NATIONAL INTELLIGENCE DAILY THURSDAY 3 OCTOBER 1985

• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 0005500143
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 23
• Document Creation Date: June 24, 2015
• Document Release Date: September 9, 2010
• Case Number: F-2007-00450
• Publication Date: October 3, 1985

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APPROVED FOR RELEASE^ DATE:
07-22-2010
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CPAS NID 85-231JX
October 1.985
Copy 535
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Persian Gulf: Reaction to Attack on Tunis ...... ..
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Persian Gulf: Shia Holidays Pass Quietly .......
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South Yemen: Gearing Up for Party Congress
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North Korea: Changes in the Leadership ... ....
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India-Sri Lanka: Cease-Fire Talks
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Canada: Bank Controversy Growing
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Terrorist Watch
In Brief
Special Analyses
Iran: Foreign Exchange Controversy......... . .... ...
International: Pressure for Monetary Reform ...........
 Israel's raid against the PLO headquarters in Tunisia has
heightened European concerns about the prospects for Middle
East peace negotiations and may prompt the EC to take a more
EC Council President Poos said on Tuesday that the EC Foreign
Ministers had authorized him to meet with a Jordanian-Palestinian
delegation when it confers with British Foreign Secretary Howe in
mid-October. The announcement followed a strong condemnation of
Even before the raid, senior EC officials had expressed deep concern
about the lack of progress on the Hussein peace
initiative and suggested the EC might increase its role in the peace
Comment: EC members believe that the PLO-Jordanian accord of
11 February offers the best hope for achieving an Arab-Israeli peace
settlement and that the US is uniquely capable of bringing it to
fruition. They fear, however, that the growing cyclical violence in
the Middle East, coupled with US reluctance to meet with PLO
representatives, is rapidly destroying prospects for a settlement and
jeopardizing Western influence with Hussein. The decisions by the EC
and the UK to meet with a Jordanian-Palestinian delegation are
intended as modest steps to prompt the US to make a similar move
and to reinforce what they feel is Hussein's flagging determination.
The EC is unlikely to go further toward independent involvement in
the Middle East peace process as long as it believes that the US is
committed to Hussein's efforts. Should this commitment appear to
wane, however, the Community would begin to search for ways to
negotiations short of a major international conference.
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 Saudi Arabia and the smaller Persian Gulf states have condemned
Israel's bombing of PLO offices in Tunis but appear more worried
about the implications for their own security. Saudi Prince Sultan, in a
speech to the UN General Assembly, has called on the Security
Council to impose sanctions on Israel immediately, comparing overall
Comment: Few tears will be shed for the PLO in the Gulf region, but
leaders there admire Tunisia for its ability to balance pro-Western
policies and ties to the US with support for Arab League causes. The
attack, and the assumption of US complicity, will revive old worries
about relying on US assurances where Israel is concerned. Security
officials in the Gulf states should be able to contain small anti-US
demonstrations but probably cannot protect Americans or US
facilities against a terrorist attack.
Ton soccal
 North Korean Leadership Changes
Yon Hyong-muk Party Secretary
(economic management)
Paek Hak-nim Vice Minister of Defense
An Sung-hak Party Secretary
(light industry)
Kim Pok-sin Vice Premier; Chairman,
Light Industry Commission
Kong Chin-tae Vice Premier; Chairman,
Foreign Trade Commission
First Vice Premier
Other post -- ~ - -
Other post
Minister of Public Security
Vice Premier
Vice Premier; Chairman,
Foreign Trade Commission
Chairman, Public Welfare
Commission
*Note: Approximate ranking on the party's Political Bureau; An Sung-hak, Kim Pok-sin, and
Kong Chin-tae are candidate (nonvoting) members.
i 1&
 North Korea yesterday announced new assignments for seven of the
33 officials on the party's ruling Political Bureau. The party secretaries
for economic management and light industry were named vice
premiers, two vice premiers were shifted to other posts, and Political
Bureau-level officials were assigned to the government portfolios for
public security, welfare, and foreign trade.
Comment: The full implications of these changes are unlikely to
become apparent for some time. At a minimum the regime appears to
be trying to reinvigorate lagging performance in foreign trade and
consumer goods and services. At least one of those shifted to other
posts may now be involved with P'yongyang's effort to develop a
dialogue with South Korea; In late 1983 similar terminology was used
to describe the appointment of an official who became a key
participant in the North-South dialogue. Trade, the standard of living,
and internal security are taking on more importance as the interaction
India is urging Sri Lanka to agree to a formal cease-fire with Tamil
militants before a new round of fighting-for which both sides are
prepared-can erupt. Indian
Foreign Secretary Bhandari, who was in Colombo last week, has
pushed Sri Lankan President Jayeward
by the militants to monitor a cease-fire
if a cease-
tire is established, three main militant groups are prepared to accept
an Indian-brokered settlement giving limited autonomy to the Tamils.
Comment: New Delhi Is determined to keep the peace talks on track.
The willingness of the militants to meet with Bhandari and consider
arrangements to monitor a cease-fire suggests they are now prepared
to settle for only limited autonomy for Tamils. Without a lasting cease-
fire agreement, New Delhi fears recent progress toward a settlement
 The appointment of a Supreme Court judge to investigate the events
surrounding Ottawa's recent decision to close two regional banks will
not end the controversy. The failures, the first since 1923, occurred
despite Ottawa's efforts to save the banks.
Comment: Conflicting evidence regarding Ottawa's attempt to Jail
out the banks and charges that the government's actions were
politically motivated have allowed the opposition to bring the
competence of financial ministers into question. Prime Minister
Mulroney hopes the appointment of a jurist to conduct the inquiry will
curb parliamentary debate and forestall demands for ministerial
resignations. Although no national bank Is in trouble, federal officials
fear the acrimonious debate will further erode confidence in the
banking system and endanger Ottawa's efforts to aid several regional
 - The Belgian Communist Combatant Cells may attack US or
Belgian targets this month to commemorate the group's first
anniversary. The group has bombed five defense-related firms and
Belgian political targets since last October and has threatened to
 t~
 approval as way of keeping dialogue going.
- British Liberal leader Steel to meet Argentine President Alfonsin
in Spain this weekend ... Labor leader Kinnock met with Alfonsin
last month ... meetings may have Prime Minister Thatcher's
- Regional underground Solidarity leader arrested yesterday is
seventh activist detained in last two weeks ... Polish regime
probably trying to intimidate populace on eve of parliamentary
election, weaken opposition's boycott campaign.
- All 20 South Korean students on trial for USIS sit-in given jail
terms of two to seven years ... less than prosecutors demaAded
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 IRAN: Foreign Exchange Controversy
A serious foreign exchange shortage has provoked bitter debate
within the Iranian regime over economic policy and is resulting
In widespread criticism of the government. Since the beginning
of the year, sagging oil sales and low foreign exchange reserves
have led Iran to reduce its imports drastically. Industrial output,
already depressed, has fallen even further, and more cuts in an
austere development budget are Inevitable. Iraqi attacks on
Khark Island have heightened uncertainty over the future
availability of hard currency and have caused the government to
the first six months of the year forced Tehran to slash imports to
avoid drawing on its already limited foreign exchange reserves.
Preliminary data indicate that imports dropped at least 40 percent in
aggravated the general scarcity of consumer goods.
forcing buyers to pay black-market rates.
Heavy Industries Minister Nabavi said in July that the nation's inability
to buy raw materials and spare parts had caused production for
March through June to fall 24 percent as compared with the same
period in 1984. Prime Minister Musavi has admitted that a slowing of
development is inevitable because of low oil revenues, and the Iranian
press has reported the worst power and water shortages since the
revolution. So far, however, Iran's ability to continue the war has not
been seriously affected
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3 October 1985
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 have been blaming Musavi's government, made up largely of radicals,
for economic mismanagement and corruption. The Assembly is trying
to use these charges to win a greater role in economic affairs.
Continuing weakness in the world oil market and Iran's low foreign
exchange reserves-now equivalent to only about three months'
worth of imports-will keep Tehran in serious economic trouble. Over
80 percent of Iran's oil exports are shipped through Khark Island, and
Iraqi attacks-which show no sign of easing-have reduced exports
from the island by more than half, now 700,000 barrels per day.
Tehran would be hard pressed to deal with a lengthy shutdown of the
terminal. espe r if labor problems recur or the fall harvest is poor.
Even if Iraq does no more than maintain its current level of military
pressure against Khark, Iran will have to ask for still greater sacrifices
from its war-weary people. The economy is by far the most divisive
issue facing the regime, and increased infighting over distribution of
the shrinking economic pie is likely to increase conflicts between
opposing factions
 Special Analysis
Economically troubled Third World countries plan to call for
international monetary reform during the annual IMF meeting
opening this weekend in Seoul. Although industrial countries
recognize shortcomings in the existing system, ast do
accept the need for major Institutional changes.
Developing countries have submitted the fallowing specific proposals
for monetary reforms for formal consideration at the IMF Interim
Committee meeting:
- Coordination of macroeconomic policies by requiring
industrial countries to submit to an explicit consultation
process with the IMF.
- Reduction of fluctuations in exchange-rates by adopting
target zones for key international currencies.
- Promotion of developing countries' growth by easing
domestic economic measures required for international loans.
- Improved loan avail the funding of the IMF
and the World Bank
Most Industrial countries share the Third World's concerns about key
features of the monetary system-including volatility of exchange
rates-but remain unwiling to support extensive reform. Instead, they
will probably stand by the strategy they approved this summer-
improving existing, informal arrangements to coordinate
macroeconomic policies, including exchange-rate fluctuations. Most
major industrial countries-including the US, West Germany, and the
UK-believe that consistent and sound macroeconomic policies in
industrial nations would foster greater private lending and ease
pressure to increase international liquidity with official funds.
Publicized reports of improved World Bank funding is apparently
being well received in debtor countries, but they will probably view It
as not going far enough. We believe these countries-especially
Brazil and Mexico-will push vigorously for even greater increases in
lending by international banks and for easier conditions for IMF loans
to promote growth and development.
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