Created: 2/6/1961

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6 February leeT






This report represent! the immediate views of the originating intelligence components of the Office of Research and Reports. Comments are solicited.

This document contains LrJormWUm affecting tna-Tfitfional defense o*

helaws, TitleSC., Uie_fcansmfe*cn or revelation ofny manner to an unjwtfTorlied personTs^prohlbited by law.


Recently reported Soviet financial maneuvers in the Free Worldontinuing effort to exploit the propaganda impact of the ruble revaluation while generally strengthening and enhancing the international standing of the ruble. Reports have been received to the Effectoviet Union is seeking to establish rublein certain Western countries and to obtain ruble quotations in certain Free World money markets. The significance of thesecould range froa the reflectionere propaganda move to the foreshadowingiberalization of Soviet foreign trade and financial policy leading eventually to the convertibility of the ruble. More likely, however, they reflect an attempt to enlarge the ruble trade area by exploiting current or prospective balance of payment difficulties in susceptible Western countries through impoainR ruble cloarings aa the price of expanding trade with the USSR.



Lnion recentlyransactionreek businessmanto accept "new hard" rubles in payment. 1/ Thedid not provide for reciprocal purchases of Sovietservices in payment for which the rubles could be used. Ratherthe eventual convertibility of the ruble. Thiswith related information received on Soviet financialIntoattern.

The Brazilian report originated with the leftist BrazilianUltima Hora which stated in0 that "delegations from Srazil and the Soviet Union will confer in Geneva or Moscow next) to study the possibility of placing rubles on sale in the Brazil currency exchange as well as the free exchange of the Soviet currency." This newspaper account ended with the claim that "in the future, any Industrialist or businessman can buy or sell the required amount or rubles directly from Soviet commercial/

The Brazilian Foreign Office declared that the Ultima Hora articlewithout substance, however, and that Brazil would not depart from the provisions of9 trade agreement with the USSR which speci-nes settlement in US dollars for any amounts in excesa of the swing credit. 3/

Such accounts would serve as clearing accounts for Soviec--apanesu trade. Whereas commercial contracts would continue to be negotiated ln terms of dollars or pound sterling, accounts would beera3 of rubles. Balances over and above an agreed limit could be convertible to Free World currencies or could be transferred to third countries within the ruble trade area, opening the door for limited multilateralism tn trade with the Soviet Bloc. 5/

At the present time the Soviet Union maintains ruble. ruble denominated clearing accounts in only one Westernnland. These accounts represent an exceptional case which grew out of Finnish dependence upon the USSR marketubstantial portion o- its export- availabilities ever: since reparations shipments induced

the orientation of Finnish industrial development to meet Soviet According to9 Russo-Flnniah trade agreementin rubles are kept in the Bank of Finland and ln GOSBANX. wing credit and stipulates payment in goldfreely convertible currencies for imbalances ln excessof exports and imports are fixed in rubles on the basis ofprlcos. 0 Russo-Finish trade agreement provided forclearing of Soviet debit balances through transfersaccounts. This system was largely discontinuedermany and Poland withdrew on the grounds that they neededmore than rubles in payment for their exports. ProvidedSoviotmultilateral settlement of debit

as well as credit balances, the Satellite countries might be more

What dictated the choice of Brazil,the

initial targets for the reported Soviet financial maneuvers can only bo assumed. In the Soviot view, each of these countries plays arole ln its part of the world. Accordingly, any step which it night take to alter the extent or the conditions of its trade with the Soviot Union would be likely to have repercussions beyond its borders. each of these countries is experiencing or shows some concern over possible balance of payments difficulties and, ln the Soviet view, might therefore be expected to welcome the opportunity to lessen the drain on their gold and convertible currency reserves by increasing trade with the Sovietat tho expense of ruble clearing. This Juxtaposition of circumstances may appear to Soviot officials tolimate propitious- for an attempt to expand the ruble trade area. Even if the Soviet overtures are rejected, an importantpoint will have been scored as ruble trading will haveerious alternative to trading In Free World currencies.


Much accounts in

less likely than the possibility of opening rubleree World countries appears the possibility that the Soviet Union will attempt tothe foreseeable future-extensive convertibility of the ruble. To place the significance oftep into its perspective it should be remembered that any move towards. towards allowing foreigners tosubstantial claims on Soviot output, wouldadicalfrom Soviet policy which has sought effectively to quarantine the USSR economy from the influences of Free World markets bycontrol over all foreign trade and financialrohibition over the export and Import of Soviet currency. All foreign trado and financial transactions of (he USSR are conducted either through bilateral clearing or through payment in foreign exchange or in gold.

By maintaing its strict control over all foreign trado andtransactions, the Soviet leaders have been able to gear exports and imports to tho requirements of the economy of thetoforeign policyforeign trade as aninstrument for promoting tho policy priorities of the Soviet Union at home and abroad.

The establishment of ruble accounts in Western countries the ownership of which would be permitted to change hands, is seen as weakening the government monopoly over foreign trade and foreign exchange resources, for the rubles held by non-Soviet interests would represent claims against the Soviet economy which must be paid for out of Sovietout of the Soviet gold hoard. Nevertheless, the volume of such claims could be controlled by means of restrictions on Soviet imports, and the demand for rubles could be controlled through restrictions on exports. At the sameowever, tho smaller the availability ofwhat appears to be thegreater the uncertainty regarding limitations on their use ln the purchase of Soviet goods and services, the greater the difficulty faced by the Soviet Union in attempting to market its rubles abroad.

To compensate for the uncertainties surrounding tho usefulness of thoin terms of convertibility or in terms orrights (as distinct from purchasing power) In thois likely that the Free World money markets would exact discounts, not an auspicious debut for the much heralded "heavy" ruble as an international currency. It is this dilemma, which, at least in the near future, appears to militate against any serious Soviet attempt to enter its rubles into competition with Free World currencies.

On the other hand, the Soviet Union may plan to expand the ruble trade area by pressing for the establishment of ruble denominated clearing accounts and for the inclusion of limited intra-blocclearing, provisions ln payments agreements negotiated with selected Free World countries. Tho amount of actual trade flowing through these clearings could be varied by Soviet authorities to meet prevailing circumstances. It would not have to be large, in any case, to reap propaganda advantages ln the ensuing struggle between the ruble and the dollar.

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