LONGER LEADTIMES: A SYMPTOM OF SOVIET PROBLEMS IN USING WESTERN TECHNOLOGY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00313R000100130007-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 22, 2016
• Document Release Date: June 11, 2009
• Sequence Number: 7
• Publication Date: June 1, 1984
• Content Type: REPORT

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Directorate of Secret
Intelligence
Longer Leadtimes:
A Symptom of Soviet
Problems in Using
Western Technology
Secret
SOV 84-10082D
June 1984
Copy 474
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Intelligence
Longer Leadtimes:
A Symptom of Soviet
Problems in Using
Western Technology
This paper was prepared b
Office of Soviet Analysis. Comments and queries are
welcome and may be directed to the Chief, Soviet
Economy Division, SOVA~
Secret
SOV 84-10082D
June 1984
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Secret
Longer Leadtimes:
A Symptom of Soviet
Problems in Using
Western Technology
Key Judgments Soviet use of imported Western plant and equipment has fallen far short of
Information available its potential for improving the USSR's overall economic performance, in
as of 15.Apri1 1984. large part because the Soviets take so long to acquire and put to use many
was used in this report.
of these imports. Average leadtimes are, much longer in the USSR than in
the West, almost invariably exceed the plan, and show no signs of
diminishing.
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The picture is not uniform. Imports for projects in high-priority sectors-
defense and energy, for example-usually get special handling and, as a re-
sult, are acquired and assimilated promptly. In most other sectors,
however, a variety of factors-some unique to imported technology and
some affecting domestic as well-prolong the leadtimes:
? Divided responsibility. The lack of a single body to coordinate all stages
of the import acquisition and absorption process fosters redundancy,
prolongs negotiations, and slows down the assimilation of new
technology.
? Administrative barriers. Official reluctance to permit personal contacts
with foreign suppliers isolates production managers from important
Western sources of information about the equipment, often leading to
improper installation and prolonging the period of adjustment.
? Accounting practices. Because the Soviet economic system levies a very
small interest charge on capital assets (both domestic and imported), no
one feels obliged to get imported equipment into production quickly.
? Incentives. By emphasizing quantitative output, the Soviet incentive 25X1
system breeds resistance to technological change.
Individual Soviet end users probably can save time by importing a product
embodying new technology rather than waiting for its development in the
USSR. However, diffusion-the widespread use of a new technology
throughout the economy-may be faster with indigenous development.
This is primarily because the Soviets seldom begin the research and
development needed for embodying imported technology in Soviet-pro-
duced equipment until the import has been operated in a "prototype
factory." From initial expression of interest to factory operation generally
takes two to seven years.
iii Secret
SOV 84-10082D
June 1984
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Nevertheless, as the pinch on labor, capital, and natural resources tightens
and the leading edge of Western technology continues to advance, the
Soviets will continue to import Western technology and equipment to
alleviate bottlenecks and modernize domestic industries. Even though
effective diffusion of technology might occur more quickly through
indigenous development, Moscow will continue to rely on imports because
the USSR puts a greater premium on satisfying current requirements for
equipment and technology than on potential long-term uses.
The USSR is trying to speed up the assimilation of new technology in
nonpriority civilian projects through various reorganizations and special
bonuses. Results continue to be disappointing, however, to judge by the
chronic official complaints. We believe the prospect for improvements will
remain dim, barring a major overhaul of the system of incentives for
More important, as long as the USSR relies on imported plant and
equipment for its most advanced civilian technology, it will continue to lag
in the generation of new technology. Even though Soviet engineers who
study imported equipment may note well what the Western designers have
done, they may still-not having gone through the designing experience-
be ill prepared to carry the embodied technology further.
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Key Judgments
Acquisition, Assimilation, and Diffusion of Imports
1
Determinants of Leadtimes in Each Stage of the Import Process
4
Stage 1: Discovery of Western Plant or Equipment
4
Stage 2: Request for Funds
5
Stage 3: Negotiation With Western Suppliers
6
Stage 4: Delivery, Installation, and First Use
7
Stage 5: Assimilation
8
Stage 6: Diffusion
9
Implications
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Longer Leadtimes:
A Symptom of Soviet
Problems in Using
Western Technology
Despite its high degree of self-sufficiency, the Soviet
Union has traditionally imported Western technology
to help ease bottlenecks, raise efficiency, and modern-
ize its economy. Imports of Western plant and equip-
ment expanded rapidly in the 1970s, as Moscow
increased its emphasis on these goals in response to
increasingly severe material and expected manpower
shortages.
Such imports have significantly benefited specific
sectors. They contributed much, for example, to the
substantial enlargement of the natural gas pipeline
network and the major advances of defense industries.
But the Soviets hoped that Western technology also
would stimulate productivity-not only in the individ-
ual plants where the imports were used but also
generally, through diffusion. This has not happened.
There is, in fact, direct evidence that Soviet handling
of legally acquired Western technology for use in the
civilian economy has been notably inefficient. A
prime example is the disproportionate length of time
the Soviets take in assimilating and diffusing most
imports of Western plant and equipment.' These
excessive leadtimes play a major role in diluting the
potential benefits of such imports.
Our focus in this paper is on the overall pattern of
handling foreign technology. Drawing on comparisons
with Western experience, we identify factors that
prolong the process of acquiring and using imports in
the Soviet economy. We describe the performance of
the Soviet system in each stage of the assimilation and
diffusion of imports and compare that to the system's
performance with domestically generated technology.
'Assimilation is the mastering of new technology by a single end
user. Diffusion is the use of it throughout the economy. In this
paper the phrase "assimilation and diffusion" refers to all of the
stages from initial Soviet interest in a technology to its economy-
Obviously there are exceptions, most notably priority
projects in the defense and energy sectors. Their
shorter leadtimes usually reflect official actions to
override the obstacles built into the system. These
actions include (1) allowing the end user more direct
participation in import negotiations, (2) promptly au-
thorizing payment in hard currency, and (3) interven-
ing to guarantee on-schedule delivery.
Acquisition, Assimilation, and Diffusion of Imports
The process of legal acquisition and use of Western
plant and equipment for the civilian economy can be
divided into six stages:
? Discovery of Western plant or equipment (initiation
of interest).
? Request for funds.
? Negotiation of Soviet foreign trade organization
(FTO) with Western suppliers.
? Delivery, installation, and first use.
? Assimilation of the import by the original end user.
? Diffusion of the embodied technology to relevant
uses throughout the economy.
To work well, the process must facilitate the flow of
information, reward initiative and innovation, foster
trade, and provide the know-how and resources for
production with the new equipment or process. In no
country, of course, does it work perfectly. But in the
USSR the process is seriously flawed in almost all
stages by:
? An inefficient decisionmaking apparatus.
? Lack of motivation to innovate.
? A xenophobic leadership.
? The treatment of capital assets as virtually free
goods.
? Protracted construction times.
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In the Soviet Union, responsibilities for decisions that
affect innovation and import policy in the civilian
economy are shared by a number of organizations,
including the State Planning Committee (Gosplan),
the State Committee for Science and Technology
(GKNT), the Ministry of Foreign Trade, the Ministry
of Finance, and the various industrial ministries.
Within these organizations, the import decisions are
made primarily by a few officials in the central
administrations. These officials are usually geographi-
cally separate from the end users they are supposed to
represent and are not always well informed about all
the technologies in which they have trading inter-
ests-despite the Soviets' well-organized system for
collecting and disseminating information.
The officials responsible for innovation are further
handicapped by a frequent lack of common objectives
with the end user. An enterprise manager often resists
innovation because it causes downtime and other
short-term disruptions of plant operations, and these
jeopardize his fulfillment of immediate sales and
production goals-his prime success indicators. Such
resistance, in turn, tends to discourage the import
decision maker, who also fears being identified with a
failed innovation attempt. This conflict of objectives
encourages temporizing and buckpassing and makes
the import process even slower.
The Soviet Union's high degree of self-sufficiency
further weakens the motivation to trade. Trade has
never been crucial to its economic survival, and
today-despite the expansion of trade in recent
years-imports account for only 5 to 10 percent of
Soviet GNP. Xenophobia, deeply rooted in Russian
history, has inhibited the Soviet ability to make the
most of Western technology, even when imports are
expanding rapidly. For example, when detente flour-
ished and imports surged in the early and mid-1970s,
the Soviets still severely limited Western participation
in economic projects-participation that would in-
crease foreign contacts and possibly diminish Soviet
operational control. Even though management studies
showed long ago that technology is more efficiently
transferred through personal interaction than through
technical documentation alone, the USSR has placed
significant limitations on foreign travel for its people
and on visits by Western technical advisers. The
Soviets rely, for the most part, on Western publica-
tions to identify and learn how to use Western
imports.
The Soviet economy treats capital as virtually a free
good. This attitude contributes to long leadtimes by
reducing the motivation to put new plant.and equip-
ment into operation as promptly as possible. This
particular problem is not peculiar to imported tech-
nology but reflects a general managerial indifference
toward having capital tied up, whether that capital is
imported or domestic and whether it embodies new or
old technology.
This indifference prolongs construction times, and
building delays in turn delay the assimilation of
Western technology. During the 1970s Soviet sources
estimated that the building of an enterprise from the
initial design to full-capacity operation took five to
seven years on average; it takes only two to three
years in the West. A more recent Soviet estimate
(1980) puts the average leadtime for all projects at
eight to 10 years. Since new technology is generally
made operational through new plant and equipment,
the far longer construction times mean that all tech-
nology, both imported and domestic, is brought on
stream much more slowly in the USSR than in the
West.
In the Soviet chemical industry, for example, the time
that elapses between Stages 2 and 5 (initial inquiries
about import contracts and operation of the purchased
plant and equipment) is roughly two to three times as
long as in the West (table). In the machine tool
industry, the time between contract inquiry and first
production is more than twice that required by West-
ern firms.' In two of the six stages of the process
(negotiation and installation/first use), Soviet firms
take three times as long as Western firms.
'This figure is based on a survey by Dr. M. R. Hill of eight British
manufacturers that provide machine tools to both Western and
Soviet purchasers; reported in Soviet Absorption of Western Tech-
nology: A Survey of West European Experience, by Malcolm Hill
and Philip Hanson, Stanford Research Institute, December 1978.
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Leadtimes in the Chemical Industry,
Soviet and Western (u)
From contract inquiry through
negotiations
From the end of negotiations
to initiation of production b
Total
Soviet indigenous development c
Research, development, test-
ing, evaluation, and achieve-
ment of normal-capacity oper-
ation
For the Soviets, Western rates may be less important
than whether they themselves can assimilate an im-
ported. technology more quickly than one developed at
home. As the table shows, if the technology is not
available domestically, importing saves time. Howev-
er, if equipment embodying the technology is already
available in the USSR, assimilation is presumably
speedier through its use, rather than through imports.
But even in this case, Soviet enterprises sometimes
prefer Western suppliers because they are supposed to
be more reliable. In fact, however, this reliability can
be offset by delivery delays after shipments have
reached Soviet soil. Furthermore, US-Government-
imposed sanctions have on occasion caused US suppli-
ers to suspend contractual obligations to Soviet buy-
ers
Moreover, even if importing speeds up assimilation by
one end user, it is not clear that it accelerates
diffusion throughout the economy. Diffusion usually
requires that a new technology be embodied in Soviet-
produced equipment-a time-consuming process that
often demands considerable research and develop-
ment. The USSR seldom begins such R&D work until
assimilation of imported plant and equipment is well
under way or even complete. This is usually some two
to seven years from the initiation of interest by the
In the
USSR
In the
West
1.5
0.8
5.2
2.3 to 3.0
6.7
3.1 to 3.8
15.0
a Soviet Absorption of Western Technology: A Survey of West
European Experience, by Malcolm Hill and Philip Hanson, Stan-
ford Research Institute, December 1978 (a survey of 31 projects).
b Initiation of production is an earlier stage than the attainment of
normal-capacity operation, the stage cited in our source for Soviet
indigenous development in the chemical industry.
V. S. Sominskii (survey of 132 projects); referred to in Trade and
Technology in Soviet-Western Relations, by Philip Hanson, New
York, Columbia University Press, 1981, p. 79.
The large difference in the time required to put new
technology (domestic or foreign) into operation in the
USSR and in the West is also indicated by the
interval between the application for an inventor's
certificate on new technology and first use of that
technology. For instance, a 1979 Western study com-
paring the implementation of inventions in the USSR,
the United States, and West Germany showed that 50
percent of those sampled had been implemented after
little more than a year in the two Western countries
and after over three years in the Soviet Union.' At the
end of two years, 66 percent of the sampled. US
inventions had been implemented, 64 percent. of the
German, and only 23 percent of the Soviet.
Soviet end user (Stage 1).
Additionally, there is evidence that the Soviets some-
times-perhaps frequently-fail in their attempts to
accomplish diffusion (Stage 6).' 1
successful diffusion of an import within
the civilian economy is rare.
imported Western technology has not produced dra-
matic changes in the economy, and technological
advances in Soviet industry continue to depend pri-
marily on domestic research and development.
At least three Western studies have shown that in the
Soviet chemical industry a high level of imports,
' It is important to note that the Soviets import for a wide variety of
purposes, including alleviating bottlenecks and supplementing do-
mestic production, and thus do not try to diffuse all imports
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continued over a. long period of time, has tended to
perpetuate dependence rather than end it.
despite a need for specialized
equipment (which the chemical industry has been
importing for the past 20 years), the machine-building
industry has made only limited progress in its produc-
tion. This prolonged dependence ensures a continued
lag of Soviet technology behind that of the West. Both
Western and Soviet observers have noted that even if
a new technology reaches Stage 6 in the Soviet Union,
it often has taken so long that the diffused technology
is obsolete
Moreover, the Soviets evidently are not improving
with experience. A statistical test-based on survey
data from Western businessmen collected in Philip
Hanson's chemical industry study of 31 projects-has
indicated that leadtime performance has not improved
over the last 20 years, despite Soviet industry's in-
creasing familiarity with the same Western firms.6 F
The Soviets themselves seem dissatisfied with their
leadtime performance. Articles drawing attention to
uninstalled or malfunctioning imports often appear in
the Soviet press. One such article concluded that the
actual time from plant commissioning to attainment
of full capacity can be up to 50 percent longer than
the planned time. A Soviet engineer has estimated
that a large share of all foreign equipment is almost
useless because it is delivered so late that it no longer
fits in with the enterprise's plans. These problems
persist, even though the Soviets seem to assign higher
priority to the assimilation of Western equipment
than to that of domestic equipment (see inset). F_
Determinants of Leadtimes in Each Stage of the
Import Process
Stage 1: Discovery of Western Plant or Equipment
The Soviets have developed a massive and effective
system for collecting and disseminating information
on Western technology. The key organization in this
effort is the large Moscow-based All-Union Institute
for Scientific and Technical Information (VINITI). It
collects Western materials in scores of technology
areas and distributes compilations (usually monthly)
to R&D institutes and ministries throughout the
country. The VINITI documents are supplemented by
material from other Moscow-based clearinghouses,
reports filed by Soviets who have traveled abroad, and
subscriptions to Western journals.
The distribution system functions smoothly, but its
usefulness is to a considerable degree offset by certain
impediments. For example:
? A thorough grasp of the Western data often depends
on instruction that can be provided only by direct
personal contact with suppliers-which the Soviets
often forbid or sharply limit.
? The scope of technologies in which the Soviets have
trading interests is too great for the relatively
limited number of import decision makers to ade-
quately grasp through their own efforts. (These
decisionmakers are primarily officials in Gosplan,
GKNT, the Ministry of Foreign Trade, and Mos-
cow- or Leningrad-based ministerial offices who are
far removed from the day-to-day activities of pro-
duction and R&D enterprises.) Therefore they must
rely on these enterprises to accomplish the bulk of
the review of Western literature and to submit
pertinent information and recommendations to
them. These enterprises, however, may distort the
information they give to the decisionmakers-or
even withhold information-in order to escape pres-
sure to innovate.
Central authorities attempt to counterbalance this
reluctance to innovate through a combination of
administrative direction and tinkering with incentives.
The former are generally annual "innovation targets"
levied on a ministry and its constituent enterprises.
The latter involves modifying economic or organiza-
tional mechanisms to provide incentives without
changing the basic command structure of the system.
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The high priority assigned to assimilation of Western
equipment is evidenced by a decree issued in Septem-
ber 1979. This established a basic bonus of 3 percent
of the total value of construction and installation
work for on-time project completion and provided a
25 percent increase to this bonus for projects using
large amounts of imported equipment. In October
1983 a separate resolution was issued ordering minis-
tries to ensure that imported equipment is put into
service and brought up to capacity operation within
the warranty period.
Soviet officials have recently criticized the foreign.
trade organizations forfoot-dragging in their negotia-
tions with Western suppliers. This suggests continu-
ing attention to the problem of import leadtimes.
Whether inspired by the carrot or the stick, however,
innovation tends to be conservative, even when it is
genuine. Since many production managers view West-
ern companies (especially West European and Japa-
nese) as more reliable than Soviet suppliers, they often
choose importing as a way to meet innovation targets.
Ministries, for the most part, try to inaugurate new
technologies in new facilities; because innovations in
an existing plant often require production adjustments
that threaten its ability to satisfy its existing perform-
ance indicators. Furthermore, new facilities increase
the size and prestige of the ministry
Stage 2: Request for Funds
After enterprise or ministry officials have identified a
potentially useful import, they begin the process of
getting approval to enter into trade negotiations. This
is usually complex and protracted, except for imports
deemed by central authorities to have high priority.
Even seemingly sensible centrally directed measures
often go awry, however, in the prevailing sellers'
market, where chronic shortages force buyers to take
what they can get. For example, guaranteeing a
higher price for a new product stemming from innova-
tion often leads to "gold-plating"-pseudo-innovation
in which a manufacturer represents as new or im-
proved a product that has in fact had only a cosmetic
change. The combination of centrally controlled allo-
cation of resources and the weak bargaining position
of buyers enables such activity to spread widely. C
Even though disincentives far outweigh incentives for
innovation, not all innovation targets are met through
deception. There are some reasons-although not
many-for enterprise managers to pursue real innova-
tion.
Genuine innovation probably helps ministerial and
enterprise officials gain attention from higher authori-
ties and thus enhances their career prospects. In a few
cases, managers may be forced to introduce real
change in response to centrally exerted pressures.
These pressures are applied at the enterprise level
through an Enterprise Technical Council, which mon-
itors the enterprise's technical achievements and re-
ports to the ministry. The enterprise also has a fund
for innovation, and management has an incentive to
make it appear that this fund is being used well. F_
the applica-
tion to purchase machinery must demonstrate that the
import is needed, that the USSR has no suitable
substitute, and that money would be saved by the
purchase. The application must include statements
from relevant Soviet ministries that they cannot pro-
vide the equipment in the required quantity, quality,
and time
The actual purchase justification is submitted first for
ministry review and then (if tentatively approved) to
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typed pages.
such a document may contain up to 25X1
Developing a purchase justification is a time-consum-
ing procedure, generally requiring the following steps:
? Consultations within an enterprise's design bureau
or between it and other interested organizations to
formulate a "first cut" technical specification.
? Submission of technical specifications to a ministry
technical review committee with an explanation of
the purpose of the import, for preliminary approval.
? Resubmission (after preliminary approval) with a
detailed funding request and the documents showing
that the technology is not available from domestic
sources.
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The ministry's technical review committee evaluates
the justification request and either denies it or sends it
forward for funding. If approved by central authori-
ties, the funds are usually included in the ministry's
annual plan. Since plans are formulated three to six
months before they go into effect, a significant
amount of time can be lost in the budgeting cycle.
long as 18 months may elapse between ministry
approval and the beginning of negotiations with the
foreign supplier. (Similar delays can be expected for
projects involving domestic resources, since they must
usually go through this same application process.)
Inertia seems to be a major determinant of budgeting
for imports.
industrial ministries
routinely win renewal of yearly allotments for imports
at a nearly constant level. However, the central
authorities tend to place requests for increased or new
funds at the bottom of their priority list, and if the
funds are approved the lag before import negotiations
begin is generally longer than for renewal requests. In
many instances, addiction to routine, coupled with
tightening hard currency constraints, apparently takes
precedence over the need for new technology from
Stage 3: Negotiation With Western Suppliers
UNCODEDirge Soviet foreign trade organization like
Mashinoimport is responsible for conducting some
10,000 trade negotiations annually-many more than
its staff can handle expeditiously. This problem is
recognized by Soviet authorities.
(Once
negotiations do begin, they typically take three times
as long as in the West-for several reasons, including
the need for approval from multiple sources. An
import order may need as many as 18 signatures.
The bureaucratic and geographic separation of the
FTO negotiating team from the Soviet end user also
stretches out the process. The FTO is qualified to
pursue commercial negotiations, but usually not the
necessary technical discussions. Since end users are
not often part of the formal negotiating team, special
arrangements must be made for their participation.
This requirement prolongs leadtimes by making the
commercial and technical aspects of the negotiations
relatively distinct and sequential, instead of overlap-
ping. Still, cases exist where the end user does not
participate in the negotiations at all (see inset).
Leadtimes are further lengthened in Stage 3 by the
incentive system for FTO negotiating teams. This
usually emphasizes economizing on foreign exchange,
obtaining favorable financing, and extracting price
concessions. Negotiations to achieve these objectives
are often time consuming, even though the interests of
both individual end users and the economy as a whole
might be better served by speedier import of the
technology being sought.
Leadtimes are also prolonged by the exclusion of
foreign advisers from most projects. Western compa-
nies find it difficult to supply all relevant instructions
and documentation because of the Soviet reluctance
to supply information on how and where the import
will interface with existing systems and plants. For
example, the Soviets significantly limited Western
suppliers' visits to the Kama River Truck Plant and
withheld drawings of the buildings in which the
imported equipment was to be installed.
To get as much as possible out of this one-way flow of
information, the Soviets often demand vast amounts
of documentation.
)a typical proposal prepared by his company to
oviet specifications filled a box of approximately 36
cubic feet. Furthermore, an FTO normally sends
inquiries to a fairly large number of competing West-
ern firms (in the case cited, seven) and must usually.
study all their proposals before it selects the firms
with which it will negotiate further.
Great detail is later required in the contract itself
in the operating instructions.
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Because of information transmittal problems result-
ing from bureaucratic and geographic separation,
FTOs may order equipment that the end user cannot
use.
expensive "automated furnace" equip-
ment purchased for the iron foundry at the Kama
River Truck Plant has never been installed, because
it was not requested by foundry managers and is
inappropriate to their needs. In another case,
the Ministry of Foreign
Trade failed to include representatives
to the negotiating team sent to purchase ccom-
p equipment-even though the Ministry was not
familiar with his enterprise's special requirements.
As a result, the computerized banking system that
the Ministry purchased from France proved to be "a
colossal failure, because it was designed for a capital-
ist system and could not be adapted to Soviet needs."
Two other Soviet tendencies can cause delay at the
negotiation stage. One is to word an initial inquiry so
vaguely that many Western firms do not realize they
have been asked to make a proposal, and the other is
to interrupt negotiations for substantial periods with-
out warning or explanation.
Stage 4: Delivery, Installation, and First Use
Leadtimes in Stage 4 are long; the overall leadtime
from initial contact to first use of the import is often
three to four times the normal leadtimes in the West,
according to Western studies of the chemical and
machine tool industries.' Soviet literature is replete
with examples of poorly formulated shipping sched-
ules, inadequate port facilities, and shortages of do-
mestic transport-all of which tend to stretch out
delivery of imports to the end user
Another cause of delay is the fragmentation of au-
thority. Domestic shipping channels are so arranged
that imports must be cleared through a number of
' Soviet Absorption of Western Technology: A Survey of West
European Experience, by Malcolm Hill and Philip Hanson, Stan-
ford Research Institute, December 1978, and Soviet Absorption of
Western Technology, by Heinrich Vogel and Karl Rothlingshofer,
checkpoints, each under a different jurisdiction, be-
fore final delivery. This multiplies the opportunities
for bureacratic delay.
Once the import arrives, the Soviet end user faces a
whole new set of obstacles. If the plant is new, the lag
associated with installation is particularly lengthy-
primarily because of problems in the construction
the purchasin
officers who select imports for new plants and arrange
for their delivery must do so during the planning
stages of the project-years before the plant will be
ready for installation of equipment. However, 50
percent of all construction projects are completed
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behind schedule (even though the schedule is anything
but demanding).' As a result, the Western producer 25X1
often delivers equipment long before the construction
of the plant is at the stage where it can be installed.
A recent example wasl la .
Western firm that supplies oil production equipment
to the USSR. The Soviets insisted that production
units for a Caspian Sea project be delivered in 1984,
even though drilling was not scheduled to be complet-
A plant presumably can adjust a domestic delivery
schedule more easily than it can revise an internation-
al contract. Thus, the lack of coordination between
equipment deliveries and plant preparation probably
is greater when the equipment is imported
Even if the plant is built and already producing, the
lag in installing imported equipment can still be
significant; it often has been the subject of criticism in
the Soviet press. The chemical industry's handling of
imports was derided in a Pravda cartoon of August
1981 showing a plant buried under crates of machine
tools. The accompanying narrative stated that the
8 Major reasons for this are the low cost of construction investment
funds and an incentive structure that rewards a new construction
start more highly than a job completion.
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Novopolotsk Production Association "Polimer" had
not made any use of imported equipment valued at
674,000 rubles and that in 1969 the Usolskiy "Khim-
prom" Association had received imported equipment
worth 650,000 rubles that had never been installed
and had, in fact, deteriorated beyond repair while in
storage. In 1979 Soviet authorities checked 45 petro-
chemical complexes and found 24 at which equipment
awaiting installation was lying unprotected. Such
negligence results from a host of problems-many of
which affect the handling of domestic as well as
imported equipment.'
'These general problems include lack of tools, unpredictable fluctu-
ations in the labor force, slow decisionmaking, a general lack of
Still another important factor can prolong leadtimes
in Stage 4: a reported Soviet procedure of sometimes
requiring that 80 percent of total equipment be
delivered before installation begins. Because deliveries
for new plants (or for major renovation projects in old
plants) are often spread out over many months or
years, equipment that could have been installed may
instead lie deteriorating pending arrival of additional
shipments.
Stage 5: Assimilation
the intervals between first
use of imported equipment and its use at rated
capacities are frequently 50 percent longer than Sovi-
et planners consider normal. There are two main
reasons for this:
? Difficulty in finding reliable suppliers for the mate-
rials and equipment necessary to install and service
the new technology. This reflects, in part, the
characteristic tautness in Soviet plans.
? Faulty coordination among central planners with
responsibility for different phases of the same
project.
A current example of poor planning has a supplier
plant and an end-use plant being built at the same
time (each by a Western contractor), over 900 kilome-
ters (km) apart. This distance greatly increases the
probability of delivery problems.
if the two plants were constructed in the
West, they would be no more than 15 km apart. F
Because supply uncertainty is more the rule than the
exception in the USSR, Soviet enterprises tend to
produce in house the items they really need. This
inefficient practice can cause downtime and equip-
ment malfunctions that, among other negative conse-
quences, can delay the achievement of rated capacity.
When new technology-foreign or domestic-is used
in a new enterprise, managers may attempt to mini-
mize the risk of failure by altering the criteria used to
monitor their performance. They can do this, for
example, by deliberately operating at less than opti-
mum rates, out of fear that higher rates may convince
superiors to set more demanding norms.
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The difficulty the Soviets have experienced in mesh-
ing imported and domestic machinery is another
major cause of delay in Stage 5. In some imported
ammonia plants, for example, incompatibility of do-
mestic and foreign machinery has caused equipment
malfunctions resulting in significant production de-
lays. Other industries have been affected as well. The
failure of domestic and foreign equipment to dovetail
has been a major problem since 1980 at the Nairit
Production Association. This incompatibility delayed
the opening and impeded the subsequent smooth
functioning of a synthetic rubber production line
there. Furthermore, in 1982 it caused a pollution
accident that prompted local sanitation authorities to
order production stopped until the necessary repairs
were made; this task was scheduled to be completed
by the end of the current five-year plan.
Malfunctions in imported plant and equipment often
stem from the processing of low-quality or otherwise
unsuitable materials and from inadequate preventive
maintenance. Examples include the breakdown of
imported machinery when it was used to make parts
from steel with too great a tensile strength or parts
that exceeded permissible dimensions and weights. A
Western bearing cage production line at a Soviet
plant went out of commission because of the use of
inferior Soviet bronze.
Another important constraint on putting imports into
service promptly is the Soviet reliance on technical
documentation for learning how to use equipment. A
good example is the experience the Soviets have had
in trying to use the IBM Information Management
System. This was imported in 1974 but,
has never
worked well-mainly because the Soviets have used
only the written instructions. These are incomplete
because IBM expects to send its own people to help
end users-an offer rejected by the Soviets.
Whatever the cause of equipment malfunctions (lack
of information, poor maintenance, improper raw ma-
terials, or labor problems), their effect depends on how
quickly the Soviets can get the equipment working
again. Here their record is poor. Even when they do
allow Western technicians to service imported equip-
ment, bureaucratic meddling often delays the work.
it is usual
practice to buy few or no replacement parts to avoid
spending foreign exchange. Therefore, a breakdown of
the simplest part can cause an extended delay as
replacements are ordered from the West or fabricated
locally. This problem-a major source of delays-
occurs more frequently as equipment ages. Recently
one-half of the 50 Western-made bulldozers used by
the Lenzoloto Production Association gold-mining
facility lay idle because of a lack of spare parts.
shortage has kept many of the imported US pipelay-
ing machines-critical to the USSR's petroleum in-
dustry-out of service for extended periods. The
problem also plagues oil drilling activities.
worst
it is getting wo 25X1
spare parts portions of recent import contracts for 25X1
the petroleum drilling industry have in many cases
been cut by over 50 percent. I --I 25X1
Stage 6: Diffusion
Successful diffusion usually requires becoming inde-
pendent of imports by producing the equivalent plant 25X1
and equipment domestically. This arduous technical
task is becoming increasingly difficult because of the
growing complexity of the imports. In many cases the
Soviets lack the skills and materials needed for series
production of similar items. Additionally, Soviet re-
searchers do not always have access to the types of
equipment and resources used in the West and thus
have difficulty achieving the necessary quality stand-
ards
in
the late 1970s the research staff at the Mechanical
Project Institute for Oil and Water Equipment in
Moscow spent several years trying to develop a sub-
mersible pump for use in oil, wells. The staff took
apart a number of US pumps and attempted to copy
them with minor modifications. The major stumbling-
block was the refusal of Soviet industrial officials to
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supply the materials on whicl. the quality and durabil-
ity of imported pumps depended. Staff engineers were
amazed that US companies could easily obtain nickel
and other metals for their pumps, since Soviet strate-
gic metals are reserved primarily for direct defense
applications
Soviet failures in diffusing imported technology result
not only from organizational mismanagement and
inferior technological capability, but also from the
practice of keeping existing facilities and equipment
in use far longer than in the West. Demand is so great
that old and inefficient plants can still sell their
output and continue to operate. Thus, there is a
significant variation in physical configuration, equip-
ment, and performance standards between plants
producing the same goods. These variations doom to
failure most attempts to force-fit to one plant the
complex imported equipment that works in another.
Even when the Soviets have successfully diffused
imports, their leadtimes, compared to those in the
West, have been extremely long. Long lags in Stage 6
are not unique to imports, however: many of the same
influences also impede the diffusion of domestic tech-
nology
The successful adaptation of imports for use as
Soviet-made products must begin with R&D concepts
that are workable, but the geographic and bureau-
cratic separation of most R&D organizations from
end user plants deprives the R&D employees of full
knowledge of the environments within which their
concepts must work. The R&D incentive system in the
USSR, which usually allows bonus payment before an
idea is translated into production, does not encourage
the R&D employee to seek such knowledge. This
partially explains the significant gap between research
and application in the USSR.
The Soviets have attempted to close this gap and
speed up the innovation process through the use of
scientific-production associations (NPOs) that bring
research, development, and production responsibilities
together under one roof. They claim that the NPOs,
which currently number more than 250, have reduced
leadtimes by 50 to 65 percent. They probably are
referring, however, to the time between the R&D
phase and first use. in the NPO plant, not between
R&D and economy-wide use. Additionally, NPOs are
often assigned normal production quotas by their
industrial ministry bosses, in addition to their experi-
mental work toward speeding up innovation. Some-
times they have even been ordered to cease experi-
mental work altogether in order to make up for losses
of production elsewhere in the ministry.
The efficiency of Soviet R&D institutions in formulat-
ing workable concepts is also impaired by the low
quality (and sometimes virtual absence) of support
services and equipment. A Soviet survey of 300 design
institutes in different branches of industry showed
that 85 percent of them copied designs and technical
drawings by hand.
Ithe Soviet Union has
only 20,000 to 30,000 photocopiers-a small fraction
of the number that a Western country of equivalent
size and development would have. This is a symptom
of a more general Stage 6 problem
and very poor manufacturing capability to produce
new types of industrial-scale equipment
Misallocation of R&D labor resources also.lengthens
leadtimes. This problem has two parts. First, most
well-qualified scientists, for prestige and other rea-
sons, pursue theoretical work in research institutes-
which are not the prime movers in applied R&D and
diffusion. Second, the successful performance of pilot
plants developed to manufacture prototypes requires
performance and prolonging leadtimes.
about the same pay as the less taxing work in a
production plant and that the pilot plant workers have
smaller "bonus pools" than those in production. As a
result, the innovating sector cannot attract the talent-
ed workers it needs-significantly weakening R&D
After workable R&D concepts are formulated and
pilot tested, there is still no assurance they will ever be
introduced into serial production. The R&D establish-
ment, for the most part, lacks the authority (even
when it has the desire) to force implementation of its
recommendations over the objections of plant manag-
ers.
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Examples of Gains From the Use of Western
Equipment
? The Soviets could never have accomplished their
ambitious 15 year program of modernization and
expansion in the motor vehicle industry without
Western help. The Fiat-equipped VAZ plant, for
example, produced one-half of all Soviet passenger
cars when it came fully onstream in 1975; and the
Kama River Truck Plant, which is based almost
exclusively on Western equipment and technology,
now supplies nearly 50 percent of Soviet output of
heavy trucks.
? Large computer systems and minicomputers of
Western origin have been imported in large num-
bers-1,300 systems since 1972-because they (a)
have capabilities that the Soviets cannot match and
(b) use complex software that the Soviets have not
developed.
? Gear-cutting machines of US origin have been used
to produce military trucks, wheeled armored vehi-
cles, and components for missile transporters, and
US technology acquired for the Cheboksary tractor
plant was used to make a new 12-cylinder tank
engine.
This weakness results, in part, from the absence of a
single body to coordinate the diffusion process. The
State Committee for Science and Technology super-
vises interbranch R&D, but its authority ends with
the preparation of a prototype; Gosplan handles the
serial production and distribution phases. With this
split, each organization under the nominal supervision
of the GKNT or Gosplan has tended to.become
parochial, creating barriers that inhibit the movement
of an idea through the stages from concept to produc-
tion.
The extremely slow pace at which imported Western
technology is generally assimilated and diffused in the
USSR sharply limits its contribution to the modern-
ization of the Soviet economy as a whole. Even in
some high-priority civilian areas-such as imported
gas-lift equipment used to maintain or increase oil
well flow rates-the protracted delays in acquiring
and installing the equipment have reduced the effec-
tiveness of its use.'? F____] 25X1
As the pinch on the USSR's labor, capital, and
natural resources tightens and the leading edge of
Western technology continues to advance, the Soviets
will continue to import Western technology and
equipment to alleviate bottlenecks and modernize
domestic industries. Even though effective diffusion of
technology might occur more quickly through indige-
nous development, Moscow will continue to rely on
imports because the USSR puts a greater premium on
satisfying current requirements for equipment and
technology than on potential long-term uses.
As in the past, some of these imports will raise the 25X1
technological level of specific industries and/or in-
crease the quantity and quality of their output, and
some may find application in Soviet weapons produc-
tion (see inset). 25X1
Nevertheless, Moscow will find it increasingly diffi-
cult to catch up with the general level of technology in
advanced Western countries by relying on imports of
Western plant and equipment. This is partly because
some imports embody technology that is not state of
the art and are bought simply to improve the average
quality of the USSR's own plant and equipment. Even
if the Soviets choose the most up-to-date technology,
however, imports stand little chance of eliminating
the Soviet lag behind the West, because:
? Widespread application of such imports probably
will be rare.
? If effective application ever occurs, it is likely to
take many years.
? Soviet engineers, having not gone through the de-
signing experience that underlies the imported
equipment, will be ill prepared to carry the embod-
ied technology to a still more advanced level.
10 In 1978 the Soviets contracted with a French firm (Technip) to
install gas-lift equipment in 1,800 wells at Samotlor-their largest
oilfield. Similar equipment was purchased for 600 wells at the
Federovo field. Completion of these projects was scheduled for 1985
but has been delayed for a year or two. If installed on schedule, this
equipment could have provided some 200,000 to 300,000 barrels
per day of oil output beyond that otherwise expected from these
fields. Because of the delay, however, the window of opportunity for
the most effective use of this equipment may have been missed,
because the water cut (the amount of water mixed with the oil) at
Samotlor and Federovo is now higher than optimal for extraction
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