WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A009100050001-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 42
• Document Creation Date: December 21, 2016
• Document Release Date: May 12, 2008
• Sequence Number: 1
• Publication Date: October 8, 1971
• Content Type: SUMMARY

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Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
NAVY review
completed.
State Dept. review
completed
Secret
8 October 1971
No. 0391/71
Copy N! 44
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LJSJ SY.L 1
CONTENTS
(Information as of 1200 EDT, 7 October 1971)
Communist China: The Unsolved Mystery . . . . . . . . . . . . . . . . . . 1
Indochina: Cambodia: Taking Stock . . . . . . . . . . . . . . . . . . . . 3
South Vietnam: Return to Normalcy? . . . . . . . . . . . . . . . . . . . 4
Laos: Preseason Pause . . . . . . . . . . . . . . . . . . . . . . . . . 6
South Korea: Party Woes as 0 Goes . . . . . . . . . . . . . . . . . . . . . 6
Russian Globetrotters in Asia and Africa . . . . . . . . . . . . . . . . . . . 7
Soviet Exercise in the Pacific . . . . . . . . . . . . . . . . . . . . . . . . 9
Mixed Results at Geneva Disarmament Talks . . . . . . . . . . . . . . . . . 10
NATO: Renewed Interest in Defense Cooperation . . . . . . . . . . . . . . 11
International Economic Developments . . . . . . . . . . . . . . . . . . . 12
EC Concerned About Agriculture . . . . . . . . . . . . . . . . . . . . . 12
Further Erosion Likely in East-West Trade Controls . . . . . . . . . . . . . . 14
Spain: Elections Improve Government Standing . . . . . . . . . . . . . . . 14
UN: The Deficit Issue is Revived . . . . . . . . . . . . . . . . . . . . . 15
The Arab World . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Soviet Military Shipments to Egypt . . . . . . . . . . . . . . . . . . . . 18
Tunisia: Politicians Look to the Future . . . . . . . . . . . . . . . . . . . 19
India's Green Revolution: A Plus and Some Minuses . . . . . . . . . . . . . 19
Pakistan: East Side, West Side . . . . . . . . . . . . . . . . . . . . . . 20
Guinea: Another Judgment Day . . . . . . . . . . . . . . . . . . . . . . 21
BHUTAN ENTERS THE WORLD ARENA
(Published separately as Special Report No. 0391/71A)
Peru: Velasco Takes to the Provinces . . . . . . . . . . . . . . . . . . . . 22
Argentine Military Shaken by Navy Discord . . . . . . . . . . . . . . . . . 23
Brazilian Terrorists on the Defensive . . . . . . . . . . . . . . . . . . 23
Guatemala Beset by Church and Students . . . . . . . . . . . . . . . . . . 24
Panama Prepares for Anniversary . . . . . . . . . . . . . . . . . . . . . 25
NOTES: UN-Canada; Iceland;) ~ Central African Republic
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Communist China: The Unsolved Mystery
The origins of the troubled political situa-
tion in Peking remain shrouded in mystery.
Ethiopian Emperor Haile Selassie's six-day visit-
he arrived in Peking on 6 October-may cast some
light into the corners. He reportedly was to meet
Mao Tse-Tung on 6 October but has not yet done
so. The military air stand-down, the still un-
explained crash of a Chinese aircraft deep within
the borders of Mongolia, and the unprecedented
cancellation of several traditional National Day
activities all seem to be symptoms of political
turmoil at the top. It seems certain that China's
leadership has been plunged into an upheaval of
the first magnitude, but the evidence is not con-
clusive as to what set it in motion or when and
how it is likely to be resolved.
The most obvious sign of serious disarray is
the unprecedented curtailment of the tradi-
tionally festive celebrations held in conjunction
with National Day, 1 October. In addition to the
decision to cancel the parade, after several weeks
of preparation, diplomats in Peking were told at
the last minute that the banquet normally hosted
by Premier Chou En-lai on the eve of National
Day would be replaced by an abbreviated recep-
tion sponsored by the Foreign Ministry. As in the
case of the parade, Chinese officials tried to ex-
plain the move as just another "reform." The real
purpose was probably to avoid the top-level turn-
out a banquet would require. Furthermore, for
the first time in many years the regime failed to
publish an editorial on National Day. The deci-
sion not to publish appears to have been made at
the last minute and suggests that the leadership
was unable to agree on even a bland statement.
The continued absence from public view of
nearly all military members of the politburo,
while their civilian counterparts appear regularly,
indicates that whatever the issue, the controversy
which apparently now centers within the military
establishment is unresolved. In particular, more
attention is being focused on the status of Mao's
designated heir, Lin Piao, who has not appeared
in public since :early June. Peking has demon-
strated considerable sensitivity to rumors that Lin
is in poor health, and there are signs that the
regime may be taking steps to crack down on
such speculation at home.
Other top military leaders who have been
out of sight since the current round of troubles
began are army chief of staff Huang Yung-sheng,
air force commander Wu Fa-hsien, and navy po-
litical commissar Li Tso-peng. All three had im-
portant political roles during the Cultural Revolu-
tion and almost certainly are heavily involved in
the present political maneuvering. Squabbling
among these military figures would very likely be
intense should a sudden decline in Lin Piao's
political or physical condition give rise to succes-
sion questions.
Another factor that could contribute to un-
certainty in high military councils is the question
of personnel assignments in certain politically
important regional military commands. For
example, the commander and the political com-
missar of the Peking Military Region, both of
whom held concurrent posts in the civil govern-
ment structure, apparently were removed late last
year. Thus far, there is no firm evidence that
replacements have been named for them. This
suggests that the question has been the subject of
considerable debate within the leadership councils
at the center.
The current status of Hsu Shih-yu, an im-
portant regional military figure in east China, is
also uncertain. Hsu has been out of sight since 6
June, and a recent provincial broadcast revealed
that another man may have moved into Hsu's
post as commander of the Nanking Military
Region. Any change of this magnitude would
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almost certainly be connect;d with the unset,led
situation in Peking.
Although some elements of the Chinese
populace have been told that the present crisis
atmosphere derives from Soviet "pressures,"
neither Peking nor Moscow has stepped up public
polemics since early September. The long-drawn-
out Sino-Soviet talks in Peking are apparently
continuing in routine fashion.
Whatever the motivation and significance,
developments since mid-September seem to be a
new and more critical manifestation of the power
struggle within China's ruling politburo that
emerged from the ninth party congress in April
1969. The deep-seated personal rivalries and
policy disputes that surfaced during the Cultural
Revolution probably continue to be the major
ingredients in the crisis, although it is uncertain
what brought it to a head now and who the
primary adversaries are. The possibility is not
excluded that a succession struggle has been pre-
cipitated by a dramatic change in the physical or
political status of either Mao or Lin.i
Chief of Staff
Huang Yung-sheng
WHERE
ARE
THEY
Air Force Commander
Wu Fa-hsieu
Navy Commander
Li Tso-peng
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Cambodia: Taking Stock
The Cambodians do have some things to
cheer about despite the government's wary deci-
sion to call off celebrations marking the first
anniversary of the founding of the Khmer Repub-
lic on 9 October. Not only has the regime stood
up to Communist military pressure, substantial
economic dislocation, and increased political dis-
content, but it has also made the difficult psycho-
logical adjustment to the prospect of a long and
difficult war. Assuming that the Communists
stick to their low-cost strategy in Cambodia, the
government's most difficult task in the coming
months may be to maintain its political cohesion
and stability.
As the dry season approaches, the leader-
ship's determination to resist the Communists on
the battlefield has been strengthened by the
army's improved showing in the past few months.
Although the army is still heavily dependent on
allied air strikes and on elite Khmer Krom units,
there is evidence that the training and experience
Cambodian officers and men have gained over the
past year have begun to pay off.
The army's Chenla II operation to open
Route 6 to Kompong Thom town has made slow
but steady progress since it was launched on 20
August and it reportedly achieved its objective
early in the week. Although the Communists have
offered little resistance, Cambodian planning, co-
ordination, and logistic support has been far more
professional than during the operation to clear
the same highway just a year ago. Smaller govern-
ment sweep operations during the rainy season
along other main roadways-while less impressive
than Chenla II-have also reflected growing mili-
tary confidence and a corresponding willingness
to take the war to the enemy.
On the economic front, the net is showing
signs of stability following the drastic deprecia-
tion in early summer. Prices of foodstuffs and
locally manufactured goods in Phnom Penh have
also dropped, and the capital's stocks of rice are
being maintained by regular government truck
convoys from the northwest. Although prospects
for the forthcoming rice harvest are less grim due
to a late season surge of planting, some rice may
have to be imported in 1972.
The government is pushing ahead with a
comprehensive program of fiscal and monetary
reforms designed to reduce the enormous budget
deficit and to halt the steady deterioration of the
country's economic position. The regime is con-
tinuing to seek international participation in an
exchange support fund-the key element of its
reform program even though initial reactions by
prospective donors have been discouraging.
Though the short-term military and eco-
nomic outlook seems somewhat brighter right
now, the prospects for political stability in
Phnom Penh are ci;ouded. Despite warnings from
his doctors, Lon Nol is now working a full day.
This not only fans renewed concern over his
health, but it irritates many officials. The disturb-
ing fact remains that there is no potential succes-
sor on the horizon who can command the respect
and support-particularly within the military-
that he enjoys.
For the moment, given the lack of any or-
ganized effective civilian opposition and the poor
chances for holding elections, it appears that the
self-effacing but politically dominant military es-
tablishment will retain its strong influence over
Lon Nol and will encourage his predilections for
resorting to more authoritarian means of govern-
ing. The prime minister's recent dismissal of In
Tam and his reluctance to renew the National
Assembly's mandate have served to underscore an
evolving polarization between Cambodia's mili-
tary and civilian elites.
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Indochina
South Vietnam: Return to Normalcy?
The South Vietnamese political climate may
be somewhat calmer now that the presidential
election is over. It could be that the country's
major political forces will decide to take a
breather and a few soundings before deciding
what to do next. Vice President Ky has indicated
that he hopes for prolonged agitation by radical
student and veterans' groups. But he failed in his
attempts to stir up large-scale antigovernment
demonstrations at election time, and his prospects
do not appear any brighter now.
The An Quang Buddhists, the opposition
group most capable of causing major trouble,
began to take a harsher position against President
Thieu in the final days before the election. Now,
An Quang is backing an opposition committee set
up to plan a long-term cam-
paign against the government.
Despite the use of more stri-
dent language, the Buddhists
probably will continue to
move cautiously to avoid pro-
voking the government into
taking repressive measures.
Thieu is pointing to the
election returns as a vote of
confidence. According to gov-
ernment figures, more than 87
percent of the country's
registered voters went to the
polls and over 94 percent of
these cast their ballots for
Thieu. It seems likely that of-
ficials in some provinces may
have padded the figures, at
least on voter turnout. The
claimed turnout was greater
than the 84 percent voting in the 1967 presi-
dential contest. This seems high in view of the
calls by the Buddhists and others for a boycott.
Nevertheless, it is apparent that political agitation
by radical students and veterans aimed at disrupt-
ing the election process was generally ineffective.
The Communists' antielection campaign,
largely mortar, rocket, and terrorist attacks, was
also ineffective. 'There were numerous shellings,
but the over-all impact was small; only light cas-
ualties and damage were inflicted. There were
only a few instances where the Communists ac-
tually tried to bloc voting by direct attacks on
polling places.
In the wake of Thieu's heavy-handed tactics
and the consequent one-man race, political ele-
ments of all persuasions will be watching closely
to see whether Ky and other militant opposition
leaders have any staying power. For his part,
The Ky Camp
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D 25
Miles
Thieu seems fairly confident that he can ride out
the furor among the urban political elites and that
he will be able to defuse the opposition generally.
The President reportedly hopes to get Ky out of
his hair by sending the vice president on an over-
seas assignment after Ky's term expires.
With a new Lower House just elected, Presi-
dent Thieu faces a number of immediate practical
problems in the weeks to come. The fall session
of the National Assembly convened this week,
and the President is likely to face a larger and
more vigorous opposition in the legislature than
he has in the past. He probably will be able to
gain approval for most of his requests, but he may
have a tougher time. A major economic reform
package that the government plans to implement
in the near future could also cause political
difficulties. The reforms are designed largely to
stimulate economic growth and increase gov-
ernment revenues, but they could create in-
flationary pressures. If they should trigger price
rises, the government islikely to come in for harsh
criticism again, as it did following some past re-
forms.
South Vietnamese forces, aided by heavy air
and artillery support, have reportedly inflicted
severe losses on the Communists east of Krek
during the week. The 174th Regiment of the
Communist 5th Division, which was involved in
the Krek action, has now withdrawn to the east.
The results of this action by the South Viet-
namese against the enemy division that hurt them
badly at Snoul last spring will help restore the
morale and fighting spirit of the South Viet-
namese. They fought well and without the assist-
ance of US ground forces.
Nevertheless, the Communist forces-one in-
fantry and one artillery regiment plus a division
headquarters-still pose a strong threat in the bor-
der area. South Vietnamese artillery bases and
field positions along Route 22 north of Tay Ninh
city have been the targets of enemy shellings
almost daily since this latest round of enemy
action began on 26 September.
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Military action has been relatively light
throughout Laos for another week as both sides
take stock before the dry season begins. North
and northeast of the Plaine, pilots continue to
report increased Communist activity that pre-
sumably is related to North Vietnamese efforts to
redeploy and resupply units in this area.
Farther south in the Paksong area on the
Bolovens Plateau, the principal concentration of
Communist forces appears to be north of the
town, and enemy-initiated activity has increased
there in the last few days. Irregular units sweeping
south and west of Paksong continue to clash with
small North Vietnamese units, indicating that this
area is still far from secure. Poor weather has
hampered air support for government units
around Paksong. This has given the North Viet-
South Korea: Party Woes as O Goes
The National Assembly censured Home Min-
ister 0 Chi-song late last week and brought to the
surface deep-seated factionalism within the gov-
ernment's Democratic Republican Party, seriously
embarrassing President Pak. In the censure vote,
some 25 DRP legislators broke ranks against Pak's
orders and joined the opposition. The move
against 0 was really aimed at Prime Minister Kim
Chong-pil, a close political ally. The prime minis-
ter had reportedly benefited from the home min-
ister's appointments in the Korean National Po-
lice made at the expense of anti-Kim elements in
the hierarchy.
The break in party discipline took Pak by
surprise. It also presented him with a difficult
choice-either take action against the anti-Kim
forces, which he organized to serve as a check on
the ambitious prime minister, or let them off and
Page 6
namese an opportunity to regroup and resupply
their forces.
Government forces in Paksong and Lao
Ngam north of the plateau have been reduced by
seven irregular battalions. Only 14 battalions, plus
a few support companies and an artillery battery,
are left in the area. Three battalions were sent
back from Paksong to their home base in Military
Region 3, presumably for rest and refitting before
the beginning of dry-season activity in that area.
A four-battalion irregular task force in the Lao
Ngam area was withdrawn because of morale
problems and desertions. So far, only four com-
panies of neutralists have been sent to replace this
force, although other neutralist units will be dis-
patched if command problems and the troops'
reluctance to leave safer areas can be overcome.
The over-all reduction of forces in Military Re-
gion 4 will reduce the government's ability to
consolidate its position and to keep nearby en-
emy units off balance.
thus appear to fail in his support of Kim. Pak's
response thus far has been an attempt to support
Kim and yet not decimate the prime minister's
political opposition. Party elements supporting
Kim engineered the mass resignation of the execu-
tive committee on 4 October, providing Pak with
an opportunity to take action. He has accepted
the resignations of four leaders of the anti-Kim
faction but has replaced them with a group only
slightly less hostile to the prime minister.
25X1
Pak will probably be reluctant to take any
further action against the anti-Kim faction but
may still face additional difficulties.
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SLUKt 1
EUROPE
Russian Globetrotters in Asia and Africa
Moscow's peripatetic leaders began in earn-
est this week their campaign to offset Peking's
increased stature. President Podgorny was in
southern Asia and Premier Kosygin in North Af-
rica. Podgorny was given the unusual honor of a
personal send-off by party leader Brezhnev, a
gesture not repeated later in the week when Kosy-
gin took off.
The most important stop on Podgorny's
itinerary is clearly Hanoi, where he arrived on 3
October. To lay the groundwork for a successful
visit, the Soviets took belated notice of the recent
US bombing raids over North Vietnam. Tass on 1
October strongly condemned the attacks and reit-
erated Soviet support for Hanoi. Podgorny took
along fellow politburo member Mazurov and a
host of senior officials from the party, military,
Foreign Ministry, and aid and trade departments.
His remarks on Moscow's desire to improve
relations with the Chinese notwithstanding, Pod-
gorny is clearly intent on reaping whatever gains
he can at the expense of Peking in the wake of
the recent movement in Sino-US relations. In the
wake of special Chinese efforts to ease the strain
Podgorny (far right) Leaving Moscow with Mazurov (far left)
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in Sino-Vietnamese relations resulting from this
movement, Hanoi has curtailed its open polemics,
but the North Vietnamese are probably especially
anxious to keep relations with Moscow in good
repair of this crucial time. The rhetoric out of
Hanoi is effusive. The Soviets are stressing the
continuity and reliability of their support, and
the Vietnamese are expressing gratitude for past
and present Soviet assistance and are restating
their resolve to continue the struggle to the end.
On his way to Hanoi, Podgorny made what
is becoming the customary stopover in New
Delhi. His remarks there regarding the situation in
East Pakistan cannot have been satisfying to the
Indians. Podgorny was milder in his criticism of
the West Pakistanis and firmer on the necessity of
avoiding war than was Kosygin during Mrs.
Gandhi's visit to the USSR last week.
Podgorny also stopped off briefly in Ran-
goon, doubtless hoping to apply cold water to the
recent warming in relations between Burma and
China. He implied that additional Soviet assist-
ance would be provided to further encourage the
Burmese along their path to a "socialist democ-
racy."
Kosygin in North Africa
Kosygin is due to arrive in Morocco on 8
October after a four-day visit to Algeria. His
itinerary is identical to that of Podgorny's visit to
north Africa in 1969. Podgorny accomplished a
variety of ceremonial purposes but failed to
bridge the political differences between Moscow
and the Maghreb. Kosygin is expected to have
similar results.
The initiative for Kosygin's visit to Algeria
apparently came from the Soviets who, judging
by the make-up of the delegation, wanted to talk
about economic and trade relations. These have
been strained over the past few years; the Al-
gerians have been slow to draw on Soviet eco-
Premier Kosygin
nomic credits and have shown a marked prefer-
ence for Western equipment and expertise.
Kosygin probably made some effort to bring
the two states closer together on contentious po-
litical issues. Boumediene has regularly de-
nounced the Soviets for their support of the
Arab-Israeli cease-fire and has demanded the de-
parture of all foreign--including Soviet-naval
forces from the Mediterranean.
Whatever the political results of the Kosygin
visits, he will have dramatized once again Mos-
cow's interest in the western Mediterranean.
Neither Algiers nor Rabat is prepared to permit
Soviet influence over its policies, but both seem
willing to accept broader relations with the So-
viets. F_ I 25X1
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Soviet Exercise in the Pacific
A major Soviet naval exercise, under way in
the northwest Pacific for five weeks, has ended.
Most of the ships and submarines involved have
returned to Petropavlovsk and Vladivostok. The
exercise included helicopter and ASW training,
missile firings, and a high level of participation by
naval air units. During the exercise at least ten
nuclear and diesel submarines and a like number
of surface ships operated in and around the Sea of
Okhotsk, the Kurile Island chain, and the Bering
Sea.
An additional group of seven ships-three
missile equipped surface ships, two F-class diesel-
Soviets End Naval Exercise in Qaifjc
powered submarines, and two support ships-con-
ducted a "show the flag" cruise to the Gulf of
Alaska and the Hawaiian Island area in early Sep-
tember. While en route to home waters last week,
this group took part in the exercise by simulating
an aggressor force as it approached the Kurile
chain.
The only significant departure from recent
Soviet naval usage was the cruise through Hawai-
ian waters, the first since 1966. Other than that,
the scope and number of participants in this "De-
fense of the Homeland" exercise were similar to
the last big Pacific exercise in July and August
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VLt/1\L 1
Mixed Results at Geneva Disarmament Talks
The 25-nation arms control conference in
Geneva adjourned for the year last week, having
decided on the final day to endorse the US-Soviet
draft convention curbing biological weapons. The
superpowers, however, may encounter considerable
criticism in the UN General Assembly this fall over
the failure to make more progress toward a compre-
hensive ban on nuclear testing.
Agreement on the convention was the only
substantive accord reached at Geneva this year. A
key factor in the negotiations was the Soviet deci-
sion last spring to back away from insistence that
any agreement would have to include chemical
weapons as well as biological. The nonaligned bloc
of 12 states also backed away from including chemi-
cal weapons when the US convinced them that pro-
hibition of chemical weapons could not be verified
adequately at present. The assembly is expected to
accept the draft convention and open it for signa-
ture by December.
Discussion at Geneva this year on the test ban
issue focused on verification problems, and a grow-
ing number of participants seem to doubt that either
the US or the USSR genuinely desires a comprehen-
sive test ban. A nonaligned memorandum submitted
UN-CANADA: The Canadian's long-promised initia-
tive on peace-keeping is in the final stages of minis-
terial coordination and may be presented next week.
Preliminary indications are that it could pose prob-
lems for the US.
Details of the Canadian scheme are not yet
available, but it apparently would give the key role
in conducting peace-keeping missions to the military
staff committee of the Security Council rather than
to the secretary general. Such an arrangement would
seem closer to the Soviet preference for strong coun-
cil controls than to the US view that a secretary
general must have latitude for at least the daily
conduct of peace-keeping operations. There has
been a recent drift toward the Soviet position
on the eve of the Geneva adjournment calls on the
superpowers to give "priority" attention to the sub-
ject and to take "an active and constructive part" in
negotiations. The principal proponents are expected
to make a determined effort during the current
assembly session to secure passage of a resolution
similarly placing the burden for progress on the
superpowers.
Advocates maintain that a ban will serve to
prevent erosion of support for the nonproliferation
treaty and complement agreements reached in the
strategic arms talks. Canada this year has been the
most vociferous in seeking testing curbs, in large
part out of concern over US plans for a high-yield
underground detonation in the Aleutians soon.
The Soviets have sparked some interest with a
proposal that a world disarmament conference be
convened as "a matter of expediency and urgency."
Soviet Foreign Minister Gromyko last week told the
assembly that agreement on a date for the session
should be reached before the end of 1972. He added
that the world-wide conference should meet every
two or three years as a semipermanent body that
would not, however, infringe on the negotiations at
Geneva.
25X1
among the middle and smaller powers, who now
regard a Western veto on the council to be as good a
protection of their interests as the actions of a
neutral secretary general once appeared.
Canada is a leading member of the General
Assembly's Committee of 33 on peace-keeping, and
its suggestions will probably be welcomed by most
of the other members. The initiative will at the least
require considerable study and thus serve to prolong
the committee mandate, due to expire this fall. The
Canadians have told the US they will oppose discus-
sion of partial measures, such as the creation of a
roster of units earmarked for UN peace-keeping, as
detracting from consideration of their pro-
posal.
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NATO: Renewed Interest in Defense Cooperation
Bonn and London, spurred by the monetary
crisis and by concern about US intentions regard-
ing Europe, are reassessing the organization of
West European defenses. One result may be
greater stress on new programs of intra-European
cooperation than on "burden-sharing."
Within the last year, the members of the
Eurogroup-the European caucus in NATO-
worked out at US urging the European Defense
Improvement Program through which they would
share a greater portion of NATO expenses. The
program, although still not fully subscribed, is
financing new aircraft shelters and helping to pay
for the new NATO communications system. The
group will meet once or twice before the NATO
ministerial in December to assess the burden-shar-
ing program and possibly reorient their efforts.
Officials of the West German and British
foreign offices have recently discussed a marked
shift away from the burden-sharing approach.
They agreed that the Eurogroup should become
active in exploring ways to improve conventional
defense capabilities through cooperative efforts.
The Europeans are faced with a dilemma.
They view US troop cuts as inevitable and believe
it is more important than before that Europe
ICELAND: In a shift of tactics, the center-left
coalition in Reykjavik has arranged to open nego-
tiations with the British next month over fishing
rights in waters around Iceland. Current arrange-
ments allow the UK and West Germany to fish
outside a 12-mile limit. The primary aim of the
government, which assumed power in July, is to
extend the country's fishing limits to 50 miles, an
issue on which it enjoys broad domestic support.
contribute to the maintenance of a credible con-
ventional defensive capability. They find them-
selves limited, however, by constraints on military
spending resulting from increasing demands for
social expenditures and from pressures growing
out of detente expectations. One solution they
see is to make better use of their resources
through cooperative efforts in such endeavors as
weapons development and joint training pro-
grams. And the fallout from the new US eco-
nomic policy appears to be providing new im-
petus in this direction.
The French position, as odd-man-out in al-
liance matters, remains a potentially serious lim-
itation on defense cooperation. The French are
also concerned about maintaining an adequate
European defense, and a close adviser of the
prime minister claimed recently that France is
willing to undertake a greater share of the burden
of free world defense in order to prevent with-
drawal of US for-es. Paris has not said how it
envisages doing so in conjunction with the other
Europeans. The French have stayed out of Euro-
group activities sc. far, and the other allies are
unclear how far Paris will be willing to go toward
joint programs even if these were less closely tied
to the NATO framework.
Originally intendirg to abrogate the UK and Ger-
man agreements unilaterally, Reykjavik now ap-
parently wishes to pursue tactics more defensible
abroad and avoid being called before the Inter-
national Court of Justice. The government has
made no recent m wes on its other major foreign
policy objective cf negotiating a withdrawal of
US military forces It still intends to initiate talks
early next year.
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International Economic Developments
The consensus is that last week's International
Monetary Fund meeting in Washington produced
only a "first step" toward resolving the international
financial crisis, and that negotiations will be long
and arduous.
The most optimistic comment thus far came
from the Netherland's Finance Minister Nelissen,
who believes that an early resolution can proceed
without threat of further trade restrictions by any
country. The comment from London likewise has
been optimistic, and stems from what is viewed as
greater US flexibility on the price of gold and re-
moval of the import surcharge. French Finance
Minister Giscard D'Estaing has stated it now seems
possible, and perhaps likely, that "serious" negotia-
tions will be undertaken before the end of the year.
The French, like many others, remain convinced
that the free market cannot be counted on to pro-
duce an acceptable international currency alignment
as advocated by the US. West German Finance
Minister Schiller, although reiterating the impor-
tance of a small dollar devaluation against gold, has
endorsed the US proposal for temporarily per-
mitting major currencies to float freely. He fears,
however, that the current situation will last longer
than desirable.
In related developments, the Common Market
and Britain formally protested proposals by the US
to exempt imported capital goods from the invest-
ment tax credit and defer taxes on US export earn-
ings. The protest note warned that such measures
are discriminatory and could result in retaliatory
actions.
To dampen further appreciation of the pound
by stemming the inflow of foreign currencies, Lon-
don has imposed additional restrictions on foreign
holdings of certain UK securities. Following an-
nouncement of the new ban, the pound dropped
from 3.8 percent above par to 3.5 percent.
Rumors of yen revaluation continue in Japan,
but Tokyo appears to be waiting for moves by the
US and Western Europe before doing so. In the
interim, Tokyo apparently has decided to relax
somewhat the bounds on its controlled float. This
week, the value of the yen moved 8.6 percent higher
than the old official rate after the Bank of Japan
considerably reduced its intervention in the foreign
exchange market.
The Japan Economic Research Center, a highly
respected independent research agency, last week
published an 18-month economic forecast that as-
sumed a 14.3-percent increase in the value of the
yen relative to the dollar and removal of the US
import surcharge prior to the end of 1971. Its
prognosis is considerably more optimistic than other
recent Japanese forecasts and sees the major impact
of revaluation concentrated in the first quarter of
1972 with the economy rebounding to a rate of real
GNP growth in excess of ten ercent durin the
fiscal year that begins 1 April.
EC Concerned about Agriculture
Largely because of present monetary arrange-
ments, farm policy is again a major concern within
the European Community. Last week, the agricul-
tural ministers of the Six debated the consequences
if exchange rates continue to float within the Com-
mon Market. It became clear that safeguarding the
agricultural system-the most integrated area in the
community-will not be easy until considerable
progress is made toward monetary union.
The ministers agreed with the commission
that, although no significant disruptions of trade
have occurred thus far, fixed exchange rates within
the community are necessary to assure the smooth
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operation of the Common Agricultural Policy. Since
Bonn and The Hague floated their currencies in early
May, compensatory import levies and export sub-
sidies were introduced to offset the reduction in
farm prices that the floats would otherwise entail in
these countries. This system has become less man-
ageable now that, in the wake of the US actions,
there are three different prices within the market for
each farm product. Moreover, compensatory meas-
ures always lag behind exchange rate changes upon
which they are based. Continuation of this situation
could induce greater reliance on national farm mar-
kets to the detriment of trade, and on other national
measures incompatible with the Common Agricul-
tural Policy.
A return to fixed parities poses serious prob-
lems, since the new exchange rates will differ from
the ones at which the common prices were de-
termined. Three solutions are possible. Farmers los-
ing out because of lower prices could be granted
income compensation. The European unit of ac-
count-in which the common prices are expressed-
could be adjusted. Or the present system of com-
pensatory subsidies and levies could be maintained.
Germany objects to the first two, claiming they
would involve heavy budgetary outlays; Bonn wants
to maintain the compensatory system even after
new parities are fixed, despite charges that this
would lead to isolation of the German market and
constitutes a "sabotage" of the Common Agricul-
tural Policy.
Eventually, a solution to the agricultural prob-
lem-probably involving a new value for the unit of
account and progress toward monetary union-may
have to be sought at the highest political level,
possibly at a summit meeting in early 1972.
In the meantime, the community is unable to
decide on agricultural prices for 1972-73 or to make
much progress on the agricultural reform proposals
the commission had hoped to push through with the
price increases. Moreover, delay in setting the new
prices probably means that they will ultimately be
set at higher levels than the original three-percent
average increase the commission had suggested. This
could
ports,
duced
pose a further threat to US agricultural ex-
especially grains, which the Europeans pro-
in record amounts this year.
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Further Erosion likely in East-West Trade Controls
The COCOM states (NATO members, less Ice-
land and Portugal, plus Japan) meet later this month
to consider the levels of control on trade with Com-
munist states. Like the last time the list was re-
viewed, the US will be fighting a holding action to
limit the degree of relaxation of the controls.
on components, instrumentation, and technology in
these areas. Britain and France have made the most
requests, followed by the Italians. In some cases,
COCOM members have taken unilateral action, in-
forming the organization only after a deal is put
through.
The re-examination occurs against a distinctly
unfavorable background. In 1968-69, a number of
controls on exports to the USSR and Eastern Eu-
rope were relaxed, although more severe restrictions
on exports to Communist China were maintained.
Japan, for one, has indicated that it will no longer
accept this China differential. Since the earlier re-
view, the number of applications for exceptions-
relatively small until that time-has increased
sharply. Virtually all have been approved, and the
value of such exports rose from $40 million in 1969
to $106 million last year.
The exceptions requested have concentrated on
advanced electronics, such as computer and tele-
communications systems. The requests have focused
The basic problem confronting the US is that
the increase in exception requests includes equip-
ment with capabilities far above those covered under
COCOM cut-offs as well as technology having both
military and civilian uses. In both instances, COCOM
rules call for negotiations in which the US typically
finds itself in the minority.
Up till now, other COCOM members have gen-
erally gone along with the US in priority situations
in return for US willingness to compromise on less
critical matters. This gives reason to hope that effec-
tive controls probably will be maintained over tech-
nology and equipment having important military
and strategic applications.
Spain: Elections Improve Government Standing
Candidates favored by the technocrat - opus
Dei faction that dominates the cabinet won a major-
ity of the 104 contested seats in direct elections to
the Cortes last week, although the official tally is
not complete. The Opus Dei group is expected to
improve its position still more in the indirect elec-
tions to be held this month to fill most of the
remaining 452 seats in the Cortes.
Although the Cortes has severely limited
powers, the renewal of its membership every four
years is an important bellwether of the strength of
the several political factions that support the Franco
regime. The previous Cortes was dominated by rival
Falangist (strict authoritarian) and syndicalist (offi-
cial labor organization) factions. The additional sup-
port that the Opus Dei faction is expected to pick
up in the month-long selection process will give it a
majority in the new Cortes. With this majority, the
government can permit the Cortes to exercise a
more independent legislative role. The government
will also be able to control selection of the Cortes
representation in the Council of the Realm, an ad-
visory body that will participate in the selection of a
prime minister when Franco decides to give up the
post. The prospects will therefore be enhanced that
the present cabinet will play a significant role in the
post-Franco government.
Voting in the direct elections was light, around
55 percent of the 17 million eligibles. This was close
to the participation in 1967, the first time direct
elections to the Cartes had been permitted since
Franco came to power. Voter apathy reflected the
government controls over the election. The cam-
paign was limited to 15 days, candidates were not
allowed to use radio and television, and a large
number of candidates were government
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office-holders. Other hindrances were the finan-
cial burden of campaigning and the fact that a
number of the most independent and attention-
getting members of the retiring Cortes decided
not to run again.
The illegal opposition groups canvassed the
possibilities of presenting a slate of candidates
they would secretly support since party labels are
forbidden, but the plan collapsed because of dis-
sension among Monarchists, Christian Democrats,
Socialists, and others. These groups then urged a
UN: The Deficit Issue Is Revived
The Soviets and the French have offered to
make voluntary contributions toward meeting the
UN's huge deficit, which largely stems from their
refusal to honor assessments for UN peace-
keeping operations in the Congo (K) during the
early 1960s. Their bids, however, appear inade-
quate and hedged with unpalatable conditions.
Ambassador Malik said at a private Big Four
meeting on 1 October that Moscow would make
its donation only if the US provided something
and announced the amount of its contribution.
He further qualified his remarks by maintaining
that the USSR's contribution would only be
against the $31.9 million determined by a General
Assembly committee in 1965-just after the
Congo (K) operations ceased-to be the minimum
deficit then current. He declined any interest in
either current estimates of a deficit of $52-70
boycott of the elections, but the appeal was prob-
ably not a great factor in the mediocre turnout.
Three important opposition figures running
on their own were re-elected. In addition, the
independent candidate from Barcelona, Eduardo
Tarragona, a persistent gadfly in criticizing the
government, won his seat by a large majority.
Some candidates from the various rival govern-
ment factions also won, so that debates in the
new Cortes will be lively in spite of the predomi-
nance of Opus Dei.
million (depending on methods of calculation) or
the $119.4 million needed to amortize the UN
bonds issued as an emergency solution to the
peace-keeping deficit problem.
The French were somewhat more responsive,
offering $3.9 million or 7.5 per cent of the cur-
rent minimum figure for the deficit. Like the
Soviets, they said their donation would be volun-
tary and directed toward no particular deficit
issue, thereby avoiding any accommodation on
the "matters of principle" that provoked the
lengthy impasse. The French refused to say
whether they will offer additional sums at a later
date.
The US and the USSR will be meeting at the
UN soon for further consultations on the subject,
and subsequently the Big Four will reconvene.
Hopes for an early resolution of differences ap-
pear bleak.
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MIDDLE EAST - AFRICA
The Arab World
Setting Up Shop
The leaders of Egypt, Syria, and Libya met
in Cairo this week at the first session of the
Confederation of Arab States presidential council.
During the three-day conclave, they began to set
up the confederation's structure and consulted on
other political and military matters.
The first order of business was to elect a
council chairman to serve as president of the
confederation-a largely ceremonial post. The
selection of Sadat surprised no one. It had been
expected that the chairmanship would rotate be-
tween Sadat, Asacl, and Qadhafi in that order.
The confederal constitution does specify, how-
ever, that an incumbent's two-year term can be
renewed. The presidential council, in which the
confederation's power is concentrated, has no
authority to impose policy on a member state.
For the next two years, important questions must
be decided unanimously, and each member is
empowered to determine which issues are im-
portant.
The council then proceeded to select Cairo
as the confederal capital, establish a headquarters
in a suburb of Cairo, and discuss the formation of
a cabinet and other bodies.
Sadat, Qadhafi, and Asad sign Federation Agreement, April 1971
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The three also addressed Jordan-fedayeen re-
lations in view of the inconclusive talks in Jidda
late last month. Egyptian and Saudi mediators
failed to persuade representatives of Jordan and
the guerrillas even to paper over their differences.
There was no indication of what steps, if any, the
three heads of state intend to take on the issue,
although Qadhafi has previously argued for sanc-
tions against Jordan if King Husayn continued to
balk at concluding a settlement with the feda-
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The Egyptians and the Israelis have reacted
unfavorably to Secretary Roger's speech listing
six areas of compromise needed for an interim
settlement to reopen the Suez Canal. Tel Aviv's
reaction was by far the more negative. Even the
moderate papers say that the speech represents an
"erosion" in the US stand and shows a trend
toward "cumulative pressure" on Israel-which,
they hasten to add, Israel can withstand. The
Jerusalem Post called the proposals "a package
largely made in Egypt," and the organ of the
ruling Labor Party agreed that the speech sug-
gested explicit support for the Egyptian position.
One hard-line newspaper said the speech in effect
particularly with its stand on Israeli withdrawal.
The Lebanese Government has capitulated
to public pressure and revoked a decree imposing
a tariff on luxury goods. The capitulation attests
to the viability of Lebanon's democracy, unique
in the Arab world, and shows once again how
difficult it is to bring about sorely needed eco-
nomic and social reforms.
The tariff was intended to encourage local
industry and to finance development projects.
The powerful Beirut merchants went on strike.
They had the support of the public who feared a
price rise. Although President Franjiyah has
weathered the first real political crisis since he
came into office a year ago, his cabinet of techno-
crats has suffered a loss of face, and its opponents
may be emboldened to attack on other issues.
Politicians have been demanding a cabinet that is
representative of their factions in parliament, but
the formation of such a coalition cabinet may be
difficult because of the unwillingness of the fac-
tions to cooperate.
put an end to Washington's role as a mediator Refugee Problems
because it made the US a party to the negotia-
tions with fixed positions of its own.
Cairo's initial reaction seems to have been
critical more or less out of habit. Then-pre-
sumably on the theory that anything attacked by
Tel Aviv must contain something good for
Cairo-Egyptian papers began to find positive ele-
ments in the speech. Egypt's semiofficial news-
paper AI-Ahram gave an impartial synopsis of the
speech. It emphasized the secretary's pledge that
the US would work constructively to achieve an
interim settlement as a first step toward complete
fulfillment of UN Security Council resolution
242. One Beirut newspaper-admittedly conserva-
tive-reported that Arab UN delegates had ex-
pressed "reserved satisfaction" with the address,
Both the UN Relief and Works Agency and
Amman face severe budgetary problems that
hamper efforts to alleviate the plight of the
Palestinians in the refugee camps of Jordan.
UNRWA Commissioner General Rennie told a
General Assembly committee this week that cuts
in the agency's program to resettle the refugees
permanently will soon be imperative unless in-
come is greatly increased. Jordan does not have
the estimated $400,000 that would be needed to
take over and expand UNRWA's efforts to induce
refugee resettlement in the East Ghor Valley.
Amman may also be chary of breaking with the
traditional reluctance of Arab governments to
acknowledge any responsibility for the Palestinian
problem.
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Soviet Military Shipments to Egypt
The current level of Soviet seaborne military
deliveries suggests that the military establishment
in Egypt is being maintained rather than built up,
as was the case in 1970 and early 1971 when the
air defense system was significantly expanded.
Although deliveries in September appear to have
declined well below this year's monthly average,
monthly arrivals vary considerably and not too
much can be read into it.
About half of the seaborne military cargoes
are not identified, but the mix of the remainder
has changed somewhat this year compared with
the first nine months of 1970. This year a greater
share has consisted of fighter aircraft and heli-
copters, primarily MIG-21 interceptors and MI-8
helicopters, largely delivered earlier in the year.
Shipments of surface-to-air missile equipment, a
big factor in last year's deliveries, have repre-
sented only a small portion of the total in 1971.
The number of trucks observed, ranging from
utility to specialized vehicles, has increased
markedly over 1970. This may reflect the delivery
of advanced electronics and communications
equipment that the Egyptians have been seeking
to counter Israeli improvements in the same field.
President Sadat is expected to discuss more
military equipment during his upcoming visit to
Moscow, and his requests are likely to focus on
such items as additional electronics counter-
measure materiel. He may also bring up the
chronic problem of inadequate spare parts that
result in down time and frequently require
emergency deliveries. In any case, Egypt's
primary defense problem continues to be the lack
of trained personnel to man and maintain the
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Tunisia: Politicians Look to the Future
The eighth congress of the Destourian Socialist
Party, which convenes on 11 October, faces the
need to prepare for a future without Habib Bour-
guiba, the dynamic and Western-oriented President
who has dominated Tunisian politics for nearly 40
years. If his health permits, Bourguiba will appear at
the congress to appeal for continued party unity,
but for the most part he will remain in the wings
and his subordinates will carry out his directives.
Two interrelated problems will dominate the
congress-decentralization of power and an orderly
presidential succession. Guidelines were laid down
by Bourguiba, 15 months ago when he named a
superior commission to propose revisions to the
Constitution and to prepare for the congress. At the
time, he suggested that the authority of the cabinet
and the National Assembly be increased and proce-
dures for presidential succession reviewed.
For the past decade, Bourguiba has balanced an
unwillingness to share autocratic power with a deep
desire to assure orderly succession. At his request,
the constitution was amended in early 1970 to pro-
vide that the prime minister would succeed in the
event of the death or incapacitation of the presi-
dent. Last fall, Bourguiba seemed to be having sec-
ond thoughts about this arrangement, and the com-
mission drafted a new amendment providing for the
temporary accession of the president of the National
Assembly and the election of a new president within
a month. It is not known whether this new proposal
will be submitted for approval, since the documents
prepared for the study of delegates in advance of the
congress have not been made public.
Debate over these and other issues probably
will be lively and may become bitter and divisive,
reflecting the factionalism and personal antipathies
that have rent the party along regional and ideo-
logical lines. The structure that emerges from the
congress will probably be similar to past hierarchies.
It should, however, be more representative of the
rank and file and provide a better opportunity for
dialogue between local and regional units and na-
India's Green Revolution: A Plus and Some Minuses
New Delhi's drive since the mid-1960s toward
self-sufficiency in food grains has seriously limited
the production of industrial crops. Food grain pro-
duction reached record levels this year, 21 percent
higher than the 1964-65 bumper crop. But some of
the gain comes at the expense of industrial crops,
since scarce irrigated land has been shifted to more
profitable food grains.
The resulting decline in production of cotton,
jute, and oilseeds has caused serious shortages of raw
materials for major industries using these crops. This
has resulted in significant price rises, a squeeze on
industrial profits leading to business failures, short-
ages of consumer goods, and losses of export earn-
ings. Over-all industrial output increased by only five
percent during 1969 and 1970 instead of the nine
percent growth target.
The cotton textile industry has suffered most.
Short supplies of domestic cotton, combined with
restrictive government policies, which include limit-
ing imports of long-staple cotton needed by larger
factories, has sharply raised raw cotton prices. The
output of textiles has failed to meet domestic de-
mand and per capita availability of cotton cloth has
declined.
The erratic domestic jute supply, together with
limits on raw jute imports, export taxes, and restric-
tion on investment in jute manufacturing, have re-
sulted in a sharp decline in India's share of the world
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market. Fluctuations in the price and supply of
jute manufactures have induced foreign con-
sumers to shift to other sources or to synthetic
substitutes.
The price of oilseeds and their products has
risen about 50 percent since mid-1968. The in-
crease reflects not only lagging domestic produc-
tion, but also increased domestic demand for
edible oils as incomes have risen. Imports of oil
substitutes such as tallow have increased, and
exports of certain oilseed products have been
restricted. Per capita consumption of edible oils is
still at about the 1963-64 level.
The slowdown in industrial crop production
has not seriously affected India's balance of
payments, mainly because of government import
restrictions. Despite the shortages described,
imports of edible oils, cotton, and jute have de-
clined since 1967-68.
With all of India's arable land already under
cultivation, accelerated industrial crop production
can be achieved only by shifting land back from
good grains or by improved yields. Clearly, the
latter is the more promising option, as New Delhi
is not likely to reduce significantly its incentive
programs for food grains. The keys to higher
yields are adequate irrigation and the de-
velopment of more productive techniques, in-
cluding improved seeds. Progress in these areas
will be slow, however, unless the government pro-
vides new-and costly-incentives for industrial
crop growers.
Pakistan: East Side, West Side
Islamabad's efforts to ease its troubles in
East Pakistan are not making much headway. The
US Embassy in Islamabad reported recently that
the Mukti Bahini guerrillas are gradually stepping
up their activities and may attempt to launch a
major offensive later in the fall.
According to the embassy, the government
has failed to undercut popular support in East
Pakistan for the guerrillas, especially in rural
areas. The army continues to carry out reprisals
against the population, and recent government
measures, ostensibly designed to mollify the East
Pakistanis but probably aimed primarily at reduc-
ing international criticism of the government,
have not made much of an impression on the
people. Civil administration in the province is
functioning very badly and in many areas is non-
existent. In some districts the insurgents appear
to have established parallel administrative struc-
tures.
In West Pakistan, on the other hand, the
government continues to enjoy widespread sup-
port. The strife in the east has not yet caused
severe economic dislocations in the western prov-
inces. The separatist elements that have long
existed in several parts of the western wing re-
main quiescent. Efforts by the regime to bring
about unity among the various factions of the
conservative Muslim League have floundered, and
Z. A. Bhutto's leftist Pakistan People's Party re-
mains unchallenged. However, the government ap-
parently still hopes to strengthen rightist groups
at the party's expense.
Elections to fill vacant East Pakistani seats in
the national assembly are scheduled for Decem-
ber, and Bhutto's party-heretofore based entirely
in West Pakistan--plans to participate. He hopes
to emerge from the balloting with a majority of
assembly seats and to form a national government
shortly thereafter, Bhutto recently stated that he
and his followers would wait at least until next
January before resorting to more drastic measures
to force a return to civilian government. By then,
there is a strong chance that their expectations
will have been thwarted by a poor showing by
their party in the elections, by further slippage in
Yahya's election timetable, or by government dis-
inclination to turn the reins of power over to
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Guinea: Another Judgment Day
A "peoples trial" of another large group of
alleged traitors appears to be nearing an end, but
this probably does not mean an end to the terror
that has gripped Guinea for months. President Toure
still feels insecure and continues to search for help
in combating what he believes is a foreign-backed
invasion threat.
Last week, the various levels of Guinea's single
political party began meetings to consider confes-
sions broadcast over Radio Conakry. These con-
claves are to forward recommendations on the dis-
position of nearly 150 alleged traitors and "merce-
naries." The date for final sentencing is uncertain.
The procedure probably will follow closely that
used last January when the National Assembly met
as a "revolutionary tribunal," which condemned 91
to death; 15 were subsequently hung publicly. Dur-
ing September, the focus shifted slightly from high-
level "traitors" to the activities of long-time resident
foreigners engaged in business. The total number
jailed since January is not precisely known, but
probably is several times the 150 currently facing
sentencing.
Part of the game is to maintain pressure on the
US, which, Toure is convinced, is in a position to
block any new Portuguese attempt to overthrow
him. Last month's batch of public confessions ad-
vanced the charges of US involvement in Guinea's
CENTRAL AFRICAN REPUBLIC: Bangui is quiet
again after demonstrations last week in support of
President Bokassa's current effort to loosen Paris'
financial controls. Mob violence against French na-
tionals and property shook up the French commu-
nity, which has calmed down considerably and
largely returned to work; Paris appears to be taking
the episode in stride. A US Embassy source has
claimed that, while the demonstrations were going
on Bokassa foiled a military coup attempt against
him. So far, however, the President has not de-
nounced or moved against any plotters nor insti-
tuted extraordinary security precautions.
domestic affairs a step further by specifying Ameri-
can complicity in past attempts to assassinate Toure
and to overthrow his government. Toure evidently
intends to keep up these verbal attacks until Wash-
ington shows its support in more concrete terms.
Toure may have in mind such things as a favorable
US response to a recently reiterated request for
military aid.
The USSR continues to exploit Toure's secu-
rity fears and the West's difficulties in Guinea. Mos-
cow's prompt response to Toure's pleas for help last
November included a show of naval strength. Soviet
warships arrived off Guinea in mid-December and
two or three ships have remained in the area almost
continuously, making occasional port calls. They
were anchored in Conakry harbor from late August
to 6 October.
At the UN, the long-delayed report of the
Security Council mission to Guinea was finally in-
troduced on 29 September. Toure requested the
mission last August to investigate an alleged immi-
nent invasion threat. Its report contains no rec-
ommendations, and it may not lead to a council
resolution
The demonstrations appear to have been staged
to coincide with talks between Bokassa and a rep-
resentative of the Paris-based Central Bank of
Equatorial Africa, which issues the republic's
currency. Bokassa wants the bank's monetary con-
trols and his country's share of its reserves trans-
ferred to Bangui and the currency revalued. Apart
from nationalistic reasons, Bokassa probably is
motivated by his perennial quest for read cash to
meet current ex enses.
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WESTERN HEMISPHERE
Peru: Velasco Takes to the Provinces
In his first major trip outside Lima in tUNC
ilu
three years since assuming power, President
Velasco last week made a swing through the
southern part of Peru. He wanted to impress the
peasants and others in the south with the aims of
the revolutionary government and gain additional
support in this part of the country.
President Velasco's speeches, especially the
one in Arequipa on the anniversary of the coup,
overflowed with nationalistic rhetoric. He praised
his government's agrarian reform program and, in
the plaza where an Inca descendant was executed
in the eighteenth century, proclaimed, "The land
belongs to whoever works it, so this land is
yours." The President hastened to add that legal
formalities must be respected. He defended his
government's recent action against striking teach-
ers, claiming that the teachers had been used by
"antirevolutionary forces."
President Velasco also handed out a few
economic plums to the southern area. He author-
ized construction of a road linking Cuzco to
Machu Picchu, Peru's greatest tourist attraction.
New hotels will be built in both places, taking
advantage of incentives under the new tourism
law. Another law establishes specific incentives
for private industries established outside the
Lima/Callao area. The President also authorized
investment by the Peruvian mining corporation in
a copper concession south of Cuzco. These proj-
ects should provide important economic stimulus
to the entire Cuzco area.
The Velasco government clearly is beginning
to come up against problems in carrying through
its programs after three years of revolutionary
rhetoric, accompanied by initial reforms in some
areas. In Arequipa, he admitted, "No revolution
can be free of errors and shortcomings." His
drumbeating in the south should give the govern-
ment increased support and a little breathing
space in that area.
President Velasco Visits
Southern Peru
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Argentine Military Shaken by Navy DiSCOUkODED
Changes in the top navy command have added
to military dissension and prompted rumors of more
far-reaching changes. The navy has insisted that the
sudden dismissal of five senior officers was an in-
ternal problem, but speculation in the public me-
dia-and even among many military officers-is that
it poses a political crisis for the Lanusse government.
The forced retirement of the navy chief of staff
and the chief of naval operations and the removal of
three other senior officers from their posts report-
edly resulted from an attempt to force the removal
Five additional admirals reportedly have
requested early retirement in a demonstration of
solidarity with the dismissed officers and in an ap-
parent attempt to maintain the pressure on Gnavi
and force his resignation from the navy and the
three-man governing junta.
The apparent deterioration of morale and unity
in the armed forces is likely to sharpen the concern
of senior officers who are already wary of Lanusse's
political and economic policies. Thus, policies that
appear divisive to the military, such as Lanusse's 25X1
rapprochement with the Peronists, could begin to
meet with strong opposition from the senior gen-
erals on whom Lanusse relies for support.
Brazilian Terrorists on the Defensive
The last year has been a period of retrench-
ment for the terrorists who face an increasingly
efficient government campaign to suppress them.
The last important surge of terrorist violence, in
mid-1970, was capped by the kidnaping of the West
German ambassador. The subversives' plans to
launch a sustained campaign in November 1970 had
to be abandoned after the death of terrorist leader
Joaquim Camara Ferreira in October. The abduction
of the Swiss ambassador in December appears to
have been an isolated act and not part of a general
campaign of urban violence. The substantial im-
provement of the armed forces' techniques against
rural groups was demonstrated last month in the
tracking down and killing of renegade army Captain
Carlos Lamarca.
Although the tempo of activities in Rio de
Janeiro and Sao Paulo has increased since May, the
activity is of a much more limited nature than that
executed during the high-water period of 1969 and
1970. The recent operations consist largely of rob-
beries, attacks on police and military vehicles, raids
on government offices, and seizures of printing
equipment. Many of the actions have been joint
operations carried out by small teams from more
than one group.
The largest and best organized groups are the
National Liberating Action and the 8 October Revo-
lutionary Movement (MR-8), both of which have
their roots in dissident factions that developed in
the Brazilian Communist Party in 1967. These two
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groups have acted cautiously during the past year,
and have been damaged less as a result. The third
major terrorist organization-the Popular Revolu-
tionary Vanguard-has suffered from the combined
problems of general exhaustion and the loss of sev-
eral key members. Lamarca's defection from the
Vanguard last March was a symptom of its decline.
Its strength had been based on conventional military
skill and daring.
The authorities have failed to follow up on
many of their successes, giving the terrorist groups
time to fall back and to recruit the few replacements
they can use effectively. The number of active mem-
bers of armed revolutionary groups probably does
not exceed 100 within Brazil, and about as many in
exile. No more than 1.000 persons, out of a popu-
lation of 93 million, have ever taken part in violent
opposition to the government.
The government has demonstrated that, while
it is unable to eliminate armed terrorism, it has the
ability to restrict such activities to essentially in-
consequential skirmishes. It has been suggested that
the security forces now are overplaying terrorist
activities in order to justify the retention of extra-
ordinary political controls. Leaders of the opposi-
tion party have already claimed that Lamarca's
death removes the government's rationale for main-
taining authoritarian controls in force. Spokesmen
for the progovernment party, reflecting the view of
the security forces, contend that the terrorists have
retreated only long enough to re lenish their leader-
sh ip. 25X1
Guatemala Beset by Church and Students
The Arana government's approach to the se-
curity problem is under cautious attack from several
quarters. It is extremely sensitive to criticism and
may crack down hardest on its least favorite Guate-
malan institution, the University of San Carlos. Only
last week, the government expelled two foreign cler-
gymen for interfering in Guatemalan affairs, and it
has not been much less subtle in warning the do-
mestic clergy. Silence by the government now might
let the storm blow over, but there are signs that
other elements unhappy with the high levels of
violence-a good deal of which is caused by security
operations-may be emboldened to speak their
piece.
Already irritated by pleas from their partisans
to end the eleven-month-old state of siege, President
Arana and the military have been meeting a prolifer-
ation of similar protests. On 20 September several
church officials, including Episcopalian Bishop Frey,
a US citizen, released a document calling for an end
to the systematic extermination of citizens and as-
serting that the perennial violence in Guatemala is a
symptom of moral depravation. It asked for the
lifting of siege so that the law might operate demo-
cratically. A few Catholic priests signed, but most
Catholic officials passively dissociated themselves
from the declaration. The top church official has
now dissociated himself publicly after a personal
warning from President Arana to keep the clergy out
of politics. This warning to the church, however, did
not deter university groups, opposition congress-
men, and the bar association from publicly con-
curring in the protest against violence.
Coincidentally, the bad blood between the
largely leftist university and the government was
also agitated on 20 September with the killing of a
Communist professor. Several university faculties at
San Carlos are now on strike, believing-correctly-
that he died at government hands. Tension escalated
with the government's kidnaping of another Com-
munist professor, since released, and of a Commu-
nist student, whose detention the government now
admits. The government has sent a letter to the
student council warning it not to place the nation in
the "tragic position of choosing between university
autonomy and the liberty of all Guatemalans," and
alluding to the closure of universities in other Latin
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Panama Prepares for Anniversary
The government, having devoted consider-
able time and effort to getting a large crowd into
Panama City for the third anniversary of the
Provisional Junta Government, is now concerned
lest provocateurs cause anti-US incidents. Initial
publicity had billed the 11 October rally as an
opportunity for the people to demonstrate sup-
port for the government's position on treaty ne-
gotiations and had stressed the attainment of
total sovereignty over the Canal Zone. More re-
cently, however, the government has played down
the sovereignty and treaty issues.
Torrijos may focus instead on domestic is-
sues and attempt to put the best face on the
regime's rather limited accomplishments. He will
undoubtedly make the now-ritual obeisance to
labor and the peasantry. He may hold out the
promise of higher wage rates and an intensifica-
tion of the government's development efforts. He
may announce an administrative rejuggling to in-
crease government responsiveness to local prob-
lems and may hint at future steps toward normali-
zation of the political process. Dramatic an-
nouncements heralding either bold revolutionary
schemes or a quick return to constitutional gov-
ernment are not in prospect. Torrijos, however, to
demonstrate his independence from the US may
announce publicly the establishment of diplo-
matic relations with Romania.
Security forces will be much in-evidence and
even Panama City firemen will be pressed into
service to keep the crowd, expected to reach
100,000, under control. The government seems
resolved to prevent violence and discourage incur-
sions into the zone. Given the number of people
expected and their proximity to the Canal Zone,
the potential for trouble is high. Not all elements
of the crowd will be friendly to the regime and
some may seek to-embarrass Torrijos by creating
disturbances. Some students, moreover, might
seek to win momentary glory by raising the Pana-
manian flag in the zone.
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Secret
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Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
Bhutan Enters the World Arena
Secret
N4 44
8 October 1971
No. 0391/71A
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On 21 September 1971, the Year of the Iron Hog in Bhutan, the country was elected
to membership in the UN. This secluded Himalayan kingdom, one of the world's smallest
independent states, enters the international arena backed by a population of one million
who live in a feudal manner not much different than was the case in the 17th century when
Bhutan first became a distinct political entity. Since the mid-1960s, a small group of
Bhutanese elite has aspired to UN membership in order to ensure international recognition
of Bhutan's sovereignty and to hasten development of its backward economy.
The country, almost totally dependent on India for economic and military assistance,
is required by treaty to be "guided" by Indian advice in foreign affairs. New Delhi's interest
in Bhutan rests heavily on the fact that Bhutan borders on the strategically sensitive Indian
corridor that leads to isolated northeast India. New Delhi energetically endorsed the
Bhutanese bid for a UN seat, and Bhutan is expected to vote with India on most issues.
Peking appears content to see Bhutan develop further as a viable buffer state and has not
pressed earlier territorial claims.
Special Report
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The landlocked Himalayan kingdom, about
19,000 square miles, is nearly the size of Vermont
and New Hampshire combined. The majority of
its population are Bhotias-Buddhists of Tibetan
extraction. This group, which shares the basic
features of Tibetan culture, dominates the govern-
ment and the clergy. People of Nepalese origin
and a number of small tribal groups are distinct
minorities on the fringe of Bhutanese society.
Much of the population lives in almost inacces-
sible valleys largely untouched by the laws and
activities of the government.
Life is primitive, but, compared to much of
the rest of Asia, living standards are relatively
good. The Bhutanese are self-sufficient, meeting
their basic needs by farming, livestock raising,
cottage industries, and trade. The country has a
good economic potential, but its vast forests have
scarcely even been explored, and its mineral re-
sources have not been tapped. Less than five
percent of the population is literate, and basic
elementary education is just beginning in a lim-
ited number of government schools. Some 500
Bhutanese attend secondary schools in India, but
probably no more than a few hundred Bhutanese
have ever traveled beyond India's borders. The
kingdom's international affiliations, prior to ad-
mission to the UN, were confined to membership
in the Colombo Plan and the International Postal
Union.
The ruler of Bhutan is 43-year-old Jigme
Dorji Wangchuk. The King (whose official title is
Druk Gyalpo or Dragon King) succeeded to the
throne in 1952, about 35 years after his grand-
father centralized power in the Wangchuk family
and became the first monarch of all Bhutan. The
family is still in full control. There is no evidence
of a serious challenge to the King's pre-eminence
in both secular and religious affairs, but Bhuta-
nese history is checkered with power struggles
between prominent families. The anticipated
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increase in developmental efforts could upset
long-standing balances, and there has already been
some evidence of dissension between tradition-
alists, particularly within the monasteries, and
more progressive elements favoring moderniza-
tion. The King and Queen have lived apart since
the mid-1960s when members of her influential
family, the Dorjis, were involved in an unsuccess-
ful conspiracy for enhanced power at the King's
expense. The King's half-brother has since be-
come his chief adviser, a post previously held by a
Dorji.
At present, political power is centralized in
the monarchy and a small circle of court officials
drawn from the monasteries and landed elite. The
few reports emerging from Bhutan indicate that a
rudimentary system of representative government
is developing at a slow pace. In recent years, the
King has taken steps to make the government
more democratic, and his proclaimed goal is the
establishment of a constitutional monarchy. A
150-member legislature (the Tshogdu or National
Assembly), consisting of elected village headmen
and Buddhist lamas as well as royal appointees,
has functioned since the mid-1950s. In 1968 the
King set up a cabinet that now numbers five. The
ministers belong to a larger Royal Advisory Coun-
cil that makes recommendations to the King on
economic and administrative matters. The King
has introduced a number of reforms, including
Bhutan's first law code. More recently, he set up a
high court with the authority to hear appeals
against judgments of district courts and adminis-
trators. A potentially far-reaching innovation was
added in 1969 when the King decided that his
continuation should depend on his getting a two-
thirds majority in a vote to be taken every three
years in the National Assembly. Such a vote of
confidence was taken last May, and the King won
133 of the 137 votes cast. There are no political
parties, but the King has not foreclosed the pos-
sibility of their eventual creation.
The King has not recently been incapaci-
tated due to serious illness, as he was several times
in the last decade, but his health is not considered
Special Report
King Wangchuk
Opposite Page
Top: Monks blowing ceremonial trumpets
Center: Market place in Chortens
Bottom: Women pounding grain
- 3 _ 8 October 1971
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J A)Kh 1
Kingdom of BHUTAN
Lang k'a-tad
OCV INA
AREA: 19,000 sq. miles
POPULATION: approx. 1,000,000
WEST
PAKISTAN
Special Report
- 4 - 8 October 1971
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SLLKL I
robust. On his death, or in the highly unlikely
event he were to be voted out of office, the
throne would pass to the crown prince, who will
be 16 in November. A four-man regency council
will actually rule until the heir reaches his 21st
birthday. The crown prince, who received his
secondary education in England and is now being
tutored in Bhutan, already has had a far more
extensive exposure to the outside world than has
his father.
The Crucial Indo-Bhutanese Relationship
India is the most important factor in Bhu-
tan's development. New Delhi inherited Britain's
relationship with the kingdom after Indian inde-
pendence in 1947, and in 1949 a treaty of friend-
ship marked India's formal succession to the role
played by Britain. The treaty recognizes Bhutan's
sovereignty but requires that the country "be
guided by the advice" of India in its external
relations. The two countries apparently have
reached an accord on the imprecise stipulation
regarding foreign affairs, and neither claims a de-
sire for treaty revision. Domestic matters remain
in Bhutan's own hands.
In the late 1960s, the Indian Government
committed itself to sponsor Bhutan for member-
ship in the UN at some unspecified date. Al-
though progress toward this end probably pro-
ceeded faster than New Delhi anticipated, the
Indians responded to Bhutanese pressure with
enthusiasm and good faith. The Indian UN dele-
gation assisted Bhutanese officials who attended
recent UN General Assembly sessions as unofficial
observers, provided them with training in diplo-
macy, and undertook a successful lobbying effort
last winter to win Security Council approval for
the Bhutanese bid.
The Indians will underwrite most of the cost
of maintaining a three-man Bhutanese delegation
in New York and will, in effect, groom the dele-
gates for their new role. In return, Bhutan can be
expected to vote with India and the Afro-Asian
group on most issues. Both are also very much
Special Report - 5
SECRET
interested in the international recognition ac-
corded Bhutan, establishing its separate identity.
This is significant because the Bhutanese-Tibetan
border is undemarcated; indeed, there is no evi-
dence of any treaty that comprehensively defines
the more than 200-mile border. Moreover, Bhutan
borders on the strategically sensitive Indian cor-
ridor that leads to the isolated northeast region.
Indo-Bhutanese relations have become more
extensive in concert with Bhutan's growing ability
to absorb additional help, particularly in terms of
economic aid and training. The kingdom is almost
totally dependent on India for financing develop-
mental programs. Bhutan's annual revenue, de-
rived largely from taxes on land and its produce,
amounts to only slightly over $1 million. Its for-
eign exchange earnings total less than $100,000,
mostly from the sale of postage stamps to col-
lectors. New Delhi plans to contribute about $47
million to Bhutan's third Five-Year Plan
(1971-76), a substantial increase over previous
help. In addition, India is making sizable contri-
butions for road construction and is responsible
for building the first roads usable by four-wheel-
drive vehicles. These join major settlements and
connect the capital, Thimphu, with the Indian
border.
Hundreds of Indian technicians and advisers
are assigned to Bhutan to work on numerous
development projects. They are gradually being
replaced as more Bhutanese acquire the necessary
skills. The pervasive Indian presence arouses re-
sentment among some Bhutanese officials, but
the small number of trained Bhutanese makes the
situation unavoidable.
The Indo-Bhutanese Defense Arrangement
Indian involvement in Bhutan's defense or-
ganization is even more pronounced. In the late
1950s and early 1960s, when Peking published
maps claiming more than 300 square miles of
northeastern Bhutan and spoke of "liberating"
Bhutan and other Himalayan frontier states
"'wrongfully held by imperialist India," New
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Delhi began strengthening Bhutan's defenses.
Several months before the outbreak of Sino-
Indian hostilities in October 1962, New Delhi
established a military mission in Bhutan to train
and reorganize Bhutan's defense forces. Now, of-
ficers in the 6,000-man army receive basic train-
ing under Indian direction at the military acad-
emy at Ha Dzong in western Bhutan, and some
officers are sent for additional training to military
institutions in India. In addition to their training
function, Indian officers serve with Bhutanese
field units, and India regularly rotates Indian
Army units through Bhutan, sometimes conduct-
ing joint exercises with the Bhutanese.
Indian
troops are believed still to man watch posts on
the Tibetan-Bhutanese border, with special inter-
est focused on the five strategic passes serving as
potential invasion crossing points for an army
moving from Tibet into India.
Both the Bhutanese and Indians recognize
that Bhutan could not by itself withstand Chinese
incursions. Both seem to believe a close defense
relationship enhances Bhutan's securit . 25X1
there has been no
recent indication of Chinese pressures on Bhu-
tan's borders. It is likely that Chinese troops and
Tibetan graziers occasionally wander across the
open border by mistake.
There has been, as far as is known, no recent
official contact between Bhutan and Communist
China. Sino-Bhutanese relations deteriorated fol-
lowing the Tibetan uprising in 1959 and the with-
drawal of the Bhutanese representative in Lhasa.
There are no formal ties between the two nor any
indication that the Bhutanese are planning to seek
resumption of special political or trade relations
with Tibet. Chinese troops continue to patrol the
border region, but Peking has not pressed its
former boundary claims. A Bhutanese official re-
cently declared that in 1970 the Chinese pub-
lished maps of the border that seemed to indicate
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Peking's acceptance of 'Bhutan's version of the
border.
In preparation for its debut at the UN, Bhu-
tan established its first permanent mission in
India last May. The 48-year-old Perna Wangchuk,
who had served as an assistant to the King and
more recently as a liaison officer in the Indian
road-building effort, was named Bhutan's "special
representative" in India. In reciprocation, the
ranking Indian official in Bhutan, B. D. Das, was
accorded a similar title.
For the near future, Bhutan does not plan to
establish any missions in addition to its posts in
New Delhi and New York. Designated as its UN
permanent representative is 43-year-old Sangey
Penjore, minister of communications and a dis-
tant relative of the King. He has been in govern-
ment administration since 1945 and was intri-
cately involved in the steps leading to UN
membership. In his brief contacts with US offi-
cials, Penjore has appeared friendly and intelli-
gent. He is assisted by an Indian official, A. M.
Ram, who is on loan from the Indian Foreign
Ministry and had spent the previous three years as
an adviser in Bhutan. The second secretary and
head of chancery is Kingley Wangdi. Wangdi has
dealt with foreign affairs in the National Assem-
bly and served as observer at UN General Assem-
bly sessions during the last three years.
The US has no plans at present to open a
post in Thimphu and will conduct its relations
through the Bhutanese missions in New York and
New Delhi. The US had already recognized Bhu-
tan as a sovereign independent state.
King with Indian President Giri and wife
The top echelon of Bhutanese officialdom is
relatively realistic about Bhutan's shortcomings in Opposite Page
terms of finances and lack of educated man-
power. Nevertheless, they decided to push for Top: Indian Army border post
early full UN membership instead of limiting their Center: Troops march before King's residence
participation to the UN's specialized agencies. Bottom: King watches militia training
Special Report
7- 8 October 1971
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Furthermore, full membership was the only op-
tion open as the UN has not yet devised a form of
associate membership for "micro-states," such as
Bhutan.
There is a realization in Bhutan of the dan-
ger of proceeding too fast in opening the coun-
try's doors to the world. The King has taken
specific measures to preserve Bhutan's heritage;
for example, by insisting on the wearing of tradi-
tional national dress and by the observance of
ancient cultural traditions. Tourism may eventu-
ally bring much needed foreign exchange, but
today the country is accessible only to invited
guests. In large part, this is due to the Indian
Foreign Ministry, which has strict control over
visas to Bhutan. In practice, this means that with
few exceptions all but government officials, se-
lected journalists, and the King's special guests are
excluded. As Bhutan begins to flex its muscles, it
probably will seek to assume added responsi-
bilities in the field of foreign affairs. For the near
future, however, the Indians and the Bhutanese
will continue their cordial political, economic,
and military relationship, especially their mutual
obligations in the realms of defense and foreign
Special Report -8-
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