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payments to West Germany for rail transport and port services in Hamburg, running at $80 million in 1971. Payments to other Western countries for transport services more than offset East German earnings from those countries; the net outlay may now run at $25 million a year. Interest payments on the East German debt may run at about $40 million. Finally, East Germany has made outlays in West Germany for espionage and for the maintenance of the West German Communist apparatus. These were estimated in 1959 at $12 million a year, and they have probably grown. Overall, the balance of payments with the industrial West has probably been nearly in balance, apart from the large retroactive payments made by West Germany.

On capital account with the U.S.S.R., the East German position has improved since 1959. Soviet claims against East Germany at that time are not known, apart from hard currency and commodity credits of nearly $300 million drawn in 1957-58. These were probably repaid by 1965, but credits of about $310 million drawn in 1961-62 have probably been refinanced, and credits of $200 million or more drawn in 1970 are also probably largely outstanding. Thus, there has been a net increase of perhaps $200 million in East German liabilities to the U.S.S.R. since 1959. Assets increased by more, however. The annual "contribution" to Soviet heavy industry since 1967, amounting to perhaps $150 million a year, will just begin to flow back in the form of oil and other materials in the mid-1970's, so the cumulative "contribution" (as of the end of 1972) might be about $900 million.

Capital accounts with West Germany indicate significant indebtedness in 1960, which increased little through 1965, but has risen sharply thereafter and amounted to more than $550 million (1972 exchange rate) at the end of 1972. Of this amount, about $180 million was on "swing" credit, the unpaid balance on the clearing account, which since 1968 has been allowed to run to as much as 25% of East German deliveries in the previous year. Of the remainder, almost $145 million represents medium- and long-term credit drawn to finance machinery purchases, and the remained is partly short-term and partly medium-term credit.

Hard-currency debts to other Western creditors rose from a very low level in the early 1960's to as much as $400 million (1970 exchange rates) on medium-term, a few million dollars on long-term, and an unknown amount on short-term at the end of 1971. Of the medium- and long-term indebtedness, perhaps $240 million was owed to NATO countries (mainly France and the United Kingdom), with most of the rest being owed to Switzerland and the Soviet banks in Western Europe.

A partial offset to East German debts is a stock of some $70 million in gold. East Germany bought roughly $100 million in 1967-68, but has since sold perhaps a third of it.

East Germany's cumulative surpluses of $175 million with North Vietnam through 1971 are presumed to have been financed with grants. Similar surpluses with Cuba and North Korea and with Western LDC's have probably been financed by credits repayable in kind.

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APPROVED FOR RELEASE: 2009/06/16: CIA-RDP01-00707R000200110021-0