The New Cold War
America, China, and the Echoes of History
Amid the various anniversaries of the last year, one seems to have passed unnoticed. It was just ten years ago that the Soviet Union embarked on its program of economic aid to neutralist countries. Beginning with a grain elevator and highway program in Kabul, Afghanistan, and the Bhilai Steel Mill in India, Soviet promises of aid mounted rapidly until they reached a peak of more than $1 billion in the year 1960. In terms of gross national product, this was as much as the United States was providing at the time. Subsequently, however, in late 1961, promises of Soviet aid diminished and remained insignificant until late 1963.
The ten-year mark is an appropriate point at which to evaluate the program of Soviet aid which in that period has totaled $3.5 billion. Heretofore, Soviet successes in foreign aid have usually been so breathtaking that they have not only overshadowed the much less dramatic American projects, they have also eclipsed Soviet shortcomings. The coming of age of the program reveals, however, that the Soviets have also had their failures. To their surprise, they have encountered almost all of the problems which have frustrated us, plus some that we have been spared.
The Russians have a knack for the spectacular. What success they have had in foreign aid has come from concentrating on certain key projects which are often industrial in nature. These major impact projects not only excite the imagination but often have productive and visible results. The workmanship and administrative efficiency that go into completing these showpieces are good, indeed often better than are found in the U.S.S.R. itself. The steel plant at Bhilai is one of the largest and most successful in all of the underdeveloped world. The decision to build it came after West Germany and Great Britain had also agreed to build steel mills for India. Resolved to win the competition, the Russians not only shamed the West Germans into offering a lower interest rate, but completed their plan much faster and built their mill more cheaply than either the English or Germans did. Although the German and British plants are technically more complex, most Indians agree that the Soviets have outperformed their competitors.
The success of the Soviets at Aswan is even more impressive. World opinion was dubious when they assumed the financial and physical burden of building this dam immediately after the Americans and the World Bank had refused to do so. On the upper Nile, 100-degree heat was regarded as the norm and the granite to be moved defied the finest drills in the world. Nevertheless, the Russians helped excavate more than ten million cubic yards of dirt and rock so that the first stage of the dam could be completed on schedule. Ultimately the dam will have a water storage capacity double that of the combined resources of the Grand Coulee Dam in Washington and the Kuibyshev Dam in the U.S.S.R.
When they do not undertake industrial construction, the Soviets like to erect showplace monuments in capital cities. Centers like the Polytechnical Institutes in Conakry, Guinea, and Rangoon, Burma, are conspicuous and more attractive than comparable institutes in the U.S.S.R. itself. The same can be said for the Soviet-built hospitals in Djakarta, Indonesia, and Phnom Pehn, Cambodia; the hotels in Conakry and Rangoon; the stadiums in Djakarta, Conakry, and Bamako, Mali. The beauty and impressiveness of many of these structures and the resulting political and psychological impact compensate for the fact that they do not make a direct economic contribution.
The Soviets also take pride in their training of native technicians. Some are sent to the Soviet Union and some are trained on the job. Immense patience is required; but the Russians normally feel that training is more important than speed. Nevertheless, they have trained their replacements at the Bhilai Steel Mill so quickly that there are fewer than 50 Russians left there, in contrast to more than 250 foreigners at the companion German plant. Even so, the German plant has more technical breakdowns and is far behind the Soviet plant in meeting performance targets.
When a project is singled out for priority handling, the full resources of the Soviet Union are often put at its disposal. Accordingly, after it was decided to help construct the Aswan Dam, 50 top specialists of the Research Department of the Hydroelectric Planning Administration were assigned to solve the necessary engineering problems. To complete the dam before the onset of the spring rains, extra equipment was rushed to the site. The Bhilai Steel Mill received similar attention from the steel specialists in the Soviet Union. In such cases, the specialists in the field often have authority to make decisions without referring to Moscow. If it is necessary to obtain a decision there, the answer is usually fast in coming.
The Russians also tend to be pragmatic about their aid policies. While they prefer to lend to the state, they will also lend to private firms, as they are doing in the case of watch, tractor and prefabricated housing loans in India. Furthermore, they provide gifts as well as loans. For example, Afghanistan has received over $500,000,000 in Soviet loans, but also $150,000,000 in gifts. Almost all Soviet aid to the Asian countries of Nepal, Burma and Cambodia has been in the form of grants.
However, it is in the field of public relations that the Russians are at their best. Their preference for impact projects and their sense of timing create exciting drama and win applause from the recipients, their own people and even their competitors. Because there is no need to seek time- consuming approval from any legislative body, the Soviet Union was able to announce its willingness to finance the Aswan Dam immediately after the Americans refused to do so. They reacted in the same way after the United States decided against financing the Bokaro Steel Mill in India. Similarly, no sooner did the French proclaim that they would no longer help Guinea than the first Russian promises of aid went off to Conakry; similar promises were made to Tunisia when the French bombed the naval base at Bizerte. In fact, the absence of a new Soviet aid agreement in the wake of an international crisis or realignment of power is a rarity. The 15-month delay between Algeria's assumption of independence in July 1962 and the issuance of a Soviet loan in September 1963 provided one of the first clues that the Soviet Union had cut back on its whole aid program.
To keep their projects constantly in the news, the Russians employ a variety of techniques. One of the most effective is their habit of sending top officials to make on-the-spot inspections. Khrushchev, Mikoyan and Brezhnev have visited most of the Soviet aid projects in Asia and Africa. They also make sure that Soviet factories and their employees who supply the components of various aid projects are properly praised for their contribution in much the same way that American firms are praised for their role in space or military achievements. These techniques serve to focus both domestic and world attention on Soviet aid projects and make them household words. In contrast, most Americans are unable to name a single American aid project and few seem to know about such spectacular American accomplishments as the Volta Dam in Ghana, the Sharavati Dam in India or the Gresik Cement Plant in Indonesia. Clearly the Russians have something to teach us here.
The major Soviet triumphs at Aswan and Bhilai, along with several other projects, have helped to create the general impression that the Soviets are more adept at handling foreign aid than we in the United States. A close look at American and Russian aid projects in Africa, however, reveals that just as we have had our successes which no one seems to have heard about, the Russians have had their failures which have gone unnoticed. Moreover, as more and more of their programs are completed, the shortcomings become more and more evident. The Russians are beginning to learn only too well that foreign aid can pose a variety of challenges.
Some of them are by no means unique to the Soviet Union. To begin with, economic aid to underdeveloped countries, whether from the U.S.S.R. or the U.S., is inherently difficult to render. Most developing countries do not as yet have the resources to implement complicated foreign aid schemes easily. They lack qualified manpower, supporting equipment and sufficient supplies. Since there are few if any qualified subcontractors, the donor must be prepared to undertake the most elementary production and construction tasks on its own. This makes it difficult to adhere to schedules and standards.
The tropical climate in most developing countries further complicates the process and jeopardizes even simple operations. Proper maintenance is a problem even in temperate zones, but in Africa and Asia it is a major challenge. Thus Russian-built roads wash away in the rains of Indonesia and Russian equipment rusts on the docks of Guinea, Ghana, India and Indonesia. Even when machinery has been installed, heat and humidity accelerate the normal process of deterioration and hamper repair work. In the 100-degree sun of Mali, a useless Soviet crane, its hoist separated from the cab, sits impotent at the portal of the Russian-financed stadium; apparently there are no suitable repair facilities nearby and it is too enervating to attempt to make repairs manually. Similarly, after only a week's work, two Soviet bulldozers lie disabled outside the Russian-financed coke oven in Helwan, Egypt. Nearby, one of the plant's two boilers, only two months old, is completely scorched; the other is still operating, but it too is partially burnt. Even the successful Soviet operations at Aswan and Bhilai have been affected. In the frantic drive to complete the first stage of the Aswan Dam before the onset of the spring rains, safety measures were discarded. It was necessary to remove large quantities of dynamited rock before it could be determined that all the charges had been properly detonated. As a result, more than 220 lives were lost. Even at Bhilai there have been blemishes on the impressive record. The 40,000 Indians mobilized to build the mill refused to accept the fact that only about 7,000 could be retained after the completion of construction. This led to a hunger strike and the slogan: "We built the plant-now you are throwing us out." The plant is still plagued by jurisdictional strikes among the unions.
Finally, the personality of the local leaders is often unsuited to cope with complicated programs of economic development and foreign aid. Most of the leaders in Asia and Africa have risen to power through political action and revolution and as a result tend to prefer the excitement of agitation and speechmaking to the tedium and frustration of investment and construction. The crowd roars when President Sukarno promises to "Crush Malaysia." Who can be so aroused about a fertilizer plant? Foreign aid projects are not usually glamorous, provision of money and manpower for them is not popular and the results may be slow in coming. Long-term investment may even be dangerous if an increase in taxes is required. As a result, the economic development side of the budget is sometimes neglected. Indonesia's failure to supply its share of development funds goes a long way in explaining why, after six years of frustration, Soviet aid to Indonesia has not resulted in the completion of a single industrial project.
The inherent difficulties of working in underdeveloped countries are made even more acute by the fact that the Russians are still relatively new to the business of foreign aid. Often they are too eager to please and find it hard to say no to countries that have been rejected as poor economic and political risks by the West. In such cases promises of Soviet aid are good for public relations, but they often involve the Soviet Union in uneconomic projects. For example, in their efforts to win the confidence of Guinea after the French withdrawal, Moscow virtually agreed to do whatever Guinea asked. As the Soviet Ambassador said, "Guinea was in such a state of economic and psychological shock, we felt we could not refuse her requests." Accordingly, the Soviet Union loaned Guinea $2,000,000 to build a sports stadium. Mali also asked for and is receiving a similar stadium. It was in Indonesia, however, that the Russians outdid themselves with an impressive $12,500,000 athletic complex for the Asian Games. While the stadiums are all attractive and make beautiful political and sports arenas, they do not do much for economic development nor do they generate the foreign funds or commodities which are needed to pay back the Russians. The same seems to hold true of the Russian-built hotels in Africa and Asia. The 120-room hotel in Guinea, for example, stood empty from April to October 1964 waiting for someone to run it. Burma resolved a similar problem with its Russian-built hotel in Rangoon by bringing in an Israeli firm as manager. Now, however, the Israelis have been expelled and the Burmese refuse to allow tourists in their country for more than 24 hours. Consequently the 219-room luxury hotel with its Otis elevators and Westinghouse air conditioners is three-quarters empty and unable to meet expenses.
There are numerous other instances where the Russians have been in too much of a hurry to give themselves time for proper studies. In their rush to complete the first hydroelectric power station in Nepal, they chose a dam site which is only 40 feet wide. As the river flow is subject to seasonable fluctuations, it can be used at full capacity only four months a year; the rest of the time it runs at one-third or two-thirds of capacity. Their inexperience was further demonstrated when they built a radio station on a hillside near Conakry, Guinea. The hill turned out to be rich in iron ore, and thus poor in radio transmission. They are now building a superphosphate plant at Tjilatjap, Indonesia. The plant is about one-fourth completed, but so far no one has been able to find any sulphur or phosphate for the plant to process.
The Russians often assume that what works at home will also work in other countries, which explains the relatively large size of some of the factories they have built. They are used to planning to meet a large potential demand for the goods produced. While this may be the proper policy in countries with large populations such as India, Egypt and Indonesia, it is not suitable for others like Guinea, Ethiopia and Nepal where the markets are much more limited. These countries are concerned lest the under-utilization of Soviet-built plants for which loans must be repaid may ultimately put a severe financial burden on them.
In their eagerness to succeed and please, the Russians have sometimes forgotten that it may be hard for some of the countries to repay their obligations. The first installment on several Soviet loans is now falling due. Guinea, Egypt and Indonesia are having financial troubles and have had to ask for refinancing or debt postponement. Frequently the repayment of aid loans is made even more complicated by the need to repay military loans which have also been extended by the Soviet Union.
The Soviet task is made even more difficult by the fact that neither the quality of Soviet equipment nor the logistical methods used are always the best. Thus the Egyptians say that the breakdown of the bulldozers and boilers at the coke plant in Helwan was not due to the climate or lack of maintenance, as the Soviets claimed, but to the poor quality of Soviet equipment. It was found necessary to supplement Soviet machinery at Aswan with Swedish drills, English trucks and American caterpillar tractors. Except at Bhilai, native engineers working on Soviet-financed projects invariably assert that they would prefer American equipment to that provided by the Soviet Union. In some cases this may be due to the higher efficiency of the American equipment; in other instances the Soviet machinery simply may not work.
To some extent the Soviet reputation suffers because the Soviet products are not made or adjusted for the requirements of the southern hemisphere. There are desert and tropical areas in the U.S.S.R., but most Soviet equipment is produced for temperate or arctic zone conditions. This explains why tractors were sent to Guinea and Mali with sealed cabs through which an exhaust pipe was passed to provide extra heat. (The Russians did not, however, send snowplows.) Furthermore, the Russians sometimes do not produce the equipment which many aid-receiving countries need, as, for instance, machinery for refining cane sugar or rolling normal size cigarettes. To fulfill their commitments in Nepal, they were forced to purchase cane sugar and cigarette equipment from Czechoslovakia. (They apparently profited from the experience of their East German colleagues who presented Indonesia with a beet sugar plant even though Indonesia has only cane sugar.)
Soviet quality is frequently made to appear much worse than it actually is because the goods are often damaged in transit. Packing and transportation within the Soviet Union are still surprisingly inefficient, and the bad results are compounded when goods are shipped long distances abroad. The Soviet merchant marine is handicapped by its need to keep Cuba afloat. Unlike American exporters, whose trade volume warrants the maintenance of regular routes, the Russians must ship at irregular intervals, depending on when the shipping is available. If their goods arrive before they are required, they must be stored on docks. Since most underdeveloped countries are short of warehouse space, the goods must stand in the open, exposed to tropical weather. In combination with the Soviet substandard packaging methods this explains why the docks of Russian-aided countries are frequently loaded with rusting equipment. It also accounts for the cement which has hardened not only on the piers of Burma, but also of Guinea, Ghana and the Sudan. Furthermore, because production schedules are not always planned efficiently, components are not always shipped in the proper sequence. The construction of the Tjilegan Steel Mill in Indonesia is a prime example of this. One of the first pieces of equipment to arrive at the Djakarta docks in late 1962 was the stand for the mill's heavy rollers. However, this part of the mill is not scheduled to be installed until everything else is in place. The completion date, originally planned for 1964, has now been postponed until 1966. In the meantime this 60-ton instrument continues to sit on the open dock.
Criticisms are also heard about Soviet administrative procedures. While the Soviet Union is generally faster than the United States in announcing a new loan, it is slower in implementing the project once the agreement has been signed. Priority projects continue to be expedited, but only a limited number of activities can be classified as such. In order to prevent chaos, it is necessary to establish standard operating procedures, and as the volume of aid increases this leads to bureaucracy-as inevitably in Moscow as in Washington. Accordingly, there are delays and complaints. The Egyptian engineers working with their Russian counterparts at the coke furnace in Helwan complained that not even small changes in design could be made without checking first with Moscow.
When it comes to endeavors of a type which the Russians have been unable to carry on successfully at home, their foreign aid is almost always unsuccessful. They have undertaken agricultural programs in India, Ghana and Indonesia, but so far with no hint of success. The Soviet-aided farms have been unprofitable and the Soviet agricultural equipment has on the whole proven to be inappropriate. Foreign aid is difficult enough when the giver is a master of the technology involved, but when the giver has not yet solved his own problems the results are likely to be unsatisfactory.
Like the United States, the Soviet Union has discovered that acceptance of its foreign aid does not necessarily assure acquiescence in its policies, friendship or even gratitude. This has been made painfully clear to the Russians in China and in the former satellite countries of Jugoslavia, Albania and Rumania. It is now happening in the neutralist countries as well. During the Cuban missile crisis, Guinea denied the Soviets permission to land Cuban-bound planes at the Soviet-aided airport in Conakry, nor did it hesitate to expel the Soviet Ambassador after he was caught interfering in its domestic affairs. Soviet economic aid has not helped to convert any country to Communism. Egypt and Algeria willingly accept hundreds of millions of dollars of Soviet aid while continuing to arrest their native Communists. In fact, the repression of local Communists may begin long after Soviet aid has started. After conducting a large and apparently successful aid program in Iraq, Soviet aid officials watched helplessly as the Iraqis reversed their political orientation and started to execute or jail Iraqi Communists.
The Russians have also found that aid to one country creates resentment in neighboring countries. The Somalis denounce Soviet aid to Ethiopia (and vice versa); Sudan is jealous of aid to the U.A.R., and aid to India arouses the hostility of Pakistan and Afghanistan. The Chinese were particularly displeased by such aid. Significantly, the tenth anniversary of Soviet aid to Afghanistan and India coincides with the Soviet refusal to grant any new loans to China. It was in late 1955 and early 1956 that the Chinese were first forced to export more to the Soviet Union than they imported. This was one of the earliest manifestations of the Sino-Soviet dispute.
Nor does foreign aid in any way guarantee the Soviet Union eternal gratitude. China may be an extreme case, but China is not just unappreciative or uncoöperative; it is openly hostile. Despite economic loans in the past of more than $1 billion, the Chinese are now doing everything they can to limit the power and destroy the reputation of the Soviet Union. Sometimes the economic rivalry is open, as when the Russians accused the Chinese of sabotaging their efforts to build the Penauti Dam in Nepal; they said that by stealing rocks from the existing roadbed in order to construct their own road nearby, the Chinese made it impossible for them to bring in the necessary supplies for the construction of the dam. The Chinese have also resorted to racist appeals to undermine Soviet efforts. In Yemen they reportedly boasted that Chinese aid was superior to Russian aid because "men of the East" understood one another and worked better together. Their most humiliating affront to Moscow, however, was in warning other underdeveloped countries of the dangers of taking Soviet aid. Hinting that their own experience was unhappy, they asserted that the Soviet Union used foreign aid in an effort to dominate the economies of the recipient countries and relegate them to an inferior position as suppliers of raw materials. They further accused the Russians of ignoring the sovereignty of developing countries and interfering in domestic affairs. The Chinese have now been joined in criticism by the Rumanians and North Koreans who also assert that the Russians have frustrated their efforts to build an independent economy. And the North Koreans claim that the Russians sold them exports at prices that were higher than those of the world market while it imported goods from Korea at prices that were lower.
While foreign aid has considerable support from Soviet citizens, periodic complaints are heard that the money could just as well be spent at home. The Russian's heart may swell with pride when he sees pictures of Soviet cars in the streets of Guinea, but he nevertheless resents the fact that he must wait for years before he can buy a car for himself. Similarly, the dock-workers of Odessa refused to load butter destined for Cuba when their own stores were empty.
After a decade of experience, what is to be the future course of Soviet aid? It seems clear from the virtual cessation of foreign aid commitments in late 1961 that the Soviets have been studying the question. Up to that date, at least, they obviously felt that the successes of the program far outweighed its failures. It provided the Soviet Union with a substantial leverage in international affairs and created favorable publicity throughout the world. It probably is not too much to say that it made neutralism possible. Until 1955 there was no place to turn to for economic help but the West. Soon, however, the Soviets discovered that neutralism seemed to be a dead-end street for them. Their aid helped make a country politically independent and in some cases economically stable, but nowhere did it lead to Communism. Furthermore, while the sociological and political impact of many Soviet projects was favorable, the economic value sometimes was not. There are already signs in Guinea and Mali that the economic shortcomings are even beginning to affect the propaganda successes.
Other considerations as well may have brought about the retrenchment in 1961. The Soviet satellites resented the aid being given to non-Communist countries. Every steel mill or oil refinery sent to a neutralist country meant that there was one less available for the Communist bloc. Albania and China were the most outspoken about this, but it is unlikely that they were the only ones to have felt this way. It was also late in 1961 that strains in the Soviet domestic economy first began to show. As the rate of growth in the industrial sectors slackened, and in agriculture even turned negative, it was clear that the Soviet Union could no longer afford to be so generous. The rather large and urgent demands imposed by Cuba intensified these troubles.
It was somewhat unexpected, therefore, when the Russians again started promising large sums for aid. Though it is unlikely that they will match the record level of 1960, they did commit themselves in late 1963 and early 1964 to $226,000,000 for Algeria, $280,000,000 for the U.A.R., several million for the Bokaro Steel Mill in India and smaller sums to Kenya, Pakistan, Cyprus, Tanganyika and Nepal. Two factors help explain this change, one having to do with the nature of foreign aid itself and one having to do with the international situation. First, the Russians seem caught up in what might be called the "quicksand" effect. Once they begin an aid program it is not easy to withdraw. Even though they have already promised the U.A.R. more than $500,000,000 worth of aid, they were apparently forced to extend another $280,000,000 because the Egyptians were unable to repay existing debts and were in dire need of additional funds. To do otherwise might have jeopardized the positive political effects of all Soviet aid in the past. Moreover, there is reliable evidence that this latest Soviet loan was granted over the strong objections of Soviet economic advisers. An equally if not more important factor in producing the Soviet decision was the determination to continue the advantage Moscow has had over Peking in being able to win favor with the help of economic aid. Just as countries in the past have successfully played the United States off against the Soviet Union, now they are playing the Soviet Union off against China.
The Russians may have been so busy re-assessing their successes and failures of the last decade that perhaps they have failed to notice the anniversary of their first aid program. Clearly they have learned much. They seem to be moving away from economically useless stadiums and hotels and wherever possible encouraging projects which have more economic rationality, including some that are financed on purely commercial terms. There may also be fewer large loans in the immediate future. One of the criticisms of Khrushchev was that he sometimes over-committed his country. None the less the new Soviet leaders cannot abandon their program and most likely would not if they could. But surely one of the most painful lessons for all the Russian officials must have been the discovery that mistakes in foreign aid are not an American monopoly.