STRATEGIC RESEARCH MONTHLY REVIEW MAY 1977

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79B00457A001200020001-8
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 21
• Document Creation Date: December 15, 2016
• Document Release Date: July 27, 2004
• Sequence Number: 1
• Publication Date: May 1, 1977
• Content Type: REPORT

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Top Secret
Strategic Research
(Monthly Review
DIA review(s) completed.
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Strategic Research
Monthly Review
May 1977
This publication of the Office of Strategic Research contains
substantive findings and analytical judgments that are preliminary in
nature and have not been formally coordinated with other CIA and
intelligence community components.
Comments and queries regarding the articles are welcomed. They
may be directed to the person named following each item.
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Problems With a Reduction-of-Budget
Approach to Arms Control
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A reduction-of-budget agreement with the
Soviet Union has been suggested as a means of
controlling the arms race. In our judgment, how-
ever, the difficulties of defining and measuring de-
fense spending and the problems of verification
make this approach unworkable under present
circumstances.
The Soviet General Staff Academy
A recent Soviet history of the General Staff
Academy provides new insights into this prestigious
institution's subordination, organization, and func-
tions, and its impact on the careers of the senior
military command elements of the Soviet Union
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The Colilium of the Soviet Ministry
of Defense
Recent information, examined in conjunction
with older material, has revealed the membership of
the Collegium and its probable functions in the
defense establishment.
Dollar Cost Implications of Soviet
SAM Design and Maintenance Practices
indicates that the SA-2 and SA-3 systems
are highly reliable and have maintenance features
that are different from those of US SAM systems.
These differences result in estimates of the dollar
cost of operating these systems which are sub-
stantially lower than estimates based on costs of US
SAM systems.
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Problems With a Reduction-of-Budget Approach
to Arms Control
Reduction-of-budget (ROB) agreements have long been considered as a means
of controlling the arms race, and this approach has recently received increased
attention in the US. A report written by a study panel commissioned by the United
Nations Association of the United States of America (UNA-USA)-a prestigious
private nonprofit organization-recommended that the US seek a negotiated mutual
freeze on defense spending with the Soviet Union as part of a total military budget
and force reduction policy. A similar recommendation was made by Wassily
Leontief, the prominent US economist and Nobel Prize winner, in a recent editorial
in The New York Times.* Leontief noted the great waste of the US-USSR arms race
and the need for an agreement between the two nations to limit the competitive
expansion of military expenditures.
The UNA-USA study pointed out the pitfalls of an ROB agreement, but felt
that it could be used to augment and strengthen a force reduction package. Leontief
also stressed the feasibility of such an approach:
The currently available techniques of economic-data gathering and analysis are
powerful enough and accurate enough to enable each side to express in com-
parable terms the real level of its own and its opponent's total military spending
and output.
In our judgment, however, such an agreement between the US and the USSR is
noi: possible at this time because of the problems of verification and the difficulties
of defining and measuring defense spending.
Definition. A concise and mutually acceptable definition of "defense" is the
first step in the formulation of a comprehensive ROB agreement. Ambiguous
activities such as civil defense, military aid, commodity stockpiling, and pensions
may or may not be classified as defense activities. Moreover, some military-related
activities in both the Soviet Union and the US have no direct counterparts in the
other country. For example, the Soviet Union has large paramilitary forces-border
guards, construction troops, transportation troops, and internal security troops-but
has no equivalent of the US Coast Guard.
Additionally, an ROB agreement may or may not include military activities
that primarily benefit the civilian economy and, conversely, civilian activities which
* %Vassily Leontief, "Cutting U.S. and Soviet Military Outlays," The New York Times, 24 March
1977.
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support the military sector. For example, in the US the Corps of Engineers and the
Hydrographic Office provide services to the civilian sector, while civilian highway
construction and subsidies to the maritime shipbuilding industry add to national
defense capabilities. There are activities in the Soviet Union also which provide
spillover benefits between the military and civilian sectors-e.g., military construc-
tion and grain harvest activities.
Measurement. The radically different economic systems of the US and the
USSR make measurement of defense effort under an ROB agreement especially
difficult. Prices in the US are to a large extent determined in competitive markets
and usually reflect the cost of resources. In the Soviet Union, on the other hand,
prices and resource allocation are largely administratively planned by central author-
ities and are generally far less reflective of actual resource costs.
As a result, any comparison of US and Soviet defense activities based on Soviet
ruble expenditures and US dollar expenditures is likely to be misleading. Moreover,
the Soviet government's direct control over prices allows it to vary arbitrarily the
value of its military activities. For example, Soviet authorities could simply adjust
military prices downward to fit their interests.
Inflation. An ROB limitation agreement must also distinguish between nominal
and real changes in military expenditures. Because of inflation, larger defense
budgets are usually required over time even if the level of defense activities remains
the same. Wholesale prices in the US have increased almost 9 percent annually since
1970, while prices in the USSR, according to published Soviet statistics, have
remained stable over the same period of time. (Western analysts and some Soviet
economists believe that actual inflation in the Soviet Union has averaged 1 to 2
percent annually in recent years.) Thus, because of the differences in inflation rates,
the USSR would gain an advantage over time in any simple across-the-board budget
limitation that did not account for inflation.
Verification. The most difficult obstacle to the implementation of the budget
limitation approach is the problem of verification. A workable verification
mechanism would require a method for collecting, processing, and analyzing a large
amount of financial and economic data. This would require access to information
never before divulged to foreigners by either the US or the USSR and would involve
the release of classified data. A large inspection force of accountants, economists,
and financial experts would have to be permanently stationed in each country, and
even then full compliance could not be ensured.
Any agreement that relied only upon officially announced Soviet budgetary
data could not be verified. The Soviets release only one official figure annually-the
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single line item labeled "Defense" in the Soviet state budget. The activities included
in thus number have never been clearly defined. Moreover, the published numbers are
patently too low to procure, operate, and maintain a force the size of the Soviet
military establishment or the other military-related activities such as RDT&E, civil
defense, foreign military aid, and military stockpiling, about which the Soviets say
nothing. Also, since 1970 the "Defense" numbers have remained constant or have
decreased while Soviet military forces have grown.*
Some defense expenditures probably are hidden in other parts of the Soviet
state budget. We believe, for example, that military RDT&E probably is financed
largely from the "Science" line of the budget. Some military expenditures may also
be financed from nonbudget sources.
Independent examination of USSR force levels and military activities by
national means could possibly be used to verify Soviet compliance with an ROB
agreement. However, since such an agreement would be stated in terms of military
budgets, a single, aggregate nominal value still has to be assigned to the Soviet forces
and activities observed. We do not believe that any such measure we can produce is
accurate enough to provide an independent monitoring mechanism in the short run.
Moreover, it is unlikely that we can improve upon the accuracy of this method
sufficiently in the future-e.g., by adding more analytical resources to this effort and
by more careful direction of present resources-to rely upon it as an independent
ROB verification mechanism. At best, flagrant violations probably could be detected
within several years by this method, but the Soviet government still could hide
substantial violations for even longer periods of time. Furthermore, it is unlikely
that the Soviets would agree to any provisions written into an agreement which
would improve our ability to independently measure more accurately the value of
Soviet defense expenditures.
In sum, Soviet secrecy concerning defense expenditures and the opportunities
for hiding military spending under other governmental functions or by manipulation
of the prices paid for military goods make verification all but impossible at this time.
Without a rather elaborate inspection system, considerable uncertainty would exist
as to Soviet and US compliance with any ROB agreement. Moreover, even if both
sides were to strictly follow the terms of such an agreement, differences in inflation
rates as well as definitional problems could lead to serious imbalances in the forces
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Dollar Cost Implications of Soviet SAM Design
and Maintenance Practices
stimates the dollar cost tor
operation and maintenance o the SA-2 and SA-3 surface-to-air missile systems. The
ud is based on an e