SOVIET DECEPTION IN THE ECONOMIC AREA

Created: 10/20/1977

OCR scan of the original document, errors are possible

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MEMORANDUM FOR THE

SUBJECT: Soviet Deception in the Economic Area

The attached memorandum was forwarded to NFAC Liaison to DDS&T, for inclusion in an inter-Agency study,urvey of Warsaw Pact Deception and Intelligence Denial Activity".

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NFAC Liaison to tho DDSiT

Soviet Deception in the Economic Area

Soviets rarely falsify economic data. omit, reclassify, redefine and conceal data thatwould violate their national security or prove Some data are unavailableheycollected in thehey are not publishedaccessible to foreigners,hey arecategories useful only in Soviet economic analysis. purpose of this memo, Soviet deception is assumedan obvious reason can bo discerned for concealingfrom foreigners. This is not an exhaustive list,

but it includes the most obvious examples that create serious obstacles to an accurate assessment of the Soviet economy.

Foreign TradeThe USSR does not publish data on its external financialhe data required to join an international organization such as the IMF. This would encompass statistics on gold reserves and sales, net services and transfers (including data on interest payments on tho hard currency debt, tourism andservices and hard currency transfers) ana capital flows.

Soviet foreign trade data is published in annual handbooks which are fairly complete and consistent. Occasionally, however, some categories are combined or eliminated that illustrate Soviet sensitivities in certain areas.

a. he entire grain category was excluded from2 handbook, tho year of the massive qrain purchases from the West.

b* reakdown of oil trade into crude and petroleum products by country has net been revealed although total trade for these categories has been given. In6 edition, individual petroleum products were combined into one category.

CONFIDENTIAL

CONFIDENTIAL

- In6 handbook, somesuch as phoophate rock, sulfurare no longer given as individualby quantity and value.

6 handbook no longerthe two major categories, rolled steelpipe. The latter contains twoitems from the intelligencediameter pipe and oilfield pipe.

any individual items6 handbook, including copper, lead,aluminum.

. Aggregate economic statistics

production indexes appear to bea methodology that deliberatelyreal growth rate.

budget dnta is considered sensitive andto be concealed in residual categoriesamong other budget items. This includes,

the location, amount and scope of the appropriations for expansion and maintenance of state material

investment in defense industries.

the distinction betweon civilian and military outlays in ostensibly civilian economic expenditure categories.

the science budget by end-use.

the defence budget by ond-use.

expenditures on intelligence and internal security operations.

location and amount of budget funding for nuclear energy, foreign economic and military aid, ana civxl defense.

numerous budget revonuos such as receipts from gold sales in the West, income from foreign trade, repayments for credita extended to foreign countries.

c. pparently because of rising infant

mortalityrates,S Mar, khoz. did not include . the rate Inhe entire infant mortality column was eliminated.

materials

- No statistics are available on oilcapacity of oil refineries, output ofproducts, consumption of petroleum products,

or storage of crude oil and petroleum products. In6 Narodnoye khozyaystvo all data on regional production of oil and gas and statistics on drilling have been eliminated.

metals androduction dftaitems are guarded as etate secrets.

- No production data is publishedrubber, pharmaceuticals, chlorine,pnosphoric acid, and phosphate rock,they are considered to be strategic. on the share of Soviet chemical outputin the Eastern regions was discontinuedpublication of3 Nar. khoz. by theate of construction, have stopped publishing in the annualreports information on the locations

of chemical plants that have commissioned new facilities. In one case, the Soviet presslant reaching ratedear ahead of scheduleestern contractor that supplied tho facility proved was not true.

, With the notable exception of moat output inunsupportably large number, the agricultural datathe Soviet yearbooks does not seem to be deliberately However, this does not mean that the informationtaken at face value. Grain output, for example, is given

bunker weight, that is, the weight of harvested grain isas it comes from the combine, notleaned and dried basis. This practice tends to overstate the size of the grain harvest but io moreunction of the crude state of the statistical reporting system than an attempt to deceive

COMlpTIM

CCKFIBENIIAL

Forward estimates of agricultural production, consumption, demand and trade are another matter. The Soviets have been extremely reluctant to reveal this type of infomtion even after promising to do so in an agricultural exchange agreement signed with the US 4 they claimed that theof this provision hadistake and that plan data should be adequate. Moreover, US field inspection teams which the Soviets agreed could visit the USSR twice during each crop season have been constantly harassed. Visits to'vital ^rain areas have been denied, causing one US team to depart after several days in Moscow.

6. Machinery

The Soviets have successfully acquired electronic (semiconductor) production machinery from the US through illegal channels since at US suppliersbeen both witting and unwitting. Despite trade controls, this is possible because the machinery typically travels to two or more countries before reaching Moscow.

The Soviets frequently publicize in catalogs and brochures, as available for sale*machinery that is still in development. This is done, at least in part, to encourage the relaxation of US trade controls policy.

Ornce or Economic Kcscarcn

Original document.

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