ESTIMATED: SOVIET DEFENSE SPENDING: TRENDS AND PROSPECTS

Created: 8/1/1978

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NATIONAL SECURITY INFORMATION

I

Estimated Soviet Defenserends and Prospects

jKev Judgment* 1

ToUl Defense Spending. Our estimates of the ruble cost of Soviet defense activities duringeriod Indicate that

defense spending, defined to correspond to US budgetary accounts and measured in0 prices, grew at an average annual rate ot0 billion rubles7illion rabies

Defined more broadly, as Soviet practice might require, defense spending grewillion rubles7illion rubles

Economic Impact The defense effort hasubstantial Impact on the

Soviet economy:

-I-j: il I j

eriod, defense spending consumed an almost constant share of Soviettoercent oroercentj

depending on how defense spending Is defined.

rI- *

investment consumed about one-third of the final product of

machlnebuildlng and metalworlclng, the branch of Industry thatInvestment goods as well as military hardware.

Betweenndercent of the males reaching draft age werento the Soviet armed forces. Uniformed militaryand civilians working for the Ministry of Defenseercent of the total labor force.

Defensearge share of the economy's best scientific, technical, and managerial talent and large amounts of high-quality materials, components, and 'equipment. .

The armed; Vorcot accounted directlymall share of total Soviet enemy consumption. Lessercent of the refined petroleum and lessercent of the heat and electricity consumed by the USSR went to the armed forces,

Composition andon. Ruble estimates provide insight Into the resource composition of the Soviet defense effort and the trends in resource allocation among the services. Analysis based on the narrower definition ofwhich the estimates are morethat duringeriod overjone-Kalf of total ipendlng went forittle over one-fourth for operating expenditures, and over one-fifth for research, development, testing; and evaluation.

Examination of defense spending according to service indicates that:

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The Air Forces and the Crourvd Forces received the largest shares of Investment and operating spending. The share going to the Air Forces increased during the periodesult of increased spending for Frontal Aviation. The Ground Forces* share was relatively constant

Spending for the Navy and the National Air Defense Forces grew more slowly than defense spendinghole.esult, the shares of investment and operating spending going to these forces were smaller7 thanost of Ihe growth in spending for the Navy was allocated to ballistic missile submarines, while most of the growth In spending for the Air Defense Forces was allocated to interceptor

ircraft;: / j

Strategic Rocket Forces received the smallest share of investment and operating spending among the five services. Spending for the SRF was primarily determined by deployment cycles for ICBMs and

luctuated more than that for any other service. By the end ofperiod, spending for this service was only slightly higher than

Examination cf defense spending for Intercontinental and regional

Spending for intercontinental attack forces subject toittle overercent of total defense spending andlower pace than the totaL 1 ' ;

for Ground' Forces arid Frontal Aviation in theGuldelArea constituted less thanercent of total defense it

speriduig|ciit)Crew^iabout twice the rate of the total <

for Soviet forces along the Slno-Soviet border constitutedittle overercent of total defense spending and grew at more than

twice the rate of tbe totalii

Prospects. Soviet economic growth has been slowing Inndand weurther slowdown In. Nonetheless, all ofavailable to us on Soviet defense programs under way andthat the long-term upward trend In allocation of resources tolikely to conti&ue Into. There Is no indication thatare causing major changes In defense policy. The atmospherewith regard to the economy, however, is one of concern, andleaders could be contemplating modest alterations in militaryBut even] if such alteration! were undertaken, the rate of growthspending over the next five years or so probably would slow .

the next two or three years, Soviet defense spending will continue to grow. Because some current ICBM, ballistic missile submarine, and fighter aircraft programs are nearlng completion, the annual rates of growth in thnt period probably will be slightly lower than the long-run

SSI!

!During tbe'e expect the Soviets to begin testing andumber of the new weapon systems under development. This probably will cause the annual rates of growth in defense spending to Increaseace more In keeping with the long-term growth trendear.

ALT II agreement along the lines currently being discussed would not, in Itself, slow the growth of Soviet defense spending significantly.

BLANK PAGE

CONTENTS

ill " -!

Key Judgments.. '

Soviet Spending for

Estimates of Total

conomic

m>I,L

Spending byategory%

s| 2

perating; s

'* T '< It' J ' V': 'J.

Spending by ,3

;fr| 8

j. Ground Forces' r

i *

National Air Defense |*

Strategic Rocket Forces |6

Command and7

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Spending for InterconUnental and Regional

Intercontinental Attack Forces Subject to SALT II

1 Soviet Forces In NATO Guidelines Area

! Forces Along the Sto^Soviet

'f [Factors Affecting Future Defense Programs.

, Problems taj Projecting Defense SpetvJlns

fj Defense Spending Through the Early

Impact on the Servkes

Appendix: Methodology and Confidence in the 15

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If'! ll- t Iy i I

BLA1SKPAGE

PREFACE

ThU report presents estimates of Soviet spending for defense In rubles duringeriod and describes what we believe to be the prospects for the next five years.

The estimates are expressed In rubles to reflect our understanding of the costs of military equipment and activities in the USSR.imates allow us to nurss the impact of defense on the Soviet economy, the resourceconfronting Soviet defense planners, and the relative priorities assigned to the forces and activities lhatp the defense effort. Constant prices arc used so that the estimates reflect only real cliangrs In defense activities, noc the effects of inflation. The use0 prices permits comparison of estimated defense expenditures with other CIA tstlmates of Soviet economicwhich also use that price base.

The estimates are basedetailed identification and costing of the activities and components that make np the Soviet defense program for eachescription of our methodology and our confidence in the estimates can be found In the appendix.

This report Is an expanded version of an unclassified research paper of the same title. It provides additional information on trends and developments within the Soviet military forcesore detailed description of our methodology and our confidence tn the estimates. It is the basis for the testimony the Director of Central Intelligence presented to the Joint Economic Committee of the Congreu Inhis report complements our dollar cost comparison of Soviet and US defense activities.1

SEC1ET

Estimated Soviet Defense Spending: Trends and Prospects 1

Spending far Defame

Eirlmotai of Total Dfftnu Spending

I iij

We do not know precisely bow Ihe Soviets define defense spending This report uses two definitions: one corresponds to that used In the United States; the other Is broader and Includes additional costs tbe Soviets are likely to classify as spending for defense. These additional costsexpenditures for internal security troops, certain civil defense activities, militaryforeign military assistance, and spacethat are operated by the military In the USSR but by the National Aeronautics and Space Administration In the United Sftes. :

Defined to correspond to US accounts,Soviet spending for defense increasedillion rubles7illion rubleseasured0 prices.to the broader definition, estimated spending grewillion rubles7illion rublesnder the narrowerfor which the estimates are more detailed and precise, estimated Soviet' defense spending increased at an average annual rate ofercent for the periodhole. Growth rates varied from year to year, however, reflectingfluctuations In procurement spending for aircraft and strategic missiles.

Economic Com id

Although no single measure adequatelythe economic Impact of the Soviet defense effort, defensehare of GNP Is often used for this purpose. Duringeriod, defense spending according to the narrowaccounted foroercent of Soviet GNP, and. according to the broader definition, foronoviet spending for Investment In the economy during

' Rmw imttm tomtom pw atawn* rata aa MMnhola, lhanlnW thtnm Ut tha than of CNF coin* lo.

this period accounted forf GNP, and spending for health andaccountedercent.

Another perspective Is provided by comparing our estimate of Soviet defense spending with the size of the total Soviet state budget.he year In which our defense spending estimate (stated In0 rubles) is directlyto Soviet state budcet data (published in currentpending for defense under the narrow definition was over one-quarter the size of total budget expenditures. According to the broader definition, it was nearly one-third.

Hi Estimated Soviet

expenditures for

hCmouncadExpandrturaa

i{Cumnt Pncei)

,1, I I I I

89 71 73 '-77

Dafnta. JrntgM ba Safinta by tha Sovttla. 'ipandiig ai dafliwftat

ft*

, SEQRET

Indication cf the economic impactis provided by examiningcrucial Industrial output and economicDuring* period,approximately one-third of theof machinebuilding andbranch of Soviet industry that producesInvestment goods as well as militaryIn ruble cost terms, about two-thirds rfand over two-thirds of the ships andIn the Soviet Union went to the

During the period,oercent of the males reaching draft age were conscripted Into the Soviet armed forces. Uniformed military servicemen and civilians working for the Ministry of Defense constitutedercent

The Sovietelatively small

of the ti *al Soviet labororces accounted directly for share of total Sovietercent of the refined petroleum and lessercent of the heat and electricityby the Soviet'ilt

i| To the extent that these measures fall to take qualitative considerations Into account, they tend to understate the: impact of defense programs on the Soviet economy. Defensearge share of the economy's best scientific, technical, and managerial talent and draws heavily on theof science and high-quality,materials,and

Spending by Reteurce Categoryf i

seful way of analyzing Soviet defenseis to break it down into three principal resourceoperating, andresearch, development, testing, andnvestment, which Includes spending for theof new equipment and major spare parts'-! 4'R*pf*P

he iraiyrtj preasntpd here ti bood on the narrow definition of defenao, corrnpondlng to lhat used la Ir* United Statr* However, In break! na down Soviet defsnar tpendlm Into reaocrt* eatftortw. we uwwider definition of Invert merit,arrower definition of opef atlnf, lhan amploved In US defenaaheaahich are oonalatenl wllh our undent*ndtna of Soviet accountingeater lhan* of wendlm for ipare pert* and repair to Inveatment.here to operatlnc than Ihe US definition*

las well as for the construction of facilities, reflects the flow of new equipment and facilities into the military forces. Operating expenditures are those associated with the day-to-day functioning of the military.xpenditures, associated with exploring new technologies, developing advanced weapons, and improving existing weapons, provide some Indication of plans for future force modernization.

Duringeriod, Soviet expenditures for investmentittle over one-half of defense spending, while expenditures foraveraged over one-quarter. The shore of defense expenditures going togrowingfrom less than one-fifth7 to nearly one-fourth

I nvai truant

7ore thanercent jof Soviet Investment spending was forand most procurement spending was for acquisition of weapons. The bulk of thecquisition outlays went for aircraft, missiles,hips. Spending for aircraft and missilesost rapidly. Spending for land armaments grewomewhat slower pace, while spending for naval ships grew little during the period.

Expenditures for the Investment categoryhole grew at an average rate ofercent per year during the period, although growth rates varied from year to year. The growth pattern for investment was determined, for tbe most part, by procurement cycles for aircraft and missiles.

Operating expenditures, which are associated with maintaining current forces, can be divided into personnel costs and operation andcosts,7ersonnelpay and allowances, food, personal equipment, medical care, travel, and militaryaboutercent of operating expenditures and approximately one-sixth of total spending for defense.ercent increase in the totalof Soviet uniformed military personnel, along

:

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ii

Increased food rations and higher spending for military retirement pay, caused tiieseto grow during the periodateercent per year. The growth tn personnelwas most rapid7 andduring the height of the Soviet buildup along the .Chineseperation and maintenancethe maintenance of equipment and facilities, the purchase of petroleum, lubricants, and utilities, the hiring of civilian personnel, and the leasing ofconsistently lower than personnel expenditures but grew at approximately twice the rate.

ROT&E

The estimate for Sovietutlays is the least reliable of our estimates. Because theis based on highly aggregated and uncertain data, we cannot speak with confidence, nor In detail, about the allocation of this category of defense spending among the services or among missions. Nevertheless, the Information on which the estimvo isSoviet statistics on science, statements by Soviet1 authorities on the financing of research, and evidence on particular RDT&Ethat militaryxpenditures are large and growing. We estimate that outlays forurrently account for almost one-quarter of total Soviet defenseAs with the Investment category, we believe that the growth In Sovietpendingfrom year to year, I

Spending by Savvies

The Soviet armed forces are organized Into fiveForces, Air Forces] Navy,Air Defense Forces, and Strategic Rocket Forcesirect-costing approachus to estimate the allocation of much of defense spending among these services. Wehowever, estimate how the costs ofor of certain command, rearj service, and other support functions are allocated. The analysis that follows excludesnd, assigns the, com-,mand andunctionseparate cate-

SECf

Percentage Shares ot Estimated Soviet Investment and Operating. Expenditures for Military Services

acketationaltfmi

Air Force*

Ground Forcaa

Command Support

ffie* Iho baili otWWo*.'

; gory. Again, the analysis Is based on thend more detailed definition of spending for

I-

Overview

j; Duringeriod, the Ground Forcesand the Air Forces eachittle over one-fifth of total Investment and operatingWhile the Ground Forces' share remained relatively constant throughout the period,hare allocated to the Air Forces grew from one-sixth7 to about one-quarter In theefore declining slightly near the endhe period. The Navy's share averagednd declined slightly during the period.hare going to the, National Air Defense Forces, which averaged one-eighth during theluctuated and was smaller7 thanutlays for tho SRF, which averaged well under

*ThU ctlnory ihotild not be ron'umJ wllh cvuimand, ermlroi. and communlcoltofu, tho com ot which aro dUlrlbolrd among iW Mtvlon In (hi! iml.ui

SECRET

SEdftET

nth of total spending for Investment and ope jtlng7onstituted the smallest ond most widely fluctuating share. The portion assigned to the command and support category averaged one-sixth during the period.

I Total Investment and operating spendinghe Ground Forces grew throughout Ihe period at

approximately the same rate as total defense spending. With the exception ofyear the Soviets Invaded1 for the Ground Forces did not change abruptly from year toajor factor In the growth .was an increase In manpower frommillion uniformed personnel7 toillionnother was the long androcurement programs for mejprlridpalorces weapons and:

Investment consistentlyittle overercent of spending for the Ground

share for any military service.ent spending, which accounted forf Ground Forces investment, was driven, in

large part, by the purchase of tanks and mobile tactical surface-to-air missiles andesser extent by the purchase of armored personneland artillery. Operating expenditures took overercent of spending for the Ground Forces, and the share for personnel,ercent, was higher, han that for any

Ground Forces77 were spurred jby the addition 'oflong the Sino-Spvtet border ind by theof units jn the western Soviet Union and Eastern Europe. Expansion of ground forcesChina proceededigorous pace be-iitweenhen the Soviets Increased the number of divisions along the border fromhroughouteriod the Soviets modernized Ground Forces units byjlntroduclng

1 'This eatlmate awlm* the command ind support oalreerysmaller share of defense tpendinj than our previous estimate because II allocate* to Ihe Individual Mrvlore comumber of functWio which were prevtouslrto (he command and

!i! Mi!

a number of new, more expensive weaponby Increasing the number of tanks, armored personnel carriers, and artillery pieces Inunits, by providing more helicopter support, and by increasing the number of men assigned to tank and motorized rifle divisions. These changes gave the Soviets more balanced and operationally flexible ground forces with Improved capabilities for conventional as well as theater nucleur war.

Air Forces

7pending for the Air Forces increased more rapidlyndlng for any other military service.93 it grew at over three times the rate for defense spendinghole.3 it declined slightly but remainedigh level,

Investment expenditures for the Air Forces averaged aboutercent of total spending for the service, and more thanercent ofspending was for procurement.for operation and maintenance and for personnel each averaged aboutercent of the totaL Air Forces manpower Increased slowly throughout the period and totaledn L

Spending for both Long Range Aviation and Military Transport Aviation grew somewhat in absolute terms, but by far the largest Increase in Air Forces spending77 was for Frontal Aviation. This reflected Quantitative and qualitative Improvements In equipment and an Increased role for Frontal Aviation Insupport and theater strike. Major investment expenditures caused that component's share of Air Forces spending to rise from less thanercent7 to overercent

The number of tactical aircraft In the Frontal Aviation Inventory Increased by aboutercent over the period. The Increase was most evident along the Chinese border, where the number of

' Tha share of outlay! for Frontalteeter lhan. and the lhare Tor Military Transport Aviation lea lhan, lhe there* Mated In our previous Ml mileecause we atslined moat of lhe Soviet helicopter force to Frontal Aviation IhUlhan to Military Transport Aviation, aa we did In our ^revtous estimate.

tactical aircraft grew more than fivefold. Most ofdditions were old-model aircraft removed from storage or transferred from operational units stat'oned in other areas of the Soviet Union.

: The Soviets also improved the quality of the force7 overercent of the fighters in Frontal Aviation were third-generationaircraft with improved range and payloadwhich entered production7rontalnditters, andencers. These new aircraft were Initially Introduced In large numbers Into units In the European USSR and Eastern Europe. New model Fitters and Floggers began to appear. In large numbers along the Slno-Sovlet border

77 the Soviets alsoFrontal Aviation's survivability andcapabilities by building new airfields and improving existing ones. Outlays for airfieldHon reached high levels8

The expansion and modernisation ofmade this force more capable ofstrikes in the Immediate battlefield areathe theater. Theparalleled the modernization withinForces, provided the Soviet theatera better capability! to wage bothand theater nuclear wai at high levels

77 the Navy ranked third in totalnd operating spending,the Ground Forceshe :Alruring the period, spending for the Navy grewate slightly slower than that for defense aswhole. Spending for ballistic missile submarines grewapid pace7t the ia mr time ipending for genera) purpose naval forces declined. These trends Were reversed

;f| ,j

Duringeriod, Investmentconstituted overercent of total spending

for the Navy. Procurement expendituresoverercent of Investment and over three-quarters of total spending for theperating expenditures absorbed aboutent and were about evenly dividedperation and maintenance and personnel,niformed Navy manpower totaledercent higher than

Trends In naval procurement spending during the periodoviet emphasis on forces associated with strategic attack, open-oceanwarfarend open-ocean anli-shlp missions. The bulk of expenditures for combat ships and naval aircraft went for weapon systems associated with these missions. Expenditures for procurement of systems associated wllh the ASW missionarked Increase7 that was maintained throughout the period. Less emphasis was placed on forces for coastal defense,warfare, mine warfare, and Interdiction of sea lines of communication. Also evident was afor submarines.7pproximately two-thirds of naval shipspending was for ballistic missile and attack submarines.

Major procurement programs during the period Included Y-lass ballistic missilewhichtrategic attack mission;I nuclear attack submarines, associated primarily with the open-ocean antlshlp mission;1 nuclear attack submarines, whose primary mission is open-ocean ASW. Majorhip procurement programs included Krestaresta II, and Kara guided-missile cruisers and the Kiev-class ASWhaving eithercean ASW or open-ocean antlshlp missions- Soviet Naval Aviation's antlshlp capabilities wereby the procurement of Backfire bom ben.

Nolionoi Air Oaf ansa Forces

77 Ihe Soviet National Air Defense Forces ranked fourth among the services In terms of spending for operating andwith an average share of about one-eighth. During this period, spending for these forces grewlower pace lhan defense spending as a

Sfc4Rb-I

In iUUrrwted Soviett' Investment end Operating Expenditures by Branch of i

whole Overall spending for the service peakedhen expenditures for air defenseaircraft and the Moscow antiballistic missile (ABM) system reached their highest levels.eduction In spending for the ABM system, surface-to-air missiles, and interceptor aircraft, outlays declinedhe increase in spending for the National Air Defense Forces5 is primarily the result of procurementarge number of Flogger interceptors. ;

Investmert spending consistently absorbedof overall spending for theseoverercent of investmentfor procurement. Expenditures formaintenance of the Natfonal Airaveragedercent of the total,for personnel accounted for aboutUniformed manpowerercent during thenthe servicebehind tbe Ground Forces, in numberX? f'

Outlays for the National Air Defense Forceshift toward Interceptor aircraft, and away from SAMs and ABMs, over tbe period. Spending for interceptor aircraft increased by roe-third, while spending for SAMs and ABMs decreased by over one-auarter.

Strategic Rocket Forces

During the period, spending for the SRF grewlower pace than total defense spending. Of the five Soviet services, the SRF received the smallest and most widely fluctuating share of Investment and operating spending Primarily responsible for tbe fluctuations were deployment cycles for ICBMs.t the height of deployment for third-generation ICBMs, the SRF accounted for aboutercent of totaland operating expenditures.2 the share had fallen toercent. Outlays have grown steadily since then with the acquisition of fourth-generation ICBMs and theallisticd7 spending for the SRF rose above7 level for the first

SE:het

SEQRET

in this neiiod. Asresult, the SRF's share of total investment and operating spendingtoercent. j

nvestment outlays declined through thewith thef deploymentICBMs and roseith deployment ofICBMs. Operating costs remainedhowever, as the SRF shifted to systemsmore complex but hadniformed militaryassigned to the service numbereda figure slightly lower than the total|.

Most of the spending for the SRF was allocated to ICBM forces. These forces consistentlyfor over three-quarters of the spending for tbe service. Spending for medium- andballistic missile1 forces associated with the peripheral attack mission accounted for less than one-quarter of the spending or tbe SRF.

cnmnd and Support

Some costs |are: not allocatedpecific combat branch because thoy relate' to general support provided by the Ministry of Defense apparatus. Cher costs cannot be allocated to the combat branches because we lack theWe assign both types of expendituresategory called command and support. ThisIncludes rear services, salaries of Ministry of Defense employees, space program* that.In the United States would be managed by tbeof Defense, border guards, material for nuclear weapons, and military retlrerneot pay. Duringeriod, spending forand support grew at about tbe same rate as total defense spending and claimedone-sixth of total operating l I

Spending for Inrercentinental and Forces

The direct-costing methodology also permits us to assess Sovlui spending for forces asslgnrd to specific missions andasis for estimat-

Ing spending for forces assigned to variousregions. This section discusses spending for three sets of forces of particular concern to US

Iattack forcesto strategic arms limitation, the tactical air and ground forces stationed In the NATO Cuide-

1 lines Area of Eastern Europe, and the theater forces opposite China. This analysis Is Intended to provide Insights Into thc priorities the Soviets assigned to these forces during the past decade. While we are not certain that Sovietare supplied with budgetary data on these particular forces. It is reasonable to assume that theyeneral understanding of the levels and trends of resources assigned to each.

I

Tbe spending estimates presented here include

costs of Investment for and operation oforces, as wellroportional share ofand and support co*:ts.osts are not

included; If they were, the totals would, of

course, be higher than shown.

: .

Irrf-rfcpotlntntol Attack Forces Subject to SALT II Limitation

Duringeriodhole, the Sovietsittle overercent of total defense spending to intercontinental attack forces subject to SALT IIpending for

I these forces fluctuated from year to yearto investment cycles for ICBMs and ballistic

I missile submarines, reaching peaks in thend the. Spending was lowest in the, during the transition from third-generation to fourth-general Ion ICBMs and the changeover from productionlasslass ballistic missile submarines.7pending for Intercontinental attack forces grewlower pace than defense spendinghole, and,esult,maller share of defense spending7 than

'Spending for Intercontinental attack, as defined here. Includes Rpendlturas fee ICBMs. heavy bombers, and those ballistic missile submarines assigned Intercontinental attack missions It does not Include ipendlng for the Baciflre bomber, which the Soviets

: contend Is not rotated to the SALT II limit on the aggregate number

i of strategta nuclear delivery vehicle*

SCdRET

9 3 7

Soviet Forces in NATO Guidelines Area

ii : I I' '

The NATO Guidelines Area (NGA) Includes East Germany, Poland, and Czechoslovakia. The Spending figures discussed here cover spending -ror Soviet Frontal Aviation and Ground Forces units stationed within these East EuropeanThese data reflect Soviet efforts'to Improve forces positioned in Eastern Europe,'but do not reflectto other Soviet forces which have been assigned missions against NATO.

uring the period, spending for Soviet forces within the NGA constituted less thanf Soviet defense spending but grew.at approii-mately twice the, rate of total defenserowth was particularly highhe Soviets introduced large, numbers ofactical aircraft into Frontal Aviation units within jUte. NGA.77 |thencreased the number of tactical aircrafthe NGA byercent.7 overercent of the Soviet tactical aircraft jinventory in the NGA consisted of modern aircraft produced since

: These improvements to Frontal Aviation In the IGA enhanced the Soviets' capabilities to wage 'entional and theater nuclear war In Central By Increasing the number and quality of leal nuclear delivery aircraft, the Sovietshe flexibility with which they can em-

100

3 '77

CttcoMod onboM ol diU0 rubtw.

'

ploy tactical nuclear forces. They also provided the theater forcesapability fortheater nuclear war at higher levels ofbefore having to resort to peripheral strikeand medium- and intermediate-rangeon Soviet territory.

Spending for Ground Forces units in the NGA grewlower pace than spending for Frontal Aviation but reflected Soviet efforts to increase the size and combat ability of these forces. The deployment of five Soviet divisions8nd increases in the number of men assigned to divisions, Increased the total of Ground Forces personnel In the NGA by about one-third7t the same time, Ground Forces units In the NGA were modernized with additional artillery pieces, rocket launchers, tanks, and mobile air defensejjV'.j

Forces Along the Sino-Soviet Border

The bulk of the Soviet buildup along the Sino-Soviet border, which beganccurred7uring this period. Soviet forces along the Sino-Soviet border ac-

skret

In

Spending for Soviet Forces '

Along tha Sino-Soviet

riwor.

Crt^iw or.tie

countedittleercent of total defense spending and their cost grewate more than twice that of defense:rowth was rapid7 andwhen the Soviets doubled the number of Ground Forces divisions along the Sino-Soviet border and increased the tactical aircraft inventory fivefold. (Most of these aircraft were!olderhe buildup of forces opposite China proceededlower paceigh levels of spending67 reflected the Introduction of new-generation aircraft such as theitter, thelogger, and theoxbat I

' Soviet rpmding (or forcer alone tbo Qilnte border, uInclude* ipendlm (or Frontal Aviation. Croundial ion. and Border Guard* unit! Ib thoational Air DoferaaiianrB ilont themiliiary forces atattoned In MoncolUi and tholocated

Pros pacts

.

Factors Affecting Future Defenis Programs

Soviet leaders mustumber offormulating future defense programs.include the leaders' perceptions ofthreats, their assessment of the utilitypower in advancing Soviet foreignand Internal politicalinfluence of Institutions andindividual defenseeconomicj

The present Soviet leaden appear to shareconsensus on defense policy. Over thedefense spending has risen eachactivities have been well funded,periodic economic setbacks, andon key programs has been strong.there are forces at work, both at homethat could make lt more difficultthis consensus. Thesegloomy economic prospects, anenvironment,omingassume particularthe next year or so, as Soviet plansprograms In the first half of

Economic Outlook. Soviet economic growth has been slowing duringnd, and weurther reduction In. Recent announcements on plan fulfillment by the Central Statistical Adrninlstration confirm that Soviet economic growth Ineriod was lower than in any other period since World War II, and the situation Is likely to worsen. The Soviet economy probably will grow atearut average growth15 probably will fall toercent These projections reflect the likely Impact of the declining growth rate In the Soviet labor force and continuing Soviet Inability to achieve offsetting growth In productivity.

While the Soviet leaden are clearly concerned about present and impending economicthere is no indication that they aremajor changes in defense policy. They

will assess future Soviet defense programs,against the backdrop of anroubled economy, and rivalry amonglaimants forcivilian andcertainly will Intensify. .

While there may be pressure to constrain defense spending to promote economic growth, even sizable changes In defense resourcepolicy would not In themselves solve the USSR's economic ills. In part,ue to the fact that defenseelatively small and highly specialized sector af the economy. In addition. Soviet economic problems are such that even sizable transfers of resources would have little impact on overall economic growth unlessby major Improvements in productivity. The fundamental reforms In the Soviet system that would be required to effect suchare unlikely over the;next few years, though modest alterations in the system ofincentives and bolder action in critical areas such as energy use and production are probable. We do not believe that shifts Inand priorities are likely to oust defense from its privileged position in the Soviet economy.

The International Environment. Despite the considerable increase of their military power, the Soviets remain concerned about the dynamism of Western military programs and the potential threat from China. The uncertainty with which they view the, future strategic environment ar-for Soviet prudence In planning military and discourages measures to reverse the trend in defense ipehdlnfr^'jli/^K

The Political Succession. Oyer the next five rs, several of the top Soviet politicalwill almost certainly pass from the scene. No heir apparent to Brezhnev has been Identified. While we cannot discount the possibilitytrong singlegroup ofcome to power and Implement major policy changes, such an eventuality seems less likely In the period through theontinuation of current policiesaretaker regime

Under these conditions, wejbelleve that abrupt changes In defense spending trends are unlikely.

10

The political influence of Institutions and leaden who support defenseuniformed military, managers and overseers of defense and related Industries, and party and government leaden whose constituents depend heavily on defensebe likely to remain substantial. |:

Problems in Projecting Dafanse Spending

In part because of these economic, strategic, and political uncertainties, our projections of Soviet spending for defense are less certain than our estimates of spending in past years. Inour ability to forecast Soviet defenseis hampered by uncertainties concerning the size of future forces, the numben and types of new weapons to be deployed, and their physical and technical characteristics. Even greatersurround estimates of *he costs of future weapon systems, which are closelyrelated to technical characteristics. The Soviets go to great lengths to deny us these technical data. The difficulties inherent In forecasting the future Sovietffort compound the uncertainty in our estimates.

Despite these difficulties, the trends revealed by our estimates of past Soviet defense spending, the evidence gathered in preparing them, and our understanding of the facton the Soviet leaden consider in making their decisions on resource allocationeasonable basis for anof the future. We believe that we can forecast trends in defense spending for the next year or two with high confidence, and for up to five years' with moderate confidence. Beyond that, we have low confidence in such projections because of the difficulties inherent In projecting both individual defense programs and thepolitical and economic situations which the Soviets will face In. The discussion that follows, therefore, focuses on the period from now through the next five years.j

iVcugh the

All of the evidence available to us on Soviet defense programs under way and plannedthat the long-term upward trend in alloca-

- K

lion of resources to defense Is likely. There is no indication thatproblems are causing major changespolicy. The atmosphere in Moscowto the economy, however, is one ofand the Soviet leaders could bealterations in military force goals.If such alterations were'ate of growth of defense spendingjthe next five years or so probably would slow

I This view is based on several trends in Soviet defenselarge number of weapons development and deployment activities under way, the continuing capital construction in the defense Industries, and the Increasing costs of new mllltaiy hardware.

the broad scope of the new weapons development and deployment programs, outlays for new military hardware are likely toore important determinant of Soviet defense spending In. Military RDT&Einclude potentially costly systems for all of the Soviet armed services. In the strategic forces, new solid- and Hauid-propeUantarge follow-on to there being developed, as are new strategic naval missiles. Air defense programs for Improving surveillance and control and for newnd low-altitude surface-to-air missiles are being pursued. ABM research and development is also continuing. Still other systems are being developed for the air, ground, and naval forces. Not all of the systems under development will be deployed, but many will enter production by theo shift the weapons acquisition mixore expensive systems. Even, If procuredlower pace than their predecessors, these systems 'will Increase tho costs of weapons acquisition and

i | t'fljj ! '* iiJ We also see continued capital construction at defense Industrial facilities which indicateshe Soviets have committed capital resourcesevelopment and production of new weapons Ini. An analysis of expansion at key weap-ions production plants suggests that the Soviet

defense Industries are currently maintaining the same general growth they have demonstrated for tbe last IS years or so. Some of this investment Is related lo weapons development programs and some apparently is designed to enhancecapacity. Much of tbe construction we have observed Is at facilities associated with theof strategic missiles, naval ships, andcostly systems that have been driving procurement and maintenance costs upward.

Finally, in the Soviet Union, as In the United States, the Increasing complexity of new weapons has resulted In escalating development,and maintenance costs. Such cost escalation is evident In most of the new systems entering the forces in thein aircraft,missiles, and naval ships

Economic difficulties notwithstanding, wethat Soviet defense spending will continue to grow over the next five yean. For the next two or three years, growth in defense spendingwill be slightly lower than the long-run average, as the fourth-generation ICBM andfighter aircraftlass ballistic missile submarine programs wind down- This marginal reduction In the growth of defense spending is not related directly to economic difficulties. Such cycles have occurred several times In thefor example. In thehen deployment of third-generation ICBMs tapered off before that of the fourth-generation systems reached high levels. They do not signal changes Inallocation policy.

Duriim thee expect the Soviets to begin testing andumber of the new weapon systems underthe next generation of strategic missiles, new aircraft, and new ballistic missile and atlack submarines. This probably will cause the annual rates of growth in defense spending to Increaseace more In keeping with the long-term growth trendear.

Thisf defense spending Is based on the assumptionsALT II agreement will not be reached and that the current state of

relations between thetates andoviet Union will continue. However,ia SALT II agreement along the lines currently beingwould not. In itself, significantly alter this projection. Such an agreement would probably reduce the rate of growth of total Soviet defense spending by onlyercentage point per year. The resulting savings would amount to lessercent of total defense spending projected through then thef an agreement.

" '

Impact on the Service*

jEach of the Soviet services will gainontinuation of the upward trend Inpending over the next five yean. We expect the snares of investment and operating spending,to each service to be roughly the! same as Ineriod, although some shifts inareodernization is likely to continue within the Ground Forces, as the Soviets increase themobility, and air defense capabilities of these forces with new equipment and weapons. New weapons currently being procured Include2 tank, two self-propelled artillery guns,actical missile, and theurface-to-air missileariety of Ground Forces weapons are under development, Includingtactical SAM systems, new tactical rnlssiles such as theewropelled antiaircraft artillery aun, and newguided missiles. Many of {these will enter production by thexpansioniently under way atone bf the major Soviet tank plants could presageiwoductlon program. ji Jf'f|tr ;

Within the Airpending for Frontal Aviation will rtfobably decline, and expenditures for Long Range Aviation and Military. Transport Aviation are likely to rise and consume anshare of Air Forces spending into the

. Much of the capital construction currently under way at Soviet airframe plants appears to be

! associated with production of transport aircraft, although some may be for Increased production

of bomben. During the next five yean we expect

% ,

the Soviets to Introduce Into the Airsystems currently undertheettransportew helicopter.anker version of theI'ili$'yi

The Soviets areew tactical fighter-bomber aircraft, which may be deployed with Frontal Aviation, and they will undoubtedly make incremental Improvements to one or more of the new tactical aircraft currently InThese could Include improved targetand weapons delivery systems, navigation and bombing radars, and tactical air-to-surface

.missiles, v

The Soviets may also beew long-range bomber. If so, one could beInto Long Range Aviation units by the,

The Navy's share of Soviet defense investment probably will Increaseew classarge ballistic mlsslk submarinesunderand should reach operational statusthe. Capital construction atassociated with submarine programs, as well as information on new submarines Inindicates that the Soviets willreater priority to the open-ocsan ASW mission and to increasing production of nuclear-powered attack submarines. Continued production Is likelyariety of surface combatants. Including frigates, guided-missile destroyers, gulded-missile cruisers, and.at least one guided-missile ASW aircraft carrier. Continued procurement of the Backfire bomber is also likely, and introductionew long-range ASW aircraft Is possible.

Continuing concern with low-alUtude airand with defense against cruise missiles In particular, probably will prompt the Soviet' to Increase Investment In the National Air Defense Forces, By thee expect deplovment of theow-altitude SAM and one or more modified interceptors designed to engage low-flying targets. In addition, the Soviets wilt probably deploy now ground-based airradan and airborne warning and control aircraft.

slotET

SECRET

least five new orCBM ivitems are currently under development for the SRF. Some of these systems will be flight-tested and deployed by the.

Forecasting future RDTAE activities Is more difficult than forecasting future operating and investment activities.umber of factors lead us to conclude that the resources

allocated to the Soviet militaryffort will continue to grow into. The rising trend In Soviet expenditures for sciencehole, the high level of activity at Soviet design bureaus and test facilities, tbe large number of strategic and tactical weapon systems currently under development, and our estimate of Soviet force requirements and objectives all indicate Increased funding for military RDT&E.

The author of this paper is

. r OJ

Strategic Research. Comments and Queries arc welcome andirected to

BLANK PAGE

il

yj*1 appendixr

METHODOLOGY AND CONFIDENCE IN THE ESTIMATES

Methodology

In the USSR, inforrnation on defense spending Isclosely guarded stile secret Only onetingle-line entry for "defense" in the published statereported each year. This figure ts unlnformatlve because Its scope Is not defined and its size appears to be manipulated to suit Soviet political purposes. (Changes in the announced defense figure do not reflect the changes we rave observed In the level of military activities.)

Tu provide information which the official "defense" entry does not, CIA periodically estimates the cost of Soviet defense activities. Our estimates beginetailed Identification and listing of the activities and physical components which make up the Soviet defense programiven yearJ These include data on order of battle, manpower, production ofonstruction of facilities, and operating rates for the Soviet militaryhese data are based on all-source Intelligence and on Intelligence community judgments presented In National Intelligence Estimates and other publications.

ariety of methods this dataonverted Into value estimates.

For many components, such as military personnel. RDT&E, construction,

procurement of naval surface ships, and some operation and maintenance

expenditures, the data are coated directly In rubles. In tbe estimate presented

Ui this report, about half of Soviet defense spending7 was estimated

directly in rubles. For the remaining components, we first estimate the dollar

costs rJJ the SovietIt would cost to carry them out In the

Unitedthen convert these costs to ruble terms. The conversion

factors are based on growing samples of prices of Soviet military equipment

and activities, obtained from human and technical Intelligence sources. Where

possible, the ruble estimate* derived!from this direct-costing technique ore

checked for {reasonableness against other Intelligence information or Soviet

i!(! I' 1

ij|i'-'JSOT ; 8

' 1For two of the main components of defenseand

operatingand quantities are estimated separately for

each major element We cannot, at present, apply this approach to the

remainingThe cost of militarys estimated by

anotherof Soviet Information on expenditures for science.

I Ccnfideftce tn the Etilfnotot

The estimates presented In this paperontinuing effort to acquire more and better data and to Improve our methods During the past year we have acquired additional ruble prices for military equipment and

improved our understanding of Soviet pricing policy and Inflation In the

Soviet economy. New information and new costing methodologies led to Improvemenrs In jour estoriates of the costs of Soviet military hardware, supplies, andpetroleum, oil, and lubricants, equipment maintenance, and RDT&E. This effort has Increased our confidence in the estimates. Even so, theyargin of error which could be substantial for

!p WW'*"' ,

e have higher confidence In the estimates for total defense spending than in those for any of the Individual suhaggregates. Two Intelligence sources provide independent benchmarks on the overall level and rate of growth of Soviet defense spending lheriod. One source [

| reported that at the Soviet Central Statistical Administration0 he hadlassified document whichummary accounting of actual defense expenditures9 and estimated figures0 (based on data for the first six months of thate remembered total figuresillion rubles9illion rubleshese totals fall within the range of our estimates for those years, under the broad definition of defense spending. t'. ; *:

.The other source is General Secretary Brezhnev, who Is reported to have saidI simply am afraid for our people to know that every third ruble in the government budget, goes forne-third of the2 Soviet state, budget wasndillion rubles Taking Inflation Into account, this Is within the range of our estimate (stated in0 prices) for total defense ipendirig2 under the broad definition.;

- '^vj;;Br^use-Jthe^|dli^<osting methodology reflects the actual changes

observed Inefense activities over time, we are confident that the upward trend In these estimates Is correct. We have greater confidence in the general trend of our estimates than In year-to-year changes; our year-to-year estimates are sensitive tb Judgments regarding the phasing of costs for major procurement programs. We believe that the average annual rate of growth In Soviet defense spending over the pastears, in constant prices, is unlikely to have been significantly higher or lower thanercent Implied by our estimates. The Independent evidence cited above, when adjusted for inflation, also-ercent growth rate In Soviet defense spending

We have checked our estimates of Investment spending bySoviet statistics for the machlnebullding and metalworklnghich produces most of the nation's defense hardware.of this analysis, while subject to substantial uncertainty, arewith ottr estimates of defense investment and with our uridersUnd-of Inflation in the Soviet i sr1

Our confidence in the estimates at tbe lower levels of aggregationrom'category to category^ We bave high confidence In our estimatesrocurement of major naval ships. These are easily observed and are costed oUreetly ,ln rubles, using Soviet data which we have found to be reliable,

ftr f: Reasonable confidence can be assigned to the estimates of spending for 'pay and allowances of uniformed military personnel and for strategic missile

' and aircrafthe pay snd allowances estimates are made directly in rubles and are based on extensive Information on the Soviet military pay .ystem. Tbe estimates for missiles and aircraft are made Initially In dollars, but the factors we use to convert these estimates to ruble terms are based on fairly large and reliable samples of ruble prices. We have less confidence In our cost estimates for the operation and maintenance of weapon systems and for the procurement of smaller Items, such as general purpose vehicles and some ground fore- jL.q-

e are least confident of the estimates for Soviet military RDT&E, which are derived In tha aggregateethodology less certain than those for either investment or operating spending. This year, however, we have made an Improvement In ourew technique provides an estimate of total Soviet spending for science In which we have considerable confidence. (Thisexceeds the published Soviet scienceconsistent with figures cited privately by several senior Soviet officials and reported by Intelligencenfortunately, we have less confidence in our estimate of what portion of this total is allocated to military RDT&E, Soviet sources provide only limited and ambiguous information on that allocation. The level and trend of these estimates, however, are consistent with ourade with high confidence, that the Soviet militaryffort li large and growing.

Original document.

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