From Soviet sources, we can obtain only the following kind of general, nonquantitative, and incomplete information on the classes of ships that have been recently placed on order with various foreign shipyards:

The vessels cited above, we are informed, will be powered by Burmeister-Wain and Sultzek-Mann diesel engines with a capacity of 8,000-12,000 horsepower. They will have a speed of 16.5-18 knots. 1. Orders placed with Japan

35

Japan has moved out in front among the non-Communist countries as a major supplier of tonnage to the Soviet Union. Between 1957 and 1965, Japan exported to the Soviet Union a total of 43 vessels, aggregating 832,500 deadweight tons.36

Within the framework of the latest 5-year trade agreement between the two countries, the official ship-importing corporation of the U.S.S.R. (Sudoimport) delivered to the leading shipbuilders of Japan the required specifications for the ships to be built by 1970. The entire order is reported to consist of about 100 ships, of an aggregate worth of $500 million.

Among the ships to be built in Japan for the U.S.S.R. are: five multipurpose cargo ships in the 20,000-25,000 deadweight tons class; five bulk carriers in the 20,000 deadweight tons class; three car carriers. in the 15,900 deadweight tons class; 10 icebreaker cargo ships in the 9,000 deadweight tons class; 40 lumber carriers in the 3,000-5,000 deadweight tons class; five salvage tugs; 13 fish factory ships in the 10,000 deadweight tons class; two fishmeal factory ships in the 10,000 deadweight tons class; and nine refrigerated cargo ships. Other maritime facilities to be built will include a 17,000-ton floating dock.37

2. From East Germany

At present, the largest supplier of ships to the U.S.S.R. is East Germany. In 1965, it supplied 22 percent of all imports in this category. According to Soviet sources, furthermore, 90 percent of all ships exported by East Germany today are absorbed by the Soviet Union. By comparison, the proportion of East Germany's exports in the class of "machinery and vehicles" destined for the U.S.S.R. amounts to 50 percent. In general, the Soviet Union and East Germany are at present each other's principal trade partners: to the extent of 45 percent of total trade in the case of the latter, but only to a point of 20 percent of total foreign trade as far as the former is concerned. The dollar value of their exchange in 1965 amounted to some $1.3 billion each way.

35 Soviet Life, March 1966. p. 14.

36 Japan Shipping and Shipbuilding, March 1965.

27 Shipping and Trade News, Tokyo, June 20, 1966.

During the postwar period as a whole, between 1946 and 1965, East Germany supplied Russia with a total of 2,600 ships of a total capacity of 1.6 million gross registered tons.

In value terms, recent exports of ships from East Germany to the Soviet Union are reported as follows: 38

Under a recent bilateral trade agreement, signed by the two countries in April 1965, the U.S.S.R. will be supplied with 339 ships of all kinds, as well as ship equipment, during the period 1966-70. The main types of vessels to be delivered by East Germany will be dry-cargo ships of above-average capacity, fishing trawlers, and seagoing tugs. 3. From Poland

Poland is another major supplier of shipping tonnage to the U.S.S.R. Over the past 15-year period, Poland exported to the Soviet Union 388 ships of an aggregate deadweight of 231,500 tons. All three major Polish shipyards, Gdansk, Gdynia, and Szczeczin, are reported to be working on Soviet ship orders.

For the 5-year period immediately ahead, namely, 1966-70, Poland has undertaken to build 175 ships of a total deadweight of 1,472,900 tons for the Soviet account. Included in this order are the following: 43 dry-cargo ships, 15 tankers, 20 lumber carriers, seven ore carriers, nine hydrographic ships, 21 floating canneries, and 45 fish-processing

trawlers.

Of the above, the first contingent, consisting of 65 ships valued at $200 million, is scheduled to be delivered during 1966-68.39 It will include, among others, six tankers, each having a displacement weight. of 19,000 tons.

4. From Yugoslav yards

In Yugoslavia, as of the end of 1965, the U.S.S.R. had an order, 20 dry-cargo ships and 12 tankers, to be delivered during 1966-70. The freighters are in the category of 14,000 tons carrying capacity each.40 Actual imports of ships in 1965 from that country amounted to $58.8 million, which represented the value of five cargo ships and seven tankers delivered to the U.S.S.R. An additional order, scheduled for signature in March 1966, brought the total number of ships on order for Russia from Yugoslav yards to 78 ships, to be built in four shipyards, and valued at $250 million."1

5. From Finland

The U.S.S.R. also continues to acquire substantial amounts of new tonnage from Finland, which generally supplies smaller types of vessels. Between 1966 and 1968, for example, Finland will build for the Russian account 12 tankers, each one to be 4,000-4,500 deadweight tons, for a total value of $44 million. 2 The latest contract also calls

"Vneshniaia torgovlia, No. 10, 1966, p. 21.

"Vneshiaia torgovlia." Jan. 1966, p. 40. "The Financial Times." Jan. 28, 1966.

"American Consulate General," Zagreb, Nov. 4, 1965. Moscow. Tass, May 14, 1965.

for the delivery of nine cargo ships, with a capacity of 1,814 deadweight tons each. At the same time, an option agreement was signed for another 14 ships, scheduled for delivery in the period 1969–70. Powerplants for the ships will be manufactured in the U.S.S.R.

A later contract, signed in November 1965, called for the construc-. tion, by Finnish shipyards, of two polar icebreakers of the Moskva type.

C. THE SOVIET UNION AS A SHIP EXPORTER

Although it has appeared in the world market in recent years, primarily as an importer of shipping tonnage, the Soviet Union also exports a small proportion of the output of its shipbuilding industry. Most prominent among the varieties of ships now being exported are fishing vessels [mainly seiners], trawlers, and refrigerator ships. The Russians have found a market, in particular, for trawlers of the Mayak type and for large fishing trawlers of the Mayakovsky type. Along with these, ships exported by the Soviet Union at present include refrigerator vessels in the Tavria category, and tankers of the Baskunchak type. They have also found a market abroad for the wellknown Soviet hydrofoils such as the Raketa, Kometa, Meteor, and the pleasure yacht Volga.

The dollar value of exports of this category has not increased materially in recent years, as shown in the official foreign sales figures below:

There is, however, a rather strong expectation among Soviet shipping officials that their export situation will soon change for the better. In recent months, Soviet export agencies have succeeded in selling a number of dry-cargo vessels abroad. As a result, they are now quite confident that they have broken into the main arena of the ship market as exporters of tonnage and that the sales of Soviet ships will show a strong upward spurt between now and the end of the decade.

In December 1965, the owner of the Franco shipping company of Athens, Greece, traveled to Moscow to sign a contract for the purchase of $81 million worth of Soviet ships. This, in fact, was the second contract of its kind. In July of the same year, the two parties in question signed a contract for the export of $25 million worth of ships from Russia to Greece.

The two contracts call for the delivery of 9 "all purpose" drycargo vessels of 13,000 dwt. (presumably of the oltava series), 4 dry-cargo ships of 16,000 dwt. (presumably of the Leninsky Komsomol series), 3 refrigerator ships with a processing capacity of 1,500 tons each, 12 bulk carriers of 36,000 dwt. each, and 5 fishing trawlers of 2,500 dwt, each.43

Payment to the Soviet Union will be made partly (30 percent) in Greek farm products (tobacco, olive oil, oranges), while the rest will be paid in hard currency on the basis of a "long-term" credit."

43 American Embassy, Athens. Jan. 15, 1966.

44 "New York Times." Dec. 17, 1965.

The Soviet Union is now actively taking part in international trade exhibits, displaying and promoting the sale not only of ships but also of navigation, hydrographic, and lighthouse equipment. As a result of this promotional effort, the U.S.S.R. has reportedly sold a number of hydrofoil boats to several foreign countries, including West Germany.45

VI. THE ECONOMIC COST OF THE SOVIET DRIVE TO THE SEA

As a result of the heightened interest in maritime power on the part of the Soviet Government, sea transport has moved rapidly into the foreground during the past decade as a major area of economic activity in the country. The total tonnage of the merchant fleet tripled between 1955 and 1965 (from 3.0 to 9.6 million deadweight tons). Employment in the merchant marine passed the 300,000 mark by the end of 1965, as against 240,000 in 1955. In general, in their recent official declarations, Soviet leaders have committed themselves publicly to a line of policy calling for the "creation within a short span of time of a new and powerful merchant fleet, speedy in its movement and economical in its operation, marked by a high degree of mechanization and automation of all processes related to the ship's movement." 46

A. A HIGH-INVESTMENT INDUSTRY

In keeping with this public policy, the Government of the U.S.S.R. has been very generous to the sea transport sector. Since 1959, in particular, the investment status of the industry has been raised to a new and higher level. As officially reported, the annual outlay on capital expansion in the Soviet maritime industry averaged $402 million during the period 1959 to 1963.47 Viewed in a broader economic perspective, this figure assumes a special significance on several counts. For one thing, it is larger by as much as 90 percent than the capital outlay in this field authorized by Soviet authorities during the preceding 5-year period. For another, it represents some 13 percent of the total annual investment figure allocated during this period to all forms of transport in the country. Overall, as shown by the official Soviet record, capital investment in sea transport consumed roughly 1 percent of the total value of new investment made in the economy during the above period.

The pattern of distribution of this large investment fund in the U.S.S.R. also helps to shed some light on the priorities enforced within the maritime transport sector. According to the same Soviet source, expenditures on fleet expansion absorbed 71.7 percent of all new capital funds, or an average of $286 million a year during the period 1959 to 1963. For the most recent year of the period covered by these data, namely 1963, capital expansion of the fleet alone reached a figure of $423 million. To date, no more recent figures on this politically sensitive subject have been released by the Soviet Government.

B. A HIGH-WAGE INDUSTRY

As could be expected, the officially induced boom in Soviet merchant shipping, underway since the mid-1950's, has produced some important repercussions throughout the economy. In an economy in which

45 "Vneshniaia torgovlia." April 1966, p. 34.

Bakayev, Ekspluatatsia Morskogo Flota, op. cit., p. 14.

Koriakin, S. F. and I. L. Bernshtein, Ekonomika Morskogo Transporta. Moscow, 1964, pp. 327–328.

labor is officially considered to be the basic productive resource, the effect of this boom has been most notable in the sphere of wages. Today, the sea transport industry enjoys the status of being the highest-wage-paying industry in the country. The average monthly money wage in 1965 was 135.5 rubles 48 ($150), as compared with an average wage of 95.3 rubles ($106) for the economy as a whole. The two nearest high-wage sectors in the U.S.S.R. today are: manufacturing, with 103.0 rubles ($114); and construction, with 109.0 rubles ($121).49

There is still another way in which the improved economic status of the industry may be illustrated; namely, by the fact that the average wage of merchant sailors was raised by 33 percent during the 7-year plan period [1959-65], as against an increase of only 22 percent recorded for the economy as a whole during the same period.50

C. A HIGHLY COST-CONSCIOUS INDUSTRY

According to published accounts, the quality of management has also improved perceptibly in the merchant marine in recent years. The industry is reported to have increased its average annual net earnings of foreign exchange 5.1 times during the course of the most recent 5-year period. In keeping with established practice, however, the absolute figures underlying this claimed achievement were not revealed. The economic profits of the fleet have also increased at the same time. The "overall rate of profitability" of the industry was reported to have amounted to 27 percent during 1965.51

For one reason or another, the Soviet press is now authorized to compare the planning practices followed in the sea transport industry at present with those of the past. It emerges from these reports that the method of economic planning followed in the past, as far as seagoing freight operations are concerned, was of a rather primitive character. The principal index of successful performance, for instance, was "ton-miles," that is, the reported amount of tons of freight carried by a given vessel multiplied by the distance traveled. Accordingly, Soviet dispatchers [and captains] were eager to load their ships with the most heavy cargoes available-coal, ores, sand, cement-to be carried to the most remote destinations. By the same token, the lighter, higher revenue cargoes were left behind, to be transported on foreign ships and to be paid for in hard currency.52

Under the present system of management, in effect since September 1965, the Ministry has found it necessary to put an end to this kind of planning as shortsighted, to say the least. In its stead, the Ministry has introduced a new planning index; namely, the amount of net foreign exchange earnings realized by the given unit of operations. In general, the maritime industry, along with all other economic enterprises in the country, has been under official instruction from Moscow, since the fall of 1965, to base its operational decisions related to commercial cargoes on the standard criteria of economic calculation. using for that purpose the generally accepted indicators of profit. return on investment, and material incentives for the managerial staff as well as for ship personnel in general.

48 One ruble is officially valued by the Soviet Government at $1.11.

49 "SSSR v. tsifrakh." Moscow, 1966, p. 126.

50 Morskoi flot." Mar. 1966, p. 2.

51 Ibid.

52 Izvestia, Oct. 10, 1965.