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• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00787R000200190003-2
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 43
• Document Creation Date: January 12, 2017
• Document Release Date: April 21, 2011
• Sequence Number: 3
• Publication Date: April 1, 1986
• Content Type: REPORT

Directorate of
Intelligence
Top Secret
}
Defense Costs: 1970-84
Non-Soviet Warsaw Pact
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SUPPLEMENTAL DISSEM
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Top Secret
SOV 86-10018CX
April 1966
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Directorate of Top Secret
Intelligence
Non-Soviet Warsaw Pact
Defense Costs: 1970-84
This paper was prepared b Office
of Soviet Analysis. It was coordinated with the
National Intelligence Officer for General Purpose
Forces.
Comments and queries are welcome and may be
directed to the Chief, Defense Economic Division,
SOYA
Top Secret
SOV 86-10018CX
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Non-Soviet Warsaw Pact
Defense Costs: 1970-8 25X1
Key Judgments An analysis of the defense costs of the non-Soviet Warsaw Pact (NSWP)
Information available nations indicates that between 1973 and 1983 there was little growth in
as of 28 February 1986 these costs, whether measured in domestic currencies or dollars. In
was used in this report.
particular, the dollar costs of military procurement were almost unchanged
over this period. In 1984, purchases of military equipment surged in
Romania and Czechoslovakia, but this was the result of unusually high
aircraft procurement and not a harbinger of a new trend.
The lack of growth in NSWP procurement during this period represents a
significant change from the growth of the 1960s and early 1970s. Available
evidence suggests that difficult domestic economic conditions and other
economic factors were primarily responsible for the procurement plateau:
? In Poland and Romania, statements by government officials confirm that
policy decisions to allocate a larger share of resources to the civilian
economy were responsible for the procurement slowdown in those
countries.
? East European officials I confirm that military
spending is linked to economic performance, and the procurement
plateau in Eastern Europe, like the slow rise in procurement that we have
observed in the USSR since the mid-1970s, has occurred in a period of
lower economic growth. Since the mid-1970s, the rate of increase of
GNP throughout the Warsaw Pact has been the lowest in the post-World
War II era. The economic slide in Eastern Europe has been even more se-
vere than in the USSR because of its foreign debt crisis.
? The NSWP countries import most of their weapons, so problems in
domestic weapons manufacturing or in research, development, testing,
and evaluation would have only a limited impact on procurement.
Moreover, the weapons typically imported from the USSR are older
generation models unlikely to be affected by Soviet problems with state-
of-the-art technology.
? Low export earnings also appear to have been a limiting factor in NSWP
procurement plans. The repayment of foreign debt has claimed an
increasing share of East European export earnings that would otherwise
go to purchase much needed imports, including weapons from the USSR.
The need to expand hard currency exports to the West, especially,
conflicts with higher exports to the USSR in payment for arms.
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? Declining equipment operating rates in all the Warsaw Pact countries
also point to decisions to hold down defense costs.
Direct and indirect evidence suggests that, in Eastern Europe, defense has
had a lower priority and consumption a higher priority than in the USSR.
The USSR and the East European countries appear to be satisfied with a
defense share of GNP in the NSWP countries that is half or less than half
that of the USSR. Our estimates in domestic currencies indicate that the
NSWP countries allocate 5 to 8 percent of GNP to defense spending, a
share that is probably declining. In contrast, the Soviet defense burden is
gradually increasing and is estimated at 15 percent.
Moscow's willingness to countenance a lower defense burden for Eastern
Europe does not mean it is satisfied with its allies' efforts-it has
continuously pressed the allies to spend more on defense. But, despite
Soviet control over Pact military planning and procurement
all of the East European countries have
opposed this Soviet pressure, often successfully. Since the inception of the
Pact's current military planning system in the early 1970s, the East
Europeans have scaled down the ambitious spending plans Moscow has
attempted to impose and, for the most part, have failed to meet even the re-
duced objectives. The challenges to Soviet wishes appear to come most
often from Romania, Poland, and Hungary-countries for which our
estimates generally show the least procurement growth after 1975.
The Soviets continue to exert pressure on the NSWP nations to spend more
on defense because the slow rate of military modernization in the region
has serious implications for the Warsaw Pact. In the late 1960s and early
1970s, the NSWP countries were assigned significant offensive missions in
Pact military plans. Since the mid-1970s, however, NSWP forces have
only slowly modernized, widening the gap in military capabilities between
Soviet and NSWP forces. What may well be most disturbing to the Soviets
is that NSWP forces are falling behind in precisely those categories of
equipment most critical to Soviet conventional strategy in Europe-self-
propelled artillery, modern tanks, tactical aircraft, and surface-to-air
missiles. Prospects for material improvement that would satisfy Soviet
requirements hinge on a broad and sustained economic recovery in Eastern
Europe, but the region's economic prospects through the rest of the decade
are bleak.
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The Soviets' options for improving their allies' capabilities are few and
unappealing:
? The Soviets could pay more of the East European defense bill, but,
because they are in the midst of their own costly force improvement
program and are launching a broad industrial modernization program,
they are unlikely to offer the expensive, long-term support necessary to
close the gap in force capabilities.
? They could, and probably will, offer some older equipment on concession-
ary terms, but this also would fall short of closing the gap.
? They could give the East Europeans a bigger stake in the production of
new Soviet weapons. This, however, goes against Moscow's longstanding
efforts to specialize, rather than diversify, NSWP defense industry and
would require an expensive and lengthy upgrading of the industry. In
addition, NSWP production runs would probably be smaller, raising unit
costs significantly over those of Soviet-produced items.
Even with these measures, the Soviets may have to take on a greater share
of the Pact's wartime missions. The Soviets have apparently experimented
with the precombat deployment of some of their own forces from the
western USSR to Eastern Europe. These forces would compensate for
some of the NSWP's shortcomings, but such a move in effect would
concede defeat in Moscow's efforts to narrow the increasing discrepancy
between Soviet and NSWP capabilities. Ultimately, the Soviets may have
to consider a return to their earlier strategy of more limited use of NSWP
forces in an offensive role.
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Assessing NSWP Defense Spending
NSWP Costs by Country 6
Operations and Maintenance 10
Perceptions of the Threat 17
The High Cost of Military Modernization 18
Implications 20
Military Capabilities 20
C. Estimates of Defense Spending in Domestic Currencies 31
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Non-Soviet Warsaw Pact
Defense Costs: 1970-84 r
In 1949, with the postwar Communist regimes firmly
entrenched in Eastern Europe, Stalin moved to reha-
bilitate and expand their military forces. His objec-
tives were to add the military potential of Eastern
Europe to that of the Soviet forces opposing NATO
and simultaneously to tie the satellite armies into the
Soviet system of control in Eastern Europe. During
the early 1950s, the national defense forces were
organized according to the Soviet model, politically
unreliable personnel were purged, Soviet officers took
over staff and sometimes command roles, and large
quantities of equipment were received from the
USSR. This laid the basis for eventual standardiza-
tion under the Warsaw Pact (officially, the Warsaw
Treaty Organization), which was formed in 1955.
Little was done, however, to make the Pact an
integrated military alliance. In the first six years of its
existence, there were no joint exercises, and the non-
Soviet Warsaw Pact (NSWP) forces remained hardly
more than national defense forces with minimal re-
sponsibility in Pact plans for offensive operations
against NATO. Moscow's strategy for war in Central
Europe relied almost entirely on Soviet forces and
reinforcement of those forces in Europe from the
USSR before an attack on NATO.
In 1960, Khrushchev began to stress closer military
integration with Eastern Europe. Joint exercises, or-
ganizational changes, and a major arms moderniza-
tion program lasting through the early 1970s substan-
tially upgraded NSWP capabilities for theater
operations. T-55 tanks, MIG-21 Fishbed aircraft, and
surface-to-air missiles (SAMs) were provided-at
least initially on concessionary terms. The emphasis in
this upgrading was on the northern tier countries-
Czechoslovakia, East Germany, and Poland, the
offensive missions against frontline NATO forces. As
a result, current Pact strategy calls for the NSWP
countries to supply about half the first-echelon forces
in the Western Theater of Military Operations, gener-
ally on the less critical flanks of the main Soviet
offensive. This shift in war plans entailed a much
greater reliance on the NSWP forces, and a new
Soviet emphasis on modernizing those forces and
improving their war-fighting capabilities.
The Soviets also increased their control over NSWP
military and defense-industrial planning. The Pact's
current planning system is based on the March 1969
Peacetime Statute, which gives Moscow a high degree
of control over the military affairs of its East Europe-
an allies, including their defense industries and pro-
curement of military hardware.'
The NSWP countries made notable progress in mod-
ernizing some parts of their forces in the 1970-84
period.' They:
? Increased the number of armored troop carriers by
80 percent, to include a large number of BMPs.
? Increased tube artillery by 40 percent and multiple
rocket launchers by 70 percent.
' Ratified by the Warsaw Pact nations on 17 March 1969, the
Peacetime Statute formally created the administrative structure of
USSR's key allies in the western theater.
In the late 1960s, while this equipment was being
acquired, there was a marked change in the wartime
role of NSWP forces-they began to be assigned key
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? Replaced much of their towed antitank artillery
with vehicle-mounted and man-portable antitank
guided missiles and began replacing towed antiair-
craft guns with mobile SAMs.
? Began deployment of a new strategic SAM, the
SA-5.
? Upgraded tactical aircraft by replacing early model
MIG-21 Fishbeds with more advanced versions and
? The East Europeans do not have the latest Soviet
tank (T-80), and only Czechoslovakia has even a
division's worth of T-72 tanks. Only a few have
improved T-55s or T-62s, and several still have
World War II-vintage T-34s in active units.
? Most still rely on towed antiaircraft guns rather
than mobile surface-to-air missiles.
are beginning to acquire MIG-23 Floggers.
Despite these accomplishments, the overall pace of
military modernization has been slow, widening the
quality gap between Soviet and NSWP forces rather
than closing the gap as the Soviets had hoped. The
Warsaw Pact system appears to have been a mixed
success from Moscow's perspective. On the one hand,
Pact forces have been used effectively by the Soviets
as an instrument for exercising political control over
Eastern Europe, and the Warsaw Treaty Organiza-
tion has from the outset provided Moscow with the
means for transmitting its foreign policy and military
requirements to its East European allies. On the other
hand, its allies have been able to resist and scale back
what they have considered to be burdensome Soviet
procurement goals.
At the height of NSWP modernization, in the mid-
1970s, NSWP forces were well behind the standards
for Soviet units in Eastern Europe. The northern tier
ground forces lagged forward-deployed Soviet forces
by five to 10 years or more in many categories, while
the southern tier nations were equipped with even
fewer modern weapons. Since the mid-1970s, the gap
between Soviet and NSWP forces has widened. F_
Most disturbing to the Soviets is the fact that NSWP
forces are falling behind in precisely those categories
of equipment most critical to the Soviet conventional
strategy, which is based on integrated firepower and
combined-arms maneuver (see figure 1). For example:
? Most NSWP divisions do not have attack
helicopters.
? As of 1984, only 40 percent of the NSWP aircraft
represented models introduced since 1970, com-
pared with 80 percent for Soviet aircraft opposite
NATO.
The lagging modernization of NSWP forces during
the 1970-84 period occurred in the context of lower
economic growth within Eastern Europe and opposi-
tion within NSWP countries to Moscow's ambitious
spending plans. To explain how defense priorities have
changed in response to political and economic pres-
sures, we must go beyond the trends in the size and
composition of NSWP forces, important as they are to
assessments of each country's military capabilities. In
countries where political debate is closed to the public
eye, an index of defense outlays is a useful indicator of
real, rather than announced, priorities and also mea-
sures the impact of defense activities on a nation's
economy and the resource levels a country devotes to
defense. This paper examines the burden of defense
within the NSWP countries, compares the trends in
their contributions to the defense effort of the War-
saw Pact, and analyzes the reasons for those trends.
Defense costs in both indigenous currencies and dol-
lars are used for these purposes for the period 1970-
84, the last year for which we have estimated defense
costs.
? Some NSWP countries still field mainly World War
II-vintage towed artillery, and none approach Sovi-
et standards of employing modern self-propelled
artillery.
Assessing NSWP Defense Spending
To assess the impact of defense spending on a coun-
try's economy, we need a measure in that country's
own currency. An indigenous currency measure also
indicates the domestic perception of the cost of de-
fense activities and of the trade-offs as seen by
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Figure 1
Modernization of Non-Soviet Warsaw Pact
Ground Forces as of 1985
Regiments With Air Defense Unitsa
t AAA equipped
O SAM equipped
East
Germany
Hungary
Bulgaria
Motorized Rifle Regiments, by Type
of Troop Carrier
Equipped with APCs or IFVs
East
Germany
Hungary
Bulgaria d
I Does not include hand-held SAMs such as the SA-7.
b Poland's airborne and amphibious landing divisions are not
included.
C Bulgaria's five tank brigades are not included.
AAA equipped
O SAM equipped
East
Germany
Hungary
Bulgaria
Regiment-Level Artillery e
O Regiments without artillery
Regiments with six-gun battery
O Regiments with 18-gun battalion
East
Germany
Hungary
Bulgaria r
d Reflects equivalent number of APC-equipped MRRs; Bulgaria
and Romania distribute small numbers of APCs in all MRRs
rather than concentrate them in a few units.
e Pact goals are to equip all regiments- tank as well as motorized
rifle-with a battalion of 18 guns.
F Bulgaria's five tank brigades, which are equipped with artillery
battalions, are not included.
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national leaders. Unfortunately, the published defense
budgets of the NSWP countries have grave weakness-
es. (They are discussed in appendix A). There is
evidence, for example, that the budgets in several of
the countries significantly understate the true costs of
defense activities. In addition, the activities included
in the published budgets are not defined, and the
budgets cannot be reliably adjusted for inflation.
Despite the lack of reliable domestic spending data,
however, public and closed discussion of the defense
budget by the national leadership can provide valu-
able clues to spending trends and leadership views on
defense priorities.
Even if we had reliable NSWP defense spending data,
we would not be able to answer questions about the
comparative resource levels and trends of the various
countries, the relative importance of each member to
the alliance total, or the trends in costs of individual
weapon programs. To make defense cost comparisons,
we use dollar costs to provide a common resource
index, even though dollars do not reflect actual
spending. Dollar costs are based on what it would cost
the United States to equip, man, and operate the
Warsaw Pact forces as the Warsaw Pact does, using a
detailed compilation of all known Pact equipment,
facilities, and manpower.' (See appendix B for an
explanation of the procedures followed in estimating
these dollar costs.) The "building block" approach,
which prices all of these items individually, allows us
to take into account the different physical, manpower,
and operating characteristics of each military force.
Since dollar costs reflect what it would cost US
manufacturers to produce Soviet weapons, however,
they are based on US production efficiencies and do
not measure relative manufacturing efficiencies.F_
Dollar costs are thus an artificial index of resource
inputs. They allow us to aggregate disparate activities
and items, make cross-country comparisons, show
trends over time, and adjust for inflation. Because
In this paper, we do not present estimates of costs for NSWP
military research, development, testing, and evaluation (RDT&E)
because of a lack of information. Preliminary estimates based on
hypothetical shares of published spending for total RDT&E are
presented, however. RDT&E averaged about I I percent of total
dollar costs in the USSR from 1970 to 1984 and may account for a
comparable share in Czechoslovakia, Poland, and Romania, which
dollar costs are based on US prices, growth rates
measured in dollars will be different from growth
rates measured in domestic currencies. However,
since all defense activities carry some cost regardless
of currency, dollar costs do indicate the presence or
absence of growth in actual spending.
It must be emphasized that dollar valuations are not
indexes of military capability. The dollar cost compar-
isons in this report represent the resource inputs to the
NSWP defense effort, not output. They are useful as
general indicators of changes over time in a country's
emphasis on military forces but are not sufficient to
measure the overall capabilities of the forces. Capa-
bilities depend on the utility of both the existing stock
of military hardware and personnel and that of newly
purchased inputs. Assessments of capability must take
into account a host of considerations, including mili-
tary doctrine and battle scenarios; the tactical profi-
ciency, readiness, and morale of forces; the numbers
and effectiveness of weapons; and logistic factors.
An assessment of how well we estimate the dollar
costs of defense activities must necessarily be subjec-
tive, but some statistical techniques are available to
analyze this problem. Using these techniques leads us
to believe that the dollar cost estimate for the USSR's
total defense activities is unlikely to be in error by
more than 10 percent. Our confidence in the NSWP
dollar costs is equal to or better than our confidence in
the Soviet estimates. The margin of error can be
much wider for some individual items; hence, lower
levels of aggregation have more uncertainty. Further,
we are generally more confident in trends rather than
absolute levels, especially if only a single year is
involved.
Dollar Costs of Warsaw Pact
Defense Activities
Total Costs
We estimate the total cost of Warsaw Pact defense
activities in 1984 at $278 billion in constant 1983
dollars, of which $42 billion, or one-seventh, repre-
sented the NSWP contribution (see figure 2). In the
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Figure 2
Dollar Costs of Warsaw Pact
Defense Activities, 1970 and 1984
Figure 3
Dollar Costs of Warsaw Pact Defense
Procurement, 1970-84
60
I INSWPi I
0 1970 72 74 76 78 80 82 84
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years 1971-84, total Pact costs rose at an average
annual rate of 1.9 percent. Soviet costs, however, grew
two and a half times faster than NSWP costs (2.1
percent versus 0.8 percent a year), reflecting both
much greater force expansion and more rapid mod-
ernization. Consequently, the share of NSWP costs in
the Pact total fell from 18 percent in 1970 to 15
percent in 1984.
Both Soviet and NSWP costs show similar trends
during the period 1971-84, with costs growing more
slowly after 1975. The main reason for the slowdown
was the virtual halt in the growth of both Soviet and
NSWP procurement (see figure 3). Through 1975,
Warsaw Pact procurement grew at an average annual
rate of 4 percent; after 1975, there was practically no
growth. NSWP procurement actually leveled off ear-
lier, at its 1973 total of about $7 billion.'
' Occasionally, annual increases of as much as 5 to 10 percent above
this level were recorded (usually because of a rise in aircraft
procurement), followed by a return to the $7 billion level. Such
A second reason for the slower growth in defense costs
has been slower growth in operations and mainte-
nance (O&M) costs. Through 1975, Warsaw Pact
O&M costs rose at an average annual rate of 3
percent; after 1975, at less than 2 percent. This
deceleration primarily reflects the trend in Soviet
procurement. Because the weapons inventory in-
creased less rapidly, the cost of maintaining it also
grew more slowly. There is also an accumulation of
evidence that the Warsaw Pact countries have cut
equipment usage as a cost-saving measure, although
this is not reflected in our current estimates. If
the mandated cuts were actually
achieved, O&M costs may actually be declining in
some countries, or at least growing more slowly than
we presently estimate.
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Table 1
Warsaw Pact Defense Costs by Country in 1984
and Growth Since 1970
Growth in Defense Costs
(average annual percent)
(billion /983 US $)
Share of NSWP
Total (percent)
USSR
236.1
3.4
1.5
NSWP total b
42.0
100
1.0
0.7(0.50)
Poland
12.1
29
0.3
-0.1
2.1
1.4
Because military activities in the Warsaw Pact economies are
probably more expensive compared with civilian activities than in
the United States, growth rates in domestic currencies are probably
higher than those measured in dollars.
b Because of rounding, columns may not add to the totals shown.
Figures in parentheses are for the 1976-83 period. A major surge
in 1984 aircraft procurement in Czechoslovakia and Romania,
almost certainly a one-time event, distorts average growth
indicators.
NSWP Costs by Country
The estimated dollar costs by country show the
relative size of each nation's defense activities (tables
1, 2, and 3). Poland's defense costs are the highest,
reflecting the larger Polish force levels. East
Germany's and Czechoslovakia's costs are next in size
and almost equal. Together, the three northern tier
countries account for two-thirds of NSWP costs. F_
Each country's share of total NSWP costs has
changed little since 1970. Beginning in the early
1970s, the already modest rates of increase in NSWP
defense costs fell off. Only Czechoslovakia, East
Germany, and Romania averaged more than
1-percent annual growth during the entire period, and
no country showed any acceleration. Growth in the
costs of defense in Poland,-Hungary, and Bulgaria-
which account for almost half of the NSWP total-
was almost zero.
Procurement
Figure 4 compares NSWP costs by resource category
with the costs of comparable Soviet activities over the
1970-84 period. While procurement accounted for
about 30 percent of the total Soviet costs in the 1970-
84 period, it was only 17 percent of the NSWP costs.
The lower NSWP share for procurement reflects the
stability in NSWP force levels and a slower pace of
weapons modernization. A pattern of slower procure-
ment growth after the mid-1970s applies to all of the
NSWP nations except Bulgaria:
? In 1971-84 Poland and Hungary had the lowest
average annual growth rates of total defense activi-
ties-only 0.1 percent. Before 1976, the acquisition
of substantial numbers of MIG-21s, helicopters, and
OT-64 armored personnel carriers (APCs) resulted
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Table 2
NSWP Defense Costs by Country, 1970-84
Poland
12.0
12.1
12.3
12.5
12.8
12.2
12.5
12.3
11.9
12.2
12.0
12.2
12.2
12.1
12.1
Czechoslovakia
6.3
6.1
6.1
6.9
6.8
7.0
7.2
7.2
7.3
7.2
7.2
7.2
7.2
7.4
7.9
Table 3
NSWP Defense Procurement by Country, 1970-84
Bulgaria
0.8
0.7
0.9
0.9
0.7
0.8
0.8
0.6
0.9
1.0
0.9
1.0
0.8
0.9
0.8
Romania
0.9
0.8
0.9
1.0
1.0
1.1
1.0
0.9
0.9
1.3
1.1
1.3
1.0
1.0
1.5
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Figure 4
Cumulative Dollar Costs of Soviet and Non-Soviet
Warsaw Pact Defense Activities, 1970-848
Billion 1983 $
USSR
Total: $3083
NSWP
Total: $598
in procurement growth of 1 percent per year in
Poland and 4 percent per year in Hungary. After
1975, procurement growth and the growth of total
defense costs stopped. Procurement and total costs
in 1984 were equal to their 1975 levels in both
countries.
? Bulgaria showed almost no increase in total costs in
the 1971-84 period but did maintain steady procure-
ment growth of about 2 percent a year. (The small
share of procurement reduced its impact on total
costs). The procurement of two regiments of costly
MIG-23 Floggers was responsible for most of the
rise in procurement during the last five years.
Procurement 17 %
Construction 5%
-Operations and
maintenance 34%
? Defense procurement in Czechoslovakia and Roma-
nia averaged 5- to 6-percent growth in the early
1970s as the two countries replaced their
MIG-15/17 Fagot/Frescos with MIG-21s and ac-
quired modern APCs. Romania replaced its aging
T-34 tanks with T-55s. Procurement growth slowed
to only 1 percent annually as modernization pro-
grams for both land arms and aircraft lost momen-
tum. Procurement surged by 40 percent in both
countries in 1984, but this almost certainly was a
one-time event and not a change in the long-term
trend. Similar dramatic upturns in NSWP countries
during the last decade have been followed by a
return to previous levels of growth.
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Figure 5
Cumulative Dollar Costs of Soviet and Non-Soviet Warsaw Pact
Defense Procurement by Category, 1970-84
USSRa
Total: $624
NSWP
Total: $101
Land arms' 12%
Ships 5%
Missiles 3%
u USSR data exclude strategic offense, military space, and nuclear weapons
for better comparability.
b Organizational equipment, aircraft ground support equipment, naval
supplies and equipage, noncombat vehicles, engineering equipment, and
electronics.
c Includes ammunition.
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? East Germany has maintained the most consistent,
albeit moderate, rate of increase in total defense
activities of any East European country-a steady
1.3 percent throughout the 1971-84 period. Procure-
ment growth slowed substantially after 1975, but
O&M costs continued to rise and military manpow-
er increased. Despite the brake on procurement,
East Germany has sustained a relatively rapid rate
of modernization and now has the fastest growth of
total defense costs of all the NSWP countries. F_
Weapons account for a little less than half of total
NSWP procurement costs, with the remainder going
for electronics, support vehicles, and miscellaneous
equipment (see figure 5). Aircraft, by far the largest
single component of procurement costs, accounts for
almost 20 percent of the total. Land arms, including
ammunition, is the next largest component, with 12
percent of the total.
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In contrast, weapons account for more than 70 per-
cent of Soviet procurement.' This reflects in part the
much heavier Soviet investment in missiles and ships,
weapons the NSWP countries have not emphasized,
and in part Soviet force expansion. The larger weap-
ons share of Soviet procurement also is the result of
the stronger Soviet commitment to force moderniza-
tion during the period 1970-84. A comparison of
Soviet and NSWP procurement per man shows that,
although per-man procurement of support equipment
is roughly similar, Soviet weapons procurement per
man was three times the NSWP level.
Operations and Maintenance
About half of the NSWP O&M costs are incurred for
operating and maintaining equipment and facilities.
The rest provide mainly for civilian personnel, reflect-
ing what we believe is a relatively high NSWP use of
civilians, compared with Soviet practices. The USSR
relies more on uniformed personnel made available by
universal conscription. Although the NSWP countries
also have an official policy of universal conscription,
they do not routinely conscript at such high levels,
depending more on civilians employed by the military.
Aircraft and land arms account for about one-third of
the total costs of maintaining equipment and facili-
ties. O&M for ships and missiles together constitute
only 3 percent-reflecting the small size of these
forces-while electronics and support vehicles' each
account for about 10 percent.
all the Warsaw Pact countries have scaled down
equipment operating rates as a cost-saving measure-
direct evidence of policy decisions to hold down
defense costs. Numerous measures to cut fuel costs
and reduce the use of equipment in Soviet forces have
been cited:
? The continuing expansion of Soviet Ground Forces
equipment opposite NATO without corresponding
manpower increases suggests that average usage
rates are probably declining. For example, we esti-
mate that in 1970-83 Soviet manpower in the
Western Theater increased by about 20 percent,
while the number of armored troop carriers in-
creased by 130 percent, tube artillery by 80 percent,
multiple rocket launchers by 40 percent, and gener-
al purpose trucks by 60 percent in tank divisions and
by 80 percent in motorized rifle divisions.
Similar developments have been reported in the
NSWP countries:
? NSWP manpower stayed about the same after
1970, while inventories of troop carriers increased
by 80 percent, tube artillery by 40 percent, and
multiple rocket launchers by 70 percent.
6 For comparability with the NSWP, the costs of strategic offense,
military space, and nuclear weapons are excluded from these Soviet
procurement figures.
' Includes general purpose and special-purpose noncombat vehicles,
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? In 1980, Romania also announced cutbacks in
ammunition and materiel consumption, training
time, and equipment operation
Personnel Costs
Military personnel costs increased only marginally
during the 1971-84 period because growth in NSWP
manning levels was almost negligible. Only East
Germany increased its manpower levels-by about 10
percent in the late 1970s.
The Economic Context of
Warsaw Pact Defense Activities
The procurement plateau in Eastern Europe, like the
slower growth in the USSR, has occurred during a
period of slower economic growth. Since the mid-
1970s, economic growth throughout the Warsaw Pact
has been at its lowest since World War II. In the
USSR, the rise in GNP was relatively robust through
the mid-1970s, then decelerated to an average annual
rate of growth of only 2 percent from 1979 to 1985
(see table 4). The slide was even more severe'in the
NSWP countries, which averaged only 1 percent for
the same period, because of the additional problem of
the foreign debt crisis.' Growth throughout the
NSWP generally slowed after 1975, and in 1980 and
1981 the region showed negative growth. Although
the region's performance in 1984 was the best in the
last 10 years, preliminary 1985 figures show a return
to sluggish growth, and the likelihood of a sustained
revival in growth is low. External constraints and
systemic weaknesses will make it difficult for the
region to return to its generally good performance of
the early 1970s, keeping average growth through
1990 at 2 percent or less.
The East Europeans' greater dependence on foreign
trade made them more susceptible to the Western
recession than the USSR was. Most of their problems,
however, lay in their failure to make efficient use of
the massive amounts of Western equipment imported
on credit during the 1970s (by all but Czechoslovakia
and Bulgaria) and their inability to boost exports to
repay the credits. The East European hard currency
debt, just $6.1 billion in 1971, reached $66.8 billion
10 years later. Most of the countries-especially
Poland and Romania-had overborrowed. As West-
ern banks drastically cut back on lending in response
to the faltering economies, those countries were
caught in a serious credit squeeze. The lack of new
credits combined with poor export performance forced
Eastern Europe to slash hard currency imports by
about 30 percent during 1981-82. This produced a
hard-won trade surplus for the region in 1982, but at
the cost of lower domestic investment and consump-
tion.
progress.
Economic problems in Eastern Europe vary widely
from country to country. Poland remains in the worst
shape. The Polish economy all but collapsed in 1981
and has improved only slightly and selectively since
then. Poland plans to continue its practice of covering
only a small portion of its financial obligations and
probably will receive only a small portion of the new
credits requested from Western governments. Sus-
tainable economic growth would require major
changes to the economic system, but these are unlike-
ly, given the political problems of the Jaruzelski
regime. Party leaders endorsed greater centralization
of economic decision making in June 1985, backtrack-
ing on earlier commitments to decentralize. And 1985
was the second consecutive year the government
backed away from stringent austerity measures in
order to generate popular support and show economic 25X1
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Table 4
Growth in Real Gross National Product
in the USSR and the NSWP Countries
Like Poland, Romania's prospects are bleak. Roma-
nian living standards were already the lowest in
Eastern Europe, and, since 1980, worker productivity
and welfare have worsened as food and fuel shortages
have intensified. Although Romania has succeeded in
reversing its hard currency trade deficit, it has done so
at the cost of drastic cuts in imports. Apparently
confident in his powerful security apparatus, Presi-
dent Nicolae Ceausescu has squeezed the domestic
economy to boost export earnings and pay off foreign
creditors as quickly as possible to prevent their inter-
ference in domestic policies. In its effort to generate
exports, however, Romania probably has aggravated
its structural economic problems. Despite its reliance
on exports requiring energy-intensive production, it
has failed to achieve greater industrial energy effi-
ciency, and cutbacks on imports of spare parts and of
investment goods needed to modernize the industrial
base are undermining the potential for future growth.
After several years of painful austerity and major
foreign trade adjustments, East German economic
growth in 1985 was 2.4 percent, and prospects for
maintaining at least 2-percent growth per year are
good. This is the best growth outlook for any East
European country, and the country's average of 2-
percent annual growth from 1979 to 1985 was easily
Eastern Europe's best. Foreign debt remains large,
requiring continued austerity, but East Germany's
relative success in managing its financial problems is
likely to make it even less willing to undertake
decentralizing reforms that would increase long-term
growth prospects.
Although Czechoslovakia is not suffering from the
debt problems of the other East European countries
and therefore has a better outlook than most, it is in
difficult straits nonetheless. GNP growth during
1979-85 averaged little more than 1 percent per year.
The list of structural problems is typical for Eastern
Europe-transportation bottlenecks and energy ineffi-
ciency, rigid management, an obsolescent industrial
base, and an unmotivated labor force. There has been
some talk by the government of limited economic
reforms, but, in the absence of a substantial change in
the way the country is managed, growth prospects
remain low
Bulgaria also has a more promising outlook because
of its strong foreign trade position, but it faces
discouraging problems, too-economic growth has
averaged only 1.1 percent a year since 1979. Although
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1984 showed an encouraging 3.5-percent growth,
growth in 1985 was negative. Consistently conserva-
tive economic policies and generous economic support
from the USSR have been the key to growth in the
past, but mounting structural problems-resource
constraints, an obsolescent industrial base, and bu-
reaucratic inflexibility-are taking their toll. In addi-
tion, Moscow has tightened the terms of trade and
demanded higher quality consumer and industrial
goods, making it harder for Bulgaria to compete with
Third World countries in the Soviet market. Given
declining Soviet economic support and Sofia's reluc-
tance to relax central planning, slower growth will
probably continue for the rest of the decade.
After six years of austerity to stabilize Hungary's
balance of payments, Budapest's 1985 plan called for
increased accommodation of domestic demand and no
further cuts in real wages or investment. To accom-
plish this, Hungary counted on the success of market-
oriented reforms, but GNP fell by 0.8 percent. Its
economy remains extremely sensitive to external
shocks and dependent on support from both the West
and the East. Like the other East European countries,
Hungary must reconcile Soviet demands for more and
better quality exports in payment for vital raw materi-
als with the need to finance its hard currency debt by
exporting to the West.
Factors Behind the Slow Growth
of NSWP Procurement
In short, East European economic policies have-with
the notable exception of. Romania-generally favored
consumption over investment in adjusting to foreign
debt problems. They have been designed to avoid
domestic unrest and to overcome worker apathy,
frequently cited as a leading cause of low productivity
and.quality. In addition, because Eastern Europe
depends on export earnings to obtain most of its
weapons, economic problems constrain weapons pro-
curement. Evidence from official sources in Poland
and Romania, the two countries with the worst eco-
nomic problems, shows that defense spending has
indeed been subordinated to more pressing economic
In addition, direct evidence and defense cost data
show that the NSWP countries place a lower priority
on defense than the USSR does and have a long
record of opposing Soviet pressure to spend more.
Reinforcing this resistance is the remoteness of the
NATO "threat," the supposed reason for the Warsaw
alliance. Even if the NSWP countries were not in
economic trouble, the soaring costs of modernizing
their weapons stocks would also make them think
twice about going along with Soviet demands to
upgrade their forces. Development and manufactur-
ing problems also sometimes affect procurement
trends. This factor has been significant in some areas
of the NSWP defense industries, but it has played
only a minor role in affecting total procurement
trends, primarily because Eastern Europe imports
most of its weapons.
Defense Spending and the Economy
Statements by East European officials
onfirm that, within the NSWP
countries, military spending is linked to economic
performance. For example, the defense burden is
taken into account in setting military spending goals.
Warsaw Pact
proposals that limits be placed on NATO and Pact
defense spending have elaborated the economic bene-
fits of spending reductions.
It seems unlikely the East European leaders in the
mid-1970s could have foreseen that economic growth
would gradually slow and that, unless growth in
defense outlays also slowed, the burden of defense
would begin to rise. Economic plans did not anticipate
the economic slowdown, and the growth record of the
early 1970s had been nearly equal to or higher than 25X1
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that of the previous decade. By the late 1970s,
however, economic growth in all six countries had
taken a definite turn for the worse, and by 1980 the
region was in serious trouble. Hence, the region's
declining economic prospects were probably not a
major factor in the early years of the procurement
growth slowdown, but they were undoubtedly upper-
most in resource decisions by 1980.
By 1980, the resource choices confronting Eastern
Europe were acute, and serious sacrifices had to be
made. Austerity programs had slowed both consump-
tion and investment growth in all of the NSWP
countries and lowered absolute levels in most. Living
standards had stagnated or declined, except in Bul-
garia. Consumers in the USSR have generally seen
modest growth in levels of consumption in the 1980s,
albeit slower than in the 1970s. But servicing foreign
debt has taken priority in East Germany, Poland,
Romania, and Hungary, while structural problems
have largely occupied Czechoslovakia and
Bulgaria.
In all NSWP countries, arms imports compete with
imports of investment and consumer goods. Paying off
foreign debt has claimed an increasing share of East
European export earnings, which would otherwise go
to purchase much-needed imports, including weapons
from the USSR. With the growing Soviet reluctance
to subsidize trade deficits in Eastern Europe and
mounting Soviet pressure for more and better quality
goods in trade, the allies face rapidly mounting
demands on their trading abilities. They must improve
their balance of payments with both the West and the
USSR from the same overtaxed export industries,
many of which produce for domestic consumption as
well. In this situation, the incentives to hold down
military spending are very strong, especially if further
declines in living standards increase the likelihood of
The Soviets have also tried to a small degree to reduce
the cost of NSWP defense modernization. They have
granted licenses for East European production of the
BMP, the T-72 tank, T-55 upgrades, self-propelled
artillery, and other less complicated systems, and they
have also purchased some of these items from the East
Euro eans.
Against this background, it is significant that Bulgar-
ia and East Germany are the only ones maintaining
some growth in defense procurement (Bulgaria) and in
total costs (East Germany). GNP growth is down in
both, but debt to the West is relatively small and
living standards have continued to improve slowly.
This is partly attributable to conservative financial
policies, but also to Soviet economic support-espe-
cially Moscow's willingness until recently to tolerate
Bulgaria's profitable reexport of Soviet oil for hard
currency. Bulgaria and East Germany are Moscow's
most loyal allies, and their relatively fortunate eco-
nomic circumstances allowed a modest response to
Soviet desires for a greater defense effort.
In the future, Bulgaria may not sustain even this level
of commitment.(
political unrest.
problems are sufficiently serious to constrain defense
spending.
East Germany also supports defense spending for
domestic political motives. The government has long
been sensitive to competition for legitimacy from
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West Germany and has used the military in an
attempt to create an independent national identity
and to inspire popular pride in Prussian military
traditions. Although this has not created real enthusi-
asm for the regime, the military plays a heavy role in
the regime's public image-a role that, until the
imposition of martial law in Poland, was unique in
Eastern Europe.
Political Decisions in Poland,
Romania, and Yugoslavia
Although Poland has the highest defense costs of the
NSWP nations, its response to political and economic
problems has been to try to avoid spending as much as
requested by the Soviets. Since 1970 the Polish
Government has faced a series of progressively more
serious economic and political crises. Its responses
typically favored consumption and limited real growth
in defense costs. Poland and Hungary are the only
NSWP countries for which our estimates show 1984
defense costs still at 1970 levels. The delivery of a
large number of aircraft in 1974 raised Polish pro-
curement temporarily to a high of $2.2 billion, but it
fell to $1.7 billion the following year and has averaged
that amount ever since.
The impact of the economic crisis has been openly
acknowledged. In a recent press interview, the Chair-
man of the Sejm National Defense Commission stated
that military spending "has been restrained for many
years ... because of our economic possibilities." He
also said that inflation was the "primary" cause of a
15-percent increase in the 1985 defense budget and
that state planning explicitly linked growth in military
spending to overall economic growth, implying that in
real terms the military had received minimal in-
creases.
An article in the military press took a more conserva-
tive line. Responding to a Radio Free Europe broad-
cast about increases in the Polish military budget, the
article asserted that recent increases were purely
inflationary and that, in real terms, the defense
budget had actually declined. Touching on what was
probably the real concern, the article claimed that
Radio Free Europe was using the issue to cause unrest
in Poland as people prepared for food price increases.
Romania has resisted Soviet domination more consis-
tently and vocally than any other current Pact mem-
ber, including publicly opposing Soviet calls for higher
military spending. Bucharest announced a reduction
in defense spending (zero growth in 1979 and a 16-
percent cut in 1980) as part of a general austerity
program, supposedly to provide more for the consum-
er. In fact, the overall austerity measures have be-
come increasingly severe for both the military and the
consumer. President Ceausescu explained that Roma-
nia must "achieve a balance and an adequate ratio
between the growth of national income and the rise in
military spending." Subsequent statements by Roma-
nian officials have elaborated on the trade-off be-
tween consumption and military spending, but the
military cuts have probably offset little of the drastic
cuts in consumption.
Announced defense spending has not surpassed its
1978 level. Since the budget is not adjusted for
inflation, this suggests a major reduction in real
terms. The military has openly announced major
cutbacks in operations and maintenance, and our
estimates show a falling off in arms imports and a
decline in procurement in 1980-83. The Romanians
have also reduced the defense burden by assigning
conscripts to civilian labor projects for at least four
months out of their 16-month terms. The massive use
of conscripts as civilian labor probably will continue
until the economy improves.
Although procurement costs in 1984 showed a dra-
matic rise, this was almost certainly a one-time event
and highly unlikely to be sustained. Because of the
low NSWP procurement levels, dollar costs frequently
show wide variations if equipment deliveries are
bunched in a particular year. In the past, in Romania
and elsewhere in Eastern Europe, abrupt increases
have been followed by large procurement declines.
Although Yugoslavia is not a member of the Warsaw
Pact, a major decline in its defense spending since
1979 illustrates the role played by slower economic
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growth in resource allocation decisions. It also may
give an idea of the course that NSWP defense
spending might have taken in the absence of pressure
from the Soviet Union.
Beginning in 1980, Yugoslavia was hit hard by the
foreign credit squeeze. External debt and structural
weakness, which limited annual real GNP growth to
less than 1 percent during 1980-85, remain serious
problems. Real investment and incomes declined five
years in a row in 1980-84, and inflation has averaged
over 40 percent a year. Another constraint on defense
spending is the unique Yugoslav political culture, in
which debate on national issues fragments along
regional and ethnic lines. The military, whose career
ranks have a heavy share of Serbs and Montenegrins,
is seen as a potential instrument of repression by some
of the other ethnic groups. Since President Tito's
death, some of these groups have resisted higher
military spending in part to restrain what they see as
Serb and Montenegrin influence.
The result, described in a recent speech by Defense
Minister Branko Mamula, has been that in 1981-85
the defense share of national income averaged only
4.7 percent instead of the 5.8 percent set by the
government as a goal in 1981. Mamula stated that
spending per soldier declined by 25 percent in real
terms. a slowdown in
weapons procurement and a decline in living stan-
dards and amenities for military personnel.
NSWP Defense Priorities
The procurement plateau in Eastern Europe started
earlier than in the USSR-between 1973 and 1975,
depending on the country. Over a period of 10 years
or more, the leaderships of those countries could have
used their central economic control to ensure addi-
tional resources for the military if that had been the
priority. Because Eastern Europe relies heavily on
imported arms rather than domestic production, in-
creasing procurement would primarily entail shifting
priorities in export industries to pay for weapons
imported from the USSR. This could be achieved by
expanding capacity in key sectors or by redirecting
exports from other countries to the USSR. Only
secondarily would it involve resources for domestic
defense industries.
The absence of such measures during this period
implies that decisions were made to either hold pro-
curement level, not to devote more resources to key
exports and defense industries, or a combination of
both. The military balance and the state of the
economy probably figured prominently in such deci-
sions, as did Soviet influence and the interplay be-
tween differing Soviet and NSWP attitudes about
defense. The fact that the relative weight of these
issues has been in flux further complicates the search
for an explanation of the procurement plateau.
Because the slowdown predates Eastern Europe's
economic troubles, it may, at least initially, have been
the result of decisions to lower the relative priority for
defense and raise the priority of consumption
Although there are frequent reports of Soviet pressure
on East Europeans to spend more on defense, the
evidence also suggests Soviet acceptance of a lighter
defense burden in Eastern Europe than in the USSR.
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Estimates in dollars also suggest a declining burden
over time. During the first half of the 1970s, although
economic growth in Eastern Europe was a rapid 5
percent per year, the rise in defense costs averaged
only about 1 percent per year. Regional economic
growth after 1975 slowed to 1.5 percent, while defense
costs hardly increased (see figures 6 and 7). In
contrast, estimated Soviet defense spending growth
was roughly comparable to GNP growth, whether
measured in rubles or dollars, during both favorable
and unfavorable economic periods. Hence, even in
times of rapid economic growth, the East Europeans
had put a lower priority on defense, and, during
prolonged economic stress, defense growth remained
Figure 6
Growth in Non-Soviet Warsaw Pact
GNP and Defense Costs, 1971-75 and 1976-84
Defense
total
Defense
procurement
Defense
other
n Data for 1976-83. A major surge in 1984 in Romanian and
Czechoslovak procurement distorts average growth
rates, raising the 1976-84 average to 0.7 for total
costs and 0.7 for procurement.
A lower priority for defense in Eastern Europe than in
the USSR is also implied by estimates of defense
spending in domestic currencies, by the trends in
dollar costs, and by trends in the published defense
budgets. The domestic currency data show a low and
declining NSWP burden and a high, slowly rising
Soviet burden. Although the estimated defense share
of NSWP GNP, 5 to 8 percent, is more than twice the
level suggested by the published budgets, it is much
lower than the 15 percent share in the USSR. In real
terms, estimated defense growth in domestic curren-
cies lagged GNP growth in the NSWP countries,
suggesting that the collective defense burden declined
during the 1970s.11
" See Thomas W. Clements, "The Costs of Defense in the Non-
Soviet Warsaw Pact: A Historical Perspective," in US Congress
Joint Economic Committee, East European Economies: Slow
well below economic growth.
Perceptions of the Threat
The reluctance to support higher defense spending on
economic grounds is reinforced by Eastern Europe's
appraisal of the NATO threat. Warsaw Pact military
plans are based on a conflict with NATOF
We 25X1
have little information on the views of key NSWP
leaders, other than those in Romania, on the strategic
"threats" to their countries, although we believe they
do not seriously entertain the possibility of a NATO
attack either. 25X1
These leaders may feel that the Warsaw Pact and
their contribution to it would deter NATO from
carrying out aggressive intentions. If this were the
case, we would expect the NSWP leaders to be more
"prodefense" than they appear to be, although they
might still disagree on the best way to share the
burden of defense. A more realistic view, perhaps, is
that they are more concerned about Soviet interven-
tion, especially if domestic unrest is allowed to erode
regime stability. East European governments recog-
nize the Warsaw Pact's role in enforcing Soviet
political control in Eastern Europe, and the Soviet use
of force in East Germany (1953), Hungary (1956), and
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Figure 7
Growth of GNP and Defense Procurement
in Non-Soviet Warsaw Pact Countries,
1971-75 and 1976-84
Average annual percent
~' Data for 1976-83. Including the 1984 procurement surge would raise
annual growth to 5.7 percent in Romania and 5.2 percent in Czechoslovakia.
prestige, stability, or industrial development.
Czechoslovakia (1968) and the threat to use it in
Poland (1980-81).ts Indeed, because Romanian and
Yugoslav leaders hold this view, their military forces
are organized against a Soviet, rather than a NATO,
threat.tb Although the other NSWP countries are not
as openly opposed to Moscow's military planning, the
likelihood of Soviet intervention probably reduces
their support of Soviet demands for a strong defense
against NATO, except insofar as it enhances regime
The High Cost of Military Modernization
Another obstacle to upgrading NSWP arms is the
high cost of new generations of weapons, particularly
those with advanced technology. The basis on which a
prospective East European buyer evaluates prices for
Soviet weapons is unclear. CEMA (Council for Mutu-
al Economic Assistance) trade prices for civilian goods
are often based on prevailing prices for the same
goods in the West, with an adjustment for quality if
necessary. Setting a price for Soviet weapons, which
do not have close Western counterparts, is more
arbitrary
Although we do not know the prices that an NSWP
country pays for Soviet equipment, we can estimate
the magnitude of the increase in costs across weapon
generations. Estimated Soviet production costs in
constant rubles show a dramatic escalation.
The land arms that the NSWP is acquiring (T-72
tanks, BMP infantry combat vehicles, self-propelled
artillery, antitank missiles, and self-propelled antiair-
craft weapons) are on average three to five times more
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costly than the weapons now in NSWP inventories.
Some systems, like the ZSU-23-4 and the SA-6
surface-to-air missile (SAM), are even more costly.
Replacing the strategic SAMs and tactical aircraft in
NSWP inventories would cost perhaps two to three
times as much as those countries paid for their current
equipment. (A comparison in current prices, which
include inflation, gives a much greater apparent
spread in costs than one in constant prices. Given the
difficulties NSWP buyers would have in constructing
more formidable than it really is.)
price indexes, they may be forced to rely on current
prices, making the cost of modernization appear even
during the last 10 years.
Using dollar costs, we can illustrate the impact of
different rates of modernization on NSWP procure-
ment costs. For instance, the cost of replacing the
NSWP's T-54/55s with T-72s would be equivalent to
its procurement of all land arms in the last decade.
Similarly, the cost of upgrading NSWP MIG-15/17s
to MIG-21s and current MIG-21s to MIG-23s would
equal NSWP procurement of all types of aircraft
take ambitious modernization programs.
If NSWP procurement growth returned to its pre-
1975 rate of about 3 percent per year, achieving the
above goals would take 13 years. (At current rates of
growth, it would take 34 years.) Even so, by the time
this hypothetical program could be completed in the
late 1990s, NSWP forces would be equipped with
weapons first deployed in the early 1970s. As a result,
Eastern Europe is understandably reluctant to under-
Other Factors
Although there is strong evidence that policy decisions
related to economic difficulties and the high cost of
modernization slowed East European military pro-
curement, other factors played a contributing role.
Weapons manufacturing problems clearly pushed
land arms procurement below intended levels. Con-
trary to Soviet intentions in providing designs and
technology, NSWP tank modernization was slowed
for several years by T-72 production problems in
Poland and Czechoslovakia, and the tank is still only
in limited series production there. Problems encoun-
tered in manufacturing the Czechoslovak 152-mm
self-propelled howitzer delayed its serial production
also. Other problems that have afflicted Eastern
Europe generally, such as materials and energy short-
ages and transportation bottlenecks, could have
slowed procurement of support equipment, much of
which is produced domestically.
We believe, however, that the impact of development
and manufacturing problems was only an ancillary
cause of the NSWP procurement slowdown. Because
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of the region's dependence on imported weapons, even
widespread production delays would have only a
limited impact on total procurement. The region's
defense industry concentrates on land arms and sup-
port equipment. Aircraft and missiles, accounting for
one-quarter of NSWP procurement costs, are the key
drivers behind procurement swings and are almost all
imported. Decisions on aircraft and missile purchases
from the USSR, not domestic defense production,
have the most impact on trends in total procurement.
Development delays are also unlikely to have played a
major role. NSWP defense industry depends heavily
on proven Soviet designs rather than new technology.
Hence, there are few research, development, testing,
and evaluation (RDT&E) problems that would inter-
fere seriously with total procurement over an extend-
ed period of time. Moreover, because the Soviets
typically export or license for production weapons that
are one or more design generations behind the Soviets'
own, NSWP modernization traditionally has not de-
pended on the success of the Soviet RDT&E estab-
lishment in getting the latest weapons ready for
production.
Finally, there are wide differences in the size, com-
plexity, and composition of each country's defense
industry and each would be affected differently by
development and manufacturing delays. It is unlikely
that such problems could cause a nearly simultaneous
and relatively even slowdown of procurement costs in
five countries
Economic Growth and Defense Spending
The relatively low shares of GNP accounted for by
East European defense activities compared with those
of the Soviet Union, and the much slower annual
growth rates of those activities, suggest not only that
the East Europeans have given a lower priority to
defense than has the USSR, but also that they have
successfully resisted longstanding Soviet pressure to
spend more. In effect, the East European governments
have arrived ata relatively stable balance between the
defense and civilian sectors, although the exact bal-
ance varies from country to country. Economic prob-
lems have reinforced this tendency in most of the
NSWP countries, but the experiences of Bulgaria and
East Germany, whose procurement and total defense.
costs, respectively, did not appreciably slow despite .
slower economic growth, show that political decisions
can sometimes run counter to economic pressures.
However, even in East Germany, apparently the most
"pro-defense spending" of the NSWP countries, de-
fense costs are growing only half as fast as in the
USSR.
We do not know whether the procurement plateau in
the NSWP will persist in the future. If the slower
growth of NSWP defense costs after 1975 was an
accommodation to slower economic growth and
changing priorities, we would not expect a return to
faster growth in defense activities soon. The East
European economies suffer from serious structural
problems-rigid central planning, poor management,
rising energy and raw material costs, obsolescent
industrial plants, and an unmotivated labor force-
which make an appreciable acceleration in GNP
growth unlikely. The economic prospects for East
Germany, Czechoslovakia, and Bulgaria are better
than for Poland, Hungary, and Romania. Improved
performance for the first three would make a modest
upturn in defense procurement more likely, but only
East Germany's and Bulgaria's priorities have consis-
tently favored defense procurement in the past.
Future growth in NSWP military procurement will
probably hinge on acquisition plans for.aircraft, which
historically have accounted for one-fifth of all pro-
curement costs. If the NSWP continues to emphasize
savings by buying upgraded models of 20-year-old
aircraft rather than modern aircraft, cost growth
probably will remain restrained. Land arms costs,
which have accounted for 12 percent of NSWP
procurement, will be heavily influenced by the pace of
tank modernization programs.
Military Capabilities
Even with little or no growth in procurement costs,
the NSWP countries have made notable-progress in
modernization in 1970-84 (see p. 1). Nevertheless,
Eastern Europe's deteriorating economic performance
and the lower priority given to defense have increased
the quality gap between NSWP and Soviet forces.
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The gap will almost certainly widen given the nature
of Eastern Europe's economic problems and the politi-
cal difficulty of squeezing consumers to pay for major
defense increases.
The current emphasis on improving Soviet conven-
tional forces threatens to leave the NSWP forces
further behind, with military and economic implica-
tions for the USSR. Although we expect the NSWP
forces to make important gains in the future in
selected areas, they will have great difficulty adopting
some of the most promising Soviet combined-arms
tactics, such as the operational maneuver group,
which requires all-tracked combat systems, or in
developing the integrated fire support viewed by the
Soviets as the key to defeating NATO's air and armor
defenses of the future.
Soviet alternatives are few and unappealing. Since the
mid-1970s, the Soviets have consistently pressured the
East Europeans to spend more on defense, but only in
East Germany and Bulgaria do our estimates show
consistent growth in procurement, and neither has
increased its procurement growth rate. The Soviets
have made some concessions with respect to the East
European defense bill, but additional help will proba-
bly be limited. They have been reducing their subsi-
dies of the East European economies, and they have
their own costly force improvement program to main-
tain. As in the late 1960s, the Soviets might offer
some of their older equipment-now being replaced
by newer models-on concessionary terms. This
would result in some improvement, but even if given
on a large scale, the equipment provided would not
narrow the gap in force capabilities appreciably.
require an expensive upgrading of the East European
defense industry-which, for example, has been
plagued with difficulties in producing T-72 tanks. In
addition, NSWP production runs would probably be 25X1
smaller, raising unit costs significantly over those of
Soviet-produced items and reducing the number of
weapons that could be procured.
Finally, the Soviets may take on a greater burden of
the Warsaw Pact's wartime missions. The Soviets are
apparently experimenting with the option of relieving
the East European forces of responsibility for portions
of their missions and may be practicing the precombat
deployment of some Soviet forces from the western
USSR to Eastern Europe. These forces might be
intended to augment or possibly even replace some
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creased its logistic base in East Germany, lessening its
dependence on the rail network in Poland.
Such changes would provide short-term solutions to
Moscow's problems, but over the long term, Soviet
and East European force disparities are likely to
continue to increase. Given the difficulty and expense
of significantly improving Eastern Europe's capabili-
ties and the constraints on the USSR's own military
budget, the Soviets may ultimately have to consider a
return to the former strategy of more limited use of
NSWP forces in an offensive role.
The Soviets could break with their past policies and
give the East Europeans a bigger stake in the produc-
tion of sophisticated weapons, sharing some of their
more sensitive designs and manufacturing processes.
This is the least likely alternative because the Soviets
have reaped important benefits from their longstand-
ing efforts at tightening the integration and special-
ization of NSWP defense industries." This would also
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Appendix A
The Published NSWP
Defense Budgets
Although the coverage of officially acknowledged
defense figures is uncertain and no detailed break-
downs are provided, the announced NSWP budgets
seem to include more military activities than the
USSR's budget, and thus they provide a more valid
indicator of overall trends in resource allocation.
Uncertainty about coverage and pricing is too great to
make reliable estimates of the burden of defense on
the economy from the published figures
Like the USSR, the NSWP countries reveal very
little about their defense spending. Bulgaria has pub-
lished no defense budget data since 1970. Poland has
only two entries, one for "current outlays" and one for
"investment." 19 The remaining countries have only
single-line entries in their annual budgets.20 However,
unlike the Soviet budget, the announced NSWP
budgets are large enough to cover much of the costs of
personnel, operations and maintenance, and invest-
ment. The major drawback is that none of the NSWP
countries defines the activities included in its defense
budget, and therefore we believe the budgets are a
better index of trends than of levels. The trends shown
by NSWP budgets generally follow observed differ-
ences in the modernization, expansion, or reduction of
the armed forces. For example, Hungary's defense
budget declined in the early 1970s and Romania's in
the 1980s because of military personnel and force
cutbacks. Similarly, the steady growth in the East
German budget reflects continuous and relatively
and the costs of military-related activities in the civil
sector. Ordinarily, we would not be concerned with
investment in defense industries, because in Western
economies it is usually included in the price of defense
products.
In the NSWP
countries with the largest defense sectors-Poland,
Czechoslovakia, and Romania-investment in defense
industries and R&D costs are probably equal in value
to a large fraction of the published defense budget.
L--_JThe significance of defense investment and
R&D in Czechoslovakia and Romania is unknown,
but, judging from the size of their defense sectors, it
may be about the same as in Poland. Preliminary
estimates of military R&D spending in the remaining
countries, on the basis of a share of published govern-
ment R&D spending, suggest that it is considerably
smaller, between 5 and 10 percent of the announced
defense budgets.
Numerous military-related costs are borne by civilian
ministries.
rapid modernization since 1970.
Omissions
Three categories of costs are probably omitted from
the announced defense budgets: investment in defense
industries, research and development (R&D) costs,
There is too little
information on the details of these activities to deter-
mine their economic significance, but it, too, may be
1' The Poles define "investment" as housing, amenities, and other
facilities for armed forces personnel, not weapons-related spending.
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substantial in comparison with the published defense
budgets.
In addition, the defense budgets probably do not
include income derived from services performed by
the military in the civilian economy and charged to
the recipient ministry at rates intended to produce a
profit for the defense ministries.
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The impact of these omissions varies from country to
country and over time. In East Germany, Bulgaria,
and Hungary, countries with only small defense in-
dustries, the published budgets are probably closest to
total defense spending. In the remaining countries,
with larger defense sectors, these omissions probably
result in a substantial understatement of defense
outlays. Moreover, because industrial investment rises
temporarily when new production lines are built and
decreases thereafter, not only do the published bud-
gets understate actual levels of defense spending, but
also at times they may not reflect actual year-to-year
changes. Therefore, the published budgets are useful
only to indicate minimum levels and long-term trends.
the cen-
tral planning system sets the prices of domestically
produced military goods well below their actual cost.
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The existence of pricing biases for military goods is
another reason to view the published defense budgets
as minimum levels of effort. The net impact of these
practices on NSWP defense planning is unclear.
Although it obviously encourages more defense pro-
curement from domestic industry, it may, by creating
the appearance of relatively high costs for imported
equipment, discourage procurement from abroad. It
may also serve to heighten NSWP interest in licensing
arrangements with the USSR despite the higher real
Average annual
percent growth
cost domestic production might entail.
Impact of Pricing Problems and Omissions
To illustrate the probable impact of pricing problems
and omissions, we have estimated defense costs in
domestic currencies for Poland in 1975 and 1980; for
Hungary in 1970, 1973, 1975, and 1980; and for
Romania in 1975 from the dollar costs presented
earlier, using purchasing power parities. (The method
is explained in appendix C.) The converted dollar costs
are considerably larger than the published budgets in
all three countries-from 1.6 times (Poland) to 3.6
times (Romania) larger-suggesting that the pub-
lished budgets represent only one-third to two-thirds
of total costs. The discrepancy for Hungary appears to
be roughly stable over time, between 1.8 and 2.3 times
the published budgets for 1970, 1973, 1975, and 1980.
Table 6
Growth in NSWP Published
Defense Budgets, 1961-84 a
Czechoslovakia b 5.7 5.8 3.1 2.0
East Germany 10.2 c 4.5 5.8 6.7
Poland 9.3 7.1 7.0 40.9 d
a Measured in domestic currencies, not adjusted for inflation.
b Includes internal security costs.
Data for 1963-70.
d A national price revision in 1982 roughly doubled prices, raising
the defense budget from 77 to 176 billion zloty. Otherwise, the
annual average would have been 9.7 percent.
e Bulgaria has published no data since 1970.
Trends in NSWP Defense Budgets
Table 6 shows the average annual growth in the
published NSWP defense budgets, unadjusted for
inflation. During the 1960s, when the NSWP coun-
tries were modernizing their forces along Soviet lines
and taking a new offensive role in Warsaw Pact
planning, published defense spending showed rapid
growth. After this expansion and reorganization,
growth slowed; In Czechoslovakia and Romania, it
continued to decelerate through the early 1980s, while
in East Germany and Hungary, it increased in the last
half of the 1970s but did not return to the rapid rates
of the 1960s.
There are no generally accepted measures of price
change in NSWP defense budgets, and these coun-
tries do not publish the data needed to adjust for
inflation. In an attempt to roughly adjust for inflation,
we compare growth in the defense budgets with
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Table 7
Growth in NSWP Consumer
Prices, 1961-84
Czechoslovakia
3.2
2.1
2.6
1.7
East Germany
1.2
0.4
1.9
1.3
Poland
2.5
5.4
9.2
37.9
Southern tier
3.2
3.0
6.8
2.5
2.1
4.1
6.5
7.0
Table 8
NSWP Announced Defense Spending
as a Share of GNP a
a In current prices, domestic currencies.
b Reflects data for 1981. The burden rose to 4 percent in 1982
because of a major decline in GNP.
growth in consumer prices (see table 7).22 In such a
comparison, a different picture of resource trends
emerges. In Czechoslovakia and Romania, the slow-
down in nominal prices becomes even more pro-
nounced if we take inflation into account. In Roma-
nia, the defense budget in 1984 in current prices was
the same as in 1978, evidence of a major decline in
real terms. The steady 2- to 3-percent growth in the
Czechoslovak military budget in current prices in the
last 10 years almost matches the inflation in consumer
prices, suggesting little or no growth in real terms. Of
the countries showing accelerated growth in defense
budgets during the 1970s in current prices, only East
Germany clearly shows growth in real terms, at a
rapid rate of perhaps 4 to 5 percent. Hungary and
Poland show little or no real growth.
In inflation-adjusted terms, then, only East
Germany's budget suggests a pattern of consistent
growth after 1974. The remaining countries (except
Bulgaria) suggest either negligible gains or actual
declines in real terms.
" Given the probable difference between established prices for
defense goods and services and their real resource cost, it would be
difficult even for the NSWP governments to derive a meaningful
index. The governments tend to restrain growth in conscript pay
and to fix the prices of military equipment, giving the appearance of
little inflation. But, since the costs of civilian labor and inputs are
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Source: Thad P. Alton, et al., "East European Defense Expendi-
tures, 1965-82," in US Congress Joint Economic Committee, East
European Economies: Slow Growth in the 1980s, pp. 475-495.
Even though the official budgets understate total
defense spending, we present in table 8 the defense
share of GNP that the budgets imply to help illustrate
the probable range within the NSWP countries. After
allowing for budgetary understatement, the defense
share (excluding RDT&E) of NSWP GNP is probably
about 5 to 8 percent, still much less than the 15
percent estimated for the USSR. The northern tier
countries have the highest defense burdens, reflecting
their better equipped and better trained armed forces.
There are significant differences in the trends among
the six countries. Romania's declining burden in 1982
reflects the freezing of defense spending at the 1978
level. Hungary and Poland also show a falling burden
during the 1970s; changes over time in Czechoslova-
kia and East Germany are minor. Only East
Germany's burden appears to have increased, turning
up in the late 1960s.
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Appendix B
Definitions and Methods
Dollar estimates of Warsaw Pact defense activities
measure what it would cost, using prevailing US
prices and wages, to produce and man a military force
of the same size, armed with the same weapons, and
operated in the same manner as the Soviet and
NSWP forces. In principle, we could use any currency
to make cross-national comparisons, but for practical
reasons we use dollars. We already have a comprehen-
sive estimate of Soviet dollar costs, and we can
directly use a great deal of data from that estimate to
develop the NSWP costs. Because so much NSWP
equipment is Soviet manufactured or designed, Soviet
unit procurement costs are often applicable
countries provide support in the form of infrastructure
and certain price subsidies.
These definitions are similar to those NATO uses to
monitor the defense spending of its member countries,
with the main exception that NATO includes military
pensions. In addition, the definitions of resource cate-
gories are similar to NATO's, although NATO has a
narrower definition of research, development, testing,
and evaluation costs. This paper does not give esti-
mates of NSWP RDT&E costs because, even with
direct evidence of RDT&E programs, it is difficult to
develop a reliable cost estimate. (An effort is under
way to estimate the defense share of the NSWP
science budgets and apply a currency conversion
In this paper, defense activities are defined to include:
? National security activities funded by defense min-
istries (other than those noted below).
? Border security forces that have a wartime mission
of border defense.
? Premilitary training performed by civilian schools.
? Pay for reservists funded by civilian enterprises.
They exclude:
? Military pensions and veterans' programs, which
reflect costs of past rather than present defense
activities.
? Space activities that in the United States would be
performed by the National Aeronautics and Space
Administration.
? Military assistance to foreign nations (except for the
costs of uniformed personnel) and foreign military
sales.
? Civil defense.
? Internal security troops or uniformed labor troops
who do not have wartime missions of national
defense.
? Stockpiles of strategic reserves such as fuel, spare
parts, and raw materials.
The costs of stationing Soviet military personnel in
NSWP countries are considered part of Soviet de-
fense costs, although there is evidence that host
factor, but it is only in a preliminary stage.)
The methods used to estimate NSWP defense costs
closely duplicate those used in the Soviet estimate.
The costs for all NSWP defense activities (except
RDT&E) are developed by identifying NSWP mili-
tary forces and weapons. Order-of-battle, weapon
inventory, and supporting production estimates are
made for each individual type of ship, ground force
division, aircraft, and so forth. Support and command
and control activities are also estimated. Dollar cost
estimates are then applied to these physical quantities.
Procurement costs are based on what it would cost to
manufacture the NSWP weapons and equipment in
the United States at prevailing prices for materials
and labor (including overhead and profit), using US
manufacturing technology. Generally, the average
unit cost used in our Soviet estimate is used for the
same item in the NSWP inventory. For a limited
number of items that recently began production in
Eastern Europe, such as the Czechoslovak BMP or
the Polish T-72, a unit cost is derived using estimated
Soviet learning curves. Since most NSWP equipment
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is one or more design generations behind the equip-
ment being produced in the USSR, these prices are
fairly well researched and considered quite reliable.
The trend in procurement for support equipment 23 is
uncertain, however. This category is difficult to moni-
tor closely and is estimated to account for slightly
over half of NSWP procurement. If the growth of
major weapons procurement has slowed, procurement
of support equipment has probably slowed also. Un-
fortunately,,the available evidence does not permit a
reliable estimate of year-to-year changes in this cate-
gory.
Construction is the only category not based directly
on NSWP activities. Lacking detailed information on
NSWP construction activity, it is assumed that for a
given type of facility, NSWP construction is similar to
observed Soviet activity; The NSWP estimate uses 15
separate types of facilities costs derived from the
Soviet estimate, allowing adjustments for the differ-
ent mix of military forces (and facilities) in each
country.
Operations and maintenance (O&M) costs assume
that NSWP and Soviet practices are the same except
for land arms, whose operating rates are adjusted for
the different levels of division readiness in NSWP
countries. This is a good assumption for maintenance
practices, since virtually all NSWP equipment is
Soviet designed or produced, but a weak assumption
for operating practices, because NSWP training and
exercises differ. Refinement of this estimate will
require detailed information on operating practices in
the NSWP countries. Civilian pay is calculated by
multiplying the estimated number of civilian defense
workers by the average pay of their US counterparts.
Although we do not have a detailed estimate of
NSWP civilians, we believe there are proportionately
more than in the USSR, which relies more on uni-
formed personnel provided by universal conscription.
Our estimate of Soviet civilian personnel yields a ratio
of civilian to military personnel of one to six, and we
Z' Includes electronics, vehicles, engineering equipment, naval sup-
plies and equipage, organizational equipment, and aircraft ground
believe that for the NSWP, a ratio of one to four is
more appropriate. If we had used the Soviet ratio of
one to six, estimated NSWP costs in 1984 would have
been $3 billion (or 7 percent) less than our estimate.
Personnel costs are based on the estimated rank of the
person the United States would assign to carry out
functions similar to those in the NSWP military. The
US pay rates used include all pay and allowances. For
each country, a US rank was assigned to each of six
categories of personnel-officers, warrant officers,
career enlisted men, conscript sergeants, conscript
privates, and cadets-in each military branch. The
NSWP conscripts' rank, and thus dollar pay, was
based on the rank of the US personnel with the same
average time in service, taking into account the
different terms of service in each country. To account
for the fact that the United States would use enlisted
men for many positions in which the NSWP would
use officers, dollar pay for NSWP officers is an
average of US noncommissioned officer and commis-
sioned officer pay, which takes into account the
differing average tenure in each country. Average
officer pay is derived from models of occupational
tenure corresponding to known recruitment, promo-
tion, and retention practices in each country. Separate
estimates are made for food and travel costs.
Our confidence in the estimate for total NSWP
defense costs is at least as high as our confidence in
the estimate of total Soviet defense costs:
? We believe that estimated NSWP procurement
costs are better than those for the USSR. NSWP
procurement rates are derived from order-of-battle
data that are as good as or better than those for the
graphic area, and the slower pace of weapons
deployment. In addition, compared with Soviet
equipment, NSWP weapons are older and well
known to Western analysts and have been exploited
more thoroughly for cost analysis. Thus we have
higher confidence in their estimated prices.
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? We are less confident in our estimate of NSWP
construction costs, but this category is a relatively
small one.
? NSWP personnel costs are as good as or better than
those for the USSR, since we have equal confidence
in total estimated manpower and have used an
improved costing method in the NSWP case. After
further study, we intend to apply this method to the
Soviet estimate as well.
? In general, the lack of detailed operating rates
makes the O&M estimate for any one country less
certain than for the NSWP as a whole. However, we
believe the assumption of Soviet-like O&M prac-
tices leads to a good estimate for the NSWP as a
whole.
Because dollar costs are based on the prices of
personnel and physical inputs in the United States,
however, they will not show the same levels and trends
as actual spending in a domestic currency. Because
the cost of Pact weapons relative to, for example,
manpower and construction costs is lower in dollars
than in domestic currencies, procurement costs mea-
sured in domestic East European currencies are high-
er as a share of total defense costs. Hence, dollar costs
cannot be used to show the domestic perception of
defense activities, particularly the relative emphasis
? We do not have an estimate of NSWP RDT&E
costs. On the basis of our experience at estimating
Soviet RDT&E costs, we know that such estimates
are among the most difficult to make. However,
since NSWP RDT&E costs are lower than Soviet
levels-both absolutely and as a share of total
defense costs-the exclusion of NSWP RDT&E
costs probably has only a small impact on our total
NSWP estimate.
Among the NSWP countries, our confidence varies. It
is highest for the estimates for the northern tier
countries and Hungary, and lowest for Romania and
Bulgaria. Our lack of country-specific information on
operating rates and our lower confidence in the
manpower estimates for Romania and Bulgaria make
our cost estimates for those two countries more
uncertain.
Interpreting Dollar Costs
Dollar costs can be used to compare the overall
magnitudes and trends of defense activities of various
countries. For example, the use of a common currency
permits comparisons of growth rates of military pro-
curement or of the various procurement shares of
defense activities. We can also use dollar costs as a
general indicator of the varying emphasis on specific
military forces or services
on procurement versus personnel
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Appendix C
Estimates of Defense Spending
in Domestic Currencies
To estimate the probable magnitude of pricing biases
and the actual defense burden, we convert dollar costs
to domestic currencies using purchasing power pari-
ties (PPPs) for Poland in 1980 and 1975; Hungary in
1970, 1973, 1975, and 1980; and Romania in 1975.
PPPs are a measure of purchasing power, rather than
an exchange rate. They represent the ratio of prices of
identical products in two economies, and they mea-
sure the comparative advantage of one country over
another in producing those products. A comparison of
the actual prices of goods and services in two coun-
tries is the ideal index to convert one country's defense
costs into another's currency. It is preferred over the
exchange rate because, even among countries with
market-determined exchange rates, the exchange rate
applies only to goods and services that are traded. A
hypothetical use of a PPP would be as follows: If the
price of product X is 100 country A units and 50
country B units, an illustrative PPP would be 2.0. If
the PPP for the two countries' gross domestic prod-
ucts is 4.0, this indicates that country A has a
comparative advantage in producing product X.F_
The PPPs are based on prices provided in detail by the
countries participating in the United Nations Interna-
tional Comparison Project. Because the PPPs are
based on prevailing prices in civilian production, they
largely, but not completely, overcome the problem of
defense pricing biases (they will reflect any pricing
distortions present in the centrally planned civil econ-
omies). An estimate of defense spending that would be
free of these distortions, the "factor cost" estimate, is
unavailable at present. One important advantage of
PPPs is that they give us personnel costs valued closer
to their factor cost by using the average nondefense
government wage rather than the artificially low pay
of military conscripts.
(civilian, reserve, and military active duty), and the
remaining operating and personnel costs. The PPPs
for the following sectors were applied, respectively:
producer durables, nonresidential construction, gov-
ernment compensation, and consumption (see table 9).
The converted dollar costs are not strictly comparable
to defense spending because they are based on ob-
served deployment of weapons and personnel, not the
actual flow of funds presumably reflected in the
published budgets. In addition, the dollar costs ex-
clude RDT&E, possibly a significant omission in
Poland and Romania. We do not know if the convert-
ed dollar costs would be higher or lower than an
actual spending measure. Because of this and other
uncertainties, we believe that actual defense spending
in these countries lies within the range bounded by the
converted dollar estimates-1.6 to 3.6 times the pub-
lished budgets.
The probable range of NSWP defense burdens is
different from the range in defense spending because
Romania and Hungary, for which our estimates are
highest relative to published spending, had the lowest
burdens according to the published budgets (see table
8). The burdens for these countries that correspond
with our estimates of defense costs are about 5
percent in Hungary and 8 percent in Romania, well
below the USSR's 15 percent. Unless the actual
burdens in Bulgaria, Czechoslovakia, and East Ger-
many are understated by as large an amount as in
Romania, the burden for the NSWP as a whole is
probably in the 5- to 8-percent range.
Because PPPs are not available for defense activities,
the dollar cost estimates of defense programs were
divided into categories corresponding to the sectors of
the civil economy for which PPPs are available:
procurement (including spare parts), construction, pay
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Table 9
Conversion of Defense Costs
From Dollars to Domestic Currencies
Estimated Defense
Costs
(billion current
dollars)
Purchasing Power
Parities a
(domestic currency
per dollar)
Estimated
Defense Costs
(billion domestic
currency)
Published
Defense Budget
(billion domestic
currency)
GNP b
(billion
domestic currency)
9.8
116.2
70.4
2,533
1.8
18.1
32.8
1.0
13.3
13.0
Pay
6.2
9.0
55.5
Operating
0.8
17.9
14.8
1975 c
6.9
80.7
50.2
1,673
Procurement
1.3
27.1
34.6
Construction
0.6
18.9
11.7
Pay
4.5
6.0
27.2
Operating
0.5
14.1
7.1
2.4
29.3
16.4
773
Procurement
0.8
19.0
15.8
Construction
0.2
16.1
3.3
Pay
1.2
6.3
7.5
0.2
12.6
2.7
1.6
21.4
11.8
513
0.5
23.2
12.1
0.1
22.8
2.9
0.1
11.2
1.4
1.4
21.9
9.5
452
0.5
33.1
15.9
0.1
16.1
1.6
0.8
4.2
3.2
Operating
0.1
13.9
1.2
1970 c
1.1
17.4.
9.8
350
Procurement
0.3
33.5
11.3
Construction
0.1
18.5
1.6
Pay
0.6
5.3
3.3
1975 c
3.4
35.0
9.7
441
Procurement
0.8
23.7
18.8
Construction
0.3
9.8
3.2
Pay
2.0
5.3
10.8
Operating
0.3
8.0
2.2
a Units of domestic currency per dollar in current prices. The 1980 The 1970 and 1973 parities are from Kravis, et al., International
parities are from United Nations, World Comparison of Purchas- Comparisons of Real Product and Purchasing Power (Baltimore:
ing Power and Real Product for 1980, forthcoming. The 1975 Johns Hopkins University Press, 1978), pp 180-181 and 202-203.
parities are from Irving Kravis et al., World Product and income, b Alton, et al.
International Comparisons of Real Gross Product (Baltimore: Because of rounding, columns may not add to the totals shown.
Johns Hopkins University Press, 1982), pp. 260, 276, and 277.
Top Secret 32
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