PRELIMINARY ASSESSMENT OF ECONOMIC IMPACT OF PRODUCTION FREEZE ON NUCLEAR WEAPO

Created: 3/16/1964

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Acoocioent of Ecoacndc Defect of Production Freeze on Sfuclcar Weapons and Delivery Vehlclce

K c enclosure to this ataoraadua is our recpouoe to an ACTA request fororder oftaccscccnt of tbe ccoaoaiie ieraoct of proposed freezes oa noclearnd Qtrnteale delivery eyatetts. Rra. Bivsrd of Br.taff at ACDA bas cugssflted that you, Kr. Kreaiah, and Kr. Eoeh receive copies.

'2. It oust be ecofcasiccd tbat the bacl^rouad text end caveats should be studied corcfuUyrecictlon of the data presented ln the table. Tele is especially ioportent in the contest of ca^psrlooos hetueen thend USSE.

SIGNED

Assistant to the Deputy Director (Intdliseoce)

facloauret

Sevlnse Implications rtf tm ACUA PropOOSl

CENTRAL INTELLIGENCE AGENCY

. C.

4

FOR:

SUBJECT:

REFERENCE:

Archibald S. Alexander Director, ArasDisaraeicent Agency D. C. '.

Preliminary Assessment of Economic. Impactof Production Freeze on Nuclear Weapons-and Delivery Vehicles

I-ieraoranduro frdnlexander to Mr. Cooper, .ventedb

v . o thisur response to your, rcaucstrough order of magnitude" assessment of the economiccf proposed freezes on cuclear weapons and delivery systems.

'I"

2'. It must be er.phasiz.ed that the baeV.grcund text ond caveatsshould befuUyullofain the table. This is especially important in the ontext ofetween she us and USSR.

SIGHED i

Assistant to the uep'.ity Director (Intelligence)

'; 1iocs ACDA Proposal'

5 March

.Savings Implications of ao ACDA Proposal

A preliminary uppreciation of the savings tbat might accrue to the Sovietsesult of the implementationreete on the production of nuclear weapons and their delivery systems uas derived from existing intelligence estimatea of Soviet military expenditures and the assumption that all production and deployment of the weapons systems under consideration* would ceocc as The choice of themphasizes the point that the calculatloo of esving provided in the table Is meant to be illuntrative rather than definitive. This year woo also chosen because the underlying prograa estimates are considerably more reliable than those available for the years following. Obviously, actual Soviet strategic weapono programs for the years3 may differ in important respects free those estimated

In expenditure terms, the result of this procedure is that7 billion savings detailed lo the accompanying table,the maximum amount that could have been BRVed if the proposal under consideration had been implemeoted The savings in investment expenditures represent the effect of the complete cessation of production of the various categories of oquipoent and theof related deployment facilities. The savings in operating expenditures represent the elimination of those personnel and operation and maintenance costs which would have occurred if the incremental deployment estimated to have occurred3 bad in fact not occurred.

Thereumber of caveats that oust be borne ln mind when essoBslcg the data in tbe table. These caveats may be divided

cn int0 BCCOuDt calculating

Probeble Maximum Saving in Estimated Soviet Mllltory Expenditures

3

He suiting from Froete on Production of Bucleor Weapons and Strategic Delivery Systems a/

Million lQgg Dollars

Systems d/

Submarine Missile Systems Submarines e/ Missiles

Aircraft f/

Air Surface MissilesRRM Systems h/ Bucleor Weapons i/ Total

Investment b/ Oporatlng c/ Expenditures Expenditures

f

230

360

150

l.fcoo

have been rounded to tvo "significant" digits; therefore

totals may not equal the sua of components.

expenditures for procurement of major weapon system

hardware and construction of facilities where applicable. HOTS: Probable covings in research and development programs have not been included. Sec the text on this point.

e. Includes only tbe increment In3or such Items ao pay and allowances, otbor personnel costs, purchase of POL products, recurring spare parts, etc.

nd SS-8.

SSBN-n, SSGB-E,nd SSLR-P. Winder.

Kipper, Kangaroo, and Kitchen,nd SS-5.

Covers expenditures for fioialted weapons not Just fissionable nater-lal.

into tvo brood classeshose vhich vould tend, to increase and thoae vhich vould tend to decrease tbe cite of the saving. The ooat Important factors that should be noted with respect to increasing the aaving are the omission from the calculation of possible savings in expenditures for ABM tad research andprograms. The lackeliable methodology for estimating research and development expenditures for specific weapon systems and the high degree of uncertainty surrounding Soviet ABM Intentionseaningful evaluation of savings associated with these prograa*.

A nuaber of other factors which have bocn neither quantified nor included ln this calculation, would tend to decrease the saving. .One potentially significant emission pertains to limited replacement production of the systems under consideration of 'confidence firings, training, normal attrition, etcj Tbe expenditures for such production could be substantial. In addition, tbe Imposition of the postulated freeze vould undoubtedly result ln the retention in the active inventory of certain strategic veepon systems vhich previously bod been scheduled to be phased out Such retention vould result in greater operating expenditures. Further, tho savings in tho table must be considered torofls rather than net calculation ln an even mora general senseo the extentreeze in strategic forces might resultelative build-up of more conventional forces. Tbe final major factor not quantified that vould tend to decrease the saving is "termination coats". For this preliminary appreciation it vaa not possible to compute meaningful costs which night be generated by sudden cancellation of large-scale production and cpnstructlon programs. Even if Soviet practices of defeasevera such that costs would not be reflected in the outlays of the Ministry of Defense, the cost to the economy in terms of reel resources wasted might be substantial.

udgment cannot be aade with assurance. It appears likely that tbe influence of these latter factors vould outweigh that of the factors tending to increase the saving, with tbe result tbat the saving vould probably' be less than that indicated by tho

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calculation. Given an estimate of total Soviet military expenditures3 of the equivalent of8 billion, the calculationavlng of aboutercent,angeercont la probably more realistic. On tha othar hand, when the some calculation of Having Is madeuble basis, the saving, because of price structure differences, equalsercont of total Soviet military expenditures. Obviously, it is the ruble figures that would be of interest to tbe Soviet leaders.

In any event, the really important point to be mode is that probably none of these numbers reflects fully the potential impact on the ocoooray of the proposed freeze. umber of years the production and deployment of nuclear weapons and their delivery systems have undoubtedly bed first claim on tbe ocaree supply of top quality manpower and material resources available to tbe Soviet economy. Implementation of the proposed freeto would free nany of these resources for other usesadly needed investment programs.

united states arms control and disarmament agency

^

MEMORANDUM

FROM:

SUBJECT;

to Che Deputy DirectorIntelligence- '

Archibalds. '

Assistant Director, U. S. Arms Control and Disarmament Agency

Proposed Study of Economic Impact in thef Freeze of Strategic Nuclear Vehicles and Freeze of Production of Fissionable Materials Used in Nuclear Weapons.

1. By separate tncrooranoum ol this date, subject Proposed Study of the Structure of Soviet Industry wich Reference to the Production ofeferred to the related project toeans for estiotating the impact Ln the USSR of differing arms limitations. xpressed the hope that ic would be possible to evolve useful information on the impact of such limitations on Soviet weapons production and on other parts of the economy which rcight be affectedelease of assets from defense production.

2. ish now to request that CIA undertake an assessment of the economic impact in the USSR of theroposed freeze of (a) strategic nuclear vehicles and b) the production of fissionable waterials' used in nuclear weapons. Although such an assessment ia plainly included in the larger project, mentioned inbove respecting the estimate of ihe impact in the USSR of differing arms Limitations, the urgency of obtainingon the impact of the two freeze proposals is such as to suggest that the present separate request be handled as promptly as possible. In view of the need foi

speed, oil "theC is wanced is the rough order of magnitude (in dollar equivalent) of the impact of these two. ;y. .'.

" Mrs. Sivard is the ACDA project officer for the purpose of the assessment of the inpact in the USSR of

control limitations, 'including the.twoproposals. It is suggested that the appropriate.

. representatives gee in touch with her for anythey may.

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