THE IMPACT OF TECHNOLOGICAL TRANSFER ON THE USSR

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00176R000900010003-4
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 50
• Document Creation Date: December 20, 2016
• Document Release Date: November 16, 2007
• Sequence Number: 3
• Publication Date: June 1, 1974
• Content Type: REPORT

Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
Confidential
The Impact of Technological Transfer on the USSR
Confidential
CIA No. 8113/74
June 1974
Copy No. 140
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
Page
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. ECONOMIC PERCEPTIONS
1. How does the USSR assess its technological position? . . . . . . . . 3
2. What role and value does the USSR assign to the
acquisition of Western technology? . . . . . . . . . . . . . . 5
3. How do these Soviet assessments differ from ours?
What are the reasons for the differences? . . . . . . . . . . . . 7
4. In addition to assistance in overcoming technological
backwardness, in what other areas is the Soviet
government interested in expanding economic relations
with the West? . . . . . . . . . . . . . . . . . . . . . . . 9
5. How far have the Soviets moved from a policy of autarky
to full acceptance of an international division of
labor? . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6. In seeking new technology, in what areas is the United
States the sole or clearly the best supplier? Conversely,
to what degree can the USSR meet its objectives from
non-US Western sources? . . . . . . . . . . . . . . . . . . 14
III. ECONOMICS AND DETENTE
7. How important are economic considerations, particularly
technological transfer, in the general Soviet policy
of detente? . . . . . . . . . . . . . . . . . . . . . . . . 19
8. To what extent would the USSR sustain its current foreign
economic policy if detente faltered badly on other
fronts-e.g., arms control, the Middle East? . . . . . . . . . . 21
9. Do Soviet foreign policy considerations involve a prefer::?nce
for US suppliers? . . . . . . . . . . . . . . . . . . . . . 22
10. To what extent do Soviet leaders view increased trade and
exchanges with the West as a vehicle for building Western
constituencies with vested interests in pressing for
greater accommodation to broader Soviet objectives? . . . . . . 23
11. Is there any evidence that Brezhnev is out in front of his
Politburo colleagues in promoting trade with the West,
and with the United States in particular? . . . . . . . . . . . 25
Confidential
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
Page
12. How strong are the political forces opposed to increased
economic relations with the West and the United States? . . . . .
28
13. Are there any indications of the development of important
vested interests in acquiring important new means of
technical and economic assistance from the West? . . . . . . . .
30
14. Is Brezhnev likely to encounter trouble from his colleagues
if the large deals with the United States fall through?
If so, what would be the likely political results? . . . . . . . .
33
V. THE DURABILITY OF CURRENT ECONOMIC POLICY
15. Do the Soviets view their present policy as a temporary
expedient which will be followed, in a later phase, by
a return to greater independence? . . . . . . . . . . . . . .
36
16. What problems is the USSR likely to encounter in importing
Western technology? Will the leadership adjust its course
if assimilation of new technology proves to be more diffi-
cult than expected? . . . . . . . . . . . . . . . . . . . .
38
17. How has economic detente affected Soviet military capabilities.,
What is the potential in this regard? . . . . . . . . . . . . . .
40
VI. LONG-RUN EFFECTS
18. What can be said about the effects of economic cooperation,
especially big projects involving large numbers of Westerners
and increased foreign travel for Soviets, on Soviet managerial
structures and procedures? . . . . . . . . . . . . . . . . .
44
19. What can be said about very long-run socio-political effects
of economic cooperation-especially big projects involving
large numbers of Westerners and increased foreign travel
for Soviets? . . . . . . . . . . . . . . . . . . . . . . . .
46
U
Confidential
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
Confidential
THE IMPACT OF TECHNOLOGICAL TRANSFER ON THE USSR
INTRODUCTION
In any international commercial or technological exchange, each party expects
to benefit or the exchange would not take place. In their bilateral economic
relations, the United States and the USSR are no exception. The chief economic
benefit to the United States has been the opening up of the Soviet market. In
1973 the US export surplus in trade with the USSR climbed to about $1 billion.
The Soviet market holds continuing promise for US exports of machinery and
grain, while the USSR may in time become an important source of raw materials
for US industry.
The potential gains for the USSR in trading with the United States are well
knowr.: our equipment, technology, and know-how are greatly desired by the
Soviets. Without US (or other Western) equipment and technology, the costs of
producing some items would be higher: the time involved in producing them would
be longer; or the quality of the product or service resulting would be less.
It is in this context that this paper examines, through a series of questions
and answers, the economic and political impact on the USSR of the burgeoning
exchange with the United States and the West.
Note: Prepared by OCI and OER for the NIO for the USSR and Eastern Europe.
Comments and queries regarding this publication are welcomed. They may be
directed to the Office of Economic Research,
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
25X11
25X1
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
1. How does the USSR assess its technological position?
In recent years, Soviet leaders have become aware that technical progress would
have to be accelerated to recover the economic growth rates of the 1950s. During
the 1950s, high rates of Soviet economic growth were generated by massive
injections of labor and capital and respectable gains in productivity. As the postwar
backlog of potential productivity gains disappeared, the declining productivity of
capital and the very slow growth in labor productivity have reduced economic
growth to levels which the leadership considers too low. Brezhnev told the Supreme
Soviet in December 1972, "it is a question of achieving economic growth to an.
ever greater extent by increasing labor productivity and accelerating technical
progress. "
Soviet leaders seem to have mounted a three-pronged attack to improve the
USSR's technological position.
0 Attempts are being made to improve efficiency in domestic applied
R&D.
Western technology is to be imported for relatively short-run
improvements in the technological position of key sectors such as
oilfield exploration, motor vehicle production, and computer
production.
Technical cooperation agreements are being sought because they
offer the USSR an opportunity to obtain long-term technological
gains with minimum hard currency outlays.
The major failing of applied R&D, which the Soviets readily admit, is an
inability to convert the results of basic research quickly and efficiently into usable
technology, for Soviet industry. This research-production gap is partly the result
of poor organization that isolates researchers, designers, and customers. There is
also a critical absence of incentives for industrial enterprises to assimilate new
technology as well as a shortage of development facilities. Despite its shortcomings,
the applied R&D sector is assigned a large role in accelerating technological progress.
Soviet leaders are now attempting to eliminate some of these shortcomings through
reorganization of industrial management and other bureaucratic adjustments.
The USSR is aware that its technological position in basic scientific fields
is considerably better, than in applied R&D. An official of the Soviet State
Committee for Science and Technology (SCST) noted, for example, that basic
research in chemistry is excellent but chemical engineering skills are deficient. The
same discrepancy applies to computers. Nevertheless, the Soviets portray their
technological position in basic scientific fields as sufficiently good to make
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
long-term technical cooperation profitable both for the USSR and Western
countries. Whereas they are not too forthcoming in just what they have to offer,
they clearly hope to acquire the better engineering skills needed to convert research
findings into usable technology for Soviet industry.
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
2. What role and value does the USSR assign to the acquisition of Western
technology?
Soviet leaders and top industrial managers believe- that importing foreign
technology will provide production capacity in a much shorter time, and at less
expense, than it would take to' develop the technology in the domestic applied
R&D sector. As Kosygin put it, "it is cheaper in the long run to import or license
foreign processes than to try to reproduce them."
The Soviet approach is to modernize a key industry or process to leading
world standards in one step, if possible. The USSR tries to obtain the most advanced
technology in existence, but will turn to secondary sources if satisfactory
contractual or financial arrangements can not be made with the preferred source.
Soviet policymakers place an especially high value on technical cooperation
agreements with Western firms. Not only do these agreements hold promise for
long-term technology transfers, but they would also be much cheaper than large
purchases of machinery and equipment. Furthermore, cooperation agreements are
less damaging to Soviet pride than outright, one-way transfers of technology from
the West to the USSR. N.S. Patolichev recently expressed indignation at what he
called "voices alleging 'that the Russians are pumping out advanced Western
technology"' and went on to stress the mutual benefits of cooperation, citing
licensing agreements under which West European countries have purchased Soviet
technology.
Little evidence is available concerning the value assigned to imports of
technology for individual industrial sectors. In' general, the priority accorded
chemical technology in the early 1960s gave way to automotive technology in the
late 1960s. As automotive requirements. are being met, chemical technology is
gaining renewed importance, and the priority of computer technology appears to
be rising. Soviet planners know that mastery of modern industrial process
technology depends on a strong computer capability. Furthermore, the USSR is
anxious to set up regional and nationwide computer networks to aid in planning
and data gathering. The USSR is quite aware that massive transfers of Western
technology are necessary if this is to be done within a reasonable amount of time.
Recent imports of technology fall into four categories in terms of the capacity
that they provide.
? Many imports are intended to give the USSR production capacity
for goods that have not yet been mass produced in the USSR.
For most of these products, the Soviet applied R&D sector has
created prototypes, and foreign assistance is needed to implement
mass production. Computers and electronics provide outstanding
examples of this kind of transfer. Prior to 1970, for example, the
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
USSR had no technology or equipment to manufacture the printed
circuit boards needed for computer production. The technology
apparently was purchased from France, and the United States and
Great Britain supplied the necessary equipment - spray etchers,
laminating presses, and numerically-controlled drilling machines. The
USSR also imported US and UK computers for which no Soviet
counterparts existed.
? Technology is imported to upgrade existing Soviet technology to
state-of-the-art levels. Rather than install obsolete domestic foundry
technology at the Kama truck plant, the USSR imported the design
and equipment for a state-of-the-art automated foundry from the
United States. Similarly, Soviet engine manufacturing technology
was discarded in favor of modern, specialized US equipment that
allows economical mass production of diesel engines for heavy
trucks. Although the Soviet chemical industry has already benefited
from imports of Western technology over the las. dozen years, in
1973 the USSR imported a US acetic acid plant that utilizes a process
previously unavailable in the USSR.
? Advanced Western technology is imported to supplant Soviet-made
equipment that does not meet requirements for quality or reliability.
Imports of oscilloscopes and videotape recording equipment fall into
thin category, as do important kinds of oilfield and pipeline
equipment. Technology imported for the manufacture of chemical
products has allowed the USSR to upgrade the quality of
intermediate products for synthetic fibers and plastics.
? Finally, technology is imported to expand existing capacity to
remedy shortages. Much chemical equipment and technology is now
being imported for this reason. The USSR is attempting to obtain
US plants and equipment to manufacture larger quantities of
intermediate products for plastics. fertilizers. and synthetic fibers.
While these products are already mass produced and some are of
adequate quality in the USSR, additional quantities are needed to
meet all requirements. Other examples of this kind of import are
French gas processing units purchased to supplement Soviet
equipment and digital playback centers to locate oil and gas deposits.
The USSR also wants to install additional production lines in the
automobile plant at Tol'yatti.
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
Confidential
3. How do these Soviet assessments differ from ours? What are the reasons for
the differences?
Western views of the Soviet technological position differ from the Soviets' own
perception largely in degree.
The technological position of the USSR varies greatly from industry to
.industry as a result of the system of priorities under which Soviet economic planning
has been conducted. The USSR has virtually a dual economic system - military
and civilian. Traditionally, the military sector has had priority allocations of
high-quality manpower and materials, as well as protection from Party interference.
Thus, the military sector has flourished and has achieved near technological parity
with its US counterpart in the production of many types of weapons and space
equipment. The civilian industrial sector, however, is plagued with backward
technology, supply shortages, and management problems that do not appear to
exist in the military sector, or at least not to the same degree.
We see the USSR as further behind and more dependent on the West for
civilian technology than Soviet leaders openly admit. The basic industries whose
output directly supports both military production and investment programs - steel,
fuels, electric power, producers equipment, and chemicals - have received sufficient
priority so that their technology occasionally equals that of the West. But the
bulk of Soviet output is produced with technology obsolescent by Western
standards. Imports of technology in recent years have been heavily weighted in
favor of machinery, equipment, and know-how to modernize these basic industries.
In industries producing consumer goods, the USSR is operating at a
technological level far below Western standards. Greater recent concern by Soviet
leaders with consumer welfare, however, has led to increased purchases of
technology to improve the output of consumer goods. The USSR recently
contracted to purchase two factories from the United States to produce tableware,
for example.
We share the Soviet view that the technological gap is large and probably
widening. But we are less sanguine than Soviet planners about the contribution
that foreign technology will make to closing the gap. To the extent that Western
technology continues to advance beyond the level of technology sold or embodied
in the equipment exported to the USSR, the gap will persist. The long delays
typically experienced by the USSR in getting new technology on stream virtually
assures that this will be the case. For example, the Kama truck plant is being
furnished with some of the most modern equipment and processes available. Western
observers believe, however, that the USSR will experience years of delay in trying
to bring all of the equipment together into a successfully integrated operation.
By that time, the trucks may well be obsolete by Western standards.
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
We expect Soviet imports of foreign technology to raise technological levels
in key areas such as computers, electronics. oilfield exploration, and the like, but
not to effect a substantial improvement in the general level of Soviet industrial
productivity. In fact, imports of technology may perpetuate disparities in the
technological level of Soviet industry. Since diffusion of technology in the USSR
is slow and uneven, the technological level of some sectors will improve while
others will fall farther behind.
Management problems in the USSR that inhibit the diffusion and utilization
of domestic technology will also work against assimilation of foreign technology.
Soviet enterprise managers are still rewarded primarily for fulfilling output plans
and are unwilling to interrupt production to install new equipment, foreign or
domestic. Management in the applied R&D system is also rewarded for fulfilling
plans, not for developing usable technology or facilitating its wide dissemination.
The USSR has been struggling for years with the need to improve incentives to
solve these problems. But the leadership is inclined to tinker with the administrative
apparatus of the economy rather than t ?ead on the ideologically unsure ground
of reform with respect to material incentives (prices, wages, or profits).
Even if these problems could be overcome - and this is a big "if" - the
massive imports of technology and equipment needed for an across-the-board
improvement in Soviet technology sufficient to close the gap substantially would
be extremely costly.
Nonetheless, the Soviets believe that imports of Western equipment and
technology have made, are making, and will make important contributions to the
level of their technology and are therefore willing to pay substantial sums of foreign
exchange and accumulate foreign debt to acquire Western equipment and
technology.. The Soviets probably do not think in terms of the contributions of
Western equipment and technology to overall growth. The questions asked more
likely are: what would imports of Western equipment and technology do for the
output of large trucks or passenger cars? for the production of synthetic fibers
or plastics? for the extraction of oil and gas? In other words, it is the Soviet
perception of the importance of Western technology and equipment in concrete
instances that persuades the Soviets to press for increased trade and technology
exchange with the West, and not Western analyses of the impact of such imports
on overall Soviet economic growth.
Additionally, because the Soviet R&D establishment is not in a position to
provide the equipment, technology, and know-how that the leadership believes is
required to achieve planned goals, there is no real alternative to Western suppliers.
Until the Soviet leaders find ways to overcome the shortcomings of the applied
R&D sector, reliance on the West for advanced equipment and technology will
persist.
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
4. In addition to assistance in overcoming technological backwardness, in what
other areas is the Soviet government interested in expanding economic relations
with the West?
Traditionally the Soviets have traded with the West to acquire advanced
equipment and technology as well as commodities in short supply, such as the
large purchases of grain in 1964-66 ($1.3 billion) and again in 1972-73 ($2.2 billion).
The function of exports has been to generate enough foreign exchange to pay
for imports. Because of a chronic shortfall in exports, the USSR has had to finance
some imports by Western credits and by sales of gold.
The additional areas in which the USSR is now interested reflect these
traditional Soviet aims.
? The USSR needs more Western capital than has been made available
through normal long-term credits to enable the USSR to tap basic
resources and undertake large industrial projects.
The USSR recognizes the need for advanced management techniques
to introduce greater efficiency in the Soviet economy and has been
seeking them in the West.
? The Soviets are pushing export expansion more than in the past
in order to finance increased imports and, presumably, to reduce
their heavy dependence on increasingly expensive Western financing.
A major hoped-for benefit from expanded economic relations with the West
has been the infusion of substantial foreign capital, plant, and equipment in support
of Soviet investment programs. The planned rapid development of Siberian
resources, for example, depends on the USSR's ability to obtain unprecedented
amounts of foreign capital. The USSR is discussing several development projects
with the West which in total would require $10 billion to $20 billion in Western
plant and equipment during the next several years. Total Soviet debt to the West,
in contrast, currently stands at less than $4 billion. Energy-related projects would
be particularly expensive, with the natural gas development in Yakutsk and Project
North Star each involving at least $2 billion to $3 billion over a five-year period.
The Soviets have also recently approached the Japanese for some $3 billion in
loans to cover the construction of a second Trans-Siberian rail line which would
be used to transport crude oil for export to Japan. Other projects relating to coal,
timber, and copper would require several billion dollars.
The USSR also hopes that increased relations with the West will allow it to
benefit from Western management expertise. Moscow is particularly aware of the
need to upgrade management techniques and has taken several steps to draw upon
Western knowledge in this field. Selected Soviet officials, for example, may soon
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
study business management in US institutions. In addition, Soviet managers and
industry officials have had an opportunity to discuss management problems with
Western businessmen and observe the benefits derived from the application of
various Western management techniques. In some instances, the USSR has enlisted
the assistance of Western consultants - firm of
the United States, for example - in a irec attempt to upgrade the quality of
Soviet industrial management and control. In other efforts to improve production
and sales, the USSR has sought Western training in computer applications. Similarly,
the USSR greatly desires US assistance in the management of large agricultural
complexes, especially for livestock and poultry.
Over the long term, increased Soviet imports of Western technology and
equipment must be supported by an increase in Soviet exports to the West. As
a result, export expansion - particularly of manufactured goods - is a key Soviet
goal in expanded economic relations with the West. The USSR has expanded efforts
to establish outlets in the West, often in partnership with Western businessmen.
The Soviets have also engaged Western firms to research potential markets for Soviet
products, or to assist in marketing and production design through agreements such
as the one signed in 1973
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
5. How far have the Soviets moved from a policy of autarky to full acceptance
of an international division of labor?
Soviet Minister of Foreign Trade Patolichev wrote in Pravda in December 1973
that "rapid technical progress cannot be accomplished without the broad use of
world achievements in individual branches of production and without the mutual
exchange of these achievements, i.e., without the active development of the
international division of labor." The statement, taken at face value, is a far cry
from the often proclaimed Soviet goal of economic self-sufficiency - before World
War II, to combat "capitalist encirclement," and after World War II, to create
a self-contained socialist alternative to the capitalist economic world.
Almost from the very beginning of the Soviet state, economic planners in
the USSR believed that selective trade with the more technically advanced countries
of the West should be used to achieve economic self-sufficiency more rapidly. The
temporary upsurge in trade with the West in the early 1930s was in fact so designed.
After World War II, Stalin tried to adapt the self-sufficiency concept to the
Communist countries as a group, with the aim of creating a bloc which would
no longer have to trade with the West. Trade with the West declined until Stalin's
death, and indeed did not increase substantially until Khrushchev decided in the
late 1950s that Soviet plan goals could not be met without Western help. The
table below shows that the share of trade with the West increased when the Soviet
leadership expressed special interest in this trade - after Khrushchev's
pronouncements on trade, and again when trade with the West was given heavy
emphasis in the Eighth Five-Year Plan directives published in 1965.
Current Soviet efforts to obtain West':rn goods and technology have again
resulted in an upswing in trade with the Wtst. The share of the West is now larger
than at any time since 1948. It is too early to judge whether this share will increase
further. But looked at in the perspective of two decades, continuing Soviet efforts
to obtain Western equipment, technology, and now large sums of capital are leading
the USSR willy-nilly to a greater dependence on the West. The USSR, for example,
is committing itself to long-term deliveries to Western trading partners and increasing
its participation in the international division of labor. In the gas-for-pipe deals with
firms in Austria, Italy, West Germany, France, and Finland, the USSR agreed to
deliver natural gas for periods of 20 to 30 years. Lon-term Soviet supply
commitments also are involved in the French participation in the Ust-Ilimsk pclp
complex and in the Italian Montecantini-Edison's sale of seven large chemical plants
to the USSR. The same type of arrangements apply to the prospective multibillion
dollar projects which envision US and Japanese development of Soviet fossil fuel
resources.
Obviously there are limits to dependence on trade with the West. The USSR
is still working toward CEMA integration, with a major objective being an integrated
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
Confidential
USSR: Trade with the Developed West
Trade Turnover
(Billion US S)
Share of Developed West
in Total Trade
(Percent)
0.5
1.0
1.6
1964
3.0
20
.1965
3.0
19
1966
3.5
21
1967
3.7
20
1968
4.2
21
1969
4.7
22
1970
5.1
21
1971
5.6
- 21
1972
7.0
22
1973
11.0
25
economic plan for the member countries for 1976-80. Writing in Izvestiya 0.
Bogomolov, Director of the USSR Institute of Economics of the World Socialist
System, suggests that it might be more advantageous to rely on foreign suppliers
for some items and, meanwhile, expand export capacities in areas where the USSR
has a comparative advantage to pay for rising imports. He recognizes, however,
that before the USSR ever "fully" subscribes to the idea of the international division
of labor, "much time and effort will be required to solve many theoretical and
methodological problems," and a "certain psychological reorientation of Soviet
thinking, working, and planning" will be required.
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
6. In seeking new technology, in what areas is the United States the sole or
clearly the best supplier? Conversely, to what degree can the USSR meet its
objectives from non-US Western sources?
In many areas, the USSR can obtain technology equal to or even better than
US technology from other developed Western nations. In some areas, however,
the United States clearly possesses the hest technology in the world, or is the
sole supplier. The flavor of the situation can perhaps be suggested by a survey
of some of these high-technology sectors.
Computer Technology
The United States is the only country that can provide computer hardware
and software across the entire spectrum. For very large scientific machines (such as
the CDC 7600), the United States is the sole supplier, and manufacturing technology
for producing general-purpose computers on a very large scale exists only in the
United States. Also, certain types of production equipment (high-capacity core
presses) and computerized testing systems are available only in the United States.
But design and production technology for most hardware and software systems
are available in Western Europe and Japan. Japan, Britain, West Germany, France,
and the Netherlands all have a diversified product mix, but produce on a much
smaller scale than the United States.
Semiconductor Technology
The United States leads the world in semiconductor technology and is the
only country that can supply the USSR with design and production technology
for semiconductor devices across-the-board. For advanced integrated circuits (IC)
technology. - that is, high-speed and high-density devices (MOS/LSI) - the Lnited
States is still the sole supplier. It is also clearly the best supplier for advanced
semiconductor production and testing equipment such as computer-aided design
systems, computerized IC testers, and ion-implantation equipment and techniques.
Nevertheless, technology for the production of modern semiconductors is
available outside the United States, although only Japan has an industry sufficiently
large and diverse to be able to supply the USSR with a wide range of production
processes. Japan is particularly strong in areas where the Soviets appear to be
weak - diffusion, mask-making, and probe testing.
Western Europe, considered as a unit, could supply the USSR with a wide
range of semiconductor technologies. However, Phillips, the largest and
technologically most advanced. semiconductor producer in Western Europe,
consistently has opposed in COCOM the sale of this technology to Communist
countries.
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
Non-COCOM countries have limited capabilities in select areas, but are not
able either individually or collectively to meet Soviet needs. Switzerland is strongest
in thin-film technology and Sweden in hybrid integrated circuit technology.
Petroleum Industry
The United States clearly iq the best supplier of complete systems for onshore,
offshore, and permafrost exploration, production, and pipelining. Advanced
geophysical equipment and related computer hardware and software that would
best serve the USSR's exploration needs can be acquired only in the United States.
US firms also manufacture the most advanced drilling and production equipment
in the world. Only US companies, subsidiaries, or foreign licensees manufacture
fully automated pipeline valves, compressors, and pumping equipment for large
diameter pipelines. Permafrost technology is largely controlled by US firms and
their Canadian affiliates and subsidiaries.
As with computers, however, Soviet objectives could be met to a considerable
degree by turning to non-US sources. Britain, France, and West Germany can supply
certain types of seismograph and geophysical equipment. Some offshore technology
is being developed by Dutch, French, Norwegian. British, and Japanese firms.
Western Europe and Japan can supply large diameter linepipe. The USSR could
carry out its exploration and development programs with its own equipment,
supplemented from such non-US Western sources, but at greater cost and over
a longer period of time than would be the case if it had access ti US technology
and equipment.
In petroleum refining the United States leads the world in technology, but
again the USSR could meet most of its needs from non-US sources. West European
and Japanese firms can supply most of the process equipment and the technical
assistance required, although some processes may be available only under US license
arrangements.
Automotive Technology
Automotive technology available in Western Europe or Japan generally is good
and often is available on more favorable purchase terms than in the United States.
The United States has the best specialized aut-)motive machine tools (e.g., transfer
machines) for high-volume output and computerizLd warehousing systems. Because
the USSR has based the differential gearing of its cars and trucks on US design
(tooth-form), the United States is its sole source of supply for differential
gear-cutting mach:,ie tools incorporating the latest technology.
The United States is probably the only country the USSR can turn to for
the design of very large automated foundries. The foundry that the USSR recently
acquired from Swindell-Dressler for the new Kama plant embodies a unique
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
production process. The United States is also the best supplier for certain types
of foundry machinery, such as very large melting and molding machines.
Chemical Industry Technology and Equipment
The extensive cross-licensing of chemical technology and the restricted nature
of much industrial cost data makes it difficult to differentiate national origin or
excellence among several chemical processes. Certainly US process technology for
large-scale production of a broad range of petrochemicals and synthetic materials
must be ranked among the world's best. Nevertheless, most of the equipment needed
for such processes can be produced by non-US firms. For example, although US
technology was provided for five Soviet ammonia plants ordered in 1969-71, Japanese
firms provided much of the equipment.
There may be a clearer case for US technological superiority in the field of
relatively low-volume but important chemical or related items such as catalysts,
fiberglass products, and engineering plastics. But the US superiority by no means
extends to all such materials. Moreover, substitutes entailing some sacrifice in
efficiency and cost probably are available.
Given the present Soviet chemical priorities - synthetic materials and
fertilizers - the USSR does not depend much upon direct purchases of technical
data from US firms. The chemical and petrochemical technology needed by the
USSR can be obtained mainly in Western Europe or T?pan. West European firms
can supply modern equipment and technology for a number of man-made fibers,
plastics, fertilizers, and related intermediates. Japan has a substantial capability for
providing petrochemical technology and equipment as well as process and design
data for installations producing synthetic fibers and plastics.
Aircraft Production
US civil aircraft production technology ranks with the best in the world,
although it is uniquely superior in only a few areas. The greatest US advantage
is its overall, large-scale systems approach to civil aircraft production. Except for
some parts of inertial navigation systems, the large-scale numerically-controlled
assembly line operation, and some aspects of airframe fabrication, US technology
can be matched by France, Britain, and West Germany. The USSR could acquire
advanced engine technology in Western Europe that is equivalent to US technology
if it were not barred by COCOM trade controls. US technology for air safety (air
traffic control) and for pollution control rates among the best in the world but
can be hatched by other Western countries, particularly Britain.
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
The United States is the sole supplier of heavy-duty industrial tractors and
the largest sizes of earth-moving equipment, such as front-end loaders and dump
trucks. It also is the sole supplier of the process for manufacturing grain-oriented
electrical sheet (for transformer cores), although the machinery is available in
Western Eirope and Japan. The United States is the best supplier of numerical
controls for machine tools, especially those for simultaneous control of more than
two axes. US numerical controls are easily programmed, and delivery times are
more favorable than elsewhere.
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
III. ECONOMICS AND DETENTE
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
7. How important are economic considerations, particularly technological
transfer, in the general Soviet policy of detente?
Economic considerations, particularly technological transfer, are extremely
important, but not overriding in Soviet detente policy. Such problems as coping
with China, controlling nuclear risks, and advancing Soviet political influence in
Western Europe are also important factors 'in leading the USSR to adopt a detente
approach. Economic considerations complement these other aspects of detente,
offering an alternative to autarky and a response to changing world conditions.
The Soviets need advanced Western technology and have flatly admitted this.
The USSR can, as it has in the past, however, do without US or other capitalist
assistance and obviously can do so in the future. Given the self-imposed Soviet
commitment to accelerate technological progress and economic growth and to
overcome deficiencies in critical sectors of the economy, the USSR would in some
areas prefer to obtain superior US technology and know-how and have access
to the large US capital market. Without detente, this desire would go largely
unfulfilled.
The Soviets already have obtained important economic benefits from detente:
massive quantities of grain to mitigate the effects of the 1972 crop failure;
technology and equipment delivered or ordered that were previously denied by
US export. controls, and more than a billion dollars in credit to finance grain and
machinery imports at a time of difficult payments problems.
The USSR has obtained substantial amounts of equipment and technology
from Western Europe and Japan as well as ample long-term credit to help finance
such imports. In some instances, US technology and equipment would have been
preferred, but the levels of technology embodied in much of the equipment
imported were in any event superior to that available in the USSR and Eastern
Europe. Even though the relaxation of US export controls has made considerable
amounts of US equipment and technology available, the USSR continues to place
80%-85% of its orders for Western capital equipment in Western Europe and Japan.
Superior US technologies which the Soviets would like to acquire in helping
overcome some deficiencies in critical industries include equipment and technology
for the petroleum industry, computers, and semiconductors. Aside from outright
purchases of equipment, access to highly prized US technology would also be
realized via the scientific and technical agreements that the Soviet Union has
concluded with more than 20 US corporations and other organizations. In seeking
a foothold in the Soviet market, US companies may be willing to part with
technology that the USSR desires but has not been able to obtain through trade
channels.
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
Perhaps one of the most important benefits which can be derived from detente
is access to US technology, know-how, and capital through so-called cooperative
arrangements. Without US capital, for example, some of the ambitious projects
the Soviets have in mind - North Star and Yakutsk gas or Sakhalin oil - would
have to be postponed - some for many years - since the USSR is unwilling or
unable now or in the near future to make the necessary investment to develop
these resources and sufficient capital is unavailable in other countries.
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
8. To what extent would the USSR sustain its current foreign economic policy
if detente faltered badly on other fronts -- e.g., arms control, the Middle East?
If detente suffered in important strategic or political areas, Moscow would
make great efforts to sustain its foreign economic policy so long as some major
Western governments were receptive. The economic considerations that led Moscow
to formulate its current policy of improving business ties with the West would
remain even if certain political considerations supporting detente lost various
specific competitions with other Soviet policy priorities.
Almost 60 years of economic experimentation have failed to deliver the USSR
from its relative technological backwardness compared with the industrial states
of the West; this has been acknowledged by some of the more forward thinking
Soviet officials. These Soviets also acknowledge that the gap may widen between
East and West in the vital area of economic competition unless vigorous efforts
are made to adapt to the demands for technological growth.
Apart from the desire to lessen the risk of global nuclear conflict, probably
'no other aspect of Moscow's current detente policy has developed a stronger
consensus among Soviet leaders than its economic policy. However, there are
doubtless greatly differing views on the implications of detente for the structuring
of the Soviet domestic economy. The need for Western technology and credits
seems to have few serious critics, though there are strong forces in Moscow who
oppose any fundamental tampering with the Soviet economy in order that it might
more effectively absorb the technology and investments the USSR seeks. Thrr~-
are also influential circles who worry about'the constraining implications of growing
economic interdependence.
A serious setback for detente would seriously hamper but not stop the Soviet
leaders from pursuing their foreign economic course. The Kremlin would likely
judge that it would have to forgo some of the economic benefits it seeks from
the West, but that it would be able to maintain economic dealings with some
major Western governments and in time restore beneficial relationships with others.
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
9. Do Soviet foreign policy considerations involve a preference for US suppliers?
Yes, for both political and economic reasons. Soviet officials have for some
time said that Moscow would prefer US sources of advanced technology and credits
in order to strengthen political relations and create conditions for greater mutual
trust. Among economic considerations, the Soviets clearly like the resourcefulness
of US businessmen and the American technological experience, and they know
that the volume of capital investments they require is available from virtually no
other Western state.
The Soviets have also made the case, however, that unless the US terms for
expanded economic ties are economically non-discriminatory, they will be forced
to turn to other states for the technology and capital they need. They have insisted
that most-favored-nation (MFN) treatment in particular be granted, inasmuch as
Moscow cannot indefinitely accept an unfavorable trade balance with the United
States. They have acknowledged that a trade deficit with the United States will
exist for some time, even under the most favorable conditions, but that this
situation can eventually be corrected as the Soviet economy adjusts to US and
other Western market demands.
If the Soviets are eager to reinforce the positive bilateral political relationship
by means of expanded economic ties with the United States, they are not eager
to pay a political price for economic objectives desirable in themselves. The Soviets
have insisted that there be no political preconditions for increased economic
ties with the United States, but in fact they have shown a certain willingness
at times to make some political concessions - e.g., on Jewish emigration - to gain the
kind of economic benefits they seek. They have also indicated, however, that there
are sharply defined limits to the concessions they are prepared to offer so long
as the prospects for acquiring MFN and credits are unfavorable.
Apart from normal business bargaining for the best deal available, Soviet
competitive bidding for Western technology is also grounded in ideological rationale.
The Soviets view economic competition among capitalist states in particularly stark
terms, characterizing it as an unbridled, unprincipled scramble for national and
corporate advantage.
It is not surprising therefore that Moscow should at empt to play the leading
Western nations against each other both for political and commercial advantage.
Thus Soviet Trade Minister Patolichev, in an effort to prod the United States into
granting more favorable credit terms, threatened in February to take Soviet trade
elsewhere in search of better terms.
Perhaps more surprising is the readiness with which Soviet leaders have for
political reasons bluntly threatened to boycott US firms attempting to do business
with a fraternal socialist ally, Romania.
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
10. To what extent do Soviet leaders view increased trade and exchanges with
the West as a vehicle for building Western constituencies with vested interests in
pressing for greater accommodation to broader Soviet objectives?
Soviet leaders clearly hope that increased commercial contact between the
United States and the USSR will aid in "making the process of detente irreversible."
Moscow has consistently pressed for a very high level of bilateral trade, and Kremlin
leaders from Brezhnev down have shown a preference for long-term economic
commitments, ranging up to forty years. They obviously make a strong connection
between the breadth and depth of economic ties and the "stability of US-Soviet
relations as a whole."
The Soviets apparently expect that the capitalist appetite for profit, once
sufficiently whetted, will prove a powerful force in shaping future Western policy
toward the USSR. In addition to the economic dividends which they see flowing
from expanded commercial contact, the Soviets probably expect enhanced political
leverage with the West, though they must realize that this can cut both ways.
Moscow appears already to regard US businessmen as allies in the campaign
to defend detente against its Western opponents. Soviet commentators, for example,
have been quick to publicize support from the US business community for
liberalized trade and credit policies toward the Soviet Union.
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
IV. THE INTERNAL POLITICS OF THE MATTER
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
11. Is there any evidence that Brezhnev is out in front of his Politburo colleagues
in promoting trade with the West, and with the United States in particular?
Brezhnev is the principal spokesman for the Soviet leadership on most subjects,
certainly including detente and its economic aspects. He has spoken more
voluminously and more often than any other member of the Politburo. and his
recent collected speeches outweigh even the sum of all the other members. He
is patently, therefore, "out in front" of his colleagues. There is, of course, a
difference between being the spokesman for an agreed position and being a
proponent of that position in the closed councils of the Politburo. On the specific
issue of trade with the West and with the UnitLd States in particular, however.
there is no evidence to suggest that Brezhnev is now a reluctant front-man for
a policy he regards as distasteful or dubious. Moreover, from the Kremlin vantage
point, his identification with detente with the United States is no more marked
than his identification with detente with West Germany.
The General Secretary is a relatively new convert on this subject. In the
mid-1960s, Kosygin as Premier was actively pushing trade prospects with both
Western Europe and the United States. Brezhnev, then focusing on his
responsibilities as Soviet head of the international Communist movement, was
suggesting that praise for Western technology by proponents of trade with the
West denigrated the achievements of the "socialist camp." Since 1970. however;
Brezhnev has more than made up in volume and enthusiasm for his laggard
performance earlier.
In part because of his enthusiastic personal style. Brezhnev is particularly
associated with a series of large projects, rather than with the less dramatic general
growth of trade. This has been true in his discussions with he Germans and Japanese
as well as with the United States. Brezhnev, more than his colleague. thus is linked
with projects whose failure would be public and conspicuous.
Some comparison of how individual Politburo members stand on economic
cooperation with the West is possible on the basis of a series of speeches made
by 13 of the 16 full members in the fall and winter of 1973-74. The positions
that emerged must, of course be viewed with caution. Polyansky and Shelepin.
for example, have both suffered political setbacks and must be concerned to
maintain their acceptability to the General Secretary. regardless of their inner
inclinations. There are, in addition, professional or bureaucratic inhibitions. It would
be inappropriate for Grechko as Minister of Defense to dwell on the economic
benefits to flow from detente. His responsibility is to assure his audience that
the security of the Soviet Union will not be endangered by such a policy and
to assure the military that they are still needed. Similarly. Andropov as chief of
the KGB can scarcely afford to denigrate the threat of ideological suhversion from
the West.
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
With these caveats in mind, however, there are some differences in emphasis
to be gleaned from the speeches. No one expressed explicit doubts about trade
with either the United States or Western Europe, but some were more enthusiastic
than others. Brezhnev, Gromyko, Kosygin, Mazurov, Polyansky, Shelepin, and
Suslov all specifically mentioned economic factors in the context of improving
relations with the developed countries. Brezhnev at the high tide of his enthusiasm
in October commented that the times require a "broad international division of
labor". He described "mutually advantageous, long-term, large-scale. bilateral and
multilateral cooperation" as a means for "dependable material strengthening of
peaceful relations between states."
Gromyko noted that "multilateral and mutually beneficial contacts" with the
states of Western Europe are expanding." His long and relatively favorable account
of relations with the United States contained no reference to trade, possibly in
recognition of the sore point of failure thus far to achieve MFN status. In contrast.
he made specific reference to prospects for trade with Japan, including "joint
economic projects in Siberia and the Far East."
Kosygin came down hard on scientific and technological progress, an area
of exchange with which he has long been associated. He argued that it represents
the main way to raise Soviet labor productivity, and that both rising living standards
and successful economic competition with capitalism depend on the rate at which
technological achievements are introduced into the Soviet economy.
Mazurov called for "constructive business links with capitalist states". a slightly
less enthusiastic formulation. Polyansky pointed to the economic benefits of
detente, and Shelepin called for large-scale mutually advantageous economic
relations with the capitalist world. Suslov called for large-scale. lon,_-range, mutually
advantageous economic relations among capitalist and socialist states.
A second group of leaders used less explicit formulations that Could still be
interpreted as including prospects for trade among the benefits to flow from
detente. Andropov described improving relations with the West as creating the most
favorable conditions for the construction of communism in the USSR. Grechko
referred to the promise of the creation of conditions for the USSR's "further
advance along the path toward communism." Kirilenko referred to "prospects for
mutually advantageous cooperation." Kulakov noted that "a considerable advance
had been achieved in the development of relations between the Soviet Union and
the United States and several other states."
Podgorny's references to the potential benefits from detente were cast almost
solely in state-to-state terms - "mutual respect for territorial integrity and
sovereignty", "non-aggression", "non-interference in internal affairs." His sole
reference to trade was limited to Europe and was so low-keyed as to be almost
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
a brush-off: "If today ... business cooperation among states is expanding ... this
testifies to the fact that positive tendencies in this part of the world are gaining
strength." He made no reference to Soviet-US relations in any field.
A rough leadership grouping on the economic elements of detente might look
like this:
Explicitly Pro
Brezhnev (Party head)
Gromyko (Foreign Minister)
Kosygin (government Premier)
Mazurov (1st Deputy Premier, industrial responsibility)
Polyansky (Minister of Agriculture)
Shelepin (trade unions head)
Suslov (senior Party ideologist, world Communist movement expert)
Andropov (KGB Chairman)
Grechko (Minister of Defense)
Kirilenko (Brezhnev's Party deputy, supervises industry)
Kulakov (Party Secretary, supervises agriculture)
Minimizing or silent
Podgorny (Head of State)
Pelshe (Party-Control Commission)
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
12. How strong are the political forces opposed to increased economic relations
with the West and the United States?
A number of the USSR's more powerful interest groups seem to have
reservations about the wisdom of increased economic relations with the West and
the United States.
The one most frequently mentioned by Soviet sources is the Party bureaucracy
itself - specifically, the regional political bosses whose views carry a good deal
of weight with the top leadership in Moscow. Their negative attitude toward
increased trade with the West is said to be prompted by several factors - not
the least of which is a conviction that it would violate an unwritten "Trading
with the Enemy Act." Briefly put, many of these local satraps are far more
isolationist and suspicious of the capitalist West than Moscow-based officials seem
to be at this time.
Regional Party leaders' negative attitude is reinforced by their awareness that
they themselves will have to cope with the local dislocations resulting from any
increase in trade with the outside world. They are the ones who will be tasked
with seeing to it that local enterprises adjust to the new conditions: make use
of the imported technology even though change-overs interrupt production,
conform to higher standards of quality, and so forth. They will also be responsible
for making sure that increased trade does not lead to undesirable side effects in
the political sphere, and that rising expectations of the Soviet population do not
get out of control. While some may view East-West trade as a panacea' for Soviet
ills of the moment, most probably see it as only adding to the complications of
their day-to-day life.
The Soviet ideologists and security officials responsible for dealing with
"imperialist" intrigues and subversive activities are also likely to be against increased
East-West trade. Many undoubtedly view the prospect with alarm, certain that it
will make it easier for foreign intelligence services and other hostile forces to operate
within the Soviet Union. While some KGB and GRU officials may feel that more
trade will make it easier to recruit foreigners to work for the USSR and to assign
Soviet intelligence officers abroad, most probably see it as working against Soviet
national interests, as well as their own.
The attitude of the Soviet defense establishment is more difficult to fathom.
but it may be significant that it has been the political officers - responsible for
the ideological health of the armed forces - who have emphasized the importance
of economic autarky and integration with the other socialist countries along CEMA
lines, rather than economic cooperation with the capitalist world.
Meanwhile, it is the experts at the policy-oriented research centers such as
the USA Institute in Moscow who come out with the most outspoken endorsements.
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
in private and in public, of more East-West trade and cooperation in scientific
and technological fields. Several of these experts have ties. past if not present,
with the Soviet military hierarchy, specifically with the General Staff. It seems
likely that at least some professional soldiers also feel that economic growth and
social investment, not just military hardware, are required to ensure that future
defense needs can be met. This is likely to be particularly true of those familiar
with the problems connected with qualitatively improving Soviet weapons.
At the same time, it seems unlikely that this attitude would predominate
among lower-level officers - the colonels in troop units - who may see detente
as all right in itself but dangerous when it threatens to weaken troop morale. They
and their superiors, up to and including military district commanders and their
counterparts in the navy, probably feel that any increase in East-West contacts
could make it more difficult for them to keep the Soviet armed forces up to
the mark in terms of combat readiness.
Additionally, there are other known grounds for opposit:oi, to increased
economic ties with the West, although the exact political clout of their adherents
is uncertain. One school of thought objects to paying for increased Western imports
with Soviet raw materials, especially energy-related resources. The worldwide energy
shortage has given new force to this argument. Concern also exists that increased
trade with the West will arouse Soviet consumer expectations that the regime will
be unable to fulfill.
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
13. Are there any indications of the development of important vested interests
in acquiring important new means of technical and economic assistance from the
West?
There is some evidence of the rise of vested interests in the Soviet Union
at both the national and local levels which are actively promoting increased
economic ties with the West. Such interest groups may be defined as those which
have been able to build new administrative empires and/or set more ambitious
production goals because of the import of Western technology and equipment.
The most important of these groups are:
a. the State Committee for Science and Technology (SCST);
b. certain economic ministries;
c. research institutes; and
d. production associations.
In general, whatever policy promotes trade is in the best interest of the Ministry
of Foreign Trade. However, at least one report suggests differences of opinion and
very real bureaucratic maneuvering among middle-level Ministry officials as to the
relative merits of the US and West Germany as trading partners for the Soviet
Union. No doubt there are others who view a major expansion of trade beyond
CEMA boundaries with foreboding. But Patolichev's public support has, as noted
earlier, been unequivocal.
The SCST was placed directly under the Council of Ministers in 1965 and
has a broad mandate to establish the priority of and approve all national scientific
and technical programs. Included in this task are the identification and introduction
of foreign science and technology into Soviet industry. The Committee's Chairman,
Academician V.I. Kirillin, claims that it acts mainly as a catalyst in this respect,
paving the way for cooperation between Soviet ministries and foreign traders. It
is much more than that, however, since it approves the expenditure of most foreign
currency for Western equipment and technology and signs virtually all
"scientific-technical cooperation agreements" with foreign firms and governments.
Soviet leaders view technical progress as neither haphazard nor spontaneous
but as a process amenable to central planning and control. Assessment of the USSR's
technological position and the formulation of technology policy are carried out
in great detail at the highest party-government levels as part of the long-range
economic planning process. Once these plans are set, there is a strong disinclination
to change them. This is one respect, of course, in which the whole Soviet economic
organizational structure is likely gradually to acquire a vested interest in
technological transfer and the rest of economic transfer.
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
The planning goal of such bodies as the SCST is to formulate a long-term,
integrated technology policy that combines imported technology with domestically
developed technology in a complementary fashion. To this end, the SCST is assigned
the job of sorting out the technological problems that will receive priority. It then
decides which technology will be obtained abroad and which technology will be
developed domestically. For the top priority projects, even the decision regarding
a particular foreign supplier is believed to be made by the SCST.
One of the Committee's four deputy chairmen is D.M. Gvishiani, Premier
Kosygin's son-in-law, who handles all foreign relations in the field of science and
technology. His office is a natural first stop for most Western businessmen,
reportedly incurring the wrath of Foreign Trade Ministry officials who believe that
some of their functions have been usurped. Gvishiani's prestige has grown with
the importance of his office, making him an outspoken advocate of
scientific-technical cooperation with the West. In a recent Pravda article, he justified
Western equipment and technology imports as a way "to improve the living
standards of the people living under socialism." He also co-authored an article with
a Colonel Bondarenko in the Soviet military newspaper Krasnaya Zvezda which
sought to persuade skeptics that increased trade with the United States "insures
considerable advantages for both countries."
The economic ministries have a clear vested interest in the import of Western
technology, especially those ministries that are expected to shoulder the main
burden of growth. This growth must. now come from increased productivity rather
than from additional inputs of capital and labor, meaning that more advanced
technology must be found. According to Academician O. Bogomolov, writing
recently in Pravda on'the importance of expanding economic ties, "a characteristic
of the Soviet Union's import policy is the purchase of equipment for those sectors
of industry which will develop rapidly in the five-year plan." He identifies those
sectors that have benefited most from imported equipment as the chemical,
metallurgical, automotive, pulp and paper, light and food industries, the merchant
and fishing fleets, and the railroads. The computer, electronic, petroleum, and
livestock sectors may be added to this list as future beneficiaries if current
negotiations with the West are consummated.
Ministry officials have been acutely aware of a wide technology lag behind
the West and have viewed the import of Western technology. and equipment as
a short cut to boosting productivity and fulfilling state plans. Since the leadership
has given the green light to such ties, the Soviet ministerial bureaucracies have
unabashedly courted Western firms. During a recent trip to the USSR by US
chemical industry representatives, for example, the Soviet Chemical Industry's chief
of science and technology presented the visitors with a shopping list of 13 needed
chemical technologies. The minister of another priority sector, the petroleum
industry, recently admitted to Western visitors that Soviet oilfield technology is
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
about 10-15 years behind current US know-how and equipment. He concluded that
they must acquire foreign assistance if the country's increasing needs for energy
are to be met.
In an effort to speed the introduction of new technology into Soviet industry,
the civilian R&D sector was restructured by 11 decrees issued between September
1966 and December 1970. Basically, this reform sought to tie the "economic
incentives and material rewards" of research institutes to the economic effectiveness
of the new technologies which they developed. One of the decrees defined the
rights and duties of each R&D organization, specifically including a responsibility
for submitting recommendations to obtain promising foreign licenses and supplies.
In a more general sense, all R&D organizations were tasked with "engaging in
scientific-technical cooperation with foreign countries in order to solve important
branch and inter-branch problems."
These new duties, which are now a part of the institutes' success criteria,
should give them a vested interest in obtaining Western technology. So far, however,
it has been difficult to determine if any foreign contracts have resulted from the
new regulations.
In 1973 a Party-government decree declared that the production association
would become the basic Soviet industrial unit by 1975. A production association
unites a number of enterprises which use similar production technology or
manufacture similar products, mainly for the purpose of exploiting economies of
scale and putting new technology into use more quickly. Most of the associations
formed to date have included research institutes under their umbrella. This new
industrial unit should allow the more efficient use of foreign technology and would
have more power to agitate for such at Lie ministerial level.
It has been rumored for some time that very large enterprises will eventually
be given the right to engage directly in foreign trade. Some East European
enterprises already have this right. Such a reform would place a greater initiative
in the hands of Soviet technical and managerial personnel, giving them a strong
vested interest in maintaining trade with the West.
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
14. Is Brezhnev likely to encounter trouble from his colleagues if the large deals
with the United States fall through? If so, what would be the likely political results?
Brezhnev's personal prestige seems directly involved in large, joint economic
ventures with the United States. How much trouble he will be in if all the big
joint projects - for instance the exploitation of Siberian natural gas - fall through
will depend in part on how successful he is in arranging alternative or comparable
deals with other countries such as Japan and West Germany. After meeting recently
with Brezhnev, West German officials had the distinct impression that Brezhnev
was eager to get the Germans on board in participating in the Kursk iron and
steel project at whatever cost, and that his reasons for doing so were strictly
political. He wanted to have something tangible in hand.
If all the joint ventures fall through, and there were no progress in other
areas of detente, Brezhnev's position in the leadership would to some degree be
weakened and he would surely be put on the defensive. This would probably mean
less flexibility in Soviet foreign policy, less willingness to compromise or be
accommodating on other issues. Judging from his past behavior, Brezhnev could
be expected to trim on detente policy at least temporarily.
It seems unlikely, however, that Brezhnev would be toppled from leadership
in these circumstances, unless he encountered at the same time major setbacks
on the domestic front. In the first place, his political support is broadly based.
His preeminence within the leadership seems now to be generally accepted by his
colleagues. Personal ambition, lingering bad blood over past political defeats, and
policy differences are all tempered to some extent by the recognition that
Brezhnev's greater international prestige enhances the prestige of the USSR as a
whole.
In the second place, it would not be easy for any of Brezhnev's colleagues
to exploit any vulnerability of his stemming from even serious detente setbacks.
Brezhnev might, of course, be faulted for allegedly mishandling the policy, for
banking too much on personal diplomacy because of the enhancement of his own
position, and for having overstressed glamorous and grandiose deals. Critics taking
this line might get some tacit backing from Suslov, because of his ideological
concerns, and from Kosygin, who has lost ground as Brezhnev has gained. Both
Suslov and Kosygin appear concerned to maintain their influence over Brezhnev,
however, rather than to remove him. There is also the larger problem of finding
a viable foreign policy alternative to controlled detente.
Furthermore, the most outspoken critics of detente have been removed from
positions of power, such as Leningrad party boss Tolstikov and Ukrainian party
boss Shelest. And the remaining critics of detente within the leadership seem mostly
to be in Brezhnev's own political camp, in the so-called "Ukrainian group." Political
allies such as Kirilenko, Podgorny, and Polyansky have never been out in front
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
in support of detente and have come around with some reluctance. This may have
caused some strain in their relations with Brezhnev and they might not be unhappy
to see detente falter, but it seems unlikely that they would feel inclined to use
a setback in detente as a political weapon against Brezhnev.
It is also questionable that a challenge to Brezhnev by some leadership
colleagues could get sufficiently broad support among important regional and
institutional groups. Brezhnev has sought to win over conservative regional critics
of detente by lending his name to some of their pet local schemes. This goal appears
to have been a major factor in Brezhnev's support of the experiments in industrial
and agricultural management carried out by the Leningrad and Moldavian party
leaders. Even Brezhnev's recent announcement of an ambitious agricultural program
for the northwestern non-black-soil region of the Russian Republic may have had
the same political motive. In addition to the present validity of the project on
economic grounds, it should have strong appeal to conservative, isolationist
Slavophile elements, who tend to take an emotional view of the region as the
neglected "heartland" of "Mother Russia."
Brezhnev has also always kept an attentive ear to the needs of the military
and has been careful not to leave his flanks exposed to attack from any such
powerful dissatisfied quarter.
Brezhnev in the past has also been careful to combine a policy of relaxing
international tensions with tight internal controls, and has apparently succeeded
in containing fears of the ideological dangers of detente.
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
.V. THE DURABILITY OF CURRENT ECONOMIC POLICY
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
15. Do the Soviets view their present policy as a temporary expedient which will
be followed, in a later phase, by a return to greater independence?
Self-sufficiency always has been a Soviet policy goal. This policy was
formulated when the USSR was a Communist island in a capitalist sea. The capitalist
encirclement syndrome was carried into the post-World War II period and extended
under Stalin to include the other Communist countries. Selective imports from
the developed Western countries were designed to foster, not supplant,
self-sufficiency. In the 1930s the USSR expanded imports from the West, only
to reduce them a few years later when the leadership believed that the goal had
been largely achieved. Trade with the capitalist West increased following Stalin's
death but not substantially, and there was no indication that the goal of Soviet
self-sufficiency was in any way being repudiated.
The capitalist encirclement doctine was eliminated as a major obstacle to
expanded trade with the West under Khrushchev following the 20th Party Congress
in 1956. Officially, trade with the West was to be conducted basically to keep
abreast of Western technology, to "overtake and surpass the capitalist West," i.e.,
to import or otherwise obtain Western technology and equipment for upgrading
the Soviet economy. The goal of self-sufficiency was the same; only the slogans
were changed.
By the late 1950s, however, Khrushchev recognized that plan goals could not
be met without Western help, and increased trade with the West was to give the
Soviet Union the opportunity for "quicker fulfillment of its program," in spite
of Khrushchev's claim that fulfillment could be accomplished "through our own
efforts ... our own resources."
Since about 1950 there has been a more or less steady, if unspectacular, growth
in trade with the West. Imports have been focused largely on machinery and
equipment, and from time to time substantial imports of grain have resulted in
large increases in trade. But Soviet trade with the West has increased more rapidly
than trade with the Communist countries, and in recent years the USSR has counted
on the West for about one-fourth of its imports. Thus. this rather significant trade
has become a more or less permanent feature.
The detente atmosphere has created the impression that foe recent increases
in trade are a new phenomenon. What is new about the current policy of importing
Western technology is the scale of imports and the larger share that is being bought
in the United States. Imports of machinery and equipment from the West were
aboui $1 billion annually in 1971 and 1972. They may reach $ 2 billion in 1975.
Assuming sufficient Soviet wherewithal, such imports could reach $5 billion
annually by the end of the decade, if the USSR chooses to rely more heavily
on the West for its equipment and technology needs
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
Thus, although the Soviets may not have decided to rely on some sort of
international division of labor, the increased exchanges with the West suggest that
it will be increasingly dependent on Western technology and capital. Even if the
USSR really perceives increased trade with the West as a means of increasing
self-sufficiency, such a goal would be - as it has been - more difficult to attain
with the passage of time.
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
16. What problems is the USSR likely to encounter in importing Western
technology? Will the leadership adjust its course if assimilation of new technology
proves to be more difficult than expected?
There is already ample evidence that imports of Western technology often
fail to meet Soviet expectations. Western businessmen have remarked from time
to time that the Soviets seem to be overly optimistic about what Western technology
and equipment can do for them and consequently there will be disappointments.
Frequently, imported equipment does not mesh- well with existing Soviet
equipment, with other foreign equipment, or with Soviet inputs within a production
process. Soviet difficulties often stem in part from a tendency to import equipment
that is too advanced for rapid assimilation, given existing levels of domestic
technological development. Assimilation of foreign technology also depends on the
quality of the labor force. Soviet workers must first master the unfamiliar and
complex foreign machinery; therefore, many foreign-built plants reach rated
capacity only after lengthy delays.
Because of problems in digesting imported technology piecemeal, the USSR
has turned increasingly to the purchase of turnkey plants. Turnkey plants have
not proved to be a completely satisfactory answer to the USSR's difficulties with
foreign technology, however, because they are too expensive to buy on a massive
scale and because they do not resolve all of the interface problems. The Western
plants often require labor skills in construction and operation that exceed the skills
available on site in the USSR. In addition, the processes sometimes demand raw
and semi-finished materials of a quality that the domestic economy is not prepared
to supply.
Finally, problems may be caused by the. Soviets' relative lack of experience
in managing large complexes of very modern technology. Soviet managers have
been trained to concentrate on meeting narrowly defined production goals in an
organizational environment that does not promote the coordination of many
complex parts. Western corporate management has invested heavily in specifically
training middle-level managers in problems of complex organization before
advancing them to higher levels. The Soviets have displayed interest in importing
these management techniques.
Soviet expectations from these infusions of Western technology may differ
from sector to sector, and there may be significant changes in policy in certain
sectors resulting from experience with imports to those sectors. The Fiat-built
plant at Tol'yatti produces the Zhiguli automobile. Its completion was behind
schedule, but it produces a car superior to what the Soviets could do on their
own. By the same token the Kama plant already is about two years behind schedule,
but the Soviets probably would do worse without Western help and turn out trucks
less efficiently. Again, in the chemicals field, the Soviets have spent about $2 billion
over the past decade or so to upgrade their chemical industry. They have succeeded
38
Confidential
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
in doing so. The plants are producing more slowly than the Soviets have hoped
and many of them have and will reach a plateau of output well below their rated
capacities, but the alternative would be a lesser one.
Continued on-site presence - after plants begin production - of Western
technicians and managers would alleviate some of the problems the Soviets currently
face in operating high technology plant and equipment imported from the West.
Many Fiat engineers and technicians stayed on for some time at Tol'yatti. This
assistance would be maximized, moreover, if the Western firms were given a vested
interest, e.g., equity participation, to ensure the efficient operation of these plants.
The Soviets are not yet prepared to make such an ideological compromise, however.
On economic grounds alone, we do not visualize a situation in which the
Soviets will decide to cut back sharply on imports from the West because
expectations have not been realized. The amount of foreign exchange likely to
be allocated in this decade to obtain Western technology and equipment is not
a staggering amount, particularly in view of the fact that Soviet earnings will rise
substantially for the next couple of years. The alternative of relying even more
heavily than the Soviets do now on domestic and other Communist sources makes
little sense economically. If the Soviets indeed decide to turn inward, they would
do so for other reasons. What adjustments would be necessary would depend on
what programs the Soviets had in mind. Many of the Siberian resource development
programs would be postponed for long periods. Resources affected would include
important ones such as oil, gas, and nonferrous metals. If the Soviets are serious
about developing these resources, there seems to be little alternative to Western
investment if they plan to exploit them in the next decade or so.
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
17. How has economic detente affected Soviet military capabilities? What is the
potential in this regard?
Economic detente offers three sources of potential improvement in Soviet
military capabilities. Some have argued that:
? Increased trade fostered by detente will help Soviet economic
growth, thus providing a detente dividend that could be spent at
least partly for military purposes.
? By furnishing medium- and long-term credits, the United States
could free Soviet investment resources for military purposes and still
allow the USSR to carry out planned projects in petroleum,
chemicals, and minerals.
? Greater access to US technology might lead to qualitative;
improvements in Soviet weapons and materiel.
We do not believe that detente will help the military establishment by
providing it with additional resources. Imports of Western machinery and equipment
are only a small share of total Soviet investment in plant and equipment and
therefore will not provide a significant growth dividend. Furthermore. to fill military
requirements from resources freed from civilian industry would be a reversal of
traditional Soviet resources allocation policy. Generous allocations have been made
to military programs regardless of shortages elsewhere in the economy.
Detente is much more likely to improve Soviet military capabilities by raising
the quality of Soviet military goods and by increasing the quantity of basic
commodities such as trucks, petroleum, and communications equipment. The
general problem is that practically all sophisticated technology - whether in the
areas of automotive technology, electronics, electronic instruments, and metallurgy
or in other industrial areas - has some potential application in military production.
Large computers imported from the West would improve planning and supply in
the civilian economy as well as in military logistics. If the USSR is successful in
purchasing an aircraft factory from the United States, the quality of.Soviet military
aircraft is likely to improve. The air traffic control system for Aeroflot that the
USSR is seeking would increase the efficiency of air defense systems as well as
civil air transport.
This does not mean that military refinements to those technologies would
be transferred to the USSR along with the basic civilian technology. For example,
by buying integrated circuit technology, the USSR could improve the quality of
communications systems generally. But the USSR would not gain access to the
radiation-hardening process necessary to install integrated circuits in missiles. Nor
would the acquisition of general US computer technology give the USSR the
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
capacity to manufacture highly specialized minature computers for missile guidance.
The purchase of an aircraft factory would not include US military avionics, radar,
infrared systems, or flight recording systems.
Judging from the way US-Soviet commercial relations have developed, detente
thus far has not produced discernible transfers of military technology to the USSR.
Over the coming years, however, detente probably will promote the transfer of
military-related technology in the following ways:
? The present inclination of the US Government and business is to
approve rather than deny Soviet requests for technology. The USSR
clearly is receiving machinery and equipment that was denied before
detente.
? By the same token, detente will speed technology transfer to Eastern
Europe, which is effectively a transfer to the USSR. The sale of
integrated circuit technology by France to. Poland, for example, will
be of great benefit to the USSR.
Technical cooperation agreements and scientific exchanges have
encouraged technology transfer in general, although the precise
impact on military capabilities is hard to assess. Soviet visitors are
not shown uniquely military technology, but informal contacts with
US military contractors could provide isolated assistance to the
USSR in the production of military aircraft, computers. and
high-performance metals.
In the short run, detente will undoubtedly enhance Soviet military capabilities
in the support and logistics areas. Because of US and Western aid, the USSR and
the Soviet military forces will have better trucks, more reliable communications.
and an improved network for petroleum supply, as well as a number of other
improvements that are embodied directly or indirectly in the equipment and
technology delivered in normal trade. Nevertheless. marginal improvements in
transportation and petroleum distribution will not tip the military balance. What
matters is the US superiority in particular high-technology fields that provide the
foundation for strategic forces.
The long-run effects of detente are difficult to predict as the channels of
technology transfer could shift in various directions. If the relaxation of COCOM
controls continues, the USSR will receive greater amounts of sophisticated industrial
process technology that will permit continual quality improvement both in military
and civilian production. US firms, desiring to expand their markets, will press for
fewer controls. To the extent the USSR is successful in cultivating close. long-term
contacts with US firms producing military equipment. the more successful it is
likely to be in increasing military-related transfers.
41
Confidential
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
. Substantial additional research and analysis would be required to go beyond
these rather general observations on the long-term problem. We need to study in
more detail whether Soviet acquisition of Western technology under detente could
contribute to major advances in particular military systems such as highly accurate
MIRVed ICBMs, improved ASW systems, or silent, nuclear-powered submarines.
Circumstantial evidence, at least, suggests that certain Soviet military programs have
been shaped or inhibited by various constraints including design difficulties and
production limitations. In a few military applications the Soviets appear to have
deliberately avoided using computers by adopting design concepts which do not
require them.
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
18. What can be said about the effects of economic cooperation, especially big
projects involving large numbers of Westerners and increased foreign travel for
Soviets, on Soviet managerial structures and procedures?
The long-run effects of economic cooperation on Soviet managerial structures
and procedures could be transmitted through:
? Constant, prolonged contact between Soviet and Western managers.
? Soviet study of Western management techniques through exchange
programs and visits abroad,
? Long-term management contracts let to Western management
companies, and
? Western control of enterprises on Soviet soil.
The first and second of these seem the more likely sources of managerial
impact. The third and fourth would raise serious ideological. problems.
Large-scale economic cooperation is too new to serve as a meaningful guide
to long-term effects on Soviet management. One of the biggest and oldest projects,
the Fiat-equipped passenger car plant at Tol'yatti, has been under way since 1966
but became fully operational only last year. The Italian engineers and managers
were phased out during 1973. Soviet ability to manage this plant or to transfer
its Western managerial structure and procedures elsewhere has not yet been tested.
Many Western management techniques are hard to apply in the Soviet economy-
because they are designed to facilitate efficient, flexible decisionmaking in a market
economy where rapidly changing conditions require quick decisions in the face
of uncertainty and high risk. These techniques cannot be used or work less well
in the Soviet managerial setting, where a large number of targets for output, labor
payments, and other inputs are handed down from above.
The capitalist philosophy that underlies Western management techniques is
not only ideologically unacceptable to Marxist economists in theory, but is not
understandable in its practical ramifications to Soviet managers. Western visitors
to the USSR have noted that the concept of marketing, a central feature of theories
of management, is totally foreign to Soviet industrial officials. Similarly. US
managers and teachers of business administration have no real und9rstanding of
day-to-day industrial management in the command economy with its central
planning and Party domination of economic activity.
In 1969-70 the USSR expressed great interest in importing Western
management techniques for use in the USSR, but this interest evaporated. By 1972
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
the USSR had broken off negotiations with Western management consulting firms.
canceled a scheduled US-USSR management exchange program, and had stopped
publishing extensive writings on the subject. With the onset of detente and the
rapid increase in imports of Western technology, interest in Western management
techniques has revived somewhat as the USSR continues to experience serious
difficulties in assimilating Western technology.
Economic cooperation is bound to persuade many Soviet managers that the
USSR's existing management practices are deficient. Nevertheless, Western
management techniques are likely to be adopted only on a piecemeal basis. And
they will be restricted in scope because of the limitations imposed from above.
To enable the enterprise manager to maximize output at least cost while adhering
to the targets sent down from on high, the manager can make use, for example,
of computers for such things as inventory control, accounting, payrolls, process
control, and solving a variety of production problems within his sphere of operation.
The manager's freedom of maneuver is clearly limited, but some rationalization
is possible even within the narrow confines of his operating unit. Other managerial
techniques can be applied in the Soviet milieu without causing ideological conflicts
or needing basic changes in the way the Soviets run their economy. Thus, US
personnel placement practices or non-monetary' incentives for workers can be
applied. Where Western management practices are successfully implemented and
adapted to Soviet practice, they can be disseminated by way of Soviet management
schools.
The adaptation of Western management practices and theories to the Soviet
setting by definition will exclude those features that would tend to undermine
centralized government and Party control over the economic activities of the
enterprise. The experience with the 1965 reforms, e.g., the continual amendments
of the rules of the original reform to restrict enterprise managers' leeway for action,
suggests that Western techniques that contribute to independent action by the
enterprise manager would suffer the same fate.
Approved For Release 2007/11/16: CIA-RDP85T00176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
19. What can be said about very long-run socio-political effects of economic
cooperation -- especially big projects involving large numbers of Westerners and
increased foreign travel for Soviets?
Any long-run socio-political effects of economic cooperation will be very
difficult to identify, because they are likely to come slowly and be felt unevenly.
The Soviet leadership itself will remain the most important determinant of
the pace of change in Soviet society. The authorities have considerable capabilities
not only to retard change in general but to limit the impact of foreign economic
relations on Soviet society in particular. Furthermore, economic cooperation with
the West is only one of many factors, and probably not the most important one,
that will influence the evolution of the Soviet political system in the years ahead.
It will be difficult to look back and ascribe precise impact to any one of them.
Nevertheless, economic cooperation seems certain to reinforce liberalizing
tendencies in the USSR. A b.ginning already may be seen in terms of economic
development, political management of the economy, and general world outlook.
The economic basis for both the Soviet political system and the structure
of the Soviet economy has been the need to marshal resources for defense and
for rapid economic growth in a situation of extreme scarcity. To the extent that
it aids economic growth, reduces chronic shortages. and contributes to the
development of consumer industries and services, economic cooperation will soften
the traditional approach.
Fiat, in building the automobile plant on the Volga, encouraged a Soviet
commitment of resources to the consumer sectar and aided the Soviets in taking
a step in the direction of a consumer society on the Western model.
The massive import of US grain in 1972 and 1973 helped Soviet consumers
to maintain an adequate diet and kept the Soviet livestock program on course
as well. The leadership's response has not been simply to coast on the basis of
such imports but to strengthen its commitment of resources to agriculture - that
is, to try to build on the level of living that the imports permitted to be maintained.
This commitment is evidenced in the recently decreed program of agricultural
development in the RSFSR.
An increasingly complex economy marked by growing plenty and attention
to consumption is less and less suited to the traditional methods of political
management and control. Khrushchev wrestled with the problem and sought to
find an answer by turning the party into a society of specialists. This regime has
reversed that approach, but its course threatens to leave economic decisions more
and more to a managerial elite outside the party. Foreign economic relations. once
they have become broad and routine, will directly enhance the operational role
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
 Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4
and influence on decisionmaking of commercial and economic officials who must
attend to them. Some Soviet leaders have in -recent years expressed this anxiety
in attacks on the idea that economic management is the business of a specialized
managerial elite, operating according to theories and principles of business
management, as in the West.
Finally, economic cooperation will contribute to the erosion of the ideological
and foreign policy rationales for the Soviet brand of absolutism. The concept of
the undying antagonism between the two world camps, socialism and capitalism,
becomes harder to maintain in the popular mind in these conditions. Commerce
with and borrowing from capitalists make it harder to use anti-bourgeois labels
to protect the purity of doctrine and practice in all spheres of Soviet life. The
populace will find more opportunity and freedom to tuna its attention to material
comforts and to developing a Western life-style, at least in its consumer aspects.
The turn to detente has, in fact, been accompanied by criticism from some leaders
of the development of bourgeois "consumerism" in the Soviet Union and the
consequent loss of communist morality.
The connection between all of these tendencies, however, and their realization
in practice is a very uncertain one. Soviet society underwent considerable
transformations during Khrushchev's rule with little direct reference to detente,
much less to foreign economic cooperation. In recent years the leadership has
pursued detente and expanded economic relations abroad while reinforcing the
defenses of the status. quo in most areas of Soviet life. Factors such as foreign
trade may be conducive to change and may thus make change more likely than
it would be in their absence. The leadership still exercises enormous discretion
in deciding how much change will or wil not come, however. The present leadership
has leaned toward the cautious side.
47
Confidential
Approved For Release 2007/11/16: CIA-RDP85TO0176R000900010003-4