300. Intelligence Assessment Prepared in the Central Intelligence Agency1

ER 78–10591

Arms Sales to the Third World, 1977

Key Judgments

Arms sales to the Third World2 reached an estimated $22.4 billion in 1977 as sizable orders by Iran and other Middle East clients reversed a two-year slump. In terms of constant US dollars (with Soviet sales being valued on a comparable basis), 1977 sales, although still 10 percent less than 1974 sales, were about 10 percent above the 1975–76 level.

Billion US $ Billion 1976 US $ Constant Prices
1974 21.3 25.6
1975 19.5 21.1
1976 19.5 20.9
1977 22.4 22.9
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On the buyers’ side, Iran and Saudi Arabia continued to dominate the market in 1977, purchasing about 45 percent of the arms sold to Third World countries. Algeria, Iraq, Ethiopia, India, and Argentina accounted for another 20 percent.

As for suppliers, the USSR, France, and West Germany substantially increased their Third World arms sales in 1977, in both absolute and percentage terms. The United States, while retaining its lead as the single largest supplier, saw its market share decline by 8 percentage points. US sales are characterized by proportionately larger support and associated services provided clients. In the support category, US sales in constant prices surpassed those of the USSR (the second-largest arms supplier) by 75 percent; in services, the ratio was 8 to 1. As for weapon systems, the spread between US and Soviet sales was narrower, with US sales only 12 percent higher.

Deliveries of military items to the Third World continued their rise of recent years, in both current prices and constant prices (with Soviet deliveries valued comparably):

Billion US $ Billion 1976 US $
1974 7.9 9.8
1975 8.9 10.3
1976 11.7 12.7
1977 13.8 14.1

Once again the USSR responded more quickly than other suppliers in following up sales with deliveries. At the end of 1977 the backlog of Soviet orders stood at about $5 billion, while the backlog of other suppliers had mounted to $45 billion, including $30 billion for the United States (fiscal year data). The five top Third World recipients of foreign arms in 1977 were Iran ($2.7 billion), Saudi Arabia ($2.0 billion), Israel ($1.1 billion), Iraq ($1.0 billion), and Libya ($0.8 billion).

Looking ahead for the next several years, we expect the Third World arms market to level off and drift downward: (a) the leading clients have huge backlogs of orders and, in some instances, find it hard to digest the existing flow of arms; and (b) a number of Third World countries face increasing financial problems—for example, in managing their debts and marketing their raw materials at good prices. We note that the USSR and West European suppliers are taking vigorous steps to maintain sales in what may well prove to be a stagnating market.

[Omitted here is the body of the assessment.]

  1. Source: Department of State, RG 59, Office of the Deputy Secretary: Records of Warren Christopher, 1977–1980, Lot 81D113, Withdrawn Items, Box 5, Chronological Files, Memoranda to the Secretary, 1977. Secret; Noforn.
  2. For the purpose of this report, the Third World refers to the following: (1) all countries of Africa except South Africa; (2) all countries of East Asia except Hong Kong and Japan, and Cambodia, Laos, and Vietnam, which became Communist in 1975; (3) Greece and Turkey in Europe; (4) all countries in the Middle East and South Asia; and (5) all countries in Latin America except Cuba. [Footnote is in the original.]