THE CHANGING PATTERN OF YUGOSLAVIA'S ARMS PROCUREMENT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001600040005-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 15
• Document Creation Date: December 12, 2016
• Document Release Date: March 7, 2002
• Sequence Number: 5
• Publication Date: January 1, 1971
• Content Type: IM

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Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
The .Changing Pattern Cif Yugoslavia's Arms Procurement
Secret
ER IM 71-5
January 1971
Copy No.
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DO NOi DESTROY
3.'~
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ti'~A~tNING
'This doeumet:t contains information affecting the national
defense of the United States, within the meaning of Title
18, sections 793 and 79~, of the US Code, as amended.
Its transmission or revelation of its ColltCllts to or re-
ceipt by an unauthorized person is prohibited by law.
crtour i
Eaduded from aumma~ie
downgrading and
r dedarr~fiwlion ~i
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
January 1971
INTELLIGENCE P'iEMORANDUM
Introduction
Yugoslavian arms procurement has vacillated be-
tween East and West since the end of World War II.
Moscow provided some military equipment and
training to Yugoslavia's armed forces until Bel-
grade's 1948 break with the Cominform. Yugoslavia
then turned to the West fcr military assistance,
and ror the next 10 years obtained most of its
military equipment from the United States. In
1957, however, Defense Minister Gosnjak indicated
US military aid would not be renewed after the
then current agreement expired in 161. From
1961 until the present the Soviet Union has re-
mained Yugoslavia's primary arms supplier.
Although the Soviet invasion of CzechoslovakYa
in 1968 strained Belgrade's relations with Moscow,
the military supply relationship hay been main-
tained, and a new arms accord currently is under
negotiation. Yugoslavia, nevertheless, is con-
corned over its heavy dependence on the Soviet
Union for arms and has sent delegations to Western
countries in an effort to diversify its sources of
supply. This memorandum examines the sources,
rationale, and implications of Yugoslavia's arms
procurement programs.
Note : Th is memorandum uas produced s o Ze Zy Iz~ CIA .
It raze prepared ~ the Office. of Economic Research
and eoordina.ted t,~ith the 0 f fice o f Current Irtte Z -
Zigence and the Office o f Strategic Research .
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Magnitude of Yugoslavian Arms Procurement 7,broad
1. Since 1952,* Yugoslavia has received at
least $l.l billion of military equipment from
foreign sources (see Table 1). Although two-
thirds of this equipment was supplied by 'Western
countries, the U5SR has been the source of most
of Yugoslavia's arms purchases since 1961 and of
almost all of Belgrade's modern weapons systems.
Foreign Arms Deliveries to Yugosla~~ia a/
1952-70
Country
Million
L'S $
Percent of
Total
Deliveries b/
Total
1,13 9. 1
100 .0
Communist countries
370.6
32.5
USSR
365.0
32.0
~?zechoslovakia
3.6
0.3
Hungary
2.0
0.2
Poland
N.A.
N.A.
Free World
768.5
67.5
France
~ 1.2
0.1
Italy
6.0
0.5
United f:ingdom
21.0
1.8
i1r_ited States
733.3
64.4
West Germany
7.0
0.6
a. Excluding fh ~ .value of mi Zitary equip -
ment ass emaZed vr~ cons tructed in Yugos Zavia
under licensing agreements.
b. Becaus e o f ~~ounding, components mad not
add to the totals shown.
Earliest year for Mich information is available.
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Procuretr~ent in the Free World
2. Ejected from the.Cominform in 1948, Yugo-
slavia turned to the West to meet its military
equipment requirements and found a willing sup-
plier in the United States. The United States
subsequently provided Yugoslavi:~ with nearly
$735,, million of military equipment, almost all of
it as grant aid in the Z950s u:tder the DZutual
Lefense Assistance Program. Equipment received
under this program included 546 .fighter aircraft,
117 trainers, 20 transports, ZO helicopters,
7 minesweepers, 8 patrol bats, nearly 1,000 tanks,
and a wide variety of other ground forces equipment
(see Table 2 for thz types of major military equip-
ment delivered from Soviet and Western sources).
Major Military Equipment Delivered to Yugoslavia
1952-70
Equipment
Soviet
Manufacture
Land armaments
Tanks
420
Armored personnel carriers
25
Rrtillery and heavy mortars
:,830
Self-propelled guns
115
tvaval ships
Destroyers
0
Large guided
missile patrol boats
10
Patrol boats
4
Minesweepers
0
Aircraft
Propeller bombers
~
Jet fighters
58
Propeller fighters.
0
Transports
2
Helicopters
45
Others
0
Surface-to-surface,
anti-tank
Some
Surface-to-surface,
anti-ship
Some
Surface-tom-air
8
battalions
Western
Danufacture
945
0
2,103
. 56
2
0
8
7
88
422
126
27
44
130
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In the hope of gaining political concessions from Moscow
in the years immediately following the 1956 revolts in
Eastern Europe, Tito in 1957 artiounced the termi-
nation of the US arms aid program, wr~ich was near
completion. Yugoslavia has continued to Purchase
small quantities of supplies from the United
States, mainly spare pa=ts, naval ordnance, and
communications and support equipme~:t. During the
past. six years, these purchases have averaged
about $20,000 annually.
3. Yugoslavia also has purchased some mili-
tary equ:~pment from several West European coun-
tries, usually on a cash basis. The Uni'ced
Kingdom has supplied antiaircraft guns, destroyers,
aircraft, and, more recently, jet engines and
5-55 Whirlwind helicopters that were assembled in
Yugoslavia. In 1969, Yugoslavia purchased mili-
tary vehicles from West Germany and Italy and a
few helicopters from France.
Resurgence of the Soviet Arms Program
4. In the early 1960s, Yugoslavia initiated
a program to augment its armament inven}Tories
witl:i more modern equipment. Belgrade ac^.epted
So~~iet offers because of the closer political
rF,lations existir_g between the two countries and
t~hE favorable repayment terms for the arms. Since
1961, Yugoslavia has obtained almost all its arms
from Communist countries. Practically all of the
more tYian $370 million of Communist arms have
come from the Soviet ilnion. P~4oscow has provided
most of the modern equipment currently in Yugo-
slavia's inventories including medium tanks,
surface-to-air missiles, guided missile patrol
boats, and MIG-2 i. jet fighters -- Belgrade's only
supersonic aircraft.
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5. Soviet equiprent was provided under three
major arms accords, as shown in the tabulation
below. The value of the agreements are based on
known equipment deliveries calculated at Soviet
export list prices (see ER H 70-3), with a factor
for spare parts and support equipment added.
Estimated
Value
Years of (Million
Agreement US $)
1961
1962
1964/65 225
Major Items Covered
T-34 tanks, artillery,
Snapper anti-tank missiles,
SA-3 surface-to-air mis-~
siles, MIG-21C jet fighters,
D4I-4 helicopters.
T-55 and T-62 tanks, Sagger
anti-tank missiles, SA-2
surface-to-air missiles,
Osa-class guided missile
boats, Shershen-class
patrol boats, Mi:l-21D jet
fighters, MI-8 helicopters,>
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6. A second method of determining the value
of Soviet military deliveries, one which has
proven reasonably accurate when applied to ATarsaw
pact countries, is based on Soviet trade sta-
tistics (see F:R IM 69=95). This method assumes '
that Soviet trade statistics on total exports
include. military shipments. A residual is cal-
culated representing the difference between the
reported total exports and the sum of the reported
values of items exported to Yugoslavia. This
residual represents an~upper limit on the value
of .Soviet military sl:iprtents. The results obtained
by the residual method bears a close correlGtion
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with th~oGe obtained by pricing known deliveries
of equipment until 1966. For the period 1966-70,
however, this method gives a much higher figure
than the value of equipment :known to have been
deliveried. As a check on the residual method for
the period 1966-70, Soviet data on exports to
Yugoslavia were compared with Yugoslav data as
imports from the USSR, which are known to exclude
military deliver~,es. The difference obtained by
this method corresponds closely with the residuals
in Soviet exports. The discrepancies, about $13G
million, between the two calculations from trade
statistics and the ~-alue of known. deliveries can-
not be resolved at this time.
7. Three other Communist countries also have
supplied military equipment to Yugoslavia. In
1969, Hungary provided Yugoslavia with $2 million
of military vehicles and Czechoslovakia sold some
$3.6 million of antiaircraft guns and transport
equipment. In the mid-1960s, Czechoslovakia
granted a license to Belgrade to produce the L-200
P4orava, a piston-engi:e-light utility aircraft.
About 30 of these aircraft were produced at the
Libis Airframe Plant with the designator of L-200D
Morava Libis.
Domestic Arms Production
8. Yugoslavia has only a small capability
for producing military equipment. Its arms
industry can manufacture all of its needs for
small arms and artillery ammunition and artillery
up to medium size (see Table 3). Yugoslavia had
assembled a few M-60 armored personnel carriers
domestically, but this production has been dis-
continued and Belgrade is now totally dependent
on foreign sources for its armored equipment 2.nd
heavy artillery. The army also must import most
of its support equipment, including tank trans-
porters, radar, and heavy engineering equipment.
9. Domestic shipyards produce most Yugoslav
naval ships, except for the Osa-class guided
missile patrol boats which have been supplied by
the USSR. 'Although Yugoslavia has the capability
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Estimated Yugoslav Production
of Ground Forces Equipment
Type of Equipment
1968
1969
Pistols (7.62r~~n:, 7.65mm, and 9mm)
12,000
12,000
7.62mm semiautomatic rifle A4-59/66
10,000
10,000
7.62mm submachine gun M-56
2,000
2,000
Antitank. grenade 'launcher M-56
1,500
1,000
20mm antiaircraft gun H SS 804/630-3
'.00
100
82mm recoilless rifle M-64
75
75
105mm recoilless gun M-64
75
75
76mm mountain howitzer M48B-1
50
200
105mm howitzer M-56
0
25
to build warships up to destroyer size, construc-
tion has been confined, to patrol boats, mine-
sweepers, subchasers, gunboats, landing craft,
and submarines. The navy, however, is dependent
on foreign sources for much of its electronic
equipment and naval weapons.
3.0. Yugoslavia also produces a small number
of jet basic trainers. (Caleb), subsonic armed
reconnaissance/attack aircraft (Jastreb), and
some communications/utility aircraft. The engines
for these aircraft, however, are imported from
the United Kingdom.
Procurement Plans for the 1970s
11. Concerned wwith Soviet policies .toward the
East European countries,-with Moscow's deep i.~~-
volvement in the Middle East, and with the growing
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Soviet naval presence in the eastern D~editerranear.,
Tito apparently has made two decisions which will
shape Belgrade's arms procurement policies during
much of the 1970s. He has decided to modernize
the country's aging military inventories and
hopes to diversify Yugoslavia's sources of supply
by purchasing larger quantities of arms in Western
Europe, If Yugoslavia succeeds with its diversi-
fication plans, it will be the first time the
country has not been almost completely dependent
on either East or A~est for its major new weaponry.
12. Early in 1970, Yugoslavia approached
several West European governments on the avail-
ability and terms of their military equipment.
13. Arms negotiations were opened with the
French ir. May 1970, and an agreement was con-
cluded with a French concern to build some 100
SA-341 helicopters in Yugoslavia under license.
Belgrade also expressed in~~erest in purchasing
French armored personnel carriers, antitank mis-
siles, and radars. The French have indicated
that additional sales will be concluded b mid-
1971. Belgrade
nego is ions wi
Tnlest Germany and Norway reportedly are under way.
14. Despite efforts to shift much procurement
to the West, Yugoslavia will continue to buy. the
larger part of its military equipment from the
USSR. Economics is the major determining factor
specifically Soviet willingness to accept payment
in goods. The fact that very 'ittle interest was
shown in Western jet fighter aircraft and armored
equipment -- particularly tanks -- indicates that
such equipment piobably will be purchased from
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the USSR. Defense Minister General Ljubicic dis-
cussed Yugoslav defense requirements with the
Soviets in May 1970 and Prime Minister Ribicic
arrived the next monich to negotiate a renewal of
the five-year Soviet-Yugoslav arms accord. Dis-
cussions, however, were suspended until after the
1971-75 trade agreement, to be concluded probably
early 1971.
Financing Arms Procurement
15. Defense spending has been the largest
single element in the Yugoslav federal budget
since 1965 (see Table 4). Although defense out-
lays have steadily increased during this period,
they have zemained relatively constant as a per-
centage of the country's social product. The
Yugoslav Defense Budget
Year
Federal
Defense Budget
(Million US $)
Defense Budget Defense Budget
as a Percent as a Percent
of Federal Budget of Social Produ
ct
1965
343.4
51.2 5.4
1966
405.6
58.2 5.1
1967
430.5
53.9 5.2
1968
512.5
59.4 5.7
1969
548.8
61.1 5.2
1970 a/
606.0
55.4 N.A.
projected defense b d et for 1970 increased b
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the largest part o t is increase re ec s p ammo
arms purchases for the ground forces. Purchases
of military equipment and armaments in 1968-69
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accounted for about one-fourth of the total de-
fense budget, and the share is estimated to have
increased in 1970. The budget is likely to in-
crease even more rapidly over tl-~e next few years
as Yugoslavia begins to implement its arms modern-
ization program.
16. One of the major considerations which led
Yugoslavia to obtain its arms in the USSR has been
i-ha fa~~nr_ able Soviet repayment terms .
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as of mi - 0 some 2 0 mi ion
stzll was owe o the USSR for past arms purchases.
This would indicate that Be'_grade has been paying
$35-$50 million a year on its arms debt. Payment
is covered largely through the clearing account
from a trade balance which is almost always in
Yugoslavia's favor (see Table 5).
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Table 5
Yugoslavia's Trade with the USSR a/
P4illion US $
1964
1965
1966
1967
1968 1969
Exports to .
116.1
188.3
193.8
218.8
207.0 206
.4
Imports from
99.8
108.7
147.2
163.8
188.1 168
.2
Balance
16.3
79.6
46.6
55.0
18.9 38
.2
a, The values used are taken from Yugoslavia govern-
ment statistics and dv not include military imports.
17. Belgrade's inability t;o arrange similar
favorable terms in the West (particularly repay-
ment in goods) is likely to place serious con-
straint on the extent to which arms purchases can
be shifted away from the Soviet Union. Yugoslavia
already runs a significant payments deficit with
West European countries.. At the end of 1969,
Yugoslavia was servicing a total convertible
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currency debt of more than $3.3 billion, and ~,ts
foreign exchange reserves in July 1970 were equiva-
lent to only se~ren weeks' imports from hard cur-
rency areas. Belgrade negotiated a $100 million
long-term loan from a London bank in mid-1970,
presumably to meet some of its foreign exchange
obligations. Even if Yugoslavia arranges extended
repayment terms in the West, the likely require-
ment to repay arms credits in hard currency would
add to the prESSUre on the country's scarce
foreign exchange reserves.
L /eloped Countries
18. Yugoslavia does not publish official arms
export statistics, but it is estimated that Bel-
grade's arms exports to the less developed coun-
tries (its only market of any consequence) have
ranged between $10-$20 million a year since 1966.
Psuch of this consists of ammunition sold in
amounts of less than $500,000 per sale. In addi-
tion, Yugoslavia has had some success in marketing
its 76mm pack howitzer, 20inm antiaircraft gun, and
small naval craft. Belgrade's objectives for
exporting armaments are primarily economic -- a
desire to increase export earnings and to find
outlets for its growing armaments industry.
19. Although .Indonesia was Yugoslavia's
largest arms customer -- having purchased over
$200 million of military equipment between
1960-65 -- it has not bought any equipment since
1965. India, the second largest market, has pur-
chased more than $21 million of equipment since
1963. In addition, Belgrade has a licensing
agreement with India to manufacture the 76mm pack
howitzer. Belgrade sold its first domesticall
roduced militar aircraft in June 19.70
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ere are ~.n ica-
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t].ons triat Libya and Sudan also are interested
in buying these aircraft.
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Conclusions
20. Al~hough Yugoslavia has received about
two-t:~irds of its post-~~'orld War II arms from the
West, the USSR has been its dominant supplier of
military equipment during the 1960s. The Soviet
Union has sold at least $365 million of arms to
Yugoslavia, accounting for most of Belgrade's arms
purchases since 1961 and for its major modern
weapons systems. In Yugoslavia's current efforts
to modernize its armed forces, political considera-
tions apparently have led Belgrade to lessen
somewhat its dependence on the USSR. French
helicopters and Swedish torpedo boats have already
been acquired, and negotia~ions for purchase of
other types of equipment are under way with the
United Kingdom and several other West European
countries.
21. Yugoslavia, however, will continue to pro-
cure the major portion of its military equipment --
particularly tanks and jet air.craft -- from the
USSR. The large share of Soviet equipment already
iri its inventories, the more favorable repayment
terms offered by the USSR, and Belgrade's chronic
payments deficits with the West will all combine
to assure a preeminent position for purchases from
the USSR.
22. Belgrade will continue to push sales of
domestically produced military equipment in the
Third World in an attempt to increase export
earnings. Ammunition sale~~ probably will continue
to be the mainstay of Yugoslavia's export drive.
Nevertheless, reports indicate that some $1 mil-
lion of. naval craft have recently been sold to
Zambia, and negotiations with other countries for
additional sales are in progress. Some jet trainer
and attack aircraft sales may also be sold under
this program, but on balance Yugoslavia will con-
tinue to be an arms importer by a wide margin.
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