NATIONAL INTELLIGENCE DAILY

• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 0005301344
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 30
• Document Creation Date: June 23, 2015
• Document Release Date: September 9, 2009
• Case Number: F-2007-00571
• Publication Date: July 2, 1990

OEM
(b)(1)
(b)(3)
APPROVED FOR
RELEASE^DATE:
01 -Sep-2009
NATIONAL
INTELLIGENCE
DAILY
Monday, 2 July 1990
CPAS NID 90.153JX
2 July 1990
jQ
 Yugoslavia: Federalists' Last Stand?
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Lithuanian Territory Claimed by Moscow
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The Port of Klaipeda and Surrounding Region
Al 1945 the Soviet Union took over the part and region
which Hiller had claimed in March 1939 by threat of
force. and returned it to Lithuania. Historically pan of
Germany, the part had been transferred to Lithuania by
the Allies in 1923 when its name was changed from
Memel to Kleipeda.
IOD 17ianaara
100 Maw
The City of Vilnius and Its Environs
In September 1939, Moscow took control oflhe area that
had been under Polish occupation since 1920 and coded
it to Lithuania under a 10 October 1939 Soviet-Lithuanian
mutual assistance treaty. Vilnius, with a population of about
580,m, is roughly 50-percent Lithuanian, 20-percent
Russian and 19-percent Polish. Poles appear to represent
the largest minority group in the surrounding area-in two
districts they reportedly comprise more than two-thirds of
the population. Poles represent about 7 percent of the
total Lithuanian population, Russians roughly 9 percent,
and Lithuanians about 80 percent.
 The call by the three Baltic presidents for talks with Moscow, following
the resumption of oil deliveries to Lithuania on Saturday, suggests that
Latvia and Estonia may place moratoriums on their independence
Estonian officials yesterday told the press the three presidents
want "three plus one" talks with Moscow. Baltic officials expect
negotiations will not begin until the Soviet Communist Party's
congress that opens today has ended, probably the middle of next
Lithuanian Prime Minister Prunskiene, who supported the
moratorium decision taken in Vilnius, is nevertheless taking a wary
stance toward future talks. She told reporters yesterday that Moscow
may not accept three-plus-one and warned that Moscow is likely to
take a hardnosed position in negotiations. Prunskiene also said Soviet
Premier Ryzhkov has reiterated Moscow's claim to some current
Lithuanian territory, including the port of Klaipeda and some
military facilities.
Comment:)
Moscow is unlikely to consider a three-plus-one formula unless Latvia
and Estonia declare moratoriums on their independence declarations.
The Estonians, who feel their declaration to be the least abrasive of
the three, are likely to be the slowest to declare a moratorium.
Moscow probably will bargain hard once the talks are under way,
including raising territorial claims. Vilnius is likely to step up its
efforts to build ties to the Russian and Belorussian Republics in the
-TmrseeF"-
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 recently unveiled calls for economic sacrifice across the board and is
likely to pave the way for an agreement with the IMF.
The plan has been distributed to business, labor, and agricultural
organizations to stimulate discussion the government says it hopes
will lead to a national consensus on the need for economic reform.
The strategy seeks to promote export-led growth and increased
employment, and it outlines plans to reduce labor benefits and
protective industrial and agricultural tariffs. It calls for austere
government spending and the elimination of price controls, export
concessions, and the $540 million owed international financial
institutions. The government wants to shrink the public payroll by
eliminating jobs, reducing salaries, and selling state-owned
enterprises; the cost-cutting reforms would be balanced by greater
Comment: The administration's ambitious plan is a major step away
from the inward-looking economic policies of the past 20 years.
Public reaction has been subdued, but criticism of the program is
certain to increase as agricultural, industrial, and labor groups come
to understand how the reforms will affect them. Most of the reforms
have been recommended by multilateral institutions in the past but
never fully implemented. The plan in any event is likely to expedite
talks with the IMF about tough reforms.
 EC Economic Issues Facing Rome
The growing consensus among member states on the shape of an EC monetary union will
shift the focus of the Italian presidency to other economic issues:
- Rome will look for ways to break the stalemate over farm subsidies at the GATT
Uruguay Round by the December deadline but
will encounter resistance from Bonn and other members. Hard bargaining is likely to
continue to the last moment.
- Italy will look for ways to reach a consensus among the members on aid for the
USSR. A special EC summit in October will use recently mandated EC Commission
studies on Soviet aid requirements as a partial basis for a decision.
- The Italians are likely to make important progress in pending EC negotiations with
East European states-particularly Poland, Hungary, and Czechoslovakia-on
economic association agreements that would establish virtually free trade, greater aid,
and stronger bilateral political dialogue.
- Community talks this fall with the European Free Trade Association countries to
make EFTA part of the 1992 single market are likely to be much tougher because of
the reluctance of member states to give EFTA a role in EC decisionmaking.
Rome will continue the push to complete the EC single market by the end-of- 1992
deadline-the members have already approved two-thirds of the needed legislation-but
may also try to focus on the more controversial "social dimension" of 1992, a harmonization
of member-state labor laws that is adamantly opposed by the UK.
 Italy sees its six-month presidency of the EC Council of Ministers,
which began yesterday, as an opportunity to lay foundations for a long
period of Pan-European growth and stability based on deeper EC
integration and a wider Community role in European security and
foreign affairs.
Agreement last week at the EC summit in Dublin that a constitutional
conference on EC institutional reform will begin in December clears
Comment: In preparation for the CSCE summit this fall, Rome will
give high priority to forging a member-state consensus on the future
role of the CSCE in European security arrangements; it is leaning
toward creating a formal CSCE structure.
Italian officials favor a formal US-EC treaty but are likely to press
only for enhanced bilateral consultations on foreign policy because
most other members view a treaty to be premature while the
Community is in institutional flux.
Third World issues are likely to receive a higher profile under Italian
leadership. Rome undoubtedly will press for closer EC political ties
and increased assistance to Algeria, Morocco, and Tunisia. Italy and
other members fear the victory of Islamic fundamentalists in recent
Algerian local elections might threaten EC economic ties to North
Africa and prompt a wave of emigration across the Mediterranean.
 mm
 KCM
The increasing assertiveness of republic and local leaders on economic
matters threatens Moscow's ability to manage the economy and control
the pace and direction of reform.
Local authorities are trying to claim control over their resources and
dictate more favorable terms of trade, a trend that is gathering
momentum from the bold assertions of sovereignty the Russian
Republic's Yel'tsin-led legislature is making. Yel'tsin recently
announced his republic's intention to reduce its funding of all-union
programs; keep more of its earnings from the foreign sale of oil, gas,
and gold; and bypass Moscow to establish direct economic ties to
other republics. In addition, a growing number of republics
reportedly are refusing to honor existing state contracts for the
delivery of goods, further jeopardizing Moscow's attempts to control
the current economic plan
Moscow's plans for reforming the national economy also are being
outpaced by some of the more radical regional leaders. As the
government reworks a new reform program, local officials have
ceased waiting for Moscow's approval to expand private ownership or
put in place other rudimentary instruments of a market economy,
such as commodity exchanges and investment banks.
Comment: Local efforts to seize the economic initiative stem in part
from nationalist aspirations for greater independence but also from
Moscow's failure to allocate enough resources to local infrastructures
or to develop an effective program for reform. The trend has been
accelerated by the emergence of dynamic regional leaders-all of
them eager to take matters into their own hands and many convinced
Some Soviet economists believe this devolution of authority will
hasten the development of markets, but all are concerned about the
short-term consequences. These include increased economic
disruption and greater constraints on the center's ability to cut the
budget deficit and fund essential national programs.
Over the longer term, Gorbachev appears to be banking on an
all-union common market to hold the country together. It is not clear
if he can get approval for the reforms necessary to create such a
-To
 Yugoslavia: Prospects for Economic Reform
The increasingly unsettled political situation impairs Prime Minister
Markovic's efforts to restore the country's economic health.
Markovic on Friday introduced the next stage of his economic reform
program, emphasizing the privatization of public-sector firms and a
reduction of commercial bank interest rates. This round of reforms is
to follow up the highly successful effort to stop hyperinflation: prices
in May rose at a rate of 0.5 percent, as compared with 60 percent last
December.
Markovic's program, however, is coming under increasing attack
from labor over the six-month wage freeze. The federation is
experiencing a growing number of large strikes, culminating last week
in a one-day warning strike by 250,000 Serbian textile workers-the
largest labor action in Yugoslav history. Key legislation needed to
implement the next phase of the reform program is being blocked by
Slovenia and Croatia, the federation's most prosperous republics.
They want to restrict federal power over the economy in favor of local
authority.
o
 Belgrade is urgently searching for a formula that will satisfy Slovene
and Croatian desires for autonomy and avoid a violent breakup of the
country.
Slovenia's representative to the federal presidency, Janez Drnovsek,
is trying to broker a plan-with alleged Serbian support-that will
allow Slovenia and Croatia to become independent states while the
rest of the federation remains together, according to press reports. A
summit between the federal presidency and republic leaders is
expected to draw up specific options soon. Meanwhile, Slovenia's
government this week will present a program to the Slovene assembly
that provides for local control of the Army and the judicial and public
finance systems as well as an independent foreign policy. These steps
adopted.
The Serbian assembly last week enhanced Serbian control over
Kosovo by passing a law allowing the takeover of any noncompliant
institution in that Albanian-majority province. The first target was
the electric power industry, the province's most important economic
sector. Ethnic Albanian reaction has been restrained, but a
confrontation is possible today when Albanian assemblymen attempt
to convene the dissolved Kosovo parliament
Comment: Drnovsck's plan is the first public sign that the federal
government may be willing to accept some rearrangement of the
federation. The price for Serbian support of splitting off the northern
republics probably will be an agreement by Croatia to leave Bosnia
and Hercegovina in what would be a Serbian-dominated rump
federation. Croatian nationalist leader Tudjman may resist such a
deal, however, having gone on record as claiming that both Bosnia
 KIM
OD .
 Under the current Constitution, the president is elected by a majority
vote in the National Assembly-the combined members of the
Sejm and the Senate. For Lech Walesa to be voted in, President
Jaruzelski-whose full term would run to 1996-would have to
resign or be impeached.
- Jaruzelski almost certainly would resign if so advised by
Prime Minister Mazowiecki.
- With Mazowiecki's support, Walesa almost certainly would
easily win the endorsement of the National Assembly.
 were cut. Wage restrictions, however, were loosened.
for energy went up 80 to 100 percent yesterday and dairy subsidies
POLAND: Mazowiecki Calls for Compromise With Walesa
Prime Minister Mazowiecki offered yesterday to meet with Solidarity
union chief Lech Walesa this week, a move that suggests he may
abandon efforts to forestall a Walesa presidency. A government
minister also hinted that legislative elections, expected in the spring,
may be moved up to later this year. Warsaw continues to press ahead
with painful economic reforms in the face of rising opposition; prices
is likely to be temporary, particularly if politicians must position
Comment: Mazowiecki's appeal came at a meeting of Solidarity's
regional Citizens' Committees. The meeting was called by the Prime
Minister's supporters, who hope to create a federation to support his
government-a move Walesa opposes. The government may have
concluded that the cost of attempting to fight Walesa at a time of
economic hardship outweighs the risk that, as president, he will try to
impose his own policies. Mazowiecki stressed that the two must talk
as equal partners, but whether Walesa is interested in a compromise
now is unclear. Moreover, any arrangement between the two camps
 mm
 Nam
 KOM
crackdown 13 months ago
first new Japanese loan to China since Tiananmen Square
- Large Japanese bank reportedly has loaned Chinese airline
$126 million ... money to be used for purchase of Boeing 747.. .
Houston summit this month, other conferences.
to gain standing with West Europeans on climate change issue at
-Japan may set carbon dioxide emissions target for year 2000.. .
probably would allow some emissions growth ... proponents want
- Yugoslav Republic of Macedonia will hold elections in November
... third republic to conduct free elections ... Communists,
nationalists main contenders ... announcement increases pressure
on Serbia, others to hold elections this year.
 Special Analysis
Having resolved Contra disarmament, the most explosive issue
confronting her new administration, President Chamorro is focusing on
the difficult task of consolidating her authority over Nicaragua's
security services and government bureaucracy, both dominated by
to assert authority over the government's work force and day-to-day
operations. Several departments, including the Foreign Ministry and
the Civil Aeronautics Directorate, have been hit with wildcat work
stoppages meant to block efforts to remove Sandinista-appointed
middle-level managers and personnel; public-sector workers are
threatening another nationwide work stoppage today. In several
instances, Managua has had to reinstate dismissed officials or create
new jobs for them as well as grant wage increases to striking workers.
Chamorro has adopted a cautious approach to the military,
Nicaragua's most powerful institution. Believing there is more risk
in moving quickly against influential Sandinista officers than in
allowing them to keep their positions, she has agreed to a Sandinista-
inspired plan to reduce the armed forces to some 41,000 men rather
than the 25,000 she had earlier intended.
There are some factors working in Chamorro's favor. For now, she
appears to have the backing of most Nicaraguans, especially after
resolving the divisive Contra issue. Moreover, the Sandinistas are
in the throes of their own internal reorganization and may find it
increasingly difficult to capitalize on her vulnerabilities.
 Foreign Minister Botha's plea for restraint in public statements by US officials during
Nelson Mandela's visit stems from deep concern in Pretoria that President de Kierk not be
further undermined. Officials in Pretoria realize there is little they can do to counter the
international adulation that has been heaped on Mandela. His trip to Washington has
dominated the South African press: editorial opinion reflects concern that Mandela has not
been taken to task for his positions on armed struggle, nationalization, and sanctions. Critics
see a contradiction in his demands that sanctions be maintained while expressing concern for
rebuilding the South African economy.
A poll of white South Africans last month indicates that whites' esteem for Mandela has
decreased since his release from prison. Half (49 percent) said their perception of Mandela
was less favorable than at the time of his release; 11 percent said their opinion of him had
improved. Among supporters of the National Party, 41 percent held a more negative view, as
compared with 72 percent of Conservative Party supporters. Whites who said they had a less
favorable view of Mandela cited the lack of progress on talks, continuing violence, calls for
nationalization and sanctions, and Mandela's outdated leftwing views.
Although whites are disappointed with Mandela's actions since his release, they increasingly
accept de Klerk's decision to release him unconditionally. Some 60 percent now approve of
the decision-apparently an increase since February-with 57 percent of Afrikaners
approving, as compared with 47 percent in the previous survey. White, particularly
Afrikaner, opinion tends to lag behind government reform announcements.
 Special Analysis
The South African President has kept his critics off-balance by plunging
headlong toward negotiations at home while aggressively putting his
case against sanctions before the international community.
De Klerk so far has skillfully juggled the demands of whites, blacks,
and the international community, although white criticism that he
has nothing concrete to show for his efforts is growing. Critics charge
he has bent over backward to bring the ANC to the table but has
obtained no sign of substantial compromise from the group.
Similarly, they note that, despite a barrage of reforms, he has
achieved little tangible relaxation of Western sanctions.
Rather than slowing events to let whites and blacks adjust to new
conditions, de Klerk and his Cabinet are forging ahead. They recently
revealed plans to repeal key apartheid legislation segregating
residential areas and restricting land ownership next year and to let
US diplomats know of their strong interest in gaining a measure of
acceptance and some level of participation in the UN.
Getting substantive talks going tops de Klerk's agenda. He wants
them to begin as soon as possible, mindful that under the current
Constitution he must face the increasingly popular Conservatives
at the polls before March 1995. The ANC, however, needs time to
establish a national organization, build support in a diverse
constituency, and secure international financial assistance. It may
delay a commitment on substantive talks until its national conference
in December, which probably will set positions on a range of issues
related to negotiations. De Klerk probably worries that such a
De Klerk undoubtedly is finding it harder and harder to put a
positive spin on international developments. Nelson Mandela's tour
through Africa, Europe, and the US has blunted the antisanctions
message de Klerk delivered on his recent European trip. Publicly,
he is insisting that sanctions are no longer the main issue in South
Africa's foreign policy and that he is encouraging Western countries
 'Thp'Sec-~e.L
Although he has little to show on sanctions yet, de Klerk appears
determined to press ahead. To maintain momentum, he may
announce before the Nuclear Non-Proliferation Treaty Review
Conference next month that South Africa will accede to the NPT,
hoping the move will improve Pretoria's access to nuclear energy
technology as well as to various international forums.
De Klerk's long-term prospects turn on whether he can keep his
reform efforts and diplomacy in step with each other. He clearly is
waging an uphill battle against international opinion on South Africa,
and officials are worried that diplomatic successes will not come fast
enough to offset reaction against reform efforts, in part by promising
badly needed economic growth. Some are troubled that Mandela and
the ANC have not explicitly renounced violence and may not be
ready to enter substantive negotiations. Continuing reports that
Mandela's health is fragile add a sense of urgency to the process.
The success of de Kierk's dual strategy will be measured in the
medium term by the standing and cohesion of his National Party. It
was humiliated in a recent byelection, barely retaining a seat
considered safe six months ago, and might lose to the far right if an
election were held now. The Conservative Party cannot force an
election by itself, but the Nationalists' constituency is increasingly
polarized, and the party may split if the trend continues. The prospect
of losing a vote of confidence in the white legislative chamber to a
coalition of Conservatives and renegade Nationalists could become
the test of de Klerk's attempt to get whites to accept negotiations with
the black majority.