SOVIET OBJECTIVES IN TRADE WITH THE UNITED STATES

Created: 3/10/1975

OCR scan of the original document, errors are possible

TRANSMITTALATC^

TO

k

FROM:

whichni. hmd.

3 aw

xS

5 .

MEMORANDUM

Soviet Objectives in Trcde with trie United States

Through trade withast, the USSR seeks equipment and know-how that will raise tho level of Soviet industrial technology and increase production norc rapidly than is possible with do-cstic resources. The United Statesas the world's largest and most advanced industrial poweris the single greatest potential source for this equiprt^nt and technology, although US sales0 million4 were exceeded by West Gerroan and French sales. Ability to Acquire Equipment

So--lot ability to acquire needed equipment and know-how is partly determined by the amount of hard currency that tho USSf: can acquire through exports and sales of gold. Higher prices for Soviet oil and other raw aaterials haveurnaround in the Soviet hAlar.ce of trace with hard currency areas,eficit ofillionurplus of about SI billion Gold sales may have added over SSOO million to hard currency receipts

In addition, Itosccw hasbtained Western credits and, when possible,arn -cs-?rn guarantees to purchase part of the cocsnoditisti produced withorted equipment.

Tho United States, with its extensive capital market and huge domestic demand for many fuels and raw materials, is an especially attractive source of credits and cooperative deals. US Equipment and Technology

In trade with the United States, the USSR has especially sought state-of-the-art technology and technologically advanced end-items unavailable elsewhere. Moscow, for example, has shown great interest in equipment and technology to produce trucks and wide-bodied aircraft; large computers, their software, and equipment to produce then; air traffic control systems; and oilfielc equipment. The USSR has also tried to involve the US in large-scale development projectsYakutsk and North Star natural gas, chemicals, offshore oil, and timber. Eximbank funds havo provided financial support for major deals such as equipment for the Kama Truck Plant and the Occidental cr.emical complex. Even when US equipment and know-how were not superior, the availability of low-interest Exinbank credits kept US firms in the bidding. Impact of US Equipment and Technology

The Soviets stand to gain technologically from expanded commercial relations with the US noie than the quantitative data on trade volume would suggest, but .this should not be overemphasized. Imports of plant and equipment from the US, even under the most optimistic assumptions, will constituteraction of the total value of equipment invested in Soviet

industry and those will be operated in the Soviot institutional milieu with all its endemic inhibitions to the rapid diffusion and utilization of even domestically generated technology. Perhaps tho most that can be said is that US technology will raise technological levels in certain key sectors of the Soviet economy, but the barriers to rapid assimilation will ensure that the overall diffusion of foreign technology in the USSR will be slow and uneven. Use for Military Purposes

Many of the advanced technologies and production processes and much of the equipment that the Soviets hope to obtain in the United States can be used for military purposes as well. Civilian air traffic control systems, for example, could help Soviet air defense development, particularly if US firms sold production know-how as well as hardware. Similarly, purchases of production equipment and technologies in the fields of advanced computers, minicomputers, semiconductors, wide-bodied aircraft, and advanced aircraft engines could be of diroct use in military RfiD and production. The problem is that practically all sophisticated technologywhether in the area of automotive technology, electronics, electronic instruments, metallurgy or in other areashave some potential application in military production. The Soviets, however, design their military system so as not to be dependent on foreign imports of technology and equipment.

*

Conpet^ no Sources

The USSR realizes) West European and Japanese firms can meet most Soviet requirements for advanced technology and high-technology equipment, and (b) many US firms have foreign subsidiaries and affiliates capable of providing most of the processes and products developed by the parent firm. Aside from the US technological superiorities noted above, however, US firms sometimes enjoy other advantages. They may be better (or uniquely) qualified to fulfill Soviet needs for fully integrated systems sucharge hardware-software computer package, or for processes requiring across-the-board production equipment and know-how, or for rapid delivery and installation of large amounts of machinery.

Except in the case of West Germany, the USSR is able to finance its European and Japanese purchases with low-interest credits. The UK and France in recent months haveotal of overillion in long-term credits% interest to cover Soviet purchases. Japan extended overillion in low-interest credit4 alone. Italy has recently granted the0 million credit and is considering Soviet requests for an additionalillion, US sales must be financed at higherver prime rates in the US or Eurodollar money markets. US banking regulations, moreover, limit loans to any single borrowerank's capital and surplus and may, over time,eiling on the amount of credit that could be made available to the USSR.

Soviet officials have professed confidence that US-Soviet trade can continue to develop despite the absence of MFN and Eximbank financing. At the same time, Moscow may be giving substanco to warnings that it can and will take its business elsewhere. ajor US paper company, for example, has indicated that the production0 million in equipment for the Soviet pulp paper complex new being negotiated would have to be shifted abroad to take advantage of better financing. Similarly, Armand Hammer has announced-that better financing may allow French instead of US firms toontract to0 million worth of pipe for an ammonia complex pipeline, although US firms should still0 million in contracts for pipeline construction know-how and management. The USSR still desires US technologies* and equipment, and Moscow's improved balance of payments has and will allow it to pay cash for many US purchases. The lack of Eximbank financing, however, vill diminish the competitive position of many US firms and willarticularly adverse impact on major development deals where Eximbank backing and low interest are essential. Economic Relations and Detente

Economic relationsajor element in US-Soviet detcnto and they cannot be separated from the politicaligh Soviet official recently claimed that the passage of the Trade Act has set back US-Soviet relations in general. At

the came time, Moscow has made it clear that it wants to preserve and extend the gains of its policy of improved relations with the United States and maintain momentum in arms control, CSCE, and in other areas. This desire for progress in detente, however, has not prevented Moscow from making the point that it will go elsewhere to help fulfill its economic needs.

Original document.

Comment about this article or add new information about this topic:

CAPTCHA