PAPERS FOR THE PRESIDENT'S TRIP TO VLADIVOSTOK

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80B01495R000600040006-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 41
• Document Creation Date: December 19, 2016
• Document Release Date: August 24, 2005
• Sequence Number: 6
• Publication Date: August 13, 1974
• Content Type: MEMO

25X1
Approved For Release005/09/29 : (g]iT01
THE DIRECTOR OF CENTRAL INTELLIGENCE
Office of the Director 13 November 1974
PAPERS FOR THE PRESIDENT'S TRIP TO VLADIVOSTOK
These papers fall into three groups.
--Maps and data on the Vladivostok area.
--Short resumes on current Soviet policy
toward China toward the
Koreas plus
a summary o the Siberian development
projects.
--Three background papers on Soviet leadership
politics, on the political role of the Soviet
military, and on the workings of the Soviet
economy.
Nationa n e igence 01f
for USSR/EE
Distribution:
Cy 1 - DCI
Cy 2 - DDCI
Cy 3 - D/DCI/NIO
Cy 4 - DDI
cy 5 - D/OCI
Cy 6 - NIO/USSR
7 - NIO/USSR
NIO/USSR
SECRET
25X6
25X1
25X1
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 25X1 Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
Next 2 Page(s) In Document Exempt
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved Foi%Release 2005/09 ( PP80B01496RO00600040006-9
Vladivostok (the name means "ruler of the east") is the
largest and most important port city in the Soviet Far East.
It is located on Golden Horn Bay at the southern tip of the
hilly, wooded Murav'yev-Amurskiy Peninsula which extends into
the Sea of Japan. Direct access to the Pacific Ocean is
denied by Sakhalin and the Japanese Islands.
The city is only 70 nautical miles northeast of the USSR --
China -- North Korean border junction. For this reason, as
well as its strategic role, the city has been closed to non-
communist foreign visitors for a number of years. Vladivostok
is the headquarters of the Soviet Pacific Fleet, and subordinate
headquarters and naval facilities are located here and
in adjacent bay areas. The city is also a major commercial port.
Vladivostok's location on a sheltered bay, its terraced
residential sectors, and its general orientation to the sea
have moved some to call it the "San Francisco" of the Soviet
Far East. Uniforms and sailors' garb are a common street
sight.
A 1959 Moscow directive launched a major physical transfor-
mation of Vladivostok that is still going on. Former open areas
are filling up and apartment blocks are replacing sections
formerly occupied by old single-family cottages. Construction
also includes highways, cultural and educational facilities,
hotels, and light industries. A major development is the
establishment of the Far Eastern Scientific Center in the
northern coastal suburbs about 15 kilometers from the town
center. It includes the headquarters of the Far East Branch
of the Siberian section of the USSR Academy of Sciences. Other
institutes now housed in the city, such as that for oceano-
graphic research, will be moved to the Science Center as
facilities become available.
Approved For Release 2005/09/~4'I.C R1P80B01495R000600040006-9
 Approved Fo elease 2005/09/2 i P80B0149 000600040006-9
Shipbuilding and repair are major industries. Enterprises
servicing the navy and commercial and fishing fleets also are
significant employers. Other industries, such as metal working
enterprises, support local requirements for precast construction
materials plants and consumer goods enterprises.
Founded in 1860 as a military outpost, Vladivostok rapidly
developed into a significant commercial port as well, and in
1935 became the capital of Primorskiy Kray. The city has a
population of half a million, mostly Great Russians.
In 1880 the arrival of a steamship from Odessa inaugurated
scheduled service between Vladivostok and the Black Sea. Pas-
senger and freight service has since expanded to Pacific and
Arctic coastal cities. Construction of the eastern end of
the Trans-Siberian railroad began in 1891, but an all-Russian
route was not completed until 1914. Vladivostok was the
only port open for shipping allied material to European
Russia during World War I, and in World War II it again played
a major transshipment role for war material and foodstuffs
destined for Soviet military forces. .
Associations With the US
Vladivostok was occupied by allied forces during the
"intervention period" of the Bolshevik Revolution, 1918-1922.
The United States landed about 7,000 troops in August 1918;
these were withdrawn by April 1920. Their role was primarily
to protect and maintain lines of communication -- the Trans-
Siberian railroad. The Japanese intervention was more serious;
Japanese troops were in the city from April 1918 until late
1922 and used it as the base for penetrations deep into Siberia.
Under the Lend-Lease master agreement, more than 940
Soviet and Soviet-leased ships cleared American west coast
ports for Vladivostok. Between July 1943 and September 1945,
about 7 million tons of critical military items, industrial
goods, and foodstuffs were funnelled through the harbor, some
destined for Soviet troops in Manchuria fighting the Japanese.
Approved For Release 2005/09(JDP80B01495R000600040006-9
 Approved For Reuse 2005/09MPG.
%PLfqDP80BO1 495RA00600040006-9
The "Cold War" period left its imprint. A monument in
Zharikovsk Garden on Lenin Street marks the common grave of
15 passengers and 6 crewmen of a Soviet aircraft allegedly
shot down on 27 July 1953 by US aircraft.
Weather
Relatively pleasant, although cold, weather is highly
probable during late November. Clear skies and light northerly
winds generally prevail. Topcoast temperatures are characteristic,
with daytime highs about 40? F and nightime lows about 25? F.
Landfast ice formation is probable in protected bays. Gale
force winds are the exception at this time of year, and any pre-
cipitation is likely to be a brief rain shower. Visibility is 25X1
generally good as fogs are rare and industrial smoke is light.
Approved For Release 2005/09WS-C A bP80B01495R000600040006-9
 25X1 Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved For FRC a`
P/Nr:TP~DP80B0149500600040006-9
Large-scale investment in Siberia is a major element
in the Soviet 15-year plan (1975-1990) now on the drawing
board. Much of Soviet hopes for future economic growth
rest on the exploitation of Siberia's abundant resources,
and Brezhnev takes a particular interest in the program.
The Siberian projects also have major foreign trade impli-
cations, in terms of meeting Soviet export commitments
to Eastern Europe and generating output that can be sold
to hard-currency countries.
Siberian projects already approved--a few with work
actually under way--involve about $3.5 billion in foreign
investment, almost all Japanese or West'German. Moscow is
also actively seeking foreign investment over the next five
to ten years in projects still under discussion whose value
could exceed $10 billion. The US share might be two-thirds.
This is a level of capital and high-quality capital goods
for which Moscow actively seeks foreign assistance. Foreign
investment on this scale represents a significant policy
departure from traditional Soviet autarky. Additional
challenges, for which foreign technology is important, are
posed by the location of many of the richest Siberian de-
posits in remote areas and severe climate. (Other, sizeable,
non-Siberian foreign investment projects are also under
negotiation, of course.)
A. Energy Projects
1. Yakutsk Natural Gas
In 1973 the USSR signed a general agreement with
US and Japanese firms to develop natural gas deposits in
the Yakutsk region in eastern Siberia. El Paso Natural
Gas and Tokyo Gas have agreed on joint participation in
the exploratory phase.
Approved For Release'YUO 1Ji79'MA=RDP80B01495R000600040006-9
 Approved For IeeejsO*SlMT11P80B0149500600040006-9
The project entails the construction of a 1,200-
mile pipeline from Vilyuysk to Nakhodka on the Pacific
Coast, where facilities to liquefy and export the gas
would be built. Japan and the United States would each
receive 1 billion cubic feet per day (cf/d) of liquefied
natural gas (LNG)--less than 2% of US consumption--over
a 20-year period beginning about 1985. Roughly $3 billion
in Western plant and equipment would be supplied by the
US and-Japan and financed by long-term credits.
It is not clear that Yakutsk's reserves are
sufficient to justify such a large investment; three to
five years of exploration will be needed to verify the
reserves claimed by the USSR. The Soviets are asking
for $200 million in US and Japanese credits to support
this exploration. The Japanese have agreed to finance
half this amount, contingent on the availability of a
matching amount from the US Eximbank.
2. North Star LNG Project
A consortium of three US companies--Tenneco,
Texas Eastern, and Brown and Root--is considering a
cooperative venture with the USSR to import 2 billion
cf/d of LNG over a 25-year period for US east coast markets.
The gas would come from the large Urengoy deposit in Western
Siberia via a pipeline to an export terminal near Murmansk.
Difficulties over the pricing of the gas and the availability
of Western financing have hindered the negotiations. The
project depends on Eximbank credits and guarantees to cover
Soviet purchases of up to $2.5 billion in Western equipment.
Even if an agreement is reached soon, deliveries would not
begin until the early 1980s.
3. Natural Gas to Western Europe
In recent years the USSR has contracted to deliver
natural gas to Western Europe. By 1980 the volume will
reach 2 billion cf/d. Although the gas is now being piped
Approved For Releas92051QJ/6CIR- P80B01495R000600040006-9
 Approved For Rei'ea"(ItAr-IfE80B014900600040006-9
from Central Asian and Ukrainian gas fields, future deliveries
may come from the Urengoy fields---the intended source of the
North Star deliveries. An existing pipeline system probably
will be extended eastward to Urengoy as additional gas de-
posits are developed and, in the west, tied into the gas
pipeline network now connecting Eastern and Western Europe.
Western Europe has supplied much of the line pipe
and related equipment for this and other natural gas pipe-
lines, with repayments to come in future gas deliveries. To
date the USSR, has contracted for $2 billion in pipe and pipe-
line equipment from the West. By 1980, annual Soviet earnings
from natural gas sold in Western Europe should exceed $8 billion.
4. Sakhalin Offshore Exploration
The Soviets are nearing final agreement with a Gulf
Oil-Japanese consortium to explore offshore oil and natural
gas deposts on the Sakhalin continental shelf. Because the
other parties regard Gulf's expertise as crucial to the pro-
ject, progress has been stalled by Gulf's refusal to join in
what it regarded as an unprofitable operation. Gulf sub-
sequently decided to participate in return for Soviet assurances
that the company would be given sole rights to explore other
offshore areas surrounding Sakhalin under a more lucrative
arrangement. Total offshore reserves on the Sakhalin conti-
nental shelf could equal those claimed for Alaska's Prudhoe
Bay. Western investment required to explore and develop
one or two major offshore fields might well exceed $1 billion.
5. Tyumen Oil Project
For several years the USSR and Japan have been dis-
cussing construction of a 4,200 mile pipeline from the Tyumen
oil fields in West Siberia to Nakhodka. In return for fi-
nancing $1 billion in Soviet imports of large diameter pipe
and pipeline equipment, Japan was to receive up to 800,000
barrels per day (b/d) of oil over a 20-year period. In April
1974, however, the Soviets told the Japanese that they had
Approved For Relea a9aO Bk- 6&-'RDP'80B01495R000600040006-9
 Approved For F ieaget?p80B01495'Rtf00600040006-9
scrapped plans to build a pipeline in favor of a second
trans-Siberian rail line, that they could only supply the
Japanese a maximum of 500,000 b/d, and that they wanted $3
billion in long-term credits for equipment to be used in
building the railroad. The Japanese refused because of
economic reasons (smaller deliveries, larger investment,
and a longer construction period) and fears that China
would oppose Japanese participation in building a strategic
railroad in the Far East. Some Japanese officials profess
to believe, on the basis of very recent developments, that
Moscow may tender a revised proposal. Rail transport of
oil out of Tyumen is so unrealistically expensive, however,
that it seems clear the Soviets want the railroad far more
than the oil.
6. Chul'man Coal Deposits
Last June the USSR signed an agreement with a
Japanese consortium to develop coking coal deposits near
Chul'man. Japan's Eximbank will put up $450 million in
long-term credits to finance Soviet purchases of coal
mining equipment, railway equipment, and consumer goods. In
return, the USSR will supply the Japanese with 104 million
tons of coal during 1979-99, about 5% of projected Japanese
needs. If coal prices stay up, Soviet earnings from the
project could exceed the cost of foreign credits by several
billion dollars. US firms may be asked to supply some of
the advanced equipment.
1. Baykal-Amur Railroad
Moscow has decided to build a second trans-
Siberian railroad running 100 to 500 miles north of the
existing line. Some segments at the eastern and western ends
of the planned Baykal-Amur Magistral (BAM) already have gone
into operation. The BAM, running through difficult terrain,
will provide access to important Siberian mineral deposits--
Approved For Release' 005X&R-' % l
 Approved For R1ase fI'll)r,"A810B01495F0600040006-9
including coal, copper, iron ore, and gold--and open up
new lands for development. It will be less vulnerable than
the existing trans-Siberian line, which at some locations
is within ten miles of the Chinese border. To help in
building the new line, the USSR last month ordered $400
million in trucks from West Germany and $100 million in
crawler tractors from International Harvester. The latter
order was the largest in that company's history.
2. Port Development Protect
In late 1970 the USSR signed an agreement with a
consortium of Japanese firms to jointly develop port
facilities at Vostochnyy, on Vrangel Bay 65 miles east of
Vladivostok. The Japanese are providing $80 million in
engineering services and equipment. Soviet purchases are
being financed by long-term Japanese Eximbank credits.
When completed--possibly by 1975--the port will be the
largest in the Soviet Far East. The coal and wood chip
handling facilities under construction at the port should
be fully employed in handling exports resulting from
Soviet-Japanese resource projects. A large modern container
facility also has been built to support the recently in-
augurated Siberian "land-bridge" for Japanese-European
container traffic.
1. Aluminum Processing Facilities
Because Siberia's energy resources are plentiful,
the USSR wants to locate energy-intensive industries there--
and to attract foreign cooperation.
Approved For Release 2Ub510~."CIThQP80B01495R000600040006-9
 Approved For RaWase(2 N"1M ltpjkILOB01495W0600040006-9
2. Other Metals
The USSR has negotiated for nearly a decade
with Western firms over the development of the rich Udokan
copper deposits east of Lake Baykal. Western investment
has been deterred in part by the lack of railroads and
other supporting facilities, but construction of the new
Trans-Siberian railroad should spur renewed interest in
Udokan copper. Soviet officials have announced that other
mineral deposits being readied for development include
copper and nickel deposits at Nizhneangarsk and polymetalic
deposits elsewhere. The new railroad will also provide
access to large iron ore deposits in East Siberia.
D. Forestry Projects
1. Timber Projects
The first Siberian project involving foreign
participation, begun in 1968, exploited timber resources
along the Amur River in the Soviet Far East. It was
successfully completed, and last July the USSR concluded
a much larger contract with the same Japanese companies.
Approved For Release2179/091 . A_A
 Approved For RpWasqCRI9]EPMOB014959P00600040006-9
The USSR in 1975-78 will import, on Japanese Eximbank
credits, $550 million in timber cutting and processing
equipment, ships, and consumer goods. Soviet earnings
from saw logs and other timber products could be double
the value of the Japanese credits. The two countries are
also cooperating in the building of a wood-chip plant
in the Soviet Far East, but progress has been slow.
2. Pulp/Paper Plants
The USSR is building a major wood processing
center at Ust' Ilimsk on the Angara River. The center will
process wood pulp and lumber, and factories to produce chip
boards will also be built. It is a Bloc-wide project;
Romania, Poland, and East Germany are providing large amounts
of equipment in return for long-term deliveries of wood pulp.
The Soviets and Japanese are negotiating over the
construction of another pulp/paper plant on the Yenisey
River, west of Lake Baykal. Although US and West German
firms have shown an interest, Japanese officials say they
prefer a bilateral arrangement. The Japanese seem to be more
interested in very recent Soviet proposals for two other
plants on the Amur River in the Soviet Far East, which would
require $1 billion in Japanese investment.
Approved For Re1ease'2'OQ59/R9':`8" flP8OBO1495R000600040006-9
 o m .c
p ". z O
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
G N \~
CS O \\ ~\~\C~ , Y. V J
C L
 25X1 Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
Next 3 Page(s) In Document Exempt
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved For l e1ease 2005/09/29 : CIA-RDP80B01495 f 0600040006-9
China is Brezhnev's most intractable problem, and will
be very much on his mind during the Vladivostok Summit, even
though he may not speak of China directly. The Sino-Soviet
dispute today colors the thinking of the Soviet leaders on
virtually all foreign policy issues, not the least that of
relations with the United States.
What the Quarrel is About
For two decades the Soviets have seen their quarrel with
China steadily expand, despite periodic efforts to find ground
for reconciliation.
--Originally, this was mainly a dispute over
which of the two Communist great powers
should dominate the Communist world.
--This became transformed into a struggle
over whether the policies of what was
then the Sino-Soviet alliance should be
shaped to serve Chinese or Soviet
national interests.
--As grievances accumulated, the rivalry
became charged more and more with personal,
racial, and national animosity, leading
to a gradual precautionary buildup of
strong Soviet forces along the border, and
then to military clashes.
--At the same time, the political rivalry
between the two powers has gradually
broadened into competition for influence
in every world arena.
SECRET
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved For Release 2: CIA-RDP80B01495RZ0600040006-9
Today, wherever the Soviets turn--in dealing with Japan,
the US, Western Europe, or the Third World, in the UN or the
Indian Ocean--they find the Chinese leadership attempting to
obstruct Soviet policy. In practice, China is not strong
enough to organize serious opposition to Soviet policy in
areas outside Asia. The Soviets realize this, but neverthe-
less emphasize that the present Chinese regime is their most
fanatical, single-minded adversary. The decisive fact for
Soviet policymakers is that, while Washington under several
Presidents has shown willingness to improve relations with
Moscow, Peking under Mao Tse-tung has adamantly refused to
do so.
The Core Problem: The Border
The most sensitive issue of the protracted Sino-Soviet
impasse is their 4,000-mile border.
--Only about 250 miles north of the Vladivostok
summit meeting place is the island of Damansky
(Chen Pao) in the Ussuri river, the eastern
frontier between Chinese Manchuria and the
Soviet Far East.
--In March 1969, this island was the scene of
two bloody firefights between Chinese and
Soviet border guards, launching six months
of similar incidents elsewhere along the
frontier and mounting tension in both countries.
--Alarmed over their inability to read Chinese
intentions, and worried that Peking might try
to convert the border into a continual "running
sore," the Soviets that summer floated threats
of drastic punitive military action. This
evidently impressed the Chinese, and they ceased
aggressive border patrolling and opened border
negotiations with Moscow in the fall of 1969.
--But in five years of intermittent talks since
then, the Soviets have met only frustration
and stalemate.
SECRET
Approved For Release 2005/09/29 : CIA-RDP80B01495R000600040006-9
 Approved For Release 82W&Yff: CIA-RDP80BO1495WO600040006-9
The heart of the Soviet negotiating dilemma has been
Peking's insistence that thousands of square kilometers long
held by Moscow are "in dispute," and Chinas unwavering de-
mand that the USSR pull its forces out of all this territory
before a final border settlement can be reached.
--The Soviets have no intention of making such
a pullback.
--They may be willing to make some limited
concessions as part of a general settlement,
but there are some Chinese claims to which
Moscow will never yield.
--Chimnaya Island (Hei-hsia-tzu), at the
junction of the Amur and Ussuri, is the
most essential to Soviet national interests.
The large city and military center of
Khabarovsk lies just across the river, and
the vital Trans-Siberian railroad runs
through Khabarovsk.
Soviet Conclusions
The Soviets are convinced that Mao knows all this,
but that he maintains Chinese demands unaltered in order
to preserve the impasse--and ensure continued Sino-Soviet
hostility. The Chinese expelled certain Soviet diplomats
in Peking last January, and refused to release the crew
of a military helicopter which strayed across the border
in March.
The Chinese recently published for the first time the
unaltered demand they have been insisting upon privately in
five years of border talks--a mutual non-aggression pledge
linked to the total Soviet troop pullback Peking has wanted.
The Soviets will regard this as a ploy intended to create
an impression of Chinese reasonableness. The Soviets ex-
pect no real improvement while Mao lives.
The US-Soviet-Chinese Triangle
This Chinese conundrum has been a constant worry for
the Soviet leaders in their calculations about dealing
with the United States.
Approved For Releas /A : CIA-RDP80BO1495R000600040006-9
 Approved For Release 2O 0'5/DW A-RDP80BO1495 00600040006-9
25X6
The Longer Run
The Soviets have not,. however, given up hope of
improving their position in the triangle by some day se-
curing a breakthrough in their own relations with Peking.
To this end the Soviets have in recent years sought Chinese
SECRET
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved For Release 20 0619`. CIA-RDP801301495WO600040006-9
consent to a major improvement in economic relations, and
have repeatedly attempted to obtain a Sino-Soviet summit
meeting. The Chinese under Mao have rejected all these
Soviet requests, but after Mao's death Moscow is likely to
offer such a package again to his heirs.
Above all, the Soviets hope that a post-Mao leader-
ship will be willing to moderate Chinese terms for a border
settlement. Although Brezhnev recently told an East European
leader that he felt confident that Mao's successors would
show an improved attitude toward the USSR, a recently acquired
Soviet document indicates that Moscow simply does not know
whether Mao's passing will actually move China in this direction.
In the meantime, for tactical purposes Moscow has instructed
all Soviets abroad to create the impression, in talks with
Western representatives, that the USSR expects such a post-
Mao improvement.
SECRET
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
Disputed Sino-Soviet Border Areas
Principal areas in dispute between China and
the Soviet Union over the last five years. Chinese
claim the Soviets hold islands in the Amur and
Ussuri and areas in the Pamirs which were not
given to Tsarist Russia even by the "unequal
treaties" of the 19th century.
-10 1-1- -p o/painl~~n 1Jslan
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved For Rase Yd651~g CIA-RDP80B01495 OO600040006-9
Soviet interest in the Korean peninsula stems from:
--its geographic proximity to China, Japan,
and the Soviet Union;
--and historical circumstances that have
made North Korea an arena for Soviet-
Chinese rivalry.
Moscow's efforts to strengthen its influence in North Korea
at China's expense have not been particularly successful,
however, because:
--the Chinese have been active themselves;
--Pyongyang has been able to use Sino-Soviet
rivalry to maintain a high degree of in-
dependence.
To compete with Peking, Moscow continues to give
military aid to North Korea and political support in the
UN and elsewhere.
f -~
--on the military side, aid has included high-
performance aircraft, tanks, guided missile
boats, and short-range tactical missiles.
--politically, Moscow renders pro forma
support to Pyongyang on the issue of
Korean unification, although the Soviets
have privately made it clear that they are
not sympathetic to some of Pyongyang's be-
havior and rhetoric. The Soviets have been
anxious that the Korean question in the UN
not seriously complicate their relationship
with the US.
SECRET
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 25X6 Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved For Ref2ase 20M EL014951Q0600040006-9
THE SOVIET PROPOSAL FOR ASIAN COLLECTIVE SECURITY
During the course of the summit, Brezhnev may conceivably
raise his proposal to create an Asian collective security
system.
The Soviets have touted this idea for five years, but
have remained purposely vague about exactly what it means.
Among the "principles" they have cited for inclusion are
non-use of force, non-interference in the internal affairs of
other states, and the inviolability of frontiers. Their aims
in pushing this scheme are:
--to embarrass and contain China;
--to sanction a Soviet role in the settlement
of Asian disputes;
--to promote the atmosphere of detente.
The Asian states are aware of these objectives and
chary of lending themselves to Soviet purposes. A number
of them with unresolved border problems also find difficulty
with the principle of "inviolability of frontiers." This is
particularly unacceptable to China and Japan, which have
territorial disputes with the USSR.
The Soviets have no illusions that their collective
security idea will become a reality soon. So far they have
picked up only a few endorsements, from Mongolia, Iran and
Afghanistan. But they find it useful to keep this proposal
alive as a symbol of their benign intentions and a reminder
that they are a force to be reckoned with in Asia.
Approved For Release 2d BI: d 01495R000600040006-9
 25X6 Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
Next 9 Page(s) In Document Exempt
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved For RQN(b)}tN'rVP80B01495RW0600040006-9
The Soviet military establishment is quite a different
animal from its US counterpart, and it fits into the larger
society in a different way as well.
In the first place, Soviet society is much more free
of conflicts between military and civilian viewpoints
than is American society. Given Russia's long history of
invasions and enormous civilian suffering, the population
accepts with little question the need for a strong defense.
The notion of an external threat is persuasive,with the
Chinese filling any vacuum left by the warming of relations
with the West. Patriotism remains a widely honored value
in this society, which accepts without demur such practices
as substantial pre-military training in high school and
the draft.
In the second place, the Soviet military is in
important respects a much more self-contained institution
than other armed forces. Short of issues important
enough to engage the Politburo, civilians do not share in
the running of the defense establishment. In-the Soviet
equivalent of the Pentagon, practically everyone is a uni-
formed member of the armed forces. This creates a formidable
continuity, with all its virtues and vices. One of these
vices--resistance to change--provoked Khrushchev into re-
peated forays into the field of doctrine and weapons se-
lection. The results were mixed, and the Brezhnev regime
has not repeated the effort. There is some reason to believe
that, when the Minister of Defense died in 1967, the
Politburo did initially consider breaking precedent by
appointing a civilian successor, but finally decided to
avoid bad feeling in the high command. At any rate, the
job went to Marshal Grechko, who in the American system
would have become Chairman of the Joint Chiefs but, in the
Soviet system, is Secretary Schlesinger's opposite number.
CONFIDENTIAL
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved For RaleaUNMIT-'tIDP80B01495W0600040006-9
The Military and the Politicians
This strong acceptance of the principle of professionalism,
compounded by the Soviet practice-of long tours in key posi-
tions, creates a real danger that the military will become
a separate and even dominant force in the political arena.
The Communist party is acutely aware of this and has devised
pervasive control mechanisms. The three most prominent ones
are:
--a separate network of political officers who,
while members of the armed forces, are re-
sponsible for insuring loyalty and morale
throughout the forces; they have their own
chain of command leading into the Central
Committee of the Party.
--a directorate of the KGB devoted to the same
tasks.
--the requirement that any officer who wishes
to advance must join and be active in the
party; practically all officers do join.
While these systems work effectively, the conspiratorial
traditions of Soviet politics are so strong that the Party
has remained highly nervous about Bonapartist tendencies
in the military. As a case in point, Khrushchev in 1957
used Marshal Zhukov to defeat his political rivals, bringing
him into the Politburo as part of the deal, but four months
later Zhukov was fired.
It is important to note that these control mechanisms
are designed to insure political loyalty, not to join in
or second-guess military judgments on professional matters.
Of course, the Ministry of Defense does not have a free
hand in setting its own budget or determining its own force
structure. But, in contrast to the American military estab-
lishment, it has a virtual monopoly on the development of a
CONFIDENTIAL
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved For Rase
2R0< M: f01495R@00600040006-9
strategic doctrine and on military data and on the expertise
needed to analyze it. It does not have to contend with a
Congress, or with competing bureaucracies--such as State,
ACDA, and CIA--or analytic centers--such as RAND--or private
strategic analysts, all of them demanding that the profes-
sional military prove its case, offering rival analyses,
criticizing official doctrine, and in general assuring an
unending debate over national defense policy. Such inde-
pendent bodies do not exist in the USSR, with sufficient
power or facts to work effectively.
To be sure, this somewhat overstates the case. The
Politburo itself pays a good deal of attention to military
matters, and Brezhnev and other political leaders saw a
good deal of combat, albeit as political officers, in the
Second World War. The industrial administrators who oversee
defense production have acquired strategic expertise in the
course of their work. Both these elites are represented at
the Defense Council, which is a sort of Politburo sub-
committee charged with integrating Soviet policy in. the
fields of defense, economics, foreign policy, and more
recently arms control. But in comparison to the US mili-
tary, the Soviet military has almost no institutional
competition in presenting to the political leadership its
version of the Soviet-US strategic balance. As to overall
policy, it can only recommend, but its recommendations
carry a weight of professionalism which others cannot match.
In these circumstances, it is natural to expect that
the military analysis which Brezhnev and his colleagues
receive stresses worst-case possibilities, emphasizes US
strengths, and serves to support military desires for con-
tinued high levels of funding. The military briefing on
the strategic balance which the Soviets presented to former
President Nixon last July bore this stamp. Perhaps Brezhnev
is not entirely happy with this heavy dependence upon mili-
tary analysis, but there is no evidence that he has estab-
lished any alternative unit and provided it with the necessary
highly classified data.
Approved For Release 2 IIPIB I qC M101495R000600040006-9
 Approved For Role NISI(D rr1 P80B01495RM0600040006-9
Indeed, there is Litt e
in current Soviet policy which is offensive to military
interests. Back in 1964, when Brezhnev and his colleagues
ousted Khrushchev, they abandoned his habit of constantly
interfering with the generals, publicly criticizing their
CONFIDENTIAL
Approved For Release 2005/09/29 : CIA-RDP80B01495R000600040006-9
 Approved For R O l ?TZGIA&DP80B01495 0600040006-9
conservatism, and forcinq unwanted innovations down
their throats. The military nudget has grown, slowly
but without interruption, and all services have shared
about equally in the benefits. The detente line pursued
since about 1969 has not hurt the military, --it has
been accompanied, for instance, by major new weapons
programs. The military, which participates fully in
SALT policymaking, professes itself satisfied with the
1972 arms accords. The military shares, for its own
particular reasons, the Soviet interest in stimulating
a greater flow of advanced technology into the USSR from
the West. But it seems certain that on security matters--
and particularly the negotiations for a SALT II accord--
the military influence is both strong and on the con-
servative side.
The Soviet Military-Industrial Complex
Soviet military budgeteers have much different
problems, and generally easier ones, than their American
counterparts. There is no equivalent of the Congressional
scrutiny to which the US Department of Defense must submit.
There is, of course, the equivalent of executive scrutiny,
at a general level in the Defense Council and in a more
detailed fashion in the Military-Industrial Commission
and in Gosplan. This commission brings together the
heads of several ministries responsible for defense
production and the planners of the Defense Ministry. It
is chaired by L. V. Smirnov, who conducted the final nego-
tiations on the SALT I accords at the 1972 summit.
These men are not indifferent to questions of cost
and efficiency. They know that their betters in the
Politburo are genuinely concerned to devote more re-
sources to raising Soviet living standards. But they also
know that the Politburo regards armed forces as much more
than just an unwelcome necessity--that it attaches a high
political value to a strong military posture. And the
budgetary cost of total manpower is low--it takes only
Approved For ReleaOsse~1F0~5/d9129TJ&-~DP80B01495R000600040006-9
 Approved For Release 200f#FM~ 1M495R%0600040006-9
31 percent of Soviet defense spending. The result is
a stable bureaucratic environment in which defense spend-
ing grows steadily, at a somewhat slower pace than the
economy as a whole, but free of the swings which
characterize the military budgets of democratic countries.
Soviet weapons designers are a breed apart. In
the leaders' eyes, the heads of the major design teams
are the repository of Soviet hopes for overcoming the
US lead under which the USSR has so long labored. These
chief designers are given a great deal of latitude and
have enjoyed personal access to the leaders, first to
Khruschev and then probably to Brezhnev. Frequently they
are allowed to purse competing programs, and in some
cases the military will buy and deploy the product of
both contestants--thus reinforcing other tendencies in
favor of quantity in Soviet military policy. Their bureaus
are permanent government units, not private companies which
can lose funds, personnel and expertise when contracts
are completed. These establishments obviously have strong
NrPsted interes+-G in developing new weapons technology.
The Ministry of Defense is set up in a different way
from the US Department of Defense. The dominant element
is the General Staff. Many of its officers are graduates
of the General Staff's own Academy. The Soviet tradition
resembles the old German General Staff, i.e., a unified organ
rather than a joint representation of the several services.
Its officers spend long years in specialized positions, in
contrast to the US system of periodic rotation between
line and staff responsibilities. Among Soviet military
institutions, the General Staff alone has the access to
both information on Soviet forces and foreign intelligence.
It is the source of military staff work on arms control.
Approved For Release 2005%D''SP19FCrA=R13PalB0'1'495RO00600040006-9
 Approved For Re a dOENTtlh-kDP80BO1495Fip60600040006-9
Instead of four combat services, the Soviet military
establishment has five. The Soviet Navy contains a small
element which is a counterpart to the US Marines. The
Ground Forces' responsibilities are comparable to those
of the US Army, except that it has no air defense or
missile defense role. These are handled by the National
Air Defense Force, which also controls interceptor air-
craft. The Soviet Air Force provides tactical air and
transport support to the Ground Forces and a bomber force,
but has no strategic missiles. These are controlled by
the Strategic Rocket Forces--except for SLBMs which, as
in the US, are the Navy's.
There is considerable evidence of the normal kinds
of interservice conflict and rivalry within the Soviet
military. The Ground Forces have traditionally enjoyed
preeminence, and although they are now yielding to the
Strategic Rocket Forces, they continue to provide the
greatest share of the top military leadership. Whereas
Khrushchev exploited interservice competition to press
his own military policies, the Brezhnev regime has tended
to provide satisfaction to all important claimants under
the rubric of "balanced forces."
Approved For ReeaaOse 70~ 09129r . UA RDP80BO1495R000600040006-9
 25X1 Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved For Release 2005/09/29 : CIA-RDP80BO1495W0600040006-9
The Soviet economy has grown since
1950
from about
one-third to about one-half the size of
the
US economy.
The USSR's basic strategy has been:
--to invest at high rates in heavy industry,
fuels and power, and construction; at lower
rates in consumer goods and agriculture;
--to emphasize modern, capital-intensive
technology in the favored sectors while
using old-fashioned, labor-intensive
methods in the low priority sectors;
--to spend heavily on education and science
in order to raise the technical skills of
the population;
--to import advanced Western technology and
equipment in exchange for raw materials.
Making and Implementing Economic Policy
This is a "command economy." Basic economic decisions
are made by central administrative fiat rather than in the
market place:
--The Politburo of the Communist Party makes
the big economic decisions. In practice,
because the system is so centralized, it
ends up making a lot of little ones too.
--Given these guidelines, a huge bureaucracy--
headed by the Council of Ministers--sets output
goals, allocates manpower and materials, fixes
wages and prices, and regulates incentives.
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved For Release 2005/09/29: CIA-RDP80BO1495RQ 0600040006-9
--Lower down, state-owned industrial facilities
and collective farms struggle to translate
the economic plans into action.
The Politburo--the highest Soviet policy-making body--
acts much like the board of directors of an enormous con-
glomerate. As chairman of the board, Brezhnev presides
over Politburo weekly meetings where periodic decisions on
general economic priorities are reached by consensus. The
Politburo decides--basically annually--on the division of
resources between military and civilian use and the distri-
bution of investment between industry and agriculture.
The Council of Ministers--the government's highest
body--can be likened to a senior management team of the
conglomerate. Kosygin, as Chairman of the Council, has
final responsibility for setting the output of all major
commodities, distributing resources, and ensuring that plans
are fulfilled. The organization under the Council includes
the State Planning Commission (Gosplan), more than 50
functional economic ministries (such as ferrous metallurgy,
foreign trade, and agriculture), and a host of state
committees and main administrations concerned with finance,
prices, supply, and the like. The State Planning Commission
is now working on an annual plan for 1975, the Tenth Five-
Year Plan for 1976-80, and a new 15-year plan for 1976-90.
Each ministry oversees production by the plants and
laboratories under its control. Most ministers and their
deputies are senior executives, not policymakers. A
minister's main job is to see that plans are fulfilled. He
also deals with production and staffing, allocates funds
for investment and R&D, and decides matters that would come
before the department head of a giant Western corporation.
Each plant and laboratory has its own production,
technical, and financial plans. The manager's main "success
indicator" is whether or not he meets the production target.
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved For Release 2005/09/29 : CIA-RDP80BO1495Rp00600040006-9
Strengths
The Soviet economy has great crude strength, based on
a wealth of natural resources, a sturdy labor force half
again as large as that of the United States, rapidly growing
industrial facilities, and a tough, hard-driving leadership.
Growth has been maintained by the brute force method of
allocating 30 percent of output to investment (compared with
18 percent in the United States) and by extracting as large
a work force as possible out of the populace. The result
has been a rapid increase in the output of machinery and
materials, the maintenance of a formidable defense estab-
lishment, and even some gains in the long-neglected con-
sumer sector.
These strengths of the Soviet "command economy" have
made it largely immune to some major problems now plaguing
the market economies of the West--double-digit inflation,
international monetary crises, and the energy crunch.
--Because of tight central control, prices and
wages are stable. Retail prices, with the
exception of a few luxury items, have not
risen since 1950. Wages have risen gradually
as increased output permits gains in living
standards.
--The Soviet drive for self-sufficiency has
largely insulated the economy from disruptions
in world trade and finance. Imports are equal
to 3 percent of GNP, and only one-third of
foreign trade is conducted with non-communist
countries. Moreover, recent world trade prob-
lems have worked to the advantage of the Soviet
Union. The rapid rise in world prices for
major Soviet raw material exports and gold will
turn the USSR's hard currency balance from
deficit to a healthy surplus in 1974 and 1975.
--The USSR's vast reserves of mineral fuels are
adequate to meet current needs and to support
economic growth for many years.
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved For Release 2005/09/29 : CIA-RDP80BO1495R 0600040006-9
Weaknesses
The Soviet leadership is aware of persistent problem
areas threatening economic growth.
--Low productivity and the declining efficiency
of investment. Despite a volume of investment
per worker nearly equal to US levels in recent
years, labor productivity in Soviet industry
is only about half the US level. This is
particularly serious since additions of men
and equipment on the scale of the 1950s are
no longer possible, and productivity gains
must be the future source of growth. An added
difficulty is the gradual exhaustion of easily
accessible natural resources and the rising
cost of exploiting new resources, many located
in remote and frozen areas of Siberia.
--Technology gap. Although the latest technology
is employed in some areas--particularly in the
defense and space industries--technology in the
civilian economy generally lags far behind that
of the West. The Soviet system is particularly
ineffective in moving new ideas and products
from the research and development stage into
full assembly-line production. Moreover,
Western equipment frequently is not as pro-
ductive in a Soviet setting as it is on native
ground. Even as the USSR is struggling to
catch up, the United States, Western Europe,
and Japan are forging ahead with still newer
technology.
--Rising consumer expectations. Though well fed
and clothed compared with past generations,
Soviet consumers are increasingly aware of the
disparity between Soviet and Western living
standards. In 1973 the average Soviet citizen
consumed only about one-third the goods and
services of a US consumer. Consumer grievances
are especially acute as to housing, long queues,
the poor quality of durables, and the indifferent
quality of repair and other services.
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved For Release 2005/09/29 : CIA-RDP80BO1495R 0600040006-9
--Inefficient agriculture. Nearly a third of the
labor force is still employed on the farm; equip-
ment is badly operated and maintained; and the
cost of producing grain and meat is far above
world market prices. Agricultural labor is only
about 10 percent as productive in the USSR as in
the United States despite a decade of much larger
investments in Soviet agriculture.
Most of these problems seem rooted in the Soviet economic
system itself, which is too centralized and clumsy for the
increasingly complex economy. Central planning, for example,
becomes more difficult as the number of links between pro-
ducers, consumers, and suppliers multiplies.
The Soviet incentive system is also ill-equipped to
deal with today's problems. Although it has been effective
in maximizing physical output, it has created bottlenecks
and idle capacity, sacrificed product quality, and dis-
couraged innovation in production and management techniques.
Thus far the leadership has been unwilling to act on
the fact that fundamental change in the economic system is
needed. It has taken a few timid steps to reform the R&D
sector and to reorganize industry. At a Central Committee
meeting last. December Brezhnev paid lip service to the need
for improved economic management and planning but offered
no specific proposals. He realizes that a truly effective
reform would decentralize decision-making and thereby diminish
Party control over the economy. In lieu of a direct attack
on the problem, the leadership apparently believes that it
can take a shortcut to technological progress and accelerated
growth by importing Western machinery and technology. Some
Soviet economists believe that, if they set up a vast com-
puter network, they can exert efficient central control over
the rapidly expanding number of price and output decisions.
Soviet experience with the computer to date shows these
economists are almost certainly wrong.
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 Approved For RQ1.ease 2005/09/29 : CIA-RDP80BO1495W0600040006-9
Key Measures of the Soviet Economy
US-USSR: GNP
Billion 1973
US Dollars
1,500 r
1950 55 60
66 68 70
US-USSR: Resource Allocation, 1973
USSR as a percent of US
62 64
DEFENSE
INDUSTRIAL
INVESTMENT
CONSUMPTION
FOREIGN AID
R- W-1 I I I I I I I I I I I I I
50 100 150
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
 DCI/DT'CI
Approved For Releas20Q5Q : CIA-RDP80B01495R000600040006-9
outing p
ACTION
INFO.
ACTION
INFO.
1
DCI
11
LC
2
DDCI
12
IG
3
S/MC
13
C
Compt
4
DDS&T
14
sst/DCI
A
DDI
15
AO/DCI
6
DD0q
16
Ex/Sec
7
DDO
17
8
D/DCI/IC
18
9
D/DCI/NIO
19
10
GC
20
Approved For Release 2005/09/29 _ 1495R000600040006-9
DCI / 6>114C1
 25X1 Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9
Approved For Release 2005/09/29 : CIA-RDP80BO1495R000600040006-9