CIA, DIA SAY GORBACHEV GROWTH GOAL WILL NOT IMPEDE DEFENSE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00965R000605160001-6
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 22, 2016
• Document Release Date: May 1, 2012
• Sequence Number: 1
• Publication Date: March 30, 1986
• Content Type: OPEN SOURCE

Declassified and Approved For Release 2012/05/01: CIA-RDP90-00965R000605160001-6
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30 March 1986
CIA, DIA SAY GORBACHEV GROWTH GOAL WILL NOT IMPEDE DEFENSE
BY MICHAEL P SO NER-
WASHINGTON
Two U.S. intelligence agencies said today Soviet leader Mikhail Gorbachev's
goal of improving a sluggish economy by modernizing industry will not impede
production of strategic weapons for the next few years.
The Central Intelligence Agency ( CIA) and Defense Intelligence Agency
(DIA) also told Congress in a joint report their newly revised estimates of
Soviet economic growth show a lower growth rate of under two per cent in the
last two years.
Earlier intelligence reports had put growth after inflation at or above two
per cent in 1985 and 1984.
Gorbachev, who inherited a powerful military establishment but a shaky
economy, has made economic growth a major goal by improving an outdated civilian
industrial plant.
This could lead to fierce competition for steel and other resources between
industrial planners and the military, the U.S. agencies said.
But they said that because of past heavy investment in military assembly
lines, which can not be readily converted to civilian use, "the industrial
modernization goals are unlikely to significantly impede the completion of the
major deployments of strategic weapons that the Soviets have programmed through
the 1980s.
"Thus Gorbachev can coast for a few years on the strength of the USSR's past
investment in its military-industrial complex, which will permit the continued
modernization of the USSR's strategic and conventional forces."
The real test will come in several years when defense industries must tool up
for a new generation of weapons in the face of resource allocation, the report
said.
Richard Kaufman, an analyst on the Congressional Economic Committee, where
the report was presented secretly 11 days ago, told Reuters a question remained
whether the economic goals of Gorbachev can be met without further slowing
defense.
Releasing the report, Democrat Sen. William Proxmire of Wisconsin said "The
latest intelligence assessment shows a Soviet Union struggling to regain the
path of sustained rapid growth. If I am correct, Gorbachev's efforts may be
doomed unless there is a real cutback in defense."
The agencies revised their measure of the Soviet economy, or GNP, by using
1982 prices instead of the old method of using 1970 prices-. As a result of what
they call a major revision, they now estimate that total Soviet economic growth
after inflation has been much slower than previously calculated.
In 1985 preliminary estimates, they figured Soviet GNP after inflati on at
1.6 per cent, compared to 2.1 per cent previously. For 1984, the new estimate is
1.5 per cent compared to 2 per cent using 1972 dollars.
Declassified and Approved For Release 2012/05/01: CIA-RDP90-00965R000605160001-6
 Declassified and Approved For Release 2012/05/01: CIA-RDP90-00965R000605160001-6
In earlier years, the agencies had said the annual growth of Soviet defense
spending had started slowing down in the 1970s from about four per cent to two
per cent a year. It now says this slowdown started occuring in 1975, or two
years earlier than it had figured before..
But the estimate of defense spending as a share of the total economy was
figured by the agencies as rising from 12 to 14 per cent in the early 1970s to
15 to 17 per cent in the early 1980s.
By comparison, in 1970 the United States spent 8.2 per cent of its total
economic output on defense, and President Reagan estimated 6.4 per cent was
spent in 1985.
Declassified and Approved For Release 2012/05/01: CIA-RDP90-00965R000605160001-6