Economic stringencies are beginning to produce their first visible effects on
Communist Bloc expansionist policies. DIA
reports (Tab A) that
—an official of the 10th Directorate (Foreign Military Assistance) of the
Soviet General Staff last December has indicated that economic pressures
will compel a reduction in the number of Soviet military advisors and
instructors serving abroad.
—East Germany is said to be contemplating a 30 percent reduction of its
personnel in Ethiopia. (S)
All this suggests how significant the West’s economic and financial pressures
are in inhibiting Soviet aggressiveness in the Third World. (S)
Tab A
Memorandum From Nils Ohman of the Defense Intelligence
Agency Staff to Richard Pipes
of the National Security Council Staff2
Washington, April 13, 1982
SUBJECT
- Soviet Bloc Reassesses Foreign Aid and Trade
Recent reporting indicates that the USSR, East Germany, and Czechoslovakia are considering
measures that would restructure some aspects of their foreign aid to the
Third World, as well as trade with the industrial West. The policy
deliberations can be linked to these nations’ growing shortages of hard
currency—an outgrowth of Poland’s financial crisis—and to the declining
growth in their domestic economies.
Last December, an official of the 10th Directorate (Foreign Military
Assistance) of the General Staff of the Soviet Ministry of Defense
reported that the USSR’s military aid
programs were coming under pressure from the ailing Soviet economy and
from needs of the armed forces. Consequently, the overall number of
Soviet military advisers and instructors abroad might be reduced.
Since January, we have seen similar reports regarding a possible change
in East Germany’s aid and trade policies. In response to economic
problems, including a growing trade deficit, the East German Government
is considering a 30-percent reduction in its technical assistance
personnel in Ethiopia; a cutback in imports of Western components needed
for East Germany’s military research and development program; and a
redirection of trade from financially strapped Third World nations to
those capable of paying with hard currency, important energy sources, or
raw materials.
Czechoslovakia clearly considered a similar change in its foreign policy.
Last September, the Czechoslovak Party Presidium endorsed a decision to
reduce aid to Third World nations, a measure designed to alleviate the
nation’s financial problems.
DIA COMMENT: We believe these reports
accurately reflect the seriousness of the Soviet and East European hard
currency situation, [Page 535]
characterized by fewer available Western credits and a diminished
ability to generate hard currency earnings.
Poland’s financial crisis has exacerbated Eastern Europe’s hard currency
problems in two ways. First, the specter of a Polish default has made
the West less willing to extend credit to other East European countries.
Second, shortfalls in Polish deliveries of coal and other goods have
forced several East European nations to purchase additional supplies
from the West, thereby adding to their hard-currency indebtedness.
Overall economic malaise in the USSR
and Eastern Europe is another factor aggravating the region’s financial
problems. In the USSR, consecutive
crop failures and the need to import record amounts of food have severly
strained the Soviet hard currency position. In Eastern Europe, falling
productivity has limited the flow of saleable commodities to the West,
making Western imports required for industrial expansion difficult to
finance.
These financial difficulties are likely to persist. Thus, we expect the
USSR and Eastern Europe to
continue to reassess foreign aid with the Third World and trade with the
West in an effort to alleviate their faltering hard currency
positions.
Nils B. Ohman
Lt Colonel, USAF
Senior Intelligence Analyst
