WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A010200010001-9
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 25
• Document Creation Date: December 21, 2016
• Document Release Date: June 12, 2008
• Sequence Number: 1
• Publication Date: March 23, 1973
• Content Type: SUMMARY

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`-Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Secret
23 March 1973
No. 0362/73
Copy N2 45
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SUMMARY, issued every Friday morning by
=.)f Current intelligence. reports and analyzes signif-
iopments of the week through noon on Thursday.
iv includes material coordinated with or prepared
ice of Economic Research, the Office of Strategic
and the Directorate of Science and Technology.
f more comprehensive treatment and there-
CONTENTS (_'3 March 1973)
1 Indochina
5 China: Economic Slowdown
6 Burma: In from the Cold?
6 The Koreas: At Loggerheads
7 Philippines: Refugee Problems
8 Indonesia: Just Fade Awav
9 Europe: Force Reduction Talks
10 East Germany: Summer Happening
12 Money: Markets; EC; Middle East
MIDDLE EAST
AFRICA
14 Egypt: Economic; Cabinet Change
15 Morocco: Incident in Interior
16 Somalia-Ethiopia: Border Tensions
17 Iran: Campuses Closed
17 Sudan: Mending Fences
18 Pakistan: No Better Off
18 Turkey: Full Circle for Sunay
WESTERN
HEMISPHERE
19 Panama: Back to Business
19 Argentina: Morning After
21 Colombia: A Mixed Bag
Comments and queries on the contents of this
publication are welcome. They may be directed
to the editor of the Weekly Summer ,
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NMWI SECRET
inOTMDocr~inA
a shaky ruse
), fhe cease-fire got a little shaky last week as
the word spread that the Communists were con-
tinuing to reinforce their troops in the South.
Several sharp battles were fought north of Saigon
and west of Hue-areas long used by the Com-
munists to move troops from the border areas
into South Vietnam.
)Most of the recent military activity has cen-
tered around government outposts in Tay Ninh
and Binh Duong provinces. Communist main
force units have isolated a Ranger camp at Tonle
Cham, preventing even aerial resupply, and have
hit government positions farther south at Rach
Bap, Lai Khe, and Ben Cat. The ICCS has ordered
an investigation of the fighting, but the Com-
munist delegates on the Four-Power Joint Mili-
tary Commission have so far thwarted attempts to
arrange an on-site inspection)) At week's end, the
South Vietnamese Government had begun moving
to clear the trouble spots, conscious that this
could lead to a major battle.)
j1 = In the northern provinces, the most sig-
nificant fighting developed in outlying areas as
government forces patrolled near Communist
infiltration routes. This happened west of Hue,
where the Communists are trying to develop an
access route to the coastal lowlands, and in the
Que Son Valley, where Communist units have
reportedly been reinforced with newly arrived
armor and artillery. In Quang Ngai Province,
South Vietnamese officials believe that the Com-
munists are about to make a renewed attempt to
capture the coastal village of Sa Huynh to use as a
deepwater seaportI
Who's Supervising
j STwo months after the signing of the cease-
fire agreement, the various supervisory agencies
are talking in a variety of forums, but making
only spotty progress on specific issues. Polariza-
tion has hampered the International Commission
for Control and Supervision. The Four-Party
Joint Military Commission is due to expire with
little to its credit beyond the exchange of prison-
ers and its Two-Party successor may prove even
less effective:
!; h In the international commission, the Cana-
dians and Indonesians have usually lined up on
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SLUHt
one side and the Hungarians and Poles on the
other. Only a few reports of cease-fire violations
have been investigated. In those few cases, where
a final report could be compiled, it died a quiet
death in the Joint Military Commission. The
international commission has also been hampered
by personality clashes: in particular the Com-
munist delegations resent Canadian efforts to give
purpose and direction to the body.!
!The Four-Party Commission scheduled to
expire on 28 March, thus far has made little use
of its authority to investigate truce violations,
spending most of its energy handling Communist
complaints over living conditions, freedom of
movement, and harassment of their delegations:?
Maneuvering is growing more intense over
the South Vietnamese - Viet Cong Two-Party
Joint Military Commission that is supposed to
take over. A Hungarian member of the interna-
tional commission recently told US officials that
the Viet Cong delegates would insist on moving
from their isolated compound at Ton Son Nhut
Air Base to downtown Saigon or to a contested
area once their North Vietnamese colleagues
depart. 'The Viet Cong clearly are pushing for
greater public exposure than Saigon is ready to
concede. Viet Cong General Tra is expected to
stay on as head of the Communist side of the
two-party commission. Saigon has named a rather
undistinguished general to head its contingent.
Progress on this front is so questionable that there
has been some press speculation the four-party
body may be extended another 45 days..
Meanwhile, political talks between the South
Vietnamese and the Viet Cong formally opened in
Paris on 19 March. The two parties have yet to
agree on an agenda, and outside the meeting, the
Communists have engaged in relatively low-key
polemics. Laying the groundwork for elections in
South Vietnam will be a major part of the discus-
sions, but progress, if any, on this and other issues
is likely to be slow in view of the deep suspicions
and dramatically different objectives of the two
sides.!
Political Parties Stirring
The approach of the deadline next week by
which South Vietnamese political parties must
meet the terms of the presidential decree trig-
gered a flurry of last-minute activity. Several par-
ties are trying to form an alliance to preserve their
status, but the government's relatively new
Democracy Party has been making headway at
their expense. Some parties may be put out of
business or forced to go underground.
r
'Two of the better organized parties-the
Farmer-Worker Party and the Progressive Nation-
alist Movement-are now talking about joining
forces with several smaller groups! Another new
alliance, the Catholic-based Freedom Party,
applied for provisional recognition several weeks
ago. Both coalitions will have trouble meeting the
requirement that they win 20 percent of the vote
if the Senate elections are held as scheduled next
August 1
;One of the most prominent leaders of the
Farmer-Worker Party, Lower House Chairman
Nguyen Ba Can, says he is switching to the Demo-
cracy Party and estimates that more than half of
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his party officials have already done so. Can
claims that Democracy Party leadership is weak
and corrupt, but he considers it impossible for
any independent party to operate effectively "in
the middle" between the Communists and the
administration. Can has cooperated with the gov-
ernment in the past, but he is one of the first
prominent political figures with some degree of
independence to make a commitment to the
Democracy Party. A number of other strongly
anti-Communist figures may share his attitude
and conclude that it is a practical necessity to
identify with the government in its political strug-
gle with the Viet Conga
IThe Democracy Party now has chapters in
38 of the country's 56 provinces and autonomous
cities and is planning a national convention in the
near future. The first test of its strength may
come when village council elections are held later
this spring. The government seems certain to
make a strong effort to elect Democracy Party
members to the councils. The .decision to resume
the elections, suspended during the Communist
offensive last May, reflects the government's
desire to show its own constitutional legitimacy
at the local level in light of.the political negotia-
tions with the Viet Cong:11 President Thieu has
indicated that the elections will be held in rela-
tively secure government-controlled areas. This
would rule out any overt Communist participa-
tion unless the two sides have reached agreement
in their Paris talks.!
jC? The day before the deadline (24 March) for
the formation of a new coalition government-as
set by the peace accord signed last month-a
government spokesman announced that more
time will be needed to reach an agreement. The
Communists have been deliberately stalling all
week, and their ranking delegates left Vientiane
on 22 March for consultations at Sam Neua.j
1-j The major impediment to progress is the
continued absence of the chief Communist nego-
tiator, Phoumi Vongvichit. Until he returns to
Vientiane, high-level discussions on the composi-
tion of the future cabinet cannot begin, and the
official negotiating sessions will remain pro forma
exercises
Despite the failure to form a new govern-
ment, the major provisions of last month's settle-
ment remain in force. One effect of the delay,
however, is to set back the deadline for the with-
drawal of North Vietnamese troops. Under the
terms of the agreement signed last month the
withdrawal of foreign forces must be completed
60 days after the formation of the new gov-
ernment.
All Quiet on the Fronts
(There is a good chance that the cease-fire
will continue to hold. There are no signs of any
impending increase in military activityjThrough-
out the week field commanders reported only
minor skirmishing near Khong Sedone and Pak-
song in the south and between Thakhek and Dong
Hene in the central panhandle. In the north, Com-
munist units reacted to a move by Vang Pao to
establish a presence along Route 4 southeast of
the Plaine des Jarresjj but elsewhere Communist
and government units are honoring informal local
cease-fire arrangements.?
Lao students demonstrate support for cease-fire.
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CAMBODIA: UNHAPPY ANNIVERSARY
the 18th of March 1970 is an important
date on Lon Nol's calendar. It marked the end of
Sihanouk's rule and the beginning of his own.
Any plans the President may have had to com-
memorate the date this year literally went up in
smoke on 17 March. A disaffected Cambodian Air
Force,pilot bombed the presidential residence, and
although Lon Nol escaped injury, 43 of his coun-
trymen were killed.
The bombing was not the only violence in
the capital on the 17th. A few hours before the
bombing incident, two people were killed and
several injured when Cambodian Army troops
threw grenades into a crowd of striking teachers
who had gathered to decide whether to continue
their month-old protests against the government's
economic policies. The soldiers, in civilian dress
reportedly were under orders from Lon Nol's
younger brother, Brigadier General Lon Non, to
enforce the regime's ban on such assemblies.
Considerable confusion has surrounded the
two incidents. The regime was quick to allege that
the events, as well as the continuing anti-govern-
merit protests by teachers and students, were part
of a coordinated plot against the republic. A state
of emergency was immediately proclaimed, and
the government began to move against various
opposition elements and members of the royal
family including Republican Party Chief Sirik
Matak. A government spokesman on 22 March
attempted to dispel reports that Matak is under
house arrest, but in effect confirmed that he is
being held incommunicado.
The move against Matak probably stems
from recent rumors that he has been involved in
royalist plotting against the government, allega-
tions probably circulated by Matak's long-time
foe, Brigadier General Lon Non, who is deter-
mined to block Matak's appointment to the vice-
presidency. The government's action against
Matak will intensify political tensions in Phnom
Penh and make important figures in the govern-
ment apprehensive about their own positions.
Army Chief of Staff General Fernandez, another
of Lon Non's political enemies, will be especially
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D a 1AJ P V1 V cl 1MFAARV 2-~ Mar 7-~
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CHINA: ECONOMIC SLOWDOWN ( I
In contrast to its sparkling performance in
foreign affairs, China suffered an economic set-
back last year. Gross national product barely kept
pace with the relentless 2-percent annual increase
in population. Agricultural production may have
declined by as much as 5 percent, and the growth
in industrial output probably fell to around 8
percent. China's news media provided ample
documentation that agriculture, still the founda-
tion of China's industrializing economy, had an
off year.
Some slippage had been anticipated in the
rate of economic growth, because most of the
slack in the non-agricultural sectors caused by
the Cultural Revolution had been taken up over
the previous two years. The slowdown, however,
was greater than expected; agricultural produc-
tion was hit by adverse weather, shortages of raw
materials slowed industrial expansion, transporta-
tion was hampered by bottlenecks, and key con-
struction projects were not finished. Local
authorities commonly misused the decision-
making authority they inherited after the Cultural
Revolution. Production gains were reported in
steel, petroleum, and a few other industrial goods,
but in every case the rate of increase was below
those registered in 1971.
Chinese Agriculture Less reason for smiles
Peking's reaction thus far has been one of
cautious concern rather than panic. Some adjust-
ments have been made in national economic
plans. The government cut the 1973 ration of
cotton cloth, strengthened measures to conserve
food, increased emphasis on the mining of raw
materials, and acted to curb unsanctioned eco-
nomic activities by local authorities. Peking has
shown a greater willingness to increase imports to
support agriculture and maintain living standards.
Grain and cotton imports have been stepped up,
and China has purchased these commodities from
the US for the first time in more than two
decades. Moreover, Peking is again accepting cred-
its and has recently contracted to buy six Western
plants, worth almost $150 million, to expand
production of fertilizer and synthetic fibers.
Agriculture is, as always, the crucial element
in China's economic future. Peking gives every
indication that it will take measures to restore
momentum in this key sector, and with rea-
sonably good weather, may succeed. The con-
tinuation of pragmatic economic policies is
crucial to China's being able to feed and clothe its
huge population and still make progress in de-
veloping a modern industrial and technical
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;The Burmese, upon gaining independence 25
years ago, adopted an isolationist foreign policy
that is still pursued today. Although xenophobia
has helped Burma avoid a number of international
pitfalls, it has done little to improve thorny prob-
lems at home like a stagnant, ill-managed econ-
omy and widespread, foreign-assisted insurgency.
Recently, Rangoon has been cautiously emerging
from its self-imposed shell to explore the chang-
ing diplomatic waters in Southeast Asia.'
,This past January, in a marked departure
from its policy of avoiding regional forums,
Rangoon announced its willingness to participate
in a ten-nation conference on ,regional develop-
ment after the Indochina war; the only proviso
attached was that the North Vietnamese must be
invited. In recent weeks the Burmese have been
receptive to Thailand's overtures for improved
relations. Last week the Burmese foreign minister
visited Bangkokj(fhe Burmese have also softened
their attitude toward UN involvement in a limited
narcotics suppression program and are co-
operating in a field survey. Rangoon probably
judges that the end of the Indochina war and
shifting power relationships will ease the way for
Burmese participation in regional affairs without
violating Burma's neutralist credentials.
,Rangoon may also have decided that its iso-
lationism provided little immunity from Chinese-
inspired subversion and that the problem might
he eased if outside opinion could be focused on
it. In recent weeks, government officials have
actively sought international assistance in curbing
Chinese support to the insurgents.
Burma's small size and proximity to China
sharply limit what Rangoon can do to counter
Chinese subversion. There is no sign that Rangoon
intends to take any step that would inflame its
relations with Peking, such as asking for sig-
nificant Soviet military aid to counter the-insur-
gency.
1 During three days of negotiations in Pyong-
yang last week the North-South Coordinating
Committee found little to agree on, and no com-
munique was issued. The lack of progress appears
to have resulted from a tougher North Korean
negotiating position. Although the details of the
actual discussions are not yet available, North
Korean Vice Premier Pak Song-chol gave a press
conference his version of what went on. He indi-
cated that the North Koreans had demanded a
mutual reduction in arms and military manpower,
a withdrawal of foreign forces from South Korea,
and a peace treaty as prerequisites for progress.;
-Although these demands have been part of
North Korean propaganda for some time, they
had not been raised before as conditions in the
negotiations. Their introduction in this way now
underscores the importance Pyongyang attaches
to the withdrawal of US and UN forces from the
South. Pyongyang would also like to halt the
modernization of the South Korean military,
since the North is having difficulty sustaining
heavy military investment in the face of the grow-
ing demands of an expanding economy.]
=The North Koreans may believe that these
tough tactics now will pay dividends. A similar
approach worked late last year when Pyongyang
launched a harsh propaganda campaign, and Seoul
responded by coming to terms on the organiza-
tion and functions of the coordinating commit-
tee. Pyongyang may have perpetrated the shoot-
ing incident in the DMZ earlier in the month to
underscore the fragile nature of the detente.;
;Although the South Koreans were prepared
to discuss substantive economic and cultural ques-
tions in the meetings last week, they flatly re-
jected the new North Korean demands. Pyong-
yang does not anticipate that its tough tactics will
effect an immediate change in Seoul's position;
but the North will keep the pressure on, tensions
may be escalated, and pauses between sessions
lengthened.
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14W StUKt I
THE PHILIPPINES: REFUGEE PROBLEMS
, '1After several weeks in the headlines, the pable of routing the well-armed dissidents from
Muslim uprising in the south is back on the inside their fortified strongholds in the interior of Min-
pages. The atmosphere in the southern islands danao and on scattered islands in the Sulu Archi-
remains tense, however, and thousands of Chris- pelago'.)
fThe fighting has already driven thousands of
amilies out of their homes. Most Muslims have
fled to Sabah and its offshore islands where they
iyU,UUU sand =.0UU,000 retugees. I he figures may
snot be%p urgte, since it is difficult for the govern-
ment:;:to,. count the refugees. Their numbers are,
nevertheless, significant, and Manila will be hard
pissed t 3 pr vid equate relief. The problem
can ortly grow .unttiil ccurity improves so that the
Initially, s
surprise attacks caught government forces c&
pletely off guard in many areas. Novo; the govern-
refugees cart b erf'tg ack home.
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On 16 March, he flew to Zamboanga td-i2ei t
with local civilian officials in an effort, tq; ip$i a
ment pressure
the Muslim population without relax ing_govern
searching for new ways to isolate the rebbls r`orno(
tians and Muslims have fled their homes, creating
a sizable refugee probleni President Marcos
claims that government forces are firmly in con-!l
trol. He is playing down the military threat and is
of the amnesty period1(during wh`ich_ dissid5'r.t5 have relatives and friends. Their plight adds fuel
may surrender without penalty, and\h? will pr'ofi- to an international Muslim campaign about Ma-
ably establish some sort of blue ribbon gmmit#ee nila's treatment of its Muslim minority. Christian
to consult with Muslim leaders. Such 1)Iliativ refugees have flocked to the government-con-
seem unlikely to be more successful th lm~I--f trolled urban areas -where they compete for lim-
efforts in the past, since Muslim confidence in th Ited;, food stocks.)IThe Philippine Government
ment seems to have regained the initiative at least
in some places.JThe armed forcessst'ill seem inca-
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-: ' he Indonesian armed forces in the mid-
1960s potentially were one of the strongest in the
Far East. Massive Soviet and Eastern European
aid had provided Jakarta with one of the most
impressive arsenals in the region. After the failure
of the Communist coup attempt in 1965, how-
ever, the government formed by Suharto decided
that the economy could no longer afford the
free-spending defense policies of former president
Sukarno.'
';Since then, the Soviet weapons held by the
I n d o n e s i a n armed forces have deteriorated
rapidly. The Indonesian Government has been
unable to obtain sufficient spare parts and tech-
nical assistance, and, today, almost all of this
Soviet equipment is inoperable. Although Suharto
has been able to get some replacements from the
West, Indonesia's air, naval, and ground combat
capabilities have gradually weakened:
of the jet bombers has flown for several years. In
an effort to restore some combat capability to the
air force, Australia recently delivered 16 F-86 jet
fighters to Indonesia, and Jakarta is looking to
the US for additional assistance.l
\The Indonesian Navy received an impressive
number of warships from the Soviet Union and
Eastern Europe. They included a Sverdlov-class
light cruiser, eight Skoryy-class destroyers, eight
Riga-class destroyer escorts, 12 W-class attack
submarines, and 12 Komar- and 16 Kronstadt-
class patrol boats. Almost none of these ships are
operational, and most are being scrapped. The
navy has been reduced to a coastal patrol force,
although it still can move a limited number of
troops to outlying islands for counterinsurgency
and security duty. Although attempts are being
made to obtain patrol craft from Australia and
the US is providing a destroyer escort, the navy's
role will be limited in the future.I
''The army has suffered less from the dete-
rioration of Soviet equipment because less than
20 percent of the items in its inventory are So-
viet-made. Nevertheless, much of the army's
mixed arsenal of Communist and Western weap-
ons is not in working order, and the army could
not repel a major attack on the country. The
number of troops has been gradually reduced over
the past few years, and a further reduction of
some 50,000 from the present level of 225,000 is
planned. The idea is to create a more mobile force
capable of coping with insurgency threats and
undertaking related civic action programs.
;Nearly 80 percent of the aircraft in Indo-
nesia's air force in the mid-1960s came from the
Soviet Union and Eastern Europe. These included
26 TU-16 jet medium bombers, 28 IL-28 jet light
bombers, and nearly 100 MIG-21, MIG-19, and
MIG-17 jet fighters. The air force also received
equipment for three SA-2 missile sites, several
IL-24 and AN-12 transports, and MI-4 and MI-6
helicopters. Almost all of this equipment has been
put in storage.1
fhe air force now is essentially a transport
service, and it relies on a few vintage US aircraft
to fill this role. Indonesia would be virtually de-
fenseless against air intrusions, and the air force
could provide little tactical ground support. None
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EUROPE: FORCE REDUCTION TALKS
After another two weeks of consultations,
NAYO and the Warsaw Pact delegates have failed
to resolve the Hungarian participation issue that
has held up the initial talks on force reductions
since late January. An end to the deadlock is not
in sight.
The Soviets have reacted coolly to the most
recent allied proposal-that the status of Hungary
be left in abeyance for the time being so that the
initial talks might move on to other matters.
Moscow continues to find unacceptable any pro-
posal that singles out Hungary. Thus, it maintains
that if Hungary is to participate in the talks, so
should Italy, and that if Hungary's status is left in
abeyance, Italy's should be also. Some of the
NATO allies oppose such a linkage.
The Soviets have not, however, formally re-
jected the Western proposal. In informal conversa-
tions, they have floated the idea of including
Hungary in a constraints area even if it were not a
direct participant in the negotiations, provided
that similar constraints were applied to Italy. This
would have some appeal to the Belgians and
Dutch, who originally made their participation
conditional on Hungary's being included and who
see constraints as an end in themselves.
The Hungarians, strongly supported by the
Soviets, have proposed that countries not directly
involved initially should later be able to petition
the participants to be included. In this regard, the
Soviets have emphasized that it is important to
leave open a way for France to join the talks. In
fact, the Soviets have lately begun to stress the
theme of France's eventual participation
It will be difficult to find a way out of the
Hungarian quagmire. Any compromise solution is
certain to get a hard look in the North Atlantic
Council, where the European allies remain con-
vinced that the whole force reduction exercise
raises basic security issues and that concessions to
the Soviets at this early stage would set a bad
precedent.
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Festival to be held in East Berlin beginning 28
July. East Germany wants the nine-day affair to
be a major international event and is seeking wide
foreign participation. The festival's preparatory
committee, dominated by the Soviets, chose East
Berlin as the site to boost East Germany's pres-
tige, but the possibility that the youth will again
prove unmanageable is bothering festival spon-
sors. 1
47 The festival theme will be, "the common
stfuggle against world imperialism." The prelimi-
nary schedule calls for heavy emphasis on the US
role in Vietnam, Israeli "aggression," and "neo-
colonialism." Angela Davis has been asked to take
a leading role in demonstrations against "racial
imperialism." As many as 50,000 delegates are
expected to attend. The figure includes 20,000
East Germans, and the regime is doing all it can to
whip up interest among the young.I
"f n fhe festivals, beginning in Prague in 1947,
have been designed as Communist propaganda
spectaculars. They have not always produced pro-
paganda coups for their Communist sponsors,
generating instead disruptions and subsequent em-
barrassment. The most recent festival, held in
Sofia in 1968, was marred by violence and dis-
putes over the participation of Czechoslovak "lib-
erals" and the anti-Soviet antics of New Left
agitators. The squabbles that marked the Sofia
gathering raised considerable doubt whether the
Communists would stage any more of these spec-
taculars. The Soviets, however, apparently ecided
in 1971 to have another go, presumably because
Moscow judged that the international climate, at
that time heavily influenced by Vietnam, offered
overriding propaganda benefits for the bloc.'`
ore recently, the Soviets have shown some
'cone rn that the customary provocative nature of
these festivals conflicts with their support for
East-West detente. In talks with US diplomats this
month, Soviet youth officials appeared uneasy
over this inconsistency. The reluctance of some
Western youth groups to attend the festival with-
For over a year Pankow has been working out guarantees of free debate, plus the dwindling
hard on preparations for the tenth World Youth US presence in Indochina, could cause the
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Communists to tone down the affair this year.
Indeed, some Western observers believe that these
factors could present non-Communist representa-
tives with a chance to take the initiative on such
topics as human rights and. international coop-
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MARKETS OPEN AGAIN %r~ -, 4 4)
Only limited interventions by central banks
has taken place since foreign exchange markets
reopened Monday for the first time since 2
March. The dollar fluctuated slightly as official
trading resumed. Japan sold some $50 million on
Monday to keep the dollar's value from rising too
fast, as seasonal trade factors produced an in-
creased demand for dollars. The mark was the
weakest currency in the European float, and the
Bundesbank sold $10-15 million in Belgian francs
and a smaller amount of Swedish and Danish
crowns to keep the band intact. During the recent
crisis, the mark appreciated more than any Euro-
pean currency, except for the Swiss franc, and the
weakness this week reflects fears that mark hold-
ers will switch to other currencies.
Several West European nations have in-
stituted new controls to discourage capital in-
flows. The Benelux countries, following the
example of West Germany and Switzerland,
imposed interest charges on non-resident com-
mercial bank deposits. France stopped payment
of interest on non-resident deposits. It also pro-
hibited commercial banks from increasing their
net foreign exchange liabilities to non-residents
and from permitting such accounts to be used for
the purchase of French securities. Finally, Stock-
holm imposed new controls on foreign exchange
holdings and operations of Swedish commercial
banks. The government claims the new controls
have already eased upward pressures on the
kroner.
The generally light trading activity in the
reopened exchange markets indicates that most
traders are taking a wait-and-see attitude. Those
traders who speculated in marks and other strong
currencies may well hold off repurchasing sub-
stantial quantities of dollars until they get a
clearer picture of trends. Preliminary analysis of
balance-of-payments prospects in Japan and West-
ern Europe suggests that pressures will build for
further appreciation of the yen and mark and a
depreciation of sterling.
The International Monetary Fund and the
Committee of Twenty, the fund's offspring that
was given the job of developing a reform package,
have had their roles in international monetary
affairs diminished. Monetary reform is in fact
being introduced as a result of exchange market
pressures. The introduction of the European
float, for example, has overtaken discussions
about more flexible exchange rates. Moreover, the
parities of the US dollar and the mark are being
quoted in terms of Special Drawing Rights, in-
stead of gold. Committee of Twenty meetings this
week and next will make a fresh attempt to deal
with the new situation."
IMPACT ON THE EC
}The EC emerged from the latest monetary
crisis neither significantly strengthened nor weak-
ened, but possibly with a better appreciation of
the problems facing economic and monetary
union. The narrow exchange-rate margins of EC
currencies vis-a-vis each other have been retained
in the joint float of six of the community
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currencies. This float, with the problem cur-
rencies left out, may give the community breath-
ing space to reach agreement on the nature and
purpose of a community-wide intervention fund.
The economic policy harmonization necessary for
the long-run success of a monetary union still
seems distant.
Agreement on the partial float nevertheless
showed a desire, especially on the part of Paris
and Bonn, to act together. Political considerations
were apparently as important as such economic
considerations as preserving the common agricul-
tural policy. The Europeans generally accepted
London's decision not to take part as logical; with
the UK in, a common float would have been
jeopardized from the start. Rome's abstention,
however, has given rise to charges, even from the
Italian Communists, that the government has hurt
the prospects for European unity.
However much the monetary trouble took
on the overtones of a confrontation between the
EC and the US in which the community's unity
was put to the test, the Europeans continued, in
their search for a solution, to bid for US support
for their efforts. The importance of the com-
munity's trading ties to other European countries,
meanwhile, has been highlighted by the participa-
tion of Sweden, Norway, and Austria in the con-
trolled EC float.
Despite any political benefits from the com-
munity's togetherness, economic integration
suffered some setbacks. The new French and
Benelux measures to deter inflows of foreign
capital have further divided the EC's capital
markets. Moreover, the exclusion of the UK,
Italy, and Ireland from the fixed exchange rates
inside the community will make it harder for the
EC to determine its 1973-74 farm prices. The EC
Council is still scheduled to begin this debate next
month, but decisions may not come until next
fall.?
MIDDLE EAST: DOLLARS AND THE CRISES
Although mbney f om the Middle East is
widely rumored to have been a major factor in
precipitating the recent exchange crises, there is
no hard evidence that a massive intervention from
the Middle East actually occurred. Of the esti-
mated $13 billion exchanged during the recent
crises, Middle East sales of dollars for gold and
foreign exchange totaled no more than $1.5 bil-
lion through early March, and probably were sub-
stantially less.
Saudi Arabian dollar holdings, about $2.5
billion, may have increased somewhat in recent
months. Libya, with almost $3 billion in gold and
foreign exchange,
like Saudi Arabia, took substantial losses as a
result of the dollar's devaluation.
Kuwait
also probably suffered some devaluation
losses.
There is little reason to suppose that any
Middle East nation was intentionally seeking to
weaken the dollar. Middle East money managers,
like other portfolio managers, attempt to protect
the value of their assets in a period of currency
uncertainty. Indeed, they have been less willing
than multinational corporations, including the
large oil companies, to desert the dollar. Con-
sequently, their losses have been relatively
greater. Reported dollar sales on behalf of Middle
East interests were distributed over a relatively
long time and among different countries, belying
the contention that these sales were motivated by
a desire to weaken the dollar or precipitate a
monetary crisis.
There are, however, indications that official
and private Middle East dollar holders are pre-
paring to pursue a more aggressive portfolio
management policy that could cause problems for
the dollar in the future. This, is a result, rather
than a cause, of the dollar devaluation in Feb-
ruary and the dollar's continued weakness. US
and European banks are aggressively soliciting
Middle East business, arguing that they can more
effectively manage and protect Middle East for-
eign exchange assets. Some Middle East interests
already have hired Western specialists to this
end.
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Egypt's economic troubles are likely to con-
tinue for the foreseeable future even if Cairo's
problems with Israel are resolved. The country's
beleaguered economy is riddled with fundamental
weaknesses. A largely peasant population, dou-
bling every generation, has only meager land and
water resources. Uneven economic development
has left Egypt dependent on imports to feed its
population and operate its industry. Government
control over the economy has been handicapped
by bureaucratic inertia and extravagance. Assist-
ance from the West has been steadily reduced. 1'
The June 1967 war with Israel multiplied
long-standing economic difficulties by cutting for-
eign exchange earnings from two key sources-the
Suez Canal and tourism. These and other losses
were largely offset by an annual subsidy of $250
million from Libya, Kuwait, and Saudi Arabia;
another $200 million a year was available for
balance of payment purposes from Libya. From
1967 through 1972, over $2 billion in grants
poured in from Q,ther Arab states to keep Egypt's
economy afloat.
--' \Sadat has sought to lessen his dependence on
his Arab neighbors by seeking private foreign cap-
ital investment and by encouraging the repatria-
tion of funds banked by Egyptians abroad. The
Arab International Bank was created and a large
number of investment guarantees have been of-
fered. Thus far, however, only a small number of
investment projects have been approved. Invest-
ment from abroad may continue to increase
slowly, mainly because revitalizing the private
sector runs counter to deep socialist currents and
poses difficult political questions.
[In 1973, Sadat has been beset by additional
economic difficulties. Libyan President Qadhafi
has suspended the $200 million in aid that helps
offset Egypt's chronic balance of payments def-
icit. Higher wheat prices and lower oil output
threaten to increase the payments deficit to over
$250 million, and no alternative financing is in
sight. A more aggressive military posture toward
Israel or a seemingly large deficit in Egypt's de-
fense budget might cause Qadhafi to relent and
perhaps attract assistance from the Persian Gulf
states. On the other hand, increased tension be-
tween Egypt and Israel would complicate the task
of attracting private capital and increase Egypt's
dependence on foreign aid.!
/A settlement with Israel would not solve
Sadat's economic problems. Over the long run,
peace would benefit the economy by making in-
vestment more attractive to foreigners and by
releasing Egyptian energies to economic develop-
ment. The immediate results of a settlement
would be less promising, partly because the in-
come-earning potential of the Suez Canal and
assets in the Sinai have been reduced over the
years. In addition, a settlement almost certainly
would cause Qadhafi to cut off the $59 million
annual subsidy paid since the Six-Day War.)
A settlement would provide a net gain of
about $100 million annually as against a prospec-
tive annual payments deficit of at least $200
million. Other Arab states are committed to as-
sisting Egypt only until Israel withdraws from the
occupied territories. If they were to end their aid
after a settlement, Egypt's annual payments def-
icit could mount to $400 million even if the
present low level of investment and rigid austerity
measures were maintained.)
)President Sadat has reportedly requested the
resignation of Prime Minister Sidqi and charged
presidential adviser Hafiz Ismail with the forma-
tion of a new cabinet. Rumors of an impending
government reshuffle have been circulating in
Cairo during the past week. The new cabinet may
be unveiled early next week, possibly during a
meeting Sadat has scheduled with representatives
from Egypt's legislature and partyf
jSidgi is disliked by many Egyptians and in
January 1972 was criticized by student demon-
strators as a poor choice to lead the nation's war
effort. Sadat may hope that Sidqi's removal will
help heal some of the divisions troubling the
government. Sidqi's failure to deal effectively
with Egypt's largely intractable economic prob-
lems probably weighed in the President's decision.
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_7l' rThe combined military, gendarmerie, police,
and civilian sweep for subversives has expanded
beyond the Middle and High Atlas regions of
central Morocco.
The Algerian press late last
wee enie "tendentious" news item, appar-
ently filed by the AP in Rabat, that Algeria had
arrested some 400 Moroccans Meanwhile, Moroc-
can opposition figures complain of police harass-
ment and several more prominent ones, identified
by arrested subversives as contact points, have
been arrested.
In addition, Sadat may have feared that the am-
bitious Sidqi represented a potential threat.(
3 Hafiz Ismail is a trusted lieutenant of Sadat
and 'a logical choice to succeed Sidqi. Ismail has
been heavily involved in Egypt's recent diplo-
matic offensive, and his appointment to the pre-
miership would appear to confirm Sadat's con-
tinued interest in political efforts to resolve the
dispute with Israel. Nevertheless, the new govern-
ment might be cast in terms of a "war cabinet" in
an attempt to underscore Sadat's commitment to
MOROCCO: INCIDENT IN THE INTERIOR
Ii lKing Hassan, the target of two assassination
attempts in the past two years, is very nervous
about the security situation following attacks by
armed bands on two widely separated police posts
in the rugged Middle and High Atlas regions. One
was hit on 3 March, the other on the 8th.)
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Somalia's recent calls for diplomatic media-
tion of its long-standing claims to the Ogaden, a
largely Somali-inhabited part of Ethiopia, appear
to mark a retreat from its earlier demand for
bilateral negotiations with Addis Ababa. Mogadi-
scio, however, is keeping its guard up. Somalia
reportedly has countered an Ethiopian military
buildup on the border by moving troops to the
area. Moreover, Mogadiscio gives no sign of re-
laxing its territorial claims in the Ogaden or of
ending its close ties to Moscow and its receipt of
sizable deliveries of Soviet military equipment, all
of which have generated considerable Ethiopian
concern.
In a recent speech Siad acknowledged that
efforts to resolve the dispute have foundered
through bilateral channels and he called upon
other African countries to mediate. Siad's offer to
take the problem to mediation was foreshadowed
by Somalia's announcement last month that the
conflict will be settled peacefully.'I According to
the Ethiopians, Somalia has already approached
several African countries-Sudan, Uganda, Tan-
zania, Morocco, and Mauritania-to act as media-
tors, and Siad probably will raise the issue at the
OAU summit in May?
'Siad clearly hopes the involvement of other
African countries will help to limit or halt the
Ethiopian military buildup on the border.!'The
Ethiopians now appear to be in a good position to
counter a conventional attack, and they are im-
proving their capability to contain a Somali-
backed insurgency on Ethiopian soil!
;This week, Somalia reportedly moved an
estimated 2,000 troops to the border. The mutual
troop buildup could lead to incidents and perhaps
a wider outbreak of hostilities. Somalia, however,
could not sustain a conventional offensive with-
out more modern Soviet tanks and better logis-
tics, neither of which appear forthcoming. Never-
theless, the Somalis are capable of supporting a
renewal of insurgent activity in the Ogaden and of
encouraging Eritrean insurgents.
SECRET
?Siad probably hoped his moves would con-
vince his many domestic opponents that he is
working actively to unify all ethnic Somalis.]
Siad's failure to make any progress on this emo-
tional issue and to take a more aggressive stand
against Ethiopia has contributed to widespread
dissatisfaction with his regime.]
. !,Chances for a successful diplomatic resolu-
tion of the Somalia-Ethiopia conflict are slim;
recent bilateral negotiations indicated there is lit-
tle room for compromise. Ethiopia has not com-
mented officially on Siad's proposalj\ but in a
conversation with a US Embassy official, a For-
eign Ministry officer rejected it out of hands
.Moreover, OAU members, many of which have
'their own border problems, are reluctant to
discuss territorial issues. Although many African
countries are unhappy with borders left over from
the colonial era, they apparently prefer them to
the chaos they believe would result from
wholesale revisions.
SUDAN
Red
Sea
,OMAN
N
hartoum fE REA ~ -~EME
'Asmara - ~ *Sana Jg~ti~
/_` *Ad b of Ad?e
lpiitiouti
Addis Ahab
F T H 10 P I A
UGANDA)
Kampala / K ? N Y A
d
TANZANIA
Nairobi \ ,. ~Chisimaio
OGADEN//
,,
0
49
Indian
Ocean
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IRAN: CAMPUSES CLOSED
2C FRecent anti-regime demonstrations by stu- down almost the entire system of higher educa-
dents throughout Iran have induced the govern- tion. The Shah may decide to keep the schools
ment to close nearly all of the country's universi- closed until next term in an effort to postpone
ties. Publicity about arms purchases from the US dealing with student discontent. 25X1
appears to nave been a factor in the unrest; the
students are complaining about high tuition costs
and calling for government subsidies.
7 ,Authorities dealt swiftly and sometimes
harshly with the demonstrators. At least three
students were killed and more than 200 injured at
Tabriz University. There have been no reports of
fatalities elsewhere, but many of the arrested
students remain in custody. Although the gov-
ernment has not allowed news of the disturbances
to appear in the press, word has spread among,he
students along with rumors of police brutality.
SUDAN: MENDING FENCES
7C% [The Arabs were spared the embarrassment of
more fraternal infighting this week after media-
tion efforts by the Iraqi Government and repre-
sentatives of the Arab League. The Sudanese
Government and the fedayeen agreed to halt their
propaganda assaults on each other. The Sudanese
ac
t
d f
d
cep
e
e
ayeen denials of complicity in the
o ,The current phase of student dissidence was Khartoum murders1(and gave the Palestinian Lib-
set off in late January when several hundred eration Organization permission to reopen its
Tehran University students, skeptical of the local office. President Numayri may also have
Shah's claims of success for his White Revolution agreed not to execute the eight Black September
reforms, rioted. No one was injured and the., , terrorists he holds;jfto uphold his end of the
authorities quickly regained control and closed'. charade, Yasir Arafat promised to investigate the
the university. Then, three weeks ago, demon- affair.l
strations-sometimes violent-broke out at vir-
tually every major college, university, and tech-
nical training school in the country.'
61 1 [Numayri's anger was still present in an inter-
view) on 16 March. He said that one of the main
objectives of the terrorists was to put a stop to
+Anti-regime sentiment is probably greatest the "Arab-US dialogue." Although he did not
among intellectuals, but until recently there had mention Libya by name, it was clear that
been relatively few instances of student activism Numayri believes that Qadhafi planned the opera-
in Iran. During the 1950s and early 1960s, dis- tion to embarrass Sudan. Numayri said he had
turbances were frequent. In the last decade the called for a special meeting of the Arab League's
Shah's security forces have kept down manifesta defense committee to air the whole matte f LNow
tions of opposition to the government. They wereI / that Sudan and the fedayeen are smoothing things
helped by the Shah's reform and economic pro- over, his request will probably be conveniently
grams, which pre-empted many of the issues forgotten:"]
around which vocal opposition might have rallied.
C/ - Khartoum announced that a date will be set
The widespread nature of the recent demon- for he terrorists' trial before Numayri leaves for
strations attests to the depth of anti-regime feel- London early next week) LThe eight commandos
i
h
)
ng on t
e campuses. While most students were
' are expected to be quickly tried, convicted, and
previously content to secure a place in the estab- condemned to death. Whether Numayri will carry
lishment rather than fight it, many now are more out the executions is still uncertain, although
willing to take risks in a show of opposition. most of the diplomatic corps in Khartoum be-
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)President Bhutto's campaign against the op-
position so far has neither achieved its objectives
nor brought the violent reaction some observers
feared. By discrediting, intimidating, and disorga-
nizing his opponents, Bhutto had sought to lessen
their criticism of his proposed constitution and to
replace the two provincial governments they con-
trolled.
;On 15 February Bhutto dismissed the gov-
ernment and the governor of Baluchistan and
imposed a month of rule from Islamabad on the
province. He also dismissed the governor of the
Northwest Frontier Province, and the provincial
government then resigned in protest.
Bhutto's actions followed charges by his sup-
porters that the party that dominated the coali-
tions in both provinces was plotting the breakup
of Pakistan and was the intended recipient of the
arms discovered at the Iraqi Embassy in Islama-
bad on 10 February. At the same time, other
opposition groups-including dissidents within
Bhutto's own party-came under attack and some
were jailed,'
jin Baluchistan, Bhutto has won away some
of the supporters of the former ruling coalition,
but it still has 11 or 12 of the 21 provincial
assemblymen. Central rule has been extended for
another month. There is still room for com-
promise and political deals, but Bhutto may have
to settle for less than he expected.1
the provincial govern- approved by committee on 21 March}l It could
ment. With considerable ICI run into problems in the Senate. Two small par-
difficulty, a pro-Bhutto ties have announced their opposition. A constitu-
)In the frontier province, local objections !(It (The proposed amendment should have
torced Bhutto to abandon his first choice to head smooth sailing in the lower house, where it was
majority has been
formed, but the forma-
tion of a government is
being delayed by dis-
agreement over the divi-
sion of the spoils.)
stitution is now being debated, neither side seems
willing to compromise. The opposition, uncowed
by Bhutto's campaign, is doing its best to dis-
credit the constitution and prevent its passage.
The government, however, has an overwhelming
majority, controlling 90 votes to 25 for the oppo-
TURKEY: FULL CIRCLE FOR SUNAY
Stymied for more than a week in its effort
to elect a president, parliament is considering a
proposal to amend the constitution and extend
the term of incumbent President Cevdet Sunay.
This effort to break the presidential deadlock
began to unfold on 19 March when the majority
Justice Party decided-probably under pressure
from the generals-to introduce the amendment
enabling the 72-year-old Sunay to serve two years
beyond the expiration on 28 March of his regular
seven-year term. The military candidate, Faruk
Gurler, and the Justice Party candidate, Tekin
Ariburun, subsequently withdrew from the con-
test. Bulent Ecevit, leader of the Republican Peo-
ples Party, and at least half its members in parlia-
ment are on record in favor of extending Sunay's
term.(
tional amendment requires a two-thirds
Ironically, supporters of Sunay in the mili-
tary tried without success early this year to per-
suade political leaders that an extension of Su-
I In the National As- nay's term would be the best solution to the
sembly, where the con- presidential problem
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ir > ,Now that the United Nations Security Coun-
cil meeting is over, Panamanian leaders will be
trying to measure its impact on US attitudes
toward a canal settlement. At the same time, they
will be seeking ways to convert the abstract ex-
pressions of support they received into bargaining
chips.)
)Panama got broad support from Communist
and Third World delegations at the meeting, and
as a result insisted on a stronger resolution on the
Panama Canal than could be accepted by Wash-
ington. The support received at the meeting will
encourage Panamanian moves toward the estab-
lishment of relations with a number of these
countries. Relations with Algeria, Libya, Bulgaria,
Guyana, and Guinea were announced recently,
and formal ties with Cuba, the Soviet Union,
China, and East Germany are under considera-
tion. Final decisions are likely to wait until after a
full evaluation of the impact of the Security
Council meeting and a re-examination of the bid-
ding in the canal talks.)
)It will quickly be apparent to Panamanians
of all persuasions that they cannot shift to a
non-aligned international position without jeop-
ardizing US aid, a major source of funds for the
public expenditures that have come to charac-
terize the economy since Torrijos took overjfFor-
eign Minister Tack denounced the motives behind
US economic assistance but there apparently has
been little thought about the possible conse-
quences of a cutback in that aid. The search for
alternate sources of aid may come to dominate
Panama's budding relationships.)
/Although the Security Council meeting was
not all that he hoped, Torrijos is still a believer in
pressure tactics against the US. Torrijos has pub-
licly promised to obey last October's National
Assembly resolution recommending that he refuse
to accept the canal annuity, though the payment
in February went through. He could also use the
resolution to open a legal assault on the 1903
treaty in the World Court)i'Foreign Ministry of-~
ficials have been checking with the World Court-
to which Panamanians are unusually partial
because one of their most distinguished jurists
once served on it-and have been advised not to
renounce the treaty unilaterally. Appeals to other
international bodies such as the OAS or theUN
General Assembly would also serve to keep the
ARGENTINA: THE MORNING AFTER
The Peronists' efforts to heal old political
wou ds following the election last week have
been well received by all but their most impla-
,,,cable political enemies. The armed forces are
seeking ways to work with President-elect
1Campora, although they also seek to intensify
inherent differences within the Peronist camp.
Most Argentines are taking the Peronist triumph
more or less in stride, but the Brazilians are quite
concerned over what it means for them./
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Colombia: Guerrilla Operational Areas
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National Liberation Army (ELN)
People's Liberation Army (EPL)
Revolutionary Armed Forces
of Colombia (FARC)
VENEZUELA
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While Argentines appear to be taking the
Peronist victory with relative equanimity, their
neighbors to the north are openly worried. The
Peronists have warned that they will not accept
the agreement made with Brazil by the Lanusse
government giving up Argentina's demand for
prior consultation on proposed hydroelectric
projects on rivers that flow out of Brazil to Ar-
gentina. The Brazilians intend to go ahead any-
way, but foresee nothing but problems from the
Campora government on this matter.:
The Peronist victory in Argentina has also
added to Brazilian fears that the Spanish-speaking
nations of South America will cooperate more
closely in an effort to isolate Brazil. Peronist
campaign statements give some substance to
Brazilian fears, and cooler relations are probable
once Campora is inaugurated. If the Campora
government tries to play the role of a Latin Amer-;
ican leader, however, Argentina's other neighbors,
including Chile and Peru, will immediately be-
come as suspicious of Argentina's intentions as
the now are of Brazil's.
the field are suffering as a result. The guerrillas
/// [The National Liberation Army's urban sup-
port network has been decimated by the security
forces, and the group's 250 to 300 guerrillas in
have managed to build up their depleted treasury
by kidnaping wealthy ranchers and holding them
for ransom. The guerrillas have been less success-
ful in acquiring supplies from isolated police and
army posts. The reduced circumstances of the
insurgents have caused them to take risks that
have led to the death or capture of several promi-
nent leaders. Morale is likely to suffer further as
captured guerrillas are brought to trial to foster
the government's law-and-order image before the
presidential election in April 1974.'
/:/- LAs the fortunes of the National Liberation
Army have waned, the Revolutionary Armed
Forces of Colombia appears to have abandoned
the lengthy "training phase" imposed by the legal
Communist Party, nominally its parent organiza-
tion. The pro-Soviet guerrillas not only show a
willingness to fill the vacuum left by their Castro-
ite counterparts, but they also show an interest in
overcoming long-standing ideological differences
by working closely-and in a few cases joining
,;_forces-with militants of other groups. In this and
other aspects of its renewed activity, the Revolu-
tionary Armed Forces is in a strong position. It is
supported by a legal political party, and many
small rural areas used as base camps are nearly
devoid of central government influence. These
guerrillas, numbering up to 400, are well
equipped and organized
fThe security forces are not likely to take on
the Revolutionary Armed Forces as a whole al-
though individual members or small groups may
suffer if they venture into the cities or misjudge
their ability to raid a security forces installation.
i Alj Guerrilla groups are showing remarkable re- (,1 frhe pro-Peking People's Liberation Army
siliency despite strong government counter- has far less potential than the pro-Moscow group
insurgency measures. While the military and po- but both have taken advantage of the govern-
lice forces have been concentrating since mid- ment's preoccupation with the National Libera-
summer on the pro-Havana National Liberation 03tion Army. The pro-Peking group has some 50 to
Army, the pro-Moscow Revolutionary Armed 75 active guerrillas, but they are disorganized and
Forces of Colombia has emerged from years of poorly armed and would be a relatively easy tar-
inactivity. Even the minuscule, poorly organized' yget if the government decides to seek additional
pro-Peking People's Liberation Army has been victories over the guerrillas during the election
active recently.) campaign.
SECRET
25X1
Approved For Release 2008/06/12 : CIA-RDP79-00927A010200010001-9
 Approved For Release 2008/06/12 : CIA-RDP79-00927A010200010001-9
Secrt c
Secret
Approved For Release 2008/06/12 : CIA-RDP79-00927A010200010001-9