SOVIET HARD CURRENCY EXPENDITURES ON FOREIGN SHIP CHARTERING

Created: 11/1/1967

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CIA HISTORICAL REVIEWELEASE IN

DIRECTORATE OF INTELLIGENCE

Intelligence Report

Soviet Hard Currency Expenditures on Foreign Ship Chartering

-Secret

Copy No.

CENTRAL INTELLIGENCE AGENCY Directorate of Intelligence

intelligence report

Soviet Hard Currency Expenditures for Foreign Ship Chartering

Summary

56 the USSR made net hard currency expenditures ofillionillion, respectively, for the charter of foreign ships. Recent abundant Soviet wheat harvests should makeharp decrease in these expenditurestoillion

illion in net hard5illion to carryillion to carry exports,1 million to carry cargoes between foreign ports on Soviet account. Soviet imports of grain from Canada, Australia, and Argentina accounted for most of the expenditures on imports. Petroleum accounted for two-thirds of the charteringfor export cargoes. Most of the funds spent to move cargoes between foreign ports were used to divert Soviet purchases of Canadian grain and flour to Cuba and Australian grain to Egypt. All expenditures aboveillion were, in effect, reimbursed in hard currency by the foreign purchasers. exports.

Note: This report was produced by CIA. It was prepared by the Office of Economic Research; the estimates and conclusions represent the best judgment of the Directorate of Intelligence ae of Uovemher

oviet direct and indirect hardexpenditures for ship chartering probably increased toillion because of aneed to move part of Soviet grain imports on chartered ships. The outlook7 isecrease in nonreimbursed expenditures of hard currencyillion due largelyubstantial decrease in chartering for grain imports. There is little likelihood of increased Soviet expenditures for the charter of tankers resulting from thoin charter rates since the closure of the Suez Canal.

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Introduction

1. 5 the seaborne foreign trade of the USSRolume1 millionercent of the world total. The predominance of exports in this trade, the distribution of this trade between dry cargo and petroleum, and the approximately equal shares of this trade carried by Soviet and foreign ships arc shown in millions of tons and by percentage distribution in the following chart:

More than half of7 million tons of Soviet foreign trade cargoes carried by foreign ships5 moved on ships chartered by the Soviet ship chartering agency Sovfraaht. Most of these cargoes consisted. exports to Great Britain, Italy, Japan, and other industrially

Under the accountingoviet Ministry of the Maritime foreign trade cargoes that move are included in the seaborne for OSSH. Becauae of the difficulty purely river cargo from data pro Ministry of the Maritime Fleet, Soviet eeaborne foreign trade us include Soviet foreign trade1 million tone includes only to the USSR and exports shipped excluding cargoes shipped betuee on Soviet account. All tonnagee tone.

by the Fleet, all Soviet on the Danube River eign trade of tha

of extracting vided by the the statistics on ed in this report the Danube. The

imports delivered from the USSRn foreign porta

are in metric

developed countries of tho Free World.* Soviet expenditures of hard currency to charter ships for exports to these countries are reimbursed in hard currency. Thus the only Soviet expenditures of hard currency for the charter of foreign ships which are not reimbursed in hard currency are thoseoviet imports from all. exports to countries whose trade with the USSR is entirely or partly inather than hard currency,ertain shipments between foreign ports on Soviet account.

Imports

Theof exports in Soviet seabornethat Soviet ships frequently arecarry import cargoes on their returntrade officials, therefore, buy most. pproximatelySoviet seaborno imports moved on Soviet ships.

Soviet hard currency expenditures for chartered foreign shipping to carry the remaining

when nxporta are eold. basis, the exporter ie reeponeible for their transportation to the port of the importer, and the price paid by the importer covers the coat of the merohandiae plue chargee for insurance and freight. When exporte are sold on. basis, the importer ie responsible for the aost of transportation and insurance.

** The trade of the USSR with all Communiat coun-triee, moet of the leae developed countriea, and certain aountriea in the developed Free World ie conducted in accordance uith paymente or "trade and paymente" agreements whioh stipulate that payments for goods traded between the signatory countriea will be handled through clearing acaounte. This means that ae long ao trade between the two countries remains more or less in balance, no currency, hard or soft, hae to change hands. On the other hand, trade traneaotione between the USSR and countries with whioh it does not have payments agreements that stipulate payment in clearing require payment in hard currency, usually US dollars or British pounds.

imports totaled atillion* Most of these funds were spent to transport the massive grain imports that followed the poor wheat harvest in the USSR (see The remainder was spent to supplement the Soviet tonnage used in moving routine imports of sugar from Cuba.

Table 1

Soviet Imports Carried on Chartered Foreign Ships Requiring Net Hard Currency5

of Imports (Thousand Metric Tons)

Of OrlRirJ

SJ

Foreign Ships Chartered for Hard Currency

Currency Expenditures (Thousand

US 4)

Wheat Wheat Sugar

Australia Argentina Cuba

b/

/

Including only those movements of imports in whichforeign ships participated. Soviet ships alsoin all of these movements except that of wheat from

Argentina. There were additional movements of imports5 in which only Soviet ships participated, b. Carried on Soviet-chartered ships.

C. Imports of wheat from Argentina were carried on Free World ships chartered by the seller who was reimbursed, in turn, by the USSR.

* Because of difficulties in estimating timecoste and, under some circumstances, in determiningiven voyage was performedoyageine charter, chartering costs throughout this report have been estimated on the basis of voyage charter rates. When current rates for specific cargoes moving on specific routes were not available, rates were estimated using adjusted data for other routes or time periods.

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Soviet purchases of grainCanada and Australia. so thatchartered the foreign ships directly,from Argentina. Inthe Argentine sellers paid theand passed the cost on to the USSR. price. All ofonsgrain went to the USSR inWorld tonnage. The indirectto the USSR wasillion.

Exports

5 million tons ofmoved by sea. More than half ofwent to theountries (see Appendixare believed to transact their tradeUSSR primarily in hard currencies. hard currency paid by the USSR toships for the movementhese countries was reimbursed in hardpart of the total cost of the goods. seaborne trade withtherAppendix B) including most of thecountries, Finland, Iceland, theand many of the less developed countriesin clearing, which means that Sovietfor the movement of exports towere not reimbursed in hardexports tof these countrieson Soviet ships or on foreign shipsthe USSR had to disburse no* Deliveries to eachountries included some cargoeson ships chartered by the USSR for This chartering cost theillion for petroleum cargoesmillion for dry cargoes. he cost was for the movement of exportsdeveloped countries and Cuba (see

both ahipe chartered by the USSR with payment in clearing (mostly Communiet flag) and ships chartered by trading partners of the USSR to carry Soviet exports eold on. basis.

Soviet Exports Carried cn Soviet-Chartered Foreign Sal Hequirlng Ket Hard Currency Expenditures, by5

(Thousand Metric Tons)

Hard Currency Expenditures (Thousand US $)

' y

Ftrazil

Cssobodla

Ceylon

v- rus

flhaaa

Greece

Guinea

India

He roc co

Pakistan

Syria

Tunisia

Turkey

Finland Iceland Xetnerlaails

Coreniailst

Cuba

1'ugosJ oviotal

Developed

3

lie

JO

87

llU

20

it?

150

5

15

519

leum Total Dry Cargo Fatroleum

lt,6K

Including only exports to countries whose trndc with the USSRn clearing.

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ji it I*

7. ess thanercent of the volume of Soviet seaborne foreign trade consisted of crude oil and petroleum products. Most of theillion tons of petroleum cargoes were exports, as shown in the following tabulation:

Million Tons

Soviet Ships

On Foreign Ships

Imports Total

0

42

1 43

8. Foreign tankers carriedillion tons of Soviet petroleum exports However-illion tons of this amount required Soviet charter expenditures of hard currency that were not reimbursed in hard currency (seehe remaining cargoes consisted of the categories given in the following tabulation:

Million Tons

for which the USSR was paid in hard currency

Exports for which the USSR was paid in clearing

Carried on tankers chartered with payment in clearing

Carried on tankers chartered by the purchaser. exports)

Total

0.8

7

9. The chartering costs to the USSR in hard currency for the movement ofillion tons9 million. The heaviest charterwere for petroleum exports to India, Ghanat Ceylon, Brazil, and Cuba.

SBGIlffP-

10. ry cargo exportsercent of the total drymoved in Soviet seaborne foreign tradeandercent of total exports. Onlyof these exports required Soviet outlays of

currency that were not reimbursed in hard

currency. The cost in hard currency of transporting them6 million. The heaviest expenditures were for the movements of dry cargo to theEgypt, Ghana, and Cuba. The major dry cargoes that moved on ships chartered by the USSR for hard currency were wood, cement, sugar, and metals, as shown in Table 3.

Table 3

Soviet Exports of Dry Cargo Carried on Soviet-Chartered Foreign Ships Requiring Net Hard Currency Expenditures, by Conmodlty5

Hard

Metric Tons) (Thousand US

Wood

and equipment

and cellulose

Including only exports to countries whose trade with the USSR5 was in clearing.

Shipments Between Non-Soviet Ports

Soviet-chartered ships areto carry exports from or imports tothey sometimes carry shipments betweenports. These shipments usually consistpurchased by the USSR but delivered to a 5 the most important ofwere wheat and flour purchased fromAustralia (see The USSRtons of its purchases of Canadian wheat

and flour toons in Soviet shipsons in Soviet-chartered ships. The hard currency cost of chartering these ships1 million. ons of Australian wheat were diverted toons in Soviet ships0 tons in Soviet-chartered foreign ships. The hard currency cost0 tons of the sugar imported from Cuba were diverted to Ceylon on Soviet-chartered foreignard currency cost The total expenditure of hard currency for the movement of these cargoes between non-Soviet ports51 million.

Trends in Net Hard Currency Expenditures

expenditures of hard currencychartering of foreign shipsthose that were reimbursed in hardmoreillion. Thesedistributed as shown in the following

Million US $

For movement of

Por movement ofmovement ofnon-Soviet

ports on Soviet

This total is equivalent toercent of the5 million Soviet deficit on current account with hard currency countries

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tankers are unlikely to be increased significantly by the high-voyage charter rates generated by the closure of the Suez Canal. The USSR has more tankers available this year and also has reduced petroleum exports to many countries thatreceived part of their imports of Soviet petroleum in Soviet-chartered foreign tankers. Thus the level of Soviet expenditures ofhard currency for ship chartering could drop from approximatelymillion6 toillion

Countries That Traded with the USSR

Entirely or in Part by Sea and That Transacted Their Business with the USSR in Hard Currency

Australia

Belgium

Canada

Denmark

Ethiopia

France

Great Britain

Indonesia

Iraq

Italy

Ivory Coast

Japan

Jordan

Kenya

Kuwait

Lebanon

Libya

Malaysia

(trade by sea via India)

New Zealand

Nigeria

Norway

Saudi Arabia

Senegal

Spain

Sudan

Sweden

Switzerland (trade largely by sea via Italy and the

Tanganyika

Thailand

Togo

Uganda

Uruguay

United States

West Germany

Yemen

-SECRET

s * <'*

Appendix B

Countries That Traded with thc USSR

Entirely or in Part by Scj andTransacted Their Business with the USSR in Clearing Accounts5

Brazil Bulgaria* Burma*

Cambodia

Cameroon*

Ceylon

Communist China*

Congo (Brazzaville)*

Cuba

Cyprus

Dahomey*

East Germany*

Egypt

Finland

Ghana

Greece

Guinea

Iceland

India

Iran*

Mali*

Morocco

North Korea*

North Vietnam*

Netherlands

Pakistan

Poland*

Rumania*

Sierra Leone*

Somalia*

Syria

Tunisia

Turkey

Yugoslavia

Soviet exports to these countries moved either entirely on Soviet ships or on Soviet ships and foreign ships for whioh the USSR did not have to disburse any hard currency.

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