IMPLICATIONS OF THE 1968 SOVIET MILITARY BUDGET

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP71B00364R000100160010-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 15, 2016
• Document Release Date: December 8, 2003
• Sequence Number: 10
• Publication Date: November 17, 1967
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
Implications of the 1968 Soviet Military Budget
Secret
N2 29
17 November 1967
No. 0316/67A
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SPECIAL REPORTS are suprok- Mo ents to the Current Intelli-
gence Weeklies issued by the ()Vice of Current Intelligence.
The Special Reports are lauhlislier'irselparately to permit more
ehensive treatment of a >uiriect. They are prepared by
the Office of Current Intelligeticc the Office of Economic Re-
search, the Office of Strategic l s:la. and the Directorate of
ace and Technology. Spear rli Reports are cdordinated as
appropriate among the l:)irector4 tes _,f (IA but. except for the
normal substantive exchange wit:aaytner agencies at the working
level, have not been coordinates tAside CIA unless specifically
at defense of the:( i t i States, within the mean-
Title 18. sections 793 . nue- `t94. of the US Code, as
, , ended, Its transmission or rove fon of its contents to or re
ceipt by an unauthorized person s r rohihited by law.
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IMPLICATIONS OF THE 1968 SOVIET MILITARY BUDGET
The new Soviet budget for 1968 calls for de-
fense spending to grow by 15 percent, a rate about
twice that experienced during the past two years.
The military category of the budget does not con-
tain the bulk of expenditures for military research
and development or the space program. These prob-
ably are included in allocations for "science,"
which in 1968 will grow by nearly 11 percent.
Combined defense and space spending in 1967
already is larger than at any time since World War
II, and will total about 20 billion rubles, or the
equivalent of about 56 billion dollars spent in
the US. The USSR--with a gross national product
less than half that of the US--has been maintain-
ing a military and space effort equal to about 85
percent of the comparable total for the Department
of Defense, the AEC, and NASA, if the costs of the
Vietnam war are excluded. The added spending
planned for 1968 would amount to $5-$7 billion if
converted from rubles to dollars at rates more
accurately reflectinq purchasing power parity than
the official exchange rate.
Although actual increases probably will be
smaller than those announced, they will be large
enough to make 1968 the third year in a row that
the growth rate for defense and space expenditures
has increased significantly. The specific programs
to benefit from the increases cannot be identified
until direct evidence becomes available. It is
unlikely, however, that a single program or force
will get the lion's share of the additional money,
but rather that a number of strategic programs will
be stepped up somewhat and the capabilities of the
theater forces improved.
The tensions generated by the Vietnam war,
the Arab-Israeli conflict, and the Sino-Soviet dis-
pute may have led the USSR's leaders to decide to
make broad improvements in the general purpose
forces and the command and general support estab-
lishment. The extent to which the recent announce-
ment of US intentions to deploy a thin antiballis-
tic missile (ABM) screen influenced the budget
announcement is not known. The Soviet leaders
were aware of the public discussions that preceded
the announcement and probably took the possibility
into consideration in their planning. The US deci-
sion undoubtedly strengthens the hand of those Soviet
officials advocating increased military spending.
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The Political-Strategic Context
The decisions reflected in
the announcement of next year's
budget probably represent com-
promises made within the collec-
tive leadership. These decisions
have been made against a back-
ground of policy problems that
the past year's developments have
posed for the USSR.
The Soviet leadership is
reaching the point where it no
longer can afford to postpone ma-
jor policy decisions. It must de-
cide soon how far and how fast it
wishes to proceed in implement-
ing its economic reform; what
response it is going to make to
the US decision on ABM deploy-
ment; what additional steps it
should take in the areas of ac-
tive contention with US power
and influence, particularly in
Vietnam and the Mediterranean;
and how large an ICBM force the
USSR will deploy.
With the exception of the
build-up of conventional forces
during the Korean war, most of
the sharp rises in the Soviet
military budget in the past have
ESTIMATED TOTAL SOVIET DEFENSE AND
SPACE EXPENDITURES, 1950-1968*
0
4954 195
1950 8 4962 1966 1968
'In 1955 ruble prices. Includes military research and development,
space expenditures, and expenditures on security forces.
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been closely associated with the
production and deployment of new
strategic weapon systems. Nor-
mally, only one or two strategic
programs have been responsible
for the bulk of the increase,
with most of the other programs
moving up and down in such a way
as to cancel out one another.
In 1955, production and de-
ployment of the first Soviet in-
tercontinental bomber strongly
influenced spending. Increases
in 1961 and 1962, which occurred
during periods of tension over
Berlin and Cuba, stemmed largely
from Soviet efforts to build up
a force of medium- and inter-
mediate-range ballistic missiles.
The increases in 1966 and 1967
were forced by the decision to
undertake simultaneous programs
to deploy strategic offensive and
defensive systems.
The announced budget also
has a political function. It
serves to inform the Soviet pub-
lic, the party and government
workers, and the outside world of
the leadership's intentions with
regard to the allocation of re-
sources. While the announced
budget is generally an accurate
barometer of direction, it is
less accurate as an indicator of
the size of change. For example,
it is clear that actual Soviet
military spending in 1961 did
not increase as much as forecast
at mid-year, when Khrushchev
found it politically useful to
announce a large increase.
Dividing the Soviet Military Pie
The costs of operating the
Soviet military forces have been
fairly stable over the years.
Most of the long-term growth has
gone into research and develop-
ment and the space program. The
majority of year-to-year fluctua-
tions have resulted from the
phasing of investment--that is,
procurement and construction--
for new weapons deployment. A
large fraction of the research
and development effort has been
directed toward strategic sys-
tems at the expense of tactical
forces. (See Figure 2)
The USSR's increasing re-
liance on sophisticated weaponry
has resulted in a downgrading
of the old-time foot soldier. Al-
though better paid than his
1950 counterpart, the Soviet
soldier of today costs the USSR
only one quarter of its military
budget. The fact that the budget
today is much larger only par-
tially offsets the decrease. The
other quarter formerly spent on
manpower now is being invested
in the development of new weapons.
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Because the Soviet budget
lacks detail, it is necessary to
construct detailed expenditure
accounts on the basis of direct
costing of observed and estimated
military activity. Unlike the
gross budget figures, these de-
tailed expenditure accounts can
be directly related to informa-
tion acquired on individual mili-
tary programs. They permit a
thorough examination of the struc-
ture of Soviet expenditures as
well as the detection of shifts
in programs and missions.
Although the difference be-
tween the announced Soviet budget
figures and the detailed expenditure
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ESTIMATED SOVIET DEFENSE EXPENDITURES, 1950-1967
- Operating
- Investment
- RDTE 6 S"
Major Categories
Percentage Distribution by Category
17%
48%
Major Missions
r `
6 4
50 19
-
55 19
60 196
5 191
- General Purpose Forces
RDTE?S"'
Strategic Attack
Strategic Defense
3% 29% 3%
11 I
Operations
S Personnel Fa ilities Procurement
Maintenance ~
18%
24%
2% 29%
1
*Expressed in 1955 prices.
"Research, Development. Test, Evaluation, and Space.
'Includes personnel costs for military manpower engaged in RDTEgs,
27%
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estimates have never been fully
resolved, several important con-
siderations account for the bulk
of the discrepancies. For ex-
ample, much of the space and de-
fense-associated research and de-
velopment effort in the USSR is
funded through the science
budget. Moreover, some military
activities may be included in
other budget categories. Expen-
ditures for the military security
forces, for instance, are not
covered in the budget allocation
for defense.
The Soviets have never ex-
plained just what the published
budget covers. Its scope changes
from time to time. Shifts in
accounting practices, for example,
probably explained a significant
portion of the increased defense
budgets in 1961 and 1962.
Before Vietnam, Soviet mil-
itary and space spending--measured
in dollars--generally averaged
about 85 percent of comparable
US outlays.
As Table 1 indicates, the
USSR is spending somewhat more
in 1967 for strategic offensive,
considerably more for strategic
defense, about the same amount
for space and military research
and development, but only about
two thirds as much as the US
in total. US spending for gen-
eral purpose forces and for
command and general support,
where the costs of Vietnam im-
pact most strongly, is about
double Soviet outlays.
Table 1
64W" US AND SOVIET MILITARY AND SP
,1-967. (_-11-
Billion Dollars
US USSR
(Fiscal Year) (Calendar Year)
St_rate is Offense Forces 4. 5
Strategic Defense Forces 1.7 5. 1
General Purpose Forces 33.6 16.3
RDTE & Space 14.9 13.2
Command and General Support 28.2 14.9
/
The figures on Soviet spending show the general size of various programs in f (
terms of what they would cost in the US.
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CURRENT ESTIMATES OF SOVIET INVESTMENT EXPENDITURES
FOR SELECTED STRATEGIC WEAPON SYSTEMS, 1965-68*
Billion Rubles:.
ABM & Anti-Satellite
Long Range SAM
Fighter Interceptors
01 1 1 1
1965 1966 1967 1968
Sub-Launched Ballistic Missiles
1965 1966 1967 1968 1965 1966 1967 1968
'Does not include annual operating expenditures
"Expressed in 1955 prices
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Spending the Increase
Since 1965, Soviet expendi-
tures for ICBMs have doubled and
outlays for SAM and ABM programs
have increased 70 percent. On the
basis of current estimates of
Soviet ICBM deployment, the costs
of the ICBM programs will peak
this year and decline considera-
bly in 1968. A new deployment
program for intermediate- and
medium-range ballistic missiles,
estimated to be scheduled for
1968-71, will keep the costs of
strategic offensive programs at
a relatively high level, however.
A different pattern is ex-
peOted for strategic defense
systems. The programs presently
under way or projected in the
USSR will require increasing
expenditures through 1970 at
least.
Expenditures for general
purpose forces and for the com-
mand and general support estab-
lishment together amount to about
nine billion rubles. This out-
lay has changed little during the
past several years, although in-
dividual programs have been phas-
ing in and out with commensurate
shifts in spending. These have
tended to balance one another, and
projections based on current es-
timates suggest they will continue
to do so.
Of the planned 3-billion
ruble increase in Soviet military
and scientific expenditure in 1.968,
less than half--at most--can be
accounted for by price increases,
civilian research and development,
budget shifts, and increased
personnel costs. Between 1.5 and
2 billion rubles remain for actual
increases in 1968 in the Soviet
military forces and for stepped-
up expenditures for space and
military research and development.
This amount--equivalent to $3-$5
billion in goods and services if
purchased in the US--is partic-
ularly impressive when viewed as
a further increment to the large
expenditures for strategic weapons
that have been made during the
past two years.
Relatively few of the mili-
tary programs under way in the
USSR are big enough in themselves
to influence the military budget
significantly. The largest ex-
penditures made in 1967 are for
the SS-9 and SS-11 ICBM deploy-
ments, which together will total
about 1.7 billion rubles. If
these programs do not slack off
next year as estimated, or if
major qualitative improvements
are introduced, ICBM programs
next year could raise military
expenditures as much as a bil-
lion rubles.
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No other weapon program is
currently as expensive as the
ICBM deployment effort. This
year, the ABM deployment program
around Moscow required about 100
million rubles, deployment of the
million, the program tor con- 25X1
struction of nuclear-powered bal-
listic missile submarines approxi-
mately 140 million, and aircraft
and airborne missile procurement
about 300 million. Even though
several of these programs are
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expected to grow considerably in
1968, none is susceptible to an
annual expansion that would re-
quire a major part of the an-
nounced military budget increase.
Theater Force and Command and
General Support Programs
For a number of years, pres-
sures have existed within the
USSR for upgrading the capabili-
ties of the general purpose forces
as well as the command and gen-
eral support establishment. Such
improvements would give the Soviet
leaders greater capability for
influencing international situa-
tions through the use of conven-
tional forces. These pressures
appear to have been held in check
by the cost of developing and
deploying strategic systems, but
any general loosening of the
restraints on military spending
will release pent-up demands ac-
cumulated over a number of years.
The requirements will extend to
many program areas and could gen-
erate sizable increases in expend-
itures.
Annual spending for the gen-
eral purpose forces has been rela-
tively stable at a level of about
six billion rubles in this decade.
The command and general support
structure has received about three
billion rubles annually. A
stepped up effort to improve the
mobility or limited war potential
of the Soviet military machine
could raise outlays as much as a
billion rubles next year.
Several programs might bene-
fit from such an increase. For
200 million rubles, for example,
200,000 men could be added to the
Soviet armed forces. A crash
program to augment the mobility,
firepower, and tactical air sup-
port of the ground forces might
require an increase of about 300
million rubles, and a speed-up
in the introduction of new trans-
port aircraft could raise outlays
by about 100 million rubles.
Improvements in the surface fleet,
naval air arm, and submarine at-
tack forces could require 200 mil-
lion more.
In many ways, the summer of
1967 was traumatic for the So-
viet leaders. One significant
result--concern for the level of
military readiness--has probably
-already generated increased opera-
ting and maintenance costs. At
least one conference of military
district commanders held during
the year placed great stress on
maintaining high levels of pre-
paredness among the troops. In
September, the massive "Dnepr"
exercise was conducted in western
USSR. In addition, more Soviet
troops have been shifted to the
border areas of the Far East, and
the USSR's naval presence in the
Mediterranean has been.increased.
This improved readiness posture
is making additional demands on
fuel supplies and logistics fa-
cilities. Its continuation could
cost the USSR an additional 100
to 200 million rubles annually.
MilitarX and Space Research
an Development
Soviet expenditures for mili-
tary and space research and
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development have climbed steadily
over the years, roughly paralleling
trends in the US. The decline in
the annual rate of growth of these
expenditures during the past few
years has been reversed by the
announced increase in the Soviet
science budget for 1968. Because
of the very diffused nature of
scientific research in the Soviet
economy and because of the lag
between program initiation and
identifiable results, the direc-
tion of next year's increase prob-
ably will not be identifiable
before 1969.
The space program cost the
USSR an estimated 2.3 billion
rubles this year. Of this, ap-
proximately 1.8 billion is being
spent on the civilian space effort,
much of it for the Soviet lunar
and interplanetary program.
A large boost in the space
program probably would be directed
to the military sector, whose
primary responsibilities are the
reconnaissance satellite program
and, presumably, the development
of a manned orbiting laboratory.
An all-out effort to improve the
military space program could add
as much as 400 million rubles to
the military and science budget.
There is no evidence, however,
that a greatly accelerated program
is under way.
Artificial Effects: Inflation
And Accounting Shifts
A number of factors could
exaggerate the real significance
of the announced budget increase.
A general change in wholesale
prices for military hardware and
other commodities used by the
military was made in mid-1967.
Although the net effect of these
price changes is far from clear,
it appears unlikely that the
over-all inflation of the budget
would exceed 500 million rubles,
and it probably would be less.
Some of the announced. in-
crease may be accounted for by a
shift of additional military
programs into the military budget
from other categories. One place
where changes of this type could
occur is in the accounting for
foreign military assistance. If
made, such a change would be un-
likely to amount to as much as
500 million rubles in 1968.
A broad military pay increase
in 1968 to parallel wage increases
for certain nonmilitary workers
could add 200 to 300 million
rubles to the budget. An in-
crease is long overdue, but
there is no evidence that one is
planned.
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In sum, price increases, ac-
counting shifts, and military
pay increases could combine next
year to exaggerate the signifi-
cance of the larger defense
and science budgets. It is ex-
tremely unlikely, however, that
the three together could account -
for much more than a billion
rubles; their combined effect more
likely will be less. A large
fraction of any such "artificial
effects" probably would be in
the military section of the budget
rather than the science cate ory. -
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