SOVIET AND US DEFENSE ACTIVITIES 1970-79: A DOLLAR COST COMPARISON
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National
Foreign
Assessment
Center
Soviet and US Defense
Activities, 1970-79:
A Dollar Cost Comparison
SR 80-10005
January 1980
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National
Foreign
Assessment
Center
Soviet and US Defense
Activities, 1970-79:
A Dollar Cost Comparison
Information available as of 31 December 1979
was used in the preparation of this paper.
Comments and queries on this unclassified report
are welcome and may be directed to:
Director for Public Affairs
Central Intelligence Agency
Washington D.C., 20505
(703) 351-7676.
For information on obtaining additional copies, see
the inside of front cover.
SR 80-10005
January 1980
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Soviet and US Defense
Activities, 1970-79:
A Dollar Cost Comparison
The military establishments of the USSR and the
United States' are difficult to compare because they
differ so much in missions, structure, and characteris-
tics. Any common denominator used for comparative
sizing is imperfect, and its limitations must be under-
stood in interpreting such comparisons. The approach
taken here is to compare the defense activities of the
two countries using the familiar common denominator
of dollar cost.
This paper presents estimates of what it would cost to
produce and man in the United States a military force
of the same size and with the same weapons inventory
as that of the USSR and to operate that force as the
Soviets do. It then compares these estimates with
known US defense outlays. This approach provides a
general appreciation of the relative magnitudes of the
defense activities of the two countries. Dollar cost data
also provide a means of aggregating elements of each
country's military program into comparable categories
and thus can show trends and relationships between
the two defense establishments that are difficult to
discern and measure in other ways.
Definitions
The defense activities used in this comparison encom-
pass the following:
? National security programs that in the United States
would be funded by the Department of Defense.
? Defense-related nuclear programs such as those
funded in the United States by the Department of
Energy.
? The defense-related activities of the US Coast Guard
and the Soviet Border Guards.
? Military retirement pay, which reflects the cost of
past rather than current military activities.
? Space activities that in the United States would be
funded by the National Aeronautics and Space
Administration.
? Civil defense, foreign military sales, and military
assistance programs, except for the pay and
allowances of uniformed personnel engaged in such
programs.
? Veterans' programs.
? Soviet Internal Security Troops who perform police
functions and Soviet railroad and construction troops
who are not directly involved in national security
matters.
US Data
US data are derived from the US budget and The Five
Year Defense Program issued by the Department of
Defense in September 1979. The US data have been
converted to calendar year outlays, and defense-
related activities of the Department of Energy and the
Coast Guard have been added. All data are expressed
in constant prices to eliminate the effects of inflation.
The US figures in this report, therefore, do not match
actual defense budget authorizations or appropriations.
Estimates of Soviet Defense Activities
The dollar costs of Soviet defense activities are
developed on the basis of a detailed identification and
listing of Soviet forces and their supporting elements.
The components that make up these forces and their
support are multiplied by estimates of what they would
cost in the United States in dollars. The results are
then aggregated by military mission and by resource
category.
The following activities are not included in this
comparison:
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The reliability of the estimates depends on the
precision and accuracy of our estimates of the Soviet
activities and the cost factors applied to that data base.
In sum, we believe that our dollar cost estimate for
total defense activities is unlikely to be in error by more
than 10 percent in the current period or by more than
15 percent early in the decade. This judgment, while
aided by the use of statistical techniques, nonetheless
contains a large subjective element. Moreover, the
margin of error can be much wider for some of the
individual items and categories. We are more confi-
dent in the higher levels of aggregation than in the
lower ones, and within the lower levels our confidence
varies from category to category.
We place our highest confidence in the estimate of the
pay and allowances for uniformed personnel. These
costs represent about 35 percent of the total estimated
dollar cost of Soviet defense activities for the 1970-79
period. We obtain these manpower costs by applying
US factors for pay and allowances to our estimates of
Soviet military manpower. Soviet military personnel
performing duties similar to those of US counterparts
are assigned the same rates of pay as their
counterparts.
We also have substantial confidence in our estimate of
total military investment, which represents about 30
percent of the estimated total dollar cost. The invest-
ment category includes the procurement of weapons
and equipment and the construction of facilities. These
dollar costs are based primarily on detailed estimates
of Soviet weapons production rates and characteristics
which can be ascertained with confidence through
intelligence methods.
Although we have continued to make improvements in
our estimates of operation and maintenance (O&M)
costs, which are about 20 percent of the total dollar
estimate, we remain somewhat less confident in these
estimates than in those for investment.
The estimated dollar costs for Soviet research, develop-
ment, testing, and evaluation (RDT&E), which are
derived in the aggregate using a less certain method-
ology, should be regarded as significantly less reliable
than those for either investment or operating. The level
and trend of these estimates, however, are consistent
with the judgment, made with high confidence, that
the Soviet military RDT&E effort is large and
growing.
Dollar Costs and Military Capabilities
US defense expenditures and our estimates of the
dollar costs of Soviet defense activities are measures of
the annual flows of resources devoted to defense. Such
measures can be used to compare the overall magni-
tudes and trends of the defense activities of the two
countries in terms of resource inputs. They have an
important advantage over many of the other input
measures-such as the numbers and types of
weapons-in that they are a common denominator
which permits aggregative comparisons. Dollar cost
valuations, for example, take into account differences
in the technical characteristics of military hardware,
the number and mix of weapons procured, manpower
strengths, and the operating and training levels of the
forces.
But dollar valuations still measure input rather than
output and should not be used alone as a definitive
measure of the relative effectiveness of US and Soviet
forces. Assessments of capability must also take into
account strategic doctrine and battle scenarios; the
tactical proficiency, readiness, and morale of forces;
the numbers and effectiveness of weapons; logistic
factors; and a host of other considerations. As with
other input measures, dollar valuations are probably
more instructive as general indicators of changes in the
military capabilities of the two nations' forces over
time than as indicators of the comparative capabilities
of the forces.
Dollar Costs and Soviet Perceptions
Estimated dollar costs do not measure actual Soviet
defense expenditures or their burden on the Soviet
economy. These questions are addressed by different
analytical techniques that yield estimates of the ruble
costs of Soviet military programs.
Similarly, dollar cost analysis does not reflect the
Soviets' view of the distribution of their defense effort.
Neither the system of accounts nor the structuring of
expenditures by military mission is the same for the
Soviet Ministry of Defense and the US Department of
Defense. In addition, the sharp differences between
relative prices of various defense activities in the
United States and the USSR affect the distribution of
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defense expenditures significantly. How the Soviets
view their own defense effort is best inferred from
estimates made in terms of rubles, not dollars.
Price Base
The data presented here are expressed in constant
dollars so that trends in cost estimates will reflect real
changes in military forces and activities rather than
the effects of inflation. This paper uses prices that
represent the purchasing power of the dollar for
defense goods and services at midyear 1979.
Dollar Cost Comparisons
Aggregate Defense Costs
For the 1970-79 decade, the cumulative estimated
dollar costs of Soviet defense activities exceeded US
outlays by almost 30 percent. The trends of the defense
activities of the two countries, moreover, differed
markedly. Estimated in constant dollars, Soviet de-
fense activities increased at an average annual rate of
3 percent.' While growth rates fluctuated somewhat
from year to year-reflecting primarily the phasing of
major procurement programs for missiles, aircraft, and
ships-the pattern was one of continuous growth
throughout the decade. Evidence on weapon systems
currently in production and development, continuing
capital construction at major defense industries plants,
and the increasing costs of modern weapons indicate
that this long-term trend in Soviet defense activities
will continue into the 1980s at about the same rate of
growth.
In contrast, the trend in US outlays was downward for
most of the period. US outlays fell from the beginning
of the decade until 1976. Since then they have grown
somewhat, as increases in procurement, RDT&E, and
O&M offset continuing declines in military personnel
costs and in construction.
As a result of these diverging trends, the estimated
dollar costs of Soviet defense activities caught up with
US defense outlays in 1971 and exceeded them by a
widening margin through 1979. In 1979 the Soviet
total was about $165 billion, approximately 50 percent
higher than the US total of $108 billion.
' When valued in rubles, this growth rate is 4-5 percent, reflecting
the different pricing structure in the Soviet Union.
If uniformed personnel costs (which are based on US
pay rates) are excluded from both sides, the estimated
dollar costs of Soviet defense activities exceed US
outlays in 1979 by 40 percent and are 15 percent
greater for the entire decade. If RDT&E costs
(estimates for which are considerably less reliable than
those for other activities) are excluded from both sides,
the estimated Soviet dollar cost total exceeds the US
total in 1979 by about 45 percent and is 25 percent
greater for the decade.
The Index Number Problem
Evaluating the defense activities of both countries in
dollar terms introduces a basic measurement problem
common to all international economic comparisons and
known to economists as the index number problem.
Because of this problem, a comparison will yield
different results depending on which country's prices
are used. Given different resource endowments and
technologies, countries tend to use more of the
resources that are relatively cheap-and less of those
that are relatively expensive-for a given purpose. A
comparison drawn in terms of the prices of one country
thus tends to overstate the relative value of the
activities of the other. This tendency is more pro-
nounced the greater the disparity between the two
countries' resource endowments and technologies.
The degree of overstatement of Soviet defense activi-
ties relative to those of the United States inherent in
the dollar cost comparison cannot be measured pre-
cisely. We can obtain an appreciation of its magnitude,
however, by the reverse calculation-that is, by
computing the ratio of Soviet to US defense activities
measured in ruble cost terms, which overstates US
activities relative to Soviet. Whereas our dollar cost
comparison shows the total cost of Soviet defense
activities in 1979 to be approximately 50 percent
higher than the US total, a ruble cost comparison
shows it to be about 30 percent higher.
Economic Impact of Defense Activities
Although no single measure accurately describes the
economic impact or burden of defense activities,
defense spending as a share of GNP is often used for
this purpose. This measure uses each country's own
prices to reflect relative scarcities and efficiencies in
production. Measured in 1970 rubles and calculated at
factor cost, the Soviet defense activities as defined in
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Total US and Soviet Defense Activities
A comparison of US outlays with estimated dollar costs
of Soviet activities if duplicated in the United States
o Military Forces
RDT&E
US
USSR
75 76
Calendar years
The dollar cost estimates reflect the cost of producing and manning in the US a military force of the same size
and weapons inventory as the Soviet force and of operating that force as the Soviets do. The costs shown for
military forces are investment and operating costs excluding pensions; they are best estimates, with possible error
margins displayed. The costs shown for Soviet RDT&E are estimates derived in the aggregate, using a less certain
methodology; because they provide only rough measures, they are shown separately from the dollar costs of
military forces. The US defense costs are in terms of outlays based primarily on the Department of Defense Total
Obligational Authority (TOA) in The Five-Year Defense Program, September 1979. The estimated dollar costs of
projected Soviet defense activities for 1980 and 1981 are preliminary assessments and are subject to greater
uncertainty than those for earlier years. Comparable US data were not available.
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this report accounted for some 11 to 12 percent of
Soviet GNP throughout the decade of the seventies.
Defense activities in the United States accounted for
approximately 8 percent of US GNP in 1970 and 5
percent in 1979.
Resource Comparisons
Soviet and US defense activities can be compared in
terms of the major resource categories-military
investment, operating, and RDT&E costs:
? The investment category covers the dollar cost of the
procurement of equipment (including major spare
parts) and the construction of facilities. Investment
costs represent the flow of equipment and facilities
into the defense establishment. They are not an
indication of the size of the force in any given year.
? The operating category covers the costs associated
with maintaining current forces (including personnel
costs). They are directly related to the size of the
forces and to the level of their activity.
? The RDT&E category covers a variety of activities
including exploring new technologies, developing
advanced weapon systems, and improving existing
systems.
Military Investment. The trends in military investment
in both countries followed those for the respective
totals over the decade of the seventies. US investment
fell sharply from 1970 to 1976 but then grew by more
than 3 percent per year until the end of the period.
Soviet investment showed an upward trend but dis-
played cycles in annual growth rates that were related
to the phasing of major procurement programs-
especially those for missiles and aircraft. The esti-
mated dollar cost of Soviet investment programs rose
throughout the decade. This growth rate is expected to
continue in the early 1980s.
The estimated dollar cost of Soviet military investment
exceeded comparable US spending by 80 percent in
1979. (The difference was as large as 95 percent in
1976.) Over the decade, the estimated dollar costs
were 55 percent larger than comparable US outlays.
Operating Costs. Measured in dollar terms, operating
costs made up the largest share of the total defense
costs for both countries.' US outlays declined rapidly
from 1970 to 1973, reflecting the scaling down and
eventual termination of the Vietnam involvement.
Since then, growth in O&M costs has partially offset
the continuing decline in military personnel costs,
slowing the decrease of total operating costs. Esti-
mated Soviet dollar costs for operating, on the other
hand, grew continuously during the period-reflecting
growing force levels-and exceeded those of the
United States by a widening margin after 1971. By
1979 they were 35 percent higher than comparable US
outlays. Over the entire decade, they exceeded the US
total by 15 percent.
RDT & E. Estimates of the dollar costs of Soviet
RDT&E are derived in the aggregate using a less
certain methodology than the other estimates in this
assessment. Although we consider the estimates to be
less precise, it is clear there is a substantial Soviet
military RDT&E program. The available information
on particular RDT&E projects and published Soviet
statistics on science indicate that military RDT&E
expenditures were both large and growing during the
1970-79 period. This assessment is reinforced by
evidence on increases in the manpower and facilities
devoted to Soviet military RDT&E programs. US
outlays for RDT&E, on the other hand, declined
steadily over the early years of the period, before
turning up in 1977. As a result, the estimated dollar
cost of Soviet RDT&E activities over the decade was
approximately one and one-half times the US outlays.
Military Manpower
The Soviets historically have maintained a large
standing force that has a broader range of responsibil-
ities than does the US military. The uniformed
personnel strength of Soviet forces in 1979 was
estimated to be 4.3 million-about twice the US level.
The Soviet figure includes the five armed services of
the Ministry of Defense and the Soviet Border Guards,
2 This results from the use of US pay rates in estimating dollar
operating costs for the USSR. In ruble terms, investment (not
operating costs) constitutes the largest share of estimated total
Soviet defense costs.
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US and Soviet Defense Activities
Dollar cost of Soviet activities
and US defense outlays
Total (with RDT&E)
Billion 1979 dollars
200
USSR oop? oc
150
US
100
50
Dollar cost of Soviet activities
as a percent of US defense outlays
Percent
200
1970 71 72 73 74 75 76 77 78 79 80 81 1970 71 72 73 74 75 76 77 78 79
Projected
Investment
Billion 1979 dollars
60
USSR
45
30
US
15
1970 71 72 73 74 75 76 77 78 79 80 81 1970 71 72 73 74 75 76 77 78 79
Projected
Operating
Billion 1979 dollars
100
USSR o 0 0 0 00
75
US
50
25
1970 71 72 73 74 75 76 77 78 79 80 81
Projected
Us
USSR
Percent
200
USSR
US
Investment includes all costs for the procurement of military hardware and the construction of facilities; but
excludes RDT&E. Operating includes all personnel-related costs (with the exception of pensions) and all costs
associated with the operation and maintenance of weapon systems and facilities.
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US and Estimated Soviet
Active Military Manpower
Strategic Forces. This mission includes all forces
assigned to intercontinental attack, strategic defense,
and strategic control and surveillance, plus the Soviet
peripheral attack forces, but excludes RDT&E. The
level of Soviet activity for strategic forces (excluding
the Soviet peripheral attack forces, for which the
United States has no counterpart), measured in
dollars, was two and two-thirds times that of the
United States over the 1970-79 period and nearly three
times the US level in 1979. If Soviet peripheral attack
forces are included, the estimated dollar costs of the
Soviet forces were three times the comparable US
outlays over the period.
us
The USSR line excludes Internal Security Troops and construction troops-
well over half a million men-who do not fill what in the US would be con-
sidered national security roles.
which are subordinate to the Committee for State
Security but have some military responsibility. Well
over a half million men in the internal security forces of
the Ministry of Internal Affairs and in railroad and
construction troop units are not included in the
comparison, because they do not fill what in the United
States would be considered national security roles.
Military manpower trends paralleled those for total
costs in the two defense establishments. Estimated
Soviet military manpower grew by more than 400,000
men between 1970 and 1979. The largest increase-
200,000 men-occurred in the Ground Forces. In
contrast, the level of US military manpower has fallen
every year since the peak of the Vietnam buildup-
from 3.1 million men in 1970 to 2.1 million in 1979.
Military Mission Comparisons
Comparisons of Soviet and US activities can also be
made by US accounting definitions, which are used to
array defense authorizations by the missions they are
designed to support. The missions in this section follow
the guidelines in the Defense Planning and Program-
ming Categories (DPPC) issued by the Department of
Defense in November 1979.
Within the strategic forces mission, intercontinental
attack forces accounted for about 35 percent of the
total dollar cost estimate of Soviet strategic forces for
the period. US outlays for intercontinental attack
forces accounted for 65 percent of US strategic force
outlays for the period.
Estimated dollar costs of Soviet intercontinental attack
activities dipped in the early 1970s with the completion
of third-generation ICBM deployment programs, then
rose sharply in the mid-1970s with the deployment of
fourth-generation systems. As the Soviets complete
deployment of their fourth-generation ICBMs, the
estimated dollar cost of intercontinental attack will dip
again before rising sharply in the mid- 1980s, when the
Soviets are expected to deploy the new ICBM systems
now in development.
Our cost estimates for intercontinental attack forces
reflect a substantial difference in the mix of weapons in
the Soviet and US forces. During the period, ICBM
forces accounted for more than half of the estimated
dollar cost of Soviet intercontinental attack forces,
compared with only about one-fifth for the United
States. On the other hand, bomber forces represented
about one-third for the United States but less than 5
percent of the Soviet total.' In every year of the decade,
the dollar costs of Soviet programs for ICBMs and
ballistic missile submarines exceeded those of the
United States, but the dollar costs of Soviet bombers
were lower than comparable US outlays.
' Backfire aircraft assigned to Long Range Aviation are included in
peripheral attack forces, and those assigned to the Navy are included
in general purpose forces.
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US and Soviet Major Missions
Dollar cost of Soviet activities Dollar cost of Soviet activities
and US defense outlays as a percent of US defense outlays
Strategic Forces Note: Scales vary
Billion 1979 dollars Percent
40 400
30
=O??c
USSR
20
10
us
1970 71 72 73 74 75 76 77 78 79 80 81 1970 71 72 73 74 75 76 77 78 79
Projected
General Purpose Forces
Billion 1979 dollars
80
pp 0~
60
USSR
40
US
20
Percent
200
1970 71 72 73 74 75 76 77 78 79 80 81 1970 71 72 73 74 75 76 77 78 79
Projected
Support Forces
Billion 1979 dollars
80
60
US O -c
USSR
40
20
Percent
200
US
!REMM
USSR
1970 71 72 73 74 75 76 77 78 79 80 81 1970 71 72 73 74 75 76 77 78 79
Projected
us
USSR
USSR
These comparisons use US Defense Planning and Programming Categories of November 1979, with minor
adjustments made to attain comparability. Costs for pensions and RDT&E of both sides are excluded.
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US and Soviet Forces for Intercontinental Attack
A comparison of US outlays with estimated dollar costs
of Soviet activities if duplicated in the United States
US USSR
Billion 1979 dollars Billion 1979 dollars
15 1
The intercontinental attack mission is defined according to the US Defense Planning and Programming Categories
of November 1979, with minor adjustments made to attain comparability. Costs for pensions, nuclear materials for
warheads, and RDT&E of both sides are excluded. The peripheral attack forces of the USSR are also excluded.
75 76 77 78 79
72 73 74 75 76 77 78 79 80 81
Projected
Peripheral attack forces accounted for about 15 percent
of the total dollar cost of the Soviet strategic mission.
(Peripheral attack forces include medium- and
intermediate-range ballistic missiles, medium bomb-
ers, and some older ballistic missile submarines. These
forces are assigned strategic targets on the periphery of
the Soviet Union.)
Estimated costs of Soviet forces for strategic defense
accounted for roughly half of the dollar costs of the
Soviet strategic mission during the decade. US outlays
for strategic defense, on the other hand, accounted for
only about 15 percent of US strategic mission outlays
during the period. Soviet strategic defense activities
during 1970-79 remained at a high level, while US
strategic defense activities declined during the period.
As a result, the dollar cost of Soviet strategic defense
activities increased from five times US outlays in 1970
to 25 times US outlays in 1979. Soviet strategic
defense activities will probably continue to grow in the
early 1980s as the Soviets introduce a new generation
of interceptor aircraft and surface-to-air missiles, in an
attempt to further improve their air defenses.
General Purpose Forces. This mission includes all land,
tactical air, naval, and mobility (airlift and sealift)
forces. Estimated dollar costs of Soviet activities for
general purpose forces (exclusive of RDT&E) have
exceeded comparable US outlays since 1970, although
the absolute difference between them has remained
relatively constant since 1973. For the decade, the
Soviet total for this mission was about 55 percent
higher than the US total.
Within both the Soviet and the US general purpose
forces, land forces accounted for the largest share of
the dollar cost. The estimated dollar cost of Soviet land
forces increased steadily throughout the period.
Outlays for US land forces continued to drop from the
Vietnam-era high until 1973. Since 1973 they have
grown at a moderate rate.
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US and Soviet General Purpose Forces
A comparison of US outlays with estimated dollar costs
of Soviet activities if duplicated in the United States
72 73 74 75 76 77 78 79 80 81
Projected
The general purpose mission is defined according to the US Defense Planning and Programming Categories
of November 1979, with minor adjustments made to attain comparability. Costs for pensions, nuclear materials for
warheads, and RDT&E of both sides are excluded.
The dollar costs of the two countries' general purpose
naval forces (excluding attack and multipurpose carri-
ers and their associated aircraft, which by DoD DPPC
definitions are included in tactical air forces) showed
divergent trends. US outlays for this mission fell until
1973 and then were relatively constant for the rest of
the decade. The estimated dollar costs of Soviet
general purpose naval forces also declined until 1973
but then grew at a rapid rate for the rest of the decade.
As a result of these trends, the estimated dollar costs of
Soviet activities in 1979 were more than 15 percent
higher than US outlays. Over the whole decade they
were approximately equal to US outlays. (If the costs
of the US carriers and their associated aircraft were
included in general purpose naval forces, US outlays
would be 20 percent more than the estimated dollar
costs of Soviet forces in 1979 and 50 percent higher
than the Soviet total for the entire period.)
US outlays for tactical air forces (including aircraft
carriers and their associated aircraft) fell from 1970 to
1974 but have grown since then. The estimated dollar
cost of the Soviet forces with a tactical air mission
showed a cyclical, but upward, growth pattern related
to the procurement cycle for new aircraft. By the end
of the decade, US outlays exceeded estimated Soviet
dollar costs for tactical air forces by 20 percent-a
considerable decrease since 1970. Over the decade, US
outlays were about one-third more. (If the US carriers
and their associated aircraft were excluded, estimated
Soviet dollar costs would be 35 percent higher than US
outlays in 1979 and 45 percent higher for the period as
a whole.)
Support Forces. In addition to the training, mainte-
nance, major headquarters and logistic activities nor-
mally considered support, this mission also includes
military space programs. Over the decade, US outlays
on support activities exceeded the estimated Soviet
total by approximately 20 percent, but while the US
level was two-thirds higher than the estimated Soviet
level in 1970, the two were equal at the end of the
decade. The estimated dollar cost of Soviet support
forces grew steadily over the period to match the
growth of the other major missions.
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Both countries structure their forces not only for a
major East-West war but also for other possible
conflicts. For example, between 10 and 15 percent of
the estimated dollar cost of Soviet defense activities
(excluding RDT&E) is for units that we believe have
primary missions against China. Some of these forces
also could be used to meet other contingencies.
Estimates of the dollar costs of Soviet defense activities
are revised each year to take into account new
information and new assessments of the size, composi-
tion, and technical characteristics of the Soviet forces
and activities, as well as improvements in costing
methodologies. The US data used for comparative
purposes are similarly revised each year to take into
account changes in The Five Year Defense Program
and the Defense Planning and Programming Catego-
ries. Both the Soviet and the US data are updated
annually to reflect the most recent price base.
This year's estimate of the dollar cost of Soviet defense
activities for 1978 is about 9 percent higher than the
estimate for that year in last year's publication. Almost
all of the 9-percent difference is the result of changing
from a 1978 to a 1979 price base. The refinements
made since our last report in our assessments of Soviet
defense activities and their costs for the year 1978 have
resulted in no appreciable change in our estimate.
Readers making cumulative comparisons with pre-
vious versions of this report should be aware that this
year we are covering a 10-year period-the decade of
the 1970s-rather than an 11-year period, as was the
case with the earlier reports.
Approved For Release 2008/09/09: CIA-RDP08SO1 350R0001 00210002-2