The first half of 1984 saw extensive developments in the Soviet internal political and economic situation. In January, the Supreme Soviet of the Soviet Union ratified the nuclear agreement reached with the U.S. in Geneva, which resulted in a decrease in the Soviet nuclear stockpile
from 30,000 to 24,000 warheads. This allowed the Soviet government to save additional money and resources, which were badly needed in other areas. Furthermore, three changes at the top of the Soviet political ladder took place:
Viktor Kulikov replaced Dmitry Ustinov as the new Minister of Defense of the Soviet Union. During his tenure, the Soviet Armed Forces would undergo extensive reform and modernization. Nikolai Ogarkov was recalled from Afghanistan and would take over as Supreme Commander of the Unified Armed Forces of the Warsaw Treaty Organization. Another change took place in the KGB, where
Victor Chebrikov was chosen by General Secretary Romanov as the new chairman of the KGB.Through information supplied by American spy Aldrich Ames, Chebrikov was able to dismantle the network of CIA operatives in the USSR. Chebrikov was highly respected for his skills among his American counterparts; according to Kenneth E. deGraffenreid, the senior White House intelligence official in the Ronald Reagan administration,
"One has to say that Chebrikov's term as KGB chief was the heyday of the KGB in terms of foreign intelligence. In terms of intelligence production—spies, and dishing the Americans on the secrets—they were going strong right up to the end. We uncovered 80 spies during those years. These guys were on the rise, and there was no question about their influence."
(Starting from 1984, the Red Army would undergo a massive reform and reorganization)
Facing the still difficult economic situation of the USSR and the Eastern Bloc in general, a decision was made to greatly reduce the budget of the Soviet Armed Forces, which in 1983 accounted for almost 25% of Soviet GDP. Romanov and Kunaev knew that, in the long run, such a situation would put immense pressure on the already struggling Soviet economy, so a sudden and drastic change of course was needed. In 1984, the budget of the Soviet Armed Forces would be reduced from 25% to 17.5% of Soviet GDP, in 1985 to 12.5% and in 1986 to 10%. Such a reduction would allow the Soviet government to save hundreds of billions of dollars.
Additionally, the Soviet Armed Forces would undergo extensive reorganization and reform, which included the following elements:
- reduction of the army to a more manageable number (down from 4,200,000 to 3,000,000)
- focus on the development and integration of new technologies
- withdrawal from human wave tactics and mentality: "the more tanks, the better."
- Gradual specialization of the Soviet Army
- more autonomy for non-commissioned officers and regular officers in battlefield conditions
- reduction of bureaucracy in the Army
- campaign against corruption
- focus on computing, electronic warfare, and beyond the visual horizon engagement (both air and land).
- higher professionalization.
(Romanov's reorganization of the Soviet economy would put the wellness of Soviet citizens on the first place)
Additionally, the Soviet government introduced a wide reform of the Soviet economy, which included:
- development of agriculture and the pharmaceutical sector
- development of army-factory collaboration
- expansion of the "luxury" industry
- reduction of bureaucracy and inclusion of more autonomy in economy
- focus on mechanization
(A column of newly supplied Soviet T-62 tanks to Iraq)
On the topic of Iran-Iraq, a decision was made to remain neutral in the conflict, which allowed the USSR to sell weapons to both sides of the conflict. Thanks to the choice made by General Secretary Romanov, the USSR earned badly needed hard currency from both Iran and Iraq. Nevertheless, the USSR provided much more tanks, spare parts, ammunition, training of pilots, intelligence support, along with surface-to-air missiles, air defense systems, aircrafts and helicopters to Iraq than to Iran. The USSR feared the Iranian victory over Iraq, fearing Tehran would go on to export Islamic revolution elsewhere in the world. However, Iran, after the Western embargo of 1979, was motivated to expand its own manufacturing capability and to seek short-term, clandestine procurement of spares and replacements compatible with its Western equipment base. To the extent the Soviet Union could satisfy these needs, it had incentive to do so. Some equipment was shipped from satellite states such as Bulgaria, Poland and Romania. North Korea during the Iran–Iraq war both shipped Soviet-designed weapons it made, and acting as a conduit for shipments directly from the Soviet Union and the China, even though China was a rival of the Soviets for Middle East influence. Certainly, Soviet clients, such as Libya and Syria, were providing Soviet products to Iran, and the Soviets did not announce a general embargo on them. That the Soviets were willing to do so selectively, as when they proposed shipment of advanced naval mines from Libya to Iran, saying "opposed the unauthorized transfer of their military technology to a third country" indicates that some exports were tolerated.