WEEKLY SUMMARY

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`" Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Secret
12 January 1973
No. 0352/73
State Dept. review completed Copy Na , . 44
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WEEKLY SUMMARY, issued every Friday morning by
e Office of Current Intelligence, reports and analyzes signif-
developments of the week through noon-on Thursday.
uently includes material coordinated-with or prepared
e Office of Economic Research, the Office of Strategic
r, and the Directorate of Science and Technology.
ics requiring more comprehensive treatment and there-
)ublished separately as Special Reports are listed in the
CONTENTS (12 January 1973)
2 Czechoslovakia: Nods to the West
3 The Philippines: The "New Society" Ages
4 France: Watch on the Seine
0 FYR
'25X1
6 Indochina
10 China: The PLA; The Economy
3.2 North Korea: The Party's the Thing
14 Europe: Security talks; Eurocrats
16 Malta: NATO Makes an Offer
116 Romania: Dee-fense, Dee-fense
MIDDLE EAST
AFRICA
19 Egypt: Quiet Flows the Nile
19 Israel-Syria: Clashes Continue
21 Africa: Hounding the Israelis
21 Comoro Islands: Toward Freedom
22 Bangladesh: Opponents at Home
23 Ghana: A Year after a Coup
WESTERN
HEMISPHERE
24 Brazil: Economic Situation Lauded
25 Colombia: New Year Prospects
26 Argentina: Peronlist Problems
27 Venezuela: Oil Treaty Fades
28 Cuba: USSR Picks up the Tab
28 Panama: Host to the Council
SPECIAL
REPORT (Published separately)
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CZECHOSLOVAKIA: NODS TO THE WEST
!Officials at the Ministry of Foreign Affairs in to deal only with North America. Deputy Foreign
Prague have been showing a more cooperative Minister Ruzek, the number-three man at the
/spirit toward the West.`; They have told the US ministry, has been given the North American re-
Embassy that Czechoslovakia is ready to get sponsibility)`'Deputy Foreign Minister Rohal-Ilkiv,
{rdown to business on a consular convent ion.)jThis who controlled the former Western Hemisphere
reverses the line in December when they de- department and who spoke the hard lines of De-
manded that bilateral negotiations open with the cember,~\apparently has been dernoted3l It may
most difficult and complex issues. They left the (> well be that the regime belatedly saw the error of
impression that Czechoslovakia intended to hold its December ways and chose Rohal-Ilkiv as the
back on the less contentious consular and ex- I I scapegoat J
change agreements until some progress was made
in settling stickier trade and financial questions./In a further development related to the
On another significant departure from their
stance in December, the Czechoslovaks have
shown a willingness to discuss cultural matters!
They also expressed the hope that Secretary of
State Rogers and/or the new secretary of trans-
portation would visit Czechoslovakia in 1973.!
As if to underline the shift, a reshuffle at the
Ministry of Foreign Affairs has upgraded the
section dealing with the US. The department
formerly concerned with the entire Western
Hemisphere has been split into two, one of them
change in Czechoslovakia's attitude, Miloslav
Hruza, another deputy foreign minister, told the
US ambassador that, in negotiating the establish-
ment of diplomatic relations with West Germany,
Prague is now ready to give up its insistence on
the invalidation, ab initio of the 1938 Munich
Agreement-provided language can be found to
protect Czechoslovak sensitivities in this matter.
,,This would remove the issue that has deadlocked
negotiations with Bonn. The easing of the ab
initio requirement follows a month of Western
speculation that the Czechoslovaks were under
pressure from their allies to ameliorate their de-
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The Philippines
THE "NEW SOCIETY" AGES
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As the shock effects of Marcos' martial law
wear off, Filipinos are beginning to take a second
look at his much-vaunted "New Society." The
result has been a rising level of public disenchant-
ment, something of a shock to Marcos, who ex-
pected Filipinos to accept his sincerity as a re-
former.
Marcos has been receiving reports from sub-
ordinates, both military and civilian, that indicate
serious slippage in domestic security and in
popular acceptance of martial law. In particular,
local committees entrusted with organizing a
favorable vote for the new constitution report
considerable resentment of that document and its
transitory provisions which allow Marcos to retain
unlimited powerl tWith the "New Society"
crumbling about the edges, Marcos may try to
dress it up with new promises of sweeping reform,
but his immediate ,reaction has been to take the
authoritarian road. I
i , The Philippine President announced on 7
January that he was postponing the scheduled
constitutional plebiscite indefinitely and rein-
stituting the restrictions on free speech, recently
suspended to allow open debate on the con-
stitution.i On 10 January, government officials
began polling the 34,000 village-level citizens'
assemblies created by Marcos on 31 December for
their "reactions" to a suspension of the present
constitution and new measures to legitimize his
martial law regime. The assemblies consist of all
residents of a village over age 15, but the local
government representative has complete control
over their deliberations and will ensure "appropri-
ate" reactions. Marcos has also asked these
assemblies to ratify the new constitution in lieu
of holding a national plebiscite, but they are
supposed to recommend that he continue ruling
through martial law for seven years before putting
the new parliamentary system into effect. J
;Marcos apparently decided he had to move
quickly to avoid a constitutional test on 22
January, when Congress is scheduled to convene.
Several senators have threatened to call for a full
debate on the legality and appropriateness of
Marcos' actions since September.!jAlthough he
probably could get a favorable vote, he would
prefer to avoid the messy debate that would go
before. Now, he can justify suspending Congress
as the "will of the people," expressed through the
citizens' assemblies. The citizens' assemblies will
replace existing representative bodies and will
doubtless be called upon to ratify future decrees
by Marcos. They will also give him feedback on
public opinion in the countryside.;
Marcos has more than his own political
position to worry about. Peace and order in the
Muslim south have deteriorated steadily since the
imposition of martial law. Marcos has tried to
reach an accommodation with Muslim leaders by
meeting some of their economic grievances, but
what he is offering is probably too little and too
latejj)Many Muslims are losing confidence in their
traditional political leaders and are turning to
religious leaders who are less inclined to com-
promise with Manila. Marcos may gain a tempo-
rary respite, but the prospects for a lasting peace
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FRANCE: WATCH ON THE SEINE
Pompidou's Gaullist coalition can take cold
comfort from a poll that reflected a drop in
support for the left opposition. The poll, taken
between 16 and 21 December, showed the alli-
ance of Communists, Socialists and left Radicals
down from a high of 46 percent to 43 percent.
The same poll gave the Gaullists 40 percent-a
gain of two percent, but still five points below
their high in October.{ The Gaullists, outwardly
confident, are expressing concern in private about
the outcome of the legislative elections, scheduled
for 4 and 11 March, and are casting about for
ways to improve their prospects.?
After a well-staged, highly publicized rally,
the left reached a peak in the polls in early
December. Negative public reaction to an an-
nouncement that retail prices had risen in Novem-
ber at the highest rate since January 1969, the
efficiency of the leftist organization, and public
alienation caused by the Gaullists' long tenure in
office all figured in the strong showing for the
left. In addition, lackluster Gaullist campaigning
and the absence of clear-cut issues has done little
for the ruling coalition, already hurt by 18
months of scandals and by internal dissension.]
Polls do not, of course, forecast the final
voting pattern. In the latest poll, for example,
only 17 percent of those questioned thought the
left alliance would win a majority. Fifty-one
percent predicted a victory for a coalition en-
larged to include the centrists, who have been
receiving about 14 percent of the votes in the
polls.
Unless a candidate receives an absolute
majority on the first ballot, there must be a
runoff in which only candidates who polled at
least ten percent of the registered voters on the
first round are eligible to run. The French tradi-
tionally vote in the first round against their
grievances and in the second against their fears.
This will work in favor of the Gaullist coalition,
which will reiterate the theme-exploited so
successfully in 1968-that it is dangerous to give
power to the left. The shift of a small number of
centrist voters could have significant conse-
quences, for a key enigma in the coming election
is whether such voters will choose Gaullist or
leftist candidates in the second round.1
1'~ [The Gaullists and their allies are clearly con-
cerned over the improving ability of the leftist
alliance to present itself as a credible alternative
to the present government. The Gaullist campaign
has not really got going yet; once it does, cam-
paigning will be strenuous. President Pompidou
)i announced on 1 January that he will speak out
r against the "incompatibilities" that would result
from a leftist victory. Also, in an effort to prevent
further damaging scandals, he has warned civil
servants not to misuse privileged information
during the campaign. His government has also
pushed through a law outlawing publication of
opinion polls just prior to the elections when they
might adversely influence voters.I
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The Legislatiive Race Is On
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President Thieu's decree stiffening the legal
requirements for political parties is still the center
of political attention in Saigon. Thieu told a
group of National Assembly members last week
that political unity will be essential in the "new
phase" of the anti-Communist struggle coming
up. He asserted that the decree is the only feasible
way to bring about such unity in time. Thieu
rejected complaints from the legislators that the
provisions of the measure are too strict. One
senator who attended the meeting told US
Embassy officers that Thieu appeared uncon-
cerned by the prospect that his own Democracy
Party might be the only one able to qualify under
the new provisions.!
Some of the country's significant political
factions are publicly attacking the decree, and
one party leader has asked the Supreme Court to
overturn it. He has little hope of success, but he
claims he will ignore the decree if his appeal fails.'
The An Quang Buddhists are organizing a
new group of elected Buddhist officials, but they
have given no indication yet that they will try to
turn it into a legal party. The Buddhists have
expressed concern to US officials that the govern-
ment might harass their organizational efforts. An
Quang leaders are also trying to compile a list of
persons detained "illegally" by the government--a
move that runs the risk of causing new friction
with Thieu. While reluctant to challenge the gov-
ernment for fear that the Communists will be the
ultimate beneficiaries, the Buddhists do not want
to remain on the political sidelines when they feel
their vital interests are at stake.
they do not command enough support on their
own to develop an influential party, and they
hope eventually to ally with non-Catholic
factions.-1
,The North Vietnamese offensive, bad
weather, and the US troop withdrawal hurt South
Vietnam's economy last year, and the rapid pro-
duction advances of 1971 were not repeated.
Nevertheless, inflation was held to a modest rate,
progress was made in both tax reform and tax
collection, and exports rose.
The military offensive brought little damage
to productive facilities; still, the large-scale dis-
location of people and the uncertainty among
businessmen and consumers about the future did
cause considerable economic disruption. Con-
sumer demand dropped sharply, business activity
declined, and investment decisions were post-
poned. The drop in consumer purchases led to a
severe recession, especially in the manufacturing
sector where only firms with government con-
tracts or US military procurement orders are
producing anywhere near capacity.
With the exception of the rubber plantations
and rubber-processing facilities, agriculture did
not suffer as much as industry, and output prob-
ably equaled that of 1971. The rice crop now
being harvested probably will be about the same
size as last year's despite the effects of bad
weather and military disruptions in some places.
New momentum has been imparted to the dis-
tribution of land to new owners, and Saigon's
goal of distributing 1 million hectares probably
will be reached by the end of March on schedule.
The Catholics are one of the few groups
responding positively to the new decree. Several
Catholic factions, which have been cooperating in
an informal alliance in recent months, have de-
cided to try to merge and seek validation as a
legal party. Catholic political leaders realize that
Local economic activity in support of the
US presence also slowed as US forces continued
to withdraw and major construction projects were
completed. Large numbers of Vietnamese
employed by the US have been laid off, causing
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some unemployment problems. The impact of the
layoffs, however, has been obscured by the over-
all business recession and the more than 1 million
refugees generated by the offensive.
On the financial side, the rate of inflation
was held to about 24 percent for the year, com-
pared with 14 percent in 1971 and the 30-55
percent rates registered annually during 1965-70.
Although the rise is a deterioration from the 1971
rate, it nonetheless was a fairly good record, con-
sidering supply disruptions due to the offensive
and the increasing cost of imports resulting from
the 16 percent devaluation of the piaster during
1972. The government's vigorous effort to in-
crease domestic tax revenues was successful,
especially for local governments, which more than
doubled their tax collections in 1972. During the
period of President Thieu's emergency decree
powers, Saigon enacted major reforms of income
and property taxes and adopted a value-added
tax. Although the full effects of these measures in
generating added revenues will not be felt until
1974, they represent the first important attempt
to reduce the country's large budget deficits.
An encouraging development has been an
increase in commodity exports. Last year, they
were about double the 1971 level, principally
because the government instituted realistic ex-
change rates and export subsidies. The value of
commodity exports-$20-25 million-still is small
in relation to commodity imports of about $650
million. Nevertheless, the increase was the first
since 1963 and sets the stage for the further
export growth needed if South Vietnam is to
reduce its dependence on foreign aid. f
HARD TIMES AHEAD IN CAMBODIA
T ,he last of the Indochinese states to become
directly involved in the war, Cambodia faces some
imposing problems in the months ahead. A wide
political gulf separates the Lon Nol government
and the Khmer Communists, and any chance for
bridging this gap is complicated by the disunity of
the Phnom Penh regime and by the complex
The Economy Rolls Along
relationships on the insurgent side. Strong ex-
ternal pressure may eventually be needed to break
the political deadlock.
The military situation appears headed for a
stalemate. With the return of most Vietnamese
Communist units to South Vietnam in 1971, the
fighting in Cambodia has taken on the overtones
of a civil war-a development that adds to the
difficulty in reaching a settlement. The Khmer
Communists oppose any compromise with Phnom
Penh, an attitude adopted in part to accom-
modate the North Vietnamese, who would prefer
to see continued fighting in Cambodia until they
have had time to assess their post - cease-fire
prospects in South Vietnam.
The insurgents' hard line is also based on
their favorable position throughout much of the
Cambodian countryside and on the fact that they
no longer need rely on the Vietnamese Com-
munists to do the bulk of the fighting. But
despite the greater tactical independence and
effectiveness displayed lately by the Khmer
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insurgents, they are still dependent on Peking and
Hanoi for most of their military supplies and
equipment.
The gradual growth in insurgent military
capability provides counterpoint to the Cam-
bodian Army's own uninspired combat per-
formance. Although bettor armed and trained, the
army has lost the enthusiasm that buoyed it dur-
ing the first months of the war. It will probably
remain indefinitely in its defensive positions
around population centers and close to major
communication lines.
The government's !lackluster war effort is
matched by its disappointing political record. The
arbitrary Lon Nol has been unable to keep the
considerable confidence he enjoyed during the
first year of his rule, and his reluctance to share
authority has'dashed hopes for a unified, broadly
based government. If for reasons of health Lon
Nol should be removed from power, the path
toward a compromise settlement might be
smoothed. It could equally well be rougher be-
Sihanouk and Chou in Peking
cause there is still no generally acceptable replace-
ment to the President in sight.
Phnom Penh's political problems and uncer-
tainties may be dwarfed by those in the insurgent
camp. In any strict sense, the term "Khmer Com-
munist" does not accurately describe the dis-
parate and contentious forces operating under the
banner of Sihanouk's "Royal Government of
National Union." Although little is known about
the inner workings of the insurgent movement,
most of the evidence available points to a basic
nationalist-communist cleavage. This is best
reflected in Peking, where difficult and uncom-
fortable relations exist between the shadowy
Khmer Communist members of the rump govern-
ment on the one hand, and Sihanouk and his
entourage on the other.
Sihanouk's future poses the main political
problem to the insurgents. From all accounts,
Sihanouk expects to return to Cambodia to serve
for a time as head of a coalition regime that
includes some Communists. Although mindful of
Sihanouk's value as a figurehead and of the linger-
ing peasant loyalty to him, the Khmer Commu-
nists must harbor real reservations about allowing
him to return in any capacity. A political come-
back for Sihanouk would be complicated by the
murky status of his relationship with widely
divergent Communist movements--the Khmers,
the Vietnamese, and the Chinese.
In view of the evolving stalemate in Cam-
bodia, all parties concerned may come to believe
that an end to the Cambodian conflict will
ultimately demand some form of compromise
between the current regime in Phnom Penh and a
Communist-dominated insurgency. But the key
question of Sihanouk's role in a political settle-
ment must first be threshed out within the insur-
gent ranks and in Phnom Penh, Hanoi, and
Peking. Until it is, everyone involved may find it
easier just to go on fighting.- \
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The war in the south seldom reaches the
intensity it reaches around the Plaine des Jarres,
but for the past two months the fighting for the
provincial capital of Saravane has been heavier
than anywhere in the country., This week a North
Vietnamese division supported' by antiaircraft and
r artillery units moved against the 2,200 govern-
ment defenders around the town, and after two
days of ground assaults and some of the heaviest
shellings ever seen in the panhandle, the defenders
pulled back to the south and west.(
", Since mid-October, the Communists have
forced the irregulars out of Saravane three times,
but each time the government has been able to
reoccupy the town after air strikes on Communist
concentrations. Many government soldiers have
been on the line for over two months, and it may
be more difficult now to organize them for an-
other counterattack.'
Pathet Lao and dissident neutralist troops
still hold the upper hand along Route 13 north
and south of the Sala Phou Khoun road junction.
.
Bouam
Low
Luang Prabgrlg?
Sala u Phn 0 res
Ka w~
"M uong Kassy
3
*Government-held location
?Cammunist-hold location
Bolovens
Plateau AtLOPeq
-,' In the Plaine des Jarres area, North Vietnam-
ese gunners have resumed shelling the government
base at Bouam Long after a brief lull.
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25X1
2~.)n i
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As the Chinese New Year approaches, mili-
tary and government units throughout the coun-
try exchange lengthy and effusive greetings, each
unit declaring an intention to cherish and assist
the other. One of the greetings is an authoritative
pronouncement from Peking, called the "Spring
Festival Directive," which for the past few years
has provided an index of how the regime thinks
the army is handling the many civilaffairs tasks it
inherited during the Cultural Revolution. This
year, the greeting from Peking was a tersely
worded three paragraphs virtually ignoring the
army's still-considerable political tasks. Lin Piao's
removal seemed to foreshadow a change in this
political role, but the glaring lack of central
guidance indicates that Peking's efforts to
redefine these tasks have not yet borne fruit(
The Cultural Revolution produced a number
of stock phrases to describe the civil functions the
army was taking over. It was, and still is, sup-
posed to "support-the-left" with troops sent to
run factories, schools, and government offices,
the so-called "three support and two militaries"
forces. This year, both quotes were missing in the
Spring Festival Directive.
;These omissions, although they obviously
have political meaning, do not mean that the
armed forces have totally withdrawn from civil
affairs. Over the past year there has been some
reduction in the number of troops assigned to
these activities, but a variety of sources indicate
that the military maintains a sizable role in pro-
vincial and sub-provincial party and government
organizations, and some provinces have continued
to praise the contribution of the "three support
and two militaries" troops.(
A corollary to the problem of the army's
political future is the question of who will fill the
administrative void if the military amen are with-
drawn. Basically, the choice is between pre -
Cultural Revolution officials who are now in the
process of being rehabilitated in growing num-
bers, or new officials, many of whom were
activists during the Cultural Revolution. Articles
supporting either alternative continue to appear
regularly in the domestic media, suggesting no
agreement in Peking over the proper mix of old
and new in the civil administration. This con-
troversy, together with other fallout from the Lin
affair, has drastically complicated the process of
reconstructing the party and reasserting orthodox
party control.;
The PLA : Treading water
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11 ` j fOn top of all this, a subtle new controversy
has emerged over who commands the armed
forces. Some provincial broadcasts state that the
military is commanded by Chairman Mao alone;
others, adopting a line first surfaced on Army
Day last August, assert that it comes under the
joint command of Mao and the party. While the
difference may seem arcane to outsiders, recent
history suggests the formulations are more than
that. For example, a similar seesaw battle took
place in the media during much of 1971, with
Mao and Lin Piao alternately portrayed as in
direct control. The outcome of that skirmish is
well known.;
Industrial Growth Slows
!./ ;` At year's end, Peking released selected sta-
tistics citing industrial gains in 1972. The sta-
tistics show rates of increase considerably lower
i than those of 1971. Aggregate industrial growth
in 1972 appears to have been at most 10 percent,
down a bit from the gains of 1970 and 1971,
when the economy was recovering from the
effects of the Cultural Revolution. According to -// )The most notable event pointing
Peking's figures, the rates of advance in the d growing industrial capabilities was the opening of
production of three pacesetters of recent years- a television network carrying live broadcasts from
steel, petroleum, and chemical fertilizer-were Peking to most of the nation's provincial capitals.
substantially below the gains claimed for 1971., The buried cables and microwave relay stations
Peking acknowledged a shortfall in the harvest of associated with the system will be used also for
foodgrains and most vital industrial crops like military command and control purposes. Other
cotton.
;The New Year's editorial circulated by
Chinese news media offered no explanation for
the decline in the rate of growth, noting only that
continued growth "at a fairly rapid pace" hinges
heavily on expansion of the steel industry and of
;other basic industries producing raw materials,
fuels, and power. Actually, the Chinese have a
number of major expansion projects under way in
most of these industries, and the failure to report
progress in capital construction may indicate that
the rate of completion has fallen behind schedule.
The new facilities now under construction as well
as plants being imported from Japan and Western
Europe will have to become operational soon if
China is to maintain its industrial momentum
during the fourth Five-Year Plan (1971-75).
Preliminary
Percentage Increase
Over Previous Years
1972
1972
1971
Crude steel
(million metric tons)
23*
9.5*
18.0*
Crude oil
(million metric tons)
30
16.0*
28.0*
Chemical fertilizer
(million metric tons)
11.3
18.1*
20.2*
Electric power
(billion kilowatt-hours)
95
10.5
18.0*
Coal
(million metric tons)
340
4.6
8.0*
Cement**
(million metric tons)
15.5
6,9
16.5*
*Officially reported data.
**large-scale plants only.
significant signs of progress included the com-
missioning of five large-and at least 100 small-
chemical fertilizer plants. Chinese officials are
optimistic on prospects for the petroleum
industry, and they have predicted an annual
output of 50 million tons by 1975. Moreover,
China could begin exporting small amounts of
crude oil before the end of the year. Groundwork
for a substantial expansion of electric power
capacity was laid in 1972 when construction of
several new plants was begun, and a considerable
volume of high-capacity equipment was imported.
Lagging coal output could constrain future
industrial growth although Peking has begun
converting some power plants from coal to
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NORTH KOREA: THE PARTY'S THE THING
North Korea has always been one of the
least liberal of the Communist states, but even it
has attempted in the past to display some trap-
pings of representative government. Now, under a
new constitution, even the fiction of popular par-
ticipation has been largely dropped by putting the
party in greater control of day-to-day administra-
tion. Although Kim II-sung had an eye on the
government changes under way in South Korea,
his modifications were clearly designed to cope
with problems in his own ranks.
The new constitution approved by the party
and government in mid-December replaces the
one in force since 1948, streamlines the bureauc-
racy, and reflects the regime's claim that it has
achieved socialism by eliminating the vestiges of
the old economic system. A new Central People's
Committee made up of senior Politburo members
headed by Kim is formally designated the gov-
ernment's top policy-making body. It takes over
many of the responsibilities once ostensibly
vested in the popularly elected Supreme People's
Assembly. The new committee is also responsible
for supervising the working of the State Admin-
istration Council, formerly the Cabinet. In con-
trast to the previous administration, ranking Polit-
buro members have been appointed to head
important ministries and commissions, including
those dealing with the economy. The total
number of these bodies has been significantly
reduced from 37 to 22.
The changes announced thus far do not sig-
nal any significant realignment in the North
Korean leadership, although minor-juggling in the
party hierarchy is evident from the government
assignments. Kim II-sung's paramount position
has been reinforced by his designation as chief of
state.
IThe
appoinemnt of Kim 11 as premier, the post
formerly held by Kim II-sung, appears to move
the former solidly into the number-two spot.
There are no indications that the reorganiza-
tion will affect the North-South negotiations.
Pyongyang did not claim, like Seoul, that govern-
ment restructuring was needed to further the dia-
logue. Rather, President Kim, discussing the reor-
ganization in his New Year's address, said it was
necessary to overcome inefficiency, disorganiza-
tion, and regional rivalries. He focused on the
need to increase agricultural production and in-
dustrial development, particularly mining. Kim
also called for an increase in the quality and
quantity of consumer goods; the new constitution
calls for a Committee for People's Service headed
by a senior party officer. This suggests he may be
under some pressure to improve the quality of life
of the average North Korean. These challenges
were probably laid before the party hierarchy in a
plenum of the central committee held at the end
of 1972, the usual vehicle employed by Kim to
pass on new policies.
The Supreme People's Assembly : Adopting a new constitution
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SECURITY TALKS TO RESUME
Next week when the 34 delegations open the
second round of conference preparations in Hel-
sinki, they will begin to draw the battle lines on
which the outcome of the conference itself may
well turn. The first-round skirmishes went mainly
to the West, but Moscow's major objective of
holding the conference next summer still appears
attainable at a price Moscow will pay. The Soviets
undoubtedly will keep trying to quicken the pace
of the talks.
jWhen the talks adjourned last month, they
were bogging down over the Western insistence
that the preparatory sessions specify in draft
mandates what should be discussed under various
conference agenda items. Moscow wants such
detailed considerations left for the foreign minis-
ters. The Western participants will try to trump
Moscow's objection as soon as the talks resume
simply by tabling their proposed agenda items
and the accompanying detailed mandates.'
youth and political personality than its predeces-
sors. It will need energy and persuasive skill to
cope with the community's enlargement from six
to nine members and with the programs approved
at the European summit in Paris last fall
_'-ICommission President Ortoli skillfully and
rapidly arranged the distribution of responsi-
bilities among the 13 commissioners. The addi-
tion of four commissioners has spread out the
work load, but this also risks increasing the
tendency for individual commissioners to identify
themselves with narrow aspects of community
policy. Ortoli apparently considered, but rejected
a task-force approach to commission organiza-
tion, and he has not revealed how he will restore a
sense of collegial responsibility to the body.'
fBritain's former ambassador to Paris, Chris-
topher Soames, after some hard lobbying, will
take over most of the external relations briefs,
Jake
that for the forthcoming multilateral
,trade negotiations: One of Soames' avowed aims
is to improve the E di
l
i
a
ogue w
th the US, and he
"Moscow in the last month has been grappling feels he will be aided in this by the confidence
with the Western desire for an agenda item on that both Prime Minister Heath and President
"freer movement." Party chief Brezhnev, speak:-5?ompidou have in him. EC relations with the
ing at the USSR's 50th anniversary celebration, less-developed countries!! except for Latin Amer-
noted that Moscow might agree to discuss expar- ica, will be in the hands of France's Deniau.
Sion of East-West contacts and exchanges. An---,-" !Problems such as the Mediterranean and the trade
authoritative f
ll
`
o
ow-up commentary in Pravda
'negotiations will test how well Soames
appeared to warn that Brezhnev had drawn the Deniau can cooperate
.?
limifc .,f C.-. + tI....:L:,:i.-
---- --- - ""~ ?"??"^IIIly VII LI IG IIIdlLtlfs` in nel-
sinki, the Soviets may be willing to put' certain
aspects of freer movement on the agenda, but will
stick hard on the substance of any proposals for
unregulated increases in East-West contacts.`I
1 he British and some other NATO allies
suspect that to get freer movement on the agenda
the West will have to agree to an item on poste
conference machinery. The US disagrees. In
NATO discussions, the members of the European
Communities have been much more willing than
the US to countenance some form of permanent
machinery to follow the conference.`
. "The new Commission of the European Com-
munities that took office this week has more
''. Germany's Ralf Dahrendorf, who formerly
held Soames' job, has suffered something of a
comedown. His new responsibilities cover areas in
which activity is likely to be slow. Bonn did not
strongly push Dahrendorf's claim to retain foreign
affairs, in part because his political stock is not
high at home, and in part because Germany's
other commissioner moved to the economic and
financial affairs post-a major assignment even
though some of its functions have now gone to a
new Belgian commissioner. '(t
',- fThe Commission not only has to meet the
challenges of the enlarged community but also
has to contend with sagging morale among the
Commission's more than 5,000 employees. Work
has tended to become routine and the innovative
atmosphere of former years is missing. The recent
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strike of Commission personnel reflected dissatis- requirements of their European posts and to be
faction with salary prospects as well as uncer- active in promoting initiatives in the name of the
tainty over the impact of contingents from the EC's common interests, taking the community's
new members. Parceling out posts in the various,,, -ease to the people.jf Ortoli's reputation as an ad-
directorates will be a delicate chore.'! ministrator and his experience years ago as a
Although the Commission still lacks real po-
litical heavyweights, six of the seven new commis-
sioners have held ministerial posts in their na-
Jtional government`. J The British commissioners
say they intend to' take seriously the political
senior official in the Commission give some prom-
ise of increasing the efficiency of the Brussels
executive. He is, however, a protege of Pompi-
dou's, and this probably will lead him to avoid
doctrinal disputes with Paris on European organi-
Wilhelm Haferkamp
50
FRG
First Vice President
Commission secretariat
Legal service
Spokesman's group
Security office
Economic and financial affairs
Carlo Scarascia-Mugnozza
53
It.
Vice President
Statistical office
Liaison with European Parliament
Sir Christopher Soames
53
UK
Vice President
Environmental policy
Consumer interests
Transportation
Press and information
Dr. Patrick Hillery
50
Ire.
Vice President
Henri Simonet
42
Belg.
Vice President
Fiscal harmonization
Financial institutions
Energy policy
EU RATOM safeguards
Altiero Spinelli
66
I t.
Member
Developing countries linked to EC
Budget and financial control
Albert Borschette
53
Lux.
Member
Competition policy
Ralf Dahrendorf
44
FRG
Member
Personnel and administration
Research, science, and education
George Thomson
52
U K
Member
Regional policy
Petrus Lardinois
49
Neth.
Member
Agriculture
Finn Olav Gundelach
48
Denmark
Member
Internal market
Customs union
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MALTA: NATO MAKES AN OFFER
Prime Minister Mintoff reacted calmly to the
NATO response to his demand that Malta be
compensated for losses in base rental caused by
the sterling float, although he did raise several
points that may result in additional haggling. He
also wants to settle several bilateral issues with
the UK before he accepts the NATO offer.
The UK's NATO allies had set aside enough
of their own currencies to pay their shares of the
base payment in sterling when the pound was
valued at $2.60. With sterling down in value, the
contributors in effect have extra amounts in their
own national currencies budgeted for the base
payment. These extra amounts total roughly $2
million, and this is what the UK's NATO allies
have agreed to pass on to Malta for 1973. These
payments would begin only after Malta accepts
London's 1 January payment made under the
terms of the base rental agreement.'
'Mintoff told the US ambassador in Valletta,
who presented the NATO offer, that he had to
consult with his colleagues before responding. He
raised several questions. Concerned that the
payments would be only for 1973, Mintoff said
he did not want to get into yearly wrangles and
hoped he could be reassured that the allies would
continue to make these payments. The Prime
Minister also proposed that all of the annual
payment of $36.4 million be made in the respec
tive national currencies instead of pounds. The
terms of the base agreement, however, specify
that the payment is to be made in pounds, and
the US ambassador responded that the change
Mintoff wants would alter the basic agreement.
Mintoff also commented that the UK, the biggest
contributor, had not agreed to any extra.'
i Although Mintoff claimed he has to consult
with his colleagues, the decision on what Malta
does next is essentially up to him. His calm
reaction suggests that, basically, he is relieved that
he will get most of what he demanded and that he
will not have to rely on Libya for aid. Mintoff
now appears to want to reconcile bilateral dif-
ferences with the British on the Malta Flight'
Information Region and the removal of security
clearances from Maltese personnel working on the
British bases before he answers the allies on their
ROMANIA: DEE-FENSE, DEE-FENSE
Bucharest has reasserted its right to run its
own military affairs. It has just passed a new
defense law that codifies this independence in the
broadest way possible without violating
Romania's Warsaw Pact obligations. The law also
reinforces a point Bucharest is pressing at the
European security talks-that a sovereign state has
the right to formulate its own defense policy
without outside interference The insistence on
independence in military matters dovetails with
another point Bucharest is making at Helsinki,
that military blocs must eventually disappear.
L - The law provides, for the first time, compul-
sory military training for women as well as men.
It provides that all organizations and economic
enterprises would come under military authority
in the event of war. It prohibits Bucharest from
accepting the action of any foreign power that
would tend to injure Romania's defense capabil-
ity. Although the new law does not address the
subject of military maneuvers specifically, it is yet
another document Bucharest can point to in its
opposition to hosting Warsaw Pact exercises.
The law has striking similarities to the code
governing the Yugoslav defense system and under-
scores Romania's already numerous differences
with its pact allies. Even before passage of the
defense law, a mutual fear of Soviet hegemony
had brought about Romanian-Yugoslav military
cooperation and consultations. Bucharest and
Belgrade are putting final touches on a plan for
the joint production of a subsonic fighter/trainer
aircraft. There are reports that an agreement has
been reached for a joint venture in submarine
construction.
;There are, however, limitations on both
Romania's independence of the pact and the
extent to which Bucharest can work with Bel-
grade. The new law contains references to Roma-
nia's treaty obligations and stops short of creating
a comprehensive nationwide defense system such
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`-' SECRET
1 The closure of all Egyptian universities on 3
January, coupled with strict police control of
student activity, has halted the latest outburst of
student unrest. Scattered protests continued over
the weekend, but they were of a minor nature.
Most university students apparently have left for
home to begin their longer than ordinary, mid-
year vacation.
\Some of the confrontations between the
police and protesters were fairly bloody, and both
sides sustained sizable casualties. In spite of the
number of injured, the incidents were largely con-
fined to the immediate vicinity of the campuses,
and only a limited number of students partici-
pated. More important for the regime, no other
segments of the population actively supported the
protesting students. A constant fear of the gov-
ernment is that workers might join in student-
initiated protests, or that demonstrators would
win support from younger military personnel."
Some of the over 100 arrested during the
disturbances were apparently from the political
left, and there are Egyptian officials who suspect
that foreign Communists encouraged the out-
burst!, Pinning the blame on outsiders is, of
course, one way to absolve the Sadat regime of
responsibility for the underlying causes of dis-
content.
In an interview published by a Lebanese
newspaper on 8 January, Sadat underscored his
determination to keep student activism within
manageable limits. He charged the troublemakers
had exploited the freedom of expression allowed
them. He warned that students who had poor
grades or who failed to report for classes when
the schools reopened would be expelledSadat ., keep the cease-fire completely. The Israelis insist
obviously hopes that such warnings will suffice, /T that Damascus can determine fedayeen plans and
but his domestic security forces will be on guard that it can easily shut off fedayeen actions as have
25X1 against any indication of renewed student restive- Jordan and Lebanon. Damascus is apparently not
ment it is taking.
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Page 19 WEEKLY SUMMARY
7 -j Israeli forces on 8 January mounted another
retaliatory action against regular army positions
and fedayeen bases in Syria that exceeded in
terms of firepower the last heavy attacks of late
November. These attacks brought a few weeks of
relative quiet along the Golan Heights cease-fire
line, but mid-December Syrian-based fedayeen
began a new string of incidents.
An attempted ambush of an Israeli patrol,
accompanied by some supporting Syrian artillery
fire, set off this latest Israeli attack. There were
no Israeli casualties resulting from these fedayeen-
inspired incidents, but Israeli aircraft launched a
wide-ranging attack involving some five separate
air raids that extended from southwest Syria as
far north as the port of Latakia. The targets
included four Syrian radar sites, two fedayeen
supply bases, two Syrian army camps, and as
many as 35 Syrian artillery positions close to the
cease-fire line. 7i
" The Israeli air attacks prompted a Syrian
artillery barrage into the Golan Heights that was
answered by Israeli artillery and tank fire. ;During
i the air strikes the Israelis downed another six
MIG-21s. They shot down six in late November.
Damascus has lost 17 aircraft-3 SU-7s and 14
MIG-21s-since early September when the Is-
raelis-in the wake of the Munich slayings-
stepped up their actions against the fedayeen./
Israeli officials stated-as they have on each
such occasion-that there would be no Israeli
shelling or bombing once the Syrians decided to
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African country which has broken
relations with Israel since March 1972
RHODESIA}
(UK.)
AFRICA -
(Internat. BOTSWANA
-`- REPUBLIC
OF
SOUTH AFRICA
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AFRICA: HOUNDING THE ISRAELIS
)[Growing Arab influence in black Africa, first Israel is trying to repair its diplomatic net-
evident early last year when Uganda broke with work in Africa and still has friendly relations with
Israel and adopted a pro-Arab policy, has led toy 24 African countri
'
s diplomatic ouster from four more Afri-
Tel Aviv
,} ~~ can countries over the past two months~~
r ,.1' )Chad triggered the recent series of ruptures
in a sudden action last Novemberr~The Congo and
~?" Niger severed their ties following Israel's an-
nouncement in late December that it was re-
l ducing its representation in those countries to
non-resident status; (Tel Aviv's announcement
coincided with signs of nervousness in Niger over
Israel's continued presence there after neigh-
,., boring Chad had broken relations The Israelis
apparently believed that their position in Brazza-
,L Ville was crumbling;; Mali-next door to Niger and
`-also to Mauritania, which had broken with Tel
Aviv in 1967-did not wish to be out of step and
,","-followed suit on 5 January.thad, Niger, and Mali
all have large Muslim populations; Congo does 4
not, but has long been pro-Arab in outlook.?
1fhe expansion of Arab influence southward
in Africa is in large part the result of Libyan
President Qadhafi's Arab activism and his ability
to provide generous financial inducements from
his country's oil wealth. In the case of Chad,
Qadhafi had special leverage by virtue of the
support he has been giving to the long-standing
Muslim insurgency against Christian President
Tombalbaye's government. Since his break with
Israel, Tombalbaye has visited Qadhafi, who]
r :-}"promised to turn over any Chadian rebels-except
for the most prominent political leader-found on
Libyan soil. The Chadians are claiming that they
were also pro . ised substantial development funds
by Qadhafi.f Niger, already receiving modest
Libyan aid before the break with Israel, was
anxious to silence domestic critics and forestall
any difficulties with Qadhafi. The Libyan Presi-
dent's machinations in the Arab cause were
supplemented by the anti-Israel line urged by
Saudi King Faysal when he visited Chad and Niger
last fall.
Davar, the semi-official newspaper which mirrors
Israeli Labor Party opinion, indicated that while
these diplomatic setbacks should not be belittled,
there was no cause for hysteria or for a general
revision of the activist policy that Israel has long
pursued in Africa. Davar called for rational links
and rational application of Israel's limited re-
The government of this Indian Ocean ter-
ritory, elected on 3 December, is moving cau-
tiously toward independence from France. The
negotiations, once started, will probably be pro-
longed, but France is expected to accede to the
island's wishes. Once independent, the islands will
still be heavily dependent on outside aid; inde-
pendence could also lead to increased friction
between the islands' Arab aristocracy and a
largely black population. I
g ~>Phile sincere in their desire for ultimate
independence, Comorian leaders for the most part
want no abrupt change in status, and they have
emphasized their wish to maintain close, cordial
relations with France. Negotiations are expected
to lead finally to the holding of a referendum on
the independence question. French officials have
stated that they will grant independence, pro-
vided a majority of the Comorians vote in favor
of such a move. In order to accommodate the
separatist sentiment on one of the islands, Paris is
committed to allowing each island to accept or
reject the proposal. The inhabitants of Mayotte,
who feel little sense of identity with the other
islanders and have always resented their domina-
tion from the capital, are eager to end their
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association with the rest of, the Comoros and mainly on its domestic opponents and is stepping
become a French department. 1 up the use of strong-arm tactics against them:'
'-,Until the fall of this year, leaders of the two A New Year's Day clash outside the USIS
main political parties, representing different fac- building in Dacca, in which police killed two
tions of the ruling aristocracy, were content to student demonstrators, triggered a spate of pro-
maintain the Comoro's territorial status. Agita- , test activities by opposition parties',;On 3 January
tion for independence originated with a liberation some leaders of the Awami League, seeking to
movement based in Tanzania, which had little shift attention from the government's role in the
following on the islands. Last September the two student deaths, issued a state_ ent blaming Chi-
Parties adopted a common policy favoring inde- , 1nese and American "agents." The following day,
pendence. The government then fell, and in the Prime Minister Mujib took some sting out of this
resulting elections those favoring independence when he publicly asserted that the government
won a decisive victory, gaining 34 of the 39 seats was determined to adhere to a. neutral foreign
in the legislature; the 15 deputies opposed all 'f- policy "with friendship to all." }Foreign Minister
come from Mayotte. The independence coalition Samad made a similar declaration and also
is not agreed on a timetable for independence, stated-clearly referring to the USSR--that "we
and the differences may become more pro- don't want to get into the pocket of any of the
nounced as the negotiations proceed. powers." Several other Awami League leaders
made speeches on 4 January blaming the unrest
The move for independence probably grew on foreign "inimical forces" and "agents," but
out of a general feeling on the part of the islands' this time only China-not the US-was men-
leaders that territorial status had become anoma- tioned. Both Mujib and Samad have acknowl-
lous. The recent classification of the Comoros as a edged Bangladesh's obligation to pay for damage
colonial state by the UN's decolonization com- done to several USIS installations last month.
mittee may have added to that feeling. The Moreover, the Dacca press, possibly with govern-
Comorian leaders may have feared they would ment prompting, has begun to play up American
find themselves in a really embarrassing position economic assistance.)
if they went on clinging to France. On top of this,
independence sentiment had been steadily grow- T,? IThe government also has taken action to
ing among Comorian youth .3 restore the Dacca USIS building, occupied last
week by opposition-led student protesters, to US
At the same time the islands' Arab aristoc- control. Normal USIS operations have not yet
racy can only be mindful of the example of been resumed, but the occupiers have abandoned
neighboring Zanzibar, where the African majority the building, the police have taken US officials on
rose against the Arab minority shortly after an inspection tour that revealed no apparent
independence and overthrew the government. damage, and USIS custodial and security per-
Comorian Arabs do not want the independence sonnel are back on the job..
question to become an inflammatory public is-
sue. (Meanwhile, violence sponsored by the
tion artier has in-
e
t
BANGLADESH: OPPONENTS AT HOME
p
oppos
Awami League agains
creased Some Awami League leaders have been
publicly threatening to employ force against the
oppositionOn 5 January members of the party's
pposition
student organization set fire to two,
9
The government, possibly fearful of jeop- officeSin Dacca and stoned two otherst In at least
ardizing future US economic aid, has moved to,_ two district capitals, opposition rallies and build-
tone down the anti-American line taken recently ings have also been physically attacked. Politically
by a number of leading members of the ruling inspired violence, chronic in Bangladesh, will
Awami League. The regime is concentrating 'j probably increase in frequency as the March elec-
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GHANA: A YEAR AFTER A COUP
lLolonel Acheampong, the head of Ghana's pudiating some of it and accepting the remainder
second military government, and his cohorts on only on Ghana's terms. At present, the govern-
the ruling National Redemption Council are ment is drafting a response to a compromise of-
firmly in power as they celebrate the first anni- fered by the creditors last fallI Meanwhile, having
versary of their overthrow of former prime minis- CI'declared an intention to seize the "commanding
ter Busia. As a result of nationalistic policies and heights" of Ghana's foreign-dominated economy,
effective propaganda, the government's popu- the council recently moved to acquire majority
larity at home and prestige in Africa have grown. ownership in some mining and timber firms. In-
It has also managed some modest economic suc- creasingly, economic policy is being made by ad-
cesses, but huge problems remain.1t visers who advocate a centrally directed economy
h
3E ' )After a slow start marked by policy con-
fusion and a preoccupation with security, the
regime over the past six months has gained con-
fidence,\\formulated definite policies, and assumed
effective control of the country's administrative
machinery at all levels. Acheampong F_
has
grown in his fob) le clearly has no plans to step
down soon; on 10 January, he confirmed publicly
that he will not return the country to civilian rule
until the economy is sound.,
[The turning point for the junta came when it
easily foiled an inept coup plot last July. The
government faces no visible threat,j('the exiled
'Busia's followers are either discredited or in de-
tention, and the labor movement has been effec-
t l 'tively contained. Nonetheless, policy disputes,
tribal animosities, and personality conflicts within
the group have the potential eventually to
,,,.,threaten regime stability,ii'1or example, personnel
'shifts within the military are always a bone of
contention, and Acheampong's decision, reported
this week, to remove the popular acting army
i commander is likely to alienate some younger
officers. 'j
muc as in the days of Nkrumah, who, in fact,
has been partially rehabilitated posthumously.
)The government's "Operation Feed Your-
self," restrictions on luxury imports, and smug-
gling controls-aided considerably by rising cocoa
and gold prices-resulted in a favorable trade
balance. No appreciable progress has been made, 25X6
however, toward solving the country's major
economic problems-inflation, commodity short-
ages, a stagnant growth rate, and a declining
standard of living. Indeed, some of the gov-
ernment's policies, popular at home, complicate
the search for solutions. Ghana's major creditors,
including the USSR, are in effect tying a re-
sumption of aid to a resolution of the debt
problem, and Ghana's participation policies are
discouraging new foreign investment. 7
`J n foreign affairs, the council
h
a
G
an
from a pro-Western tilt to a more non-
aligned position. It has espoused more militant
' positions on African issues. It has restored rela-
tions with the People's Republic of China, which
has scored points by becoming the only country
to offer aid since Acheampong took over. It has
established relations with the German Democratic
Republic. Acheampong remains basically friendly
to the US, but his regime is clearly moving along a
course that is likely to subject these relations to
(.I / )Pragmatic self-interest-not ideology-has led increasing friction. He has criticized the West's
t` he junta to implement decidedly nationalistic economic ties to South Africa, and early this
policies, strongly emphasizing iance.11 iThel ~i week\fcalled on the OAU's African Liberation
f f "junta's most significant initiative so far was an Committee-meeting in Accra-to reaffirm armed
attempt early last year to reduc
Gh
'
e
ana
s large revolution as the only means of liberatin
nil +
l
debt to Western creditors b
y
a
ly
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BRAZIL: ECONOMIC SITUATION LAUDED
Past economic growth and promises of more
in the future dominated the year-end addresses by
President Medici and his economic czar, Finance
Minister Delfim Neto, but neither focused on tie
problems that both this administration and its
successor may face.)
The Brazilian leaders asserted that the gross
domestic product rose by 10.4 percent during
1972-the fifth consecutive year when growth
exceeded 9 percent. They said that the cost of
living in Rio de Janeiro climbed only 14 percent, 1
percent less than they had projected at the start
of the year. Medici declared that he intended to
cut inflation to 12 percent in 1973. Exports last
year increased to about $4 billion-more than one
third above the 1971 total-but imports also con-
tinued to rise-to around $4.2 billion. The re-
sulting unfavorable trade balance, along with the
outflow represented by services, interest, and
debt payments, added up to a current account
deficit of $1.6 billion at year's end. Enormous
new foreign capital inflows more than offset this
deficit, however, and raised reserves above $4
billion, more than double holdings at the end of
197 1\
$61.5 Million Naphtha Refinery Project
Claims of growth...
Finance Minister Neto and President Medici
...and promises of progress
f, '~These claims are based on preliminary
figures, but now that they have been publicized
by the President they are unlikely to be changed
even if the final tabulations are not quite as
favorable. Opponents of the government have
charged that the statistics have been manipulated
to make them look better, but since the govern-
ment produces the figures, the charge is hard to
prove. The government also tends to set goals it
feels it has the power to achieve. The cost-of-
living figure cited by Medici, for example, is for
the relatively small Rio de Janeiro zone where
controls could be better enforced than in other
areas. Inflation nationwide may have been higher
than 14 perc nt last year, but was probably lower
than in 1971
1/ (Medici seems to measure the success of his
administration largely in terms of delivering on its
economic promises. By setting and achieving
reachable goals, Medici convinces top military
officers that his regime is capable and effective.
The good economic record strengthens Medici's
prestige and his hand in choosing a successor, and
also smooths the road for the successor.
/Administration economic officials are al-
ready taking steps to attain Medici's targets for
1973. There are factors, however, that could
'/ hamper this effort. For example, the cut in
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C2 Iii
inflation last year was made possible by unusually
abundant harvests, lower sales taxes, and tighter
price controls. The spectacular growth in export
earnings was in large part a result of high world
prices for several of Brazil's basic exports, the
devaluation of the dollar, and increased inflation
in Europe. The great influx of foreign capital was
almost entirely in the form of loans, which
pushed the country's foreign debt over $10
billion. The Brazilians must balance the need for a
continued flow of foreign goods and capital with
their desire to maintain firm control of the econ-
omy so that both debt burden and inflation can
be kept manageable. This is likely to be a more
pressing problem for the administration that will
come into office in March 1974 than for the
present one.
~O j In his year-end speech, Medici said that the
ultimate objective of his economic policies is
social progress. Although some steps have been
taken to improve the lot of the average Brazilian,
most of his programs are long-range ones-such as
improving education and raising employment-
that will bring visible results only over a period of
time. As the nation continues to roll up year after
year of high growth, there may be more pressure
to distribute a larger share of the new wealth
among the people who thus far have not bene-
fited much.
)The presidential campaign and the form of
government that will replace the National Front
are already dominating Colombian political life,
although the election is not to be held until April
1974. The country's principal political leaders
have both proposed coalition governments, but of
dramatically different kinds.
f F'( I.Conservative Party elder statesman Mariano
Ospina Perez is pushing hard for a continuation of
the present National Front system of Liberal-Con-
servative parity. This would balance the present
strength of the Liberals by guaranteeing a Con-
servative president in 1978. Liberal Party director
Carlos Lleras Restrepo, trading heavily on the
strong support he gained at the Liberal con-
vention last October, has suggested a coalition
embracing progressives from both parties. Unlike
the National Front, Lleras' coalition would not
involve parity and would not assure the Con-
servatives another turn in power.
r:7 Much will depend on whether Lleras can
maintain his hold on the Liberals. His personal
strength and that of his party are such that he or
his nominee could win the presidency fairly
easily, barring a dramatic change in the situation.
Although the Conservatives are trying mightily to
reopen old breaches in the Liberal Party, they
recognize that their chances in 1974 are slim. In
these circumstances, the Liberals have virtually no
interest in extending the National Front. More-
over, they realize that if enough progressive Con-
servatives become disenchanted with their own
party's chances, Lleras' proposed bipartisan
coalition would look better to them, thus
strengthening the over-all Liberal position.]
JThese old-line parties, caught up in their
dispute over coalitions, appear all but oblivious to
a new political factor that has developed since the
National Front was created in 1958. Since then,
the lower class-ignored by the essentially con-
servative, upper- and middle- class govern-
ments-has been molded into a power base by the
populist ex-dictator Gustavo Rojas Pinilla. Rojas,
old and ineffective, has since been eclipsed, and
his followers have turned to an assortment of
peasant organizations. The promise of freer
political activity, prompted by the scheduled end
of the National Front next year, has encouraged
these elements to believe that their hour is at
hand. If this prospect is whisked away by some
new coalition arrangement, profound lower class
demoralization could result. The existing political 25X1
system would be hard pressed to cope with a
strong new_populist movement.
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ARGENTINA: PERONIST PROBLEMS
Squabbles over the distribution of candidate
slots and the defection of some Peronist leaders
are impeding Peronist efforts to prepare for the
general elections on 11 March. The other major
political parties and coalitions stand to benefit
from the growing problems within the Peronist
movement, but the government-sponsored al-
liance has been the most active in soliciting the
support of dissident Peronists.
The resignation of Rogelio Coria as head of
the "62 organizations," the controlling bloc
within the General Confederation of Labor, could
be the most significant break in Peronist ranks to
date. Coria's dramatic announcement came after
unsuccessful appeals to Peron to reconsider the
make-up of the Justicialist Front's election slates.
Several labor leaders have been critical of the
nomination of Peron's lackey, Hector Campora,
for president, but it was the refusal of Peron and
Campora to give labor more congressional and
provincial candidate slots that caused the greatest
disenchantment among union leaders.
.Coria has pledged his support to no one as
yet,
Ezequiel Martinez
A hand-picked candidate
Rogelio Coria
support of dissident labor leaders, and with wage
negotiations currently in process he has some
good bargaining points. As an added enticement,
a new group of dissident Peronists has been or-
ganized and has joined the Martinez coalition, the
Federal Republican Alliance.;
;t Another defection that could have further
ramifications is that of Raul Matera, a long-time
Peronist leader. Matera, who has rivaled Peron in
popularity in some recent polls, has announced
that he will support Oscar Alende for president. A
former member of the Radical Party, Alende cur-
rently leads a center-left coalition that recently
attracted the support of the illegal Communist
Party.
It is doubtful that Matera, despite his
popularity, will be able to swing much support to
Alende; indeed, the power of any labor leader to
deliver votes to any non-Peronist candidate is
questionable. On the other hand, if Coria and
Matera are joined by other respected Peronist
leaders, it could encourage the rank and file to
break party discipline and vote against the un-
popular Campora.
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VENEZUELA: OIL TREATY FADES
Ij? The Peronists are still considered the strong-
est political party in Argentina, but disputes over
congressional and provincial candidate slots are
hurting their prospects. Some 300 Peronists
traveled from Rosario to Buenos Aires this week
to protest the imposition of a gubernatorial can-
didate on Santa Fe Province by the Peronist
national leadership. Similar rebellion against
national leadership is in evidence throughout the
country, and in some provinces rival Peronist
slates will confront one another at the polls on 11
March.
i) / I ne ywerninenL nay aISO
voiced dissatisfaction with the companies' pro-
duction estimates for 1973 ) 'Some government
7 Last September, US and Venezuelan officials 1'dfofficials talk of imposing penalties and taking a
agreed to begin discussions on a petroleum agree Z hard line, particularly toward Creole, the
ment. The Venezuelans would like the agreement' I "country's major oil producer, whose relations
to guarantee continuing high revenues, large with the government range from cool to frigid. In
amounts of foreign investments, and a secure ?Venezuela, the oil companies are viewed with
market. At the same time, the US would get a deep-seated distrust, and the government's pres-
steady source of oil and the companies a fair idential candidate is already accusing them of
return on investment, present and future. Nego- financing the opposition.1
tiators were selected, but little progress has been
made. Venezuela's chief negotiator recently
explained that the press of other duties-specif-
ically Venezuela's entry into the Andean Pact-
will completely occupy his time for the next few
11 ?months. He and other officials connected with
the discussions are probably concerned that the
talks with the US might become a political foot-
ball in the campaign. Several leftist politicians
-have already signaled that they would make an
' issue of any agreement reached. "j
17 [The government's decision on how hard to
press the oil companies on any or all of these
issues will depend at least in part on its as-
sessment of the political situation in this election
year. If public opinion polls continue to indicate
that the government's candidate is trailing, the
temptation to beat this particular nationalist
drum will be great
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Page 27 WEEKLY SUMMARY
the Caldera government's growing preoccupation
with the campaign fo the presidential election to
be held in December.
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J (Although government officials now give a
low priority to an oil treaty, there is still hope
that the state-owned petroleum corporation and
the US oil companies can reach an agreement that
would set up a consortium to conduct a geolog-
ical survey of the Orinoco Tar Belt in eastern
Venezuela. Several companies have already ex-
pressed interest in such a venture, but have been
delaying a final decision until it is clear what the
government's attitude toward future foreign
investment will be. f
i`1 (While professing interest in forgetting past
differences and creating a suitable investment
climate, Venezuelan officials continue to take of
shots at the oil com anie
The timetable for a long-term petroleum
agreement with the US has been pushed back by
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The USSR has renewed its commitment to
underwrite the Cuban economy in a series of
agreements concluded during Fidel Castro's visit
to Moscow late last year. The new pacts not only
represent explicit recognition of Cuba's inability
to meet its debt obligations, but also point to a
revived effort to accelerate development of
Cuba's sluggish economy. I
The agreements provide for rescheduling
payment of Cuba's $3.5 billion debt to the USSR
and for $370 million in new long-term develop-
ment aid. Debt repayments, which Cuba thus far
has been unable to meet, have been officially
postponed until 1986; repayment begins then and
will stretch over a 25-year period at no interest.
The long-term aid follows the nearly $400 million
received over the last decade and is to be provided
at "low interest "probably 2.5 percent per year.
The assistance will be used in agriculture and in
industry, particularly textiles, nickel, and electric
power.
Moscow also agreed to finance Cuba's annual
trade deficit with the USSR for at least the next
three years. This deficit, which has averaged some
$350 million annually in recent years, reached a
record $450 million in 1972, reflecting the poor
Cuban sugar harvest. To help reduce future defi-
cits, the USSR has agreed to raise the price it. pays
for Cuban sugar from 6 cents to 11 cents per
pound, well above the unusually high current
world market price of 9 cents a pound. In ad-
dition, Moscow will double the price it pays for
Cuban nickel, as well as provide financial and
technical aid to expand nickel production capac-
ity. Despite these price concessions and an ex-
pected improvement in sugar output this year--5
to 5.5 million tons compared with the slightly
more than 4 million tons last year-the deficit will
remain substantial this year.
The Cuban economy has done poorly under
Castro, despite large and increasing amounts of
aid in the past, and Moscow has been stepping up
the pressure for meaningful economic reform in
recent years. Two high-level Soviet delegations
visited Havana in 1971 to survey the economy,
the number of Soviet advisers appears to have
increased since 1970, and Cuba recently has been
brought into the Communist Council for Mutual
Economic Assistance. While the new agreements
may reflect in part Cuban accession to Soviet
suggestions, they constitute no guarantee of rapid
economic development, as Castro has readily
admitted. The Cuban economy still faces serious
organizational and managerial cleficiences that
will severely handicap achievement of sustained
growth.
Castro evidenced no
genuine enthusiasm regarding the agreements
when he described the key aspects in a televised
speech last week. Although he has been more
receptive to Soviet advice since 1970, his re-
strained reaction suggests that he realizes the
agreements serve to tie Cuba more closely to
Moscow and restrict his freedom of action in
political matters.
/The Torrijos government this week all but
nail 6d down a United Nations Security Council
meeting in Panama. On 9 January, it formally
invited the council to meet in Panama City from
15 to 21 March, at which time Panama will have
}the chairmanship. Panama has already won the
Unanimous backing of the Latin American group
at the UN and appears to have the necessary
council votes to gain approval for its proposal;
i1''' tThus far, an agenda for the session has not
been' prepared, but it seems very likely that
Panama will bring up the canal problem. Panama
seems to believe that it can advance its negoti-
ating objectives by presenting its case clearly and
forcefully in a forum that would attract US and
international public attention. A final decision on
how Panama will play the issue, however, will
probably not be made- until the last mo-
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Secret
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Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
Brazil- The Selection of a President
Secret
Nn 46
12 January 1973
No. 0352/73A
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The major political challenge facing President Emilio Medici in coming months
is the need to arrange for a successor. Although his term does not end until March
1974, potentially divisive behind-the-scenes maneuvering by ambitious generals has
already begun and may prompt Medici to name his man long before then.
Succession is a problem as the military-backed governments since 1964 have
not institutionalized the presidential selection process. This means that the President
and the most senior military officers, whose views and attitudes differ, must
somehow agree on a choice. Failure to reach agreement or the selection of a man
who proves inadequate to the job could disrupt the country's political stability.
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President Medici
1969-
President Castelo Branco
1964-66
President Costa e Silva
1966--69
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It is almost certain that only an active duty
or retired general will get the nod. Moreover, he
must have four stars, at least by the time he takes
office, to avoid the hierarchical strains of full
generals being commanded by lesser generals. The
military are convinced that only one of their own
can carry out the development and national
integration programs they have started. They
firmly believe that only a man with a military
background will possess the integrity, technical
know-how, and discipline to do the job. The
officers are still not ready to return the decision-
making machinery to civilians, whom they blame
for the corruption, inflation, and economic fail-
ures that helped prompt their intervention in
1964. Moreover, since the military have a mo-
nopoly on the disposition of force and have
severely curtailed all civilian institutions, there is
no way for a civilian to launch a viable candidacy.
When the military assumed power in 1964,
they sought among their ranks a leader who was
uncompromised politically and was both re-
spected by and acceptable to diverse military fac-
tions. They found such a man in Humberto
Castelo Branco, army chief of staff, who had led
the Brazilian contingent in Italy in World War II
and was known as a military intellectual. He was
among the leaders of the 1964 revolution and had
worked successfully with generals who held
widely differing views. The Supreme Revolu-
tionary Command had little difficulty in agreeing
on Castelo Branco, who was then formally elected
by Congress.
His successor, War Minister Costa e Silva,
actively sought the presidency. He maneuvered
skillfully to line up support, while remaining
outwardly loyal to Castelo Branco. Costa e Silva
was evidently astute enough to perceive a delicate
balance within the army between his supporters
and those of the President and studiously avoided
taking a stand on most issues. Costa e Silva
managed to emerge as the unity candidate of the
armed forces, and he was elected by Congress in
October 1966.
In August 1969, Costa e Silva suffered a
stroke. A junta of the three armed forces cabinet
ministers took over, bypassing the civilian vice
president. When it became clear that the President
would not be able to resume his duties, the junta
convoked the military high command, dominated
by the army, to choose a successor. The high
command agreed on Medici, then commander of
the Third Army and former chief of the National
Intelligence Service. Medici reportedly neither
sought the office nor encouraged anyone else to
seek it for him. His selection was largely due to an
excellent military record and his reserved person-
ality, which made him acceptable to a broad
sector of the armed forces. The early agreement
also avoided the threat to military unity that
would have been posed by prolonged maneu-
vering among generals ambitious for the top job.
There are indications that Medici, when he sensed
less than total support among the generals, has
not hesitated to remind them that he accepted
the post reluctantly and only to preserve military
unity.
Medici, remembering Castelo Branco's fail-
ure to plan the succession, is determined not to
repeat that mistake. He is also aware that there is
much behind-the-scenes maneuvering by generals
who desire the presidency for themselves or for
favored colleagues. Months ago, he moved to
prevent open debate that might promote or
exacerbate divisions within the military or harm
the chances of any candidate. He also wanted to
postpone a decision that would, in effect, make
him a "lame duck" with a year of his term still
left.
Medici has the confidence of the senior
commanders and is, therefore, in firm control of
the succession and likely to remain so. He is
widely respected in the military and among the
public. He is seen as highly competent and effec-
tive in achieving important national goals; his
term of office has brought a reduction of infla-
tion, sustained economic growth, and an apparent
end of terrorism. He has consistently kept
decision-making within a small group and has not
Special Report - 3 -
12 January 1973
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tolerated ineffectual subordinates. The President,
through his army minister, moved the military
commanders frequently enough to prevent their
establishing power bases from which to maneuver
politically. He promoted officers who supported
the regime. Ever conscious of the need to main-
tain military unity, Medici has carefully balanced
the various factions; e.g., he has appointed fol-
lowers of Castelo Branco to high positions.
importance, first as chief military adviser to Presi-
dent Castelo Branco, then as a member of the
Supreme Military Tribunal, the nation's highest
military court. Geisel, like presidents (Medici and
Costa e Silva, as well as many of Medici's top
advisers, is a native of the state of Rio Grande do
Su 1.
At Petrobras, Geisel has demonstrated again
that he is an able administrator and talented
manager. Heading that company has undoubtedly
given him intimate insights into the nation's
development problems and considerable experi-
ence in dealing with complicated technical
matters.
Like Medici, Geisel is reserved, personally
honest, and politically acceptable. Medici is said
to regard Geisel highly. He has been described as
moderately nationalistic; he favors nationalized
public utilities and authoritarian solutions to
national problems. A few factors work against
him, and they could be si nificant.
Most often mentioned as the successor to
Medici is retired General Ernesto Geisel, brother
of Army Minister Orlando Geisel. Ernesto Geisel
has headed the state petroleum enterprise,
Petrobras, since his retirement from active duty in
1969. Geisel, more than any other figure, seems
to embody the qualities that the military wants in
the next president of Brazil. Basic to these is a
long and distinguished military career, spent in a
wide variety of command positions that led
eventually to the rank of full general. His com-
petence as an officer is acknowledged even by
those who oppose his presidential candidacy.
Since the military take-over in 1964, Geisel has
shown ability in a number of positions of national
Special Report
Geisel's "candidacy" surfaced too soon,
giving his opponents a long lead time in working
to defeat him. It also provided an early impetus
to the succession scramble the President had so
urgently hoped to avoid.
Almost all the four-star army generals in the
Brazilian Army can be considered, potential
candidates. Indeed, many consider themselves
presidential timber and are maneuvering to
strengthen their bids for the office. There are
several who, measured by the military's criteria,
seem particularly well-qualified.
? One is General Artur Duarte Candal da
Fonseca, chief of the Armed Forces General Staff
and former director of the national petroleum
enterprises. Candal was born 63 years ago in Rio
Grande do Sul. He was a supporter of former
president Costa e Silva and is friendly to the US,
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President Medici Confers with
Army Minister Orlando Geisel
General (Ret.) Ernesto Geisel
A Meeting of the Army High Command
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General Jorge Correa
kSn
General Candal da Fonseca
a'E
General Coelho da Frota
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but his nationalistic views could be strong enough
to make him too controversial.
? Another is the commander of the First
Army, General Sylvio Couto Coelho da Frota. A
native of Rio de Janeiro, he is 62. Frota is highly
respected throughout the army. This respect is
reportedly shared by President Medici himself.
General Frota is re arded as ; -4-11
and has long been concerned
about corruption in the army and the govern-
ment.
? General Antonio Jorge Correa, chief of
training and research for the army, has held
several positions in the Armed Forces General
Staff and was secretary general of the army. A
rising star at 60, he is among the youngest of the
possible contenders.
? General Joao Bina Machado, commander
of the important Superior War College, is a Rio
Grande do Sul native, born in 1908. A supporter
of Castelo Branco, the first military president
after the 1964 take-over, Bina Machado is re-
garded as an intelligent and competent profes-
sional.
? Two other four-star generals whose names
have been mentioned are Breno Borges Fortes,
army chief of staff, and Humberto de Souze
Mello, commander of the Second Army. Generals
Oscar Luiz da Silva and Walter Menezes Paes,
commanders of the Third and Fourth armies,
respectively, are outside possibilities.
There are two major generals who have a
chance, albeit a slight one. Each could receive a
fourth star by the time of the transition. The first
is Major General Carlos Alberto da Fontoura,
director of the National Intelligence Service,
which President Medici once headed. Fontoura is
one of Medici's closest advisers and as such can-
not be ruled out. The other dark horse is Major
General Euler Bentes Monteiro, chief of the army
budget and finance department. Euler Bentes
headed the Northeast Developmental Agency and
is considered an expert in the economic problems
of that region. The nationalist views of Euler
Special Report
Bentes also could prove strong enough to render
him too controversial.
The supporters of controversial Major Gen-
eral Affonso Augusto de Albuquerque Lima,
who has long aspired to the presidency, are still
maneuvering in his behalf, but he stands virtually
no chance. Passed over for promotion to full
general by the high command, he subsequently
retired. He is outspokenly nationalistic and a 25X6
charter member of the hard-line group of officers
who advocate very harsh measures against any-
thing and anybody they perceive as a threat to
national security. It is highly doubtful that he
could generate anything like the needed con-
sensus in the high command, even if he had the
requisite four stars.
Prospects
Some things seem fairly certain. One is that
once Medici and the high command have desig-
nated a successor, his elevation to the presidency
is virtually assured, barring death or incapacita-
tion. Only if Medici were to lose the confidence
of the senior commanders would his choice be
seriously questioned. It would take something
very drastic-such as a sharp, prolonged reversal
of the economy-to provoke such a loss of con-
fidence.
Another is that while the President and the
high command will pick the next chief executive,
there is no reason to assume that he will be a
carbon copy of the incumbent. Although basic
policy directions will probably change little, the
new president, whether Geisel or another general
of similar mold, will have his own team and his
own ideas of how to do things.
In office, he will face a number of persisting
and unanswered questions. One of the most
basic-whether or how the military will give up
the active exercise of power-will have to be
addressed or skirted again by the administration.
There is as of now no indication that the military
establishment is contemplating an early return to
civilian rule. The success that the military govern-
ments have had since 1964 in moving the
economy ahead, in reducing inflation, and in
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restoring Brazil's international credit rating has
made the military confident that their policies are
sound. Likewise, they probably feel vindicated by
the virtual cessation of terrorism, as well as the
progress made in such areas as vast road-building
projects and large-scale literacy campaigns.
Another basic question is how to include in a new
or revised constitution the Institutional Acts on
which the revolutionary governments have based
so many of their actions. Medici has avoided
acting either to include all these acts in a new
constitution, as some urge, or to do away with
them, as some political opponents of the regime
Special Report -8-
8 -
propose.
propose. His reason has been that he wishes to
avoid the divisive debate the issue would involve
if broached formally.
Finally, there is the succession issue itself.
Until the selection process is institutionalized, it
will continue to present a major political chal-
lenge for the government every time a presidential
term ends. And every time the issue arises, it brings
a threat to military unity and thus to national
SECRET
Approved For Release 2008/08/18: CIA-RDP79-00927A010000040001-8
 Approved For Release 2008/08/18: CIA-RDP79-00927A010000040001-8
Secret
Secret
Approved For Release 2008/08/18: CIA-RDP79-00927A010000040001-8