Created: 3/18/1963

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MEMORANDUM: Soviet Policies: The Next Phase


number of recent developmentsthe Soviet leaders have completed apolicy reassessment and decided on aline of action. The new Soviet coursedecisions to defer once again anyof resources away from the defense effort

to consumer goods programs. Moreover, military programs may have been adopted which would affect investment for general industrial expansion and thereby slow general economic growth.

decisions should have importantpolicy implications. There is aa "pause" is required in internationalwhile the Soviets attempt to build upstrength. During this phase theon sacrifice will militate against anyof detente, any imputation of goodto the West.




MEMORANDUM: Soviet Policies: The Next Phase

Khrushchev has given the Sovietloomy forecast of their lot and of Sovietabroad for some time to come. His election speech ofebruary and subsequent privateto Western diplomats suggestost-Cuban policy reassessment has been completedeneral line of action decided.

The new Soviet course rests on the"difficult" decisions concerning the serious problem of allocating economic resources* As1hrushchev has been forced once again to defer any attempt to redistribute resources away from the heavy industries supporting theeffort to the consumer goods program. He

has justified this on the ground of an ominoussituation and the increasing importance of keeping up in the arms race, lest the "balance of power" shift decisively against the USSR. In his speech the Soviet premier acknowledged that the "national economy" is growing more slowly"reality"oncern for defenseinvolving "enormous sums" and "enormous resources." In an unusually frank statementsaid that maintaining this defense program "diminishes, and cannot but diminish" the prospects for the consumer.

is still committed to athe competing sectors, but for theproponents of defense clearly have wonwith the advocates of more investmentand other consumer-oriented sectors*



How long this solution will prevail is not clear, but Khrushchevong-term effort wasto improve the USSR's military position. The arms race will "obviously continue"ong period; old armaments will have to be renewed "all the time."



The Soviets cannot afford to underestimate military requirements, as Stalin didut must bofor the decisive "initial period" of the war, toetaliatory blow "on the very first day."

general direction of Soviet economicpolicy seems to have been defined, butimplications are not clear. The Sovietis capable of bearing the defense burdenby Khrushchev, but at the cost of againany substantial rise in living standardsrisking further decline in the future rate

of industrial growth. When last year's mediocre agricultural results arc considered along with the reaffirmation of defense priority, it is probable that there will notignificant improvement ln living standards Beyond the question of consumption,emarks raise thethat military programs have been adopted which will affect investment for general industrial expansion and thereby slow general economic growth.

Khrushchev's statements have an air of finality, but he probably came to these decisions reluctantly; the problem of resource allocation will continue to plague the leadership and it isthat sooner or later this question will be re-opeued. Indeed,op planning official publishod an article repeating Khrushchev's earlier argumenthift of resources away from heavy industry toward consumer-oriented sectors. Ifreact to future disappointments withof discontent on the scale this line may acquire greater force. However, theof defense, having prevailed again in the policy debates, aretrong position to win future arguments and even put forward new demands,

The overall impression given by Khrushchev is that the developments of the past three years have finally brought him to abandon for the indefi-nate future0 hopes for easing the military burden on the economy through streamlining theestablishment. While we still think Khrushchev may one day reopen the question of force reductions, he clearly does not think it feasible to push any drastic measures of this sort at this time. This speech and his private remarks are clues that the Soviets have found no inexpensive weapons system or low-cost strategy to satisfy their military require-

ments .


That Khrushchev has opted forrogram should have some important implications for Soviet foreign policy. First, iturther decline in confidence and expectations, already increasingly apparent in tho last two years and, in our view, an important part of the motivation fer the Cuban Second, there Is the recognitionpause" is required in international affairs, while theattempt to repair their position. Third, there is the appreciation that real military strength is still tbe vital ingredient ir. tte balance of power. Fourth, the internal stress on sacrifice tends to militate against any resumption of detente, anyof good intentions to the West.

The Cuban crisis has, then,urning point. In effect, Khrushchev seetcs to have decided that the "world relation of forces" no longer supports the broad political offensive he initiatedis fundamental calculations about "'contradictions"

in the Western alliance, the growth of Soviot economic and military power, the cotesiveness of the socialist camp, and the outcome cf tho revolution ln theworld have proved erroneous in sone degree.with these failures, Khrushchev could have chosen to attempt seme accommodation with the West, seeking settlements of some contentious issues. This would gain time to concentrate on Bloc and internal problems and to build up Soviet arms, and wouldcontribute to the strains in The Western alliance as the Soviet threat seemed to recede. But Khrushchev seems to have ruled out this approach, at least for now. Instead, he has Justified his economic andpolicy on the ba3ishreatening international situation, which suggests that he intends to invoke the "foreign devil." Thus tho present phase is likely to be one in which the atmospherics of propaganda will not be congenial to East-West negotiations.

9. This does not mean, hosever, that hostile atmospherics will be accompanied by aggressive actions. There is nothing in the lessons of Cuba which warrants an optimistic Soviet view of the risks in forward actlcn. On the contrary, the one point which comes through ctoarly in Soviot pronouncementsainful appreciation of US power and Whereas Khrushchev earlier seemed -to accept new chances for direct encounters with the US, first in the Congo, then in Laos, Berlin and Cuba, he now



appears sobered by the thought that the OS was on the^ verge of attacking Soviet forces in Cuba, and appalled at the options of having to counterattack or accept humiliation. The chances of Khrushchevecond such dangerous misjudgment have been considerablyven though thewhich must have contributed to this initial miscalculation remain operative.


10. It is only logical that the end of this offensive phase should be symbolized by theof the Berlin issueore or less continuous crisis. This is substantially what Khrushchev did in his speech ofanuary. His subsequentreflect little optimism about the possibilityegotiated settlement advantageous enough toemonstrative end to the Berlin crisis. Rather it appears that Berlin will remain as anfor agitation and propaganda, if only tothe general contention that tho international situation remains tense. Moreover, without athe Soviets retain the opportunity to make some minor enroachments on the Westerno make occasional new moves to aggravate current Western differences, or to seek better terms for aif governments change in Bonn or London. Finally, if the current respite is conceived ofemporary retreat, then Berlin will stillbea crucial issue to test Western resolve and prove Soviet power in new circumstances.


11. Talks on disarmament and nuclear testing will probably continueime, but there is not likoly toreat Soviet interest ln serious dealing on disarmament. It is even possible that the USSR will eventually disrupt the Geneva as they didhen they feci the needurther demonstration of the ominous state of world affairs. The Soviets are averse towhen they regard their position as inferior, or when they cannot bring outside pressures to bear. The next phase of Soviet disarmament policy,is likely to be confined to agitation of those partial measures which would inhibit Western defense and disrupt NATO planning for the sharing of nuclear weapons,


12. As totest ban, the Soviot position has apparently hardened since Khrushchev'secember letter to President Kennedy. Moscow professes to have understood that the US wasto settlenspections. But more important than the actual number of inspections were certain implicationsest-banwould have at this time. The presentSoviet stand is based on the judgment that, with the Chineseell-out and thepopulace being called upon for sacrifices, this is no time to encourage hopes for an East-West dotonte. In addition, the Soviets probably realize that the time has passedhree-power test ban wouldeal obstacle to the spread of nuclear weapons. Finally, the Soviets may now see the need toree hand to test again.

The Underdeveloped Areas

13. If the Soviets now expect to mako no major breakthrough in Europe, then it will become more Important to compensate elsewhere in the world, or at least to make sure that further losses are quickly and effectively contained. Theareas will continue torucial arena in the contest with the West, but it is becoming more and more apparent to the Soviets that prospects for further, significant gains in any near term are very mixed indeed. The Soviets are finding that it requires full-time effort Just to keep thethey have, let alone develop new opportunities. The Sino-Indian dispute demonstrateson-aligned country, when it is subjected to pressuresommunist country, can quickly develop strong pro-Western attitudes; the events in Iraq suggest that even the most extensive Soviet influence is subjoct to rapid deterioration, while lnrocess of erosion of Bloc positions is already well along. All this isime when the need to mobilize various international combinations against the West is greater than ever.

14. The experience of tbe last six or seven years has taught the Soviets that most nationalist leaders are reluctant to bring local Communists into their governments and aro frequently ready to turn on them with repressions. The Soviets lack promising alternatives, however, since ln very few



cases are the local parties strong onough toeizure of power on their own. The USSR's recent shrill responses to Iraqi developments and recent denudations of anti-communist moves in Algeria and Tunisia suggest current frustration on this score. Thus in some cases tho Soviets may concentrate upon building local communist strength, oven if this risks some injury to their relations with the nonaligned governments. Strong factors in this approach nay be tbe threat of Chinese Communist proselytizing among the parties of underdeveloped areas, and Cuban ambitions to lead the revolution in Latin America.

The Bloc

internal policies enunciated byand their implications for foreignto be cause for some satisfaction inChinese would welcome Soviet adoption of atoward the Hosturning away from Nevertheless, we doubtuperficial and temporary trucefrom tho present exchange of proposals formeeting. The Chinese editorialsarch, which followed receipt ofletter, make it clear that Peiping isto break the Soviet hold on themovement; the nore the USSR adoptsresemble those urged by China, the more China

is likely to press futher demandscceptance of Albania, rejection of Yugoslavia) and assert its own leadership of the world revolution. Thus, even though the Soviets will in the coning period see an advantage in quieting down public contention and may proceedeeting, Chinese terms are so high, and Chinese polemics so fundamental and bitter, that at some point the Soviets must resume the

Some Frctors of Uncertainty

if Khrushchev has settled on afor the present phase, it could beby several factors. First, there is theas long as the Soviets maintain theirpresence in some size in Cuba, they areto American pressures, which for Castro'sthe sake of their own failing prestige theyto resist. If the Cuban crisis shouldagain, it would overshadow all otherand have important effects on otherSoviet policy.


Second, the decision that the consumermust continue to give way to military needs stores up problems inside the Soviet Union which will probably requiro new and perhaps even more painful reappraisal in the future. Thereide range of internal issuesde-Stalinization, handling ofresource allocation, party-military re-lotions, and the party-state economicwhich may add up to considerable turmoil within the top leadership. These divisions probably have not been fully resolved by recent decisions and the chances are good that Khrushchev will continue to be under conflicting pressures, and that Soviet policy may correspondingly fluctuate.

A third source of further policy shifts is developments ln the Western alliance. An aggravation of divisions in Europe and between Europe and the US will encourage the Soviets to revive their hopes and pursue more actively the exacerbation of differences in the enemy czmp. inimum, the present degree of disarray probably already constitutes an argument in Moscow against any substantial "pause" in Soviot policy.

Khrushchev's present course rppears toong, hard pull, bound toense of desperation and frustration. There remains athat these pressures will force the Soviet leaders to reconsider the advantages of somewith the West. But the danger also remains

that Khrushchev will again be driven to break out of this entanglement by some audacious move abroad, even though this might appear risky or foolish.


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