moreillion tons of food grainshree-year grain trade agreement signed in January. Buenos Aires alsoive-year trade agreement with East Germany, marking the renewal of formal trade exchanges afterears.

Bolivia

Bolivian dealings with Communist countries centered on mineral resource development Moscow pledged more than SI million in new aid for mining machinery. This credit is repayable over five yean atnterest. La Paz also purchased rriuiing equipment and two tin volatilization plantsillion credit extended by Moscowoscow, in concert with two Western firms, also agreed to supply equipment for the tin smelter at Vinto. Other Communist aid consisted of Czech deliveries of antimony smelter equipmentlant scheduled to be completed at Crura earlyrague had3 million credit for this purpose

In mineral trade, Bolivia soldons of tin and tin concentrates to Communist countries. Moscowons forillion; Czechoslovakia and Poland purchased most of thc rest.

There were no dramatic military aidolivian military dclcgarion visited the USSR on an inspection tour, but no arms deal was concluded.

Brazil

0 million in existing Communist credits to Brazil remained largely unusedhe only new allocation was for the purchase of electric generators for the Jorge Laccrda powerplant1 Czech credit Prague also continued to provide assistance for thc Promissao powerplant For its part Moscow,6 credit, delivered turbines for the Capivari powerplant

Brazilian-Communist trade continued to expandith turnover expected toillion4 based on long-term barter agreements. Soviet exports to Brazil increased markedly, reversing Brazil's large trade surplus with Moscow. The USSR, for example, sold0 million worth of petroleum products to Brazil. Soviet imports0 million, and0 million in sugar and coffee imports is scheduled

established diplomatic relations with Pekinghinesevisit in mid-AugusL Later in the year, China signed atoons of sugar annually, which atwould be worthillion annually. Price, however, is to beeach contract0 tons is signed. Brazil also sold moreof goods, principally sugar, cotton, and sisal, to China during the firstthe year.

Peru

Although there is an active Communist economic presence in Peru, Lima is extremely cautious in negotiating specific aid projects. In May, Peking agreed to participate in the Chimboic irrigation project, the first specific project fundedillion credit extendederu also signed its first contracts with Poland against an existingillion credit. Warsaw will supply port equipment and fish processing unitsew fishing complex at Tacna.oint-venture lumber complex called for2 creditillion, also was implemented. Warsaw will provideillion to build the complex and will be repaid in lumber products. Other East European aid involved the deliveryillion worth of educational equipment by Hungary, railroad cars by Romania, and power equipment by Czechoslovakia.

Peru received no new Soviet aid pledges, but signed contracts for several important projects tied to existing unused credits. MoscowS million contract for work on the first stage of0 million Olmos hydroelectric project and agreed to5 million in oil storage tanks for0 million Andean pipeline project. Both agreements will be financedillion credit extendedlthough Moscow continues to aid theort project,8 million offering in processing equipment fell far short of Peru's original expectations.

The most interesting new development in Lima's relations with Communist nations is the implementation of joint venture arrangements with East European countries. Under Peruvian law, such ventures are limited to lessoreign ownership. Czechoslovakia, for example,hareotorcycle manufacturing plant in TrujUlo; the estimated capital cost of the plant topsillion. Hungary signed two joint venture agreements: one setsillion electric motor pUntungarian firmnterest; the other is for anus assembly plant. Romania also is participating in two jointillion Antamina copper development projectillion machine tool plant in Trujillo.

for militaryew| pullion contract was signed with| tank transporters. Other Soviet arms, including surface-to-air rrussilebeing considered, but none was purchased. Moscow speeded shipments ofand small amounts of other ground forces equipment under theAlthough the armed forces arc pleased with the tanks, there iswith the training package. Fifteen Soviet tank technicianseruvian military personnel went to the USSR during the year

Other Latin American Countries

Only China and Romania have maintained diplomatic tics and trade ties with Chile since the3 coup. Peking importedillion worth of copper, nitrates, and iodine in the first half4 and soldillion worth of rice. Negotiationsoint venture with Romania in copper smelting continues. Nonetheless, no aid was made available 3gainst Chinese or Romanian credits.

During the year, Colombiaewillion Soviel credit for the purchaserolley buses and actively promoted commercial ties with other Communist countries. Bogota is emphasizing trade in fertilizers and insecticides and technical aid to develop mineral and raw material resources. Colombia and Romania signed an agreement in November that calls for development assistance in coal and phosphate nuning and petroleum exploration. Poland also pledged technical assistance in coal and phosphate exploration.

Costa Rica concluded its first commercial contract with0 coffee sale, and the USSR became San Jose's second largest coffee market withillion in orders for the first half of theoviet offer toillion in trolley buses as part of an1 creditillion was pending at the end of the year,

Ecuador bought tractors from Czechoslovakia5 million credit extendeduito agreed to enter joint-venture enterprises with Romania and Poland that involved upn foreign equity. In January, Ecuador and Romania agreedutual assistance program in petroleum matters, including establishmentoint company for oil development. Bucharest and Quito also are jointly6 million salicylic acid plant Warsaw hopes to join with Ecuador in buildingillion tuna port and currently isoint fisheries research expedition. Ecuador isoviet invitation toilitary delegation to Moscow.

Gi/ya/wi relations with Communist countries improved somewhatreoccupied with bauxite rutionalization efforts. Prime Minister Burnhamlanned October visit to Peking for discussions on new aid, but work progressed on use2 creditillion. Ground breakingarge brick factory was scheduled fornd preparatory workotton textile null continues. The most significant development, however, occurred in trade as Peking made its first purchase of Guyanese sugar.0 ton deal is worth about SIS million, more than double the value of their bilateral tradeuyana also increased its purchases of Chinese equipment

Guyana received its first economic pledge from EastIO miliion credit Some of these funds have already been allocatedice bran oil extraction plant. The East Germans also are training local personnel in maintaining and operating mining equipment at the nationalized aluminum plant

China became one of Jamaica's new sugar clientsive-year accord, stipulating shipmentsons. Deliveries4 called for0 tons, worthillion. Although Jamaica and Peking signed an economic and technical cooperation pact in February that called for some Chinese project aid, specific projects have not been identified.

Mexico still receives no Communist aid but expanded commercial relations with Communist countries. Initial trade agreements were signed with East Germany and Czechoslovakia, and negotiations began for joint ventures with Prague andoint venture agreement was reached with Moscow to manufacture tractors.

Nicaragua's export trade with Communist countries tookew look after the ban on such trade was lifted. Peking reportedly purchased SI5 million worth of cotton in the first half of the year, and several East European nations recently began negotiations for purchases fromrop.

Uruguay revitalized aid and trade relations with Communist countries. In August, aboutillion in capital goods were purchased from Bulgaria as part1 credit forillion. In September, two contracts were signed with Hungary, drawing down the remainder0 credit1 million. Budapest will supplyailway coaches, spare parts,aintenance workshop as well as power transmission equipment earlyrawings9 Soviet equipment credit continued to be slow.

In foreign trade, the value of Uruguay's exports to Communist trading partners totaled SI7 million by mid-year, up one-trrirdomparable periodoscow entered the wool market for the first time and was the largest single buyer of greasy wool duringlip year. Communist countries tookf all wool exports.

Venezuela had limited economic dealings with Communist countries,umber of them offered to trade technology and agricultural machinery for petroleum and iron ore. Caracas did buy some Hungarian buses, after being assured that Hungarian technicians would maintain the vehicles until training of indigenous personnel was completed.

Near East and South Asia

The Near East and South Asia continued to receive the largest share of new Communist economic and military, respectively. Nonetheless,8 billion in new pledgesharp decline from93 agreements. Economic aid0 million; militaryuTion) wasrom last year.

The USSR remained the top donor with moref new military credits and more than one-half of the economic pledges. Syria, Pakistan, and Bangladesh, in that order, were the major claimants for new economicaking moref the total. Small amounts were offered to five other clients. India received no new credits (see

There wereecipients of new military credits, led by Syria, Iraq, and Iran. Egypt received hardly any militaryramatic turnaroundhen Moscow offeredF tnillion.

Drawing against outstanding economic and military credits approximated

illion2 billion, respectively.arms deliveries

to the region went to Syria and Iraq. Most of the rest was sent to India, Iran, and Egypt India and Egypt took moref the economic aid deliveries.

Afghanistan

ommunist aid to Afghanistan was limited to deliveries against unused economic and military credits. Kabul garnered no new aid credits.

Economic and

tho Nut East and

Asia

taininct

Moscow agreed to double the price it pays Afghanistan for natural gas, toents per thousand cubic meters, effectivefgrianistan exportsillion cubic meters to the USSR annually as repayment for aid.

Moscow agreed in October,2 credit, toon-capacity oil refinery with storage and piping facilities at the Angot oil depot Other Soviet initiatives under old credits included an agreement to assist in mineral and petroleum exploration and toajor bridge that will link both countries with direct road and rail transport.

After someears of surveys and construction delays, Afghanistan's tint fertilizer plant, theharif facility, came on stream late in October. The plant, which was fundedillion in Soviet credits, will have an annual capacityons. Moscow will provide spare parts and technical assistance

Afghanistan's aid relations with other Communist nations also improved. Prague initiated surveysrolley busementhermal power station,oal mine. If the projects appear feasible, Prague will given construction supportillion credit extendedhinese technicians continued to work on the Parwan irrigation system and soon will begin the S5 million expansion of the Bagrami textile mill under an2 creditillion.

The record deliveries of Soviet armor to Afghanistan3 continuedarmored personnel carriers,elf-propellcd antiaircraft artillery pieces were turned over to Kabulircraft to augment Kabul's fighter pilot training programndere flown in to replace aircraft lost in crashes. Delivenes of tank transporters, trucks, spare parts, ammunition, and support equipment raised the value of deliveriesmillion. To cope with the rapid influx of new equipment, Kabul sentilitary personnel to the USSR for training whileoviet technicians were in Afghanistan to assist thc army and air force.ilitary dependence on Moscow has not been lessened despite some attempts to seek training and some equipment from India and Egypt.

Bangladesh

garnered more3 million in new economicthe Communist countriesaking it the fourth largest recipient

European Communist countries were the principal donors:

Romaniaillion creditew spinning mill and toetrochemical complex. Bucharest also added SI rruUion to cover cost overruns on railroad equipment furnishedrevious credit.

East Germany gave its firstrullion repayable overearsacca will use these credits toalcium sodaice mill,ypewriter factory.

Bulgaria0 food grant and allocated about one-half6 rrullion credit extended

Czechoslovakia made no new pledges, but worked on several projects, including upgrading the capacity of the Khulna powerplants.

Poland's iiutiatives centered on implementing electrification and textile mill projectsillion credit offeredhe USSRnillion credit for relief assistance. About half was in hard currency and the rest in commodities. Project assistance under existing credits was limited to the Ghorosal powerplant, nearly completed, and to drilling for oil and gas. Moscow agreed to help modernize the Chittagong petroleum refinery and to expand its steel mill. Both projects are still in the planning stage.

The USSR finally completedillion salvage program in the port of Chittagong. The operation was supposed to take two months; it took two years. The Soviets donated some of the salvage equipment to Bangladesh for use at the Maritime Institute they helped set up in Chittagong.

Egypt

Moscow's roleonor of new economic aid declined4 as Cairo was slow to accept new offers. The only new Soviet creditillion grant for clearing mines from the Gulf of Suez, which was completed in November. Drawings on existing Soviet credits were in high gear, however.

0 million agreement was signed in July, apparently to allocate unused funds1 credit.

Atillion was earmarkedxpansion in the capacity of the Hulwan iron and steel complexillion tons. When this project is completed, Cairo will approach self-sufficiency in steel.

illion will go to expand the capacity of the Naja Hamadi aluminum plantonsons. Initial plant operations, delayed becauseack of bauxite, should start up inith Guinean bauxite. Three-fourths of the output is for export, mostly to the USSR.

illion will be used to build cement and textile plants.

Soviet aid to Egypt's fishing industry and support for irrigation, rural electrification, and other projects continued. Studies on improving the Nile River, including plans to build five small dams, wereew contract was negotiated to enlarge the capacity of thc Soviet-built Alexandria shipyard, completeduclear power stationillion-ton-capacity iron and steel mill at Alexandria to be financed by Soviet aid were to be discussed during Brezhev's aborted visit scheduled for

Rescheduling Egypt's military debt was also to be discussed during thc Brezhnev visit Although Cairo apparently has met repayment obligations on its economic debt, most repayments on the military debt have been deferred through successive reschedulings

Other activity centered on efforts to accelerate use of East European credits. Romania. Bulgaria, and Poland, for example, set up joint cooperation committees with Egypt to speed thc use of unallocated aid funds. Bucharest discussed participation in chemical projects0 million credit and completed its largest aid project in Egypton-capacity sodium products plant in Alexandria.

Virtually all East European countries signed trade protocolsmphasizing the sale of their machinery and equipment for Egyptian agricultural goods and cheap manufactures that Cairo has difficulty in selling elsewhere. Bulgaria, East Germany, and Hungary are estimated to have boughtf Egyptian crude oil during the year.

Moscow halted arms deliveries to Cairo in April when political relations between the two countries soured. Seaborne deliveries were resumed in August.

but major items of equipment were not involved. Consequently, only

in rnilitary equipment was supplied, onlydeliveries3 and the lowest in any yearhe December meeting between Soviet General Secretary Brezhnev and Egyptian Foreign Minister Fahrru in Moscow did not result in new military aid agreements. The Soviets, however, apparently agreed to meet the unfulfilled elements of3 commitment. Among Fast European countries, only Hungary offered new military aidj jnillion covering small arms, ammunition, and support equipment.

India

ith no new economic creditsillion in new military aid. Communist economic relations with India lost some of the momentum of previous years. Despite mutual concerns over China and New Delhi's continuing dependence on Moscow for military support, the USSRequest to recommit unallocated project aid to finance the purchase of industrial raw materials. Moscow also demurredequest for further large food assistance. Moreover, the USSR neither extended new aid for India's Fifth Plan4 toor agreed to reschedule any of India's annual debt service of0 million.

The second meeting of the Indo-Soviet Commission on Economic. Scientific, and Technical Cooperation that met in Moscow in September produced no more positive results than did3 meeting. Protocols were signed to confirm previous commitments and in some cases to accelerate project construction schedules. Although discussions were held on setting up joint projects in third countries and production sharing in the USSR and India, no steps were taken to implement the recommendations.

Drawings on Soviet project aid remained sluggish as they havelthough aid deliveries were0 million, they were Inflated by huge emergency wheat shipments5 million) delivered3 commitment Utilization of project aid for the year was only inillion range.

First stage operations at the Bokaro steel mill, although begun early in the year, will not reach scheduled capacityillion tons untilt theour to five years behind schedule. Late dehvencs. labor disputes, and material shortages still stifle plant production at Bokaro. Moscow's major industrial aid venture in India. Studies are now under way to expand output at the Bhilai steel plant from its planned capacityil lion torn to an eventual

7 million tons. Preparatory work continued for the construction of several major plants agreed tospecially the Mathura oil refinery, an alumina plant in Madyah Pradesh, and copper ore mining at Malanjkhand. Construction was slow on several other projects, including the aluminum smelter at Korba (which is nearing completion of the firstil and coal exploration, and exploitation and expansion of powerarge new coal field was reported in Bihar during the yearesult of joint Soviet-Indian exploration efforts.

Thc trade surplus with the USSR was reduced markedly because of4 Soviet wheat deliveries,

Indian economic activity with other Communist countries remained unchanged. Implementation on all projects was slow. No new aid came from East European countries, although the time period for drawing against7 credits was extended. Work on details to implement ongoing aid projects and to increase trade turnover went on throughout the year. Finally, East Germany and Indiaoint commission for economic, scientific, and technical cooperation.

military deliveries to India fellillionhe lowest pointhe decreaseull as old agreements are completed and deliveries under newer agreements begin ratherhift in Soviet military aid policy.

Deliveries were rughlightcd by the arrival oflass submarinesetya-class destroyer escort funded1 agreement. Shipment of ground forces equipment began3 agreementtillion. and full-scale production ofs at Hindustan Aeronautics got under way. Moscow

there were unconf

accepted at least ndianor overhaul in the USSR. Toward yearend, ntirmed reports that India would purchase | .

zechoslovakia and India signed a| [villion aid agreement in December. It5 tanks,rmored personnel carriers, truck-launched assault bridging,9 trainer/light attack aircraft.

Iran

ran received no new Communist economic aidlthough new military credits wereecord high. Communist initiatives stressed completing on-going aid projects and expanding trade. Strains in Soviet-Iranian economic

relations were eased somewhat after an 8S% increase in the price for Iranian natural gas. This settlement set the price at S7 cents per thousand cubic feet. The value of Soviet natural gas imports4 probably5 million.

The Shah made an uneventful trip to Moscow in November. Both sides agreed in principle on new. undisclosed, long-range industrial development projects. At yearend, Moscow was considering aid to several projects, including developmentields in northeastern Iran. Work is under way to triple annual production at the Soviet-assisted Isfahan steel complexillion tonsurther Soviet expansion is planned. The Shah also agreed to resume trilateral talks with the USSR and West Germany on the sale of natural gas to Western Europe, which would involve constructionecond natural gas pipeline from Iranian fields to the Soviet border. The USSR would consume Iranian gas and substitute Soviet gas at its Western terminal.

Major developments in Communist aid included:

installation of compressors on the Soviet-assisted gas pipeline to raise annual throughput capacity toillion cubic meters of natural gas;

discoveryoviet-managed geological survey of coal reserves totaling atillion tons in south-central Iran;

commissioning of the first ofoviet-built prefabricated housing plants as partillion credit extendednd

delivery by Poland of equipment for textile plants earmarked3 credit.

Warsaw wanted tof oil4 as aid repayment, but price differences slowed oil deliveries.

Czechoslovakia, Hungary, and Poland agreed to remove the gold clause from their trade and payments on agreement with Iran. Trade is now denominated in either Iranian rials or an average of several Western currencies. Iran was unable to persuade Romania and the USSR to drop the clause.

Iranian-Communist trade will continue to grow as project aid is implemented and aid repayments rise. For example, the value of Soviet natural gas imports from Iran4 probably was twice3 levelillion.

Gas exports4 peirnitted Tehran to service its entire military and economic debt to the USSR and still leftillion to be settled on current account. Iranian exports previously used to balance the Soviet trade account probably are being diverted to other markets.

Communist countries, which now absorb more than one-third of Iran's non-oU exports, signed new accords to further increase trade turnover. Iraneven-year trade agreement with Romania valued5he largest concludedommunist nation. Under the accord, Romanian agricultural products will be exchanged for Iranian industrial goods.

Large credits reportedly were offered to Poland and Bulgaria as advanced payments to establish joint agricultural enterprises. Atucharest request for an0 million credit was still pending because Tehran wanted toarge portion of the funds to joint agricultural ventures.

In the military sphere the Shah continued to supplement procurement of sophisticated weapons from the West with purchases of ground forces, military support, and engineering equipment from the USSR. Tehranmillion accord in May, the largest deal since Iran started ordering Soviet equipment. Military deliveries under old creditsniltion despite the fact that Soviet delivery schedules were lagging.

Iraq

Militaryew commitments and deliveries under oldas the dominant element in the Communist-Iraqi aid dialogueew Soviet military creditsecord of Sjnd East European countries addedillion. These new accords not only guarantee the continued growth and modernization of the Iraqi armed forces but also replenish ordnance depleted in the Kurdish war.

Moscow also delivered| million worth of equipmentide range of new weapons systems was introduced, includinglogger jet fighters, thcurface-to-air missile system, Osa-I! guided missile patrol boats, andactical surface-to-surface rockets. In addition, theurface-to-surface missile system was reintroduced. Iraq receivedn the,

v v. I. /. '

but they were subsequently transferred to Egypt because the Iraqis could not operate them.

Moscow enlarged its military advisory contingent from 7S034 to accommodate this surge in sophisticated weapon systems deliveries. Iraqilitary personnel to the USSR for training, half to attend surface-to-air missile courses.

East European countriesillion in arms and military support equipmentulgaria shipped about half of thd [million of unspecified military goods it agreed to supply during thc year, and Romania completed deliveries of more thanillion worth of military clothing ordered inraguemm artillery pieces as partillion accord signedlthough most ofmillion in Hungarian military goods contracted for4 was not delivered, Budapest did complete shipmentsmm artillery pieces ordered

Oil developments dominated the economic aid picture. Both the second-stage development of the North Rumail3 oilfield and the Basra oil refinery (the major Communist projects in Iraq) were completed. Production at the largely Soviet-developed North Rumaila oilfield now standsnd accounts for about one-fifth of Iraq's total output Moscow also speeded work to increase capacityyome of the oil from North Rumaila goes to the Czech-built refinery at Basra, and discussions were under way to double thc capacity of thc Basra facility. Soviet constructionile oil products pipeline between Baghdad and the Basra refinery proceeded, usingillion of1 credits.

Iraq's oil barter arrangements with the Communist nations were set back early4 when Baghdad temporarily stopped all crude oil shipments on Soviet account and demanded hard currency paymentsrice equal to that charged Western customers. Soviet oil purchases from Iraqast European nations took some barter oil despite prices of moreer barrel. Few long-term agreements were concluded, however, and prices were left open on those agreements.et oil exporter, purchased Iraqior the first time.

In other developments, the USSR and Iraq signed protocols to build the Haditha hydropowerement plant, and an irrigation project and to conduct mineral prospecting. New Soviet financing probably will be needed to

complete this (roup of projects. Both sides also agreed tooint fishing company based in Basra. The company is to be capitalizedillion, ofs to be funded by Iraq.

wasontract, possibly as part ofextendedo install facilities to handle liquid sulfur at theUmm Qasr. Budapest also agreed to go ahead with construction ofcold storage plants, and bride factories and agreed to acceptfor agricultural training Polandraqis for trairiing andimplement agricultural project aid0 million credit extended incredit calls for repayment In oil. Finally, an Iraqi delegation visiteddraw up contractsarn washing plant, the first projectillion credit extended by Pekinghinese proposals onto be built in northern Iraq were also discussed.

North Yemen

The USSR contributed the only new Communist economic aid to North0 tons of wheat valued atillion. Moscow also completed technical support for expanding the port of Hudaydah4 credit and may provide machinery and equipment for further expansion. Romanian specialists arrived4 to survey oil deposits; studies already have been completed on petroleum storageeam of North Koreans also was ino survey sitesehicle and tractor spare pans plant. The Chinese initiated surveys toottonseed oil extraction plant2 aid agreement.

Moscow resumed military shipments, the first in three years. Delivcnes.omber, some medium tanks, small arms, spare parts, and ammunition. Moscow's renewed interest probably stems from the transfer of some West European-manufactured ground forces equipment from other Arab states lo San'a last year, and Yemeni discussions with the United States for military training. Saudi Arabia's active interest in helping San'a modernize its armed forces may stimulate further offers of Soviet military assistance.

Pakistan

was among the top claimants of new Communistanking third among all LDCs. All of6 million in new aidMoscow and was earmarked for the Karachi steel mill, the mostaid project in Pakistan. Moscow's pledges for that facility now approximate

iTiiilion. Except for setting up an ancillary training centertudents, the USSR has yet to make major deliveries under these credits. Moscow did ship tractors, textile machinery,ilowatt radio transmitter to be set up in Islamabad.

China focused on implementing5 million in unused credits and grants. Late in the year Chinese technicians began limited testing of the foundry-forge constructed at TaxiJahinese grant Work was finished on the Larkana sugar mill, slated to start operationseking agreed to help setrea fertilizer plant in the Northwest Frontier Provinceillion grant. Construction of the Ha liar refractory plant, alsorant, wasear standstill.

China began work on three textiletadium complex in Islamabad, and the transmission grid connecting Tarbela and Wah, all0 rrullion credit extendedarly in the year, China0 laborers to work on the Pakistan portion of the Karakoram highway because work had been delayedajor landslide in the spring.

Romania,3 creditillion, is helpingear project toefinery in Karachi. Bucharest also is negotiating to participate in the constructionextile millocomotive plant Poland agreed to construct two sawmills and two sugar plants under3 million in outstanding credits. Warsaw's program has been inactiveugar mill at Hyderabad was completed. Bulgaria announced that it wiU set6 million leather tannery under an9 pledge.

Peking reaffirmed its military supportewaccord

for tanks, | hanghai-II-cIass motor gunboats, f

Huchwan-Class nydrofoil motor torpedo boats,

jet fighters. The gunboats were delivered during the year; shipments of tanks and aircraft are still under way.

Ihe USSR for

fforts to buy additional

helicopters, however, have been delayed. The last increment of Czech trucks ordered2 was delivered

Yemen

hina and the USSR added to their economic positions in the Gulf of Aden area, possibly in response to Yemeni overtures to Western and Arab states for aid. In July, Moscow agreed toillion in credits for projects2 accord,hermal powerplant, airfield modernization, and geological surveys. The USSR also won its bid to replace Algeriaoint-venture oil company, and the Soviet-Yemeni joint fishing company began operations.

n economic and technical cooperation agreement was signed in November during the visitemeni delegation to Peking. China repeated an earlier offer to expedite food grain shipments and to speed implementationillion in credits. Bulgaria agreed to increase its aidillion. Sofia also5 million land reclamation contract, which will be funded by the Kuwait Fund for Arab Economic Development. Hungary0 worth of medical equipment.

Moscow sent

million in arms to Aden, the most in any year since shipments startedeliveriesnd miscellaneous ground force equipment, funded3 accord. In addition, Hungary offered new aid coveringmillion in uniforms, medical supplies, and foodstuffs.

Srt Lanka

sing outstanding credits, Moscow beefed up project aid to Sri Lankaoviet technicians began to expand thc Ceylon Steel Corporation mill built with Soviet aid in thend to prospect for oil. Equipment was deliveredlour millousingultipurpose dam and irrigation project, the center of aid discussions during Prime Minister Bandaranaike's visit to Moscow in November, also was surveyed. Moscow has agreed to assist in0 million project,irm financial commitment is not expected until early

hinaractors as new grant aidillion worth of rice3 grant. The Pugoda textile mill began operations, and constructioninishing mill to complete the complex was initiated. Minneriya was chosen as the site for another Chinese-assisted textile complex, to be funded from anillion credit extended

zechoslovakiailiiary aid agreement wilh Lebanon4illion in small arms and ammunition. Czechoslovakia has provided small quantities of this type of equipment in previous years for cash.

Peking began to implement several aid projects in Nepal2 grantrolley bus system connecting Katmandu and Bhaktapur is scheduled to be completed lateonstruction of8 million Katmandu ring road is moving ahead, as is workrick plantextile mill. Nepal's reliance on Peking for industrial goods increased under new trade agreements that will make China the major source of cement, iron rods, and paper.

China also concluded its first military aid accord with Nepal under which communications and power generating equipment will be provided to the Napalese army. Nepal still remains dependent on India for its weaponry.

The Persian Gulf slates intensified their economic dialogue with Communist countries. Bahrain concluded its first direct governmental agreementommunist country in Mayillion cash saleons of domestically produced aluminum ingots to China; sales to China3 were less

Moscow still triestronger economic position in Kuwait, despite its failure to0 million contract Io build four powerplants in that country. The Soviet oil niinister visited Kuwait during the year, and Soviet trade organizations are seeking close ties with their Kuwaiti counterparts. Romania and Kuwait signed their first official trade and economic cooperation agreements calling for participation by Bucharest in chemical, petroleum, and construction projects over the next few years.

In what is believed toirst for the Arab oil producers in economic relations with Communist nations, Kuwait's International Investment Companyillion inonds to Kuwaiti subscribers on behalf of Hungary. The repayment schedulehree-year grace period.

Most East European states sent trade delegations to the United Arab Emirates Romaniaillion barrels of crude oil from Abu Dhabi forer barrel. In other activities. Oic USSR wasoniract toransformers worthillion to Abu Dhabithe first Soviet contractAE state.

Original document.

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