NSC MEETING ON NATIONAL DEFENSE STOCKPILE GOALS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87B00342R000100090001-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 41
• Document Creation Date: December 22, 2016
• Document Release Date: December 13, 2010
• Sequence Number: 1
• Publication Date: May 13, 1985
• Content Type: MEMO

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Mr. Casey and David Low attended this meeting.
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TRANSMITTAL SLIP I
1116' Executive Secretary
I
ROOM NO. BUILDING
FROM:
ROOM NO.
7B42
NIC/Econ (David Low
3UILDING
REPLACES FORM 36-8 (47)
FORM NO.,.
1 FEB 56 c41 WHICH MAY BE USED.
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The Director of Central Intelligence
Washington, D.C. 20505
National Intelligence Council
MEMORANDUM FOR: Director of Central Intelligence
Deputy Director of Central Intelligence
NIC 02394-85
13 May 1985
FROM: David B. Low
National Intelligence Officer for Economics
SUBJECT: NSC Meeting on National Defense Stockpile Goals
1. Apparently for domestic budget-related reasons, the NSC decided
to take over from FEMA the task of determining U.S. needs for stockpiles
of strategic minerals and metals. Richard Levine, a member of the
economics cluster at NSC, set up interagency teams to evaluate the future
wartime needs and availability of these commodities. Based on this
analysis, the NSC will argue at the 14 May NSC meeting that stockpiles
can be reduced from the current level of $10.9 billion to a range of $230
to $680 million. It will also argue that portions of the surplus stock
created by these new findings should be sold at a rate of up to $500
million per year over the next five years and will present to the NSC
options for using revenues from these sales.
2. This is a radically different result than the FEMA-led exercise
yielded in 1979. It thus could prove quite controversial. In addition,
the draft NSDD (see Tab A) places the responsibility for this issue
firmly in the hands of the NSC, and that also may be controversial (FEMA,
Interior).
3. A CIA-led team, chaired by Maurice Ernst, evaluated the
reliability of key foreign suppliers in wartime, and you may be asked to
comment on the results of this study group (see Tab D). In a letter sent
to Mr. McFarlane on 17 January, you concurred with the findings that
lower stocks are consistent with the analysis performed based on the
assumptions given, commented that establishment of a new base level of
stocks and decisions relating to the proceeds from sales are issues of
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SUBJECT: NSC Meeting on National Defense Stockpile Goals
domestic concern and not subject to Agency comment, and suggested that
other scenarios be examined on an annual basis. In essence, we were
trying to detach ourselves from being used in what is obviously a highly
politicized domestic turf and budget issue.
4. The NSC will argue that FEMA's estimate of the need for a $17.3
billion inventory (the current goal) is too high.
According to the NSC, by eliminating non-essential civilian
needs in wartime, private sector demand will be much lower than
estimated by FEMA.
As to domestic supplies, the NSC is more optimistic than FEMA on
the ability to increase rapidly domestic production.
Also, past FEMA analysis counted only resources in the United
States and Canada as ?secure" for military use in wartime.
Under assumptions supplied by NSC, the CIA-led group counted
non-contiguous foreign suppliers as "highly reliable" in wartime
and the NSC assumed these countries could rapidly increase
output and exports.
5. The CIA-led analysis generally supports the availability of
imports, but only under the scenario and assumptions dictated to us for
use in the study. Key assumptions include:
A three-year conventional war with the Soviet Union fought in
Europe, the Persian Gulf, and Korea with one year for
preparation.
Minimal shipping losses in the Atlantic and Pacific.
Other scenarios and assumptions such as disruptions directly affecting
some African nations, of course, could have produced significantly
different results.
6. At a preliminary briefing of the results by NSC in January, State
Department focused on problems caused for foreign countries should the US
begin sales from the stockpiles. NSC responded by adding a recommenda-
tion for an interagency group to establish criteria for sales to minimize
market impacts. In your January letter to McFarlane you said that CIA
2
SECRET
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SUBJECT: NSC Meeting on National Defense Stockpile Goals
would assist in any studies relating to reactions of producing
countries. DOD did not take a position at the January meeting, and it is
not clear whether Secretary Weinberger will support criticism by his
staff of the study or agree to suggestions to reduce stockpiles.
7. Tabs attached include:
A. Draft NSDD
B. Proposed stockpile goals
C. Your letter to Mr. McFarlane
D. Background and Talking Points on Reliability of Suppliers
E. Limitations of the NSC study
F. IEEW article on world metals prices
G. Briefing board presentation to be used by NSC at the NSC
Meeting
H. Handout package to supplement the briefing boards
Attachments:
As stated
3
SECRET
David B. Low
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SUBJECT: NSC Meeting on National Defense Stockpile Goals
A/NIO/Econ:
NIO/Econ/DL
Dist:
Orig - DCI
1 - DDCI
1 - ER
1 - C/NIC
1 - VC/NIC
1 - D/OGI
1 - NIO/Econ
1 - A/NIO/Econ
1 - NIO/Econ Chrono
1 - NIO/Econ File
q(8 May 85)
13 May 1985 NIC 02394-85
SECRET
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THE WHITE HOUSE 91338
-7,743
?
SECRET
NATIONAL SECURITY DECISION
DIRECTIVE NO.
? m
WASHINGTON
...?????
%.
U.S. National Defense Stockpile Goals, Mobilization
Planning Factors and Implementation Measures (U)
? ?
Statement of Policy
It is the policy of the United States to maintain a broadly
based deterrent against different types of conflict. It is
essential that the United States have appropriate mobilization
capabilities including available supplies of strategic and
critical materials to support the conduct of a protracted
conventional war, both in terms of direct defense production
and essential civilian requirements. (S)
The National Defense stockpile goals are to be sufficient
to meet all wartime military, industrial and essential civil-
ian material requirements that cannot be satisfied through
total domestic production and reliable imports. The National
Defense stockpile will contain, for the forty-two materials
investigated, those materials noted in the attached list. (S)
Study Process
In June 1983, the Assistant to the President for National
Security Affairs established an interagency group to develop
appropriate stockpiler goals and mobilization planning
factors. On July 13; 1984, the first seven mobilization
planning reports (war scenario, defense expenditures, GNP
planning levels, energy supply and demand, domestic and
international material supplies, sealane attrition factors,
and country wartime reliability ratings) were approved for
stockpile planning and related industrial preparedness pro-
grams including Section 232 investigations. This NSDD imple-
ments the complete NSC study and recommendations. (S)
Study Findings
The NSC stockpile and mobilization study has concluded that
there is no systemic threat of wartime nonfuel mineral
shortages, but there are isolated shortages of minerals used
extensively in defense applications and imported from unreli-
able sources. The study concludes that, during a war, Defense,
ineustrial and essential civilian requirements for
petroleum can be met throigh reductions in non-essential
civilian consumption. However, to-ensure that DOD has immedi-
ate access to secure supplies during this conflict,
SECRET
Declassify on: OADR
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a standby reserve of up to 50 million barrels of crude
oil will be established. This crude can be used by DOD
to supplement its primary supply from domestic and interna-
tional sources. (S)
Implementation of Study Results
This crude stockpile will be funded by the disposal of $500
million a year in excess nonfuel materials for a five-year
period. All funds from stockpile sales are to be used to
purchase crude oil for DOD v to purchase other nonfuel
materials for which an unmet goal has been established.
To ensure that the DOD oil stockpile is funded at a rate
consistent with this program plan and to permit flexibility in
material sales, the Administration will seek authorization to
sell approximately $800 million a year in materials but will
cap the actual annual sales at the $500 million level. (C)
To help ensure that the disposal of excess stockpile materials
does not cause undue disruption to the markets for materials
consumers, processors, and producers, and to provide an
additional reserve for U.S. emergency needs, the United States
will maintain a Strategic and Critical Materials Supplemental
Reserve for the next five years. This Reserve will consist of
those materials not proposed for sale and which have a current
value of about $6 billion. (C)
The NSC study reports on war scenario, wartime DOD expendi-
tures, worldwide petroleum supply/demand and prices, GNP and
investment levels, industrial sector output levels adjusted
for austerity, wartime reliability of exporting nations, and
- sealane attrition factors shall be used, as appropriate, as
the basis for all related mobilization planning activities.
IThe Assistant to the-President for National Security Affairs
must approve any exceptions to this policy prior to use in a
mobilization planning function. (S)
'The NSC interagency group will have the responsibility to
Idevelop future stockpile goals. Stockpile acquisition and
disposal plans will be decided through the NSC system. The
NSC interagency group will prepare necessary changes in
existing Presidential policy documents, executive orders
and laws required to fulfill the provisions of this NSDD.
NSC, DOD, DOE, and OMB will develop an implementation plan
for the creation of a crude oil stockpile for DOD. (C)
Attachment
SECRET
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NSC SASS CASE STOCKPILE
SECRET
00ALS COMPARED TO PIMA'S 1979 00113 AND PRESENT STOCKPILE INVENTORY
(Millions or Dollars)
MATERIAL . '
NM SION
IASI CASE
1979
GOAL
EXISTING
STOCKPILE
INVENTORY
SURPLUS
(DEFICIT)
Antimony 1
$98.2
$106.0
$106.0
Bauxite (Natal Coluill.)
1.363.9
752.7
782.7
Bauxite, Abrasive Grade
316.6
125.6
128.6
Bauxite, Befriotory
282.9
40.4
40.4
Beryllium
234.8
204.2
204.2
Bismyth
5.3
5.0
5.0
Cadmium
19.2
10.4
10.4
Chromium
14.4
1.035.2
1.006.8
992.4
Cobalt.
106.0
1.069.1
577.4
671.6
Columbium
44.0
23.0
23.0
Copper
1014.7
44.0
44.0
Diamonds, Industrial Stones
190.4
371.8
371.8
Fluorspar
464.5
212.8
212.8
Germanium
35.1
?
N/A
0.0
0.0
35.1
Graphite
Ceylon
8.6
12.3
10.7
2.1
Malagasy
38.0
60.0
S3.6
15.6
Other
1.5
2.0
2.0
0.5
Iodine
39.9
51.3
51.3
Lead
582.9
318.5
318.5
Manganese
375.6
489.5
489.5
Mercury
?
3.2
53.8
53.8
Mica
Muscovite Block
0.4
'
33.1
27.8
27.4
Muscovite Film
0.2
1.1
13.8
13.6
Musoovite Splitting*
19.5
19.0
26.1
6.6
Phlogopite Blook
0.4
1.1
0.7
0.3
Ph1oglipite Splittings
0.9
1.9
3.3
2.4
MolYbdenum
0.0
0.0
0.0
Nickel
892.3
143.7
143.7
Platinum Group
Iridium
35.0
9.5
9.5
Palladium
481.4
201.4
201.4
Platinum
520.7
179.9
179.9
Quartz, Natural
0.1
3.6
12.4
12.3
Rubber
1.103.6
154.4
154.4
Rutile
34.4
12.7
12.7
Silver
0.0
1.326.5
1,326.5
Silicon Carbide
13.0
36.2
36.2
Tantalum
5.0
419.0
142.0
137.0
Tin
549.8
2,450.8
2.450.5
Titanium Sponge
2,131.5
353.4
353.4
Tungsten
324.4
496.1
496.1
Vanadium
104.5
6.5
6.5
Sins
1.521.4
403.9
409.9
SUBTOTAL
$230.1
$15.925.6
010.493.9
$10,290.9
$35.1
?
ALL OTNERS.
1.376.8
406.1
TOTAL
$11,300.0
$10,900.0
RFCRFT
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The Director of Central Intelligence io
WWmprIOCXYWS
1 7 JAN 1985
MEMORANDUM FOR: Assistant to the President for
National Security Affairs
SUBJECT: National Defense Stockpile Goals and
Mobilization Planning Study
1. I believe the basic conclusion in the Executive Summary of the
Study prepared by the NSC that lower stockpile goals for strategic
minerals are warranted is consistent with the analysis conducted by the
Study team. As to the actual setting of new base needs, sales of
surplus stocks, and the establishment of a defense-related oil reserve,
these are issues of domestic concern and not subject to Agency comment.
2. On the matter of our stockpiles, I suggest that the concerned
agencies continue to review these goals on an annual basis taking
account of differing wartime scenarios and up-to-date evaluations of the
reliability of key suppliers. Also, should the Cabinet decide to
proceed with disposal of surplus materials, we are prepared to assist in
any studies relating to the possible reactions of producing countries.
SECRET
William J. Casey
Cl By Signer
Decl OADR
Derived fm Multiple
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Next 7 Page(s) In Document Denied
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CENTS PER POUND
140
120
100
80
60
40
72 73 74 75 76 77 78 79 BO 81 82 83 84 85
. QUARTERLY AVERAGES
COPPER
WE
CENTS PER POUND
800
600
400
200
0
'TIN
LME
72 73 74 75 76 77 78 79 BO 81 82 83 84 85
QUARTERLY AVERAGES
CENTS PER POUND
CENTS PER POUND
60
40
20
0
80
60
40
20
0
LEAD
LME
72 73 74 75 76 77 78 79 80 81 82 8354 85
QUARTERLY AVERAGES
INC
WE
72 73 74 75 76 77 78 79 80 81 82 83 8465
QUARTERLY AVERAGES
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CENTS PER POUND .
0
40
INDEX: 1975=100
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eiN "
1984 NSC Study Recommended Actions
A. Create a two-tiered stockpile.
Tier I ? derived from the 1984 stockpile study or a sensitivity case.
Tier II ? keep a portion ($6.0B) of the existing stockpile stocks ($10.9B)
so as not to disrupt markets.
Secret _
$.2B-.7B
$6.0B
Total stocks to be kept -- $6.2B-6.7B
B. Sell a portion of remaining materials (2.5B out of about $4.0B) over
five years in a manner that minimizes market impacts.
C. Use the sales revenue for some other DOD or mobilization function.
D. Use Stockpile Goals Study planning assumptions for other appropriate
mobilization preparedness areas.
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00''S
History of the Stockpile
1950's
Stockpile built for 5 year war.
1960's
Requirements reduced to 3 year war, some materials sold.
1970's
Stockpile studied?Nixon Administration adopts 1 year war requirement.
1979 goals adopt 3 year war scenario.
1980's
Considerable attention focused on stockpile due to:
a) oil disruptions, b) large unmet 1979 goals.
1981
Administration purchases new materials.
1983
NSC begins comprehensive study-1984 goals developed.
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Policy Significance of the Stockpile
Stockpile methodology broadly applied to other areas:
Industrial Mobilization Policy
- to support subsidies, "buy American" proposals to maintain domestic industry.
- planning used to calculate other industrial mobilization needs.
Trade Policy
- 232 trade cases-- are imports eroding the mobilization base?
- barter
Secret --
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004
NSC Study Methodology, Tasks and Agency Participation
US GNP and
Industrial
Sector Outputs
(CEA)
Secret _.
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elk
1984
? 3-year conventional war against the USSR.
"
Comparison
War Scenario
? 3 fronts (Europe, Asia, Middle East-Persian Gulf).
? $766 billion peak war-year spending.
1979
? Indefinite duration, conventional war against
the USSR.
? 2 fronts (no Middle East-Persian Gulf front).
Defense Build-up
? $697 billion peak war-year spending.
AIN
Secret .
? ..
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MN
1984
ANN
Secret _
U.S. Economy
? GNP growth at 4+% annually.
? DOD-related GNP increases 10 times more than
the civilian GNP component.
? Oil prices reach $100 per barrel, constrain the
economy.
1979
? GNP growth at 7% annually.
? Civilian-related GNP increases by approximately the
same amount as DOD GNP component.
? Economy not significantly constrained by oil cutback.
Civilian Austerity
? Austerity assumed in consumer durable goods.
? Automobile production averages 1/3 of prewar
year.
? Housing--300,000 units per year.
? Very little austerity assumed.
? Automobile production averages 5 percent more
than prewar year.
? Housing--750,000 units per year.
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011% OIN AfieN
ecret ..
1984 1979
Materials Supply
? Non-naval ship loss rate at .5 percent ? Shipping losses estimated at between 1-2 percent.
average over 3 years.
? Reliable for Reliable ? Country reliability rankings based on mechanistic
DOD and for approach, i.e., only Canada considered a reliable
essential essential supplier for DOD needs.
civilian civilian
needs needs Unreliable
Mexico S. Africa India
Australia Chile China
Philippines Sri Lanka Zaire
Japan Peru Zambia
Malaysia Bolivia Zimbabwe
? Reliable imports at $38.4B ? Reliable imports at $22.4B
? U.S. production increases by 27% from war ? U.S. production increases by 10-12% from war
year 1 to war year 3. year 1 to war year 3.
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? O'N
197b Study
1984 Study
eN
..
Secret ..
U.S. Three Year War Material Requirements,
Supply Availability, and Stockpile Goals
(42 Materials)
Stockpile goal $17.3B (60 materials).
Stockpile goal $230M (42 materials).
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NSC Study
U.S. Wartime
Materials Requirements, Supply and Sources
? 'fatal Three:yeir Mai's' ReqUIrements. -($ 21.6' 8)
Chromium
Cobalt 0.14.;,
:Germanium .
Graphites
Micas
I Natural Cluertz
Tantalum
S2.4 B O'ihitt: Retbi? IM4Ports,,:( I%
rkt
less Supplemental Reserves? ed t
meet the following requlrementi*W.!
Columbium (18%) AustratiOrizli..
Germanium (48%) Westernlurope, ii
Graphite, Ceylon (28%) , Sri Lanki!4. 4f,
Iodine (4%) Japan Irtdo seri
,
Mice, Muscovite Block (13%) ' Brazil '
Rubber (83%) MalayTI,f6n
Tantalum (28%) AustralfOrezil
itorth *Amer c n Rroduct on 88%)
(US, Canada, Mexico, and Jamaica)
?
Secret
Secret
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01%
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Olik
Examples of Material-By-Material Goal Changes and Reasons
Millions of U.S. Dollars
1979 Goal 1984 Goal
Titanium
$2,130
0
1979 counted no U.S. capacity. Existing
capacity can meet most needs.
Zinc
$1,320
0
Used in autos, housing. Supplies from
Canada, Australia.
Chromium
$1,000
$14
Available in Brazil and South Africa. U.S.
has resources, recycling ability.
Cobalt
$1,070
$106
Wartime supplies from Australia, Canada
and proven U.S. reserves.
Nickel
$930
0
Supplies available from Canada, Australia
and several Asian nations.
ooms
Secret -
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PS
NSC Study Findings
- Existing stockpile goals of $17.3 billion developed under prior Administration are based on:
- a "guns and butter" world war; and
- seriously flawed methods.
- 1984 stockpile goal for the 42 major materials is $230 million.
opts
Secret _
- No systematic threat of wartime non-fuel material shortages.
- U.S. and reliable suppliers have capacity to meet about 99 percent of wartime requirements.
- Much nondefense consumption is in uses (autos, construction) not essential to wartime
national security objectives.
- Petroleum is the commodity in shortest supply. Supplies to U.S. decrease by 20 percent.
DOD consumption more than triples. Defense, industrial and essential civilian oil requirements can
be met with sharp reductions in nonessential consumption.
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eIN
Sensitivity Cases
(Cheriget Apt,Iled to All Three War Years
Secret
educe other non-Soviet bloc material production
by 10%.
Plus Increase shipping losses 20 times to 10%. $696
vat, Eitt
tit Alg-
id would be lirbher hi first year of the war and
ower In the third year
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"
Recommendations
1) Adopt a two-tiered stockpile system.
peN
Secret ..
Tier I National Defense Stockpile goals derived from the NSC study or a sensitivity case.
Options:
A. $230 million
B. $681 million
Tier ll Supplemental Strategic and Critical Materials Reserve. Currently valued at $6.0 billion
for 42 major commodities.
(Note: The supplemental reserve to be kept intact for at least 5 years.)
2) Seek authorization to dispose of the remaining materials ($4B) over the next 5 years.
In no case would more than $500 million of materials be disposed of in any one year
and an interagency group will establish criteria for sales to minimize market impacts.
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3) Use receipts from stockpile sales, in addition to purchasing any needed materials to:
Options:
A. Let material receipts accumulate in the stockpile transaction fund.
B. Establish a Strategic Petroleum Crude Reserve for DOD for use in wartime?have an
OPD-led energy policy group consider this option and report back in 30 working days.
C. Create an incoming receipts account to the military budget to help offset overall
Defense spending.
D. Use to finance stockpiling of long lead time components for production of weapons
systems in the event of an emergency.
4) Use Stockpile Goals Study planning assumptions for other appropriate mobilization
preparedness areas.
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1984 Stockpile/Mobilization Study
Composition of the Present Stockpile
? The National Defense Stockpile contains $10.9 billion in non-fuel materials at present.
? Of this amount, $7.1 billion is considered, under the existing 1979 stockpile goals, to be
required material for use in wartime.
? $3.8 billion?including silver, tin, tungsten?is considered surplus.
? The current stockpile goal, based on the 1979 study, is $17.3 billion (60 materials) of
which $10.2 billion is Unmet.
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1984 NSC Study Recommended Actions
A. Create a two-tiered stockpile.
Tier I ? derived from the 1984 stockpile study or a $.2B-.7B
sensitivity case.
Tier II? keep a portion ($6.0B) of the existing stockpile $6.0B
stocks ($10.9B) so as not to disrupt markets.
Total stocks to be kept $6.2B-6.7B
B. Sell a portion of remaining materials ($2.5B out of about $4.0B)
over five years in a manner that minimizes market impacts.
C. Use the sales revenue for some other DOD or mobilization
function.
D. Use Stockpile Goals Study planning assumptions for other
appropriate mobilization preparedness areas.
??????
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History of the Stockpile
? Origins predate World War II. Bulk of stockpile built in 1950s, based on a 5-year conventional
war scenario.
? In 1960s, materials sold based on a 3-year war requirement. Nixon Administration further
reduced stockpile and based needs on a 1-year war.
? Carter Administration restudied issue, updated Ford planning?which became the 1979 goals.
These goals are in effect at present.
? In 1979, law passed to ensure that stockpile goals were based on a 3-year war and that the
receipts of the sales of surplus materials would only be used to buy needed materials rather
than to balance the budget.
? Before 1980 election, considerable attention focused on stockpile size and composition. The
transition team recommended new stockpile purchases. In March 1981, the President
announced new stockpile purchases. Planning for these purchases predated the present Ad-
ministration: From 1981 to date, the Administration procured or has authority to procure $583
million of materials. Planned sales of surplus stockpile materials amount to less than $400
million.
? In late 1982, the NSC began an independent study of the stockpile.
? In July 1983, the Secretary of the Treasury, Director of OMB and Chairman of CEA requested
the National Security Advisor to undertake a comprehensive study of the stockpile. This request
was prompted, in part, by the stockpile goals methodology being applied in Section 232 trade
cases to determine the adequacy of domestic industries for wartime expansion.
? In August of 1983, the NSC began the 1984 stockpile and industrial mobilization preparedness
study.
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Policy Significance of the Stockpile
Stockpile materials goals and methodology have been broadly applied in other policy areas.
Industrial Mobilization Policy
? The stockpile goals methodology and resulting U.S. industrial mobilization requirements have
been used by both industry and government to support subsidies or "buy American" pro-
posals to maintain domestic suppliers of materials or industrial items for wartime production.
? Many of the planning assumptions used to calculate the 1979 stockpile goals (e.g., war
scenario, GNP level, political reliability, etc.) have been used for estimating other industrial
mobilization resource needs. This helps ensure consistency in mobilization planning (the new
1984 study reports should replace the 1979 study in this function).
Trade Policy
? The Section 232 trade investigations are based, in part, on the existing stockpile methodology.
These investigations seek to determine if imports are eroding domestic production capacity
below a level needed for wartime production of a given good (e.g., machine tools, fasteners or
materials).
? Various agricultural barter proposals (grain for materials) are based on stockpile goals and
decided in this context.
? Stockpile acquisitions have trade implications.
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NSC Study Methodology, Tasks and Agency Participation
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Comparison of New (1984) Stockpile/Mobilization
Planning Factors to Existing (1979) Study
1984
War Scenario
? 3-year conventional war against the USSR;
1 year of prior mobilization.
? 3 fronts (Europe, Asia, Middle East-Persian
Gulf).
? Full mobilization to 5 million men.
1979
? Indefinite duration, conventional war against
the USSR; 1 year of prior mobilization (only
first 3 war years stockpiled for, but invest-
ment for subsequent war years included).
? 2 fronts (no Middle East-Persian Gulf front).
? Full mobilization to over 4 million men.
Defense Build-Up
? $766 billion (1984 $) peak war-year spend-
ing.
? Defense spending increases 310 percent by
the last year of the war over 1982 peacetime
defense spending levels.
? DOD spending levels provided by Secretary
of Defense letter dated 15 February 84.
? $697 billion (1984 $) peak war-year spend-
ing.
? Defense spending increases by 234 to 334
percent by the last year of the war over lower
1978 peacetime defense spending levels.
? DOD spending levels developed by staff in
1979.
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U.S. Economy
-- Rapid defense buildup induces growth.
However, sharply reduced oil supplies
caused by Middle East war damage con-
strain the economy. Oil prices reach $90-
$100 per barrel.
? GNP growth at 4+% annually.
? DOD-related GNP increases 10 times more
than the civilian GNP component.
SECRET
1979
? Extremely rapid increase in the civilian
economy not significantly constrained by
petroleum supply cutback.
? GNP growth at 7% annually.
? Civilian-related GNP increases by approxi-
mately the same amount as DOD GNP
component.
Civilian Austerity
? Austerity assumed in consumer durable
goods but not in nondurables and services.
? Total new automobile and parts production
averages 1/3 QI prewar year. Consumer auto
purchases eliminated in first year of war.
Spare parts production maintains existing
160 million vehicle fleet.
? Housing production averages 300.000 units
annually.
? USG will stockpile materials for DOD and
essential civilian uses, but not for auto,
housing, home appliance or other nonessen-
tial consumer durables. Consumer durable
production might occur if labor and materials
are available after war needs are met.
? Very little austerity assumed.
? Total new automobile and parts production
averages 5 percent more than prewar year.
Consumer purchases during war average 1/3
of prewar level.
? Housing production averages 750.000 units
annually.
? Consumer durables production averages 2/3
prewar level and includes campers, home
appliances and toy production. Stockpile to
ensure material availability for production of
these goods.
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Materials Supply
- Shipping losses estimated by the Navy to
reduce imports to the U.S. Non-naval ship
loss rate at .5 percent average over 3 years.
- Allies were considered reliable suppliers.
In addition, CIA/DIA/State ranked 39
mineral-exporting nations for political relia-
bility as U.S. suppliers during the war.
Reliable for
DOD and
essential
civilian
needs
Mexico
Australia
Philippines
Japan
Malaysia
Reliable for
essential
civilian
needs
S. Africa
Chile
Sri Lanka
Peru
Bolivia
Unreliable
India
China
Zaire
Zambia
Zimbabwe
- Reliable imports available to the U.S. are
estimated at $38.4 billion.
SECRET
1979
- Shipping losses estimated at between 1-2
percent.
- A priori judgment that only Canada can be
considered a reliable supplier for DOD
needs. Country reliability rankings based on
mechanistic approach, i.e., Iran rated more
reliable than France or Ireland. The People's
Republic of China was rated among the
reliable suppliers.
- Reliable imports were estimated at $22.4
billion.
Materials Production
- Some domestic expansion-e.g., cobalt and
titanium-because of higher materials prices
and government incentives. U.S. production
increases by 27% from war year 1 to war
year 3.
- Imports available to the U.S. increase 15%
from war year 1 to war year 3.
- U.S. production increases by about 10-12%
from war year 1 to war year 3.
- Imports available to the U.S. increase by 8%
from war year 1 to war year 3.
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?
U.S. Three Year War Material Requirements,
Supply Availability, and Stockpile Goals
(42 Materials)
1979 Study
? Total supply significantly less than demand.
? Civilian needs nearly twice DOD needs.
? Reliable imports less than domestic
production.
? Stockpile goal $17.3B (60 materials).
1984 Study
? Total supply more than 3 times greater than
requirements.
? Civilian requirements (adjusted for austerity)
less than DOD needs. Defense material
needs smaller than 1979 study because of
use of a more refined DOD model.
? Reliable imports substantially higher than
domestic production.
? Stockpile goal $230M (42 materials).
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NSC Study
U.S. Wartime
Materials Requirements, Supply and Sources
Threefirearlkiliterial Requirements-1$21.6 B)
":.?-ttk..,- ?
Stockpile (1%) $0.2 B
'Chromium
b:Germanium
`1,1.4Straphites
Micas ????,'
*Natural Quartz
? Tantalum
B
, ?.'..'t, '... ,"?-4 ' j414--t.VNY
Other Reliable Imports (11%)
, 'Jess Supplemental Reserves are used to
:meet the following requirements:
A
??Columbium (18%) -..tikustralls, Brazil
??C
Germanium (46%) `:11Vestem Europa, Japen
Graphite, Ceylon (28%) Lanka
,
riVAtx/ine (4%) '',0apan, Indonesia
,f,j1Aica, Muscovite Block (13%) b_kitrazil
Rubber (83%) '6`11/1alays1a, Indonesia
Tantalum (28%) 'Australia, Brazil ?
North American Production (88%)
(US, Canada, Mezico,ind Jamaica)
Secret
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Examples of Material-By-Material Goal Changes and Reasons
Millions of US Dollars
1979 Goal 1984 Goal
Titanium
$2,130
0
1979 counted no U.S. capacity. Existing capacity
can meet most needs and new plants can be built
in 8 months to process domestic ore.
Zinc
$1,320
0
Extensive use in galvanizing (autos, housing).
Abundant supplies available from Canada and
Australia.
Chromium
$1,000
$14
Used largely in steel?available in Brazil and South
Africa. U.S. has recoverable resources, recycling
ability.
Cobalt
$1,070
$106
DOD needs are great, but below 1979 estimates
and civilian substitution is above 1979 estimates.
Wartime supplies available from Australia, Canada
and proven U.S. reserves.
Nickel
$930
0
Abundant supplies available from Canada, Australia
and several Asian nations.
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NSC Study Findings
? Existing stockpile goals of $17.3 billion developed under prior Administration are based on:
? planning assumptions that are not consistent with Administration policy in that the
stockpile was to support a "guns and butter" world war; and
? analytical methods that are seriously flawed.
? 1984 stockpile goal for the 42 major materials is $230 million.
? No systematic threat of wartime non-fuel material shortages.
? Possible isolated shortages of minerals used in defense applications and/or
imported from unreliable sources (cobalt, chromium, tantalum, germanium, mica,
graphite). These materials should be stockpiled in sufficient quantities.
? U.S. could produce three-fourths of its wartime materials requirements
domestically. U.S. could import most remaining minerals from Canada, Australia,
Brazil and Mexico over land or sea lanes which would be relatively secure.
? U.S. and reliable suppliers have abundant capacity to meet about 99 percent of
wartime requirements for the most significant minerals. Stockpile should supply
the rest with a margin for safety.
? Much of the nondefense consumption is concentrated in uses (autos, construction)
which are not essential to wartime national security objectives and which should
be postponed during a war.
? Petroleum is the commodity in shortest supply throughout the war scenario.
Petroleum supplies available to the U.S. economy are estimated to decrease by 20
percent during the war?assuming a drawdown of Strategic Petroleum Reserve?while DOD
consumption more than triples. Defense, industrial and essential civilian oil requirements can
be met with sharp reductions in nonessential civilian consumption.
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Sensitivity Cases
9134basecaselderiv.ed from study
VI
Increase defense,spending by 15% and investment
n domestic production capacity by 10%.*
?.
PJUS tut back domestic materials production by 16%,
Areduce other non-Soviet bloc material production
?
apacity Investment increases average AO% per year
ut would be;higher inlirst year of the war and
ovielln`lhetkiird
? .
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