THE SOVIET GAS PIPELINE IN PERSPECTIVE

Created: 9/21/1982

OCR scan of the original document, errors are possible

The Soviet Gas Pipeline in Perspective

Svoiil Nadolol lildlimn EiUmn

B2

THIS ESTIMATE IS ISSUED BY THE DIRECTOR OF CENTRAL INTELLIGENCE.

THE NATIONAL FOREIGN INTELLIGENCE BOARD CONCURS.

The following intelligence organizations participated in the preparation of the

Estimate:

The Central Intelligence Agency, the Oe'erte Inleligence Agency, the Notional Security Agency, and the intelligence organizations ol the Departments ol State, the Treasury, and Energy.

Alio Participating:

The Assistant Chiel o* Stolf lor intelligence. Department ol the Army The Director of Novo) Intrfigonee. Deportment ol the Navy The Asiistant Chiel of Staff, Intefigence. Department of the Air Force The Director of Intelligence,erino Corps

CONTENTS

SCOPE

KEY JUDGMENTS

Page 1

1 THE SOVIET ECONOMY THE TIME OF 9

THE HOLE OF EAST-WEST TRADE

A. Easl-Wesl Economic

Boviet

C Soviet Gains From Trade

Dfor Soviet Military

F- The Hard Currency Squeer* .

III. OIL AND CAS FUTURE KEY TO

A. The Soviet Energy Problem.Inipfiitunce uf the Export PI

17

C Alternative Energy

D. Soviet Dependence en Western Or*

IV OPPORTUNITIES FOR WESTERN GOVERNMENT

A Povuble

B Impact mi the Gas Export

C Impact on Oil

0 Impact on Future Cat Export Deals .

E Impact on the Soviet Economy and Military

V WEST EUROPEAN

A Altitudes on East-West Trade and Tradehe Pipeline Deal in West European Eyei

28

ANNEX: SOVIET DEPENDENCE ON US AND WESTERN OIL AND

C Possible Areas of ^0

SOVIET DEPENDENCE ON US AND WESTERN OIL AND CAS

k :

SCOPE NOTE

This Special Nalional Intelligence Estimate reviews the degree to which Western trade, technology, and energy relationships havecan in the futureUSSR to increase its military strength and impose unwanted burdens on the Western nations. The Eslimate also assesses the potential Impact on the USSR of the following courses of action:

A strengthening of COCOM to assure that militarily sensitive technology is withheld from tlie Soviets.

Avoidance of gas imports by the Europeans beyond ihe imports already agreed lo as part of the Soviet export pipeline project.

An embargo on some energy equipment and technology.

An end to subsided credits

KEY JUDGMENTS

I Tin* USSR has used imports from the West to enhance Its military capabilities

By obtaining goods and technology, legally and illegally, that contribute directly to the production and technicalof weapon systems

Hy expanding the base ol industries of particular importance to military production

And. more generally, by easing economic problems, thereby reducing ihe burden of defense.

he rapid increase in Soviet imports from the West Inas made jsossible by large windfall gains in export earnings due to the surge in oil prices and the willingness of Western countries to provide large credits, most of which were government guaranteed The USSR is encountering growing economic difficulties, which will make it more difficult for Moscow to increase its imports from the West in the future The outlook for most Soviet exports, including oil. is not favorable, and Western (tanks are unwilling to extend new long-term credits without government guarantees.

3 Only the increase in gas exports through the Siberia-to-Western Knropc pipeline willarked decline in Soviet hard currency imports in the iy*Os The USSR almost certainly will be able to meet scheduled deliveries of gas through the pipeline without diverting Soviet equipment from domestic uses, tlnough equipment has already been delivered, or soon will lie. lo enable tbe USSR to meet likely West Kuropeun demand for gas until the late I'ISOs. By then, Moscow will prolsablv lie able lo produce enough modern turbines and compressor* to bring the line to full capacity, or will have found new sources of equipment for any it may have lostesult of US actions. Meeting gas delivery commitments and becoming self-sufficient in turbines and compressor vsdl impose costs on the Soviets in inefficiencies and shifts in resources and effort.

I While gas exports are ihe most promising future source of hard currency, oil exports still account lor someercent of Soviet export earnings, and il is Important for Moscow to minimize their future

decline. The USSR depends on the West for specialized oil exploration, drilling, pumping, and processing equipment. As ils deposits ofccessible oil are <lepleted. the Soviets are lurning to more remote oil and gas fields and morexploitation lechniques. But thev lag badly behind the West in the necessary technology. Without any access to Western equipment, the adverse impact on Soviei oil production could be as high asercent of output0

oscow's best hope of improving its strained hard currency posilion in the longer run is to secure ihe cooperalion of Western Europe in building large new pipelines for the delivery of additional natural eas in ther in. With enormous gas reservesosverful incentive Io earn more hard currency, Moscow is prepared to sell as muchs the West Europeans will accept There is potential uncovered gas demand in Western Europe to fill not only the Siberia-to-Western Europe pipeline now being built, butecond and third strand during. Development of these large gas projects currently requires Western pip*.', equipment, and credit and markets as partackage deal, although Soviet need for these Western products will diminish as Moscow develops ils domestic gas equipment industry Alternative sources of gas exist, notably in the Norwegian sector of tbe North Sea and in North Africa, although they are in general relatively cosily and some are considered insecure.

fi. It will Ik- difficult to enlist Allied cooperation in restricting trade wiih the USSR. Beyond economic incentives, there are political considerations lhat fuel ihe West Europeans' reluctance lo accept restrictions on trade and credits to ihe USSR. These include:

Their desire to restore the detente cliinate in Europe and to avoid exacerbating East-West slralns.

Their desire to maintain access to Eastern Europe.

Their belief that economic and other lies wilh the USSR willSoviet behavior.

These political considerations, combined with the economic incenlive, continue lo limit West European cooperation wilh the United Stales in restricting East-Wesl trade.

7 The crux of the problem lies in developing wilh the West Europeanommon understanding of the strategicol East-West trade. Such an understanding has been notably absent, but the chances of achieving it may be better now that the West Europeans are becoming more aware of the issues and llie depth of US

a

concern Allied leaders have asserted that thev will not conductwarfare against the Soviet Union. But adequate analysis and discussion can le-.idommon conclusion

That deficiencies in sreiirily policies among the Western Allies have resulted in Soviet acquisition of militarily important technology, financial sulcidies, and. potentially, an important role in Western Europe's energy supply

That taking steps to withhold these benefits is merely prudent seeurilvich Allies owe to each other, and can be seen as self-protect ion rather than economic warfare.

S. Accordingly. Western countries might be willing to cooperate

Developing and implementing broader and tighter COCOM restrictions.

Agreeing to stricter limits on the terms and volume ofcredits

Developing other energy sources as an alternative to additional Soviet pipelines.

aking Western military-related technology, subsidized credit, ami locked-in gas markets available helps the Soviet military buildup Western governmentsen be under increased pressure to raise defenseove thai requires heavy laves, sometimes leads to deficit spending, and contributes to inflation and high interest rates The United States is now committingerceni of its economicand ihe European Alliesercent of theirs lo defendoviet military threat that consumesercent or more of their CN Pthe same time Western leaders are asking their citizens toeavy defense burden lhe> are pursuing policies lhat help the Sovietshreat that adds to this burden

his Estimate includes analysis of ihe potential impactestern actions, including actions by Western Europe and Japan, on Soviet economic and military programs

reduced availability of hard currency and energy would make more difficult the decisions Moscow must make among key priorities in thegrowth in military, programs, feeding the population, modernizing thempean clients, IUMJ expanding (or maintaining) its overseas involvements

While the cumulative impact of Western actions would clearly increase .pressures on Soviet decisionmakers, we cannot judge how they would choose to spread such losses throughout the economy

Because economic growth will be slow through, annual additions to national outputoo small tomeet the Incremental demands that planners areon the domestic economy. Even now. stagnation in the production ot key industrial materials is retarding growth in machinerysource of military hardware, investment goods, and consumer durables.

Shortfalls in Soviet hard currency earnings due to Western actions probably would force further cuts in imports ofand equipment. Moscow fears that reductions in food imports would cause popular unrest and wants to avoid the bottlenecks lhat would be caused by cutting imports ofmaterials, such as steel.

In the longer term, cuts in machinery imports would retard progress inumber of industrialmachine building, oil refining, robotics, microelectronics,and constructiona time whenis countingtrategy of limited investment growth and relying instead on productivity growth.

Placing controls on energy-related equipment and technology would aggravate civilian industrial bottlenecks and, therefore, might cause civilian encroachment on defense production, sucheallocation of some military-oriented metallurgical and machine-building facilities to produce the embargoed oil and gas equipment.

The combination of enhanced COCOM controls and foreign exchange shortfalls would raise the cost of Soviet military modernization while at the same time weakening the industrial base for military production.

he relative impact of Western economic measures on the USSR can be estimated only as general orders of magnitude, as follows

Eschewing futureear in

Denying all oil equipmentear for several years but then declining.

ei

Eliminating0ear

In the long run. tighter COCOM restrictions on militarily sensitive technology (including technology and equipment that indirectlyto significant improvements in weapon systems) would perhaps be the most valuable action lor the West. Such action would retard major improvements in Soviet weaponry, which the West would be forced] to counter. While the dolbr value? of such action is difficult tothe savings in terms of Western spending for defense annually would probably come to billions of dollars.

oscow has the means to react to Western pressure by giving defense needs an even greater priority than at present and byore truculent foreign policy. The Soviets meet their fundamental military requirements from their own large industrial base. Military programs, moreover, have great momentum and political support, they would not easily he scaled back, although the rate of modernization could be slowed Even so. Moscow could not escape the reality that its basic choices between military and economic programs would become more difficult,imehange in leadership might also make those choices less predictable.

SEWET

DISCUSSION

THE SOVIET ECONOMY; THE TIME OF TROUBLES

TWrscourstering incrraungiv severe and fundarnrntal economic difficulties Its rale of economic mowth has slowedercent and the chancel ol any substantial Improvement are dim The causes of this slowdown are basically liomrerosvit Sotncdrastic reduction in the growth ol populationr king ace and the increasingof extracting and transporting energy ami otherinevitable Other causes of thehowever, appear to base Iheii routs in the Soviet bureaucratic, command-type system, which seemi to encounter great difltcukv in coping with the increasingly sophisticated prolnernsodernand in the negative reaction ol Soviet workers to what theyeakening of their standard of living and inadequate rewards for hard work ami initiative within the system

Although major Mslcmic reforms could improve Soviet economic performance, at least in the long term, none are in the offing because Soviet leaders and party functionaries are unwilling to take anv chances with an erosion of their political power andcontrol Events in Poland have reinforced this fear Reform attempts have basically taken the form of bureaucratic reorganization* that put new clothes on old problems Any substantial political change after Brezhnev is more likely to he in the direction of lightening controls and labor discipline than toward liberalization

he slowdown in Soviet economic growth has been characterizedramatic decline in the productivity uf investmentuch slowrr growth of labor productivity Moreover, with some Important lectori and industries, notably stool and grain, actually espenencing an absolute decline in output, maior diortages have developed Given an unwillingness to undertake major economic reforms, the Soviethav used imports from the West to ease its problems and will continue to do so

II. THE ROLE OF EAST-WEST TRADE A. East West Economic Inleroclton

its history the USSR has exploited economic interaction with the West both legally and Illegally to expand its economic base, raisr thelevel of Its industry, relieve industrialincrease domestic food lunpllcs, improve ils military capability, and lessen the burden of defense This exploitation reached its zenith Ins Soviet postwar productivity gains slowed and Moscow increaungly turned to the West lor equipment and techrsology to vpur Us industry, and lor grain to offset shortfalls in its inefficient farm sector For ils part, ihe West encouraged expansion of East-West trade by loosening export controls and expanding theof credil, often at subsidized interest ratesthe Soviets supplemented legal trade aruuisitions of Western goodsell-organ! zed and centrally directed clanded inc acquisitions program The Soviet intelligence services and their Eavt European surro-statesajor rose in acquiring US and other Western military technology, embargoed equipment, and manufacturing technology for Soviet military and defense industrial needs'

rofile of Soviet Trade

he value of Soviet bardimports from the West increased more than mnefold in current prices (see figure I) and more than tripled in constant prices Although it,II small in relation to gross national product (lessuercent ofoviet hard currencyespecially machinery, ferrous metals, undhaveritical role in many high-priority industrial, agricultural, and militaiy programs,those for raising energy production and meal

'frgggggfi c4 am artraly aad- io Saw*

acakwtaii J SI ItM6 Tkt

rrrluwfag>crtr of thr Mo* InuUifntf

spmft

and improving mresle performance Mnscow* ability to sustain growing imports ofcapita) moods and foodslulls was boosted sharply tn the runup In priees for oil andkey sources of (oreigne figurea buigconing market In the Third World for SovietIbe ISSB's highest quality manufaeti.-cd foods Spurred b> overture* Irom Wevtern businessmen hop-Inn lo sell equipment and technology fromcapital goods Industries, Moscow successfullyeries ol but back deals with the wnt involving purchases ol Western plant and equipment Iinaneed at favorable lates and long-term maturities As payment for the equipment. Movcow was to sell raw materiab and semi man ufacturra at prices lhatrellected rising rales of inflation

C. Soviet Coins From Trade

ti Imports from Ihe West have contributedumber ol important ways to Soviet ecottrtmic capabilities1

, Imported chemical equipment, accounting lor about one-third ol allmachinery purchased by the Soviets.

was largely responsible lor doubling ihe output of ammonia, nitrogen fertiliser, and

plastics and for tripling ssnlhetic fiber

production.

Soviets could never have accomplished theiryear program of modern-Izalion and expansion in (he motor vehicle industry without Western help The Ftal equipped wz plant, fur eiample. produced one-half of all Soviet passenger cars when it came fully on streamnd the Kama Bi*er truck plant, which is hated almost etclusively on Western equipment andnow supplies nearlyerceni of Soviet output of heavy trucks

Grain imports have averagedons pet year5 Withoutgrain. Soviet meat consumption would have increased less in the, and

'oreir*ev <rfCI* Inlelligence ABesmwnl SCA'ortf* tftmom*mWin lApocndiO.S| the fall in per capita consumptioneat in theould have been far worse

Large computer systems and minicomputer* of Western origin have Iven imported in largesystems sincebecause they 'a) have capabilities that the Soviets cannot match, (b) use complexwart that |he Soviets have not developed, and (c) often are backed up by eipert training and support that the Soviets cannot duplicate.

Because of Soviet deficsencles in drill bits, pumps, and pipeline equipment,SR bought about S3 billion worth of oil and gas equipment alone in, but these purchases have now largely ceased.pumps purchased from (lie United States, for esample. may have added a* muchillionay of capacity to Soviet oil production in recent yeais Similarly, tbe Soviet offshore eipiorstio-effort would nut be nearly as far along as il is without access lo Western equipment ami know-how Meanwhile. West Germany ind Japan have provided most of Ibe large-dlameter pipe needed lor gas pipelinr const ruction

D. Cortseouarices 'or Soviet Military Power

7 Oirecl B< n. fit, fo military Weapon SwWemt.

Acquisition of goods and technology from tbe West, either by legal or illegal meant, enhances Soviet militarv programs in two principal ways by making available specific lechnologies thai permitin weapon and military support systems and the efficiency of military and civilian productionand bv providing rconomir gains Irom trade that relieve bottlenecks and improve thehe economy and thereby reduce ihe burden nf defense Soviet military power Is based fundamentally on ihe laige viae and diversity of the Soviet economy aid Ihe breadth of the Sivlet technical and scientific base, on Soviet success in acquiring sophisticated technology in the West, and on the longstatiding preferred sialus of the military sector.

A ll lui only been through an extraordinary alloca-tton of MM to defense that the MK have attained their present military power Soviet weapum are donned lo minimize the requirements for lech-nologics in which the USSR is deficient, but the Sovieti have turned to legal and illegal acuutvillom of Western technologies lo make up for domestic shortcoming'

') Thr- Soviet armed forces are being modernized in nearly every category of weapon system Soviethardware, which was al one time distinguished for III rugged simplicity, has been qualitativelyunlll il is in some instances the lechnolngtcal equalnot superiorhardwarein the West Without Western technology, modernization and qualitative improvement of Soviet military equipment would have proceededlower pace

the acquisitions of Westernhardware, ihe Soviets have been ablend production obrectives

The reduction of engineering risk by following or copying proven Western designs

The reductionime by several years through the use of Western designs and li-chnol-ogv and equipment.

The incorporation of counlermeasores early in the Soviet weapon development process

In addition, the Soviets have been able lo upgraderitual industrial sectors such as computers. micToesec-irooKv and metallurgy, as well as lo nsodrrnizr Warsaw Pact industrial manufacturing capabilities This ha* also hetprd Io limit the rise in military production costs

Soviets commonly acquire evenhardware under COCOM license,for commercial purposes. For example,acoustic signal analyzers, legallyDenmark tn Ihe, if used onown submarines, could significantlyIuiIk.iI passive sonar capability to detestWestern submarines. In addition. Iwodrydocks purchased from the Westcivilian

strategic and tactical naval

use have been diverted shipbuilding and repair

egal purchases of Western machinery,and manufacturing technologies haveide range of applications in Soviet weapimv(See inset below )

Soviet AUfory Uses of Lego! Impels

US-origin sear-rutfins marhinet were used to produce milslarv trucks, wheeled armoitd vein oles. and components for mimic lun-poden

Western aear-cullinf machines were used In the ctweloprnerit of the latest Soviet military heaty-Mt helicopter. ,he MI-26

mUlr* ma chinev and other ma-iv Mots Iron Sweden and Weil Germany and twong mtlh. one Japanese and one West German ared in the corBtruct>on ol htamjiotass nuclear attack submannr. theltli fastest and deepest diving submarine

grinding machinesd inimall. high-precision henrings variable lor ballistic missile guidance operation

An electron beam drilling device <if Writ Ccr man origin was used to improve the uuality i4 Soviet turbine blades

Austrian-origin hot and cold lotarv lorgean all) were used to produce artillery tubes and

barrels

ind riveting and French aermpace aeldina technology en jipcoerat wn turd lo peal neeSoviet intercept or aucralt

tungsten arc welders ware cardarmor plate for Soviet tanks

US technology acquired for the Chebnkiaryplant was iiaed toder lank engine.

V2

mm

gET

Mililory Umi ol Mrmports

Information on ihr IS RoJ-ir ihoukSre fired wr fare to-air mratikhe cleveforjcnenr ol the Sovieturing the prototypeol the SAT. hrjunei acquired fromending the tulnrqurntnoVcrwout hranran of wrtablr quahly

In tho mMlltthot the Soviets copied the Teui Insltument* "tOO scrtci nionoinhlc integrated rir-nail flCI u> produce theC Tha K: was ther. ined lo develop tSr KS-IOsO computer. whoar uVugn and -ninin! ir were copied Irom theheai bren inedumber ol military application*

Matmab acquired rm the US TACAN na> nation lyitnii were adapted for me in theoihal navigation system

Dala aeuuired nn theransport have apparently been ised in the drirloproeral of the neweavy transport under development al ihe Anfonov Deitgn Bureau In Kiev

M Other Benefit* io MUilan Programstechnology and equipment alio enable the Soviets to improve iisdustries thai indirectly support weapon developmentv Even though the delerne industrial ministries perform Ihe bulk of weapons development and production. Ihey rely on ihe nondelense industries to supply specific products such as missile-handling equipment, and lo supply mosl ol the basic tools of weapons developmenl and prodiv and computer software Because most defense industries also produce for the rlvllranimports ol Western machinery lor live civilian sector atyi lielp to present greater erscrnachmenl of civilian requirements on defense production facilities

raditionally llie Soviets have lagged behind ihein their ability to produce modern rlrctrooicso perhaps than In any other area of military technology Iu particular, they have not been able lo produce the highly sophisticated precision equipment they have needed in volume, and their RM> methods are too ponderous and react loo slowly to slay currentechnology that moves with espressway speed

esult, ihe Sovietsajor effort in theo obtain Western equipment for ihe manufacture of integrated circuits They have now acquired several hundred million dollais' worth of machinery that, if combined, would enable them In equipoedium-sue production lines capable of producing advanced devices, including large-scale integrated circuitry wilh sufficient capacity lo meet all current Soviet military requirements Thisbase it known lu be used to support developmenl of military equipment such as strategic missiles, anti ballistic missile systems, sensors and weapons for anli-suhmarine warfare, and computers for militaryll isey technological capability for continued advances in Soviet military electronics

estern manufacturing technologies have helped the USSR produce materials wilh criticalapphcatsons. especially inS lirmurnkey plant to produce rock-drill bits that included eilensive tungsten-based powder melalluigv technology The US equipment and expertise provided have enhanced the Soviets' ability to make tlie tung sten powders needed to produce new and mure lethal tungsten-alloy penelralors for their kinetic-enemy, antitank projectiles- Sweden, fapan and Westalso have sold the Soviets powder metallurgy ptessing Irchnology similar lo tbat used bv Western manufacturers to make tungsten-alloy penetralors The French firmuv is helping toassive steel plant in Novolioetsk. which will produceillion tons of vpecialty steel when operating al full capacityuch of the plant's output will be electroslag and vacuum-arc remelt steels ol the kind used in submarine bulls, artillery lubes, and tank armor.

E. The Hord Currency Sqoeereime when Soviet economic difficulties arr growing, the USSR's hard currency earnings are ile-cllning In the past lew years. Moscow has used ils hard currency earnings primarily to buy the goods necewary to cover maior domestic shortagesesult of four bad grain crops in succession, (nod Imports have risen tn about SI2 billion, or aboutercent of lotal bard currency imports, reflecting the high priority (he Soviet Government gives lo at least maintaining supplies of maior foods in the consumer market There has alsoarge expansion of sleel imports, especially Urge-diameter pipe and special steels, because the Soviei steel industry lacks ihe

diversity to support .ill ihe major Soviet economic and military programs These priority needs for hard currency imports have squeered Soviet imports of Western machinery and equipment, which have fallen lis aloulercent in cutuianl prscesith most of the decline having, occurred in the past two sears.

unne theoot In or m, the I'SSP. hasevere lureign exchange squeeze,esultoft oil market, low prices for other Soviet export commodities, and unexpected expenditures on imported grain and on aid to Poland. Although the cyclical causes of this delennratinn are onlythe longer term outlookise In Soviet hard currency earnings ins poor Unlike, when enormous oil price increases financed the bulk of the threelold increase in the volume of Soviet hard currency imports, the outlook for oil prices for at least several years int isecline in real terms, if not in nominal term* At the same time, the volume of Soviet oil export* is hkefy lo be squeezed by al least slow growth in domestic consumption coupled with stagnant or declining production Marketfor most other Soviet exports do not look very promising either In contrast to, therefore, likely market conditions inointecline in the purchasing power of Soviet hard currency exports (See inset below.J

Prospects for Major Hard Currency Exports

The increase In gas exports now in train will essentially constitute, an olfselhe likelyin oil exports.

The dramatic decline of oil revenue* oft producers such as Libya makes it unlikely thai tome major Soviet arms clients will be able lu continue paying in hard currency.

Eiports of timber and wond products are squeezed between rising domestic consumption and ibe ming costs of exploiting timber inremote area).

tvpurls id mineralitpl.itmum-group metals,copper, aluminum, chrnmile, mancuiteie.lead, and fine}ixed picture -xrnie (rending up. others down

Export) ol Soviet manufacturers are not finding ready acceptance in Western markets, andhai noi made the large investment required in quality control and marketing lo make mold

Role of Western Credit. Western credils to the USSR, often government guaranteed, have been an Important factor in the rise in Sovietince the USSR began large purchases of Western technology in the. Moscow has used official andbacked credits lo finance one-third uf lis imports of plant, equipmenl. and large-diameter pipe from the Wesl. Annual Soviet drawings on government-backed credits lumped from an averageilliono nearlyillionut have heldillion per yearS The volume of new-commitments felleak ol nearly Si billion5 to less than S2 billioneflecting falling Soviet orders for Western machinery and equipment.

The combination of rising debt serviceand level drawings has steadily reduced the net resource inflow lo the USSR on official creditsaximum2 billionheremall net outflow from Ihe USSR as debt service exceeded drawings

Subsidized interest rates and lengthy maturities on most government-backed credits have helpedconserve some scarce hard currency Interest rale subsidies on new official loan*ecord level mthe orderrates In most Western countriesercentage points more than those charged on officialst October's increase in Ihe OFCD inleresl rate guidelinesossible reclassification of the USSR into the "rich country" category will reduce the subsidy, but only slowly.

, contracts for sales ol large-diameter pipe and chemical plants were the primaryof government-backed financing (seeipe contracts backed by official financing totaled at5 billion, and0 million in contracts for other energy-related equipmenl also received official guarantees ur credits- Officiallycredils coveredillion in contracts for completewo-thirds of ihcse commitments were for chemical plants, with Ihe remainder going mostly lor steelluminum plants (SlnOnd factories for machineryillion together) OECD dala report someillion in official credit commitments for machine tools and other plant and equipment. Small amounts of credits have financed

SECRET

Table I

Official Credit Commitments to the USSR. by Industrial Sector

or contracts supported by official eredlls -wh anatunly of more than five years

includes credits for pipe rtpntts

< OKCD reports for ill countries eicepl lipan Datafl on announcements ol credits baciina ipwific contracts

""TTilllliliiiiu^^

(milUMi US dollars:

'

ititiij.tm

[it.rai

and thermal ponce

pulp, and coper

copper, and one

and eaulpmrnr

ipnides

quipment

for telecommunications equipment, ships, and eaithmoving vehicles

rance and Italy probably provide more than half of the interest rale subsidies.esult of these subsidies, the Soviets saved an0 million in interest payments to France0 million in interest payments tosomeoercent of the value of Ihe machinery exports ol these countries to the USSR. If all official debt had been contracted at commercial rates, the Sovicls would have had toillion more to the United Kingdom andillion more In Japan. Any West German subsidy was undoubtedly quite small becauseercent of exports lo the USSR have been financed through West Germany's AKA rediscouiil facility When tlie Soviets demand interest rates below market levels on Hermes-guatantecd credils. iheexporter usually covets the financing cost by charging higher prices. There is. however, an implicit subsidy involved in providing governrnenl guarantees for privatethe interest premium the private lenders would require if there were no

ore recently, however. Moscow has had lo recognize thai it cannot countarge increase in

Western credits to expand its hard currency imports. Although the Soviet bard currency position is still relatively strong (the debt service ratio is only abouthe prospective stagnation In export volume means that any attempt loubstantial increase in imports would quickly push up hard currency debt to an unacceptable level.arge inflow of Western capital would be required just lo maintain the current volume of imports, awl this would resultoubling of debt5uadruplinghe debt service ratio would approachercent bylevel high enough to cause concern Inerceni)

mpltca'iona of Hard Cvrrencu Saueeze.oderate fall in hard currency imports could greatly complicate Soviet economic problems and make allocation decisions more painful Largeimports are essential to the growth of meal consumption even in normal crop years Expansion of gas consumption and exports requires massiveof Western large-diameter pipe Large imports of metals and chemicals are an integral part of Soviet economic plans. Orders of Western machinery and equipment have already been sharply curtailed; fur-

I

N'sV&&ET

cut* would certainly Impinge on priorityin iteel. transportation, agriculture, and heavy machine building

III. Oil AND GAS:

FUTURE KEY TO IMPORTS

f Moscow is loevere squeeze on ils hard currency import capacity, with painful rrpercus-sions in the economy, il must find new ways of increasing its export* lo the West TKs menunew capacity a* wrll at feeding new markets. By (ar the most promising potential for eiport npuntion is in the massive resources of West Siberian natural gas Proved reserves of Siberian gas are ample to cover any hlely increase in total energy consumption inSR duringHs wellrge expansion in gas exports to the West Althoughcost* are high, production costs of Soviet gas are low. and the USSR is willing loow rate of return on natural gas investment, making it likely that Soviet gas can continue lo be offered lo Western Fur ope al prices lower than those of most alternative sources Moreover, while gas exports are the only promising future source of bard currency, oil eiports still account for sum*erceni of Soviet export earnings, and it is inqioitant (nr Moscow to mimmue their future decline An Important factor ullrctlng future ol] production and export* will be the degree of access to Western oil equipment and technology

ispute nver ihe papehnr Lo occupied much of the policy discussion of Fast-West inter action within Ihe Western Alliance, partly because il involves both political and slralegicexpo" controls affect the pipeline, which the United Stale* abo opposes for strategic reasons Some perspective on Soviet energy developments, problems, and prospect* is necessary lor anof the potential impacl of Western actions

A. Th* Soviet Energy Problem

oscow is cricounlcring tapidly iising costs in the production and distribution of oil and ciul

Theace between declining oil production in its older fields and Increasing development of new ones. Requirements for drilling and fluid lift are rising rapidly, and Ibe Soviets are moving to develop offshore deposits and inlrnducc more sophisticatedtechniquesecline in oil output

The ioa) industry I* iiilfcring from mineincreasing mine depths, reduced seam thickness, and declining heat value per unil of taw coal produced Although the USSRenormous coal reserves in Siberia, the Soviets are ill prepared to exploitresult of neglecting the coal industry, when Sovietut increasing emphasis on development ol oil Thus,of coal deposits east of the Urab is now constrained by lack of progress on coaltechnology, unresolved technicalrelating lo tranimission of electricityat mine-mouth power stations, and lack of sufficicnllv developed transportationin ihe easi.

-0 gas will be the largest single source of Soviet energy, with production al roughly TOO billion cubicequivalent of II fi millionay) of oil Reaching this level however, willostly undertaking because It -ill require largepipe and equipment The Soviets are building an unprecedented sitinchillimeler> trunkline* from Siberia-eacharger undertaking than theoilthough labor and equipment are already stretched thin The massive outlays lor pipeline construction, and provision of neededas roads, all-wealher purls, and electric power strain Soviet investment

In contrast to ihe West, ibe Soviet record on energy consumption has been abysmal Soviet energy consumption has continued to grow more rapldlv lhan gross nationale figuref ihe relationship betwren energy comumption and GNP in ihe USSR bad followed the trend in tbeSeven"1 Ih* Ii annual consumption of energy would beil equivalent lower (banwas0

A major reason why conservation gains are difficult in Ihe USSB is lhat most of them require

v16

l. SSR

i. i

90

USSR and Big Seven: Enemy/GNP Ratios.

ro *o

uh seven*

must come in the industrial sector Producing and introducing energy-efficient equipment, however, will require most of the decade

i- The pattern of energy production andhown in tablebout one-fourth ol Soviet oil production is evporled. of whichs sold to tbe West for hard currency. Cat eiports are abo becoming substantial

B. Importonca of 'he Eiport Pipeline

he Soviet Union ha* been delivering gas to Western Europe since (he.85 Mokow concluded eight "gas for pipe" agreements with Austria. France. Italy, and West Germany. Under these agreements, the USSRwith long-term government-backed credilsillion tons of large diameter pipe and other gas-related equipment To repay the loans, the UVtR agieed to long-term gas dellveiy contracts, some of which eitcnd to the0

began negotiating with the West Europeans for construction of an export gas pipelinelanned gross captsctty ofillion cubtc metersillthough iwo pipelines were originally discussed,contracts call for only one strand Even so. this Siberia-to-W'esrern Europe natural gashe largest East-West trade project lo date (see thumbnail description in figurehe pipeline could deliver nearlyilhon cubic meters to Westrance. Italy. Austria, and other countries. Gas pur-

USSR; Estimated Energy1

(million

nam.

Siberia-to-Westem Europe Natural Gas Pipeline*

4

piovlsionai route* ol tronji! lines Idrougn CjecnoiHwakta and Hunaaiy lo Wes" Carinar-jr. Austria, and Italy

Pipelinelance

!Jrengri|rUfngo'oil)

m' pei yearM rn* par

et|

tar-ifra

Cperatng f-oweiw

Coiyprraaor Srancs re>narjc-

ftitonunancy)

CompWlion Data: * (peeaying)

coe>pressor siaten*]

/

'Niduitaja lora

Peim'

Kursk..

Ka

y

Union

Unclassif.ea

Table 3

Projected Soviet Gas Deliveries to Western Europe

Excluding Finland, amount) ot annual of (take node, the nr- eonWKli are tubiedredncrWn by upft perenn- under scheduled semiannual tiwotwtiotol"*Italy hw not vel tinned ihe re- purchaseiehidina potential drllveciejof OS billion cubic meter, lo Wen Berlin

ibilliun cubic

US

J

contracts

contract*

1

,i

contract*

*

"

contract*

0

conl'Md

Germany *

contract!

ii

nairiMli

0

cur*rjc(s

tontrsrti

1

5

contract*

.j

ranriacii

chase agreements were signed in1year period with West German and French utilities and in2 wilh Austria's Fern-gas Initial exportsillion cubic meters peril equivalent) arc to startM. and full deliveries are scheduled to begin

he USSR will be able loombination of the existing Soyuz export pipeline, domestic trunk-lines, and East European transit lines to begin initial gas deliveries on schedule Wilh the phasing-in of the new gas export pipeline, total Soviet gas deliveries lo Westernolder conlraels as well as ihe new export pipelinereach aboutillion cubic meters per5 and then8 rise to as muchubic meters per yearil equivalent) (see tableAnnual gas deliveries to

Eastern Europe would increase by several billion cubic meters ifercent of the projected Soviet exports are delivered to Czechoslovakia and Hungary as transit fees.

the gas sales, the pipeline

Soviet purchases of large-diameter pipe (aboutostly from West Germany and Iap3n

Soviet purchases nf lurbine compressors and relatedrom the major Wesl European countries.

Government-guaranteed credils (at leastillion) repayable In eight loearshree-vear grace period on repayment ofand interest raleso ft percent, well below market.

gas export pipeline project is one of sixgas pipelines that ihe Soviet* hope lo completecurrent Five-Yearwo of the five

SESREI

1

domestic lines have already been Lid. In addition to the export pipeline, Moscow hopes to lay5 ihree more line* from the Urcngoy gavfield to the European USSR,10 kilometer* long The sixtrunklincs from Wert Siberia account for roughly hall of the total0 kilorneten of gat pipelines planned for construction tn IflAl-AS

f the Soviets believe the*count on Western imports of pipe and comprevsors they will develop Iheir own capability more rapidly. Certainly byhev would be able to pioducemegawalt turbines lo move gas thnxnthpipelines, such as the export line currently being bulk The Soviets would prefer to continue to import some of thn equipment from the West,became it ran be paid for with gav exports and it maintains the commercial ties between Westernand the USSR.

e-cause ol ihe weak export prospects outlined above, the pipeline is vital lo Moscow's prospects for earning sufficient hard currency beyond theoajor drop in its import capacity Annual revenues from the pipeline deal alone shouldillion1 dollars) in ihehen all credits ate repaid, and total gas earnings (including existing contracts) could be roughly SIu--billion

he USSR also calculates that ihe Increased future drprtidence of the West Euroiieans on Soviet gas deliveries will make them more vulnerable to Soviet coercion and willd or ip thesr decisionmaking on Fast-West istuei The Soviets, moreover, have used the pipeline issue lo create and exploit divisions lietween Western Europe and the United States In the past, the Soviets have used West European interest in expanding East-West commerce to undercut US sanctions, and they believe successful pipeline deali will reduce European willingness to tupport future US economic actions against the USSR

'oUovdht Cathe factors that led the Soviets to conclude the recent Siberia-lo-Western Europe gasgas reserve* and continued need for hard currencycertainly will leadroposal for new export contracts that will require additional export pipeline*econd strand of the new export pipeline were built. Soviei revenues from gas sales would rise ino moreillion peroviet behavior in negotiating ihe first conlracti suggests lhat additional gas supplies wouldase price near llie low end of the market Byelatively km pnee initialii ihe Soviets would be able lo increase their market penetration and still secure hard currency earnings

4i. Indeed, potential demand in Western Europe could support purchases of at least an additionalillion cubic metersilof Soviet gas by the yearfor Iwo additional pipelines of ihe magnitude of the one now being buill. This potential will lie realized, of course, only if alternative new sources of gas for Western Europe are nol developed *

C. Alternative Energy Sources

he development 'if such artemative Western energyKularls the Urge gas resources of the Northtake loo long to have much effect on the West European demand for Soviet gas inOs but could determine whether Western Europe seeks additional Soviet gas Int best, an5 billion cubic meters of new supplies could be delivered by IWO through increased Dutch and Norwegian production, estimated Norwegian gas reserves are by thrmu'lse* sufficient toarge expansion of production ineveral Alrican and Middle Eastern countries also have the potential lo increase gas export) during

' See'i'-S2 WVirrrn Airrrnamcf to Sonet .Vaiu-df Cm Frail*i'ii and Implieaiieeu.

M. Continental gas Import requirements arelo increase byillion cubic meters ins demand grows and domesticdeclines Under lavorablr circumstances. North Sea and Dutch gas could meet about SO percent of these requirements, or al*>ulillion cubic meters North African gas could provideillion cvUc meters Supplies from the Middle East and North Africa would be sulatantialls less secure disruption than would gai Irom West European sources Moreover the likely investment cests ofand transporting thu gas would be extremely high iSee

5EVM1

Table 4

Proposed Non-Soviet Ca* Project* for Western Europe

Train-Sahara pipeline

two

0

7*

250

Medium

Medium

Secure Secure

Protect -at carxeicd in earlv IS bul we believe Nigerian needs -HIeMCI lo go forward and be later eipandrd

Nigerians dismissprotectof potential transit andproblems

Probable

possibility

Highly

Krtbl UVC

Train 1

75

fumi are actively

in ihe prefect

dili>xul rmc*vw air>

coveted.

Fmlnfle al end ol lakta.

SEC^

TableContinued) Proposed Non-Soviet Gas Projects lor Western Europe

Proposed tercels Start

Dalian

(billion evil* Production and

meters) Transport Ceil' Reliability

Considerations

reliable Will probably be built only4 Some possibilit.

and secure rrplaisrsneM for Rrega plan!

II

LoB-mediuni Pai'lv reliable Only il offshore reser.es $om* possibility and secure discoveird by an luiian company) of NO billion cubic meters nr more ar* Proved up and adtKeni oilfields developed beforehand.

Ivory

Qatar

Ha. Lilian LNC I 3

West European pipeline

Inn

ICAT-Turkey- II LNC

lCAT-slesr Euro- l( peon pipeline

Seturr

Secure. Secure

Will require discovers- of reserves Some possibility

Some pasahllily

Even if recent gas duenveries are Some ixisUliilii) provod up. Irs- gas is likely lo be used domestically.

Temporarily shelved because of Probable failure to find buyer*

Insecure

The regional political tensions, hath Highly improbable transit fees, and large costs makepro-eel dilfiesih io Implemenl.

Medium-high Politically in- Possible eipcat to Western Europe Some possibility secure and unirllabtr

Some dossiI*'Ills

Medium-high Politically in- Italian and West German llrtns secure and corsvleriEa protect, unreliable

Takes account of held drseksprnent, operating, and transport costs amortised al IS percent Etcludcs wellhead value of gas Low cusl Is defined ai costs under S3 per billion BTL's deliveredestern Europe mediumoigh cost, above S3

SEW"

u III national cooperation will be critical il sizable new volumes of North Sea gas are IP be brought to the. Corilinent by the. Protects to boost North Sea fias etporU will require enormous capitalbillion mas be neesled to develop Norway's Troll gastieldwill have to compete with other Niirlh Sea oil and gas piosectshare of the development funds to be spent durine the next decade Interest rate subsidies similar tu those offered for IB* const nxtion of the Soviet pipeline could vubstantially speed development of North Sea gas reserves; an interest rale subsidy ofercentage points could cutercent from total Investment costs

ooperative agreements lo transport us to the marketplace will be equallyas swap agreement, for example, would Involve increasedgas deliveries to the United Kingdom in exchange for delivery of equal volumes of British gas to the European Continent. This could2 billion in facilities investments and could shorten leadtimes by two to ihree years Similarly. Dutch participationoordinated gas marketing strategy could vastly simplify Norway's efforts to increase future gas sales.

lthough the commercial advantages of such arrange men It are sizable numerous political obstacles must still be overcome, including Norwegianto become overly dependent on hydrocarbon development Other critical factors determining the timing and size of new North Sea prolects include-

Tea poiicirt. The current UK tax regimeerious deterrent lo the development of small fields.etrnleum faxes are also high, and development hits been slowed further by short drilling seasons and generally cautious government policies

Market proiveett. An unprecedented decline inFiirtiprsn na> tonsumptUMie last two years ha* clouded Ihe outlook for Ihe future size of Ihe European gas maiket I'm-enl uncertainties could cause North Sealo hesitate before launching newespecially in view of the possibility of being undercut by cheaper Soviei gav

needs of producing eouitfriea. II

lhc budget crisis in the Netherlands worsens,

pressures to increase gas sales will increase Similarly. Norway may be inclined lo speed gas development because of loweredof future oil revenues

D. Soviei Dependence, on Western Oil Equipment

he USSR faces increasing dependence on the West in developing and processing ils cal resources inth. The Soviets already have dnlied most of the relatively shallow, easily located, accessible oilThey speclhcally need Western seismic and well-logging technology to holster their ability to explore for oil reserves insee annex) The Soviets plan lo nearly double the amount uf drilling lor oil and gasnd to increase it further in the, but their drilling productivity is poor bystandards Thus. Western rigs, drill pipe, tool joints, drill bits, blowout preventers, and dtilltng-fluid technology could substantially1 aid Soviet drilling efforts

he Soviet oil industry faces rising fluid lift requirements in, as the amount of water produced along with oil Increases. According to Sovieiarge additional volumeillion barrels ahe lifted5 simply to maintain production of oil at0 level ofo handle the high volume of fluid the Soviets plau to double the number of wells producing oil wilh ihe help of submersible pumps ami gas-llfr equipment. Imported equipment could hi mil (beof this effort because the capacity and quality of Soviet-made subrnersihle pumps ami gas-lilt equipment are low.

Soviets"xplored prospective areaspetroleum discoveries are offshore, amiand development of Ihe continental shellto their oil production inalready has received substantial assistanceWest, and cimlinued assistance could speedin theand Arctic areav

United Stales Is the preferred suppliertypes of oil and got equipment throughoutbecause il is by far the largest producer,most experience, the best support network,the best technology In someUrge-capacity downorld monopoly The position nf mosl

SEofJET

LS suppliers in ihe changing world market has been preserved by establishing overseas subsidiary firms and licensees during ihe pasi decade These offshore operations deterred new competition from "wedging in" lu overcrowded markets Up lo now. the learning curve lor new competitors has been very steep and enlrance has been too costlyighly cyclical market Rooms in demand often trigger newin additional capacity, often only lo be followedrying up of Ihe market when production beginsoonths later. Bisk is high lor any newcomer because the period following tbe boom is marked by fierce price competition until the excess capacity is worked off Nonetheless, in recent years the US share of the market decreased, evenie US embargo was imposed.

IV. OPPORTUNITIES FOR WESTERN GOVERNMENT POLICY

A. Possible Restrictions

estern governments, al considerable cost to themselves, could increase Soviet economic difficulties

by:

Restricting Soviet access to Western oil and gas equipment and technology

Eliminating subsidies, including government guarantees, on credits to Ihe USSR.

Using their influence lo discourage Western firms from entering into large-scale energy projects with the USSR.

Taking steps lo shrink the potential Western energy markel for Soviet gas by developing alternative energy sources.

he effectiveness of such steps depends on many- factors, including the scope of the action, the degree of cooperalion among the Western Allies, and the duration of the restriction II is highly unlikely, for example, that US Allies will participate in an export embargo, except in response lo specific political events, wilh the result lhat such an embargo is likely to be partial and/or short-lived. On (lie other hand, there may-etter chance of gaining Allied cooperation on credit policy and on development of alternative energy sources, especially il common ground can he foundstrategic" policy concerning East-West economic relations

he following sections consider Ihe impact of possible Western measures on:

The conston of ihe export pipeline and the planned Soviet gas deliveries In Western Europe

The development of Soviet oil production.

The development of new gas export projects

B. Impact on the Gos Export Pipeline1

c believe that the USSR will succeed in meeting its gas delivery commitments lo Western Europe throughnd will do so without significant diversion of domestic resources from other sectors. Deliveries could begin Insby using existing pipelines, which have excess capacity of at leastillion cubic meters anr.vi.ilK

The Soviets probably can begin deliveries through the new pipeline5ilh theurbines built with the GE-made rotors already shipped from Western Europe, or about to be shipped, and by operating compressor stations without standby units. Moscow could deliver through the new pipeline aboutercent of the planned annual throughput of nearlyillion cubic meters. Turbines using anumber Alsthom-Atlaritique contracted before ihe US embargo to build for the Soviet Union under GEboostto more thanercent of capacity. Forof pipeline operation and periodic maintenance, however, the Soviets might use some of Ihe available turbines as standby units, thereby reducing throughput somewhat

It is highly unlikely that full capacity will be needed until near the end of the decade, because West European gasagging .substantially. Before the end ofhe Soviets will ln> able lo fully equip ihe pipeline using either imported or domestic equipment. Hy then they will probably be able lomegawatt turbines, in spiteistory of troubles. If necessary, ihe USSR could divertcrews and com pressor-station equipmentew domestic pipelines to the export pipeline or even

etiiledhe ripoil pipeline's stilus, see CIA Intelligence- Assessment SOVOOT* Ouilonk lor lU SuVra-lo-UVsrem Europe Saiurel Got Pipe/ine.2

Table 5

Eslimated Impacl of Embargo by NATO Counlries and Japan on Selected Oil Equipment

Eiploralion nqulpmcrU

Off(hear drilling equipment

Drill bits, drill pipe. tool other dnllirtg equipment

Hi, lit-It It equipment

Equipment for producing and pioe-esung ruah-ptenurc. blgh-iulfur gai

Oil refinery secondary unfa

of Cuiteiu US Sanctions Minimal

Small

SnbatMrtii

and Dcgrr* ol Estimated Impair! of Envbatto Imposed by SATO Members ind Japtn

Reductionloratioo success in (listing producings uneiplored re-gxtns. -jib substantial impacl in. Stori tun. Minimal Una tun: Substantial

Moderate delays in offshore driPing oper-alions

Shot! tun Moderate Looa tun Moderate

Small short-run impact on drilling program Short run Small Imi run Small

Potentially moderate In short run.on Soviet inipori efforts. Short run Moderate Lone run Moderate

Critical lor production cd* blgh-suilurAsun gas and hiah-pressute gas in Weil Siberia and elsewhere Short run Substantial Long run Moderate

Potentially substantial if Soviets proceed .lih plans hi upgrade relinenes. but they have concluded no recent agreements for thaw

a domestic pipeline for export use to ensure capacity adequate to meet conlractual delivery obliga-tions. This diversion would-be costly, but it is highly unlikely lo be requiredarge scale More likely. Moscow would lw able lo meet Western Europe's demand with little or no losy in domestic gas deliveries.

C. Impact on Oil Development

he impact uf export leUrictlons on oilin the USSli would depend critically on ihe development of domestic oil equipmentcapabilities While some improvement Is likely over the decade, wc do noi believe that it will come in lime to offset Ihe need for the kinds of Western equipment shown in

Continued denial of US oil and gas equipment wnuld retard Soviet oil production,in offshore drilling and in production of high-pressure, high-sulfur gas.

- Denial of all ml equipment by all NATO countries and Japan wouldubstantially larger impact, which could reach as muchy the end of thealmostercent of tnlal oil production.

mpoct on Future Gas Export Deals

he most damaging measures to the Soviets in the long run would be inflicted by Westernthat restrict further agreements cither lo buv Soviet gas or to sell Moscow oil and gas equipment Under such conditions tlie USSR would lose ils main source of new hard currency earnings in

StS^tET

Inspect on Ihe Soviei Economy ond Military Capability'

fiO Shortfalls in Soviei oil and gas production would direcltv afreet the USSR's ubilily lo earn hardTo protect its hard currency earnings. Moscow would be lempted lo further cut energy exports to Eastern Europe. And the importance to Ibe Soviet economy of subslanllal hard currency imports is such thai, in the eventaior production shortfall, allocations of oil and gas In domestic Soviei uses would be reduced.

onieowenrea for ihv Economy. Energy shortfalls would affect the Soviet economy and might lead to cuts in imports The USSR would be reluctant to cut fond Imports because this would risk popular unrest and, in any event, would probably adversely affect incentives and productivity.

urther reductions in imports of machinery and equipment would hinder industrial modernization and productivityin allocations of oil and gas, or of Imported materials such as steeJ, would createbottlenecks, cause some plant capacity to be unused, and disrupt supplies in many parts of the economy. Tbe bottlenecks would diminish andeventually disappear as the Soviets look steps to conserve the scarce products, to substitute otherand to adjust the pattern of demand.

Given all the uncertainties surrounding (he scope and duration of Western measures, and ihe way the Soviets would cope with and adjust to these measures, quantitative measures uf impact can at best be viewed as illustrative orders of magnitude.

The effect of Western measures on potential Soviet energy output {measured in dollars at world market prices! would approximate the following]in billions of dollars per yearfc

Pun

II

Run

3 lean]

ean>

anction

ak.no

EVniuwun'

jbnp

AUK*

Car

.

beyond current

In the hypothetical caseull Western embargo on all oil andequipment, including lurge-diameler pipe, the cost to the Soviets wouldillion annually0 Thti case illustrate! the particular importance of Western linepipe to thr Soviet gas program over the next several years: inhis dependerxe will decline as the Soviets master serial production of multiwall large-diameter pipe.

he Impact of these shortfalls on Soviet GNP mightultiple of the above losses, especially during the periodbottlenecks could not be aimded The potential aggregate economic impact could be characterized ax follows:

Insignificant. In the case of US unilateral controls aimed only nt the export pipeline

GNP by tbe end of Ihe decade wouldoercent less in the cawustained Allied embargo of cal equipment, but the impart would be much smaller in the more likely case lhat US Allies provide limited, if any, cooperation

In the hypothetical case lhat includes anon pipe, the Soviets wouldoss In CNPercent0

0 the efleets of Western policies could be enhanced considerably if follow -on Soviet gas protects were squelchpd.

oviet cosh, on the orderercent of CNP0 are significantoss of CNP would be equivalent to all the investments made in houurag coristructionr nearlyerceni of all industrial investmentsr more thanet rent of military expenditures0 These measures indicate only the order of magnitude of foigone Soviet GNP and do not equate to potential cuts in investment ot defense spending While the cumulative effect of such losses would cteatlv increase pressures on Soviet decisionmakers, we cannot nidge bow thev would chooae lo spread such losses throughout the economy

tVs Additional Western actions such as restricting subsidized governmenl guaranteed credits could raise the cost to the Soviets of Western assistance bv0ear. Credil extensions

seVwet

SSrXgCT

probably (all sharply If government guarantees were withheld, ji most bankers jib rrlixlanl lo extendij urm credits saitbout government guar an-Ices

n ibe long run. tighter COCOM reslnttlons on militarily sensitive technology (including lechnology and equipment that indirectly contributes loimprovements In weapon systems) would perhaps be the most valuable action lor the West Such action would retard major improvements in Soviet weaponry, which the West would be forced to counter While the dollar value of such action is difficult to estimate, the savings In terms of Western spending for defense annually would probably come to billions of dollars

iinifoufncii for Mllilaru Prog rami The

reduced availability of hard currency and energy would also make more difficult the decisions Moscow must make among key priorities in thegrowth in military programs, feeding thernoderreiiog the civilian ccortoem. supporting rrs East European clients, and expanding or maintaining! its overseas tnvobemenl* because economic growth will be -low through thennual additions to national output will be too small to simultaneously meet the ira lemen' il demands that planners are placing on the domestic econceny Even now.in the production nf key industrial materiab is relarding growth in mat lonerysource of mililary hardware, investment goods, and consumer durables

f growing resource slriisgencses and hardshortages prompt Soviet leaders to cut back on imports il seems likely lhat. in true bureaucratic tradition, initial efforts would be implementedroad-brush fashionumber of Soviet ministries across ihe board. The very top-priority programs no doubt would be spared, bulnes. Including some militarycould be hurt at least indirectb

ven in the longer lerm. cuts in machinery imports would retard progress in modernizing aof Industrialmachine building, oil refining, robotics, microelectronics, transportation, and conalructiona time when Moscow-is countingtrategy of limited investment growth and relying instead on productivity growth

ard currency shortages by themselveswould have little effect, however, on Sovietof Western lechnology and equipment which directly facilitate qualitative improvements in Soviet weapon systems These inputs are so important lo Moscow (hat the necessary hard currency will certain ly be alkveated to them, and ihe value required probably is alew hundred millionear. Such military related ucqulsitions, legal andcan be prevented onlyroadening and tightening of (XXiOM controb

educed Soviet petroleum and cat output would aggravate civilian industrial bottlenecks and. therefore, might cause civilian encroachment onproduction, sucheallocation ol some military-oriented metallurgical and machine-building facilities to produce Ihe embargoed oil and gasTechnical requirements, however, could force significant "upstream" changes in capital and opera-tmns Kor rsample, major changes in capital equip men! would probably be required before assets in ihe defense Industries could contribute lo the production of energy-related equipment such as drilling ngs. platforms, or pipe. High-temperature component* made hy the aircraft industry could more readily contribute to the production of compressor equipment for the gas pipeline protects Increased production of turbines and transformers (or electric power would also require shdts of skills and machinery lo the civilian electrical equipment producers from theindustries

he materials used by defense plants could be redirected to alternative civilian production with greater ease For example, powder metallurgy used in tbe production of munition* could be redirected to (he production of drill bits lor petroleum extraction availability of steel for drilling rigs and tubular goods could help the Soviets meet their oil drilling and gas output targets. In addition, special steels (nr Ihe manufacture of turliiru- blades could increase the reliability of gas turbines used to power electric generator* and pipeline compressors Concrete,and other const ructionould hrlp to the serious Lack of infrastructureroads, housing! in crucial area* ol energy develop-meiil such as West Siberia Transfers of fuels,petroleum products, from the military would also civilian production bottlenecks

hite there is lite possibility ol resourceIrom defense facilities, the atmosphere olEaM-Wcslwhich would be likely to prevail after imposition of an embargo- might prompt Soviet leaders ton more tlie priority ol defense programs in the allocation of resourceseakening of the industrial bate force some cuts in military programs, this would not happen quickly, and the effects on overall Soviet military capabilllio would be very gradual

V. WEST EUROPEAN PERSPECTIVES

A Attitudes Toward Eost-Weit Trade and Trod* Sanctions

n general Ihe West Fiuopeans believe lhat Increased trade with theruit of detente and thatntributn to improved relations They- argue that Soviet behavior will be more restrained tf ihr USSRarge stake in the international economic system Many West European* would therefore reiect economic sanctions, arguing that they also hurt tbe West and do nol alfect Soviet behavior in any event The problem lies in developing with the Westat least the maiorcommon understanding of the strategic implications of East-West trade and agreement on what kind of Soviet behavior should trigger what kind ol response

7fl Devpste statements to the contrary Alliedwant to prevent the pipeline issue from afferting maior initiatives in NATO, such as INK deployment If therolonged, however,ikely to adversely affect the political climate in which final deployment decisions will be madett could reinforce the sell-image nf the West Europeans a* iunior partnerselationship with ihe United Stales in which tliey have an equal stake The pipeline ban could be seen in Western Europe as anothereries of US moves lhat have erodedin US leadership and inlrnufaed aniietv about US-Soviet relations Although START and (he INK talks have reduced European concerns about the US willingness toulogue with Moscow the pipeline decision will cootnbute toabout how the United States will manage the East West relationship. It will abo nurture suspicion about ihe seriousness with which Washington will pursue arms control negotiations

esult of the era of detente, some West European political leaders generally have acquired more complacent altitudes toward the USSR.in (heirhe superannuated Sovietalready is undergoing an uncertain struggle for succession and faces economic burdens lhal it can manage only with considerable difficulty These West European political leaders, therefore, believe that it would be in the interest of their countries toess confrontational approach In Moscow in tlie hone of precluding tbe emergence of more intransigeni leadership following Brezhnev's departure.

West European perceptions of Ihe Soviei tbn-al depend heavily on Soviet actions close loirect intervention by the USSR in Poland orin Eastern Europe would greatly harden West European attitudes, at leastime. Bvonet actions in Afghanistan. Africa, and Central America, while unwelcome lo West Europeans are perceived as lesshreat and would nol have much effect on Allied willingness to support US initiatives outside the treaty area.

B, Thel in West European Eyes

The West Europeans are convinced tli.il tin-pipeline dealood one for them In reaching this conclusion they are looking at ihe dealackage, taking into accounl their projected energy needs and considering such aspects as the cos! and reliability of Soviet gas. ihe cost of their export credil subsidies, and ihe export sales lhal are likely to ie*ull The* are convinced lhal (hey will need large additional gas supplies, especially in. They have nolextensively on what the additional gas revenue might do for Soviet military power, but they tend to aigue that the Soviet mililary will get prelty much llie resources il wants whether or not ihe pipeline is limit. They are skeptical that it is in ihe West's interest to cause cutbacks in Moscow's consumer-orienled and civil investment expenditures, which thes beliesc would suffer most if earnings from the pipeline were reduced or cut off.

The West Europeans' prime energy goal is to reduce their dependence on OPEC While lhat dependence has fallen significantly3 it is villi high enoughustained OPEC embargo nonld

havedevastating impact. In(or OPFC substitute*Wed Europeans obviously would pre-fer to find Western energy source* because of their reliability ftpartly for this reason that they plan to substantially expand their use of coal arid nuclear putter Nevertheless,mainly for homebe ihe primary fuel displacing OPEC oil, anil there have been nn alternative gas sources that could match the Soviet offer West European gai producers have been neither willing nor able toproduction sufficiently in, andnon-Europeanas Algeria. Nigeria. Qatar, Indonesia, andloo unreliable or too expensive or botb

he West Europeans further believe thai tbe Soviet gas deal is relalrvely advanogeous in terms of secxirtty. flexibility, and price iSee imet below.)

M The total number of jobs in Western Europe directly dependent on pipeline contracts is0. Nevertheless, these job losses are important because they are concentrated in ley depressed industries.

ll in all, ihe United States would havear better chance of aborting the pipeline projecl il it had weighed in earlier and stressed the strategic implications of East-West trade The time to acl probably was beforeperiod when tin-West European* were evaluating the prosect By ihe time Washington raised strong obseclion* the West European governments had already commutedto the deal and contract nrsjrotiatioris were well under way. In addition, the US arguments initially focused on the question of energy' dependence on Ihevery issue that tbe West Europeans said

ofeWast Eurofseon View

The deal provides thr Waal Furoceaniyear gas supplyartner that they consider more reliable than OPEC They think thai Moscow will deliver the gas onboth to maintain its hard currency earnings mvd io preserve its reputationeliable trade partner Furthermore, ibey maintain that they have carefully considered (he consequencesoviet cutoff At ihe protected peak delivery levels ol Ihe pipeline currently being buih. Wag-era Europehole wdl get onlyerceni of its total energy supplies Irom Soviet gas. whileUrges purr hasget about JO percent of its gagen-en! oi its total energy supplies from the USSR Planned gas storage capacity in WriterEurope -il equal about three months of Soviet itnportind many imSustral gas users will have ihe capab-hty ol twitching to other Iwrlsvesult, the West EueocseaM bebrvr thai tl-ey could cope withustained Soviet has culolf wiihouta(or economic disruption

WaW*gss> The Soviets also agreed to slgnilicunt flexibility- in gas deliveries. West Germanyctober willne-time option loreduce the base amount of gas In lisillion cubic meters Per year) by up toortent. More important, each purchasing country in each year of the contract will have the tighl lo leduce deliveries during that sear up toercent below ihe base amount

rVice. The West Europeans were.civil by the price formula even though they will be paying mote than the current marker price lot most ga* Tbe contract apparentlyase price ofpet million BTUs. lo be adjusted inlo future changes In oil prices, ai wellloor price ofhe West European* will pay whichever is0 or the adluiled hair price The West Germans were particularlythai ihe adjustment formula isercent on ihe prices of heavy and lurtu heating od and onlyerrsrm on thr price of crude They believe that tbe prices ol ibesr sxodutti will rite less rapadry than crude prices la luturrecause greater use of coal gas. and oxirlear powet will hold down tbe demand lor hratsng >al Mr* current gas prices ate belowhr Soviet ccastract but are nsarag rapidly forWest Ceeriuny1 is paiingl0 per million BTUs for imported gas. upercent1 Even at ihroot price. Soviet gas would be aboutercent cheaper, on an energy-equivalent basis, than ml alper barrel. Given that the Soviet bus deliver let will not reach full volume. and will continueuring which time oil price* are likelyise fat above currentif only because of worldWrSl Europeans are confldenl thai ihe bulk of (be Soviet gas will be purchased at the adjusted have price, which will always be well below thecrude oil price

stiuei

ihey had already studied carefully and resolved to iheir satisfaction

C. Possible Areas of Compromise

hile reiterating their intention to honuralready made to the USSR, mosl of the major suppliers see the necessity to tone down public polemics over ihe pipeline issue, minimize the damage to transatlantic relations, and seek somewith the US position. Underlying this need is the realization that EuropeanAmericanbe far less competitive in the world energy market. The four West European countries involved (France, West Germany. Italy, and theKingdom) have thus far failed to develop astrategy with respect lo US sanctions. Allied acceptance of any US package designed to achieve consensus on joint sanctions would be contingent on two essential criteria: <l) (hat the burden be shared evenly among Ibe Western countrieshat the sanctions not be applied retroactively. Possible areas of compromise might include:

The second strand of theecond Soviet pipeline is an obvious candidate to meet Western Europe's projected gas shortfall in, although there are no negotiation* in prospect at the moment. Tlie West Europeans would be concerned about substantiallytheir dependence on Soviei gai The gas needs could be satisfied by someof other measures conservation,of other fuels, or other sources of gas Norway, for example, could expand gasenough loarge part ofWest European needs in, if development efforts are begun in the next few-years. Given these possibilities, live Westmight be willing lo renounce the Soviet option

credit rettrictian.i. .As noted earlierisrtsidembleIrom Westending vuhwdired interest rates on Soviet creditv the West Europeans paid some hpservtce to the idea at Versailles and might now be pressed lo act Thr French have been the slrongesl opponents of higher inieresl rates,with goodthey would lose some Soviet salesesult. Although supporting il on Interest rales, the West German position is by no means wholly cocisoriani wilh thai o/ the United States. On government exportfor example. Bonn argues strongly agaimt (heiris adamant that it will do nothing on this issue at least until vulnadimi export credits are limited by other West Europeans.

COCOM restriction: There Is al ready some support in Western Europe for tighter controls, and the Untird States canompelling case lhat technology iranden are contributing significantly lomilitary improvements Purely out of *elf-imercst the West Europeans yhould see that these Soviet gains detract from their security and/or compel them to increase defense expenditures

i

ore important than compromise on thesepoints, however, is the need to reach agreementhaied understanding of the long-run strategic implications of* East-West trade. Such anhas been nolably absent in the past, but the time may now be ripe to achieve il Although the sancliom imbroglio has heaghleoed the serious differencesWestern Europe and the United Statesthe linkage of economic and political policies it has raised the West European comctonsness of thr issues and (lie depth olcernt

SEWET

El

ANNEX

SOVIET DEPENDENCE ON US AND WESTERN OIL AND GAS EQUIPMENT

Equipment"

I Having drilled mosl uf their easily gsMMkbtV deposits, the Soviets now need Western seismic and well-logging techrtology to accelerate discover* ol additional oil reserve* for the remainder of theSoviet exploration equipment, however, with its dated technology and limited data-processingis poorly suited to the exploration ol complicated geologic areas such as the potential petroleum-bearing regions in East Siberia, as well as to finding ml and cas in una tier subtle geologic formations in the West Siberian basin Soviet equipment is also inadequate for ciii'i-nimi I'mlini.nii. lacking purlieu la rly the sophisticated positioning, sta-bili/itig. and seabed production capabilities ofequipment.

estern geophysical equipment would help the Soviets explore deeper, hard to-find subtle trapiWestern seismograph software anddigital recorders, cable, grophones. computers, fieldeiiabk> ihem to increase thrtrcapability and better locale potentialtraps Western well Lunging equipment for drlll-ing-fluad analysis and final borehole evaluation would improve both drilling efficiency and od discovery rates

Magnetometers and Gravity Meters

3 This equipment Involves highly sophisticaled vnung technology and data processing capabilityarrav such as East Siberia, will be difficult to explore without this equipment The USSR'sin this area is perhapsears behind that of the West. Skanla of Swedene only known producer of this equipment outside the potential embargo uioup. and itmall producer

Seismic Equipment

4 Improved seismic eqeipment is necessary if the Soviets are lo find smaller and deeper oil ami gas deposits The lack of Ihis equipment will limit Soviet production five to seven years from now. as welln titer in the future If the Soviets try to develop their own seismic capability, the oil Industry will need improved computet technology and additional RAD resources Seismic equipment is available elsewhere, but tlie data-processing capability is closely held bv Western firms.

Well-logging Equipment

S Improved well logging equipment could greatly aid the Soviets in identitying and assessing new ml and gas deposits .As is the case with seismic equipment well-logging tools could be produced within one to two years In countries outside the Western embargo grrnip, hut the all-important vol (ware, which is more lightly controlled, would nol lie available

Drilling Equipment

elopmcnt of geologically complex and deep oil and gas reserves is consuming an increasing vhare ol scaice resources throughout the USSR In general, however, Soviet drilling equipment, characterised hy poor metallurgy and manufacturing technology, isisadvantage relative lo new Western equipment in working such deposits Rew-tvous of more0 meters are considered too deep for present Sovietustained emfsargo could substantially slow oil production in the. Westernpreventers and remote hydraulic controlsensablc for controlling high pressure, corrosive gas when exploring and exploiting deep reserves Western drill pipe, collars and tool joints would he lighter and stronger and provide improved riln.-im in deep drilling opera ttoris These items wouldextend the depth capability of elisting rigs by at leastoercent. Improved Westernarhide insert bits with sealed lour rial bearings would provide the Soviets with slate ol-thr-jil cutting and bearing lechnologv. Thr latler features ileteimine

Sfhk^ET

average hi! life and the meters dulled perun The longer ihe hil holds up. the lewet bin med per well. Changing the hit lakes up toercent ol all deep drilling time The Soviets change biti twice dallyeter depths. US mrdeontinenthange biti abouleek

DrJ Pipe ond Tool Jwnti

Soviet Oil Ministry's planpercent increaae In drillingill probably not be met. in part because of the insufficient quality and quantity of domestic drill pipe. The Soviets currently import substantial quantities of drill pipe Countries uulilde NATO and Japan could fulfill only part of the need in the short run. bul could eipand production within one to two years Increased Soviet production would require larger allocations of crude steel to the pipe mills Inituation the machine-building and metal working sector would probably be theloser ;tl consumes someerceni of steel output!

Drill Bits

Soviets badly need Western technical help in improving operationsurnkey bit plant purchased Irom Dresseri II substantial inipmsemenls in the plant's operations are not forthcoming, imports of Western bill, which amoimes longer lit life than normal Soviet bits, will have to be stepped up lo meet drilling requirements

Other Specialized Drilling Equipment

he I'ruled Stateside assortment ol drilling tools thatariety of lasks such as retrieving broken drill pipe. Specialized toolsgreatly to drilling efficiency when unr spotted drilling problems arise. Greater use of such tools could lewd lo some irscrease in Soviet drilling efficiency Much of this equipment requires ipccial steel and precise machining and would be easier ami probably less costly for trie Soviets to import than toCountries such as Austria and Finland could produce this equipment within one to two yean, bul it is qur-slionable whether such firms would Invest efforl based solely on the Soviet market

Blowout Preventers (BOPs) ond Controls

Soviet wells can be drilled usingSoviet or Romanian BOPs. The dangersin drilling for high-pressure or high-sulfurrequire the use of high-pressure BOPscontrols. Although countries such asFinland, or Mexico could produce thisone lo two years, an embargo wouldgas condensate development in Westpressures) and Central Asia (high sulfurthen.

Production Equipment

Soviets need production equipmentold. developed fields and new undevelopedIn both cases, the availability of themore reliable Western items would be strongly

advantage. Oil production is most ufferliilencroachment at the Volga-Urals,West Siberian fields. Large quantities offluid-lift equipment is critical to maintaining

levels and improving oil recoveryundeveloped high-pressure, corrosive, andand gas deposits will require equipment madecurrosion-resistant alloyedcasing, tubing valves, and ihe like. Highpressures and temperatures cause manyto fail, and development of deep reserves alandbe deferredif special Western equipment is not available

Wellhead Assemblies, Dowrshole Completion Units, Casing, ond Tubing

situation with this type of equipmentidentical tu that with Ihe blowoutarul East European equipment is adequatewells, bul high-pressure gas production andgas production require speciality steelsmachining Countries outside NATOcould begin production uf all uf theseone year. Soviet production of thisrequire reallocation of scarce specialty steels.

Off shore/Arctic Equipment

ajor efforl to improve offshore oil and gas exploration and production capability has been

launched by the I'SSH The Soviets purchased three dnlbhips. two semitubtisercbie drilling platforms,ull comnaert>enl ol IB Ircbtiolngy and eutiiirnicnt duringlan period Olfshoro activities have been concentrated in thr Soviet Ga* Ministry, whsehrnartaiie both oil and ga* exploration and productinei Exploration for oil -ill be the focus of offshore activity inasmuch as onshore Arctic ita)are abundant. However, the most promising offshore areas could be moreexample, the Caspxaa.ara. Baltic Barents, and Okhoisk Seas Thewaters of the Kara and Barents Seas have the must potential, but they present the most serious technical problems for exploitation fee flows could prevent year-round operations in all but parts ol the western Barents Also, pipelines to shore would still have to traverse Arctic permafrost area*

Offshore Positioning Equipmenl. Tensioners. Risers, ondSysttsms

lthough most offshore drilling equipment Is currently produced in countries outside NATO and Japan, essential positioning equipment is not Tlie lack of such equipmenl would cause moderate delays in the Soviet offshore (billing program especially Arcticountry such as Klnland wouldrequire Iwo or more years to develop thisThe Soviet* would require several years more

Pipelint Construction

I" Current and future Soviet plans for newcoristructron areiased toward natural gas. whose production has. thus lar. been heavily dependent on Western large-diameter lincpipc. pipe-Layen. turbinc-compievsors. ball valves, and nml rob. Western pipe-coaling and wrapping rruIerUb are abo rvreded Soviet lirtrpipe is unsuited for bnjh pressure natural gas transmission service in the Arctic.turbine-compressors, pipelavers, and valves are generally Ion small, or too limited In capacity lo do the rob efficiently The Soviets, however, are cxirrentlv anemptirtg to improve the Quality and capacity of these items. Similar effoits lo upgrade technology in the past proved unsuccessful, but ihe Soviets" political prestige is now on the line as far as the export pipeline is cotscerrsed- Some improvements can be expected, but tlie Soviets will slill need all the help they can gel in building major gas trunklme* lorrsB-Diomatet Pipe ond Volvas

epending on the amount ol Western large-diameter line-pipe already in Soviet inventories an embargo on pipe and valves couldmpede Soviet progess toward the USSR's, stoal of completing six Sfl-inchsjas pipeline*he completion of one ot Iwo pipelines by9 might be prevented reducing potential ga* dehserse* in that year a* much asillion cubiche Soviets are developing Iheir own large-diameterultilayered pipe manufactured in short sections Use of this pipe wouldnassive increase in the amount of welding rest Hired for joining pipe In any event, production of this pipe almost certainly will be insufficient lo rope wilh ambitious Soviet pipeline construction plans through theteel requirements for Soviet seH sulfieiencv in Lirgr-dia meter pipe would beAlthough other countries, such as Sweden, could produce tbe pipe and valves, the eslsiitig large pipe-mllt capacity in Wesl Germany. Japan, and Italy might deter potential suppliers Irom undertaking large investment to supply ihe Soviets who openly are trying to develop then own production capability

Pipaloyets

he United Slates. Japan, and Italy are curtmt-ht the only producers of prpetivrrs Large enough to handle the large diameter ga* pipe Soviet prnduclmn of such pipelayery is msl beginning, and Iheir quality is uncertain The lack of Western pipelavers would slow the Soviet effort, although the impactdifltcxill tonaior iiracertainty I* ihe degree lo which the service life of equipment is reduced under Soviet operating and maintenance conditions

Compressors ond Turbints

estern compressor*n*rgaw-Jtt uithe Soviets rannot yetep ordered for iheEurope pun-line If expanded US sanctions were followed by Ibe NATO ce*intries and Japan, the Sovietse someillion cubic meters of gas annually for one lo two years The Soviets have two principal options in the faceull NATO and Japanesesmaller turbines built in thr USSR ot in countries outside NATO and Japan and perfecting theirmegawatt turbines

Stv^ET

Got-Processing Equipment

tpmcril isdeveloping (hr? high-sulfur gaifichls of CentralAsirak ban HnoYqualilvarea mSoviet* arrihe mainthis producing equipment Firm* tn countriesSweden could enter the market within one lo

Oil-Refining Equipment

Soviets intend lo expand theircapabllily substantially Inof additional secondary refining capacityrefinery operations more efficient, and allow the Soviets lo refine crude oils wilh higher sulfur content Plans to substitute cas for nil would involve displacing heavy fuel od from present uses and wouldoviet inabihts to further refine heavy fuel oil The heavy fuel oil currentlyarge share of refinery output and we anticipate that the export market for this product will continue to be unattractive to the Soviets

hilr the Soviets are imtaUing secondaryequipment, they would probably like to obtain more W'eUein units but may be conslralned by hurd currency shortages.

N*4

SK^ET

DISSEMINATION NOTICE

document wai diueminated by the Directorate of Intelligence. Ihii copy is <orand use of the recipient and of person* under hit or he* jurisdiction on obasis. Addmonal essential dissemination may be authorized by the followingtheir respective deportments:

Director, Bureau of InteHigerKt and Research, for the Deportment of State Director. Defense Intelligence Agency, tor rhe Office of the Secretary of Defense

ond the organiionon of the Joint Chiefs of Staff Assistant Chief of Staff for Intrasigence, for the Deporfneot of the Army Director of Naval Intelligence, for rhe Deportment of rhe Navy Assistant Chief of Staff, Intelligence, for tht Deportment of the Air Force Director of Intelligence, for headquarters, Axarlne Corps

Deputy Assistant Secretory for International Intelligence Analysis, for theof Energy Assistant Director, FBI. for the Federal Bureau of Investigation Director of NSA, for the National Security Agency

Special Assistant lo the Secretary for National Security, for the Department of the Treasury

The Deputy Director lor Intelligence for any other Deportment or Agency

ThTT-Hac^iment may be retained, or destroyed in accordance with opptkabJe security regulations, orthe Directorate of Intelligence.

When this documertt it atelmwftojed ovfteat. the overseas recipients may retain iteriod not in excess of one year. Athit period, rhe document thou Id be destroyed or returned to the forwarding agency, or peemiHiotSMiiould be requested of tbe forwarding agency to retainccordance with2 hiiiTtfl

title ol this document when used separately from the textsywiird

Original document.

Comment about this article or add new information about this topic:

CAPTCHA