REPAYMENT TERMS OF COMMUNIST AID (S-4141)

Created: 2/10/1972

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central intelligence agency

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MEMORANDUM FOR: Mr. Elmer Glaser

Statistics and Reports Division Agency for International Development

Terms of Communist Aid

Attached is the infornation you requested concerningterms of Coomunist aid to the Less Developed Countries.

Office of Economic Research

Attachment

As stated above

CIA HISTORICAL REVIEW PROGRAM RELEASE AS9

UHCWSSIFIEO

Repayment Terms oft Aid to the Less Developed Countries

Economic Aid

he COHBDunist countries extendedillion of economic aid to less developed countrieslmost all of this aid bas been provided as credits with fixed terms of repayment, i/ lessr0 Billion, was in grant aid. The People's Republic of China (PRC) provided5 million, more than three-fourths of which wasto Cambodia, Nepal, and Pakistan, u The USSR5 million of grant aid, largely to Afghanistan9 for road construction. East European countries have provided only negligible amounts of grant aid to the IDCs.

Tho terms of repayment of Communist economic credits to the LDCs have changed little during the l8 years of the Chinese repayment terms always have been more liberal than those of other Ccexsonist donors. Its aid is interest-free and usually requires repayment overears,0 year grace periods. ew cases, -however, China has permitted longer repayment periods. Onillion credit extended0 for thea Railroad, China allowedears for repayment0 year grace0 million credit extended to Somalia1 may carryear terms as does the Chinese creditillion provided to Afghanistan

oviet aidunder less favorable terns. Host Soviet credits coll for repayment overearsi beginning one year after project completion. These terms usually arc applied to project-type old administered by the Soviet State Committee on Foreign Economic Relations. More thanof6 billion of Soviet aid oxtendedas carried these terms.

U. Moscow has allowed longftr repayment periods on2 billion of its aid. illion of aid to Afghanistan involve repayment periods ranging betweenndears with grace periods5 years. Algeria, Turkey, and Yemen (San'a) received5 million of credits calling for re payment overears.

T. Includes credits with amortiiation periods of five years or more.

2. 7 million extended to PakistanVG8 as credits but converted to grants

5. About ISi of total Soviet economic aid consists of supplier-typo credits provided by the Soviet Ministry of Foreign Trade. These credits, uhlch Moscow calls "commercialften ore allocated by recipient governaents to private coapanies. They0 years for repayment, carry interestnd require downpayments of up. Almost all Soviet aid to Latin America has consisted of such credits. The first Major Soviet credit of this type0 aillion credit to Argentina/ he USSR extended5 million of these credits, no re than tvo-thirds of vhich went to Egypt, India, and Pakistan. During the past four years, Latin American countries hove received5 million of0 year credits; Iraq, approximatelyillion; and Egypt,illion. this type of aid has not directly reduced Soviet project assistance, as is sometimes assumed, nor has it continued to growercent of total aid extended. These credits, vhich accounted forI of total Soviet aid extendedere less thanof the aid provided innd lOf,xtensions.

6. Aid extended by East European countries almost always carries harder terms than, that provided by the USSR or China. Dounpayacnts often are required, repayments usually are madeears and interest normally is setlt although it has ranged up Occasionally, they have allowederns. bout kyf, of their aid to Latin American countries carriedear repayment periods.

7- Mast Communist credits allow repayment in the local currency or goods of the aid recipient. The exceptions to this rule generally apply to countries, ouch as Indonesia, that do not have clearing agreements with Communist countries. Tbe goods used for repayaent often arc the output of Coasninisl-assiatcd plants. Some repayment arrangements arc highly advantageous to the donor country, such as Iran's and Afghanistan's repayments in natural gas and Iraq'sin crude oil. They contrast with previous agreements with these LDCs that called for repayments in other cooneodities. "

Hilitary Aid

8. Communist military aid to the LDCs totaledhe end Sovietfor more than

f the total

CIA/OER

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