Soviet officials and scientists were no less surprised by Sputnik's launch as Americans. The US had promissed first instrumented satellites in the space for the International Year of Geophysics (July 1957-December 1958) two years in advance, with the USSR promtly making an identical though unspecific promise. The satellites were supposed to measure the effect of maximal Solar activity on Earth's magnetic field. Participants of the special geophysics conference were invited to the Soviet embassy in Washington on the evening of October 4, 1957. The scientists were expecting to hear first details of the Soviet programme, while the Sputnik was already making the second circle around the Earth. Of course, they got bigger news than bargained. Soviet scientists were accepting congratulations perplexed as well. Their spokesman Anatoli Blagonravov was stressing that there is nothing much to the 83.8 kg and 58 cm diameter Sputnik but a thermometer, a radio transmitter, and a big battery. The guests were still wondering whether the weight is not 10 times smaller. The New York Times was very impressed next morning, while Pravda was not even arrogant.

Boris Chertok, one of the founders of the Soviet space programme, told last week more about the first launch project than he was allowed previously. His name, and that of Sergei Korolyov, were a state secret.

Chertok and his veteran colleagues disclosed that Sputnik was born out of other Soviet programme: the development of a rocket capable of striking the US with a hydrogen bomb. Because warhead weight was undetermined, its R-7 ballistic missiles were built with much thrust to spare. The warhead project hit a snag when the test launch destroyed a fake warhead, and a new fake had to be made. There were two R-7 rockets remaining, which could be tested in the meantime. Korolyov saw a chance - why test empty rockets, when they could be tried for a space launch?! But no artificial sattelite was made yet - the Academy of Science was late with preparing instumentation. Korolyov simply arranged production of a simplest sattelite - the Americans could have taken the same decision. (Americans had two rocket projects - the scientific Vanguard, and the top secret military Atlas. They had a good chance if they would have used Atlas "creatively". The Soviet R-7 rocket was not a certainty then - seven of the first eight launches were unsuccessful.)

Korolyov's team build and polished the "Prosteishiy Sputnik" (The Simplest Satellite) in 3 months. The launch was first scheduled for 6 October, but Korolyov cancelled some last-minute tests and moved the launch forward by two days, fearing that the US might be planning a launch on October 5th (for the same conference, presumably). The Soviet leaders were delighted, especially after the shock reaction of the Western Media. The simple Sputnik was worth more than a hydrogen bomb.

Immediately after the launch, Korolyov called Soviet leader Nikita Khrushchev to report the success. Khrushchev's son, Sergei, who was alongside his father at the moment, recalled that they listened to the satellite's beep-beep and went to bed.

The second sattelite was ordered for the beginning of November, the 40th anniversary of the Bolshevik revolution. There was little point to launch an empty ball again. They decided to put a dog inside - Korolyov was improvising the construction again. A stray dog Laika was launched, even if Sputnik 2 was not designed to be recoverable. She died in a few hours due to thermal shock, though it was announced for years that she stayed alive for a week.

But Soviets frustrated Americans for several years with ongoing space successes. Yet, they lost the big race to the moon - Soviet leaders did not match Kennedy's vision, and the death of Korolyov in 1966 was a big blow.

[My main reference in English is this article, republished under various headlines. I found more details in Russian and (indirectly) in German.]