NATIONAL INTELLIGENCE DAILY MONDAY 7 OCTOBER 1985

• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 0005500147
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 18
• Document Creation Date: June 24, 2015
• Document Release Date: September 9, 2010
• Case Number: F-2007-00450
• Publication Date: October 7, 1985

Dire
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Central
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APPROVED FOR RELEASE^ DATE:
07-22-2010
Tep Secret
85-234JX
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7 October ~~
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 Notes
Japan-US: Efforts To Reduce Trade Friction
Portugal-West Germany: Frigate Program
Eastern Europe: Setback in Hard Currency Trade
7 October 1985
 Moscow is knocking on all doors to obtain the release of the
remaining three Soviet hostages, but the group holding them now
The Soviet Charge In Beirut met Saturday with Druze leader Junblatt
and Amal chief Barr!, and the
Soviets have also approached Iraq and Iran for help.I
Meanwhile, a caller who said he represented the group holding the
hostages told a Western news agency yesterday that the terrorists
would not release the hostages despite the cease-fire in Tripoli. He
said the diplomats would not be freed until the US and the USSR
agreed to end the Lebanese civil war. The caller appealed to the
terrorists holding the American and French hostages not release their
Comment: General Secretary Gorbachev's purposefully vague
response to a question about the situation during his news
conference in Paris on Friday was consistent with the Soviet line since
the crisis began of avoiding public threats of retaliation. The new
demands, however, will add to Moscow's frustration with the
Lebanese problem.
Despite the cease-fire in Tripoli, the terrorists' demand for the
withdrawal of Syria and its surrogates has not been met. Media
reports that Syrian troops are disarming the militias in Tripoli almost
certainly will reinforce the kidnapers' unwillingness to release their
captives. In any event, the extremists are aware that, if they were to
free the Soviets, they would be open to retaliation
-CIA, DIA, NSA-
4111P 10
 ZIMBABWE- Aid to Insurgents
SOUTH AFRICA:
Zimbabwean Prime Minister Mugabe is Increasing his support to
the Pan Africanist Congress, a minor South African insurgent
group that is a rival of the African National Congress,Fs-
Mugabe was Instrumental in arranging a visit to China and Yugoslavia
by the group's president late last month, and he is trying to unite its
factions. His government recently provided a fourth and final
shipment of arms and ammunition to PAC activists in neighboring
Meanwhile) (South African agents are
reconnoitering ANC properties in Harare and intend to make all South
African liberation groups in Zimbabwe priority targets for punitive
Comment: The Pan Africanist Congress is desperate to demonstrate
Its military capabilities and establish itself as an alternative to the
African National Congress. Mugabe, long suspicious of Moscow's
close ties to the ANC, probably hopes to revitalize the PAC as an
effective counterweight to Soviet influence within the South African
liberation movement. His increased political and military support for
the PAC, however, heightens the risk of provoking direct South
African retaliation against Zimbabwe.
 The high level of the delegation from Japan's ruling Liberal
Democratic Party in Washington this week points to growing
Japanese worry about possible US Congressional action on
restrictive trade legislation. The party last week scrambled to work
out a 17-point plan to increase domestic demand-including housing
incentives and tax cuts-to keep the mission leader, party Vice
President Nikaido, from arriving emptyhanded. Nikaido reportedly will
propose establishing regular bilateral parliamentary consultations in
Comment: Japanese officials see the mission as a major effort to
respond to protectionist pressures and pave the way for Prime
Minister Nakasone's meeting with President Reagan later this month.
Nikaido expects a difficult time and probably will steer clear of
detailed talks on specific problems. He will instead reaffirm Japan's
support for free trade and stress the Liberal Democratic Party's
domestic political problems as it faces national elections next year.
4F 10
 Minister Ivanov not raise the Soviet failure to meet its wheat purchase
commitment under the US-Soviet Lon -Term Grain Agreement at the
arain consultations at mldmonlh~
phrase "market price prevailing" refers to world prices, riot US prices
and therefore that they are not obli ed to buy wheat at artificially high
US prices.
offered by major competitors, suggest further current Soviet
Comment: Moscow bought 1.1 million tons less than the 4 million
tons of wheat specified for the second year of the agreement. Its last
purchase of US wheat was in March of this year, and Soviet officials
have been complaining about high prices since then. At the
consultations, Moscow will probably argue that the more than
15 million tons of US corn bought for shipment between October
1984 and September 1985-at least 12 million tons more than
required-should more than compensate for the failure to buy the
remaining wheat. Soviet concerns about US market prices and
preferential wheat sales to Egypt, coupled with subsidized wheat
 West German and Portuguese
officials have broken the stalemate over financing the Portuguese
frigate program by agreeing to increase each nation's financial
contributions. The new agreement has not closed the gap between
total costs and Portuguese allocations for the program, but Lisbon
expects to finance the difference through aid contributions from the
Netherlands, which is providing electronic equipment for the ships,
and additional loans. The Portuguese Council of Ministers has
authorized the signing of a contract for three frigates, which are to be
built in West Germany at a cost of $800-900 million and are similar to
several built for Argentina.
Comment: The negotiations may still collapse if the Netherlands
reneges on its contribution or if the Portuguese are unable to borrow
additional funds. The new frigates will be equipped with shipboard
and helicopter-launched antisubmarine weapons and will increase the
ability of the Portuguese Navy to fulfill its antisubmarine warfare
mission assigned by NATO and to maintain a deepwater capability.
The program also will provide needed employment in West German
Eastern Europe's surplus in its hard currency trade fell in the first half
of the year to half that of the same period last year, reversing the
trend of steadily improving trade balances over the last several years.
Even with the growth in demand from the recovery in Western
Europe, East European exports fell by 4 percent. Imports rose by
6 percent as Eastern Europe increased purchases of energy and raw
Comment: Eastern Europe's deteriorating trade performance, a
result of harsh winter weather and declining commodity prices, has
forced Bulgaria, Hungary, and Romania recently to seek loans. At the
same time several East European countries have increased their
exports to the USSR, possibly at the expense of the availability of
goods to export for hard currency. The declines in exports to the
West will complicate Poland's struggle to make debt payments due
later this year and Yugoslavia's attempt to meet foreign reserve
targets mandated by the IMF. Most East European regimes will need
to improve export performance soon to avoid the difficult choice of
either trimming Imports or seeking new credits.
TOP 688F8!
r
 - Canadian defense policy review may recommend reduction in
NATO roles ... seriously considering as one option major cuts in
its European forces ... would free money to replace aging
destroyer fleet in 1990s.
Belizean Government responding to US pressure to eradicate
marijuana ... widely publicized test spray program reportedly to
begin in mid-October following Queen's visit ... unlikely to reduce
fall crop drastically as farmers probably will harvest early
- Iranian Deputy Foreign Minister Mansuri touring five South
American states ... promoting economic relations, especially use
of barter arrangements to secure materiel ... portfolio indicates
he is also proselytizing among local Muslim communities.
Western Europe - Partial returns in Portuguese legislative election show Social
Democrats leading with 30 percent ... Socialists follow with
21 percent ... whatever coalition comes out of election will be
unstable and dependent on outcome of presidential election next
- Finnish Government urging companies to cooperate with US,
COCOM export controls on sales to Soviets ... chief of Finland's
internal security service emphasized issue at recent seminar with
 French
Japanese Economic Planning Agency announced last week
defense spending will remain under 1 percent of GNP for fiscal
year ending March ... projected GNP for 1985 increased by lona-
- Biennial Antarctic Treaty Consultative Meeting to begin today in
Brussels ... China likely to become 17th consultative nation ...
Uruguay also to be considered, but case not as strong ... nations
Top Searei
W
 Special Analysis
SOUTH AFRICA: Black Economic Leverage
The economic power of blacks has grown dramatically in recent
years. Black consumer spending now accounts for 40 percent of
total retail sales, and black workers comprise 70 percent of the
economically active population. While black economic leverage
will continue to grow, it Is unlikely to represent a major threat to
the government as long as blacks are unable to organize and
sustain lengthy, nationwide strikes Involving key Industries.
For years blacks have used the power of the purse to obtain
economic concessions and draw attention to political grievances.
Strikes organized by labor unions have been the most effective,
although blacks have boycotted white-owned businesses. Boycotts
and strikes often have been used jointly. For example, black
consumers have boycotted products of companies involved in labor
disputes or have combined work boycotts and consumer boycotts to
protest racial policies.
The latest round of consumer boycotts began late last year and were
intended to force several companies to reinstate workers fired in
earlier strikes. They had considerable support and achieved their
narrow objectives. This inspired other boycotts, often with broad
political goals, such as ending the state of emergency or freeing
Although most strikes are still linked to economic goals, blacks
increasingly are using short work boycotts to dramatize their anger
over Pretoria's racial policies. A series of local boycotts in September
and October last year culminated in a two-day general strike in
November by some 500,000 workers in Transvaal Province who
demanded the withdrawal of troops and police from black townships,
release of political prisoners, and a freeze on rents. Despite the wide
participation, Pretoria made no concessions.
Black support for these actions has been strongest where effective
grassroots organizations or unions can publicize the events in
advance. In many cases, gangs of teenagers have enforced
participation by assaulting blacks who report for work or patronize
white-owned shops. Other protests, however, such as the consumer
boycott that was called off this week in Natal Province, were not able
to overcome the difficulties posed by intergroup rivalries, fear of
being fired, or unwillingness to pay the high cost of goods available in
continued
Zen Sec. et
7 October 1985
 Pretoria recognizes that a lengthy coordinated strike in the mining
and manufacturing sectors would cause serious economic damage; it
has been quick to arrest leaders and crack down on unions that stray
too far from narrow economic issues. Although an increasingly
militant rank and file has pushed some unions to make political
demands, most union leaders know the risks and avoid serious
confrontation. Even the tentative steps that some unions have taken
recently to become politically active may collapse under government
pressure.
With the unemployment rate among blacks above 25 percent, the
threat of wholesale firings continues to inhibit protests. Some 6,000
blacks were fired from a corporation after a work boycott last
November. Last month the threat of mass dismissals broke a miners'
strike.
Consumer boycotts-even widely supported ones-generally have
evoked a less harsh response from Pretoria because they tend to be
local, affect only a small number of whites, and have little impact on
the national economy. The effect on local business is more
pronounced. In some areas where white businesses have lost one-
third or more of their usual sales, boycotts have caused local white
businessmen to lobby for racial change; more often, white
businessmen have cut supplies to black-owned competition, and
police have harassed and even arrested some black shopowners.
Blacks will continue to rely on boycotts and work stoppages to make
largely symbolic political statements. As long as these actions remain
localized, Pretoria is unlikely to use its security apparatus to suppress
them completely. Moves to politicize labor disputes or launch lengthy
nationwide strikes, however, will be dealt with harshly.
Even if blacks were able to strike successfully against key industries,
Pretoria is not likely to grant political concessions. Whites have the
economic and security resources to outlast blacks in sustained
economic warfare. Moreover, the government does not want to be
seen as caving in to pressure from blacks
 I
 is
 i ~
 Special Analysis
GUATEMALA: Economic Policy and the Election
With only a month to go before national elections, Chief of State
Mejia is making short-term economic adjustments to reduce
public unrest and keep the transition to civilian rule on track.
The replacement this week of economic ministers who advocated
unpopular austerity measures underscores his intention to avoid
contentious policy initiatives. Neither of the major presidential
contenders appears likely to come to grips quickly with the
severe problems the new administration will inherit when it takes
over in January.
Following widespread protests against economic measures last
month, Mejia raised public-sector wages, maintained consumer
subsidies, and enacted price controls. These measures, however, fell
far short of worker demands, provoked grumbling among
businessmen, and further eroded government finances. A visiting IMF
team predicts the wage Increase will accelerate the already
unprecedented Inflation, which Is now expected to each 40 percent
this year,
The government's failure to make payments to petroleum suppliers
has aggravated Guatemala's economic plight. Some parts of the
country already are out of fuel, causing disruptions in bus and
trucking services.. Fuel shortages are causing long aas lines and have
led to the Imposition of a strict rationing program,
but government officials remain opposed to eliminating
The Guatemalan central bank estimates a foreign exchange shortfall
of $83 million for the remainder of 1985, largely as a result of the
failure of exporters to surrender foreign earnings at the official rate.
he ign excnange
 Economic officials had been urging stabilization measures- including
devaluation-to pave the way for an IMF agreement and to relieve the
burden on the new government of making unpopular adjustments.
Mejia objected, however, and last week replaced the Minister of
Finance and the central bank president with less competent
associates to reduce policy conflicts. This assures that no significant
economic stabilization measures will be taken under Mejia during his
The major presidential candidates have criticized the government but
have failed to put forward comprehensive economic plans or to build
public support for needed austerity measures. The leading candidate,
Viniclo Cerezo Arevalo of the Christian Democratic Party, is strongly
opposed to devaluation, he would solve
foreign exchange problems wan strict controls on major export crops.
The other front-runner, National Centrist Union leader Jorge Carpio
Nicolle, is more likely to accept devaluation as a way to gain badly
needed foreign economic assistance, although he is not making it part
of his platform
Over the next three months, the economy is likely to experience
continued fuel shortages, rapid inflation, and further labor unrest
because of Mejia's delaying tactics. The leading candidates appear to
be counting on large infusions of foreign aid after the election to stem
the economic decline. Most of the foreign assistance, however, will be
conditioned on difficult adjustments, such as currency devaluation,
tax Increases, and reduced consumer subsidies. Mejia's posture and
politically unpalatable for the new administration