THE SOVIET ECONOMY UNDER A NEW LEADER

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP08S01350R000300730001-4
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 29
• Document Creation Date: December 22, 2016
• Document Release Date: March 1, 2012
• Sequence Number: 1
• Publication Date: July 1, 1986
• Content Type: REPORT

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The Soviet Economy
Under a New Leader
DDB-1900-122-86
July 1986
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The Soviet Economy
Under a New Leader
This is a report prepared jointly by the
Defense Intelligence Agency and the
Central Intelligence Agency for submission
to the Subcommittee on Economic Resources,
Competitiveness, and Security Economics of
the Joint Economic Committee, Congress of
the United States
Information Cutoff Date: 19 March 1986
DISTRIBUTION STATEMENT
This document has been produced for official use within the US Government and
distribution is limited to US Government agencies. Requests for this document
from outside the US Government must be referred to the Defense Intelligence
Agency, Washington, D.C. 20340.
DDB-1900-122-86
July1986
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The Soviet Economy Under a New Leader
During the year he has been General Secretary, Mikhail Gorbachev has shown himself to be
the most assertive leader since Khrushchev. He has accumulated power by virtue of his strong
personality and by inserting his own cadre into key positions. Moving forcefully to place his personal
stamp on economic policy, he has announced an ambitious strategy for modernizing the economy.
Gorbachev's plans call for boosting economic growth through massive replacement of outdated
plant and equipment and an emphasis on high-technology industries. Both the general program
goals he has laid out in public speeches and the investment targets set forth in the 1986 Economic
Plan would require record growth in the machinery allocated for modernizing Soviet plant and
equipment. The machinery needed for industrial modernization is produced in the USSR in the
machinery and metalworking sector - which is also the primary source of production of military
hardware and consumer durables.
In the near term, the Soviet defense establishment is well positioned to accommodate the
possible shifts in machinery demand implied by the industrial modernization program. Since the
mid-1970s, major investments in defense industrial facilities have resulted in a substantial expansion
and upgrading of defense industry. As a consequence, most Soviet weapons expected to be delivered
to the Soviet forces through 1990 will be manufactured in plants already built and operating.
Competition for resources could be intense, however, for some basic materials and some
intermediate goods, such as high-quality steel and microprocessors, and for skilled labor -
resources traditionally supplied on a priority basis to military production. This competition could
result in some trade-offs at the margin between military and civilian production. Nevertheless, in
view of the immense sunk costs for plant and installed equipment in defense production facilities,
and the fact that these cannot be readily converted to civilian use, the industrial modernization
goals are unlikely to significantly impede the completion of the major deployments of strategic
weapons that the Soviets have programmed through the 1980s.
At this stage, Gorbachev's economic policies appear to command widespread political support
- both because of the consensus for the need to revitalize the industrial base and because defense
procurement programs are largely unaffected in the near term. A number of senior military officers,
moreover, have declared that industrial modernization is necessary if the USSR is to meet the
technical challenge of the 1990s. The real test of Gorbachev's support will come in 2 or 3
years when renewed demands for expanding and renovating defense industries begin, as defense
industries have to start preparing to produce new generations of weapons. How the Soviets are
able to deal with their resource allocation problems then will depend on their success during the
next few years in raising productivity, increasing the supply of advanced machinery, and building
more modern industrial facilities.
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Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gorbachev's Inheritance . . . . . . . . . . . . . . . . . . . . .
Gorbachev's Strategy . . . . . . . . . . . . . . . . . . . . . . .
Addressing the Human Factor . . . . . . . . . . . . . . . . .
Industrial Modernization . . . . . . . . . . . . . . . . . . . .
1985: A Year of Transition . . . . . . . . . . . . . . . . . . . .
The 1986-90 Plan . . . . . . . . . . . . . . . . . . . . . . . . .
Ambitious Targets . . . . . . . . . . . . . . . . . . . . . . .
Dependence on Unrealistic Conservation and Productivity Goals .
The 1986 Plan: Emphasis on Modernization . . . . . . . . . . .
Implications for Defense . . . . . . . . . . . . . . . . . . . . .
Factory Capacity Available . . . . . . . . . . . . . . . . . . .
Materials, Intermediate Goods, and Labor . . . . . . . . . . . .
Capitalizing on Sunk Costs . . . . . . . . . . . . . . . . . . .
The Politics of Modernization . . . . . . . . . . . . . . . . . .
Future Decision Points . . . . . . . . . . . . . . . . . . . . . .
Short-Term Economic Prospects . . . . . . . . . . . . . . . .
Long-Term Uncertainty . . . . . . . . . . . . . . . . . . . . .
A. Revised CIA Estimates of Soviet GNP . . . . . . . . . . . . . .
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The Soviet Economy Under a New Leader
This joint DIA-CIA report reviews the current
state of the Soviet economy and its probable
direction after the first year of Gorbachev's stew-
ardship. It begins by briefly discussing the eco-
nomic situation when he took over with special
reference to the defense sector. It then describes
what Gorbachev appears to want to achieve with
respect to the economy and the military, and
how he plans to go about achieving his goals.
Finally, the report analyzes the implications of the
new General Secretary's gameplan for resource
allocation and evaluates its prospects for success.
Before turning to these issues, a methodolog-
ical note is in order. Past assessments of the
Soviet economy and defense expenditures sub-
mitted to the joint Economic Committee by CIA
were conducted using a 1970 ruble price base.
The analysis in this report was carried out in 1982
prices. The move to a more recent price base
culminates a 3-year research effort and allows us,
we believe, to give a more accurate assessment of
the resources associated with Soviet production.
Although the basic trends have not changed, the
use of 1982 prices has resulted in somewhat dif-
ferent estimates of historical growth rates for the
Soviet economy, as well as the share of GNP de-
voted to consumption, investment, and defense.
These findings are discussed in more detail in
appendix A.
strengths, including a highly skilled workforce
and an enormous resource base. Nonetheless,
over the past decade, despite continued growth,
the gap between economic performance and plans
and expectations had been widening, forcing So-
viet leaders to turn more and more of their at-
tention to the country's economic problems. For
example, despite generally increased use of fer-
tilizers and other key resources in recent years,
growth in agricultural output had failed to keep
pace with the increase in population for a decade.
Industry had also failed to live up to expectations.
Problems in the energy, steel, and construction
materials sectors, coupled with occasional trans-
portation bottlenecks, had restricted industrial
growth during 1981-84 to only about half the
planned rate. The net result was that Soviet GNP
growth during the 11th Five Year Plan (1981-85)
appeared headed for its worst showing in any FYP
since World War II (see figure 1).
Moscow's basic problem was that by the mid-
1970s the simple growth formula that produced
major economic gains in the postwar period
- ever increasing inputs of labor and capital
resources - was no longer feasible. Over the past
decade, the USSR had experienced:
. Near stagnation in steel output.
? A precipitous rise in energy and other raw
material costs.
? A sharp fall in investment and labor force
growth.
When Gorbachev came to power in March
1985, he inherited the world's second largest
economy. It possessed a number of major
? A decline in productivity.
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GNP
10 -T
1-1
Factor productivity measures the difference between the growth of gross national product and the growth of a weighted sum of inputs
of land, labor, and captial.
Growth was calculated using net agricultural output, which excludes intra-agricultural use of farm products but does not make an adjustment
for purchases by agriculture from other sectors.
Figure 1. USSR: Key Economic Indicators When Gorbachev Took Over
(Average Annual Percentage Growth).
Gorbachev's predecessors recognized these
problems and indicated, at least rhetorically, that
in the future the economic system would have to
operate differently if it were to meet the USSR's
needs. Efforts to increase the quality and quan-
tity of output and make better use of available
resources in the economy - i.e., a switch to a pat-
tern of "intensive growth" based on productivity
gains - were frustrated, however, by a relatively
backward technological base, inflexible produc-
tion processes, and, perhaps, most important, a
cumbersome and inefficient system of planning
and management and a distorted structure of
incentives.
Moreover, the leadership's inability to stimulate
higher economic growth had contributed to a
growing malaise among a substantial and growing
share of the population by the end of the Brezh-
nev era, not only because gains in living standards
had slowed but also because of an apparent belief
that the system was incapable of bringing about
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any meaningful improvement. This attitude -
reflected in the rise in alcoholism and health-
related problems - exacerbated the corruption
and inefficiency that had permeated the Soviet
economic structure -'from farmhand to factory
worker to the ministerial bureaucracy. Workers
and managers alike spent increasing amounts of
time and effort trying to insulate themselves -
often through illegal means - from the effects
of shortages in both the home and factory. This
reduced productivity on the job and aggravated
shortages of goods and services throughout the
economy, especially for individuals and enter-
prises with little or no "special access."
result, the share of GNP devoted to the military
increased in current ruble prices from about 12
to 14 percent in the early 1970s to around 15 to
17 percent in the early 1980s as the growth of
military spending during this period continued to
exceed that of the overall economy.
Soviet gains in the strategic area were espe-
cially large. Over the last decade, Soviet strategic
forces received roughly 3,500 ICBMs and SLBMs, 3
times as much as the United States procured. Sim-
ilar sweeping improvements occurred in Soviet
conventional forces where the USSR added large
numbers of more sophisticated fighters, bombers,
and tanks. In addition, throughout this period, So-
viet defense industries, whose capacity expanded
rapidly, produced an increasing amount of mil-
itary hardware for delivery to other countries,
particularly in the Third World, in an effort to
both gain political influence and also to increase
hard currency earnings. (Table 1 compares pro-
curement of selected military hardware by US
and Soviet military forces, and table 2 presents
estimates of the value of Soviet military exports
massive quantities of military hardware. Asa during 1974-85.)
Meanwhile, Gorbachev took charge of a power-
ful military - one that had been built up through
a massive commitment of the nation's best re-
sources over the past two decades and one that
had been used increasingly to achieve political
goals. During 1965-75, for example, Soviet mil-
itary expenditures grew in constant rubles by
nearly 50 percent (see Inset). Growth slowed in
the mid-1970s, but the Soviets sustained spending
at very high levels, enabling them to procure
The CIA estimates the annual value of Soviet defense activities in both constant ruble prices and
constant dollar prices:
? The dollar valuation is used to measure how annual Soviet defense activities compare in size
with similar US activities.
? The ruble valuation is used to measure the impact of Soviet defense spending on the
country's economy.
In comparing the Soviet defense effort with that of the United States, a common set of prices is
needed. Military goods and services procured by the USSR are valued in dollar prices. Either dollars
or rubles could be used, but dollar prices are used because they are most familiar to US defense
planners and policymakers and because of the difficulty of estimating ruble prices for US defense
activities - especially the cost of producing US weapons in Soviet manufacturing plants. These
estimates can then be compared with US defense budget outlays for a comparable set of activities
over the same period of time,
The impact of Soviet defense spending on the economy must be measured in rubles. Our
ruble calculation provides an estimate of the level of, and the trend in, the annual Soviet resource
commitment to military forces. This estimate is used to assess the impact of defense programs on
the Soviet economy and, conversely, the impact of economic factors on Soviet defense activities.
The estimate permits insights into the resource constraints confronting Soviet planners and the
priorities they assign to the elements of their defense effort.
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Table 1
US and USSR: Procurement of
Selected Weapons Systems, 1974-85'
ICBMs and SLBMs
1,050
3,500
Surface-to-air missiles2
11,700
105,000
Long- and intermediate-
range bombers
8
400
Fighters
4,050
7,800
Helicopters
2,050
6,500
Submarines
44
110
Major surface combatants
98
90
Tanks
8,400
27,000
Artillery
2,200
22,000
'These numbers represent gross additions to weapons inventories and do not
reflect retirements because of obsolescence or SALT restraints.
' Does not include naval or portable SAMs.
Despite the priority given to the military in
resource allocation, the defense sector was not
totally immune to the effects of economic prob-
lems. Resources devoted to military-related re-
search and development continued to grow at a
healthy 4 to 5 percent per year, but growth of
military procurement dropped markedly and held
overall defense growth (measured in dollars) to
about 2 percent per year during the 1974-85
period - about half the rate of the previous
decade. Both DIA and CIA agree that a slowdown
in defense procurement occurred during this pe-
riod, although the Agencies differ somewhat on
procurement trends in recent years (see inset).
Table 2
USSR: Estimated Value of
Military Deliveries, 1974-85
(billion US dollars)
Recipient
1974-79
1980-85
1974-85
Six Warsaw
Pact countries
8.7
9.8
18.5
Syria
4.5
10.3
14.8
Iraq
6.0
8.2
14.2
Libya
5.4
5.8
11.2
Vietnam
2.1
4.9
7.0
India
2.0
4.8
6.8
Algeria
1.6
3.6
5.2
Cuba
1.3
3.9
5.2
Ethiopia
1.5
2.6
4.1
Angola
0.7
2.8
3.5
60 other
7.7
11.3
19.0
countries
Total
DIA and CIA dollar cost estimates of Soviet defense procurement are derived from estimates
of weapon systems production. As a result of an extensive 1985 review of such estimates, past
differences between DIA and CIA have been narrowed greatly. Both Agencies agree on estimates
for more than 200 of the 250 weapons systems examined. Both Agencies also agree that between
1975 and 1981 the dollar cost of weapons procurement increased at a rate of roughly 1 percent
per year.
Some differences still exist, however, on the growth of procurement in recent years. After several
years of stability, DIA estimates that, in the 1982-84 period, major weapons procurement increased
at about 3 to 4 percent per year. In contrast, CIA believes that defense procurement was essentially
flat during this period.
It should be pointed out that the DIA's methodology differs somewhat from CIA's, and therefore
the results are not directly comparable. DIA concentrates on estimating the year-to-year changes
in the costs of major weapons procurement, which includes approximately 350 weapon systems.
CIA estimates total procurement, which encompasses such additional categories and components
as organizational equipment and some weapons systems not costed by DIA (e.g., missile launchers
and air-to-air missiles). As a result, the DIA estimate in value terms - is about 70 percent of
CIA's total procurement.
In addition to this difference in coverage, DIA and CIA do have different estimates for the
production of some weapons systems, and some methodological differences in arriving at unit
costs still remain.
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In short, Gorbachev's predecessors left him
with powerful military forces and a large but
troubled economy. One of his primary challenges
as General Secretary was, therefore, to find the
resources to accelerate economic growth while
sustaining the military gains of the past 20 years.
Indeed, Gorbachev probably was selected as Gen-
eral Secretary in part because of the belief among
certain of the elite that he was the best man
to bring about a resurgence of broad-based eco-
nomic growth and to push through an effective
program of industrial modernization.
Gorbachev's Strategy
Gorbachev has, in fact, made it clear almost
since the day he became General Secretary that
revitalization of the economy is a top priority.
Gorbachev has acknowledged that without im-
proved economic performance the USSR would
have trouble simultaneously meeting require-
ments for defense, boosting consumer welfare
sufficiently to improve labor productivity, and
modernizing the economy. In particular, with-
out a major renovation of the country's indus-
trial base, the new General Secretary probably
realized that the USSR would continue to trail
technologically in some areas vital to the mil-
itary. In recent years, Soviet military authori-
ties (including Marshal Ogarkov) have gone on
record saying that, without major improvements
throughout the economy, the USSR's military ca-
pabilities would continue to lag the West's tech-
nically in many areas, and Soviet forces would
face increased difficulties in meeting the military
requirements of the 1990s.
In laying out his economic program, Gorbachev
has focused his efforts squarely on increasing ef-
ficiency. To this end, he has essentially adopted a
two-step approach. Initially, Gorbachev is relying
on a combination of measures to strengthen party
discipline, improve worker attitudes, and weed
out incompetents - what he refers to as the
"human factor." Over the longer term, Gorbachev
is counting on achieving major productivity gains
as a result of a series of organizational changes,
reform initiatives, and, most importantly, an ex-
tremely ambitious campaign to modernize the
country's stock of plant and equipment.
Addressing the Human Factor
Gorbachev's first and most accessible target in
his campaign to boost productivity has been his
campaigns for discipline and against corruption
and alcoholism. These efforts - like those pushed
less vigorously by Andropov - have received
widespread public support and yielded positive
results. According to Soviet figures, purchases
of alcohol at state stores declined 25 percent
during the second half of 1985 compared with
those of the last six months of 1984. Soviet press
statements indicate that, as a result, there has
been a marked decrease in absenteeism, fewer
industrial accidents, and increased productivity
overall.
At the same time, Gorbachev has removed
an unprecedented number of senior economic
managers (see figure 2). Since taking over, he
has replaced the Chairman of the Council of
Ministers and five deputy premiers with officials
more beholden to him. He has also removed
the Central Committee department chiefs who
oversee the machinebuilding, construction, and
trade and service sectors, while replacing 25
of the country's economic ministers and state
committee chairmen. Some of the replacements
have backgrounds in defense industries, reflecting
Gorbachev's willingness to draw upon talented
officials in that sector to improve management of
the civilian economy.
In contrast to his personnel moves, Gorbachev
has moved much more cautiously on the orga-
nizational front, eschewing a sudden sweeping
overhaul in favor of a more selective approach
in an apparent effort to reduce economic dislo-
cation and political infighting. Since mid-October,
he has established new bureaus to oversee the
machinebuilding and energy industries and has
embarked upon a major reorganization of the
agro-industrial bureaucracy.
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Major Personnel
Changes Under Gorbachev
? Three Politburo opponents removed; five
allies appointed.
? Chairman of the Council of Ministers
retired; some 25 economic ministers and
state committee chairman replaced.
? Eight Central Committee Department
Chiefs removed - including five responsible
for economic affairs.
Similarly, while avoiding any major reform ini-
tiatives and expressing a preference for working
within the system, Gorbachev has voiced support
for giving greater operational independence to
enterprise managers and workers through expan-
sion of such programs as the "Five-Ministry Exper-
iment." Begun in January 1984, this experiment is
supposed to give enterprises greater control over
investment and wage funds and to make fulfill-
ment of contractual sales obligations the prime
indicator for evaluating enterprise performance.
Without downplaying the importance of his
personnel and organizational changes, Gorbachev
has made it clear, however, that his call for ac-
celerated productivity growth depends ultimately
on fundamental improvements in the country's
production base, or, in his words, on nothing less
than "the structural transformation of the econ-
omy." According to one unofficial Soviet estimate,
the stock of machinery and equipment is 20 years
old on average. In laying out his program last
summer and fall, Gorbachev proposed:
? Doubling retirement rates of capital
stock to accelerate the replacement of
obsolete capital by more efficient, largely
state-of-the-art machinery.
? Modernizing the nation's capital stock so
that by 1990 a third of it, including up to
half the machinery portion, is new.
? Increasing capital investment in civilian
machinebuilding in 1986-90 by 80 per-
cent over that of 1981-85.
The qualitative side of Gorbachev's moderniza-
tion strategy has emphasized the development
of those industries that provide the advanced
equipment for industrial modernization.
As Gorbachev was putting forward his blueprint
for reviving the economy during the latter part
of the 1980s, the Soviet economy was turning in
another lackluster performance. Shrinking farm
output held GNP growth in 1985 to about 1 1/2
percent for the second straight year. Meanwhile,
non-farm output rose by about 2 1/2 percent last
year. Industrial output increased nearly 3 percent,
a figure about equal to the 1983-84 pace as the
tabulation below shows. (See appendix B for a
description of Soviet performance by sector.)
Despite the relatively slow growth in the
economy overall, Gorbachev could take some
satisfaction from the 1985 results. Through a
combination of factors, a year that started out
very badly turned into one that was at least
respectable. Certainly, improved weather after
the first quarter eased pressures throughout the
economy. But a similar situation during 1981 -
when harsh weather also disrupted production -
did not result in nearly the same turnaround. (See
Inset on Gorbachev's impact on the economy's
performance in 1985.)
USSR: GNP by Sector of Origin'
Annual Percegtage Growth
1981
-85
1981
1982
1983
1984
19852
GNP
2.2
1.7
2.7
3.5
1.5
1.6
Agriculture'
2.2
-0.5
6.2
6.8
-0.5
-0.6
Other Sectors
2.3
2.4
1.6
2.5
2.4
2.6
(including
industry)
Industry
2.3
1.6
1.4
2.9
2.9
2.8
' Calculated in 1982 rubles at factor cost.
Preliminary.
This measure for agricultural output excludes intra-agricultural use of farm
products but does not make an adjustment for purchases by agriculture from other
sectors. Value added in agriculture grew by an average of -1.5 percent in 1981, 7.4
percent in 1982, 7.4 percent in 1983, -1.7 percent in 1984, -2.1 percent in 1985,
and at an annual average rate of 1.8 percent for the period 1981-85 as a whole.
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Although Gorbachev probably deserves some
credit for the economy's showing in the last half
of 1985, the programs and decisions involving
resource allocation resulted from policies that
predate his selection as General Secretary. During
1985, for example, growth in investment was 2.7
percent, up from the 1.9 percent rate in 1984,
but far below the rate necessary to carry out
Gorbachev's modernization program. Probably be-
cause of harsh winter weather that delayed many
construction projects, investment grew faster in
the second half of the year. Even when the
weather improved, however, problems in bring-
ing new production facilities on line continued.
New capacity commissioned in 1985 was val-
ued at only 0.7 percent more than the capacity
brought on stream in 1984, despite repeated calls
by Gorbachev and other top officials to cut back
on unfinished construction during the year.
Similarly, whatever Gorbachev's intentions re-
garding increasing the availability of consumer
goods as a spur to labor productivity, such a
policy was not evident during 1985. In particular,
shortages of sought-after goods and services con-
tinued, limiting growth of per capita consumption
to less than 1 percent, half the rate achieved in
1984. Supplies of some quality food, e.g., [neat,
showed little increase over 1984 levels. As a
result, queues continued to be widespread, and
rationing continued in some areas in 1985.
While we have a fairly good sense of con-
sumption and investment trends in 1985, our
information on Soviet defense spending is much
less solid and we have not settled on an estimate
for last year. What is certain is that the Soviets
continued the broad based modernization of their
military forces during 1985. They augmented
their strategic nuclear strike capability by begin-
ning to deploy new bases for the new mobile
SS-25 ICBM. At the same time, they added new
units of both the TYPHOON and DELTA IV Classes
of ballistic missile submarines.
At the recently concluded 27th Party Congress, party leaders hailed Gorbachev for the economy's
improved performance since he took over last March. On the surface, their praise seems justified.
After a miserable first quarter last year, non-farm output rebounded strongly. Industry, in particular,
has done well and by the last quarter of 1985 was growing at close to 3.5 percent per year.
Much of the rebound is attributable to improved weather during the last three quarters of the
year. Last year's winter was the coldest in 20 years. Rail freight traffic fell sharply, apparently
causing shortages of raw materials throughout industry. As the weather improved, these problems
disappeared. Another factor in the rebound was the "postponement" of two holidays during the
second half of 1985. As a result, there were two more work days during the last 6 months of 1985
than in the same period in 1984.
Nevertheless, Gorbachev's vigorous campaigns to increase worker discipline and cut alcohol
abuse probably paid some dividends. At an April plenum just after taking office, Gorbachev issued
an urgent call for better economic performance. While acknowledging the severe winter weather,
he blamed the lack of discipline and passive management for the poor first quarter results and
told workers and managers, in effect, to shape up or "move aside." His firing of one-third of the
industrial ministers during the year - mostly in sectors that had been doing poorly showed that
he - unlike Brezhnev - was willing to follow through on his criticisms of industrial leaders.
The Soviets do not set a target for GNP, which is a Western concept. Rather they use a Marxist concept of national income which
excludes depreciation, as well as most wages in services. To convert their national income target to a GNP goal, we add an estimate
for growth of most service sectors.
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Soviet general purpose forces modernization
also continued apace, with many of the programs
- especially those in the ground forces -
apparently intended to make Soviet forces more
capable of extended operations. As part of this
effort, for example, Moscow continued to field
new tanks, an improved tracked infantry vehicle,
and a new wheeled armored personnel carrier.
Meanwhile, Soviet air force units received their
initial complement of Su-27/FLANKER fighters, as
well as other aircraft already in serial production.
Finally, the Soviets continued their commitment
to a blue water navy with the addition of a new
OSCAR Class cruise missile submarine and the
fitting out of both the fourth KIEV Class aircraft
carrier and a new large aircraft carrier.
Ambitious Targets
Whatever the economy's shortcomings in 1985,
Gorbachev has made it clear that he expects
much better results during the next FYP. The
draft economic guidelines for 1986-90 that were
issued in early November set ambitious targets.
GNP is slated to grow at roughly 3 1/2 percent
per year in 1986-90 and by about 5 percent per
year in 1991-2000, rates not achieved in more
than a decade.'
Among the major sectors, agricultural output
is planned to increase by about 3 percent per
year, a substantial improvement over the 1981-
85 results. Meanwhile, in line with Gorbachev's
strategy, industrial output is scheduled to grow
by a respectable 4 1/2 percent per year, led by
a 7- to 8-percent annual increase in production
of the machinebuilding sector. Within machine-
building, special emphasis is to be given to the
machine tool, computer, instrument making, elec-
trical equipment, and electronics industries -
the same sectors that have paced modernization
efforts in the West. Production in these indus-
tries, identified by military leaders as being the
key to modernization of the defense industrial
sector, is to grow about 1 1/2 times as fast as
machinebuilding output as a whole.
Despite these impressive goals, the guidelines
allow for only moderate increases in factor inputs.
In line with demographic trends, little growth
is anticipated in the labor force. What appears
incongruous, however, is that total investment is
slated to rise by only about 3 1/2 to 4 percent
per year. Although somewhat above the rate of
recent years, the investment target is insufficient
to meet Gorbachev's stated goals for increasing
investment in the machinery sector, while satis-
fying the needs of other critical sectors such as
energy, transportation, and ferrous metallurgy.
The reason for the low investment target is un-
clear. The fact that Gorbachev remanded the draft
guidelines repeatedly before they were issued and
that no investment data other than an overall
growth target appeared suggests that the issue of
resource allocation was a difficult one. Moderate
investment growth appears inconsistent with a
radical modernization of the economy.
Dependence on Unrealistic
Conservation and Productivity Goals
To make the plan balance - given the low
investment figure - the guidelines for 1986-
90 call for sharp increases in productivity and
substantial energy and raw material savings. The
guidelines exhort managers and workers to save
industrial materials and fuels - an old theme.
The leadership's problem is that in the short
term there are few opportunities for quick savings
that have not already been exhausted. While
substantial savings could be realized by the use
of more efficient equipment, its development -
a high priority of the Gorbachev regime - is
difficult and time consuming.
At the same time, to help bridge the gap be-
tween planned output and factor inputs, substan-
tial real growth in productivity is planned. Success
in meeting this goal would stand in sharp con-
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trast with the past two FYPs, when productivity
actually declined (see figure 3). To this end,
the leadership is apparently banking on greater
worker effort prompted by increased availability
of consumer goods and services. For example, the
12th FYP largely repeats the targets of the Food
Program - first advanced by Brezhnev in 1982
Factor productivity measures the difference between the
growth of Gross National Product and the growth of a weighted
sum of inputs of land, labor, and capital.
Figure 3. USSR; Growth in Factor
Productivity, 1976-90.-
- including a goal for boosting per capita meat
production by 17 percent over the next 5 years.
As a further incentive to the workers, the
Politburo also approved a Consumer Goods and
Services Program last fall that lays down impres-
sive goals for improving the quality and quantity
of nonfood consumer goods and services. Both
are to grow at annual rates roughly double the
average annual rates achieved during the 1981-85
period. While less ambitious than those proposed
by Khrushchev in the 1961 Party Program, they
seem unrealistic in light of recent trends and
the apparent lack of any substantial increase in
planned investment growth in these areas during
1986-90. No investment figures for these areas
were given in the guidelines, but Gorbachev's
emphasis on focusing investment resources on
sectors related to industrial modernization would
seem to preclude a large shift of resources in favor
of the consumer.
Even if the Soviets were to achieve all the
targets set forth in the Food and Consumer Goods
and Services Programs, it is still unlikely that
they would be translated into sizable productivity
increases - no matter how much greater effort
the workforce put forth - unless they were
also able to meet their plans for producing new
machinery and equipment. Indeed, this point was
made by Nikolay Ryzhkov, the new Chairman of
the Council of Ministers, in his speech to the
27th Party Congress. He said that assimilation
of new machinery would account for more than
two-thirds of the planned increase in labor pro-
ductivity in the country.
The 1986 Plan: Emphasis on Modernization
Whatever the reason for the low investment
target in the 1986-90 guidelines, and the need to
set unrealistic conservation and productivity goals
as a result, support for the investment program
was back on center stage by the time the 1986
annual plan was issued. The 1986 growth target
for new fixed investment is 7 1/2 percent - at
least twice the average annual growth target for
the 1986-90 period as a whole. Within the total,
investment in civilian machinery is slated to grow
a whopping 30 percent. Moreover, in apparent
contrast with Gorbachev's previous statements
that the share of investment in energy would be
held constant during the FYP, investment in oil
extraction is slated to rise by 31 percent, in the
coal sector by 27 percent, and in the electric
power sector by 24 percent. Similarly, agricul-
ture's investment share apparently will be held
nearly constant in 1986, rather than decreasing
as had been suggested earlier.
Although the 1986 plan calls for rapid growth
in investment, the machinery sector will be hard
put to meet the demands placed on it for in-
vestment goods, while at the same time meeting
the requirements for consumer durables output
and military procurement - the other two major
claimants on the sector's output. The Soviets
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probably could increase the supply of new capital
somewhat without increasing domestic produc-
tion of investment resources by reducing the
stock of uninstalled equipment and the backlog of
unfinished construction. Success in accelerating
capital assimilation would give a one-shot boost
toward meeting equipment modernization goals.
For example, pronounced success in reducing the
stock of uninstalled equipment might free 2 to
3 billion rubles of new machinery. Once the
additional stocks have been mobilized, however,
inventory drawdowns are no longer a source of
additional machinery.
Some increase in machinery imports is also
certain in 1986. The plan guidelines for 1986-90
make it clear that the leadership expects substan-
tial help from Eastern Europe. They emphasize
increasing economic integration within CEMA,
and Gorbachev's appointments of Boris Aristov
and Nikolay Talyzin - both with extensive ex-
perience in East European affairs - as Foreign
Trade Minister and Chairman of the State Plan-
ning Committee, respectively, could help in this
regard. Moreover, the USSR may also be looking
to the West for increased machinery imports,
especially in key areas such as energy, advanced
machine tools, and ferrous metallurgy. But while
potentially helpful in 1986, the absolute gains
over the longer term probably will not be large
because of (a) the lead times involved in con-
tract negotiations with Western suppliers, (b)
the, deterioration in the USSR's hard currency
position, and (c) the reluctance of Eastern Europe
to provide more and better machinery.
In sum, the 1986 annual plan appears designed
to give a powerful boost to modernization. The
question still open is whether this commitment
will be sustained throughout the 5-year period or
whether the Soviets will stick to the investment
target in the draft guidelines. Indeed, if invest-
ment grows at 7 1/2 percent in 1986 as planned,
investment would have to grow at only 2 1/2 to
3 percent per annum during 1987-90 to meet
the FYP target. A cutback to these levels in the
late 1980s is unlikely, however. Investment rising
at this rate would not support industrial modern-
ization on the scale Gorbachev has been talking
about. Moreover, Gorbachev probably would not
slow the investment momentum in 1987-90 if he
comes close to meeting his 1986 target.
Implications for Defense
Gorbachev's plan for refurbishing the country's
industrial base through the massive replacement
of machinery and equipment will certainly involve
increased demands for many of the resources
used in the production of weapons. We do not
know how far Gorbachev will go in emphasizing
modernization of civil industry as opposed to
defense industry. We do have evidence, however,
that the Soviets are aware of the heavy resource
constraints the military burden places on the
modernization program.
Many Soviet military leaders appear to real-
ize, however, that the military will be the
ultimate beneficiary of successful industrial mod-
ernization and have voiced their support for it.
Soviet military authors are aware that economic
improvements will ease resource constraints and
accelerate the introduction of new technology,
thus setting the stage for more rapid military mod-
ernization in the 1990s. In particular, weapons
to be introduced in the mid-1990s will use more
sophisticated guidance, sensor, computer, and
communication subsystems, which in turn will
require advanced microelectronics, design, fab-
rication, and testing capabilities. An example
of the military perspective was contained in an
article in the October 1985 issue of Kommunist
vooruzhennykh sil by Major General Yasyukov
who identified "fundamentally new instruments,
computer-controlled machine-tools, robot equip-
ment, and the latest generation computers," as
"the leading directions of scientific-technical pro-
gress and simultaneously the basic catalysts of
military-technical progress."
To the extent the Soviets have difficulty find-
ing the resources to meet Gorbachev's indus-
trial modernization goals and satisfy military
requirements in the near term, the problem will
be centered in the machinery sector - which
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traditionally has allocated a large portion of its
output to the military. The increased demands
for resources needed for these programs will be
centered around several areas:
? Factory Capacity. Implicit in Gorbachev's
call for increased output of advanced
machinery is the competition - in the
absence of rapid plant expansion -
for modern workspace at production
facilities. In this connection, robots,
computer-numerically controlled machine
tools, computer-aided design systems,
flexible manufacturing systems, and other
highly automated manufacturing systems
are important for the production of both
advanced manufacturing equipment needed
for boosting industrial productivity and for
producing sophisticated weapon systems.
? Basic Materials. Chemicals and metals
are used in producing both weapons and
advanced machinery. The ferrous metals
ministry, for example, has failed to meet
its targets for many types of steel in recent
years.
? Intermediate Products. Engineering plas-
tics, advanced composite materials, elec-
tronic components, and microproces-
sors are currently in high demand in the
defense industry and, as modernization
proceeds, will be needed increasingly by
civil industry as well. These products,
however, are in short supply.
? Labor. Both the defense industry and
modern civil industry require highly skilled
workers, particularly computer technicians
and software engineers.
Factory Capacity Available
The near-term competition for factory floor-
space and investment goods has been mitigated
by the substantial expansion and upgrading of
defense-industrial plants over the past decade.
Comprehensive programs to modernize many
weapons production facilities began in the early
1970s. Efforts to modernize defense industry
accelerated in the late 1970s, and we believe a
large portion of the best domestically produced
machinery was delivered to defense industry dur-
ing this period. In addition, the defense sector
was helped by a surge in clandestine and open
acquisition of Western manufacturing equipment.
As a result of this investment in defense in-
dustry, almost all of the production capacity re-
quired to support Soviet force modernization over
the next 6 years or so is already in place. Our
calculations suggest that virtually no additional
investment in plant and equipment is needed
to manufacture the military hardware that we
believe will be in production in 1986-88 and that
most of the capacity required to turn out the
military equipment projected to be in production
in the early 1990s is already available. Moreover,
weapons development and industrial construction
indicate that investment in defense industries will
continue at a high level, adding new capacity with
greater capabilities. Thus, military production
Would not be constrained in the near term by a
reallocation of new fixed investment in favor of
civilian machinery and other priority sectors.
Although the Soviets have the production ca-
pacity to maintain or even increase the current
level of weapons production, competition for la-
bor and material inputs used in the production
process could force-some trade-offs at the margin
between military and civilian production. The
nature of this competition is shown in figure 4,
which summarizes our judgments on (a) the de-
gree of need for the particular resource in civilian
machinery, (b) its availability in non-machinery
sectors of the economy, and (c) how easy it
would be to shift the resource from military de-
fense industry to civilian machinery.
High-quality steel and energy, for example, will
be in great demand to manufacture machines
needed for both industrial modernization
and weapons production. The high targets the
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USSR: Military-Civil Competition for Resources
Need in Civilian
Availability
Transferability
MBMW Sector for
of Outside
from Military to
Modernization
of MBMW Sector
Civilian MBMW
Comment
Materials
Basic/Raw:
Energy
Medium
High
High
Intermediate:
Chemical feed stock
High
Medium
Med-High
Engineering fibers
High
Low-Med
High
Micro-electronics
High
Low
High
In very short
supply in
both sectors.
Specialty steel
Med-High
High
Med-High
Aluminum
Med-High
High
High
Titanium
Medium
Medium
Medium
Construction
materials
Medium
High
High
Intermediate Products
Conventional:
Electric motors
Med-High
Low
Med-High
Diesel engines
Med-High
Low
Med-High
Advanced:
Engineering plastics
High
Low-Med
High
Microprocessors
High
Low-Med
High
Composites
Medium
Low-Med
Medium
Microelectronic
High
Low
Medium
In short
components
supply.
Manpower
Skilled:
Computer
programmers
High
Low-Med
High
Shortage
exists
throughout
economy.
Electronics
technicians
High
Low-Med
High
Software engineers
High
Low-Med
High
Researchers
Med-High
Med-High
Medium
Machinists
Medium
Low-Med
High
Industrial engineers
Medium
Low-Med
High
Unskilled:
Laborers
Low-Med
High
High
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Soviets have set for machinery production will
place tremendous demands on the ferrous metals
branch. This industry, however, has been doing
poorly in recent years and apparently will receive
little, if any, increase in investment during the
1986-90 FYP. Although there is likely to be some
growth in the energy sector, the energy situation
may be tight.
The competition for human resources could be
even more intense. Extensive underemployment
exists in the Soviet economy, and Gorbachev may
hope that he can support his modernization pro-
gram by mobilizing currently underemployed en-
gineers and labor. But shortages persist in the
USSR in several skill areas critical to both defense
and modernization - for example, systems ana-
lysts and, to a lesser degree, computer program-
mers and selected types of engineers and skilled
machinists. The most likely immediate source of
additional specialists for civil machinebuilding is
a reallocation of the employees already working
in the machinery sector.
Capitalizing on Sunk Costs
In view of the massive investment already made
in defense plant capacity and the powerful prece-
dents of military priority, we believe that the
Soviets will move ahead with most of the military
modernization that the Intelligence Community
has projected through the end of the decade. As
noted, nearly all of the major systems expected
to be delivered to the forces in the next several
years already are being built on fully equipped
final assembly lines. The Blackjack bomber, the
Su-27 fighter, the SS-25 ICBM, and the T-80 tank,
for example, have all entered production, and
although the SS-X-24 is not yet in production, the
necessary capacity is ready and the production
machinery is probably installed.
The demands for basic materials, intermediate
goods, and skilled labor to meet Gorbachev's
industrial modernization goals, however, might
cause the pace of production of some of these
new systems to be somewhat slower and the
date of introduction somewhat later than would
otherwise be the case. Even allowing for such
delays, however, the USSR can proceed with its
strategic and general purpose programs over the
next several years - whether the annual rate
of procurement spending grows a little or even
declines. For example, table 3 compares 1981-
85 production of major weapons systems with
representative levels of production of the same
systems that are feasible over the next 5 years
if procurement spending grows at an average
annual rate of less than one percent. The specific
mix of weapons may be somewhat different -
some higher, some lower. Nonetheless, taking
into account the sunk costs and the momentum
of ongoing programs, we believe these figures
reflect the general level of procurement that will
occur during the 1986-90 period.
At these general levels of production, improve-
ments to Soviet strategic forces will be substantial.
New generations of land- and sea-based ballis-
tic and cruise missiles recently have entered or
will soon enter production. As a result, a com-
prehensive modernization of the USSR's strategic
offensive forces should be completed by the early
1990s. Strategic defense force improvements, al-
though less substantial, also will permit sustained
improvements in capabilities.
Conventional forces will undergo a similar
upgrade. Two late generation fighters, the MiG-29
and Su-27, are entering the inventory, while new
submarines and warships - including the USSR's
first full-size aircraft carrier - are improving naval
capabilities. Meanwhile, a variety of improved
land arms (most notably new artillery weapons
and the T-80 tank) are being deployed to the
ground forces.
Thus, Gorbachev can "coast" for a few years on
the strength of the USSR's past investment in its
military industrial complex, which will permit the
continued modernization of the USSR's strategic
and conventional forces. As already noted, the
military appears to support Gorbachev's basic
program - both because it will allow for the
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modernization of strategic forces and because of
its long-term promise of more advanced weapons.
The extensive top-level leadership changes and
the formal endorsement of the Party Congress
put Gorbachev in a good position to move ahead
with implementation of his programs for change.
His preoccupation now will be with lower level
elements of the entrenched bureaucracy - that
is, how to get them to implement his policies.
Nevertheless, over the longer term, the politi-
cal risks for Gorbachev are likely to mount as the
demand for new investment for defense plant and
production equipment rises in the late 1980s and
early 1990s, when the Soviets will have to begin
tooling up for the next generation of weapons.
Unless Gorbachev's efforts to modernize industry
pay off in greater numbers of more advanced, high
quality equipment and in substantially increased
productivity, Gorbachev will need to reconsider
his overall economic strategy. Over the next few
years, the defense industries will be expected to
do more with the resources they have as they
satisfy continuing defense requirements. In the
late 1980s, however, decisions will have to be
made regarding the building of new capacity to
produce the major new weapons of the 1990s.
At that juncture, shortfalls in industrial modern-
ization and technological advancement could
increase pressures to postpone certain major
defense initiatives - a development that would
be unpalatable to the military and some political
leaders.
Table 3
USSR: Procurement of Selected
Weapon Classes
Estimated
Possible
Weapon Class
1981-85
1986-90'
ICBMs/SLBMs
800
7002
Submarines
40
50
Tanks
12,500
18,000
Fighter Aircraft
2,400
2,0002
Helicopters
2,500
2,1002
Strategic Bombers
200
210
' See text for explanation of the 1986-90 projections.
'Although our projections suggest lower overall numbers in these categories,
the missiles, fighters, and helicopters the Soviets will procure during 1986-90
are more complex, capable, and costly than those purchased during 1981-85.
Gorbachev's political fortunes ultimately will
depend on maintaining his political support within
the Party. If Gorbachev is not able to reverse
the downward trend in economic growth, his
support will be greatly weakened. In the short
run, at least, prospects for at least some success
in reviving the economy are promising. In 1985,
industry rebounded from a very poor start to reg-
ister respectable growth. As noted earlier, much
credit is due to better weather, but Gorbachev's
initiatives may also have had a positive impact
which should carry forward in 1986 and beyond.
Some modest improvements in economic per-
formance also could show up when the "Five-
Ministry Experiment" - the limited expansion of
the operational decisionmaking authority of plant
directors under way since 1984 - is extended
industrywide next year. Positive results depend,
however, on preventing the economic ministries
from encroaching on the authority of industrial
firms and - at the same time - assuring that
enterprise managers do not use their increased
powers in ways that are inconsistent with na-
tional economic goals. Historically, these have
been elusive objectives, and, even as amended by
Gorbachev, the Five-Ministry Experiment has not
introduced changes in economic incentives that
are likely to result in significant progress toward
them.
Gorbachev's program should also benefit some-
what from the upturn in machinery production
that began in 1983. After averaging annual gains of
about 1 1/2 percent during 1981-82, machinery
output has picked up to an annual rate of more
than 3 1/2 percent. The 30 percent rise in
investment in the machinery sector planned for
this year will help future growth.
Long-Term Uncertainty
How much economic improvement can be
expected, and how long it can be sustained,
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however, is very much an open question. Al-
though personnel changes, reorganization of plan-
ning and management apparatus, and increased
discipline may boost labor productivity for a few
years, we believe they cannot by themselves sus-
tain growth indefinitely. The key to success will
be Gorbachev's ability to cope with some funda-
mental problems:
? Improving management efficiency and
worker morale will require an effective
incentive system and a better supply
of consumer goods at a time when
the investment sector will be oriented
toward producer goods. Investment in
some consumer sectors has apparently
received short shrift, risking consumer
discontent that will counter efforts to raise
productivity.
? The greater managerial independence nec-
essary for effective technological develop-
ment and resource use is inconsistent with
a centrally planned pricing and allocation
system.
? Industrial modernization is a process
best served by slack in the economy that
give plants the time to retool and learn
how to use new equipment. Gorbachev's
emphasis on immediate acceleration of
GNP growth means a continued priority
on current output - the major source
of the traditional reluctance of enterprise
managers to introduce new technology.
Thus, Gorbachev could be taking a consider-
able risk in implementing his modernization pro-
gram. If he tries to carry it out without raising the
overall investment rate for 1986-90, the impetus
to growth based on the 1986 plan is likely to trail
off after a few years, leaving the shortages and dis-
proportions characteristic of an unbalanced plan.
Shortchanging the energy sector after this year,
particularly oil, could result in a further sharp
decline in oil production. Already last year, falling
oil prices and a decline in sales to the West led
to a $3.5-billion drop in hard currency earnings.
An erosion of the same magnitude is possible this
year. To offset some of this loss, Moscow will
probably try to push arms sales, but lower oil
prices have resulted in a weak demand from major
Middle Eastern customers. Hard currency arms
exports fell about 30 percent in 1985 and could
fall again this year. Moreover, unless the USSR is
willing to underwrite Western imports through
massive borrowing - which seems unlikely -
Moscow may be forced to reduce imports of
state-of-the-art technology.
To maintain or restore the momentum to his
modernization program, Gorbachev could decide
to step up investment toward the end of the 12th
FYP by trying to curb the military's demand for
machinebuilding output and R&D resources. The
military obviously might become restless under
such a scenario while waiting for the deferred
improvements in the technological base of mil-
itary industry. Alternatively, Gorbachev could
find machinery for the modernization program by
curtailing the resources committed to consumer
durables production or the Food Program or by
leaning more heavily on Eastern Europe. Scaling
down resources for the consumer might be es-
pecially attractive if better than average weather
over the next few years resulted in unexpected
gains in agricultural output. In the absence of
such an upturn, however, Gorbachev's plans to
increase work effort would probably founder as
general disillusion set in, with the population see-
ing Gorbachev as no more effective than Brezhnev
or Chernenko.
Rather than direct more resources to invest-
ment, Gorbachev might seek to promote produc-
tivity through organization reforms. He could,
for example, permit some legalization of private-
sector activity, particularly in consumer services.
This would indicate willingness to overturn past
economic orthodoxy in order to improve con-
sumer welfare, and thereby, economic per-
formance. Although Gorbachev has taken a
conservative approach to reform measures so far
- preferring to work within the system - he
may be willing to introduce bolder measures once
his political support has solidified.
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In sum, major adjustments probably will have
to be made in Soviet economic policies if Gor-
bachev hopes to achieve his economic objectives,
although at this stage it is too early to tell just
what he will do. The one thing that appears
certain is that the new General Secretary remains
committed to his industrial modernization pro-
gram. Indeed, at the recently concluded 27th
Party Congress, Council of Ministers Chairman
Ryzhkov, in his keynote speech on the economy,
reiterated the ambitious targets laid out in the
draft guidelines of the 12th FYP. He repeated
the importance of investing more in machine-
building, while maintaining the large share, about
one-third, taken by the agro-industrial complex.
He also announced, however, that investment in
the energy sector would rise by 47 percent during
the 12th FYP. How the leadership intends to
achieve these rates of growth without squeezing
other sectors of industry - while staying within
the overall investment goal of 3 1/2 to 4 percent
per year - was not addressed, which suggests
that the leadership is still developing its resource
allocation strategy.
Whatever adjustments have to be made, Gor-
bachev is in a stronger political position as a
result of the personnel changes conducted at the
Congress. With the election of the Lev Zaykov
to the Politburo, Gorbachev gained an additional
ally with voting membership. In addition, ma-
jor changes were made in the Party Secretariat,
strengthening Gorbachev's hand there. Five new
Secretaries were added and two - Boris Pono-
marev, head of the International Department for
a quarter of a century and Ivan Kapitonov, a
Brezhnevite with the light industry portfolio -
were dropped. With these changes, only 2
Brezhnev-era officials remain on the 11-member
Secretariat.
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Appendix A
The economic growth rates presented in this paper are based on a major revision of the estimates
that have been published annually in CIA's Handbook of Economic Statistics and described in detail
in USSR: Measures of Economic Growth and Development, 1950-80 (issued in December 1982
under the aegis of the joint Economic Committee). The purpose of the revision is to base the
estimates on prices of a more recent year - 1982 instead of 1970. The results should be regarded
as preliminary and subject to further revision as more information becomes available.
The shift to a new price base affects estimates of GNP and its growth rates in three major ways
when compared with previous estimates:
? Values of output are higher, because prices in general increased between 1970 and
1982.
? Rates of real growth - excluding price effects - are lower for GNP and most key
components. This result is to be expected when prices of a more recent year are
used to calculate growth rates (the "index number" effect - see Inset). In converting
estimates of US GNP from 1972 prices to 1982 prices, the Department of Commerce
obtained similar results.
? Shares of key components of GNP are different because of the components experienced
diverse rates of change in both real growth and prices.
The estimates of Soviet GNP are calculated first by using prevailing 1982 prices and then adjusted
so as to measure better the actual allocation of resources in the economy and changes over
time in its potential to produce goods and services. Official Soviet prices give quite a distorted
To see why measured economic growth is likely to be lower, the more recent the price
base used in the calculation, consider an example. Suppose we want to estimate the real
growth in output of precision instruments, a group of products ranging from clocks to
automation equipment to computers. Depending on the base year chosen, the change
in relative prices of individual products in this group will differ because of differences in
technology, scale of production, and input costs. The prices of the new and fastest growing
products - like computers - tend to fall relative to other prices because of more rapid
gains from advances in technology and economies of scale. Therefore, the fastest growing
products will have smaller weights - and less impact on average growth of the group -
in a later base year than they would in an early base year.
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picture of the true costs of economic resources, largely because the prices include huge sales taxes,
levied mostly on consumer goods, and subsidies, which affect mainly food and services. Moreover,
the profits included in the prices do not reflect accurately the differences in efficiency among
producers. To correct for such distortions in official prices, a so-called "factor cost adjustment" is
made in which profits and indirect taxes are subtracted and subsidies and charges on fixed and
working capital are imputed. The resulting values give a much better picture of patterns of resource
allocation by producing sector and by final end use than the distributions shown by official prices.
Also, estimates of changes in GNP using factor cost valuations provide more accurate measures of
growth in production potential over time.
With both prices and real output rising, Soviet GNP increased by nearly 90 percent between
1970 and 1982, to a level of 720 billion rubles. Prices accounted for over a third of this increase,
implying a rate of inflation of a little more than 2 percent per year. In contrast, official Soviet
statistics for measures similar to GNP imply an inflation rate of less than half a percent per year
during that period. Most Western specialists believe that these official statistics seriously understate
the extent of price increases and therefore overstate Soviet economic growth.
Annual growth rates of Soviet GNP in real terms as measured in 1982 prices are with few
exceptions lower than previously estimated rates measured in 1970 prices (table 4). Shifting the
price base reduced annual rates of increase by a few tenths of a percentage point in the 1980s.
The differences between rates are a little larger in earlier years - half a percentage point or more
in the 1970s.
Table 4
USSR: Comparison of GNP Growth
at Factor Cost in 1970 and 1982 Prices
(percent per year)
1970
1982
1966-70
5.3
4.9
1971-75
3.8
3.1
1976-80
2.7
2.3
1981-85
2.4
2.2
1981
1.9
1.7
1982
2.4
2.7
1983
3.5
3.5
1984
2.0
1.5
1985'
2.1
1.6
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Table 5
USSR: Shares of GNP by Sector of Origin at
(percent)'
Value Added in
1970 Prices
Value Added in
1982 Prices
Industry
36.8
33.7
Construction
7.6
7.9
Agriculture
14.3
20.0
Transportation
10.4
10.3
Communications
1.2
1.1
Trade
7.7
6.3
Services
20.2
18.2
Military personnel
1.6
1.8
Other branches
0.3
0.7
GNP
100.0
100.0
The shift to a new price base had a significant effect on the relative shares in total output coming
from the two largest producing sectors - industry and agriculture (table 5). The share of industry
is smaller when measured in 1982 prices because average wages in industry increased much
less during 1971-82 than average incomes in agriculture, and the capital-output ratio increased
more rapidly in agriculture than in industry. The shares of the trade and services sectors dropped
somewhat, while the shares of the remaining sectors are little affected by the change in the price
base.
Impact on Estimates of Defense Spending
Moving Soviet defense spending estimates from a 1970 to a 1982 price base has affected
assessments of defense spending and its components in four major ways:
? The overall level of spending rose.
? The share of GNP allocated to defense spending increased from 13 to 14 percent in the
early 1970s to 15 to 17 percent in the early 1980s.
? Estimates of the rate of real growth decreased slightly.
? The shares of major resource categories in total defense spending changed.
The estimates of defense spending in 1982 prices show a higher overall level of spending than
did the 1970 series. The new series averages almost 50 percent higher for the period since 1970
than the series in 1970 prices, indicating that military costs increased about 3 percent per year.
When both price change and growth in real output are taken into account, the growth in defense
spending averaged over 5 percent annually during 1971-84. Price changes accounted for more
than half of this increase.
The change to a 1982 price base shows a somewhat higher share of GNP allocated to defense
than did earlier series. This result implies that prices for defense goods and services increased
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faster than for civilian goods and services. During 1966-84, total defense spending increased on
average by almost 3 percent annually - somewhat less rapidly than the series in 1970 prices.
The direction of this change in relative growth rates is what index number theory predicts (see
above), but it is not a large effect. One reason for this is that in the conversion to 1982 prices the
share of defense spending devoted to procurement increased, while the share of the more slowly
growing personnel category fell.
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Appendix B
Soviet economic performance in 1985 continued the uneven record compiled by the economy
during the just completed the 11th Five Year Plan. Disappointing farm output held GNP growth to
about 1 1/2 percent, the same as in 1984. After a poor first quarter, however, the pace of Soviet
non-farm growth - led by strong recovery in industry and transportation - had returned to its
recent annual rate of nearly 2 1/2 percent. Industry grew by almost 3 percent in 1985, but by
more than 3 1/2 percent in the last quarter. Agricultural output, in contrast, shrank for the second
year in a row, although an improved grain harvest allowed Moscow to cut grain imports substantially.
This reduction was helpful in dealing with a 20-percent drop in hard currency earnings, largely
the result of reduced oil and arms exports, although increased borrowing and gold sales also were
needed.
Industry
After showing a moderate improvement in 1983-84 from the depressed levels of the previous
2 years, Soviet industrial performance worsened abruptly during the first quarter 1985. The USSR
was hit by the coldest winter of the last 20 years. Industrial growth slumped. Output of several
industrial products was so low, in fact, that the customary data on their production were omitted
from official monthly plan fulfillment reports during the early months of the year. Nonetheless, for
the year, industrial production rose close to 3 percent, or roughly on par with the previous 2 years.
Machinery. Performance in all branches of industry improved during the course of the year. As
usual, however, the increase in machinery production - the major source of consumer, investment,
and defense durables - led most other branches, although growth for the year was below the
4-percent increase in 1984 (see table 6). Production of computers, high-tech machine tools, and
other types of automated equipment showed the best results. Growth in output of transport
equipment, in contrast, was slight.
Industrial Materials. While machinery posted the best results overall, the most significant
recovery was in the branches producing industrial materials - the raw materials and intermediate
products used throughout Soviet industry. After registering a 2 1/2 percent decline during first
quarter 1985 (compared with first quarter 1984), output of industrial materials rebounded to plus
2 1/2 percent for the year. Growth in the production of ferrous and non-ferrous metals was on a
par with 1984. The chemicals branch did somewhat better as the addition of four new ammonia
plants helped boost fertilizer output by 8 percent. Only the construction-materials branch failed to
rebound completely from the dismal first quarter in which output actually fell by 6 percent over
that of a year earlier.
Energy. Energy production continued to rise in 1985 with strong performances in the coal, gas,
and electric power sectors. Growth fell slightly, however, below that of 1984 due to a decline in
oil production.
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Table 6
USSR: Growth of Industrial Production by Branch'
Industry
2.3
1.6
1.4
2.9
2.9
2.8
Machinery
2.7
1.4
1.6
2.8
4.0
3.6
Industrial materials
2.2
1.6
0.7
3.7
2.3
2.5
Ferrous metals
0.8
-0.3
0.0
2.6
0.9
0.9
Nonferrous metals
2.0
0.3
0.8
3.0
3.0
3.0
Chemicals
4.1
4.0
2.1
6.9
3.5
4.3
Wood products
2.1
1.9
0.5
2.9
2.7
2.2
Construction materia
ls 1.3
1.3
0.1
2.0
1.3
1.6
Energy
2.2
1.9
2.2
2.3
2.8
1.8
Fuels
1.1
1.4
1.6
1.2
0.9
0.3
Electric power 3.6
2.5
3.1
3.7
5.2
3.5
Consumer nondurables 2.1
2.0
1.3
2.1
2.0
3.0
Soft goods 1.7
1.8
-0.5
1.2
2.8
3.0
Processed foods 2.4
2.2
2.8
2.9
1.3
3.0
' Value added at 1982 factor cost. Based on CIA's index of Soviet industrial production.
z Preliminary.
? Soviet oil production declined for the second straight year, to 11.9 million barrels per
day, or about 300,000 b/d below the 12.2 million b/d posted in 1984.
? The Soviet gas industry finished with a record-breaking 55-billion-cubic-meter increase
in 1985, a 9 1/2 percent jump over the previous year.
? Meanwhile, Soviet coal production increased by 13 million tons, the largest annual
increment during 1981-85, while electricity production climbed by more than 3 1/2
percent over 1984, almost reaching the plan target.
The Soviets were able to cope with declining oil production and less than expected output of
other fuels by cutting exports, by shifting some oil users to natural gas - a process expected to
continue over the longer term - and possibly by drawing down oil stocks.
Other Branches. Other industrial branches did fairly well. Overall growth of consumer
nondurables was about 3 percent in 1985, up from recent rates. Light industry was not unduly
affected by the bad winter, as textile production increased moderately. At the same time, the
food-processing industry showed a substantial improvement over 1984 - meat and fish products
did particularly well.
Agriculture
While industry posted a relatively good showing, Soviet farm output shrank slightly in 1985. A
small increase in overall crop production was more than offset by lower production in the livestock
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sector.' The same snow storms that hurt industry and spring sowing protected fall-sown grain and
helped replenish the soil moisture needed for a good crop. For the year, grain production totaled
an estimated 190 million metric tons according to USDA (the USSR has not published a grain figure
since 1980) - the best harvest since the record 237 million tons in 1978 and some 20 million tons
above the 1984 estimated results. But this achievement, together with increased production of
sunflower seed, fruits, and cotton, was largely offset by lower output of key crops such as potatoes,
sugar beets, and vegetables.
The setback in the livestock sector resulted largely from declines in the number of cows -
partly the result of culling of unproductive animals - and in the numbers of hogs, sheep, and
goats. Meat production was up by less than 1 percent. This result was unexpected in view of the
much more robust monthly growth reported for meat produced on state and collective farms that
accounts for roughly two-thirds of the total. The implied reduction in the share of meat produced
by the private sector may reflect an accounting shift from the private sector to production under
contract with state or collective farms, a practice the leadership is encouraging. Officially, meat
produced under such an arrangement is counted against state and collective farm targets.
Performance in other major sectors of the economy was mixed. Transportation - a major
problem in the early 1980s - proved to be another sector that rebounded from a negative first
quarter and turned in a fairly strong showing. The recovery of the railroads was particularly
impressive as rail freight traffic, which declined by 5 1/2 percent during the January-March period,
posted a 2-percent gain for the year - a much better result than would have been expected in
view of their poor performance after the weather-related strains of early 1982. Highway traffic was
also able to overcome some of its recent problems and showed positive growth for the first time in
3 years. Only crude-oil pipeline shipments, which were affected by declining oil production, were
lower than planned.
In contrast to the better news in transportation, probably the most disappointing showing from
the Soviet perspective was in the foreign trade sector. Declining oil exports to the West precipitated
an estimated 5 percent drop in overall trade - the first such reduction since the mid-1950s. Based
on Soviet trade data for January-September 1985, we estimate that exports to the West dropped
by almost 20 percent from the previous year - largely the result of declines of 20 percent in oil
earnings and 30 percent in Soviet arms exports. To offset the fall in earnings from lower oil sales,
the Soviets stepped up borrowing, increased gold sales, and postponed some planned purchases.
Imports from the West were down by as much as 8 percent. Overall, Moscow ended 1985 in a
less comfortable financial position than it enjoyed at the beginning of the year, although it has still
maintained its excellent credit rating.
Soviet trade with the Communist countries, in contrast, continued to increase in 1985. As in
the recent past, Soviet imports from Communist countries have grown faster than Soviet exports,
reducing Moscow's trade surplus with these countries especially its East European partners. Overall,
trade with the Communist countries grew by an estimated 7 percent (in ruble terms), and the share
of this trade in total Soviet trade increased to 61 percent, the highest level since 1972.
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8588
1
DIA/JSI-2C
C509
1
BALLISTIC RES LAB
B591
2
DIA/DI-5
C510
1
AV R&T ACTY/A VSCOM
A015
1
DARPA
8593
1
DIA/DB-1E
C 513
1
ARRADCTR
A024
1
DEF NUCLEAR AGCY
8597
1
DIA/DB-1 G1
C522
1
YU MA PG
A028
1
DSAA (PLANS/SUPT)
8602
1
DIA/VP-I
C523
1
ERADCOM/FI-A
A056
1
DSI
8609
300
DIA/DB-4E4
C525
1
SIG WAR LAB
A085
1
NAT DEF UNIVERSITY
8632
1
DIA/DB-4G2
C532
1
MEW ELCT WAR LAB
A086
1
NAT DEF UNIV (SCDC)
8633
1
DIA/DB-4G3
C535
1
AVIATION SYS CMD
Al 00
1
0SD
8640
1
DIA/JSW-3
1538
1
WHITE SANDS MSL RG
A102
1
OUSD(P)
8643
1
DIA/DB-4F1
C539
1
TRASANA
A103
1
OSO A5D5D NATO AFF
8644
1
DIA/DB-4D
C545
1
ARRCOM
Al 04
1
ODUSD(P)/CSP/IS
8645
1
DIA/DB-4D3
C550
3
CECOM
A109
1
OSD IODUSD(P)/IP&S
B661
1
DIA/DB-4F3
C562
1
TRANS SCH
A115
1
DASD ISA
8702
5
DIA/DX-5
C 569
1
MERADCOM
A11 7
1
DASD PAVE
B710
1
DIA/DX-4A2
C590
1
USATAC
A124
1
05D NET ASSESSMENT
8711
1
DIA/DX-4A1
C591
1
FSTC
Al 25
1
OUSORE
B712
1
DIA/DX-4B1
C605
1
1ST SOCOM
A134
2
DASD ISP/IET&SP
8718
1
DIA/DX5A
C617
1
CONCEPT ANLYS AGCY
Al 36
1
DASD ISA/T&ATP
8731
1
DIA/DX-6
0620
1
SRD
Al 38
1
OASD ISP/EUR- NATO
8735
1
DIA/DX-78
C633
1
ORDNANCE CTR & SCH
Al 50
1
STD JS E0 GW CM TP
B737
2
DIA/RTS-2B (LIB)
C635
1
AIR DEF AGCY
A151
1
OUSDRE (IP&T)
B744
1
DIA/DX-7A
C639
1
CMBT&TNG DEV DIR
Al 52
1
OUSORE (SAA)
8762
1
DIA/DB-6E2
C641
1
AVIATION CTR & SCH
Al 53
2
ASO (C3I)
8763
1
DIA/DB-6E3
C644
1
10G CTR
Al 54
2
0USDRE (R&AT)
B776
1
DIA/JSI-2E
C645
1
CA0RA
A155
2
OUSDRE (S&TNF)
8777
1
DIA/JSI-2A
C646
3
CACDA
Al 56
1
OUSDRE (TAP)
8778
1
DIA/JSI-2F
C667
1
USAJFKSWC
A157
1
OUS DRE (T&E)
B779
1
DIA/JSI-2D
C683
1
INTEL CTR&SCH
A158
1
ASD (A&L)(ACQ MAN G)
8781
1
DIA/DB-1 Cl
C684
3
USAISD
A205
1
DMAHTC, CODE SDTSD
8782
1
DIA/DB-1 C2
C697
1
TEST & EVAI COMO
A210
I
DMAAC
8783
1
DIA/DB-101
C715
1
ARMOR CTR
A302
1
JCS/CHAIRMAN
B785
1
DIA/JSI-2
C748
1
HODA DAMI-FRT
A303
1
ASST TO CJCS
B786
1
DIA/DB-1H
C757
1
SED
A304
1
JCS/SECRETARY
B789
1
DIA/DB-1 H1
C759
1
ADCSOPS-HUMINT
A307
1
USAISA
8792
1
DIA/DB-1 H3
C763
1
HQDA DAMI-FIT
A308
1
JCS/DIR JT STAFF
8812
1
DIA/DL-4 FRG
C 766
1
HQDA DAMI -FIC
A310
1
1OINTSP EC 0PSAGCY
8820
1
DIA/DIA REP JEWC
1768
2
ITAC (LIBRARY)
A315
1
JCS/J AD
B823
1
DIA/DIA REP SHAPE
C788
2
HDDA DAMI-FIS
A340
1
JCS/J-5 MIL SEC
8826
2
DIAREP RED ICENTCOM
C 798
1
1ST(BN) 1 SFGA
A350
A353
1
2
USDOCO USNMR SHAPE
JSTPS
B855
1
1
USD A0 VIENNA
A
C799
C802
1
1
1ST MI CO 1ST SFGA
R
A363
1
USNMR SHAPE
8858
8878
1
USDA0 BRASILI
USDAO HELSINKI
C81 3
1
USASSD BEIVOI
USAFS AUGSBURG
A368
1
USRMC/NATO
8888
1
USDAO JAKARTA
A706
1
JAD NAPLES
8892
U5DA0 TEL AVIV
A708
1
OSD/OES
8896
USDAO TOKYO
A835
1
UNIT MM
8898
USDAO SEOUL
D001
CO MNAVOC EA NO
8902
USDAO KUALA LUMPUR
D002
D007
OP-91 (DNM)
8916
8921
U5DA0 MANILA
USDAO RIYADH
D008
NIS HO (NISC-22P)
N I S C
8001
1
DIP/DR
8927
USDAO STOCKHOLM
D027
OP-32
8002
1
DIA/DO
8928
USDAO BERN
D031
NAVAIR PRO PC EN
B003
1
DIA/DR (PROD REV)
8931
USDAO BANGKOK
D043
NAVF ITREPS COI
8004
50
DIA/DI-1
8937
0047
OP-37
8030
032
1
10
DIA/ED
DIAIJSJ
8948
D058
D150
OP-65
)
8
8040
1
DIA/DIO
0151
CMC (INTP
NA VEODTECHCEN
8054
1
DIA/DT-4A
0152
NISC -OFM
8055
1
DIA/DT-4B
C020
2
DCS-OPS&PAANS
D153
P ACMISTESTCEN
8060
1
DIA/RTS-2A5 PENT
C043
2
AFMIC
D159
NAVAIRDEVCEN
8068
1
DIA/DT-4C
C046
1
WRAIR
0184
NAVSTRKWARC EN
8080
1
DIA/NWS
C080
1
INFOSY50FTWSUPTCMD
D202
NAVWARCOI
8093
1
DIA/RSM-1
C081
1
USARI
D217
NAVWPNCEN
8100
20
DIA/DB
C090
1
TECOM/BEEO
D220
ONR
8102
I
DIAID B (SPEC ASST)
C201
1
HO I CORPS
D246
NAVSURFWPNCEN DAHL
B1 32
1
DIA/DE-D
C202
3
303RD MI BN
D247
NAVSURFWPNCEN WORK
8139
1
DIA/DE4 TRANS NAT1
C206
1
124TH ARCOM
D248
NAVSEASYSCOM
B1 40
1
DIA/DE-1 (GROUND)
C207
1
1IMRES
5249
NAVPGSCOI
81 41
1
DIA/DE-1 (NAVY)
C227
1
101ST AIRBORNE DIV
D256
NAVSH IPWPSY SE NGS TA
8142
1
DIAIDE -1 (POI/MIA)
0231
1
COMMANDER
D258
DTNSRDC
8159
1
DIA/DT-5A1
0232
1
3RD ARM CAV REST
D261
NUSC NPT
B160
1
DIA/DT-1B
C234
1
1ST CAV DIV'
D263
NO SC
B1 62
1
DIA/DT-5A2
C239
1
2030 MI BATTALION
D264
OP-35
8163
1
DIA/DT-5B
0243
1
FIFTH US ARMY
D321
NAVSECGRUACT
8166
1
DIA/DT-2
C 244
1
11TH ADA BRIGADE
D359
F IE CO MBATRAC EN I ANT
8167
1
DIA/DT-2B
C247
1
THIRD US ARMY
D361
F IEMINEWARTRACEN
8168
1
DIA/DT-2C
0251
1
50TH ARM DIV
D433
FLEA S WTRAC EN I ANT
B169
1
DIA/DT-2D
C297
1
245TH PSy OP CO
D447
NIONIAB NUSC
8252
1
DIA/0S-4C
0298
1
244TH PSYOP CO
D491
NAVIIAISo NU MUNICH
B311
1
DIA/DC-6
C300
1
172ND INF BDE (AK)
D496
DIR SSPO
8331
1
DIA/RTS-2A2
C302
1
2ND PSYOP GROUP
0507
COM INEWARCOM
8335
1
DIA/DC-7A1
0303
2
4TH PSYOP GROUP
D511
NA VAIRS VS COM
8345
1
DIA/RTS-2C(VJ)
C304
5TH PSYOP GROUP
D559
NA VMEDR S C HDEV COM
8351
1
DIA/RTS3A4
C309
500TH MIG
D561
NWEPEVIFAC KIRT AND
8352
100
DIA/RTS2F
1348
453D MID
D576
FIRSTPAC 0370
8361
1
DIA/DB-1B1A
C350
454TH MID (STRAT)
D583
FIRSTPAC 0919
8364
1
DIA/DB-1B1C
C351
10TH SFG(ABN)15TSF
D641
NSGDET NORFOLK
8367
1
DIA/D8-4G
C399
837TH MID (STRAT)
D766
NAV CO A S TSY SC EN
8541
1
DIA/DB-4E1
C412
CISI GS EC S P B N PSF
D900
NAVOP IN T CEN
8542
1
DIA/DB-4E5
C414
4TH INF DIV
D902
NAV0PINTCEN DET NP
8545
1
DIAIV P
C415
5TH INF DIV (M)
0910
OP-009G
B549
1
DIA/VP- PDO
C41 7
7TH INF DIV
D914
OP-605E9
8552
32
DIA/DI-68
C419
9TH INF DIV
D971
OP 009Y2
8565
1
DIA/DB-1 F1
C420
75TH INF RANGR REG
B571
1
DIA/DB-4G1
C428
OP TEST&EVAI AGCY
8575
1
DIA/DB-1
0454
FLO ARTY SCH
8579
1
DIA/JSI-2B
C459
COMD-GEN STF C01
E016
1
AFIS/INC
8580
1
DIA/DB-1B3
C460
ENGINEER SCH
EO17
1
HO USAF/INA (W)
B581
1
DIAID B-18
C461
INFANTRY SCH
E018
1
HO USAF/INA (C)
8582
1
DIA/DB-1C
C467
MS1-MUN CEN - SCH
E021
1
DET 1, AFIS
8583
1
DIA/DB-1D
C 468
QUARTERMASTER SCH
E053
1
HO USAF/INET
8584
8586
1
1
DIA/DB-1B2
DIAID B-4D1
0470
00
ARMY WAR COI
TRADOC
E054
E100
1
90
HQ USAF/INER
TAC 480 RTG/INPPD
8587
1
DIA/DB-4F
C5
C505
MATERIALS TECH LAB
El 04
1
4513 TTG/INOI
Declassified and Approved For Release 2012/03/01: CIA-RDP08SO135OR000300730001-4
 Declassified and Approved For Release 2012/03/01: CIA-RDP08SO135OR000300730001-4
E200
AAC
H005
1
USCINCEUR
E231
HQ USAF/IERX (CM)
H100
1
HO USAFE/INS
E281
AFOTEC/XPQ
H 1 01
1
USAFE 497RTG (IRC)
P005
DOE/DA5I
E303
HQ USAF/INEGD
H300
1
ODCS IN(USAREUR)
P115
NPIC/IEG/MSE&C3
E310
HQ USAF/ XOXA
H500
1
CI NC US NAVE UR
P 01 6
NPIL/IEG/SOV AIR
E317
HQ USAF/SAMI
H506
1
1OMIDEASTFOR
P017
NPIL/IEG/NAW/NSTI
E400
HQ AFCC/IN
H511
1
COMSIXTHFET
P 01 8
NPIC/IEG/SSWFETVD
E401
HQ OPEC/IN
H525
1
HO VII CORPS
P020
NPIC/IEG/N/NW/TVD
E405
AFRPE/IN
H701
1
FOSIF ROTA
PO55
CIA/OCR/DSD/DB
E407
BM0/IN
1005
1
USCINCCENT
P079
STATE INR/PMA
E408
AFW1
1005
1
USCINCCANT
P081
STATE INR/EC
E410
HO AD/IN
J010
1
CO MUSF0RCARIB
P085
STATE
E41 1
ASD/FTD/TQIA
J502
1
C0MSE CO ND FLT
P090
NSA
E 41 3
ISO/INS
J51 5
1
FICEUREANT
P1 00
NAT SEC COUNCIL
E41 5
OC - AIC/XRO
J654
1
TACTRAGRUTANT
P109
PFIAB
E416
HQ AF SC 'IN' IG
K007
1
COMUSJAPAN
Pill
WH SIT ROOM
E429
HO SPACE DIV/IND
K 1 01
1
PACAF/INOI
P112
WH MIEIT ARY OFF
E436
AFEWC/ESRI
K300
1
IPAC (LIBRARY)
P1 75
US CUSTOMS SERVICE
E437
AFIS/INDI
K313
2
IPAC (CODE IA)
P700
VICE PRESIDENT
E438
3480 TCHTW/SSO R1
K31 4
1
IPAC (CODE PT)
P702
CIA/NIO/GPF
E451
AU1/LSE
K320
1
USARJAPAN
G420
FTD/SII5
E550
1
HQ ESS/IA
K500
1
CINCPACFLT
0619
MSIC REDSTONE
E555
1
6916 E55
K505
1
FICPAC
R025
COMMERCE
E556
1
6917 ESG
K510
1
COMNAVFORJAPAN
R048
FEMA
E559
1
6931 ESS
K514
1
COM THIRDF LT
R066
USCG OIS
E560
1
6949 ESG
K515
1
COM SEVENTHFLT
R069
USCG ICC
E563
1
6948 ESS (M)
K520
1
IFTCPAC
R082
NNBIS
E567
1
6985 ESS
K645
1
FOSIF WESTPAC
R083
USCG DISTRICT 8
E699
1
USAF FED IIASN OFC
K710
1
FISC WESTPAC
R084
COORD SE REGION
E706
1
HO ESC/INYQ
1005
1
HQ SAC (INS)
R086
SOUTHWEST NNBIS
E726
2
USAFTAWC/IN
1040
4
SAC 544 SIW/DAA
R087
NORTH BORD NNBIS
E730
1
HQ USAF/XOOIR
1044
1
HQ SAC/INA
R135
USIA
1045
1
544 SIW/DIA
IA NI
1107
1
8 AF/IN
S013
1
E11
1110
1
15 AF/IN
5030
1
FRD hIB OF CONS
F005
1
CINCMAC
M005
1
USCINCSO
------------------------------ - ------
G005
1
HQ SPACECOM/INO
N005
1
USREDCOM
399 CUST'S
1063
COPIES
C515
CHEMICAL SYS EAB
1539
TRASANA
6331
1
DIA/RTS-2A2
C591
FSTC
E100
2
TAC 480 RTG/INPPD
8352
5
DIA/RTS-2F
C644
6OG CTR
E420
2
FTD/SIIS
B580
1
DIA/D8-1B3
C667
USAJ FKSWC
E563
1
6948 ESS (M)
8813
1
DIA/D1-5 JAPAN
C768
ITAC (LIBRARY)
E567
1
6985 ESS
8934
1
USDAO MOSCOW
E699
1
USAF FED EIASN OFC
E706
1
HQ ESC/INYQ
D043
NAVFIT WEPSC01
C242
FORSCOM
D049
ASWSY SP ROJO FF
C302
2ND PSYOP GROUP
0153
PA CM IS TES TC EN
1005
1
USCINCCENT
C311
305TH PSYOP BN
1184
NAVS TR KWARC EN
K115
1
5TH AF
C312
64TH ENGR DET (T)
D216
NAVWPN5 UPPCEN
K300
1
IPAC (LIBRARY)
C351
10TH SFG(ABN)1STSF
D261
NUSC NPT
K668
1
COMSUBPAC
C414
4TH INF DIV
D360
NORDA
C417
7TH INF DIV
D447
NEONEAB NUSC
C440
USAFS BERLIN
D580
FIRST PAC 0794
C 442
USAFS MISAWA
D583
FIRSTPAC 0919
C500
TRADOC
D700
CGMCD EC
Declassified and Approved For Release 2012/03/01: CIA-RDP08SO135OR000300730001-4