Foreign Relations of the United States, 1969–1976, Volume XVI, Soviet Union, August 1974–December 1976

267. Memorandum From the President’s Assistant for National Security Affairs (Scowcroft) to President Ford¹

Washington, February 23, 1976.

SUBJECT

• Special National Intelligence Estimate: “Implications of the 1975 Soviet Harvest”

The Director of Central Intelligence, with the concurrence of the United States Intelligence Board, has issued a Special National Intelligence Estimate on the implications of the disastrous 1975 Soviet harvest (at Tab A).² The following paragraphs review the magnitude of the grain shortage in the USSR and measures being taken to cope with it, the domestic political consequences, the implications for U.S. grain sales this year and beyond to the USSR and possible related political leverage, and the impact on Soviet grain customers in Eastern Europe. A principal conclusion of the Estimate is that the “leverage” inherent in a temporary Soviet grain dependency on the U.S. is limited.

Developments in 1975

The 1975 crop failure in the Soviet Union was the worst since Leonid Brezhnev came to power in 1964. Production of all major crops suffered from severe drought during much of the 1975 growing season and grain production—140 million tons or 50 million tons below the average for 1971–74—was less than two-thirds of needs. The grain shortage, in particular, had far-reaching consequences:

—The livestock sector of the economy was hardest hit in 1975, despite government efforts to maintain the herds by such desperate measures as shipping animals from drought to non-drought areas, feeding livestock low-grade feedstuffs, cancelling longstanding export commitments to Eastern Europe and purchasing 27 million tons of foreign grain. State and collective farms began distress slaughtering of hogs and poultry late last summer and scattered sources report that private owners of livestock were also killing their animals during the fall. As a result, inventories of hogs and poultry dropped 20 percent and 15 percent respectively during 1975.

—The consumer was generally unaffected last year by the poor harvest, but by late in the year shortages of some food products—notably flour—were being reported in parts of the drought stricken area.

—Soviet GNP growth fell to about 2½ percent last year, a drop from 4½ percent in 1971–73, due in substantial measure to two successive years of decline in agricultural output.

—Imports of grain cost the Soviets over $1 billion in 1975, increasing the hard-currency deficit to an estimated record $4.7 billion.

The Outlook for 1976

The main impact of the 1975 crop failure will be felt this year and the consumer will be hardest hit. Probably the most serious problem in 1976 will be an expected one quarter drop in per capita meat consumption. In addition, an expected downturn in egg and milk production from 1975 levels will further erode the quality of the Soviet diet. Domestic and imported feed supplies will not be sufficient to support livestock inventories at the January 1, 1976 level and further distress slaughtering of livestock will occur at least in the first quarter of 1976. Prolonged shortages of meat will therefore be common through the summer and probably for the remainder of the year.

Consumer reaction to the expected meat shortages is difficult to predict. While the Soviet people have traditionally accepted programs to build the military and boost industrial production as justifying slow growth in living standards, food shortages and price increases caused by Khrushchev’s agrarian policies sparked considerable civil discontent and some rioting in the early 1960s. The 1976 contraction in meat supplies is expected to be unusually severe and comes in the wake of regime promises which have aroused expectations among consumers. Additionally, the government has done little to prepare consumers for the coming shortages. As a result, morale will undoubtedly sag and tensions will grow during the next few months, reaching a peak in late spring and early summer when shortages of livestock products will be most severe. There will be widespread grumbling in urban centers and occasional disorders are possible outside the major cities, especially if an equitable form of rationing is not enacted.

The government’s control mechanisms are adequate for their tasks but a pervasive malaise is likely. Criticism and debate within the regime on agricultural policy can be expected to mount.

In the area of foreign trade and payments, grain imports will be the main cause of a hard currency deficit of $3–5 billion in 1976. While equipment purchases contracted in previous years will keep 1976 Soviet imports high, Moscow is apparently reducing its planned cash expenditures abroad. There is, however, no indication that the USSR’s longer-term policy of increasing imports of high-technology Western products is changing.

As in the past, no slackening of key military programs is expected as a result of the crop failure. The poor harvests of the early 1960s did not hinder the first major buildup of Soviet strategic weapons and the poor harvest of 1972 came at a time when the Soviets were preparing a number of new strategic missiles for production and deployment. The new Five Year Plan suggests that the military establishment will remain insulated from the effects of last year’s harvest. In fact, it appears that the plan allows for a rise in expenditures for military and space programs.

Another harvest failure in 1976 would force further large reductions in livestock numbers and additional massive imports of grain from hard currency areas. This, in turn, might force the USSR to make substantial cutbacks in non-agricultural imports from the U.S. and elsewhere to avoid a rapid build-up of foreign debt. The Soviet consumer would face another reduction in meat supplies and, as the meat queues lengthened, the leadership would have to decide whether formal rationing should be initiated. Another poor harvest in 1976 or 1977 could generate domestic difficulties on a scale that would affect regime cohesion. The succession problem would then take on more urgency, and the chances of factionalism would increase as the agricultural issue became critical.

Soviet Need for U.S. Grain

Even if the grain harvests in the next several years are average or moderately above average, the Soviets will have to import from the West more than the 6–8 million tons per year stipulated in the US–USSR grain agreement. The Soviet demand for U.S. grain depends on hard to predict Soviet requirements and on production prospects in supplier countries. Additionally, over the longer term the U.S. share of the Soviet grain purchases could be considerably reduced if the Soviets are willing to develop the markets of smaller exporting countries.

While chronic argicultural problems may exert some moderating effect on Soviet calculations about adventurist foreign activity, Moscow probably believes that it need not take this factor into much account in specific situations, reasoning that:

—it is already entitled to buy up to 8 million tons per year;

—U.S. ability to exert leverage is limited since U.S. farm and free trade interests will oppose any attempt to limit sales in reaction to unwanted Soviet behavior, and any government controls are likely to be short-lived;

—in the short run, other countries will provide additional amounts;

—over the longer run, the Soviets could expect to shift the pattern of their imports toward other suppliers; and

—in extreme circumstances, substantial belt-tightening is possible, and this is the likely reaction of the leadership to overt foreign pressures.

Soviet behavior to date, for example in Angola, suggests that the leadership sees no need to accommodate U.S. concerns because of its current reliance on U.S. grain.

Further successive crop failures, however, would create import needs that only the U.S. could satisfy. On occasions when the leadership wants to exceed the 8 million ton level of the five year agreement, it will probably judge that it should avoid threatening or highly offensive behavior in other arenas for a time. And if the bilateral détente relationship came under serious challenge, either in the U.S. or USSR, the advantages of the grain arrangement would be one of the significant arguments in Moscow in favor of keeping that relationship on an even keel and promoting mutual interests.

In sum, the DCI and the USIB judge that the “leverage” inherent in a temporary Soviet grain dependency is limited. The stringencies that would face the regime are unlikely to be so desperate, nor the extent of U.S. power to withhold goods so great, as to compel the USSR to substantially alter any important element of its domestic or foreign policy in response to outside pressure. Indeed, overt pressure from abroad would probably unify the leadership behind a negative reaction. If the result were reduced access to foreign grain, the regime would, we judge, be able to maintain control over increasingly disgruntled consumers.

Implications for Eastern Europe

The East European regimes stand to be tested as a result of the 1975 harvest. More than half of their normal grain imports come from the USSR, and these have been cut off for the current crop year, forcing them into Western markets. This phenomenon is likely to recur, probably compelling a reduction in East European imports of Western capital goods (of which the U.S. share is small). Any sharp reduction in living standards in East Europe carries with it a heightened risk of popular disorders, more so than would be the case in the USSR. While the USSR probably will provide some financial assistance to its clients in their time of troubles, it will resist any accelerated redirection of their trade patterns toward the West. This will be a persistent dilemma for both the Soviets and the East Europeans.

This memorandum is forwarded to provide you with the intelligence community’s initial assessment of the impact to be expected from the Soviet crop failure. We will continue to monitor developments in the USSR and Eastern Europe closely and to examine the implications for U.S. policy.

1. Source: Ford Library, National Security Adviser, Presidential Country Files for Europe and Canada, 1974–1977, Box 18, USSR (30). Secret. Sent for information. Although no drafting information appears on the memorandum, Clift forwarded the text in a February 19 memorandum to Scowcroft. “The Estimate, prepared at our request,” Clift explained, “reviews the magnitude of the resulting serious grain shortage in the Soviet Union and measures being taken to cope with it, the domestic political consequences, the implications for U.S. grain sales this year and beyond to the USSR and possible related political leverage, and the impact of the harvest on Soviet grain customers in Eastern Europe.” (Ibid.) A note on the memorandum from Scowcroft reads: “The President has seen.” Ford also initialed the memorandum. According to an attached correspondence profile, the President noted it on February 25.
2. SNIE 11–6–76, “Implications of the 1975 Soviet Harvest,” dated February 10; attached but not printed. A copy is in Central Intelligence Agency, Electronic Reading Room.