SOVIET GRAIN, AND INTELLIGENCE FAILURE?

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Collection: 
Document Number (FOIA) /ESDN (CREST): 
LOC-HAK-37-5-21-2
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RIPLIM
Original Classification: 
S
Document Page Count: 
14
Document Creation Date: 
January 11, 2017
Document Release Date: 
December 20, 2012
Sequence Number: 
21
Case Number: 
Publication Date: 
August 7, 1973
Content Type: 
MEMO
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No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 MEMORANDUM NATIONAL SECURITY COUNCIL MEMORANDUM FOR HENRY A. KIS FROM: A. W. Maf shall Action August 7, 1973 NSS Review Completed. SUBJECT: Soviet Grain, an Intelligence Failure? Further Comment In response to your marginalia I would add: ON-FILE Agriculture RELEASE INSTRUCTIONS APPLY -- While the key CIA analyst probably had a reasonable. estimate of Soviet needs and personally drew some of the right conclusions as to Soviet buying, the routine CIA product did not convey a strong, clear alerting message. This is a .common failure of the CIA product. -- He personally communicated his concerns to Agriculture where he knew some people; he did not do so at the NSC because he had not been dealing. directly and personally with anyone on the NSC staff. CIA does not positively encourage personal initiative in communication, especially to the NSC.. He may not have known Latimer. --_Therefore, my preliminary diagnosis is that is a primary case of communication failure. In contrast with thex areas the failure is often in collection and analysis; they really have nothing to communicate. For example, the persistent inability to provide intellectually interesting ex- planations of Soviet decisionmaking with respect to their ICBM program.. Question A case study could address the following issues: Was there an intelligence failure? -- If so, what was the nature of the failure: Collection, Analysis, Communication? No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 SECRET = What were the major causes of the failure? -- What can be done about them? Its results would shed some light on the performance of the CIA:. How interested are you in this case? Do you want me to initiate a study of this case? Yes No SECRET No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 I s No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 13 MEMORANDUM W 1 11 NATIONAL SEC ..U ITY COUNCIL ' e a f ae'.s MEMORANDUM FOR HENRY A. KISSI rRR . FROM: A. W. Marshall' ACT ION July 31, 1973 SUBJECT: Was the Soviet Grain Deal an Intelligence Failure? You recently expressed the opinion that the cause of the U. S. being taken in last year's Soviet grain deal was inadequate i.nte?lligence. For your information here is my assessment of that situation: -- The major intelligence community failure was in the communication from intellige?ice-analysts to responsible officials. - While collection and analysis of information on Soviet grain needs could have been improved (as they are now being), the key CIA analysts estimated. Soviet needs fairly accurately, - The written items included in the regular. intelligence publications (see the chronology of CIA reporting attached at Tab A) communicated the message, but less strongly and less clearly perhaps than it might have. The key CIA analysts sought to convey personally to Agriculture officials their concern as to Soviet actions when they saw that the message was not getting through. (They_ had no personal contact on the NSC staff they fel ey could appi oacho) A .~ too weak, and there is a perception problem on the receiving end. Here, as in other cases we have examined, the communication r,.. , The bureaucratic interest in, and the historical focus of Agriculture on, supporting and increaskpg domestic prices, an opportunity rather than a prob.l.exn. SECRET - XGT)S D1ECLAS TMPDET 13YAUTH - H_AI ISSINGER No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 SECRET Agriculture evidently preferred its own sources and analyses to CIA.'s. Indeed, Butz and Palmby indicated they did not want to receive the GIB and other CIA products when offered to them. m Moreover, the major strategic intelligence failure is Agriculture's responsibility, for they are the agency tasked to produce worldwide market forecasts. They have not done agood job. They did not forecast the general increase in the market for U. S. grain. They have been so conditioned by the historical experience of potential and actual oversupply that they missed the turnaround in the basic situation, and were psychologically unprepared for the warnings of others. What really happened is a very complex tale. It illustrates in some of its aspects the range of problems U. S. institutions and society have in dealing with the Soviets. For example, our capabilities to follow their activities here by intelligence or other means are very limited. Pre- ve 'ion of their r n..a.ni.peri;a.i;.r' ~.i_e cti1J aaiaLar.eL is ULLL.Lcul1.. %L.,-- A more comprehensive assessment of the performance, of intelligence in the Soviet wheat deal could be undertaken. Do you wish to initiate a study of the problem? If so, I will get it started. SECRET No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 SFC FT No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 production and Drain imports Publication publications Dealing with Soviet Grain Number IM 71-161 27 Sept 71 Title and Content The Soviet Grain Sup-ply, 1971* "Even with a near record grain crop of 140-145 million tons (in 1971) the Soviet Union will be hard pressed in fiscal year (FY) 1972 to meet domestic needs and, at the same time, to continue supplying its client states at the level averaged in recent years. The surge in use of grain as livestock feed in the past year... is expected to continue. More importantly, wheat reserves suitable for consumption as food are believed to be currently near minimum levels...it appears likely that the USSR is in a shaky position... The USSR has already contracted for up to 4 million tons of wheat imports for FY 1972 from Free World suppliers.") CIWR USSR- Good Harvest but Grain Problems* 17 Sept 71 "Despite indications that the quantity of grain. L~a th year may fall Just short of the previous record, insufficient reserves of bread- grains may increase Soviet requirements. for grain. imports. This situation arises because of a sharp increase in the use of wheat as livestock feed, a higher level of dependence of East European. and.o.ther.:client states on Soviet.graih, and physical deteriQriation of:some'grain reserves...") CXWR Soviet Economy Dances to A ricultuxe's Tune* 29 Oct 71 ("Unusually good weather during the recent harvest.period improved the prospects for this year's grain-crop...Nevertheless, the Soviets are still in the market for Western grain. By September, they had contracted for about 4. million tons of Canadian and Austrialian wheat worth about $305 million.") *Publications received by the US Department of Agriculture. No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 ^ 53916 rie.finq of Secretary of Commerce Stands :10 Nov 71 on the Soviet E;conony (Reports Soviet grain purchases and predicts that grain and meat imports will be at least $600 million between 'l July 71 and the of 1972.) CXWR Agriculture Slows Economic Growth* 28 Jan 72 "After a bumper year. in 1970 because of CIB Brief 22 Feb 72 unusually good weather, agricultural output last year declined by about 1.5 percent ...the Soviets are.buying grain and sugar in non-Communist markets to cover domestic requirements. and export commitments.") USSR T"Party and government leaders of the 15 republics- met late last week in Moscow with Brezhnev Lo assess Like dv ucsye Lu. wiuuLer yrai.ris caused by the severe cold...If the winterkill is as extensive as in 1969, the net loss could amount to about t four'percent, of the planned'grain crop, or. seven million tons--almost as much'as.the USSR planned to import this year.") CIWR C61d Hits Soviet, East.Euroaean Crops* 25 Feb 721 ("Severe cold and scanty snow. cover threaten winter crops in the Soviet Union and Eastern Europe ...the net loss could amount to about four percent of the planned grain crop, or seven million tons -- almost as much as the. USSR has arranged to import this fiscal year. Last week, Soviet foreign trade bank officials admitted that further imports may be necessary. S-4228 Soviet Indebtedness and,the Role of US-Soviet 14 Mar 72 Trade (Soviet: indebtedness, to the West, mainly long- term, has grown rapidly in recent years and apparently exceeded $2 billion by the end of 1971. Previous estimates of US--Soviet trade. growth following the dismantling of trade SEC ,. ;"w No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 IM 72-48 15 Mar 72 barriers put the level of US exports o the. .USSR at $400-500 million by 1975 and about $1 billion by 1980. .If a new USDA estimate of Soviet requirements for $1.95 billion in US-agricultural products over the period FY 72/73 to FY 76/77 is correct,, however, the leveliof US exports by 1975 might reach $800 million.) Soviet A siculture in 1971 and the Outlook for. ("Even though farm production in'1971 was near .the record 1970 level, the Soviet Union spent roughly $650 million-$700.. million in hard currency to purchase large quantities of grain, sugar, and meat in 1971 and early 1972. Imports nd may even e ti - a nu con of grain are likely to increase next year because-they are required to support the growth of the Soviet livestock economy so as to provide more. meat and milk to the increasingly demanding Soviet consuiner. ~'z----- -~ USSR ? H~5' N~ 7~ r~ i rt ("r_d'J,a CiB Note -4. ---VC rPnnrt_s indicate that L L l.,ives o ("USSR short of'all types of feeds but "shortage of concentrate feeds is most acute".. Concludes,.-- that, on basis of cost-efficiency, USSR has clear incentive to'use mote corn and soybeans and that "interim purchases of US corn and. soybean meal would be a quick fix approach to the Soviet feed problem" .if necessary financial arrangements can be made.)' S-4253 Prospects for Soviet Trade with the. West 28 Mar 72 and the Unzed States* _ ("During most of the last two decades, the USSR has been a net importer of agricultural products. While the domestic supply situation is tight for many agricultural products, prospects for, and speculation about, large new purchases center on those commodities for which the Soviet: Union paid $650-$700 million in hard currency in 1971 and early 1972 -- grain, w~ather~uthe,outlookafor Due, to adverse winter S-4249 n 4- 'k 28 Mar 72 t Ck Rations* "rn and Soyhean M[}a1: 16 Mar 72 (? kxeceni ~~~~~4 PLC? unfavca~?;~1 e :.cagier during the first two months of the year killed about one third of the winter grains sown in the Ukraine and Belorussia No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 I 25X1 the USSR's grain crop in 972 is uncertain. However, in view of the USSR's grain requirements..... both foreign and domestic -- even if an average grain crop is obtained, it is almost certain that the Soviet Union will purchase more grain in FY 72/3 than the 3.5 million tons already contracted for.") ? S-4265 Briefin of - Secretary of Acrri culture Earl Butz 3 April 72 Soviet consumer programs are concentrating on the Soviet diet. "The Soviet decision to import $700 million of grains, meat, and sugar between last July and the end of 1972 shows that they are indeed in a hurry to alleviate the existing shortages:") . IM 72-6.5 The Current State of the Soviet Economy' 28 Apr 72 --("The fragility of.the USSR's grain and livestock economy has been exposed once again...?Even with average weather, the USSR will probably buy more grain in 1972...If the weather this spring and summer turns out to be worse than normal, the possibility of large additional Soviet imports of foreign grain would of course be even greater...A large share of the imports would have to come from the US.") ?CIB N. ~- ' USSR % 17 May 72 ("Soviet trade officials have indicated a 14+- Credit o S G Soviet Devel- opments 6 'Jul 72 y orcun willingness to accept U Corporation terms in purchasing US grain, but only for a.one- or two-year conmiitment...Under the short-term pommitment,"however, annual purchases could reach $500 million, about twice that suggested in earlier talks.") Soviets Assess 1972 Grain Crop? ("During a public lecture in Leningrad a Soviet economist admitted that one third of the 1971- 72 winter wheat crop had been destroyed by the severe weather...current estimates-are for a grain crop of'not less than 175 million tons'. Our agricultural attaches estimate that Soviet production will be 171 million tons") CIB Brief USSR .19 Jul 72 ("Moscow reportedly has purchased for delivery during the next 12 months 1.5.million metric tons of Canadian wheat and 300-400,000 of barley... Unconfirmed reports state that four million tons of wheat and five million tons of corn worth $500 million have already been bought d i..L 0 . iv M No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 25X1 W under the US pact for delivery y mid-1973. .During the next 12 months the USSR should become a large net importer of grains for the first time since the. disastrous harvests of 1963 and 1965. .Imports lmay .total. h5 .million tons.") soviet uevt:~l" v..r4.?- .. .,, -- - opments ("reportedly, 122.3 million hectares of grain- 24 Jul 72 were left from the fall and spring sowings implying that 11.5 million hectares, or one- third of the total planted in winter grains, had been used for forage or lost to winterkill.") CIWR USSR: Economy' at Mid-Year* 28 Jul`r.72 ("Soviet economic growth sagged during the first half of 1972 although industry was still on the 1971-75 plan schedule...As in 1969, agricultural problems threaten the. achievement of five-year plan goals...Figures in the mid-year report on sown area imply that one third of the winter bread-grain acreage had been lost to winterkill or used for spring forage ...Brezhnev's livestock program requires a grain harvest substantially higher than in 1971.") Soviet Devel- VIP Meeting Reflects Concern for'Harvest opments An array of VIPs attended .a meeting in the 9 Aug 72 Central Committee headquarters on u Aug u~L Lo discuss harvest progress and other agricultural problems, indicating unusual concern over this year's harvest. "It is estimated to be about. 9-10 percent less than 1970 and 1971, largely because of severe winter weather and summer ~'drought...As a.result...the USSR is buting large amounts of foreign grain, mainly wheat, for delivery during the next year.")~~ CTB Brief 10 Aug 72 .LIL ''Memorandum for Kissinger, Peterson, and Butz: A poor harvest this year (estimated to he about 10% less than in 1970 and 1971) is forcing the Soviets to import record quantities of grain. So far they have bought about 21.6 million tons of grain and soybeans worth almost $1.4 billion from the US, Canada, and France for delivery in FY 1973.) (S ma a as above) S-4530 Some Implications of the Poor Soviet Grain 25X1 No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 II g opments ,("Confronting poor harvest prospects, the 11 Aug 72 Soviets have contracted to purchase by mid-1973 about 21.6 million tons of grain and soybeans worth. almost $1.4 billion from the US,.Canada and France. As a result, their hard currency trade deficit will rise to more than $800 million in both 1972 and 1973.") IM 72-124 Outlook for the 1972 Soviet Grain Harvest* 15 Aug 72 ("Because of a combination of.winterkill, and. drought, the preliminary estimate of 1.972 Soviet grain prop ects is for a decline in the crop to about 135 million metric tons of usable grain, 13 million tons less than the 1971 harvest. To stave off the consequences of this shortfall, the USSR has already bought more than 20 million tons of grain from the West for delivery in fiscal year (FY) 1973, up '1.2 million tons over imports of the. previous.year.") CIWR USSR: The Grain Drain* 18 Aug 72 A "The prospect of a poor; harvest this year (more than 10% below 1970 and 1971) is forcing the Soviets to import record quantities of grain. So far, they have bought about 20.6 million tons of grain worth almost $1.3 billion...and they are negotiating to buy more.") Soviet Devel- Brezhnev Travels to What Belt opments ("General Secretary Brezhnev arrived in the 25 Aug 72 Kazakh grain--growing center of Kokchetav on Thursday, presumably to urge farm officials to exert. maximum effort in the?harvest nowl.. underway." The situation is precarious because of a late-ripening crop and the danger of frost.) Soviet Devel- ? Soviet Campaign to Save Grain ' opments ("For the third time in a decade Soviet leaders 28 Aug 72 are asking consumers to 'save bread.' The campaign began in early August in the Ukraine -- one of the areas most severely affected by this year's poor harvest... Although the large foreign purchases'of grain this year will partiall, offset domestic losses, some' additional measures, such as rationing and lowering the quality of bread that were taken in 1963, may have to be employed again.") No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 CIB Brief 29 Aug 72 CIB Brief, 29 Aug 72 n a hit by early frosts.) Soviet . Devel- opments 31 Aug 72 CIWR 1 Sept 72 Soviet Devel- opments 5 Sept 72 Soviet Devel- opments 6 Sept 72 USSR article i of 25 TSa,me as Soviet Developments August) USS of concern over the ("In an unusual display harvest. prospects, Party General Secretary Brezhnev has flown out to the key virgin Lands grain-growing area for conferences with local farm officials." Adverse weather.hhs already damaged the crops in the other major g growing areas and the situation in the Virgin Lands is precarious because the crop is late ripening and is in serious danger of being UP I N?CJSS h ("Continuing his unusual tour of the Vi rgin Lands grain-growing area, Brezhnev addressed a meeting of party and economic executives. in Novobirsk on 31 Aug, once again focusing on this ysi harvest.") USSR: Wti'orrVfL 10, About the Harvest* ("Brezhnev flew to the Virgin Lands for a icials- local a.nfarm round of conferences with above~average The Virgin Lands have produced stand of wheat i~uL i t i c in serf ~'us dancer of being hit by early frosts. Harvesting is hampered by cool and rainy weather.) Mare Mare Grain Purchases in ProS'OeCtain ("The president of a large international grain -trading firm, Cook Industries, is in Moscow at the invitation of the Soviets to discuss.,The purchases additional grain.and soybeans .Soviets invited Cook to return to Moscow in November, saying that their agricultural plan for 1973 would then be firm ofor delivery purchases of grain and soybeans tons, by mid-1973 already top 2million mainly from the US.") Soviet Fi.nancin of Hard Currency Needs ard- ("T eh enormous ddit ediwithurecenttSov~ethgrai currency cash associ purchases have evidently led the USSR to seer` selective foreign loans.") No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 AIM 72-135 Some Aspects of Recent Soviet Crain Purchases* 6 Sept 72 ''This year's poor harvest, a result of severe winter weather and summer drought, is forcing the Soviets to import record quantities of grain. So-far they have bought about 25.2 million metric. tons of grain and soybeans worth almost US $1.6 billion, mainly from the US, for delivery in fiscal year 1973... The massive grain imports... also reflect a recent change in agricultural and consumer policy. Brezhnev's livestock program, aimed at improving the Soviet diet, has required large increases in grain supply which have exceeded Soviet grain production, even in good years.") S-4575 The View from the Kremlin Three Months After 7 Sept 72 the Summit ("Because of the poor weather that has plagued the Soviet grain areas this year, the 1972 crop will fall far short of covering both domestic reg4irements and export commitments... As a result US exports of. grain and soybeans should reach $650-700 million in 1972... Moreover, the delayed ripening of grain in the crucial New Land area of Siberia and Kazkhstan could cause above-normal harvest losses during the coming weeks and could generate a need for further imnports.") CIWR 15 Sept 72 Report on the Soviet Harvest* Soviet Devel- opments 19 Sept 72 C . ("Grain yields reported by the USSR for areas where the harvest has been completed confirri that poor weather severely damaged the crop in the major grain-growing areas of European Russia...that will only be partially offset by a good harvest in the New Lands...The un- 'certainty surrounding the final verdict on the Soviet harvest. apparently has temporarily' halted negotiations for additional grain imports... Soviet purchases of grain for delivery by mid-1973 already top 27 million tons...") ,Leningrad's-Questions Concerning the Harvest A- Leningrau lecturer sax. that some ^~es;:c rn reports put the harvest this year at 20 percent below last year's. It is "known," he said, that the USSR has bought 7-12 million tons of grain from the US, 5 million from Canada, 1-1.5- million from France, and some from Australia.and Sweden.") i. , k 't, ,.^ No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 25X1 No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 c ;Soviet Deve1Romanian Wheat Too L 25 Sept 72 that the Romanians nave agreea to suppLy ;nt.- ?Soviets with as much as 500,000 tons of wheat from the successful harvest this year.") CIB Brief Soviet Devel-- Comment on NY Times Article on Soviet Wheat opments Harvest 28 Sept 72 ("The New York Times today reports that USDA estimates that the wheat harvest in 1972 will be 75 million tons, 25 percent below last year... primarily a result of winterkill and summer drought...The USDA estimate is virtually the same as the Cm Pst--imate -- 76 million tons... Soviet wheat purchases of 18 million tons for delivery by mid-1973 cover most of this year's losses and will go far to ensure an adequate supply of milling quality wheat.") Soviet Devel- Forced Slaughtering of Herds Reported opments (Deputy Minister of RS?SR'' s Meat and Dairy 28 Sept 72 Industry says the drought in the RSFSR is "the most severe since the 1930s." He adds that even some of basic cow herds are being butchered.) 27 Sept 72 ("Slow progress in grain harvesting threatens. additional losses...If this slow pace is maintain& the harvest will extend well into October-,,when conditions usually deteriorate... Thus, harvest prospects have deteriorated further since the last major round of Soviet grain purchases in early August. Racent reports of negotiations for wheat from West Germany and Romania could reflect a reassessment of, the country's immediate needs for milling quality wheat. Confirmed Soviet purchases of grain for,delivery by mid-- 1973 now stand at almost 27 million tons..."). CIWR Soviet Outlook Gets Dimmer* ?29 Sept 72 ("Since the last major round of Soviet grain purchases in early August, harvest prospects have gone on deteriorating. We now estimate that the 1972 crop of usable.grain will be roughly 128 million tons -- down 20 million tons for 1971." Total confirmed purchases of grain stand at about 27 million tons worth over $1.6 billion and there are recent reports of negotiations for more wheat from West Germany and Romania.)! 25X1 Y /. Ri ti6 arl No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2 29 Sept 72 or Since the last major round of Soviet grain Soviet Grain -- Purchases and Prospects* purchases in early August, harvest prospects have deteriorated even further because of poor weather. The 1972 .crop'of usable grain is now estimated a roughly 128 million tons --- more than 10 percent below 1971 output. Recent reports of negotiations for more grain from West Germany and Romania may reflect a reastessrnent of the country's immediate needs. Confirmed purchases now total more than 26 million tons. worth $1.7 billion.) CIWR Soviet Harvest Problems Persist* 13 Oct 72 "The grain harvest is stall behind schedule.. Deteriorating weather conditions jeopardize its completion... They (the Soviets) now say this year's grain crop will -be no more than. 160--167 million tons compared with 'the 181 million tons harvested in 1971. We estimate that gross grain production will be 160 million-tons ...foreign grain purchases stand at about 28 million tons for delivery by mid-1973...") CIB Brief USSR 18 Oct 72 `There is a near record lag in.completing the yr ai har Vest ten percent of all grain si-i11 had not been threshed as of 9 October. No Objection to Declassification in Part 2012/12/20: LOC-HAK-37-5-21-2