Challenge in Giving

Since the fateful June day in 1947, when General George Marshall, U.S. Secretary of State, rekindled Europe's war-deadened spirits with his promise of massive infusions of U.S. financial help, economic aid has been one of the most effective instruments of U.S. foreign policy. But at Cairo's Afro-Asian Conference last week (see below), Soviet representatives were gleefully hammering away at a new theme: "The capitalists no longer have a monopoly of credit and machinery. The Socialist countries are really giving!"

By hindsight, experts date Russia's economic aid program from 1953. At that time, the argument goes, the Kremlin's bosses took due note of the U.S.'s vigorous response to the Korean invasion, concluded that further military adventures would be unprofitable. Last week, in the hope of averting further congressional cuts in U.S. aid, the State Department put out a statement showing that Russia and its satellites have now handed out to underdeveloped nations $1.9 billion in loans and credits.

The Russians' economic drive was slow getting started, was stronger at first on promises than performance. Compared to the more than $50 billion which the U.S. has dispensed in foreign aid since World War II, the Russian effort seems unimpressive. But today the Soviet bloc has aid agreements with eleven uncommitted nations, and its scientists and technicians are spread through eight more.

Unlike the U.S., the Iron Curtain countries almost never make outright grants of money; instead, they specialize in barter deals and in loans payable at a modest 2 1/2% to 3% over periods ranging up to 30 years. They have avoided demanding any overt political pledge, are ostensibly content to establish economic beachheads in country and government while demonstrating their respectability. The results, as observed by TIME correspondents around the world:

INDIA. Capitalizing on the desperate Indian drive to create a healthy, modern economy (TIME, Dec. 9), the Russians have set out to make India the showpiece of their Asian aid program. Out of the 1955 Bulganin-Khrushchev visit, India got one of Russia's rare outright gifts: $1,500,000 worth of agricultural equipment for a state-operated mechanized farm. More important, capital-starved India has also received $270 million in Soviet credits, nearly half of it earmarked for the Russian-designed Bhilai steel plant, which is being built under the supervision of Soviet technicians. Though it is only one of four foreign-financed steel mills currently under construction in India--the others are being built by Britain, West Germany and the U.S.'s Henry Kaiser--the Russian plant is by far the best publicized in India. U.S. aid, private and public, totals more than a billion dollars, but it has been spread over such wide and hard-to-dramatize areas as public health, education and agriculture, whereas any Indian can remember what the Russians have done: "They have given us a steel mill." So far, the caliber of Soviet aid has been relatively high. "The Russians are keeping their promises without fail," said one Indian expert. "Progress at Bhilai is ahead of schedule." But despite the U.S.S.R.'s best efforts, the Nehru government continues to resist proposals that would send too many Indians to Russia for technical training or allow Russian technicians to spread out over the Indian countryside.

CEYLON. Since April 1956, when Prime Minister S.W.R.D. Bandaranaike's left-trending government came to power, repeated threats of nationalization have dried up most sources of private capital, foreign and local. In partial compensation, Ceylon has got $20 million from the Soviet bloc, the great bulk of it a grant from Communist China, which is hungry for Ceylon's rubber. Recently a 16-man Soviet delegation came to Colombo to talk over a proposed Soviet credit to finance oil prospecting, expansion of Ceylon's sugar and textile industries and construction of hydroelectric projects. Prospects that the Soviet credit would go through, announced Ceylonese Transport Minister Maithripala Senanayake last week, were "favorable."

EGYPT. The $250 million barter deal that the Soviets negotiated with Nasser in September 1955 has cost Egypt dearly. What Egypt got was Czech arms--many of which were captured by the Israelis--plus such items as crude oil of such a high sulphur content that it damaged Egypt's refineries, and newsprint so coarse that it tore up Cairo's high-speed Western presses. In return. Nasser gave the Soviets a long-term mortgage on Egypt's cotton crop, the nation's No. 1 source of income. The Soviets started off by reselling Egypt's cotton on world markets at giveaway prices, thus undercutting Egypt's own sales. Then, in mid-1957. they abruptly stopped taking any cotton at all, leaving Egypt with one-third of her previous year's crop unsold. But Nasser, still unwilling to come to terms with the West, two months ago signed up for another $175 million in Soviet credits.

SYRIA. The Soviet aid agreement signed by the Syrians with such fanfare last October ostensibly commits the U.S.S.R. to supply in credits and technical aid about one-third the estimated $600 million cost of 19 specific development projects (among them: oil exploration, port expansion, construction of a dam across the Euphrates). But the agreement also specifies that a separate accord must be negotiated on each project before actual work is begun. The result is that Russia is not legally bound to spend a single ruble on Syrian development. And, in fact, the agreement has not yet netted Syria a single ruble. Economists consider many of the projects overambitious for the Syrian economy. But unlike the U.S., the Russians profess themselves willing to undertake whatever projects the Syrians want, regardless of their fundamental economic utility. Thus the Russians have achieved their real objective, which is not to make the Syrians prosperous but to keep them happy.

THE SUDAN. A Russian offer to trade arms and machinery for surplus cotton has so far met with no success. But last year an estimated 200 Sudanese went to the U.S.S.R. at Russian expense as students or visitors. Says a Western diplomat in Khartoum: "The Soviet appeal is that they pay attention to people who have never had any attention paid to them before. They offer free trips to Moscow to people who have never been ten miles out of Khartoum. I'd go too."

YUGOSLAVIA. Tito has signed agreements for about $450 million in nonmilitary aid --more than Russia has granted any other non-satellite nation. But in contrast with their usual practice, the Russians make little attempt to disguise the political strings attached to their offers to Yugoslavia, have pointedly frozen credits already agreed upon when displeased by Tito's diplomatic posture. (One consequence of this is that, despite the fact that the Russians first agreed to supply credits for it in August 1956, construction of a $175 million aluminum plant in Montenegro has now been postponed to 1960 at the earliest.) The Yugoslavs are also distressed by the poor quality of East German equipment purchased with Soviet credits, have left hundreds of East German cars and other machines sitting forlornly idle in a huge vacant lot in the center of Belgrade. The only solid benefit Yugoslavia has got out of Russian aid, declared one disillusioned Yugoslav economist last week, was a loan: $30 million in gold and hard currencies.

AFGHANISTAN. This small (pop. 12 million) but strategic country has accepted $145 million in Soviet credits, now ranks among the five top recipients of Russian aid. The bulk of the Soviet money has gone to finance arms purchases, hydroelectric projects, grain elevators, a flour mill and a bakery. The Russians' most conspicuously successful gesture in winning Afghan good will was paving the streets of Kabul--a project that had been turned down by the U.S. as economically unproductive. Despite signs that its rulers are worried at the prospect of sinking too deep into the Soviet embrace, nearly half of Afghanistan's foreign trade is now with Russia; when the time comes to begin paying off the Russian loans in Afghan products, the percentage will rise even higher.

INDONESIA. Strong opposition from anti-Communist leaders has so far prevented Indonesia's Parliament from formally accepting the $100 million loan offered by the U.S.S.R. in 1956. But Indonesia has accepted 4,500 Russian jeeps (purchased with a $6,000,000 credit), and near Djokjakarta 40 East German technicians, backed up by a $13 million East German credit, are rebuilding a war-damaged sugar mill. Neither deal has proved very popular. Style-conscious Indonesians find the rough-finish GAZ jeeps unimpressive, and the sugar-mill project is already two years behind schedule. "What those so-called technicians are doing I don't know," complains one annoyed Indonesian official. But, angered by U.S. hesitation to meet its request for arms, the Indonesian government is threatening to buy arms from Soviet satellites, last week sent military missions off to both Eastern and Western Europe.

BURMA. A five-year agreement to barter rice for Soviet-bloc cement, signed in July 1955, has proved disillusioning. The cement, for which Burma had only limited use, arrived during the monsoon and hardened on the docks. The Soviets turned around and sold the rice for cash in other Asian countries, thereby depriving Burma of potential export markets. Under another 1955 agreement, Russia is to "give" Burma $28 million worth of building materials and technical help toward construction of a hospital, a technological institute, a hotel, a sports arena and an exhibition hall. The agreement requires Burma, as a token of gratitude, to give Russia in return $28 million worth of rice, and so far the only progress made has been leveling of some of the building sites. But. says a Burmese official: "The Russians have been quite amiable in their personal relationships. The British, who built our engineering college and polytechnic institute, were very exacting in matters of personal comfort. They demanded select housing for each family, complete with new furniture. With the Soviets we put 20-odd families into five houses, and give them secondhand furniture. There have been no complaints."

CAMBODIA. Apart from promising Prince Norodom Sihanouk's neutralist wonderland a 500-bed hospital. Russia has left aid to Cambodia largely in the hands of Communist China, which has adopted its own version of U.S. counterpart aid schemes. Periodically Peking sends Cambodia free shipments of cotton textiles, galvanized iron, raw silk, cement and other Chinese products. These goods--last August shipments were valued at $5,000,000--are sold on the local market by the Cambodian government, and the proceeds are spent on dams, irrigation schemes and low-cost loans to farmers. The catch is that the caliber of the goods is so low--the cement takes twice as long as it should to harden--that even Cambodia's impoverished citizens shun them. Says one Cambodian government spokesman: "I have heard about gift horses, but this one is really an old nag." Last year's U.S. aid to Cambodia: $35 million --part of it for a modern highway and construction of a deep-water port on the Gulf of Thailand.

Despite its frequent blunders and bad faith, the Soviet bloc is undeniably getting more for its aid dollar than the U.S. The fact that the Soviets make loans rather than gifts is not resented as tightfisted, instead flatters the touchy pride of newly independent nations as businesslike dealing between equals. When they insist that the factories they build must be state property, Russian negotiators are often more in tune with the vaguely socialist ideology of most Afro-Asians than are U.S. aid administrators in their attempts to promote free enterprise. Needing raw materials and food that the underdeveloped countries produce, the Russians can profitably make barter deals that the U.S. has no use for. Their apparent aim is to achieve a reputation for disinterestedness, their hope that eventually the underdeveloped countries will look to them for leadership and help. The economic bridgeheads, once established, can be expanded into an economic dependence that can eventually bind a country as firmly into the Communist orbit as any political pledge.

So far, the Russians' failures have been due partly to the innate reluctance of the more sophisticated leaders to entrust their nations' future to the Communists, partly to the inability of Soviet industry to deliver the quality and quantity of goods promised. But the Soviet industrial machine is expanding. It will take the West's best united efforts to match its challenge.

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