Created: 9/1/1967

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Intelligence Report


in the International Financial Position of the USSR6




Directorate of Jntcllia^nce


in the International Financialthein

The IIKSPubstantial deficit in itstransactionsr.our.tina tomillion, instead of drawino down itsas it has done in recent vears, theit?orrowiner and reducer-currency holdincrs. Pad thethe6 wheat harvest,nrohablv haw snent Jess for wheatillion actually exoendert,is evevt the? combined aol(>currency position of

or the first tiTe in e number of years. Trade nlans7 suaoest that the UPSPto reduce or eliminate its hard currttnev deficit

vas producedCIA, it vas

Prepared by the Office ofsecrch: the estimatesconclusions represent the bestmeni fif the Directorate of as oe

- 1-

Hard Currency Balance of Trado

1. 6 the hard currency deficit in Soviet commodity trade, as shown in the table, amounted to an0 million. This was slightly greater than the deficit0 millionut well below the hiqh0 millionhen the USSR was forced to spend several hundred million dollars for wheatesult of3 harvest failure.

Soviet Commodity Trade in Hard

Million US $


1 31

2. Soviet imports paid for in hard currency6 rose0 million to an0 million. The USSR apparently eased the restrictions it had imposed during thecrisis3 on imports of industrial goods from Western Europe and Jaoan and allowed them to rise by0 million. Deliveries of Western wheat, based in part on contracts concluded in the previous year, sra estimated to have increased byllionnd additional purchases of rubber, wool, and other commodities from non-Furopean countries accounted for the remainina expansion in Soviet imports from hard currency areas.


exports paid for in hardby0 million to an estimated Exports of petroleum increased bypercent, and exports of cotton grew as alarge sales to Italy, Japan, andood domestic crop into Western Europe and Japanillion, but those to the lesscountries, notably Indonesia and Aroentina

Balance of Payments

The USSR not only0 million hard currency deficit from commoditv tradeut also one ofillion on other transactions (for freioht, insurance, and the like). To finance the total deficit0 million, the USSR obtained anin medium-term and lono-term credit (net of repayments) to cover Durchases of Western machinery and equipment. Gold sales, the chief Soviet method of deficit financina ir. recent years, totaled anillion, and sales of other precious metals brouaht in anillion. The remainino deficitl-lion must therefore have been financed bv short-term borrowingeduction in holdinqs of iiard currency.

The estimate5 million is derived from fioures which are themselves estimated and is subject to large margins of error. It seems quite clear, however, that the deterioration in the USSR's short-term position6 was areater than the rise in its gold reserves, which was0 million. It is also clear that6 the USSR relied to an unusual extent on foreign currency holdings and short-term borrowing.

The available evidence on the hardposition of the OffS6 corroborates the balance-of-payments analysis. Reoorts from the Bank for International Settlements and the

Bank of England show that the combined net position" of the USSR and the Eastern European Communist countries innd sterling dropped substantially The Soviet and Eastern European position in Euro-dollars wasillion to0 million. In sterling the net position of the group fell by the equivalent of5 million to0 million. As the USSR is the major holder and borrower of Western currency in Eastern Europe, the decline in the combined position of these countries almost certainlyecline in the Soviet position.


USSR is believed to have soldamounts of gold during theogether with Soviethis suggests that the currentis no longer willing to rely heavilysales to finance its hard currency payments. is apparently to part with gold onlyunplanned imports as it did followingharvests3 and If so, thenmust either resort to Western money markets

for short-term funds or avoid hard currencydeficits that cannot be financed through medium-term or long-term credits.

sign that the USSR plans to followcourse is provided by Soviet These plans indicate non the total volume ofthe Free World. Although no directavailable, it is also likely that theof trade in hard currencies is not scheduled

Figures for the USSR alone are not available. ** The Bank for International Settlementsuro-dollar as one that has been acquiredank outside the United States and used for lending ultimately to nonbank borrowers anywhere in the world.

to grow, for such trade constitutescent of the total Soviet trade with the Free World. If, as is likely, Soviet planners expect to increase exports paid for in hard currency, as they have done in recent years, thenutback in imports paid for in hard currencieseduction of the trade deficit ir hard currencies are implied.

9. One import likely to be reduced is wheat. At present, theat ii ports known to be planned7 are thoseear aqree-ment with Canada callingillion long tons over the1mports7 probably willillion tons at most. If this is all that the "SPP buys, hard currency expenditures for wheat will drop by0 million

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