Soviet Union: Moscow's Hungry Monster

By Bruce W. Nelan

Amid deeply furrowed fields 25 miles southeast of Moscow -- behind concrete walls, barbed wire and a sign reading FORBIDDEN ZONE -- sprawls the Central Aerohydrodynamics Institute. Employing 10,000 scientists and technicians, the research center combines the theoretical study of aerodynamics with practical experiments on airplanes and spacecraft. In one hangar-size workshop, stress- testing sensors cling like barnacles to prototypes of the new MiG-31 fighter and the next generation of Soviet civilian airliners, the Tu-204 and Il-114. Nearby is the T-128 transonic wind tunnel, where the space shuttle Buran and the Energiya booster rocket were tested with airstreams driven by a 1,000-kW compressor. The center is also adjacent to the Ramenskoye proving ground, the largest airfield in Europe.

The institute is one of the jewels in the crown of the Soviet military- industrial complex, the vast archipelago of factories, ministries, design bureaus and think tanks that exists to sustain and strengthen the country's armed forces. While the Soviet Union's other power centers -- the Communist Party, the army marshals and generals, the KGB -- are well known in the West, the military-industrial complex has received far less attention.

Long hidden from the eyes of foreigners and ordinary citizens alike, the complex is the reason the Soviet Union can produce better MiG fighters than passenger cars and outproduce the entire globe in missiles while coming up short on light bulbs. It is also the reason the U.S.S.R. is nearly bankrupt and economic reform has stalled. The leaders of the military-industrial complex have long been accustomed to having things their own way, and are trying to ward off change.

To a large extent, the Soviet Union was originally constructed as a military enterprise. After taking power in 1917, Vladimir Lenin and Leon Trotsky quickly forged the Red Army to fight the White Russians. Lenin's successor, Joseph Stalin, saw his first priority as building up powerful defenses to protect against "capitalist encirclement" and to preserve the "Socialist Motherland." Beginning with the first Five-Year Plan in 1928, industries were divided into A (military) and B (civilian) groups, with the A organizations having first call on all resources.

That is how it has been ever since. Kommunist, the party journal, reported in 1988 that 62% of all Soviet engineering output was military hardware, while consumer goods totaled only 6%. Because it has been secret for so long, quantifying the magnitude of the military-industrial complex can be only an approximate business. "We have no way of measuring its size," says Alexei Pankin, deputy editor of the journal Mezhdunarodnaya Zhizn. "The defense industry just takes what it wants, and whatever is left over goes to the civilian sector."

At least 5 million and possibly as many as 8 million highly trained, well- paid employees staff the thousands of factories, laboratories and offices that plan and produce Soviet weaponry. Almost all the installations are in the Russian republic and the Ukraine, with heavy concentrations in Moscow, Leningrad and the Urals. Production is checked by Gosplan, the central economic planning agency, which operates on directives and specifications from the design bureaus of defense-related ministries. The bureaus, often named for chief designers like Sukhoi, Tupolev, Ilyushin, Mikoyan and Gurevich, are the Soviet equivalent of Boeing and Lockheed.

The most remarkable aspect of this enterprise is that no one -- not even the Soviets -- seems to know how much it costs. The government sets prices arbitrarily, so they bear no relation to the actual market value of the planes, tanks and missiles produced. The weapons programs were measured by input: so much steel, titanium and manpower. "The Defense Ministry simply ordered up weapons," says Abraham Becker, a senior Soviet specialist at the Rand Corp., "and the Ministry of Finance paid the bill. Finance didn't know whether the weapons were needed, and Defense didn't know whether they were worth the cost."

While Moscow publicly puts its defense budget for this year at 96.6 billion rubles ($171.9 billion at the official but meaningless exchange rate), about 35% of the national budget, most Western analysts say the figure masks as much as it reveals. For the past 20 years, the CIA has employed laborious computations to estimate the Soviet defense outlay. They have usually calculated it at 15% to 20% of the country's gross national product. Experts in Washington now put the real expenditure at about 30% of GNP. When Richard Nixon visited Moscow recently, Defense Minister Dmitri Yazov used figures indicating that the cost is closer to 40% of GNP and that the Soviet GNP is smaller than Western estimates. Says Becker: "No society can endure that level of defense spending."

Gorbachev reached the same conclusion, and beginning in 1988 he ordered cutbacks in both military production and manpower. He also directed defense plants to convert further to civilian production. They have always had nonmilitary production lines to take up the slack in weapons cycles, but now they were told to increase the proportion of consumer goods from 40% of their total output to 60% by 1995. If the military-industrial complex was as competent as it claimed, Gorbachev wanted to use it as the locomotive to power his economic reforms.

None of that was to the liking of the bureaucrats in charge of the factories. Of more than 5,000 military enterprises, only 400 began the conversion process and fewer than a dozen have completed it. "Conversion simply isn't happening," says William Hyland, editor of Foreign Affairs and a Soviet expert. "All sorts of hopes have evaporated."

After parliament abolished the Communist Party's monopoly on political power last year, radical democrats ran for and took control of city councils in the military-industrial bastions of Moscow, Leningrad and Sverdlovsk. Last September, when it looked as if Gorbachev was actually going to abandon central economic planning and accept the so-called 500-Day Plan for a market economy, the military empire struck back.

Forty-six chiefs of eight defense-related ministries signed an open letter in Pravda. They complained that new laws at both the national and local level were "aimed at destroying our complex," which was becoming the target of "destructive criticism and attacks." Such conflict, they fretted, even raised doubts about the need for the military-industrial complex. They declared that whatever changes might go on elsewhere, there had to be a "centralized system of management of defense programs." The next month Gorbachev rejected the 500-Day Plan, and economic reform came to a halt. "We have solid information," says a State Department official in Washington, "that the military-industrial complex played a critical role in blocking Gorbachev's proposals."

The Cabinet of Ministers formed last month by new Prime Minister Valentin Pavlov, a former Minister of Finance, confirms the complex's growing role in Kremlin politics. Two of Pavlov's first deputies are alumni of defense industries. Of the 38 Cabinet ministries, at least 20 have a direct role in running the military-industrial complex. At last week's Central Committee plenum, a man in uniform was added to the Politburo. He is Major General Mikhail Surkov, head of the Communist Party organization inside the armed forces. At the same time, the party secretary in charge of military production, Oleg Baklanov, was named Gorbachev's deputy on the President's Defense Council, the top military decision-making body.

"The armed forces are more influential today than at any time since Gorbachev came to power," says a senior U.S. official. Gorbachev almost confirms that himself. He said last month that the armed forces must have "everything necessary to guarantee the security of the state and the preservation of peace." He and his colleagues, he said, "will not permit any underestimation of the role of the armed forces."

The prosperity of the military-industrial complex, however, may be short- lived. It is no longer sealed off from the rest of the economy. Inflation is rising rapidly, capital investment is drying up, and the supply system has broken down. At least 500,000 skilled workers have left defense plants for civilian jobs as their salaries and privileges have eroded. People's attitudes have changed. "Once upon a time," a U.S. official observes, "the Soviet worker didn't give a second thought to walking to work and building a tank. Now he wonders why it isn't a car."

So bleak is the Soviet economic situation, says U.S. Defense Secretary Dick Cheney, that it will be impossible "to insulate the military-industrial base from the overall decay. Clearly, there has to be an impact on the size and quality of their forces and on their ability to produce weapons systems."

This year the military men and their bureaucratic allies won a 27 billion- ruble, or 37%, increase in the defense budget. At the same time, the government's budget deficit for the first three months of 1991 reached 26.9 billion rubles -- its highest quarterly loss ever -- and the country's total production fell 9%. The downward spiral is picking up speed, and some Western experts predict that the defense budget will be cut by a third over the next four years.

"Political institutions," said Lenin, "are a superstructure resting on an economic foundation." Gorbachev seems unable to control the vast and powerful institutions of the military-industrial complex, but the defense monster may eventually be tamed by the iron laws of economics.

CHART: NOT AVAILABLE

CREDIT: TIME Chart

CAPTION: THE SOVIET MILITARY-INDUSTRIAL COMPLEX . . .

With reporting by John Kohan/Moscow and Bruce van Voorst/Washington