Soviet Spending for Defense: Trends5 and the Outlook for
me
National
AsvfwnKttt
Soviet Spending for Defense:
Trends5 and
the Outlook foru)
An Inldtisroc* Awswittol
Motmcllol avullMrclot*'wol vttd in ihr prtparaiion af mi rrport.
ThU repc-il ou been coofdintted with IbeEconomicNluctl
Ani'.ysii Scientific Intelligence,Weapons Inlelliienot. ll bis ttto been reviewed by Ihe Ntliontl Intelligence Officers for General Pur pose Forces, Politietl Economy,tudies. Sualilictnd Ibe USSR tnd Etslern Ettopt (ll)
Soviet Spending for Defense:
Trends5 and
the Outlook foru)
Trend* in Defense Spending, and Pfograrii
When the current Soviet regime lock poaer in thetolky. which probably hid begun in ther, of increasing the commitment of resources to the military forces-oviet defense expenditures in0 rubles have increasedeal average annual ratec'Cent Because defense spending grew it about the umc rale as the economyhole, these expenditureselatively constant II toercent of the Soviet GNP. This figure reflects defense a* it is defined in the United Stales;roader definition, which the Soviets may use, the defense share of GNP wasercentt)
The increase in Soviet etpenditures on defense59 resulted fromubstantial expansion of Soviet military force* and an across-the-board improvement in ihe quality of weapons and equipment. Tola! Soviet military manpower increased byercent during those years. The most signific.nl increases in force sizelace in Fromal (tactical) Aviation and Ground Forces--especially those along the Sino-Sovlet border -and in strategic missile forces. All of the Soviet military services benefited from the introduction of successive generations of major w< apons and support systems, (u)
Outlook for Future Defcnie Spending
Changing economic and political factor, make il difficult to forecast Soviet defente peogranis and expenditure* inK:
The rale of Soviet economic growth has been slowing and has recently fallen below ihe rale of growth that we estimate for defense expenditures.
Energy problems and demographic problems arc likely to leadurther economic slowdown in, so that defense activities could begin lo consume as increasing share of Soviet resources.
1 Thli utliratc it preaenied ia msle teroi* to rr.fi ki the coat rl miliaryctivitiet in thcl'SSR For ia alternative meaiu'c thatlh< coil of repnilitary activities in the Unite*kilai Cosi Compo'ttvn efSoUti and VS. SRXieAer(u)
A political succession is immincM, ind ihe potential candidates for (he lop positions appear to hold differing views on resource allocation Issues.
Arms control negotiations now under way could affect th'. future composition of Soviet military forces and expenditures.
These factors take on particular importance in the light of decisions that the Sovfei leaders are making now on economic plans. (u)
L"rJn the bavis of this information, wc believe that Soviet defense spending will continue to Increase in real terms at leasthe available evidence indicates that, if the Soviets do not alter their current plans, defence spending probably will continue tp grow over thefive yean at or near the 'ate of the pastears. Ifures became particularly severe. however, the Soviets could moderate ihr rate of increase in defense .'pending b> economizing in ways that would ha>conly modest impact on the modernisation of iheirstretching on selected weapon programs, for example, or by taking advantage of the limited direct savings made possible by arms control agreements, (u)
In the longer te in. growing economic difficulties may puvh the Soviet leaders lo icciaminc iheir plansiew to reducing the grow th of defente spending 8ul Ihey will haveeigh their economic concern against iheir perception of futureiu remcntt and their strong seme of ihe utility of military power in advancing Sovicl policy objectives. Whatever choices they make with regard to defense spending, we think ii highly unlikely lhat. even in Ihe longer term, economic difficulties willeversal of ihe Soviet leaders' longstanding po'icy of continuing lo improve Iheir military capabilities (u)
Key Judgments Introduction
1
Announced "Defense" Budget
Defense Spending as Defined In the United States
1
rn -
and Priorities Revealed b* Analysis of Expendi.ures
Analysis of Expenditures by Resoui ce Category: Measures of Force Expansion and Moderniralion
3
Expenditures
Investment
4
Procurement Programs: the Drivers of Defense Spending Expenditures by the Military Service* Insight* into Changing Institutional Priorities
6
Forces 6'nund Force/
V
National An Dc'cntef^MrtcfS^uppori aciivilb
11
*1F
Affeciiag Fittn* Defense Expenditures
Economic Considerationi
4
Considerations
for Future Military Forcesntiiri-il Affeemcnli
16
III* VVIIIIVfl
The Planning Process
TnToWOT pun .
r
ami
Share* of Etlimiicd Soviet iMtNtl ind Operatini Expend it urct for Military Service*
Soviet Spending for Defense:
Trends$ and
Ihe OutlooV fort>
Sintc Ihe acccnioflower of ibe current Soviet regime in ihehe USSR has carriedajor expansion and modernization of lo military establishment. Ttiitwhichhe present kadcnaaivinKdofTkc- hasubiientdividends in military capability and political pre Migc Bui ihe cost has been high, the effort has directed low aid the s rowing infusion of scarcei technical resources and raw materials, (u)
y in which Ihe US Intelligence Community mca*ures the Soviet commitment of resources to Us military force* it to estimate the annual rubleforis report amty.es ihe le>el and trend of (bete expendituresihecars,lScir diiiributionresource categories and military services, and the major weapon procurement programs that have provided the principal impetus for theirIt ttan evaluate* ihosc Ckfcnic spending ircndi in .he lightrojected transition from the generally itcady economic growth and political liability of (he pastearsecline in Ihal growth and the instabilityolitical lucctxiion. Finally, on the basis of lhat evaluation, we attempt an assessment of future Soviet defense1
The estimates p'esenled in this report ere cxprc-scd in ruble* to reflect ourf the coso of military equipment and activities in the USSR Such estimates help us assets the resource considerations confronting Soviet defense planners, ihe relative priorities assigned to the forces and activities thai male up the defenit effort, and the impact of defenve on the Soviet economy. We use conmnt prices so thai the estimates reflect real changes in defenie activities rather than the effects of inflation. The use0 pricese comparison of estimated defense expenditures wiih other Central Intelligence Agency estimates of Soviet economic performance, which abo use thai price base (i)
The estimates arc based for the most parietailed identification and direct costing of the activities and components ihat mate up the Soviet defens: program for each year. We haveonfidence ia ihe estimates ofxpenditures than inor lower levels of aggregation We alto have greater conf dencc in out estimate* for past year* than in our projections of futureore detailed description of our methodology, our concepts, snd our confidence in the estimate* can be found in the appendix, (l)
gn In the publishsd state budget, ihe Sovki Union annuallyingle-line figure forhich la expressed in current prices The definition of defense what activities art included in thishas not been publicly released Announced Soviet defense spend ng wasillion rubles5 ll increased in thend remained stable at aboutillion rubles in thet fell2 billion rubles7 and bas remained atver since (u)
! Ii i i
IBBS 68 M n
Cmc lompsiiwn Btfi US
* Hilled
US. it-ti OoiV*
sir
16"
Iff
L_iliJJ 4 itsee " '
The relatively low kvrj of the announced "defenie" figure, coupled willi lis rcmarkabk liability inears, suggests that if il rcftecuany sel of actual expenditures atsheMl beortion of the total. If the Soviets bate their figure on aa actual inventory of defense activities,r lime Ihey have apparently changed in Kope; Ibis would enable them lo manipulate the announced figure for poiitkal purposes while at the same time enlarging theireffort.
Oe/Vase 5pe aeVag ai Dtfl*t4Stmiti
Several definitions or way. of measuring defense expenditure* arc used in the United State* Probably the mmt common is the one used in the annual budget of the Deparimeni of Defensehis measure.r. Includes fundi for some Bondcfcasc activities that the Department administers and excludes varioes defense- relatedu'e* administered by other goveinment organisations In ihe US grow national product (GNP) accounti. the Department of Commerceroader definition, intended lo cover all government pure hi ses of defense-related goods and servile* Tht. CIA.omparisons of the dollar SDH of US and Soviet ckfcr.se activities, uses yet anotherhis is siiritar to the definition used ia GNP accounts, but it excludes someas net expenditures on foreign military assistance -whose coats lor the USSR cannot be estimated with confidence llor the United State* -national security programs carried out by theof Defense and the defcaw-related programs of the Department of Energy, the Coast Guard, and the Selective Service Commissionthe USSR equivalent Soviet
According lo this CIA definition, estimated Soviet defense expenditures3 were about6 billion rubles (measured in0hey have increased since theneal average annual rale of growthercent, andestimate that9 they willillion rubles. Growth raies varied from year lo year, primarily in response lo fluctuations in the procurement of strategic missiles and aircraft. Ta* cosv. inoing increase in estimated Soviet defense expenditure* is in keepingobserved trends in So* let military activities. The trend in US
'oll*w" cfS fVrax,ecret (ul
i
Analyiliprnditarn by Rrsovcc Cat rgory: Measures af Fa*c< Evawwdoa aad Modrmiiiiioa
Onen terms of three principal icsourceRDTAE (research, dcelop-mem, testing, andnd investment The operating category includes expenditures foe pertontsd and for operating and maintaining current forces. RDTAE expenditures are used for exploring neweveloping new weapons and improving existing weapons. Investment expenditures arc those associated with the acquisition and capital repair of weapons, equipment, and facilities, (it)
Thethodology for estimating Soviei defense spending makes ll possible lo analyie expenditure paitcrnsumber of ways* Ana lysis by resource Categoryeasure of Soviet force expansion a'd modernirauon; analysis of majorprograms reveals the principal determinants of defense spending: and analysis of expenditures by the Individual service* provides an insight intog-ing Soviet iriliinry priorities, (U)
The analyses of expenditure* in the sections that follow arc based oa narrow definition of defense,to lhat ised in the CIA cempariaoM of US and Soviet defease activities,ppodn fofutor of aaalinj
A breakdown into these categ-vfle* revealsoviei military planners devoted about JO percent of total defense expenditures overeriod SO updating expenses and about one-half to investment. The remaining one-fifth appears lo hive been allocated to RDTAE. Expenditures for alt three resource categories increased5e estimate lhat spending for RDTAE grew more rapidly than operating or investment expenditure- While tVv estimate is subject to particular uncertainty, its rapid growth suggest* lhat qualitative improvement isincreasingly Important in shaping Sovietspending i. )
The operaiing category includes expenditure* for pet tonand allowances, food, personalmedical care, andand for the operation and maintenance (OAM) of active forces5ersonnel expenditure* (except penwhich art excluded fromnalyiii) ac-counted fcr aboutercent of total Soviei military cipcndtivcs andrercent of operating expenses. There was an Increase of overercent in personnel costs over the period, resulting mainly from an increaseill-on men in Soviet active military manpower. Most of ihe growth in manpower took placeeflecting primarily iht growth and modcrniuiion of the Soviei Ground Forces (u)
IS
OAM pari of the operating category we include our data on Soviet expenditures for the msinie nance of equlpmcni and facilities, fue petroleum product*,and civilian persoenel. and for tht kasing of communications. Bet* ten IMS9 these coats accounted foe about IS percent of total defense expenditures and for almost one-half of tbeIn the operating category.xpenditures almost doubled during this period, largely because more (and more sophist ka od) svcaponi require more (and moreaintenance, (u)
KDTAE
We con.ider the estimate of Sovietutlays to be less reliable than the estimates of operating and investmentevertheless, information is available or some partkulatrojects, and we have access to published Sm-ki statistics oa scknee and to statements by Soviet authorities on theof research. These sources indicate that militaryspenditures are large and growing. This indkalion Is reinforced by evidence that the Soviets have Increased the manpower and facilities devoted io military RDT aVE programs, (u)
Our estimate suggests thai outlays for RDTJtE accounted for aboutercent of total Soviet military expenditures duringeriod. Tht estimated share hat Increased over tine and this yeat probably will reach almostercent of the total We believe that the growth in Soviet spending for "the RDTJtE category (as for the in.es'. nem category) varied fiom year to year with the initial ko and compktion of individual development programs.
Rfiuse our calculations arc based on highlyand uncertain data, we cannot speak with confidence.in detail, about the allocation of RDTpcn.'tirg among the services or among military missions- (U)
ImvtumtHt
The investment category Is divided into twothe procurement of weapons and equipmentconstruction of facilities'ccounted for oxrercent ofTj>am ef iU* Uwtrlaw infrri beat
cce.li mown to iikThCc ail*ft* ufii itf*ii<o- liel sparewiuai^ii with .' iiai*fi<ifacoAfilina faitic* (u)
expendilures ia the Investment category and overercent of soulonst ructionar smaller share than procurement (i)
Spending for the Investment categorybok grew at nearly the same rate as total defense spending during the period, although its growth rate vjsrlrd from year to year. The growth pattern for im-eatmeni -as determined, for the most part, by procurement Cycles for aircraft and missiles, (u) ^
Major Procurement Programs: the Drhcrs of Defense Spending
Whenanalyze Soviet defense spending5t becomes apparent that theof new weapons and equipment was |he major factor driving il apeard. Procurement accountedarge part of the increase (more than either RDT AE or operating coats) and t'sc accounted for itshe Initiation and completion of major procurement programs was pritnarily responsible for the cyclical fluctuations in the rate cf growth of the total (u)
Expenditures by the Miliaryight* lnlo Changing lutttutioftal Priori lira
Th* Soviet armed forcci ire organized inlo fi-eForces, Ground Force*.Air Defense Forces, andsing the direct-costingeasonable picture of the allocation ofspending among these service* andinto trends in Soviet prioritiesbimants. Thethat we cannot confidently allocate in thisinclude* Ihe costs of RDTAE and ofcommand functions and rear service and'urnTherefore the analyvs that iexamine the invest men* and opera'inglures of the service* but exclude their expendituresand it will treat the national commandfunctionsategory separate fromservices
Snares ol Estimated Soviet Investment and Oparallne Eapendltura* for Military Services
"'oom
- -i
l
CMon if
Foreii
.
TB
The Air Forces and Ground Forces each claimed over one-fifth of investment and operating expenditures. The Ground Forces share remained relatively constant throughout but inert*ved alightly51uh of the Soriti Buildup along the Sine Soviet border. The Air Forces, or. the other hand, experienced significant fluctuations in its share, (u)
The Navy share, uhieh declined slightly, accounted for about one-fifth of total investment and opera'ing spending for tbe periodthole After peakinghe National Air Defense Force share declined in thend has fluctuated in recent years It accounted for less thanercent of investment and operating expenditure* during the entire period The SRF share, which rose and fell depending on the deptoy mem cycle* of nc* missile systems, accounted for ku thanercent of total kotstmcM and operating expenditure* duringeriod Tb* national command and support share averaged less thanercent of investmeni and operatingduring ihe period and increased slightly, (u)
Ail Fttctt
Tht Sot'kl Aitcomponents: 1
tactical)ange Ato* '*nd Military Trarupon Aviation. Frontal missions include counttrait. ground attack, reconnaissance, electronic warfare, and helicopterround aitackend troop lift. The primary missions ol LRA art intercontinental nuclear strikes andlionat ot nuclear strikes in support of theater forces Military Tran.portesrfonsible for the transport of airborne assaultu)
Frontal Aviation. Within the Air Forces. Frontal Aviation has consistently absorbed the largest share of spending, and9 il was responsibleajor shifi in defense resource allocation. Its eapendi-
-tures more than doubled during the period and^ accounted for overercent of the investment and
. operating resources going to Soviet Air Forces, (u)
m
Nmi
Over itte last IS yean, the Soviet* have undertaken programs aimed at acquiring naval forces with im proved capabilities for botb conventional and nuclear war. They have Invested rnost heavily in strategic and general purpose submarines but bave alto increased expenditures for surface ships and naval alrcafi They have also increased ibe peacetime operations of their skips away from rsomeesult, anneal expenditures b> the Soviet Navy have grown subslan-tixlly and probeb'y will be aboutercent greater9 than they werell)
he Navy consumedercent ol Soviet military investment and operating expenditures. Investment programs made up over three-quarters of the total navalnd procurement of ships, aircraft, weapons, andaccounted fx nearly all of this share Tola) Navy expenditure* fluctuatedaltcra corresponding to the fluctuation of expenditure* for the major ship procurement programs- Ship procurement1 accounted for aboutercent of overall naval procurement, end ballisticd attack submarines accounted for overercent of total ship procurement (Most of these submarines were nuclear powered) Missiles and aircraft each aocnunied for aboutercent of overall naval procurement expenditures, (u)
Tlve Soviet Navy's operating expenditure* increased by almostercent5rimarilyesult of the Increasing, cosis of maintaining complex ships and aircraft.i
The Soviet*raditionally placed great tmphasii on strategic dc'cnihc forces. These arc under the jurisdiction of the National Air Defense Forces, expenditures for this service reflected continuing concern about the threai from manned aircraft and about ihe deployment oranliballistic-missile (ABMlihe cosily ABMwith ihe United States was constrained by treatyJ Recent Soviet procurement programsonlif uing emphasis on countering mannedspecially those capable of penetrating at Sow altitude,ew emphasis onewralcgic threat, (he cube missile, (u)
Soviet expenditures for the National Air Defense forces rose ntv, peaking9evelercent higher than that
primarily the.rapid and costly deployment of he Moscow ABM system and Ihe procurement of the SA-JSAM4 and have fluctuatedgcncraili increased ever sinceof ae* third generation fighter aircraft ha* been an important influence on spendiag in-
Soac
uaaar awra to
Similarly, the advancing age of the top political leaders and the poor health of many of them make tbe coming political succession increasingly relevant lo theof future defense ictivilies. We review below some of the major forces that are likely to affect Soviet decisions on military programs anduring the period0v)
EcoHomie
Past Trends. Before we can consider the future relationship between the general Soviet economy snd the defense effort, we must examine the past relation-chips. The defense effort of the pastears hasubstantial impact on the economy, buto single measure that adequately describes ibis Impact or how the Soviet leaders and planners might perceive it. The discussion lhat follows presents severalmeasures of the relationship between Soviet defense expenditure* aad economic growth. (u)
Soviet defense spending (as defense is defined in the United States) consumed aboutoercent of the Soviet GNP at factor cost5ecause defense -pending grew al about the same rate at the GNP. there was little change in its shart5There were minor shifts In ihe share from year io year because of fluciualions tn GNP growth and the cyclical behavior of defense
If we consider only ;hc nonagricullural sectors of the Soviet economy, we sec that they generally have grown more rapidly lhan GNPhole and more rapidly lhan defense spending. The defense share of the nonagricullural CNP averaged someoercent during Ihe period bul was slightly lower8 thanhe growth of 'he final output of Sovietnd of ihe final output of ihe machine building and meialworking sector (which produces civilian investment and consumer durable goods as well as militarywere also higher for the period lhan the growth of defense purchases from these sectors. Defense programs consumed on the average nearlyercent of the final output of industry in general and over one-third of the final output of
Uadcr ike bnaSrt Stflr-tka tlutk* appendixfiwuuiontost idjuiifl-ini
".'.
machine buitdins; in particular. In each category, the defense share wa* lower al the end of the periodt the beginning, (u)
The above discussion of alternative measure* of the defense "burden" understates in impact on the Soviet economyhe extent that it fait* to lake into account qualitative coniidcrations and the effect of defense programs on key sectors of the economy Defensearge share of the nation's best scientific, technical, and management talent and draws heavily on tbe output of science and of high-quality components and equipment In tddition.defense ptogramsiakeportions of the output of import* nt industries such as steel and electronics (i)
Morcoer, thet: four quantitative measure* of the economic impact of defense are based on Wesiern estimates of Soviet economic performance ll itlo determine ho* the Soviets perceive this defense imparl."Our information on iheir view of (belt own economy Isconsists mainly of general ditements by Soviet leaders indoui analysis of their actions.
Economic factors do not appear so have limited Soviet military programs by much, over the pail IS years lit the USSR the military sectorriority claim on scarcend this claim isi/td in the Soviet admit istrativc system* for economicmaterial supply, and the supervision of production. Soviet leaders have funded the defense programs wttt, even during period* of lower than average economic growth, and the follow.through on hey programs has been strong [i)
Recent Deidopmeats. In recent yean the rait ofin all four of these measures cf economic performance has declined. The primary cause of this slowdown has been declining growth In fatloruse of labor, capital, and natural resources But Soviet leaden also have to copeightening Labor supply and with natural resource" thai ire kss accessible and more expensive than in Ihe past.oviet industrial employment grew byercent, the lowest rale In overears, and the Lnc/eavt in Soviet oil production in that year was the irnsjttcsl in the postwar period Stalisiicsfor "Sm tilli Jii ImfuritinaWimioa ofpoint (c)
theonths9 indicate ihal Ihe Soviet economy it beaded for one of the worst years io. almost three decades (u)
Defense spending has grownlightly lowerrate for the past several years. This appearscycles in procurement (as several majorprogramsow point) rathera new trend. In fact, our observationsmilitary programs8 and Ihe first halfsuggest lhat in defense spending ihe fateis beginning to turn up again. Thein three of our fourcnp, and the final output ofbeen fairly stable since thef machinery, however, have continuedperiod to grow more slowly than ihe final output
i ihe nut several years, developing demographic and energy problems will combine with ihe difficult its of longer standing lo cause an even sharper decrease in economic growth. Recenton Soviet-economic performance8 and the first halfuggests thai8 forecast of Soviei economic growthear) may have been overopiimUllc. ll now appears ihal during ihehe averageie of growth may not be moreercent- If defense spending returns to its long-term trend-growingercent awill consume an increasing share of Soviet resources5 ihe defense share of cnp (as defense Is defined in the United States) could be as much asoercent, rather lhan the currentoercent, (v)
Recent Soviei statements indicate increasing concern over declining economic growth. Some Soviei officials have linked economic problems directly lo the costly defense effort, and recent speeches by the lop leader* suggest differences over ihe relative priority to be givenuture defense programs As the economy slows, the level of defense spending is likely to become more of an issue for the leadership (u) .t
Politital CvMiHrrai/omt
0*tr the pail year there tbeen increased evidence ofl potilkal maneuvering in Mcecew in preparelioa for ihe departure ol* Brezhnev from the scene, buthave loo little inforrnaiion lopredici the makeup of the post-Brezhnev kadershipor its likely policy preferences. The dissatrsfaction of the polilical leadersthe performance"of their ecor omy hat incrcawd. and differences on questions cf resource allocation aad eccerotnic management ate becornint more ekar. We cannot determine bo* they will be resoHcd.nticipate that theytecomc increasinglythe potential for an adjustment (perhapseduction) in planned defense(tJ)
Rtftlrtmtnn/or
iter) it-f
Although the Soviet* have made substantialin their military capabilities In recent years, lhc>'ac topc'ceive important denciencks ia theirse lake oa increased importance in the contest of the improvemeiis in Western and Chinese military forces lhat Sovk; planners undoubtedly project, (v)
temost all of tbesc problems require costly high-technology soluiions. They demand ihe continual upgrading of current weapons and the developmeni of newnd thus directly affect future Investment andxpenditures, (u)
Armi ControlAgretmttlt
The USSR is currently engaged tna number of arms control negotiations that could provide opportunities to moderate the growth oi defense spending. Although past agreements have nol apparently caused ain defense spending, current economiccould encourage (he Soviets to pursue ihe potential economic benefits of arms control. We have therefore analyzed in detail ihe potcnlial impact of SALT and MBFR on Soviet defense spending and studied brkfly the possible economic benefits of other negotiations, (tu)
Sc*kl econo-nicmdc ibe fundamental directions for industrial activity in both the civilian and the defense sectors Du'in| plan preparation periods, Ihe Soviet leaders project the future environmenl and arriveotucntos on nationallan targets can be rrsodifkd after they have beenarc constantly needed -but each change creates complkationi. and theirimpacttrong aversion to plan modifi-cation, i' i
.omitiuing eccutomk difficulties probably will give ihe Soviet kadcn an increasingly strong In.id ree.amin* these plantie* lo reducing the growth of military spending in the long run. They might well be undertakingeexamination in conjunction with the major choices lo be made on the allocation of economic resources in ihe llth Five-Year Plan, andessibk lhat tht coming political succession will affect these choices significantly, (si)
How ever, Soviet military expenditures over ihe next five years- and even beyond -art already determinedarge cxtcni by programs now in production or in late sieges of development. The decistofii that set these programs in motion were mack some lime ago They reflect agreements already reached between Soviet political and military leaders on defense requirements for, and siaebk resource commitments, including expansion of defense industrial capacity, have already been made, li is possibk tbat the kadxm couldumber of these decisioni and thereby slow the growth of defense spending significantly. But we think they would be more likely to limit their alterations of ongoing programs to reducingtargets, it retching out some weapon programs, and possibly Irking greater advantage lhan in Ihe past of the limited direct savings permitted by ermt control agreements. The Sokt* might also intensify iheir efforts to improve efficiency and lower production
costs in the de'ense industries and to Improve ihttr analysis of military force requirements. Thesecould moderate the rate of growth In defense spending3 and would be of some benefit to the economy. Moreover, ihey would not ia themselves slow ihe rrvodcanidation of the Soviet armed forces significantly, (if)
Trim Cemidt'slio*,
The Sovkts tl emselvc* probably doat additional steps they might lake over the longer term. However, from now on their decisions regarding new military programs and future investment in the defense industries mayreater concern Tor the Impact of military programs on the economy and for the implications thai ihe declining rate of economic growth willfor ihe capability of the economyupport the defense establishment. Because military programs have long lead limes, most curreni decisions would not becin to affect defense expenditures until thel is possibk thai the Soviets will soon mike decisions that attempt io reduce the growth of military spending in iheuch decisions will depend on how the leaders weigh iht potential economic savings against their forecast of ihe strategic environmenthat period aad its militaryas wcD as on their perception of how iheir militaiy effort enhances their security and advances their foreign policye decision will aho leptnd on Ihe defense end foreign policy actions of iheir potential adversaries, and pe'haps on progress in arms control
Whatever decisions Ihe Soviei leaders nuke forterm, il is highly unlikely lhatwilleversal of theirof continuing to imprtwe theirA reduction in tbe rate of growthspending in iheould delayIn some areas and could posefor So*ict defense planner*l of Sovkl military investment is soeveneduction in the rate of growthwithrowth at all substantialof the Sjvkt armed forces as a *
Defease Spending Priorities lath **
Wjlhin the context of the projected continuation in the growth of Soviet defense spending, we have examined the major military prof 'arm and activities lhat the Soviet* arc likely to undertake through the1 the SALTreaty eaten into force they would prob: Vy give slightly leu emphasis in expenditures lo inlereonlinental attack roroes and slightly more lo conventional, theater nuclear, and (especially)defense lofcca. (c)
Qualitative facton are likelyecome much more important in shaping Soviet defense spending inhan they are now. The Soviets will face dcmojrapble problems thai probably will limitis force sire, and the rate of growth of operating costsrobably will be lower than il was in the past. The requirement for high-technology remedies for current deficiencies, however, indicates that force rnod:rnira:ion will continue io be rapid The decreasing availability of manpower could also spur the Soviets to seek more capable, test manpower-intensive weapon system* Militaryand RDT f> F.hocforc.* ir.crea-cd
a ikt Military Strrleti Changing Soviet prior'ilei and Ihe constraints of SALT will alter the distribution of investment and operating expenditures among the services in. The average shire* of these expenditure* devoted lo the Navy. Ground Forcea, and Air Forcesrobably will be about the same as ihcir current shares.ALT II agreement, the share allocated lo the SRF probably will fall slightly from its current level, atong with the share allocated to national command and support. The National Alt Defense Forces, howe*er. arc hfcely to lake aashare ofnd operating expenditures in theu)
Airxpenditures for the Ait Forces are projected lo increase at about the same rate as total defense investment and operating spending Only minor shifts are likely in the allocation of resources among tbe three component* of the Airu)
"er*oracre is based en
a Sa.LTwill fee 'n efiW in. Without swAaieemeni.mosi cf the intoconunsnul stuckave abuser rank, (u)
Appendix
Mclnodolosy, Concepts tnd Confidence in the Estimates
Mcthodoiogi
For assessing (he trends of thr' and the prio-itics of thehat effort, we use estimatesrices" -Ihe actual prices paid by the Soviet Ministry ofoods and services. For ciarrspk, our estimates of total defense spending and of spending by the individuil military services are based onprices In the Soviet eexsnomy. however, prices arc established administratively, not by market forces. Consequcni'y. they arc lets accurate in reflecting relative scarcity and value lhan price*arket economy wculd beesult. these established pricesisleading picture ol the real economic impact of Soviet defense activities.
er to improve Ihe validity of ruble price*conomic analyses for tiample, in calculatingefense share of CNP- -we adjust our established-priceso that they more nearly reflect ihe real allocation of resour.es un the Soviet eetyitomy.
CIA's estimates of Soviet defense spending are based primarily on dinedK, first idcellfyirg indi.-rdi.a1 components of ibe Soviei defense effon and then calculating ihe costs of each, from all source Intelligence and ftom US Intelligence Community udgments (arctcnicd in National Intelligence Esli-males and othc publications) weetailed list of the activities and physical components which make up the Soviet defense programiven year. This list includes data on order or battle, manpower, production of equipment, construction of facilities, and operating rates for ihe Soviet military forces.
prkes and often display quite different growth trends."
Thus, the ncrceptioni the Soviets draw from their own data may differ from the analysis ia this paper in ways .that are hard for us to determine. We do know, [however, thai although their measures of overall [economic performance differ from ours in concept and price base, they toolowdown in their economy (seeimilarly, Soviet perceptions of the economic impact and priorities of their defense programs probably differ from ours in detail. Bui the planners clearly are aware thai the defense effon hasubstantial effect on their economy and that this effect is likely lo Increase, (u)
and more important. Soviet plannersifferent peke base. Tbe Soviets present their cconomie data cither la ihe prices prevailing in each year (current prices) or in what they call comparable pricesiven year. The Soviets' comparable prkes arc intended lo show trends in real terns, but they arc constructed differently from Weatern-ilyk constantlaikeaf tSueeuift) IS-H. NoxwAeiM
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