IMPACT OF THE PIPELINE PROJECT ON THE SOVIET MILITARY EFFORT

Created: 7/9/1981

OCR scan of the original document, errors are possible

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Impact oi1 the Pipeline Project on ^Tfte Soviet Military TrToFt

Soviets have Increased defense spending in real terms at an average ennual rateercent since; military nowercent of GHP.

Economic growth is slowing and could dropercent or less by esult, USSR will have increasing difficulty

in maintaining pact of defense buildup. Military share of OiP couldoint or two higher5 and three or four points higher0ast trends continue. More 1tt>artant, military could take as much as three-fourths of annual Increment to GNP by end of the decade. )

-- Although the pipeline project would not eliminate economic problems it would at bestew tenthsoint to GNPt could ease the strain considerably in key sectors and thus facilitate the military effort.

Hard currency earnings from the project could maintain the

Soviets' import capacity in the face of declining oil revenues. This would permit them to continue to Import large amounts of Western machinery and equipment. )

Technology transfer associated with the project will benefit domestic gaskey to meeting Soviet energy demands in. It would enable the Soviets to purchase Western Arctic-design extraction and processing equipment, large-diameter pipe andwhich the USSR cannot match in quality nor produce in the quantities required.

These aspects of the project will aid the military effort in two ways: some imported equlfcnent financed by gas salts will likely be used in military systems; other imports will be directed to civilian bies, reducing pressure on

the defense industries to switch to non-milltary products.

-- Collapse of tha pipeline deal could significantly Increase Soviet long range economic problems and the difficulty of maintaining the current pace of their military prograos.

currency earnings could fallillion or moreequiring major cuts In purchases of energy and of Western goods that cushion the defense effort.

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industries such as electronics, chemicalscould be especially hurt, because they th* machinery and equipment imports.

-- tvtn withoutlloneters fromields to Mestern Europe, tholr five-year plan colls tnr then to0 klloneUrs of gas pipeline to sectnergy needs. For the* to producehe USSH the equipment needed for those pipelines and doawsllt energy production, given likely trend* In production of naval Ships, ground force weapons, and aircraft engines, the Soviets would be forced to divert Investment frostctors and cope with Important additional costs, delays, and stringencies. These could substantially IsCrtdM the Soviets' overall aconoetlc problems andgnlMeant COStS and difficultiesaintaining the pace of their

ary buildup.

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These factors could induce the Soviets to at leasthe growth rain tary spending (if not cut It In absolute terns).

They would not necessarily resulteduction in Sovietcapabilities. Soviet defenseow so high) that with reduced growth (or Indeed with no growth at all) substantial nodemlrationreed forceshole would continue.

They could, however, require the Soviets to curtail or stretch out selected weapon progrssn ande them sore forthcoatlng In area control negotiations.

Original document.

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