VULNERABILITY OF THE SOVIET BLOC TO ECONOMIC WARFARE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01012A000500030001-4
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 15
• Document Creation Date: December 22, 2016
• Document Release Date: September 20, 2012
• Sequence Number: 1
• Publication Date: February 19, 1951
• Content Type: NIE

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COPY NO.270
NATIONAL INTELLIGENCE ESTIMATE
VULNERABILITY OF THE SOVIET BLOC TO
ECONOMIC WARFARE
NIE - 22
Published 19 February 1951
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CENTRAL INTELLIGENCE AGENCY
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SE
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NATIONAL INTELLIGENCE ESTIMATE
VULNERABILITY OF THE SOVIET BLOC TO
ECONOMIC WARFARE
NIE-22
The intelligence organizations of the Departments of State,
the Army, the Navy, the Air Force, and the Joint Staff
participated in the preparation of this estimate. All mem-
bers of the Intelligence Advisory Committee have given their
concurrence to the estimate. This paper is based on infor-
mation available on 15 February 1951.
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VULNERABILITY OF THE SOVIET BLOC
TO ECONOMIC WARFARE
PROBLEM
To estimate the vulnerability of the Soviet bloc to economic warfare.
FOREWORD
The term "economic warfare" as applied in this paper covers the offensive use in
peacetime of measures to diminish or neutralize the war potential of the Soviet bloc.*
The extent to which in the event of war the resources of conquered territories
could be effectively utilized and the extent to which they would represent a net gain
to the bloc is a problem beyond the scope of this paper. The absence of military opera-
tions is assumed as a part of the terms of reference.
Since China is engaged in military operations against United Nations forces in
Korea, it is necessary to assess the effect of economic warfare upon China under the
existing circumstances.
The measures considered available to the Western Powers to deny exports to the
Soviet bloc include the following: export and import licensing, trade manipulation,
preclusive buying, black listing, foreign funds control, and the denial to the Soviet
bloc of access to non-Soviet maritime and air facilities. The effects of blockade and
of the use of the navicert and ship warrant systems are not considered in this paper
under the term economic warfare since these measures are usually not employed
except in a state of war.
GENERAL CONCLUSIONS
Military Capabilities.
1. A program ** of economic warfare di-
rected against the Soviet bloc, which en-
compassed selected commodities and
services and which received a high de-
* The Soviet bloc is defined as: the USSR, China,
Albania, Bulgaria, Czechoslovakia, Eastern Ger-
many, Hungary, Poland, and Rumania. The vul-
nerability of Korea, Outer Mongolia, and certain
Communist-controlled areas in Southeast Asia is
not considered because of the relative insignificance
of the economies in these areas; however, it is as-
sumed that economic warfare measures will also ap-
ply against these regions.
gree of cooperation from the Western
Poivers would, if well coordinated and well
enforced, seriously retard and limit the
development of the Soviet bloc war po-
tential. Although, because of the ad-
vanced state of Soviet preparedness for
** No attempt is made to assess the general effec-
tiveness of the control measures that are already in
effect, or to suggest wherein they are adequate or
need to be supplemented. It should be noted, how-
ever, that direct US shipments to the Soviet bloc
have already been reduced to relatively insignificant
proportions through our export control policies.
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war, such a program would not signifi-
cantly affect the present capability of the
USSR to wage initial campaigns, it would,
nevertheless, seriously affect the capabil-
ity of the USSR to conduct a general war
of long duration and might correspond-
ingly influence a decision concerning
such a venture.
Conduct of Foreign Policy.
2. The total effects of a program of eco-
nomic warfare are not likely to force a
basic change in the aggressive foreign
policy of the USSR.
Economic and Political Stability.
3. The effect of a program of economic
warfare on the economic and political
stability of the USSR and its Satellites
and upon relations between the USSR and
its Satellites would not be decisive, though
such a program would intensify popular
discontent, particularly in the Satellite
states and would aggravate problems of
commodity distribution throughout the
bloc. Soviet authority, however, would
doubtless be effective in dealing with con-
flicting claims among the Satellites for
scarce commodities. In view of the re-
pressive power of the Soviet bloc se-
curity organizations, the political stabil-
ity of the various regimes would not be
seriously jeopardized unless and until
other disruptive pressures were brought
to bear, in which case the cumulative ef-
fect would be serious.
Economic Development.
4. A program of economic warfare would
add to the internal economic problems of
the USSR and its Satellites and would
make it virtually impossible to carry out
the planned balanced development of
their economies. Such prospects as they
now have for narrowing the present great
gap between their combined productive
capacities and those of the West would
be decidedly reduced.
Ability to Reduce the Effects of Controls.
5. To achieve worthwhile results a high
degree of cooperation among the Western
Powers is essential *; otherwise the So-
viet bloc could reduce the effect of an eco-
nomic warfare program: a) by purchases
from Western nations unwilling to engage
in parallel action on the economic warfare
program; and b) by the employment of
covert trade channels to circumvent con-
trols. In any case, the Soviet bloc would
attempt to reduce the effects by adjust-
ments within the economy, including re-
allocation of resources, the use of syn-
thetics and substitutes, and the tempo-
rary utilization of stockpiles. There
would, however, be a definite limitation
on their ability to reduce the effect of con-
trols through such internal adjustments.
Chinese Military Capabilities.
6. The effect of a program of economic
warfare against China requires special
consideration since China is actually en-
gaged in military operations of major im-
portance. The effect of economic warfare
alone would not be a decisive factor in
limiting Chinese military capabilities.
Combined with the present drain caused
by the Korean war, however, economic
warfare would substantially reduce Chi-
nese military capabilities (though not to
the extent of critically disrupting cur-
* Although it is not actually within the terms of
reference of this estimate, it should be noted that
effective measures for economic warfare against the
Soviet bloc would involve substantial cost. This
cost would probably include, inter alia, loss of the
imports of Western Europe from the Soviet bloc
which are of significance to their economies, and
would require a redirection of trade. This estimate
makes no attempt, however, to balance off the costs
of economic warfare against its advantages.
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SE,C RET
rent tactical operations) and might ulti-
mately affect the Korean war itself. Un-
less the Soviet Union were engaged in sup-
plying major campaigns elsewhere, it
would have the capability, despite cer-
tain stringencies in its economy, of sup-
plying China's essential military require-
ments, but it is uncertain how much the
flow of Soviet supplies to China could be
stepped up without creating critical trans-
portation difficulties. The effect of these
difficulties together with the drain caused
by the Korean war might, conditioned
upon the degree of resistance, exert a re-
straining influence upon Chinese plans
for further expansion in Southeast Asia
or might significantly hamper the execu-
tion of such plans if they were put into
operation.
Chinese Economy.
7. The industrial centers of China which
are largely the product of Western capi-
3
talism are peculiarly dependent upon the
West for raw materials, for supplies, and
for industrial spare parts, and, indeed,
even for the maintenance of some of the
barest essentials of an industrial type of
society. A program of economic warfare,
by depriving these centers of their im-
ports, would consequently have a serious
effect on their economy and would in-
crease the problems of internal control
there. In addition, a well enforced pro-
gram of economic warfare would make
Communist China more dependent on the
very limited Chinese rail facilities con-
necting with the, USSR. Such a program
would have increasingly serious effects.
It would hamper current industrial pro-
duction, retard industrial development
and might seriously limit China's ability
to sustain large-scale military operations.
If continued for a long enough time, it
might even threaten the internal stability
of the regime.
DISCUSSION
Vulnerabilities of the USSR and Its Eastern
European Satellites.*
8. In 1950 the USSR and its Eastern European
Satellites imported roughly $1.4 to $1.6 billion
worth of goods from the outside world. While
the amount is only about one percent of the
aggregate national output of the Soviet bloc,
it consisted primarily of items essential for
military preparedness and for expansion of
the basic industries of the Soviet orbit. It in-
cluded, in particular, equipment embodying
Western technical improvements, some of
which was imported to serve as models for So-
viet copies. Inability of the Soviet bloc to pro-
cure essential import requirements would seri-
ously retard economic and technological de-
velopment in many lines.
* A more detailed discussion of these vulnerabili-
ties is contained in OIR Report No. 5447 of 26 Jan-
uary 1951, Vulnerability of the Soviet Bloc to Exist-
ing and Tightened Western Export Controls.
Low Industrial Productivity of the Soviet Bloc.
9. The very low per capita income both in the
USSR and in the Satellites reflects an econ-
omy with a very limited total area for adjust-
ments which might be necessitated by meas-
ures of economic warfare directed against the
bloc. It reflects on the other hand the exist-
ence of an authoritarian regime which has the
power to ration consumers to the barest sub-
sistence level and consumers inured to such a
low level. This means that adjustments in
the Soviet economy which might be necessi-
tated by measures of economic warfare may
be feasible even though they have to take
place within an area of extremely limited
maneuverability.
10. There are very few economic resources
within the Soviet bloc which are not in much
shorter supply than in the Western bloc.
Thus, even in the case of general purpose
steel, which is not estimated to constitute a
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commodity in critical shortage for the Soviet
bloc, both total production and per capita pro-
duction are for example only a fraction of that
of the US or of the Western bloc. Conse-
quently total steel production in the USSR
would not at the present time allow, for ex-
ample, a large merchant ship construction
program or a great expansion in the number
of automobiles without a drastic curtailment
of war materials. This relatively low produc-
tion of steel thus constitutes a sharp limita-
tion upon the industrial capabilities of the So-
viet Union in comparison with those of the
US or of the entire Western bloc. The Soviet
economy, however, is adjusted to present sup-
plies of steel produced domestically, and since
the USSR does not rely to a significant degree
upon imports of finished general purpose
steel, there is only limited vulnerability to eco-
nomic warfare in the case of steel or of other
commodities in like status.
11. Quite different is the case of most of the
commodities and facilities discussed below.
In these cases the shortage is deemed critical
not primarily because quantities available are
low in comparison with those available to the
Western Powers, but because a significant pro-
portion of the quantities used by the Soviet
economy have been imported and are not
likely to be replacable without substantial ad-
ditional cost to the economy.
Fuel and Power.
12. Of the three main sources of power?coal,
petroleum, and electricity?the Soviet bloc is
least vulnerable with respect to coal.
13. Petroleum production and stocks are ade-
quate for a reasonable rate of peacetime eco-
nomic development and for initial military
campaigns, but they would probably be insuffi-
cient to support the requirements of a large-
scale war of long duration involving strategic
air operations, especially if some of the refin-
ing facilities were destroyed. Expansion of
crude oil output in excegs of planned goals has
been achieved through over-intensive utiliza-
tion of facilities. There are shortages of many
types of oil field equipment, ranging from geo-
physical prospecting instruments to drills,
rigs, and essential . pipe and tubing. The
shortage of refining capacity for the produc-
tion of 100 octane aviation gasoline and high
grade lubricating oils is of particular impor-
tance. At present there are indications that
air units' are rationed in the use of aviation
gasoline, which may be due, however, to trans-
portation difficulties and/or stockpiling as
well as to the low refining capacity.
14. In electric power the USSR and its Satel-
lites have not been able to provide the generat-
ing capacity envisaged by the state planners,
despite large imports of equipment from
abroad. Major items in short supply are
steam and hydroelectric turbines and gener-
ators, switching and control equipment, large
power transformers, steam boilers and boiler
tubes, electrical indicating and recording in-
struments, and electric motors of over 200 h.p.
Expansion of electric power capacity has a
leading priority throughout the bloc, and ina-
bility to obtain the equipment necessary
would impede the expansion of many other
industries and retard the development of re-
serve capacity so necessary in the event of
destruction during war.
Metals, Metal Products, and Metallurgical
Equipment.
15. (a) Copper and lead are in short supply
in both the Soviet and Satellite economies.
Copper is among the most critical of the metal
shortages and in wartime direct military re-
quirements in this metal are extremely high.
In 1950 Soviet output of copper totaled be-
tween 250,000' and 300,000 tons and imports
ranged between 50,000 and 100,000 tons.
Practically all of those import requirements
were supplied by Western sources.
(b) The Satellites continue to acquire tin
and tin alloys from the West, although the in-
clusion of China in the bloc has made such
procurement less imperative. Imports of Chi-
nese tin would be sufficient for minimum
peacetime needs but would be insufficient to
make up the deficit in wartime.
(c) Zinc, tungsten, nickel, bronze, and
brass are in tight supply. Soviet require-
ments for nickel in the atomic energy pro-
gram make this item particularly important.
The deficiency in tungsten can be partly off-
set by Chinese supplies.
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(d) Cobalt, mercury, and cadmium have
reportedly been smuggled into the USSR, indi-
cating a shortage of and an intense interest
in acquiring these items.
(e) Aluminum capacity is satisfactory
with the possible exception of facilities for
producing aluminum foil.
16. The Soviet bloc economies have adjusted
to limited but increasing supplies of steel.
Consequently, even though the quantities
available are far below those of the Western
Powers, carbon steel is not likely to constitute
a critical shortage. There is, however, a par-
ticular stringency in high grade alloy steel,
and in certain products such as seamless pipes
and tubing, and steel wire and cable. Czecho-
slovak and Polish steel production depend to
a considerable degree upon high grade Swed-
ish iron ore. If the supply of this ore were
cut off, it would at the least force extensive
plant and equipment changes in these coun-
tries. The achievement of planned goals for
iron and steel production, particularly in Po-
land, Czechoslovakia, and Hungary, would be
retarded by inability to procure necessary
equipment from the West.
Non-Metallic Minerals and Selected Manufac-
tures.
17. In this category shortages are evident in
industrial diamonds and other industrial gem-
stones, graphite and electrodes, piezoelectric
quartz, manufactures of mica and possibly
asbestos brake lining. Although these short-
ages affect many key industries in the Soviet
bloc, the relatively small bulk represented by
several of the above items (particularly in-
dustrial gemstones) makes circumvention of
controls through clandestine shipments rela-
tively simple.
Chemicals.
18. The USSR and its Satellites are relatively
self-sufficient in raw materials for the chem-
ical industry, except for sulphur and pyrites.
Production facilities for basic chemicals are
adequate for current requirements, although
the industry would be hard pressed to supply
a major war effort of long duration. The key
items in short supply are the special chemi-
cals, many of which the Soviets have at-
5
tempted to procure from the West. These in-
clude plastics, pharmaceuticals, rubber chem-
icals and carbon black, and chemical cellulose
of nitrating grade. In the equipment line, it
is believed that export controls on such items
as glass lined equipment, special valves, reac-
tors, vacuum and pressure pumps and record-
ing and control apparatus could be an im-
portant factor in retarding the expansion of
capacity in lines important to the military
potential.
Rubber and Rubber Products.
19. Unrestricted purchases of natural rubber
during the past three years have enabled the
USSR to bridge one of the most vulnerable
gaps in its strategic supply position, and, by
providing stockpiles for future needs, have
greatly strengthened the Soviet military posi-
tion. Future restrictions on natural rubber
shipments would, of course, force the Soviet
Union to dip into its stockpile sooner than
it intends, both for its own use and for its
Satellites. The Soviet synthetic rubber in-
dustry presently produces between 220,000 and
270,000 tons of synthetic rubber annually, and
thus requires about 75,000 to 90,000 tons per
year of natural rubber for admixture. In the
production of tires even though rubber stocks
are adequate, other difficulties detract from
the quantity and quality of tire output.
Strict Western control over shipments of all
sizes of tires, together with embargoes on tire-
manufacturing equipment, tire cord, and car-
bon black, would be among the most effective
means of exploiting this vulnerability.
Cotton, Wool, and Hard Fibers.
20. A Western embargo on cotton and wool
fiber exports to the USSR and Eastern Europe
would not have a critical effect upon the econ-
omy of the bloc as a whole. The impact upon
the USSR would not be serious in view of the
relatively small share of Soviet imports com-
pared with domestic output. It would neces-
sitate the closing down of some textile plants
in such industrial Satellite countries as Poland
and Czechoslovakia, which have a well de-
veloped textile industry of long standing, but
lack the broad domestic raw material bases
that the Soviet Union possesses. Some diffi-
culties are likely to be experienced, principally
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in the USSR as a result of the loss of high-
quality grades of both cotton and wool. The
Soviets are aware of this deficiency and have
purchased large quantities of wool for stock-
pile from Australia. Reduced supplies could
be partially offset by increased domestic pro-
duction of synthetic fibers, particularly in
Poland, Czechoslovakia, and Eastern Germany
and by temporary withdrawals from stocks.
Military and industrial requirements would be
given priority in the allocation of supplies, and
the main brunt of any reduction arising out of
Western controls would have to be borne by
the civilian consumer.
21. Cessation of imports of hard fibers (sisal,
jute, and henequen) into the Soviet bloc would
create some stringencies, but probably not
have any disastrous effect on the industrial
and military economy because of the ability
to use domestic fibers as substitutes.
Metalworking Machine Tools.
22. Increased resrictions on Western exports
of machine tools would seriously iktpede devel-
opment of Soviet and Satellite economic
potential. Western trade restrictions on cer-
tain complex types could create bottlenecks
within a short period of time, for example, in
the manufacture of precision gears for certain
types of aircraft. Soviet bloc -efforts to get
machine tools of numerous types?multi-
spindle automatic lathes, honing and lopping
machines, horizontal combination boring,
drilling and milling machines, etc.?are strong
evidences of the importance of those items to
total Soviet economic development.
Electronics Equipment.
23. Although the Soviet bloc has developed
most lines of electronics production, it has not
been able to develop a comprehensive enough
electronics industry to produce a large enough
volume of materials, component parts, and
items which might well be of critical impor-
tance in the prosecution of a war. Intensive
efforts have been made to secure raw mate-
rials, electronic equipment and components,
production equipment and technical informa-
tion through both overt and covert trade
channels. Denial of Western exports in those
lines would seriously hamper Soviet bloc elec-
tronics development and production. These
weaknesses would be felt in the fields of radar,
guided missiles, radio, aircraft navigational
aids and atomic energy. Internal adjust-
ments by the USSR and its Satellites would
not be able satisfactorily to offset this de-
ficiency.
Precision Instruments.
24. The Soviet bloc has the same vulnerability
to restrictions on shipments of precision in-
struments that it has in the case of electronic
equipment. The entire orbit is critically short
of a number of specialized measuring, ana-
lytical, and control instruments essential for
a wide range of industrial and military de-
mands. Items in short supply include such
basic instruments as spectographs, vacuum
measuring gauges and pyrometers.
Abrasives.
25. The impact of increased restrictions of
Western exports of abrasive materials would
be felt directly in the metal working optical
and precision instrument industries. This in
turn would affect the output of such items as
bearings, range finders and precision gears.
Important deficiencies in abrasives include
white aluminum oxide, silicon carbide, and
certain specialized grinding wheels. Certain
Satellite states are currently attempting to
develop an abrasives industry, but it will prob-
ably not be a significant factor in the economy
for at least five years.
Bearings.
26. Current production of all types of antifric-
tion bearings in the Soviet bloc is quantita-
tively and qualitatively below minimum indus-
trial and military requirements. Industry
throughout the orbit is strongly dependent on
non-orbit sources of bearing supplies, particu-
larly in the case of specialized and precision
type bearings. Since the end of the war the
USSR has been forced to import an estimated
10 to 20 million units yearly from Western
countries for use in a wide variety of vital
machinery and end products including air-
craft engines and tanks. In the producion of
bearings for jet aircraft, for example, the So-
viets rely heavily on non-orbit sources. The
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sizeable postwar procurement program of the
Soviet bloc has probably provided a reserve of
some types and sizes; nevertheless, antifric-
tion bearings represent a category which is
definitely vulnerable to Western export restric-
tions. Cessation of shipments would have a
substantial impact on capacity for military
and industrial production.
Construction and Road Building Machinery.
27. The Soviet bloc is dependent on non-orbit
sources for a high percentage of its total re-
quirements for construction and road building
equipment, particularly the heavier and more
specialized types. If the bloc were forced to
rely on domestic production of this equipment,
the development of capabilities for the rapid
construction of such projects as military in-
stallations, air strips, and strategic roads will
be greatly limited.
Transportation Equipment.
28. One of the greatest shortages in the Soviet
bloc's internal transportation system is in rail-
road rails. This shortage has reduced the
normal maintenance replacement of worn rails
and is a factor in failures to meet railroad
construction plans. This deficiency however
would not be a critical limitation in wartime.
It is not viewed as acute because right-of-way
maintenance is apparently above minimum
operating levels, and because new line con-
struction of economic as well as strategic im-
portance has been going on throughout the
orbit area. The capacity of the Eastern Euro-
pean Satellites to roll rails has been increased
and supply should be easier in 1951.
29. Other shortages include: tank cars, tank
trucks, heavy-burden freight cars (including
well-cars) , tires and tubes, motor vehicle spare
parts, motor trucks, locomotives, railway sig-
nal equipment, and safety devices. None of
these shortages is sufficiently critical to force
a breakdown in the system, but they deprive
the transportation system of a valuable
cushion in wartime and in peacetime cause
temporary bottlenecks in the distribution
system.
Merchant Shipping.
30. The limited capabilities of the Soviet bloc
merchant fleets force a strong dependence
upon foreign flag shipping sources and repre-
sent a major vulnerability within the bloc.
Approximately 65 percent of the value of So-
viet bloc imports and about 57 percent of the
value of its exports in trade with countries
outside the bloc is carried by merchant vessels.
The majority of this trade is presently carried
by the vessels of non-Soviet nations. An anal-
ysis of shipping engaged in trading between
Soviet and Satellite ports and the ports of
non-Soviet nations during November 1950 re-
vealed that nearly 90 percent of the vessels
involved were of non-Soviet registry. West-
ern measures designed to control the availa-
bility of shipping to the Soviet bloc through
limitations on the export of items for use in
expansion of shipbuilding facilities, through
refusal to build ships for Soviet account and
especially through denial of shipping itself
would seriously limit the ability of the bloc to
obtain transport both for its imports and ex-
ports.
Air Transport.
31. The USSR through its Czechoslovak
and Polish Satellites maintains a network of
air routes serving the principal European
countries in addition to connections with Iran
and Afghanistan in the Middle East. A vig-
orous Western civil aviation policy toward the
USSR and its Satellites would not only help
contain the Kremlin's efforts to extend its in-
ternational air network, but would force the
retrenchment and cessation of a number of
important connections. The effective appli-
cation of US export controls on aircraft parts
and equipment would force changes and re-
ductions in Czech airline schedules and has
even caused over-intensive utilization of air-
craft and inadequate maintenance. The So-
viet bloc economy is not strongly dependent
on these airlines, but inability to maintain
these airlines would have many non-commer-
cial disadvantages.
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Replacement Parts.
32. The entire orbit constantly needs replace-
ment parts for the vast amount of assorted
foreign equipment acquired in former years.
A large percentage of the inventory of indus-
trial equipment in the Soviet sphere is of for-
eign manufacture. For example, it is esti-
mated that approximately 35 percent of the
machine tools in operation in the USSR are
Western built. The bulk of this equipment is
now over five years old and is already begin-
ning to present serious maintenance problems
because of the non-availability of spare parts
and the difficulty encountered in manufactur-
ing them in the USSR or the Satellites. The
problem is further complicated by the fact that
most of this equipment is of an especially com-
plex type, purposely obtained from abroad be-
cause of Soviet inability to produce it domes-
tically. An estimated 75 percent of Soviet
specialized machine tools are of foreign make.
The constantly growing spare parts problem
is, therefore, concentrated in the weakest and
most important sector of the Soviet orbit in-
dustrial establishment.
Technical Aid.
33. In view of its quantitative and qualitative
deficiencies in technical resources, the Soviet
bloc would probably gain most by obtaining
the services of experienced engineers. Their
"know-how" would enable the Soviet Govern-
ment to make better use of the industrial re-
sources which it controls and to introduce new
techniques in those industries which have been
developed in the USSR relatively recently. It
is very likely that full use of foreign technical
assistance, if it were available, would still be
hampered by insufficient skilled workers and
by political interference; but aside from these
two retarding factors, the principal obstacle
to technological progress in the Soviet sphere
is the lack of sufficient technicians who can
bridge the gap between a working model and
quantity production, between a flow chart of
some new process and the operating installa-
tion. Judging by the number and persistence
of Soviet attempts to get technical data in
recent years, the bloc's most pressing need for
technical assistance is in such fields as elec-
tronics, specialized metalworking machinery,
testing equipment, rubber products, special
chemicals, and petroleum refining. Needless
to say, the published and unpublished tech-
nological literature which the bloc has pro-
cured or sought to procure would provide in-
formation that is applicable in practically all
branches of industry, but the USSR and ad-
vanced Satellite countries undoubtedly use
such information primarily in the fields just
mentioned and in other industries that direct-
ly support military production. The problem
of enforcing controls to exploit this vulnera-
bility is of course a very difficult and in some
cases impossible one.
Major Vulnerabilities.
34. Main obstacles to development of the So-
viet bloc economy are the lack of skills, tech-
nical "know-how" and fabricating facilities.
There are relatively few critical raw material
shortages at current levels of production. The
USSR and its Satellites are aware of these de-
ficiencies and are exerting strenuous efforts to
improve their capabilities for sustained mili-
tary operations. In addition to their efforts
to expand the over-all economic potential for
war through increased capacity in such basic
lines as steel, electric power, coal, petroleum,
and transportation, they are giving special
attention to the correction of deficiencies in
certain key items * including: certain types of
electronic equipment; precision instruments;
copper and tin; natural rubber; special chem-
icals; ball and roller bearings; merchant ves-
sels; special types of production equipment;
and a wide variety of replacement parts and
equipment components. There is also, of
course, an intense effort to procure technical
"know-how," materials, parts and equipment
for production of a wide variety of weapons.
Cumulative Effects of Vulnerabilities Result-
ing from Controls.
35. The effect of an economic warfare pro-
gram which denied significant quantities of
critical items to the Soviet economy could be
expected to go substantially beyond the mere
summation of the separate and direct effects.
Shortages would ramify widely throughout
* It is emphasized that there are many defi-
ciencies other than those here enumerated.
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the economy and one shortage would in many
cases compound the effect of others. The
total effect of such a program, well coordi-
nated and well enforced, would seriously re-
tard development of the capabilities of the So-
viet bloc to wage a prolonged war and thus
might correspondingly influence a decision
concerning such a venture.
Soviet Bloc Capabilities to Minimize the
Effect of Controls.
36. Largely as a result of export controls, di-
rect US shipments to the Soviet bloc have be-
come relatively insignificant. The Soviet bloc,
however, has benefitted from the lack of com-
plete parallel action by other non-Soviet na-
tions. Many Western nations have recently
displayed a greater willingness to cooperate on
export controls,- but progress in the prepara-
tion of a sufficiently inclusive list has been
slow. The effectiveness of an economic war-
ware program would depend to a large extent
on parallel action by the non-Soviet countries.
37. In addition to the lack of parallel controls,
a widespread net of more or less covert trade
channels has developed in recent years
through which the Soviet bloc continues to
obtain products on Western control lists.
The intense efforts of the Soviet bloc to secure
these items by burdensome circuitous and
expensive channels is one measure of the
urgency of its requirements. On the other
hand, the substantial volume of this trade is
a measure of the partial ineffectiveness of the
current Western control program. This gap
in enforcement could be closed to a signifi-
cant extent through the cooperation of the
non-Soviet countries and the application of
instruments of economic warfare not widely
employed at present, or not employed at all.
Those measures would include: preclusive
buying; black listing; foreign funds con-
9
trols; and denial of shipping facilities. De-
spite these measures some restricted items
would, of course, still get through, especially
those of small bulk or those with numerous
sources of supply.
38. In those cases where it would be impossi-
ble for the Soviet bloc to procure vitally needed
imports, compensating internal adjustments
could in some cases be made. The USSR could
order a stricter control over the distribution
and utilization of critical items within and
between members of the orbit. This proce-
dure would be feasible because of the high de-
gree of integration of the Soviet and Satellite
economies. Labor, fabricating facilities, and
materials would be reallocated in an effort to
produce the products previously imported.
Synthetics and substitutes would be utilized
wherever possible.
39. The full effect of these measures, however,
would not offset adequately the damage result-
ing from Western trade restrictions. Presum-
ably the bloc, through its planned economies,
is operating under a scheme of allocations
which has already been decided as the best
possible arrangement. Reallocation of labor,
materials, fabricating facilities, and products
is not always feasible, and when it can be
accomplished it is time-consuming, inefficient,
and is generally less satisfactory than the
previously adopted program. In view of the
fact that Soviet plans have already provided
for an allocation of resources giving top pri-
ority to the development of capacity for mili-
tary production and heavy industry as opposed
to consumers goods, reallocation of priorities
can take place only within an already nar-
rowed area. Any general change in the
planned pattern of allocation would certainly
retard the development of the economic poten-
tial for war.
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GPO--SSO-6309
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