CIA HISTORICAL REM PROGRAM
.RELEASE IN FULL w.
SOVIET ECONOMIC ASSISTANCE TO THS LESS DEVELOPS?Shifts in the Aid U the USSR has extended8 billion oftoon-Ccenmunlst less developed countries." In spiteincrease In annual aid undertakings since the endL-average of0 million, betweentodisbursements have not Increased. Thisin deliveries, togetherack of vigorous new Sovietand the generally harder terns associated with manycredits, suggest that the present leadership has adopted aapproach to foreign aid. During the first decade ofoffensive, Moscow was willing to extend assistance to almost anycountry that requested it. Large lines of creditnot committed to specific uses) were extended forwhich, because of the accompanying propaganda, thethe kinds of projects undertaken oftenoliticalwas out of proportion to the amount of aid or Moreover early Soviet aid agreements often wereprior study of the proposed investments, either oa theythe recipients' absorptive capacity or the feasibility ofassistance. onsequence much of the aid remainedsome cases completed projects operated far below optimum 1
* Soviet extensions of military assistance* todewl-Tjve^ CrOurr&rltf bring this figure up to somewhat moreillion. Less military aid was extended9 than, os an annual overage. The decline9 reflects smaller aid pledges to Arab countries, which had largely restored their inventories to pre-war levels following the7 war with Israel.
During the past few years, however, the USSR Jibs modified its foreign aid program bo as to make it more effective, both politically and economically. Assistance is being concentrated in fewer countries, a* discussed inelow. Recent Soviet aid commitments also haveiversity in terms and content which suggests that Soviet aid officials arereater attention to local conditions and individual requirements than in the pact. The USSR undertakes extensive feasibility surveys before aid is extended to specific projects, and repayment terms vary with the type of aid extended.
From the beginning) Soviet aid was highly concentratedev countries, especially in the Near East and South Asia. To sone extent this early concentrationeflection of the greater willingness of certain less developed countries to accept assistance frcra the Soviet Union rather than any Soviet strategy for penetrating particular areas.
By thes, as sure developing nations discarded their forcer
inhibitions against accepting Soviet assistance, the USSR was able to
use aid more directly to promote its foreign policy objectives. Although
the USSR continues to extend at least token assistance to all Free World
areas, its aid program has become core highly targeted as Khrushchev's
successors apply location criteria to their aid determinations aore
systematically than before. These criteria identify Soviet Interests
in the Arab World and Moscow's desire to reinforce its foothold iri^he
*
Near East including, In particular; Turkey, Iran, Pakistan, India, and Afghanistan; they also reflect the USSR's growing concern with China, and
the desire to strengthen Soviet relationships with nations along its own and Coemsinist China's southern borders. Thus in most recentarger part of new ccomitDents has been earmarked fcr Rear Eastern and South Asian countries. Out of total Soviet assistance extended to developing nations5ome was allocated to the Near East and South Asia, compared. Meanwhile Africa's share of the total felloand the share of Eastatin America, together, fell to
k. The emergence of Iran, Pakistan, and Turkey as major aid recipients5 is one of the most significant indicators of intensified Soviet interest in the Near East-South Asian region. With the extension of aid to these Central Treaty Organization countries, the USSR has created an unbroken chain of foreign aid clients with borders contiguous to its own or Communist China's. roup, the six nations along the USSR's southern periphery have receivedof5 billion, t of which has been extended since Aid extended to these "border" states comprises one-half of total Soviet economic aid extended to all less developed countries since the inception of the aid program" and about two-thirds of the total provided the Near East and South Asian countries.
5- The USSR has extended aid tofrican countriesut the amount extended to each recipient usually has been smaller than before. The reduced participation of African countries in the Soviet
aid program demonstrates not only the shitting geographic focus of the program; it alsoeflection of the inability of some African nations to absorb effectively the aid provided to them in the past,
6, To an increasing extent, the USSR is extending assistance that will provide mutual benefits both to aid recipients and to the USSR. For example, Soviet aid extended for developing petroleum resources in several Middle Eastern countries may help these countries to establish independent national industries and also to enable them to repay Soviet credits in crude oil. Soviet-aided natural gasin Afghanistan Is supplying part of Afghanistan's local power requirements. Its natural gas exports to the USSR, which eventually willillion cubic meters annually, will help Afghanistan to payarge part of its deht to the USSR. These exports also will help to satisfy Soviet requirements for natural gas. The Soviet-aided pipeline being built from Iran to the Soviet border will allow Iran to capitalizeormer waste product while providing the USSR with natural gas that it needs. Other examples of mutually advantageous projects are the trans-border roads and railroads that have been included in Soviet aidumber of border countries; the expansion of port facilities in less developed countries that can also be used by Soviet vessels; and Soviet aid to the developing countries' fishing industries that will provide facilities for use by the far-flung Soviet fishing fleet.
Joint borderland economic complexesuch as the dam being built on the Arasatural boundary between the USSR and Ironalso offer prospects for future technical cooperation.
Aid Extended
he USSR2 million of economicmore than the Mount extended in the previous year. (See Tableof the major cceamitmentsade to Turkey, Iraq and
Guineaas designated, for an industrial undertaking. In6 million of credits was allocatedteel plant already under construction with Soviet aid; in Iraq the aid was for petroleum exploration and developmentjand in Guinea it was for bauxite mining. Other smaller credits were extended to the Sudan, Pakistan and Uruguay. Therade credit allowing repayment over an eight-year period, was the first aid Uruguay had received fraa the USSR. Afghanistan and Iran, which rank third and fourth, respectively, on the scale of Soviet economic aid recipients were provided, with eld8 for their current development plans. Pakistan also received assistance for its Fourth Plan which begins
amount of aid extended by the USSR has varied widelyto year,ow ofillion2 toillion Recent fluctuations In annual aid undertakings
do not appear to be related to the changes In post-Khruachev aid policy.
1
Such fluctuations are expectedrogram whose commitments are to projects and development plans that often require several years for implementation. For the most part, recent peak years hove reflected the ext 'nsion of aid to countries that are initiotlng new development plans; the low years often mean that major aid recipients are working off credits previously extended {see The amount of aid extended for forthcoming plana is conditioned largely on the feasibility of proposed projects and the developing nation's progress In drawing down old allocated for previous plans. In general, the USSR has been unwilling to expand significantly its cormitnents to countries that have large undrawn balances on credits previously extended. At the end9 these undrawn balances amounted to an7 billion.
Implementation
9. Soviet aid deliveries totaled1 billion by the end of
rawdown of> of the total aid extended
The ratio: between cumulative drawings and extensions, which averaged
n earlier years, has been relatively stable3
Afghanistan, India, and the United Arab Republic which
together have received almost one-half of total Soviet aid commitments,
have had the best implementation record. By the endhese
3 countries probably had drawn as muchf the aid extended to
them, compared with an average rate for all other aid recipients of
t
one-third. In general, the countries of the Near East and South Aal* have drawn Soviet aid sure rapidly than other areas. Theirrawdown hasimes faster than that of African countries.
10. Nevertheless, implementation of the Soviet programhole
has been slow. Drawings for recent years are estimated at about
illion annually, still somewhat below thepeaJc level drawings of
f
I96U. By thehe leas developed countries had drawn down credits equivalent to the amount of aid extended during theears of the, showing an average lag in drawings ofears. Lengthy delays, however, are hardly unique to the Soviet program, although the character of this program makes it mora susceptible to these lags. Generally, thqOSSP. has refused to cover local projects costs, which the less developed countries often are unable to provide. Although the developing countries'share of the under-talcing runs as highf total cost, thus far the USSR has provided only aboutf its total aid in the form of commodities, whose sale is intended to generate currency to finance the local costs. Other aid donors have tried to reduce the effect of local problems by helping toarger share of these costs and by accepting greater responsibility for constructing the physical plant and putting It Into operation. Exceot for gift installations (such as hospitals and culturalhe USSR is known to have assused full responsibility for
implementing projects onlyov coses. The Assah refinery in Ethiopia, startedas builturnkey project.* he USSRoviet organisation in Guinea that assumed responsibility for local Soviet projects, and8 the USSR took over the management of local labor forces in Algeria that were working on Soviet-aided dams and irrigation projects. Although the USSR did not act as the contractor for the Aswan Dam in the UAR, it did provide management assistance to direct itB construction.
* Also referred tolocked" agreement, under which the donor country assumes full responsibility for plant construction and Its initial operation.
rees the beginning the Soviet Union has recognized that shortages of technical skills and trained administrative and managerial personnel would obstruct the effective implementation of its economic assistance program. To combat this problem, the USSR has dispatched technicians to the less developed countries and provided training for personnel from the developing nations. here were0 Soviet economic technicians in the less developed countries. Ir. addition to technical training which the USSR is providing to large numbers.of personnel from the lass developed countries in the USSR, Moscow also is building technical institutions in the developing countries to trein local personnel. On-the-job training at the site of Soviet-aided construction projects alBO has been provided to moreersons.
In spite of problems encountered in putting Soviet old to use, the USSR has'contributed significantly to the development plans of some less developed nations. In Afghanistan, for example,f its aid requirements in recent years have been met through Soviet assistance. In India, Soviet-aided steel capacity will represent> of total output when capacity operations are reached. In the UAR, Soviet-aided projects will increase electric power capacityimes and steelimes.
Outlook
The USSR almost certainly considers the position of influence
it has gained in less developed countries, at least partially through
its economic aid program, to have outweighed the costs, the frustrations
and the occasional setbacks. It will probebly continue to extend assistance
where it believes its long-or short-run political end economic objectives
will be promoted. At the moment, there Is no reason to expect a
major departure in Soviet aid policy, either with regard to geographic
distribution or the annual volume of deliveries. Present patterns may
be accentuated in some years, however, as Arab countries and those in
strategic border areas approach new plan periods and the USSR provides
them with additional aid. The USSR will continue to press recipient
countries to draw down more quicklyextended, and the
somewhat
of drawings may rise^over theyears as Soviet training
programs provide larger pools ofand less developed countries
develop the skill&end resourcesabsorb capitalrapidly.
Table 2
Soviet Economic Aid Extended to Current Economic Development Plana of Selected Aid9
Soviet Economic Aid Extended
Current Plan
Country Current Economic Plan Dates Date Kxter.dert Milium
Afghanistan
2
^
3
0
5
3
^
starting date for the Fourth Plan, originally, was delayed untily.
0
Table 3
USSR: Economic Credits and Grants to Less Developed Countries Extended and9
Dollar amounts inf currentiars Currjlu'.lve
End Of Drawn*' Percentage DrswnnV
derived from annual issues of Ministry of Foreign TradeTsrpovlya SSR (international Relations Publishing Expert of equipment and material for complete plantsCategoryn Vneshnyaya Torgovlya SSR) is estimated toof total drawings. Thencludes: technicalare not Included underachinery and. equipmentcomplete plants; grant aid not included In Soviet exportcommodities exported to the less developed countries tocurrency for Soviet-aided projects.
ratio of cumulative drawings at year's end toat the beginning of the year. This Is thought to beappropriate method of computing the percentages sinceon project undertakings could not be expected in theaid is extended.
0
Original document.
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