THE MERCHANT FLEET OF THE USSR (ER IM 69-59)

Created: 5/1/1969

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OA HISTORICAL REVIEW PROGRAM RELEASE IN FbU

OF INTELLIGENCE

Intelligence Memorandum

The Merchant Fleet of the USSR

Confidential

HISTORICAL REVIEW PROGRAM RELEASE IN FULL

9

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CENTRAL INTELLIGENCE AGENCY Directorate of Intelligence9

INTELLIGENCE MEMORANDUM

Tlie Merchant Fleet of the USSR

Suntiiiary

Although the Soviet merchant fleet haa tripled in tonnage during the last decade. It does noterious competitive threat to Free World shipping. Tho fleet grew at an annual rate ofnd advanced from thirteenth place to seventh place among the world's merchant fleets2 ts rate of growth has slowed to an average of 9and it still ranks seventh in the world.

At the end8 the Soviet merchant fleet consistedhips4 milliontons (DWT). Ship deliveries to the fleet, which peaked4illion DWT, have been declining and totaledWTnless this trend is reversed, the plannedof the fleet toillion DWT by the end0 will not bo achieved. Recent deliveries to the fleet have favored dry cargo ships at thoof tankers. Deliveries of dry cargo ships increasedWT6WT, while deliveries of tankers decroasedWT WT. In ercent of the new tonnage added to the fleet came from shipyards in Communist Eastername from the USSR,ercent wasfrom the Free World, principally Finland,

Thie memorandum uaa produced by CIA. It was prepared by the Office of Economic Heeearoh and coordinated uith the Office of Strategic Re Bearah.

andercent from Yugoslavia.

Although three-quarters of the tonnage of the Soviet fleet is less than ten years old, even the newer ships are small by current world standards. The Soviet fleet has no suDertankers, no large bulk carriers, and no container ships, all of which are becoming increasingly common in other modern fleets.

More thanercent of the ton-miles performed by the fleet are in international trade. trade cargoes carried by the Soviet fleet8 totaled aboutillion tons, four percent of world seaborne foreign trade. Of this amount more thanercent were Soviet cargoes and thewere cargoes carried for foreign tradersforeign ports. The latter, which were carried in competition with foreign steamshipounted to onlyercent of world seaborne foreign trade.

While the Soviet fleet has grown rapidly, so has the USSR's seaborne trade. Consequently, the share of Soviet seaborne foreign trade carried on Soviet shipsercent is no largerecade ago, and the USSR is forced to charter many ships for hard currency. The priority use of most new additions to the Soviet fleet has been to carry Soviet cargoes. An increased ability to compete with Western fleets has been basically aof the expansion of the Soviet fleet. Soviet ships are chartered to Pree World traders mainly for reasons of convenience and efficiencyin such instances as tramp voyages by ships returning to the USSR in ballast from the delivery of exports and ships that are temporarily surplus during the winter. Most of the Soviet cargo linos are on routes where therearge volume of Soviet trade,ow recently opened lines are designed to carry mainly foreign cargoes, and the USSR has engaged in some active, if largely unsuccessful, rate cutting.

Competition of Soviet ships with Free World shipping can be expected to increase, but it could become severe only on selected routes and willsmall-scale at least for the next few years. Most of the Soviet fleet will be needed to carry Soviet trade and will be designed for this purposelarge and specialized ships will be lacking. The

Soviet fleet is discouraged fron participating in the carriage of US seaborne trade, which is one-fifth of the world total, by restrictive US regulations and the threatoycott by US longshoremen. Even if tho Soviet fleet should double Its carriage of foreign interport cargoes, the increased amount would represent little more than one percent of world seaborne trade.

Basically, the Soviet merchant fleet willarrier of Soviet cargoes in domestic and foreign trade, and expansion of both of those categories will require continued expansion of the fleet. Soviet Minister of the Maritime Fleet Baxayev has revealed that the USSR intends to increase tho size of its merchant fleet to more thanillion DWTn increase of more thanercent over the current tonnage.

Size and Growth of the Soviet Merchant Fleet

8 the Soviet merchant fleet ranked seventh in the world, close behind the Greek fleet, and consisted of morehips totaling more4 million dwt (see* The size of the Soviet fleet is less than one-half that of any of the top five fleets and accounts forercent of total world tonnage, as shown in the following tabulation:

. ^IJ10"

of8 a/ of World Total

Liberia

United

United

ctive)

4

100

the exception of the USSR, data used in

this tabulation were taken from officialof the US Maritime Administration. Estimates of ths tonnage of the Soviet merchant fleet used

m this memorandum are somewhat lower than those of other sources because CIA estimates exclude tankers and refrigerator ships subordinate to ths Ministry of the Pishing Industry and all passenger ships. When non-CIA estimates of the Soviet fleet are used the Soviet fleet stands in sixth place.

flag of convenience"US, and other Free World shipownersavoid the higher tax and wage levels of their

own oountrisa.

1 Ths Soviet fleet has ranked seventht0 tHiB Btandin9 feom thirt*enth place in

Among the largest fleets, those showing the most spectacular recent growth in DWT have been theercent, andercent. The British fleet has been growinglow rate, and the US fleet has been diminishing. The Soviet fleet grew at an average annual rate ofercent,ercent. to the fleet8 were moreillion DWT, comparedillion DWT in the peak:4 (see

2. Deliveries to the Soviet merchant fleet during the first three years ofive-year plan revealed an increasing emphasis on dry cargo ships at the expense of tankers. Deliveries of dry cargo ships increasedWT6WThereas deliveries of tankers decreasedWT6WT* This change in emphasis also was accompaniedecrease in the average size of tankers0 DWT60 DWT The average size of dry cargo ships delivered remained closeWT.

3. New merchant ships delivered to the Soviet fleetncluded vessels belonging toistinct series or classes,f them dry cargo and eight of them tankor. Eleven of the dry cargo classes and three of the tankor classes Most of the new clasr.es are modernized versions of earlier classes with improved power plants and design features that increase efficiency in handling cargo. Only one new class, the Polish-built Zvenigorod-class bulk carriers0 DWT, consisted of vessels larger than previous additions to the fleet.

1 Statiatioa on fleet aise and additiona to the fleet in thia memorandum exclude ehipa of laaaRT.

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CONPIDEN'HAfc

Yugoslavia produces the only class of large-hatch ship* still being acquired by the Soviet fleet. The other classes of large-hatch ships, formerly produced in the USSR, East Germany, Poland, and Finland, have been phased out of production andby similar ships with hatches and holds of conventional length. At the end8 the USSRarge-hatch ships in its fleet, representing moreillion DWT. Although not explicitly stated, the decision to stop the delivery of most large-natch ships may have been related todeficiencies. One large-hatch ship less than three years old sanktorm on the North Atlanticnd most large-hatch classes have been criticized as poorly adapted for efficienthandling.

4 percent of the new tonnage added to the fleet came from shipyards in Communist Eastern Europe,ercent from Soviet shipyards,ercent from Free World shipyards, andercent from Yugoslav shipyards. The principal Eastern European suppliers were Poland and Bast Germany, and Finland was the leading Pree World supplier^. Payment for ships from these major foreign suppliers was handled through bilateral trade clearing accounts and did not require any hard-currency expenditures.

The high volume of deliveries over the past decade haselatively" new Soviet merchant fleet; three-quarters of its tonnage is less than ten years old.** The fleet, however,igh proportion of ships that are small by current

The designation "large-hatch ship" refere to vessels built vith one hold of unusual length and at least one hatch of more than SO feet in length for the carriage of oversized cargo. Shipsin this list have large hatches ranging in length fromeet in the case of the Simferopol' class toeet in the case of the Poltava class. *A In ercent of the world's fleet was less than ten years old.

world standards. The dry cargo fleet, which accounts forercent of the tonnage, consists largely of general-purpose freighters and includesew undersized bulk cargo ships. The average Soviet freighterWT, comparedorld averageWT. The ships in the tanker fleet, which account for the remainingercent of0 DWT, comparedorld average0 DWT. Moreover, the Soviet fleet has no tankers of more0 DWT, no bulk dry cargo ships of more0 DWT, and no container ships. Ships in these categories are becoming increasingly common in other modern fleets, and their omission from tho Soviet fleet limits its ability to compote in international trade. Free World shipownors have bulk dry cargo ships of moreWT and tankers of moreWT in operation at the present time.

7. The Soviet merchant fleet lacks ships in many important size and functional categories because it has been tailored to the requirements of Soviet seaborne trade. The sizes and other characteristics of the ships in the fleet have thus been determined by the commodity composition of the trade and by the depths and other characteristics of. the Soviet and foreign ports visited by these ships. The largest tankers currently handled at Soviet petroleum ports aro0 DWT in the Black Sea0 DWT in the Baltic. Limitations on bulk dry cargo ships are even greater. The largest ship of this type that can currently be handled in Soviet portslightering offshore in deep water0 DWT. There has been heavy emphasis on the building of general-purpose ships in order toigh degree of flexibility in carrying Soviet cargoes. Moreover, Soviet leaders have usually been cautious in their approach to new merchant shippingholding bock on such innovations as the use

of large containers and the building of container ships.

Employment of the Fleet

8. The Soviet merchant fleet is usedin international trade, which accounts for

more thanercent of the fleet performance ln ton-miles. International trade cargoes carried by the Soviet fleet8 totaled aboutillion tons, four percent of world seaborne trade. Of this amount, more thanercent were Soviet cargoes, and the remainder were cargoes carried for foreign traders between foreign ports. Soviet cargoes were largely exports, which account for aboutorcent' of total Soviet seaborne foreign trade by weight. Petroleum, which makes up almost one-half of all Soviet seaborne foreign trade cargo, was the principal commodity carried by Soviet ships, followed by wood, grain, ore, metals, chemicals, coal, and general cargo,

9. 8 percent of the Soviet foreign trade cargoes carried by Soviet ships moved between the USSR and industrialized countries of the Free World,ercent was carried between the USSR and other communist countries, andercent moved between the USSR and the less developed countries. The principal ports of call for Soviet merchant ships in the Free World were in Italy, Japan,West Germany, France, Sweden, and Great Britainthe USSR's most important Free World trading partners. Because all of these countries have significant merchant fleets, Soviot trade with them moves on Free World as well as Soviet ships.

10. Cuba is the only Communist country whose seaborne trade with the USSR (close toillion tonsa comparable in volume to that of the Free World countries listed above. f this trade moves on Soviet ships and the distance is groat, the USSR devotes more of ita merchant tonnago to the Cuban5 port calls than it does to its trade with any other country. Although Soviet seaborne commerce with North Vietnam is less than one milliononsiderable amount of Soviet6 port calls also ia devoted to this trade. Soviet ships carry almost all of the cargoes moving between the USSR and North Vietnam and some of the cargoes that move between North Vietnam and other countries. Because of the closure of the Suez Canal, the tonnage required toiven amount of dry cargo between Black Soa ports and Haiphong has been

-CONTIOENTIAT.,

increased by almostercent, and virtually all Soviet petroleum deliveries to North Vietnam now originate from Soviet ports in the Far East.

the less developed countries,India are the USSR's most importantby sea. However, the volume ofwith these two countries is less thanCuba or with any of its major tradingindustrialized Free World countries. India and Egypt have small merchant fleets

and shipping agreements with the USSR that allot half of the trade to the ships of each trading partner, Soviet ships normally carry more than half of Soviet trade with these countries.

the Soviet Navy has fewmerchant fleet also provides logisticalthe Soviet military establishment. Duringpreceding the Cuban missile crisis inpassenger and dry cargo0 Soviet troopsonsequipment to Cuba. Other logisticalfor the Soviet armed forces has beento supply missions along the Northernduring the summer and the occasionalof small tankers to naval task forces,in the Mediterranean Sea. The merchantcarries almost all of the Soviet militarythat go by sea.

Soviet Dependence on Foreign Shipping

spite of the impressive growth ofmerchant fleet, the USSR is stillforeign shipping to carry almost one-halfseaborne foreign trade. Soviet shipspercent of Soviet seaborne foreign tradebut with the rapid growth ofnearlyear)carried by Soviet ships dropped1 The growth of Sovietin the past decade is shown in Table 3. share carried in foreign ships, manythe USSR with payment in hard currency,to the Soviet merchant fleet, andthe share carried in Soviet ships had rebounded

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toercent.* There are some indications that the share carried on Soviet ships continued At the same time, the tonnage of Soviet seaborne trade carried on foreign ships continued to increase in absolute termslthough there is evidence that it declined8 for the first time in more than ten years. The portion of this trade carried in ships chartered by, the USSR includes exports of cement, wood, androleum to Cuba; chrome ore to the United States; coal to France; chrome ore, pig iron, and coal to Japan; and cement to Ceylon and Libya.

Soviet Competition with Free World Shipping

The growth of the Soviet merchant fleet has resulted in substantially increased competition with Free World shipowners for the carriage of foreign cargoes. For many years, the only cargoes carried by Soviet ships for foreign shippers outside of Soviet trade were those carried between foreign portsoyage charter basis by ships returning to the USSR from the delivery of exports. Such voyages still represent the most important form of Soviet competition with Free World shipowners. The largest volumes of these cargoes consist of petroleum carried from the Persian Gulf to Western Europe by tankers returning to the Black Sea from India and Japan, sugar carried from Cuba to Europe by ships returning to the Baltic and Black seas from Cuba, and ores and metals carried from India to Japan by ships returning to the Soviet Far East from India and Ceylon.

4 the USSR began toecond category of ships available to foreign charterers. These were cargo ships, largely inWT range, which were surplus during the winter when shipping in northern ports is curtailed by ice. This practice, usually involving short-term time charters, has been continued and expanded ew Soviet ships have also been turned over to North Vietnam on long-term time charters.

* The US-flag merchant fleet carries less thanercent of US seaborne foreign trade.

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16. Soviet international cargo lines also are competing with Free World lines. Priorll

nLthe-Soviet lines served trade routes linking the USSR with its trading partners, and most cargoes consisted of Soviet exports and imports. In4 the USSR opened its first cargo liner serviceouteajority of the cargoes were foreignbetween Europe and Canada. This also was the first Soviet liner serviceoute served mainly by Free World lines organized into freight conferences." The USSR has subsequently opened cargo lines on four additional routes where its ships carry foroign cargoes in competition with Free World liner operators:

astern Canadaoutheastndiaurope

estern Canada

At the end8 the USSR was providing scheduled liner service on at leastnternational routes (see

17. In many cases the services on Soviet cargo lines are more loosely organized than they are on Free World lines. There are fewer advertised schedules, specific vessels are not alwaysassigned to the lines, and often the serviceof nothing moreuaranteeoviet ship will calliven portonth. On some trade routes it is difficult to tell which Soviet freighters are functioning as tramps and which are in liner service. Ships may function as liners in one direction and carry tramp cargoes under voyage charter on the return voyage.

A freight aonferenae ie an organization of liner operators whos'e ships provide scheduled serviceiven trade routeiven direction. set rates, establish schedules, and determine the number of sailings each participating line will moKe per year or month. The major conferencesthe route between Western Europe and Eastern Canada, for example, are the Canadian North Atlantic West-Bound Freight Conference and the Canadian Continental Eastbound Freight Conference.

-eONPIDENTIAl

18. erious limitation on the Soviet ability to compete in international shipping is the self-imposed exclusion of the Soviot fleet from the movement of US seaborne foreign trade, which is one-fifth of the world total. During the past ten years, no Soviet merchant ship has calledS port to load or discharge cargo. Tho USSR attributes this to US port security and shipping legislation dealing with US port calls by Communist ships and all ships that call at ports in Cuba or Asiancountries. Although other CommunistBulgaria, Czechoslovakia, Poland, and Rumaniapermit their merchant ships to call at US ports under the provisions of these regulations, the USSR does not. An important cause -of Soviet abstention may be the threatened boycott of Soviet ships by US East Coast and Gulf longshoremen.

Rate Cutting

19. Soviet cargo lines on routes served bylines traditionally have charged rates close to those aet by the conferences but have not joined the conferences." Inowever, the Baltic Steamship Companyiner service between Australia and Europe at ratesercent below those charged by the conference lines." The USSR claimed that its imports of wool from Australiaonsntitled it to participate ln liner activity on this route and that its initial attempts to join the Australia/European Conference had been rebuffed. epresentative of thestated that the Soviet bid for membership had failed because the USSR demanded an unfair share of theear)oute where Soviet export cargo was insignificant and wool was the only import.

""* 6 the USSB joined the conferences that set rates for passenger ships on the Borth Atlantic route.

** More thanree World conference lines operate on this route. They are organised into the Australia/ European Conference, whioh governs westbound traffio, and the Outward Continent/Australia Conference, which governs eastbound traffic.

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20. It is not uncommon for small, independent (non-conference) lines under Free World flags to charge rates that areercent below those charged by the conference linos. Nevertheless, tho Soviot rate cutting caused considerable alarm in Free World shipping circles. The conference lines reacted quickly to the Soviet initiative by cutting rates, by increasing rebates, and by other more subtle pressures. In response, the USSR requested aof negotiations with conference officials. These negotiations led to tho announcement in9 that the USSR would accept theions for membership in the conferences and that, after ratification by Soviet and conference officials in February, the Soviet Baltic Steamship company would be admitted to the conferences. Sovietbecame official As the first Soviet steamship company toreight conference, the Baltic Steamship Company will charge conference rates anduota ofestboundear from Australia in contrast to theriginally demanded.*

21. Since the Australia-Europe line opened, there have been two additional cases of Soviet rate cutting. In the firstoviet liner service between Japan and Western Canada was opened in8 on an independent basis at ratesercent below those charged by the Free World conference lines. This service involves only oneonth and apparently has aroused little concern among the conference lines with which it competes. In the otheroviet line was set unrial basis in9otentially profitable route from Singapore and Malaysia to Europe at rates reportedlyercent below those charged by the

* Sight of the sailings will be from Australia to both Free World and Soviet ports in Europe, and four will be from Australia to Soviet ports only. There will be only nine eastboundear, six from specified Baltic and Continental ports and three from specified Baltic parte. Because only nine ships will be coming from Europe, the USSB will probably use ships of the Baltic Steamship Company that have delivered sugar from Cuba to Japan as partound'the-world circuit to make the three additional voyages from Australia to Europe each year.

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competing Far Bast Freight Conference. This new line also will provide only one call per month; Soviet ships already average two calls per month at Singapore and ports in Malaysia to load Soviet imports of rubber. In establishing the line, the USSR probably was influenced by Singapore rubber exporters who have been boycotting the lines of the Far East Freight Conforence because of high rates nd other abuses and have been encouraginglines to enter the trade.

the increase in SoviotFroo World maritime fleets, thebeen selective and does not loom large intotal world trade. Foreign interportby Soviot ships for foreign traders inaboutillion tons,ercentseaborne foreign trade.

Prospects

deliveries to the Sovietpick up substantially9plan goal for expansion of the fleetmillion DWT will not be met. But even iffalls short of target, the fleetgrow faster than Soviet foreignnd the share of Soviettrade carried by Soviet ships shouldpercent Soviet efforts to increasecarried by its ships aboveercent mayby the insistence of certain tradingon moving part of their trade with the USSRown ships. Some trading partners reservethe trade for their ships by negotiatingshipping agreements with the USSR, andinsist. terms in purchasing

24. As the Soviet fleet expands and Soviet ships carry larger volumes of foreign trade cargo. Free World shipowners will experience increasedfrom Soviet ships. More Soviet ships will be available for voyage charters while returning from the delivery of exports and for time charters during the slack winter season. The USSR will continue to open new international cargo lines.

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pmrmmTiAT

most of them on routes where some Soviet cargoes move or where there is already some activity by Soviet freighters on tramp voyages. (The west const of South Americaikely area for tho establishmentew Soviet cargo line.) Rate cutting by Soviet cargo lines may continue, but it will generally be confined to situations where there are major differences between the shippers and the conference lines or where there is little chance of effective retaliation by the conference lines. The recent accommodation by the Baltic Steamshipin the Australia-Burope trade indicates that tho USSR will cooperate with conference lines if reduced rates fail to entice business.

25. Although the Soviet merchant fleot may occasionally provide serious competition with Free World shipowners on cortain routes, the Soviet fleet will not pose an overall threat to Free Worldthrough thes. Even if tho USSR doubled its carriage of foreign interport cargoos for foreign shippers, the volume carried probably would represent little more than one percent of world seaborne trade. Moreover, existing size and functional limitations on tho ability of the Soviet fleet to compete in certain trades will change little through the end The USSR plans to add some bulk dry cargo ships0 DWT to its fleet beginning9 and apparently isWT as well as container ships. only small numbers of any of these ships will be added to the Soviet fleet before thes, and by that time Free World fleets will include bulk dry cargo ships ofWT ond tankers of moroWT.

26. The emergence of the containerhe growing size of supertankers are likely future Soviet competition with Free World

shipowners. The introduction of large, fastships on trade routes formerly served by conventional cargo liners will reduce tho number of routes on which cargo liner operations withfreighters, such as those used on Soviet lines, are viable. This willorldwide surplus of these ships, most of them relatively

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shlft^Jh0 DWT range. The shaft to the charter market ofarge bloc of

haVV^ct on9?he rates Soviet dry cargo ships could earn under foreign

reduce bartering of Soviet

An S? ln?reasin* emphasis in tankeron ships largerWT is likelv to

andDWT surp'lu: Because this is the size range of all of the larger

Soviet tankers, the USSR may also be confronted

"*limited cha"-

27. Basically, the Soviet merchant fleet will

a.ca"ierSoviet cargoes in domestic and

forfi? xpansion of boththesewill require continued expansion of the fleet Soviet Minister of the Maritime Fleet Bakayev has revealed that the USSR intends to increased sLe

t0 more thanillion DWT

tonnalp'0ter than current tonnage, if this goal is attained, the Soviet fleet

S ^nlXtlrabiY lar9er thm ^US-flag UltdV. However' if ^iPs beneficiall? owned by US firms but registered under the flaqs of Liberia, Panama, and other flag-of-conveniencTcoun-tries are grouped with US-flag ships, the US fleet at the endould be more thanillion tons larger than the Soviet fleet.**

8 eelim*te assumes retirement5 of all US tonnage built before and during World War II and additions to the US fleetear during. AboutWT of merchant ships were built in US yards

More than one-fourthillion DWT) offUet ^almostfTZan'an-fla3

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Table 1

Inventory of Ships in the Soviet Merchant Fleet a/

Year

DWT

Increase in DWT over Previous Year

59

50

a- Including only vessels RT and over and excluding ships of the Caspian Steamship and river vessels of the Danube Steamship

b. As ofecember.

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60NF1DEN-HAX.

Table 2

Yearly Deliveries of New Dry Cargo Ships and Tankers to the Soviet Merchant Fleet a/

Year

Tons

1.2

1.1

1.0

0.8

0.8

Including only vesselsr more GR'f

delivered to the Ministry of the Maritime Fleet; excluding ships of the Caspian Steamship Company and river vessels of the Danube Steamship Company,

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Table 3

the USSR a/

Increase over Previous Year

Including foreign trade cargoes carried on the Danube River.

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Table 4

International Cargo Lines Served by the Soviet Merchant Fleet as of8

Unilateral Lines

USSR (Balticestern England

USSR (Baltic Sea)est Africa

USSR (Baltic Sea)candinavia

USSR (Balticuba

USSR (Balticustralia

USSR (Baltic Soa)esternastern Canada

USSR (Blackastern Canada

USSR (Blackuba

USSR (Blackoutheast Asia (including North

Vietnam) USSR (Blackraq

USSR (Blackear East (Mediterranean)

USSR (Blacktaly

USSR (Black Soa) - Greece

USSR (Black Sea)asted Soa

Iranorth Sea (via Volga-Baltic

Waterway) USSR (Lowerear East USSR (Lowerorth Africa USSR (Lowerurkeyestern Canada

USSR (Faroutheastndia

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Table 4

International Cargo Lines Served by the Soviet Merchant Fleet as of8 (Continued)

Lines Operated Jointly by Soviet and

USSR USSR

USSR USSR USSR USSR USSR

USSR USSR

USSR USSR

(Baltic Sea) (Baltic Sea)

(Baltic Sea) (Baltic Sea) (Baltic Sea) (Baltic Sea) (Baltic Sea)

(Black Sea) (Black Sea)

(Black Sea)(Far East) -

East Germany

Eastern

Europe -Western

Europe -South

America

West Germany

Netherlands

Belgium

France

Eastern

England

United Arab Republic India Japan

Nationality of Foreign Participant

East German

Polish

West German Dutch Belgian French

British Bulgarian

Egyptian

Indian

Japanese

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