THE SOVIET STATE RESERVES SYSTEM (SC RR 124)

Created: 11/7/1955

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THE SOVIET STATE RESERVES SYSTEM

CIA HISTORICALRELEASE AS SANITlZtO

Office of Research and Reports CF.NTRAL INTELLIGENCE AGENCY

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CONTENTS

Summary and Conclusions

Ii.

. . .

Rationale and Organizational Structure of theSystem .

Structure

III*. Measures *of the State Reserves System

of the System

and Withdrawal of Selected State

Reserves v. -

Aspects of the Program

Reserves Bases (Post Boxes?

Transfers of State Reserves . .

IV. Quantitative Estimates of Soviet Reserves . . . .

Appendixes

Appendix A.

Appendix B. Methodology for Table 3 .

Appendix f

Appendix U

Page

10. State Budget o( the USSR: Estimated Breakdown of "Other Expenditures" Within the Category "Financing the National Economy, "

1 I. Slate Budget of the USSR: Category, ofWhich Includes Payments

Illustrations

Following Page

Figure I. Buffer Stocks in the

2. USSR: Formation of thc Chief Directorate

ol State Material Reserves (Chart) . .

Figure 3. USSR: Storage Bases of the Chief Directorate of State Material

Reserves

to

Figureigure 5.

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Figure u.

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THE SOVIET STATE RESERVES SYSTEM*

Summary and Conclusions

Soviet state reserves consistarge, maneuverable fund of commodities stored throughout the USSR under the direct control of the central government. Theyajor part of Soviet reserve stocks of producer and consumer goods. In value andew bulk commoditiesotably agricultural andproductsairly large part of Soviet slate reserves, but the state reserves program alsoreat number and variety of other commodities, of whichave been

Thc postwar expansion of the Soviet state reserves program beganhen the construction of storage bases was initiatedarge scale. Under the Fifth Five Year, the USSR undertook to double the iiize of slate icservcs. There is abundant evidencearge investment has been made in thc program during this period. The aggregate volume of this invest -ment. however, cannot be estimated, and estimates pertaining to Soviet reserves of commodities and commodity groups generallyery wide range of error.

he Soviet economy, where almost every product of economic significance is allocated by the central planning authorities,control over reserve slocks is logically and practically necessary. Current planning must cover allocations to (and from) reserve slocks, and long-lcrm planning must allow lor any kind of

* The estimates and conclusions contained in this report represent the bent judgment of ORH as ofeptember I'm (However, some Of the data uponie estimates and romius ions aie based .ioflicr date I

contingency, including naturalnd war, in which reserves would be needed to sustain Soviet economic and military activity. In practice, moreover, close centralized control of reserve stocks is required in order to prevent their unauthorized accumulation or dissipation, which could caGily diutorl or defeat the. aims of the central planning authorities. Working stocks in the hands ofare maintained, therefore, under strict control at calculated minimum levels.

There are three categories of Soviet state reserves. The first is designed to maintain continuity of planned production in the eventerious interruption of normal supplies. Thc second is designed to permit the rapid conversion of the economyartime basis, under mobilization plans. Roth these categories of commodities are stored at plants and warehouses of*The economic ministries. Tbe third consists of stocks held at state reserves bases, for use in extreme emergencies when all other stocks have been exhausted.

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Soviet state reserves are thus very-much broader in character and purpose than the "strategic stockpiles" of Western countries. Moreover, state reserves operations penetrate the economy to such an extent that they necessarilyarge pipelineonsiderable portion ol current Soviet consumption of some modilics is regularly supplied by planned releases from state reserves.

The magnitude and coverage of the Soviet state reserves program require some flexibility in dealing with both the procurement and Ihc release ol commodities, and available informationew examples. There is. in particular, considerable evidence lhat slate reserves, especially of grain, were drawn upon,uch greater extent than in previous years, lo meet the shifting requite ments of Soviet economic policy. It is probable that these releases were large enough to interfere with the fulfillment ofplans for increasing state reserves and thai the Fiflh Five Year Plan goal of doubling slate reserves will not be met. ecent slate -menl byn implied thai slate reserves will not bs drawn upon .igain mi socale, at least in the near future

The releases made, however, even though exceptionally large, cannot be regarded aa unique in character, since it is clear that in doctrine and in practice one of the functions of state reserves is to Servebuffer" or "flywheel" and that state reserves operations are in plan and execution an integral part of the operation of the Soviet economy.

Although Soviet stale reserves operations are an importantin economic planning and policy at the highest level, thc state reserves organizationhe Chief Directorate of State Material Reservess not believed to have ministerial status at present. It is organized functionally, thc first eight numbered directorates beingeach responsible for Union-wide storage and maintenance of reservesommodity or commodity group. Its operations are carried out through territorial directorates^ of which there areorresponding fairly closely to administrative divisions. Ilwn bases, of whichave been identified, are located throughout the USSR. Their geographical distribution reveals that thc largest single cluster is in the country's chief industrial area. Nearly half thc known bases,ie east of the Urals, in regions which produce altogether only one-fifth of total Sovietand support about one-fifth of the total population of the USSR.

Policies governing the level of Soviet state reserves areby the application of specific criteria: essentiality (in war andcarcity, scale of production, storage conditions, the feasibility of quickly increasing production, and distributiontransport) factors. On lhe batia of these criteria,for individual commodities are set in terms of the economy's requirementsiven period. It is believed thai the objectives for most commodities would run at leastonths' .supply.

The only known source of financing the purchase of commodities for slate reserves is the Union budget, in the residual item "other expenditures" under "financing lhe national economy. " Thisis believed to berots basis. It wasillion rubles the last year (orre.ikdown is available. rude analysis of this budgelaiy item uidic.iles that annual

allocations lo stale reserves may have been two or three times Ihis amount, and perhaps even higher in some years. At producers' prices the volume of stale reserves purchases'is obviously very reat, especially since producers* prices for agriculturalwhich bulk large in the state reserves program, are artificially low. Moreover, it is also possible

rves purcnases may be linanceo irom sources otner than this item in ihe budget. If this is true, then reserves expenditures arearger order of magnilude lhan the rungefi indicated by budgetary analysis.

Although it cannot be measured or analyzed, the cost of thc state reserves programnot only of Ihe net investment inbut also of processing, trporlation. storage, and maintenanceignificant charge on the Soviet economy. The state reserves program also has important direct effects on the allocation of resources, and it will continue to have such effects until the basic objectives have lie en attained. The high cost of the state reserves program, however, is fully justifiedn the Soviet viewB one of (he conditions of maintaining the adaptability and continuity of the Soviet economy, in peace as well as in war.

I. Introduction.

Stocks of various types of goodsital part ol the Soviet'-lem of reserves In addition to monetaryof gold and foreign exchangr. ihc USSR also holds in reserve several types ol material stocks, subdivided according lo thethey are to serve.

The lour general categories of Soviet material reserves are emergency (straithovyyc) slocks at ihc enterprise level, military stacks of the armed forces, the reserve of the Council of Ministers, and llie al.ile food .ind in.ileii.il reiei <e:

Emergency stocks are of two types, agricultural andagriculture, such stocks consist of seed, (odder, and foodthc kolkhozes are required by law to maintain alsize of these stocks is indicatedecree stipu-

lating olkhozes must croalc,, untouchable emergency seed funds on the order ofoercent of their annual needs.

Emergency stocks at the industrial enterprise level consist of supplies of raw materials and other materials consumed by the enterprise in its daily production. Tbey are financed by thecapital of thehe emergency stocks are set aside, to be drawn upon only in case the current supply should become exhausted through late delivery, an increase in the plant'sof the material, or some other local contingency.

The size of the emergency stock is determined "on the basis of thc least time needed for restoring the current supply, /including7 thc time needed for ordering from ihc supplier, for the supplier to Borland ship the materials, for the transport of the maie-iaU. and for preparing them for consumption at the enterprise. " The emergency stock may vary from zero, where prompt, regularol the material is assured, tor more days' supply, at enterprises which would require thai length of time to obtain an urgent delivery of the material.**

The importance of emergency atocks in industry and agriculture ii. limited by thef these atocks. Designed to aclhort, term buffer against temporary interruptions in normal supply, they would be exhausted quickly in the event of any extensive breakdown nll supply channels.

ri'i'iaiiysource reiurenvea, e m- ik evidence, earlyhange inliry lOwrfrdreserves in industry, thel wliU'li wouldto reduce sharply or eliminate these reserves

ilitary end rired in ano( regionalperated by the Soviet Ministryand located'throughout then addition toMocks of weapons, ammunition;'tanks-and vehicles,signal equipment, and fuel, military depots alsoof rations and feed, clothing, medical'supplies, andcurrent needs of the armed forcespartlyse stock*. Inventories probably arc kepthigh level toirst-line reserve in case of war. function of the Ministry Of Defense thun ia limitedof military end items for supplying the armed forces.

The reserve of the Council of Ministershird category of material reserves in the USSR. From this reserve, which appears in the material balances.meets various demands in material resources, arising during the year and not foreseen by the annual planor example, the overfuifillment of the production plan, the starting of constructionew projecttc."

references have shown allocation of coal,

gasoline, newsprint, CMtfM cloth, iron, and possiblyto the reserve of the Council of.ippe:iro

thai above-plan production and other unallocatedsometimes are placed in it.

The reserve of the Council of Ministers probably is not large enough to warrant setting aside special areas exclusively for its storage. There is evidence ihnl nome of thc products contained in it arc stored at the enterprises which produced them.

Although the size of this reserve is no*robable upper limil to its ruble value can be determined. It It believed that this

The reserve ol the Soviet Council ofis described here. The insignificant reserves of the Union Republics' Councils of Ministers are not discussed, although the remarks made here llM apply in

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reserve is financed out of Ihe All-Union budget, from theFund of the Council of Ministers" under "FinancingEconomy. " This ruble fund appears to be used chieflypurposes. First, it is used to purchase commoditiesthe Council of Ministers' reserve. Second, it may be drawnan insurance fund when property of All-Union or Unionhas been damaged or destroyedaturalia,lexible fund, which occasionally has been usedpurposes designated by the Council of Ministers." In thebudget the Reserve Fund of the Council of Ministers wasin the amount ofillionis not knownof this amount were used for eacn ui the purposes

The reserve of commodities held by the Council of Ministers probably is limited both in size and in range of products. it would duplicate certain functions of the state food and material reserves, which are described below.

The reserve of the Council of Ministers thus appears toelatively small stock of certain widely used materials. Its direct control by the Council of Ministers facilitates Ihe urgent dispatch of these materials in an emergency, as designated by (heecondary function of the reserve may be to hold unallocatedin order to prevent its being dissipated for unauthorized purposes.

The fourth general category of Soviet reserves is Kate food and material reserves. arge, maneuverable fund of centrally controlled commodities located throughout the USSR, atate reserves are designed to serveuffer "against any eventuality."While fulfilling the functionsstrategicbe Sovie( state reserves are much broader in scope than the traditional Western concept. They serve as (he Soviet economy's ultimate source of supply, and, as such, they have certain unique

For further discussion Of this lund. see source

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First, lhe Soviet state reserves are planneduffer against natural catastrophes and against military, political, and economic eventualities. Second, they are believed to contain storksndividual products, covering several hundred commodity categories and including such, critically important goods as mercury and motor vehicles as well as common, bulk articles like firewood and barley. Third, the control over state reserves is exercised directly from Moscow, and withdrawals Iromthem may be made only with the consent of the Soviet Council of Ministers. Fourth, thereonstant flow of goods into state reserves (as sequestrations),stale reserves bases in different areas (asnd out of state reserves into production and distribution (aa refreshening, as loans, and as unrequited Fifth, there are several separate categories of stale reserves, classified according to general type of product and specific use or consumer. Each categoryarticular way.

It is upon these large, flexible, all-inclusive state reserves that the USSR must depend to meet any large-scale or long-term In time of war they woidd furnish the material means for converting the economy to war production, lor maintaining economic life in areas isolated by military action, and for limited, directof military forces. In peacetime they are called upon to lessen the effects of breakdowns in production and distribution and to give theertain degree of regional self-sufficiency. Figureshows the position of state reserves in the Soviet system of material buffer stocks.

This report is limited lo surveying lhe Soviet state food and material reserves in their various aspects.

are defined.elow, and

* Releases and M III E, beto*

** Following p. 8.

Buffer Stocks in the Soviet Economy

U" Rationale and Organizational Structure ofystem.

A. Rationale.

The Soviet state food and material reservesunction of the Soviet planned economy. Their rationale is twofold: "for the planned conduct of the national economy and for the defense needs of the nation. "

The difference in concept between thisstrategic stockpile" is clearly brought out in Soviet economic literature.oviet article on stockpiling in Westernerman economistcriticized for his views on stockpiling"he thinks of the state reserve as an untouchable fund for wartime. The maneuverability of these stocks and theirfor fulfilling various economic functions do not enter into this conception. "

In the same article the US strategic stockpile is discussed at some length. The author concludes that, because of its small size and composition, the US stockpile "can have only strategic significance and cannot fulfill the functions of an 'economic

Soviet literature is also quite explicit in defining this nonmilitary "economic flywheel" function of state reserves in thc USSR. In achieving the "uninterrupted progress of socialhe Soviet economy utilizes its state reservesmaterial fulcrum for efficient control over plan and to meet various contingencies. These areecent article on economic planning

Difficulties and partial disproporlions in the Soviet economy can be aggravated or fur -thcr provoked by mistakes in organizational economic activities.and. in particular, in lhe planning of the national economy. II isto ignore the possibility of stoppages in

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the development of Certain branches o( the economy due to natural disasters. For example, lheof weather conditions for raising and harvesting crops is familiar to all. But. as experience shows, individual or partial disproportions arising in the Soviet economy are quickly eradicated on thc basis of planning the economy. State reserves are the material means in the hands ofthe Suviet state which permit the prevention of imminent disproportions and the elimination of existing disproportions.

In working out material balances, for example, it sometimes happens that planned'commitmentsaterial exceed lhe available supply. "Such divergences call for the supplying of goods from other sources. (Such release from stale reserves,

Slate reserves are also drawn upon to help overcome seasonal declines in production and particularly for maintaining production levels during the winter months.

An additional reason for maintaining stale reaerves, at least of grain, was disclosedoint decree of the Soviet Council of Ministers and lhe Centra) Committee oi the Communist Party, The decree stated in pari that

he reserves are necessary for the further strengthening of the economic independence of our state: it has been proved lhal wc arc all the more reckoned with, the more grain wc have in the state reserve.

This may mean, first, psychological satisfaction- thatull granary reassures Soviet leaders as to the stability of their regime. .Second, it may mean that large grain reserves could be used by the USSRuffer againsl world price flucluaiions.

The chief strategic functions of the state reservr* program are indicated by the existence of the so-called moMInation, or reserves and by the Union-wide distribution of slate reserves

Formation of the Chief Directorate of State Material Reserves

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bases. In time of war the mobilization reserves would assist inthe Soviet economy to war production as rapidly as possible. The state reserves stored at state reserves bases in each area of thc USSR would be able, in event of war. to sustain production, .feed the

population, and lend support to local military unitsimited

emergency period.

Although the state reserves system has been so constituted that it may serve in any of the situations described above, the use of state reservesiven situation is not automatic. The decision, in each case, rests with the Soviet Council of Ministers. Further* more, it appears that the policy of the Council of Ministers into the use of state reserves may vary from time to time.

Inor instance, the new Sovietspoke of the need to increase state reserves andsolving "individual, current problems at the expense ofwords imply that in the past the Soviet

leadership has allowed plans for enlarging state reserves to lag in order that other commitments could Be met. It is thereforethat state reserves will be doubled in size by the ends originally set forth in the Fifth Five Year Plan.

There may be an additional implication in Bulganin's statement. There is evidence that widespread releases of certain state reserves products took place. * Duringears, not only were increments to state reserves permitted to fall short of those planned but also the existing level of stateerves actually may have decreased. If this is the case, then the statement of Bulganin mayore strict interpretation of the conditions which wouldelease from state reserves.

Thereowever, no evidencehange in the concept of the functions of state reserves. The state reserves system is designed to play the twofold wartime and peacetime role described

See HI, B. below.

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in the preceding pages. lanned economy, where each branch of production is dependent on theerious disproportion in one branch would affect the plane'of-all othertate reserves are the buffer against such disproportions in the USSR. In the event of war, various regions of the USSR might be cut off from their usual sources of supply. The state reserves bases distributed in each area would furnish the food and materials necessary to sustain the areaeriod of at least several months.

B. Organiiational Structure.

I. Organization.

The accumulation of all state reserveshatof food and mate rials the.-responsibility ofPlanningChief Directorate of Stale

Material Reserves, attached tu ihe Soviet Council of Ministers, is charged with administering the state-reserves program. II is through this Chief Directorate that the fjale exerts the centralized, planned control which is essential to the realization of the goals 'of the program.

This Chief Directorate was formed inJ by the amalgamation of the Chief Directorate of State Food Reserves and the Chief Directorate of State Material Reserves Figurellustrates whal happened when this merger too* place.

Unlike the general reorganization of thc Sovietwhich followed the death of Stalin, this consolidation was effectedinimum of confusion, indicating that it represented na basic changes. The responsibilities of both the field and the headquarters levels remained essentially the same, although certain necessary renumbering of departments and directorates occurred. The functions of the new Chief Directorate of State Material Reserves appear to lieombination of those of the iwo previous or-ganizationa. Prominent personalities of lhe earlier lood reserves

* Following p.

organization generally assumed equally important roles in the new chief directorate, including that of chief. hen the slate reserves organisationimilar consolidation, the official in charge of food was put in the top position as chief. This seems lo be reasonable, in view of the fact that food products constitute the largest component' of the reserves organization. The Deputy Chief, Vovchenko, was brought in from Gobbnab (State Committee forerhapsthe increasingly large-scale distribution problem with which the state reserves organization is faced.

Most of the ministries which were consolidated after Stalin's death have since been subdivided. This is not true of the Chief Directorate of State Material Reserves, although itshad been divided and consolidated several times before.

It appears that the state reserves program currentlyalthough reductions in force are known to have takenseveral state reserves field offices duringreduc-

tions have been limited to administrative personnel, in keeping with thc present Soviet effort to lower the costs of government

The general extent ol reductions in state reserves personnel is not known. In the Irkutsk Territorial Directorate the administrative staff was reduced bynits4eddction of approximatelyercent.

The status of the slate reserves organizstion issome question. When thc state reserves organization wan aits minister enjoyed cabinet rank,eat on the SovietMinisters can be so described. Infter theSlate Reserves had been replaced by two chief directoratesreserves, its representation on the Council ofecree of the Supremeseveral

other organizations not designated as ministrieseat on the Council of Ministers, it appears that the state reserves organization

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no longer has thint ie possible that ife head of Gosplan represents state renervee interests on the Council.

There ie evidence that state reserves affairs atlevelesponsibility of Latir

view of the increasing complexity of materials flows in tbereserves system, Kaganovich's past experience as chairman of Cose cab would seem lo makeogical choice for top state reserves responsibility.

The Moscow headquarters of the Chief Directorate of State Material Reserves is set up along functional lines with numbered directorates, which are concerned either with the accumulation, maintenance, and release of reserves or withfunctions (personnel, bookkeeping, construction, and so on). The highly specialized nature of thia Chief Directorate is shown by the fact that lhe Thirteenth Department and the first eight numbered directorates are each responsible for the Union-wide storage and maintenanceommodity or group ofin accord with qualitative and quantitative levels set by the national economic plan. (See Figure 2.

In addition to the Moscow offices, the Chiefof State Material Reservesetwork of regional offices located in various cities throughout the USSR. These subordinate offices, referred to as territorial directorates, are eachfor conducting stale reserves operations and maintaining physical reservesarticular geographical area. These geographical areas correspond generally to the Sovietdivisions. The territorial directorates are believed to be organised along lines similar to the parent organization in Moscow. For example, the approved table of organisation for the Irkutsk

* ecree of the Supreme Soviet ofhe Council of Ministers incluaed, in addition to all Ministers, the chiefs of Gosplan, Cosbank. the Slate Security Committee. ,ind lhe State Committee for Construction Affairs. ** Following p. above.

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Territorial Directorate4 consisted of six deparIments: Food. Consolidated Industrial Raw Material. Kighth,(Specialnd Accounting

territorial directorates, which cover the USSR, are the primary links in the policy of attaining regional self-sufficiency. Through them the USSR attempts toattern and level of reserves which will guarantee the uninterrupted operation of each regional economy in any eventuality.

Within each geographical area are located storage bases belonging to the Chief Directorate of Slate Material Reserves^

Reserves

belonging to tbe Chief Directorate ol State Material Reserves are stored also in facilities of various ministries, requisitioned for thc purpose. The enterprises and installations at which these facilities are located are known as "responsible custodians. "

Stale reserves are administered by the appropriate territorial directorate. Operations are carried out through direct orders from Moscow, usually issued by the appropriate directorate or department to thc chief or deputy chieferritorial directorate. In reporting to Moscow, the chief or deputy chief of the territorial directorate reports to the person associated with the directorate or department which originated the order.

Z. Categories.

The reserves controlled through the territorialInclude capital equipment, industrial materials, and These reserves are divided into three categories.

The first category (designated as Croup I) includes reserves of goods held in ihe responsible custody of plants and warehouses ol economic ministries. These reserves are inlo. and are carefully differentiated from, current andstocks ol the enterprise, and are owned and controlled by Ihc Chief Directorate of Slate Material Reserves. They consist of planned amounts of inputs required under the normal production plan of the enterprise and of its finished products.

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The second category {designated asonsists of mobilisation reserves. This category ia administered by the Eighth Directorate of the Chief Directorate of State Material Reserves. (See Figure( These reserves are located at plantB and warehouses of economic ministries but are not designed to guarantee continuation of normal production. Instead, they consist of tools, equipment, and materials necessary to convert an industrial enterprise from peace to wartime production in accordance with its mobilisation plan.

The third category consists of reserves held at the special state reserves bases which are intended to include those goods required to insure the uninterrupted operation of the regional economy if and when depletion of all other sources has occurred. These reservesast line of defense, to be used only after the exhaustion of all others.

3. Operations.

a. State Fqod Reserves, t_

Food reserves, which are administered by the First, Second, and Thirdf the Chief Directorate of State Material Reserves, are stored both at stale reserves bases and with responsible custodians.

In order to assure adequate food supply under all conditions, food reserves have been established to cover each step of tbe.production and distribution processiven industry as well as within each area or region. tudy of grainrimary component ol the Soviet food supply system reveals that at each step along the line between the production of seed grain and the production of flour for the ultimate consumers, reserves are held which are in addition to the regular, seasonal, and emergency stocks which these distributor and consumer organizations are required to maintain. If food supplies were disrupted at any point in this chain, each of the

* Following p. above. ** Thc First Directorate handles grain and hay reserves, the Second, meat and dairy reserves, and the Third, miscellaneous food reserves.

ould continue operations to the extent of the state reserves held against this contingency.

The participation of the reserves program in the supply of meat is equally marked. The state reserves organization has superimposed on the regular meat distributionpecial controlortion of the product at every stage of production, including cattle on the hoof, cattle entering the fattening stage,meat, tinplate necessary for canning, and the end products cold-storage and canned meat.

The products stored at state food reserves bases appear to be the ultimate reserves of food in the USSR, to be drawn upon only when all other sources have been exhausted or have failed to meet the demands of an emergency_situalion.

Various emergencies have occurred in recent years. Frequently, where the situation was acknowledged as very serious'

, reserves ui giaui urpneiuiy weic uu> in otner instances, unrequited releases may have beenreserves. For example, the Soviet state reserves systemto be the supplier of grain and feed to the SatellitesEast German riots in Juneis not unusual for seed

grain to be releasedoan, condii.ou.il upon repaymentharge in kind for the loan, It appears that34 the USSR used state reserves of grain more freely than in mosl previous years to satisfy the needs of the economy. *

The qualitative preservation of commodities in storage is an important factor in their instant availability foruse, and every effort is made lo refreshen them on schedule.

Seeelow.

Considerable quantities of products arc madeevery year through refreshening of trie stored food products. These quantities are undoubtedly taken into account in planning. In exchange for the products returned to consumer channels, there is placed in state reserves an equal quantity of the product fromproduction.

b. State Material Reserves.

The Chief Directorate of State Material Reserves in Moscoweparate directoratesepartmentresponsible for thc administration of materials in state reserves atorage. These arc thc Fourth Directoratehe Fifth (criticalhc Sixth (lumber, paper, and hardhe Seventhhe Eighth (military mobilizationnd the Thirteenth Department (sacking material, rope, ond possibly other items formerly under the Sixth Directorate of State Food Under the jurisdiction of these directorates andthereide variety of materials in raw, semifinished, and finished forms stored throughout the country at state reserves bases and in the warehouses of responsible custodians.

Storage bafiee have been observed holding mjny itema of bulk storage such as petroleum products, ferrous and non-ferrous metals, rolled steel, ferroalloys, wire, pipes, chemicals, rubber and rubber products; pharmaceuticals, and paper products. Procedural details are similar for both food and materials held at storage bases. II is in connection with commodities in responsible custody.r Grouphai special activities of materialshow up. The materials held in responsible custody are divided into two specialized categories.nd Groupnd the purpose of these categories largely determines the type of commodity included within them.

(1) Group 1.

aterials ace planned amounts of the normal material inputs or outputsiven plant or enterprise. They are paid for and administered by the state reservesand are held at the warehouses of the individual plant orIn responsible custody.

lumber reserves

demonstrates several aspects wi tne operation oi meategory within the state reserves system, such as quality control and loan activities, as well as indicating the place of state reserves in the priority pattern of the Soviet economy.

Lumber mills have been observed holding inhe types of lumber they would use or producerom un-trimmed logs and firewood through common and quality lumber to agricultural machine building, ship building, and railroad car. The specifications forommodities re quite rigid, and sometimes production is geared especially to these ' When an inferior grade is sequestered in order touota or toeadline for return, permission must be secured from the chief directorate in Moscow. It is granted only on the condition that the inferior product be replaced with the specified gradeater date.

Thc timl>er industry chronically fails to meet4 it reached onlyercent fulfillment of its annual plan and it borrows frequently fromo meet assignments. This borrowing follows the standard state reserves procedure of requiring permission from the chief directorate in Moscow and returning the products within an established time.

Because the timber industry continually hasin meeting its quotas, the demands of consumers on itsresourceseasure of the relative priority Statusby various sections of the economy at any given period. the postwar years, stale reserves orders haveigh priority rating, even to the extent of altering the plan.

During the early stages of the new consumer goods programertain relaxation of attention toward statedeveloped within the government bureaucracy.

t* reserves lumber activilies have been described above to illustrate lhe nature of Group J. thia category oi material reserves is not confined to lumber alone. Other materials observed innclude ferrous and nonferrous metals, chemicals and pharmaceuticals, rubber, hard fuels, leather, rope, and sack-ing material. *

(2) Group 2.

The second category of material reserves incustody is Groupr military mobilization reserves, currently under the jurisdiction of the Eighth Directorate of the Chief Directorate of State Material Reserves. These reserves are for thc purpose ofiven enterprise from peacetime to wartime production in accordance with its own mobilization plan and oflhe war production operationpecilied period ol lime. Accordingly.they arc specialized stocks designed for the particular

* Petroleum products are also held in responsible custody, although such storage is not referred to as Group I. The military depots. Storage tanks of the Ministry of the Petroleum Industry, and oil storage facilities of the machine tractor stations, sovkhozes. and otherenterprises hold slate reserves petroleum in various1 purpose funds and pl<ins.

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enterprise. The tools, equipment, and materials so designated are locked in separate warehouses. Although controlled {arid, perhaps, owned) by the Chief Directorate of State Material Reserves, they are under the immediate supervision of the military mobilizationat the individual factory or plant. He, in turn, is joinlly re-Sponsible to the territorial directorate of the state reservesand Lo the chief of tbe mobilization department within his own ministry.

The mobilization reserves supplies may be borrowed during peacetime for production needs by the enterprises storing them. This may be done only after securing permission from (he Chief Directorate of State Material Reserves in Moscow, and it in. moreover, conditional upon repaymentew days or within the first or second quarter following Ihc release of the commodity.orrower failB to make the required repayment or to get an extension of the time limit for return, the papers related to the transaction are turned over to (he public prosecutor.

Items involved in loan transactions authorized by (he Eighth Directorateariety of commodities under its jurisdiction.** The quantities borrowed from mobilization reserves are varied and follow no set pattern.

The heaviest and most consistent borrowers from mobilization reserves over the years have been found intransportation, and heavy industrial enterprisesrailroads, communications directorates, coal and metallurgical combines, shipyards, and enterprises of the machine-building industry.

* For example, sulfuric acid, ethylene dibromide. phenol, pit props, trosstiey. JSabbitt, rails, brass bars, raw aluminum, cu bon steel, tinplalc. technological coke, electric detonators, soap, tires, drying oil. super-heatingnd cotton wadding have all been borrowed (rom time to time.

* In separate transactions, there have been observed potassium chlorateetric tons (tonnages throughout this report are given in metr ic tons)ons; pitubic meterubic meters. ubic meters,ubic meters, wirendons; ileelonsons, casi0 tons andons;ompressor

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Second, after Stalin's death inisembarked ona complete reorganization of thc government apparatus, reaching down into every level of the bureaucracy. The administration of economic activity was affected, along with other phases of the administrative system, arid the resultant upheavalarked decline in thc rate of productionith the slowing down of the rate of growth in production and its consequent interruption in thc flow of materials, the peak level of borrowing was observed, indicating the possibility that disruptions in production were being relieved.ertain extent al least, by Loans from military mobilization reserves. Thereloan transactions noted in contrast toor the previous year.

Ihc possibility that supply problems in the economy were being cased through lifting military mobilization rcservrs is strengthened by evidence on the level of, ,

* 'For further details On the1 lag in production, see source

when the total observed borrowings (ell to 18

Witn MM

Korean War already terminated, the administrative reorganization completed, and the internal economic flow patterns rearranged, the volume of borrowing appeared to decline toward ita pre-Korcan level.

It must be emphasized that even while military mobilization reaerves apparently were being brought into useoan basis to support the Korean conflict and relieve dislocations in the economy caused by3 reorganization, the Eighthin no way loosened its control over the supplies under its jurisdiction and, while granting loans, was as insistent as ever upon proper return o( commodities within the established payment periods.

IU. Measures of thc State Reserves System.

A. Extent o( the System.

As indicated above, it appears that Soviet leaders believe state food and material reserves to(or the success of the Soviet economy.

These reserves must bo large, varied, and constantlyif they are to fulfill the functions assigned to them. In Conditions of an expanding industrial productionrowingsmall, static state reserves would not be effective in meeting large-scale emergencies. Thus the goals of the Fifth Five Year Plan called for "doubling the state food and material reserves."

It is quite probable that the size of slate reserves willto increase in the future, although there are two important qualifications lo this. First, the growth of state reserves will be extremely pronounced in some products, while reserves ol other products will be increased little, if at all. For example, it is believed that during thc Fifth Five Year Plan the emphasis has beenharp increase of food reserves, especially of grain, meal, and butter, although it is doubtful thai planned goals were reached

Second, while thc absolute volume of good6 in state reserves will probably continue to rise, the sine of stale reserves relative to Soviet production is not likely to increase. Indeed, the proportion of goods sequestered into state reserves may well be lowered In the long run. As Soviet economic planning is improved, theof thc production and distribution processes will become more certain. Also, additional productive and distributivewill be developed in the course of time. These factors will probably make it unnecessary to maintain, sohare of Soviet output in state reserves.

In this connection it should be borne in mind that state reservesreat expense to thc Soviet economy. The flow of goods which is diverted into the state reserves each year would, jf directed into productive uses,ignificantto Soviet economic expansion, "'In addition to havingresources lie idle, thc USSR must bear the high cost of transporting, processing, storing, and maintaining these These activities require the use of transport capacity ami thc construction of suitable storage buirtiings and living quarters for the guards, inspectors, freight handlers, and other personnel needed to maintain reserves.

It is obvious that Soviet leaders would not lightly incur aucb costs except for an important purpose. The Soviet leaders must therefore consider the state reserves program toital adjunct to the Soviet economy in war and peace.

This leads to the question of how Soviet planners determine thc total size of state reaerves. The evidence seems to indicate that this is decided at the apex of the Soviet planning hierarchy on the basis of certain definite criteria, officially stated as follow.-.

(I| lhe significance of the product for thc economy and for lis mililary capacity; (Z) thc scarcity <dclitr.itnosf) of Ibche scale of itstorage| lhe po-.sibtlily of quickly increasing itsin case of need,he distribution of its production in the country and the distance of the production from Hie centers of consumption.

/I,

Furthermore, it appears Uial the size of state reservesin terms of thc economy's requirements foriven period. Foroviet economistthat "it is necessary toinimumworeserve ofoviet article on stock-

piling in Western nations, tt is repeatedly emphasized thativen commodity "makesany/ months' consumption of industry. " *

This distinction becomes especially important when one attempts to estimate how muchiven product is held in the Soviet state reserves system. At the prcsenl time it is axiomatic that, the greater the Soviet economy's requirementsroduct, the greater the quantity of that product is in state reserves.* This explains the presence in state reserves of vast quantities of grain, oil, and lumher, all of which are produced in great volume in thc USSR and are not generally subject to import. Because the economy uses large amounts of theseorrespondingly large amount is held in reserve. On thc same basis, it is probable that the state reserves also contain stocks of relatively scarce products, such as molybdenum, in quantities roughly proportionate to the needs of the Soviet economypecified period of time.

Estimates of the time period for which state reserves would be able to sustain the Soviet economy vary widely (seet is possible, however, that supplies held at state reserves bases

arc equal toonths' consumption, in the case of certain standard industrial equipment, upear's consumption or more in grain, imported items of military significance, and possibly other

products. It is believed that most products are held in the stale reservesevel capable of supplying the economy foreriod

of atonth-..

And. also, the greater the wartime consumptionroduct, the greater Us quantity in state reserves is likely to be.

SECRET

Although there ia no precise measure of the volume of goods in state reserves, there are several important facets of the program aboutignificant amount of information is available. An examination of these features should e'erve two purposes. First, it will indicate the scale of thc state reserves program, and, second, it will show more clearly the extent of state reserves operations. While all of these activities arc discussed in detail below, it may be useful to discuss them here insofar as they shed light on thc magnitude of the state reserves program.

Thc extent of the state reserves system is reflectednumber of state reserves storage basesin the USSR," The products storedases,those stored at facilities of the Ministry of AgriculturalMinistry of the Defense Industry, 'Ministry of theand other responsible custodians, constitute a'vastunder! the administration of the Chief Directorate of

An additional indication of the fnagnitude of thc stateprogram is the wide range of commodities,. which are subject-to sequestrationvary considerably in degree of fabrica-

tion,-in Unitanner and place of* storage, and in end use. For example, state reserves have contained such bulk raw materials as coarse grain, firewood, and crude oil as well as highly fabricated articles such as delicatessen canned meat, electrical equipment, and aviation gasoline.

The extent of state reserves activity is revealed further by movements of products within the state reserves system, called transfers. |he

transfers imlicaKarge volume oi stale reservesthe USoRtate reserves

products were transferred among at least S4 leniIori.il directorates.

* Following

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omplete picture of transfers4 is not available, the scope of these transfers illustrates the Union-wide scale of state reserves movements and the centralized, top-level planning which they must entail.

B. Accumulation and Withdrawal of Selected State Reserves.

There are no official Soviet statistics availablemovements of goods into and out of'state reserves. Anbeen made tothere

has been any trend in thc relationship iiecwe-.ii ot.jucstralions" andn selected commodities for selected years. Grain, meat, butter, and sugar have been included in this report because they constitute thc bulk of food products hold in state reserves, and sufficient information is available^totudy of them.

The long-range goal of the USSR is to increase State reserves. Thereresumption, therefore, thatto reserves over the course ofwill exceedfrom reserveshat is, sequestrations will exceed If, on the other hand, sequestrations are less thanit is to be inferred that state reserves have been drawn down.

equestrationocumentary commitment otjirodmi to the state reserves system.

eleaseocumentary withdrawalroduct from the state reserves system

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:

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The distribution of slate reserves bases by economic region* Is set forth in Tableelow.

Table 5

sa

Soviet State Reserves Bases According to Economic Region and Type of Commodity Stored a/

Economic

and,.

S

IV

The figures in parentheses represent additional bases of Ihctype located in an area but whose exact location is not known. The remaining figures represent bases that have been definitely located. Both figures have been included in thc totals.

* The term region in this report refers to the economic regionsand numbered on CIA1 (First Revtsion,. USSR: Et unomit Region*..

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The largest dingle cluster ol state reserves bases8 is in the industrial area of Region VII, centered about Moscow. Ol theseases, at leastontain only food reserves. old oilre. believed to store only material,old both food and materials. This vital area of the USSR, with its heavyof industry and its dense population, is backed up by large, diverse state reserves.

Region XII ranks second, withtate reserves bases. This outlying region, in contrast to the highly industrialised and heavily populated Region VII. includes the Far East areas of the USSR. In which economic activity is light and the population is small. There probably are two reasons for the large number of stale reserves .bases in this region. First, this area is notself-sufficient but must receive supplies from other parlii of the USSR. Region XII is thus particularly vulnerable lo transportation breakdowns or to interdiction. Last, but certainly not least, these bases are needed to support military and naval forces as well as the local populationarea which would be extremely vulnerable to attack in the eventeneral war.

Nearly half the known stale reserves bases in the USSR lie east of the Urals, in Regions IX. X. XI. and XII. Although this vast territory supports onlyercent of the total population of lhe USSR and produces aboulercent of all Soviet output, it containsercent of lhe known state reserves bases of the USSR

Ofases known to store both food and materialrercent, are located east of the Urals. ase which holds different types of commodities in storage must have on hand the special facilities, personnel, and equipment needed to process each type. tate reserves base storing hold food and materials therefore probably wouldreater variety of storagearger amount of equipment,igger staff thanase limited to maintaining only one type of product: The large percentage of diversified food and material bases east of the Urals suggests that state reserves

-

bases in tbemay he larger and more complex llian ilione in the western part of the USSR.

Approximatelyercent of the state reserves basesto store only food also are situated in theanternthe USSR. This figure appears large in relation lo theproduction ofegions, which suppliedotal Soviet agricultural production in

we

Ce

large.state reserves of food products are maintained In these food-deficit areasufferreak in the flow of food from slern regions. imilar relationship exists between thetage of slate-material reserves bases located In the eastern regions, and the share of these regions in total Soviet industrial production. Of the tola) number of state reserves bases believed to store only materials,ercentin the eastern regions, while these territories contribute aboutercent of the value of total manufactures.

I.U9 -

It thus appears that the number^of slate reserves basesegion does not always correspond to thc volume of economic activity in that region. While Ihe heavily populated, industrial Region VII is supportedarge number of stale reserves bases-the same is true of-the relatively unpopulated and low-production territories cast of the Urals. Tbe apparent lackinglefor determining thc size of state reservediven area iseflection ol the multiple rationale of slate reserves. It was pointed out above that there are various criteria on which the size and composition of thereserves depend. In Region VII tbe large volume of state reservesunction not only of Die population density and the hiyli level of Industrial activity in this regioD but also of Soviet determination to maintain control over tbis industrial and political complex which is centered about Moscow. The relatively high percentage ol state renerves banes east of Ihe Urals may be explained by the combined factors of lack of economic self-sufficiency and distance from supplicrr Large stale reserves would enable these outlying regions to tain Ihe regional economic lite in cane nupplies tiom the rest ol (he USSR were cut oil by war or by some natural caiantrophe.

4 7

(such an earthquake otnd would again provide (he possibility for nuppott of Soviet Europe in the event of another invasion from the Weal.

The prevalence of food baaea in the total network of alate reserves bases is evident from.Table 3Of the total narnber of bases observed,erceut are believed to store only food reserves andercent arc believed to store1 food in whole or in part. This may be compared withercent kriown to store materials in whole or in part andercent believed to store only state reserves of oil, although significant state petroleum reserves are believed to be stored al military depots, Themhcr of food reserves bases is an indication of tbe relative Importance of food products in the slate reserves system.

Tbe relatively small number of bases believed to store only materialn tie entire USSRsesult of two basic factors. First, the share of material reserves in tbe total state reserves-ia relativelyhe great bulk of stateis believed to consist of food. arge percentage of material reserves is held in responsible custody, in Groupsiscussed previously. An additional factor is theof various material stocks outside the state reserve" system emergency stocks, reserves of the Council of Mmistc ra,.rcrnu'rd there.

The several bases storuig only materials are relatively evenly distributed among the conomic regions. Three regionsaterial basesegionsaterial baseaterial bases each.as no such base, and Region VIIaterial bases. This distribution of material bases among the several economic regions suggests that these bases mayommon function, ouch as the storing of certain critical materials (including metals, chemicals, and vehicle tires) The evidence on this, howef/er, is inconclusive.

bove.* P. . above.

Petroleum products are stored in at leastlate reserves bases. These Oil bases are chiefly concentrated in three economic regionsII, XXI, and in. Region VII, with its concentratedactivity, itselfroducer of crude petroleum,arge consumer of oil products/ and hence large state reserves of oil are located there. The oil bases in Region XII are clustered about the southern part of Primorefciy Kray, for support of tbe naval and military forces in that area. The presence ofil bases in the western border area. Region III. is probably due to several factors. First, there are many military airfields in this region. Second, tills area has been historically the chief land route for attack upon the USSR. Third, it is the most heavily mechanized agricultural area of the USSR.

Thc distribution of state reserves bases shown in Figurehus provides an indication of the nature and extent of the Soviet state reserves program. It should be emphasized that the products stored at stat'c reserves bases arcart,arge part, of the total state reserves. Inthese reserves bases, numerous military depots and military units are known to beproducts for the Chief Directorate of State Material Reserves. Also, as previously mentioned, therearge volume of state reserves held in-rcSponsible custody at enterprises of other

Slowing p. W. .tin

IV. Quantitative Estimates of Soviet Reserves.

As indicatedhere is no precise measure ofof state reserves. The budget alldcations to the slatethe existencetate reserves bases, theof state reservestbe intensityand withdrawal ol state reserves all I. utify toof the state reserves system in the Soviet economy.

The question of the site of Soviet reserves, in general, has been tooroblem to be ignored

despite the lack ol data on which to base an estimate. In attempting to overcome this lack of data, various assumptions have been made and various methodologies have been used to estimate Soviet reserves. The following discussionairly extensive, though by no means complete,sample of these estimates. It must be emphasized that there is no attempt made here to evaluate or reach agreement with the estimates presented. These estimates are summarized in order to illustrate Ihe types of information available to the analyst and the range of estimates aad methodologies currently being used. The over-all reserves estimatesill bc discussed first, and the commodity estimates. second.

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periodically include speculations on oovio reserves, generally in connection with the sporadic activity of Soviet purchasing agents in buying, orto buy, strategic commodities in-large amounts on the world market. Such reports can be helpful as indicators of Soviet interests or shortages and in tracing opecific commodities, thus having Home indirect bearing on the Soviet state reserves program.

Toe value of information in prisoner-of-war reports isadvantage of their being on-the-spot observa-

tions is neutralized by the disadvantages of (IJ the prisoners not always being interested Or .competent observers, and the prisoners being under guard and kept away from restricted areas.

Despite the fact that the state resexves systemlosely guarded state secret, occasional references have appeared in Soviet literature. Sources such as published plan figures,journals, and financial texts carry statements that are very helpful in any attempt lo assess the size of the Soviet reserves. ForhartS article on Soviet state incomeercent of the national income going into "reserves."

Plants producing certain specified ferrous, nonferrous. and rare metals, critical materials, and liquid and solid fuels were required touantity equalonths* production in special warehouse a.

Plant* consuming these items had touantity foro t> months' tonsumplinn in uninterrupted piodurlion

SK

State reserves basesmonth supply of these name items, guaranteeing an uninterrupted supply to industry during the course of this period.

Tools neededear's uninterrupted production0 topercent (usuallyercent) increase overproduction must be maintained.

Certain standard equipment, such as'electric motors and light pumps, is kept at stale reserves bases in an amount equal to as much asercent of the yearly consumption of industry. Subsequent information5 raises the total of the materials heldiven industry. These materials arc to bc sufficient to insure work under wartime conditions foronthsearn. The number of machines and amojpnt of-^quipment is determined at the rate ofercent,or sometimes more, of that already mounted in the factory.

Thc grain reserve is givcr(that

amount requiredear supply wmie another report raises thisear supply. Ten percent of the horses and wagonsolkhoz arc earmarked for the army's use inand must be maintained in good condition at the expense of the kolkhoz.

Using such material as can be gained from newsopen literature, prisoncr-of-war and defectorfrom production and consumption calculations, variousagencies have come up with both general andot the quantitative side of the Soviet.cur rent9 included

a grain reserves estimate (in million tons) as follows ' ':

to 9

included in discussions of Soviet capabilities or as part ofEstimates. An example of the first is thc estimatetotal reserves figure valued at between lOJbillionithillionillion of this representingreserves, found in an analysis of the Soviet militaryNIE contribution comments on thc inabilitythe magnitude of Soviet reserves but adds that thcinvestment throughill support an enlargedthat the Fifth Five Year Planr such andoubling of Soviet reserves.

Detailed estimates on the possible reserve stocks of individual commodities have been made from time to time by the commodity branches of ORR. either in the course of individual studies or in responseequirement. Such estimates have generally been confined to the total amountroduct withhold from current use in the economy, including industrial working stocks and military stockpiles of the Ministry of Defense, as well as state reserves: Given below are representative example^ftpf estimates made byORR commodity branches, accompanied by their methodology and such discussion as might shed further light on the nature of thc data.

1. MetaIs.

a. Aluminum.

Soviet stocks of aluminum are thought to be capable of meeting Soviet war needsear, and it is estimated5 percent, of the aluminum production of the USSR has been allocated to stocka. This percentage figure is aderived by subtracting estimated consumption from estimated production. The proportion of production assigned to stocks is expected to decline

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b. Antimony.

Although there is little information, estimates of the amount of antimony held83 can be made, which are thought to be accurate within plus or minusercent.

8otal of0 tons of antimony is estimated to have been available in the Sino-Soviet Bloc, with consumption estimated toons. Thc exact status of theons ,is not known, but since there is evidence that the large Chinese production docs notin Communist China but is absorbed instead by the USSR, it may be reasonable to sayotal of atons haa found its way into the strategic stockpiles of thc USSR.

Should the Chinese supply be cut off, stocks0 tons added to Soviet domestic production would be sufficient to last the USSR and the European Satellites forears at current rates of consumption. Loss of the Satellites woulda net gain to thc USSR in this respect,and0 tons would last the USSRears at current rates of consumption. With no domestic production at all.ons would lastta littleears at current consumption rates.

C. Copper. Lead, and Zinc.

An estimate of the size of copper, lead, and zinc stockpiles9 has been made on the basis of prisoner-of-war reports. Assuming that thc annual increment to stocks9 wasercent of yearly production, Soviet stocks2 are believed to have contained the following(in thousand tons)'

6

7

.

nesc.

There have been no reports to substantiate theof manganese stockpiles within the USSR- In view of its absolute necessity to the iron and steel industry, and of theofoercent of the supply in two producing centers, however, the establishmenttockpile is entirely plausible.

In view of the sketchy evidence available, it is extremely difficult, with knowledge of the consumption of tin, to estimate the extent of the Soviet stockpile of tin. It is probable that sufficient amounts have been accumulated to enable the Soviet Bloc to operate.witb the same pattern cnVconsumption,ears without serious difficulties, even if all imports were Considering (he increasing Chinese Communist production available to the USSR, this quantity can be enlarged over the next few years.

2. Agricultural Products.

Food.

A figure for stocks of canned food is arrived at by adding the estimated consumption for civilian, military,hat is, the hypothetical utilizationnd subtracting the result from estimated production. The result1 is anfigureillion cans,illion cans of meatillion cans of fish. This total is converted on thc basisramigure for stocksonB ol canned goods is produced.

The study of cotton reserves was bascc* jr.

Ihe production of ginned cotton ano its nsignmenl to (he state reserves in the Middle Asia Territorial Directorate, an area producingercent ol the local Soviet cotton

-

productionV per ecu!nd aboutercentt k. believed thatercent of the Soviet cotton production in the fourth quarter (or thia area waa consigned lo reserves. Although sequestration takes place throughout the year, it diminishes after the beginning of lhe fourth quarter. It may be estimated that (romoercent ol the total Soviet cotton production is.consigned to state reserves annually. "

c. Grain.

Estimates of changes in grain reserves are made in the course of working out the balance of grain production with utilization for each consumption yearuly throughver the last decade, an average annual accretionillionas been made to the reserves. This rate of accretionigure of aboutillion tons inIt is estimatedillion tons were withdrawn from reserves andiUion tons.

3. Critical and Miscellaneous-Materials.

It is probable that antibiotics are stockpiled, though there is no quantitative information. Penicillinrystalline form will keepears.and.because of the importance of the commodity, it is possible that it is stored this length of lime (or military needs.

f I) Benzol. Toluol, and PhonQl.

benzol, toluol, and

phenol are being stochfrilod. Benzol and toluol are fairly easy lo store, only requiring tankage of the type used (or petroleum products. Phenol is corrosive and requires sine or enamel-lined tanks or drums.

imp srrtifi

Fluid.

estimates produetion of all ethyl fluids0 to ulve ocenons (equivalent lo aboutons ofnd the total-distribution, ons;esidue ofons as the quantity of fluid being stockpiled each year.

Coke and Coking Coal.

The stocks of coking coal andcoke are It is assumed thatstocks would be part oioperating stocksat coke plants and blast furnaces. Since both thesedeteriorate rapidly in storage* sudva combination ofnormal operating stocks would provide simple proceduresnecessary rotation.and the strategic level (assumed to beday supply) would simply represent the minimumwhich total "stocks would not be permitted to fall.

Other special-use coals apparently are stored separately.but no quantitative estimates are possible.

C'. Petroleum.

The method of estimating the possible magnitude ol the state reserves of petroleum* is as follows:

hat estimated

the total available storage capd<_uy torhe USSR. Inasmuch as petroleum producing, refining, and distribution to consumerslow operation, it is axiomatic that the storage capacity can neither be full nor empty at any given time. It is estimated, therefore,torage level of aboutercent ol capacity is about the maximum that could be attained at any given

* State reserves of petroleum are thc quantity of petroleum products in storage facilities that is in excess of normal working inventories and designated for future emergency use.

-

'FersecKirr

time, and this probably could be accomplished only on the basisplans. Theercent cushion ia actually quite smaltChe US, storage levels fluctuate betweenercentf capacity. Even alpercent level, flow in parts ofhas been jeopardized because of excessive quantitiesin storage tanks. Assuming that storage levels innormally run aboutercent of capacity, the possiblepetroleum storage may be considered as tbeercenlpercent levels of storage capacity. Thuscapacity for storage of petroleum products

in the UbbK lo have3 million tons. The maximumof petroleum products that could be stored in this capacity .would, therefore, beillion tons, while the normal working inventory would average about1 million tons. this line of reasoning, the possible magnitude of stateof petroleum can be placed atillion tons.

In view oi the large increase in Soviet exports of petro leum to the West4 compared3 and earlier postwar years, it should not be overlooked that these exports could have been made possible by deliberately suppressing domestic demands andthe difference to the West. In this way the USSR may well be creating capacity that is similar to "shut-in" capacity in the US. Exports could be diverted at any lime to meeting lhe needs of the Soviet war machine, in much thc same way thai the US shut-in capacity has been and could again be channeled directly to the This possibility suggests that the USSR may be emphasizing petroleum exports rather than petroleum storage, which would alleviate the storage problem simultaneously with acquiring needed foreign exchange and acarce commodities from the West.

An ORKaku for the andhowed the following minimum observed quantities (in ions) of.ctane aviation , i . li-oCUna whrr. etliy!aled| going lb stale reserves'

.

Himed on production estimates (or the Bakuminimum observed quantitiesercent ofercent There was no

d. Rubber and Tires.

Only natural rubber is stockpiled, and thisbe Imported from outside the Sovielccordingly,ia estimated on the basis of the total imports overthe residue treated cumulatively. This adds upotalseported rubber imports have

been too low to permit stockpiling on thie assumed residual basis.

Soviet tire production is sufficient to supply domestic needs of China and of some of the European Satellites. Stockpiles of tires are known to exist but there are no quantitative data available.

4. Transportation.

a. Locomotives and Frcight Cars.

The USSR plans standby reserves of bothand freight cars, but the size of such reserves is not ercent of the locomotives were in theof the railroadpost-World War IIby Western observers have indicated relatively largeat lhe present time.

The MPS (Railway Ministry) allocates freight cars od eondilion to be kept in reserve and used only in an emergency

on instructions from thebased on official

pronouncements show that as much as one-third of the total car park may be either laid up for repairs or held inactive, By Western standards this would be excessive, but it is known that at least some sort of storage reserve of cars in good condition docs exist.

b. Merchant Shipping.

There is no known reserves fleet of maritimevessels. report indicates that under mobilization

plans set up following World Warertain number of vessels in current operation in the central river fleets which could be rapidly utilized without special additional refitting were designatedstockpile. " They were not taken out of service nor were there any known'plans to do so.

The preceding commodity estimatesrossrsection of estimates currently in circulation, from brief statements to complex methodologies and with wide ranges of error due not only to the lack of information on stockpiling, but often to inadequate production and/or consumption statislics. Accordingly, these individual commodity estimates are not comparable andbe added together to form an estimate of total Soviet stockpiles. Instead, each must be treated individually, weighed, and measured according to its own merits, and used in this same manner in lhe production of finished intelligence until further information and further research make more general applications possible.

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1 OrT'

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APPENDIX II

METHODOLOGY FOR TABLE 3

* Tho only known source of financing for the purchase of goods to be placed .in state reserves ie the Union budget, in thethernder Vfinancing the nationaln the published breakdown of this residual in1 budget, given in Tablehe state reserves organisation received theesl single allocation of funds, over two-fifths of the total. The next largest allocation, to the Ministry of Finance. Chief Directorate of Precious Metals, for tbe purchase of the domestic output of gold, amounted to about one-quarter of the total. The other allocations listed,iscellaneous group of Organizations, were all quite small. The principal allocation in the "undisclosed" category was 'ia housing and the municipal communal economy.

Table 8

State Budget of the USSR: "Other Expenditures" Within thc Category "Financing the National Economy"

Billion Current Rubles

State Reserves

Chief Directorate of Hyriromctoorology Ministry of Motor Transport Ministry ol Finance, Chief Directorate

of PreciousDnertorate of Geodosy andResctUoment8

1 Ihe USSR has published no breakdown of Ihe residual under "financing the national It has been determined, however.

lions have been financed in this residual at one time or anotherthe postwar period. The announced lotals spent (or budgeted) in there given in Tableogetheristing of organisations believed to have been financed therein8 andsubaequent changes. It lias been established that the largein tbe residual0 reflects the inclusion of atomic energy expenditures, and thereresumption (for which there is as yet no direct support) that the similarly large reduction5 reflects the transfer of these expenditures to another subcategory. Otherwise, only minor changes are believed to have been made in the activities financed in the residual. The Chief Directorate of Precious .Metals and the four miscellaneous organizations listed by name in1 budget all appear to have been included throughout, together with the allocation to housing and thc municipal communal economy (in the years for which announcements have not beea-made).

- years in which aloiqic. energy expendituresincludedt is possible lo set Urn its to the stateesidual within the item "other expenditures." Thelo housing and the municipal economy is known forpurchases9 by the Ministry of Finance have been5 billion rubles. They are believed to have beennd slightly more intentative estimate can be

made also for the four miscellaneous organizations carriedy adjusting the allocation ofillion rubles1 lo allow for the postwar rises in wages,igure ofillion rubles. This figure is probably low. since the scale of specific activities may well have increased, and since one or more other organizations are also included under this item.

The resulting breakdown, given Inindicates that Ihc allocations to state reservesrobably ran at two to three times the prewar level ofillion rubles.

ollows onableollows on

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Table 9

State Budget of the USSR: "Other Expenditures" Wlilhin the Category "Financing-the National Economy"

Billion Current Rubles

Amount

Year Included

6 h/ Ministry (subsequently Chief Directorate) of State

Material Reserves Chief Directorate of Hydromc teor ulogif al Service Ministry of Motor Transport and Highways Ministry of Finance,-Cbief Directorate of Precious

Metals

Chief Directorate of Gfeodesy and Cartography Chief Resettlement Directorate Chieff

Chief Directorate of Organixed Recruitment of Manpower

Chief Directorate of Hydrolysis and Alcohol Spirits Housing and the Communal Economy

2 b/ Samexcept that Chief Directorate

of Hydrolysis and Alcohol Spirits in excluded

9

xcept that atomic energy activities

1

Samexcept that Chief Directorate

of Hydrometeorological Service. Chief Directorate of Hunting and Chief Directorate of Organized Recruitment of Labor were dropped and MVD correctional Labor Camps were added.

}

xcept that atomic energy activities

presumably were dropped

Table 10

State Budget ol ihc USSR:timated-Breakdown of "Other Expendituresthe National Economy"

Billion Current Rubles

"Other Expenditures" 6 a/

a/

and the Communal Economy b/

, 2

purchases c/

activities df

- 2.

reserves c/

-

expenditures.

are announced plan figures.

C. -The range of error for thesercenthat given for domestic production in physical terms.

of1 budget figureillion rubles to allow foractivities with postwar wage increases.

figuresange (rounded to the nearestby margins of error in the other figures in each column.

Information available in the published budget on revenues from state reserve operations is even less satisfactory; it is included here chiefly for purposes of completeness. Planned revenues of which state reservesart are shown in. + Untilevenues from sales of products released from state reserves were entered into the**

* Table II follows on* Continued on p.

-

ran

Tabic II

State Budget of the USSR: Category of Planned Revenue" .Which Includes Payments to Slate

Amount (Billion Current

Rubles) Budget Category

and various nontax

income

Collections and

various nontax

income Collections and

various nontax

income

reserves, receipts from fines, receipts of water supply payments from state irrigation system, receipts from sale of stale property, collections for violating established prices, various collections including: payments for passports, receipts from sale of domestic books, re-entry blanks and leaflets, receipts of special funds, fines collected for nonfulfillment of obligatory deliveries to the state, receipts of non-demand deposit sums of institutions existing on Union and Republic budgets, and other receipts.

Same9

Same0

Footnotes forollow on

-

Table II

Stale Budget of the USSR: Categ-ory of Planned Revenues Which Includes Payments to StateContinued)

Amount. (Billion Current-Ruble b) Budget Category

/

*

and various nontax income

Other revenues

Other revenues

Other revenues Other revenues

1

Returned loans and repayment of miscellaneous expenditures, tim-bcx.revenue. tuition payments for advanced schooling, return of funds received and not used by institutions and organizations during the previous year, receipts from revaluation of noncredited and credited balances of goods, payments of enterprises and institutions into the budgetpayment for work done by militaryrants and other receipts from the Union budget,from revaluation of liabilities, income of planning organizations.

Same2 plus Union budgetfrom additional profit resulting from cancellation of turnover tax on potatoes and fruit

Same1

Same4

D. The Chief Directorate of State Food Reserves contributed toand Various Nontax Income while the Chief Directorate of State Material Reserves contributed to Other Revenues.

9b

i-rtwr :

"collections and variouo nontax income" category of theevenues from food reserves operationsthe above category while revenues from materials were"other revenues.the consolidation of the Chief

Directorate of State Food neserves and the Chief DirectorateMaterial Reserves int appears that allbeen entered under "othereveral sourcesto state reserves contributed to both of these"collections and various nontax income" item includedas water supply payments from the state irrigationfrom sale of state property, and payments forfines for nonfulfillment of obligatory deliveries of "Other revenues"4 included timberpayments for advanced schooling, receipts for creditedbalances of goods, payments of enterprises andand the income of planning organisations aa well asplanned total thus only places an

upper limit below which state reserves revenues can be presumed to lie.

- <i7 -

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let

APPENDIX E

SOURCE REFERENCES

Evaluations, following the classification entry andave the following significance:.

Source of Information

ocumentary

-

by other sources

- Completely reliable

r

true

- Usually reliable ,

-

true

- Fairly reliable

-

usually reliable

-

false

'".ifci reliable

-

be judged

- Cannol be judged

"Documentary" refers to original documents of foreignand organizations; copies or translations of 6uch documents by.-aataff.officer; or information extracted from such, documentstai? officer, all of which may carry the field evaluation"

Evaluations not otherwise designated .ire those apnearihg on the cited document; those designated "RR" are by thc author of this report. No "RR" evaluation is given when lhe author agrees with thc evaluation on the cited document.

Original document.

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