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National Intelligence Estimate 11-3-55, Soviet Capabilities and Probable Soviet Courses of Action Through 1960, Part 1 of 5
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National Intelligence Estimate 11-3-55, Soviet Capabilities and Probable Soviet Courses of Action Through 1960, Part 1 of 5
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TOP SECRET
NIE 11-3-55
17 May 1955
102081-t
NATIONAL INTELLIGENCE ESTIMATE
NUMBER 11 - 3 - 55
55
SOVIET CAPABILITIES AND PROBABLE SOVIET
COURSES OF ACTION THROUGH 1960
(Advance Copy)
Submitted by the
DIRECTOR OF CENTRAL INTELLIGENCE
The following intelligence organizations participated in the
preparation of this estimate: The Central Intelligence Agency
and the intelligence organizations of the Departments of State,
the Army, the Navy, the Air Force, The Joint Staff, and the
Atomic Energy Commission.
Concurred in by the
INTELLIGENCE ADVISORY COMMITTEE
on 17 May 1955. Concurring were the Special Assistant, Intel-
ligence, Department of State; the Assistant Chief of Staff, G-2,
Department of the Army; the Director of Naval Intelligence; the
Director of Intelligence, USAF; the Deputy Director for Intel-
ligence, The Joint Staff, and the Atomic Energy Commission
Representative to the IAC. The Assistant to the Director, Federal
Bureau of Investigation, abstained, the subject being outside of
its jurisdiction.
DECLASSIFIED
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Authority MR92-143IL1
By be NLE Date 9/9/92
26214
TOP SECRET
CENTRAL INTELLIGENCE AGENCY
17 May 1955
NIE 11-3-55: SOVIET CAPABILITIES AND PROBABLE SOVIET COURSES
OF ACTION THROUGH 1960
CONCLUSIONS
General
A.
The totalitarian character of the Soviet political
system is unlikely to be altered in any important respect during
the period of this estimate. It appears that a struggle for
personal power, probably in a context of differences over policy,
has been going on within the small ruling group and is as yet
unresolved. Although this struggle may be sharpened during the
period of this estimate, we continue to believe that it will be
confined to the small group at the apex of the power structure,
and will not result in open violence involving the police or
military forces. (Paragraphs 1-5)
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B. The relations between the USSR and Communist China are
probably now conducted as between allied powers having common
interests and a common ideology, but also separate and potentially
conflicting national objectives. Despite the possibility of some
frictions between the two countries, they will almost certainly
maintain a relationship of close alliance throughout the period
of this estimate. The continuing dependence of Communist China
on the USSR for support of its military and economic programs
gives the USSR great influence over Chinese policy, but this would
probably not be decisive in matters which the Chinese believed
involved their own vital interests. (Paragraph 11)
Economic
C. Soviet economic policy during the period of this estimate
will almost certainly be directed primarily toward a continued rapid
growth of basic economic and military strengths and the maintenance
1/ The representatives of the Director of Naval Intelligence and the Deputy
Director for Intelligence, The Joint Staff, consider that this paragraph
overstates the degree of independence which Communist China enjoys in
matters of major policy. They believe, therefore, that the last clause
should be deleted, and the following substituted: "We believe therefore
that the Soviet leaders would almost certainly be able to apply sufficient
pressure, including the curtailment, and if necessary the withdrawal, of
economic and military aid, in order to obtain Chinese conformity to Soviet
views.
"
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"TOP SECRET
of high peacetime levels of military production. Heavy industry
will continue to be the primary focus of Soviet economic activity.
(Paragraph 20)
D. The rate of growth of the Soviet economy has been
declining in recent years and will continue to decline during the
period of this estimate. We estimate that the annual increase in
Soviet gross national product (GNP) by 1960 will probably be
slightly less than five percent, compared to a seven percent in-
crease in 1954. Although absolute defense expenditures apparently
are to increase markedly in 1955 over 1954, we believe that they
will probably increase henceforth at a slower rate and will be about
15 percent higher in 1960 than in 1955. (Paragraph 22)
E. The expansion of agricultural production and the procure-
ment of foodstuffs for the cities are problems which will continue
to plague Soviet leaders during the period of this estimate. Some
of the more recent agricultural measures like the new lands program
and the corn cultivation campaign appear to be less realistic than
the measures announced carlier. Although the results achieved will
almost certainly fall far short of plans for a nearly 100 percent
increase, We estimate that, with average weather conditions there
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will be approximately a 30 percent increase in agricultural
production in 1960 over 1954. Per capita consumption will probably
rise, although at a rate far more modest than that held out to the
people in the goverment's statements of 1953. (Paragraphs 36-41)
F. We estimate that in 1960 Soviet GNP will be roughly two-
fifths that of the US, as compared with about one-third in 1954;
however, the US economy will probably continue to draw ahead in
absolute terms, the dollar gap between the two economies increasing
from $228 billion to about $269 billions. The USSR allocates an
exceptionally large volume of resources to investment and defense --
in the case of investment about four-fifth and in defense about one-
half the amounts allocated to these sectors in the US economy.
(Paragraph 21)
G. The Soviet regime will, in the pursuit of its objectives,
continue to face difficult choices in resource allocation. On the
one hand, increasingly heavy investment outlays will be needed in
order to maintain high rates of economic growth. On the other
hand, military requirements constitute the chief competitor for
the resources on which investment must draw, Consequently, if the
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Soviet regime should choose to increase military expenditures at
a rate substantially higher than we have estimated in paragraph D
above, a reduction in the rate of growth of the economy as a whole
and in consumption levels would result. (Paragraphs 22, 35)
Military
H. We believe that, generally speaking, the personnel strength
of Soviet and other Bloc forces will remain substantially unchanged
during the period of this estimate. However, the over-all effective-
ness of these forces will increase, mainly because of the following
factors:
a. Introduction into the Soviet Air Force during the
present year of supersonic interceptors, jet heavy
bombers, and four-engine turbo-prop aircraft, possibly
heavy bombers. An increase in the number of all-
weather fighters and jet medium bombers;
b. A great increase in numbers of nuclear weapons, and
in the range of yields derived from these weapons;
c. A great increase in the number of long-range submarines;
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d.
Generally improved and modernized weapons available
to Soviet ground forces, together with changes in
organization and tactics designed to adapt these
forces to nuclear warfare.
If the USSR in fact develops the guided missiles which we estimate
to be within its capabilities, these will provide a significant
increment to over-all Soviet military effectiveness. (Paragraphs
76, 117)
I. At present the main Soviet offensive strength lies in
the capability to mount large-scale ground attacks against
Western Europe, together with air attacks against Western Europe
and the UK and an extensive submarine campaign to disrupt the
flow of reinforcements and supplies from North America. During
the period of this estimate the additions to Soviet air strength
listed above will increase very markedly the ability of the
USSR to launch air attacks against distant targets, including
the continental US. The growing submarine force will also pose
a greatly increased threat to allied naval forces and shipping.
(Paragraphs 106,107,111)
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J. During the period of this ostimate the Bloc air defense
system will probably be substantially strengthened by greater
operational experience and by the introduction into operational
units of new fighter types (including all-woather), new antiaircraft
weapons, improved early warning and GCI equipment, and guided missiles.
However, in view of the increasing capabilities of offensive weapons
and improved techniques in countermeasures, Soviet air defense capa-
bilities will probably remain inadequate to prevent attacking forces
from reaching critical target areas ofthe USSR. (Paragraph 110)
K. The chief limitations on Soviet armed forces are likely
to arise from the vast size of the USSR, the groat distances
from main interior sources of supply to several main operational
areas, the relatively inadequate road and rail network, and the
acute shortage of Bloc-registered shioping. The Soviet rail system
would be vulnerable to air attack in general war, and Soviet armed
forces would eventually suffer logistical difficulties, and especially
in operations in the Far East. Other deficiencies during the period
of this estimate will probably be in experience and training for
long-range air operations, and in certain equipment for air defense,
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together with lack of capability for long-range amphibious
and surface naval operations. The questionable political relia-
bility and relatively low combat effectiveness of many of the
Satellite forces wil continue to limit their usefulness to the
USSR, especially for offensive operations. (Paragraphs 76, 77, 97)
Probable Courses of Action
L. We believe that the principal immediate objectives of
Soviet external policy during the period of this estimate will
be (1) to promote the political and economic instability of non-
Communist states, and to render them incapable of decisive action
by fostering and exploiting neutralism and dissensions within and
among them; (2) to bring about the withdrawal of US power from its
present advanced bases around the periphery of the Bloc; (3) to
impede or offset the rearmament of West Germany and its association
with the Western Powers; and (4) to detach Japan from the sphere of
Western influence and encourage its closer association with the
Sino-Soviet Bloc. At the same time the USSR will continue to pursue its
fundamental aim of expanding Communist influence and, as opportunities
develop, of extending the area of Communist control. (Paragraph 131)
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M. The Soviet leaders probably now believe (1) that general
war would present formidable hazards to the survival of their system,
and (2) that they can make progress toward their objectives by poli-
tical action, and in some cases by localized military action.
Therefore, we believe that during the period of this estimate the
Krenlin will try to avoid courses of action, and to deter Communist
China from courses of action, which in its judgment would clearly
involve substantial risk of general war. The Soviet leaders are
unlikely to believe that Soviet, Communist Chinese, or European
Satellite forces can be used in open attacks across recognized state
frontiers during this period without running such a risk. However,
the USSR or one of the Sino-Soviet Bloc countries might engage in
indirect aggression or take action which would create a situation
in which the US or its allies, rather than yield an important
position, would take counteraction which could lead to general war.
We believe, moreover, that the Krenlin would not be deterred by
the risk of general war from taking counteraction against a
Western action which it considered an inminent threat to Soviet
security. This, general war might occur during the period of this
estimate as the climax of a series of actions and counteractions,
initiated by either side, which neither side originally intended
to lead to general war. (Paragraph 132)
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N.
We believe that the USSR will, despite the growth of its
nuclear capability during the period of this estimate, continue to
try to avoid substantial risk of general war, since the Soviet leaders
will probably still not be confident that they could attack the US
with nuclear weapons without exposing the USSR to an even more devas-
tating counterblow. However, as their nuclear capabilities grow,
Soviet leaders may come to estimate that the US, because of fear for
itself or for its allies, or because of pressures exerted by its
allies, will be increasingly deterred from initiating the devastation
entailed in a full-scale nuclear war. They may therefore come to
believe that local wars will be less likely than at present to expand
into general war, and thus that superior Bloc militory capabilities in
certain local areas can be exercised without substantial risk of
provoking general war. (Paragraph 134)
O. We believe that Soviet diplomacy during the period of this
estimate will not be directed toward a general settlement between
the USSR and the West. It will almost certainly continue to combine
moves intended to ease international tensions with other moves which
increase such tensions, and with political warfare pressures calculated
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to play upon the non-Communist world's fear of war. At present the
USSR is engaged in very active diplomacy on a number of important
issues -- Austria, disarmament, Yugoslavia, Japan -- and has made
important concessions, though no apparent important sacrifices as
yet. We bclieve that the current Soviet diplomatic efforts are
directed primarily toward preventing the rearmament of Germany in
close alliance with the West, and that the ground is being prepared
for new Soviet proposals on this subject, perhaps at Four Power
meetings during this summer. We also believe that in connection
with the forthcoming peace treaty negotiations with Japan the USSR
is likely to make some concessions in the hope of promoting frictions
in the relations of Japan with the US and encouraging Japanese neutral-
ism.
P. It is possible, however, that the Soviet leaders also desire
a substantial and prolonged reduction in international tensions that
would not only prevent German rearmament but also further their other
objectives, including US withdrawal from advanced bases and a reduction
of the incentive for the West to maintain its present defense efforts.
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The Soviet leaders may also feel that such a reduction of inter-
national tensions is desirable because of the pressure of their own
internal problems.
Q. The principal objective of Soviet policy in Europe is to
obtain a solution of the German problem favorable to Soviet interests.
Prevention or slowing down of West German rearmament and blocking the
development of West Germany's ties with the NATO powers have first
priority. To achieve these aims, Soviet policy will almost certainly
make great efforts to influence the situation in West Germany itself.
The Soviet leaders probably calculate that by sedulous encouragement
of German hopes for unification they can, for a limited time, increase
neutralist feeling in West Germany, complicate the relations of the
West German Government with its NATO partners, and undermine unity
of purpose within the NATO alliance. The settlement of the Austrian
problem, together with the recent Soviet proposals on disarmament and
the current advances to Yugoslavia, may indicate a Soviet willing-
ness in the course of further negotiations, to give up control of East
Germany in exchange for a guaranteed neutralization of united Germany
and a Soviet share in international control over German armament. We
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believe that the chances of such a development are less than even.
(Paragraphs 138, 139, 142)
R. If such measures did not, in the Soviet view, succeed in
countering the developing threat of West German rearmament, we be-
lieve that the USSR would turn to more rigorous policies, including
a sharp build-up of Soviet and Satellite military capabilities.
They might also adopt more threatening courses of action against
Berlin, or in the Far East, or elsewhere, with the purpose of arousing
fear of nuclear war in the West and causing Western peoples to demand
that their governments pursue a cautious policy. We believe that even
at this stage the USSR would still avoid courses of action which in
its judgment clearly entailed the probability of general war.
(Paragraph 141)
2/
The Special Assistant, Intelligence, Department of State, believes
that the estimate contained in the last sentence of this paragraph
should read: "We believe that the likelihood of such a development
is small, primarily because it seems to us that its uncertainties
and disadvantages, from the Soviet point of view, would far out-
weigh its advantages."
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S. We believe that the USSR is in substantial agreement
with Chinese Communist objectives to destroy the Chinese
Nationalist Government and to gain control of all territory held
by it. The primary Soviet interest in issues arising in the area of
the Formosa Strait is to exploit them in such a way as to SOW dis-
trust of the US among neutral nations and to promote a maximum of
discord between the US and its allies. We believe that Moscow
might see certain advantages in clashes between Chinese Communist
and US forces, provided it believed that the clashes would be
limited and localized. However, we also believe that the USSR will
seek to restrain Peiping from adopting policies which in the Soviet
view would carry grave risks of major hostilities between the US
and Communist China since the Soviet leaders probably believe that
such hostilities would also entail grave risk of Soviet involvement.
(Paragraph 145)
T. The Soviet leaders probably consider that if major hos-
tilities between Communist China and the US should occur, the USSR
would be presented with extremely grave choices. They would
probably give the Chinese Communists support in weapons and material,
and the scale of this aid would probably increase in proportion to
the threat to the Chinese Communist regime. As hostilities expanded
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and the threat to the Chinese Communist regime increased, they
would probably engage Soviet forces in defensive operations, to
the extent that they felt they could plausibly deny such involve-
ment. Should the conflict progress so far that destruction of the
Chinese Communist regime appeared probable, we believe that the
Soviet leaders would recognize that open intervention on their part
sufficient to save the Chinese regime would involve extremely grave
risk of general war with the US with its consequent threat to the
survival of the Soviet system. In deciding upon a course of action,
the Soviet leaders would have to weight the strengths which they could
bring to bear in the struggle against those which would be opposed
to them, and the dangers to their own regime of a possible global
war with the US against the strategic and psychological consequences
to them of destruction of the Chinese Communist regime. We believe,
on balance, they would conclude that loss of the Chinese Communist
regime would be sufficiently damaging and final to cause them to re-
sort to open intervention to save that regime. (Paragraph 146)
The Director of Naval Intelligence, and the Deputy Director for
Intelligence, The Joint Staff, believe that the last sentence
overstates the willingness of the Soviet leaders to risk their
own regime and would substitute for the last sentence:
"On balance, we believe that they would not consider the
elimination of the Chinese Communist regime sufficiently damaging,
or final, to warrant the risk to their regime which open inter-
vention would entail. "
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U.
Southeast Asia will almost certainly appear to the USSR
to be the most profitable field for the extension of Communist in-
fluence, at least during the early period of this estimate. The
Soviet leaders will probably continue, in concert with Communist
China, to support Communist subversive activities, and possibly
localized military action if circumstances are favorable. (Para-
graph 147)
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/ 63
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CENTRAL INTELLIGENCE AGENCY
SUBJECT: NIE 11-3-55: SOVIET CAPABILITIES AND PROBABLE SOVIET
COURSES OF ACTION THROUGH 1960
THE PROBLEM
To examine the political, economic, scientific, and military
strengths and weaknesses of the USSR and to estimate probable Soviet
courses of action through 1960.
DISCUSSION
I. INTERNAL POLITICAL DEVELOPMENTS
1. The Soviet political system continues to exhibit the essential
features which it acquired during the period of Stalin's ascendancy,
even though power appears now to be exercised by a small group rather
than by a single man. Its totalitarian character, resting on the
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monopoly of political power held by the small group composing the
Communist Party Presidium, remains unaltered by developments since
Stalin's death. We think it extremely unlikely that in the period
through 1960, despite possible shifts in leadership and policies,
the nature of the Soviet political system will change in any
important respect.
Problem of Leadership
2.
Since Stalin's death there has clearly been an unstable
situation at the top level of the Soviet power structure. The
elimination of Beria and the demotion of Malenkov, together with
a number of similar actions against lesser personalities, indicate
that the division of power and influence posed a serious problem
for Stalin's heirs. It seems unlikely that this problem has yet
been resolved, despite Khrushchev's apparent rise to a position of
primacy. It is not yet clear whether his position as Party First
Secretary, the key position Stalin used to gain absolute power,
will enable him to acquire a similar domination over his colleagues
in the Party Presidium. Prime Minister Bulganin and other veteran
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members of this body like Molotov, Kaganovich, and Mikoyan, all
of whom hold high governmental positions, are probably not eager
to submit to the renewed domination of one man. Alignments among
the top leaders, their relative power and influence, or the following
that each may have within the Party and Government apparatus are
unknown. For the present, major personnel and policy decisions
are probably still subject to negotiation among them. There may
be factional jockeying for some time, although we incline to the
view that sooner or later the Soviet system will revert to a personal
dictatorship. This may occur within the period of this estimate.
3. The personal power struggle has probably been taking
place in a context of differences over policy. Strongest evidence
of such differences has appeared in connection with the agricultural
program, and in particular concerning the most effective methods of
increasing agricultural production. On other issues the evidence
of divergent views is far less clear, but the Soviet leaders may
also have disagreed among themselves concerning the allocation of
resources among the defense, investment, and consumption sectors of
the economy. Except on agricultural problems, however, the Soviet
leadership has not publicly exhibited differences of view within its
ranks.
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4. The struggle over power and policy may be exacerbated
during the period of this estimate, unless one of the leading figures
succeeds in acquiring a clear dominance in the Party Presidium. As
death or ill health thin the ranks of the veteran members of the
Presidium, who have probably up to now been able to check the rise
of any aspirant to the full array of Stalin's power, the problem of
co-opting younger proteges may become acute, Moreover, the issues
of policy likely to develop during the period of this estimate, will
present hard choices, the resolution of which may sharpen the struggle
for personal power.
5. We continue to believe, however, that the struggles
over personal power and policy will be confined to the small group
at the apex of the power structure and will not result in open
violence involving the police or military organs. We do not be-
lieve that the police or military establishments are likely within
the period of this estimate to participate as independent factions
in the contest over power and policy. They are effectively con-
trolled by the Party, both openly and through penetration by agents,
and their leaders are probably too involved in conflicting personal
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loyalties and factions outside the professional group to permit
independent political action. However, to the extent that issues
affecting spheres of activity of the arimy and police divide the
top Soviet leadership, the bureaucratic and professional point
of view, particularly of the army, may have a greater influence on
policy decisions.
6.
Serious and prolonged instability within the top leader-
ship would probably impair the efficiency of the Party and State
administration. Insecurity and uncertainty might reach serious
proportions if a rapid series of removals, accompanied by charges
of disloyalty and trials of those unseated, occurred within the
top leadership. In this case the regime might have as much
difficulty in carrying out as in reaching its policy decisions.
However, the Soviet leaders are certainly aware of these problems
of effective administration in their totalitarian state and will
be concerned to prevent their personal struggle for power from
degenerating into widespread purges which might cause a deteriora-
tion in the administrative apparatus. On balance, we think that
the regime will surmount dangers of this kind.
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Relations Between the Soviet People and the Regine
7.
The post-Stalin leadership has clearly given increased
attention to the attitudes of the Soviet people toward the regime,
and in particular it has been concerned to improve morale
and to cultivate more positive attitudes toward its goals. Despite
the decline in emphasis on the consumer goods program, the regime
has not explicitly repudiated the promises made to Soviet citizens
in 1953. It will probably maintain the effort to raise living
standards to the extent that current defense and investment programs
permit. It probably still intends to limit arbitrary and terroristic
actions by the secret police as much as it feels is compatible with
safety.
8.
During the period of this estimate, the attitude of
the Soviet people toward the regime will continue to be characterized
more by apathy than by dissidence. It is unlikely that the promises
made in 1953 to raise living standards, or even the limited ful-
fillment which followed, have aroused demands and expectations
dangerous to the regime. The policies of the regime are likely
to be successfully calculated to allay active discontent and at
the same time to check excessive demands. However, if there should
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be such a conspicuous failure of current agricultural programs as
to lead to a decline in food supplies, or if the regime should be
obliged to resort to greater pressures on the peasantry to extract
the foodstuffs essential to feed the cities, a serious deterioration
in public attitudes toward the regime might result. Such a develop-
ment during the period of this estimate would be unlikely to threaten
the security of the regime.
9. The attitude of the Soviet people toward the particular
dangers of nuclear war is difficult to gauge. Only within the last
year has the regime begun to make some information available, and
this has been for a limited, largely military, audience. For
civil defense purposes, an intensive public information program
undertaken
would appear to be necessary. Even if this is done, popular fears
are unlikely to limit the freedom of action of the USSR in a
diplomatic crisis in anything like the same degree as would be
true for the Western Powers. Nevertheless, the desire to avoid
war is strong and articulate in the Soviet people, and the regime,
despite its ability to distort and obscure the meaning of events
by propaganda, must to some extent adapt its policies to this
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attitude. It may be obliged to do so in greater degree when the
facts of nuclear warfare become better known to the Soviet people.
II. THE USSR'S RELATIONS WITH OTHER COMMUNIST BLOC STATES
Sino-Soviet Relations
10. Sino-Soviet relations within the last year have been
marked by a continuing enhancement of Communist China's status
within the Communist Bloc. This was shown by the visit of the
Soviet
delegation in September-October 1954, by the
agreements announced in the 11 October communique restoring Port
Arthur and certain joint enterprises to Chinese control, and by
the more recent association of Communist China with Communist
policy in Europe in opposition to West German rearmament. The
trend toward greater Chinese independence from Soviet tutelage
probably was inevitable in view of the growing power of the
Chinese regime and the international prestige it derived
1/ There will be a fuller discussion of the issues raised in this
paragraph in a forthcoming estimate, NIE 100-55, "The Probable
Effects of Increasing Nuclear Warfare Capabilities upon the
Policies of Selected Countries."
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from the Korean War and from Communist successes at the Geneva
Conference. Communist China is coming to be accorded a formal
status within the Communist world more nearly equal to that of
the USSR.
11. The relations between the USSR and Communist China are
probably now conducted as between allied powers having common in-
terests and a common ideology, but also separate and potentially
conflicting national objectives. Communist China continues to
be dependent on the USSR because only through Soviet aid can it
maintain or expand a modern military establishment and because
its industrialization program is also geared to Soviet support.
This dependence gives the USSR great influence over Chinese
policy, but it would probably not be decisive in matters which
the Chinese believed involved their own vital interests. The
USSR probably would not
apply so serious a sanction
as withdrawal of economic and military aid in order to obtain
Chinese conformity to Soviet views, since to do so would
seriously threaten the relationship.
Footnote * The Director of Naval Intelligence and the Deputy
Director for Intelligence, The Joint Staff, consider
that this paragraph overstates the degree of independence
which Communist China enjoys in matters of major policy.
They believe, therefore, that the following should be
substituted for the last two sentences:
"The Continuing dependence of Communist China on
the USSR for support of its military and economic
programs gives the USSR great influence over Chinese
policy. Through manipulation of the various pressures
which they can exert, the Soviet leaders would probably
be able to forestall any development in Chinese policy
which they believed would involve a serious conflict
with Soviet vital interests. However, if such a
conflict should arise, we believe that the Soviet
leaders would be prepared to apply these pressures
to whatever extent they deemed necessary, even to the
point of withdrawal of military and economic aid, in
order to obtain Chinese conformity with Soviet views."
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12, The USSR and Communist China will almost certainly
maintain a relationship of close alliance throughout the period
of this estimate, despite the possibility of some frictions between
them. The USSR will continue to sell or grant military and capital
goods to China but will almost certainly not meet Chinese demands
to the extent of overtaxing the Soviet economy. Soviet policy may
take a more cautious view than the Chinese of the risks appropriate
to the pursuit of Communist objectives in Asia. Some issues will
probably cause hard bargaining between the two partners, but not
to the extent of endangering the alliance. The interests of both,
as well as the ideological gulf which separates both from the
non-Communist world, will continue to dictate policies a joint policy of
hostility against the West. The contribution which each makes
to the military security of the other may assume even greater
importance if the Western alliance is able to add substantial
military power in Germany and Japan to its present strength.
These considerations, at least during the period of this estimate,
will almost certainly outweigh any frictions in the Sino-Soviet
relationship.
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Soviet-Satellite Relations
13. The USSR's relations with its Eastern European Satellites
involve problems of control rather than of negotiation. Effective
direction and surveillance of the small corps of Party carecrists
in each of the Satellite regimes, together with the presence or
proximity of Soviet military forces, have been enough to insure
Soviet control. This system does not appear to have lost any of
its effectiveness despite the economic difficulties encountered in
most of the Satellites during the last two years, and despite the
uncertainties Satellite leaders have apparently felt about who
among their Moscow preceptors might win the contest for power
going on there.
14. There have been two developments of purely external
significance not affecting the substance of Soviet control, but
which are nevertheless suggestive of the form which that control
is likely to take in future. One of these has been the withdrawal
of the USSR from the direct forms of exploitation exemplified by
the joint stock companies which held important economic assets
in several of the Satellites. To replace direct Soviet control
through bilateral arrangements it is intended apparently to link
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all the Satellite economies more closely with each other and with
the USSR by a greater degree of joint economic planning in the
new Five-Year Plan period 1956-1960. The other organizational
development of importance is the recently announced collective
defense and joint command structure which will replace the bilateral
military arrangements the USSR has had with each of the Satellites.
In both the economic and military fields therefore there is likely
to be during the period of this estimate a development toward
multilateral forms of organization and planning. The result
will probably be closer integration and more efficient Soviet
direction and control of the Satellite area as a whole.
15. Popular resistance of an organized and active kind
is unlikely to appear in any of the Satellites during the period
of this estimate. Disaffection showing itself in noncooperation
in economic fields and even passive resistance might increase
in some of the Satellites if there should be further serious
deterioration in living standards. The USSR would intervene with
force or by grants of economic aid to check any development of
this kind which it believed threatened the security of any
Satellite regime. The USSR's actions in the Satellite area will
be based on the assumption that effective Soviet control there is
an essential security requirement.
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III. DEVELOPMENTS IN THE SOVIET ECONOMY
SOVIET ECONOMIC POLICY
16. The fundamental characteristics of Soviet postwar
economic policy have been enphasis upon a rapid rate of capital
accumulation, maintenance of high levels of military expenditure,
and the direction of the najor share of new capital to heavy industry.
There has recently been added a basic and probably enduring concern
for the expansion of Soviet agricultural production, as a result of
its continued failure to keep pace with the requirements of population
growth and industrial production. In 1953 marked attention was given
to consumer welfare and to agricultural problems. However, during 1954 and
the early months of 1955 there was a reduction of enphasis on the
numerous promises to raise standards of living which were made in
official pronouncements in 1953, but the emphasis on agriculture,
which was the keystone of the 1953 plan revisions, has continued
with increased intensity. There was also a reaffirmation of the
central role of heavy industry as the necessary foundation for
the entire Soviet economy, including the consumption sector.
Reductions in explicit military outlays in 1953 and 1954 are roughly
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restored to the 1952 level in the 1955 S viet budget. This increase of
military cutlays is apparently to be achieved by a reduction in the rate of
growth of consumer goods activity and capital investment.
17. The 1955 budget gives little information on details of
the current investment program, but it does indicate that investment
in heavy industry will increase about four percent and over-all
investment expenditures will decrease about one percent from the
level planned for 1954. Announcements of some aspects of invest-
ment in agriculture indicate increases of as much as 10 percent over
the record 1954 level. Nevertheless, total investment in the sectors
of the economy related to consumption will be reduced from the levels
planned for 1954. These reductions will probably still leave an in-
vestment program for these sectors substantially above the 1953 out-
lay and in most cases above the levels actually achieved in 1954.
18. The traditional Soviet policy of concentrating economic
decisions in the central party and government apparatus in Moscow
was slightly modified during 1953, and has been further modified
during 1954 and early 1955. Although the central apparatus con-
tinues to make the basic decisions in economic planning, a large
The explicit military expenditures in the Soviet budget do not
include the outlays for atomic energy and for most military
research and development. Expenditures on military plant and tooling in
any given year appear elsewhere in the budget, but these expendi-
tures are believed to be charged against defense outlays in sub-
sequent years.
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share of the detailed work necessary to implement plans has been
transferred from Moscow to regional ministries and local plant
managers in the case of nanufacturing and to local (raion) conmittees
in agriculture. Manufacturing and agricultural enterprises have
been given the responsibility, and have even been encouraged, to
use
local materials and techniques,
and to make their own arrangements for the purchase of these
materials. There have been large-scale reductions in reporting
requirements and in clerical and administrative personnel of both
the central and the local governmental apparatus. Individuals re-
leased from these positions have been largely transferred to pro-
duction responsibilities, particularly in agriculture.
19. The foreign economic policies of the USSR, although
not significantly modified, have been somewhat reoriented during
1953-1954. Soviet foreign trade has always been directed to the
expansion of Soviet influence and :
to the long-run objective
achieving
of // economic self-sufficiency. In the past, the Soviet economy
has not been in a position to accomplish much toward the former objective.
At present, however, the increased size and diversity of the Soviet
economy and the coordination of the European Satellite
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economies gives the USSR a supply of goods and trained
personnel with which it may attempt to increase its economic influence
upon the free world. Increases in Soviet offers of technical assistance,
particularly in Asia, and extension of the - geographical distribution
of foreign trade in 1954 indicate
of Soviet intent to use its
industrial economy to extend its political influence as well as to
build up its own political, military, and economic strength.
20. Assuming there is no war and in the Soviet view no Substantially increased
danger of war, Soviet economic policy in 1955-1960 will be directed
toward achieving
a continued rapid growth of basic economic
and military
strength and at the same time, as far as is conpatible with this
objective, a steady improvement in the well-being of the general
population. This latter improvement will almost certainly be at a
rate far more modest than that held out to the people in the govern-
ment's statements of 1953. Heavy industry will continue to be the
primary focus of Soviet economic activity. Capital investment will
continue to absorb a slightly increasing share of Soviet output.
Defense
expenditures- will probably increase moderately as the cost of
production,
development and maintenance of modern military equipment increases.
in
In this and the following paragraphs, Soviet "defense expenditures"
have been estimated on such a basis as to permit comparison with those
of the US; i.e., they include explicit budgetary appropriations to the
Ministry of Defense, plus estimated outlays for research and development,
atomic energy, MVD paramilitary forces, military education, and some
military construction.
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A concerted effort will be made to increase agricultural production.
A slight increase over 1954 levels of production of housing and other
durable consumer goods is also likely in the period 1955-1960. Conse-
quently, a somewhat more balanced production effort in terms of the
entire Soviet economy can be expected. Such an effort would result in
growth of per capita consumption of the Soviet people at a fairly
constant rate, although at a rate considerably slower than that
growth of the
which will obtain for the /economy as a whole.
Soviet Economic Growth
21. Soviet gross national product 5/ (GNP) increased by almost
seven percent in 1954;, as compared with a gain in 1953 of about 3.5
percent; the latter rate was abnormally low for the USSR, because
of a poor crop year and the plan revisions then taking place.
Figures for gross national product (GNP) provide the most
concise and convenient means of describing the size and con-
position of the economy of a nation, and (in a rough way) of
comparing it with other national economies. However, considerable
technical difficulties arise in calculating the GNP of any country.
In the case of the USSR, the limited nature of the available date
makes calculation and interpretation especially difficult. For
these reasons the quantitative estimates given in the following
paragraphs regarding GNP and its principal components must be
considered as approximations. We believe nevertheless that they
present a reasonably accurate index of general trends in the
Soviet economy.
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The 1954 level of Soviet output -- about $129 billion
-- was
approximately one-third that of the US at $357 billion. A break-
down of Soviet and US gross national product by end use is presented
in Figure 1. From this Figure it may be seen that, in dollar values,
the USSR allocates to consumption only abcut one-fifth as much as
the US, although its population is 30 percent larger. Moreover, while
the USSR devotes larger proportions of GNP to defense and to invest-
ment than does the US, the actual amounts thus allocated are consid-
erably less -- in the case of defense about one-half, and in invest-
ment about four-fifths of the US figures. This manner of allocating
resources gives some indication of why the USSR, with its smaller
national product, has nevertheless been able to build a large industrial
economy and military establishment within a relatively short period of time.
In order to compare Soviet GNP with that of the US, ruble estimates
have been converted to dollars by using appropriate ruble-dollar
ratios for the various sectors of the Soviet economy. Only one set
of GNP figures in dollars is presented in this estimate. It should
be noted, however, that the deficiencies in the basic data on the
USSR, the fact that different methods of valuing output can be used
with equal validity, and the Intitude of judgment involved in con-
verting ruble figures into dollars permit alternative estimates
of the size and composition of Soviet GNP. For instance, an alterna-
tive calculation of Soviet GNP gives the following results:
Billion 1954 Dollars
Percent
Consumption
54.1
41.7
Investment
36.5
28.2
Defense
23.8
18.4
Administration
15.2
11.7
Total
129.6
100.0
Such differences as these do not materially affect either the discus-
sion of economic growth presented above or the general conclusions
regarding the size and structure of the Soviet economy, but they would
affect the analysis and interpretation of some of its more detailed
aspects.
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Figure 1
US and USSR
Comparison of Gross National Products, 1954
(By End Use)
USSR
129 Billion 1954 Dollars
Investment
42
33%
Consumption
52
Defense
40,
22
17%
Adm.
10,
US
357 Billion 1954 Dollars
Consumption
250
70%
Investment
53
15%
Adm
11
Defense
39
43
12%
NOTE: In interpreting the figures for Coviet and US defense expenditures,
it should be noted that the value data presented do not necessarily reflect
the volume of armaments production (in terms of physical units, fire power,
tonnage, etc.) and do not show the amounts or proportions of gross invest-
ment which are indirectly related to military production.
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22. The rate of growth of Soviet GNP has been declining in
recent years largely because of the declining productivity of addi-
tional units of capital investment in industry, but also because
of the stagnation in agriculture and the heavy burden of military
expenditure. We believe that increasing investment in Soviet
agriculture, where the productivity of labor is very low, a
slowing down of investment in consumer unnufacturing industries,
where labor productivity is relatively high, and a reduction in the
rate of increase in the labor force will tend to continue the recent
declines in the rate of growth. We estimate, therefore, that the
average annual increase in Soviet GNP by 1960 will probably be
slightly less than five percent, compared to the seven percent increase
Accordingly, we estimate that
in 1954./Soviet GNP in 1960 will be about $183 billions and US GNP
about $452 billions. To sustain this estimated rate of growth,
investment must increase as = proportion of total product while
consumption, defense, and administration decline. Although absolute
defense expenditures apparently are to increase markedly in 1955 over
1954, restoring then to about the 1952 level, we believe that they
will probably increase henceforth at a slower rate, and will be about
15 percent higher in 1960 than in 1955. This figure compares with an
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increase of about 50 percent in investment and a GNP increase of
about 35 percent. Soviet investment expenditure, concentrated as
it is in the heavy and machine industries, constitutes in itself a
direct support for a future expansion of military effort.
23. The estimated rate of economic growth in the USSR implies
an increase in the ratio of Soviet to US output. Soviet GNP in 1960
will probably be about 40 percent that of the US. However, the US
economy will probably continue to draw shend in absolute terms, the dollar
gap between the two economies increasing from $ 228 billions to about
$ 269 billions. (See Figure 2) There will be a similar relationship
between the gross outputs of the NATO countries taken as a whole and
that of the Sino-Soviet Bloc. The absolute gap of $425 billions in
1954 will probably widen to about $509 billions in 1960.
24. Our estimates of Western product for 1960 are based upon
historical patterns of economic growth in the West. Our estimates
for Sino-Soviet Bloc output in 1960 are based on the assumption,
which we believe reasonable, that the Bloc will pursue a pattern
of resource allocation comparable to that presently existing and
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Figure 2
Soviet Bloc and West
Comparison of Gross National Products
(Billions of 1954 US Dollars)
796
636
European
NATO
308
493
European
250
NATO
Canada
36
European
NATO
178
287
Canada
29
C. China
42
211
Canada
23
E. Sats.
62
C. China
33
140
E. Sats.
49
C. China
25
292
US
USSR
183
357
US
452
US
E. Sats.
34
USSR
129
USSR
81
BLOC
WEST
BLOC WEST
BLOC WEST
1948
1954
1960
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apparently planned for the future. Both the Western countries and the
Sino-Soviet Bloc have the capability to alter the pattern of resource
use drastically, and thereby to alter the final composition and value
of the product. The capability of the West, and especially of the US,
to do this is greater than that of the Bloc because of the higher
Western product in proportion to population. However, large shifts
in the pattern of resource use cannot be as quickly or as easily
made in the West as in the USSR where the economy is closely controlled
and industry is designed for maximum convertibility to war purposes.
the West
If the Bloc and / continue to mintain full employment, considerable
their respective
changes in the composition of/outputswould have little effect on their
total volune of output in so short a period. Should either fail
to mintain full employment, the volume of output would be considerably
reduced.
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