SOVIET DEFENSE SPENDING AND ECONOMIC POLICIES
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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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Presentation Staff
SOVIET DEFENSE SPENDING AND ECONOMIC POLICIES
Cabinet Briefing
6 December 1967
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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)
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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.
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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.)
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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
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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.
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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.
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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.
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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,
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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
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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
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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.
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