LETTER TO THE HONORABLE MCGEORGE BUNDY FROM JOHN A. MCCONE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80B01676R003000100005-5
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: December 19, 2016
• Document Release Date: November 7, 2006
• Sequence Number: 5
• Publication Date: March 28, 1963
• Content Type: LETTER

?
arch 1963
The honorable McGeorge:-
pedal . s sistant to the Pre*ideat for
Na. ional Security Affair.
The Whits House
Dear Mac:
I am. attaching for your ps rsooal attention a copy
rnorand rn done by our intelligence analysts
on the current phase of Soviet policy.
Sincerely
I C,
John A. McCone
Di"cter
T TElder: bd (28 Mar 63)
Orig and att - Add
1 - DCI Chrono w/cy alt
1 - DCI White House
T:-~)ER w/cy atNVI
i eaDGL Chrono
4
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THIS MATERIAL CONTAINS INFORMATION AFFECT-
ING THE NATIONAL DEFENSE OF THE UNITED STATES
WITHIN THE MEANING OF THE ESPIONAGE LAWS,
TITLE 18, USC, SECTIONS 793 AND 794, THE TRANSMIS-
SION OR REVELATION OF WHICH IN ANY MANNER TO
AN UNAUTHORIZED PERSON IS PROHIBITED BY LAW.
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18 March 1963
CENTRAL INTELLIGENCE AGENCY
MEMORANDUM: Soviet Policies: The Next Phase
1. A number of recent developments suggest
that the Soviet leaders have completed a post-
Cuban policy reassessment and decided on a.gen-
eral line of action. The new Soviet course `rests
on decisions to defer once again any redistribu-
tion of resources away from the defense effort
to consumer goods programs. Moreover, military
programs may have been adopted which would affect
investment for general industrial expansion and
thereby slow general economic growth.
2. Such decisions should have important for-
eign policy implications. There is a recognition
that a "pause" is required in international af-
fairs while the Soviets attempt to build up their
military strength. During this phase the internal
stress on sacrifice will militate against any re-
sumption of detente, any imputation of good in-
tentions to the West.
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OCI No. 1096/63
MEMORANDUM: Soviet Policies: The Next Phase
1. Khrushchev has given the Soviet people a
gloomy forecast of their lot and of Soviet pros-
pects abroad for some time to come. His election
speech of 27 February and subsequent private re-
marks to Western diplomats suggest that a post-
Cuban policy reassessment has been completed and
a general line of action decided.
2. The new Soviet course rests on the leader-
ship's "difficult" decisions concerning the serious
problem of allocating economic resources. As in
1961 and 1962, Khrushchev has been forced once
again to defer any attempt to redistribute resources
away from the heavy industries supporting the de-
fense effort to the consumer goods program. He
has justified this on the ground of an ominous in-
ternational situation and the increasing importance
of keeping up in the arms race, lest the "balance
of power" shift decisively against the USSR. In
his speech the Soviet premier acknowledged that
the "national economy" is growing more slowly be-
cause "reality" dictates a concern for defense re-
quirements involving "enormous sums" and "enormous
resources." In an unusually frank statement Khru-
shchev said that maintaining this defense program
"diminishes, and cannot but diminish" the prospects
for the consumer.
3. Khrushchev is still committed to a "balance"
between the competing sectors, but for the present
the proponents of defense clearly have won the
struggle with the advocates of more investment for
agriculture and other consumer-oriented sectors.
How long this solution will prevail is not clear,
but Khrushchev implied a long-term effort was re-
quired to improve the USSR's military position. The
arms race will "obviously continue" for a long period;
old armaments will have to be renewed "all the time."
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The Soviets cannot afford to underestimate military
requirements, as Stalin did in 1941, but must be pre-
pared for the decisive "initial period" of the war,
to strike a retaliatory blow "on the very first day."
4. The general direction of Soviet economic and
military policy seems to have been defined, but the
precise implications are not clear. The Soviet eco-
nomy is capable of bearing the defense burden en-
visaged by Khrushchev, but at the cost of again post-
poning any substantial rise in living standards and
perhaps risking further decline in the future rate
of industrial growth. When last year's mediocre
agricultural results are considered along with the
reaffirmation of defense priority, it,:is probable.
that there will not be a significant improvement in
living standards in 1963. Beyond the question of
consumption, Khrushchev's remarks raise the possi-
bility that military programs have been adopted
which will affect investment for general industrial
expansion and thereby slow general economic growth.
5. Khrushchev's statements have an air of
finality, but he probably came to these decisions
reluctantly; the problem of resource allocation will
continue to plague the leadership and it: is prob-
able that sooner or later this question will be re-
opened. Indeed, on 3 March a top planning official
published an article repeating Khrushchev's earlier
argument for a shift of resources away from heavy
industry toward consumer-oriented sectors. If con-
sumers react to future disappointments with mani-
festations of discontent on the scale of 1962, this
line may acquire greater force. However, the pro-
ponents of defense, having prevailed again in the
policy debates, are in a strong position to win
future arguments and even put forward new demands.
6. The overall impression given by Khrushchev
is that the developments of the past three years
have finally brought him to abandon for the indefi-
nite future his 1960 hopes for easing the military
burden on the economy through streamlining the mili-
tary establishment. While we still think Khrushchev
may one day reopen the question of force reductions,
he clearly does not think it feasible to push any
drastic measures of this sort at this time. This
speech and his private remarks are clues that the
Soviets have found no inexpensive weapons system or
low-cost strategy to satisfy their military require-
ments.
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7. That Khrushchev has opted for such a program
should have some important implications for Soviet
foreign policy. First, it reflects a further decline
in confidence and expectations, already increasingly
apparent in the last two years and, in our view, an-
important part of the motivation for the Cuban ven-
ture. Second, there is the recognition that a "pause"
is required in international affairs, while the So-
viets attempt to repair their position. Third, there
is the appreciation that real military strength is
still the vital ingredient in the balance of power.
Fourth, the internal stress on sacrifice tends to
militate against any resumption of detente, any im-
putation of, good intentions to the West.
8. The Cuban crisis has, then, been a turning
point. In effect, Khrushchev seems to have decided
that the "world relation of forces" no longer supports
the broad political offensive he initiated in 1957.
His fundamental calculations about "contradictions"
in the Western alliance, the growth of Soviet economic
and military power, the cohesiveness of the socialist
camp, and the outcome of the revolution in the under-
developed world have proved.errOneous in some degree. Con-
fronted with these failures, Khrushchev could have
chosen to attempt some accommodation. with the West,
seeking settlements of some contentious issues. This
would gain time to concentrate on Bloc and internal
problems and to build up Soviet arms, and would prob-
ably contribute to the strains in the Western alliance
as the Soviet threat seemed to recede. But Khrushchev
seems to have ruled out this approach, at least for
now. Instead, he has justified his economic and mili-
tary policy on the basis of a threatening international
situation, which suggests that he intends to invoke
the "foreign devil.'.' Thus the present phase is likely
to be one in which the atmospherics of propaganda
will'not be congenial to East-West negotiations.
9. This does'not mean, however, that hostile
atmospherics will be accompanied by aggressive
actions. There is nothing in the lessons of Cuba
which warrants an optimistic Soviet view of the risks
in forward action. On the contrary, the one point
which comes through clearly in Soviet pronouncements
is a painful appreciation of US power and determina-
tion. Whereas Khrushchev earlier seemed to accept
new chances for direct encounters with the US, first
in the Congo, then in Laos, Berlin and Cuba, he. now
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appears sobered by the thought that the US was on
the verge of attacking Soviet forces in Cuba, and
appalled at the options of having to counterattack
or accept humiliation. The chances of Khrushchev
making a second such dangerous misjudgment have
been considerably reduced, even though the pres-
sures which must have contributed to this initial
miscalculation remain operative.
10. It is only logical that the end of this
offensive phase should be symbolized by the shelv-
ing of the Berlin issue as a more or less continuous
crisis. This is substantially what Khrushchev did
in his speech of 16 January. His subsequent re-
marks reflect little optimism about the possibility
of a negotiated settlement advantageous enough to
justify a demonstrative end to the Berlin crisis.
Rather it appears that Berlin will remain as an is-
sue for agitation and propaganda, if only to sus-
tain the general contention that the international
situation remains tense. Moreover, without a settle-
ment the Soviets retain the opportunity to make some
minor enroachments on the Western position, to make
occasional new moves to aggravate current Western
differences, or to seek better terms for a settle-
ment if governments change in Bonn or London. Finally,
if the current respite is conceived of as a temporary
retreat, then Berlin will still bea.crucial issue to
test Western resolve and prove Soviet power in new
circumstances.
11 Talks on disarmament and nuclear testing
will probably continue for a time, but : there is
not likely to be a great Soviet interest in serious
dealing on disarmament. It is even possible that
the USSR will eventually disrupt the Geneva nego-
tiations, as they did in 1960, when they feel the
need for a further demonstration of the ominous state
of world affairs. The Soviets are averse to nego-
tiating when they regard their position as inferior,
or when they cannot bring outside pressures to bear.
The next phase of Soviet disarmament policy, there-
fore, is likely to be confined to agitation of those
partial measures which would inhibit Western defense
and disrupt NATO planning for the sharing of nuclear
weapons.
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12. As to the test ban, the Soviet position
has apparently hardened since Khrushchev's 19
December letter to President Kennedy. Moscow
professes to have understood that the US was pre-
pared to settle for 2-3 inspections. But more
important than the actual number of inspections
were certain implications that a test-ban agree-
ment would have at this time. The present unyield-
ing Soviet stand is based on the judgment that,
with the Chinese charging a sell-out and the So-
viet populace being called upon for sacrifices,
this is no- time to encourage hopes for an East-
West detente. In addition, the Soviets probably
realize that the time has passed when a three-
power test ban would pose a real obstacle to the
spread of nuclear weapons. Finally, the Soviets
may now see the need to,maintain a free hand to
test again.
The Underdeveloped Areas
13. If the Soviets now expect to make no
major breakthrough in Europe, then it will become
more important to compensate elsewhere in the
world, or at least to make sure that further losses
are quickly and effectively contained. The under-
developed areas will continue to be a crucial arena
in the contest with the West, but it is becoming
more and more apparent to the Soviets that prospects
for further. significant gains in any near term are
very mixed indeed. The Soviets are finding that
it requires full-time effort just to keep the in-
fluence they have, let alone develop new opportunities.
The Sino-Indian dispute demonstrates that a non-
aligned country, when it is subjected to pressures
by a communist country, can quickly develop strong
pro-Western attitudes; the events in Iraq suggest
that even the most extensive Soviet influence is
subject to rapid deterioration, while in Guinea a
process of erosion of Bloc positions is already
well along. All this is at a time when the need
to mobilize various international combinations
against the West is greater than ever.
14. The experience of the last six or seven
years has taught the Soviets that most nationalist
leaders are reluctant to bring local Communists
into their governments and are frequently ready to
turn on them with repressions. The Soviets lack
prompising alternatives, however, since in very few
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cases are the local parties strong enough to attempt
a seizure of power on their own. The USSR's recent
shrill responses to Iraqi developments and recent
denuciations of anti-communist moves in Algeria and
Tunisia suggest current frustration on this score.
Thus in some cases the Soviets may concentrate upon
building local communist strength, even if this risks
some injury to their relations with the nonaligned
governments. Strong factors in this approach may
be the threat of Chinese Communist proselytizing
among the parties of underdeveloped areas, and Cuban
ambitions to lead the revolution in Latin America.
15. The internal policies enunciated by Khru-
shchev, and their implications for foreign policy,
ought to be cause for some satisfaction in Peiping.
The Chinese would welcome Soviet adoption of a harsher
tone toward the West and a turning away from serious
negotiations. Nevertheless, we doubt that anything
better than a superficial and temporary truce could
result from the present exchange of proposals for a
bilateral meeting. The Chinese editorials of 27
February and 4 March, which followed receipt of the
Soviet letter, make it clear that Peiping is deter-
mined to break the Soviet hold on the international
communist movement; the more the USSR adopts policies
which resemble those urged by China, the more China
is likely to press futher demands (e.g., acceptance
of Albania, rejection of Yugoslavia) and assert its
own leadership of the world revolution. Thus, even
though the Soviets will in the coming period see
an advantage in quieting down public contention and
may proceed toward a meeting, Chinese terms are so
high, and Chinese polemics so fundamental and bitter,
that at some point the Soviets must resume the of-
fensive.
Some Factors of Uncertainty
16. Even if Khrushchev has settled on a policy
line for the present phase, it could be completely
upset by several factors. First, there is the Cuban
problem: as long as the Soviets maintain their mili-
tary presence in some size in Cuba, they are vulner-
able to American pressures, which for Castro's sake
and the sake of their own failing prestige they are
obliged to resist. If the Cuban crisis should flare
up again, it would overshadow all other East-West
issues and have important effects on other aspects
of Soviet policy.
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17. Second, the decision that the consumer pro-
grams must continue to give way to military needs
stores up problems inside the Soviet Union which will
probably require new and perhaps even more painful
reappraisal in the future. There is a wide range of
internal issues -- de-Stalinization, handling of in-
tellectuals, resource allocation, party-military re-
lations, and the party-state economic reorganization--
which may add up to considerable turmoil within the
top leadership. These divisions probably have not
been fully resolved by recent decisions and the chances
are good that Khrushchev will continue to be under
conflicting pressures, and that Soviet policy may
correspondingly fluctuate.
18. A third source of further policy shifts is
developments in the Western alliance. An aggravation
of divisions in Europe and between Europe and the US
will encourage the Soviets to revive their hopes and
pursue more actively the exacerbation of differences
in the enemy cu.mp. At a minimum, the present degree
of disarray probably already constitutes an argument
in Moscow against any substantial "pause" in Soviet
policy.
19. Khrushchev's present course appears to be
a long, hard pull, bound to increase a sense of
desperation and frustration. There remains a pos-
sibility that these pressures will force the Soviet
leaders to reconsider the advantages of some accomoda-
tion with the West. But the danger also remains
that Khrushchev will again be driven to break out
of this entanglement by some audacious move abroad,
even though this might appear risky or foolish.
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