SOVIET DEFENSE SPENDING AND ECONOMIC POLICIES

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Collection: 
Document Number (FOIA) /ESDN (CREST): 
CIA-RDP79T00827A001100040001-1
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RIFPUB
Original Classification: 
T
Document Page Count: 
12
Document Creation Date: 
November 16, 2016
Document Release Date: 
March 15, 2000
Sequence Number: 
1
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Publication Date: 
December 6, 1967
Content Type: 
BRIEF
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Approved For Release 2000/05/12 : CIA-RDP79T0 27A001100040001-1 c, RECORD COPY please return to Presentation Staff SOVIET DEFENSE SPENDING AND ECONOMIC POLICIES Cabinet Briefing 6 December 1967 TOP SECRET Approved For Release 2000/05/12 : CIA-RDP79T00827AO01100040001-1 Approved For Re ase 200 1 2.. F*fl P79T0Q927A001100040001-1 DCI BRIEFING NOTES FOR THE CABINET SOVIET DEFENSE SPENDING AND ECONOMIC POLICIES I.. The military and economic analysts at CIA who deal with Soviet military and space expenditures face two major problems, A. First, because the Soviets conceal a good deal of their total military spending, our analysts must match the published Soviet budget figures against all of the evidence we have, on all known military and space programs, and work out the actual costs in detail. In. this way, we arrive at our own figure in rubles for total Soviet ex- penditures--announced and/or concealed. B. Second, in order to permit meaningful com- parisons by our own standards, the analysts calculate what the Soviet program would cost in dollars in the United States. This is necessary because of the unrealistic official exchange rate, and because of the inherent differences in the two economies. '1'/JBU7, U S. vs SOVIET MILITARY AND SPACE SPENDING, 1967) -1- Approved For Release 2000/05/12 : CIA-RDP79T00827AO01100040001-1 TOP SECRET Approved For Relea 2000/05/12 : CIA-RDP79T0082 A001100040001-1 VS-USSR: MILITARY & SPACE SPENDING-1967 Billion Dollars US (Fiscal Year) USSR* (Calendar Year) Strategic Offense Forces 4.5 6.3 Strategic Defense Forces. 1.7 5.1 General Purpose Forces 33.6 vso' RDTE & Space 14.9 13.2 Command and General Support 28.2 14.9 TOTAL 83.0 55.7 The figures on Soviet spending show the general size of various programs in terms of what they would cost in the US. Approved For Release 2000/05/12 : CIA-RDP79T00827AO01100040001-1 Approved For ReMase 20#4 5/' F DP79T0Q827A001100040001-1 II. Analyzed by these methods, Soviet military and space spending in Calendar 1967 was the highest since World War II: 20.4 billion rubles (equivalent $56 billion) A. In other words, the Soviets with an economy of ours, are sendin roughly as much for defense and space as we are, excluding the costs Vietnam. B. For the past five years, the Soviet defense and space effort, in dollar terms, has aver- aged 85 percent of what we have been spending on the same programs. C. This chart compares the dollar cost of the comparable U.S. and Soviet programs for 1967. D. They are almost. matching us in space, research.,development, testing and evaluation. E. They are spending 40 percent more on strategic offense: Soviets $ 6.3 billion, U.S. $ 4.5 billion. F. They are spending three times as much on strategic defense: Soviets $5.1 billion, U.S. $ 1.7 billion. (l. I should note that in 1967, U.S. spending on these two missions is low because Polaris and Minuteman programs are ending, and major costs for Poseidon, Sentinel, and Minuteman MIRV re-fits have not begun to show up.) -2- Approved For Release 2000/05/12 : CIA-RDP79T00827AO01100040001-1 TOP SECRET Approved For Relea&2000/05/12: CIA-RDP79T0082ft01100040001-1 USSR: COMPARISON OF ANNOUNCED DEFENSE BUDGET E,- ESTIMATED TOTAL MILITARY E-SPACE EXPENDITURES BILLIONS OF RUBLES IN 1955 PRICES 20 16 12 0 1950 Total: in 54 . Billion Rub le s 4 58 '62 ANNOUNCED in Current Rubl,as) 66 23? 68 Approved For Release 2000/05/12 : CIA-RDP79T00827AO01100040001-1 Approved For Ra ease 205/ A ; ff DP79TQ027AO01 100040001 -1 G. Total U.S. expenditures are larger, (U.S. $ 83 billion, Soviets $ 55.7 billion) mainly because of our larger expenditures for general pur- pose forces, and for command and general sup- port--the two categories in which the expendi- tures attributable to Vietnam have the most impact. (CHART, ANNOUNCED vs. TOTAL SOVIET MILITARY SPENDING) III, On October 10, the Supreme Soviet was informed that the defense budget for 1968 will be increased by 15 percent. This is about twice the annual rate of increase for the past two years. A. The budget for science will be increased al- most 11 percent. This budget probably covers the bulk of research and development for both space and defense. B. As this chart shows, total Soviet spending for the military establishment, the nuclear program, and space runs considerably higher each year than the explicitly announced budget figures. We..estimate that with the announced in- creases, total 1968 spending will be at least 21 to 23 billion rubles, or in the vicinity of $ 60 billion in equivalent dollar costs. Approved For Release 2000/06_/i2 : CIA-RDP79T00827AO01100040001-1 TOP SECRET Approved For Release 20gW/' DP79TW27AO01100040001-1 it C. We believe that no single program is likely to get the lion's share of the announced increase. It will be spread over a number of programs, and will add to over-all Soviet military strength. N. The Soviet military leaders apparently made their case with the Politburo, not by arguing any one over-riding need, but because the political and economic climate was favorable for an increase. A. There have been two successive good-to-excellent harvests. B. Industrial production has been growing eight percent a year. C. The consumer has been getting a significantly bigger piece of the pie for two years as a 50th anniversary present. D. For the moment, the Kremlin has decided it can provide both guns and butter, but as we analyze the latest economic decisions, industry and particularly agriculture are going to have to pay for this. E. Major sectors of industry will receive less in the form of investment funds, and as a result must cut back their 1970 production goals. 1. Chemicals, for instance, are taking a 30 percent cut in investments planned through 1970, so the production target has been lowered 15 to 20 percent. Approved For Release 2000/05/12-: CIA-RDP79T00827AO01100040001-1 TOP SECRET Approved For RgLease 200p911 RRip*ff P79TQU27AO01 100040001 -1 F. Two years ago, the Kremlin leaders launched a big program of investments in agriculture, as insurance against another bad year like 1963. 1. That, you will recall, was when the Soviets had such a. poor harvest that Khrushchev had to import about 10 million tons of wheat, mainly from Canada. 2. The Russians referred to this sardonically as "Khrush.chev's agricultural miracle." They said he planted wheat in the "New Lands" of Kazakhstan, and then harvested it in Canada. G. The men who followed Khrushchev had this in mind when they planned investments in agriculture for 1966 to 1970, but now they appear to be gambling on continued good harvests. 1. The investments are being reduced. 2. The rate of increase in fertilizer production is to be cut in half in 1968. 3. Farm machinery output, supposed to increase sharply, has leveled off, even declined in some categories. -5- Approved For Release 2000/05/12 : CIA-RDP79T00827AO01100040001-1 TOP SECRET Approved For ReI ase 20( /1 I DP79T0QV27A001100040001-1 V. The consumer--the Soviet man-in-the-street--is relatively well off for the moment, but he is still shabbily treated in comparison to his Western European counterpart. A. His,-cash income has reached a new high, and he can expect further increases between now and 1970. B0 He can find an increasing supply of things like refrigerators and television sets in the stores. Ce Clothing supplies have increased markedly, and there is better quality, thanks in part to about $100 million in imports from the West in 1967. D0 On the other hand, the Russian consumer is not eating, living, or riding the way he wants to. 1. Only a trickle of automobiles is reaching the market. Production of passenger cars may reach about 700,000 in 1970, but only a small fraction will be sold for private use in the U.S.S.R. A Czech or an East German has a better chance of owning a car than a Russian, -6- Approved For Release 2000/05/12 : CIA-RDP79T00827AO01100040001-1 TOP SECRET TOP SECRET Approved For R l ase 2000/05/12 : CIA-RDP79TOO827AO01 100040001 -1 2. Housing construction is lagging as usual. The past year added only two square ?feet per capita, giving each Soviet citizen 70 square feet of living space, This is barely half of what the Soviets themselves consider acceptable by health and sanita- tion norms, and less than a quarter of the comparable U.S. figure-K-300 square feet in 1961. 3. As for food, what the Russian consumer really wants is more meat, milk and other quality foods, and less reliance on bread and potatoes. This is placed in jeopardy by the cut-back in agricultural investment. E. Even in this relatively good year, the Soviet man-in-the-street has to stand in line for hours to buy what he wants, and then he runs into spot shortages, shoddy production, and has to take something that doesn't fit because they don't have it in his size. F. One thing in good supply is sardonic Russian grumbling about these consumer problems. One story tells of the visitor who was looking Approved For Release 2000161F2 SE 79T00827A001100040001-1 11W SLURE 1' Approved For Re'ease 2000/05/12 : CIA-RDP79TOG827AO01 100040001 -1 for the Soviet cosmonaut, Colonel Yuri 'Gagarin.. A neighbor told him that Colonel Gagarin was just orbiting in outer space, and would be home in two or three hours. Well, where was Mrs. Gagarin? Oh, she had gone to the market to try to buy some meat, and wouldn't be home for another five hours. G. The new economic decisions, then, are designed to increase military strength without damaging such': improvements as there have been in the life of the Soviet consumer. We believe, however, that they are bound to affect him in the long run. 1. When you cut\4ck on the investments which are meant'\to produce more steel, more electric pov~X, and more machine tools for industry\in general, you are bound to find sooner ",,or later that you cannot turn out as many washing ma- chines, refrigerators, and television Approved For Release 2000TQkI2S I 0UP79T00827AO01100040001-1 ~'OP SECRET Approved For Release 2000 0 / 2 : IA-RDP79TW27AO01100040001-1 VI. In summary, it appears to me that what the Kremlin leaders have done is to reach another one of their constant compromises on-the allo- cationh of critical resources. - A. As a compromise, the 1968 plan is probably not fully satisfactory to any of the rival interests, although collectively it may meet the demands of the moment. B. There is already some carping in the Polit- buro on the part of the losers. C. If long-term growth rates fall off,-, Iz or if agricultural production stagnates, these decisions will probably come back to haunt the leadership. D. The budget for defense and space will be the biggest in Soviet history but it is at the expense of the future growth of the entire Soviet economy. Approved For Release 2000APJM S]INRDW79T00827A001100040001-1