Created: 12/1/1965

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TITLE: Economic Observations As War Indicators

AUTHOR: H. C. Eisenbeiss




A collection ol articles on the historical, operational, doctrinal, and theoretical aspects ol intelligence.

All statements of fact, opinion or analysis expressed in Studies in Intelligence are those of

the authors They do not necessarily reflect official positions or views of the Central Intelligence Agency or any other US Government entity, past or present. Nothing in the contents should be construed as asserting or implying US Government endorsement of an article's factual statements and interpretations.

Economic intelligences contribution to strategic warning of Soviet jur-prise attack.


The Soviet Union, being the only country with enough military capability loerious threat. power, is the principal focus in the intelligence effort to give warning of juiy deliberate all-out attack on this country. Under prevailing cormMtiora as of the, economic intelllgervce can contribute to this effortumber of important ways. The USSR has elaborate civilwhose main purpose is to facilitate the transition of the economy from peace lo war: they provide for stockpiles of all kinds of goods, industrial and agricultural, and maintain the administrative apparatus needed to Integrate industrial and transportation facilitiesilitary effort. The Soviet civil defense program Is abeady extensive and would undoubtedly be augmented in the event of imminent hostilitiesariety of economic problems would hinder the Soviets from undertaking the kinds of massive action called for by their military doctrine exceptreat deal of advancehe uansportation system, most notably, operates at close to capacity under normal loads.

It is true, however, that economic intelligenceiminishing role in today's early warning process. Under conditions that prevailed immediately before World War II, or even the Korean war, logistics were frequently more important than either weapons systems or tactics, and the potential of economic intelligence for strategicwas correspondingly great But as such currentroreaction-time" long-range ballistic missiles with nuclear warheads and "instant-ready" airborne armies approach rrsalities.on the slow build-upogistical base contributes less toward determining whether, or where and when, the technically advanced weapon systems are to be used. It is nevertheless to be expected, since the maintenance of "instant readiness* will be very expensive in this era of rapidvai>ce, that economic mtelh*-geoce will continue to be useful for strategic early warning.


In ihe USIB Watch Committee) monitoring of war mdicators Com-unist China,oor second to tSe USSR, rerrsaint ofin able concernariety of reasons. These reasonsery largeegime which sometimes talks as if ft considers war an enjoyable pastime, an inclination toward what Mr. Kent calls the "dramatically wrong decision.'* its prorimity to the Nationalists' offshore islands and Taiwan itself; its Indian adventurend the erpectatioD of its eventually producing nuclear weapon systems. Today, however, it not only lacks modern weapon ^yTtcms, but tha ability of Its economy toustained effort by its massive but obsolescent ground force Is. at best, In doubt The achievementignificant modern military capability willarge aod successful industrial program, one as much concerned withof basic commodities. high-grade steels and technically com-plei chemicals) as with military equipment proper. The economic intelligence officer charged with strategic warning of hostile Chinese action against the United States wiD be preoccupied with the regime's progress towardrogram for some years to come.

Civil De/ense'. the MOC

It could be argued that with present collection capabilities civil defense is the best bet as source for successful strategic warning of Soviet intention toig war. FiirtlKrrnore, it seems probable that the potential for collecting civil defense Information of ihetype will Improve.

* Said of the Soviet derision to Install strslepe nusnies on Cubs. StudVt VIII 2,

p. IS.

'Soviet civtl defense has longoncern of the economic intetlirrnc* of-Scar because tbe present profrasa begsa at aa Megnl part of tbe postwarconstnsctsoD of the Soviet economy. Today tbe Ministry of Drfense and other institution* are lieavily Involved in the program, hut the role of economicalso oonio crow.

Although the Soviet civil defense program seems to have changed policy several times since the war. and although there are grounds for debate over its eaact sire and effectiveness, there ia no question that it is large; in comparison with those in the West it is enormous, mvolvingj millions of people. Whether the current policy calls for urban blast shelters or urban evacuation plus fallout shelters makes no great difference in its value for warning. Either way. the public has to know what it is supposed to do, when to do it, and where to

Economic Indicators

go. The best ot security is not likely to conceal even the earliest of the massive public actions that go with the declarationspecial period* ol possible imminent hostilities. Urban evacuation,presently an integral part of Soviet policy, requires several days.

The program is as complex as it is large, and it appears to stipulate detailed procedures for every part of Soviet society. These details are one of the reasons that ft offers good opportunities for theof strategic warnmg. infe^abpn. In Moscow they mclude such seeming minutiae as relocating to tho suburbs fire enginesin the central city, removing national treasures (probably including Lenins body) for safekeeping, preparing for window by -window blackouts, and probably even making "final disposition" of carnivorous, poisonous, and obstreperous residents of the zoo. So long as persons friendly to the United States can move about inwe have simple, mcapensive, and reliable collection devices-such as an embassy wife airing thegive us the crucialon implementation of civil defense procedures.*

in Odessa; his^tooperation would doubleohe cities covered. Then. consular office opens in Lerungrad thecould be tripled.

'The imrplieity, economy, and ^lability of embassy svtvw wnerrei from com. parsson with other intoJIieeix*M other *W

A Moscow Observer's Guide, assembled by the National Indications Center, covers the possibilities for simple physical observation at times of crisis. The MOG was used during the Cuban missile crisis, and in retrospect it can be said to haveseful tool. One defect in the performance was notable, however: an ominous sign-distribution of gas masks before the eyes. personnel on one of the upper floors of the Foreign Ministryreported by the highest priority cable, whereas reports of negativeneither Lenin nor the live inhabitants of Moscow, neither fire engines nor ferocious animals ever left their normalby slow boat, or not until personnel returning to Washington underwent an end-of-tour debriefing. Next time it would help to know in Washing, ton which items in the MOC bad been checked and which of these"nohich were normal, and which ominous. Prospects for increasing the MOG type of emergency collection

Disaster Columns

Paramilitarized relief and recovery columns based in rural areas under tho civil defense program offer another possible set of indicators. The task of these "disaster columns'* is to moveuclear-devastated urban area and attempt to assist the injured, limit damage, and restore or salvage what they can. They are to get their personnel mostly from the (arms, their transport and earth-moving equipment from farms and from construction protects. Similar city units to be evacuated in an emergency draw personnel and equipment from factories, utilities, and service groups. Both the Soviet press and secret intelligence suggest that the rural relief columns have not yet developed much beyond the planning and organisation stage, but there has been recent public exhortation to increase efforts to equip and train thern.

We have no sourceemonstrated ability to observe and report promptly an alerting of tho disaster columns. Still, collectionseem fairly good- Tho columns will directly Involve large numbers of people. And if alerted they would disrupt the activities of even larger numbers by their clairm foe equipment on farms and construction activities. Thus the immediate task is to detennine the procedures prescribed for the disaster columns as they are organized and trained, so that emergency collection requirements and means to meet them may be eatabhsbed.

1 tie foregoing discussion may suggest that the prime task in day-to-day observation of the Soviet civil defense system is measureroent of its alertness for near-term use. In fact, it is not. Although portion* of the system have lieen alerted and exercised, there is no evidence of any national exercise having been staged, even oneommand-post type. The most widely held (but not rsecessarily the best) guess at the reason for this apparent shortcoming is that theroclivity to read too much between the lines and might react in ways that would hurt, for example panic buying.

Over the years, in support of tbe National Indications Center and tho Watch Committee, economic analysts have charted the slowly growing capabilities of the civil defense apparatus. They seek the answers to such questions as: "Does the disaster column programeadiness date? Does it require the diversion of resource* from some other user? How effective will the columnsn order to answer such questions as well as possible the collection and

analysis of data on civil defense developments mustay-to-day process rather than one concentrated on periods of crisis.

The overwhelming majority of the answers have, in NIC jargon, beenhat is, we have never (Cuban crisis included) discovered an urgent effort to achieve early readiness, peakiven time, or otherwisepecific target date. It appears rather that the Soviet regime believes civil defense toecessary part of the balanced economic and military power base of tbe state which, like the other parts of that baseT*fnust more or less keep'paoe with general progress.

Suppression for Surprise?

What of the posribilityurprise' attack plan which omits any direct pre action alerting of the civil defenseummarily,lan is considered to be unlikely. Even if we ignore tbe strategic oiilitary reasons for mtogihe civil defense system,its capability (as well as the even more cogent military reasons for not meditating an attack at ail under the present balance ofhereumber of considerations against it

Civil defense is an integral part of Soviet power. In some areas,egional military authority has conducted an air defense exercise, the regional dvil defense mechanism or some part of it has also been exercised. The military authority can do this because civil defense isilitary responribihty. The regional militaryis trained to consider civil defense another of his many tools. Consequently, it appearsecision to omit civil defense would bo administratively as complexecision to cancel participaHon of aircraft in an air defense effort and leave the job entirely to missiles.

The military commander, however, does not bear sole responsibility for civil defense. The party, the economic bureaucracy, and tbe civil government each has its own responsibilities, chain of command, and interlocking liaison with respect to it In order to omit civil defenseurprise strike plan, positive instructions to prevent theof standing operating procedures would thus appear to be necessaryultitude of geographicneed to go to party officials, military officers, dvil government bureaucrats, and managers of factories, and would need to go to many levels in each of these hierarchies. With so many people involved, the planners of the strikeroblem: would the security of the surprise be well served by an attempt to leave out dvil defense?

Most important is ibe probability that tbe party leaders would notilitary plan which excluded civil defense participation. One totally unacceptable result ofUn might be the decimation or worse of the party while the military leadership remained rela-liveU- unimpaired. Another consideration of the Presidium ought to be the reaction ol the surviving members of the populace, as well as of the party, if available civil defense facilities had not been put to use.

Above all, the party leaders iernember the effects of World War II on Soviet mdustry and the rsrodigjous logistic efforts required to Bght tbe war and afterward to rebuild the economy and restore the culture. Even now the demographic en* nets of World War II present problems of labor force and rnilitary manpower. It is these memories and the dangers of nuclear warfare, oot charity, that have caused the party leaders to expend the money, effort, and manpower toivil defense organisation, along with strategic reserve andmobilization systems.

To sum up. the Soviet civil defense program Involves millions of peopleultitude of tasks. It isasic component of national power, aud there are strong reasons for expecting it to be activated oven in connectionlanned lurptiso attack.collection systems are relatively inexpensive and reliable, and they arc capable of timely reporting on the activation of at least some part of the syrtern. Prospects for this repeating appear to be improving rather than qamtnishing. Let us now look at Indicatorsther economic fields that can be monitored with existingcapabtutSes.

Transportation. Pre-attack Mooes

Because the Soviet transportation system is usually operating at close loajor increase in military movements wouldnormal traffic patterns. Tbe operation of the system isof great interest for strategic early warning. Moreover,tho bulk of transport is concentrated in rail facihties, the Soviets are concerned that the ratisting system might not give them thoand service they would needar had begun, and schemes to remedy the projected shortcomings arc probably also of value in pointing to possible indicators.

These propositions are not just wishful thinking on the part of VS. intelligence officers. The1 issue of the Soviet journal

mttaru Thought (secret edition) contained an aiticlo whichtransport in much this light. The author was quitethe Wesi be tipped off to any imminent action against NATOtotal disruption of normal freight when reinforcementsto the western front. He proposed, in order toarge proportion of normal movements bethe reinforcement trains mixed ininor part of totalover several

From the Soviet viewpoint the problemof concealing thisof the groundecessary action underforce- concept, is complicated by tbe difference inSoviet and European railroad tracks. At each borderpoint, paired tracks of the two sizes parallel one another infacilitatetrain-to-train transloading. These transfer yardsslowly but steadily, and some now reach many miles bothwest of the Soviet

Surveillance of the routes, crossing points, and yards in the western USSR and abutting parts of eastern Europe should reveal by direct observation the reinforcement of the armies facing NATO. Foracquisition, information useful to the strategic warning process should be availableumber of railroad men, bureaucrats in economic administration, and plant officials oo both sides of the border. These people would quickly be aware of an either general or partial embargo on civil freight or passenger traffic, and many of them could determine whether it resulted from military usage of the system.

Wartime Capacity

Soviet military planners also appear to be much concerned about the difficulties their transportation system will face In providing the required service after the startariety of measures intended to strengthen it have been proposed, some of which would offer opportunities to collect early warning information. Because some of the measures could also serve purely economic ends,both collectors and analysts must treat them with care.

A central organization for the control and duectioo of all forms of transportation would increase the efficiency, flexibility, and rccuper-ability of the Soviet system. With central direction, priority freight could be more rationally shuttled among various routes and carriers

and around bottlenecks and damagedepairs could be organized in better accord with national priorities. The Intelligence officer concerned with strategic warning therefore watches constantly the administration of Soviet transport. Centrahration. subordination to the Ministry of Defenseupraministcrial body, and military staffing of either the operating or directing levels of rrasisportallon administration are considered possible moves that would have mean-ing for early warning.

A wide range of physical Improvements In peacetime have also been suggested as means to strengthen the wartime capacity of Soviet transport. At one end of the range these consist simply of more facilities, especially of kinds other thanpipelines, more and better roads, improved canals, and more double tracking. Less grandiose proposals are for road and rail bypasses around cities, alternative bridging, and extension of Soviet-gauge track farther into eastern Europe. Proposed emergency measures include road trailers to move rail cars across lucaks in rail lines, stocking of reconstruction materials in the vicinity of probable Western priority targets, and last-minute evacuation of transportation equipment from target areas.

We do not know which of these proposals might be implemented In preparation for an anticipated war. Economic development requires that some of"Friendship" oil pipeline into eastern Europe, foracted on without particular regard to their military utility, Others, particularly evacuation of transport equipment from target areas, would be either very expensive' or so disruptive of normal military and civil activity that they arc unlikely. But if evacuatioo did occur, it would be an unmistakable sign that large-scale hostilities were imminently expected.

Finally, in addition to land transportation, the intelligence officer must follow Soviet merchant shipping and dvil aviation. Normality in Ihe deployment and occupation of the merchant marine hasomforting phenomenon during past crisoa. Sometimes the Soviets have moved ships out of an area of immediate danger, but they have not put them in safe havens. If they really mean business one would expect them to move at least some ships to home or friendly ports. As to aviation, almost as many high-performance air transports are operated by Acroflot as. air carriers. These planes plus tbe military air transportsubstantia) airlift potential, and so any unusual activity in Acroflot needs to be Identified.

Thus transportation, like civil defense, should be featuredist of activities that under existing collection capabilities could provide useful, perhaps conclusive, strategic warning information.

Strategic Reserves

Over the years the Soviets have quietlyast and expensive system for mamtaining strategic stockpiles. It is administeredand with unusual care from Moscow, by the Chief Direc-torate of State Reserves, apparently directly responsible to the Council of Ministers. Its object is supportar effort. It was used for the initial effort in tbe Korean war,

For this purpose the Directorate administers and operates stores of foodstuffs, raw materials for industry, semfprocessed materials, finished manufactures, medical supplies, fuels, spare parts, constructionof almost everything. It is net the oidy operator offacilities in the Soviet Union; the Ministry of Defense has depots factories and distributors bold limited foveotorics; economic/jmi political administrative institutions keep some stocks. But StatTtte-serve inventories are probably by far the most important. Tbey were designed, for example, to enable tbe economically deficient eastern littoral of the Soviet Union to operate for extended periods without the aid of the vulnerable Trans-Siberian Railroad

Under rOirushchev tbe rules governing the withdrawal of materials stored in the facilities of the Directorate were relaxed to allow use in easing the effects of natural disaster and economicin4 Tass noted that farmers Uckfng seed were being supplied from state reserves. But the primary purpose of thereserve forWithdrawals from stock areoutine bureaucratic procedure;dals must rule on each individual release and approve the repkeernent schedule. Accountingincluding physical inventory, are apparently stringent. The refreshing process, putting old stores into service and replacing them with newly procured goods, seems to be pursued with care.

As long as the Chief Directorate of State Reserves exists it must be presumed toole in any Soviet plan toarge war. and it may have one to play in limited war. In recent years, however, tho value of this knowledge to the indications process has been slight because the intelligence communityource for timely and^formation on actions of the mstitutJoo. Theconomic Intelligence Committee reaffirmed4 that development of such


a source is one of the first-priority requirements for economic Prospects for filling tliis requirement are uncertain.

Industrial Mobilization

Another unique Soviet institution (or perhaps set of institutions)to coordinate the efforts of Industry and transport inmilitary needs. It ts most easily explained in terms ofeconomic ad ministratio njweause thereby as .informal ionoperafion then. Prior7 the Soviet goverrnnSTraneries of ministries based fa Moscow; there was anan aircraft production mirsistry, an ocean Beet ministry,close to fifty of them. Each mfaistry was subdividedsome functional like supply or finance, somee.g, fighter aircraft production, and some geographical,area oil ^

Now each ministry badilitary affairs office called theMobilizationnd the administration of each factory, railroad section, river fleet, or other activityimilar subdivision under oneariety ofsection, specialsecret department. These two, the ministry departrnent and the factory department,umber of different responsibilities,the kind of rninistry or facility it was fa. For example, at plants which had been converted after the war to the production of agricultural implements instead of small arms and ammunition, the responsibility of these departments included maintenance of an ability to switch back torequired ecjulprnent, limited quantities of raw materials, and personnel with tho right skills. Anotherwas to keep track of the draft status of the employees in order to assure that quotas for draftees and for skilled production personnel would both be met It was the factory departments that handled classified documents at the plant level.

Like all Soviet institutions, these were required to submit many reports. The instructions for some of the reports, which have come into the hands. mtelligeoce, clearly assumed that these units would be deeply involved fa the Soviet actions precedent to initiation of any major military action. In some instances they were thethrough which the civil defense readiness of the plant was reported to the ministry in Moscow and would have been the channel forthe effect of enemy military action on tbe plant Theofficer concerned with economic activity in the Soviet Union

presumes lhat these units will continue toonsiderable part in any Soviet preparations for war.

Again, as reflected in4 updating ol EIC priorities, thecommunityource. In at least one of the fewministries that retain more or less theirorm, the units continue to exist and to function. Soviet attitudes and procedures being what they are, the continuity of the system would be assumed without any evidence at all, but there Is some indication that units at the factory level also continue toCAirce is now needed for much more basic information than the derting of the system. We need to reidentify its parts and rediscover its procedures after theshuffle of industrial administradvo bodiesros poets forource do not appear very bright.

The four activities discussed above (strategic reserves, the industrial mobilization system, civil defense, and the tjansportatioo system) arc the ones that tbe economic mtelngence officers to CIA consider the -most likely to be productive for indications purposes. They are the fields that are kept under constant review for the National Indications Center, subject of course to what the quantity and quality of reporting are at any given time. The list of four, however, by no means exhausts the economic phenomena from which early warning indicators may be derived. Indeed, they may not even be the most urrportant

General Economic Activity

At least some economists turned intelligence officers believe that their most Important contribution to the warning process Is theanalysis of the totality of Soviet economic policy; they believeoviet decision as important as to go to war will be reflectedariety of broad economic developments. These might include great changes in the share of investment resources going to support military activities, in the division of ccmstructioo activities between projectselatively quick return and thoselow returnery long period. In the proportion of total goodsassigned to people for consumption and to industry for Investment opposed to that available for military forces, in the way the annual addition to the labor force is divided up, and in the assignment of priorities among the various claimants in the economy.

Other Intelligence officers, including economists, arguing that data on general economic policy is too imprecise to be of great value for early warning, point out that conclusions reached in the lastears

ill III"I

Economic tndfcatort

or so via this route have regularly been that the Soviet Union is hell-bent for peace. The fact lhat there hat been no global war in this period does not demolish the objection: in late Octobernvolved in intelligence were not likely to beinter vacation in southern Floods, even though the evidence from Soviet economic policy suggested that it would beto do so.

Strictly, it can be claimed only that the total economic picture should tell us what tbe potential enemy ought to be cossrideimg*if he is ra-ttonal, not what he will necessarily do. The Chinese Communists, for example, would be unable at present toassive military operation over an extended period, but Mao and friends might still start one. At timos, nevcrthelosa, the total economic view can be fairly conclusive. In3 and up to Khrushchev's fallariety of sources, secret and public, have given evidenceoviet economic policy so clearly reflecting peacefulhould pre-vad even in the face of fairly strong contrary evidence.

In practice, the National Indications Center aod the Watchhave been interested in Soviet economic policy only asfor the week-fo week examination of more direct indicators. Though this practice may seem to neglect an important part of the total picture, there arc valid reasons for limiting broad economic policyackground role The information on which judgments about this policy areore often than not obtained from open Soviet sources and is therefore subject to manipulation by tbe Soviets. Il also requires interpretation, which canong and Involved process, and frequendy it is not timely enough for indications open sources becomes available when the Soviet publisher is ready, not when tlie economic intelUgence officer needs it.

Bottleneck Intelligence

Under this heading one can collect the unending flow of reports on shortages of particular kinds of equipment and materials in theworld The warning watchman is traditionally interested to the bottleneck because it mightiversion of the commodity In question from normal to militaryucky Strikehas gone loypical example might be the periodic Soviet shortages of petroleum products, generally dieseJ fuel or bunker oil. Thereportommodity specialist is generally his most frequent contact with the indications process. All such reports are carefully reviewed for indications implications.


The commodity specialist himself, however, is not likely lo consider boetleneckery useful input for strategic warning.ihe Communist economies arc continually trying to get from available resources the maximum Output and because these resources frequently do not stretch as far as the planners had scheduled them, shortagesermanent part of all economic systems like the Soviet. The specialist m'gh'n<*disturbing if all references to shortages among tho commodities he watches disappeared from the Communist press; the disappearance mighteflection of lightened security, which in turn might suggest some dark intentonfirmed or admitted shortageommodity which he badto be in good supply might move the arsafyst rather to question hit previous estimates, all too often based on Inadequate sourcea, than toiversion to military usage.

Most investigations of bottleitecks as indications turn out like one made at the requestongressional leader who had been told that the Soviet purchases of Canadian. grain reflex-fed very high military consumption of alcohol {industrial) rat berrop too small to feed the population. The gist of the intelligence reply was that even if Soviet military use of alcohol. military use byimes it would still consume only about three percent of Soviet alcohol output, far too little to require large grain imports.

In the light of his experience the commodity analyst thus properly looks first to the economy rather than to hostile rntcntSons for theof all shortages. Even when be cannot find an economic explanation he remains reasonably sure that there must be one. That he still looks carefully for indications implications in each new shortage does credit to his integrity, for he feckan examining clams for pearls.

And Others

A myriad of other possible economic events might theoreticallyvaluable indications Information, but limits on collectionand on the ability to generalize from fragmentary information (liko data on one activity at one facility at one point In time) severely reduce the logical possibilities.

A large "unknown" area In the potential utility of economic intcl-hgence for strategic warning is covered by the items in the General Indicator last which refer to relocation of plants, increased output in armament plants, and changes in the pattern of industrial output. The validity of such indicators and to some extent tbe prospects of

collecting information on them woo Id depend on whatere made as to the kind of war plan the USSR might settle upon. There is little precedent in the history of such activities to serveuide for early warning; some redirection of economic effort occurred during (but not before) the Korean war.

fn practice, there areew additional economic areas ofcomven as background, to the NIC aod theEconomic developments in the CUR are ofvalue for strategic waniing. Inhe leveltrade has over tbe past several yearsood gaugeintensity of Communist feeling oo the Berlin issue. Moreover,difficult to see bow the Croup of Soviet Forces Germany couldto eitendod use without the support of the CDR railroad net,sometimes hard pressed to handle normal loads and thereforemove greatly Increased military traffic without cutting off its

The varying priorities accorded Communist agriculture aro also of background value For an extreme example, the periods whennumber of troops arc engaged in digging potatoes or moving wheat seem unlikely to bring war. At other times the Sovietnvolved in one of its chrome reoiganlrabous of economic adrninis-tration (such as that being prepared hi the fall, withdisruptive effects oo command, output, and supply Bows, aggravated by infighting for position in the new scheme. Thateorganization is in progress docs not preclude war. of course, but it does indicate strongly that the possibility of war is not preempting the undivided attention of party and government leaders.

Construction projects are of occasional concern in early warning Information on important projects is sometimes available with little time lag, and analysis of the purpose, priority, and cost of the effort may then be of significance

Finally, merchant shipping and related information provided in late July and early August2 the Initial indisputable evidencerastic modification in Soviet policy on Cuba. Onugust the Watch Committee concluded that "at the least, recent deliveriesa rignifscant Soviet rsfort to improve the defensive rnilirary capabilities of the Cubanhis conclusion was madeprimarily by the collectors and collators of information oomaritime shipping. Were the Soviets again to tryuild-up in an overseas location, shipping inforrmboo might again provide strategic warning.

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