INTERNATIONAL OIL DEVELOPMENTS - - - COMMUNIST - LDC OIL ACTIVITIES (CIA 8041/7

Created: 4/11/1974

OCR scan of the original document, errors are possible

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COMMUNISTLDCOIL ACTIVIT

1 tic USSR and Eastern Europe continued during the first quarter4 to seek increased deliveries of oil front Middle East suppliers. Although Eastern Europe still will rely on the USSRf its crude supplyn estimated one-fourth is scheduled to come from Iran and the Arab producers. Plannedfrom these nations may bc scaled down, however, because of recent price hikes and increasing LDC demands for cash payment rather than barter terms.Communist countries continued to expand their already substantial assistance fornational oil companies in LDCs.

Communist Aid lo LOC Oil Industries

Moscow and its Eastallies have provided more thanillion of aid toDCs for the development of their national oil industries.his aid increasingly has stipulated repayment in oil as the USSR and Eastern Europeentered the Arab markets in search of crude supplies, lnto aidcountries provide petroleum equipment and technical services under commercial contracts-

The most recent effort to break into LDC petroleumhas been observed in Latin America. So far this year, Romania has extended the only new Communist aid for suchillion forand equipment tooil industry. Both Moscow

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,uid Warsaw also have offered pelrolcum equipment to Buenos Aires. Earlier. Bucharest and Quito jointly announced plans for Romanian technical services lo Ecuador's petroleum sector, probablyommercial basis. Romania also announced an accord to cooperate with Liberia in oil development. Romania and Hungary signed agreements with Libya to swap petroleum equipment and technical services for crude oil.

New projects in countries already receiving petroleum aid also were discussed earlyhese undertakings eventually may involve new credits. In February. Moscow wasontract with Baghdad to accelerate Soviet assistance for developing the third and final stage of the oilfields at North Rumaylah, which will raise capacity from theoy lhe endrotocol signed with Damascus in March calls for an expanded Soviet oil development effort in Syria.rotocol signed in January with India, Moscow will intensify the supply of technical services and equipment for comprehensive oil and gas exploration, to be financed under existing agreements.

Although still lessf total SovietEast European aid undertakings inCs. petroleum assistance in some countries hasritical factor in establishing national oil industries. This was particularly Iruc for crude produclion and refining capacity in Indiu. where Communisi assistance. respectively; lor expanding Iran's natural gas industry, spearheaded by Soviet willingness, to take Iranian gai (generally flared in thend for Syria where Soviet-developed oilfieldszech-buill refinery account for all of Syria's production capacity.

Communist Oil Procurement Activities

Communist aid to national oil industries, which is repaid largely with crude oO and has helped to establish Communist links with oil producers, did not fulfill its promise during4 Under agreements with Arab and North African stales. Moscow received anostly for East European account.4 the supply picture is less certain. Moscow has hesitated to buy at the new higher prices, which in some cases call for cash instead of barter. Consequently, Ihe USSR may have toarger share of Eastern Europe's supply from its domestic production.

In January. Iraq stopped oil shipments lo the USSR after Moscow refused toer barrel, the puce Baghdad was demanding from Western customers. Earlier Soviet plans lo obtain as muchf Iraqi oil4 (more lhan double the3 level) probably wdl be scaled down. Although Baghdad apparently has resumed shipments under previous agreements, it is unlikely lhat the two patties will agree to long-term deliveriesixed price.

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East European countries, often agreeing to pay the higher prices demanded for Middle bast oil, bought aturing the fust quarter. Estimated direct oil imports from LDCs by Eastern Europe for all3. Libya may become an important East European supplier if agreement can be reached on prices. Recent preliminary agreementsould bring total Libyan dire ctoi exports to Eastern Europe up to atouble last year's shipments and equivalent lo aboutf Easternotal oil

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supply. Tripoli waser barrel for Ihisoil during lhe firs! quarterome olher oil producers hailed petroleum shipmcnis Io Eastern Europe because of price disputes. Iran canceled plans lof crude lo Poland during ihc firsl halfnd Syria reneged3 contract wilh Hungary.

If the USSRarger share of Eastern Europe's needs from ils own supplies, it may be at the expense of Moscow's West European and LDC clients. The USSR already has notified several LDCs of harder terms for Soviet oil. In March, Moscow notified Ghana that its price per banel forarrels of Soviet crude already delivered would be nearly SIS. Il reportedly reduced4 barter commitment to Morocco belowuppliedoreover, Bangladesh will have to pay hard currency for Soviel petroleum productsoscow was more responsive to Brazil's urgent need for fuel and reportedly agreed to supply ilf diesel fuel, valuedillion,he sale will help reverse Oielarge trade deficit thai Moscow has run with Brazil. "

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