WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A010700010001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 27
• Document Creation Date: December 21, 2016
• Document Release Date: March 19, 2008
• Sequence Number: 1
• Publication Date: January 18, 1974
• Content Type: SUMMARY

Approved For Release 2008/03/19: CIA-RDP79-00927A010700010001-4 .
Weekly Summary
State Dept. review completed
Secret
Secret
18 January 1974
No. 0003/74
Copy N?_ 58
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r.r
s and analyzes signif-
noon an
fed with or
ared
ice of Strategic
I Technology.
lent and there-
-e listed in the
ins classified information
of security of the United States, within
and 794, of the US
revelation of its con
sized person is prohibited by
CONTENTS (January 18,1974)
3
USSR: Solzhenitsyn; Brezhnev to Cuba;
Equipment Purchases
5
Communist Propagandists Meet
6
Yugoslavia: University Defiance
6
UK: Deadlock Continues
7
The Nine Consult
EAST ASIA
PACIFIC
8
Italy: The Politics of Divorce
9
Vietnam: Tet; Amending the
Constitution
9
Cambodia: Military Balance Sheet
10
Thailand: Student Protests
11
Japan - Southeast Asia: Tanaka's Tour
MIDDLE EAST
AFRICA
12
China: Old New Face at the Top
13
Tunisia-Libya: Merger Collapses
15
Portuguese Africa: Insurgents
WESTERN
HEMISPHERE
16
Turkey: Finally a Government
17
Chile: Making Haste Slowly
17
Guatemala: Election Prospects
18
Venezuela: Oil and Nationalization
18
Argentina: Labor Problems Brewing
19
Brazil: Geisel Elected
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THE MIDDLE EAST
I n Egypt
1,5 Whroughout Secretary Kissinger's week of
negotiations, the Cairo press has sounded an
optimistic note about prospects for a satisfactory
disengagement agreement] The agreement an-
15- nounced on January 17 will now allow the re-
sumption of domestic and diplomatic activity
that had been held in abeyance while the ex-
tended negotiations proceeded~President Sadat,
for instance, has apparently been awaiting the
conclusion of this round of negotiations before
moving ahead with an impending cabinet reorgan-
ization, and Foreign Minister Fahmi has had to
postpone a trip to Moscow originally scheduled to
begin last weekend
,S (adat may now also visit several neighboring
states in an effort to bring other Arab leaders up
to date on the status of negotiations and, more
importantly, to coordinate the next round with
Syria][Press sources have indicated that Syria,
3 Saudi Arabia, and Kuwait will be on Sadat's
itinerary, and President Bourguiba has told the
US Embassy that Tunisia will be included as well
In Syria
4 Syria threatened to sever diplomatic rela-
tions with Cairo on Thursday after the announce-
ment of the Israeli-Egyptian disengagement agree-
ment, according to a press report from Damascus.
If the report is true, it indicates President Asad
was pulled up short by hard-liners in the military
and Baath partywho strongly oppose negotiations
with Israel.
Asad's own position may have been seriously
weakened by this turn of events. Only a few days
ago, the Syrian President seemed ready to enter
negotiations. Asad was said to have told a special
conclave of Syrian political party leaders that
Syria would attend the Geneva conference. To
underscore the decision, he reportedly named the
delegation and said he intended to reshuffle the
cabinet. Most prominent among those who had
been rumored for replacement was Foreign Min-
ister Khaddam, a hard-liner who reportedly had
threatened to resign rather than represent Syria at
the peace talks.
In Israel
/() rM rs. Meir's caretaker government came
under stronger attack from domestic critics for
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what they saw as its readiness to make unilateral
concessions in the negotiations with Egypt.
The rightist Likud bloc, emboldened by its
recent electoral gains, charged the government
with conducting the talks through Secretary
Kissinger as if Israel had no choice but to "surren-
der in stages." Likud claimed the talks were lead-
ing only to a unilateral withdrawal endangering
Israeli security, and demanded that the agenda for
the opening session of the newly elected Knesset
on January 21 include a discussion of the govern-
ment's proposals. Mrs. Meir agreed on January 16
to make a statement to the Knesset on the separa-
tion of forces negotiations and on the country's
security condition.
The Israeli press, too, expressed misgivings,
alleging that even US security guarantees might be
insufficient to compensate Tel Aviv for withdraw-
ing from the Suez Canal without an agreement
from Cairo to thin its forces on the canal's east
bank.
Meanwhile, efforts to form a new coalition
government moved ahead. According to press re-
ports, Prime Minister Meir's Labor Alignment
hopes to conclude the negotiations by the end of
next week. The major stumbling block apparently
is reconciling the divergent views on religious
matters held by the Alignment's prospective coali-
tion partners-the religious parties and the lib-
erals-rather than the peace negotiations with the
Arabs.
The Alignment gained a measure of addi-
tional weight in the complex Israeli political equa-
tion when two Arab parties that had previously
been only affiliated with the Alignment formally
merged with it. Although these parties would
have continued in the coalition, their entry raises
the Alignment's Knesset total to 54 compared
with 39 for the opposition Likud bloc.
In addition, three Knesset members who
were elected under the Civil Rights list have
agreed to form a parliamentary bloc with the
Alignment's liberal coalition partner, the Inde-
pendent Liberal Party. This enhances the liberals'
bargaining power in the negotiations for a new
coalition, particularly with regard to the conserva-
tive National Religious Party.
I S [As Egypt and Israel this week pursued a
breakthrough on the disengagement problem, and
cease-fire violations continued on both fronts. On
one occasion, sporadic firing on the Golan
Heights escalated into an artillery duel in which
one Israeli soldier was killed. The Israelis also at
least once shelled fedayeen positions inside
Lebanon)
)!~ rOn the Suez front, UN observers reported
violations along the entire length of the canal.
Limited tank and artillery exchanges were re-
ported in both the northern and central sectors:]
0.,/ In response to Egyptian cease-fire violations,
Isra li troops halted several of the daily supply
convoys to Suez and the encircled Egyptian Third
Army. Defense Minister Dayan had publicly
warned on January 14 that Israel might stop the
convoys if the cease-fire violations continued.
Israel has suffered over 150 casualties in the fight-
ing on the Egyptian and Syrian fronts since the
October cease-fire went into effect.1
srael, meanwhile, placed new commanders
in charge of its forces on both the Syrian and
Egyptian fronts. Major General Gur, chief of the
Israeli military negotiating team in Geneva,
assumed command of the northern front. Major
General Adan, who led one of the armored divi-
sions that broke through to the west bank of the
Suez Canal, took over the southern command.
Both are highly capable professionals. It is unclear
if Gur will retain his post on the Geneva nego-
tiating team.
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1? rThe official campaign against dissident
author Aleksandr Solzhenitsyn gained impetus
last week. The central press finally took up the
cudgels against him, more than two weeks after
the publication in Paris of Gulag Archipelago.]
laj
On January 13, Pravda became the first
r newspaper to weigh in, printing a lengthy
signed article attacking Solzhenitsyn as a
"slanderer." Later in the week, Literaturnaya
Gazeta, the journal of the Writer's Union, which
expelled Solzhenitsyn in 1969, featured a similar
major attack. These charges were echoed by other
newspapers and the broadcast medial
:,20 Perhaps in an effort to counter the widely
heard Western radio broadcasts, which have given
heavy coverage to Solzhenitsyn and his latest
book, the Soviet campaign focused on charges
likely to arouse domestic sentiment against him.
He was accused of harboring pro-Nazi and pro-
collaborationist views, of denigrating the wartime
sacrifices of the Soviet people, of "consciously"
aiding the enemies of detente, and of harboring a
"pathological hatred" of all things Soviet.T
17
,21() Despite the increasing venom of the attacks,
the Soviets have yet to take, or even threaten,
direct action against Solzhenitsyn. There have
been no specific indications that he will be held
criminally liable under the provisions of the new
Soviet copyright legislation, even though he has
been accused of sending his books out of the
country illegally.
`, %IGL\JaiLUI J,LLIIGIIIL-,till! 1[lllllly
01 Rhe Soviets probably are restrained from
taking any such action by fear that a trial or
fl imprisonment of the prestigious author could
\7
have an adverse impact on detente. The media
have indirectly hinted as much, and a Pravda
deputy editor made the point openly in a conver-
sation with US Embassy officers last week`
i9 VMoscow probably sees the best solution to
its dilemma in Solzhenitsyn's departure into for-
eign exile. This was the view of the Pravda deputy
editor, who claimed that Solzhenitsyn would
soon lose his political significance once out of the
Soviet Union. Another Soviet official publicly
asserted that Solzhenitsyn need not fear being
held back if he were to try to settle abroadl
1,8 Solzhenitsyn, however, may not cooperate.
He Fas adamantly refused to leave the USSR for
any reason. The Soviet authorities might never-
theless attempt to induce him to do so by covert
threats and intimidation, perhaps directed against
his wife and children. According to Western press
reports, Solzhenitsyn's wife has already received
innumerable calls from an indignant "public."
Solzhenitsyn is not permitted the right of per-
manent residence with his family in Moscow, a
fact that might amplify his fears for their
safety
BREZHNEV VISIT TO CUBA
( o So A, C11 Fs)
General Secretary Brezhnev will soon arrive
in Havana on his first visit. Plans for the visit were
announced not long after Brezhnev returned from
the US last summer, a sign that he saw the trip as
a way to demonstrate that he is not neglecting his
Communist allies.
The occasion will call for some revolutionary
rhetoric, but Brezhnev's private comments to the
Cubans will probably focus on the benefits of
peaceful coexistence. This will not sit well with
Castro, who sees dangers for his regime in Soviet-
US detente.
Despite the generally good state of its rela-
tions with the USSR, Havana is not enthusiastic
about Moscow's pursuit of detente with the US.
The Cuban leader continues to believe he cannot
afford to ease his own anti-US stance. Castro still
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points to the "threat" of US aggression in order
to mobilize Cubans in support of regime policies,
and he has used the economic "blockade" to
explain away many of his failures.
Despite this, Brezhnev may take the line that
Cuba would profit from a less intransigent atti-
tude toward the US. The USSR, which still under-
writes the Cuban economy to the tune of more
than $1 million a day, would benefit from any
shift in Cuban political attitudes that brought an
improvement in the island's economic position.
Brezhnev, however, is not likely to press this
point so strongly as to alienate the Cuban leader.
The Soviets will be eager to obtain Castro's
support for another world communist conference.
Preparations are already under way for a series of
regional meetings of Communist parties, and
there are reports that representatives of several
Latin American parties will meet in Havana dur-
ing Brezhnev's visit.
Economic and military aid will certainly be
discussed during Brezhnev's visit. Moscow's
extensive use of Cuban military facilities could
give Castro leverage in seeking more Soviet arms,
but there has been no sign yet that major new
agreements will be made.
EQUIPMENT ORDERS,UP IN 1973]
NCSOUnCrf/
The USSR ordere a record $2.5 billion
worth of machinery and equipment from the
West in 1973-60 percent more than in 1972.
This level of orders in the face of an all-time high
currency deficit reflected the strength of Soviet
demand for advanced Western equipment as well
as Moscow's better access to new sources of
credit-notably in the US.
US firms received orders for $435 million
worth of machinery and equipment, excluding
several large orders awarded to US subsidiaries in
Europe. Italian sales increased the most, thanks to
a $500-million contract for chemical plants. West
Germany and France remained close competitors
with the US for Soviet business, while Japan,
Sweden, and the UK lagged well behind.
Equipment for the chemical industry ac-
counted for two thirds of the increase from 1972
to 1973. Orders for metallurgical and consumer
goods equipment also rose steeply. Much of the
automotive equipment (second in total value) will
be installed in the giant Kama truck plant. Since
most equipment imports are connected with
major plans for capital expansion, deliveries will
stretch out over several years.
To finance the machinery and equipment,
the USSR has insisted on long-term credits at low
interest rates, guaranteed by Western govern-
ments. Italy extended a $600-million line of
credit early in 1973 and France $350 million in
July. By the end of 1973, the US Export-Import
Bank had given preliminary or final approval for
loans totaling more than $300 million. An equal
amount is to be loaned by private US banks.
Several major projects remain in the discus-
sion stage, including another truck plant, several
chemical plants, appliance factories, tire plants,
and a commercial aircraft plant. Moscow's pur-
chases of foreign equipment thus will continue at
a high level in 1974.
Soviet Machinery and Equipment Orders, by Type
Million US $
Type
1972
1973
Chemical
250
875
Motor vehicle manufacturing
285
485
Metallurgy and metalworking
55
330
Consumer goods manufacturing
10
190
Petroleum refining and pipeline
220
160
Timber and wood processing
110
135
Ships and marine
110
95
Electronics
50
50
Textiles
45
35
Food processing
15
10
Mining and construction
110
5
Other
320
160
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COMMUNIST PROPAGANDISTS MEET
at,.`.. 'Moscow used the meeting of party propagan-
dists in Prague last week to take another step
toward convening a world conference of Commu-
nist parties. The Kremlin's interest in seizing the
propaganda initiative is shown by the effort it put
forth to persuade representatives of 67 Commu-
nist and workers' parties-minus Yugoslavia and
the ruling Asian parties-to come to Prague as
well as by the fact that the meeting closely fol-
lows last month's session of top ideologists in
Moscowa
2i (Soviet speakers, as is often the case, left it to
their loyal allies to call for another world confer-
ence and to criticize the Chinese party. Soviet
party secretary Ponomarev, the highest ranking
delegate at the meeting, limited himself to assert-
jng that the "struggle" for detente and the "crisis
of capitalism"-which he claimed has been made
much more acute by the economic and social
dislocations arising from the energy crisis-create
new opportunities to propagandize "real" social-
ism
[These remarks echo Brezhnev's recent em-
phasis on countering the influence of Western
ideas on the Soviet and East European peoples
Wenceslas Square in Prague
Ponomarev, who is responsible for relations with z, Bilak's speech further differed from Pono-
non-ruling Communist and workers' parties, ex- mare's in its harsh condemnation of Peking, the
horted the delegates to join in the effort. He strongest such declaration recently heard from
lauded the Moscow conference of Communist Eastern Europe. Bilak claimed that "the ultra-
parties in 1969, but he only hinted that another leftist Maoist leadership has departed for good
world meeting would be appropriate by alleging from Marxist-Leninist positions and stands on an
an increasing interest in multilateral meetings of anti-Soviet and anti-socialist platform.'
Communist parties and by citing a need for closer
coordination of policies]
2-I [The communique summarizing the Prague
contrast, Czechoslovak party secretary talks failed, however, to mention either a future
asil Bilak, a hide-bound conservative, pointedly world meeting or the problem posed by Peking.
called on the delegates to prepare for a future Omission of these contentious points probably
meeting. His call, the first by any member of the reflects Moscow's desire to avoid antagonizing
Czechoslovak hierarchy, is the third such sum-)11.some parties. Romanian participants, either alone
mons to come out of an East European party in l or together with other conferees, almost certainly
recent weeks. The Hungarian and Bulgarian party opposed any reference to China in the commu-
chiefs urged a similar course last month.` nique. 25X1
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25' 'The Yugoslav leadership is moving to rein in assigning all students to military training camps
Belgrade University professors, who are among for three weeks each year; previously students in
the few remaining outspoken critics of regime higher education were issued blanket defer-
policies. If mishandled, however, the party's de- ment.
) 7termined effort to tighten control over the aca-
demic community could heighten unrest at the
universities
2 fThe issue at hand is Tito's two-year-old de- UK: DEADLOCK CONTINUES
mdnd for the firing of ultra-liberal professors at
Belgrade University. Previous party efforts to oust 29 The impasse between the government and
the professors resulted in a stalemate, as the the miners continues, but Prime Minister Heath
university has a tradition of autonomy and the-,,,) apparently is still undecided about calling an early
Serb party has been reluctant to use its muscle on' election. Rumors of such a move have been
campus. At the end of 1973? however, the federal rampant for several weeks. Heath's advisers, as
party prodded local officials to begin an all-out well as the press, are urging him to hold one next
drive to purge eight liberal philosophy professors. month to settle the uncertainty
25- The local party is now on the verge of a,q ['Early this week, Heath refused to accept a
ousting the professors, but preparations for the proposal by the Trades Union Congress that
purge have generated unrest among some stu- 'lam called for the government to grant the miners pay
dents, whose displeasure cannot be taken lightly.. 2-increases beyond the government counterinflation
In 1968, for example, student riots seriously guidelines as a "special case." In return, the Con-
embarrassed the regime, and any recurrence this gress offered to restrain the wage demands of
d,'7year would be particularly damaging in view of other unions. The government's refusal was based
scheduled national elections and a party congress. largely on the Congress' past inability to control
As in 1968, economic difficulties coupled with its 10 million members and a suspicion that grow-
the party's heavy-handed tactics could anger and ing union militancy precludes any binding re-
unify the students] straintsi
.L [According to the US Consulate in Zagreb, 3) [Labor Party leader Harold Wilson, who
the Belgrade affair is threatening to spread to would prefer to avoid a general election at this
students in the Croat capital. On January 9, stu- time because of internal party problems, asked
dents at Zagreb University expressed their sup-32-'Heath to meet again with the labor leaders. The
port for the eight Belgrade professors. Zagreb Prime Minister may do so before he makes a
authorities called for a show of police strength decision on an election because he is anxious to
that apparently succeeded in cowing the students. show the British electorate that he has explored
Later in the week, party officials at the city's
university charged the dissident students with
links to nationalists whose! extremism in 1971
brought on wholesale purges of popular Croat
leaders.1
-)' This failure, coupled with the exceedingly
bad press Qadhafi has received as a result of his
opposition to the Geneva talks and his support
for Arab terrorists, will have a strong personal
impact on the Libyan leader, possibly leading to
another round of resignation threats. At this25X1
point, however, Qadhafi apparently intends to
accept Tunisia's rebuff passively while he strug-
gles to regain his footing.
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SLUKI I
Benguela.Lobito
Cassirga~
Walvis Bay
(Rep, of S. At.)
. cdborr
r 9assq
P '
MBAB
M Eit
-~ #tqw
Port-Fra
Zia
SAKrA.
Angola
(Port.)
Villa Serpa'
Pinto
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Portuguese Africa
BETTER PROSPECTS FOR INSURGENTS
[The Portuguese are growing uneasy over
what 1974 will bring in the long-stalemated in-
surgencies in their three African territories. In
fact, rebel forces may well manage to increase
pressure on the Portuguese, although probably
not enough to threaten seriously Lisbon's con-
tinued presence in Africa.]
The main pressure probably will come in
Portuguese Guinea, long the most serious insurg-
ency problem for Lisbon. Last year, the rebels
there added a new political dimension to their
decade-old guerrilla campaign when they pro-
claimed the province as the state of "Guinea-
Bissau." Although their proclamation did not
weaken Portuguese military and political control,
it won diplomatic recognition from some 60
Communist, African, and other Third World
states and gained admission for Guinea-Bissau to
the Organization of African Unity and the United
Nations Food and Agricultural Organization. A
campaign by supporters of the rebel state for its
admittance to the UN General Assembly was sus-
pended in favor of seeking western support and
representation in other international organiza-
tions. The campaign is likely to be resumed in the
next assembly session.`
3) `1n the interim, the insurgents probably will
continue their military operations, which had
been steadily increasing prior to the rebels' politi-
cal offensive last fall. They may be planning a
major campaign to coincide with the first anniver-
sary on January 21 of the assassination of their
long-time leader, Amilcar Cabrall
tuguese rail links, including recent attacks on rail
lines into Malawi and Rhodesia that heretofore
had been left untouched.1
gal f n contrast, the level of insurgency in Angola
hbeen minuscule for more than a year. Rebel
forces based in Zambia have been ineffectual be-
cause of serious internal frictions that have vir-
tually paralyzed their military operations. A rival
insurgent group based in Zaire also has had in-
ternal disputes, but has been held together largely
by Zaire President Mobutu's support and occa-
sional intervention. At the same time, however,
Mobutu has been restraining the group's military
operations into Angola because of his dependence
41 on Portuguese facilities to transport Zairian
ycopperj
REBEL FORCES MAY WELL MANAGE TO
INCREASE PRESSURE ON THE PORTU-
GUESE, BUT PROBABLY NOT ENOUGH
TO THREATEN SERIOUSLY LISBON'S
CONTINUED PRESENCE IN AFRICA.
ents. 25X1
Zairian troops recently provided -Cover at
25X1
the border for rebels returning from a foray into
Angola-a new development viewed with concern
by the Portuguese. The rebels have also been
promised support from China, to be channeled
through Mobutu, President Nyerere of Tanzania,
and President Kaunda of Zambia.7
e ! his restraint may be about to be lifted.
Mob tu's army is supporting a stepped-up recruit-
ment inin drive by the Angolan insurg-
`1
J'j Cln Mozambique there has been a sudden
increase in rebel activity in recent weeks, includ-
y2jng a series of unusually heavy attacks on fortified
villages in Tete District, where a giant hydro-
electric project is under construction. The in-
surgents long have wanted to disrupt the govern-
ment's resettlement plan, which forms the base
for its development of the district. The insurgents
also have increased mining operations against Por-
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P VThge Arab oil embargo is further com-
ica in Lisbon's problems in Africa, where
much non-essential military travel has had to be
curtailed. A broad upsurge in guerrilla activity
could seriously strain Portuguese stocks. This has
led Lisbon to fear an insurgent strike against the
Angolan exclave of Cabinda, which accounts for a
I a r ge share of , Portuqal's petroleum produc-
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TURKEY: FINALLY A GOVERNMENT
1'1
90 `The left-of-center Republican Peoples Party, alliancejrln the hard bargaining that preceded the
which won a plurality in the inconclusive par'ia- announcement this week of a coalition a ree-
mentary election last October, and the Islam- ment, Ecevit a arentl g
y yielded his claim on the
oriented National Salvation Party finally got interior post, which repo
rtedly will be offered to
together this week on terms for a governing coali- a retired, non-party general. The increasing
tion. The political stalemate that has persisted gOprospect of new elections if a government could
since the election has thus been broken, but the ` not be formed helped modify attitudes within the
prospects for the government's longevity are not Salvation Party.1
bright
The coalition will be headed by Prime Minis-
ter - designate Bulent Ecevit, leader of the
Republican Peoples Party, who had failed in an
earlier attempt to form a government with the
National Salvation Party. The two parties then
were unable to agree on which would get the key
Interior Ministry, and many of the conservative
Salvation Party deputies had refused to accept the
The army, which sees itself as the guardian
of AAaturk's secularist and modernizing reforms,
does not look with favor upon the traditionalist
Salvation Party, and senior officers are also con-
cerned about Ecevit's leftist tendencies. At
present, the military appears willing to give the
new government a chance, but the officers will be
monitoring its activities very closely
The new coalition has a fragile majority of
only eight seats in the National Assembly and is
in a minority in the Senate, which can delay
legislation. Coalition decisions will be com-
plicated by the ideological gulf between the two
parties. Ecevit himself is untested as a na-
tional leader-particularly in foreign affairs. He
will probably concentrate first on resolving do-
mestic problems and on strengthening his popular
and parliamentary support. A key issue will be
the fulfillment of Ecevit's campaign pledge of
amnesty for political prisoners. The armed forces
would be displeased by large-scale reversals of the
decisions taken by martial law courts over the
past three yearsl
c = No major departure from Turkey's basic pro-
Western foreign policy is expected. Ecevit's elec-
tion platform, however, called for a more in-
dependent approach to NATO and to defense
issues, reconsideration of the ban on opium
poppy cultivation, and nationalization of petro-
leum resources. For its part, the National Salva-
tion Party, which has reportedly received finan-
cial backing from Libya and Saudi Arabia, will
press for a more pro-Arab policy.
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NOle SECRET I%w
(7 [Opponents of the junta government suc-
ceeded in a few relatively minor acts of sabotage
over the recent holiday period, but several at-
tempted attacks on government installations were
thwarted by security forces.?
0 (The opposition's failure to pull off a spectac-
ular operation in Chile was partially offset by the
sudden appearance in Havana of Carlos Altamir-
ano, the Socialist Party leader who heads the
junta's list of most-wanted fugitives. In a press
conference soon after his arrival, however, Alta-
mirano seemed to underscore the left's lack of
readiness for a concerted guerrilla or terrorist
campaign when he declared that, for now at least,
"adventurous operations" would be counterpro-
ductive .j
110 (Disagreements over policy matters, inter-
service frictions, and personal rivalries have been
sparking controversy within the regime. At the
junta level, there reportedly has been disagree-
ment over when the presidency should be rotated.
Army commander and current junta president
Pinochet recently declared that the presidency
will not be rotated, but it was unclear whether he
meant now, or ever. In any case, his statement
probably was not the final word on the issue.)
\Some progress is being made despite these
Ypreoccupations. Marking his fourth month in of-
fice on January 11, Pinochet announced the crea-
tion of a "social fund" to be used to upgrade
slum living conditions. Present payroll taxes will
be consolidated, raised slightly, and applied to the
fund. Pinochet also announced that the govern-
ment plans to get tough with merchants who
persist in hoarding and price-gouging. Jail sen-
tences will replace fines for these offenses.
these officials favor acting to prevent Rios' elec-
tion, possibly by rigging the vote, postponing the
election, or carrying out a pre-emptive coupT
~% (President Arana does not yet appear con-
vinced that any of these actions will be necessary.
If he should decide on a coup attempt, his ability
to carry it off would depend heavily on the atti-
tude of the army; presently, the middle and lower
ranks are opposed to intervening in the political
process. Blatant vote fraud would be difficult to
hide, while a postponement of the elections
would require a plausible pretext, such as serious
public disorder. Arana probably still believes that
his strategy of dividing the leftists and uniting the
moderate and rightist vote behind Laugerud will
produce the margin of victoryl
c43 [Still, pressures on Arana are mounting. Gov-
ernment campaign managers are disturbed by re-
ports that Rios' National Opposition Front will
soon pick up the substantial centrist and rightist
support of two presently unaffiliated opposition
groupings. Support by these groups-one led by a
popular former chief of state, Enrique Peralta,
and the other a faction of the moderate Revo-
lutionary Party-would help Rios shed his leftist
image in the important professional and business
voting bloc.1
CA strengthened opposition is not the only
concern of the government.
25X1
25X1
~ome cabi-
net ministers seem convinced Laugerud will lose,
and they appear more concerned about making
plans for a future outside the government.l
6) I (A growing number of key government and
military officials, including General Laugerud, the
government's nominee, believe that he will lose
the presidential election on March 3 to the leftist
opposition candidate, General Rios. Some of
I I (The government camp is also worried about
the opinion polls. While they show Laugerud lead-
ing Rios by ten percentage points, they also indi-
cate that nearly half of the electorate is unde-
cided. Officials fear that Rios will win over many
q,2of the undecided by blaming the government for 25X1
the rising cost of living and by dwelling on gov-
ernment failures to stem a growing rate of
crime.
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Y Ot?
VENEZUELA: OIL AND NATIONALIZATION
i,r,(;) [Outgoing President Caldera and President- is certain to examine the prospects for a carefully
elect Perez share the view that Venezuela must negotiated move toward total petroleum nation-
capitalize on its petroleum resources during the alization during his 1974-1979 tenure.
The latest move in this direction is the ord r
e
energy crisis
list week that, beginning on April 8, private oil
companies must deliver to the government an
estimated 100,000 barrels of crude oil daily as
part of their royalty payments. This oil may be
used to improve Venezuela's already favorable
world trade position, but much of it is likely to,
he sold to other Latin American countries at1
preferential prices. Venezuela is finding it increas-
ingly difficult to resist using oil in its pursuit of a
leadership role in Latin America, and several Cen-
tral American and Caribbean island nations have
been especially hard hit by the energy crisis`(
There is also rising left-wing pressure for an
/?i [A serious labor conflict in the provincial
r capital of Cordoba is pitting left- and right-wing
,,..-trade union groups against each other in what
could become a major test for President Peron's
three-month-old government. Violence has be-
come endemic in this troublesome interior city,
the country's second largest industrial center and
a focal point of the long-simmering dispute be-
tween warring factions of Peron's disparate move-
ment]
immediate nationalization of the country's petro- (vim The latest confrontation grew out of a bus
leum, but this is a remote possibility although I driv rs' strike for wage increases. A settlement
Caldera has announced, and Perez has agreed, thatt& c was negotiated to end the five-day strike, which
nationalization is likely to occur before the sched- paralyzed the city and led to violence, but this
uled date in 1983. Caldera may covertly encour- )c, agreement shows little sign of sticking. In spite of
age leftists to initiate the lengthy nationalization settlement of this issue, opposition has intensified
process during his remaining two months in office between "orthodox" followers of Peron's hand-
in order to leave his successor with the resultirig\c`-? picked national labor leadership in Buenos Aires
political and economic problems. Nationalization
would require congressional action, however, and
Congress is not scheduled to reconvene until a
few days before the inauguration in March`
`T IOne of Caldera's principal ambitions is to
leave office on a nationalistic note. This week,
Venezuela made clear its intention to remain ii-
dependent in setting its oil prices. Thus, at pres-
ent and probably for the remainder of the Cal?.
dera administration, political factors will domi-
nate Venezuela's relations with its petroleum cusf
tom ers.j
j;j)JAlthough Perez is considered even more
nationalistic than Caldera, the new President may
not be able to sustain the present politically mo-
tivated pricing policy. On oil matters, he w'II
probably appoint competent technicians to policy
positions and rely heavily on their advice. He also
and a coterie of radical left-wing Peronists and
Trotskyists who dominate the regional labor ap-
paratus and are supported by some high-level pro-
vincial authorities. Adding to the strains, left-wing
Peronist guerrillas have issued militant appeals to
workers to defy the national labor organization
and take to the streets if necessary to defend their
rightsI
t o I The stage now is set for more trouble, and
both sides seem to be headed for a showdown.
Although Peron has exercised caution so far in
dealing with the potentially explosive political
problem in Cordoba, he apparently believes that
he cannot make concessions without undermining
his economic policies and jeopardizing his own
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or o a is a stronghold of the Marxist People's
Revolutionary Army, which has taken credit for
many of the kidnapings that have plagued the
Peronist government. Peron's patience with the
terrorists is probably exhausted, increasing the
chance that he will use the Cordoba situation as
an opportunity to try for a badly needed victory
against the extremists.]
1t33 lThe prospects for confrontation are likely to
increase as Cordoba's trade union organization
undertakes new leadership elections on January
Peron's 'orthodox' ollow-
ers in t e or o a unions actually appear to be in
a strong position to gain the upper hand, but
there is a distinct possibility that the left will not
be unseated without a fight. In that case, there is
a good chance that the Cordoba unions will lose
their legal right to exist under provisions of a
tough new labor law":
I DI JPeron's scheme carries a serious risk that it
might backfire and cause widespread reaction
among left-wing Peronists elsewhere in the coun-
jo try. Disapproval would be strongest among youth,
and this could trigger extensive defections from
the Peronist movement. Additionally, a worsening
of the Cordoba situation would be a further set-
back for Peron's national unity program and dam-
age the already shaky confidence of foreign in-
vestors alarmed by the continuation of terrorist-
inspired violence.
BRAZIL: GEISEL ELECTED
(The election bn J nuary 15 of retired Gen-
eral Ernesto Geisel as the next president means
that Brazil's policies will remain basically the
same. Geisel, named last June by President Medici
as his successor, was officially ratified by a special
electoral college convened in Brasilia. There was
never any doubt as to the outcome of the ballot-
ing, since the government party had an over-
whelming majority.
President Medici and Ernesto Geisel
Geisel, who will take office on March 15, is
the fourth in a line of army generals to reach the
presidency since the military took power in 1964.
Like Medici, Geisel is expected to give top prior-
ity to economic development, while stressing na-
tional security and a growing Brazilian role in
world affairs-including an independent, though
not radically nationalistic, foreign policy.
At the same time, Geisel's style and the
composition of his administration will differ from
Medici's. Some Brazilian politicians feel he is basi-
cally more liberal than Medici and will be dis-
posed to permit a gradual "democratic opening"
that would restore some political activity. In addi-
tion, some local observers view Geisel as some-
what more nationalistic than Medici and therefore
likely to be more cautious in his attitude toward
foreign investments.
The current presidential succession process,
which is unfolding according to plan, lacks the
atmosphere of tension that accompanied other
successions since 1964, primarily because Medici
deals from a position of strength that his prede-
cessors did not enjoy. Under his administration,
economic growth has been strong and steady,
while urban terrorism has declined to virtually
nothing. Thus, Medici has the confidence of a 25X1
broad range of top officers, the sine qua non for
governing effectively in Brazil. Geisel apparently
will take office with a similar advantage.
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Preliminary reports from the Geneva meet-
ing of the Organization of Petroleum Exporting
Countries, which ended on January 9, indicate
that there will be no respite before April from the
high oil prices that went into effect on January 1.
The Iranians, who are largely responsible for
doubling the price, defended the increase as mak-
ing oil prices compatible with the cost of energy
from other sources. The Saudis, on the other
hand, believe that the price is too high and will
have disastrous effects on the world economy.
Most other producers are ambivalent-happily
looking forward to the inflow of wealth but also
fearing that the process they have put into mo-
tion may eventually rebound against them.
The OPEC leaders called for an early meet-
ing between major consumers and producers to
discuss prices and other problems. They also re-
solved to establish an institution to channel aid
from their oil revenues to the developing coun-
tries. They are less receptive to the developing
countries' demands for a two-tier price system
that would substantially lower the price of oil to
developing nations.
dependent on an Israeli commitment to total
withdrawal from occupied territories, that the
embargoes against the US and the Netherlands
will be dropped when a disengagement of Egyp-
tian and Israeli forces begins and that oil produc-
tion will increase in the near future. Rumors
persist, for example, that Saudi Arabia will unilat-
erally renounce the embargoes. Even if the Saudis
do not make a unilateral decision, however, the
embargoes and cutbacks may be abandoned-or
modified out of existence-at the next meeting of
Arab producers in Libya on February 14. Embar-
goes against Portugal, Rhodesia, and South Africa
may be retained, however, to please the Black
Africans.
The Arabs recognize that oil company diver-
sions have partially offset the embargoes, some-
times at the expense of countries that supposedly
were being favored. Moreover, the expansion of
the favored list to include such major consumers
as Japan and Belgium will make production in-
creases necessary. The Arabs' decision on Decem-
ber 25 to raise January production about 11
percent will bring the Arabs up to 17.4 million
barrels a day, some 15 percent below the pre-
crisis level.
Greater Supplies
There is increasing evidence, despite the
Arab position that termination of embargoes is
Impact on Importers
For consumers, cost problems have now
largely replaced supply problems. Increased oil
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prices will mean a $70-billion increase in 1974 oil
bills if, as seems likely, world oil exports approxi-
mate last year's and prices change little. Western
Europe will experience about a $33-billion in-
crease; Japan, $11 billion; and the US, almost $16
billion. Only a small part of this can be offset by
exports to the oil producers, by earnings from
transport services, or by remittances of oil com-
pany profits.
Soaring payments for oil threaten a massive
loss of purchasing power in the importing coun-
tries, equivalent to about 3 percent of gross na-
tional product in Western Europe and Japan. All
face severely reduced rates of economic growth-
perhaps even declining output-and increased un-
employment unless expansionary measures are
taken. The governments will be cautious in stimu-
lating demand, however, because of already high
rates of inflation and the uncertain impact of
energy shortages on productive capacity.
International Impact
Any attempts to redress deteriorating trade
balances-through import restraints or competi-
tive devaluation-could aggravate international
economic tensions. The energy problem has al-
ready eclipsed international trade and monetary
negotiations. Major governments will be hesitant
to move forward on reform issues until economic
prospects become clearer.
World financial markets should be able to
absorb the oil producers' new wealth if they con-
tinue to follow conservative investment policies.
Even so, the massive buildup of funds will be a
potentially destabilizing force in world exchange
and financial markets. The strengthened dollar
and the devalued Japanese yen stand witness fo
the effect of the oil crisis on exchange markets.
MONETARY DEVELOPMENTS
The Committee o Twenty, the group
charged by the International Monetary Fund with
negotiating monetary reform, meets in Rome this
week. It will focus on the effects of sharply
increased oil prices on the world monetary situa-
tion. The views of some nations were revealed at a
closed meeting of central bankers held in Basel
last week.
European bankers reportedly expressed deep
concern over the viability of existing exchange
rates. Most felt that the rates, once believed
worthy of defense, are now outdated because of
the impact of higher oil bills on each country's
balance of payments. The French representative
said that it is more important for the Europeans
to maintain the joint float than to support their
exchange rates against the dollar. A strengthening
dollar would, of course, improve Europe's com-
petitive position. The Europeans apparently are in
unanimous agreement that continued floating of
their currencies as a group is essential. Even Japan
has reluctantly accepted the necessity for floating
as an interim measure while stressing the need to
return ultimately to fixed rates.
West Germany, the only European nation
that has intervened heavily to hold down the
dollar's recent appreciation, expressed dis-
appointment that other European nations and the
US have not done more to maintain market sta-
bility. Bundesbank spokesmen claim that German
intervention would have been even greater if
efforts to stem the mark's decline had not begun
to strain the joint float by increasing the spread
between the mark and the French franc.
The bankers did not discuss basic monetary
reform in Basel, agreeing that a solution of cur-
rent problems is more urgent. Some attention will
be given to reform at the Rome meeting, how-
ever, which originally had been scheduled ex-
pressly for this purpose. A consensus may be
developing so that a few issues, such as an interna-
tional unit to replace gold as a standard of value
and the future role of the International Monetary
Fund, can be resolved in the near future. The
French-the primary opponent of many US pro-
posals-and perhaps the Germans have accepted
this view. Nevertheless, the July 31 deadline for a
draft agreement on over-all monetary reform can-
not be met.
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As for the money market, the dollar has
again begun to strengthen after its brief downturn
last week. Both sterling and the lira fell to new
lows. A decline in some German interest rates,
following the Bundesbank measure to ircrease
domestic liquidity, helped to weaken the mark.
The Bank of Japan sold $160 million on January
14 to hold the yen at 300 to the dollar.
The price of gold reached a record nigh of
$128 an ounce at mid-day on January 17 in
London. Unstable conditions on world money
markets have recently increased demand for gold,
and reduced Soviet sales have limited the supply.
Moscow made only small sales in October
and has sold practically no gold since then, indi-
Dollars per troy ounce
130
Renewed currency Two-tier gold
turmoil begins pact terminated
601 111 111111 11 111 111111111 1 1111 11111 111 11111 111111111 1
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
sss080 i -,n "Based on the afternoon fix in London on the last trading day in each week. 1973
SECRET
cating that its requirements for foreign exchange
have been temporarily satisfied. During the first
nine months of 1973, the Soviets sold about 300
tons of gold, compared with 160 tons in all of
1972. South Africa, the world's largest producer,
continued to sell gold from its reserves during the
last quarter of 1973 to meet its exchange needs.
Speculative demand for gold probably will
remain high in 1974 because the energy crisis
assures turbulent money markets. Demand for
commercial and dental use is not sensitive to price
changes and thus is likely to continue its slow
growth. Soviet gold sales probably will drop in
1974, given the expected improvement in the 25X1
USSR's hard-currency trade balance, but in-
creased South African offerin s could more than
offset the cut in Soviet sales.
London Free Market Gold Price*
II III
Jan 4151617
1974
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