SOVIET MILITARY OPERATIONS IN AFGHANISTAN: COSTS AND IMPLICATIONS FOR THE ECONOMY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP08S01350R000100200001-4
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 19
• Document Creation Date: December 21, 2016
• Document Release Date: September 16, 2008
• Sequence Number: 1
• Publication Date: August 1, 1980
• Content Type: REPORT

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National Top Secret
Foreign
Assessment
Center
Top Secret
Soviet Military Operations
in Afghanistan:
Costs and Implications
for the Economy
R 80-/ 1 / X
August 1980
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Soviet Military Operations
in Afghanistan:
Costs and Implications
for the Economy
This assessment was prepared by
the Military-Economic Analysis Center,
National
Foreign
Assessment
Center
Information available as of 30 June 1980
was used in the preparation of this report.
Office of Strategic Research, and coordinated with
the Southwest Asia Analytic Center, the Offices of
Economic Research and Political Analysis, the
National Intelligence Officers for the USSR and
Eastern Europe and General Purpose Forces, and
the Directorate of Operations. Comments and queries
regarding this assessment are welcome and may be
addressed to the Chief, Military-Economic Analysis
Center,
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for the Economy
Soviet Military Operations
in Afghanistan:
Costs and Implications
increase in Soviet defense spending between 1979 and 1980.
continue at their present pace through the end of the year, these
expenditures will amount to about 5 percent of the total projected
Top Secret
Costs of Current Operations
On the basis of the number and types of Soviet forces committed
to Afghanistan and their operations for the first six months of 1980,
we estimate that expenditures for these forces will make up a few
tenths of a percent of total defense spending in 1980. If operations
massive use of force or firepower.
Through June 1980 several factors combined to hold down the military
outlays to an estimated 150 million rubles: operations were limited
in area and scope, most logistical support was provided by land, regular
army personnel replaced reservists, and the fighting did not require
supplying the Afghan Army.
Other military costs that can be attributed to the activities in Afghanistan
include the value of weapons and supplies for the Afghan Army, of
Soviet equipment damaged or destroyed, and of ammunition expended.
These costs have not yet been reflected in Soviet military outlays.
We have only fragmentary information on which to base an estimate
of these costs and consequently do not have a high confidence in
the calculations. We estimate that the cost of ammunition expended
and of equipment lost in the first half of 1980 is somewhere between
100 and 200 million rubles; we are unable to estimate the costs of
of sanctions has affected the Soviet economy seriously.
There have also been the indirect economic costs of Western sanctions
imposed on the USSR after the invasion. These have caused localized
disruptions in deliveries of supplies for civilian activities and have reduced
feed supplies, forcing cutbacks in the livestock sector. To date, however,
neither the diversion of resources to support the invasion nor the imposition
A conservative estimate, based on fragmentary information, puts Soviet
casualties at a minimum of 4,000.
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Our estimates of the costs of Soviet operations in Afghanistan are
small when compared with such aggregate measures as total Soviet
defense spending, military manpower, or GNP. Nevertheless, these costs
apparently have exceeded Soviet expectations. Reportedly, the human
and economic costs of the incursion have contributed to a reassessment
by the Soviets of their position in Afghanistan. They have restructured
their combat operations there, perhaps in part because of these costs.
Implications of Postulated Large-Scale Involvement
If the current Soviet forces prove insufficient to stabilize Afghanistan
politically and militarily, the Soviets would face a choice between a
political compromise and an escalation of military operations. To evaluate
the capability of the Soviet economy to support an escalation, we have
estimated the economic effects of an increase in Soviet forces. Our
calculations indicate that, in the near term, Soviet economic activity
in general would not be affected significantly by large increases of
military forces in Afghanistan.
Even a force of 500,000 men-more than four times the size of the
current force-could be fielded without a significant effect on the rate
of growth of the Soviet economy through 1985. Expenditures for a
force of this size, however, could add about one percentage point to
the share of GNP going to defense through the mid-1980s, thus reducing
the availability of economic resources for civilian uses-especially in-
vestment. Given the Soviet need for investment in key areas of the
civilian economy, the long-term economic costs of such an escalation
could be considerable.
Moreover, a large-scale commitment to Afghanistan could have a dis-
proportionate effect on specific sectors of the Soviet economy, notably
transportation and energy, thus leading to further deterioration in overall
economic performance. The Soviet railroad system is already operating
at its maximum capacity, and large additional military requirements
could disrupt the entire network. We estimate that the Soviets' supply
of petroleum products is adequate for current operational demands,
but higher force levels could increase the military's total consumption
of fuel by as much as 10 percent. This would strain the civilian economy,
which is already experiencing fuel shortages.
Soviet economic conditions could deteriorate even further if an escalation
in Afghanistan should elicit a strong response from the West and
an intensification of military competition across the board. The economic
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denial measures imposed by the United States after the invasion, if
maintained for prolonged periods and supported by other countries,
could also have a substantial effect on the USSR. Soviet leaders would
have to consider this possibility in making decisions on Afghanistan.
The Soviet leaders know, as we do, that their economy in the aggregate
is large enough to support a substantial increase of military forces
in Afghanistan. They also are aware, however, that critical problems
exist in their economy and that sizable escalation of the conflict in
Afghanistan over the next three to five years-even if carried out
gradually-would exacerbate these problems. The Soviets' actions to
date suggest that political and military considerations have dominated
their decisions on Afghanistan and that economic costs have been sec-
ondary. We cannot predict how they will weigh the economic costs
of a continued occupation of Afghanistan against political and military
factors. Nevertheless, the long-term economic effects of a lengthy,
large-scale involvement are likely to become increasingly important in
Soviet decisionmaking.
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Background
Current Operations and Their Costs
Military Expenditures
Soviet Perceptions
3
Estimated Costs of Larger Scale Involvement
3
Economic Implications of Larger Scale Involvement
4
Implications for GNP Growth and Investment
5
Implications for the Transportation and Energy Sectors
5
Implications for Industry
6
Implications for the Labor Force
6
Economic Implications of an Intensified Military Competition
7
Possible Effect of Expanded Economic Denial Measures
7
Implications for Soviet Decisionmaking
7
Appendix
Methodology, Assumptions, and Confidence in Estimates
9
1.
Costs of Postulated Soviet Operations in Afghanistan (1980-85)
4
2.
Postulated Soviet Force Options in Afghanistan
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Soviet Military Operations
in Afghanistan:
Costs and Implications
for the Economy*
Background
For more than 15 years the USSR has been engaged
in a costly expansion and modernization of its armed
forces.' Defense expenditures have increased since
at least 1965 at a real average annual rate of
4 to 5 percent. Until recently these expenditures
absorbed a relatively constant share of Soviet
GNP-1 I to 12 percent a year.
During the same period, Soviet economic growth
has been slowing. In 1978 and 1979 the economy's
performance was especially poor, with growth aver-
aging only 2 percent a year. As a result, defense
expenditures, which continued to increase at their
historical rate, began to absorb an increasing share
of the GNP. Moreover, prospects for future Soviet
economic growth are not encouraging; a continued
decline in the rate of growth-worsened by energy
and labor shortages-is virtually inevitable through
most of the 1980s.
It was against this backdrop-a steady increase
in military expenditures and a continuing slowdown
in economic growth-that the Soviets mounted the
first military operation outside their borders in more
than a decade: the invasion of Afghanistan. This
paper examines the economic implications of the
invasion and operations through the first half of
1980. It assesses their effect on defense expenditures
and their other costs-military, human, and
economic-in 1980, and then analyzes the cost and
potential economic effects of several scenarios we
postulated, ranging from a limited increase in current
forces to a large-scale, protracted conflict. Finally,
it assesses some effects that a long-term Soviet
involvement in Afghanistan might have on future
defense spending and on economic performance. The
findings of this paper are preliminary, given the
fluid situation in Afghanistan and the many con-
sequences of the occupation that cannot be costed
with a high degree of confidence.
The costs are presented in rubles to measure their
effects on Soviet spending for defense and on the
economy in general. The appendix contains a detailed
presentation of the assumptions and the methodology
of the analysis.
Current Operations and Their Costs
In late December 1979, Soviet military forces invaded
Afghanistan to install a new pro-Soviet prime min-
ister and to bolster the ineffective Marxist regime
that had been established after the revolution in
April 1978. Initially, the minimum objectives of the
Soviet forces were to consolidate control over major
cities and to secure lines of communications. Al-
though they did not mount continuous counter-
insurgency operations, they conducted limited op-
erations, including airstrikes, against rebel
strongholds.
By mid-January 1980 the Soviets had about 65,000
by tactical aircraft, helicopters, and transports sta-
tioned inside the country and in neighboring military
districts in the USSR. Supplies were delivered by
rail to the Soviet border and from there by truck
I This figure includes only those forces stationed inside Af-
ghanistan. The Soviets also have military personnel in military
districts adjacent to the border who are supporting operations
in Afghanistan or who appear to have been moved into the
area as a result of the invasion. An estimate of the Soviet
military forces committed to Afghanistan would include all the
forces stationed in Afghanistan and some of the forces in adjacent
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convoys to depots which were being developed in
Afghanistan.
By the end of June 1980, the Soviets had increased
the number of troo s to 80,000.
some ob-
solescent equipment was replaced with more modern
types.
Between January and June the Soviets also expanded
their military operations. In the early weeks following
the invasion, Soviet forces established their basing
May Soviet units throughout Afghanistan were en-
gaged in small-scale counterinsurgency operations.
Military Expenditures. We have estimated Soviet
military expenditures for the invasion of Afghanistan
and military operations for the first six months,
based on the number and types of forces we have
identified-motorized rifle and airborne units from
the Ground Forces and helicopters, fighters, and
transports from Frontal (Tactical) Aviation. Our
estimates of the costs include pay and allowances
for the approximately 120,000 military personnel
committed to the operations (that is, about 80,000
in Afghanistan and 40,000 in adjacent Soviet military
districts), costs of operation and maintenance (O&M)
of equipment, and some construction.
We estimate total expenditures for the first six
months of the Soviet involvement in Afghanistan
to be on the order of 150 million rubles, or about
1 percent of the estimated total Soviet spending
for ground and tactical air forces in 1980. This
total, in turn, accounts for about 25 percent of
estimated total Soviet spending for defense. Thus,
the estimated expenditures for the invasion and
for defense in 1980.
operations through June 1980 in Afghanistan rep-
resent a few tenths of a percent of total spending
The incremental expenditures associated with the
invasion-those costs that are over and above normal
peacetime spending levels-amount to about half
of the total. If Soviet operations continue at their
present pace through 1980, these expenditures will
account for about 5 percent of the increase in
total defense spending between 1979 and 1980. The
incremental expenditures include costs of the airlift
of men and supplies, pay and allowances for some
of the troops, including reservists, part of the O&M
costs, and all construction costs.
Several factors have combined to minimize the ex-
penditures. For example:
? Soviet military operations have been limited in
scope and areas of engagement.
? The Soviets have provided most of the logistical
support for their forces by rail and road rather
than the most costly alternative, air transportation.
? The enemy forces and the nature of their operations
have not required a massive use of Soviet force
and firepower.
? The Soviets replaced most of the reservists after
the initial invasion and now rely chiefly on regular
army personnel.
Other Military Costs. Other military costs can be
attributed to Afghanistan but have not yet been
reflected in military outlays. These include the value
of weapons and supplies for the Afghan Army, of
Soviet equipment damaged or destroyed, and of am-
munition expended.
We estimate that the cost o
ammunition expended and equipment lost would be
on the order of 100 to 200 million rubles; we are
unable to estimate the costs of supplying the Afghans.
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Indirect Economic Costs. The Soviets also have in-
curred some indirect economic costs because of the
economic denial measures imposed by the United
States after the invasion. These measures include
a trade embargo on grain and on high-technology
products, denial of fishing rights, and limits on West-
ern credits. We do not know in the aggregate how
high these indirect costs have been, but the Soviet
economy has not been seriously affected either by
the denial measures or by the diversion of resources
to support the invasion. Nevertheless, it has ex-
perienced some dislocations. For example the military
requirement for trucks in the Afghan operations,
combined with the US trade embargo, has delayed
deliveries of agricultural machinery. Some units in
the USSR probably have experienced delays in mili-
tary equipment deliveries because of equipment needs
in Afghanistan. The grain embargo has reduced
the availability of feed supplies and forced cutbacks
in the livestock sector.
Human Costs. The human cost of the invasion cannot
be estimated with confidence. A conservative cal-
culation, based on fragmentary information, puts
The minimum figure, 4,000, rep-
resents about 5 percent of Soviet manpower in Af-
ghanistan and a negligible portion of total Soviet
military manpower.
Soviet Perceptions. Our estimates of the costs of
Soviet operations in Afghanistan are small when
compared with such aggregate measures as total
defense spending, military manpower, or GNP. Nev-
ertheless, it seems that the costs in both human
and economic terms have been greater than the
Soviets anticipated. This perception of the costs may
have contributed to a reassessment of their situation.
The military has restructured combat operations,
though decisions about the composition and use of
the armed forces seem to have been dictated primarily
by military and political considerations. The Soviets,
though, apparently still judge that the political costs
of withdrawing outweigh all other costs
Estimated Costs of Larger Scale Involvement
Postulated Scenarios. Six months after the invasion,
the Soviets found themselves with about 120,000
men committed to Afghanistan, a weak and inefficient
Afghan Army as a military partner, and resilient
rebel forces and popular unrest as threats. The
Soviets have largely secured the two primary roads
into Afghanistan by assigning many of their troops
to route security missions. Cities where Soviet troops
are garrisoned seem to be controlled by the Karmal
government, although demonstrations and acts of
violence occur frequently. Control over other roads
and cities is tenuous, and the insurgents seem to
control the countryside. To cope with this situation,
the Soviets have had to reorganize their troops
and adopt new tactics.
The Soviets show no sign of planning to withdraw
major combat units from Afghanistan.' They probably
intend to remain to stabilize the country politically 25X1
and militarily. The level of manpower and resources
required to achieve those goals cannot be predicted
with confidence. Nevertheless, we have postulated
three scenarios which incorporate increasing levels
of manpower and resources over time. These scenarios 25X1
are not forecasts of Soviet intentions; they serve 2bAl
only as bases for an assessment of the costs and
economic effects of an increasingly large and lengthy 25X1
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Our assumptions (presented in detail in the appendix)
are as follows:
? Scenario I assumes a one-year effort by 150,000
Soviet troops who would be engaged in counter-
insurgency and consolidation operations similar to
those conducted in the first six months of 1980.
With a force of this size the Soviets would try
to maintain the status quo. They probably would
not be able to end the insurgency or seal the
borders.
' In late June 1980, the Soviets announced the withdrawal
from Afghanistan of some units and equipment which they
did not consider necesssary for combat operations. We believe
however, that this action was not a major withdrawal. 7-
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? Scenario II postulates a gradual buildup to 250,000.
These Soviet forces would remain in Afghanistan
for three years and would carry out widespread
counterinsurgency operations, provide additional se-
curity for populated areas and lines of commu-
nication, patrol the borders, and maintain control
over areas taken from the rebels.
? Scenario III assumes a long-term effort and a
gradual increase over five years to 500,000 men.
The Soviets would undertake aggressive and ex-
tensive campaigns to suppress the rebels, establish
firm control over populated areas and the country-
side, and seal the borders against the flow of
people and supplies.
Cost of the Scenarios. Military expenditures for
a force of 150,000 men in Afghanistan for one
year (Scenario I) would entail only a small increase
over what we estimate the Soviets are spending
in 1980 for ground and tactical air forces. A Soviet
contingent of 250,000 for three years (Scenario
II) would result in an annual increment on the
order of 10 percent over our current estimate, while
a force of 500,000 men over an extended period
of time (Scenario III) would result in an increase
of about 25 percent annually. Table 1 shows the
cost of these postulated operations.
Although investment and operating expenditures for
ground and tactical air forces make up about 25
percent of total Soviet defense spending, the effect
of the first two scenarios on overall defense spending
would be small. The increase in total projected
expenditures over the next five years under Scenario
I would be negligible and under Scenario II would
be about 3 percent. Scenario III, however, would
entail an absolute increase of slightly over 5 percent
and would raise the rate of growth of total defense
spending about 1 percent-assuming that all other
elements of defense expenditures continued to grow
at their curry-term rate of 4 to 5 percent
a year.
The increases in annual defense spending in Scenarios
II and III would absorb a large share of the estimated
annual increments to Soviet defense spending. Sce-
Costs of Postulated Soviet Operations in
Afghanistan (1980-85)'
I
(150,000)
II
(250,000)
III
(500,000)
Increase in spending for
ground and air forces,
of which:
1
10
25
Operation and
maintenance
Less than 1
5
10
Increase in total
defense spending
NEGL
About 3
5
' This table shows the estimated increases in annual investment
and operating spending for ground and tactical air forces and
the estimated increase in total defense expenditures. Military
research and development costs have been excluded because we
assumed that few, if any, new systems could be developed over
the next several years expressly for operations in Afghanistan.
Modifications to existing equipment have not been factored in
either.
nario I, like the cost of current operations, would
account for only 5 percent of the increment. The
increase in Scenario II, however, would amount
to between 30 and 40 percent of the annual increment
to defense spending in the next three years. Scenario
III would absorb an estimated 50 to 60 percent
of the annual defense spending increment over the
next five years. These figures indicate that a large-
scale, long-term Soviet occupation of Afghanistan
could become a costly undertaking, absorbing in-
creasing amounts of the resources devoted to defense.
Economic Implications of Larger Scale Involvement
The effects of the postulated scenarios on defense
spending represent only one measure of the total
costs to the Soviet economy of an escalation of
the conflict in Afghanistan. Higher defense spending
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would affect economic growth by diverting labor,
capital, and materials from civilian uses. It could
also cause localized disruptions in specific sectors
of the economy. Other potential costs, whose effects
are difficult to gauge, could be a more competitive
strategic environment that could further increase
pressure for stepped-up defense spending and perhaps
an intensification of Western economic denial meas-
ures.
We cannot forecast precisely how these factors will
affect the Soviet economy, or how Soviet leaders
would weigh the economic costs of a larger scale
involvement in Afghanistan against the political costs
of withdrawal. We can, however, assess in general
terms the opportunity costs of higher defense spending
by using econometric models to calculate their impact
on economic growth. We can also examine the
likely effects of intensified militar operations o
critical sectors of the econom
our observation of Soviet be-
havior since the invasion give us some insights into
Soviet perceptions of the costs of Afghanistan and
into the possible role of these costs in future decisions.
Implications for GNP Growth and Investment. The
rate of Soviet economic growth would not be affected
significantly in the short run by any of the three
scenarios, but all would affect the availability of
economic resources for civilian uses. Even without
an increase in the Soviet military commitment in
Afghanistan, we expect defense to absorb a larger
share of Soviet GNP-as much as 15 percent by
1985. If the Soviets expanded their forces along
the lines of Scenarios II or III, the share could
be greater by about one percentage point. Moreover,
the defense share of the yearly increment to GNP
would increase in the mid-1980s to more than
four-fifths in Scenario III. Such an increase would
reduce the flexibility of Soviet leaders to allocate
additional resources to civilian investment and con-
sumption.
Stepped-up military spending would affect investment
most noticeably, because production of military hard-
ware competes directly with production of machinery
and equipment for capital investment. Calculations
based on Scenarios II and III show declines of
about one-third of a percent in the share of GNP
available for new capital investment. The long-term
opportunity costs of such reductions could be con-
siderable, given the Soviets' continuing requirement
for investment in key sectors such as energy and
in the economic infrastructure they need for exploiting
natural resources in remote areas.
Implications for the Transportation and Energy Sec-
tors. Since the invasion, the Soviets have relied
primarily on road transportation to keep supplies
and equipment flowing into Afghanistan. They have
also moved some supplies by rail and some by
air. We judge that transporting supplies and equip-
ment to the border is not a major problem but
that the distribution within Afghanistan is hindered
by the lack of railroads and good secondary roads
and by the rebels' interdiction of the existing trans-
portation routes.
If the Soviets were to build up to the forces of
Scenario II or III by moving men and supplies
to the border by rail, they would face a difficult
trade-off. Their railroad system is already operating
at its maximum capacity, and not very efficiently.
The burden placed on the system by the long distances
traveled and large volume of freight carried within
the USSR has led to a deterioration in railroad
performance. Even minor disruptions in one area
can lead to major dislocations, across the nation.
Thus, a reallocation of rolling stock from civilian
to military requirements could severely disrupt the
entire Soviet rail transportation system. This in
turn could seriously affect other sectors of the econ-
omy.
If the buildup to support the higher force levels
should be done by road, it would require between
500 and 2,000 truckloads a day. Trucks would
have to be diverted from civilian uses, and truck
production would have to be increased to support
such an undertaking for an extended period. In
theory the current road capacity in Afghanistan
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could accommodate such a movement of supplies,
but it would preclude the use of the roads for
Afghan civilian commerce or military purposes. The
support of this amount of traffic, moreover, probably
would require diversion of Soviet labor and materials
to maintain existing roads in Afghanistan or to
construct additional roads.
The Soviets have increased the capacity of petroleum,
oil and lubricants (POL) supply points established
within Afghanistan. This increase probably has pro-
vided Soviet forces an adequate supply to meet
current operational demands, but we believe it would
prove insufficient to support operations under Sce-
narios II and III.
At these higher force levels, additional POL re-
quirements for ground and air operations could in-
crease total direct consumption of fuel by the entire
Soviet military establishment by as much,as 5 percent.
To obtain that amount of additional fuel, the Soviets
would have to either lower the operating rates of
all Soviet forces or draw POL supplies from the
civilian economy, which is already experiencing fuel
shortages.
Moreover, indirect military POL consumption (the
petroleum that would be consumed in manufacturing
military equipment) could increase by 5 to 10 percent.
Overall, the share of Soviet petroleum output allocated
to defense could be up to one-tenth larger because
of the requirements imposed under Scenario III.
This would not be a very large increase in the
present defense share of total Soviet petroleum output,
which is about 10 percent, but it would come when
energy supplies are already threatening to constrain
the USSR's economic growth
In addition to the problem of procuring additional
POL, the Soviets would face difficulties in their
distribution.
The increase
in the flow of POL required to support a large-
scale involvement, and its effect on the distribution
network, could delay deliveries of fuel needed on
Implications for Industry. The Soviet defense in-
dustries have enough final assembly plant capacity
to support expanded weapon production for the forces
in Scenarios II and III. (See the appendix for
estimated production requirements.) In some plants
an increase in military production would directly
affect civilian production. For example, some military
aircraft plants produce civilian transports, and almost
all Soviet tank plants produce railroad rolling stock.
Military production already accounts for a large
share of the output of the metallurgical sector,
and any increased demand for tanks, armored vehicles,
and aircraft could upset production plans for civilian
machinery and place increasing strain on the pro-
duction of both ferrous and nonferrous metals. The
poor performance of the economy in 1979 resulted
in regional shortages of steel products and higher
import requirements-problems that could be wors-
ened by an unscheduled expansion of defense pro-
duction.
The Soviets would be able to cushion the effects
of the forces' greater demands on industry by diverting
weapons produced for export to the Soviet military.
This, however, could reduce hard currency earnings
and political leverage with foreign military customers.
Implications for the Labor Force. To maintain their
military forces at their present size, the Soviets
probably will have to modify their manpower ac-
quisition system by 1985. We expect demographic
factors to reduce the Soviet draft pool by over
1 million between 1980 and 1985. Any absolute
increase in the size of the armed forces over current
levels will bring closer the time when changes in
the conscription system will be necessary
Over the next two or three years the Soviets could
sustain the manpower increases necessary to keep
150,000 to 250,000 men in Afghanistan by increasing
conscription rates. These are the forces postulated
in Scenarios I and II. If they chose to raise the
force level to 500,000 (Scenario III), they probably
would add several months to the two-year term
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of service required of most conscripts. Two other
options are possible but do not seem likely:
? Reliance on reservists or expansion of the number
of civilians employed by the armed forces, or
both. Given the labor problems now facing the
USSR, we believe the Soviets probably would
try to avoid any long-term diversion of manpower
from civilian enterprises.
? Retention of more servicemen for extended periods.
The Soviets would have to double the current
reenlistment rates. In light of past failures to
increase voluntary enlistment, such an increase
probably would be hard to achieve.
An extension of the military term of service to
meet the requirements of Scenario III would be
unpopular, but it would meet the needs of the
military and would have little direct effect on overall
economic growth. Although Soviet military manpower
now makes up only 3 to 4 percent of the labor
force, any large increase in military manpower will
affect the size of the civilian labor force. The rate
of growth of the Soviet labor force is expected
to decline in the 1980s, and an increase in military
manpower would aggravate this trend somewhat,
even though the civilian labor force would continue
to increase in absolute terms.
Economic Implications of an Intensified Military
Competition
A prolonged, large-scale Soviet presence in Afghani-
stan probably would not remain an isolated incident.
It could worsen East-West relations and thus lead
to pressure for an across-the-board increase in Soviet
spending for defense. The size of the increase and
the effect on the economy would depend on the
international political climate and the pace of the
intensified arms competition. Any increase in the
growth of defense spending, however, could heighten
Soviet economic problems-at a time when Soviet
leaders are already showing increasing concern over
their economic prospects.
To estimate the costs of such a worsening of East-West
relations, we postulated a worst case from the Soviet
point of view. In this situation the Soviets would
find themselves deeply involved in Afghanistan (Sce-
nario III) and also would face deteriorating relations
with the United States. As a result there would
be pressure to increase defense spending across the
board, especially for strategic forces
If the Soviets felt compelled to make such an increase,
projected defense spending through 1985 would in-
crease approximately 10 percent. This would bring
about an increase of almost two percentage points
in the average annual rate of growth of total defense
spending and a reduction of about one-tenth of
a percent in overall economic growth. Civilian uses
of GNP would be substantially affected, and there
could be a decline of one to two percentage points
in the share of GNP allocated to capital investment.
Possible Effect of Expanded Economic Denial
Measures
In considering the costs of a stepped-up military
effort in Afghanistan, Soviet leaders would have
to consider the possibility that the Western nations
would intensify their economic denial measures. These
measures-with the exception of the grain embargo-
have had no noticeable impact on the Soviet economy.
Their effect in the future would depend on the
actions of the major grain-producing nations and
the exporters of key technologies. If broadly supported
and maintained for a prolonged period, economic
denial measures could have a substantial effect on
Soviet economic performance.
Implications for Soviet Decisionmaking
Our estimates indicate that the costs to the USSR
of the first six months of their occupation of Af-
ghanistan have been relatively small. The Soviet
leaders, however, apparently perceive these costs
as higher than expected. How this perception will
affect their future actions remains closely tied to
other Soviet political and strategic considerations.
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The Soviet leaders probably believe, as we do, that
their economy in the aggregate is large enough
to support a substantial increase of military forces
in Afghanistan. They also are aware, however, that
critical problems exist in their economy and that
sizable escalation of the conflict in Afghanistan
over the next three to five years-even if carried
out gradually-would exacerbate these problems. So-
viet actions to date suggest that political and military
considerations have dominated decisions on Afghani-
stan and that economic costs have been secondary.
We do not know how the Soviets will weigh the
economic costs of a continued occupation of Af-
ghanistan against political and military factors. Nev-
ertheless, as economic growth declines, the long-term
costs of a lengthy, large-scale involvement are likely
to become increasingly important in Soviet decision-
making.
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Appendix
Methodology, Assumptions, and Confidence
in the Estimates
Methodology
The estimates of Soviet defense spending presented
in this paper are based primarily on direct costing-
that is, first identifying individual components of
the Soviet defense effort and then calculating th
cost of each.
we compile a detailed list of the activities
and physical components which make up the Soviet
defense program for a given year. This list includes
data on order of battle, manpower, production of
equipment, construction of facilities, and o gratin
rates for the Soviet military forces.
model, the capacity of the capital goods industries
determines investment, which in turn establishes
the pattern of growth in the stock of productive
capital. This capital stock, together with demograph-
ically determined employment, sets the achievable
level of production. This output is then divided
among competing uses on the basis of availabilities
and relative priorities, with private consumption gen-
erally taken as the residual claimant.
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By a variety of methods this data base is converted
into monetary estimates. For many components the
data are costed directly in rubles; for others, we
first estimate what it would cost to carry out the
Soviet activities in the United States and then convert
these dollar costs to ruble terms. The conversion
factors are based on samples of prices of Soviet
Our methodology provides an estimate of the level
of, and an indication of the real trend in, the annual
Soviet resource commitment to military forces. We
use ruble prices to reflect the relative prices of
military programs and activities within the Soviet
economic system. The estimates can be used to asses
the resource constraints confronting Soviet military
planners, the priorities they assign to the component
of the defense effort, and the impact of defense
programs on the Soviet economy. The estimates are
presented in constant prices to reflect real changes
in defense activities, excluding the effect of inflation.
The base year is 1970.
Assumptions
To analyze the costs of current Soviet activities
in Afghanistan, we compiled a detailed description
of the forces and operations.
For a detailed description of the assumptions for
calculating the costs of a larger scale involvement,
see table 2. We assumed that 40 percent of the
Soviet forces in Afghanistan would be drawn from
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Motorized rifle 8
divisions
(100,000)
Airborne divisions 2
(14,200)
Air forces personnel (11,000)
Command and support (27,000)
personnel
Equipment holdings/procurement
Ground forces Equipment increases propor-
tional to the increase in the num-
ber of divisions. All equipment
from existing stocks, not re-
placed.
Minor increases in holdings of
helicopters, fighters, and trans-
port aircraft. No new procure-
ment.
2 (14,200) 3 (21,300)
(23,000) (27,300)
(50,000) (115,000)
New equipment procured for five New equipment procured for 19
newly created MRDs. new MRDs.
Aircraft numbers increased by Aircraft numbers increased by
about 80% over current levels; all about 120% over current levels;
new procurement. all new procurement. Higher in-
creases in percentage of helicop-
ters and transports than of
fighter aircraft.
Equipment holdings proportional Same as Scenario I
to number of men. No new pro-
curement.
Forces, Germany; full-strength
units, high level of activity.
Air forces Modeled after GSFG; active Same as Scenario I
fighter, fighter-bomber, and heli-
copter units.
Some barracks, POL storage, Barracks, support infrastructure, Same as Scenario II, plus an
roads, limited infrastructure. POL storage, roads, and fortifi- airfield.
cation of existing facilities.
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existing troops and that 60 percent would be new
conscripts. We also assumed that in each of the
scenarios the relative proportions of ground forces,
air forces, and support personnel to total military
personnel would be about the same as they are
for the current force in Afghanistan.
Likewise, we assumed that equipment holdings would
increase in proportion to the numbers of personnel.
No new equipment was procured to support the
150,000-man force of Scenario I; we assumed it
was drawn from existing stocks. For the 250,000-
man force of Scenario II, however, we assumed
the procurement of about 350 aircraft and equipment
for five motorized rifle divisions (MRDs). For 500,000
men, we included procurement of equipment for
19 MRDs, one airborne division, and more than
500 aircraft. We procured the equipment for the
two larger forces because we judged that drawing
this equipment from stocks or from existing units
would decrease the overall state of readiness of
the armed forces.
The factors for calculating the operation and main-
tenance (O&M) costs of the ground and airborne
forces equipment for the 150,000-man scenario were
the same as those for current operations. For the
scenarios involving 250,000 and 500,000 troops these
factors were increased by 40 and 100 percent, re-
spectively, to account for additional equipment use
and repair. Factors for air forces O&M remained
the same, however, because we believe the Soviets
probably would not increase the rate of operation
of their air elements significantly. O&M for command
and support personnel also remained unchanged.
Construction costs for the 150,000-man force were
assumed to include barracks for some personnel
(others would be housed in expropriated Afghan
facilities), POL storage, roads, and limited infra-
structure needs. For a 250,000-man force for three
years, we assumed the construction of basic barracks
and support infrastructure, POL storage, and roads
and the fortification of existing facilities. For the
500,000-man scenario, we increased all of these
construction categories and added the cost of an
Confidence in the Estimates
We have the highest confidence in our estimates
of personnel cost
IWe
also have confidence in the estimates of military
procurement;
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estimates for construction, because we may not have
identified all Soviet construction activity. Our methods 25X1
for estimating the costs of operation and maintenance
of weapon systems are less precise than those for
the other components of the estimates
(comprehensive
examinations of the response properties of the model
suggest that growth projections are sensitive to shifts
in the distribution of investment and labor resources.
The model is not designed, however, to evaluate
the indirect effects of disruptions in some sectors,
such as transportation, on overall economic growth.
Thus, we believe the estimated effects of the defense
scenarios examined in this paper provide reasonable
indications of the resulting costs to the Soviet economy
in the aggregate, but these costs probably tend
to be understated and must be supplemented by
analysis of key sectors of the economy
airfield.
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 Top Secret
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Top Secret
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