Created: 7/1/1968

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Intelligence Memorandum

USSR; Krtf ff<wrf Currency Payments Surplusecade



CENTRAL INTELLIGENCE AGENCY Directorate of Intelligence8



First Hard Currency Payments Surplusecade


The marked improvement in the Soviet hardpayments positionesulted in the first surplusecade. Among the contributing factorsecline of more0 million in imports of wheat from Canada and0 million drop in imports from other overseas hard currency countries, eneral increase in exports. The need for extensive short-term borrowing6 to avoid selling gold was thus obviatednd the USSR was able to increase its reserves of gold by0 millionevel of3 billion.

The outlook8 is unclear. It is possible that thc USSR will again finish the year with abut therereater likelihood of some deterioration in the Soviet hard currency payments position. 0 million0 million in wheat still scheduled to be imported from Canada during the crop year, such imports may riseabove the7 level. Moreover, imports of machinery and equipment probably willas deliveries take place on major contracts signed in the past two years. The cost of theimports of machinery and equipment, however, will not be offset by medium-term and long-terra credit because of increasing repayments on earlier credits.

Mote: This memorandum was produced solely by CIA. It .was prepared by the Office of Economic Research.


1. The USSRurplus ofillion in its hard currency commodity trade7 (see This trade surplus, the firstocado, resultedecline in imports as well as an increase in exports. 0 million drop in imports, the first such dec linoumber of years, coupledise of moren exports, resultedercent rise in total hard currency trade.

Table 1

Soviet Hard Currency

on US S


2. ajor factor contributing to the favorable hard currency position7 was the decline in imports of wheatchiefly from Canadarom0 million6 to0 million In addition, imports of natural rubber from Southeast Asia fell in value byillion. In all, thererop of0 million in imports from overseas hard currency countriesCanada, Argentina, Malaya, Japan, and others (seehile the USSRits exports to overseas countries, Japan in particular, by0 million. This favorable swing in soviet hard currency trade of0 million was only partly offseteduction in

the Soviet surplus with Western Europe of0 million. The substantial rise in importsestern Europe reflected, among other things, an' increase in imports of machinery and equipment of0 million and of manufactured consumer goods. Oil evidently accounted for most of the increase in exports to Western Europe.

Table 2

Distribution of Soviet Hard Currency Trade with Western Europe and Overseas Countries

Million US $


Imports Turnover Balance

Europe 9

Overseas 3


Western Europe


Payments Developments

3. The Soviet short-term positionarked improvement beginning inndthroughout the year. This was in marked contrasthen the USSR borrowed extensively on the short term to finance its deficits and to avoidgold. The Soviet medium-term and long-term position, however, evidently changed littlehe Soviet net credit positionnew drawings of5 million less repayments and interest of5 millionwas on the order of0 million, or about the same as These credits help to finance Soviet imports of machinery and equipment, which increased0 million6 to0 million


4. Other major elements in the Soviet .balance of payments also showed improvement currency payments for freight and insurance declined sharply, the net deficit falling from6 toillionard currency receipts from tourism roseerhaps amounting toillion, otherin the Soviet hard currency balance were roughly offsetting, so that the Soviethole was even more favorable than for trade alone. The strengthened payments position obviated the necessity for the USSR to sell gold, although it is doubtful whether the USSR would have sold much gold even had itayments deficit. Estimated sales ofillion'7 were the smallest of any year since the USSR began selling gold in the postwar period. The USSR added0 million to its gold reserves, bringing themevel of3 billion by the end


The sharp improvement in the Soviet hard currency payments position probably will not be repeated The USSR is still obligated to0 million0 million in wheat from Canada duringrop year. This is in addition to0 million in wheat imported during the first halflmost as much as was bought during all Moreover, there will almost surelyiso in imports of machinery andas deliveries are madeumber of large plant contracts signed in earlier years. Somefor the Soviet Fiat plant will also begin in Data on Soviet trade with Western Europe in8 indicate that imports will rise well above7 level.

On the export side, it is doubtful whether the USSR can sustainpercent growth rate chieved in the past two years. The rate of growth

in exports of oilthe major Soviet foreign exchange earnerto Western Europe will be somewhat less thanpercent growth registeredhe outlook for other major Soviet export commodities is unclear.

" This estimate excludes small sales of gold coin and theillion gold loan to Hungary.

but7 trends are indicative, prospects are not bright: traditional exports such as lumber, cotton, and nonferrous metals increased little, if at all, 8 data, in fact,ontinuation of these trends.

7. No significant change is expected in other elements of the balance ot payments. The USSR will continue to draw on medium-term and long-term credits as in the past;et basis, such drawings may even be somewhat lower than7 in spite of increased imports of machinery and equipment. for transportation will again be reduced, but the reduction will not be as great ashe remaining elements are not expected to register any major change. There will probably be somedeterioration in the Soviet payments position, although hard currency payments and receipts will be roughly in balance. No gold sales are expected, and so the USSR will be able to add0 million to its reserves, bringing thenevel of aboutillion.


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