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Printed for the Cabinet. May 1949

The circulation of this paper has been strictly limited. It is issued

for the personal use of

Frook

Sir Norman look

Copy No. 31

TOP SECRET

C.P. (49) 123

26th May, 1949

CABINET

SOVIET INDUSTRIAL POTENTIAL

MEMORANDUM BY THE SECRETARY OF STATE FOR FOREIGN AFFAIRS AND THE MINISTER OF DEFENCE

With reference to C.M. (49) 11th Conclusions, Minute 4 (2), we circulate, for the information of our colleagues-

(i) a memorandum on the Soviet industrial potential prepared in the

Foreign Office (Annex A);

(ii) a memorandum on the economic war potential of the U.S.S.R., prepared

in the Ministry of Defence (Annex B).

The first compares the economic resources of the Soviet bloc with those of the rest of the world under various groupings of countries, and makes certain deductions as to the resources available for armaments having regard to other needs. The second examines current intelligence estimates of the U.S.S.R.'s military strength in the light of her economic resources and by comparison with the United Kingdom. We are jointly agreed on these two memoranda.

2. Although the conclusions put forward in these papers are necessarily tentative, they throw an interesting light on Russia's military strength, both present and future. It will be seen that the proportion of the national income devoted to armaments proper (as opposed to pay and maintenance of personnel) is not so very much greater in the U.S.S.R. than it is in the United Kingdom and the United States (the figures being 8 per cent., 5 per cent. and 4 per cent. respectively). It would be wrong, however, to conclude from this that Russia is less of a menace to her neighbours than is commonly supposed. In the first place, she devotes a larger proportion of her total defence expenditure to the mainte- nance of service personnel than either the United Kingdom or the United States, with the result that, while only spending about 21⁄2 times as much on actual arma- ments as we do, she maintains armed forces roughly 5 times the size of ours, amounting in all to about 4 million men. It must also be remembered that Russia has at her disposal the resources of the satellite countries, whose forces have standardised arms and training with the Red Army, making a greatly increased total force. In the past, Russia has tended to rely on her overwhelming mass of man-power: these figures seem to show that that is still her policy and that sheer weight of numbers must continue to be reckoned an important factor in her favour. Moreover, although Soviet industrial production is at present greatly inferior to that of the Western Powers, this disparity is likely to be sharply reduced in the course of the next ten years. It is also probable that the Soviet economy, being more simple than that of the United Kingdom or the United

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