ALLOCATION OF RESOURCES IN THE SOVIET UNION AND CHINA--1977

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP99-00498R000300020013-6
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 66
• Document Creation Date: December 20, 2016
• Document Release Date: September 5, 2007
• Sequence Number: 13
• Publication Date: June 23, 1977
• Content Type: OPEN SOURCE

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ALLOCATION OF RESOURCES IN THE
SOVIET UNION AND CHINA-1977
HEARINGS
SUBCOMMITTEE ON
PRIORITIES AND ECONOMY IN GOVERNMENT
JOINT ECONOMIC COMMITTEE
CONGRESS OF THE UNITED STATES
NINETY-FIFTH CONGRESS
PART 1
EXECUTIVE SESSION-JUNE 23, 1977
SUMMARY OF STATEMENTS AND EXCERPTS FROM
ORAL TESTIMONY
U.S. GOVERNMENT PRINTING OFFICE
93-8970 WASHINGTON : 1977
For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402
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JOINT ECONOMIC COMMITTEE
(Created pursuant to sec. 5(a) of Public Law 304, 79th Cong.)
RICHARD BOLLING, Missouri, Chairman
HUBERT H. HUMPHREY, Minnesota, Vice Chairman
HOUSE OF REPRESENTATIVES
HENRY S. REUSS, Wisconsin
cons n
WILLIAM S. MOORHE
AD, Pennsylvania
LEE H. HAMILTON, I
GILLIS W. LONG, Louisiana
OTIS G. PIKE, New Yo
Ohio
CLARENCE J. BROWN, GARRY BROWN, Michigan
Indiana York HECKLER, Massachusetts
Ian
MARGARET M. HECK
JOHN H. ROUSSELOT,
California
JOHN SPARKMAN, Alabama
WILLIAM PROXMIRE, Wisconsin
ABRAHAM RIBICOFF, Connecticut
LLOYD BENTSEN, Texas
EDWARD M. KENNEDY, Massachusetts
JACOB K. JAVITS, New York
WILLIAM V. ROTH, JR., Delaware
JAMES A. McCLURE, Idaho
ORRIN G. HATCH, Utah
JOHN R. STARK, Executive Director
Louis C. KRAUTHOFF II, Assistant Director
RICHARD F. KAUFMAN, General Counsel
ECONOMISTS
G. THOMAS CATOR KENT H. HUGHES PHILIP MCMARTIN
WILLIAM A. Cox SARAH JACKSON DEBORAH NORELLI
THOMAS F. DERNBURG JOHN R. KARLIK GEORGE R. TYLER
ROBERT D. HAMRIN L. DOUGLAS LEE
MINORITY
CHARLES H. BRADFORD STEPHEN J. ENTIN GEORGE D. KRUMBHAAR, Jr.
M. CATHERINE MILLER MARK R. POLICINSKI
SUBCOMMITTEE ON PRIORITIES AND ECONOMY IN GOVERNMENT
WILLIAM PROXMIRE, Wisconsin, Chairman
SENATE HOUSE OF REPRESENTATIVES
LLOYD BENTSEN, Texas OTIS G. PIKE, New York
EDWARD M. KENNEDY, Massachusetts GARRY BROWN, Michigan
ORRIN G. HATCH, Utah JOHN H. ROUSSELOT, California
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On June 23, 1977, CIA Director Adm. Stansfield Turner et al.
appeared before the Subcommittee on Priorities and Economy in
Government of the Joint Economic Committee in executive session
(closed hearing). The following is a summary of statements and
excerpts from oral testimony given that day. The full hearing will be
published at a later date.
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CONTENTS
Page
Foreword ----
SUMMARY OF STATEMENTS
I. Soviet economy-------------------------------------
--
6
II. Soviet defense costs--------------------------------------------
1
1
III. The Chinese economy--------------------------------------------
IV. The costs of Chinese defense programs----------------------------
.
14
EXCERPTS FROM TESTIMONY
Soviet oil prospects---------------------------------------------------
Soviet defense costs--------------------------------------------------
Chinese defense capabilities-------------------------------------------
Soviet technology lag-------------------------------------------------
Sovietdefense --------------------------------------------------------
---------------------
Sovietoilproduction ----------------------
Soviet particle beam weapon------------------------------------------
Soviet-Chinese relations ----------------------------------------------
Sovietoil prospects----------------------------------------------------
Soviet economy-Consumer pressures----------------------------------
Soviet access to credit and technology of West--------------------------
Soviet economy--------------------------------------- --------------
-----
Soviet grain production-------------------------
Team A-team B review of CIA-----------------------------------------
Soviet arms exports----------------------------------- --------------
Soviet weapons -------------------------------------------------------
Chinese economy and defense------------------------------------------
15
19
22
23
25
28
31
33
34
37
41
43
45
47
52
55
59
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PART I - SOVIET ECONCMY
CIA Director Admiral Stansfield Turner told the Joint
Economic Committee of the Congress recently that the USSR
will soon enter a period of reduced economic growth and that
this will have important implications for the West. Speaking
in a closed hearing on June 23, Admiral Turner said his
conclusion was based mainly on a sharp reduction in the
growth of the population of working age in the 1980s, coupled
with anticipated Soviet bottlenecks in key commodities-
especially crude oil. As a result, Moscow will face new
uncertainties and difficult policy options regarding energy
use, imports from the West, relations with Eastern Europe,
and the size of its armed forces.
According to the CIA Director, Moscow's formula for
successful economic growth over the past 25 years--increasing
inputs of labor and capital-is not likely to work in the
1980s. Already in 1976, despite a record grain crop, Soviet
Gross National Product grew only 3.7 percent, continuing the
downward trend of the past 15 years. Admiral Turner noted
first that the rate of growth in the labor force is already
slowing because of the fall in the birth rate during the
1960s and is expected to drop sharply in the 1980s. Moreover,
(1)
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additions to the labor force are coming mostly from the
ethnic minorities of Central Asia, who do not readily move
to the northern industrial areas.
Second, productivity gains have been slowing for years,
and this trend is likely to continue. One reason is that
fuel and mineral reserves west of the Orals are being depleted
while new resources in Siberia and Central Asia are costly
to develop. Other reasons include the increasing complexity
of the economy, making efficient central control more and more
difficult, and the increasing costs of technologically
sophisticated products.
Most important, according. to Admiral Turner, is a
looming oil shortage. CIA analysts have predicted that
oil production will start to fall by the late 1970s or early
l9bUs because the Soviets are not finding and developing
new deposits fast enough to offset declining output from
older fields. Last year's production of 10.4 million bar-
rels per day was close to the estimated maximum production
of 11 to 12 million b/d. By 1985 oil output is expected
to fall to between 8 and 10 million b/d. Moreover, Soviet
production techniques, such as excessive water flooding,
are geared to short-term gain rather than maximum life-time
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recovery. most large new oil deposits and alternative
energy sources, on which the Soviets are counting beyond
the mid-198Us, lie east of the Urals. Development will
take years and entail massive investment and high trans-
portation costs.
The projected fall in oil production will slow the
growth of total energy output, probably dramatically in
1981-85, according to the CIA Director. The decline in
the growth of energy output will constrain economic growth
unless Moscow finds ways to save massive amounts of energy
or shifts from a net oil exporter to a net importer,
Admiral Turner predicted. Areas for large oil savings
are more difficult to find in the USSR--where there are few
automobiles and most are for commercial or industrial use.
And under any but the most optimistic assumptions on energy
production and savings, the Soviets will be unable both
to maintain imports of industrial goods from the West and
to keep supplying Eastern Europe with the bulk of its oil
and gas.
Oil exports accounted for almost half of Soviet hard
currency earnings last year, according to Admiral Turner.
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With no change in current energy policy, he said, oil imports
in 1985 could be costing the Soviets $10 billion, making it
difficult for them to afford any manufactured goods from the
West.
The CIA chief cited a number of steps Moscow could
take to try to boost hard currency earnings and reduce oil
import costs--export promotion, gold sales, arms sales,
barter deals--but noted that there are limits on all of
these measures. he said Moscow would be under great pres-
sure to force Eastern Europe to share the burden of the oil
shortages, but would have to weigh carefully the danger
of worsening Eastern Europe's already difficult economic
situation and of undermining its political stability.
Lastly, Admiral Turner observed that, in addition
to rising energy problems, agriculture will remain a
major headache for Soviet leaders. Farm production is
well above the level of a decade ago, the result of mas-
sive inputs of investment and good luck with weather.
Even so, Turner noted, imports of farm products have
accelerated in recent years. Should the climate revert
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to the harsher and more normal conditions of the early
1960s, the Soviets will have to continue large grain
imports.
'Various options in addition to those on energy
are available to Moscow--retention of older workers,
cuts in its armed forces, shifts from defense produc-
tion, and limited economic reforms--to increase produc-
tivity gains. CIA projections, however, indicate such
measures would do little more than sustain economic
growth (the growth of GNP) at around 4 percent a year
through 1980 and would not prevent a decline to 3 to 3.5
percent in the early and mid-1980s. Without strong action,
however, especially on energy, the annual rate of economic
growth could decline to around 3.5 percent in the near
term and to 2 to 2.5 percent in the early 1980s.
The economic uncertainties and policy choices facing
Moscow in the next few years can have important effects on
the West, according to the CIA Director. Even assuming
Moscow can increase its hard currency earnings and cut
back on oil exports to Eastern Europe, the USSR will still
experience a hard currency squeeze in the early and mid-
1980s. As its ability to import from the industrial West
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declines, Moscow may ask for long-term US credits to help
develop its oil and gas resources. The squeeze could also
trigger debate in Moscow over the future levels of military
expenditures.
Admiral Turner believes the Soviet consumer will fare
poorly over the next five to 10 years compared with consumer
gains of the past decade. As a result, there is likely to
be no progress toward matching the living standards of the
West, or even of Eastern Europe.
PART II: SOVIET DEFENSE COSTS
CIA estimates of Soviet resource allocation for defense
were presented to the Joint Economic Committee by Dr. Sayre
Stevens, CIA Deputy Director for Intelligence. Because the
Soviets go to some lengths to conceal their true expenditures
for defense, Dr. Stevens said that CIA makes its own estimates.
These are made in two forms: in rubles in order to assess
impact of defense on the Soviet economy, and in dollars in order
to permit a meaningful comparison with our own defense effort.
The Deputy Director told the Committee that the Agency's
research and analysis over the past year have strengthened
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its confidence in its last ruble estimate, in which defense
spending was projected as substantially higher than previously
estimated. That increase, Dr. Stevens pointed out, did
not mean the Soviets had suddenly increased actual de-
fense programs, but rather that CIA had developed a much
better information base and now knew that Soviet defense
industries were considerably less efficient than previously
thought. The revised estimate did not alter previous con-
ceptions about the magnitude of Soviet defense activities or
about Soviet military capabilities.
Concerning CIA's latest estimate for 1976, Dr. Stevens
said that Soviet military spending--defined to include roughly
the same range of activities encompassed in the US defense
budget--totalled 52-57 billion rubles, as compared with 40 to
45 billion in 1970. Under a broader definition of activities,
including among others the entire space program--the way the
Soviets might see total defense costs--estimated Soviet
outlays in 1976 would have been 57 to 62 billion rubles,
as compared with 45 to 50 billion in 1970.
Ruble estimates of defense spending as well as ruble
estimates of Soviet economic performance are calculated in a
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constant 1970 price base in order to measure real rather than
inflationary changes, according to Dr. Stevens.
One way of measuring the economic impact is to estimate
defense spending as a share of gross national product.
Under the US definition of defense activities, the Soviet
effort absorbed 11 to 12 percent of Soviet GNP in 1976; under
the broader definition, the share was 12 to 13 percent. Be-
cause of comparable growth in both defense spending and
GNP, the defense share has changed little since 1970, Dr.
Stevens said.
Measured another way, the CIA official reported, Soviet
defense spending currently takes about one third of the out-
put of the machine-building and metal-working sector of the
economy--the sector that also produces investment goods--as
well as about one fifth of metallurgy, one sixth of chemical
and one sixth of energy output. Even these measurements
understate the impact of defense on the economy by failing
to take account of qualitative factors--the high grade
scientific, technical, and managerial talent and the high
quality materials and equipment devoted to defense.
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According to CIA projections, Soviet defense spending
will continue to increase into the 1980s at an annual rate
of 4 to 5 percent. These projections are based on the es-
calating costs of new and more complex Soviet weapons systems
that will eventually replace existing systems and on a continuing
high level of defense research and development activity.
Estimated dollar costs of Soviet defense spending are
based on what it would cost in the US to develop and operate
the Soviet military forces, Dr. Stevens said. The data
expressed in 1975 prices show that cumulative dollar costs of
Soviet and US defense programs for the entire period 1966 to
1976 were roughly comparable. Estimated dollar costs of Soviet
programs, however, have grown steadily at a rate of about 3
percent annually over the period, whereas US real spending has
declined since 1968 and since 1972 is lower than in 1966.
As a result, estimated dollar costs of Soviet defense exceed
US outlays by a widening margin after 1971. In 1976, the margin
is 40 percent; or, if military retirement programs are included,
30 percent.
Estimated dollar costs of Soviet defense programs in
1976 exceed US defense outlays in all major resource cate-
gories. For investment, including such categories as pro-
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curement of weapons and spare parts and construction of
facilities, the estimated cost is twice as much. The dollar
cost of operating Soviet forces is 15 percent greater than
for US forces; if personnel alone are compared, it is 60
percent greater, reflecting the larger Soviet manpower base.
Dr. Stevens acknowledged that estimates of some Soviet items
could contain a substantial margin of error and that
confidence is highest in aggregate totals.
In response to concern that the comparisons of US and
Soviet defense programs made in dollars might be significantly
different if made in rubles, CIA has also made some rough
calculations of the ruble value of US defense activities.
Although there are problems in this approach, such as an
inadequate basis for estimating Soviet costs of producing
some US military equipment or the Soviet inability to produce
some high technology items, Dr. Stevens said that tentative
calculations suggest no radical difference between dollar
and ruble comparisons. For 1976, the relative level of
Soviet to US defense activities (excluding retirement pay)
is about 1.4 to 1 measured in dollars and roughly 1.25 to 1
measured in rubles.
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PART III - THE CHINESE ECGNC14Y
For the Chinese economy, Deputy Director Stevens ob-
served that 1976 was an extraordinarily disruptive year
as a result of the deaths of both Mao Tse-tung and Chou
En-lai, the arrest of,and accusations against Mao's widow
and others in the so-called "gang of four," and the massive
earthquakes that caused encrmous loss of life and industrial
damage.
CIA's estimates show no growth in China's gross national
product in 1976, Dr. Stevens reported. A slight gain in
agricultural output was offset by a decline in industrial
production. The earthquakes in the Peking-Tientsin-Tang-shan
area probably caused a loss of 20 to 30 percent of output in
an area which normally provides a tenth of the national
total. The coal industry probably felt the greatest
impact, but direct loss to the steel industry was probably
around a million tons, and rail transport was significantly
disrupted and strained.
Although crude oil output increased by 13 percent in
1976, this was the second year in which the rate of growth
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slowed after averaging some 20 percent for a decade. As for
agriculture, grain output probably remained at 1975 levels-
280 to 285 tons-and cotton production was down. China held
down its grain imports for most of the year, but accelerated
purchases abroad after November; grain imports this year
will be close to 7 million tons.
China's foreign trade in 1976 declined by about 10
percent to $12.9 billion. Imports were down almost 20
percent, reflecting the cutbacks in grain purchases and
completed deliveries on contracts for whole plants. Although
oil sales fell, exports held roughly at 1975 levels, and
China's hard currency trade balance moved into surplus,
easing pressure on the balance of payments. Trade with Japan,
China's major partner, was off 20 percent. Trade with the
US dropped nearly 30 percent, and for the first time, the
balance favored China.
Economic prospects this year are mixed. Chinese
officials see 1977 as a year of recovery and readjustment and
are emphasizing month-to-month industrial and transport gains.
Dry weather reduced the winter grain crop by 10 percent or more,
but this could be made up by a good fall harvest. Gnly moderate
growth is expected in foreign trade.
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The new leadership, under Hua Kuo-feng, has given
economic issues high priority, according to CIA's Deputy
Director for Intelligence. It has confirmed Chou En-lai's
earlier announced long-term economic modernization program
as its basic blueprint. Agriculture will get top priority,
but more resources will also go to raising the level of
technology in industry. This, Dr. Stevens said, will re-
quire heavy investment and imports of equipment, along
with management reforms and worker incentives to encourage
efficiency. The new leaders are aware that this means
modifying some of the Cultural Revolution's reforms,
which were hostile to rapid economic progress, and they will
give greater stress to higher academic standards and scien-
tific and technological competence.
China's leaders will also look closely at the pace
of military modernization plans, but on balance will prob-
ably prefer a period of military belt-tightening until
problems in industry are solved, Dr. Stevens said. He',also
pointed to two major obstacles in the path of China's Fifth
Five Year Plan: the difficulty of asserting central control
over. resource allocation in the provinces, where some local
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officials have been violating state plans, and the need for
some action to curb labor unrest, stemming from the lack
of a significant wage increase over the past decade.
PART IV: THE COSTS OF CHINESE DEFENSE PROGRAMS
Admiral Turner told the Joint Economic Committee that
China's defense spending preempts a larger portion of that
country's advanced industrial sector than is the case in
the US. Defense costs probably are in the neighborhood
of 8 to 10 percent of gross national product. Noting
that China still relies for the most part on copies of
Soviet weapons developed in the 1950s, the CIA Director
said estimated total Chinese military expenditures grew
very rapidly in the late 1960s to a peak in 1971, then
fell substantially in 1972 and have remained roughly at
the 1969 level ever since. He suggested that the period
of increase reflected increased Sino-Soviet tensions and
the prominence of the military following the Cultural Re-
volution. The lower level of spending since 1971 is prob-
ably due to decreased fear of war with the Soviets,
to competing economic priorities, and to difficulty in
developing new advanced weapons systems, the Admiral suggested,
and does not involve a reduction in total Chinese forces.
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EXCERPTS FROM TESTIMONY
SOVIET OIL PROSPECTS
Admiral Turner. In 1976, the Soviets were the largest
oil producer in the world in millions of barrels of oil per
day, slightly more than the Saudi Arabians.
Senator Hatch. I don't think a lot of people realize
By 1985, you expect them to be down to about 8 million
barrels of oil a day?
Admiral Turner. 8 million to 10 million by 1985, and
I will detail why I think that is going to have some severe
impact on them, even though it is nonetheless a large amount
of oil.
Senator Hatch. Are they getting most of their oil east
of the Urals?
Admiral Turner. They are getting most of their oil west
of the Urals. They are still tapping those fields, and also
a very giant field east of the Urals called Samotlor in
Western Siberia.
Senator Hatch. Thank you.
Admiral Turner. They are still tapping the Urals-Volga
area but it is running down, and they are having to move
progressively further east.
The giant Samotlor field we think will peak in about a
year or two, largely because of the use of water flooding.
They will have to go to either off-shore areas in the north
or further out into Siberia, or hope to find extensive
(15)
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new field's in the Samotlor region. But even in the Samotlor
area, they are in an inhospitable climate, and transportation
problems are going to grow as they move north and east.
Senator Hatch. How much of this oil do they use per
Admiral Turner. They exported nearly 3 million barrels
a day in 1976.
Senator Hatch. Do they utilize the rest or do they
conserve and save it?
Mr. Diamond. No. They are utilizing everything else.
Admiral Turner. An interesting aspect of this that is
as they use more and more water flooding, they get more and
more water out per gallon of oil. They are very dependent
.upon high-speed, high-capacity submersible pumps, which at
this time they obtain only from the United States.
Now in the mid-1980s, they will surely look at ways
to find alternative energy sources: coal, water power, gas,
and so on. But again, most of these resources lie east of
the Urals and it is going to take heavy capital investment
and high transportation costs to exploit those.
Senator Proxmire. What you said is that all of this
oil is being used by the communist nations, by the Soviet
Union and the Communist Bloc nations.
Admiral Turner. No. All but about 1.7 billion barrels
a day.
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Senator Proxmire. You said that they export about 3
million barrels a day in 1976, of which about 1 million went
to Communist countries. Where does the rest of it go?
Mr. Diamond. About 300,000 barrels a day goes to soft
currency noncommunist countries, and the balance of 1.2-1.3
million barrels a day goes to the hard currency western
countries.
Senator Proxmire. So, that would mean, if they are
going to have the same amount of oil go to Communist Bloc
countries, they would simply be unable to have the exchange
they would need to buy from the west.
They would not be able to meet their growth with
additional oil, the growth which you projected they would
have. In other words, you cannot say that they could get
along with the amount of oil that they have now if that is
their only energy source because they are growing, as you
said. The other communist countries are also growing, so
they would need more to take care of the needs of Russia and
the needs of her satellite countries, and they won't have that
additional means.'
Admiral Turner. That is correct. We have projected in
our energy study that there will be about 3.5 to 4 percent
annual increase in demand in the Soviet Union, and that, plus
continuing to supply the Eastern Europeans, who expect not
1.3 million but 1.6 million barrels a day by 1980, is going
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to tax them, let alone their being able to sell this other
million barrels_a day, which currently brings them about
$4.5 billion of foreign exchange every year.
So, what I am getting to is that they are going to be
pressed either to meet their own domestic requirements for a
growing economy, or to supply the Eastern Europeans as pro-
jected, or to get the hard currency exchange to buy technology
and other goods from the West.
They have a.crunch in one of those three areas. We
don't know now to predict which way they will respond to
those crunches, but we think each one has a very interesting
and significant aspect, not only from the Soviet point of
view, but from ours and that of the entire Western World.
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SOVIET DEFENSE COSTS
Dr. Stevens. As you will recall, the ruble estimate we
presented last year was substantially higher than our previous
estimates. The reasons for this change and its significance
have been widely misunderstood. We raised our estimate because
we discovered that in the past we had underestimated the prices
of Soviet defense goods. This was due primarily to lack of
understanding of the price inflation that occurred in the so-
viet defense industries in the 1960's, and a change in pricing
policies which occurred in 1967, which led to the removal of
what in the past had effectively been a subsidy on defense
purchases.
The increase in our ruble estimates did not represent
a change in our estimate of Soviet defense activities or
Soviet military capabilities. It was really based upon these
price discrepancies that we discovered.
Senator Proxmire. I hesitate to interrupt, but I think
this is so important.
Are you saying that your estimate did not indicate a
step-up in Soviet investment in resources in defense, but simply
a reassessment of the prices, of the inflationary effect?
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Dr. Stevens. The dramatic increase in the ruble costs
of the Soviet program, as we estimated it, was due primarily
to this change in pricing.
Senator Proxmire. So, it did not mean as much of an
increase in resource allocation to defense as it seems?
Mr. Diamond. That's right.
Admiral Turner. The percentage of their Gross National
Product going to defense increased in our estimate not because
their defense programs are larger than we thought, but because
the efficiency of the defense sector of their industry is much
less than we had believed.
Senator Proxmire. I see.
Dr. Stevens. There was some growth in the hardware
estimate, but it was small as compared to the change in the
ruble estimate.
This change did carry with it some important intelligence
judgments, and these, of course, are reflected in this pricing
change that we have identified. The first, as Admiral Turner
has pointed out, is that the Soviets are far less efficient at
producing defense goods than we had previously estimated them
to be. Of course, it is clear that the impact of the defense
program on the economy is greater than we had previously esti-
mated it to be. All of this emphasizes the preparedness of
the Soviet leadership to accept these burdens and it reflects
their deep commitment to defense programs.
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The work that we have done in the past year in making
that change has strengthened our confidence in the revisions
that we made. This year we find no big changes in either
the overall magnitude of their program, as we see it in ruble
terms, or in the trends that it is taking.
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CHINESE DEFENSE CAPABILITIES
Senator Proxmire. That concluding remark that you
made on the Chinese military suggests to me that it is a
very, very limited kind of threat. After all, their Gross
National Product is about 10 percent of ours, and if they
are spending 8 percent of their Gross National Product
in defense, it means a very small military force, at least
in terms of modern strike force, as compared to ours, or
to that of the Soviet Union.
Admiral Turner. Yes, sir. They have a very limited
nuclear intercontinental strike capability.
As far as ground warfare is concerned, our only real
potential point of contact at this stage would be Korea.
I think that they do have some potential there with a
repeat of the massive human attack.
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SOVIET TECHNOLOGY LAG
Senator Proxmire. One of the sections of your excellent
testimony which you had to skip over in the interest of time
concerned Soviet technology, their technology as compared to
ours.
One of the most startling revelations that we had last
year when Director Bush came up to testify before us was his
argument that Soviet military technology was behind ours.
He put it this way. He said that there was no significant
area where they were ahead of us and many significant areas
where they were behind us.
In the two pages you have which deal with Soviet and
US technology comparisons, you indicate some areas where
they trail us, such as electronics, computers, design and
manufacturing technology incorporated into the Soviet air-
craft and missiles. Is the picture still the same as far
as technology is concerned, that we are ahead of the Soviet
Union in important respects and that they are not ahead
of us in any? Is that a fair statement?
Admiral Turner. I would be a little loath to make a
categorical statement that they are not ahead of us in
any. They are certainly ahead of us in some areas of
application.
Senator Proxmire. Such as?
Admiral Turner. In some areas of command, control
and communications of military forces I would say they are
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ahead of us in application more than in technology; that is,
they put more resources into that area.
Senator Proxmire. Can you give us an overall assessment?
Admiral Turner. An overall assessment would be that we
are well ahead of them in military technology. With brute
force techniques, however, they do achieve about the same
end result in many areas that we do with much more sophisticated
techniques. For example, they will put multiple computers in
a system, each of much less sophistication than the one we
put in ours.
Senator Proxmire. It shows a higher cost, but not
necessarily a higher effectiveness, right?
Admiral Turner. That's correct.
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SOVIET DEFENSE
Senator Proxmire. Are you saying that the USSR defense
spending exceeds ours in 1976 on a dollar basis by 30 to 40
percent and if so, I just wonder what that means? What you
are saying, as I understand it, is for us to reproduce the
Soviet defense establishment, it would cost 30 to 40 percent
more than we spend on our own defense.
Is that right?
Admiral Turner. Yes, sir.
Senator Proxmire. However, much of that Soviet defense
establishment would be irrelevant for our needs. They have a
large number of troops on the Chinese border, for example,
right?
Admiral Turner. That's correct.
Senator Proxmire. They have a problem of suppressing
dissent in the satellite countries, so they quarter substantial
troops in that area.
Admiral Turner (nods affirmatively.)
Senator Proxmire. Does it allow for their lesser effi-
ciency, their lesser technological development than ours, or
not?
Mr. Burton. Sir, actually it is US technology and produc-
tion that enter into these estimates, so it is what it would
cost us to reproduce the Soviet design.
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Senator Proxmire. Then there is one other element here.
Perhaps I am wrong, but I have heard and I get the impression
that the Soviet Union has very much more of a concern with
defense, defense against air attack, the civil defense which
you mentioned, that they are defense-minded or defensive-minded,
as compared with offensive-minded, much more than are we and
other countries. Would that not account for some of the dif-
ference?
What I am trying to say is in comparing the Soviet Union
with us, the relative force, effectiveness, and efficiency of
the Soviet Union, we don't have the concern, for example, with
a bomber attack that they seem to have. I understand that they
have the most heavily defended air space in the world. Of
course, that is enormously costly and would account for part
of their immense expenditure, would it not?
Admiral Turner. Yes sir. The Soviets have deployed a much
more ambitious air defense system than the US.
I think you can look at the history of the Soviet armed
forces since World War II and in all categories they began with
a quite defensive orientation. I, of course, am most familiar
with the naval sphere, and I would say that the origin of their
navy was to protect against incursions from the sea towards
their homeland.
I think that in all areas in the last decade we see this
merging into a much more offensive potential. Whether that
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is their intent or not, I don't know. But it certainly is not
a defensive move to build up their tank inventory and their
artillery on the western front of Europe as much as they have.
Similarly, with their air force, they are going largely from
fighter interceptor defensive aircraft to multipurpose attack
and fighter aircraft. Similarly with their navy, they are
going from short-range capability to defend their coastal
waters to a worldwide demonstrable capability, including even
small aircraft carriers.
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SOVIET OIL PRODUCTION
Senator Proxmire. You talked about the Soviet oil
production and the effect that that is going to have on the
Soviet economy, perhaps even on the Soviet military as time
goes on. You do concede uncertainty in some of your facts,
including the amount of proved reserves, estimated by you
at 30 to 35 billion barrels.
In view of our own uncertainty about U.S. reserves, what
is the margin of error in your estimate? Could it be off
by a factor of two or more, and if so, isn't it possible
that the rest of the analysis is flawed?
Admiral Turner. I hesitate to say how much the
estimate of reserves could be off without asking anybody
else if he wants to guess about that.
Mr. Diamond. Senator, that is true, but you have to
remember the definition of what we mean by "reserves."
These are not what is in the ground. These are recoverable
reserves and what we consider to be at a reasonable economic
cost.
Senator Proxmire. So do you agree that they could be
twice as high as is estimated?
Mr. Diamond. That is true. It could be tremendous.
For example, in this country we claim 30 or 35 billion
barrels of recoverable oil but total reserves may exceed
100 billion barrels. The experts believe that with
current technology only about one-third of these reserves
are recoverable.
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Admiral Turner. Even if they have twice as many re-
coverable reserves as we think, in the next decade they
cannot turn that into oil on the surface of the earth.
Thus we do not think that invalidates the analysis which
we have been presenting to you today, sir, because we are
saying that in the next decade, the pressures which we
tried to demonstrate this morning are going to exist.
Senator Proxmire. Are you saying that you are sure
that they will not be able to produce, say, 12 million
barrels a day in 1985?
Admiral Turner. Yes, sir. That is our prediction,
that they cannot even sustain the 10 million that they are
doing today.
Senator Proxmire. But they have the reserves in the
ground, so why not?
Admiral Turner. Because if they have not made suf-
ficient progress towards developing those reserves, they
cannot get it out by 1985, particularly in the inhospitable
and remote areas in which they have to work.
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30
Senator Hatch. Admiral, as I see it, at your highest
estimate they have 12 million barrels a day. Now we have
presently a need in the United States for about 18 million,
considering no gain or no particular growth.
They have a lesser industrialized economy than we do.
They have what, 40,000 manufacturing facilities in Russia
as compared with 295,000 in this country. I don't see how
they can use 10 to 12 million barrels a day. I am wondering
if they are storing that.
I9
Admiral Turner. In 1976 they exported about 3 million
b/d. Half went to other Communist countries; half to other
areas. That means that they used about 7-1/2 million
barrels a day, which is little less than half of ours.
Senator Hatch. I see. That would correspond with the
differences in the economies.
You suspect that for them to have any type of growth
at all they have to keep energy production going.
Admiral Turner. Yes, sir. That is the record; their
economic growth and their energy use have been in parallel
all these years.
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SOVIET PARTICLE BEAM WEAPON
Senator Hatch. I have one other question. Since coming
to the Senate, I have had occasion to talk to some of our
military people who are concerned that the Soviets may be
developing special high-technology weapons that your report
indicates they have not developed, such as the particle beam
weapon, various sensor devices, various forms of monitoring
technology, et cetera. Is there any reason for that disparity?
Some of these people seem to talk very intelligently about it
and I have heard both sides. Some decry everything that others
cite.
Admiral Turner. We have analyzed the particle beam weapon
in particular in some detail. It is our belief that the com-
ponent technologies that would be required to build that sort
of capability are not advanced enough in the Soviet Union to
give them the prospect of being anywhere close to developing
such a weapon. Most of the evidence adduced to the contrary
is based on the assumption that a particular facility in the
Soviet Union is dedicated to this purpose, and additional
assumptions about their state of technology. We think all of
these assumptions are questionable. Further, we don't see
signs of those efforts required for pulling this together.
Senator Hatch. Are they working on particle beam weapon
or something close to it?
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32
Admiral Turner. I cannot either confirm or deny that as
I don't have positive evidence that they are not.
Senator Hatch. We really do not know, then.
Admiral Turner. We really do not know.
Senator Hatch. But you do question seriously whether or
not they have reached that form of technology at a high state
of art?
Admiral Turner. We don't know that they are doing it,
but we have fair confidence that they don't have the required
technologies at a sufficiently advanced stage yet.
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.SOVIET-CHINESE RELATIONS
Senator Roth. There is one question that I have.
As I understand your testimony in the case of China,
they are really placing defense as a last priority, they
place agriculture and industry ahead of their defense
and military needs; whereas in the case of the USSR it is
pretty much the opposite in terms of their top priority.
The Soviets are placing their consumer needs way down on
the list.
Now if that is accurate, it would appear that the
imbalance, if we can call it that, between the USSR and
China is going to grow. I have heard it said that some
people think for that reason the military in China may
desire some kind of accommodation with the USSR.
Is there any evidence or any reason that you can see
that there may be an effort for rapprochement or accom-
modation between those two countries?
Admiral Turner. I see no evidence of any current
moves in that direction or inclination to move in that
direction.
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SOVIET OIL PROSPECTS
Senator Roth. The Soviet union, according to your
prediction, faces very serious economic problems. I suspect
that one of the problems we face on the Hill is to what extent,
if at all, should we provide, economic assistance in one form
or another. One example that we have worked with in the past
is to help them develop their natural oil and gas, particularly
in Siberia. If we, say, together with the Japanese join in
helping that development, would that substantially change the
energy picture as far as the U.S.S.R. is concerned?
Admiral Turner. Well, the word "substantial" is a problem
for me. It certainly is apparent that the Soviets today need
help to hold their own, let alone to proceed, and that if they
are going to develop new fields in Siberia, they are going to
need outside financing as well as outside infusions of technology.
So, while we do not believe that kind of assistance will
appreciably change the predictions I have given you between
now and the mid-1980s, it certainly could be an important factor
in whether they begin to come back up this downward slope that
we showed you after the mid-1980s. That kind of help is not
likely to start producing oil for probably another decade.
Senator Roth. Do you have any predictions as to what
recovery could be under a large scale program, say of 20 or 25
years? Do you have any prediction on the number of barrels a
day?
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Admiral Turner. I don't think so, but there is no
doubt that there is lots of oil out there, right, Doug?
Mr. Diamond, Yes, sir.
There are no predictions. One of our consultants
feels that unless massive infusions of investment and
technology are poured in, not only from the U.S. but also
from Western Europe, production may not turn up in the
last half of the 1980s or early 1990s.
The required investment effort boggles the mind. For
example, in this 1976-80 five year plan, they are putting
in 20 million tons of pipe or 24,000 miles of oil and gas
pipeline, just in this five year plan. The Alaska pipeline
is only 800 miles long. To accomplish this Goal, the
Soviets would have to lay an Alaskan pipeline every six to
eight weeks, under comparable or even more inhospitable
conditions. This is an indicator of required effort for
investment in the transmission system alone.
So, when you talk about overall magnitude of outlays
of investment for capacity to develop and transport oil
for 1976-80 and beyond, no expert would hazard a guess as
to how many billions of dollars of Western help would be
required to run production of oil up.
Senator Roth. I believe at one point you said the
Soviets may seek assistance from us. Would you be a
little more specific about the kind of assistance they
might want?
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Admiral Turner. I think it is primarily our techno-
logy they are after and that they can only get if they
have hard currency or credits in hard currency areas;
specifically, we have referred several times to the techno-
logy for oil development. Today it is techniques for
getting it out of the ground under existing conditions.
But as they move into the frozen north more, I think they
will be looking to us for all kinds of technology in
pipeline development, exploration techniques, and so on.
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SOVIET ECONOMY - CONSUMER PRESSURES
Senator Javits. I have two questions and I will ask
them separately. You spoke of per capita consumption
diminishing to a 2 percent annual growth rate for the
individual in the Soviet Union. We constantly hear that
every once in a while they have to divert from their
fundamental concentration of roughly 13 percent of the
GNP on military weaponry, et cetera, in order to do some-
thing for the civilian sector. What causes them to do that?
There is no public opinion, there are no elections, there
is no press, there is no radio, no television. Why do
they have any need to respond at all to the individual?
I have been to the Soviet Union on a number of
occasions. The people seem to be fairly well shod. I
am told that they eat adequately -- after all, you can
live on pretty little compared to the way we operate
around here.
What is the pressure on them to do anything for the
consumer?
Admiral Turner. Let me ask some of the Soviet experts.
Doug?
Mr. Diamond. Senator, there are really three types of
pressures. As we measure Soviet per capita consumption,
it is roughly one-third of the U.S.,-perhaps half that of
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Western European, and 70 percent of that of Hungary and
Poland.
Secondly, in particular areas, such as quality of
diet, one out of every two calories they consume is still
from starchy staples, such as grains and potatoes. Their
starchy-staple ratio is the highest of any advanced in-
dustrial country in the world. Meat consumption is 40
percent of ours and 70 percent of that of Poland and
Hungary. The queues for certain kinds of goods, especi-
ally selected high quality foods, are long. Perhaps
you may have seen them.
We have had reporting over the last year of consider-
ably more discontent in the mid 1970's than there was at
the end of the 1960's. This does not show in rioting,
as it did in 1962, when Khrushchev raised prices on some
foods, but it may show up in a lower level of productivity.,
for example.
Senator Proxmire. Did you say a lower level of
productivity?
Mr. Diamond. A lower rate of growth in labor pro-
ductivity, and that includes absenteeism.
Thirdly, it is widely believed that Russians are more
stoic than their counterparts in Eastern Europe. The Poles
will take to the streets more quickly. But, when Brezhnev
and his colleagues observe what happened in Eastern Europe
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over the last 20 years, especially widespread demonstrations
in Poland in'1970 and 1976, this causes them concern.
Because of these kinds of pressures we judge that the
leadership will feel that some growth in per capita con-
sumption is required although they will be unable to prevent
a slowdown.
Senator Javits. For me, the most important part of
what you have said has been the figures, that they live
only 70 percent as well as the Hungarians and the Poles,,
and 50 percent as well as the West Europeans.
I think that is all extremely important. I think
that we, in the Congress, should be very interested in
to what extent the public is manifesting its will some-
how, even in a country which is held in such an iron grip
as this one. I gather, as a necessary corollary, that as
far as the military people are concerned, they eat all
right and sleep all right if they are not subjected to any
of these problems. Is that correct?
Mr. Diamond. Yes, sir. They get their daily rations.
Senator Javits. The Russian soldier in my father's
day was very expendable. He ate almost anything, he slept
anywhere, and he was literally a slave. But that is no
longer true.
Admiral Turner. But his pay is not good if he is a
conscript, and you are aware, sir, of the signs of dis-
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40
content we have had, such as the pilot who flew the aircraft
to Japan.
I do not want to portray that as a major problem at
this point, but at least it is interesting as an indicator.
Senator Javits. On the positive side you are able
to testify that they are taken pretty good care of, isn't
that right?
Mr. Diamond. That is right, sir, in a comparative
sense, inside their own economy, but not by our standards.
Senator Javits. I understand that, of course. I
just told you about Russian soldiers from my personal
experience. I know from whence they come.
But I was interested in where they are now.
The other thing that interests me is your statement,
which I want you to confirm, that the U.S.S.R. will ex-
perience a hard currency squeeze in the 1980's. This means
that they may have to turn to us even more for credits and
technology.
This is a critical point for this reason. The U.S.S.R.
and the Eastern Bloc owes Western Europe about $30 billion
right now, and the United States is only in for about
$5 billion, that is, United States banks. As a matter of
fact, it is only about $1.5 billion to'the U.S.S.R.
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SOVIET ACCESS TO CREDIT AND TECHNOLOGY OF WEST
There is a big policy question which you may not even
want to answer at this time. You may wish to think about
it. There are certain factual questions which relate to
this question of policy.
Should we continue this policy of relatively easy
access to the credit markets of the world by the U.S.S.R.?
Or, should we turn against it in a very affirmative and
decided way and use that, by linkage, with Angola, the
Middle East, or any other place?
The same is true of technology over which we have
surrendered control.
On the other hand, it is said that the Russian hardness
on the Jewish emigration question was attributable to the
limitation of $300 million in Export-Import Bank lending,
which is meaningless to them now, except as a matter of
respectability, which was imposed by the Congress.
This to me is the critical area, these economic
questions. The question I would like to ask you Admiral,
is what facts do you have to cast light on this question.
This is what I would like to get at. This is to me
the basic question: what leverage is there in the economic
and technology relations between the United States and the
Soviet Union that if, as a matter of policy, we wish to
employ -- and that is not your business, it is our business
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and the President's -- we could? We have to know what are
our capabilities. And I ask you, are we abreast of that?
Admiral Turner. My best response to that at the
moment, Senator Javits, is that I feel a great responsi-
bility to provide you the factual information that would
help you approach that decision. I feel that one of the
most significant things about this long-term forecast
of the Soviet economy that we have presented today is that
it highlights that the Soviets have a limited number of
options for what we think is a serious problem.
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SOVIET ECONOMY
Senator McClure. I have only two questions and
perhaps you have already touched on these.
Do you note any diversion within the Soviet economy
away from military production and toward energy production?
With reference to all of the demands on pipeline building
and the rest of it, I have not seen any diversion away
from military production in order to meet that energy
need.
Admiral Turner. No, sir, we do not either.
Senator McClure. It would seem to me, then, that
the corollary is that if they have this tremendous problem
confronting them, then military preparedness has all of
the priority which we have attributed to them in that
area in the past.
Admiral Turner. That is our view, though we don't
know how they will weigh that if and when this prediction
really dawns upon them.
Senator McClure. So we don't know for sure whether
we can supply the technology or the economics for that
energy production. It would certainly reduce the pressure
for diversion, of those things from energy production, but
it might not result in any difference except increased
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Amiral Turner. Yes, sir.
Senator McClure. The other question is in regard to
the point, a very cogent point, that Senator Javits made
about the relative standard of living of the Russian people.
If they are only at 70 percent of the Eastern European
countries and at 50 percent of Western Europe, that is
significant, but it is significant only if they conceive
it in that way. If they are nevertheless moving up, if
their standard of living is rising each year and they feel
relatively better off this year than last year and they
don't know that they are worse off than someone else, that
would have little significance, wouldn't it?
Admiral Turner. Yes. I believe that what you are
saying is-certainly the right perception; that what the
Soviet consumer sees of his relative position is probably
more dominant in his thought than any hypothetical com-
parison with outside. However, I don't think we can
discount outside influence completely because of the
increasing amount of communication in the world today.
Even the Soviets are travelling more than they used to.
Senator McClure. That would then'indicate that increased
contacts between countries might exacerbate that domestic
problem for them?
Admiral Turner. It certainly would have some input.
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SOVIET GRAIN PRODUCTION
Senator McClure. Thank you very much.
I have no further question.
Senator Proxmire. Admiral, do you have any preliminary
estimates of Soviet grain production this year, what their
targets are and what they are likely to achieve?
Mr. Diamond. The target is 213.3 million tons
this year.
Senator Proxmire. Just what does that mean? How
much of a dropoff is the expectation?
Mr. Diamond. Last year's production was 224 million
metric tons and that was a record. Moscow would probably
consider anything over 200 million to be quite satisfactory.
The Department of Agriculture has a preliminary
estimate of 225 million tons. We agree with that estimate,
although it must be stressed that it is very early in
the season. Much of the grain remains unripened, very
little has been harvested. Right now, however, growing
conditions are very good.
Senator Proxmire. An article in "The Washington Post"
about six weeks ago reports that the figures for meat
production for the Soviet Union are lower than for the same
period last year and that the planned industrialization of
agriculture is not likely to succeed unless the resources
allocated to the military are reduced.
Can you comment on that?
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Mr. Diamond. Meat production in the first quarter
of this year remained below the first quarter of 1976. It
is just starting to turn up as the result of a sharp
upturn in use of feedgrains from the record 1976 crop.
Senator Proxmire. Well, is there a connection--have
they reduced in any way their military expenditures?
Mr. Diamond. Oh, absolutely not. There is no direct
relationship.
Senator Proxmire. Are they using troops in the fields
at all?
Mr. Diamond. Yes.
Senator Proxmire. More than usual?
Mr. Diamond. We don't have a measure.
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\TEAM A - TEAM B REVIEW OF CIA
Senator Proxmire. Admiral, I would like to ask you
about some criticisms of the CIA. I am sure that you
remember the controversy over the so-called Team B review
of last year's National Intelligence Estimates of Soviet
strategic capabilities.
,At that time I made a public comment that criticism
of the intelligence process was healthy and that conflicting
ideas made good estimates. At the same time, I was highly
critical of having one ideological group with one viewpoint
represented as the only outside critical review body.
Do you intend to have intelligence estimates reviewed
by any outside panels, and if so, will you insure that a
wide body of opinion is represented?
Admiral Turner. Yes, sir. I am moving toward that.
Senator Proxmire. It was a view that was very good
and intelligent. I think that General Keegan is a man of
great ability and I admire his ability. But he represents
a particular viewpoint, and the other viewpoint, which it
might be also wholesome and healthy to have, did not seem
to be represented.
Admiral Turner. I think an ideologically structured
Team A-Team B thing is not a normally good idea. I would
not reject it entirely, but I think it Is something upon
which I would look with suspicion.
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I think Teams A and Teams B can be good. My first hope
is to put into the process that we have, as a standard matter,
enough divergent opinions that we do not have to go out and
get Teams A and Teams B. I would hope that we have that
interplay right within our organization, possibly by bringing
in outsiders on an ad hoc basis, if particular skills or
viewpoints are needed.
Senator Proxmire. I can understand that and I think that
makes for a neater operation. But at the same.time I would
think that some people outside, who are not subject to the
discipline or the inhibitions that any person in the organiza-
tion is likely to be,. would be freer to be more aggressive and
more critical in suggesting areas where the CIA may be off
Admiral Turner. I think that is basically true. I am
planning to create a group of consultants. We will look at a
particular estimate that is being done, such as this one on
strategic forces, and we will call from that group the right
mix of people to join in the estimate. This would not be on
a full-time basis, but we would ask them to come from the be-
ginning of the exercise and to follow it right through and to
critique as we go along.
Senator Proxmire. The public debate over the Team B
episode seemed to indicate that the so-called hard-liners won
the day and forced the CIA to re-evaluate its opinions about
Soviet military strength.
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Did that in fact happen?
Admiral Turner. I really have not dug into that, Senator.
But the CIA people assure me that that is not the case.
In addition, the story got vastly distorted in the press.
Senator Proxmire. As I remember the articles--which I
thought were real shockers--in the "New York Times," there
were 25 specific points covering a wide spectrum of differences
of opinion voiced by General Keegan. I wrote a letter to the
head of the Joint Chiefs of Staff asking him to comment on each
one. But it was not just a narrow area, at least not according
to General Keegan's criticisms. It was rather broad.
At any rate, General Keegan has publicly taken the CIA
to task for a variety of mistakes, ranging from myopia to
deliberately hiding the facts from the policy-makers. For
example, he suggested that: the CIA has consistently under-
estimated the Soviet threat; the CIA contrived to reduce
the estimated range of the Backfire bomber in order to salvage
the SALT II accords; the CIA has become politicized; the
intelligence community has been wrong about parity and wrong
about virtually every great Soviet scientific and military
advance since World War II.
Let's take those in order.
Has the CIA consistently underestimated the Soviet
threat?
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Admiral Turner. I don't believe so, no.
Senator Proxmire. Has the CIA contrived to reduce the
estimated range of the Backfire bomber in order to salvage
the SALT II accords?
Admiral Turner. No.
Senator Proxmire. What about the argument of politiciza-
tion of the CIA? What is your answer to that?
Admiral Turner. I won't speak for the past, but I will
defend to the death that we are not politicized today, sir.
I feel that my responsibility is to stand clear of the policy-
makers and to give the President, the Senate, and the House
objective, unbiased intelligence to the best that a human
being can do that.
Senator Proxmire. What about the charge that the
intelligence community--not just the CIA, but the whole in-
telligence community--has been wrong about parity and wrong
about virtually every great Soviet scientific and military
advance since World War II? What is your answer to that?
Admiral Turner. I think that that is an incorrect
generalization. I cannot imagine that the intelligence com-
munity, or the CIA, has been wrong on every advance that the
Soviets have made.
Senator Proxmire. Exactly the opposite has been my im-
pression. Of course the CIA has made mistakes; what institution
does not make mistakes? But at the same time, according to
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hindsight, it would seem that you have been more accurate than
the other agencies have been.
Admiral Turner. I believe we have been generally accurate
and objective.
As a military officer, I have always valued the CIA
estimates.
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SOVIET ARMS EXPORTS
Senator Proxmire. Can you give us figures for total
Soviet arms exports during the past five years.
Admiral Turner. Yes, sir, I am sure we can. Can't
Mr. Diamond. Yes, sir.
Senator Proxmire. Would you get that to us for the
record?
Admiral Turner. We would be pleased to do so, Senator
Proxmire.
1972
1973
1974
1975
1976
Total
1,205
3,010
2,250
1,685
2,190
Africa
55
75
235
600
1,070
Latin America
..
10
25
55
80
Near East
970
2,655
1,785
850
830
South Asia
180
270
205
180
210
This table reflects a substantial upward revision of the dollar
value of Soviet arms exports and agreements in 1972-75 made
possible by new information on Soviet prices for major items
of equipment.
Senator Proxmire. What is the confidence level of margin
of error for the figures in that area? Are the estimates
reliable to within 10 percent, or to a factor of two or
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53
three--in the Soviet arms exports?
Mr. Diamond. Yes, sir. We will make that a part of
the record, too, Senator. I cannot answer that right now.
Senator Proxmire. All right.
COMMITTEE INSERT
Soviet delivery values are considered to be reliable
within 20 percent. In fact, they should be considered
a minimum figure; undetected shipments of weapons systems
and related equipment and unknown additional price increases
could raise the total values by as much as 20 percent.
Senator Proxmire. Does the latest information suggest
,that at the present time they are exporting more. What
does your most recent data indicate?
Mr. Diamond. I think the facts are that it has levelled
off. There is a change in the mix, a change in the com-
position.
Admiral Turner. There is another point that I have
asked to have studied very carefully, Senator, and that
is the difference between aid agreements and aid deliveries.
Generally speaking; their deliveries are considerably
behind their commitments.
Senator Proxmire. Do the estimates include spare
parts, military construction, supporting equipment, and
supporting services, as well as weapons?
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54
Admiral Turner. Let me check on that, senator, and
answer later if I may.
COMMITTEE INSERT
The data on Soviet military deliveries include military
hardware (land armaments, aircraft, missile systems, and
naval boats); support equipment such as radar, communica-
tions gear, and vehicles; and an estimated allowance to
cover ammunition, spare parts, and unidentifiable support
items that normally are received by military forces.
Excluded are the costs of military construction, training,
technical assistance, and supply operations. While this
aspect of the Soviet program is relatively small, it could
increase delivery levels by 10-15 percent annually.
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SOVIET WEAPONS
Senator Proxmire. Would you agree that Soviet weapons
possess less sustainability and reliability than U.S.
weapons? For example, is it correct that Soviet logistics
are not too good, that they do not have good turn-around
capabilities, that they have a kind of throw-away philosophy
with regard to many of their combat units and weapons?
Admiral Turner. I am reluctant to go quite that far.
There are lots of elements to logistics. In terms of
quantity I think there is evidence in Europe, for instance,
that Soviet logistics are not bad, particularly in the
Warsaw Pact arena.
Senator Proxmire. What about reliability?
Admiral Turner. Soviet equipment tends to be more
simplistic in design than is ours, but it is generally
reliable for the purpose for which it is intended.
Senator Proxmire. How about turn-around capabilities?
Admiral Turner. By turn-around, do you mean if it is
broken down, can they repair it and bring it back again?
Senator Proxmire. That's right.
Admiral Turner. I don't really have a specific
opinion on that. I will try to see what we can give you.
Sayre, did you want to say something?
Mr. Stevens. Well, as the Director mentioned, their
design is often focused on simplicity.
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Senator Proxmire. That should be helpful to them.
Mr. Stevens. Yes, indeed. It often is. The very
lack of sophistication in Soviet equipment makes many
items easy to repair by relatively unskilled personnel.
Senator Proxmire. Would you agree that due to the
lack of precision engineering and quality control in their
defense production that there is a likelihood that many
of their weapons will not fire? Do they have a serious
reliability problem in that sense?
Admiral Turner. I would not be willing to agree with
that right off hand, Senator. Their equipment is in many
cases more elementary than ours, but is usually does the
job.
Senator Proxmire. Have analyses of Soviet weapons
such as the MIG-25 disclosed problems of sustainability
or reliability, or any other problems concerning the
quality of production?
Admiral Turner. Sayre? -
Mr. Stevens. The people who have looked at that equip-
ment feel that if the design were taken one step further
and a production engineering job were done on it, it would
be possible to make it more effective and cheaper to pro-
duce than is now the case. The emphasis now is often on
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ease of production and the use of interchangeable parts. The
ability to perform the design mission is never compromised,
however.
Admiral Turner. Overall, Senator, I have had the
impression over the years that the Soviets could not main-
tain their equipment in as high standards of year-round
reliability as can we; but that if they knew when war was
going to start, they could peak at a very high level of
readiness and reliability.
Senator Proxmire. Did the analysis of the MIG-25
show it to be less technologically advanced and more
expensive than we had thought it was?
Admiral Turner. I will ask Dr. Stevens to supplement
my thoughts on this because he has been in on this in
greater detail, I am sure. My reaction to your question
is a qualified yes. That is, the internals of the airplane
were not as sophisticated as they would have been had we
designed the aircraft, but the overall capability is there.
Sayre?
Mr. Stevens. That is right. It is a design choice.
Senator Proxmire. That would increase its cost, wouldn't
it? My question was two-fold. First, it went to the
effectiveness of the weapon, of the MIG-25 and the techno-
logical advancement of the MIG-25; second, it went to the
cost.
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You wouldn't say that it cost more, or that it
probably performed reasonably well because of the redundancy
they have built in at considerable cost, would you?
Mr. Stevens. That is right. The use, for example,
of tubes in the electronics of that aircraft may have
surprised some people. The use of integrated circuits,
of solid state stuff, would produce more reliable electronics,
and probably cheaper electronics--if that were the only
comparison to be made.
Senator Proxmire. Do you mean that they are still
using vacuum tube technology?
Mr. Stevens. There was vacuum tube technology in the
MIG-25.
Admiral Turner. But there were other things, such as
steel, in it, too, right?
Mr. Stevens. Right, stainless steel instead of
titanium.
Admiral Turner. Of course, working titanium is
frightfully more expensive, but it gives you a real payoff
in performance. This is true today, so you can imagine
the difference in cost when the MIG-25 was designed--1961-
1963.
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CHINESE ECONOMY AND DEFENSE
Senator Proxmire. I have only a few questions on China.
To what extent was the poor performance in China due
to earthquakes and other natural disasters, and would there
have been growth but for the natural disasters?
Admiral Turner. Would you tackle that one, Mike?
Mr. Field. Poor performance in China last year was
due both to one-time factors and to longer-run ones. The
earthquake was certainly one of the most serious in the last
century. It ranks with the great Tokyo earthquake of 1927.
The loss of life was very severe, and it was in a highly
industrialized area in North China. The earthquake alone
might have taken 1 to 2 percentage points off the rate of
industrial growth.
A second factor in the low rate of growth was the
political disruption connected with the deaths of Chou and
Mao and with the throwing out of Mao's widow and the rest
of the "gang of four." When we look at the output by
province--those for which we have some information--we see
a definite correlation between the degree of political
disruption and the economic performance. This is a second
reason for the poor performance.
Then there are long-run factors. Problems in the
allocation of investment over the last five to ten years
resulted in bottlenecks. The whole extractive industry is
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60
underdeveloped. For example, the demand for nonferrous
metals for which they have ores is higher than their ability
to produce. So they have had to import, to spend hard
currency to import nonferrous metals.
In the iron and steel industry, emphasis has been too
much on the crude steel capacity and not enough on the
iron ore extraction or rolling. So, these problems in
the allocation of investment have created bottlenecks.
The last factor I would say that is a long-run factor
is productivity. There has been very little improvement
in the wages or the standard of living for the industrial
labor force. In times of political disruption, when the
Chinese workers have had a chance to express their opinions,
they have demanded higher wages. This dissatisfaction
with wages, of course, gets translated into poor morale
and low productivity.
So, the poor performance is therefore a combination
of the earthquake and the political disruption that are
one-time, short-term fact ro -and then of various under-
lying problems, such as allocation of investment and problems
of handling incentives.
Senator Proxmire. Thank you very much.
It would seem that the Chinese represent a very, very
powerful force on the continent around China, particularly
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in Korea and in Vietnam and other parts of the Asian land
mass, but that they are of virtually no military significance
elsewhere. That is just my instinct in view of their size
and in view of the kind of force that they have.
You conclude that the Chinese rely on copies of Soviet
weapons developed in the 1950's. Would you summarize to
what extent Chinese aircraft, missiles, ships, and ground
equipment are basically copies of Soviet designs of the
1950's.
Admiral Turner. They are very largely copies of those.
Senator Proxmire. They are about 20 years behind
the Soviet Union, let alone ourselves, technologically,
isn't that so?
Admiral Turner. Yes, I would say 15 to 20 years.
Mr. Stevens. They have, for example, built a fighter
aircraft, a Chinese version of the MIG-21, which is in
very limited production.
Senator Proxmire. When was the MIG-21 first built
in the Soviet Union? Was it in the 1950's?
Mr. Stevens. It was the late 1950's.
Senator Proxmire. And China's MIG-21 is in only limited
production? It is evidently not a great success.
Mr. Stevens. That's right.
On the other hand, they apparently have built a nuclear
submarine and they are capable of producing advanced radars.
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62
But in general, when it comes to aircraft, ships, and
so on, what they have done is taken the equipment that the
Soviets gave them before the break and improved upon it.
But it is equipment of older Soviet design.
Admiral Turner. But they are developing their own
force. They are doing that on their own.
Senator Proxmire. Admiral and gentlemen, thank you all
very, very much. I want to echo what other members of this
committee have said and I want to emphasize it. You have
done a superlative job. This has been a very, very fine
briefing and I am most impressed. We would appreciate it
if you could sanitize as much of this record as possible
and make as much as you can available in two or three weeks.
I recognize that you cannot do it all, but we would
appreciate your doing as much as you can.
Admiral Turner. We would be happy to do so.
Senator Proxmire. Thank you very much.
This committee will stand adjourned.
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