THE SOVIET DEFENSE INDUSTRY: COPING WITH THE MILITARY-TECHNOLOGICAL CHALLENGE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00787R000400500001-7
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 44
• Document Creation Date: December 22, 2016
• Document Release Date: September 6, 2011
• Sequence Number: 1
• Publication Date: December 1, 1986
• Content Type: REPORT

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Directorate of
Intelligence
The Soviet Defense Industry:
Coping With the Militar -
Technological Challenge
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JOB NUMBER 7
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SOV 86-10060JX
ecev mbel' 1986
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Directorate of Top Secret
Intelligence 25X1
Coping With the Military-
The Soviet Defense Industry:
Technological Challenge
Office of Soviet Analysis.
Researc
SOYA, the Office of Scientific and Weapons
Contributions were provided by analysts from
SOYA
Comments and queries are welcome and may be
directed to the Chief, Defense Industries Division,
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SOV 86-10060JX
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The Soviet Defense Industry:
Coping With the Military-
Technological Challenge F_
Summary Ithe Soviets by the early 1970s were 25X1
Information available becoming increasingly worried about the growing military-technological
as of 21 October 1986 challenge posed by the United States. Circumstantial evidence suggests the
was used in this report.
defense leadership was persuaded that its traditional approach of relying
on superior numbers of weapons to offset Western technological advan-
tages would not meet this challenge. 25X1
key defense planners believed 25X1
if the USSR was to compete effectively with the military power of the
United States, the weapons industries required extensive and sustained
modernization. 25X1
Before the 1970s, the Soviets had paid greater attention to expanding
production capacity than to improving manufacturing technology.
Throughout the 1950s and 1960s, roughly two-thirds of capital investment
in industry as a whole was devoted to construction, leaving on average less
than one-third for the acquisition of machinery and equipment.
J the defense industry applied its investment funds in a similar manner.
This policy, together with low replacement rates for obsolete machinery
and equipment and the fact that even new defense plants were often
equipped with machinery designed years earlier, resulted in a largely
outdated manufacturing capability
The Defense-Industrial Modernization Program
In the early 1970s, the Soviets began a comprehensive modernization of
their defense industry.
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an 25X1
upgrading of the entire tank industry, including the construction of modern
manufacturing facilities and the installation of state-of-the-art machinery
and equipment. major capital improvements in 25X1
other defense industries. Our analysis of the Soviet machinery sector-
responsible for the production of consumer durables, investment goods, and
military hardware-suggests that between the early and late 1970s the
share of investment in the defense-industrial ministries increased substan-
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The USSR also embarked on programs designed to support this upgrading
of the defense industries:
? There was a step-up in the development of advanced machine tools,
computers, and microelectronic devices-equipment needed to produce
advanced weapons and improve productivity. Much of this work was
undertaken within the defense industry itself.
? As legal imports of Western plant and equipment soared in the early
1970s,
Access to Western manufacturing equipment, processes,
and know-how has enabled Soviet defense plants to introduce some
advanced weapons into production up to five years earlier than would
have been possible with indigenous capabilities.
? The Soviets improved the coordination between weapon designers and
producers and tried to involve more than one ministry or plant in the co-
operative production of a given weapon system, measures which have
helped reduce unnecessary duplications of effort.
This commitment to defense-industrial modernization appears to have been
helped by the rise of Dmitriy Ustinov, who had been gaining favor,
position, and power since the mid-1960s. He had long advocated Western-
style management techniques, and the policies he implemented clearly
indicate that he believed general economic growth and modernization to be
the bedrock of the USSR's defense potential. His appointment to the
position of Minister of Defense in 1976 and the subsequent appointment of
like-minded subordinates probably signaled a coalescence of views on the
broad guidelines of defense-industrial modernization policies.
Results of the Program
The pace and scope of the defense-industrial modernization effort to date
have been uneven. Much of the effort has been in the form of new plant
and equipment rather than major retooling of existing facilities, suggesting
that considerable renovation still needs to be done in older facilities.
Moreover, the level of technology even in new production facilities often
lags well behind the overall level in the West. Nevertheless, the expansion
of manufacturing facilities and selected improvements in production
technology have given the defense industries the plant and equipment
needed to produce 90 percent of the hardware that the Intelligence
Community is projecting will be deployed by the end of the decade, as well
as the advanced weapons that we expect to be fielded through the early
1990s. Attesting to the progress the Soviets have made in modernizing
their defense industries is the number of new systems already in production
that demand relatively advanced manufacturing technology and equipment
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to meet requirements for miniaturized componentry, new materials, and
complex surface geometries. These include T-80 tanks; MIG-29 and SU-27
interceptors; Sierra-, Oscar-, and Akula-class attack submarines; and SA-
12 surface-to-air missiles. 25X1
The introduction and widespread application of more costly equipment sets
and integrated production lines require more time than modernizing with
the less sophisticated technology used in manufacturing earlier weapon
systems. 25X1
was not-as had been the 25X1
case in earlier period ollowed by ar25X1
upturn in the growth rate of military hardware production. A larger
number of defense-industrial facilities were producing at lower rates or not
producing at all. 25X1
The rising dependence of the defense industries on materials and compo-
nents produced by civil industry probably provided added impetus to Soviet
efforts, begun in the late 1970s, to upgrade the increasingly antiquated
civilian production base. Leonid Brezhnev introduced measures to share
defense management expertise with the civilian sector, to apply the
military model to spur scientific and technological progress, and to reorient
the Academy of Sciences and universities to applied research. At the same
time, growth in investment in the defense hardware ministries was scaled
back and investment in civilian machine building accelerated. In 1985,
Mikhail Gorbachev not only endorsed these measures but also further
stepped up the provision of resources to civilian machine building (invest-
ment planned for civilian machine-building ministries in 1986-90 is 80
percent higher than the actual investment in 1981-85). His program singles
out advanced machine tools, robotics, microelectronics, computers, auto-
mated management systems, and telecommunications for greater funding.
In each of these areas, he has initiated technology development programs
with extensive defense-industrial participation.
Outlook for Defense Industry
Over the next decade, Soviet defense industrialists will have to deal with a
mixture of old and new challenges:
? We estimate that the costs of Soviet weapon systems have increased
appreciably with the introduction of each new, more capable system
within a given weapon class. Although modernization has helped the
Soviets to increase productivity in the defense-industrial sector and to
limit cost increases, the growing costs of technological development and
exploitation will continue to drive up weapon costs, confronting designers
and producers with pressures to economize.
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? More capable weapon systems probably will allow replacement of certain
older military equipment on a less than one-for-one basis, easing the
production burden but increasing the need for exacting tolerances and
strict quality control.
? Retrofits of older equipment, now under way for a large portion of the
Soviet arsenal, ease demands on weapon assembly plants; but suppliers of
radioelectronic components and subsystems, computers, and advanced
materials will be hard hit as they must support both new and retrofit
programs.
The USSR probably will produce and deploy larger numbers of less
capable weapons than the United States when doing so compensates for
technological shortcomings or is a more cost effective way to meet military
requirements. Moreover, the Soviets have often succeeded in translating
technological achievements into weapon systems more rapidly than the
West does. Thus, the technological levels of deployed Soviet and Western
systems are more comparable than are the general levels of technology.
Over the longer term, however, the Soviets are almost certain to place even
greater emphasis on the development and manufacture of sophisticated
weapons that require upgraded industrial technology.
This will be a tall order. Gorbachev must contend with increasing resource
constraints, a government hobbled by organization and systemic barriers to
quick progress, and an incentive system that still retards industrial
innovation. He also faces an increasingly sophisticated and reinvigorated
military challenge from the West, including the Strategic Defense Initia-
tive. And his civil-industrial modernization program will compete for
machinery and equipment resources with the ongoing modernization of the
defense industries. Many defense plants, for example, need further upgrad-
ing with more precise and flexible computer-controlled machine tools,
special equipment to process new structural materials, and sophisticated,
nondestructive testing equipment.
Gorbachev's strategy seems directed in part at providing the requisite
breathing space to give his investment policy a chance to work. Domestical-
ly, he apparently has convinced most of the leadership-at least for now-
that the modernization of civil industry ultimately will benefit the defense
industries and the military. In foreign policy, his recent arms control
initiatives, summit diplomacy, and efforts to mend fences with Western
Europe, Japan, and China are reminiscent of Soviet foreign policy leading
up to the detente period of the 1970s. An improved East-West relation-
ship-particularly if formalized by an arms control agreement-would buy
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Gorbachev more time to implement his domestic economic agenda. Even
so, the competition between defense and those components of civil indus-
tries not directly supporting military-related production is likely to grow in
the late 1980s and early 1990s as the Soviets begin to tool up for
production of the next generation of weapons. If the performance of the
civilian machine-building sector has not improved sufficiently by then, the
Soviets will have to choose between delaying continued retooling of the
defense industry or cutting back the ambitious goals for upgrading civil
industry
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Background
Massive Military-Industrial Complex
I
Aging Production Technology
2
Functional Weapon Design and Performance
2
The Challenge: Developments in US Technology
4
Defense Industrial Modernization
8
New Defense Leadership
8
Modernizing Weapons Production
10
Spurt in Investment in the Defense Industries
10
Upgrading Management
12
Modifying Building Designs
12
Upgrading Production Technology
14
Microelectronics and Computers
16
Shifting the Focus Toward Civil Industry
The Brezhnev Program: Modernizing on the Cheap
20
The Gorbachev Agenda: Matching Rhetoric With Rubles
22
Implications and Outlook
Resource Allocations: Competition at the Margin
24
Technology: Following the West
Playing for Time
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Scope Note This paper analyzes Soviet efforts, which began in the early 1970s, to
prepare the defense industry and its support base for the military-
technological competition in the 1980s and 1990s. It also assesses the
political, military, and economic implications of this modernization pro-
gram.
Our analysis is based on evidence from Soviet policy statements, invest-
ment trends, and weapon programs and draws from substantial research on
the Soviet military-industrial complex undertaken over the last few years in
the Office of Soviet Analysis and other offices of the Directorate of
Intelligence.
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The Soviet Defense Industry:
Coping With the Militar -
Technological Challenge
To offset their lower level of technological sophistica-
tion and economic performance, the Soviets (and the
Russians) historically have relied on a three-track
strategy in their military rivalry with more techno-
logically and economically advanced Western powers.
First, they have devoted very large amounts of high-
quality material and human resources to the military-
industrial complex and its programs, often at the
expense of other economic sectors. Second, they have
developed a program for weapons research, develop-
ment, and production that plays to the strengths of
their industrial base. Third, they have extensively
exploited Western military-technological advances.
Table 1
Soviet Ministries Primarily Engaged
in Defense-Industrial Production
Aviation Industry (MAP) Aircraft, aerodynamic missiles, de-
fensive missiles (both tactical and
strategic), tactical air-to-surface
missiles, and antisubmarine war-
fare (ASW) missiles.
General Machine Building Liquid- and solid-propellant ballis-
(MOM) tic missiles, including submarine-
launched missiles (SLBMs); SLBM
fire-control systems; space launch
vehicles; spacecraft; surface-to-
surface cruise missiles; and high-
energy lasers.
Massive Military-Industrial Complex
By sheer political will and enormous allocations of
investment and manpower, the Soviets have created
the world's largest weapons industry.' Nine industrial
ministries-including the leaders in most industrial
technologies-dedicate most of their efforts to the
provision of military materiel (see table 1). At any one
time, more than 1,500 development and test facilities
are engaged in the development of 150 to 200 new
weapon and military support systems or major modifi-
cations of existing systems. Concurrently, about 150
major assembly plants, supported by thousands of
component and material production facilities, are
engaged in the production of about 300 major weapon
systems. These combined efforts have allowed the
Soviets to field, on average, about 140 major new
systems and 200 to 400 major upgraded systems
during each of the past two decades.
Shipbuilding Industry
(MSP)
Conventional ground force weap-
ons, mobile solid-propellant ballis-
tic missiles, optical systems, anti-
tank guided missiles, tactical
surface-to-air missiles, lasers, and
ASW missiles.
Naval vessels, naval electronic and
support systems, mines, torpedoes,
submarine detection systems,
acoustic naval systems, and radars.
Radars, communication and navi-
gation equipment, special-purpose
computers, guidance and control
systems, lasers, and airborne fire-
control systems.
Medium Machine Building Nuclear weapons and high-energy
(MSM) lasers.
Machine Building (MM) Conventional ordnance, munitions,
fuses, and solid propellants.
Electronics Industry (MEP) Electronic parts, components, and
subassemblies.
Communications Equip-
ment Industry (MPSS)
Communication equipment, radar
components, electronic warfare
equipment, military computers,
and facsimile equipment.
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Aging Production Technology
Soviet leaders have long relied on massive infusions of
plant and equipment to transform the economy and
spur economic development. In every ministry they
have created large staffs and institutes charged with
promoting advances in production technology. They
have developed massive systems for technical infor-
mation to inform managers and workers of new
production technology. They have tried variously to
induce or require such advances by manipulating plan
targets and incentives, including adopting "certifica-
tion" procedures to force machinery and equipment
producers to meet "world standards."
These approaches have yielded incremental modern-
ization throughout the economy, with the defense
industry-by virtue of its favored position-having
achieved a more rapid pace of modernization. Soviet
literatur indicate that each new
defense plant has been equipped with at least some of
the best available machinery and tooling. The mod-
ernization of production technology for new weapon
programs has had a high priority; the decree govern-
ing each program specifies in detail the obligations of
all contributors, including machinery and equipment
suppliers. Defense industry has also had priority
access to suppliers, including not only foreign and
domestic civil industry but also its own in-house
support base. Indeed, the realization in the 1950s that
future weapon systems would require new technol-
ogies probably led the Soviets in the late 1950s and
early 1960s to begin development of solid-rocket
production technology, advanced metallurgy, compos-
ite materials, and a modern semiconductor industry
directly under the control of one or more of the
ministries principally engaged in defense production
of military hardware.
Nevertheless, most Soviet weapons were manufac-
tured by an industrial base that was antiquated by
Western standards. The expansion of defense-
industrial capacity-for example, in the aerospace
industry-was accorded higher priority than mea-
sures designed to encourage technological innovation
and increase productivity. The limited technical de-
mands imposed on the manufacturing base by the
weapons of that era and a relatively plentiful labor
supply encouraged-or at least permitted-such a
policy. Throughout the 1950s and 1960s, the Soviets
devoted little more than one-third of their capital
investment in industry to the acquisition of machin-
ery. By comparison, in the mid-1970s nearly three-
fifths of US industrial investment was directed toward
reequipping and modernizing the manufacturing fa-
cilities. As a result, the level of technological sophisti-
cation of Soviet machinery inventories grew slowly.
Indeed, the average service life of Soviet industrial
equipment has been estimated at 20 years, compared
with average lives of 10 years in France, Germany,
and Italy, and 12 years in the United States.
low retirement rate-and its negative effects-also
prevailed in the Soviet defense industries. Signs of
high-level concern over lagging efficiency in the de-
fense industry began to appear in the 1960s, and in
1963 then First Party Secretary Nikita Khrushchev
complained that although "the defense industry is
coping successfully with creating and producing mod-
ern weapons ... these tasks could have been carried
out more successfully and at a lower cost."~
Soviet statements indicate that defense
managers preferred to retain old, yet reliable equip-
ment and to build new plants rather than to suffer
downtime associated with the startup of new equip-
ment and plant renovation.' In addition, Soviet devel-
opers of production technology and equipment worked
in relative isolation from weapon designers and pro-
ducers, frustrating efforts to coordinate the advances
in production technology needed for some new weapon
systems. In contrast, US defense industry since at
least the late 1960s typically has planned on replacing
equipment every eight to 12 years.
Functional Weapon Design and Performance
Taking into account this production base, the Soviets
took a pragmatic approach to weapons development,
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stressing predictable, low-risk development programs
and weapons that could be readily produced in large
numbers. Designers consciously avoided the use of
technically unproven materials and components
most weapons could be manufactured
with general purpose machinery and equipment oper-
ated by a semiskilled work force.
Although this
design approach limits the pace of technological ad-
vance, the Soviets were able to achieve a combination
of large-scale deployment and sufficient overall sys-
tem performance to mitigate the technical deficiencies
of individual subsystems and components, while al-
lowing easy operation and maintenance in the field by
a conscript force with minimal technical skills.
Moreover, during the late 1960s and early 1970s, the
Soviets made considerable progress in developing and
proving new weapon technologies while exploiting the
positive aspects of their weapons acquisition process.
In particular, the Soviets emphasized technical areas
such as electronics and communications that support-
ed many of the advances in weapons performance that
took place in the 1970s. Simultaneously, we saw a
premium placed on those features of their acquisition
process that encouraged program stability and pre-
dictability. These longstanding practices were set
forth in the Unified Military-Technical Policy
(UMTP), which first appeared publicly in the 1974
edition of Marshal Grechko's book The Armed Forces
of the Soviet State. It is essentially the codification of
a number of practices that date back to the 1950s and
calls for a "systematic approach" to weapon develop-
ment, including:
? Selective but preferential development of those
technologies that have the greatest potential for
enhancing future military capabilities.
? Weapon development criteria that seek both the
highest tactical-technical characteristics and the
lowest possible cost.
? Monitoring the systematic improvement of the
weapons of all branches of Soviet forces, using
systems analysis and forecasting, and keeping a
close eye on Western achievements in science and
technology.
? Creation of weapons and equipment that are easy to
operate or that can permit reductions in military
labor, especially through automation and
mechanization.
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? Improvements in command, control, and communi-
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As a result of the design philosophy, the weaker
technology base, and the industrial constraints de-
scribed above, Soviet weapons generally have been
inferior to US weapons in terms of performance and
mission capabilities. To compensate for these deficien-
cies, the USSR has relied on numerical superiority, 25X1
strong management of the weapons acquisition and
assimilation process, crash programs, and access to
Western technology:
quantitative
superiority, particularly in land arms, has often
been judged to be the most feasible way to counter-
balance the generally higher level of performance
and reliability of US systems. Soviet experience in
World War II have
indicated that the USSR expects even heavier losses
in a nuclear conflict. Thus, the Soviets have pro-
duced large numbers of comparatively unsophisti-
cated, specialized systems to counter the more capa-
ble, multimission weapons of the West. Indeed, even
in the mid-1980s, when US force expansion and
modernization peaked in many areas, Soviet produc-
tion of major types of weapons almost invariably
exceeded US production (see table 2).
? To help speed the production and deployment of
new weapon systems, the Soviets have developed a
centralized weapons forecasting and planning pro-
cess, managed by a powerful government agency-
the Military-Industrial Commission (VPK). The
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Table 2
US and Estimated Soviet Production
of Major Weapon Systems, 1974-84
ballistic missiles
Surface-to-air missiles
Long- and intermediate-range bombers
6
340
Fighters
5,600
11,700
Tanks
8,795
31,500
Artillery
5,250
30,000
Note: Where sufficiently large to express order
of magnitude, the numbers have been rounded.
Soviets attempt to minimize the time for the formu-
lation of requirements and for development approv-
al, maintain stable design teams, and strictly ad-
here to program schedules.
? Analyses of weapons indicate that the Soviets move
quickly to incorporate newly proven technologies-
even if behind Western research and development
(R&D) advances-into deployed systems. In most
weapon areas, programs to develop new or signifi-
cantly modified systems have been authorized about
every five to 10 years. The Soviets have modernized
forces by steadily upgrading proven weapons when
new subsystems-such as fire control-become
available and can be adapted.
? When revolutionary military technology advances
have been necessary, the USSR has spent lavishly
and established high-level oversight bodies to devel-
op fundamentally new systems-such as ICBMs,
nuclear weapons, and possibly, more recently, di-
rected-energy devices.
? Where possible, the Soviets have acquired and
exploited cost-saving Western technology to up-
grade their research, development, and production
base.
This approach worked well for most of the postwar
period. The USSR was able to field enough weapons
of sufficient quality to erode or eliminate the US lead
in key strategic and general purpose mission areas.
The Challenge: Developments in US Technology
Even by the early 1970s, however, the Soviets had
become increasingly concerned about the ability of
the United States to shift the military balance deci-
sively in the West's favor by exploiting its superior
technology. military
writings during the early-to-mid-1970s catalogued a
long list of future US weapons that worried the Soviet
the Soviets viewed the eventual deployment of these
systems, then slated for the 1980s and 1990s, as a
direct threat to their hard-won military gains during
the first three postwar decades:
in terms of the size-weight characteristics of war-
head materials and guidance systems. The highly
accurate MX, Trident II, and Pershing II missiles
placed fixed, hardened strategic forces at risk; im-
proved submarine sensors and the ever-increasing
quietness of US attack submarines increased the
vulnerability of relatively "noisy" Soviet ballistic
missile submarines; and space-based weapons would
pose a potentially serious threat to Soviet overhead
command, control, communications, and intelli-
gence systems. Other US developments-including
a comprehensive upgrading of command, control,
and communications, and deployment of the Trident
SSBN-promised to increase the survivability of
US forces.
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? Strategic defense. The anticipated capability of the
US B-1B, strategic cruise missiles, and future
stealth aircraft to evade radar detection and the
expected deployment of the Pershing II missiles
threatened to overwhelm Soviet strategic defensive
forces.
? General purpose forces. The M 1 tank-expected to
engage three to four opposing tanks-represented a
significant improvement in firepower, fire control,
and armor. Smart munitions threatened both Soviet
ground weapons and naval surface vessels. And the
F-15, already by the early 1970s a proven air-
superiority fighter scheduled for widespread deploy-
ment in the US and NATO arsenals, was unequaled
by Soviet aircraft on the deployment horizon.'
The Soviet defense leadership could have chosen to
offset the increasingly superior performance charac-
teristics of Western weapon systems by relying on its
traditional approach of fielding ever-increasing num-
bers of relatively less advanced weapons. Events of the
early 1970s, however, argued against such a strategy.
The Soviets had begun to make advances in basic
weapons-related technologies-advanced materials
such as composites and titanium, and components
such as microelectronics-that were making major
improvements in weapons performance possible (see
inset). At the same time, operations research in the
United States and other Western defense establish-
ments was beginning to show that the numbers of
weapons required to overcome major performance
gaps and effectively balance force capabilities were
too large to be feasible. These findings were consistent
with the results of the 1973 Middle East War in
which Soviet-armed Syria and Egypt suffered heavy
losses of weaponry relative to their Western-equipped
adversary, Israel. In addition, Soviet demographic
Improving Weapon Capabilities:
The Need for Advanced Materials
The increasing use of sophisticated new materials is
supporting advances in the technical characteristics
of weapons:
? Titanium-heralded as the space-age metal be-
cause of its high strength-to-weight ratio, excellent
ductility, and high heat and corrosion resistance-
is used in aircraft, submarines, and missiles, with
secondary uses in spacecraft, surface ships, ar-
mored vehicles, and body armor.
? Composite materials are widely applied in Western
aerospace systems. Like titanium, composites-
generally formed from a combination of resin and
boron, graphite, or aramid fibers-are lighter,
stronger, and more resistant to corrosion than
conventional structures and are ideal for increasing
the performance of aircraft.
Manufacture of these materials requires clean pro-
duction environments and relatively high production
sophistication. Production machinery must therefore
have increased tolerances, and manufacturers must
use computers extensively.
Although the Soviets have experimented with these
advanced materials since the early 1950s and used
titanium successfully on the MIG-25 Foxbat in the
mid-1960s, widespread application was delayed until
the mid-to-late 1970s. Titanium is used widely in
submarine production, and composites are used in the
AN-124 transport, the MIG-29 Fulcrum, and several
other aircraft in development.
panded arsenal.
trends confronted the defense leadership with a de-
creasing manpower pool from which to recruit the
necessary personnel to operate and maintain an ex-
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The USSR therefore pushed harder on the weapons
modernization front in the 1970s. Overall, the system
adapted fairly well to these new demands. Develop-
ment times for some new advanced systems did not
increase significantly:
? New-in-principle systems, incorporating advanced
technology in a number of subsystems, have gener-
ally continued to take nine to 14 years.
? Modernized systems, incorporating advances in se-
lected subsystems, have continued to take five to
nine years.
? Other minor modernizations-where an improved
component or subsystem is developed and incorpo-
rated in an existing weapon in production, or some-
25X1 times in the field-have still required less than five
Problems began to arise in the late 1960s (see inset).
These difficulties persisted through the 1970s, as the
Soviets sought to produce advanced systems in plants
that we believe were not extensively modernized:
? The SA-10, which incorporates phase shifters, phase
shifter controls, computers, and digital signal pro-
cessors.
many of these components-and the
missile itself-could not be fabricated in large
quantities with the labor-intensive approaches used
for the earlier SA-2, SA-5, and SA-6. This probably
has contributed to the slow deployment of the SA-
10, a pace well below that of the SA-2 and SA-5
and well below our estimates of production capacity.
? The SA-12, which uses similar advanced compo-
years.
Nonetheless, the adjustment in design approach to
emphasize increasing technological sophistication did
begin to lengthen development times for some ad-
vanced new systems, particularly in the final stages
when the weapon undergoes tests and series produc-
tion facilities are readied. These instances appeared to
increase in frequency through the 1970s, culminating
in a number of unusually drawn-out programs for
major systems:
? The MIG-31, MIG-29, and SU-27 interceptor air-
craft, as a group, were in testing roughly two years
longer than earlier, less advanced fighters.
? The T-80 and T-64B tanks were in testing about
two years longer than the average for previous main
battle tanks.
? The SS-NX-21 and SS-NX-24 cruise missiles prob-
ably will require about five years in testing com-
pared with the four-year average for earlier cruise
series production will reach 36 batteries per year,
one-half the peak deployment rate of the SA-4,
which it will replace.'
? The MIG-31 Foxhound, which is the USSR's first
true lookdown/shootdown interceptor and uses a
pulse-doppler radar, computers, and automated data
links. These subsystems require high-tolerance com-
ponents with reliable performance over a wide range
of severe environmental conditions. The slow pro-
duction rate of approximately two Foxhounds per
month, we believe, is a result mainly of delays in
manufacturing the radar and perhaps one or more
other electronics-based subsystems.'
missiles.
Furthermore, the Soviets also began to face difficul-
ties in moving advanced systems into production, as
the weapons-driven requirements for advanced pro-
duction technology were levied on a relatively anti-
quated production base. Traditional Soviet respons-
es-applying more labor, materials, and general
purpose equipment-could not compensate entirely
for the lack of sophisticated production equipment.
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Reaching the Limits of Production Technology:
The T-64 Tank
The T-64 medium battle tank, which entered serial
production in the mid-1960s, was considerably more
advanced than earlier Soviet tanks. It incorporated a
radically different engine and power train, a Western
suspension system, laminated armor, and an auto-
matic ammunition loader.
The T-64 was plagued, however, by poor performance
and unreliability-we believe in part because it was
produced largely by an aging manufacturing base.
in the mid-1960s pro-
duction technology in the Soviet tank industry had
? The SU-27, which employs advanced engines and a
substantially upgraded avionics package. After sev-
eral redesign efforts, the Flanker entered production
in 1983. By mid-1985, however, only 20 of 50
identified aircraft had engines, and nose radars have
been missing from several of the new aircraft. These
observations suggest problems in engine and radar
development or outfitting.
not advanced beyond the level it attained at the close
of World War H. Although the Soviets employed
some advanced fabrication and welding techniques,
major investment in plant and equipment for the T-64
startup was slow and often concurrent with produc-
tion. Indeed, some facilities were pressed into produc-
tion with little investment in equipment. Thus, the
level of industrial sophistication was below that
needed to properly produce the advanced components
incorporated into the tank.
In 1969, as problems with the new subsystems grew
more pronounced, the Soviet leadership created a
special committee to investigate and study the prob-
lems of the T-64. This committee was headed by the
chief of Tank Troops, Marshal Babadzhanyan, and
included military-technical and industrial experts.
The work of the committee probably resulted in the
improved production performance for the T-64A vari-
ant beginning in 1970. Its findings also may have
contributed to the eventual decision to return to the
proven V-12 engine for the T-72 and probably called
for improvements in manufacturing technology.
1970s
The problems exemplified in these weapon programs
have typically centered on developing and producing
reliable advanced subsystems called for by the de-
signs-high bypass turbofan engines, phased-array
radars, advanced sensors, sophisticated guidance and
navigation systems, onboard computers for several 25X1
functions, and a variety of complex parts made from
advanced composites and other materials. Production
of these subsystems required high-quality compo-
nents-especially electronics-as well as advanced
manufacturing know-how and equipment equivalent
to that in use in US industry in the mid-1960s to early
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Dmitriy Ustinov: Defense Industrialist
of the Modern Age
Dmitriy Ustinov was the preeminent Soviet military
industrialist.a After holding senior management posi-
tions in defense industry since 1937, Ustinov was
considered in 1967 for the position of Defense Minis-
ter during
the two-week period after the death of Defense Minis-
ter Malinovskiy, Politburo elements proposed Us-
tinov for the job three times. The military, however,
was unyielding in its demands for the appointment of
a professional, uniformed soldier, and the post was
given to Marshal Grechko. In 1976, military ele-
ments reportedly again opposed the selection of
Ustinov on largely the same grounds, but the top
leadership-concerned about economic performance
and enamored with Ustinov's expert managerial
skills-quickly and decisively promoted him to the
post
We believe the Soviets were stretching the limits of
existing production technology. Because of this, they
embarked on an intensified and systematic modern-
ization of their defense industry aimed primarily at
ensuring that defense plants could produce new gener-
ations of weapons designed to meet the qualitative
challenge of advanced Western weapon systems in the
1980s and 1990s. The modernization also offered the
benefit of enhanced production efficiency. Weapon
production facilities were expanded and-to a lesser
extent-renovated with new, more sophisticated
equipment, and the management and organization of
defense industry were upgraded
Although we have no direct evidence of any sweeping
Politburo decision, we believe the drive to modernize
defense industries gathered momentum in the early
1970s. We base this judgment primarily on the rise in
influence and eventual accession to power of a new
cadre of Ministry of Defense leaders that advocated
rationalization of weapon acquisition and industrial
modernization and on evidence of intensive modern-
ization efforts.
New Defense Leadership
In April 1976, Dmitriy Ustinov was appointed Minis-
ter of Defense (see inset). We believe his appointment
signaled that a consensus had been reached at the
highest levels of the political leadership on the broad
guidelines of weapon acquisition and defense-
industrial modernization policies. In this connection,
Ustinov
was less inclined than Grechko to look at military
demands-both for hardware and personnel-solely
from a military perspective. His background as an
economic manager and the policies he implemented
indicate Ustinov believed general economic growth
and modernization provided the bedrock of the
USSR's defense potential. This position was consis-
tent with his recognition that the military competition
with the United States was increasingly a qualitative
rather than a quantitative one, and that the USSR
had to upgrade its military and industrial technology.
Ustinov's elevation-effectively consolidating over-
sight of weapon acquisition policy and defense-
industrial support-probably was meant in part to
ensure the smoother implementation of these policies.
Indeed, Ustinov had long pushed for improved effi-
ciency and performance in the defense sector, and
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fragmentary evidence suggests that he and his views 6
were gaining influence: '
? In 1965, while under his control, the defense indus-
trial ministries were among the first to adopt the
new system of economic accountability, designed to
encourage innovation and efficiency in production.
? In 1967 Ustinov apparently advocated the adoption
of Western-style management techniques for the
Ministry of Defense.
? In 1970 the Soviets reorganized their structure for
military procurement, recreating the post of Deputy
Minister of Defense for Armaments. The new depu-
ty minister acquired many of the functions previous-
ly handled in a less coordinated fashion by the
services. Ustinov, as party secretary for defense
matters, probably actively participated in the deci-
sion to create this position.
? After he became defense minister in 1976, Ustinov
oversaw the appointment of talented people whose
concerns for military modernization and efficiency
appeared to coincide with his own. In 1977, Nikolay
Ogarkov was promoted to First Deputy Minister of
Defense and Chief of the General Staff, and the
following year Vitaliy Shabanov was brought over
from the Radio Industry to become a deputy minis-
ter of defense, assuming the armaments portfolio
(see inset)
' In 1968 the Ministry of Defense published a major work entitled
Military-Economic Problems in a Political Economy Course,
which maintained that the paths toward raising the effectiveness of
the defense sector were the same as those for production in general:
"the use of more productive equipment and technology, the use of
less expensive supplies and energy, improved design, higher quality
output, total mechanization and automation, improvements in
organization of production, and improvements in the planning and
management system." The book also indicated, however, that the
defense industry must adapt more to changing require-
ments than the civilian industry.
Vitaliy Shabanov: An Efficiency-Minded
Armaments Chiefa
From 1949 to 1974 Vitaliy Shabanov held various
positions within the Radio Industry. In 1978 he was
appointed Deputy Minister of Defense for Arma-
ments. When he assumed this post, Shabanov-the
only civilian to be appointed to this key position-
brought with him firsthand knowledge of both ad-
vanced technologies and defense-industrial produc-
tion processes. As evidenced by his military writings,
his views on military-economic issues are similar to
those of Ustinov. In a 1982 issue of Military Thought
he wrote:
... the economic resources of our state are not
unlimited, everything must be directed so that
every ruble from spending on the provision for the
country's means of defense is expended rationally,
with maximal efficiency, and to the greatest ad-
vantage of the armed forces.. .
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During most of his tenure as Minister of Defense,
Ustinov probably retained direct control over the
defense industries, and so was in a strong position to
push through measures to improve efficiency in both
sectors. Although Yakov Ryabov succeeded Ustinov
Table 3
USSR: Estimated Average Annual
in 1976 as party secretary for defense matters,
after Ryabov was transferred to
the State Planning Committee (Gosplan) in early 1979
Ustinov probably was assigned nominal responsibility
for this area, which normally is not the responsibility
of the Soviet Defense Minister. Thus, from 1979 until
1983, when Grigoriy Romanov became party secre-
tary for defense matters, Ustinov was the only mem-
ber of the political leadership to hold simultaneously
the positions of Politburo member, government minis-
ter, and-at least on a de facto basis-party secre-
tary.
ties. Typically, the advent of new weapons at weapon
assembly and composite facilities had meant the
provision of tooling, jibs, and fixtures. The new
programs appeared to be broader in scope and to be
coordinated with efforts to upgrade a large array of
support facilities.
Spurt in Investment in the Defense Industries. The
most comprehensive evidence of the increased atten-
tion to defense industries has recently appeared in
open sources. Our calculations show a big jump in the
level of investment in the defense-industrial ministries
between the periods 1971-72 and 1976-80 (see table
3). Estimated average annual investment in the mili-
tary machine-building ministries climbed by 3.5 bil-
lion rubles, or by 83 percent, between these two
periods. The corresponding rise in investment in the
civil machine-building ministries was only 1.5 billion
rubles, or 45 percent
Reflections of these investment trends at a more
disaggregated level were observed in the tank and
aircraft industries, areas where advancing weapons
technology dictated substantial improvements in both
existing and new production plant and equipment.
Investment in the Machine-Building and
Metalworking Sector, Selected Periods a
Civil ministries
3.3
4.8
6.1
Defense ministries b
4.2
7.7
8.4
a The estimates were obtainable only for the years indicated.
b The Soviets do not publish statistics on the defense industries.
They do, however, report annual investment in the machine-
building and metalworking (MBMW) sector, which encompasses
the nine defense industrial ministries (shown in table 1) and which
produces almost all the hardware procured by the Soviet military.
These data, however, also represent investment in 11 other ma-
chine-building ministries that predominantly produce machinery
and equipment for civilian use (such as machine tools, refrigerators,
and cars). Through an analysis of published Soviet economic
information we have been able to isolate the level of investment in
the civil ministries for 1971-72, 1976-80, and 1981-85. Subtracting
this estimated amount from the published data on total investment
yields a residual level of investment. This residual is not simply
investment in the nine defense machine-building ministries. It
probably includes, for example, investment in machine-building
enterprises belonging to non-machine-building ministries (transpor-
tation, construction, etc.) and excludes the investments that the
defense machine-building ministries make in non-machine-building
activities under their jurisdiction (everything from steel and alumi-
num plants to worker housing). Nevertheless, we believe that the
defense machinery portion of the residual is dominant and that
therefore movements in the residual can be taken to represent the
changes in investment in the defense machine-building ministries.
document a major program for the aircraft industry
beginning in the early 1970s. Many airframe plants
were expanded and upgraded. New milling machines
capable of machining materials such as lightweight,
high-strength titanium were installed, as well as plant
and equipment for manufacturing aircraft parts out of
composite materials
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Direct evidence of modernization programs in the
missile and shipbuilding. industries is only fragmen-
tary. Analyses of the new systems entering productio
in the late 1970s and early 1980s and their supporting
production facilities, however, indicate these required
at least a selective upgrading of manufacturing tech-
nology. For example, new aircraft, surface-to-air mist
siles, and submarines make more extensive use of
high-strength materials like titanium and composites,
which require special machining capabilities. New
materials, complex shapes, and the miniaturization
reflected in many advanced systems, such as strategi
cruise missile guidance and propulsion systems, gener
ally demanded more sophisticated equipment than
was in place in Soviet industry in the early 1970s.
? An increased emphasis on modernization-com-
pounded by the supply bottlenecks characteristic of
the late 1970s and early 1980s8 and an intensified
drive to gear up for the production of advanced
systems-probably meant that a greater-than-usual
number of Soviet defense-industrial facilities were
producing at lower rates or not producing at all.
? The introduction and widespread application of
new, more sophisticated, and more costly equipment
sets, integrated production lines, and automated
management systems for new weapons production
very likely required longer periods of assimilation.
Indeed, although the time required to build and
equip plants for new weapons has varied greatly,
9 These bottlenecks are discussed in the section "Shifting the Focus
Toward Civil Industry." F__~
construction and tooling time has been longer than
average for several recent advanced systems. For
example, production preparation for the T-80 tank
and the TU-160 and AN-124 aircraft-each manu-
factured in massive new facilities-required over
two more years than preparation for comparable
earlier systems.
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Rising weapons costs and a faltering economy proba-
bly also encouraged Moscow to hold down procure-
ment growth and introduce more efficient new equip-
ment. Despite ongoing efforts to introduce resource-
saving technology, we estimate that the costs of Soviet
weapons have continued to increase (see figure 2).
Moscow, therefore, was preparing to execute a major
costly and technologically more difficult phase of the
military competition without overburdening a strained
economy.
Upgrading Management. Ambitious production tar-
gets, combined with the frequently unreliable indus-
trial supply system, have led Soviet enterprise manag-
ers-particularly defense industrialists-to try to
become as self-reliant as possible. For example, in the
early 1960s the Ministry of the Aviation Industry was
reported to have plants for producing sheet aluminum,
magnesium alloys, shaped metal, and plaster and
rubber products. About 90 percent of all aviation
production (airframes, air-breathing engines, instru-
ments, and avionics) was concentrated in the minis-
try's enterprises. This high degree of self-sufficiency
created unnecessary duplication of effort, problems in
standardization, and production at inefficiently low
rates
Defense-industrialists appear to be making greater
efforts to pool their talents and avoid duplication of
effort, although the evidence is too fragmentary to
make a definitive judgment
applications
civilian and defense sectors of the economy. ASUs are
computerized systems used for the management of a
variety of production and planning operations, includ-
ing accounting analysis, organization, process control,
and design. The automated process control system
(ASUTP) may include direct numerically controlled
machine tools, industrial robots, and flexible manu-
facturing systems. According to the Soviet press, by
1980 Soviet industry had established more than 4,400
ASUs, which included more than 1,600 ASUTP
this kind of auto-
To improve enterprise management, the USSR
launched a major effort in the 1970s to establish
automated management systems (ASUs) in both the
tion by two and a half years.
mation has begun to pay dividends for the defense
industry, at least on a limited basis. In 1985, General
Secretary Gorbachev claimed that use of automated
design systems in the aircraft industry made it possi-
ble to raise productivity to three times the previous
level and to reduce the time taken in planning produc-
Modifying Building Designs. Although the concen-
tration of many operations at a single plant typically
has led to wasteful duplication in Soviet industry,
bringing together final assembly and major fabrica-
tion subassembly operations in a single complex-if
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Figure 2
USSR: Growth in Estimated Production Costs of Selected
Soviet Weapon Systemsa
Strategic Liquid-Propellant
Ballistic Missiles
SS-7=100
Fighter Aircraft
Fishbed CE=100
. b
G) N
L v [y
CE. U
~L m 7
Lc.
Main Battle Tanks
T-55=100
organized around group technologies and flexible
manufacturing processes-can help to increase effi-
ciency in weapons production. To the extent the
Soviets add or rebuild production lines with modern,
integrated manufacturing processes, they will find it
less necessary to continually expand or modify pro-
duction facilities when they introduce a new weapon
system or substantially modify an existing model. The
resource savings could be substantial. According to a
recent Soviet survey of 3,500 construction projects by
the All-Union Bank of Financing Capital Investment,
constructing new facilities is about 11 percent more
expensive than expanding existing facilities and about
23 percent more expensive than renovating existing
plants.
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beams whose added strength provides the more
vibration-free environment required by precision
equipment. They also provide the flexible workspace
needed for modern manufacturing processes, allowing
production lines to be rearranged, upgraded, or re-
placed periodically. For example, in such large build-
ings, all similar parts can be manufactured on one
production line or in one area (group technology),
while in another area a group of machines operating
automatically from a central station can complete all
machining operations on a single component moving
from machine to machine (flexible manufacturing
system). The buildings thus make possible integrated
manufacturing operations not only in a single plant,
but also in a single building.
Many new production facilities responsible for pro-
ducing advanced weapons combine administration
and engineering, small parts production, large compo-
nent fabrication finishing, and final assembly. Exam-
ples include the Khar'kov and Omsk tank plants,
producers of the T-64B and T-80 tanks; the Gor'kiy
submarine yard, producer of the Charlie-class cruise
missile submarine, the Tango- and Victor-11-class
attack boats, and most recently the Sierra-class (tita-
nium) and Kilo-class submarines; and the Ul'yanovsk
aircraft plant still under construction (see inset). Some
of the advanced components require highly special-
ized manufacturing facilities, and these are frequently
being colocated with weapon assembly. For example,
at least nine of the 22 airframe
plants have added or are adding specialized facilities
for producing nonmetal composite parts
Upgrading Production Technology
Modernization of the weapon production base has
required more and better production technology and
equipment. For much of the necessary support, de-
fense industry could look inward, since its ministries
and plants produce many of the machine tools, robots,
and computers and virtually all of the critical micro-
electronics and telecommunications components for
advanced production equipment and systems.
We cannot precisely gauge the growth in key Soviet
support industries or in total imports of Western
technology attributable to the demands of defense-
industrial expansion. Nevertheless, trends in the tim-
ing and pace of this upswing suggest that demands
The Ul yanovsk Aircraft Plant:
Advancing Production Capabilities
on a Massive Scale
When faced with the challenge of producing the
AN-124 aircraft, which from their perspective was
significantly more complex than earlier models, the
Soviets chose to erect a large and qualitatively
different facility rather than retool or reequip an
existing aircraft production plant.
The plant will be extensively equipped with up-to-
date manufacturing equipment and industrial pro-
cesses, including computerized design, management,
and information systems. According to Soviet state-
ments, the complex is intended to be a "Western
style" plant, incorporating the latest technologies for
manufacturing wide-bodied planes. The Soviets have
also said that the complex will not only manufacture
airframes but also ultimately will produce the en-
gines, avionics, and other components for aircraft
produced at the plant. We believe the AN-124 Condor
heavy military transport will be the first aircraft to
be produced at Ul'yanovsk
connected with modernization-which were especially
strong in the late 1970s-played a role in increased
imports. The party and government had already
adopted (in May 1971) a resolution to increase the
role of the KGB in the collection of the results of
Western science and technology. The resolution
stressed that a worldwide scientific and technical
revolution was taking place and that, in the interests
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of national defense and the development of the nation-
al economy, it was necessary for the Soviet Govern-
ment to obtain timely information on scientific and
technological developments throughout the world.
The KGB was authorized to focus on the military and
industrial applications of these developments, and the
collection program apparently gathered momentum in
the aftermath of the Central Committee plenum in
of numerically controlled (NC) and computer numeri-
cally controlled (CNC) machine tools, automatic lines,
robots, and manipulators."
nine for flexible manufacturing systems
Soviet imports of machine tools from the West also
climbed in the late 1970s (see figure 5). Although
many conventional tools were imported, probably to
compensate for the Soviet production cutback, many
others were highly advanced. For example, since the
late 1970s the Soviets have imported more machining
centers from Japan than they have produced domesti-
cally. The Soviets also have entered into at least 36
scientific and technical agreements with West Euro-
pean companies for numerical control technology, and
Although we cannot estimate the total number, many
automated machine tools have been installed in the
defense industry since the early 1970s, including NC
machine tools, machining centers, automated welding
systems, conveyers, precision casting equipment, and
automatic robot-inclusive production lines. Extensive
use of Western-origin equipment of this type has been
Machine Tools and Robots. Sophisticated machine
tools make possible advances in weapon design and
increases in productivity-twin goals of the modern-
ization program. In April 1968 a Politburo decree
assigned responsibility for the development of ad-
vanced machine tools for the defense industry to the
Ministry of the Aviation Industry. As shown in figure
4, nationwide production of both conventional and
advanced machine tools grew steadily until 1977
when the Soviets cut back production of conventional
machine tools to concentrate on expanding production
documented in all defense industries.
Despite the assistance provided by the United States,
Western Europe, and Japan, the technological level of
Soviet computer-operated machine tools lags about
three to four years behind Western models, and
flexible manufacturing systems are five to six years
behind. The USSR also lags the West considerably in
both the production of advanced robots and their
integration into computer-assisted manufacturing.
Microelectronics and Computers. Basic microelec-
tronic devices, especially integrated circuits, are criti-
cal components in a wide variety of electronic systems
for weapons and production equipment
" Conventional tools are general purpose metal-cutting equipment
(lathes; drilling, boring, and milling machines; grinders; and sheet-
metal-cutting machines) and metal-forming equipment (presses and
forges). Advanced machine tools incorporate electronic controls and
computers, enabling the machining of a part with a complex
surface, the completion of successive machining operations on the
same part, or the simultaneous machinin of several work ieces
with consistent accuracy ands eed.
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Figure 4
USSR: Production of Machine Tools, 1970-85
Numerically
controlled
2,500 pieces of major manufacturing equipment relat-
ed to the microelectronics industry, most of it illegal-
ly, at a cost of about $400 million. Copying Western
designs has sustained the industry: for example, the
Soviets have developed at least 17 microprocessor
families by copying US designs. Progress in Soviet
domestic production, coupled with access to foreign
technology, cut the West's lead in microelectronics
from eight to 10 years in the mid-1970s to approxi-
mately four to six years in 1985.
Soviet production of computers accelerated quickly
beginning in the early 1970s (see figure 7). Although
we are unable to identify production by model or
specific application
= strenuous efforts were under way to apply com- 25X1 1
puters in both design and manufacturing. Western
technology has played a key role in Soviet computer
development. In 1967 the Soviets adopted the archi- 25X1
tecture of the IBM System/360 computer for their
standard mainframe computer, the Ryad, which be-
came available in 1973. The second-generation
Ryad-modeled after the IBM System/370-became
available in the late 1970s. A parallel program pro-
duced the first minicomputers and microcomputers in
the mid-1970s. In 1984, in an effort to promote
greater computer literacy, Moscow started negotia-
tions with several Western companies to build a
turnkey plant for production of personal computers 25X1
(PCs). To satisfy immediate requirements, the USSR,
spurred by relatively relaxed COCOM trade controls
on low-powered PCs, initiated negotiations with sever-
al Western and Japanese firms to buy PCs and related
equipment.-
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Figure 5
USSR: Imports of Machine Tools From
the West, 1970-84 (Selected Years)
Note: These data represent the totals for metal-cutting and metal-
forming machine tools and have been converted using average
official exchange ratios for each year.
computer-aided design) and severe shortages of pro-
gramers and repair technicians have constrained ap-
plications.
The USSR, however, has been slow to apply comput-
ers to process control, stock control, machine tool
control systems, and especially product design systems
(computer-aided design, or CAD). According to anal-
ysis of open literature, only 8 percent of all Soviet
industrial facilities had mainframe computers in
1984, including one-third of the facilities with over
500 employees. By comparison, nearly all US indus-
trial facilities with more than 100 employees have
computers. Shortages of sophisticated CAD manufac-
turing systems have contributed to the rising costs of
the USSR's more advanced weapon systems and
further stressed the taut supply of skilled manpower.
In addition to equipment shortfalls, slow software
development (especially for machining operations and
Although the USSR now has modern, unified com-
puter systems, its progress in computer technology
and production has been dwarfed by advances in the
West and Japan. The Soviets lag the West by an
estimated seven to eight years in mainframe technol-
ogy and five to six years in the development of
minicomputers and microcomputers.
Shifting the Focus Toward Civil Industry
The campaign to modernize the defense industry was
in full swing when the already slowing pace of the
economy began to falter more dramatically. Believing
Orly l
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Figure 7
USSR: Production of Computers, 1965-84
Note: The values shown are based on 1975 "comparable" ruble
prices, which allegedly represent the Soviet measure of industrial
output in constant prices. However, because of the dubious
pricing practices for new computer products - practices which lead
to the adoption of prices higher than can be explained by
improved productivity and/or technological enhancement -there
is an unknown amount of inflation underlying the officially
claimed comparable prices. As a result, the series depicted above
overstates growth to some degree.
better management (such as that practiced in the
defense industries) and increased productivity (based
in part on rising purchases of Western equipment)
.would offset slower growth in capital and labor, the
Soviets planned and executed a marked slowdown of
investment growth in 1976-80. But the upsurge in
growth and productivity that the planners had envi-
sioned never occurred as average annual growth of
GNP fell to under 2 percent during the 10th Five-
Year Plan (1976-80). In devising and implementing
their growth strategy, the planners evidently did not
deal adequately with three developing constraints that
ultimately combined to slow industrial growth:
? A growing shortage of several key raw materials-
iron ore, steel, lumber, and nonmetallic minerals.
? An increasing shortage of energy, plaguing the
industrial sector.
? Rapidly developing bottlenecks in rail transporta-
tion
In addition, during the 1970s the planners had set a
destructive process in motion in the investment
sphere. Specifically, the concentration of investment
on upgrading the production capacity of existing
enterprises engaged more enterprises in the invest-
ment process, thus hampering the flow of production
at least temporarily. In addition, the scramble among
claimants for a share of the more limited investment
allocations produced an investment mix that neither
added proportionately to new capacity nor replaced
much old technology with efficient new varieties.
The leadership probably came to realize that the
USSR would not recover its past economic dynamism
without modernizing its civil economic base. At the
same time, they probably also were greatly concerned
about the drag that a technologically backward civil-
ian industry was becoming for defense industry, which
by the mid-1970s was supplied by at least 25 civil
ministries producing materials, components, parts,
and in some cases entire subsystems. As Gorbachev
has said repeatedly, and as our investment calcula-
tions show (table 3), civilian machine building has
been shortchanged in the allocation of investment,
given the overall limits placed on investment and the
competing demands of defense industry, agriculture,
and energy.
We believe that under General Secretary Brezhnev
the Soviet leadership opted for measures that offered
hope for improved performance at relatively little
cost-sharing defense management expertise with the
civilian sector, applying the military model for
progress in science and technology, and orienting
basic research and development organizations to
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applied research." Shortly after assuming power in
1985, Gorbachev endorsed and extended each of these
measures, but he also declared that a more basic
restructuring of the economy would be necessary to
restore vigor in the economy. His plans envision a
large increment in investment and a substantial redi-
rection of it-most notably in favor of civilian ma-
chine building.
This shift in focus toward civilian industrial modern-
ization promises to both complement and compete
with military modernization:
? Complementarity: catching up or even keeping up
with Western military technology, as well as coping
with defense costs, depends on raising the techno-
logical level and efficiency of civilian industry,
especially the machine-building and metalworking
sector.
? Competition: both the civil- and defense-industrial
sectors must vie for investment, labor, and materials
at the margin.
The Brezhnev Program:
Modernizing on the Cheap
In their earlier efforts to modernize civil industry,
Soviet leaders initially relied heavily on expanded
imports of foreign industrial technology. They hoped
that these imports would provide a relatively inexpen-
sive shortcut to overcoming some of their most press-
ing industrial deficiencies. Although Western technol-
ogy remains an important element in Moscow's drive
to modernize its broad industrial base, emphasis
shifted in the mid-to-late 1970s toward speeding
domestic technological innovation. This reflected sev-
eral developments:
? Soviet industry as a whole was making poor use of
foreign manufacturing technology. Average lead-
times for assimilating and diffusing imported tech-
nology are much longer in the USSR than in the
West, almost always exceed the plan, and show no
signs of diminishing."
? Western technology has been a disincentive to pur-
suing new technological solutions. For example,
Brezhnev at the 26th CPSU Congress complained
that foreign purchases were causing industrial man-
agers to relax their efforts to develop indigenous
technologies."
? Western controls on the export of key technologies
to Communist countries were tightened in the early
1980s, making it more difficult and costly for the
Soviets to acquire the quantity of technology used to
modernize their industrial plant and increasing con-
cern about becoming too dependent on Western
suppliers
Meanwhile, Brezhnev stressed the need to make
greater use of the experience in the defense sector to
improve the civilian economy.15 At the October 1980
Central Committee plenum he called upon the de-
fense industry to make a greater contribution to the
development of the national economy. He specifically
directed military-production-related industrial organi-
zations to help the civilian machine-building sector
develop and apply critical new technologies, and he
reiterated this call at the 26th CPSU Congress in
February 1981.
Although our evidence is sparse, we believe the
Soviets acted on many of Brezhnev's initiatives.
limited scale. For example,
in late 1981 a major defense-related physics
institute of the USSR Academy of Sciences was
required to transfer 3 percent of its scientists to the
"considering the high scientific-technical level of defense industry,
the transfer of its experience, inventions, and discoveries to all
spheres of the economy acquires primary significance." Greater use
of defense-industrial assets in the civilian economy, however,
to purchase foreign products to avoid supply problems
developed in civilian institutes and industries was applied to
commercial processes. Many processes developed by excellent
civilian research were shelved because materials and instruments
needed to convert the developments into manufacturing processes
could not be obtained. Many civilian managers, therefore, preferred
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civilian sector to help raise productivity.
Following
Brezhnev's death in November 1982, top defense
industry executives were reassigned to strategic posts
in the civilian economy and central administrative
s. And, in 1984
all Soviet military and civilian hardware was to
be given a uniform classification code designed to
expedite the use of tech n cross
ministerial jurisdictions
More important, research programs were established
in the 11th Five-Year Plan (1981-85) to develop
technology, materials, and manufacturing processes
that would support economic development and be
useful in the design and production of sophisticated
weapons. More than half of the programs dealt with
technologies that have both civilian and military-
industrial applications-composites, powder metallur-
gy, biotechnology, robotics, computers, microelectron-
ics, fiber optics, industrial lasers, and anticorrosion
protection. They were well funded and managed by
powerful commissions functionally equivalent to the
VPK. They appeared to be designed to draw military
and civilian elements together in areas of mutual
interest. Important military systems designers and
defense-industrial managers were made commission
members along with the Commander in Chief of the
Strategic Rocket Forces, the Commander of the
Moscow Air Defense District, and the Commander in
Chief of the Baltic Fleet. Soviet military research and
production facilities have been identified as partici-
pants (see inset).
Meanwhile, the USSR-under Brezhnev's successors,
Konstantin Chernenko and Yuriy Andropov-also
took steps to reorient the Academy of Sciences to
applied R&D and draw it into programs with dual
military and civil benefits. Since September 1983,
engineers have been brought into academy research
institutes to help speed up the assimilation of technol-
ogy into production. The academy also is admitting
more applied researchers and industry-based engi-
neers-particularly from the defense sector-as re-
flected in the 1984 elections of defense-industrial
Major Research Programs With Both
Civil and Defense Industry Applications
Industrial Robots. Several participants identified in
the Soviet open press are known major research or
development centers of defense-industrial ministries,
including the associations Pozitron and LOMO (Min-
istry of the Defense Industry), Ritm (Ministry of the
Shipbuilding Industry), and Svetlana (Ministry of the
Electronics and Computers. The Soviet press reports
that the Ministries of the Radio Industry and of the
Electronics Industry are major participants in the
dozen or so programs dealing with computer technol-
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personnel to academy positions. The academy is par-
ticipating more directly with the military in applied
technology development programs and, with
its participation in research programs, is being used to
transfer technology from defense to the rest of the
economy
Perhaps the most significant shift affecting the de-
fense industry during the 1981-85 plan period, howev-
er, took place in investment in the machine-building
and metalworking sector. The plan for 1981-85 was
never published, but statistics revealed during the past
year show that investment in the civilian machine-
building ministries in 1981-85 was 27 to 30 percent
higher than in 1976-80. The implied corresponding
growth in investment in the military machine-building
ministries was only 9 percent-somewhat less than
the growth planned for all investment in the 11th
Five-Year Plan. The large increase posted in civilian
machine building possibly reflected a leadership deci-
sion that modernization of the economy would require
more than managerial and technical support from the
defense industry or reforms in the scientific sector.
The Gorbachev Agenda:
Matching Rhetoric With Rubles
Since coming to power in March 1985, Gorbachev has
made it clear that he wants to accelerate industrial
modernization. Indeed, in a series of speeches and
well-publicized appearances, Gorbachev reiterated
many of the ideas advanced by Brezhnev, Andropov,
and Chernenko, including the need to:
? Increase R&D efforts throughout science and indus-
try and orient R&D work to address the needs of the
economy.
? Accelerate the rate of replacement of outmoded
plant and equipment.
? Appoint more technically competent managers and
introduce planning and management techniques
that place a premium on cost effectiveness.
? Reduce organization barriers to the application of
scientific advances in industry.
Moreover, Gorbachev has strongly reiterated the ear-
lier calls for civil industry to emulate the defense
industries, citing defense management techniques. F-
Unlike earlier leaders, however, Gorbachev has enun-
ciated his ideas more vigorously and has made mod-
ernization the centerpiece of his domestic program.
He has publicly called for:
? Increasing the retirement of machinery in the
machine-building sector from 2.2 percent in 1984 to
9.7 percent in 1990.
? Increasing machine-building output by 43 percent
between 1985 and 1990.
? Pushing capital investment in civilian machine
building in 1986-90 to 1.8 times the 1981-85 level.
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The plan also calls for a tripling of the investment
resources devoted to scientific programs to help pro-
mote rapid technological progress throughout indus-
try.
In both Gorbachev's speeches and the 12th Five-Year
Plan Directives, the emphasis is clearly on improving
performance of the civilian machine-building sector.
In mid-1986, he outlined the longstanding pattern of
neglect:
Unjustified enthusiasm for the erection of new
enterprises and neglect of the requirements of the
existing ones became standard with the planning
agencies and many ministries. The bulk of ma-
chinery and equipment went to the new facilities,
whereas a timely replacement of the obsolete
equipment in existing facilities and plants actually
was not done. The process of asset renewal was too
slow, and the age structure of the plant and
equipment deteriorated.
In the 1970s defense industry also was modernized
mainly by the erection of new facilities rather than by
renovation of old facilities, so a good deal of the plant
and equipment in defense industry is also obsolete.
Although the information available on the 1986-90
plan does not permit a calculation of the investment
intended for the defense-industrial ministries, they
probably are slated to receive substantially more than
the 9-percent increase they were given in 1981-85
over 1976-80. But an analysis of investment targets
suggests that the nine defense-industrial ministries
will not receive nearly as much of an increase as the
80 percent slated for the civil ministries.
Gorbachev has insisted on a sustained increase in the
quantity and quality of machine tools and tooling
equipment; robots and flexible manufacturing sys-
tems; microelectronics and computers; automated
management systems; and telecommunications. In
addition, he has singled out the machine-building
industries, which are likely to be the major beneficia-
ries of the increase in investment. The Ministry of the
Machine Tool and Tool Building Industry-the pri-
mary manufacturer of machine tools and flexible
machine systems-is to receive a 42-percent increase
in investment in 1986 alone. The production of ro-
bots-primarily conducted in the Ministry of the
Automotive Industry-is slated to increase at least 10
percent a year from 1986 to 1990. The major civilian
producers of microelectronic components, computers,
automated management systems, and telecommunica-
tions equipment have also been singled out for sub-
stantial growth and development. In addition, the
Soviets have communicated through CEMA channels
and high-level visits to East European countries that
they look forward to increased industrial cooperation
and larger quantities of hi h-quality machinery ex-
ports from Bloc countries.
Implications and Outlook
During the last decade Soviet weapons industries
made major strides toward improving their ability to
produce advanced military hardware. The Soviets
have largely overcome problems in producing a num-
ber of systems such as the T-80 tank, the MIG-29 and
SU-27 interceptors, new transport aircraft, titanium
submarines, and several new strategic and tactical .
missiles. In fact, according to our analysis, the Soviets
currently have in place the requisite plant and equip-
ment to produce more than 90 percent of the full
array of military hardware we are currently project-
ing to be deployed through the end of the decade.
The Soviets, however, need to make the experience of
the modernization campaign routine. Gorbachev has
acknowledged that industrial machinery and equip-
ment must be replaced every eight to 12 years, and his
plans for increasing the retirement rates in the ma-
chine-building sector imply an almost certainly unre-
alistic goal of recycling every 10 years. This cycle is
typical of US defense industry, which also stresses the
integration of new weapon systems with new produc-
tion technology. In trying to move the USSR onto a
similar path, Gorbachev must overcome resource and
structural impediments, decide to what extent foreign
technology will factor into his investment policy, and
work hard to create the peredyshka (breathing space)
he needs to implement fully his economic and invest-
ment strategy.
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Resource Allocations: Competition at the Margin
Despite somewhat improved economic performance
since 1982, the USSR still confronts serious resource
constraints. The ambitious civil-industrial moderniza-
tion and consumer goods programs demand a major
expansion of investment from an economy that is
already stretched tight. Similarly, military require-
ments show no signs of abating. If the Soviets contin-
ue to seek qualitative improvements in weapon char-
acteristics-as current development and production
programs indicate-the costs of technological devel-
opment or exploitation will continue to drive up
weapons costs. The competition for resources between
civil and military programs, therefore, will be intense.
Although we have no clear indication that the weap-
ons industries will suffer from this competition, Lev
Zaykov, who is a full Politburo member and party
secretary for defense industry and general economics,
declared publicly in mid-1986 that the defense indus-
try will step up its production of civilian goods and,
more specifically, will devote resources to aid in the
retooling of the light and food industries. Thus, we
believe the Soviets will be hard pressed to increase
military procurement outlays much beyond the high
levels that have prevailed for the past decade and still
meet Gorbachev's other goals. However, even main-
taining procurement outlays at currently high levels
would allow resources to be channeled to rebuilding
civilian plant and equipment without sacrificing com-
prehensive force modernization. The greater the share
of machinery devoted to nondefense purposes in the
1980s, the better the prospects that Gorbachev will
succeed in improving the production capabilities of
civil industry, which ultimately will benefit the de-
fense sector
We do not have any hard evidence on how military
leaders and defense industry officials have greeted the
civilian modernization program. In the mid-to-late
1970s, articles in the restricted military press suggest-
ed some disagreement over whether to reduce pro-
curement in favor of increased allocations to military
R&D and industrial modernization. This issue proba-
bly has not been resolved.
Soviet high-technology support industries, including
those in the civilian sector. For example, in October
1985 Soviet Major General Vasykov acknowledged in
Kommunist vooruzhenykh sil, the journal of the main
political directorate of the Soviet armed forces:
Today what is required for serial production of
contemporary weapons and the newest combat
equipment is not conventional or ordinary equip-
ment but the most contemporary and frequently
unique equipment, including fundamentally new
instruments, computer-controlled machine tools,
robot equipment, the latest generation computers,
and flexible production systems. In other words,
the present stage of the military-technical competi-
tion which has been imposed on us by imperialism
requires a high level of development of those
branches of industry with the best prospects, of the
most contemporary technology, and a highly qual-
ified work force.
Moreover, Gorbachev reportedly has assured defense
leaders that the military and defense industry will
benefit from modernization advances.
by late 1985 Gorbachev had committed himself to
extensive modernization of military production facili-
ties for aircraft, submarines, and other advanced
items; had authorized major resources for the devel-
opment of new, extremely powerful nonnuclear explo-
sives, an area of strong military interest; and had
approved other advanced research programs as well.
In this way,
Gorbachev has assuaged the military's fears that it
would suffer from his efforts to revitalize the overall
economy
Gorbachev may be able to save resources by capitaliz-
ing on current developments in weapons production
and deployment:
? More sophisticated and more capable weapon sys-
tems, such as the MIG-29 and the SU-27, probably
will allow the Soviets to meet mission requirements
with smaller numbers and possibly lower overall
There are signs, however, that at least an important
faction of the Soviet military realizes that long-term
competition with the West demands development of
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? The USSR and its Warsaw Pact allies are in the
early stages of a program to improve the combat
capabilities and extend the service lives of a number
of their older weapons. For example, the T-54, T-55,
T-62, T-64, and T-72 tanks are being upgraded with
new fire control, ammunition, armor protection, and
engines. We estimate that the cost of carrying out
this program over the next 10 years will be only one-
third of what it would cost to replace these tanks
with the latest Soviet models. Soviet MIG-23 and
MIG-25 fighters are also undergoing an extensive
retrofit program that will add more capable avion-
ics, radars, and self-defense systems.
? The number of types of weapons entering produc-
tion is declining in those areas where technology
advances afford greater mission flexibility (such as
fighter aircraft and space launch vehicles) or where
the Soviets have made substantial progress in satis-
fying mission requirements (such as ICBMs). Al-
though much of the design and production resources
freed as a result have been shifted to other military
forced to either slow defense-industrial modernization
or reduce the pace and scope of the civilian industrial
program. Cutting back defense-industrial moderniza-
tion probably would not have a significant effect on
Soviet military capabilities until the mid-1990s, since
the industrial capacity for producing most of the
weapons scheduled for deployment through the early
1990s is already in place. Slowing civil-industrial
modernization, however, would have a greater long-
term impact because it would erode the defense
industry's support base, which will be increasingly
important to Soviet military competitiveness in the
late 1990s and beyond.
Technology: Following the West
Importing Western (and Japanese) technology is one
way of compensating for shortfalls in domestic R&D.
The Soviets may have taken measures in the early
1980s to step up these acquisitions:
called
for an increase in the KGB's efforts to acquire
technology abroad with more attention to obtaining
hardware.
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programs, the savings from future consolidation
could be directed to civil usages.
If Gorbachev's investment strategy does not begin to
pay major dividends in the 12th Five-Year Plan
(1986-90), however, the Soviets will soon face some
tough choices. They are already in the initial stages of
identifying resource allocation priorities for the next
five-year plan (1991-95), and key defense decisions
probably will be made in the late 1980s. During this
time period, the Soviets also will have to install
machinery in the defense industry to support the
production of new weapon systems in the 1990s. If
Gorbachev's push to improve the performance of the
machine-building sector and to increase imports from
the Bloc fails to provide enough high-quality ad-
vanced tools and machinery for both defense and civil
industry, the leadership almost certainly will be
the Soviets were putting pressure on the Last Euro-
pean services to intensify their science and technol-
ogy collection activities.
? In the 1981-85 plan Moscow reportedly allocated
almost as much for "foreign technical assistance" as
for total domestic R&D.
There are few indications so far of a major upsurge in
the overall level of legal imports. Soft prices for the
USSR's major export items-particularly energy-
and obligations to client states suggest the Soviets will
not have the reserves to sustain large increases in
imports." Also, there continues to be resistance in
some quarters to importing Western technology be-
cause of the drag it is perceived to be on domestic
innovation. For his part, Gorbachev has called for
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more "rational" concentration of imports on key
projects. As in other aspects of his modernization
program, Gorbachev apparently feels that much more
can be obtained through improved use of indigenous
resources.
Western export controls and enforcement policies-
and trade policy generally-also argue for a more
restrained import policy. Export controls have hit the
Soviets especially hard in the high-technology areas of
computers and microelectronics and in the use of this
technology in advanced manufacturing applications
that are crucial to the modernization program and the
production of advanced weapons. The Soviets are
concerned about their vulnerability to aggressive
Western export controls and are trying to reduce it
through greater technological self-reliance and ex-
panded technological cooperation with Eastern Eu-
rope
On balance, we believe the Soviets will continue to
rely on their strategy of selective reliance on technol-
ogy from the West. Although the Soviets are clearly
making greater use of technology developed in the
East European countries-some of which is more
advanced than that available in the USSR-this
technology still lags well behind the Western state of
the art in most key areas. Moreover, the East Europe-
ans almost certainly cannot sufficiently increase ex-
ports of machinery and equipment to meet growing
Soviet requirements over the next decade. It is likely,
therefore, that Soviet reliance on Western innovations
will increase in areas critical to modernization of both
the civilian and defense industries-microelectronics,
computers and software, telecommunications, robot-
ics, and CNC machine tools (see inset). On the
military side, taking into account Western programs
such as precision-guided tactical weapons and the
Strategic Defense Initiative (SDI) along with ad-
vances in such key areas as electro-optics, fire control,
guidance and navigation, and signal processing, the
Soviet covert acquisition program almost certainly
will be at least as aggressive as it has been since the
late 1970s.
Microelectronics: The Problem of
Catching Up With a Moving Target
Because the Soviets will probably continue to depend
on Western technical advances in the volume produc-
tion of semiconductors, they are likely to remain at
least three years behind in semiconductor technology
and production capabilities. The USSR, however,
could lose substantial ground if the US Department
of Defense's VHSIC (very-high-speed integrated cir-
cuit) program is successful in creating VLSI (very-
large-scale integrated) devices with improved military
applications. VHSIC devices are intended to provide
greatly increased capabilities in military applica-
tions. The USSR will have difficulty manufacturing
more advanced VLSI or VHSIC devices unless it
makes significant advances in production and clean-
room technologies, material purity, and overall qual-
ity control. The Soviets have not yet demonstrated an
independent ability to develop advanced production
equipment for monolithic integrated circuit devices;
thus they probably will become even more dependent
on Western equipment to produce increasingly sophis-
ticated devices.
Structural Impediments
The impact of new domestic and foreign technology,
however, depends on how well Soviet industry capital-
izes on it. Systemic obstacles-including a cumber-
some planning process, prices that do not adequately
reward improved quality, and poor producer-consum-
er ties-have impeded the assimilation of technology.
The defense industry is plagued by these same sys-
temic problems, albeit to a lesser degree than the rest
of Soviet industry. For example, although there is
close cooperation between Soviet weapon design bu-
reaus and producers, maunfacturing research and
engineering usually are separated from production
facilities, which creates a strong barrier to improving
manufacturing processes.
25X1
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Gorbachev and the central leadership that he has
assembled have shown that they recognize the system-
ic brakes on faster technological progress, but so far
we have seen no signs that they have worked out a
consistent set of policies to deal with them. The new
Soviet leaders thus far have been unwilling or unable
to make fundamental planning and management
changes in either the defense or civilian industrial
sectors. Moscow still places its highest priority on
maintaining tight centralized control over all facets of
the economy while continuing its efforts to carry out
industrial modernization by the usual methods of
political intervention and party control. The approach
remains primarily "innovation by order." 1e This ap-
proach has inherent limitations: priorities cannot be
extended too far without diluting their effectiveness,
and high-level political intervention is similarly con-
strained.
tion program with an accelerating military-techno-
logical competition.
His strategy seems directed in part at engineering the
requisite breathing space. Domestically, he apparently
has convinced the General Staff that his moderniza-
tion program-given time-will help the defense in-
dustries. In foreign policy, his recent arms control
initiatives, summit diplomacy, and efforts to mend
fences with Western Europe, Japan, and China are
reminiscent of Soviet foreign policy leading up to the
detente period of the early-to-mid-1970s. East-West
detente, even on a modest scale, could buy Gorbachev
the time he needs. And he clearly is acting, in our
view, with an appreciation that an arms control
agreement could-especially in tandem with mount-
ing US budgetary pressures-dramatically slow US
military expansion. Detente would also make it easier
for the Soviets to acquire the types and quantities of
technology needed for the modernization program,
Soviet history is replete with examples where special
management techniques, abundant resources, and
strong political backing were unable to prevail in a
system generally inhospitable to innovation. Most, if
not all, of the industries Gorbachev has targeted for
priority attention are likely to prove equally resistant
to political solutions. This, along with resource con-
straints, continuing dependence on Western technol-
ogy, and accelerating Western advances, suggests that
the Soviet lag behind Western production technology
will not diminish appreciably over the next decade.
Playing for Time
Time may be one of the greatest constraints on
Gorbachev's room for maneuvering. He needs time
for his investment strategy to achieve enough progress
in key high-technology industries to prepare the de-
fense industry as a whole for the military competition
from now to the 21st century. Whether he gets the
time he needs could depend to a large extent on the
overall East-West relationship, and particularly on
the military competition with the United States. The
Soviets may see themselves under considerable mili-
tary pressure from Washington. Gorbachev, there-
fore, must reconcile a long-term industrial moderniza-
probably on favorable credit terms.
The implications for Soviet defense industry of short-
falls on either or both fronts vary from scenario to
scenario:
? Diplomatic failure/domestic success. A failure to
ease the pressure of Western military competition
could be mitigated by a rebound in the domestic
economy. Under such circumstances, more invest-
ment funds probably would be available for in-
creased defense-industrial modernization and in-
creased procurement. In addition, a modernized
civil-industrial base could more effectively support
the growing technological needs of the defense
sector, although the Soviets probably would not be
able to match the West in weapons sophistication.
? Diplomatic success/domesticfailure. If Gorbachev
is able to affect Western military programs-either
through direct agreement or unilateral US cutbacks
in defense-but economic modernization fails, the
outlook for the defense industry is mixed. Although
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the Soviets almost certainly will be able to field
enough weapons to maintain parity, defense indus-
try probably would be hard pressed to close the
technological gap. The notable exception would be
if the West relaxes its export controls on sophisti-
cated machine tools and computers.
? Diplomatic failure/domesticfailure. If Gorbachev's
overtures to the West are unsuccessful, and if his
modernization program fails, the impact on the
defense industry would be more severe. Weapons
plants would be called upon to both increase produc-
tion and produce more advanced systems. Pressure
to produce would be a disincentive for the defense
industry to emphasize modernization. Defense in-
dustry probably would be further hindered by hav-
ing to rely on lagging support industries for ad-
vanced technology and equipment. Soviet reliance
on Western technology would continue under this
scenario, and the Soviet technological lag probably
would increase.
The overall impact of any scenario, however, probably
would be softened by several factors that have helped,
and probably will continue to help, the Soviets to
compensate for their overall technological inferiority
to the West. First, there is no one-to-one correlation
between a technological advance in production and an
improvement in military capabilities. There is always
a lag-often of considerable duration-between the
attainment of a technological advance and its incorpo-
ration into a new weapon system. The Soviets have
often succeeded in translating technological achieve-
ments into weapon systems more rapidly than the
West. Thus, the technological level of deployed Soviet
and Western systems is more comparable than is the
general level of technology. Second, we expect the
Soviets to continue to be able to surge ahead along a
narrow front of military technologies-such as the
exploitation of titanium-because they have chosen to
place more emphasis on these areas than the West.
Finally, strategy, tactics, and the number of weapons
still count for a great deal in determining combat
effectiveness
In sum, we believe Moscow has reevaluated and
modified its traditional approach to weapons acquisi-
tion. The USSR probably will continue to produce
and deploy comparatively larger numbers of weapons
in areas where this approach to meeting mission
requirements is mandated by technical shortcomings
or is more cost effective. The Soviets, nevertheless, are
placing greater emphasis on the development and
manufacture of complex systems that require upgrad-
ed industrial technology. Their ability to meet future
military requirements will require that a rapid pace of
modernization be sustained to realize the dual bene-
fits of cost savings and weapons improvement.
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