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NATIONAL INTELLIGENCE ESTIMATE
VULNERABILITY OF THE SOVIET BLOC TO ECONOMIC WARFARE
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DISTKIBUTION (NIKffice of the President NaUonal Security Council NaUonal Security Ituourcra Board Department of State Office of Secretary of Defense Department of the Army Department of theepartment of the Air force Atomic Rncray Commission Joint Chiefs ot SUfl Federal Bureau of Investigation Reaearch and Development Board Muni lions Board
NATIONAL INTELLIGENCE ESTIMATE
VULNERABILITY OF THE SOVIET BLOC TO ECONOMIC WARFARE
Ihis docunren; ha?fez raloaseWSTCKCMi
tha Cantril Intelligence agsac?.
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Thc Intelligence organizations of the Departments of State, the Army, the Navy, the Air Force, and the Joint Staff participated ln the preparation of this estimate. Allof the Intelligence Advisory Committee have given their concurrence to the estimate. This paper Is based onavailable on
DOUBT
VULNERABILITY OF THE SOVIET BLOC TO ECONOMIC WARFARE
" PROBLEM
To estimate the vulnerability of the Soviet bloc to economic warfare.
FOREWORD
The lerm "economic warfare" as applied in this paper covers the offensive use in peacetime of measures to diminish or neutralize the war potential of the Soviet bloc*
The extent to which in the event of war the resources of conquered territories could be effectively utilized and the extent to which they wouldet gain to the blocroblem beyond the scope of this paper. The absence of militaryis assumedart of the terms of reference.
Since China is engaged in military operations against Uniled Nations forces in Korea, it is necessary to assess the effect of economic warfare upon China under the existing circumstances.
The measures considered available to the Western Powers to deny exports to the Soviet bloc include the following: export and import licensing, trade manipulation, preclusive buying, black listing, foreign funds control, and the denial to the Soviet bloc of access to non-Soviet maritime and air facilities. The effects of blockade and of the use of the navicert and ship warrant systems are not considered in this paper under the term economic warfare since these measures are usually not employed excepttate of war.
GENERAL CONCLUSIONS
Capabilities.rogramf economic warfareagainst the Soviet bloc, whichselected commodities and services and whichigh de-
* The Soviet bloc is defined as; Uie USSR, China, Albania, Bulgaria. Czechoslovakia. Eastern Oer-many. Hungary. Poland, and Rumania. The vul-nerablUty ol Korea. Outer Mongolia, and certain Communist-controlled areas In Southeast Asia Is not considered because of the relative insignificance of the economies In these areas; however. It Isthat economic warfare measures will alsoagainst these regions.
gree of cooperation from the Western Powers would, if well coordinated and well enforced, seriously retard and limit the development of the Soviet bloc warAlthough, because of thestate of Soviet preparedness for
attempt is made to assess the generalof the control measures that are already In effect, or lo suggest wherein they are adequate or need to be supplemented. It should be noted,that direct DS shipments to the Soviet bloc have already been reduced to relaUvely Insignificant proporUons through our export control policies.
SECRET
rogram would notaffect thc present capability ofto wage initial campaigns, itseriously affect theof the USSR toenerallong duration andecisiona venture.
Conduct of Foreign Policy.
total effectsrogram ofwarfare arc not likely to forcechange in the aggressiveof thc USSR.
Economic and Political Stability.
effectrogram ofon thc economic andof the USSR and itsupon relations between the USSRSatellites would not berogram would intensifyparticularly in theand would aggravate problemsdistribution throughoutSoviet authority, however,be effective in dealing withclaims among the Satellitescommodities. In view of thepower of the Soviet blocorganizations, the politicalof thc various regimes would notJeopardized unless anddisruptive pressures werebear, in which case the cumulativewould be serious.
Economic Development.
program of economic warfareto the internal economic problemsUSSR and its Satellites andit virtually impossible to carryplanned balanced developmenteconomies. Such prospects ashave for narrowing the present great
gap between their combined productive capacities and those of the West would be decidedly reduced.
Ability to Reduce the Effects of Controls.
achieve worthwhile results aof cooperation among theis essential oUierwise-thebloc could reduce the effect of anwarfare program: a) byWestern nations unwilling toparallel action on the economicand b) by the employmenttrade channels to circumventIn any case, the Soviet blocto reduce thc effects bywithin thc economy, includingof resources, thc use ofand substitutes, and theutilization of stockpiles.however,efinitetheir ability to reduce the effect ofthrough such Internal adjustments.
Chinese Military Capabilities.
effectrogram ofagainst China requiressince China is actuallyin military operations of majorThc effect of economicwould notecisive factorChinese militarywith the present drainthe Korean war, however,would substantially reducemilitary capabilities (though notextent of critically disrupting cur-
* Although it li not acluauj within the terms ol reference ol tills estimate, it should be noted that effective measure* for economic warfare against the Soviet bloc would Involvecost. This cost would probably Include. Infer alia. )ou of the imports of Western Europe from the Soviet bloc which are of significance to their economies, and would require a. redirection of trade. This esUmate makes no attempt, however, to balance off the costs ot economic warfare against IU advantages.
ononriT
tactical operations) and mightaffect the Korean war itself.the Soviet Union were engaged inmajor campaigns elsewhere, it would have the capability, despitestringencies in its economy, ofChina's essential militarybut it is uncertain how much the flow of Soviet supplies to China could be stepped up without creating criticaldifficulties. The effect of-these difficulties together with the drain caused by the Korean war might, conditioned upon the degree of resistance, exert ainfluence upon Chinese plans for further expansion in Southeast Asia or might significantly hamper theof such plans if they were put into operation.
Chinese Economy.
he industrial centers of China which are largely the product of Western capi-
talism are peculiarly dependent upon the West for raw materials, for supplies, and for industrial spare parts, and, indeed, even for the maintenance of some of the barest essentials of an industrial type ofrogram of economic warfare, by depriving these centers of their jrn> ports, would consequentlyerious effect on their economy and wouldthe problems of internal control there. Inell enforcedof economic warfare would make Communist China more dependent on the very limited Chinese rail facilitieswith the USSR.rogram would have increasingly serious effects, it would hamper current industrialretard industrial development and might seriously limit China's ability to sustain large-scale military operations. If continuedong enough time, it might even threaten the internal stability of the regime.
DISCUSSION
of the USSR and Its Eastern European Satellites.*
0 thc USSR and its Eastern European Satellites imported4 to Si.fi billion worth of goods from the outside world. While the amount Is only about one percent of the aggregate national output of the Soviet bloc, it consisted primarily of Items essential for military preparedness and for expansion of the basic Industries of the Soviet orbit. Itin particular, equipment embodying Western technical improvements, some of which was imported to serve as models forcopies. Inability of the Soviet bloc toessential import requirements wouldretard economic and technologicalin many lines.
A more detailed discussion of these volncrablU-Ues Is contained In OIR Report7 ofulneiabaila of the Soviet Bloc to KxUt-ing and Tightened Western Export Controls.
Low Industrial Productivity of the Soviet Bloc.
very low per capita Income both Inand in the Satellites reflectsery limited total area forwhich might be necessitated byof economic warfare directed againstIt reflects on the other hand theof an authoritarian regime which hasto ration consumers to the barestlevel and consumers Inured to suchlevel. This means that adjustmentsSoviet economy which might beby measures of economic warfarefeasible even though they have towithin an area of extremely
are very few economicthe Soviet bloc which are not insupply than in the Westerneven In the case of generalwhich Is not estimated to constitute a
i ii t
commodity in critical shortage lor Uie Soviet bloc, both total production and per capitaare for exampleraction of that of the US or of the Western bloc.total steel production ln the USSR would not at the present time allow, fora large merchant ship construction programreat expansion in the number of automobilesrastic curtailment of war materials. This relatively lowof steel thusharpupon thc industrial capabilities of thcUnion In comparison with those of the US or of the entire Western bloc. The Soviet economy, however, is adjusted lo presentof steel produced domestically, and since thc USSR does not relyignificant degree upon imports of finished general purpose steel, there is only limited vulnerability towarfare in the case of steel or of other commodities In like status.
different Is the case of most ofand facilities discussedthese cases the shortage is deemedprimarily because quantities availablein comparison with those available toPowers, butignificantof the quantities used by thchave been imported and areto be replacable without substantialcost to thc economy.
Fuel and Poioer.
Of the three main sources ofpetroleum, andSoviet bloc Is least vulnerable with respect to coal.
Petroleum production and stockseasonable rate of peacetimedevelopment and for initial military campaigns, but they would probably be Insufn-clent to support the requirementsarge-scale war of long duration Involving strategic air operations, especially if some of thefacilities were destroyed. Expansion of crude oil output ln excess of planned goals has been achieved through over-intensive utUlza-tlon of facilities. There are shortages of many types of oil field equipment, ranging fromprospecting instruments to drills, rigs, and essential pipe and tubing. The shortage of refining capacity for the produc-
tionctane aviation gasoline and high grade lubricating oils Is of particularAt present there are Indications that air units are rationed In the use of aviation gasoline, which may be due. however, todifficulties and/or stockpiling as well as to the low refining capacity.
electric power the USSR and Itshave not been able to provide thecapacity envisaged by thc statelarge imports of equipmentMajor items In short supplyand hydroelectric turbines andswitching and control equipment,transformers, steam boilers andelectrical indicating and recordingand electric motors ofof electric power capacity haspriority throughout the bloc, andto obtain the equipmentimpede the expansion of manyand retard the development ofcapacity so necessary In the eventduring war.
MetaU, Metalnd Metallurgical Equipment.
Copper and lead are In shortboth the Soviet and Satelliteis among the most critical of theand In wartime direct militaryIn this metal areoviet output of copperndons andbetweenall of those Importsupplied by Western sources.
The Satellites continue to acquire tin and tin alloys from the West, although theof China In the bloc has made such procurement less imperative. Imports oftin would be sufficient for minimum peacetime needs but would be Insufficient to make up the deficit ln wartime.
Zinc, tungsten, nickel, bronze, and brass are In Ught supply. Sovietfor nickel In the atomic energymake this Item particularly Important. The deficiency in tungsten can be partlyby Chinese supplies.
Cobalt, mercury, and cadmium have reportedly been smuggled Into thehortage of and an intense interest in acquiring these Items.
Aluminum capacity is satisfactory with the possible exception of facilities for producing aluminum foil.
Soviet bloc economies havelimited but Increasing supplies ofeven though theare far below those of thecarbon steel is not likely tocritical shortage. There is, however, astringency in high grade alloyin certain products such as seamlesstubing, and steel wire and cable.and Polish steel production dependconsiderable degree upon high gradeironf the supply of this oreoff. It would at the least forceand equipment changes in theseThe achievement of planned goalsand steel production, particularly inCzechoslovakia, and Hungary, wouldby inability to procurefrom the West.
Non-Metallic Minerals and Selected
this category shortages arc evidentdiamonds and other industrialgraphite and electrodes,manufactures of mica andbrake lining. Although theseaffect many key Industries in thcthe relatively small bulk representedof the above items (particularlygemstones) makes circumventionthrough clandestine shipmentssimple.
Chemicals.
USSR and its Satellites areIn raw materials for theindustry, except for sulphur andfacilities for basic chemicalsfor current requirements,industry would be hard pressed tomajor war effort of long duration. TheIn short supply are the specialmany of which the Soviets have at-
tempted to procure from the West Theseplastics, pharmaceuticals, rubberand carbon black, and chemical cellulose of nitrating grade. In the equipment line. It is believed that export controls on such items as glass lined equipment, special valves,vacuum and pressure pumps andand control apparatus could be anfactor in retarding the expansion ol capacity in lines Important to the military potential.
Rubber and Rubber Products.
purchases of naturalthe post three years have enabledto bridge one of the mostin its strategic supply position, and,stockpiles for future needs,strengthened the Soviet militaryFuture restrictions on naturalwould, of course, force theto dip into Its stockpile soonerIntends, both for Its own use and forThe Soviet synthetic rubberpresently producestons of synthetic rubber annually,requires00 tonsof natural rubber for admixture. Inof tires even though rubberadequate, other difficulties detractquantity and quality of tireWestern control over shipments ofof tires, together with embargoes onequipment, tire cord, andblack, would be among the mostof exploiting this vulnerability.
Cotton. Wool, and Hard
Western embargo on cotton andexports to the USSR and Easternnotritical effect upon theof the blochole. The ImpactUSSR would not be serious In view ofsmall share of Soviet importswith domestic output It wouldthe closing down of some textilesuch industrial Satellite countries asCzechoslovakia, whichelltextile industry of long standing,the broad domestic raw materialthe Soviet Union possesses. Someare likely to be experienced, principally
quo hot
the USSResult of lhe loss of high-quality grades of both cotlon and wool The Soviets are aware of this deficiency and have purchased large quantities of wool for stock' pile from Australia. Reduced supplies could be partially offset by Increased domesticof synthetic fibers, particularly in Poland. Czechoslovakia, and Eastern Germany and by temporary withdrawals from stocks. Military and industrial requirements would be given priority in the allocation of supplies, and the main brunt of any reduction arising out of Western controls would have to be bome by the civilian consumer.
of Imports ol hard fibersand henequen) Into the Soviet blocsome stringencies, but probablyany disastrous effect on themilitary economy because of theuse domestic fibers as substitutes.
Metalworking Machine Tools.
resrlctlons on Westernmachine tools would seriously Impedeof Soviet and SatelliteWestern trade res trie lions oncomplex types could createa short period of time, for example,manufacture of precision gears forof aircraft. Soviet bloc efforts totools of numerousautomatic lathes, honing andhorizontal combinationand milling machines,of the Importance of those itemsSoviet economic development.
Electronics Equipment.
the Soviet bloc haslines of electronics producUon. lt hasable toomprehensiveindustry toargeof materials, component parts,which might well be of criticalIn Uie prosecuUonar.have been made to secure rawelectronic equipment andequipment and technicalthrough both overt and covertDenial of Western exports Inwould seriously hamper Soviet bloc elec-
tronics development and production. These weaknesses would be felt in lhe fields of radar, guided missiles, radio, aircraft navigational aids and atomic energy. Internalby the USSR and its Satellites would not be able satisfactorily to offset this
Precision Instruments.
Soviet bloc has the samerestrictions on shipments of precisionthat it has in the case ofThe entire orbit Is criticallya number of specialized measuring,and control Instruments essentia!wide range of industrial and militaryItems in short supply includeInstruments as spectographs,gauges-and pyrometers.
Abrasives.
Impact of increased restrictionsexports of abrasive materialsfelt directly ln the metal workingprecision instrument industries. Thiswould affect Uie output of such itemsrange finders and precisiondeficiencies In abrasivesaluminum oxide, silicon carbide,specialized grinding wheels.states are currently attemptingan abrasives industry, but it willnotignificant factor In theat least five years.
Bearings.
production of all types ofbearings In the Soviet bloc lsand qualitatively below minimumand military requirements.the orbit ls strongly dependentsources of bearing supplies,In the case of specialized andbearings. Since the end of Uie warhas been forced to Import antoillion units yearly fromfor useide variety ofand end products includingengines and tanks. In Uie produclontor jet aircraft, for example, therely heavily on non-orbit sources. The
7
postwar procurement program of the Soviet bloc has probablyeserve of some types and sizes; nevertheless,bearingsategory which is definitely vulnerable to Western exportCessation of shipments wouldubstantial Impact on capacity for military and industrial production.
Construction and Road Building Machinery.
Soviet bloc Is dependentigh percentage of its totalfor construction and roadparticularly the heavier andtypes. If the bloc were forcedon domestic production of thisdevelopment of capabilities for theof such projects as militaryair strips, and strategic roadsgreatly limited.
Transportation Equipment.
One of the greatest shortages in the Soviet bloc's internal transportation system is lnrails. This shortage has reduced the normal maintenance replacement of worn rails andactor in failures to meet railroad construction plans. This deficiency however would notritical limitation in wartime. It is not viewed as acute because right-of-way maintenance Ls apparently above minimum operating levels, and because now lineof economic as well as strategichas been going on throughout the orbit area. The capacity of the EasternSatellites to roll rails has been increased and supply should be easier
Other shortages include: tank cars, tank trucks, heavy-burden freight cars (includingires and tubes, motor vehicle spare parts, motor trucks, locomotives, railwayequipment, and safety devices. None of these shortages is sufficiently critical toreakdown In the system, but they deprive the transportation systemaluable cushion in wartime and in peacetime cause temporary bottlenecks in the distribution system.
Merchant Shipping.
limited capabilities of the Sovietfleetstrongforeign flag shipping sources anda major vulnerability withinercent of the value ofbloc imports and aboutercent ofof its exports in trade withthe bloc is carried by merchantmajority of this trade is presentlythe vessels of non-Soviet nations. Anof shipping engaged in tradingand Satellite ports and thc portsnations duringhat nearlyercent of thewere of non-Soviet registry.measures designed to control theof shipping to the Soviet blocon the export of items for useof shipbuilding facilities,to build ships for Soviet accountthrough denial of shippingseriously limit the ability of the bloctransport both for its imports and
Air Transport.
USSR through itsPolish Satellitesetworkroutes serving the principalin addition to connections withAfghanistan in the Middle East. AWestern civil aviation policy towardand its Satellites would not onlythe Kremlin's efforts to extend itsair network, but would forceand cessationumberconnections. The effectiveof US export controls on aircraftequipment would force changes andin Czech airline schedules andcaused over-intensive utilization ofand inadequate maintenance. Thebloc economy is not stronglythese airlines, but inability toairlines would have manydisadvantages.
8
Parts.
ho entire orbit constantly needsparts for the vast amount of assorted foreign equipment acquired ln formerarge percentage of the inventory ofequipment in the Soviet sphere Is ofmanufacture, for example. It Isthat approximatelyercent of the machine tools in operation in the USSR are Western built. The bulk of this equipment Is now over five years old and is alreadyto present serious maintenance problems because of the non-availability of spare parts and the difficulty encountered inthem in the USSR or the Satellites. The problem is further complicated by the fact that most of this equipment is of an especiallytype, purposely obtained from abroadof Soviet inability to produce itAn estimatedercent of Soviet specialised machine tools are of foreign make. The constantly growing spare parts problem Is, therefore, concentrated in the weakest and most Important sector of the Soviet orbitestablishment.
Technical Aid.
n view of its quantitative and qualitative deficiencies in technical resources, the Soviet bloc would probably gain most by obtaining the services of experienced engineers. Their "know-how" would enable the Sovietto make better use of the Industrialwhich it controls and to introduce new techniques in those industries which have been developed in the USSR relatively recently. It Ls very likely that full use of foreign technical assistance, if it were available, would still be hampered by insufficient skilled workers and by political Interference; but aside from these two retarding factors, the principal obstacle to technological progress In the Soviet sphere is the lack of sufficient technicians who can bridge the gaporking model and quantity production,low chart of some new process and the operatingJudging by the number and persistence of Soviet attempts to get technical data ln recent years, the bloc's most pressing need for technical assistance ls In such fields asspecialized meor king machinery,
testing equipment, rubber products, special chemicals, and petroleum refining. Needless to cay. the published and unpublishedliterature which the bloc hasor sought to procure would providethat is applicable in practically all branches of industry, but the USSR andSatellite countries undoubtedly use such Information primarily in the fields just mentioned and in other industries thatsupport military production. The problem of enforcing controls to exploit thisLs ofery difficult and In some cases impossible one.
Major Vulnerabilities.
ain obstacles to development of lhebloc economy are the lack of skills,"know-how" and fabricating facilities. There are relatively few critical raw material shortages at current levels of production. The USSR and Its Satellites are aware of theseand are exerting strenuous efforts to improve their capabilities for sustainedoperations. In addition to their efforts to expand the over-all economic potential for war through Increased capacity Ln such basic lines as steel, electric power, coal, petroleum, and transportation, they are giving special attention to the correction of deficiencies in certain keyncluding: certain types of electronic equipment; precision Instruments; copper and tin; natural rubber; specialball and roller bearings; merchantspecial types of production equipment;ide variety of replacement parts and equipment components. There Is also, of course, an intense effort to procure technicalaterials, parts and equipment for productionide variety of weapons.
Cumulative Effects of Vulnerabilitiesfrom Controls.
he effect of an economic warfarewhich denied significant quantities of critical Items to the Soviet economy could be expected to go substantially beyond the mere summation of the separate and directhortages would ramify widely throughout
U emphasised that there are many defi; ciencles other than those here enumerated. .*
economy and one shortage would In many cases compound the effect ot others. The total effect ofrogram, welland well enforced, would seriouslydevelopment of the capabilities of thebloc torolonged war and thus might correspondinglyecision concerningenture.
Soviet Bloc Capabilities to Minimize the Effect of Controls.
Largelyesult of export controls,US shipments to the Soviet bloc haverelatively insignificant. The Soviet bloc, however, has benefitted from the lack ofparallel action by other non-SovietMany Western nations have recentlyreater willingness to cooperate on export controls, but progress inufficiently inclusive list has been slow. The effectiveness of an economic war-ware program would dependarge extent on parallel action by thc non-Soviet countries.
Tn addition to the lack of parallelidespread net of more or less covert trade channels has developed in recent years through which the Soviet bloc continues to obtain products on Western control lists. The intense efforts of the Soviet bloc to secure these Items by burdensome circuitous and expensive channels is one measure of the urgency of Its requirements. On the other hand, the substantial volume of this tradeeasure of the partial ineffectiveness of the current Western control program. This gap in enforcement could be closed to aextent through the cooperation of the non-Soviet countries and the application of instruments of economic warfare not widely employed at present, or not employed at all. Those measures would include: preclusive buying; black listing; foreign funds con-
trols; and denial of shipping facilities.these measures some restricted Items would, of course, still get through, especially those of small bulk or those with numerous sources of supply.
In those cases where it would befor the Soviet bloc to procure vitally needed imports, compensating Internal adjustments could ln some cases be made. The USSR couldtricter control over the distribution and utilization of critical items within and between members of the orbit. Thiswould be feasible because of the highof integration of the Soviet and Satellite economies. Labor, fabricating facilities, and materials would be reallocated In an effort to produce the products previously imported. Synthetics and substitutes would be utilized wherever possible.
The full effect of these measures, however, would not offset adequately the damagefrom Western trade restrictions.the bloc, through Its planned economies, ts operatingcheme of allocations which has already been decided as the best possible arrangement. Reallocation of labor, materials, fabricating facilities, and products is not always feasible, and when It can be accomplished lt Is time-consuming, Inefficient, and is generally less satisfactory than the previously adopted program. In view of the fact that Soviet plans have already provided for an allocation of resources giving toplo the development of capacity forproduction and heavy industry as opposed to consumers goods, reallocation of priorities can take place only within an alreadyarea. Any general change In the planned pattern of allocation would certainly retard the development of the economicfor war.
0DOHGT
Original document.
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