SATELLITES EXTEND CREDITS TO THE USSR FOR DEVELOPMENT OF FERTILIZER RAW MATERIA

Created: 3/28/1963

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GONFfDENTIAL

Current Support Brief

SATELLITES EXTEND CREDITS TO THE USSR FOR DEVELOPMENT OF FERTILIZER RAW MATERIAL BASE

CIA/RR83

CENTRAL INTELLIGENCE AGENCY Office of Research and Reports

SATELLITES EXTEND CREDITS TO THE USSR FOR DEVELOPMENT OF FERTILIZER RAW MATERIAL BASE

Several European Satellite countries apparently have recently agreed to extend long-term credits to the USSR to cover their joint investment in the construction or expansion of three large combines producing mineral raw materials for fertilizers. The agreements, which are the first known to involve Satellite credits to tbe USSR, are described by Bloc sources as "concrete examples" of the implementation of CEMA recommendations for cooperation in expanding raw material production "through theparticipation of countries Interested in receiving the products of thoset In addition to ensuring future deliveries to the Satellites of needed fertilizers, these credits will provide valuableassistanceriority sector of Soviet industry that isbadly in its attempts to meet expanding investment goals.

The following Soviet projects are to receive Satellitehe Soligorsk potassium fertilizer combine in Belorussia, Zl (Z) the Kingisepp phosphorite combine near Leningrad, iln apatite combine on the Kola Peninsula. 4/ It is likely that all of the Satellites, with the exception of Rumania, will participate in developing at least one of these raw material deposits. Under the terms of an agreement signed in Moscow onebruary, olish credit ofillion8 million) will cover the delivery60 ofequipment, and materials for production of potassiumat Soligorsk and for sulfuric acid plants. The USSR will repay the interest-bearing credit innstallments with deliveries ofriftingons0illion tons of Satellite participation in the Kola Peninsula and Kingiseppare lacking, but several countries, including Bulgaria, reportedly will participate in the Kola undertaking.ith Czechoslovakia, East Germany. Poland, and possibly Hungary as the evident participants in the Kingisepp scheme. 7/ Although Satellite participation in theof the Kingisepp mine was notedt is not known whether credits were extended at that time. 8/ Evidence now suggests that credit

arrangements, possibly similar to those in the Soligorsk agreement, are involved in both the Kola Peninsula and the Kingiscpp projects 9/

Failure to increase output of fertilizer as rapidly as planned has plagued Soviet leadersumber of years. he plan to introduce new capacity for production of mineral fertilizer waa fulfilled by onlyercent. Againn spite of the fact thathimself requested increased emphasis on production of fertilizer at the March CPSU central committee plenum on agriculture, the lag in the installation of new capacity continued. It is significant that all three of the projects slated to receive Satellite aid were started by the USSR some years ago and have encountered construction delays and investment tags which have led to plan underfulfillment andprogress toward completion. ThcSoviet leadership, therefore, faced with continuing difficulties in expanding production of fertilisers, has decided to utilize Satellite investment funds.

The fact that tbe throe projects to receive Satellite aid will be an important source of fertilizers for the Satellites indicates that they, as well aa the USSR,ital interest in seeing that Sovietare developed rapidly. Because tho Satellites havedeposits of fertilizer raw materials (except potassium) andthe exploitation costs of their deposits are high, these countries were faced with the choice of either contributing to the Sovieteffort or turning to the West for the supplies that will be needed over the nextoears to boost stagnating agricultural production throughout the Bloc.

The Polish-Soviet agreement regarding the Soligorsk combine has been the most extensively publicized of the projects, but becauseproduction problems are similar throughout Eastern Europe, the reasons for Satellite interest in all three projects probably are very much the same. Under the agreement ofebruary, theillion rubles of Polish investment funds will ensure delivery to the USSRumber of sulfuric acid plants and mining equipment. In addition, according to Polish Deputy Premier Jaroszcwicz. these funds also will ensure delivery by the USSR of quantities of potassium fertilizers that

will be sufficient to cover two-thirds of Poland's anticipated requirement: for this material during the period up East Germany, currently the largest Bloc producer of potassium salts, will supply tbe remainder of Poland's import requirements, which are expected to be four times greater0 than at present.

Although this type of joint investment credit has boen widelyas one of the first steps toward increasing Bloc economicfollowing the CEMA conference of2 in Moscow, therevelation of such Satellite credits to tho USSR was unexpected. Soviet and Polish officials have been the strongest proponents of joint investment projects, but their earlier statements seemed to imply that such coordination and aid would be largely intra-Satcllite- Evidently the USSR, too. lias found the investment assistance programs to be of direct interest (at least partly because of domestic investmentnd its future participation in, such ventures may be greater than had been originally anticipated.

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