CIA HISTORICAL REVIEW PROGRAM
Honorable Harold E. Stasaen Special Abo latent to the Preaictont The White House
Dear Nr. 3toesen:
The attached analysis waa preparedush faasi* at Um request of Mr. William TldveU of your ataff-
I would like to ocmhaaitc that, in the absence of specific asauraptlona with respect to thc detail* of the dlsaraanentunder consideration, we have had to establish somewhat arbitrary annunptlooe and paraaetera aa the basis for ourelieve, however, that to* paper does present acme usefulconclusions regarding the possible Impact on tha Soviet economy. ope you will find this paper helpful for your current discussions here in Washington.
Rsfcert Aaery, Jr.
Eatlooted Effect oo the Soviet llcunony of taa Level of Dloaroamepty Recent Soviet Propo^U
Any substantial cut in Soviet armed forces and procurement vould contrimA* significantly to tbe productive capability of the Soviet civilian economy. The proposal to reducelUloD men vouldll Hod free the armed forcesestimated at about tt
Although the Soviet economy is presently experiencing soot ecoo oraic difficulties dueemporary shortage ofial production capacity, the average annual rate of Soviet Industrial growth probably will continue to exceed greatly that of. nevertheless, the USSR probably would welcome developnents which would permit tbe assignneot of mare resources to Industrial invesbaeot, if assured that thesewould be welcomed particularly in view of the rising costs ofmaterial* end declining increments to the Soviet labor force resulting from the extremely low wartime birth rates. The increments
to the labor force resulting solely from increases in per*oca out of school of laboring age will bemillion for the five, comparedillion actually added to tbe labor force.
substantial reduction la armed forces and associatedin6 would help to alleviate these problems. Itmore In the long run than ln the short run. Since theproblem ishortage of material* rather thanreduction of procurement would release enough materials sad fuel*aome of theIn the civilian economy. The effectwould be marginal with the exception of steel whereillion ton*. While the overall supply of laboradequate. It is scare* In the areas east of th* Ural*evelopment prograa is underway. Demobilised personnel couldeasily channeled into this program than civilian* fromhe productive contribution of the demobilised personnelgreater importance a* tb* raw material* shortage* ar*tber* Integrated into theillion sen released would equal about five percent ofemployment and would bo the equivalent of th*ln the total labor force *xpectcd ln tba three1 to
tt. omewhat longer periodnd later) the labor, material* and industrial capacity released by any demobilisation could be Integrated fully Into civil Lac production. The Impact can then bo approximated by the ruble value cf these released resources. illion persona released from tb* armed forces could b* expected to odd aboutillion rubles to the annual value of production.
5- In order to osaeas tbe extent of poaelble reductions in th*
procurement sector of Soviet nilitaryhese expenditures were classified in five broad groups described in tbe attached table. It has been calculated for current national Intelligence Katlreatea that the expenditures Involved in procurement of theee activities amounted5 rubles6 and in the absence of disarmament would growillion In order to determine how0 expenditures for these items sight be affectedorce level cut fronillionillion nan snd possible changes ln specific prograaa, two arbitrary disarmament examples were constructed to Illustrate the range aad orders of magnitude that sight be involved.
6. In Case I, which night be describedelatively enall cut, the procurement levels of the various groups of Items were adjusted according to the ssaunptlons in the table. Tbs table also presents the adjustments asauned for Case IX which night be describedelatively large cut. The effects of these two seta of asaunptlons on0 expenditures for these groups together with the values60 which were prepared for currant Rational Intelligence Kstinatee ar* presented in the table. The Urge cut would reduce the0 expenditures for these items byillion rubles orercent, while the aaall cut would reduce0 expenditures by almostillion rubles orercent.
7- The resources released by reduced procurement and demobilisation of personnel constitute tbe gain to the civilian productive economy- The subsistence of ths released service personnel ia not included since lt will simply become consumption for civilians. The gain*5 rubles to the economy0 under the two procurement assumptions an:
* Includes all expenditures for military materiel, only pert of which is included in the announced budget account, "Defense Expenditures."
8. These amounts couldignificant impact co dog-all <ary production and can be comparedrojected total investmentillion rubles Hot all but most of the above amounts could ba allocated to investment. The allocation to investmentajor portion of the more drastic cut (Case II) could perhaps,ive-year period, re altevel of industrial output five to Ua percent higher than that attainable withoutot.
Kstlmated Soviet Military Procurement Expenditures6nd for0 Dlsarmaaent Alternatives */
5 Ruble a
Estimated for Current BLS'a
aearmaaeat Case I Case II
heavy supply in USSR Lth relatively low rate* of
Itema whoaa procurement is cloeely related to manpower levels.
Iteme with high obsolescencend relatively low Ban-power requirements for operation -
Itemeunction of force level andunction of equipment levela.
Expenditure involved in research and development activities for military purposea and nuclear sueray sotlvitles.
Armoured fighting vehicles, other ground force weapons, axaunltloo and naval surfsea vessels.
Automotive equipment,services, and generalmaterials and supplies.
Aircraft snd missiles, radar and air defense coaraun lest ions and
Petroleum, commonIcation construction activities.
Cut5 percent6 levela.
Cut toercent of Cut toercentlevels.
Projected at same levels/
Cut5 percent6 levels.
Projected at acme levels as were estimated
Cut toercent6 levels, basedeighted average of cuts In above groups.
Projected0 levels, except research andexpenditures reduced byercent for reduction in weapon testing and product development.
all expenditures for military materiel, only pert of which is Included in the annciocod budgetefense Expenditures.*"
Items would be available not only to aupport lower manpower levels for longer periods, but also to equip reserve forcea at Because of the growing complexity of iteme ln this6 expenditures will procure0 aweapons thanOriginal document.