THE ESTIMATED VALUE OF SOVIET ARMS TRANSFERS TO THE THIRD WORLD: A NEW METHODOLOGY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91T00498R000400080001-0
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 17
• Document Creation Date: December 27, 2016
• Document Release Date: October 16, 2012
• Sequence Number: 1
• Publication Date: July 1, 1987
• Content Type: REPORT

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Intelligence
ON
The Estimated Value of Soviet
Arms Transfers to the Third World:
A New Methodology
Interagency Intelligence Memorandum
NI JIM 87-10010)
July 198483
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NI I IM 87-10010
THE ESTIMATED VALUE OF SOVIET
ARMS TRANSFERS TO THE THIRD WORLD:
A NEW METHODOLOGY
Information available as of 1 July 1987 was used in
the preparation of this Memorandum, approved
for publication on 1 July 1987 by the Chairman of
the National Intelligence Council.
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SCOPE NOTE
Arms transfers are Moscow's major instrument for advancing its
interests in the Third World. As a result, tracking Soviet arms deliveries
has been an important intelligence priority since the mid-1950s.
The Intelligence Community has used several measures to assess
Moscow's arms transfer program. The Community periodically reviews
and updates its methodology as better information provides improved
insight into Moscow's program. For example, in the late 1970s, new data
led to an increase of 70 to 100 percent in the estimated prices of most
major Soviet military equipment. After 1980, incorporation of data on
the tonnage of military deliveries again led to sharp rises in the
estimated value of arms deliveries to many countries. This Memoran-
dum discusses the latest revisions in the methodology used to estimate
the value of Soviet arms transfers and the implications of the new
values.
In this Memorandum the Third World includes Communist
LDCs-Vietnam, Cambodia, Cuba, Laos, North Korea, and Mongolia.
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KEY JUDGMENTS
The Intelligence Community is increasing significantly its estimate
of the dollar value of Soviet military deliveries to the Third World
based on improvements in methodology. The value of Soviet military
deliveries is now estimated at over $75 billion during 1982-86, a 60-per-
cent increase over the value derived under the old methodology and
more than twice the $32 billion in comparable US deliveries during
the period.
The changes in valuation of Soviet arms deliveries arise primarily
from an increase in our estimate of the value per ton of military
support equipment-ammunition, spare parts, radar, and so forth.
Support equipment accounts for 80 percent of total shipments by
weight and usually cannot be identified on an item-by-item basis. The
new methodology estimates the value of a ton of support equipment at
$20,500 (1985) instead of the $7,000 used since 1980.
The new valuation is based on several factors:
- An improved estimate of the value per ton of support e
A broadened definition of what constitutes military tonnage to
include almost all goods delivered to military forces. For
example, dual-use items such as transport helicopters and trucks
have been treated differently by different parts of the Intelli-
gence Community in the past.
More comprehensive coverage of exports
In addition, values were increased to reflect changes in prices and
exchange rates. The valuation method for major military equipment-
warships, aircraft, combat vehicles, and so forth-has not changed.
The increase in the estimated value of Soviet deliveries is particu-
larly large for countries fighting wars or insurgencies-Iraq, Vietnam,
Nicaragua, Afghanistan. These nations receive large quantities of
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ammunition and spare parts that were significantly undervalued in the
past. The impact of the revised methodology on the total value of Soviet
deliveries to other clients varies widely, depending on the types of
military equipment supplied. Deliveries to India in 1985 rise by less
than a third under the new methodology, for example, because high-
priced weapons comprise a higher proportion of Soviet military exports
to India. In contrast, the estimated value of deliveries to several minor
recipients rise much more sharply because they often receive only
support equipment.
The changes in the methodology show that the cost to Moscow of
its arms transfers is larger than previously estimated because we now
estimate that there is a much larger grant element in the program. The
increase in the estimate of the size of the Soviet program does not
change estimates of Moscow's hard currency earnings from arms
transfers, however, because estimates of hard currency transactions are
made separately, using a methodology based on Soviet trade data. We
now believe about 40 percent of Moscow's arms deliveries are made on
a grant basis and roughly a tenth on a soft currency basis.
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Figure 2
New and Old Estimates of 1985 Soviet
Arms Deliveries to Selected Countries
Cuba
Syria
Nicaragua
Ethiopia
Vietnam
Impact on the Value Estimates
12. The new residual tonnage value and inclusion
of nonlethal military-associated tonnage under the
new definition dramatically increase our estimates of
the value of Soviet arms deliveries to the Third
World-from $9.1 billion to $15.5 billion for 1986,
and for other years by about two-thirds. For 1982-86,
the value of Soviet arms deliveries in current prices is
estimated at $77 billion, over 60 percent greater than
the $47.5 billion using our former methodology. In
constant prices, the increase is also over 60 percent.
Three-fourths of the increase is because of the new
residual tonnage value; the remainder is because of
increased tonnage estimates. The impact on each
country varies widely because some tonnage has been
reassigned and because Moscow's arms clients receive
different amounts and types of major military and
support equipment. For example, estimates of the
value of deliveries to India, which receives relatively
less support equipment and more high-priced arms
than most countries, rise by about a third. Iraq, on the
other hand, has acquired large quantities of ammuni-
tion, trucks, and other expendable items to fight the
war with Iran. Estimates of the value of deliveries to
Iraq have almost doubled. Estimates of the value of
deliveries to several minor recipients also leapt, some
by over 300 percent. This reflects the increased esti-
mate of the value of unidentified military tonnage
delivered to these countries.
Implications of the Changes
13. The value of Soviet arms deliveries to the Third
World is now believed to be much larger than the
value of US arms deliveries. The greater value now
given support equipment (residual tonnage) allows a
more accurate comparison of Soviet and US arms
transfers because US exports include large amounts of
the same items that make up Soviet residual tonnage.
The higher value for Soviet transfers brings the value
of Soviet arms deliveries in line with generally accept-
ed estimates of the quantity of major military arms
delivered where the USSR has a large lead over the
United States. In 1986, for example, the USSR deliv-
ered $15.5 billion in equipment and materiel to LDCs,
and the United States delivered $5.3 billion.'
14. The ability to make accurate comparisons of
relative cost remains limited, however, because the
prices Moscow charges for military goods do not
reflect actual Soviet costs, which, in some instances,
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diverge significantly from prices charged. For exam-
ple, we estimate the prices Moscow charges for ships
are almost twice Moscow's production costs, and the
prices Moscow charges for surface-to-air missiles are
almost 10 percent less than Moscow's production costs.
On balance, however, we believe the Soviet prices
used give a good indicator of overall cost.
15. The new values indicate that the Soviet arms
transfer program is more expensive to Moscow than
previously believed because of a much larger grant
element, underscoring Moscow's use of arms transfers
to gain influence in the Third World. Comparison of
the old estimates with estimates of arms sales made
using Soviet trade data suggested that grant was almost
exclusively confined to Communist LDCs. The old
methodology also included half the value of deliveries
to Ethiopia and one-third of deliveries to Congo as
grant The new
estimates support reporting to indicate that grants are
more widespread. For example,
one-third of deliveries to
Iraq were on a grant basis. indicates
Afghanistan and Yemen Arab Republic (North Yemen)
receive large amounts of grant, as do such African
recipients as Madagascar and Burundi. In addition, we
also now believe that other Marxist-Leninist countries
such as People's Democratic Republic of Yemen
(South Yemen) and Nicaragua receive terms as favor-
able as Ethiopia.
16. The ranking of Moscow's arms clients by the
value of military deliveries also changes. For example,
Iraq and Vietnam rise from second and fourth place,
respectively, in 1985, to first and second place (table
3). This is consistent with their rank measured by
tonnage.
17. The increase in the estimate of the size of the
Soviet program is in the grant portion. It does not
change estimates of Moscow's hard currency earnings
from arms transfers, nor does it capture arms sales that
become de facto grant aid because of recipients'
inability to pay. Hard currency estimates are made
separately and use a different methodology
About 40 percent
cow's total arms deliveries are made on a grant basis,
an additional 10 percent, on a soft currency basis.
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Table 3
Principal Recipients of Soviet
Arms, by Value, 1985
Note: CIA estimate used when separate CIA-DIA estimates given in
Annex B. DIA has $1,055 million for Vietnam, $750 million
for Ethiopia, and $11,175 million total.
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ANNEX B
Current Value of Soviet Arms Deliveries to the Million US $
Third World, 1982-86
Angola
655 1,070 1,345 730 1,040
Benin
5 17 3 4 9
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Current Value of Soviet Arms Deliveries to the Million US $
Third World, 1982-86
Note: Values over $20 million rounded to the nearest $5 million;
values under $20 million rounded to the nearest million.
When one value is given, CIA and DIA estimates are the
same or an average of the two was taken. When two values
are given, CIA and DIA estimates varied by over 10 percent
for major recipients (over $100 million) or by over 20 percent
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Constant Value of Soviet Arms Deliveries
to the Third World, 1982-86
ANNEX C
Algeria
Kuwait
0 55/9
5 85/14
5
30
13
Libya
1,4
90 1,19
5 1,51
5
1,035
730
North Yemen
3
90 59
5 7
5
205/240
225
South Yemen
3
25 995/76
0 43
0
485
Ghana
0 0 20 0 6
Guinea
3 15 65 80 50
Guinea-Bissau
1 10 45 9 20
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Constant Value of Soviet Arms Deliveries
to the Third World, 1982-86
Cambodia 80 180
India 1,900 1,245
Laos 115 180
Million 1986 US $
255
435/340
125
1,210
1,875
1,885
165
105
55
Note: Values over $20 million are rounded to the nearest $5 million;
values under $20 million are rounded to the nearest million.
When one value is given, CIA and DIA estimates are the
same or an average of the two is given. When two estimates
are given, CIA and DIA estimates varied by over 10 percent
for major recipients (over $100 million) or by over 20 percent
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