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Soviet Military Budget

Great Patriotic War
Soviet Expenditures

Total defense, 1941-1945583 billion rubles
Pay and allowances189
Fuel, food, clothing total150
Remainder: construction,
other O&M and miscellaneous
from THE EVOLUTION OF SOVIET MILITARY FORCES AND BUDGETS, 1945-1953 (U) Abraham S. Becker, Edmund D. Brunner, September 1975
based on : Col. {Reserve} V. N. Dutov, ed., Finansovaia sluzhba Vooruzhennykh Sil SSSR v period voiny, Voenizdat, 1967, Translated in JPRS 622294-1 and -2, 21 June, 1974, as Finance Service of the Soviet Armed Forces During the War.
William Odom, director of the National Security Agency (NSA) from 1985-88,said in 2004 "People always argued about how big the Soviet defense budget was. I never understood why we asked the question. We're not worried about being attacked by rubles or dollars. We're worried about being attacked by rockets, airplanes, tanks and these sorts of things. The real question is how big the forces were and what their capabilities were, not the rubles that they put into it. And we had a pretty good track record on what we knew their forces to be."

Franklyn Holzman (consistently criticized the CIA for overestimating Soviet defense spending) and William Lee and Steven Rosefield (maintained that the CIA massively underestimated Soviet defense spending). Some scholars like Franklyn Holzman asserted that the Soviet defense burden wasn't much larger than officially claimed. On the other hand, William Lee, a consultant on Soviet military and economic affairs , has updated his previous work, and shows a widening gap between his higher est imates and CIA estimates (Soviet Defense Expenditures in an Era of SALT, U.S. Strategic Institute, Report 79-1 , 1979).

Soviet modernization was a prime example of unbalanced national development. Instead of rounded economic, political and general societal development, it became increasingly oriented toward the military. The resulting imbalance was attributable to overriding foreign policy and strategic considerations. In Lenin's and Stalin's days economic and military modernization was driven by the needs of sheer survival. Their post-WWII successors, however, added global Great Power dimensions to Soviet foreign policy. The new expansive policy is reflected most prominently in the USSR's growing activities on the world's oceans.

Khrushchev had consistently regarded the growth rate of the Soviet economy, the improvement of the living standards of the Soviet people, as important an index of the growing power of the Soviet cause as Soviet military might. He was willing to live with long periods of strategic inferiority so as to promote the country's economic growth. For example, between 1955-1958 he secured a decline of two billion rubles in military spending, with the savings diverted into investment and consumption, and thereby enabled the Soviet GNP to increase annually by seven percent. This is not to say that Khrushchev has neglected the defense sector; he has in fact led the pack of reformers in remolding the Soviet armed forces for nuclear warfare of his military program; cutting back the conventional arms of service to offset the great cost of advanced weapons and to nourish the economy was the other part of his scheme.

The collapse of the Soviet strategy to put missiles in Cuba seems to have generated a strong current of opinion in favor of increasing the defense establishment's share of the country's limited resources. Both the deployment in and the withdrawal of missiles from Cuba were tacit admissions of Soviet strategic inferiority. As Soviet prestige dipped low in the wake of the crisis, as one CIA analyst put it "the remaining dynamism went out of Soviet foreign policy in much the same way that air escapes from a tire and with the same resultant immobility". The Chinese and their cohorts used the occasion to discredit the Soviet leaders with charges of "adventurism and capitulation." Soviet military morale seemed to slip to its lowest level since the announcement in January 1960 of a drastic unilateral troop-cut.

Indirect evidence suggested that there was dissatisfaction among the military over Khrushchev's handling of the Cuban operation. Under such circumstances, the need to improve the relative strategic position of the USSR with genuine increments to the military became a politically irrefutable argument, and the position of the advocates of greater defense spending was consequently strengthened.

That the Soviet leadership would give greater impetus to defense was further suggested by the declaration of military superiority as a goal of Soviet policy soon after the curtain fell on Cuba. In a pamphlet on military policy and doctrine published in November 1962, the Soviet Defense Minister wrote: "The most characteristic feature of the present state of the development of Soviet military doctrine is the fact that it bases itself on the superiority of the armed forces 0% the USSR over the armies of the most powerful countries of capitalism, with respect to milltary-technological means and moral-combat qualities.

Along the same lines, the 30 March CPSU letter to the Chicom Party introduced a new slogan: "As long as there is no disarmament, the socialist commonwealth must always have superiority in armed forces over the imperialists." Since Cuba, Soviet propagandists also proclaimed current military superiority -- at times qualified and at times not--over the West. Boasts of military superiority had dropped out of the propaganda in early 1961, and until the Fall of 1962 the Soviets were content to assert military parity with the West.

Among the reasons for reintroducing boasts of current superiority, evidently, were the Soviet need to salvage some of the prestige lost in the wreckage of the Cuban operation, and, in the case of some Soviet leaders, to play down the strategic deficiencies of the USSR in order to draw off some of the urgency that other Soviet leaders attached to the problem of improving the Soviet' strategic posture.

The methods used to create massive heavy industrial and military power worked well for a generation, but they have been the cause of the accumulated deficiencies, the slow technological progress, and the inflationary pressure.

By the mid-1960s it was obvious that economic feasibility was an important constraint on the development of military capabilities. It was one thing, however, to recognize that there were limitations on Soviet economic capability to maintain modern armed forces and quite another to measure that capability for the puxpose of testing the feasibility of particular force levels. Or put another way, can "strins" in the Soviet economy caused by advanced weapon programs be effectively measured and the measurement applied in a useful way to solution of U.S. defense planning problems?

The CIA's abrupt reassessment in 1976 of its ruble defense-spending numbers led to a lack of confidence in the Agency's work among some members of the Administration and Congress. The 1975 Soviet defense budget, earlier reported as 152 billion rubles, was re-estimated at 234 billion; the procurement estimate jumped from 56 to 94 billion. CIA's analysis of Soviet military power and intentions also missed the mark in the late 1970s. A review of CIA's estimates of Soviet defense spending in 1982 found that while outlays for military procurement had leveled-off in the USSR since 1975 and the growth in total defense spending had slowed in real terms, the Agency's assessments continued to maintain that defense spending was rising at the historic rates of 4 to 5 percent per year.

There was considerable uncertainty associated with the estimated Soviet expenditures, not only present and future but also past. But accepting these figures, they gave little warrant for extrapolating into the future on the basis of trend. This is as might be expected military budgets are a product of compromise among contrary influuences and subject to seemingly unpredictable fluctuations.

In 1980 the lowest Western estimate, 48.7 billionrubles (from the Stockholm International Peace Research Institute) was nearly three times the published figure. The highest (from the U.S.Defense Intelligence Agency) more than doubled the SIPRI figure at 107 billions.

While it is an oversimplification to say that prices in the Soviet Union are what someone says they are, they bear no regular rational internal relationship which could form a basis for extrapolation. Because the USSR is a controlled and rationed economy, prices are not a reflection of buyers' and sellers independent choice in a free market. Ruble costs have no necessary relationship to real costs. The variations between the two have been indirectly and approximately expressed by intelligence (and elsewhere) in terms of divergent ruble-dollar relationships. It may be added that there is some divergence among estimates of these divergent relationships.

CIA estimates of the costs of Soviet defense programs were developed independently of the Soviet defense budget statistic, by means of a direct costing methodology. CIA began with detailed estimates of the Soviet forces and their operations, and then applied dollar prices to these weapons programs and activities. The only element of Soviet defense spending not derived through the direct costing approach is military R.D.T.& E. - research, development, test, and evaluation - which was estimated from published Soviet financial statistics. Most cost estimates were derived from US weapons costs, adjusted to "Sovietize" the weapon. Some lower-cost Soviet items were costed simply on the basis of the nearest equivalent U.S. weapons.

The estimate of Soviet defense spending in dollar terms was inherently biased in the direction of increasing the apparent Soviet defense budget. This could be seen if the US budget was depicted in ruble terms. The ratio of Soviet military expenditures to U.S. military expenditures both priced in dollars will tend to be higher than a similar ratio priced in rubles. This is an example of a statistical truth.

It is a well-known statistical fact that when pricing the market basket of one country in terms of prices in another country and make a comparison, there is usually an upward bias. This is a known statistical fact in any international comparison. That is simply because people in one country will tend to buy more of that which is relatively cheap in their country and buy less of that which is relatively expensive in their country.

And some of the more complex electronic and technical equipment in the US defense budget did not have anything comparable in the Soviet budget. It was not possible to apply the cost of a rather simpler and really obsolete Soviet piece of equipment and say that is equivalent to the F-16 against that kind of Soviet expenditure. In the mid-1970s, the F-16, looking at the increased technical capabilities would go very high on the ruble list and would probably be almost uncountable.

The denominator problem focused on the question: How large is the Soviet economy? The CIA maintained that it was 55%-60% of the size of the U.S. economy. If, as the CIA believed, the Soviet economy was huge, then the Russians would be able to support their military expansion indefinitely, leading to the inevitable policy conclusion, favored by Kissinger and later Ford, of dtente. Others estimated that the Soviet Unions gross national product was around 25%-30% of US GNP. If the Soviet economy were smaller than estimated, it would be possible to provoke them into bankrupting themselves. This was the policy ultimately favored by Reagan.

The Eleventh Five-Year Plan for 1981-85, likely to be a centerpiece of the agenda for the Twenty-Sixth Congress of the Party of the Soviet Union, may reflect some policy changes designed to improve performance. Significant improvement in the quality and quantity of performance may await basic changes in resource allocation policy, the traditional system of planning and management, the interrelations of the domestic to the foreign economy. Most of the changes represented clear costs or losses to important leadership constituencies, e.g., more modernization investment, less military outlays; more professional planning and management, less Party intervention in the economy; more reliance on foreign technology and systems, less control over key aspects of the economy.

By 1982 analysts in CIA's Directorate of Intelligence determined that Soviet defense spending had in fact increased by only 2 percent on average since 1976 and that the rate of growth of weapons procurement had been almost flat. Nonetheless, the heads of the Defense Intelligence Agency and the military intelligence services, Garthoff points out, continued to argue that "Soviet leadership is now confident that the strategic military balance has shifted in the Kremlin's favor and that the aggressiveness of its foreign policy will continue to increase as the Soviet advantage grows."

By the mid-1980s, the Soviet Union may have devoted between 15 and 17 percent of its annual gross national product to military spending, according to United States government sources. Until the early 1980s, Soviet defense expenditures rose between 4 and 7 percent per year. Subsequently, they slowed as the yearly growth in Soviet GNP slipped to about 3 percent. In 1987 Gorbachev and other party officials discussed the extension of glasnost' to military affairs through the publication of a detailed Soviet defense budget. In early 1989, Gorbachev announced a military budget of 77.3 billion rubles, but Western authorities estimated the budget to be about twice that.

Mark Harrison wrote "In the mid 1980s Soviet leaders began to regret the price they werepaying in the international arena for extreme secrecy in military affairs.New evidence shows that in the autumn of 1986 they decided inprinciple to release more information about military force levels anddefense outlays. They went on to agonize over this commitment overthe next two and a half years. Senior military and other officialsresisted and delayed implementation. The new figures that Gorbachev announced in 1989 may not have the whole truth, but were probably better than a half-truth." In 1988 military spending was a single line item in the Soviet state budget, totaling 21 billion rubles, or about US$33 billion. Given the size of the military establishment, however, the actual figure was at least ten times higher. Western experts concluded that the 21 billion ruble figure reflected only operations and maintenance costs. The amount spent on Soviet weapons research and development was an especially well-guarded state secret, and other military spending, including training, military construction, and arms production, was concealed within the budgets of all-union ministries and state committees. Apart from considerations of state secrecy, this allocation of military spending to ministries other than the Ministry of Defense reflected the Soviet approach to managing resource allocation. Weapons produced by agencies such as the Ministry of General Machinebuilding [missiles] or the Ministry of Shipbuilding Industry [ships] were essentially provided as "free goods" to the Ministry of Defense.

On 30 May 1989 Mikhail S. Gorbachev announced what he said was the "real" Soviet military budget. Gorbachev said military spending in 1989 would be 77.3 billion rubles, equivalent to $128 billion and nearly four times the nominal defense budget. He said the budget had been frozen since 1987. The figure represented 9 percent of the Soviet gross national product.

Western intelligence agencies and military experts calculated Soviet military from 12 percent to 20 percent of the gross national product. The Central Intelligence Agency said Soviet military spending is between 115 billion rubles and 125 billion rubles - the equivalent of about $200 billion.

Kremlin officials generally mistrusted official Soviet analyses of the USSR's economy, and whenever possible would read or at least scan restricted Western studies. Kosygin and Gorbachev, for instance, indicated in their memoirs that they read Western studies of the Soviet Union. Treml also found that such Western studies as Morris Bornstein's work on Soviet prices; CIA's estimates of the rates of growth of the Soviet economy and of Soviet defense spending in rubles and dollars (which were sent directly to Brezhnev); the work of Professor Gregory Grossman and others on the "second economy" in the USSR; and the report by Christopher Davis and Murray Feshbach on the deteriorating state of public health in the USSR were read by top party officials.

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