U.S.S.R. and grain


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U.S.S.R. and grain
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Gilmore, Richard
United States -- Congress. -- Senate. -- Committee on Foreign Relations. -- Subcommittee on Multinational Corporations
U.S. Govt. Print. Off. ( Washington )
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Table of Contents
    Front Cover
        Page i
        Page ii
    Table of Contents
        Page iii
        Page iv
        Page v
        Page vi
    Letter of transmittal
        Page vii
        Page viii
        Page ix
        Page x
    Trip report
        Page xi
        Page xii
    Summary of findings
        Page 1
        Page 2
        Page 3
    Soviet grain supply position
        Page 4
        Page 5
        Page 6
        Page 7
        Page 8
        Page 9
        Page 10
    Shipments and deliveries
        Page 11
        Page 12
        Page 13
    Shortfall countermeasures
        Page 14
        Page 15
    Commercial practices
        Page 16
        Page 17
    Grain agreement
        Page 18
        Page 19
        Page 20
        Page 21
        Page 22
    Glossary of U.S.S.R. government agencies
        Page 23
        Page 24
    Appendix I. Principal interviews
        Page 25
        Page 26
    Appendix II. List of economic information supplied by the Soviet Union under the agricultural agreement
        Page 27
        Page 28
    Appendix III. Letter form Robert J. Blackwell, Assistant Secretary for Maritime Affairs, Department of Commerce
        Page 29
        Page 30
    Appendix IV. Agreement between the Government of the United States of America and the Government of the Union of Soviet Socialist Republics on the supply of grain
        Page 31
        Page 32
        Page 33
        Page 34
    Back Cover
        Page 35
        Page 36
Full Text
I ~

94th Congress
2d Session










. "APRIL 1976

Printed for the use of the Committee on Foreign Relations





JOHN SPA RKMAN, Alalama, Chairman

GALE W. McGEE, Wyoming
GEORGE S. McGOVERN, South Dakota
JOSEPH R. BIDEN, JR., Delaware

HUGH SCOTT, Pennsylvania

PAT M. HOLT, Chiff of Staff
ARTHUR M. KUHL, Chief Clerk

FRANK CHURCH, Idaho, Chairman
JACK BLUM, Associate Counsel


Pa e
Foreword by Senator Frank Church--------------------------------- v
Letter of transmittal------------------------------------------ v-----VII
Note------------------------------------------------------------- ix
Trip report------------------------------------------------------- xi
Summary of findings----------------------------------------------- 1
Introduction------------------------------------------------------ 3
Soviet grain supply position---------------------------------------- 4
Shipments and deliveries------------------------------------------- 11
Shortfall countermeasures ----------------------------------------- 14
Commercial praictices---------------------------------------------- 16
Grain agreement-------------------------------------------------- 18
Conclusions------------------------------------------------------- 20
Glossary of U.S.S.R. Government agencies--------------------------- 23
Appendix I-Principal interviews ------------------------------- 25
Appendix II-List of economic information Supplied by the Soviet
Union under the agricultural agreement------------------------ 27
Appendix III-Letter from Robert J. Blackwell, Assistatnt Secretary
for Maritime Affairs, Department of Commerce ----------------- 29
Appendix IV-Agreement Between the Government of the United
States of America: and the Government of the Union of Soviet
Socialist Republics on the Supply of Grain--------------------- 31

Digitized by the Internet Archive
in 2013

http://archive.org/details/ussrgrains00u nit


The Soviet Union has emerged in the past four years as a principal
customer of U.S. grain. Because of this trend and the momentous
political as well as economic impact it has had on the United States,
Richard Gilmore of the staff of the Subcommittee on Multinational
Corporations visited the Soviet Union November 23-December 1,
1975, for purposes of studying Soviet policies and practices as they
relate to grain.
His findings raise numerous questions about the potential success
of the recently signed agreement between the U.S. and the USSR for
the supply of U.S. grain, and the ability of the U.S. Government to
acquire the information necessary to make this agreement enforceable.
These are issues of the utmost importance having extended economic
and political ramifications for the United States which the Subcom-
mittee will want to consider.
The views and conclusions in this report are those of the author
and are not necessarily those of the Subcommittee or any of its


APRIL 1, 1976.
Chairman, Subcommittee on Multinational Corporations of the Commit-
tee on Foreign Relations, U.S. Senate, IVashington, D.C.
DEAR MR. CHAIRIMAN: At the request of Senator Dick Clark (D-
Iowa) and yourself, I visited the Soviet Union between November 23
and December 1, 1975, on behalf of the Committee to discuss with
Soviet officials and academicians matters relating primarily to grain.
I also spoke with Soviet officials and knowledgeable observers about
other forms of trade between the U.S. and the Soviet Union.
The information transmitted in this report represents my personal
accounting of what I was told in interviews, as well as some impre -
sions I received in the course of general discussions.
Some findings in this report are at variance with what has been
publicly reported on the subject to date. I, therefore, suggest that the
enclosed material and impressions be ft-sessed in :.n overall context of
Soviet objectives in its political, economic and commercial relations
with the United States.


Since the writing of this report, the USSR Central Statistical
Administration has published figures on grain production for the
Soviet Union. For the calendar year 1975 official Soviet figures are
now 140 million metric tons. This amount is 22 million tons lower than
the lowest estimate I received during my visit and yet there has not
been any official upward revision in the expected level of Soviet grain
imports. While the extremely low crop production figure is important
in itself, equally noteworthy is the fact that the U.S. Government
did not indicate any advanced accurate knowledge about Soviet
production levels nor has it yet shown any certainty about expected
levels of imports, exports and storage for the Soviet Union.
Additional material has come to my attention on other issues raised
in this report, primarily regarding commercial practices. This infor-
mination was acquired after my visit to the Soviet Union and, therefore,
will be more fully developed in the course of the Subcommittee on
Multinational Corporations' investigation of the grain trade.



The purpose of this staff study tour in the Soviet Union was fourfold:
1. To provide Committee members with background informa-
tion on the Soviet Government's purchases and sales of U.S.
and non-U.S. grain, their present grain production and storage
position and plans for the future.
2. To assess Soviet capabilities in handling foreign grain enter-
ing their ports.
3. To determine Soviet Government views concerning the
political and economic significance of the U.S.-USSR Grain
Agreement signed on October 20, 1975.
4. To consider how the Agreement will affect future commercial
sales of U.S. grain to the Soviet Union.


Grain is a highly charged political and economic issue at the present
time in the Soviet Union. There is, consequently, no completely
consistent statistical reporting of what Soviet crop production for the
1975 harvest will be nor what actual receipt of imported grain from
the U.S. and other foreign suppliers has been up through the end of
November, 1975. There is extreme reluctance on the part of Soviet
officials to identify actual storage capacity or figure- for residual
stocks within the Soviet Union. Commercial dealings with private
grain companies are handled with the utmost secrecy and no official
freely volunteered any information about how the Soviet Government
intended to implement the Five Year Purchasing Agreement. All
Soviet officials and academicians I spoke with applauded the U.S.-
USSR grain agreement, each for different reasons, as beneficial to
their country.
The Soviets maintained that their country's shortfall for the year
August 1, 1975, to August 31, 1976, will be 25 million tons. That is
the amount of grain they have indicated they will import which they
also equate with the current shortfall. They insist that there will be
no additional purchases or deliveries of foreign grain during this 13-
month reporting period. One official ventured to give his personal
estimate of Soviet crop production for the 1975 harvest at 160-162
million tons.
All Soviet officials agree that there has been a shortfall between
planned production levels and the actual 1975 grain harvest. They do(10
not aire'( on the short term remedies.
One highly qualified official insisted that there had been lno unsuallv
high distre,- slaughtering of cattle or hogs as part of an official effort to
conserve supplies. Another official, however, hinted that shaughtering
of hogs and T)oultry had increased recently because of the feed Train
short age. Tlins official confirmed that feedgrairainationiniig andI the relo-
cation of herds away from drought areas has !, c;d1v taken place.
There is considerable disagreement among Soviet offcisala.mt the
capacity of the ports, railroads, and barnv'- to handlle lam,*_' quantities
of grain imported to the Soviet Union. Figures about the maximum un-
loading capacity vary in the rag-re of 3.2 million tons of ,rain l'ler month
in all Soviet ports. At least one official source descib-rJ congestion at
the ports and railcar short'i, -;.
I \vas told that the Soviet Union intends to maintain its ,'-- \I\ ex-
port-, and stocks at 1974-1975 levels. At that time exports were csi-
mated to be roughly S million tons. No figures on stock tioldings in the
last yea'vr were provided.
Soviet officials exp 'e--ed little williiivile--- to participate in any in-
ternational initiative at this time for the estabi),mentii of i.nter-
national ,Ir;(il 'c-erve systol,, or for a UN spoin 1,red e!!'ol t in fc.,d as-
sist alce an( d informinatiolln sh aring.


Regarding other trade issues, two main points emerged from my
conversations. Firstly, the Soviet Union is extremely interested in
developing forms of joint ventures with American multinational
corporations inside and outside the Soviet Union. The Soviets look
very favorably on most commercial transactions involving American
multinational corporations, whether in cooperation with the parent
company or its European or Japanese affiliate. Secondly, it appears
Soviet officials are mainly interested in maintaining an upward trend
in trade relations with the U.S. They attach considerable political im-
portance to an increase in trade, but they did not emphasize the neces-
sity of heavy U.S. Government credits for this trend to continue.


During the last week of November, officials and bureaucrats in the
Soviet Union had already begun to gear up for the 25th Party Con-
gress in February and the announcement of the new five-year plan.
Kremlinologists are busy at this time making their best guesses about
the lineup within the ranks of Soviet leadership. Who stays and who
goes depends to some extent on how convincingly those in positions
of power in the ministries and state committees are identified with
publicized successe- under their regime. The eventual requirement for
personal advancement is how convincingly an official conveys the
impression of great accomplishment. It is as important to maintain
what may actually be an illusion of success before the rest of the world
as it is within the Soviet Union.
Designing a new five-year plan is as much a look back as a projection
of better times to come. A positive cast must be put on any poor per-
formance to avoid being displaced. Bureaucrats jockey over bigger
budget allocations and personnel assignments. Those ministrie;, state
committees and agencies dealing with the Soviet economy doubtle-ly
understate their capacity to produce in an effort to protect themselves
against having to fulfill high growth targets determined through the
planning process.
In this kind of hedging operation of Party and bureaucratic games-
manship, the risks often are very high. Personal power and the growth
of the Soviet economy may be directly affected by the outcome. When
there is a bad crop year like the one which the Soviet Union is now
experiencing, the forces already described are likely to be at play. The
stakes are high.
In the period 1971-1975, the agricultural sector received approxi-
mately 25 percent of budget outlays. Secretary Brezhnev and his
predecessor, Khrushchev, have stressed extensive land reclamation,
farm mechanization and livestock building programs as essential
elements in the growth of the Soviet economy. With greater emphasis
on consumer satisfaction with respect to meat production, demand for
grains undoubtedly has increased rapidly. The leadership has chosen,
as a result, to link its commitment to improved living standards for
Soviet citizens with its ability to provide steadily increasing supplies
of grain.
While traditionally an importer of certain agricultural commodities,
the Soviet Union is also an exporter of grain, primarily to Eastern
European countries. These countries, under the leadership of the Soviet
Union, are members of the Council for Economic Mutual Assistance
(CEMA). They each have bilateral trade agreements with the Soviet
Union and have developed their economies until recently in ways
which made them economically dependent upon the U.S.S.R. For the
Soviet Union to keep control over its European satellites, it is essential
that lines of economic dependency are preserved. Grain exports to
these countries have historically been an important part of the

It would also seem logical that Soviet leadership must downplay
the significance of having had to import substantial quantities of
U.S. grain in 1972 and now again in 1975.1 Otherwise, heavy agricul-
tural imports become an admission of weakness in other countries
eyes. The Soviets are also sensitive to external pressures from develop-
ing countries, who have recently expressed their opposition to the
Soviet Union's becoming a preferred buyer of grain on the world
market, particularly in the United States.
There are, therefore, important political and economic reasons both
of an internal and external nature which help explain why Soviet
officials may want to misrepresent their own internal needs with
respect to grain consumption (depending on whom they are talking
to about these delicate matters). As a result, what I was told may be
important for its factual content, but, in all likelihood, the greater
significance lies in the selection and presentation of information given
to me, the sources of material, and the willingness of officials to discuss
these sensitive issues with me during this unpredictable period in
Soviet politics.
Prod action
There was considerable disagreement among Soviet officials about
USSR's anticipated production for 1975. One official in the Ministry
of Agriculture predicted that the Soviet Union would have a grain
harvest of roughly 195 million metric tons in 1975. Another in the
Ministry of Procurement indicated that his personal estimate of
Soviet grain production2 for the harvest in calendar year 1975 was
160-162 million metric tons. As late as July 15, the U.S. Department
of Agriculture estimated Soviet crop production at 195 million
metric tons, then by early August revised downward its estimate to
185 million metric tons. By October 24, The Department had officially
adjusted its forecast to 162 million metric tons and as of October 31,
USDA submitted yet another preliminary projection for 1975/1976
at 148 million metric tons.3
On December 4, the New York Times reported that on the basis of
reminarks made the previous day before a session of the Supreme
Soviet by Grigory I. Vaschenko, Chairman of the Budget and Plan-
ning Commission of the Council of the Union and member of the
Party's Central Committee, it could be calculated that Soviet pro-
duction would be as low as 137 million metric tons.
On December 8, a representative of a visiting Soviet delegation from
the Ministry of Procurement expressed great surprise over reports in
the Western press that Soviet production would be as low as 137
miillion metric tons. Instead he stuck with the 160-162 million metric
tons' etimnate provided by one high level official at Procurement,
already an admission of a greater shortfall than previously suggested.
The Ministry of Procurement reportedly can be counted on to give
the lowest crop production figures of all ministries because of its job
i 19,26,OfH) metric tons of wh-it.t corn, and barley in 1072 and at least 13.2 million metric toIns at the time
oftliis w ilt iing \ ith an n (,.-oil cpiliilg of 17 million metric t.ms for all of 1.9,5.
2 initf.r whitai, winter rye, winter barley, si, i ig wheat, barley, oats, pulses, millet, buckwheat, rice,
rye and corn.
3 USDA. F.r(.'giin Africulture Circular. FG 13-75. IUSDA rprts on the b.Iis of the crop year beginning
July 1. Thp latest estimate, therefore, would not inc.lud, supplies ,xitsfiii hitweoen January I and July 1
so Soviet figures would u hnderrtandally be higher, pai ticularly since the 1974 harvest was a relatively good
one at approxi matclv 196 million metric tons.

assignment. The Ministry of Procurement is responsible for the
purchase, storage, and utilization of all state grain resources within
the Soviet Union. If shortages occur in one of the sectors where grain
is allocated (food, industrial, and livestock feed), procurement would
more than likely be held accountable. Any overstatement of production
would raise expectations of greater disbursements for which the
Ministry of Procurement is responsible. For just the opposite reasons,
the Ministry of Agriculture usually is the source of the most optimistic
production forecasts. Despite their different objectives and hence, the
discrepancies in production figures, no ministerial representative
accepted the plausibility of anything lower than 160-162 million
metric tons.
The announced goal for 1975 was 215.7 million metric tons and to
fulfill the 1971-1975 five-year target, the Soviet Union would have
had to produce 208 million metric tons in 1975.4 There has not been
any official downward revision of these figures, although there have
been individual local officials, and now a member of the Party's
Central Committee who have spoken out on the subject to a Soviet
Using the current official figures, the shortfall or difference between
the annual plan target of 215.7 million metric tons and the low estimate
of 160-162 million metric tons would be 53.7-55.7 million metric tons.
Applying the more radical calculation would, of course, result in an
even greater shortfall of 78 million metric tons. The U.S. Department
of Agriculture has indicated that the "estimated grain utilization for
the 1974/1975 consumption year" (July 1, 1974-June 30, 1975) is 205
million metric tons and a crop of less than 205 million metric tons
poses "serious problems." I
Therefore, under any set of expectations, the 1975 shortfall is
considerable. Assuming that the Soviets do not intend to cutback
drastically on demand for grain, the only way to make up for shortages
in the current crop year is to import or draw-down on existing stocks.
Local crop production plus imports and existing stocks, therefore, are
the other essential parts of any discussion of the current grain supply
position in the Soviet Union.
No official was prepared to identify what actual residual stocks were
or what levels were planned for in 1975.6 At the Ministry of Agricul-
ture I was told that it was none of the United States' business to know
what the Soviet stock position was at any given point in time.
The USSR Government claims that it does not have that kind of
The U.S. Government interpretation of Article II of the 1973
U.S.-USSR Agricultural Agreement includes exchange of information
on stocks. The Soviets have not as yet provided this material.7 Judging
from the reaction I received when I raised this question, and compar-
ing it with what other government officials have been told, it would
4 USDA, Foreign Agricultural Circular, TFG 14-75, Nov. 5, 1975.
6 USDA, Foreign Afnricultural Circular, FG 14-75.
6 Rsidual stocks for purposes of this report mean stocks remaining after consumption and xil;irIls in a
given calendar year.
7 See Appendix 3, List of Economic jiwirwiiuuii Sppjlieid by the Sotitt Union under t/.e Agriculhtura



appear unlikely that the Soviets would be forthcoming in providing any
data on stocks in the near future.
Nonetheless, the United States has through its own resources been
able to make some intelligent guesses about Soviet stocks. The Central
Intelligence Agency has published an unclassified document on the
Soviet grain balance, 1970-73, which contains figures on changes in
stocks and losses in the USSR. The sum of residuals in "grain balances"
since 1970 is listed as:
Table 1 1
Y Million
Year: metric tons
1970---------------------------------------------------- 98. 0
1971--_--------- --------------------------------------------88.0
1972_-------------------------------------------------------- 90.6
1973---------------------------------------------- ----- -149.7
I Central Intelligence Agency. "The Soviet Grain Balance, 1970-73," A(ER) 75-68. September, 1975.

After consumption and exports, the annual amount remaining as
opposed to the cumulative figure cited in table 1 was estimated to be:
Table 22
Year: metric tons
1970------------------------------------------------------- 6. 120
1971------------------------------------------------------ 5. 202
1972_---------------- --------------------------------------- 5.416
1973------------------------------------------------------- 6. 711
2 CIA. "The Soviet Grain Balance."

Figures for the last two years are more difficult to obtain, although
there are USDA statistics on stock changes beginning in 1973/74
which would seem to indicate that Soviet stocks remained relatively
constant over the last five years.


metric Net
Year tons 2 Production trade Availability

1972-73.----------------...--.-.....---------------------- 0 168 +21 189
1973-74...----------------.-------.---------------+.. 13 222 +6 228
1974-75--------------.------------------------- -9 196 0 196
1979-76-----------------....... ---..--------.-----------. -4 160 +26 186

I USDA, Foreign Agriculture Service, statistics on "U.S.S.R., Total Grain Supply Distribution 1964-65-1975-76."
2 Minus indicates net exports and a drawdown in stocks.

These findings bear out the Ministry of Procurement's claims that
Soviet stocks remained at roughly the same level during the past four
years, and would not necessarily be reduced this year, thanks to
purchases of U.S. grain. The latest sales, one official said, could be
used for replenishing Soviet stocks.

Representatives from the Ministry of Agriculture were reluctant to
discuss anything related to storage capacity. At the Ministry of
Procurement, on the other hand, I learned that current storage
capacity within the Soviet Union was 100 million tons and that an
additional 30 million metric tons would be constructed during the
1976-80 five-year plan period. A large part of the expansion program
will apparently be for terminal elevators and the improvement of
loading/unloading facilities for grain at Soviet ports. Leningrad, for
example, has plans according to local city officials to build a new
A high official at the Ministry of Foreign Trade said the Soviet
Union had purchased 25 million metric tons of foreign grain to
cover the period August 1, 1975 through August 31, 1976. He
emphatically denied rumors that the USSR had already purchased
more or would be shopping around for more grain during this time
period. This official insisted that as far as he was concerned, the 25
million metric ton figure for foreign purcha (es was identical to the
USSR's grain shortfall during its 13-month statistical calendar year,
August 1-August 31. In other words, he thought that any grain deficit
his country would have to incur because of a poor harvest could be
made up with 25 million metric tons of imported grain.8
Thirteen of the 25 million imported metric ton total were purchased
from the U.S. according to an official spokesman at Exportkhleb, the
organization responsible for importing, selling domestically, and
exporting grain, and an official at the Ministry of Foreign Trade wsa
most emphatic in stating that the Soviet Union had no intention of
buying more grain from the United States within the August 1-
Augiust 31 marketing year.
While no official claimed to know how Soviet purchases were divided
by grain type, the Foreign Agriculture Service of USDA on Novem-
ber 11, 1975 estimated the following division.9
metric tons
Wheat--------------------------------------------------------- 4, 552
Corn-__--------------------------------------------------------- 8, 64:1
O0;ts------------------------------------------------------------ 70
Total----------------------------------------------------- 13, 265
Sources at the Ministry of Foreign Trade indicated that the remain-
ing 12 million metric tons were non-U.S. origin grain, a portion of
which was supplied from Rumania, Hungary, and Bulgaria. Almost
all of the non-U.S. origin portion, he maintained, was purchased
during the U.S. Government-declared moratorium on sales to the
Soviet Union, July 24-October 20, 1975.10
8 Usinii the 160-162 million metric Itons attributed to sources at Ihe Ministry of Pr. iii int. i lhe shortfall
is 53.7-).7 million metric tons, over twice Ilhe 1',75 shortfall claimed by the ,.iiI ii v of Foi.i, :i Trade.
S USDA, Fr,.ign Agiiiultural Service, C&F, FCA on November 11, 1975, esimates o( .,ict 'jriii
10 The USSR, for examipnieh. purchased over 1 'n2iiiiiini toinsof Br7iziliLii maize between .A ii il 1 and Novem-
hier 30,1975. Brazil is also said to have sold substantial u111al it h,. of .. 1,.ii,, to the UP KR in l 5.

Estimated Soviet grain purchases I
By grain: metric tons
Wheat---------------------------------------------------- 13,452
Corn----------------------------- ------ 10,243
Barley--.-------------------------------------------------- 2, 330
Oats--------------------------------------- -------------- 500
Total-------------------------------------------- 26, 525
By origin:
United States:
ANheat------------------------------------------------ 4, 552
Corn--------------------------------------------------- 8, 64:
Oats---------------------------------------------------- 70

Total------------------------------------------ 13,265
Wheat---------------------------------- ------------ 4,200
Barley------------------------------------------------- 2,000
Oats-----------------------------------------------------. 100
Corn---------------------------------------------------- 200
Total------------------------------------------------ 6,500
Wheat---------------------------- --------------------- 1,400
Corn--------------------------------------------------- 1,000
Total------------------------------------------------ 2, 400
Wheat------------------------------------------------- 1, 500
Barley-------------------------------------------------- 100
Oats-------------------- ------------------------------- 30
Total------------------------------------------------- 1,630
Brazil: Corn------------------------------------------------- 400
West Europe:
Wheat------------------------------------------------ 1,000
Barley (Spain)------------------------------------- ------ 130
Total---------------------------------------------- --1, 130
East Europe:
Wheat-------------------------------------------------- 800
Barley--------------------------------------------------- 100
Total------------------------------------------------- 900
Optional----------------------------------------- --- ----- 300
I USDA, FAS, C&F, FCA November 11, 1975 estimates.

Aside from the fact that U.S. Government figures are slightly
higher for Soviet purchases of U.S. grain to date than those provided
by the officials with whom I spoke, there are two major discrepancies
between publicly reported U.S. projections on overall Soviet import
requirements and the final level of their purchases in the U.S. and
what Soviet officials indicated to me. In briefings on the Grain Agree-
ment for members of Congress and staff, U.S. officials have indicated

that an understanding was reached with the Soviet Union whereby
it agreed not to purchase without consulting the U.S. Government
more than 17 million metric tons before the new agreement enters
into force on October 1, 1976. Informed American sources think that
the Soviets will need every bit of the 17 million ton ceiling, if not
more, whereas the Soviets insist they will not buy more than the 13
million they have already purchased. Secondly, USDA predicted on
October 24, that Soviet import needs from all foreign soure.- will be
over 30 million metric tons for the 15-month period, July, 1975-Sep-
tember, 1976.11 Officials at the Ministry of Foreign Trade were firm
about the 25 million metric ton figure; on the other hand, Viktor I
Pershin, Chairman of Exportkhleb, in translated remarks appearing
in the Western press, is reported to have said that the Soviets have
already purchased 30 million metric tons.
The estimates concerning the import requirements of the Soviet
Union in the period August 1, 1975 to September 31, 1976 are, thus,
significantly at variance. Any conclusions must be cautiously hedged
and may in any event prove worthless.
Figures for Soviet exports are equally imprecise. Shipments of
Soviet grain have in the past gone mostly to CEMA countries and
states like North Korea, North Vietnam, and Cuba averaging 6 million
metric tons per year. The Western press and other observers of
Soviet agriculture have speculated that Soviet exports this year will
be cut back drastically because of the shortfall in the Soviet Union.
USDA estimates that worldwide Soviet exports for 1975/1976 will not
exceed 1 million metric tons. Other U.S. Government officials have
suggested higher figures, but they all agree that the amount will be
sharply reduced from their estimates of last year's export levels,
ranging from 5 million to 8 million metric tons, for the period July 1,
1974-June 30, 1975.
In normal times the Soviet Union exports annually an average of
1 to 2 million metric tons to Poland of the total 6 million metric
tons average level of exports to Eastern Europe. Apparently, the
Soviet Union was forced to cancel its contracts with Poland this year
because of its own bad harvest, and thus, Poland was forced to buy
more on the open market than in past years. Poland was rumored to
have been negotiating for as much as 6 million metric tons of grain
from the U.S. before U.S. Government officials informally requested
on September 10, 1975 that the Polish Ambassador in Washington
impose a moratorium on further grain purchases from the United
States. If, indeed, Soviet grain deliveries to Poland were cancelled, in-
formed sources think that the pattern was repeated with other Eastern
European consumers like East Germany and Czechoslovakia.
Nothing I was told suggests that the USSR will reduce grain exports
anywhere other than Poland. Even with respect to Poland, officizils
were reluctant to admit that there would be any change. A high official
at the State Committee for Foreign Economic Relations (this ,(,,-
mniittee overs(ees all development aisi, stance projects, directs aid pro-
gramis, and Soviet foreign investment in socialist ant nomn-,ocialist
countries) stated categorically that the Soviet Union will fulfill all
11 USDA News, October 24, 1.-7.

its long-term food assistance programs. He was referring to the long-
term bilateral agreements the USSR has with the other CENMA
members, denying that there would be any disruption in the flow of
grain from the Soviet Union to these countries. He emphasized that
Soviet commodity assistance programs would be maintained irrespec-
tive of whether the USSR had a good or a bad crop this year.
At the Ministry of Foreign Affairs, Soviet officials indicated that
the USSR would maintain its obligation to its allies, despite the fact
that it was a bad year for them. They indicated that exact levels for
food assistance would have to be worked out by the State Committee
for Foreign Economic Relations and State Planning Committee
(GOSPLAN). Their response was more ambiguous than at other
government ministries and committees, particularly the State Com-
mittee for Foreign Economic Relations and the Miinistry of Foreign
Trade where officials indicated that the 25 million metric ton import
and shortage figure they provided included "supplies to normal
countries." In the context of our conversation, I inferred that they
meant the Soviet Union's level of imports this year would help satisfy
the maintenance of supplies to traditional aid recipient and other
importer countries 12 as well as maintain stocks within the USSR at
the level of last year.
Regarding Poland, Exportkhleb and Ministry of Foreign Trade
sources, indicated that no delivery contracts with Poland have been
cancelled. My question was whether or not the Soviet Union cancelled
any of its contracts with Poland. I did not use the term "delivery con-
tract" so it is entirely possible that they chose not to answer my ques-
tion by discussing another entirely different question. The USSR by
all reports had to cancel contracts with Poland, but they may not have
ever reached the point of concluding delivery contracts with the Poles
in which case there would be nothing for them to cancel as far as deliv-
eries are concerned. These officials went on to say that just because
the Soviet Union has a grain problem this year, it did not mean that
they would have to cancel any contracts with Poland. So as to avoid
any definitive response to this question, one official modified what lihe
said earlier by saying that if necessary, the USSR would find "some
other solution" for Poland. He may have had in mind newspaper re-
ports that the Soviet Union promised to help finance Polish grain pur-
chases on the open market as a means of fulfilling its contractual
This key official was, on the other hand, very clear about the purpose
of Polish purchases of U.S. grain. He said that Poland was not buying
U.S. grain in behalf of the Soviet Union in August and early Septem-
ber, before the moratorium on sales to the USSR was expanded to in-
clude Poland as well. As far as lie knew, then, their purchases were
strictly for Polish consumption.
The most noteworthy aspect of my div-eu,-ions concerning exports
was the impression Soviet officials conveyed of a determination to keep
exports at levels not drastically different from earlier years. They were
12 Thbe U.S. Em-lassy official who accompanied me to the Ministry of Foreign Trade Interview under-
tlu<'d the Sovitls to .ay they plan no gain exports during the 1975,i/76 crop year beyond commitments to
s...cialist bkc countlii s. It was. my iniprss (i, that the elertu e to "normal countries" included other
ecuntiries as well. (In either case, we would buthll agree 1liat Noril1 Korea and Cuba could be included in
this definition.)

indifferent as to whether or not these exports would have to come in
part from foreign sources.
With heavy imports ranging from at least 25-30 million metric tons,
depending upon who-e figures one uses, the next critical problem for
the Soviets is how to handle this large-scale influx of foreign supplie-s.
High officials at the Ministry of Merchant Marine indicated that
Soviet ports are equipped to unload roughly 3.2 million metric tons of
grain per month-an average of 100,000 tons daily, with the rate de-
clining in the winter months. The major receiving ports for U.S. grain
are Novorossiysk, Ode-sa and Illichevsk on the Black Sea and Lenin-
grad on the Baltic Sea. Leningrad officials indicated that in November
only 20,000 metric tons per day and slightly less for the Black Sa
ports were unloaded. If they are right, Soviet port capacity for re-
ceiving imported grain would be less than the 3.2 million metric ton.-
level cited at the Ministry of Merchant Marine. Any figures under 3.2
million would raise some doubts as to whether or not the USSR would
be able to import all the grain it has or plans to purchase abroad.
Ministry of Foreign Trade spokesmen said that the proven unload-
ing capacity of Soviet ports was a maximum of 2 million tons, while
Merchant Marine officials indicated that a monthly average of 2-2.2
million tons had already been programmed for November. In contrast
to these target figures, Foreign Trade officials said that about 4.5
million tons of American grain had been shipped since August 1, with
actual deliveries of grain from all sources running at an average of 1
million tons per month and 1.5 million for November. At a minimum
the Soviets must unload or take possession of all American grain they
have purchased by October 1, 1976, when the Grain Agreement enters
into force. This deadline suggests that there will be a build-up of
deliveries during the winter months. When asked whether this in-
crease has already strained Soviet ports, the same official at the
Ministry of Merchant Marine who claimed that Soviet ports had
an unloading capacity of 3.2 million tons, admitted that the 2.2
million tons programmed for November caused considerable con gestion
in the ports because many of the American ve.--;els booked in October
were arriving at the same time as previously scheduled shipment-.
He did say, however, that despite the temporary congestion, he en-
visaged no problem for Soviet ports to handle all grain shipments.
While the Ministry of Merchant Marine and Ministry of Foreign
Trade figures were not identical, officials from both ministries were
confident that Soviet ports could handle all the nec,-,-a ry shipments.
The U.S. Merchant Marine Admini level of shipments leaving the U.S. for delivery to the Soviet Union.
(These figures do not repres-_ent confirmation of delivery within the
Soviet Union, just shipments leaving the U.S. de-tine'd for the
U.S.S.R.) U.S. information on total shipments correspond to ,-i-
mates given to me by informed Soviet official-.


[Left the United States (thousand metric tons) 1975]

Septem- Novem- Decem-
Flag vessel July August her October ber ber Total

United States----------- 93,831 28,309 0 609, 462 592,373 96,539 1,420,514
Soviet ---------------- 42,268 79,414 106,241 251,795 214,613 17,768 712,099
3d flag-...-------------- 115,018 259,797 380,203 1,134,085 961,972 112,413 2,963,488
Total------------ 251,117 367,520 486,444 1,995,342 1,768,955 226,720 5,096,101

i Maritime Administration and Agricultuie vessel inspector reports.
Percent of
Thousand total
metric tons shipments

United States..----------------- ------------------------------ 1,845.0 22.6
Soviet---...........-------------------------------------------...---------------....... :,.. 1,909.9 21.5
3d flag---.---....-..-----...-------- -------------------------------- 4,388.2 55.9
Total------------------------------------------------------.................................................................... 18,143.1 -- --

I Projected total metric tons, last crop year and this one.
Source: Based upon actual vessel sailings.

The Ministry of Merchant Marine offered a number of explanations
for whatever congestion13 existed in the ports during the months of
October and November. Officials said that as a result of the morato-
rium on sales to the Soviet Union, American vessels scheduled for
deliveries to the USSR were backed up in the U.S. When shipments
finally did resume after the Merchant Marine rate agreement in last
September, the Soviets found themselves with 1 million tons scheduled
for arrival between mid-October and November (see table 6) over and
above the 2.2 million they expected. Secondly, one well-informed
Soviet official confessed that the USSR suffers from a "rail transpor-
tation problem" on a seasonal basis. It is the harvest season which
places the severest strain on the rail system, creating a shortage of rail
cars at the ports in October. He thought November would not, how-
ever, be as rough as October.
Without adequate storage capacity at the ports, the Soviets rely on
their rail system to distribute the grain into the interior of the country.
Some ports, particularly the large ones like Novorossiysk in the Black
Sea, are better equipped than others. In 1972, it had been reported that
the Soviets had to dump grain on the ground at port sites, leaving it
exposed and unprotected until it could be picked up for direct consump-
tion or redistributed to points in the interior. As a result, Soviets were
faced with a high loss ratio at the time, ranging between 5-10% of
total shipments. Today, the storage facilities at the ports are reputed
to be considerably better, but in my tour of the port of Leningrad,
there was no evidence of any grain storage facility. According to one
Leningrad officials, 25,000 of the 30,000 tons unloaded daily in the
month of November were picked up by rail cars and routed as far as
4,000 kilometers into the interior of the country. The other 5,000 tons
13 I ,lid not see any eongestinn in the porl of Leningrad which was the only port I was able to see. The
term was used interchiangiably with the "port problem" by the Soviet official.


went onto barge; which in summertime go up the Neva River but in
winter go to the mouth of the river where their loads are emptied into
rail cars. When I was in Leningrad, I was told there were 1,000 rail
cars per day loading grain from the ships. Unlike 1972, deliveries this
year have come on strong in the winter months when it is virtually
impossible to leave vast quantities of grain uncovered. The availa-
bility of rail cars during this season is, therefore, of the utmost impor-
tance in limiting damage and loss.
Most ports in the Soviet Union can only accommodate ships 250
metres in length and in the 35-40,000 ton range with the exception of
Odessa and Novorossiysk, both of which are deep water ports with
berths for vessels in the 55-60,000 ton range. (Leningrad supposedly
can handle ships up to 60,000 tons but it was not clear whether or not
this size vessel could move through the Morskoy Canal from the Gulf
of Finland fully loaded to berth or whether a vessel of that size would
have to be partially unloaded at sea before passing through the canal
to berth). As long as there are enough berths and the proper unload-
ing facilities, shallower ports need not be a deterrent in handling vast
quantities of imported grain. It does mean, however, that shippers
who have chartered the larger vessels must break shipments up into
smaller loads before delivery in the USSR.
Merchant Marine Ministry officials indicated that the Soviet Union
was considering negotiating for some storage space in Western Europe,
just as had been contemplated in 1972. While these officials did not
specify how much storage Soviets might rent or precisely where in
Western Europe (the logical points are Rotterdam, Amsterdam, and
Hamburg which are the main grain import and distribution centers for
the European continent), they said that the purpose of renting these
facilities would be to help route some of the imported grain through
Europe. The northern ports in Western Europe are ideally suited for
transporting grain to Eastern Europe or to smaller ports in the Soviet
Union like Riga or Tallinn on the South coast of the Gulf of Finland.
Renting storage in Western Europe could also facilitate breaking down
large shipments into smaller loads for reshipment to a major Baltic
port like Leningrad. There may be other explanations for Soviet rental
space in Western Europe to store grain coming from the United States
as well as other countries but they were not mentioned by any of the
Aside from the rail car shortage, and the inadequacy of some of the
port facilities, two additional explanations have been suggested for the
port congestion during the time of my visit. Some informed observers
think that there is a labor shortage at some of the ports which has
contributed to the back-up of ships. Nothing in my conversations
nor anything I saw could substantiate this claim. What was apparent,
and openly admitted by a number of Soviet officials, was that adverse
weather conditions are a permanent problem in the Soviet Union. I
had, for instance, planned to visit the port of Odessa on November 29,
but just prior to my departure Odessa had the worst storm it has
experienced in the past 100 years. The port was virtually at a stand-
still and the city was getting its electricity from generators on merchant
vessels offshore. Leningrad has to use icebreakers to keep the port
open from the middle of November to April and during this time, it is
very difficult to accommodate certain kinds of v-s.,1 traffic. This
yezr's weather has not been particularly favorable in the Soviet


Union, thereby further contributing to delays in the discharge of
Delays are an extremely important factor from the commercial
point of view because the longer a ship has to wait in port, the more
expensive it is for the charterer. The ship cannot be used for alternative
cargoes; the shipper cannot meet other deliveries nor can the ship be
chartered or subchartered to another party; or the charter time may
run out before the ship makes its delivery. To protect the shipper,
there are demurrage charges paid by the port authority if a ship's
delay is caused by the port. Rail car or labor shortage would be subject
to demurrage charges but climatic difficulties would not. I was told at
the Ministry of Merchant Marine that the Soviet Union will have to
pay substantial demnurrage charges this year. U.S. vessels are now
reporting a thirty to forty day waiting for berth period.14
Despite these difficulties, Merchant Marine officials were optimistic
that the situation would stabilize in December and January when
500,000 tons of U.S. grain are expected to arrive in U.S. bottoms. They
thought the Soviet Union would be able to unload all foreign shipments
contracted for during the 1975-76 period. U.S. officials at the Merchant
Marine Administration have corroborated these conclusions by saying
that they have seen nothing to suggest that the USSR would be unable
to handle all it bought, at least as far as U.S. grain purchases are
concerned, by October 1, 1976, when the new grain agreement is
scheduled to be put into effect.
U.S. observers have noted that the Soviets are not rushing their
shipments, despite the initial lag in August and September, which
may indicate that the Soviets do not intend to buy more grain in the
near future. At the rate they are now importing, it would seem that
they could import at least 25 million metric tons, particularly if they
rent any Western European storage facilities to handle some shipments
destined for the USSR.

Whether the shortfall is only 25 million metric tons or whether it
is of a much higher magnitude as reported in several papers here, the
Soviets I spoke with indicated that certain countermeasures had
already been undertaken and that others of a more long-term nature
were planned. The greatest difference of opinion among Soviet officials
and other expert observers of the Soviet economy lies in the stop-gap
It has been suggested that the Soviets are degrading their bread
by using lower quality wheat. An American student at Lenin Uni-
versity in Moscow told me that she had seen a new quote placed on
the walls of the Lenin Library cafeteria admonishing students and
faculty: "Conserve bread. It's our national treasure." Also apparently,
this is the first year that the University has begun to charge students
for the bread on the tables, heretofore available without charge. The
New York Times reported in a story on December 10, 1975, that
travelers in Central Russia found bread being rationed in some stores.
Just how illustrative these anecdotes are of a concerted government
14 Appendix III, Letter from Robert I. Blackwell, Assistant Secretary for Maritime Affairs, Department
of Commerce, January 1976.


campaign to reduce wheat consumption is impossible for me to
It is certain, however, that the Soviets are importing considerable
quantities of wheat. What no one seems able to determine is just what
the purposes are for these imports. A high official at the Ministry of
Agriculture stated that there would be 44 million metric tons of wheat
available in the current year for human consumption. It is not clear
whether he was speaking only about domestic production or included
imported grain in his determination of the amount of available supply.
USDA has concluded, however, that "the quality of the recently
purchased wheat indicated that most of it will be used for food while
poorer grades of Soviet wheat are shifted to animal food." 1' The U.S.
Government does not know, however, what portion of Soviet wheat
consumption for human purposes come, from local production and
what portion is -ati-fied by imports. The Soviet Union doe, publish
some general statistics on wheat production and consumption, but
again they do not tell us whether the USSR is dependent on imports
in any way for its own food or whether there were other reasons for
purchasing high grade wheat this year.
Wheat (million metric tons) 1974 1975
Total production-------------------------------------------------------------- 83.9 63.6
Seed use-------------.- -------------------------------------------------- 15 16
Food use------------------------------------------------------------------- 46-7 46
1 Figures for 1974 are derived from the "Soviet Statistical Abstract, 1974" and those for 1975 from the "December
Plenum Report".
It is widely reported in the American press that the Soviets have
had to resort to distress slaughtering of their livestock herd-.,, par-
ticularly hogs and poultry which are more dependent on feed grains
than cattle for their diet. A Ministry cf Agriculture spokesman denied
that there had been an unusually high slaughter rate for cattle or
hogs as part of an official effort to conserve supplies. An official of the
Ministry of Procurement, on the other hand, alluded to this possibility,
but he added that "it was government policy not to cut back on one
single head (cattle and hogs) if at all possible."
Other steps mentioned by the Ministry of Agriculture spokesman
were feed rationing for cattle, greater use of sunflower seeds for meal
and shifting herds from drought and poor harvest areas to the more
fertile, well supplied sectioni, of the country. An official at Gosplan
said that the current grain shortage severely affected the Soviet
Union's balance of payments and that it would have an impact on
the rest. of the USSR's foreign trade. He was not more specific than
that so no official has openly declared that the Soviet Union will cut
back on its imports, step up its search for foreign cred(lits or charge
more for its exports like oil to CEMIA comitriie'- to make up for the
current imbalance. The closest admission that tlis approach could
be expected was in the December 2 announcement by Deputy Prime
Mini-ter Nikolai K. Baibakov tlhat there would be a lower growth
target for the country in the next year.i"
1 USDA. '"U.S. Grain Sul,. to Ihie U.S.S.R.,"' October, I-'-i.
16 Iui l ,'.-'re tf J, 11 r t. a,. D ecem ber 3, 1',75.

Longer term measures appear less disputable on the surface. As
one Gosplan official put it, the USSR will just "have to make its
agriculture independent of climatic changes" by developing modern
agriculture techniques, storage facilities, and greater use of fertilizer.
Ministry of Agriculture spokesmen outlined a program of more invest-
ment in irrigation and the mechanization of agricultural production.
No one mentioned possible Soviet participation in any international
reserve system.
Dealings with Grain Exporting Companies
At the Ministry of Foreign Trade it was said that Soviet purchases
of foreign grain were made through contracts with the following com-
panies-Continental, Cook, Cargill, Louis Drefus, Toepfer, and Bunge.
While stressing that Exportkhleb is guided by normal commerical
considerations in deciding on what company it purchases grain from,
one high official said that they do try to divide contracts evenly among
the major exporting houses. The largest exporting firms are Continen-
tal, Cook, and Cargill, listed respectively by order of size in their sales
to the USSR. When asked why the Soviet Union has elected to deal
consistently with the same companies, this official offered a number of
reasons. Firstly, he said they were "the biggest" and "most reliable."
Secondly, their size and multinational character enable them to pro-
vide a host of connections with suppliers which the Soviets admit they
do not have. Thirdly, these companies have established "many years of
good relationships" with Soviet officials.
In 1972, the Soviets reportedly signed most of their contracts for
U.S. grain with the American parent companies who then purchased
directly on the U.S. market. Apparently, the companies were dissatis-
fied with this arrangement for numerous commercial reasons, and sub-
sequently wrote contracts for United States or optional origin grain
(optional origin permits the supplier with the consent of the customer
to supply grain from any origin in fulfillment of the contract) through
their subsidiaries in Western Europe. I referred to this practice and
asked officials at Exportkhleb and the Ministry of Foreign Trade why
the Soviet Union signed its contracts with the subsidiaries even when
U.S. grain was involved. The answer I received was that the companies
prefer this arrangement and as far as Exportkhleb is concerned, it
makes no difference whether they buy through the parent or the
The question of optional origin contracts is an important one be-
cause it permits the buyer and the seller to take maximum advantage
of market conditions to reduce costs and secure deliveries of grain
scheduled for shipment. There have been rumors that the companies
are extremely interested in using the optional origin clause which they
have with the Soviets to allow them to switch from non-U.S. grain they
purchased during the moratorium on sales to the Soviet Union to U.S.
origin grain in order to provide more rapid delivery at lower prices.
At i sue, apparently, is whether the U.S. Government would con-
sider the switchover to U.S. grain as a fulfillment of contracts written
before the moratorium or as new sales. One official denied that any
company has requested this option but as far as the Soviet Union is
concerned, spokesmen for Exportkhleb and the Ministry of Foreign

Trade maintained that any switchover would be considered completion
of an old contract, and therefore, not a new sale. At the moment the
U.S. reporting system would regard the switchovers as new sale-,
forcing either the companies or the USSR to change their inter-
pretation of the original contracts if they intend to respect the un-
written 17 million metric ton ceiling.
Little more was disclosed about contracting procedures, except the
noteworthy comment at the Ministry of Foreign Trade that the
Soviets sign contracts for their grain purchases with the "majors" at
fixed prices with no escape clause. The price is an f.o.b. (free on board)
quoted price which means that shipping costs are handled separately
and the quoted price is for grain ready to be loaded onto ships at
ports in the United States.
Finally, I was told that the same companies who are the major
sellers of grain to the USSR are also exporters of Soviet grain to other
parts of the world. One well-informed official explained that the
Soviets resort to using the companies to handle much of their exports
because of their "connections with end-consumers." He did not indi-
cate whether there was any relationship between the supply contracts
the companies handle for import to the USSR and the Soviet exports
to other countries. Another knowledgeable source on these questions
said he was certain that the companies handle Soviet exports to
CEMA and other socialist countries. Usually these government-to-
government contracts are set up on a barter, rather than on a con-
ventional cash and credit basis which leaves unanswered the question
as to whether these Soviet export contracts may not be considered
partial payment in kind to suppliers for grain delivered to the USSR.
According to key Soviet officials, Exportkhleb has not received any
credits from American companies or banks with or without U.S.
Government backing for the express purpose of purchasing grain. They
said that the Soviet Government will do "most" of the financing itself.
One American correspondent in Mos.cow sugge-sted that a recently
negotiated loan of $300 million assembled by a consortium of banks
in Western Europe under the leadership of First National City Bank
(Citicorp) was in all likelihood connected with Soviet payment for its
grain importss7
Sovrakht is the Soviet charter service under the Merchant Marine.
It is responsible for everything related to ship chartering. It has a
number of "corresponding agencies which serve as ship brokers for
Sovrakht in other countries. Glenas, the ship brokerage house in
France, for instance, acted as the chief agent for Sovrakht in charter-
ing the requisite number of ships to cover grain purchases made prior
to the July moratorium.
According to one official at the .MIiniitry of MIerchant M.Narine,
70-SO percent of the current USSR contracts for U.S. origin griiin
were signed on an f.o.b. basis, although even now the companies have
17 The (Chase Worl, I information Publication, F.%.t IV is .\Ir!:. t/ reported in its October -'0, V'.7-. issue that
Cilicorp International BuL k. Ltd. was s. i,,n-liii. a with SMciete (heiirale (Paris) a loan of ili million
at i.:., over the London rate (LIBORi) lu fli. U.S..4.R. "I'll. ]B.4:k of 1nternaional Sei tlements is referred'
to as the source for a prediction thal the Soviets might liii v w 1-2 billion on tile .u ''ri llII market per vNai.


several contracts written c. & f. (cost and freight) or c.i.f. (cost,
insurance, and freight), which means that shipping costs are covered
in the overall price of the contract. As explained by sources at the
Ministry of Merchant Marine, the shipping market is now depressed
because of the number of vessels presently not in use. Oil tankers,
for instance are often used to carry grain and before Sovrakht arranged
its charters, these tankers were idle, thus reducing their charter costs.
This market situation works in favor of the purchaser who is interested
in chartering vessels. These same officials said that under the present
circumstances the companies would not charter U.S. vessels because
they were so much more expensive at $16 per ton than the going world
market rate. Table 6 shows that the Soviets have chartered as of Janu-
ary 1, 1976, 55.1 percent of all shipments in third flag vessels, belong-
ing neither to U.S. companies nor the Soviet Union.
When asked what Sovrakht had done to protect itself about demur-
rage charges resulting from the delays in unloading grain at the ports,
these officials said that generally it was Soviet practice to self-insure.
Any savings from having their own insurance program were passed
on in the form of lower shipping rates and it was stressed that this
factor could explain why charges made that the Soviet Union is dump-
ing its vessels on the market by artificially slashing prices are
At the Ministry of Merchant Marine, we also spoke about Soviet
complaints against the quality of U.S. grain shipments. I was told
there were many complaints in this regard as well as charges of short-
weighing. In this case Exportkhleb as the official Soviet importer
discounts to its own customers (i.e. millers and farmers) for short-
weighing and quality. Exportkhleb, in turn, receives a discount off the
original contract price from the companies. In Leningrad, the port
authority certifies the weight and quality of the grain as it is loaded
into the rail cars. These certificates are transmitted along with other
shipping documents to Exportkhleb and Inflot, the government
agency service for foreign vessels. If the port certifies that there
were no shortages in the shipments, then Exportkhleb can be held
responsible for any loss of grain which may occur before or when
shipments arrive at their final destination. Some informed sources
think the loss rate (the disappearance of grain which remains un-
accounted for) in the Soviet Union is as high as 10% of all supplies.
One well informed official admitted that there were, at times, signifi-
cant losses but that in every case he knew of they were resolved by
Exportkhleb and its suppliers and customers.

All Soviet officials I ;poke with endorsed the U.S.-USSR Grain
Agreement of October 20, 1975,18 but their reasons differed slightly,
reflecting to some extent the views of the individual ministry they
were representing.
At the Mini.,try of Agriculture, one high ranking official said the
agreement provides the USSR with supply stability. Secondly, he
sees the latest agreement as a logical extension of the Agricultural
Is Appendix IV, Agreement between the Government of the U.S. and the Government of the U.S.S. R:
on the Supply of Graim.

Agreement of 1973, completing what the 1973 accord had left undone.
This official was referring to the issue of exchanging specific informa-
tion on agricultural commodities as set out in Article II of the 1973
agreement. U.S. Department of Agriculture officials and several
Congressmen have contended that the Soviets failed to comply with
the terms of Article II by not furnishing data on production and trade
of grains in particular.
.. the continuing lack of Soviet rce-)on '- to our requests for current ye3ar
dita: (especially forward estimates) on U.S.S.R. production, consumption, and
trade of grains and other agricultural commodities.
Since Soviet provision of forward estiimates was specifically written into the
Agricultural Agreement, the failure to provide such data hlias caused controversy
which detracts from successes with other parts of the Agreemenot. The U.S. has
explained that having such data would improve USDA forecasts on U.S.S.R.
trade in grains, oilseeds and oilseed products, and that this greater needed knowl-
edge would facilitate the necessary adjustments and thus be beneficial to both
The Soviet official countered by saying the Soviet Union has more
than complied in furnishing the requisite information (Refer to
Appendix III). Furthermore, the new bilateral agreement for minimum
sales and purchases should satisfy any former concerns the U.S.
Government had about it:; inability to gauge what Soviet demands
for grain would be in the upcoming year. I got the distinct impression
that the Ministry of Agriculture interprets the new agreement as
another expression of Soviet good faith in helping bring stability to
American grain prices but that the USSR could not be more forth-
coming in providing additional information along the lines suggested
by USDA. In other words, the official Soviet position is that the 1975
agreement would be an adequate sub-titute to whatever informational
needs American officials claim the USSR has not yet provided under
the terms of the 1973 agricultural accord.
Exportkhleb and Ministry of Foreign Trade officials commented
very briefly on the 1975 Grain Agreement in noting that it had
"practical value and would bring stability." At the Ministry of
Merchant Marine, officials emphasized the benefits of the Agreement
for shipping. It would provide an opportunity to plan long-term
actions on a regular basis, allowing the Soviet Union to schedule ship
charters, actual shipments and deliveries from the U.S. more efficiently
At the Ministry of Foreign Affairs, my questions were directed at
the Soviet Union position on participating in an international reserve
system, perhaps as an outgrowth of their entering into a bilateral
agreement with the U.S. on grain -ales and puirciaies.
The U.S. Government has consistently handled these two issues on
parallel tracks. When negotiations began for a bilateral grain agree-
ment, the White House was already preparing finishing touches on a
proposal to establish an international grain reserve sy-tem. The
proposal was a follow-up to the President's UN addre-s in the Fall of
1974, the Secretary of State's address before the 1974 World Foo(d Con-
ference in Rome, and an ad hoc meeting of grain trading countries at
the Wheat Council, February 10, 1975. The propo-il w:is finally
introduced formally at a preparatory meeting of the lnternzitioiml
Wheat Council in London, on September 29, 1975. At the same time
the Grain Agreement negotiations were moving into an intense plihase
10 USDA, Background Paper on U.S.-U.S.S.R. Ag'iulkhur -1 Cooperation Agi,.iiiciit.


as the U.S. extended its moratorium on sales to Poland. American
officials close to these negotiations admit that the U.S. team harbored
a hope of extracting from the Soviets a willingness to join the Wheat
Council talks on international reserves as part of a grain agreement
package. The Soviet Foreign Affairs officials said that as early as
November, 1974, their government was approached by U.S. officials
on this matter and that unofficial talks were resumed in Washington
via their embassy. They neither confirmed nor denied that there was
any linkage between the signing of the Grain Agreement and their
position on participating in the Wheat Council talks on a grain reserve
plan. All they did say was that it was their understanding that any
discussion of the U.S. proposal would continue in the bilateral context.
They indicated that for now their government did not intend to
participate in any such reserve system, nor in a UN sponsored effort
for food assistance and information sharing.
Regarding the U.S. effort to link Soviet oil deliveries to the U.S.
with the Grain Agreement, officials at the Ministry of Trade made
what could be interpreted as a passing reference to this question when
they said that the oil crisis was a threat or a destabilizing factor to
international security. They noted the disparity in the rate of inflation
with prices of manufactured goods from the West increasing dispro-
portionately to prices of raw materials which account for the largest
portion of the USSR's exports.
At the State Planning Committee (GOSPLAN), one official
displayed some sensitivity to the contention that the Soviet Union,
wound up being favored over the developing countries and charged
that there was an organized effort to discredit the Grain Agreement.
Soviet Embassy spokesmen in Washington offered still another view
of the benefits of the Grain Agreement for both the U.S. and the
USSR. The Soviet Union, he thought, gained access to a secure supply
of grain while avoiding American public opposition which his country
experienced in 1972; the U.S. gained by Soviet willingness to purchase
a fixed amount over a five-year period and by Soviet recognition of the
political pressures mounting in the U.S. for an agreement of this kind.
No one I spoke with regarded the Grain Agreement as a mainstay
of detente between the United States and the Soviet Union. More-
over, official Soviet reaction ranged from passive acceptance of the
agreement to active support on the grounds of its commercial benefits.
What is most striking is how little is known and how little the
Soviets are prepared to disclose about key questions that may affect
the successful implementation of the 1975 U.S.-USSR Grain
Agreement. From the limited information provided in this report a
number of important questions arise which American officials have
either chosen to ignore or are unable to answer.
Estimates for Soviet grain production in the 1975 harvest vary
widely. Neither U.S. analysts nor Soviet officials can agree on the
figures, even at this late date. While not as great, there is also a
significant discrepancy between the amount of grain American com-
panies and the U.S. Government report and Soviet officials maintain

they will purchase from foreign suppliers up through August 31, 1976.
The U.S. Government has an even more impresionistic idea of how
much grain the Soviets will actually import. No one can vet accurately
report how much below or above what the Soviets identify as their
total foreign purchases covering August 1, 1975-August 31, 1976, will
actually be delivered to the Soviet Union. The Soviets refuse to discuss
their stock position and U.S. estimates are, at best, complicated
guesswork. The Soviets claim that their stocks and exports will stay
at the same level as 1974 when the USSR experienced a bn.inpi)er crop.
These claims run directly counter to all American reports. The biggest
question mark of all regards Soviet commercial practices-how they
handle their grain purchases and sales.
Without a firm assessminent of Soviet crop production, "i:Trvover
stocks, and the level of imports and exports, the U.S. cannot (determine
the overall supply position for the USSR in the current marketing
Notwithstanding any unwritten agreement between the govern-
ments of the United States and the USSR about coni-ultations for
Soviet purchases of U.S. grain above a ceiling of 17 million metric tons
for corn and wheat, the U.S. Government still cannot specify how
much U.S. and foreign origin grain the USSR will actually purchase
and import before October 1, 1976, when the Grain Agreeime;t enters
into force. Furthermore, if American estimate- of the 1975 Soviet crop
failure are either on the low or high side, the Grain Agr,.-ninent may
serve to lock the U.S. into a supply position which is disadva.-ntageous
to its overall economic interests.
If Soviet claims about their stock(- and exports are cori, .t, then the
United States may find itself in the awkward position of havi:' signed
an agreement and accompanying understanding which as-ists the
Soviet Union in stock replenishment and its own export prc..':;iin. By
replenishing stock-, the United States could end up protecting Soviet
leadership from any public admissions of failure in their o,. n planinn
and production process. Freeing Soviet supplies for export ,' y means of
increased, relatively cheap imports of U.S. grain also may be a boon to
the USSR's political and economic standing. Through their own pri-
vate arrangements with the Soviet Government, Americau ()contipainie
may also help to service Soviet grain contracts with Easte;' :Europ,,,an
and other countries. In this way, the United States may I.-. bolstering
the Soviet Union's position with its allies by enabling i t t maintain its
position as a traditional supplier. Given the little we know ziwut the
Soviet supply position and Soviet motives for heavy grain pr'chasaes
tllis year, it is equally possible that the Soviets are puirct' 1-in 1igh
premium wheat from the United States because they fiad that ,t is
cheaper than growing it themselvy-. The Soviet Union's Pacific Coat4
is far from domestic grain producing regions so it may be more eco-
nomical for the Soviets to purchase sonte grain in foreign fi;: et' for
dome-tic food requirements as well as for export com1 it!2ents. Su1ch
normal commercial considerations may do more to explain t'e r1ecent
trend in Soviet foiei,.n purchli-.v than the flood of assess: .. -s :bo(t a
(lisatrious economic set-back for the USSR as a result ,,i Ite r:ri'ent
shortfall in production. If the Soviet r',.pons-, is largely h ,incircinl,
then the Grain Agreement may not be the l --t tool to tie t il USSR
to the U.S. grain market and stablize prices.


One explanation for any diversion of U.S. grain shipments, destined
for the USSR, to Western Europe may be the inability of Soviet
ports to accommodate the larger vessels above 40,000 tons. Another
reason may be the quantity of grain imports, making it more expensive
for the Soviets to pay for forced delays than to divert the shipments
on a temporary basis to Western Europe.
Still another plausible explanation can be suggested for Soviet
interest in storing their U.S. grain in Western European elevators.
This option offers at least two main advantages for the USSR. It
could enable them to buy in excess of any formal commitment to the
U.S. Government to limit their purchases of U.S. corn and wheat.
Secondly, it could facilitate re-exporting this grain to points outside
the Soviet Union in violation of the Grain Agreement.
The U.S. trading system is not foolproof, and it appears that the
Soviets are well aware of the loopholes. The U.S. Government cannot
accurately determine the level of U.S. grain purchases made by the
Soviet Union nor the ultimate destinriation of U.S. grain shipments.
This situation arises from the fact that the Soviet Union knows almost
as much about the commercial practices of the major U.S. exporters
as the U.S. Government does. If the Soviets are negotiating for storage
space in a private American company's subsidiary terminal in a
Western European port, it is extremely difficult for the U.S. Govern-
ment to track U.S. grain shipments with designated delivery to the
USSR. Once the grain is deposited in one of these elevators, it is
easily transshipped at a later date to other destinations.
In light of the fact that the Soviet Union is planning to build large
grain terminals at Soviet ports plus its interest in renting storage
space in Western ports, the Soviet Union may be directing more of
its attention to becoming a grain merchant. In this case the Grain
Agreement might make it easier for the Soviets to become resellers
on the world market in competition with the U.S.
Without hard data, there can be no firm and fast conclusions. The
alternatives I have outlined remain, therefore, only hypotheses. No
matter how the Soviet Union responds, it is likely to act in a way
that would maximize its own commercial interests. When it comes to
grain, I am left with the impression that the Soviets limit themselves
to a pursuit of these objectives and do not confuse them with other
trade issues which in their estimation reflect the more general political
and economic climate of relations between the USSR and the United
The U.S. Government, on the other hand, appears to have placed
a high priority on the political value of U.S. exports to the Soviet
Union. The question remains, however, whether the U.S. Government
has succeeded in achieving even these goals, quite apart from any
economic interest when it concluded the 1975 Grain Agreement with
the USSR.


CEMIA-Council for Economic MNlutual Assistance, the Socialist
Eastern European Country economic pact.
Exportkhleb-Organization under the Iini stry of Foreign Trade
responsible for the import and export of grains and
grain products.
GOSPLAN-State Planninr Committee.
IMEMO-Initiitute of World Economics and International Relations.
INFLOT-Service and enforcement agency for foreign ve-els under
the Ministry of the Maritime Fleet.
Sovrakht-Soviet charter service under the Ministry of the Maritime


Ministry of Foreign Trade
N. V. Zinov'yev, Chief, Administration for Trade with the Countries
of the Americas.
A. V. Mel'nikov, Administration for Trade with the Countries of
the Americas.
Ministry of Agriculture
Deputy Minister B. A. Runov.
Min istry of Foreign Affairs
Lev. N. Astaf'yev, Counselor, Department of International Eco-
nomic Organizations.
Valentin Shchetinin, Dean, Faculty of International Relations,
Institute of International Relations.
Igor P. Sevostyanov, 3rd Secretary, USA Division.
USA-Canada Institute
Ye. S. Shershnev, Deputy Director.
Igor Aremiev, Research Fellow.
State Committee for Foreign Economic Relations
Deputy Chairman Kul'yev.
Min istry of Foreign Trade
E. M. Kuz'kin, Deputy Chief, Main Administration for the Import
of Industrial Raw Materials.
I. F. Mikhailov, Vice President, Exportkhleb.
Agayev, Director of Grain Department, Exportkhleb (served as
MAlin istry of Procurement
Deputy Minister Yu. V. Shilkin.
M. M. Kuznetsov, Chief, Foreign Relations Department.
A. I. Luginin, Deputy Director, Main Administration for Feed
State Committee for Science and Technology
Dr. A. E. Aykazyan, Chief, USA Section.


V. V. Mordvinov, Chief of the Section for Economic Cooperation
with Foreign (Developed) Countries.
G. N. Bazhenov, Senior Expert.
Ministry of Merchant Marine
I. M. Averin, Chief, Foreign Relations Department.
IMEMO (Institute of World Economy & International Relations)
V. A. Martynov, Deputy Director.
V. A. Morozov.
A. V. Anikin, Chief, USA Section.
V. B. Yakubovksy.

Port of Leningrad
Oleg A. Terekhov, General Manager.




DEAR MR. GILIORE: In accordance with the agreement expressed
by Deputy Minister of Agriculture Boris Runov during his conversa-
tion with you, may I refer you to the attached list of economic infor-
mation regularly supplied by the Soviet Side under the Agricultural

List of information on agriculture, on industries processing agricultural raw materials, and on certain other questions
provided by the Soviet Side in response to requests by the American Side.

(1) (2) (3) (4)


Sown areas for agriculture crops in 1974 (preliminary data)-......
Sown areas of agricultural crops (final data) gross harvest and
yield of agricultural crops (preliminary data).
Gross harvest and yield of major agricultural crops (final data)-....--
Operational data on the harvest of grain and sunflower (size of
harvested area according to plan and actually).
Production of raw cotton, including data on fine fibered cotton---....-
Fertilizer by crops applied per 1 hectare of sown area------------
Sown area under certified and recommended varieties by Republics-

Yearly------- August.
Yearly------- February.

Yearly. . .
4 dates per year.
Yearly. . .

July of the fol-
lowing year.
During harvest.


Population of major livestock and poultry on collective and state
farms U.S.S.R.
Number of major livestock and poultry (preliminary data on the
census as of Jan. 1.
Number of livestock and poultry by sex and age groups (final
results of census of livestock and poultry as of Jan. 1).
Livestock and poultry meat production by type (live and slaughter
weight, milk, wool, eggs, skins and pelts, fur, down and feathers,
raw silk and honey on collective and state farms U.S.S.R. (final
Use of feed: by major feed categories, for all types of livestock and
poultry on collective and state farms.
Number of livestock slaughtered for meat----------------------


Grain sales to the Government in total and by crops in standard'
recalculated weight.

Monthly by the
1st of the

Before the 15th.


Yearly-------......... June.
Yearly-------......... August.

Yearly ------ July.
Yearly------- August.

Yearly------- November.

1-15.---------..... Production of the food industry..........------------------------ Yearly-...
1-16--------........... Production of the food industry current data-...---------------. Monthly.....

1-17 ---------........... Production of oilcake, oil meal and fish meal--------------- Yearly...--

Month after the
February, April.

Consumption of major products per capital: meat and lard, milk Yearly-------......... October.
and milk products, bread products.

I--1. . . .
-3 -............
1-5- ...


1-I1 ----------

1-13....--- ..



Note: Economic information (sec. I points 1-18) is usually presented for the period of the last 10 yr.



Washington, D.C., January 15, 1976.
Professional Staff Member, Foreign Relations Committee,
U.S. Senate, Washington, D.C.
DEAR M\R. GILMORE: Further to our discussions concerning the
U.S.-U.S.S.R. Maritime Agreement, I am enclosing a summary
indicating the participation of U.S., Soviet and third flag vessels in the
carriage of U.S. grain from the inception of the Agreement in 1972
through December 31, 1975.
Contrary to the substantial delays which occurred in U.S. ports in
1973, there have been no significant delays in U.S. ports in connection
with the recent grain sales to the Soviet Union. However, with respect
to delays in Soviet ports our data indicates that all ve--el, are still
encountering average delays of between 30 to 40 days. While reports
from Soviet maritime officials expressed belief that vessel delay.- would
be reduced by January, the most recent information received from
U.S. ship owners does not confirm this. The principal reasons for the
continued delays in discharging are poor seasonal weather conditions
and a lack of an adequate supply of rail cars, vacuvators and labor.
Also, the occasional need to fumigate cargoes has contributed to the
slow turnarounds.
If I can be of any further assistance to you please feel free to call
upon me at any time.
Assistant Secretary,
for Maritime Affairs.
[In thousand metric tonsl

Accounting period States Soviet 3d fla Total

July 1, 1972 to December 31, 1973----........---........------------ 3,502.1 3,236.1 12,843.7 19,581.9
Percent-----------------------------------......... (17.9) (16.5) (65.6) ....--..-.
January 1 to December 31, 1974---------------------..................... 1,474.7 713.8 904.4 3,091.9
Percent----------------------........------------- (47.7) (23.1) (29.1).-----------
January 1 to December 31, 19751.........---------------------.....-. 1,845.0 1,909.9 4,388.2 8,143.1
Percent------------..... -----------------------........ (22.6) (21.5) (55.9)...........---
Cumulative total grain-----------------------......................... 6, 821.8 5,859.8 18,135.3 30,816.9
Percent----------------------------------.................................. (22.1) (19.1) (58.8)..............




(October 20, 1975)
The Government of the United States of America ("USA") and the
Government of the Union of Soviet Socialist Republics ("USSR");
Recalling the "Basic Principles of Relations Between the United
States. of America and the Union of Soviet Socialist Republics" of
May 29, 1972;
Desiring to strengthen long-term cooperation between the two
countries on the basis of mutual benefit and equality;
Mindful of the importance which the production of food, par-
ticularly grain, has for the peoples of both countries;
Recognizing the need to stabilize trade in grain between the two
Affirming their conviction that cooperation in the field of trade
will contribute to overall improvement of relations between the two
Have agreed as follows:
Article I
The Government of the USA and the Government of the USSR
hereby enter into an Agreement for the purchase and sale of wheat
and corn for supply to the USSR. To this end, during the period that
this Agreement is in force, except as otherwise agreed by the Parties,
(i) the foreign trade organizations of the USSR shall purchase from
private commercial sources, for shipment in each twelve month
period beginning October 1, 1976, six million metric tons of wheat
and corn, in approximately equal proportions, grown in the USA;
and (ii) the Government of the USA shall employ its good offices to
facilitate and encourage such -ales by private commercial sources.
The foreign trade organizations of the USSR may increase this
quantity without consultations by up to two million metric tons in
any twelve month period, beginning October 1, 1976 unless- the Gov-
ernment of the USA determines. that the USA has a grain supply of
les, than 225 million metric tons as defined in Article V.
Purcli]e-t/sale. of wheat and corn under this Agreement will be
made at the market price prevailiw. for the.-, products at the time
of purchase/sale and in accordance with normal commercial terms.

Article II
During the term of this Akgreement, except as otherwise aIgroed
by the Parties, the Government of the USA shall not exercise any
discretionary authority available to it und(ler United Stultes law to
control exports of wheat and corn pur_-'a-rd for supply to the USSR
in accordance with Article I.


Article III
In carrying out their obligations under this Agreement, the foreign
trade organizations of the USSR shall endeavor to space their pur-
chases in the USA and shipments to the USSR as evenly as possible
over each 12-month period.
Article IV
The Government of the USSR shall assure that, except as the
Parties may otherwise agree, all wheat and corn grown in the USA
and purchased by foreign trade organizations of the USSR shall be
supplied for consumption in the USSR.
Article V
In any year this Agreement is in force when the total grain supply
in the USA, defined as the official United States Department of
Agriculture estimates of the carry-in stocks of grain plus the official
United States Department of Agriculture forward crop estimates for
the coming crop year, falls below 225 million metric tons of all grains,
the Government of the USA may reduce the quantity of wheat and
corn available for purchase by foreign trade organizations of the
USSR under Article I (i).
Article VI
Whenever the Government of the USSR wishes the foreign trade
organizations of the USSR to be able to purchase more wheat or corn
grown in the USA than the amounts specified in Article I, it shall
immediately notify the Government of the USA.
Whenever the Government of the USA wishes private commercial
sources to be able to sell more wheat or corn grown in the USA than
the amounts specified in Article I, it shall immediately notify the
Government of the USSR.
In both instances, the Parties will consult as soon as possible in
order to reach agreement on possible quantities of grain to be supplied
to the USSR prior to purchase/sale or conclusion of contracts for the
purchase/sale of grain in amounts above those specified in Article I.
Article VII
It is understood that the shipment of wheat and corn from the USA
to the USSR under this Agreement shall be in accord with the pro-
visions of the American-Soviet Agreement on Maritime Matters which
is in force during the period of shipments hereunder.

Article VIII
The Parties shall hold consultations concerning the implementation
of this Agreement and related matters at intervals of six months
beginning six months after the date of entry into force of this Agree-
ment, and at any other time at the request of either Party.


Article IX
This Agreement shall enter into force on execution and shall remain
in force until September 30, 1981 unless extended for a mutually
agreed period.
Done at Moscow, this day of October, 1975, in duplicate, in
the English and Russian languages, both texts being equally authentic.

For the Government of the
United States of America:

For the Government of the Union
of Soviet Socialist Republics:


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