WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A009900060001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 31
• Document Creation Date: December 21, 2016
• Sequence Number: 1
• Content Type: SUMMARY

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%001 1450 Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
State Dept. review completed
DIA review(s) completed.
25X1
Secret
8 December 1972
No. 0399/72
Copy N? 54
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CONTENTS (8 December 1972)
I
2
Chile: At Home and Abroad
EC: Promises and Performance
3
Haiti: Pandora's Box
4
India: Westward Ho
5
International: Oil; Money
6
Vietnam: Hanoi Holds Firm
9
Laos: Progress North and South
10
Labor Takes Over Down Under
11
Japan: Tanaka Seeks Mandate
12
China: Grain; Canton Fair
14
France: Politics; Space
16
The Socialist Win in Italy
18
Netherlands: Finely Balanced
19
USSR-Hungary: A Kiss for Kadar
20
Maltese Economy Lags
WESTERN
HEMISPHERE
:21
Argentina: Hedging Election Bets
22
Brazil: A Trip to Africa
23
Honduras: After the Coup
MIDDLE EAST
AFRICA
24
Syria-Jordan: Open Border
24
Lebanon: Fedayeen Boxed In
25
Sudan: Mended Fences
26
Congo: Tribal Unrest
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1.r SLUKE I now
CHILE: AT HOME AND ABROAD (``+"
C t.l(Zelo
taken over by the government equal the annual
profits of the former owners. He said that this
was due largely to a doubling of the work force
and to "suicidal competition" among new man-
agers for political advantage. Millas and other
leaders described the widespread barter and black
market activities of the unions, many of them
Communist-led. Party shortcomings were blamed
for the willingness of lower middle-class groups to
take part in the recent strikes, and there was a
general review of areas where new tactics or effort
were needed to strengthen grass-roots support for
the party and prepare for elections next March.
Some changes in approach should soon become
apparent, given the Communists' record of rec-
tifying ineffective tactics once they have been
identified.
President Allende's trip so far has gone along
about as scheduled-an enthusiastic welcome in
Mexico, a UN speech that blasted economic ag-
gression against Chile, a day-long stopover in
Algeria for talks with President Boumediene, and
another nice welcome at the Moscow airport by
President Podgorny and Premier Kosygin.
While President Allende basks in the lime-
light abroad, two Chilean groups on which he
depends heavily--the Communist Party and the
military-have been reassessing their situation.
Communist chief Luis Corvalan reportedly
has been the central figure in negotiations in
Santiago and Moscow for new Soviet assistance.
According to Foreign Minister Almeyda, Allende
does not want to risk personal involvement in a
possibly unsatisfactory outcome to the quest for
more help. In talks with the Soviets, Corvalan
speaks with the backing of a self-sufficient and
influential political force unique among Latin
American Communist parties and can claim an
unblemished half-century record of total and ef-
fective support of the Moscow line. Membership
in the Chilean party about equals that of the
Christian Democrats, the largest opposition party,
although the Communist vote is smaller. Allende's
Popular Unity coalition was largely engineered by
the Communists and so, in reality, was his selec-
tion as presidential candidate.
Nevertheless, the Communists are only too
aware that Chile's poor economic performance
under Allende weakens the argument that Soviet
aid is justified on political grounds. A party
plenum on the eve of Allende's trip was devoted
entirely to a pessimistic analysis of the economic
situation.
Finance Minister Millas, a top party leader,
pointed out that annual operating losses of firms
Meanwhile, the military is reviewing its first
few weeks as a major participant in the Allende
government. General Prats is carefully avoiding
any appearance of deviating from Allende's poli-
cies while acting as chief of state during the
President's trip.
Prats' subordinates seem thus far to approve 25X1
of the way Prats has discharged his delicate po-
litical responsibilities and therefore accept his
judgments. At least one key and politically
independent official thinks Prats has a pro-gov-25X1
ernment bias, however, and there are indications
that Prats sees himself as a likely presidential
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The EC is under pressure to follow through
on its promises to develop beneficial trading rela-
tionships with less-developed countries. Although
the EC instituted nearly 18 months ago a system
of generalized preferences designed to help devel-
oping countries not directly linked to the com-
munity by specific arrangements, the intended
beneficiaries complain that the system has done
little for them. Moreover, they have tended to
band together in order to press their case more
forcefully on Brussels.i
The resulting problems are typified in the
pulling and hauling between the EC and the As-
sociation of Southeast Asian Nations-Thailand,
Malaysia, Singapore, Indonesia, and the Philip-
pines. For a variety of reasons, including a vague
desire to strengthen the "European" presence in
the area, the community has encouraged perma-
nent consultative arrangements with the associa-
tion. In response, the Asians have now asked for
preferential trade arrangements, technical and
financial assistance, and measures by the EC to
increase demand for their products. There is little
possibility that the community will provide such
benefits, however, especially because many of the
association's tropical products compete directly
with those of the EC's African associates7,
Latin American states also are asking the
community to translate its professions of good
will into meaningful trade and aid agreements. In
1971, these states and the community established
machinery for a permanent dialogue, but the
resulting talks have not significantly strengthened
political or economic relations. As a result, the
unhappy Latin American countries, notably
Brazil, continue to press the EC for wide-ranging
economic programs similar to those proposed by
the Association of Southeast Asian Nations.;
,, ;Prospects are for greater complications in
the future. Under the terms of Britain's accession
agreement, the EC is committed to make associ-
ate membership available to African and Carib-
bean Commonwealth states and to consider the
problems that may arise out of the enlargement
for Commonwealth countries in Asia. Common-
wealth countries in Africa have yet to decide
whether they will choose associate status or
pursue another kind of relationship with the EC.
Other countries, including India, are already
insisting on broad new trade agreements to offset
losses anticipated from British accession.
~'~ IFor the immediate future, the EC will most
'probably just go on making ad hoc concessions
when confronted by impatient developing coun-
tries. In doing this, the EC risks getting drawn
further into arrangements that benefit one group
at the expense of another. Over the longer run,
the difficulties of balancing off these clients
against each other may persuade the EC to seek
to establish a general policy for the developing
world as an alternative to the grab bag of_relation-
ships now emerging.
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?.W SECRET -..i
HAITI: PANDORA'S BOX
)/ ,jThe dismissal of interior and defense minis-
er Luckner Cambronne on 15 November has
triggered rumors that further changes in Haiti's
top civil and military leadership are at handJPer-
haps even more importantly, the ouster reportedly
has stimulated discussion among military officers
regarding the need for significant political change.
(As a result, an atmosphere of political uncertainty
hangs over the Haitian capital. Should it remain
for long, it could produce the first genuine politi-
cal strains since Jean Claude Duvalier became
president nearly 20 months ago:(
army chief of staff General Claude Raymond, and
central bank president Antonio Andre. Thus far,
no reports of further changes have been substan-
tiated, but the government's concern about the
potentially destabilizing effects of the persistent
rumors was demonstrated on 2 December, when a
presidential statement expressing "complete con-
fidence" in the entire cabinet was published in 25X1
Port-au-Prince
officers
) military ~ambronne's dismissal and subsequent de-& government. They are beginning
specifically disturbed the 25X1
parture into exile were effected quietly and were , what they see as a re-emergence of the militia in a
generally well received within Haiti. Still his de- role of primacy over the army, and some are
parture was followed by a wave of reports that 1 opposed to any further consolidation of the polit-
other high-ranking heads would roll. Those most ical power now exercised by the Duvalier family.
frequently mentioned are Foreign Minister Adrien The latter officers are said to be determined to
Raymond, Information Minister Fritz Cineas, "take action" if Marie Denise Duvalier
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5LUKL I
Dominique, the politically ambitious elder sister
of the President, or her husband returns to a
position of power and influence. Both have been
abroad for some. time, but reportedly plan to
return home soonlf While the President's mother,
whose political power in the current government
has been considered about equal to her son's,
probably would like to see Marie Denise remain in
Haiti, this wish might be overruled if the Presi-
dent came to regard her as a threat to his own
position.
In any event, it is significant that the Haitian
military, weakened by successive purges during
the fifteen long years of the Francois Duvalier
dictatorship, is beginning to evince concern over
political matters. Should the Duvalier family take
no effective measures to blunt this concern and
should sufficient cohesion and leadership emerge
25X1 within the military to further this renewed inter-
est in politics, Haiti's young President could be in
for some difficult times.
JNew Delhi has apparently concluded that
India, as a developing country with economic and
political needs that cannot-and, for tactical rea-
sons, should not-be met entirely by the Soviet
Union, ought to improve relations with the US.
The Indians are hopeful that most important ob-
stacles to better Indo-US relations are being
liquidated. They see a Vietnam settlement as
imminent and look favorably on Washington's
continued support for the agreements reached at
the Gandhi-Bhutto summit as endorsing the prin-
ciple of bilateral settlement of Indo-Pakistani
problems. One possible impediment, according to
the Indians, would be the resumption of US arms
sales to Pakistan. The leaders in New Delhi appar-
ently consider such a resumption unlikely, how-
ever, and have decided on a major effort to court
American good will.",
The effort was highlighted last week by For-
eign Minister Swaran Singh, who told Parliament:
We shall do everything in our power to try to
normalize and strengthen our relations with
America on the basis of the recognition of the
new realities." Mrs. Gandhi promptly endorsed
her foreign minister's overture.;
,Singh's speech followed a series of concilia-
tory gestures toward Washington, including re-
strained Indian comment on the Vietnam peace
negotiations, warm congratulatory messages on
President Nixon's re-election, and a generally
unobstructive approach to US positions in inter-
national forums. The timing of the speech was
probably also influenced by American gestures,
including the recent acceptance of debt resched-
uling for India.
The inclination toward better relations with
the US is based in part on a growing awareness of
India's need for economic support in light of
present foodgrain shortages. Under present condi-
tions, only the US can supply large quantities of
foodgrains.
Singh's speech hit a responsive chord in most
of the non-Communist press in India. Editorials,
however, do reflect the government's concern
that the US policy review concerning arms to
Pakistan may be nearing completion. The edi-
torials were almost unanimous in pointing out
,,that resumed US military sales to Pakistan-no
matter how small-would sour the climate for
improved relations. Meanwhile, Mrs. Gandhi's
sometime ally in Parliament, the pro-Moscow
Communist Party of India, has bitterly attacked
the initiative toward Washington.M
Singh also called for better relations with
Peking in his statement in Parliament. Relations
between the two Asian states have been bad since
the war in 1962, and attempts in 1970 to improve
them ended when New Delhi and Peking found
themselves on opposite sides in the Pakistan-
Bangladesh crisis. India obviously would like to
reduce Chinese support for Islamabad. China,
however, can do little for India in the economic
field, and, unlike Washington, has not recently
signaled good will to New Delhi.
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INTERNATIONAL
SECRET
OIL DEVELOPMENTS avoid future problems, the company is suggesting
that Baghdad participate in the operation of the
Some agreements may be reached between Basrah Petroleum Company, still operating under
oil-producing countries and Western oil com- company management.
panies by the end of the year, but problems will
continue to crop up. i Z/ /Negotiations continue between Libya and
All Bunker-Hunt on Tripoli's demand for 50-50 par-
ticipation. After consulting other Western oil
resolved on participation by the Arab Persian 1~ companies, Bunker-Hunt has refused to meet
Gulf members of Organization of Petroleum -i Libya's demands. The companies wish to avoid
Exporting Countries in the operations of Western jeopardizing the participation arrangement with
oil companies within their borders, but details on r the gulf states. The companies' counterproposal is
prices have yet to be established. Saudi Arabia, likely to be along the lines of the tentative gulf
whose oil minister Yamani negotiated the tenta- agreement. Libya's leverage in the current nego-
tive agreement on behalf of the gulf states, and tiations appears limited. Larger companies with
Abu Dhabi and Qatar are believed ready to sign diversified production sources have agreed to
the agreement. Kuwait, assigned responsibility for provide Bunker-Hunt with oil if Libya takes puni-
negotiating prices, is moving slowly on this poten- tive action against the company. Furthermore,
tially controversial issue. The gulf states, never- Tripoli's demands do not have the support of the
theless, hope to be able to implement the partici- Organization of Petroleum Exporting Countries,
pation agreement by 1 January.., and Libyan oil production has dropped.)
4~ 1eanwhile, the Shah has reopened a package MONETARY TALKS
deal negotiated last spring with the consortium of
companies operating in Iran. He is pressing the /.9lConferences last month of subgroups of the
companies to sweeten the package so that it at Organization for Economic Cooperation and
least matches the gulf participation agreement. Development and the International Monetary
The companies have already guaranteed the Shah Fund pointed up substantial disagreements among
future high levels of Iranian production, in- industrial nations with respect to the shape of an
creasing amounts of oil at a low price for sale to IT*nternational monetary reform. A recent US pro-
his National Oil Company. They also have agreed posal to use changes in international reserves to
to construct a new refinery, and they offer a joint trigger exchange rate adjustments came under par-
venture to discover new sources of oil; the com- ticularly heavy attack,]
panies probably are willing to give more to salvage
the agreement, (.Man representatives rejected the notion
that a single indicator should be decisive or that
mandatory exchange-rate adjustments be based
I ~ 3 The Iraq Petroleum Company has made an c solely on statistical indicators. A French repre-
offer to Baghdad to settle the myriad problems rsentative, for example, noted that disruptive cap-
I resulting from nationalization of the company's/2k ital movements could be expected if any easily
facilities in Iraq. The Iraqis appear to be inter- observed indicator were used to determine ex-
0 ested in reaching a settlement soon. The company change rate changes. Others argued that balance
will accept oil as compensation for its Kirkuk oil of payments problems are too complicated to be
fields. Although Baghdad has consistently refused evaluated by reserve movements alone. The chair-
to pay compensation for the North Rumaila oil man of one of the subgroups pointed out that the
field, the company hopes to end this festering use of more than one indicator, on the other
11-year-old problem by pro o in t
t
com^ hand, might give conflicting signals.
pensation in the form of nil 11 ;~g?o accep
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SECRET
The North Vietnamese have published sev-
eral authoritative comments on the negotiations
over the past couple of weeks. All of them reiter-
ate Hanoi's basic position that the cease-fire
agreement should have been signed a month ago
and that few if any changes in the draft can be
permitted. The commentaries did contain un-
usually objective expositions of the Saigon gov-
ernment's criticisms of the draft. The commen-
taries warned that Hanoi will regard any attempt
to revise the agreement's basic principles as an
intention to scrap all the commitments already
made." At no time, however, did Hanoi imply the
talks are at an impasse.)
The Diplomatic Push
gLe's talk of friendship toward Southeast
Asia is consistent with other indications that the
North Vietnamese plan to step up the efforts of
the past few months to broaden their contacts
Hanoi intends, right after a
cease-fire agreement is signed, to mount a cam-
paign to lengthen the list of countries recognizing
North Vietnam. The effort is to focus on South-
east Asia and Europe, with Hanoi trying to estab-
lish trade missions or travel offices in countries
where it cannot get full recognition.1
Hanoi, in fact, has already gained diplomatic
recognition from several European countries
(Austria being the latest), and it has been angling
with some success for closer economic relations
with the Japanese. In their eagerness, the North
Vietnamese have softened some long-standing pre-
conditions: they now are willing to accept ambas-
sadors from countries that also have embassies in
Saigon, for instance..)
The Communists are telling their cadre in
South Vietnam that the bulk of North Vietnam-
ese troops will stay on under one guise or another
following a cease-fire.
Most accounts indicate that the North Viet-
namese forces will be broken down and dispersed
in smaller units under the ostensible control of
the National Liberation Front military apparatus.
Some reports claim that the larger North Viet-
namese units will be hidden away in safe base
areas pending new orders. The reports suggest
that the Communists plan to be flexible on the
role of North Vietnamese forces, tailoring their
activities to local needs.'
In briefings on the role of the North Viet-
namese after a cease-fire, the Communist hier-
archy appears also to be seeking to reassure the
Viet Cong that they will not be deserted and left
more vulnerable to government pressures. Many
of the briefings continue to assert, in fact, that
the Communists plan to renew their military ef-
fort sometime after the cease-fire in order to win
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SECRET `2'
control of the country. The timing and nature of
this military effort is very vague at this point and
may indeed be largely for morale-building pur-
poses.'
Not Much Fighting
l .Military action continues in Quang Tri Prov-
ince and in the central highlands, but the terri-
torial gains on both sides have been negligible.
Continued poor weather, as well as stiff resist-
ance, still hobbles the government drive north
from Quang Tri City toward the Cua Viet River.
There is evidence that the North Vietnamese
forces in this sector have been substantially rein-
forced since their heavy losses last summer.
Enemy forces are managing to check most of the
limited government efforts to expand control
over terrain outside the provincial capitals of
Kontum and Pleiku.3
J Where the situation permits, the Com-
munists appear content with low key tactics just
to demonstrate their continued military presence.
Such an intent doubtless lay behind the well-
staged rocket attacks on the Saigon airport on 6
December. Although the results were marginal
from a military point of view, the Communists
were probably delighted with the world press
coverage. The enemy has the capability to stage
more such attacks in the future.]
[President Thieu's political position has been
strengthened by the desire of important opposi-
tion elements for a united anti-Communist stand
in a cease-fire period. A key group of Catholics
led by Senate Chairman Nguyen Van Huyen were
among the most outspoken critics of the govern-
ment last spring and summer. Now they re-
portedly believe that it is vital for all opposition
groups to back the government and thus thwart a
Communist take-over when the fighting stops.
:_i4_ LThe An Quang Buddhists also have been
reassessing their position. Many of the leading
members of the An Quang hierarchy believe that
criticism of the government should be muted for
the time being. They are said to be more con-
cerned with the survival of an anti-Communist
government than with Thieu's shortcomings.
Some An Quang politicians have indicated that
they would like to cooperate with the President.
The Buddhists are not totally united in this view;
some Buddhists in the National Assembly con-
tinue to speak out against the government and
would welcome Thieu's departure from the politi-
cal scene1
- [Many of those who believe that cooperation
with Thieu is necessary also believe that the gov-
ernment must broaden its base to survive a polit-
ical contest with the Communists. This view was
expressed recently by influential independent
Senator Dang Van Sung, who told the US
Embassy that he fears the Thieu government will
be unable to cope with peacetime problems be-
cause of the "military outlook" of Thieu's entou-
rage. Sung and others are naturally hoping for a
more important role in a broadened regime. .f
there is no plausible evidence that Thieu
intends at this time to bring new political blood
into his government. He has never trusted many
of the country's politicians and believes they do
not have enough influence on public opinion to
warrant concessions. He may be right, but once a
cease-fire goes into effect, the Communists will
step up efforts to influence major individual poli-
ticians and political groups. To hold his own,
Thieu may find it necessary to court civilian ele-
ments to obtain their support.
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Photos of Chinese road construction taken by Lao intelligence team
North of Pak Beng
Chinese Roadbuilding
in Northwest Laos
-- Chinese built road
Nam Thar
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Jr-Ur r- I gym'
[New dry-season road construction is be-
ginning in northwest Laos. Recent photography
shows intermittent clearing and initial grading ex-
tending about 12 miles along the alignment of old
Route 3 southwest of Nam Tha, a Pathet Lao
administrative center near the Chinese border.
This work has already covered half the distance
between Nam Tha and Vieng Phou Kha, a former
government refugee center overrun by the Pathet
Lao in mid-November. The road extension will
improve Lao Communist access to Houa Khong
Province, a rugged area for the most part under
government control. Elsewhere in the northwest,
the Chinese are continuing work on the road from
Muong Sing toward Nam Tha. They are putting
the finishing touches on Route 46 just north of
Pak Beng. There is no sign as yet that the Chinese
plan to extend this road beyond the Mekong.
uong SOUTH-
ighting chn nues
231' captur
Pby veriTTt
Bolovens
Plateau
PROGRESS DOWN SOUTH strong effort to hold it in expectation of a cease-
fire.)
4--- ?Government forces have gained the upper
hand in the struggle for several towns in southern )North of the Bolovens, other irregulars are
Laos. Irregular units that moved into Paksong on withstanding strong North Vietnamese efforts to
"r the Bolovens Plateau on 5 December quickly se- ' retake Saravane. Both sides have taken heavy
cured it against light enemy resistance. These losses in the struggle for this provincial capital
forces presumably will soon attempt to clear which has changed hands several times in the past
North Vietnamese troops from the western 4 3month. In the central panhandle, government
portion of the fertile plateau. Paksong was the troops are clearing small enemy units from Muong
commercial center for the Bolovens area until it Phalane, a town which has been in Communist
was captured by the Communists in May of 1971, hands since May of 1971.
and the government can be expected to make a
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LAOS
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. - L-1 I
Gough Whitlam and Wife
a=, )Election victories by Labor in Australia and
New Zealand do not signal any significant changes
in the historically close ties of these countries
with the US. Both new prime ministers-Gough
Whitlam of Australia and Norman Kirk of New
Zealand-have affirmed that the basic relation-
ships set up under the ANZUS treaty of 1951 will
continue to be the foundation of their respective
foreign policies. Both new governments, however,
will probably be a bit more assertive than were
their predecessors.-'
)In Australia, for example, the Labor Party
has already indicated that it intends to examine
closely the agreements governing US defense and
scientific installations in Australialllt will, in the
end, probably conclude that the installations fit
within the framework of the US alliance. The new;
administration in New Zealand has similarly
stated that it will look over the lease extending
the operations of a US defense facility, but
actually foresees no difficulty in accepting the
agreement worked out with the outgoing gov-
ernment.':
" )Since Labor has been out of power in both
countries for long periods, some foreign policy
changes can be expected outside the bounds of
the ANZUS relationship. Both, for example, will
very likely carry out campaign promises to open
idiplomatic relations with Peking. The new Aus-
tralian Government has begun talks with Chinese
officials in Paris; New Zealand, interested in
working out a formula that will not jeopardize its
trade with Taiwan, may move more slowly. The
Labor governments have indicated they will pull
back from the "forward defense" policy of their
predecessors. Perhaps the first token of such
retrenchment will be the withdrawal of the small
Australian and New Zealand training contingents
from Vietnam. Whitlam and Kirk have each ques-
tioned the utility of SEATO, but will probably
keep their membership for the time being out of
deference to the US-1
'As for their defense commitments to Singa-
pore and Malaysia under the five-power defense
arrangement with the UK, both Canberra and
Wellington will move to replace the existing agree-
ment with bilateral training and military-aid
,,programs. Whitlam has indicated that consul-
L tations with the UK over the future of the five-
power pact will begin next month. New Zealand
will probably follow the lead of Australia, whose
4,000=strong military force in Singapore and
Malaysia makes it the linchpin of the ar-
rangement.
A precipitate dismantling of the five-power
pact is unlikely. Although Whitlam has pledged
not to replace units completing their tours of
duty, he has promised to hold off on a complete
withdrawal until Singapore and Malaysia are
satisfied with substitute security measures. Singa-
pore and Malaysia, always aware that the five-
power arrangement's lifespan was highly un-
certain, can be expected to take its gradual
withering away in stride.
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A generally lackluster campaign has dimmed
public interest in the general elections set for 10
December. There are no contentious issues, and
the vote will probably not alter the political land-
scape significantly.]
Only some 900 candidates-the smallest
number in Japan's postwar history-will compete
for the 491 seats of the House of Representatives
iThe Socialists, Democratic Socialists, and
Komeito have sharply limited their candidacies to
minimize losses in districts where success is
doubtful and to conserve limited campaign chests.
In contrast, the ruling Liberal Democratic Party
has responded to factional pressures by expanding
its list of official candidates. The competition
among the party's large, semi-autonomous fac-
tions could well fragment the conservative vote in
several districts and lead to the loss of some seats
held by the Liberal Democrats. Such losses, how-
ever, are not apt to be great enough to seriously
erode the party's commanding majority in the
Tanaka (r.) Campaigning
Diet.j who lead important factions in the party, hope to
bolster their respective standings as a prelude to
f rime Minister Tanaka has the greatest stake prime ministerial bids in 1975. Fukuda and
in the outcome. He is seeking to strengthen his Nakasone, perennial rivals in the third district of
personal control of the party by enlarging his own UJGumma Prefecture, are engaged in an unusually
faction, and one third of the new candidates bitter personal competition, following Nakasone's
endorsed by the ruling party are affiliated with support for Tanaka in the party presidential elec-
him. Foreign Minister Ohira, Trade Minister tion last July
Nakasone, and former foreign minister Fukuda,
`Fukuda and Nakasone attempt to hold each other back"
J_/ Although the opposition parties are attempt-
ing to focus voter attention on broader policy
matters, such as US-Japan security arrangements
and the new defense plan, the Japanese appear to
be more concerned with the personalities of the
candidates and with domestic problems that
immediately affect their personal lives. Tanaka is
capitalizing upon his broad popularity, and his
promises of more responsive government with
increased attention to welfare and environmental
problems have strong voter appeal. Gains by
Tanaka's candidates on Sunday will decrease the
prime minister's dependence on the other factions
of the ruling party, and an impressive victory for
the ruling party will give him a popular mandate
to implement economic and social welfare reform
programs. 25X1
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Tight world supplies of wheat, poor harvest
con itions within China, and grain transport
problems in Canada have combined to change the
pattern of recent Chinese grain purchases.
The Chinese entered the grain market earlier
than usual this year to offset disruptions in the
delivery of wheat caused by the Canadian dock
strike of August and to make up for the shortfall
CHINESE GRAIN
PURCHASES
for delivery in
crop year 1973
Contract Date
(1972)
2 Jun
27 Sep
10 Nov
early Nov
early Nov
in the grain harvest in north China. Between late
August and mid-October they acquired almost
900,000 tons of US wheat and corn, mainly for
delivery by the end of December 1972.
In mid-October, the customary time for the
Chinese to negotiate for grain to be delivered in
the following year, they found themselves at a
disadvantage: prices in the world wheat market
had been driven up by large Soviet purchases. The
Chinese were forced to buy in this market by a
Quantity
Delivery Schedule
Country
(million tons)
(1973)
of Origin
0.75 (wheat)
Jan-Mar
Canada
1.0 (wheat)
Jan-Dec
Australia
1.7 (wheat)
Apr-Sep
Canada
0.5-1.5 (corn)
Jan-Jun
US
0.6 (wheat)
Jul-Dec
undetermined
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StC;Kt
further deterioration in autumn harvest prospects.
Because of Canadian insistence on unacceptably
high prices for additional quantities of wheat,
China has shifted its purchases away from
Canada, primarily to Australia and the US. For
the first time in a decade, Chinese purchases
feature large quantities of corn. Corn has been
cheaper and more abundant than wheat.
China may now be easing out of the grain
market. Tenders for wheat and corn have been
rejected, suggesting that no more large grain deals
will be made before the summer of 1973. How-
ever, grain purchases for delivery in 1973 already
total at least five million tons, well above China's
recent annual average of about four million tons.
Total foreign exchange costs for grains now under
contract could exceed $400 million:]
[Initial reports indicate that business at the
Canton Fair this fall exceeded the levels of the
past several fairs. Approximately 8,500 traders
attended and concluded contracts in excess of the
record $1 billion set at the spring fair. Chinese
export prices for many goods were higher than at
the spring fair, however, and some goods were in
short supply.
3 The Japanese again sent the largest con-
tingent-some 2,600 representatives from 1,640
Japanese firms. Their transactions totaled an
estimated $250-300 million. Among their pur-
chases were soybeans, handicrafts, and art
objects; long-term contracts to import Chinese
Canton Trade Fair Building
Outgrown
lion, including the first sales made at a Canton
fair. A $10-million sale of synthetic fibers by
Monsanto was the largest single American transac-
tion. Additional sales may result from contacts
made by such major US firms as Alcoa, Dupont,
and Uniroyal. US purchases of Chinese goods
reached at least $9 million, with chemicals ac-
counting for about $3.5 million. Other purchases
included bristles, non-ferrous metals, fireworks,
handicrafts, and light manufactures. Lack of
most-favored-nation tariff status raised prices of
some Chinese goods to unprofitable levels. US
importers, however, found the Chinese willing to
meet US administr ive procedures, such as
labeling requirements.
industrial raw materials also were concluded. ` So many visited the fair this fall that hotels
Sales of Japanese chemicals reportedly showed a were overcrowded and a strain was placed on
marked increase. The West Germans are said to t Canton's municipal services. As a result of grow-
have made substantial sales of machinery and a ing attendance, the Chinese plan to build a new
steel. ] ! exhibit center, as well as a hotel and transport
ber
Over 75 US firms attended, double the num-
at the spring fair.
Contracts signed
by US firms were valued at more than $20 mil-
.'r facilities in the northern suburbs of Canton. They
hope to have them done by the 1973 fall fair. The
- Canton fairs apparently will continue their central
role in China's foreign trade, especially as a forum 25X1
for marketing Chinese products. i
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With national parliamentary elections due in
March 1973, problems are piling up for the
Pompidou government. The biggest is inflation,
with prices increasing at the highest rate in ten
years. Moreover, the Communist and non-Com-
munist leftist parties put on a show of unity in a
joint pre-campaign rally on 1 December, but in-
ternal strains reportedly are afflicting the coali-
tion. Finally, financial scandals implicating cer-
tain Gaullists still cast a long shadow over the
government .1
The rise in consumer prices will probably
exceed 6.5 percent this year. Recent major in-
creases in wages and in the money supply will
maintain the upward pressure. Food prices, al-
ways an intensely sensitive issue in France, are up
even more than the average. President Pompidou
is expected to respond this week by announcing
new measures aimed at slowing down the rate of
inflation. The government will probably increase
reserve requirements against credit from financial
institutions, reduce the value-added tax on food
items, and emphasize price restraints in key indus-
trial sectors. Fiscal policy is not likely to change
significantly. The budget is currently balanced,
and the government would find it difficult either
to raise taxes or cut expenditures..;
These measures are not likely to reduce
inflation substantially during 1973. Pompidou
wants, if possible, to avoid anything so unpopular
as wage controls, which might be more effective.
Government leaders are attempting to minimize
the political repercussions of the price increases
by stressing that other industrialized countries
also suffer from inflation, some to a greater
extent than France, and that the competitive
position of French exports in the world market
thus has not yet been imperiled. French officials
also argue that real wages are continuing to in-
crease and that the economy is growing without
serious unemployment problems. These explana-
tions have not helped much.
;Labor and opposition leaders are getting a
lot of mileage out of the alarming economic situa-
tion and other government shortcomings. At a
recent massive rally the united left vigorously
criticized the government, effectively played
down Socialist-Communist differences, pledged
continued unity beyond the elections, and gen-
erally advanced the cause of the left as a whole. -'r
Sticky charges of
edly continue to disturb the Gaullists' coalition 25X1
partners. With the left gathering momentum and
appearing less of a bogy to the middle-of-the-road
voter, the opposition looks much more formida-
ble than it did only a month ago. Nevertheless, at
this point in time the Gaullists still look like they
will emerge from the elections with a majority
that, if not as large as the present one, will still be
workable.9
V 'France may decide to develop its own
launch vehicle for heavy satellites if its European
partners decide not to participate in building the
Europa-III launcher_
the French have made considerable
j progress in the development of a new space
launch vehicle and that Paris may proceed with
the development of such a launcher, particularly
if West Germany withdraws from the Europa-III
project. A decision on Europa III-essentially a
Franco-German effort-is to be reached at the
European space conference scheduled for 20
December in Brussels. The conference is not
expected to produce a strong vote of confidence
for the Europa program.
tfhe new launcher being developed by the
French National Center for Space Studies would
be capable-like the Europa vehicle-of launching
satellites of up to 1,650 pounds into synchronous
;i orbit. The first stage, consisting of four French-
developed Viking engines with 60 tons of thrust
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`400' SECRET
Europa 111B
Space Booster
(' I
each, is the same as that planned for Europa 111. The
Viking already has undergone static test firings at the
French rocket motor test center at Vernon. The second
stage would be designed around a single Viking engine.
There would be a third and possibly a fourth stage,
depending on French requirements.]
1 (The vehicle probably could be constructed more
quickly than the Europa III, and the French estimate the
cost at about $440 million. They nevertheless will be
prepared to continue the Europa-III program if the Ger-
mans are willing. The joint project, including other West-
ern European countries as well, would cost France less
even though the total cost would be higher-about $620
million. 3,
)The French consider that the choice of vehicles is of
secondary importance. More important to Paris is that
Europe continue to develop its own launch vehicles,
thereby avoiding restrictions on payloads that might be
imposed if US vehicles were used. French officials point
out that the US has not been willing to provide launchers
without conditions-namely prohibitions on the use of
US launch vehicles for orbiting communications satellites
outside of INTELSAT or for military purposes. The
French have not yet placed much emphasis on military
space projects. Programs for the launching of satellite
communications systems, however, are receiving top
priority within the French Government.
( (,France already has its own space launch vehicles and
has launched scientific satellites from its own space
launch centers. None of the existing French vehicles,
however, is capable of launching heavy satellites for com-
munications or other applications. Recent market studies
have indicated that there is sufficient demand in Western
Europe to justify development of larger vehicles-some
40-50 will be needed by the UK, West Germany, and
France between 1980 and 1990.
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A SOCIALIST WIN IN ITALY
JThe increased strength gained by the
/Socialists in recent scattered local elections sur-
prised the country. Only one tenth of the elec-
torate was involved, but the elections had na-
tional importance as the first test of public
opinion since the installation last summer of the
centrist Andreotti government. Christian Demo-
cratic Prime Minister Andreotti accentuated this
aspect of the vote when he asked the voters to
ratify his government which omitted the So-
cialists.;
The Republicans and Social Democrats did
well enough to provide slight evidence of popular
support for the government, but a key Social
Democratic leader, Giuseppe Saragat, and most of
the Republicans have for some time seemed
sympathetic to a revival of the old center-left
government.'
~he Socialists' victory points in this di-
rection, too. At their party congress in mid-No-
vember, a majority had favored early re-entry into
the government. The Socialists evidently picked
: -up votes from the former far-left Proletarian So-
cialist Party. The Communists had expected to
acquire this vote when they absorbed most of
that party's leadership earlier this year. At the
same time, in the northern French-speaking re-
gion of Val d'Aosta, a Communist-backed alliance
won narrowly in both a Senate and a Chamber of
Deputies by-election
Italy: Off-year Municipal Elections
Andreotti supporters in Parliament
Christian Liberals Republicans Social
Democrats (PLI) (PRI) Democrats
(DC) (PSDI)
(Figures in percent)
Municipal elections 26-27 November 1972 t
Parliamentary elections 7-8 May 1972
Socialists Communists Proletarian Far Right Others
(PSI) (PCI) Socialists (MSI)
(PSIUP)
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`V' SECRET 1%W
(n1 Economic factors probably had a bearing on
the government's poor showing. The cost of living
rose 1.2 percent in October, the largest monthly
increase in 25 years. Employment in September
was two percent lower than a year ago; un-
registered employment, including cottage indus-
try, takes up some but not all of the slack. After a
two-year recession, recovery was thought to be on
the way, but official growth forecasts for gross
national product in 1972 have been continually
revised downward; the present estimate is three
percent. With considerable unused industrial
capacity, investment remains weak, industrial pro-
duction has barely increased, and adverse weather
hurt agriculture. I
'The Andreotti government now must con-
tend with the demands from leaders of the major
Communist and non-Communist confederations.
Key contracts in the construction and metal
working fields are still to be signed, and a number
of disputes affecting public services, including
mail, are looming. The government must face the
hazards of resumed parliamentary activity as well.
One of the trickiest problems could be the argu-
ment over homeporting for a US submarine
tender on La Maddalena Island. The Andreotti
government is likely to last out the year, but
beyond its life is an uncertain thing. F
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THE NETHERLANDS: FINELY BALANCED
The Dutch may have to live without a gov-
ernment for a spell while their political leaders
grope with the consequences of the inconclusive
national elections last week. The voters gave a
mild rebuke to the center-right parties that com-
posed Prime Minister Biesheuvel's government,
but did not give any other feasible combination
enough seats to form a viable coalition. The only
Second Chamber of Dutch Parliament
DS'70 6
CPN - Communist Party of the Netherlands
PSP- Pacifist Socialist Party
Progressive Opposition Bloc
PPR- Radical Political Party
D '66- Democrats'66
Pvd A- Party of Labor
DS '70- Democratic Socialists '70
Former Government Coalition
KVP- Catholic People's Party
ARP-Anti-Revolutionary Party
CHU-Christian Historical Union
VVD-Liberals
clear outcome was political fragmentation, as the
center parties-particularly the Catholic People's
Party, the cornerstone of every post-war govern-
ment-lost votes left and right.i,
Queen Juliana began consultations with par-
'liamentary leaders late last week. Labor Party
leader Den Uyl wants to form a minority govern-
ment composed of the three leftist parties, the
so-called Progressive Bloc; Den Uyl has already
chosen two thirds of his proposed cabinet and
sees no need for lengthy negotiations. The bloc,
however, holds barely a third of the seats in the
new parliament and would require the tacit sup-
port of other parties if it were to survive as a
government. Den Uyl's lieutenants are seeking the
cooperation of the Catholics.)
For the moment, however, conservative
politicians have outmaneuvered Den Uyl. Marinus
Ruppert, a member of the Protestant Anti-Revo-
lutionary Party, on 4 December accepted the
Queen's request to investigate the possibilities of
forming a government. His appointment should
.give the confessional parties and the Liberals
more time to work on restoring a center-right
coalition similar to the last. If Ruppert can per-
suade the Democratic Socialists and some of the
ultra-conservative parties to give de facto support,
he might put together a working majority- The
idea, however, is not popular with left-wing Cath-
olics and Protestants, who disagree sharply with
both the Liberals and Democratic Socialists on
the issues of defense spending and strong wage
and price controls.
If both Ruppert and Den Uyl fail, an extra-
parliamentary government of ministers drawn
from many parties may be formed. Such a smor-
agasbord arrangement would be inherently un-
stable, but it would at least forestall new elec-
tions. The respite would primarily benefit the
battered and divided Catholics, who must even-
tually decide whether to throw in with the Prot-
estants and form a large Christian Democratic
Party or follow the general trend to the left and
strike a formal alliance with Den Uyl.
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WWI StUKL I Now
On his first day in Hungary, Soviet party
chief Brezhnev bestowed upon his counterpart
Kadar the Order of Lenin, effusive praise, and a
kiss. That set the tone for the entire visit. The
emphasis from the Soviet side was clearly on
reinforcing and displaying the unity of the social-
ist camp, and there was no hint that the Soviets
were less than fully satisfied with Kadar.
Reporters noted that on his arrival Brezhnev
looked tired-perhaps still showing the effects of
his recent illness-but was in a jocular mood and
moved briskly through the welcoming ceremonies
and greetings. Brezhnev remained in Budapest
while the rest of the delegation traveled outside
the city, but his schedule did not seem otherwise
impaired by his recent health problems.
Brezhnev, contrary to the expectations of
some Hungarian and foreign observers, did not
express any criticism of Budapest's New Eco-
nomic Mechanism. In the major speech of his
five-day visit, Brezhnev allowed for national diver-
sity in striving for a common goal. The Soviet
party chief's implicit praise of the Hungarian
mechanism will hearten proponents of the reform
in Budapest and elsewhere and should strengthen
their hand in countering conservative carping. At
the same time, the communique, which stressed
the need for "reciprocal study and sharing of
experiences," made it clear that Moscow will con-
tinue to watch the Hungarians closely.
The fact that Brezhnev did not criticize is
pegged to the Soviet desire to avoid generating
tensions now, while broader European negotia-
tions are getting under way. Moscow also rec-
ognizes that Kadar has taken measures to tidy up
the loose ends of the Hungarian economic reform.
Greater restrictions on domestic investment and
foreign trade have given a favorable turn to the
economy this year. In addition, Soviet uneasiness
about the decentralized nature of the Hungarian
economy may have been alleviated somewhat by
the promise of the Hungarian central committee
last month to grant additional authority to cen-
tral planners. The regime has also moved against
some of the more obtrusive instances of "bour-
geois" profiteering and "unjustifiable" income.
Some of the long-term economic problems
that Premier Fock publicly aired early this spring
doubtless persist. These were eased a little even
before Brezhnev's arrival. After several years of
foot-dragging, Budapest agreed this summer to
invest in the construction of a cellulose plant in
the USSR, just the kind of help Moscow has been
seeking from its East European allies. The Soviets
have made it plain to the reluctant Hungarians
that joint undertakings like this are their best
means of assuring raw material supplies from the
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MALTESE ECONOMY LAGS
The economy this year has been growing
more slowly than in any year since independence
in 1964 and well below the four-percent rate
achieved last year. Signs of discontent are be-
coming more apparent. Civil servants, teachers,
Malta: Economic Indicators
Unemployment Up
Number of workers unemployed
10,000
8,000
6,000
4,000
2,000
0
1972
1971
Since April, Emergency Labor Corps
recrutts are excluded
Feb Mar Apr May Jun Jul ug Sep Oct Nov D c
Index 1960=100
140
100 _Li _l L. J J
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Construction Down
Number of buildings under construction
10,000,
8,000
6,000
4,000
2,000
01
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Tourism Down
Number of tourists arriving
and lawyers have staged strikes in the past month,
and the important dockyard workers are unhappy
with union leaders who have agreed to defer wage
increases until April 1973.)
1Despite substantial foreign aid, which Prime
Minister Mintoff declared would be used for eco-
nomic development, the man-on-the-street in Malta
has gained no tangible benefits. Unemployment has
reached record levels and prices have risen very
sharply in the 16 months since Mintoff took office.
Government investment is down. Private investment
is too, largely because of the government's failure to
develop comprehensive economic policies. Instead,
the government has responded to specific problems
with ad hoc measures, some of which have dis-
couraged private enterprise. Imports of both capital
goods and construction materials are down sub-
stantially from last year, reflecting the stagnation in
manufacturing and in new building starts. Tourism,
previously one of Malta's most dynamic growth
industries, remains below last year's level.?
7=- iln 1971, an investment incentive program for
industry was canceled and price and wage controls
were established. To counter the negative impact of
these policies, Mintoff recently established an In-
vestment Incentive Council, composed of prominent
'foreign economists and businessmen, to advise on
strategy for attracting foreign investment. He also
indicated that some investment incentives-such as
accelerated depreciation and tax exemption for in-
vestment in certain industries-will be granted. The
impact of these conciliatory gestures may be dimin-
ished by an exchange control bill, now being de-
bated in parliament. It calls for the disclosure and
liquidation of all capital holdings abroad. Such con-
trols on capital are likely to lead to a further deteri-
oration in Malta's investment climate.`,
iAlthough the Mintoff government repeatedly
has promised to publish a new development plan, a
seven-year scheme that is being worked on will prob-
ably not be released until after the new budget is
presented next March. Private businessmen are not
likely to commit themselves to investment projects
until the direction and force of the government's
policies are clear. Prospects for the economy for at
least the next six months are therefore
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ARGENTINA: HEDGING ELECTION BETS(
As the deadlines approach for organizing
coalitions and naming candidates, President
Lanusse is moving to guarantee that the military
will be represented in the March elections. Lines
of communication remain open between Lanusse
and Juan Peron, but little progress has been made
toward a political accord that would produce
candidates acceptable to both camps.
President Lanusse's latest tactic surfaced in
the press on 5 December with speculation that air
force General Ezequiel Martinez, a close adviser
to the President, would head an election coalition
of provincial parties and other non-Pero-nist
groups. The junta decision not to extend the
organizing deadline beyond 11 December suggests
that it expects little difficulty in finding sufficient
support to qualify for participation in the elec-
tions. A, military candidate would have little
drawing power without Peronist or Radical sup-
port, but would give the armed forces more lever-
age in reorganizing electoral slates for the runoff
election that is expected.
The Peronists also made sure they met the
11 December deadline for registering coalitions.
They have announced the formation of a "Justi-
Page
~c*,.~'Cr
cialista Front," which brings together Peronists
and several small parties and splinter groups that
have been identified with Peron's election effort
since last summer. The Radicals, who have been
seeking a political agreement with the Peronists
and the military that would ensure them a role in
the next government, have refused to join the
Peronist front.
The Justicialista Front maintains that Juan
Peron is its presidential candidate, although evi-
dence is accumulating that the Peronists have
accepted the government's decision to let stand
the residency requirement that bars his candi-
dacy. The Peronists will support the old dictator's
candidacy as long as possible in an effort to keep
the increasingly divided movement from disin-
tegrating before the elections.
With the approach of the 21 December dead-
line for naming candidates, political bargaining is
likely to intensify. The military, the Peronists,
and the Radicals would still like to work out
some sort of agreement that would remove doubt
about the election outcome and reduce the politi-
cal divisions that have led to one unstable govern-
ment after another since Peron's ouster in 1955.
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Such an a reement is proving an elusive
quarry.
BRAZIL: A TRIP TO AFRICA
Foreign Minister Gibson Barboza has re-
turned from an extensive tour of west Africa.
This trip, like his travels in Latin America last
year, was designed primarily to further the For-
eign Ministry's ambition to cast Brazil in the role
of an emerging world power.]
Gibson Barboza's safari covered nine coun-
tries: Ivory Coast, Zaire, Cameroon, Nigeria,
Dahomey, Togo, Gabon, Ghana, and Senegal. His
themes were generally the same in each: stress on
historical ties with Africa-half of Brazil's popula-
tion is of African descent-and on shared eco-
nomic interests as members of the developing
world. He noted that they too are producers of
primary products such as coffee and cacao and
should work together to obtain higher prices from
the consumer nations. He also signed agreements
for exchanges of teachers, artists, and books, and
for Brazil to provide modest technical assistance.]
Foreign Minister Gibson Barboza
Promoting Brazil's aspirations
Perhaps even more than anticipated, the visiting the Portuguese territories, and possibly
principal political problem Gibson encountered South Africa, later in the year or in 1973j
was the desire of the Africans-most notably, in
Nigeria and Cameroon-for Brazil to take a strong iln his discussions with the Africans, Gibson
stand against Portugal in Africa: 'fthis is a contro- affirmed his country's support for the principle of
versial issue among Brazilian officials. The Fi- self-determination without making any commit-
nance Ministry, a rival of the Foreign Ministry in ment that could impair relations with Portugal.
the field of foreign relations, believes the poten- This equivocation contributed to a reserved of-
tial for economic opportunities in Portuguese ficial attitude toward the minister in some of the
Africa and in South Africa outweigh the some- .--countries visitedibe recognizes that his brief con-
what nebulous gains in prestige that could result tacts with the governments he visits do not in
from cultivating the area visited by Gibson.] themselves bring any immediate or dramatic
;`Early this year, the differences between the
two ministries on the subject became so pro-
nounced that President Medici called in Gibson
and his counterpart in finance and ordered them
to keep their differences private. Apparently, the
decision was to try both approaches, with Gibson
going to black Africa and the finance minister
advantages for Brazil. Gibson does believe,
however, that the trips promote Brazil's aspira-
tions for international prestige, particularly
among the developing nations, and they also bring
modest economic benefits. Next year, he plans to
extend his diplomatic campaign to another new
israei, ana ossibl other countries.
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HONDURAS: AFTER THE COUP
)j-londurans are displaying a somewhat re-
lieved, business-as-usual attitude following the
long-awaited overthrow of President Ramon Cruz
by chief of the armed forces General Oswaldo
Lopez early Monday morning.,)
))