REVIEW PRO( RELEASE AS SANITIZED
Hffl 7 CIA HISTORICAL REVIEW PROGRAM
December5
MEMORANDUM FOR THE RECORD
SUBJECT: Economic Implicationsad Grain Harvest in the USSR6
The attached report: was prepared for the NlO/Economi< for incorporationIO submission to the NSC.
Office o' Economic Research
Attachment: As stated
ecember5
Economic Implicationsad Grain Harvest in tho USSR
Another poor grain harvest next year would have profound short-run effects on the Soviet economy. The degree of impact would depend on the extent of the shortfall from the goal ofillion metric tons- If the crop is no greater thanNP growth would advance byar short of% rate of increase now planned. Industrial growth would again be hampered by shortagos of agricultural raw materials. With grain reserves now near zero, another harvest failure would force further large reductions in livestock numbers and additional massive imports of grain from hard currency areas, exacerbating next year's currently anticipated deficitS5 billion. In turn, this might force the USSR toide range of machinery and equipment imports tontenable build up of foreign debt. The Soviet consumer wouldeduction in meat supplies of perhaps one-third, putting him back to the levels of the, and widespread consumercould become evident.
As the meat queues lengthened, the leadership would have to decide whether formal rationing should be substituted for tha hit-and-miss allocations resulting from the queues. Alternatively, they could raise meat prices to avoid the
administrative costs of rationing or the unfairnessirst-come first-serve system of distributing the available supply of meat. The regime, however, has repeatedly indicated it would avoid boosting food prices.
Over tho longer-term, overall economic growth rates would be impaired and make oven the modest rates of growth plannedifficult to achieve. Undoubtedly, economic policies including the high priority for investment in agriculture would be challenged. Tne standard of living would stagnate and the growth in incomes would be held back to restrict inflationary pressures.
For the US, another poor Soviet harvest would meangrain sales over and above the six million tons the USSR is committed to buy from us annually. This might bo off-set by reduction in sales of other goods if the USSR is not able to increase its own hard currency exports. It would provide added leverage to US efforts to conclude deals for Soviet oil and other raw materials.
Original document.
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