NON-COMMUNIST EXPERIENCE IN CARGO SHARING AND SIMILAR ARRANGEMENTS WITH THE USS

Created: 1/17/1972

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MEMORANDUM

Non-Communist Experience in Cargo Sharing and Similar Arrangements with the USSR

Summary

6 the USSR has signed bilateral shipping agreements with six countriesIndia, Egypt, France, the United Kingdom, Spain, and the Netherlands, and one with Belgium and Luxembourg awaits formal signing. Besides these accords, seven company-to-companycalling for joint operations are also in force

involving enterprises in five West European countriesonsortium in Japan.

Of the bilateral agreements, only those with

India and Egypt provide for cargo sharing; the rest

emphasize the principle of freedom of navigation and

the rights of third party ships to participate in

the trade. Tho. agreements with France and the

Netherlands, however, specify that both sides will

promote the use of ships of both signatories in their

joint trade. Although India complained about Soviet

violation of its accord as earlyata for

he only year for which there is complete

information, show that Soviet ships handled

of thelight variation frost the

greement. 0 there were Indian complaints,

thus far unsubstantiated, that the USSR was understating

tha tonnage of cargo delivered by its ships to Indian ports.

A large variation fton ihe aqreement occurs the Egyptian trade, more% of which has been rried in Soviet ships. However. Egypt hasmall merchant fleet and probably could notfreo-l

expanded tirade with the USSR in Egyptian ships. Moreover, Egypt has not complained about the disproportionate carriage of this trade in Soviet ships.

With respect to the French and British agree-ents, tho French in1 complained that they were not getting their fair share of revenues from their trade with the USSR. We suspect however, that this isunction of the Sovietsarger percentage of goods with high freight rates than an imbalance in the total carriage. In the British case, Soviet ships0f the trade, Britishnd third party.

Under the company-to-company arrangements, the

Japanese have complained of Soviet failure to honor

cargo sharing agreemonts. apanese ships

handledf the cargo moving in both directions

over specified routes. Data for the ensuing years

are sketchy, but Japanese ships definitely carried

less than half of the tonnagend it is

likely that an imbalance still exists. The only other

complaint on the level was by two

French firms6 prior to the signing of the

bilateral accord between the Soviet and French.

In conclusion, the USSR, since its early accords with India and Egypt, has eschewed cargo sharing in its bilateral shipping agreements. in the absence of such commitments, it has not greatly dominated the carriage of trade with the other party. In the case of the two cargo sharing accords, India has complained, perhaps justifiably; Egypt has not complained In the company-to-company agreements, tho USSR appears to have violated the letter of its agreement with the Japanese consortium and allegedly the spirit of its arrangements with French firms.

Experience under Inter-Governmental Agreements

Th* first country with which the USSRilateral shipping agreement was India. This agreement

nSG/k^

shipltradGiGt and Mian

nwvnnUn* a spects concentrated on the movement of dry cargo moving between Soviet Black Sea ports and Indian tfeat and east coast portsoint line? sor-vice. Soviet exports of petroleum to India and trm

etWr""her'Sn the ui.jck uea and India were not covered.

eement, equal numbers of Soviet and Indian ships wore assignedlack Sea/India line. of cargo on the line was to boarity basis"

hip5' Laterril agreementequirement for the sharing of revenues^as cargoes. The USSR's ship chartering and freignTSina

^ 9ra^ud to coo^nate the service and oversee ful- illment of the agreement. To this sameoint secretariat for the line was created at Bombay

began to complain that

nn P making more than their quota of voyages

,complaints have beet, voiced as recently as

and more recent data indicate thatf

aj."Stating the tonnage ofby its ships to Indian

ho USSR's shipping agreement with Egypt, signed inoes much farther than any other in terms of cargo sharing. f this agreement states:

"Each contracting party will grant the other contracting party for the transportation by vessels of its country'sf the goods exported from the Union of Soviet Socialist Republics to the United Arab Republic and from the United Arab Republic to the Union of Soviet Socialist3)

-

In theory, third party ships aro excluded entirely. However, Egypt has apparently never had enough ships to carry its share and recent port statistics from that country indicate that Soviet ships carry moref the trade and that third party ships carry more of the remainder than Egyptian ships do. erchant fleet whose capacity was lessWT at the endthe Soviet fleet's was almostillion DWT) Egypt has never been in ato complain about the USSR's domination of the

5. The third country to join the USSRilateral-shipping agreement was France_, Thissince" was the USSR's firstajor non-Communist shipping power and its first to acknowledge adherence to the principle of freedom of navigation. In keeping with its stand on freedom of navigation, ithat both parties agree to abstain from ail discriminatory activities that hinder the development of international commerce and recognizes the right of third party ships to carry cargoes between the ports of the two contracting parties. Tho farthest this agreement goes in the direction of cargo sharing is to state that both contracting parties agree to encourage the participation of French and Soviet ships in the movement of cargo between the two countries. There is no language requiring or acknowledging the desirability of parity in tonnage carried or revenue earned.

As recently ashe French, one of whose niatives in entering7 agreementesire to increase the earnings of their fleet in the movement of French/Soviet trade, complained that toohare of the freight revenues from the trade was accruing to the Soviet Fleet. It was claimed that Soviet ships hadillion in the trade0 while French ships earned4 Such an imbalance could reflect an equivalent imbalance in tonnage carried, but it may also reflect continuation of the USSR's policy before the treaty was signed ofigh percentage of the goods with high freight rates on its ships and leaving most of the cargoes with lower rates for French ships.

The only other nations that have signed bilateral shipping agreements with the USSR to date are the Netherlands, the UK, and Spain. In its handling of the problems of flag discrimination and access to cargoes, as in most other respects, the agreement with the Netherlands, ratified on

s more similar to the agreement with France than to any other. The Dutch agreement upholds freedom of navigation and the right of third party ships to" participate in Soviet/Dutch trade, but does stress promotion of the use of Dutch and Soviet ships in their mutual trade and (unlike the agreements with France and the UK includes this, among the matters to be dealt with by the mixedset up under the treaty. There are no references to parity and there is no evidence outside of the treaty that the Dutch are particularly disturbed by the fact that Soviet ships have heretoforearger part in Soviet/ Dutch trade than Dutch ships.

,8. Because the UK is one of the foremost opponentsag discrimination, its agreement with the USSR includes language similar to that in the French and Dutch agreements upholding freedom of merchant navigation "and the rights of third flag ships. The agreement with the UK, however, handles the matter of participation by the fleets of the contracting parties in their mutual tradeess direct way than even the French and Dutch agreements. It states that, "each High Contracting Party shall abstain from taking measures which may limit the opportunities of vesse

of the other High Contracting Party to compete in relation trade between its own ports and ports of the other High Contracting Party on equal commercial conditions". The question of parity does not arise. Indeed,0 Soviet shipsf the trade comparedn British ships and 2S% on third party ships. Although this agree mcnt was signed8oviet/British mixed commission created at the time of the signing has met three times since final ratification has not yet occurred. It was scheduled To take placeeeting of the Mixed Commission in the tallut both events were postponed at that time because of the UK's expulsion of large numbers of Soviet spies.

9. The USSR is party to two shipping agreementsan "accord" signed7 that marked the end ofsuspension of shipping relations between theand an "agreement" signed9 thatby Soviet merchant and fishing vessels infor bunkering and Qther services. It is notor not topics such as flag discrimination andwere touched upon in these agreements. The USSRBelgium/Luxembourg Alliancehippingin1 that is reportedly similar to thoseFrance and the Netherlands, but it has not yetand few details aro

10. In arrangements dating as iar back as thes, steamship companies in six developed countriesWest Germany, the Netherlands, Belgium, France, the United Kingdom, and Japanoperate joint cargo lines under company-to-company agreements with Soviet steamship companies. Except for the lines involving French companies, all of the Western European companies* joint operations link ports of their countries with Soviet ports in the Baltic. French companies are involved in joint services to both Soviet Baltic and Soviet Black Sea ports. The joint service with Japanese companies connects ports of the Soviet Far East with Japan.

Experience Under Company-to-Company Agreements

Among the Western European companies participating in joint services, we know of only two that havo complained of unfair treatment by the SovietsCompagnie Gcnorale Transatlantique, the French company involved in tha service between French Atlantic ports and the Baltic; and Messageries Maritimes, the French company in the service between Southern France and tho Black Sea. Their claims6 that Soviet ships were carrying more than than their sharo) of the cargo may have contributed to France's decision toilateral shipping agreement with the

Tho three Japanese companies in the consortium that works with the Soviet Far East Steamship Company in the joint service known as the Japan-Nakhodka Line havo often complained about Soviet failure to live up to the agreement under which that line was set up8 and its subsequent revisions. The agreement provided for equal numbers of sailings each year by ships of tho Far East Steamship Company and,of the Japanese consortium. language dealing with cargo sharing was as follows: "Both sides will make efforts for equal and fair distribution of cargoes between Japanese and Sovietapanese ships carriedfons of cargo that moved in both directions on the he latest year for which data arc available, Japanese shipsf westbound cargoes butf east-bound cargoes. The equivalent percentages7_ Because data are not availabj^< the absolute tonnages moved in'both directions during these ears, it is uncertain how far the imbalance has been redressed

f

Source List

State, NewNCLASSIFIED.

8NCLASSIFIED.

Navy, Cairo,4ECRET.

Journal of Commerce (New York), NCLASSIFIED.

5" UNCLAS"IFlEDhiPPin9Kin*3aom'

State,NCLASSIFIED.

Unpublished CIA report, SECRET.

Shipping and Trade News, Tokyo, S. UNCLASSIFIED.

Shipping and Trade News, Tokyo,NCLASSIFIED.

Original document.

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