Foreign Relations of the United States, 1964–1968, Volume XIV, Soviet Union

4. Special National Intelligence Estimate¹

SNIE 11–5–64

Washington, January 8, 1964.

SOVIET ECONOMIC PROBLEMS AND OUTLOOK

The Problem

To review, briefly and in general terms, current Soviet economic policies and problems, and to assess the course, implications, and overall outlook of the Soviet economic scene over the next few years.

Summary and Conclusions

A. A number of serious long-run problems in the Soviet economy have recently reached an acute stage. Overall growth is lagging, various sectors of the economy are intensifying competition for scarce resources, agricultural production is falling far short of needs, large wheat purchases in 1963 have greatly aggravated the hard-currency deficit, and gold stocks are nearing a critically low level. This situation is due in part to chronic Soviet mismanagement, but mainly to the burdens imposed on the economy by a series of programs too ambitious for available resources. The demands of defense and space have greatly encumbered economic growth since 1958. Recently, industry has been adversely affected, as well as agriculture and the production of consumer goods. (Paras. 1–4)

B. Soviet leaders have now launched a new effort to cope with their most intractable economic problem—the stagnation of agriculture—through a large expansion of the chemical industry, especially for the production of fertilizer. They apparently expect to finance this program from the expansion they anticipate in the economy, from cutbacks in some nondefense programs, and from large and long-term Western credits. But we also think that the Soviets will make every effort to hold down defense and space expenditures so as to release scarce resources for investment in the civilian economy. (Paras. 6–8, 10, 18, 20)

C. While defense expenditures may decline, we think it more likely that they will continue to grow, though at a slower pace than in the recent past. In the short term, the Soviet leaders have the option of reducing force levels, but in the long term they must consider the advisability of curtailing or stretching out one or more programs for advanced weapons. (Para. 20)

D. The Soviets will make sustained efforts to expand trade with the West, and particularly to obtain large and long-term Western credits. This will help foster continued restraint in the tone of Soviet foreign policy, though not major concessions of substance. (Paras. 21, 22)

E. Over the next few years, investment in agriculture and the chemical industry will greatly increase, partly as a result of the policies above outlined, partly from the natural growth of the total Soviet economy. However, chances of restoring previous high levels of industrial growth are slim, and the innate rigidities of Soviet planning and administration will continue to hamper the economy. Many of the chemical program’s current targets will almost certainly not be met, agricultural production will fall far short of projected goals, and significant benefits to the consumer will be several years in the making. (Para. 25)

[Here follows the Discussion section of the Estimate.]

1. Source: Central Intelligence Agency, O/DDI Registry: Job 79–R01012A. Secret; Controlled Dissem. Submitted by the Director of Central Intelligence and concurred in by the United States Intelligence Board.