94. Memorandum From Richard T. Boverie of the National Security Council Staff to the President’s Assistant for National Security Affairs (Scowcroft)1

SUBJECT

  • Senior Review Group Meeting on Strategic Stockpile Policy— Thursday, July 22, 1976

There will be a meeting of the Senior Review Group at 10:30 a.m., Thursday, July 22, 1976. The purpose of this meeting is to review the [Page 405]final stockpile study (NSSM 228) report (Tab I)2 and reach agreement on a recommendation (or alternatively, limit the number of options) for Administration stockpile policy to be presented to the President.

Background

In August 1975, the President called for an interagency study to examine alternatives to the current Strategic Stockpile Planning Guidelines (NSDM 203)3 issued by President Nixon in February 1973. The study was prompted by Congressional refusal to consider Administration bills for disposal of material from the stockpile. Since December 1973, Congressman Charles Bennett (D-Florida), Chairman of the HASC Seapower Subcommittee, has held up all of our disposal requests. Additionally, the earlier NSDM 197 Critical Commodities study4 had indicated probable inadequacies in stockpile objectives for a few key materials.

An initial report was completed by the interagency group in January 1976, and provided a methodology for determining stockpile objectives. This methodology represents a truly major increase in the degree of sophistication in our approach to stockpile structuring and planning. It allows selection of the elements of the economy which are to be protected by the stockpile and the degree and length of protection for each element. Unlike current guidance, this new approach allows alternative entering assumptions regarding the size and intensity of postulated conflicts, the time period over which wartime demands would be made on the stockpile, and the extent of protection of both the military and civilian sectors of the economy. This “year-tier” matrix planning methodology was outlined for you in an earlier memo (Tab B) to the President.5

The study effort just completed was chaired by General Leslie Bray, Director of the Federal Preparedness Agency (FPA), and included representatives of State, Treasury, Defense (including JCS), Interior, Commerce, OMB, and CIEP. All participating agencies agree that the methodology is a considerable improvement over the current form of planning guidance. The agencies have differing views, however, as to kinds of contingencies for which we should stockpile and the extent to which the stockpile should provide for certain aspects of civilian economic demand. A brief review of past policy may be useful in examining the relevant issues.

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FPA currently implements the 1946 Strategic and Critical Materials Stock Piling Act. Using Presidential guidance, FPA determines what materials should be stockpiled, and in what quantities. FPA carries out acquisition, storage, and disposal of materials based upon an annual plan. In gross terms, the stockpile grew in the 1950’s and was subsequently reduced in the late 1960’s and early 1970’s. In 1973, President Nixon changed the planning guidelines (NSDM 203, Tab E) with a resulting significant reduction in stockpile objectives, from $6.4 billion to $700 million.

Congressional concern that this new policy could harm national security was reinforced by the oil embargo and threat of cartel-like supply disruptions in other critical materials. Congressional refusal to consider Administration disposal requests meant that the existing stockpile, currently valued at approximately $6.8 billion, could not be reduced, even for materials deemed to be excess under the most conservative criteria.

Issues for Decision

In establishing a comprehensive stockpile policy, it is necessary to make choices and decisions in three general areas: (1) the roles or purposes of the stockpile; (2) the method of translating these purposes into specific stockpile requirements; and (3) a process whereby annual stockpile planning can be implemented and updated with changes in data and, if required, in the guiding policy itself.

1. Purpose of the Stockpile. The stockpile has traditionally been viewed as a hedge, an insurance policy, to protect against wartime shortages of critical materials caused by both increased consumption and interruption or loss of overseas sources of supply. Within our stockpile study, there is basic agreement that some degree of such insurance is necessary. There are differences, however, as the extent of protection which should be provided, and the options presented in the stockpile study reflect in part these differences. The differences are of three types: nature of assumed conflict, warning time and war duration, and extent of protection of the civilian sector of the economy.

A. Nature of Assumed Conflict. Traditional stockpile planning (i.e., prior to NSDM 203 in 1973) has postulated very large-scale worldwide conflicts and derived stockpile objectives based upon these World War II-type scenarios. Current military force structure planning utilizes different kinds of assumptions. The participating agencies support two options which assume contingencies which only partially mirror US strategy for force structure planning.

Option A, supported by OSD, JCS, State, Commerce, Interior, and FPA, assumes a “two-front war” in Europe and Asia. This scenario falls somewhere between the “one and a half” war planning guidance [Page 407]resulting from NSSM 3 (NSDMs 276 and 230)7 on the one hand and traditional World War II-type assumptions (10–15 million men under arms) on the other. OSD and JCS have had some difficulties with the fact that this difference exists, and OSD has argued in its formal study comments (Tab E, Appendix)8 that Presidential action on the stockpile be deferred pending a “NSSM 3” review.

Option E, favored by OMB, Treasury, and CIEP, postulates a one-front war with no redeployment of forward-based forces from the other side of the world. In simplistic terms, this option yields a lower stockpile objective because attrition and resupply computations are applied to a smaller force structure base than in Option A. While this position’s proponents argue primarily on the basis of their assessment of the comparative likelihood of the two levels of conflict, they also argue that their “war” more closely reflects the strategy NSDMs than does the Option A scenario. Option E appears to be favored, too, in great part because of its very low costs compared to the other options.

B. Warning Time and War Duration. Both Options A and E assume a full year’s warning time in which to mobilize for war. This is again a traditional stockpile policy assumption, and differs significantly from current NSDM guidance and OSD planning for war-fighting which assume only 23 days (30-day pact mobilization with 7-dayNATOwarning lag).

Because of OSD/JCS concern about using a different mobilization assumption in stockpile planning than in other planning, General Bray inserted Option B, a “no warning” scenario consistent with current OSD policy. OSD and JCS have continued to support the larger Option A (larger because of the increased industrial capacity—and thus material consumption—associated with war years preceded by the one-year mobilization “running start”). However, this issue may be raised at the meeting.

The question of war duration and its relation to stockpile size presents a similar kind of issue. Both Options A and E provide three years of material supply for wartime consumption levels. Arguments have been voiced, particularly by Treasury, that the likelihood of large-scale wars remaining conventional for extended periods is not great, and that stockpile objectives for less than three years should be adequate. While Treasury has accepted a three-year package in Option E, they (and OMB and CIEP) may reopen the year issue should the meeting move toward consensus on Option A. Note that the three-year [Page 408]stockpile involves no tapering off, and is described as providing for the first three years of a war of unspecified duration.

C. Extent of Protection of the Civilian Sector of the Economy. This is undoubtedly the most difficult conceptual issue to be resolved, and will probably require some detailed explanation to the SRG by you or General Bray. A brief description of the stockpile study methodology in this area may clarify some points regarding civilian requirements.

In each of the five options, normal peacetime civilian economic requirements are altered rather significantly to impose conditions of wartime austerity. These alterations include reductions in: standard of living (up to 10 percent), housing construction (up to 75 percent), and durables consumption (up to 50 percent). After these adjustments are made, the remaining civilian requirements are split into two tiers, Essential and General Civilian. The term “Essential” is an unfortunate label, because it does not imply “essential” in terms of the functioning of the economy. Both categories, Essential and General, are defined as necessary to support the economy, even under austerity assumptions.

Instead, “Essential” and “General” involve two further levels of categorization. Within the Essential group are products “more directly relevant to the war effort” and requiring inputs of strategic materials for which there are no “non-strategic” substitutes. The “General” category may be made in varying degree from substitute materials and is “less supportive of the war effort.” The supporters of Option A (DOD, State, Commerce, Interior, FPA) believe that a stockpile should provide for both of these categories. The proponents of Option E (OMB, Treasury, CIEP) feel that the degree of austerity appropriate for general war is consistent with providing only for the “Essential” category. This latter position is influenced in no small way by the fact that, for any stockpile option using this methodology, fully half of the materials requirements are generated in the “General Civilian” category. It can be expected, then, that should the SRG move toward Option A, OMB, CIEP, and Treasury will raise this issue as a way of reducing that larger option’s ultimate pricetag from $10.2 billion to $4.7 billion (see page V–4 of the report for Option A’s year-tier breakdown).

2. Method of Translating Stockpile Purposes into Objectives. There is basic agency agreement that the study methodology provides a much improved tool for setting stockpile objectives based upon a set of agreed input assumptions. Because the study’s planning model does represent a sophisticated tool for deriving objectives, you should seek to reaffirm agency acceptance of the approach, subject to updating in the annual materials planning process. While we will not attempt to detail here some of the rather esoteric aspects of the model and agency staff level concerns about them, you should be aware that certain of these could be raised. If such issues are raised, it would be appropriate for [Page 409]you to suggest that they be left to staff level resolution, rather than be addressed by the principals.

3. Annual Stockpile Planning. The important aspect of Chapter II of the study is that it is an FPA product inserted after initial agency comments on the final report. As such, it has received only cursory agency review, and has caused some working level consternation and cries of an “end run.” In fact, the planning process contains little in the way of surprises. It calls for interagency participation on an annual basis and recommends a Presidential review of the stockpile every four years. While you may hear procedural grumblings on Chapter II, there should not be any significant opposition to its substance.

Outcome of the Meeting

You should attempt to secure SRG acceptance of a single option, and this will most likely involve Option A or some variation thereof. If this is not possible, the arguments for and against Options A and E should be highlighted for Presidential consideration, perhaps at an NSC meeting.

Conduct of the Meeting

Les Bray will be prepared to review for the SRG the background, options, and major issues, and has prepared briefing charts (Tab H)9 along those lines. You should raise the following specific issues for discussion and decision:

—Type of War (Nature of Assumed Conflict)

—Warning Time and Duration (only if raised; study currently implies consensus on one-year warning, three-year stockpile objectives)

—Extent of Civilian Economy Coverage (this issue applies both between Options A and E and within the context of either individual option)

—Acceptance of the study’s methodology for determining stockpile objectives (reaffirm)

—Acceptance of the study’s recommended planning process (Chapter II)

RECOMMENDATIONS

We suggest that you take a position on the above decision issues as follows:

Role of the Stockpile. The stockpile is a hedge, an insurance policy, against catastrophic failure of our military capability and wartime civilian economy under certain intensive war scenarios.

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Type of War. It seems prudent to base stockpile requirements on military contingencies at least as great as those used to plan force structure. As such, the “two-front war” assumption from Option A appears to represent an appropriate scale of warfare upon which to base a stockpile, approximating as it does the general level of conflict assumed for large-scale conventional war scenarios in current strategy guidance (the “two-front war” of Option A is of a similar magnitude to the somewhat ambiguous guidance in NSDMs 27 and 230).

Warning Time and War Duration. The one-year mobilization and three-year stockpile objectives are also consistent with maintaining a hedge. It is important to view the kind of stockpile derived from these assumptions and the type of insurance which it provides for various contingencies rather than dwell on individual entering assumptions.

Extent of Civilian Economy Protection. As to the extent of civilian economy protection, the disputed “General Civilian” category does include aspects of wartime economy which are “necessary” or “essential” to civilian needs, even under significant austerity assumptions.

The Methodology and Planning Process. The methodology and planning process proposed in the study are significant improvements over the past, and provide a vehicle for continuous review and updating of both requirements and data. Such a planning approach is mandatory, given the nature of change regarding military equipment, materials technology, substitutability, and supply and costs for individual materials.

Decision Flexibility. The chart on page 1410 of the Executive Summary indicates that for the first five years of acquisitions and disposals, there are major similarities for the various options. Over this period, we foresee a measured pace of purchases and sales designed to avoid market disruptions. Additionally, there is agency agreement on the need to dispose of large amounts of current stocks not required for any of our contemplated options. The characteristics of this mid-term schedule give us a high degree of decision flexibility.

Opportunity for Future Review. Even five years of acquisitions and disposals based upon one option do not lead us too far afield from the objectives of any other option. We can plan on a decision now knowing that subsequent review (the study suggests four year intervals) will allow us to modify our basic program if necessary, and we will have the advantage at that time of updated data and military information.

Congressional Aspects. Congressional feelings on the issue appear to argue for a significant shift on our part from the NSDM 203 guidelines back toward “traditional” stockpile planning in order to secure legislative support for our backlog of disposal requests. The kind of assumptions about war in[Page 411]tensity and duration and coverage of the civilian economy provided in Option A appear to constitute such a shift, while the Option E assumptions do not.

Compromise Considerations. If we cannot reach agreement on Option A as the appropriate choice, we should attempt to modify that option without changing its assumptions regarding a two-front war and the civilian economy. This could take the form of a recommendation that we stockpile for the first two years of the Option (yielding a two-year $6.6 billion cost versus the three-year figure of $10.2 billion), or retain only two of the three years of the General Civilian (GC) tier (this yields an $8.4 billion total). Compromises such as this would maintain much of the Congressional appeal of this Option compared to current (NSDM 203) policy or to Option E.11

[Omitted here is a list of the contents of Scowcroft’s briefing book.]

  1. Source: Ford Library, NSC Institutional Files (H-Files), Box 17, Senior Review Group Meeting, 7/22/76—Strategic Stockpile (NSSM 228) (1). Secret. Sent for information.
  2. Document 93.
  3. Document 3.
  4. NSSM 197/CIEPSM 33, “Critical Imported Commodities,” March 5, 1974, and the interagency response to it are Documents 255 and 260 in Foreign Relations, 1969–1976, Vol. XXXI, Foreign Economic Policy, 1973–1976.
  5. Document 68.
  6. See footnote 3, Document 21.
  7. Document 21.
  8. The appendix to Tab E is a copy of NSDM 203 ( Document 3).
  9. Attached, but not printed.
  10. See footnote 4, Document 93.
  11. No record of the SRG meeting was found. However, Boverie briefly summarized its results in an August 5 memorandum to Scowcroft: “At the July 22 SRG meeting, the discussion indicated areas of agreement and of dispute, and helped to focus upon issues for Presidential decision.” (Ford Library, NSC Institutional Files (H-Files), Box 12, NSC Meeting, 8/9/76—Stockpile (5))