SOVIET SPENDING FOR DEFENSE: TRENDS SINCE 1951 AND PROSPECTS FOR THE 1980S

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83T00233R000100130001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 52
• Document Creation Date: December 22, 2016
• Document Release Date: April 29, 2010
• Sequence Number: 1
• Publication Date: April 1, 1982
• Content Type: REPORT

Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Directorate of
Intelligence
Trends Since 1951 and
Prospects for the 1980s
Soviet Spending for Defense:
Secret
Secret
SOV 82-10059
April 1982
Copy 498
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
National Security Unauthorized Disclosure
Information Subject to Criminal Sanctions
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Directorate of Secret
Intelligence
Soviet Spending for Defense:
Trends Since 1951 and
Prospects for the, 1980s
Information available as of 9 October 1981
has been used in the preparation of this report.
This paper was prepared by
of the Office of Soviet Analysis. The
text is essentially that of the version originally
issued in November 1981.
omments an
queries are welcome and may be directed) to the
Chief, Econometric Analysis Division, Office of
Soviet Analysis,
This paper has been coordinated with the National
Intelligence Council.
25X1
25X1
25X1
25X1
Secret
SOV 82-10059
April 1982
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Soviet Spending for Defense:
Trends Since 1951 and
Prospects for the 1980s
Key Judgments The dominant feature of Soviet defense spending over the past 20 years has
been the persistence of its igrowth. Since 1965, the growth has averaged
about 4 percent a year-about the same as that for the overall economy.
Over most of this period, the defense share of GNP was a relatively
constant 12 to 13 percent. In 1979 the share increased by a percentage
point 25X1
This 20-year commitment of resources to the Soviet defense effort has paid
substantial dividends in political prestige and military power, but it has
drawn scarce human and technical resources and raw materials from the
economy. In specific sectors that are key to economic growth-machinery,
fuels, power, and chemicals-the Soviet military requirement has been
even higher than the one-eighth share that defense takes from the economy
as a whole. F__1 25X1
Resource commitments to these areas will be increasingly important to the
economy as demographic and energy problems combine with longer
standing difficulties to retard economic growth. Under these conditions,
maintaining historical rates of growth in defense spending will be economi-
cally and politically more difficult. 25X1
If defense spending continues to grow at about 4 percent per year and
economic growth continues to decline, the defense share of GNP could
increase to 15 percent by 1985 and could approach 20 percent by the end of
the decade. This would drastically reduce the extent to which additional re-
sources could be allocated Ito investment and consumption. It would also
erode future increments toIGNP that have been so important in the past in
easing political tensions that arise from the competition for resources.
Indeed, it appears that the',preparation of the 1981-85 economic plan has
involved particularly difficult decisions on the allocation of resources
between defense and the other sectors of the economy. Despite such
factors, we have seen no indications of a shift of resources away from the
On the basis of observed military activity-the number of weapon systems
in production, weapons development programs, and trends in capital
expansion in the defense industries-we expect that Soviet defense spend-
ing will continue to grow at about its historical rate through at least 1985.
In this connection, however, a deputy chairman of the Soviet State
Planning Committee (Gosplan) told a former US budget official in May
iii Secret
SOV 82-10059
April 1982
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
1981 that the Soviet Union had been adjusting its 1981-85 economic plan
to accommodate "large increases" to the military. These increases alleged-
ly were intended to counteract US defense budget increases and, according
to this official, required important revisions in plan targets.
If the Soviets have adjusted their 11th Five-Year Plan to accommodate
"large increases" in defense activities, such increases would almost certain-
ly be related to the production of military hardware. Opportunities for
immediate increases could well be limited by chronic bottlenecks in the
supply of components and materials. In the short run, therefore, Soviet
adjustments to increase military production would probably be limited to
two courses of action: modest increases in production rates for some
selected systems already in or about to begin production, or the extreme
measure of industrial mobilization. Longer term options include increasing
investment in the defense industries to expand their capacity to produce
military systems in the mid- and late 1980s and adding new development
programs to those already planned.
Large increases in Soviet defense activities probably would be directed
primarily against what the Soviets may perceive as an accelerating arms
competition with the West. Since March 1981 the Soviets have apparently
become less hopeful about the prospects of achieving arms control agree-
ments with the United States and more concerned about how to preserve
Moscow's military-strategic position. With this perspective, the Soviets
would probably pursue a combination of near-term production increases for
selected systems and longer term increases in investment and developmen-
tal activity to hedge against what in their view is an increasingly uncertain
strategic environment.
If the Soviets pursued these options, defense spending would probably grow
above historical rates in the mid- and late 1980s and beyond. In the near
term, investment in some civilian sectors would suffer. Cutbacks probably
would occur in such areas as consumer durables, services, housing, and
machinery and equipment for the food and soft goods industries. Such cuts
would worsen already poor prospects for improving labor productivity over
the next five years and could increase worker discontent. Despite these
consequences, we believe the Soviet leadership would be inclined to
continue the current mix of cosmetic concessions, short-term fixes and
patriotic appeals and, if necessary, to adopt repressive measures to ensure
both continued growth of their defense effort and domestic control.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 f I
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
We would detect indications of large increases in Soviet weapons develop-
ment and production programs well before such weapons became oper-
ational with Soviet forces. The best indicators would be higher levels of
weapons testing activity and increased capital construction at key weapons
production facilities. Specific testing programs and plant expansion proj-
ects would probably provide several years' advance warning of changes in
the mix and levels of weapons the Soviets intend to acquire later in this
decade.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Introduction
1
General Expenditure Trends
2
Analysis of Expenditures by Resource Category
3
Operating
3
Trends in Expenditures by Military Service
9
The SRF
11
The Ground Forces
11
The Air Forces
I 1
National Air Defense Forces
11
Command and General Support
11
Factors Shaping Defense Spending
13
The Fifties
13
Stalin's Legacy
13
The Revolution in Military Affairs (1953-60)
14
Shifting Military Priorities
15
Strategic Weapons and Organizational
Issues
16
Trends in Defense Spending
16
The Sixties
17
Policy Controversy
17
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Space 18
Strategic Weapons 19
Enhancing Conventional Capabilities 20
Shifting Naval Priorities 21
Strategic Forces 21
Space 22
Developments in the Forces 23
Strategic Forces 23
SALT and the Economics of Arms 24
Control Agreements
Theater Nuclear Systems 24
Frontal Aviation 24
Ground Forces 26
Naval Programs 26
Space 28
General Trends in Defense Expenditures 28
The Economic Setting of Defense
The Use of Economic Resources by Defense 31
Prospects for Soviet Defense Spending in the 1980s
Floorspace Expansion at Defense Industries
Weapon Systems in Test and Development
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Prospects for an Accelerated Soviet Defense Effort 39
Economic and Social Impacts of an 41
Accelerated Soviet Defense Effort
1. Estimated Soviet Defense Expenditiures, 1951-80
2. Rank Distribution of Soviet Military Personnel,
by Service
3. Trends in Soviet O&M and Personnel Expenditures,
1951-80
4. Estimated Costs of Soviet Military Aircraft
Maintenance, 1969-79 (Rubles)
5. Estimated Costs of Soviet Military Aircraft Maintenance, 5
1969-79 (Equivalent 1978 US Dollars)
6. Growth in Soviet Military Construction, 1960-80
7. Trends in Unit Costs of Soviet Weapon Systems
8. Military Service Shares of Defense Spending, 1951-65 and 1965-80 10
10. Estimated Soviet Ground Forces Military Manpower, 1955-79 15
12. Soviet Expenditures for Space,, 1956-80
13. Operations of General Purpose Naval Forces
Outside Home Waters
14. Soviet ICBM Deployment, 1960-70
15. Compostion of Soviet Weapons for Inter-
continental Attack, 1965-80
16. Tactical Nuclear Delivery Systems, 1970-80
17. Trends in Soviet Tactical Aviation Forces
18. Trends in Unit Cost and Displacement of Soviet
Large Surface Combatants
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
19.
Total Military Requirements as a Percent of Sector Gross Value
of Output (GVO)
32
20.
Growth Rates of Soviet Civilian and Military Machinery Output
34
21.
Number of New or Modified Soviet Weapon Systems
Deployed, by Decade
1. The Top 20 Soviet Weapon System Procurement Programs 8
2. Soviet Military Manpower, 1960-65
3. Average Yearly Procurement of Major Weapons, 1971-80
4. Soviet Defense Expenditures and Economic Indicators
6. Soviet GNP, Population, and Industrial Capital Stock
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Soviet Spending for Defense:
Trends Since 1951 and
Prospects for the 1980s
A priority intelligence issue is the impact that a
deteriorating economy will have on Soviet military
and foreign policies during the 1980s. In the second
year of their 11th Five-Year Plan (1981-85), Soviet
leaders are facing a continuation of the dismal eco-
nomic picture of the past few years, as well as the
prospects of invigorated defense programs in the
West. A key consideration in assessing future direc-
tions in Soviet military policy and programs is an
understanding of past trends in the Soviets' resource
commitment to defense.
Toward this end, this paper places Soviet defense
spending between 1951 and 1980 in its military,
political, and economic setting. The paper begins with
an overview of trends in Soviet defense expenditures
over the past 30 years. It next addresses the general
factors that have shaped military forces and outlays
over this period, such as technical developments,
changing military policy, and political leadership.
Then, the economic environment within which the
Soviet military has developed is analyzed. Finally, an
estimate of the trend in Soviet defense spending
during the 1980s is given.
The Soviet defense program analyzed in this paper is
defined broadly to include some activities that the
Soviets may define as defense related but the United
States does not-for example, the type of space
programs that are carried out by NASA in the United
States. The estimates of defense spending are based
for the most part on a detailed identification and
direct costing of the activities and components that
make up the Soviet defense program for each year.
The estimates are expressed in rubles to reflect our
understanding of the costs of military activities in the
'USSR. Such estimates help us assess the resource
commitment and the relative priorities assigned to the
forces that make up the defense effort, and the impact
of defense on the economyr-___-] 25X1
By using constant prices, our estimates reflect only
real changes in defense activities and not the effects of
inflation. Because of the peculiarities of the pricing
system that the Soviets use, we know that their prices
reflect real resource costs only in the years immedi-
ately following a major price reform. The last such
reform began in 1966-67 and was fully implemented
by 1970; therefore we use 1970 prices in all our 25X1
analyses of Soviet defense expendituresF__-]
The Soviets are once again engaged in a major price
reform to make their prices reflect real resource costs.
This reform is scheduled to take effect in 1982. We
anticipate that gathering sufficient intelligence on the
price reform and analyzing this information to change
the price base year will be a long-term, resource-
intensive task. F__1 25X1 25X1
If a more recent price base were used, the level of
expenditures would be higher, reflecting growth in the
price levels of military goods and services. The share
of GNP going to defense, however, would not neces-
sarily be higher. This would depend on the differential
between inflation rates for defense and for GNP as a
whole.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
General Expenditure Trends
Total Spending
Analysis of the levels and trends in total Soviet
defense expenditures 1 between 1951 and 1980 reveals
three distinct periods (see figure 1).
Between 1951 and 1955, the trend in defense expendi-
tures was dominated by a dramatic increase in 1955
because of large aircraft procurement programs for
air defense and strategic attack. During this period,
the Soviet armed forces were structured primarily for
the type of combat experienced during World War II
and were characterized by large tactical aviation and
ground forces formations.
During the mid- and late 1950s, the Soviet force
structure began to change in response to an evolving
nuclear doctrine. Emphasis shifted from the mainte-
nance of large general purpose forces to smaller forces
equipped with newly developed missiles and stream-
lined for the nuclear battlefield. Military manpower
was cut back substantially, and an absolute reduction
in Soviet military outlays occurred, which amounted
to almost 4 percent a year.
This declining trend was reversed in 1960 as Soviet
defense expenditures began two decades of steady
increases. The years 1960-65 represent the highest
growth years, reflecting growing resource commit-
ments to research, development, testing,'and evalua-
tion (RDT&E), space programs, and strategic forces.
During this period, defense was growing at about 8
percent a year while the rate of economic growth
declined to between 4 percent and 5 percent annually
because of a slowdown in industrial productivity and
the disastrous harvest of 1963.
' The analysis in this report is based on a broad definition of Soviet
defense expenditures which includes activities that the Soviets may
define as defense related, but which are not included within the US
definition of defense. These include expenditures for internal
security forces, construction and railroad troops, and the type of
space programs that are carried out by the military in the USSR,
Figure 1
Estimated Soviet Defense Expenditures,
1951-80
10
I I I I I~~~~I ~~~I
1951 55 60 65 70 75 80
The expenditures in this graph, expressed in 1970 rubles at factor cost, are
based on a broad definition of Soviet defense expenditures which includes 25X1
activities that the Soviets may define as defense related but which are not
included within the US definition of defense. These include expenditures
for internal security forces, construction and railroad troops, and the type of
space programs that are carried out by the military in the USSR but by
NASA in the United States. The shaded area represents a confidence
interval around the estimate for each year. We believe there is only a 10-
percent chance that the "true" figure for any given year lies outside the
shaded area.
585609 11-81
The relationship of defense growth to economic
growth changed after 1965. From 1965 to 1978,
Soviet defense expenditures grew at roughly the same
average rate as the economy-about 4 percent per
year.
spending in the 1980s are discussed in this paper.
Recent trends in Soviet defense spending and the
economy suggest that defense expenditures may be
returning to the relationship of the early 1960s, when
growth in military outlays exceeded economic growth.
The implications of these trends for Soviet defense
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Analysis of Expenditures by Resource Category
Defense spending can be divided into three principal
resource categories: operating, investment, and
RDT&E. The operating category includes expendi-
tures for personnel as well as for the operation and
maintenance (O&M) of current forces. Investment
expenditures are those associated with acquisition and
capital (major) repair of weapons, equipment, and
facilities. RDT&E resources are used to explore new
technologies, develop new weapons, and improve ex-
isting weapons.
Operating
Personnel. The Soviet system of military compensa-
tion is structured to retain and motivate career per-
sonnel while providing minimal support for conscripts
fulfilling their terms of service. Because most of the
USSR's military personnel are low-paid conscripts
(see figure 2), the approach the Soviets use for
personnel compensation enables them to keep their
total payroll low.
Since the mid-1950s, personnel expenditures as a
share of total defense expenditures have been steadily
declining from a high of about 30 percent during
1951-55 to its present share of about 12 percent.
Soviet personnel costs dropped in real terms by more
than 30 percent during the 1950s, reflecting manpow-
er reductions between 1953 and 1960 that totaled 2.2
million men. These expenditures began to rise in 1962
and increased rapidly from 1966 through 1970 during
the buildup along the Sino-Soviet border. This growth
slowed down during the 1970s.
O&M. Since 1965, the cost of operating and main-
taining the Soviet armed forces has been increasing
more rapidly than personnel costs (see figure 3). This
trend is a result of the forces' weapons-intensive
orientation, the Soviets' conservative approach to
maintenance, and the increasing complexity of the
advanced weapons deployed, which have required
continually increasing maintenance and support costs.
Figure 2
Rank Distribution of Soviet Military Personnel,
by Service
Ground Air Strategic Strategic Navy
Forces Forces Air Defense Rocket
Forces Forces
25X1
An illustration of the impact of Soviet maintenance
practices on defense spending is provided by the
system they have established for military aircraft.' Of
all Soviet maintenance requirements, military aircraft
maintenance appears to carry the highest price tag.
Although the ruggedness and technical simplicity of
most Soviet military aircraft tend to make them
relatively easy to maintain, the conservative Soviet
approach to maintenance, with its emphasis on fre-
quent and extreme overhauls, makes the system
costly: 25X1
since 1969-rising at an average rate of over 5
military aircraft maintenance has nearly doubled
? Our ruble estimates indicate that the annual cost of
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
25X1
NCOs
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Figure 3
Trends in Soviet O&M and Personnel
Expenditures, 1951-80
percent annually (see figure 4). This rapid increase
has resulted from a steady growth in the Soviet
inventory of technically more complex aircraft.
a Expressed in terms of dollar costs as paid by the US
Department of Defense, maintaining the Soviet
military aircraft inventory as the Soviets do would
have cost the equivalent of $6-7 billion in 1979. This
is roughly double the amount it would have cost the
US Air Force to maintain (with current US meth-
ods) a similar fleet in the United States-that is, one
with comparable numbers of aircraft, technical
characteristics, and operating rates (see figure 5).F-
Investment
The investment category is divided into two compo-
nents: the procurement of weapons, equipment, and
space systems, and the construction of military facili-
ties.
Figure 4
Estimated Costs of Soviet Military Aircraft
Maintenance, 1969-79
(rubles)
Billion 1970 Rubles
Construction. Construction as a share of total esti-
mated Soviet defense costs rose in the 1960s, peaked
in 1970 at about 7 percent, and declined to about 4
percent in 1980.F] 25X1
During the 1960s, cumulative construction expendi-
tures were more than two and a half times what they
had been during the 1950s, reflecting an expanding
Soviet military establishment (see figure 6). These
increases were driven during the early and mid-1960s
by the construction of airfields and facilities associat-
ed with SAMs, ABMs, and ICBMs. In the late 1960s,
construction resources were shifted from facilities
supporting strategic weapons to facilities for general
purpose forces and support organizations to provide
the logistical support for a global military power and
the facilities for the conventional forces buildup along
the Sino-Soviet border. Construction activity during
the 1970s shifted away from building facilities that
directly support weapons and personnel (for example,
silos, runways, and barracks) to the construction of
facilities that increase the combat readiness and
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Secret
Figure 6
Estimated Costs of Soviet Military Aircraft Growth in Soviet Military Construction,
Maintenance, 1969-79
-80
Figure 5 (equivalent 1978 US dollars)
Billion 1978 Dollars Index: 1960=100
225
200
relationships 1960-80
7 Costs estimated using
Soviet maintenance norms 175
and cost estimating
6
125
100
5
75
50
4 Costs estimated using
US Air Force maintenance norms 25
and cost planning factors
1960 65 70 75
80
2
b55614 11-81
that future construction will focus primarily on quali-
tative
1979 ment of new weapons programs. 25X1
as well as additional facilities support -9 the
The trends depicted have been smoothed.
Procurement years, procurement
investment the category past 30 and to has deploy-
in the . Over
25X1 has accounted for well over 90 percent of expenditures
been the major
585613 11-81 factor driving defense spending upward. Since 1965,
the share of weapons and space procurement has been
endurance of military units (for example, personnel about 50 percent of total defense spending.
support structures, maintenance buildings, and equip-
ment, vehicle, POL, and ammunition storage facili- In the early and mid-1950s, large procurement ro-
p
ties) and to the qualitative improvement of existing grams for tactical aircraft as well as medium and
facilities 25X1 heavy bombers dominated total defense spending. In
the early 1960s, emphasis in procurement shifted to
The slowing pace of construction and the shift to the rapidly expanding space program as well as
qualitative improvement of facilities suggest that the strategic systems. Since the mid-1960s, the steady rise
Soviets now have a stock of military facilities that the in procurement outlays has followed a general expan-
Ministry of Defense considers adequate to support the sion of all Soviet forces and a rising trend in the unit
essential missions of the armed forces. We estimate
5 Secret
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R0001 00130001
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Trends in Unit Costs of Soviet Weapon Systems'
aCalculated on basis of initial unit cost in 1970 rubles; the first entry in
each category is indexed to 100.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
costs of Soviet weapon systems (see figure 7). Increas-
ing unit costs, in turn, reflect the fact that Soviet
military programs have shifted more and more toward
LJ/~ I
Analyzing major weapons procurement programs
can provide insights into Soviet defense spending and
military force structure. Comparing the number of
major procurement programs and the weapons mixes
in different periods of time reveals trends in total
defense activities as well as shifting priorities in
weapons acquisition.
25X1
Over the 30-year period, both the number and the
variety of major weapon programs have increased:
From 1951 through 1965, the Soviets engaged in 29
major weapons procurement programs. The 20 most
costly programs made up half of total procurement
costs. During 1965-79 the Soviets engaged in more
than 40 major weapons procurement programs. The
20 most costly weapons programs (see table 1) made
up one-third of the procurement total.
In the 1951-65 period, aircraft accounted for 15 of
the 20 most costly programs and dominated pro-
curement, particularly in the 1950s. Tactical and air
defense aircraft alone made up more than one-fifth
of total procurement expenditures, and strategic
attack programs, intended to deliver nuclear weap-
ons to intercontinental ranges or to strategic targets
on the periphery of the USSR, made up another
fifth of total procurement. The most costly program
was a strategic system-the Badger medium bomb-
er. No major land arms programs for the Ground
Forces were included.
In the 1965-79 period, the 20 most costly programs
included a greater variety of weapons for a wider
range of strategic and theater warfare missions. In
terms of expenditures, the largest Soviet procure-
ment program was the Flogger fighter, which is
currently in service with both Frontal (tactical)
Aviation and the National Air Defense Forces. Five
other tactical and air defense aircraft were also in
the top 20. These six programs together accounted
for almost 15 percent of total weapons procurement
expenditures. Also important were strategic attack
systems, including two nuclear-powered ballistic
missile submarines (SSBNs), four ICBMs, one
IRBM, and one bomber (the Backfire). These eight
systems accounted for nearly another 15 percent of
procurement spending, enhanced Soviet capabilities
to attack both hard and soft strategic targets, and
improved the flexibility and survivability of the
strategic forces. Three of the top 20 programs-two
for tanks and one large program for helicopters-
improved the firepower and mobility of Soviet the-
RDT&E
Unlike our estimates of Soviet investment and operat-
ing outlays, which are based on a direct costing of
,military activities, our estimates of Soviet expendi-
tures for military R&D are made indirectly-using
,Soviet-published statistics that are highly aggregated
,and need to be adjusted to include only those activities
that the United States would define as RDT&E.
Therefore, we are not as confident of these estimates
as we are of the estimates of investment and operating
L5X I
We are confident, however, of the general trends that
we observe in Soviet military R&D. The expenditure
data, together with observed historical trends in the
resources devoted to R&D and weapon program
activity, reflect a long-term Soviet commitment since
the late 1950s to a vigorous military R&D effort. This
commitment, in turn, has produced a program that is
large, growing, and of high priority. 25X1
The expenditure data show that since 1960 military
R&D expenditures have been the most rapidly grow-
ing category of Soviet defense spending. Over the past
20 years, R&D has been consuming an increasing
share of the total, accounting for almost one-fourth of
all Soviet defense spending in 198
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
The Top 20 Soviet Weapon System Procurement Programs a
Flogger Fighter-interceptor/ fighter-
bomber
2 D-class SSBN Nuclear-powered ballistic missile
submarine
3 Y-class SSBN Nuclear-powered ballistic missile
submarine
4
Fishbed
Fighter-interceptor
4
5
Bear
Bomber
5
6
Bison
Bomber
6
9
Fishpot
Fighter-interceptor
9
10
Farmer
Fighter-interceptor
10
1 l
E-class
Cruise missile submarine
11
12
Cub
Transport
12
13
SA-2
SAM
13
20 SS-7
SA-1
ICBM
SAM
a RDT&E costs and military and NASA-type space system costs are
not included in this table.
Examination of the observable inputs to military
R&D-such as manpower, floorspace, and capital
expenditures-portrays a Soviet commitment of re-
sources to R&D that is consistent with the expendi-
ture data:
? Analysis of statistical information published by the
Soviets provides evidence of long-term growth in the
number of people working on military R&D. This is
consistent with our estimates of defense R&D em-
ployment, which indicate that about half of all R&D
personnel are working on military projects. Our
Hip-Haze Helicopter
Foxbat Interceptor/ reconnaissance aircraft
Fencer Tactical bomber
Fitter
SS-18
Fishbed Fighter-bomber
Flagon Interceptor
Candid Transport aircraft
estimates also show that the military R&D work
force grew at an average annual rate of about 6.5
percent during the 1960s and 4 percent during the
1970s.
? The number of facilities engaged in military R&D
has also grown steadily since 1960, a reflection of
the increasing complexity of Soviet weapons.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
o Annual construction and capital investment expendi-
tures at Soviet military R&D facilities were high
during the early and mid-1960s, when the Soviets
were expanding their military R&D base. They de-
clined through the late 1960s and began to rise
again in the early 1970s, approaching by 1978 the
annual outlays of the early 1960s.
The level of output of the Soviet defense industrial
R&D establishment-measured by the number of
systems developed-has remained fairly stable over
the last 20 years. The total number of weapons
reaching initial operational capability (IOC)-almost
all systems that entered the test phase reached IOC-
during 1961-80 reflects a sustained high level of
military R&D. The output of the R&D establishment
was slightly higher in the'late 1960s. Apparently,
there was a modest decrease in the number of pro-
curement programs during the 1970s. With the great-
er complexity and improved performance characteris-
tics of succeeding generations of Soviet weaponry,
ever-increasing resource allocations have been neces-
sary to maintain this level of output
Trends in Expenditures by Military Service s
The Soviet armed forces are organized into five major
service groups-Air Forces, Ground Forces, Navy,
National Air Defense Forces, and Strategic Rocket
Forces (SRF). Using the direct costing approach, we
can form a reasonable picture of the allocation of
most defense spending among these services and gain
insights into trends in Soviet priorities for allocating
defense resources among competing claimants.' F-]
Changes in the distribution of investment and operat-
ing expenditures among the services were most dy-
namic during 1955-65 as a result of policies instituted
' This analysis reflects our understanding of the Soviet armed forces
organization as of 1980, prior to the reorganization that has
affected components of the Air and Air Defense Forces. It excludes
the costs of the type of space programs that in the United States
would be funded by NASA
The spending that we cannot confidently allocate in this way
includes the costs of RDT&E and of certain national command
functions and rear service and other support functions. Therefore,
the analysis that follows will include the investment and operating
expenditures of the services but exclude their expenditures for
RDT&E, and it will treat the national command and support
functions as a category separate from the various services. F_1
under Khrushchev (see figure 8). These included
substantial manpower reductions in the late 1950s, a
shift away from intercontinental bombers, and cut-
backs in tactical aviation that impacted on the Air
Forces. Moreover, in 1959 a new branch of service
was created-the Strategic Rocket Forces (SRF)-
which in its formative years drew personnel primarily
from the artillery troops of the Ground Forces. The
period since 1965 has witnessed more stability in
service shares overall, probably reflecting a more
settled military doctrine and the more balanced ap-
proach to force development of the Brezhnev era.
However, a major shift of resources toward the Air
Forces did occur during the early 1970s.= 25X1
The Navy
The Navy's share of investment and operating funds
over the last 30 years has been remarkably stable at
about 21 percent. The stability in the naval share is
probably a function of the Navy's scope of responsibil-
ity, which has been broad enough over the years to
include both strategic and general purpose missions.
Beginning with the naval programs emphasized large-
ly under Khrushchev, the Soviet Navy evolved from a
force oriented to the defense of the Soviet maritime
frontiers to a Navy also structured for warfighting on
the high seas and for use as an instrument in support
of foreign policy in peacetime.
During the period between the late 1950s and mid-
1960s, the Navy's strategic mission was secured, and
naval programs focused largely on the application of
the new cruise and ballistic missile technology to 25X1
submarine and surface combatants. A number of
large surface combatant programs were canceled to
allow the Soviet shipbuilding industry to concentrate
its resources on submarine forces and to release
resources to civilian shipbuilding.F--] 25X1
Beginning in 1964, Admiral Gorshkov's emphasis on
distant operations coincided with a broadening of the
scope of the Navy's operations militarily and political-
ly. Accordingly, in the mid-1960s, the share of mili-
tary shipbuilding expenditures allocated to the pro-
curement of large surface combatants increased.
25X1
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Figure 8
Military Service Shares of Defense Spending, 1951-65
Percent
Military Service Shares of Defense Spending, 1965-80
Air Defense Forces
Navy
Command and
General Support
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
These newer ships were generally larger, more capa-
ble, and more costly than their predecessors, and
improved the Soviet Navy's capabilities for operations
in distant areas. Naval procurement of a large SSBN
force also began in the late 1960s. 0 25X1
The SRF
Since its creation in 1959, the SRF share of invest-
ment and operating expenditures has fluctuated from
5 to 11 percent. This fluctuation has resulted from the
cyclical character of ICBM procurement programs.
SRF expenditures peaked in 1967 with the deploy-
ment of third-generation SS-11 and SS-9 ICBMs and
decreased through 1972 as that deployment was
completed. Expenditures then increased throughout
the remainder of the decade, reflecting the addition of
fourth-generation SS-17, SS-18, and SS-19 ICBMs
as well as the SS-20 IRBM to the force.
25X1
The Ground Forces
During Khrushchev's tenure, the Ground Forces'
share declined from a high of about 30 percent in
1953 to a low of 18 percent during the early 1960s as
Soviet manpower was reduced by more than 2 million
men and conventional capabilities were deempha-
sized. The share began to rise again during the late
1960s with a reemphasis on capabilities for conven-
tional war and the buildup along the Sino-Soviet.
border. The Ground Forces' share reached a high of
22 percent in 1972 and averaged slightly over 20
percent during the 1970s. 25X1
The Air Forces
The Soviet Air Forces' three components are tactical
aviation, strategic aviation, and military transport
aviation. Tactical aviation performs counterair,
ground attack, reconnaissance, electronic warfare,
and helicopter ground attack and troop lift missions.
The primary missions of strategic aviation are inter-
continental nuclear strikes and conventional or nucle-
ar strikes in support of theater forces. Military trans-
port aviation is responsible for carrying airborne
assault forces. 25X1
increased again to a high of 26 percent in 1972 and
1976, as a result of the reemphasis by the Soviets on
conventional capabilities and the resultant moderniza-
tion and reequipment of their tactical air forces.=
National Air Defense Forces 25X1
The fortunes of the National Air Defense Forces
declined somewhat during the 1970s as compared
with the previous two decades. During the 1950s and
1960s, the air defense share of investment and operat-
ing funds averaged about 15 percent, reflecting the
large-scale deployments of interceptor aircraft in the
1950s and the costly ABM and SAM deployments of
the 1960s. Soviet expenditures for strategic defense
'fluctuated during the 1970s, and the share dropped to
about 12 percent, reflecting at least in part the
constraints of the ABM Treaty on costly ABM
deployments. Procurement of new third-generation
fighter aircraft was an important influence on spend-
ing in the 1970sr- 25X1
A major spending increase for air defense forces
began in 1980, and we estimate that it will last
through the mid-1980s as the Soviets improve their
defenses against low-altitude bomber and cruise mis-
sile attacks.
The Soviets have undertaken a large-scale reorganiza-
tion of their air defense forces that will significantly
affect the command, support, and operational func-
tions of those forces. The full effects of the reorgani-
zation are unknown, but it should streamline com-
mand and control procedures, reduce redundancies in
structure and support, and permit greater efficiencies
in operation. We cannot determine at this time how
funding for national air defense programs will be
handled or how much savings might result from the
reorganization. We expect, however, that there will be
some savings in procurement, logistics, and personnel.
25X1
Command and General Support
Cumulative expenditures for command and general
support activities ' from 1965 through 1980 were
The Air Forces' share of total investment and operat-
ing expenditures has fluctuated widely. It averaged 25 ' This category includes costs associated with rear services, salaries
to 30 percent during the 1950s, when tactical aviation of Ministry of Defense employees, space programs that in the
United States would be managed by the Department of Defense,
and bomber aircraft dominated procurement outlays; border guards, and material for nuclear weapons.
declined during the 1960s to a low of 18 percent; and
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
to their present share of about one-sixth.
nearly triple what they had been for the previous 15-
year period. The share of total investment and operat-
ing costs for these activities rose to 10 percent in 1960
and have been rising steadily during the past 20 years
of the Soviet military space effort.
The increase in support costs since 1965 reflects an
increase in the size of the Soviet armed forces and the
central Ministry of Defense apparatus, the increased
complexity in controlling and supporting increasingly
advanced weapon systems, and the substantial growth
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Secret
Factors Shaping Defense Spending
Over the past 30 years the level, growth rate, and
structure of Soviet defense spending have resulted
from the military programs and forces the Soviets
have acquired. These, in turn, have been shaped by
the interaction of a number of factors, including new
weapon technologies, political successions, reaction to
Western military developments, and the evolution of
Soviet military doctrine. This section will trace, in
broad outline, the evolution of Soviet military forces
over the past three decades and highlight some of the
more important factors that influenced that evolution.
Overview
The 1950s represented a decade of transition for the
Soviet Union. In the political sphere, the death of
Stalin in 1953 led to the relaxation of terror and
initiated a series of political events that culminated in
Khrushchev's rise to power. In the military sphere,
theoreticians began considering the implications of
nuclear weapons and emerging new technologies for
the conduct of war and force structure. As a result,
fundamental changes were made in the armament,
organization, and operational concepts of the Soviet
armed forces. By the end of the decade, the forces had
evolved from the extremely large, conventionally
armed, continental army of the early 1950s to a
smaller force that was being equipped with missiles
for the nuclear battlefield. It was in the context of
these developments that Soviet defense spending de-
clined during the late 1950s.
The Early Fifties
Stalin's Legacy. Soviet force developments from 1951
through 1955 were governed largely by defense priori-
ties and weapon programs established by Stalin dur-
ing the late 1940s and early 1950s. These included:
o Priority development of nuclear weapons and mis-
sile technology. In the postwar reconstruction peri-
od, Stalin was prepared to give nuclear weapon and
missile development programs the necessary con-
struction materials, transportation facilities, ma-
chine tools, and laboratory equipment. All of these
resources were in extremely short supply. In the late
1940s, the test facility at Kapustin Yar was estab-
lished, and the first three missile and space general
design bureaus were put into operation. The most
prominent one-S. P. Korelev's-was responsible
for ballistic missiles. Early products of this design
bureau included the Scud short-range ballistic mis-
sile (SRBM), the SS-3 medium-range ballistic mis-
sile (MRBM), and the SS-6 ICBM (also used as a
space booster). 25X1
The rapid buildup of an air defense force. Early in
the post-World War II period, the Soviets evidently
considered the major threat to be the "thousand-
plane raid," similar to those conducted against
Germany. As a result, they developed and deployed
great numbers of high-altitude interceptors, radar-
controlled antiaircraft artillery guns, and, later,
surface-to-air missiles (SAMs) to defend against US
strategic bombers. By the mid-1950s, air defense
interceptor strength reached a level of about 7,000
aircraft (mostly MIG-15s and MIG-17s), and the
first SAM (SA-1) was being deployed.
High priority on the development and deployment
of strategic bombers. In the late 1940s, Stalin
authorized large-scale production of the TU-4
(Bull), Andrei Tupolev's copy of the US B-29. In
1949 Stalin also apparently ordered the develop-
ment of a jet bomber capable of reaching the United
States. 25X1
A long-term naval construction program. By 1950
the naval leadership gained Stalin's approval for a
10-year construction plan providing for the expan-
sion of the surface fleet, including aircraft carriers
and several classes of gun-armed cruisers and de-
stroyers. The Soviets also planned for an attack
submarine force of as many as 1,000 units to
interdict sea lines of communication and to assist in
coastal defense.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Military Force Procurement. In the early 1950s the
Soviet armed forces were manpower intensive, domi-
nated by large artillery formations and tactical air
forces organized for the type of land campaigns
experienced during World War II. From 1951
through 1955, the Ground Forces, which stood at
about 2.5 million men in 1955, comprised over half
the total Soviet military manpower and received the
largest share of defense expenditures-averaging just
under 30 percent
Figure 9 shows that procurement in the early 1950s
was driven by aircraft production, which from 1951
through 1955 amounted to about two-thirds of total
Soviet procurement outlays. During this period, the
Soviets assigned most available production capacity to
light bombers and fighters designed either for support
of theater ground forces or for homeland air defense.
In 1952 the Soviets sought to shore up their air
defense network, and the production of fighter air-
craft increased markedly. More than 3,000 MIG-15s
were produced in that year, and the MIG-17 Fresco
program began. In 1953 the Soviets were phasing the
MIG-15 out of their forces and began introducing the
MIG-17, also in large numbers.
The Revolution in Military Affairs (1953-60)
A Turning Point. The death of Stalin in March 1953
produced a turning point in the development of Soviet
military forces and marked the beginning of what the
Soviets termed the "revolution in military affairs.'F_
Prior to Stalin's death, a heavy censorship was im-
posed on the military's discussion of nuclear weapons
and their implications for general war. Stalin's "per-
manently operating factors" s were the guideposts to
military planning for a future war. His death allowed
the military to devote serious attention to the poten-
tialities of nuclear weapons, their impact on. the
nature of war, and the changes necessary to their
In the special social context of warfare, what were known as the
"permanently operating factors" would determine the outcome.
These factors were "the stability of the rear, the morale of the
army, the quantity and quality of divisions, the armament of the
army, and the organizational ability of the army commanders.".
New doctrinal issues raised by the development of nuclear weapons,
such as the possible decisiveness of a nuclear strike, could not be
discussed within the rigid Stalinist framewor
Figure 9
Soviet Aircraft Procurement, 1951-59
Billion 1970 Rubles
force structure and organization to meet the require-
ments of the nuclear battlefield. During 1953-60, the
Soviet military was in transition. The roles and mis-
sions of the military services had to be sorted out in
response to the development of strategic weapons, a 25X1
new military service-the Strategic Rocket Forces-
was created, and the organization of the Ground
Forces was substantially changed, resulting in a sig-
nificant reduction in military manpower. It was in the
context of this transition that overall Soviet defense
spending declined in the late 1950s.
A second consequence of Stalin's death was the
political ascendancy of Nikita Khrushchev. While in
office, he promoted a reorientation of Soviet defense
policy toward strategic missiles, and after 1960 he
pursued policies directed toward downplaying the
importance of intercontinental bombers; large stand-
ing armies, and conventional air and naval forces.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Secret
These policies embroiled him in disputes with the
professional military until his removal in October
1964.
Shifting Military Priorities. In 1954 a series of tests
of nuclear weapons and their effects on troops began,
together with the development of doctrines for the
employment of new units and weapons. There fol-
lowed a redirection in military programs that involved
a shift of emphasis away from conventional forces and
weapons and increasingly toward the incorporation of
the newly developed missile technology into all
services:
Substantial cuts were made in active military man-
power. The strength of the Ground Forces was
reduced by 1.3 million men, and by 1960 it stood at
half its 1955 strength (see figure 10). Much of this
reduction in strength resulted from changes to the
organization of the Ground Forces, which had cut
manpower in Soviet divisions by about one-third.
Soviet theater forces were streamlined for nuclear
war. From the mid-1950s to about 1960, Soviet
military planners and theoreticians were occupied
with the problem of reconciling traditional ground
offensive tactical concepts with the new nuclear
arms environment. Line divisions and field armies
were developed that were lean in logistical support
but heavy in their reliance on the tank as the
primary ground combat weapon on the nuclear
battlefield. Mobile tactical missile systems with
ranges of 10 to 50 km were introduced into the
Ground Forces. Because the Soviets thought that
such nuclear weapons would be able to replace the
massed artillery and tactical air formations of
World War II in achieving breakthroughs, conven-
tional field artillery and tactical air forces were
greatly reduced. This streamlining, in turn, resulted
in a significant reduction in the conventional war-
fighting capabilities of these forces.
Stalin's ambitious naval construction program was
scrapped. Instead of the oceangoing navy envisioned
by Stalin, the new Commander in Chief of the
Navy, Admiral Gorshkov, was ordered to build a
fleet of missile-armed submarines and surface com-
batants to defend the seaward approaches to the
USSR, particularly from Western aircraft carriers.
Figure 10
Estimated Soviet Ground Forces
Military Manpower, 1955-79 25X1
Millions of Men
3.0
1 I I I I I I I I I I I I I 1 I 1 1 1 1 I 1 1 ,--,
1955 60 65 70 75 79
585618 11-81
By 1957, most of the ways at Soviet shipyards
previously set aside for constructing large surface
combatants had been converted for the construction
of ships for the merchant fleet.
Resources were shifted from the heavy bomber to
the ballistic missile as the means of intercontinen-
tal attack. There is some evidence that the Soviets
initially planned to deploy both the Bison and the
Bear in large numbers. However, several factors
combined to limit their deployment: technical prob-
lems with the aircraft (in his memoirs, Khrushchev
cited the poor cruising speed and altitude of the
Bear and the inadequate range of the Bison); a
strengthening of US air defenses; and, most impor-
tant, the first successful test of the SS-6 ICBM in
1957.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
o Priority was given to a substantial deployment of
medium-range strategic ballistic missiles that
could cover targets in Europe and around the
periphery of the USSR. These MRBM systems,
which were already being deployed on a small scale,
were to augment the growing force of medium
bombers already equipped for nuclear delivery oper-
ations in the same areas. SS-4 deployment began in
1958 and by mid-1962 reached a level of 500 to 600
MRBM launchers.
Central to the Soviet decision to pursue a "peripheral
strategy" in the late 1950s was the availability of
MRBMs and IRBMs for large-scale deployment.
Other factors probably included the conclusion of
arrangements in December 1957 for incorporating
American-owned and -controlled tactical nuclear ar-
maments in the NATO arsenal and the rapid expan-
sion of the US strategic bomber forces and their
overseas base network.
Strategic Weapons and Organizational Issues. The
development and initial deployment of strategic mis-
siles during the late 1950s generated heated debate
and conflict among the military services over the
relative significance of the new weapons and the
proper organizational context for their application.
The artillery troops of the Ground Forces, the Air
Forces, and the Navy all staked out claims to partici-
pate in the missions and development programs using
the new technology. Most of the early strategic
missiles came under the control of either the Air
Forces or the artillery troops of the Ground Forces. In
1959, however, the controversy culminated in the
formation of an entirely new military service of the
Soviet armed forces-the Strategic Rocket Forces
(SRF)-which was to have control of all ballistic
missiles with a range greater than 1,000 kilometers.
Trends in Defense Spending. These redirections in
programs and forces had an impact on Soviet defense
expenditures during 1956-59. Soviet military outlays
were reduced by an average of almost 4 percent a
year.
In resource terms, the only categories of Soviet de-
fense spending that increased during the late 1950s
were construction and RDT&E. The increasing trend
Figure 11
Procurement Share of Weapon Systems
Percent of Total Procurement
in RDT&E expenditures was consistent with the
continued expansion of the Soviet missile and space-
related general design bureaus, indicating an increas-
ing commitment of resources to the development of
advanced weapons.
During the 1950s, the structure of weapon procure-
ment shifted from predominantly conventional arma-
ment to advanced weapons (see figure 11):
o In 1955 Soviet procurement was dominated by the
substitution of larger, more expensive strategic
bombers for earlier models. Series production was
beginning for the Bison and Bear heavy bombers,
and production for the Badger medium bomber was
increasing.
By the late 1950s, aircraft's share of military pro-
curement dropped from 65 to 50 percent, while
expenditures for such advanced weapon categories
as missiles, electronics, and nuclear weapons more
than trinled
Land Armaments
Missiles, Electronics,
and Nuclear Systems
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Costs for RDT&E and space were still at a relatively
low level in the late 1950s, and the financing for
developing and procuring advanced weapons during
this period could, therefore, come largely from the
reductions in current forces. Personnel expenditures
were 25 percent below what they, had been during the
early and mid-1950s, and aircraft procurement
dropped substantially. Many Soviet aircraft plants at
this time were being reequipped to produce missiles.
Overview
Whereas the 1950s was a decade in which Soviet
military doctrine and forces adjusted to the changed
requirements of the nuclear systems then being devel-
oped, the 1960s was a decade in which nuclear
delivery systems began to enter the forces in signifi-
cant numbers. By the beginning of 1962, decisions
were taken on the major ICBM programs that con-
tributed to the buildup of the mid- and late 1960s.
Additionally, by 1965 there was a renewed apprecia-
tion for forces capable of waging a conventional war,
which resulted in an expansion and modernization of
the Ground Forces and the Navy during the late
The Early Sixties
The declining trend in Soviet defense expenditures
during the late 1950s was sharply reversed in 1960,
when a steady upward growth trend began. This
growth was particularly rapid between 1960 and
1965, averaging about 8 percent annually-about 3
percentage points higher than growth in the economy.
The space program, strategic weapons, and military
RDT&E contributed to the rapid growth in the early
1960s, whick took place within the context of a policy
controversy between Khrushchev and the professional
military. 25X1
Policy Controversy. Beginning in 1960, Khrushchev
attempted to change the prevailing military view on
nuclear war. From the mid-1950s to about 1960, as
previously noted, the Soviet military attempted to
reconcile traditional concepts of a sweeping European
ground force offensive with the new environment
created by nuclear arms. Nuclear weapons were seen
would still be played by massed armies that would
destroy opposing forces and occupy enemy territory.
25X1
from the outset, it was reasoned, but the decisive role
primarily as a substitute for concentrated artillery
and aerial bombardment. Combat might be nuclear
By 1960, technical developments in the ballistic mis-
sile field laid the basic foundations for a Soviet
intercontinental strategic capability. Given this capa-
bility, Khrushchev came to believe that war between
the United States and the Soviet Union would result
in an intercontinental nuclear exchange and the dev-
astation of Western Europe. The war's outcome would
be determined by massive US-Soviet nuclear ex-
changes during the first hours. Strategic exchanges
also would decide any European conflict. Therefore,
he tended to favor the allocation of considerable
resources to the development of those systems that
would be utilized in the initial exchange-for exam-
ple, missiles-while opposing expenditures for the
maintenance of large land armies, tactical and bomb-
er aviation, and the surface fleet.) 25X1
25X1
In a speech before the Supreme Soviet in January
1960, Khrushchev set the guidelines to be used in
developing a new and comprehensive military strate-
gy. This new strategy departed radically from the
traditional Soviet emphasis on maintaining large con-
ventional forces and emphasized instead the principle
of nuclear deterrence. He stressed that the USSR,
with its rocket-nuclear forces, had sufficient means to
destroy totally any enemy and argued that firepower,
not manpower, now determined the military power of
25X1
Accordingly, Khrushchev indicated that the Air Force
and the Navy had lost their importance, that the
production of bombers and other such obsolete equip-
ment would be cut sharply, and that the Soviet armed
forces would be cut by roughly one-third, from around
3.6 million to 2.4 million men. Such a reduction, he
went on to say, meant no loss of combat capability,
since the firepower provided by the new weaponry
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
would make up for the manpower cut. Khrushchev's
speech clearly indicated his belief that missile pro-
grams should be a way of reducing resources used by
the military, not increasing them.
Khrushchev's motivations for pursuing further man-
power reductions and savings on conventional forces
may have involved demographic considerations.
Owing to the low birth rates during World War II,
the number of draft-age males available annually for
military callup began to decline in the late 1950s,
reaching a low of 900,000 men in 1961-as compared
with about 2 million men annually during the early
1950s. In the face of declining growth in manpower,
the Soviet Union launched in 1959 the ambitious
Seven-Year Plan, which required more additions to
the civilian labor force than could be supplied through
population growth. Thus, the military reductions may
have been intended, in part, to relieve a potential
manpower shortage.0 25X1
There is also the possibility that Khrushchev envi-
sioned using the funds released by his intended man-
power reductions to provide for such advanced weap-
ons as ICBMs and SAMs, which the Soviets would be
~
deploying in large numbers during the 1960s.
Under pressure from Khrushchev, the Soviet military
modified its approach to a theater campaign in Eu-
rope. The military came to acknowledge the decisive
role of the initial nuclear strike, but Ground Forces
advocates within the military continued to adhere to
traditional views on a subsequent campaign. Even if
war were nuclear and characterized by missile and air
strikes from the USSR, they argued, a large-scale
ground offensive with armored forces would be re-
quired to exploit the gaps in NATO's defenses created
by nuclear attacks, to destroy NATO's military
forces, and to occupy Western Europe.F_~
This military resistance to Khrushchev's strategic
views, coupled with increasing international tension
after the Berlin Crisis of mid-1961, frustrated Khru-
shchev's attempts to carry out the troop reductions he
publicly announced in 1960. Total military manpower
increased from 1960 through 1965, and the Ground
Forces were not cut (see table 2). The failure of the
Soviet Military Manpower, 1960-65 25X1
Total active 3.4 3.3 3.5 3.6 3.7 3.8
military
manpower
troop reduction scheme, in turn, denied to the econo-
my the extra manpower needed for the Seven-Year
Plan and the savings with which the leadership may
have intended to offset the high costs of the space
program and the increasing deployment of strategic
weapons. F__~ 25X1
Space. Early Soviet space efforts paid major divi-
dends in national prestige, beginning in 1957 with the
launching of Sputnik I. During the late 1950s, the
Soviet space program achieved most of its goals at a 25X1
relatively low cost through the modification of launch
vehicles originally developed for use as ballistic mis-
siles. 25X1
During the late 1950s, however, the Soviets substan-
tially increased the level of effort devoted to space
system design and development (see figure 12). Ac-
cordingly, after 1962, the Soviet space program be-
came a major claimant of Soviet defense resources.
Payloads became heavier, and development of larger
boosters designed specifically for space applications
became necessary. Coupled with manned space flight
activity, this drove expenditures up rapidly until the
mid-1960s.1 25X1
25X1
RDT&E. Military R&D expenditures grew very rap-
idly during the early 1960s and were heavily weighted
toward aircraft, missiles, and space systems. During
1960-65, the RDT&E share of total defense spending
increased from 9 to 14 percent.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Figure 12
Soviet Expenditures for Space, 1956-80
Billion 1970 Rubles
11 1 I 1 1 I I 1 1 1 1 I 1 1 1 I I 1 1 1 1 I
25X1
585620 11-81
This rapid growth is consistent with evidence on
activities in the Soviet R&D establishment during the
same period. This evidence points to a pattern of
major expansion within the defense industries during
the early 1960s:
During 1960-65, employment in the technical sci-
ences grew at an average annual rate in excess of 18
percent. Nearly all military and military-related
technology falls under subbranches of the technical
sciences.
Strategic Weapons. During the early 1960s the Sovi-
ets accorded high priority to their strategic programs,
I particularly the newly created SRF, and deempha-
sized conventional weapons production corresponding-
ly. They apparently decided on the SS- I I as the
ICBM they would deploy in large numbers. The two
earlier generations of ICBMs-the SS-6 as well as
the SS-7 and SS-8 systems-were not considered
suitable for large-scale deployment. The massive in-
j stallations, large support requirements, and clumsy
handling procedures rendered the SS-6 undesirable
for extensive deployment of operational ICBM
launchers. The deployment and operational require-
ments for the SS-7 and SS-8 ICBMs (first deployed in
'1960 and 1962, respectively) were improvements over
those for the SS-6 and were derived from the expe-
,rience the SRF had with MR/IRBM systems. Their
deployment modes from 1960 through 1961 evolved
from soft sites to hard-site configurations. The SS-11
apparently possessed the combination of technical and
operational characteristics the Soviets considered suit-
able for large-scale deployment. 25X1
In addition to their ICBM program, the Soviets
committed considerable resources to MRBM and
1IRBM deployments as well as to the development of
ballistic missile defenses. During 1958-65, they field-
ed some 675 SS-4 and SS-5 launchers, most of which
were deployed in the western USSR. Moreover, by
the early 1960s, the major effort that the Soviets
began in the early 1950s.to develop ballistic missile
defenses became evident to the Intelligence Commu-
nity. Not only were the Soviets working on a large-
scale development program, but they had already
committed themselves to deployment. An intense
R&D program was in progress at the Sary Shagan
missile test center, construction of the Moscow ABM
system was under way, and Hen House radars were
being built in forward areas to provide early warning
We estimate that annual construction and capital
investment expenditures that supported this expansion
peaked before 1964.F____1
The Middle and Late Sixties
By the mid-1960s a consensus was emerging within
the military on the need for an across-the-board
expansion and modernization of all military forces.[
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
The immediate effect of Khrushchev's ouster in Octo-
ber 1964 was to remove the primary obstacle to larger
resource commitments to Soviet general purpose
forces and permit the views of the advocates of large
combat forces to gain much wider acceptance.=
A rationale for improving Soviet conventional forces
was provided by NATO's adoption of a "flexible
response" strategy, which envisaged a period of non-
nuclear war. This obliged Soviet planners to reconsid-
er their tenet that war would begin with a decisive
nuclear exchange and to plan for a war that, at least
in its initial stages, could involve large-scale conven-
tional operations. 25X1
A further requirement to upgrade and expand Soviet
conventional forces came from China. Sino-Soviet
relations, which began to decline in the late 1950s,
further deteriorated after late 1964. The first Chinese
nuclear test in October of that year signified to the
Soviets that the Chinese challenge was serious and of
a long-term nature. 25X1
In response to these perceived requirements, the
Brezhnev political leadership has pursued a broad
range of military programs since 1965, demonstrating
a long-term commitment to a policy of balanced force
development. From the beginning, this leadership has
been aware of the economic costs of pursuing such a
policy. As early as 1965, Soviet leaders spoke of the
burdens imposed on the economy by defense and
implied-directly or indirectly-that the expenditures
required some sacrifice of other goals. Indeed, the
steady growth of Soviet defense expenditures since
1965 reflects the willingness of the present leadership
to direct increasingly costly resources towar'
expanding military effort.0
The Sino-Soviet Border. A decision probably was
made some time prior to mid-1965 to initiate a
military buildup along the Sino-Soviet border. From
1965 through the early 1970s, more than 300,000
men, about 25 divisions, almost 1,000 tactical air-
craft, and several hundred helicopters were added to
the forces along the border.
The cost of this buildup was significant, taking almost
one-third of the increment to total investment and
operating expenditures between 1965 and 1970. F_
The heaviest influx of forces to the border area during
the five years of the military buildup took place in
1967 and 1968. Formation of about half of the new
Ground Force divisions opposite China began during
this two-year period, and several divisions that were
formed a year or so earlier began to receive major
increments of personnel and equipment. Most of the
increase in tactical air forces opposite China also took
place at this time, with all but two of the new air
regiments being in place by the end of 1968.
Enhancing Conventional Capabilities. The new Sovi-
et leadership faced another dilemma in addition to the
one posed by China. Although Soviet military doc-
trine came to accept the possibility of a beginning
conventional phase in an East-West conflict, Soviet
theater forces were structured for a short nuclear war.
25X1
The Ground Forces were tank heavy and had a
limited support structure. Much of their conventional
firepower (for example, artillery) had fallen casualty
to the "nuclear streamlining" of the late 1950s and
early 1960s. In the tactical air forces (Frontal Avi-
ation), primary emphasis was placed on battlefield air
defense and nuclear strikes. There was no effort to
deploy tactical aircraft with extended range or the
capability of carrying large conventional payloads.
There is clear evidence that Soviet planners recog-
nized in the mid-1960s that their tactical aircraft
lacked the range to conduct conventional strikes on
most of NATO's airfields and other long-range tar-
gets. Moreover, few helicopters were in use, command
and control equipment was limited, and logistical
elements were geared to the low ammunition con-
sumption levels expected in nuclear war and to the
general belief that such a war would be relatively
short. 25X1
Through the late 1960s, the Soviets emphasized:
c Expanding equipment inventories of existing types
of weapons.
c Making organizational changes within divisions.
o Developing more sophisticated weapons-such as
self-propelled artillery-to improve conventional
warfare capabilities.
20
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
and for a larger flow of supplies during hostilities.
both for greater ammunition and POL stockpiles
Strengthening the entire logistical system
Increasing construction activity at Ground Forces
installations. F -1 25X1
In about 1966, additional field artillery appeared in
Soviet divisions in East Germany and the Soviet Far
East. Over the next few years, most of the division-
level artillery eliminated during the 1950s was re-
stored.) 25X1
To support the increasing manpower and expanding
equipment inventories in the Ground Forces, con-
struction activity increased substantially at Ground
Forces installations after 1964. Although a large
portion of this activity was in connection with the
buildup along the Sino-Soviet border, Ground Forces
facilities throughout the USSR were being upgraded.
25X1
During this period, the Soviets also planned for a
major reequipment program for their tactical air
force, and in the mid-1960s developmental work
began on new, more capable fighter-bombers. This
program was carried out during the early and mid-
1970s and resulted in a major shift in resource
allocation to the Air Forces, whose share of invest-
ment and operating expenditures increased from 18
percent in the late 1960s to 26 percent in 1972 and
again in 1976.
to provide a During the late 1960s, there was a significant
25X1
Shifting Naval Priorities. Beginning in the mid-
1960s, the Soviet Navy began evolving from a force
oriented to the defense of the Soviet maritime fron-
tiers toward a more balanced navy structured also for
nuclear war, for open-ocean operations, and for use as
an instrument in support of Soviet foreign policy in
peacetime. Significant trends included the following:
The emphasis of ship procurement shifted from the
cruise missile and attack submarine programs of the
late 1950s to ballistic missile submarines (the
Y-class SSBN) and large surface combatants (3,000
or more metric tons full-load displacement). The
latter included such ship classes as the Kashin
guided missile destroyer (DDG), the Kynda guided
missile cruiser (CG), the Kresta I CG, and the
Moskva guided missile aviation cruiser.
increase in Soviet naval activity away from home
waters. Much of this activity probably reflected a
Soviet decision to use naval forces more extensively
in furthering foreign policy objectives in peacetime.
From 1965 to 1970 the operations of Soviet general
purpose ships in distant waters increased an average
of 42 percent a year, as ship operating days rose
from roughly 6,000 to over 35,000 (see figure 13).
This increase reflected the rapid growth of the
Soviet Mediterranean Squadron (particularly after
the Arab-Israeli war in 1967), the initiation of
operations in the Indian Ocean in 1968, the com-
mencement of periodic deployments to the Caribbe-
an in 1969, the establishment of a patrol in West
African waters in 1970, and more extensive exercise
activity in the Atlantic and Pacific approaches to
the USSR during the five-year period. 25X1
Strategic Forces. During 1965-70, the Soviets de-
ployed the major portion of their third-generation
ICBMs, moving forward with decisions that had been
made while Khrushchev was still in power. F____1
In 1965 the Soviet ICBM force consisted of 224 25X1
operational launchers at 18 complexes. It was com-
posed almost entirely of second-generation systems.
The SS-7 was the most numerous and was deployed in
soft launchers in relatively concentrated groups.
Second-generation ICBM deployment was halted in
1964, and, late that same year, the Soviets began field
construction of single silos for two third-generat n
ICBMs-the SS-9 and SS-I 1. 25X1
A dramatic increase in ICBM deployment took place
in the late 1960s (see figure 14). The production for
that deployment more than tripled during 1965-69 in
comparison with the previous five-year period and
reached an all-time high in 1967, with the procure-
ment of more than 400 ICBMs. The most widely
deployed ICBM was the SS-11. More than 700 of
these missiles were deployed in single dispersed silos
during the late 1960s 25X1
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Figure 13
Operations of General Purpose Naval Forces
Outside Home Watersa
Harbor cle
45 in Bangla
aring
desh
Mine c
Gulf o
learing in
f Suez
40
35
30
25
20
15
10
5
LI
T
aAuxiliaries and support ships make up about 50 percent of the above
figures. Ballistic missile submarines, hydrographic ships, and space support
ships are not included.
In 1968 the Soviets deployed their first modern
nuclear-powered ballistic missile submarine-the
Y-class SSBN armed with 16 SS-N-6 SLBMs. The
Y-class design used available technology, and with
this new-generation ballistic missile submarine the
Soviets began a rapid expansion of their SLBM force.
By 1969 Soviet shipyards were delivering Y-class
SSBNs at a rate of six units per year
By the end of the 1960s, the Soviet Union approached
an overall strategic equality with the United States,
equaling it in the number of land-based ICBMs
deployed and rapidly building an SSBN/SLBM force
that would soon be comparable in size to the US
Polaris force.
Soviet expenditures for the National Air Defense
Forces also rose in the late 1960s, peaking in 1969 at
a level 50 percent higher than that of 1965. This
reflected primarily the rapid and costly deployment of
the Moscow ABM system and the procurement of the
SA-5 SAM.
Space. In the mid-1960s, as earlier development
programs reached completion, the Soviets began to
launch newer series of satellites with practical mili-
tary and economic applications. Those directed to-
ward meteorology and civil communications were
25X1
25X1
heavily publicized to enhance the image of the Soviet
Union's technical and scientific strength
Caribbean Sea
West African Waters
Pacific Ocean
Atlantic Ocean
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Figure 14
Soviet ICBM Deployment, 1960-70 Overview
During the 1970s the Soviets continued their pursuit
ICBM Launchers of military power, concentrating on qualitative im-
SS-7/8 Soft Sites
I I I I I 1
65 70
__58562I81
pncvciiicuw 111211 1GV0150U pGiwzivuU 1m0alances witnin
their strategic and theater forces. Significantly, the
evolution of Soviet doctrine, which had turned Soviet
attention toward increasing conventional force capa-
bilities in the late 1960s, led to more flexible theater
nuclear forces and options after 1970. By the end of
the decade, the Soviets had enhanced their capabili-
ties to engage the West across a broad spectrum of
conventional and nuclear conflict. Moreover, these
developments occurred against the backdrop of a
more active and direct use of Soviet military power in
Developments in the Forces
Strategic Forces. During the early and mid-1970s the
Soviets completed the deployment of their third-
generation ICBMs, with some 1,300 in the field, and
rapidly expanded their SLBM forces. By 1975 they
had half again as many ICBM launchers as the
United States and had matched it in numbers of
SLBM launchers 25X1 25
1
X
In the late 1960s the Soviets began to test larger and
more complex space boosters and spacecraft. They
encountered serious setbacks in these programs and
did not move forward as they expected to. Their
failure to successfully develop the large booster neces-
sary for manned lunar missions, coupled with the US
success in the Apollo Project, forced the Soviets to
emphasize in the 1970s their successful Earth-orbit-
ing space stations. At the same time, they reduced
development of space programs related to the big
boosters and began another round of big-booster
development scheduled to reach fruition in the mid-
25X1
That same year, with the deployment of a fourth
generation of ICBMs-the SS-17, SS-18, and
SS-19-the Soviets began closing the gap in deliver-
able weapons through MIRVing (see figure 15) and
!improved the accuracy of their ICBMs by a factor of
three. By the end of the decade, it was apparent that
more than 800 of these ICBMs would be deployed.
Trends in the number and capabilities of Soviet
ICBM RVs indicated that the Soviet ICBM force
would be capable of destroying most US ICBM silos
and still have many warheads remaining for other
purposes.
In terms of cumulative investment costs, the outlays
for the fourth-generation ICBM systems were about
equivalent to the outlays for the third-generation
ICBM deployments of the late 1960s and early 1970s.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Figure 15
Composition of Soviet Weapons for
Intercontinental Attack, 1965-80
During the 1970s the distribution of construction
activity at defense plants devoted to the production of
strategic weapons provided indications of trends that
strategic programs would follow during the early
1980s. According to these indicators, it appeared that
greater resources would be devoted to the production
of solid-propellant offensive ballistic missiles; produc-
tion of SLBMs probably would begin to increase in
1981; and the relative importance of strategic bomber
production would begin to increase by 1982.
SALT and the Economics of Arms Control Agree-
ments. During the 1970s the Soviets entered into
strategic arms limitation agreements with the United
States. Although Soviet participation in SALT prob-
ably has been motivated by a combination of strate-
gic, political, and economic concerns, it appears that
the economic factor has been least significant. =
Soviet spending for all strategic forces-offensive and
defensive-constitutes a relatively small share of total
military expenditures (about one-fifth). Consequently,
increases in outlays for strategic forces tend to have a
muted impact on overall growth in defense spending.
Even if Soviet expenditures on strategic forces were a
larger share of overall spending, the economic benefits
derived from limitations on strategic arms would
probably be small, at least in the near term. Produc-
tion resources at plants that manufacture strategic
weapons such as aircraft and missiles are highly
specialized and not readily transferable to civilian
uses.
Theater Nuclear Systems. During the 1970s Soviet
theater nuclear forces, especially those deployed for-
ward in Central Europe, experienced important
changes in both size and capability. These changes
included:
Significant increases in the inventory of tactical
nuclear delivery systems in Central Europe. Since
1970, tactical surface-to-surface missile launchers
have increased by one-third, and nuclear delivery
aircraft have tripled (see figure 16).
o A new generation of tactical ballistic missile sys-
tems with better ranges, accuracy; and mobility
than their predecessors.
25X1
Moreover, modernization of Soviet long-range theater
nuclear forces began with the deployment of the
Backfire bomber in 1974 and the MIRVed SS-20
IRBM in 1977. 25X1
These force improvements increased the flexibility
with which the Soviets could employ their theater
nuclear forces and provided them with a capability for
conducting theater nuclear war at high levels of
intensity before having to resort to the peripheral
strike forces based on Soviet territory.
Frontal Aviation. Perhaps the most significant devel-
opment in Soviet forces during the 1970s was the
modernization program carried out within Frontal 25X1
Aviation. This program transformed the Soviet tacti-
cal air force into a balanced force capable of perform-
ing a variety of the basic military tasks required for
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Figure 16
Tactical Nuclear Delivery Systems, 1970-80
Figure 17
Artillery Frontal Aviation Fighter Aircraft
both conventional and nuclear war (see figure 17). The
in Europes
Metric Tons
II .vv Ialully VI LIII! U-gGIIGla LIVI1 LO .LIGQI dII%;I t1 L,
which was developed during the late 1960s and early
1970s, answered the requirement for extended payload/
radius and loiter performance by increasing aircraft
size and adapting variable-geometry wing technology. 2,000
Moreover, these aircraft incorporated more precise 1,500
autonomous navigation capabilities and more sophisti
cated avionics.
25X1
The modernization program began with fighter units
in the early 1970s. MIG-23 Flogger B/G aircraft
were introduced to replace earlier model Fishbeds.
These newer aircraft now make up about two-thirds of
the Frontal Aviation interceptor order of battle.)
Modernization of the fighter-bomber forces began
four or five years later, with the introduction of the
SU- 17 Fitter C/D and the MIG-27 Flogger D. These
newer fighter-bombers can carry at least twice the
bomb payload of the older Fitter A and can deliver
this payload with approximately three or four times
the accuracy.
0 150
Distance (km)
aThis shows the maximum weight of weapons (missiles or bombs)
deliverable in one sortie, as a function of distance. A sortie is assumed to
include all of the Soviet tactical aircraft in Central Europe.
Aircraft designed
for both nuclear
and conventional
operations
Aircraft designed primarily
for nuclear operations
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Tactical bomber units also began reequipping in the
mid-1970s by acquiring the SU-24 Fencer A as a
replacement for the YAK-28 Brewer.
The greatest portion of Frontal Aviation's growth
during the 1970s was directly attributable to the
creation in 1972 of a rapidly expanding attack heli-
copter fleet equipped primarily with the Hind. The
rapidity with which the new attack helicopters were
introduced into the force indicates that this is a high-
priority program for the Soviets.
The impact that this modernization program had on
the fortunes of the air forces was substantial. During
1965-79, the air forces participated in seven of the 10
most costly Soviet weapon acquisition programs: the
Flogger interceptor/fighter-bomber (the largest Sovi-
et procurement program of the last 15 years), the
Hip/Haze helicopters, the Foxbat reconnaissance air-
craft, the Fencer tactical bomber, the Backfire bomb-
er, the Fitter fighter-bomber, and the Fishbed fighter.
Those programs, in turn, resulted in a major shift in
defense resources allocation by increasing the air
forces' share of investment and operating expendi-
tures from 18 percent in the late 1960s to a high of 26
percent in 1972 and 1976.F__~ 25X1
Ground Forces. Having expanded the Ground Forces
during the late 1960s, the Soviets concentrated during
the 1970s on introducing new and increasingly sophis-
ticated land armaments, which increased the firepow-
er and mobility of their theater forces. They also
shifted the construction emphasis from basic facilities
that directly support combat units to buildings that
increase unit readiness and sustain combat operations:
o Since the late 1960s, the number of tanks in Soviet
tank divisions has increased from 313 to 322 and in
Soviet motorized rifle divisions from 188 to 214.
Two new tanks, the T-64 and T-72, were intro-
duced. Both have larger caliber main guns than
earlier tanks, with longer ranges and automatic
loaders that increased firing rates and reduced crew
size. They also have antiradiation liners to protect
against nuclear contamination and laminated armor
that is more difficult to penetrate than earlier, rolled
homogeneous steel.
At the end of 1979 the Soviet tank industry was
expanding more rapidly than at any time since
1963, indicating that at least one new tank produc-
tion program would begin before the end of 1981.
A particularly significant development, which dem-
onstrated the increased importance of conventional
artillery in Soviet thinking, was the introduction in
the early 1970s of new 122-mm and 152-mm self-
propelled artillery. These artillery pieces were sub-
stantially more expensive than a towed gun and its
prime mover, and more difficult to maintain.
A program begun in the late 1960s to replace gun
systems and older SAMs with more mobile SAM
systems continued during the 1970s.
At Ground Forces installations, the completion of
construction of most of the basic facilities and the
shift of emphasis from the construction of facilities
that directly support combat units to the construc-
tion of support facilities and logistic infrastructure
increased the Soviets' capability to conduct and
sustain combat operations.
Because of these improvements and the continuing
commitment of the leadership to balanced force mod-
ernization, the pattern in the Ground Forces' share of
total investment and operating expenditures was rela-
tively stable during the 1970s at about 20 percent. E
Naval Programs. The upward trend in procurement
expenditures for major surface combatants continued
through the 1970s. This reflected the continuation of
the Kashin guided missile destroyer program and
procurement of the Kiev guided missile, vertical-
takeoff-and-landing aircraft carrier, the Kresta II and
Kara guided missile cruisers, the Kirov nuclear-
powered guided missile cruiser, and the Krivak I and
II guided missile frigates. 25X1
Over the past two decades, each new ship class has
been more expensive than its predecessor (see figure
18). The increased cost of modern combatant ships
reflects Soviet emphasis on large units, armed with
antisubmarine, antiair, and antiship weapons. These
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Figure 18
Trends in Unit Cost and Displacement of
Soviet Large Surface Combatants
Cruisers
Index: 100=Cost of Kynda.CGa
Kynda CG Kresta-II Kara CG KirovCGN New Class
of CGN
Aviation Cruisers and Aircraft Carriers
Index: 100=Cost of Moskva CHG
Moskva Kiev CVHG New Carrier
CHG
Guided-Missile Destroyers
Index: 100=Cost of Kildin DDG
Kildin Kashin New Class
DDG DDG of DDG
aCosts are calculated on the basis of first-unit cost in 1970 ruble prices.
The first entry in each ship type has been indexed to 100.
I7500
Kynda CG Kresta-II Kara CG KirovCGNb New Class
of CGN
Moskva KievCVHG New Carrier
CHG
Kildin Kashin New Class
DOG DDG of DDG
bThe cost of the Kirov CGN-roughly 10 times that of the Kara-reflects the
large size of the ship, its costly nuclear propulsion system, and its array of
weapons and sensors.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
ships incorporate extensive communication and elec-
tronic warfare systems and have improved capabilities
for operation in distant areas. Soviet procurement
expenditures for large surface combatants are cur-
rently about nine times the 1960 level. In 1978 they
accounted for 25 percent of total ship procurement.
Soviet naval out-of-area operations peaked in 1974
and declined somewhat thereafter, averaging about
six times that of 1965. They increased again in 1978
and 1979. In 1980 Soviet naval ships spent more than
45,000 ship days outside home waters-an increase
over the previous peak set in 1974. Nearly all of the
expanded activity was in the Indian and Pacific
Oceans and in response to regional crises.
During the 1970s, the Soviet Navy demonstrated an
ability to respond to crises by nearly doubling the size
of its normally deployed naval contingents in the
Mediterranean during the 1973 Middle East war and
off East Africa during the Ethiopian-Somali war in
1977-78.
The expanded naval activity outlined above has been
one aspect of a gradual evolution of Soviet military
policy toward a more direct and assertive use of
military power in Third World conflicts. This policy
has involved the extensive use of Cuban combat forces
for intervention in Angola and Ethiopia in the mid-
and late 1970s and the outright employment of Soviet
combat ground and air units in the invasion of
Afghanistan in 1979-the first direct involvement of
Soviet ground forces in a Third World conflict. =
Space. During the 1970s, the full weight of R&D in
the Soviet space program was muted. This muting
effect was due, at least'in part, to a series of setbacks
the Soviets encountered in their efforts to develop
larger and more complex space boosters. Many space-
craft programs related to those boosters were canceled
or delayed. The failure to develop large space boost-
ers, coupled with the success of the US Apollo
program and of later US planetary missions like
Viking, caused the Soviets to emphasize what they
had left-Earth-orbiting space stations and other
systems for military support.
General Trends in Defense Expenditures
Growth in total Soviet defense expenditures slowed
somewhat during the 1970s, averaging 4 percent
annually as compared with the 6.5-percent average
annual rate for the 1960s.
This growth rate was about the same as that of the
economy, and as a result, the military's share of
Soviet GNP was a relatively constant 12 to 13 percent
for most of the decade.
25X1
25X1
25X1
In resource terms, RDT&E remained the fastest
growing component of Soviet defense expenditures,
suggesting that qualitative improvement has become
increasingly important in shaping military spending.
Outlays for RDT&E during the 1970s were double 25X1
what they had been during the 1960s, and its share
rose from 16 percent in 1970 to its present share of
about 23 percent. A measure of RDT&E's continued
growth is estimated annual construction and capital
investment expenditures at Soviet military R&D fa-
cilities, which have been rising steadily since the early
1970s. Present levels are the highest since the early
1960s, when the Soviets were still completing an
unprecedented expansion of their military R&D base.
Slower growth in other components of defense, howev-
er, contributed to a lower overall growth rate for the
1970s. Expenditures for uniformed personnel, con-
struction, space, and procurement grew substantially
more slowly than during the 1960s. The average
annual growth rate in military procurement, the
largest component of spending, slowed in the late
1970s to under 3 percent. This reflected cycles in
procurement (as several major weapons programs
reached a low point) rather than signaling a new
trend.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 i
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83TOO233ROO0100130001-9
Average Yearly Procurement of
Major Weapons, 1971-80
This slower rate of growth did not impact on the
capabilities of Soviet forces. This is because military
investment reached a level high enough to allow
substantial modernization to take place within Soviet
forces even under conditions of slower growth. Table 3
shows that the Soviets procured an impressive array of
-? - - major weapons during the 1970s. ~ 25X1
Missiles
ICBMs
210
MRBMs and IRBMs
100 a
SLBMs
150
Strategic SAMs
6,800
Spacecraft
72
Aircraft
Medium bombers
20
Tactical fighters
685
Strategic interceptors
215
60
935
Combatant ships and submarines
SSBNs
Attack submarines
Other armored vehicles
Artillery
2,455
4,050
1,050
a Includes 1976-80 only. SS-20 deployment began in 1977 after a
hiatus in MRBM and IRBM deployments of more than a decade.
Moreover, at the end of 1979, floorspace at facilities
used for weapon production was growing more rapidly
than at any time since the mid-1960s. This would
presage continued increases in defense spending dur-
ing the early and mid-1980s, because historically
there has been a close relationship between the com-
pletion of new facilities and an upswing in the rate of
growth of defense spending as these facilities begin to
produce new weapons
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83TOO233ROO0100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
The Economic Setting of Defense
This section examines the economic environment
within which the Soviet defense establishment devel-
oped over the last 30 years and the relationships
between defense spending and various macroeconomic
aggregates. For the most part, this discussion is
presented in terms of Western rather than Soviet
economic theory and measures. Its purpose is to
provide a broad appreciation of the economic dimen-
sions of the development of Soviet military forces
rather than an in-depth analysis of the economic
burden of defense.
Because this presentation is limited in scope, it should
not be construed either as an exact portrayal of the
Soviet perception of the economic burden of defense
or as a definitive study of the potential trade-offs
between defense and economic performance. Such a
thorough analysis of the burden of defense is beyond
the scope of this report
Soviet Economic Performance in the Postwar Period
In contrast to most industrially developed countries,
where productivity gains have been a key factor in
economic growth, the USSR has relied more heavily
on massive injections of labor and new fixed capital to
support its growth in GNP. During the 1950s this
policy resulted in rapid gains in output because of the
low level of GNP in the early postwar period and the
relatively high efficiency of new fixed investment in
reconstruction and repair of war damage.
During the early 1960s, as the Soviets moved out of
the reconstruction phase, highly efficient investment
projects became more difficult to identify, and cen-
tralized planning and management of a burgeoning
economy became increasingly cumbersome and ineffi-
cient. Productivity slowed, and capital-output ratios
rose rapidly. Since the mid-1960s the Soviet leader-
ship has groped continually for ways to stimulate
growth in productivity. Failing in this, they have had
little choice but to continue the large commitment of
resources to investment if economic growth was to
continue apace.
Thus, during the past 15 years, industrial and agricul-
tural growth has been supported by average annual
rates of growth in capital assets much greater than
their growth in output. In addition to maintaining
steadily larger annual flows of investment, Soviet
planners have swelled the expansion of capital stocks
by:
Holding retirement of aging equipment to a
minimum.
Prolonging the service lives of technologically obso-
lete capital stocks through repeated extensive cap-
ital repairs.
Continually expanding new construction projects,
thus channeling the bulk of investment. into build-
ings and structures rather than into new machinery
and equipment, though the latter is the principal
carrier of new technology.
Sustaining a rapid increase in total capital assets by
these methods has impeded technological progress
and productivity gains. Efforts to increase the quality
and quantity of output and make better use of
available resources continue to be frustrated by a
backward technological base, inflexible production
processes, and a cumbersome and inefficient system of
planning and management. Moreover, military pro-
grams preempt capital equipment, trained labor, and
materials that could be used in civilian production. F
Additionally, future Soviet attempts to halt adverse
trends in output and productivity growth must over-
come resource problems quite different from anything
experienced since World War II. In addition to the
continuation of chronic difficulties related to low
efficiency, several new problems beset the regime.
The rate of growth of the labor force has decreased
sharply because of the decline in birth rates that
occurred in the 1960s. At the same time the costs of
obtaining raw materials and semifinished goods have
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 i
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
risen sharply, as has the demand for technologically
advanced finished products. In short, the economy is
under increasing pressure to produce more and better
products with declining resource increments at in-
creasing costs. As a result, Soviet economic growth,
which has been slowing gradually since the late 1950s,
continues to fall. Lagging industrial production and
two successive harvest failures have reduced the
growth in GNP during the past two years to its lowest
Continually increasing defense expenditures, a trend
that has been under way for more than two decades,
have paid substantial dividends to the Soviet leader-
ship in military capabilities and political prestige. The
economic cost has been high, however, because the
effort has entailed the use of scarce human and
technical resources and raw materials. For example,
we estimate that about 50 percent of all Soviet
research and development manpower is engaged in
military-related activity, which probably has an ad-
verse effect on technical innovation in civilian sectors.
25X1
The Defense Share of GNP
The most widely used measurement of the proportion
of a nation's economic resources taken by defense
activity is the share of all goods and services pur-
chased by the military establishment. It is customary
to express this as the proportion of the value of total
defense expenditures to GNP. The Soviet defense
share of GNP has averaged about 13 percent over the
past 20 years (see table 4):
In the early 1960s, defense grew more rapidly than
the economy, resulting in an increasing defense
share of GNP. In 1963 and 1964, defense consumed
14 to 15 percent of Soviet GNP, the highest level
achieved during the 20-year period. Over the five-
year period, however, the average defense share was
13 to 14 percent.
In 1965 a pattern developed of rather close corre-
spondence between growth of the economy as a
whole and growth of defense. During 1965-78, both
grew at an average rate of about 4 percent annually.
Soviet Defense Expenditures and
Economic Indicators
As a result of this phenomenon, a fairly constant 12-
to 13-percent share of GNP went to defense.
In 1979 defense was growing more rapidly than the
economy and began absorbing a larger share of
GNP-13 to 14 percent. This return to the relation-
ship of the early 1960s was the result of the
especially poor performance of the economy in
1979-80 and the continued growth of defense
expenditures at better than 4 percent.
These patterns indicate that during 1965-78 the Sovi-
ets were able to sustain substantial improvements in
their military forces at a cost to their economy which,
while extremely high by Western standards, did not
require an increasing share of total economic re-
sources. 25X1
Sectoral Impact
The overall defense-to-GNP ratio does not convey the
fact that the impact of defense spending varies consid-
erably from one sector of the economy to another.
Measurements of the impact on economic sectors can
include both the direct and the indirect requirements
stemming from military purchases. For example, in
addition to the value of the coal purchased by the
Ministry of Defense to heat barracks and other
military facilities, the measurement for the coal sector
can include the value of the coal required in all stages
of industrial production-including metallurgical
plants, armaments factories, weapon assembly plants,
and supporting industries-to produce the weapons
and equipment that are eventually purchased by the
Defense Ministry.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Secret
Figure 19
Total Military Requirements as a Percent of
Sector Gross Value of Output (GVO)
Construction
Trade
Agriculture
Food Industry
Textiles and Apparel
Other Industrya
Other Sectorsb
Construction Materials
Transportation &Communications
Wood and Paper
Oil
Electric Power
Chemicals
Coal
Gas
Metallurgy
Machine-building & Metalworking
11
a industrial sectors not classified elsewhere.
bOther sectors of the economy not classified elsewhere.
We have made rough estimates of total (direct plus
indirect) military requirements using the Soviet input-
output tables and our estimates of the value of defense
purchases from the sectors of the Soviet economy.
Using a 17-sector reconstruction of the 1972 Soviet
input-output table,' we assigned about 75 percent of
total defense expenditures to individual input-output
' We use a. 1972 input-output table for our calculations because it is
the latest Soviet table available to us. The table depicts the
technological structure of the Soviet economy for that particular
year. The relationships that describe the inputs required by a sector
for each unit of its output change over time, but in general they do
not change rapidly. Therefore, the tables showing these relation-
ships retain their usefulness for analytical purposes over a period of
years.. The relationships in the 1972 table can be considered as
approximations for an indefinite number of years before or after the
sectors." The remaining 25 percent of total military
expenditures represents the value of military pay and
other services, which are not included in the input-
output analysis. A computation with the input-output
table determined the total requirements from each
sector implied by the defense expenditures. F_____] 25X1
Figure 19 shows the total military requirements as
percentages of the gross value of output (GVO) of
each sector. According to our estimates, the defense
share of total GVO of all sectors in figure 19 is about
the same as the share of GNP going to defense (12 to
13 percent) in 1972, the year of the input-output table.
10 We estimate that about 70 percent of military purchases of
materials consist of weapon systems and other hardware procured
from the machine-building and metalworking sector, and about 30
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Secret
The defense shares of many individual sectors, howev-
er, differ markedly from the aggregate proportionL
The impact of defense is greatest on the machinery,
metals, energy, and chemical industries. These sectors
are all key to economic growth, and there is a great
deal of interdependence among them. The machine-
building and metalworking sector is singled out con-
tinually by Soviet leaders as the mainspring of eco-
nomic development. This sector produces military
hardware and is also the source of most machinery
produced for capital investment. The largest supplier
of the machine-building industries is the metallurgical
sector, where ferrous and nonferrous ores are mined
and refined and all types of metals-from sheet and
rolled metal to wire nails and rivets-are produced.
The energy sector includes industries to which the
Soviets have always given special attention, and the
chemical sector has received significant investment
allocations at least since the Khrushchev era.~
It is clear that in these key sectors the total military
requirement is disproportionately high compared with
the 12- to 13-percent defense share of GVO and
.GNP. Further, much of the military demand repre-
sents indirect rather than direct military purchases
from industry. For example, military hardware is
procured directly from machine building and metal-
working, which draws heavily from metallurgy,
which, in turn, demands large inputs from the coal
sector. Thus, large indirect military demands are
created on the metallurgy and coal sectors, although
direct military purchases from those sectors are quite
small.
We do not know whether the Soviets have made an
analysis of the economic impact of their defense effort
along these lines. They do, however, have a penchant
for using GVO data in their economic analyses and
reporting, and this kind of sector analysis provides
results that share that frame of reference. In any
event, there is no reason to doubt that they are
aware-through whatever method-of the principal
conclusions we draw from our analysis: that the
impact of defense is heaviest on the areas of the
economy that are important to economic growth and
that defense vies with other strong claimants for the
output of those key sectors."0 25X1
" S. A. Sarkisyan and D. E. Stank, in their work entitled Ekono-
mika Aviatsionnoy Promyshlennosti (Moscow, 1980, pp. 78-84),
emphasize the necessity of recognizing both direct (pryamyye) and
indirect (kosvennyye) requirements in the context of resource
planning for the Soviet aviation industry. The method of sectoral
analysis described in that publication is essentially the same as the
input-output method applied in this section to defense require-
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Prospects for Soviet Defense Spending
in the 1980s
Economic Prospects
In their 11th Five-Year Plan (1981-85) the Soviets are
confronted with an economy that has performed very
poorly for five years and holds little promise of any
improvement during the 1980s. Halfway through
1981, Soviet economic growth was running behind the
previous year's poor showing in almost every sector.
The problems besetting the economy are many and
varied. Some are of recent vintage; others are of a
more longstanding and fundamental nature:
Figure 20
Growth Rates of Soviet Civilian and
Military Machinery Output
? Agricultural performance over the past few years
has been a disaster. Consecutive harvest failures in
1979 and 1980-unprecedented in recent Soviet
history-have left Soviet consumers facing wide-
spread shortages of meat and other quality foods.
The 1981 grain crop is expected to be smaller than
1980's, and Moscow will have to import record
quantities of grain and other farm products just to
avoid deterioration in the daily diet.
? Industry's average annual growth rate of 3.2 per-
cent in 1979-80 was a continuation of the slump
that began in the mid-1970s. Shortfalls in the
production of key industrial commodities-especial-
ly steel, oil, coal, construction materials, and chemi-
cals-contributed to an abrupt slowdown in the
production of investment goods and virtually halted
growth in construction activity. Shortages of several
key industrial commodities will probably become
more severe during the early 1980s.
? Growth in civilian machinery output has now
shrunk to its lowest level in three decades and, for
the 1979-81 period, military machinery output grew
faster than its civilian counterpart (see figure 20).
Because of this trend, Soviet investment plans for
industrial modernization will be severely con-
strained.
I
Civilian
Military
? Labor productivity has been slowing sharply in all
economic sectors. Most of the causes of the past
slump in labor productivity growth will persist and
exert even more influence in the 1980s.
? Growth of Soviet energy production is expected to
continue to slow.
? The natural increase in the working-age population
will decline from about 2 million persons annually in
the 1970s to only about 400,000 per year by the
mid-1980s
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Soviet GNP and Defense Spending Increments Soviet GNP, Population, and Industrial Capital Stock
1960-65
1980-85
(Projected)
1960
1979
1979/1960
Ratio
Cumulative GNP increments
(billion 1970 rubles)
65
69 a GNP (billion 1970 rubles)
232
518
2.2
Population (million persons)
214
263
1.2
Cumulative defense spending
increments (billion 1970 rubles)
12
15 b
Industrial capital stock
(billion 1973 rubles)
100
514
5.1
Defense increments as percent of
GNP increments
18.5
21.5
a Annual GNP growth projected at 2.5 percent.
b Annual defense growth projected at 4 percent.
early and mid-1960s, and the problem of accommo-
dating increments in defense spending that take as
much as one-fifth of total increments'to GNP may
If these trends continue, the annual increments to
GNP over the next five years will not be large enough
to support the needed increases in investment and
consumer welfare while at the same time maintaining
continued growth in defense spending at historical
rates and providing greater support to Eastern Eu-
rope. 0 25X1
If defense spending continues growing at an annual
.rate of 4 percent, then during the 1980s it would be
growing at a faster rate than the economy as a whole,
reversing a long-term trend that began around 1965
in which defense and the economy grew at about the
same rate. This pattern would be similar in some
respects to the pattern of the early 1960s, when
defense spending was growing more rapidly than the
economy and economic growth and productivity were
declining
Table 5 compares the ruble value of the increments in
GNP and defense spending during the two periods.
The ruble value of the increment to GNP that we
project over the 1980-85 period is not much larger
than the total GNP increment that we estimate was
achieved during the first half of the 1960s. Defense,
growing at its present rate, will take an even larger
share of the GNP increment during 1980-85 than it
did during 1960-65. The Soviet economy during the
1980s will be much different from the economy of the
The data in table 6 suggest the relative size of the
economy and some of the sources of the increased
demand that will intensify competition for the GNP
divided in: the 1980s. The heightened expectations of
a population that is about one-fourth larger than it
was in 1960 has significantly increased demands for
construction, food, and transportation-apart from
whatever expectations may have been created for
other consumer goods. The historical emphasis on
investment in industrial plants and equipment has
caused a very large increase in the capital stock of
industry since 1960-resulting in a much larger in-
dustrial base-but much of this stock is aging and in
critical need of renovation and modernization. The
resources that are needed to satisfy these and other
demands-for example, for new products to promote
energy development'and to substitute for labor-are
also those that are essential for new defense produc-
tion. Consequently there will be increased competition
for such resources in the 1980s.1 25X1
Simulations were conducted using a macroeconomic
model of the Soviet economy that took account of the
impact of labor and energy shortages as well as
defense spending increases of about 4 percent through
1985 and slightly less afterward. These simulations
suggest that Soviet GNP growth will slow to an
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
average annual rate of 2 to 3 percent through 1985
and to less than 2 percent from 1985 through 1990.
The defense share of GNP, which was 13 to 14
percent in 1980, could be a percentage point higher in
1985 and could approach 20 percent by 1990.
More importantly, however, the defense share of the
annual increment to GNP could increase from about
one-fifth now to between one-fourth and one-third in
the mid-1980s and to as much as three-fourths by the
end of the decade. This would drastically reduce the
ability of the Soviet leaders to allocate additional
resources to investment and consumption. It would
also erode the annual growth dividend that has been
so important in the past in easing political tensions
that arise from the competition for resources.)
Soviet economic growth is relatively insensitive to
changes in the growth rate of defense spending. For
example, a reduction from its present rate of 4 percent
to no growth between now and 1990 would alter the
growth of GNP by only a small amount. This is
because changes in defense spending cannot make up
for the deficiencies in labor and energy that the
Soviets will face)
A change in defense spending growth would, however,
alter the distribution of economic resources, even if
the overall rate of economic growth remained largely
unchanged. Given the slow rate of growth that we
project for Soviet GNP in the 1980s, almost any
acceleration in the growth of defense spending would
have considerable impact on the share of economic
output available for civilian uses. A major defense
increase could bring per capita consumption to stag-
nation or to a measurable decline. Such a decline
would influence popular morale and labor productiv-
ity, with serious political and economic consequences.
It is conceivable, therefore, that the Soviet leaders
could see some reduction in the growth of defense
spending as an attractive element of a policy program,
even though its specific contribution to economic
growth would be small.
Thus, as economic conditions worsen, merely main-
taining past rates of growth in defense spending will
become increasingly difficult-both economically and
politically-for the Soviet leadership. However, we
have yet to see any evidence of a shift of resources
away from the defense sector:
? Current indicators of weapons program activity
point to continued growth in defense spending at
about 4 percent a year through at least 1985.
? Our information on the 11th Five-Year Plan (1981-
85) suggests that the leadership has decided to
continue the priority of defense in spite of growing
economic problems
We are monitoring a number of indicators of future
defense programs to identify potential adjustments in
defense spending. Evidence of weapons production
and testing as well as construction growth at defense
industries and military R&D facilities points to con-
tinued real growth in defense spending during the
1980s.
Current Production
We estimate that the Soviets currently have in pro-
duction some 190 major weapon and support sys-
tems-military aircraft; principal land arms; missiles 25X1
and military space systems; naval surface combatant,
mine warfare, and amphibious ships; and submarines.
This total represents a slight increase in the annual
average since the early 1970s 25X1
Nearly three-fifths of the programs concerned have
entered production in the last five years, and most of
these will continue to be produced through the early
1980s. For most major weapons, annual production
rates have remained stable or have increased since the
mid-1960s, and we see no evidence that production
rates are being cut in response to economic con-
straints.
Floorspace Expansion at Defense Industries
Historically, there has been a close relationship be-
tween the completion of new facilities at weapons
production plants and an upswing in the growth rate
of defense spending. As new floorspace becomes
active, the new weapons produced boost procurement
expenditures, the largest component of defense ex-
penditures.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
At the end of 1979, completed floorspace used for
weapons production at key facilities was growing
more rapidly than at any time since the mid-1960s.
This rate of expansion foreshadows the start of pro-
duction of many major weapons that are now in the
late stages of R&D. Expansion projects reaching
completion in the next year or two should cause Soviet
defense spending to continue to grow at about its
historical rate of 4 percent for the next several years.
Moreover, construction activity now under way sug-
gests that the Soviets have begun to make resource
decisions that would lead to continued growth in
defense spending through the remainder of the 1980s.
If construction continues at normal rates, the new
floorspace will become active in production programs
between 1985 and 1990. The new weapon production
programs undertaken at these new facilities would
spur the continued growth of major weapon procure-
ment-and therefore total defense spending-into the
1990s.
Weapon Systems in Test and Development
The number of weapons the Soviets now have in
testing and earlier stages of development is consistent
with the levels we have observed over the past 20
years (see figure 21). We estimate that Moscow could
introduce some 130 new or modified major weapon
and space systems during the 1980s. This is about the
same number as were introduced during the 1960s
and 1970s.
Figure 21
Number of New or Modified Soviet Weapon
;Systems Deployed, by Decade
140
Systems postulated
as of 1981
Systems identified in
pretesting stages of
development
80
60
Systems identified in
testing stage
1961-70 1971-80 1981-90
(Projected
deployment)
a Includes military aircraft, missiles, naval ships (surface combatants, mine
warfare, and amphibious), submarines, military space systems, and
principal land arms (tanks, armored vehicles, artillery, and antiair weapons).
Thus, the military systems we have already identified
in development and production, if produced at histori-
cal rates, would sustain the growth of Soviet defense
spending at about the average annual rate of
4 percent through at least 1985. The number of
systems currently identified in development and slated
for production during 1981-90 corresponds closely to
production levels achieved during the 1970s
~
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
The preparation of the 11th Five-Year Plan (1981-85)
apparently involved the Soviet leadership in particu-
larly difficult decisions on the allocation of resources
between defense and the economy. The draft guide-
lines, published in December 1980 and adopted at the
26th Party Congress in March 1981, contained only
about half as much statistical data as the two previous
plans. The data cutback was especially pronounced in
those activities most important, but troublesome, to
the leadership-energy, agriculture, and transporta-
tion. Although the reduction in data is in line with the
trend to curtail the volume of published statistical
information evident since the mid-1970s, the absence
of concrete figures for several key goals probably
reflected delays, uncertainties, and possibly conflicts
in Soviet decisionmaking.
Nevertheless, the plan guidelines placed the greatest
emphasis on the development of heavy industry and
agriculture, with the highest growth targeted for those
branches of heavy industry most closely tied to the
military. Moreover, our analysis of these targets
indicates that there is room in the plan for continued
growth of defense spending at historical rates. Thus,
whatever anxiety the leadership felt about the worsen-
ing plight of consumers was not enough to cause a
significant reallocation of resources in their favor
The preparation period for the 1981-85 Five-Year
Plan coincided with a number of events that probably
gave added weight to military arguments for addition-
al resources:
In the fall of 1979, when the pace of work on the
plan was increasing, Soviet hopes for SALT II
ratification diminished. During this period, the So-
viets became increasingly concerned about the pros-
pect of deployments of long-range theater nuclear
forces in Western Europe and an improving US
relationship with China. Over the ensuing year,
their view of the likely strategic environment in the
1980s probably became more threatening.
o The invasion of Afghanistan in December 1979,
which the Soviets viewed initially as a "limited" and
"temporary" operation, has involved them with a
major commitment of political and military prestige
in a situation that has no short-term solution. All
indicators point toward a continued Soviet military
presence there.
The political and economic deterioration of Poland
during 1980 proved particularly troublesome for the
Soviets. It threatened Warsaw Pact effectiveness
and caused new tensions in East-West relations.r
Exacerbating these factors have been the announced
military policies and increased defense spending goals
of the new US administration, which reflect an intent
to carry through with a broad-based military buildup
directed primarily toward the Soviet UnionO
In this connection, a deputy chairman of the Soviet
State Planning Committee (Gosplan), N. P. Lebedin-
skiy, alleged to a former US budget official in May 25X1
1981 that the Soviets were making eleventh-hour
changes to their 1981-85 economic plan to accommo-
date "large increases" in defense spending. He further
noted that those changes took place after February
1981, required important revisions in plan targets,
and were intended to counteract planned increases to
the US defense budget
By virtue of his positions as a deputy chairman of
Gosplan, a member of Gosplan's collegium, and chief
of Gosplan's main computer center," Lebedinskiy
probably would have access to aggregate defense
spending data and therefore be knowledgeable about
the impact of increased defense activities on various
economic sectors. He did not describe the scope and
magnitude of the increases, but it was evident to
Lebedinskiy's interlocutor (who has known him for
over a decade) that the increases he alleged the
Soviets to be making were substantial.
There is a political context to Lebedinskiy's remarks.
In mid-1981, Soviet officials, in both public and
private statements, attempted to communicate to the
US Government both Moscow's concern over a US
military buildup and Soviet determination to keep
pace with an expanding American defense effort. In
11 Lebedinskiy also claimed that he had recently been appointed
deputy director of Gosplan for all economic planning. We have not
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
addition, Soviet commentators have alleged that pro-
spective increases in defense spending indicate that
the United States has embarked on a policy course
aimed at upsetting the existing strategic balance and
at achieving military superiority-which, they stress,
the USSR will not allow.
In this connection, President Brezhnev emphasized in
June 1981 that the Soviet leadership "cannot shut its
eyes to all this and cannot but draw appropriate
conclusions for itself." And, he warned, "the Soviet
Union will find a way to react rapidly and effectively
to any challenge. We must do so." Also in June,
Defense Minister Ustinov asserted that the USSR
would not permit anyone to upset the established
equilibrium of strategic-military forces in the world
and vowed that the USSR would give an "effective
response" to any and all challenges in the arms race.
25X1
Thus, Lebedinskiy's words may have been intended to
serve as a purposeful message to the US administra-
tion of Soviet resolve to compete, if necessary, in an
escalated arms race and an additional pressure tactic
to prod Washington into resuming arms control talks.
25X1
Beyond these political aspects, his remarks may also
have reflected some of the realities of the Soviet
defense budget process and the direction of the inter-
nal debate over military requirements and economic
policy for 1981-85. The draft guidelines suggested
that the 11th Five-Year Plan remained substantially
unwritten beyond 1981 and that difficult problems of
choice, priority, and policy had not been resolved by
the leadership in several critical areas. Nevertheless,
Lebedinskiy's remarks implied that as of February
1981 the Soviets had made some preliminary deci-
sions on defense funding that subsequent military
lobbying disrupted.
In the context of preparing a five-year plan, "large
increases" in the defense effort most likely would be
related to increases in the production and procure-
ment of military hardware. The record of Soviet
defense spending between 1965 and 1980 indicates
that the procurement of new weapons and equipment
constituted about half of total defense spending and
was the-main factor driving it upward. Such increases
could be effected by both short-term and longer term
options 25X1 25X1
Short-Term Options
Opportunities for immediate production increases
could well be limited by chronic :bottlenecks in the
supply of components and materials. We know, for
example, that the Soviets are having difficulty making
timely deliveries of critical components to meet cur-
rent production levels of strategic missiles. Soviet
attempts to achieve even modest increases across a
broad range of systems probably would encounter
shortfalls in supplies of critical components and mate-
rials.
25X1
For the short run, therefore, Soviet adjustments to
increase military goods would probably be constrained
to two courses of action:
Modest increases in production rates for some se-
lected systems already in or about to enter produc-
tion. This option probably would not cause a signifi-
cant increase in the growth of defense spending.
Implementation of partial industrial mobilization.
This is an extreme means of increasing production
of critical weapons and equipment and is normally
reserved for emergency situations. Prolonged indus-
trial mobilization carries with it severe economic
dislocations
Longer Term Options
In the longer term, one way the Soviets could acceler-
ate the pace of their military buildup would be to
increase their capacity to produce military systems by
augmenting their plans for investment in defense
industries. Accelerated investment in the defense in-
dustries would reduce the availability of investment
resources to other sectors of the economy during the
current five-year period and have the effect of sub-
stantially increasing production rates for systems slat-.
ed for production during the mid- and late 1980s.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Increases in production, in turn, would drive up the
growth rate of defense spending in the latter half of
forces), the balance that has allegedly evolved be-
tween Soviet medium-range missiles and US forward-
based systems. In any event, in considering future
requirements for war in Europe, the Soviets are likely
to view any new operational problems posed by the
modernization of NATO's theater nuclear forces as
only being additionally complicated by the questions
now raised about Poland's future role in Warsaw Pact
the decade and beyond.
During the next few years, the Soviets could, begin
construction of new final assembly facilities in addi-
tion to those that were included in the draft five-year
plan. Simultaneously, expansion of production capac-
ity at key component production facilities could re-
lieve chronic bottlenecks that currently limit in-
creased production of many military systems. These
added new facilities probably would come on stream
during the late 1980s.
A second option for the long term would be to
undertake new weapon development programs in ad-
dition to those already in train. Initiation of these
programs would increase the number of weapon op-
tions available to Soviet leaders in the long term, with
only minor immediate impact on defense spending.
Development programs do not begin to consume
significant resources until full-scale engineering de-
velopment begins, several years into the program.
Most new development programs initiated in the
1981-85 period would not enter production until the
late 1980s or early 1990s and would, therefore, not
impact on the current five-year plan.
Planning Contingencies
Plan adjustments to accommodate "large increases"
in defense spending could reflect Soviet planning for
an anticipated accelerating arms competition with the
West as well as for the Polish crisis and its potential
impact on Soviet security interests in Eastern Europe.
25X1
Recent Soviet commentary has linked together al-
leged Western efforts to subvert socialism in Poland
and broader Western initiatives aimed at weakening
the USSR's strategic position. The connection the
Soviets make between these two issues is their percep-
tion of coordinated Western efforts to upset a histori-
cally established balance-in the case of Poland, the
political-military balance codified by the wartime
agreements and reaffirmed in the 1975 Helsinki
accord; in the case of Western arms programs (such as
the NATO decision to modernize its theater nuclear
plans.
Events in Poland, at a minimum, have caused the
Soviets to plan against the progressive weakening of a
country that has been assigned responsibilities of 25X1
critical importance to the Warsaw Pact. In the event
of a war in Central Europe, Poland is responsible for
forming and commanding the northernmost front of
Pact forces and for supporting and securing the
wartime movement of Soviet troops and supplies
through its territory. Poland also maintains a defense
industrial base that not only produces a broad range
of weapons and military equipment for Polish forces
but also helps equip the armed forces of other mem-
bers of the Warsaw Pact
To hedge against the reduced reliability of Polish
forces, the Soviets may be anticipating an expanded
role for their own forces in Poland during -the 1980s
and, in this connection, may have decided to increase
production of some hardware for their ground and
tactical air forces. Such increases, however, would
probably be small and have little effect on the growth
of defense spending.
It is unclear to what extent, if any, the Soviets would
factor the impact of military intervention in Poland
into a five-year economic plan. Although an interven-
tion could be costly, the cost of an invasion would
depend on the size of the force, the type of military
operations conducted, and the intensity and duration
of Polish resistance. Consequently, the Soviets prob-
ably have not been able to calculate with any degree
of certainty the specific costs and consequences of an
invasion in military, much less economic, terms.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Secret
We believe it more likely, therefore, that adjustments
to accommodate large increases in Soviet defense
activities would be primarily directed against a per-
ceived accelerating arms competition with the West.
The Soviets would probably not view increases to
improve their military position vis-a-vis the West as '.
requiring the economic sacrifice that industrial mobi-
lization entails. They are probably still uncertain
about the long-term threat implicit in the US buildup,
and in any event they recognize that the United States
will not be able to quickly turn around the imbalances
it now perceives. Having this perspective, the Soviets
would probably pursue a combination of near-term
production increases for selected weapon systems and
longer term increases in investment and developmen-
tal activity to hedge against what in their view is an
increasingly uncertain strategic environment. F__1
We are confident we would detect indications of large
increases in major Soviet weapon development and
production programs well before such weapons be-
came operational with Soviet forces. The best indica-
tors would be higher levels of weapons testing activity
and increased capital construction at key weapons
production facilities. Specific testing programs and
plant expansion projects would probably provide sev-
eral years' advance warning of changes in the mix and
levels of weapons the Soviets intend to acquire later in
the decade.
If the Soviets pursued this course, defense spending
growth would probably increase above historical rates
during the middle and late 1980s and beyond. This
decision to increase the long-term priority of defense,
.however, would have an impact on the Soviet economy
in the 1981-85 period.F___1 25X1
Economic and Social Impacts of an Accelerated Soviet
Defense Effort
To the extent that any plan revisions increased invest-
ment in defense industries, investment in some civilian
sectors would suffer. Both heavy industry and agricul-
ture have powerful patrons in the political leadership,
and the priority needs of energy, machinery for
industrial modernization, and transportation could
make it difficult to cut allocations in these areas.
Consequently, investment in such areas as consumer
durables, services, housing, and machinery and equip-
ment for the processed food and soft goods industries
would be likely primary candidates for cutbacks, with
high-priority civilian areas being secondary targets.
Cuts in the consumer sector, however, could have two
unpalatable consequences. They could worsen the
already poor prospects for improving labor productiv-
ity and could increase worker discontent.
Moscow is counting heavily on large gains in labor
productivity to meet the economy's output goals.
Indeed, the plan directives currently stipulate that 90
percent of the growth in industry and all of the growth
in, agriculture must come through increases in produc-
tivity. Without some improvement in consumer wel- 25X1
faire, chances of generating the large productivity
gains implied in the 11th Five-Year Plan will be much
re 1uced. 25X1
Labor unrest would be even more unpalatable to the
leadership than lagging productivity. Food shortages
resulted in scattered work stoppages in 1980, and
reports of strikes have surfaced again recently. Some
midlevel party officials admit to a sense of isolation
from the working class, and concern over the Soviet
workers' mood has grown since the Polish crisis
began
25X1 25X1
The Soviet leadership is sensitive to the social instabil-
ity that could arise from increasing consumer dissatis-
faction and to the impact of this dissatisfaction on
labor productivity. There will be pressures for both
reasons to allocate a greater share of output to civilian
consumption in the 1980s at the expense of either
investment or military spending. Serious social insta-
bility could force the leaders to reassess their econom-
ic priorities in favor of the consumer. Short of this, we
believe they will be inclined to adopt the current mix
of cosmetic concessions, short-term fixes, and patriot-
ic Iappeals and, if necessary, to adopt repressive
measures to ensure both domestic control and the
continued growth of their defense effort.
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
 Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9
Secret
Kt
Secret
Sanitized Copy Approved for Release 2010/04/29: CIA-RDP83T00233R000100130001-9