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November 22, 1974
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Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 Secret Weekly Summary State Dept. review completed NAVY review completed. Secret No. 0047/74 22 November 1974 Copy N2 25X1 55 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 The WEEKLY SUMMARY, issued every Friday morning by the Office of Current Intelligence, reports and analyzes signif- icant developments of the week through noon on Thursday. It frequently includes material coordinated with or prepared by the Office of Economic Research, the Office of Strategic Research, and the Directorate of Science and Technology. Topics requiring more comprehensive treatment and therefore published separately as Special Reports are listed in the contents. CONTENTS (November 22,1974) EAST ASIA PACIFIC MIDDLE EAST AFRICA WESTERN HEMISPHERE 1 The Middle East: Palestinians; Brinksmanship 5 Vietnam: Military Action Planned 7 South Korea: A Moratorium on Dissent 7 Japan: Tanaka Plans To Resign 8 Cambodia: Uncertainty at the UN 9 United Kingdom: Party Meeting; Budget 11 Portugal: Renewed Frictions 11 Italy: Stopgap Solution 13 The East German Red Carpet 13 Soviet Navy Departs Red Sea 14 Romanian Party Congress 16 Greece: Karamanlis an Easy Winner 17 Turkey: Irmak Faces Crucial Test 18 Iraq: Cabinet Shake-up 19 Latin America Tries To Evaluate Quito 20 Peru: Policy Difficulties 21 Brazil: Opposition Electoral Gains Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 25X1 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 Next 2 Page(s) In Document Denied Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 `NW, J C I. Ii C I '%"+ THE MIDDLE EAST lis he battle between the Palestinians and the was fought on several fronts during the Israe past week. At the UN, a pro-Arab majority pushed toward approval of an Arab-sponsored resolution on the Palestine question. At home, Israeli security forces grappled with pro-PLO demonstrators on the West Bank and with terror- ist infiltrators in the town of Beit Shean. To- gether, these challenges forced Prime Minister Rabin's government into a more defensive posi- tion that will make it still more difficult for him to produce concessions in future peace nego- tiations. On November 21 the Arabs were preparing to introduce to the UN General Assembly a draft resolution outlining the "inalienable rights" of the Palestinians "in their homeland." The pro- posal is almost certain to be approved by a wide majority of member states. The proposed resolution affirms the rights of the Palestinians: to self-determination without ex- ternal interference; to national independence and sovereignty; to return to their homes and proper- ties; and to use "all means" in accordance with the UN charter to realize their objectives. In addition, the proposal asserts that imple- mentation of these rights is indispensable for a just peace in the Middle East, and that the Palestinian people must be a principal party to the establishment of such a peace. The resolution is primarily a restatement of long-standing Palestinian policy goals. Because it does not threaten Israel directly or explicitly deny Israel's right to exist, the Arabs consider the proposal to be moderate. Israel, however, will interpret the resolution-particularly the refer- ence to a Palestinian homeland-as a denial of its right to exist. The Arabs made their references to the Palestinian homeland deliberately vague. Their defense of the rights of Palestinians expelled "since 1947," however, confirms that they will continue, at least for bargaining purposes, to per- petuate their historical claim to Israel proper. In spite of this stand, the majority of Pales- tinian leaders seem prepared to join most Arab heads of state in settling for a Palestinian entity limited to the West Bank and Gaza. PLO leaders will not admit this in public, however, until Israel indicates a willingness to negotiate with them or until they realize other concrete gains through negotiations. Tel Aviv considers that UN approval of a statement authorizing the Palestinians to use "all means" to regain their rights would in effect be an international endorsement of terrorism. The Israelis are using this argument in attempts to dissuade several delegations from supporting the Arab proposal. The Arabs, for their part, clearly intend that an element of threat remain in this formulation. Some, including the Egyptians, have argued that fedayeen strikes at Israel are carried out in self defense, and are therefore legal under provisions of the UN charter. PLO representatives in New York have de- clined to belabor this line of argument, appar- ently in the hope that through avoiding too much talk of violence they can win European backing for the draft resolution. The Palestinians consider that the PLO's willingness to give up its earlier call for armed struggle and to restrict its methods to those in accordance with the UN charter repre- sent significant concessions. In addition to spelling out Palestinian rights, the draft resolution requests the UN Secretary General to establish contact with the PLO "on all matters concerning the question of Palestine." This may be in anticipation of a second resolu- tion, still being drafted, that would accord per- manent observer status to the PLO. SECRET Page 1 WEEKLY SUMMARY Nov 22, 74 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 On the occupied West Bank, anti-Israeli demonstrations that began in several towns fol- lowing PLO leader Yasir Arafat's appearance before the UN General Assembly on November 13 spread to East Jerusalem early this week. The disturbances apparently are the result of a general feeling among West Bankers that events are moving in favor of the Palestinians. Most of the demonstrators thus far have been Arab high school students. Israeli authorities have imposed a curfew on several West Bank towns, closed some schools, and arrested a number of demonstrators. They have also warned local Arab leaders to maintain order or Israeli military authorities would crack down "unrestrainedly." In the months ahead, Tel Aviv is likely to find itself facing increased anti-Israeli sentiment on the West Bank and Gaza. Recent soundings by the US consul general in Jerusalem indicate that Palestinian nationalist feelings on the West Bank were given a strong boost by Arafat's speech at the UN. Widespread resentment of Israel's occupation was further reinforced by economic austerity measures announced by Tel Aviv last week. In Israel proper, three Palestinian terrorists, early on the morning of November 19, seized an apartment house in Beit Shean, a town four miles from the Jordanian border. Before Israeli troops stormed the building and killed the guerrillas, four Israeli civilians died and a number were wounded. The terrorists apparently hoped to take hostages to be exchanged for Arab prisoners held by the Israelis. The Popular Democratic Front for the Liberation of Palestine, a Marxist-oriented group that has aligned itself with PLO leader Yasir Arafat, claimed credit for the attack. The attack reinforced the Israelis' conviction that they have been right regarding the true na- ture of the PLO. Israeli Information Minister Yariv said that the attack proved that interna- tional recognition would not lead the PLO toward moderation, but, on the contrary, would only encourage it to engage in terrorism. Defense Min- ister Peres promised the Knesset that the security forces of Israel would deal "unceasing blows" at the terrorists "until the last one is liquidated." Despite the fact that the attack was mounted from Jordan, the Israelis, conscious of Jordanian attempts to intercept terrorists crossing Jordan to carry out operations in Israel or Israeli border police with detained youthful demonstrators Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 ',J L_ V I \ L_ 1 ,400 Israeli-occupied territory, have this time appar- ently decided to settle for warning the Jordanians of retaliatory action should Amman fail to pre- vent future attacks from Jordanian territory. Yariv stated that while Israel would not conclude that Jordan had begun assisting terrorist groups, the onus was on Jordan to prove it had not cooperated with the men who attacked Beit Shean. The most likely Israeli response is to con- tinue and perhaps intensify the shellings, air strikes, and shallow penetration raids they have long been conducting against fedayeen bases in southern Lebanon. Air strikes at Palestinian ref- ugee camps in Lebanon are also possible. Follow- ing the terrorist attack on Maalot last May, also carried out by the Democratic Front, the Israelis responded with heavy air strikes on two refugee camps.I DANGEROUS BRINKSMANSHIP Military tension, sharply i creaseby Israel' partial mobilization last weekend, has eased, but the political war of nerves is likely to continue, at least through the end of the month. The Israelis said their action was a precautionary measure in response to "advanced military preparations" in Syria, but Tel Aviv almost certainly acted in part to intimidate the Syrians into renewing the man- date for the UN observer force, which expires on November 30. Whether or not Syria had made threatening military movements, Damascus' nega- tive attitude toward extending the UN mandate implies that Syria hopes to provoke a political crisis in order to focus attention on its demands for a further Israeli withdrawal on the Golan Heights. The atmosphere in Damascus and Cairo has been remarkably calm, considering the circum- stances. Officials and the media in both countries, however, have charged Israel with fomenting a war scare, and Arab fears of an attack on Syria or Lebanon have undoubtedly increased. Moreover, both Syria and Egypt probably have taken added precautions against a surprise attack. Syria, in particular, has been doing its utmost to train and equip its armed forces for any contingency. Thus, some local incident could trigger large-scale hos- tilities with little or no warning, particularly in the Golan Heights. One positive effect of the war scare has been the reaffirmation by all the parties of their com- mitment to the cease-fire agreements. Syrian For- eign Minister Khaddam has publicly stated Syria's intention to abide by the cease-fire, and Israeli Defense Minister Shimon Peres has said on na- tional television that he expects any develop- ments in the near future to be political rather than military. In elaborating on the reasons for Israel's partial mobilization, Peres cited the decisions taken at the Rabat summit conference, rumors that Syria would not renew the UN force man- date, and Arab assertions of Israeli economic weaknesses as causes of Tel Aviv's concern. These developments, along with the recent diplomatic victory scored by the Palestine Liberation Organi- zation at the UN, have left the Israelis feeling beleaguered and pessimistic about future attempts to achieve a negotiated settlement. Confronted with this situation, Israel's mobilization serves various political and military purposes: ? It gives a firm response to Arab pressures for sweeping and immediate Israeli conces- sions in disengagement negotiations. ? It puts Syria on notice that the removal of the UN troops could expose Syria to im- mediate attack. ? It raises the threat of an Israeli incursion into Lebanon if fedayeen activities are not curbed. ? It puts the Israeli forces in an even better position to deter or counter an Arab attack or launch an attack themselves. ? It underscores Israeli concern about So- viet military support for Syria in anticipation of the summit meeting between President Ford and Soviet party chief Brezhnev. SECRET Page 3 WEEKLY SUMMARY Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 S L - The Israelis, in fact, have repeatedly ex- pressed their alarm about what they perceive as a massive Soviet resupply effort to Syria. Prime Minister Rabin implied that a principal reason for the Israeli mobilization was a substantial increase in the number of Soviet arms carriers that he said were unloading at Latakia. The harbor apparently is crowded to its capacity of 20 or so ships, but not all of these are Soviet or East European vessels. The Soviets have, however, made substan- tial military deliveries to Syria over the past year. The public Soviet reaction to the Israeli mobilization has been relatively restrained and cautious, suggesting that Moscow, on the eve of the Vladivostok summit, had chosen not to ex- ploit the new tensions in the region. by recent indications that one element in the tougher Arab negotiating stance is a growing be- lief that the time has come for facing up to the hard political questions involved in a Middle East settlement and that Geneva is the best forum for initiating this process. Press reports this week suggested that the Syrians might insist on a quick resumption of Geneva as a condition for renewing the UN mandate, and Egyptian Foreign Minister Fahmi said in a magazine interview that Cairo refuses to discuss any new political initiatives outside the scope of the Geneva conference. Fahmi reportedly also said this week that he expects a resumption of the Geneva conference during February, after President Sadat meets with both Soviet leader Brezhnev and President Ford in January. ~,.7 3) The Soviets probably have been encouraged Fahmi's statements probably are not so much a reflection of Egyptian insistence on a return to Geneva as they are of Cairo's sensitivity to Damascus' refusal to support any step-by-step approach to negotiations that allows Israel to avoid dealing with Syria. Egypt probably would still prefer to restore momentum to the nego- tiating process by achieving a further Israeli pull- back in the Sinai. Nevertheless, ever since the Rabat summit, it has been clear that Cairo is being hobbled by Syria's determination to fore- stall a unilateral Egyptian-Israeli disengagement as the next step and to press the issue of an Israeli withdrawal on the Golan front. Brezhnev responded promptly to a commu- nication from Syrian President Asad that appar- ently expressed Syrian concern. Brezhnev prob- ably counseled restraint while indicating backing for Damascus in the event of war. Moscow, mean- while, announced the day after the Israeli alert that a small flotilla headed by the Black Sea commander would soon visit Syria. Moscow appears to have timed its announcement as a tangible indication of Soviet support. The Soviets probably consider that the latest episode will strengthen their hand in the region. In contacts with the Arabs, Moscow will likely argue that the Israeli action is further proof of the Arabs' need to rely on Soviet political and mili- tary backing to achieve a settlement. The Soviets may calculate that it will increase pressure on President Sadat to improve relations with Moscow in order to obtain badly needed war supplies. They will certainly point to the episode at the Vladivostok summit to underscore their con- tention that Moscow must be cut in on Middle East diplomacy if a new war is to be avoided. The Egyptians themselves last week under- scored the need for another interim agreement with Israel, providing for a further Israeli with- drawal from the Sinai, by publicly linking the issue to the reopening of the Suez Canal. Fahmi asserted in a speech to a People's Assembly com- mittee that the canal will be reopened only when Israeli forces have withdrawn "enough distance" from the waterway to safeguard shipping. The canal will be technically ready to handle shipping again in a few months. SECRET Page 4 WEEKLY SUMMARY Nov 22, 74 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 Restoration of momentum to the nego- tiating process now appears to hinge primarily on the ability of the various parties to find some formula for mollifying the Syrians. There have been suggestions in the press that Syria might yet renew the UN mandate in return for a token Israeli withdrawal in the Golan or for setting a timetable for a reconvening at Geneva. All that is clear about the Syrian position, however, is that VIETNAM: MILITARY ACTION PLAA(NB8NN)ED ecently issued COSVN inst ucfions for 1973 outline a Communist dry-season campaign, running through June, that could amount to the most serious military test for Saigon since the cease-fire. The instructions call for widespread and heavy action, apparently to achieve a maxi- mum shock effect, throughout much of the South Vietnamese countryside during the "first days" of the campaign. Subsequent action is to be con- centrated in a relatively few "vulnerable" areas. The instructions emphasize that the campaign must get under way as soon as possible-between early and late December-in order to maintain the element of surprise and pre-empt any possible government dry-season attacks. During the initial phase, the COSVN guide- lines appear to prescribe a level of fighting below that of the 1972 offensive. They suggest, how- ever, that the Communists may be prepared to commit the forces and firepower already in the South more fully than they did during the fight- ing last summer in the hope of achieving some quick and dramatic victories. Specifically, the instructions call for "in- tense" fighting in central South Vietnam and the commitment of all Communist units in Military Region 3 to offensive action in the provinces around Saigon. The Communists hope this will force the government to pull one of its divisions out of the delta. Page 5 cause the Israelis may well interpret the Syrian they are bent on playing the mandate issue for all it is worth. If the Syrians do not get a satisfactory response to their demands by the end of the month, they are likely to let the mandate expire, while reiterating their commitment to observe the rest of the points in the cease-fire and dis- engagement agreements. In this circumstance, tensions are likely to continue to run high be- 25X1 25X1 The guidelines do not cover Hanoi's military plans for northern South Vietnam, an area where Hanoi's strategic reserve could be brought to bear with relatively little warning. Although the bad weather conditions that persist in this area during the winter do not favor heavy enemy action', the Communists could mount enough pressure in the north to prevent the movement of government forces to more active battlefronts. Then, once the weather improves, they may be prepared to strike hard in order to follow up the Communist cam- paign farther south or to exploit any major gov- ernment reverses. Utilizing only the forces at hand in the South, the Communists probably would be able to make and sustain major gains in only one area-the central highlands. The North Viet- namese could probably quickly isolate and bring heavy pressure on both Pleiku and Kontum cities. There could be considerable slippage in the Communists' timetable. Moreover, with fore- knowledge of the enemy's intentions, the govern- ment may be able to mount some spoiling opera- tions, particularly in Military Region 3, which could also disrupt Communist battlefield prepara- tions. Nevertheless, once the campaign is kicked off, the government will probably suffer numer- ous tactical reverses, especially if the Communists make full use of their large inventory of tanks and artillery. It seems unlikely, however, that such reverses would lead to a major strategic break- through for the Communists. SECRET Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 Preparing for action Communist forces elsewhere in central South Vietnam could tie down government forces by threatening population centers along the coast. The North Vietnamese could also use their fire- power to capture some additional territory in the provinces north of Saigon, but they do not appear to have the forces necessary to sustain a pro- tracted drive. After some initial losses in this area, government resistance would probably stiffen and Saigon would retain control over the bulk of the people and the economically important land. Fighting of the magnitude described in the COSVN guidelines would appear to be within the framework of the strategy Hanoi adopted toward South Vietnam following the cease-fire. This stra- tegy assumed that the Thieu government could eventually be forced into making significant polit- ical concessions to the Communists as a result of declining American support for Saigon and care- fully measured Communist military pressure on government forces-pressure below the level that would risk American military re-involvement. The COSVN instructions make it clear that the Com- munists are still following this gradualist ap- proach. They present two options open to Hanoi: a "political" track that features some escalation of military pressure; or a "military" track in- volving an all-out offensive. The guidelines clearly come down in favor of the former. Behind this reaffirmation appears to be a judgment by the leaders in Hanoi that their strategy following the cease-fire is finally be- ginning to show signs of success. Hanoi's propa- ganda has been vigorously touting the recent pub- lic manifestations of opposition to Thieu in South Vietnam, and, as might be expected, has been egging it on. The North Vietnamese leaders now appear to have decided that a further, if still measured, increase in military action would serve to encourage popular agitation in the South. MORE CONSCRIPTION /ianoi is conducting its second induction campaign in fdur months. The new drive appears This latest campaign began in October and appears to be widespread, although there is no sense of urgency in the reporting. Recent propa- ganda suggests that, in general, localities are meet- ing their assigned quotas, but earlier reports had indicated that the North Vietnamese were having some difficulty recruiting troops during the Au- gust-September drive. This may be part of the reason Hanoi has had to hold a second campaign so soon. If successful in the current induction drive, the North Vietnamese should have enough manpower to sustain a moderate to heavy flow of troops to the South this, dry season. SECRET Page 6 WEEKLY SUMMARY Nov 22, 74 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 SOUTH KOREA: PAK 1 CONTRO N 2L) 7) The government of Pak Chong-hui is very muc in control as President Ford arrives in Seoul today, but domestic dissent continues to build and both Pak and his opponents seem ready for yet another round of political struggle when the visit ends. Prospects for a relatively smooth presidential visit improved during the week. Although minor protests by student and Christian groups con- tinued, opposition New Democratic Party leader Kim Yong-sam felt compelled to call for a mora- torium on demonstrations while President Ford is in Seoul. At most, there may be some attempt by Pak's critics-such as the protest by Korean women and an American priest at the US embassy yesterday-to dramatize their grievances in hopes of influencing the US visitors to counsel Pak toward moderation. Following the Ford visit, however, the politi- cal situation is likely to heat up once again. Pak's opponents, despite fear of a governmental crack- down once the visitors have left, apparently intend to press on with their campaign for basic political reform. One group, seeking outright revision of Pak's 1972 constitution, plans to move quickly to form a united front of opposition elements. Kim Yong-sam plans to persist in his campaign to secure National Assembly considera- tion of constitutional changes. Kim apparently believes that economic hardships during the winter will reduce worker support for Pak, and that the situation will become increasingly favor- able for antigovernment forces. The students remain unpredictable, but there will soon be a semester break and this will work in the govern- ment's favor. The government also has plans to get much tougher with the opposition, if necessary. Arrests and detentions would become more numerous, new security regulations would be imposed, and reimposition of martial law is also a possibility. The government, concerned over the worsening economic situation, would not tolerate political activity which attempted to exploit worker dis- JAPAN: TANAKA PLANS TO RESIGNS Prime Minister Tanaka will announce his resignation early in the week of November 25, paving the way for the ruling party to select a new head of government before the Diet convenes in December. Tanaka decided to quit rather than face a mud-slinging attack by the opposition parties. He has been under heavy fire since October when an influential magazine accused him of corrupt financial dealings over a period of many years. Pressures for Tanaka's resignation intensified early this month, but the ruling Liberal Demo- cratic Party called a nominal truce during the visit of President Ford. Nevertheless, factional maneu- vering and intra-party discussions continued unabated all this week. The Liberal Democrats have not yet been able to agree upon a successor to Tanaka, however, and even the method of choosing a successor is probably still under debate. The party can select its new president either by a consensus of its elder statesmen, or by ballot at a convention. Former finance minister Fukuda, one of the key contenders for the top job, adamantly op- poses a showdown in a convention vote. He is pushing for selection by a panel of elders who, with their conservative bias, might favor him. The Prime Minister therefore supports the convention route, which would allow him to throw the weight of his own party faction behind Finance Minister Ohira-who probably has the votes to win. If the party cannot make a choice between Fukuda and Ohira, it might feel com- pelled to accept a caretaker leader until Tanaka's regular term expires next July. Whoever the successor, Japanese policy is not likely to change. Both Fukuda and Ohira would maintain Tokyo's close partnership with the US. SECRET Page 7 WEEKLY SUMMARY Nov 22, 74 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 CAMBODIA: UNCERTAINTY AT THE UN The timing of the N debate on Cambodian representation will apparently be decided by a battle of wills between General Assembly Presi- dent Bouteflika and the chairman of the as- sembly's political committee-and the timing may well affect the outcome. The political committee had earlier decided to debate the Korean issue before Cambodia and had set November 25 for the beginning of its deliberations on Korea. The Korean issue was expected to be decided in early December, after which the assembly would take up the Cambodian question. During the past week, however, Bouteflika unsuccessfully pressed the chairman of the politi- cal committee-Argentinian Ortez de Rozas-to postpone debate on Korea so that the Cambodian issue could be taken up immediately after the debate on Palestine concludes, late this week or early next week. Bouteflika and his nonaligned colleagues apparently hope that an Arab victory on Palestine, following the action on South Africa, would create a more favorable climate for Sihanouk's case. Phnom Penh's backers hope that the debate on Korea will help dissipate some of the nonaligned momentum, and they want to adhere to the original schedule. At midweek, neither Bouteflika nor the po- litical committee chairman-who is increasingly irritated at Bouteflika's high-handed methods- had caved in, and the timing on the Cambodian issue was still undecided. Phnom Penh's backers are taking no chances. They are rushing their lobbying campaign and are preparing for an early vote on Cambodia. At the moment, it still appears that the crucial vote on the priority of Phnom Penh's resolution to defer once again UN action on Cambodia will be so close that a fluke-such as an unexpected absence or a miscast vote such as Norway's last year-could decide the issue. In Phnom Penh, it has become apparent that a significant shake-up will occur in the govern- ment next month no matter what the outcome at the UN. If his government retains its seat, Prime Minister Long Boret plans to push this advantage to reorganize his cabinet, most notably by re- placing the defense, interior, and finance ministers. These planned changes are minor compared to the political upheaval that would probably result from a government defeat at the UN. An unfavorable vote would probably lead to a rapid dissolution of the Long Boret government, and recent reports indicate that the Prime Minister holds few illusions on this score. Boret has said that he would resign immediately. Finding a new prime minister as capable as Long Boret, while keeping the inevitable round of political infight- ing within bounds, would be a major challenge for President Lon Nol. There are indications that the military would push for greater participation in the government in the event of a_UN defeat. SECRET Page 8 WEEKLY SUMMARY Nov 22, 74 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 SECRET Wilson has, nevertheless, won some impor- tant battles with Labor's left. Three left-wing ministers who criticized joint naval exercises with the South Africans submitted formal apologies to Wilson-at his insistence-for breaching the doc- trine of collective responsibility and failing to support government policy. Last week, Labor's parliamentary group elected moderate Cledwyn Hughes as their chairman, defeating incumbent Ian Mikardo, one of the leading leftist spokesmen in Parliament. In addition, the leftists, who are the primary source of sentiment against the Com- mon Market in the Labor Party, took another beating earlier this month in public opinion polls, which showed that 53 percent of the voters fa- vored remaining in the EC. This should put the damper on efforts to push through a strong anti- market resolution at the conference. ~fhe annual Labor Party c reference next week, when party delegates review government stewardship and debate policy, will be highlighted by the continuing power struggle between left- wing Laborites and the moderates led by Prime Minister Wilson. This year's conference could be heated in view of the rising challenge from the left and signs that Wilson intends to take a tougher line toward rebellious party members. Most of the problems besetting the party are not likely to be resolved, but the moderates have picked up strength and could force the left to regroup before mounting a serious challenge to Wilson in Parliament. The conference, from November 27 to 30, will focus on the government's economic policy. On the eve of his budget speech last week, Wilson warned all Britons to cooperate with government efforts to fight inflation. He cautioned trade unions to abide by the voluntary wage restraints of their "social contract" with the government. Wilson's tough talk apparently has had little effect on militant leaders of the coal miners' union. Following a vote Monday that rejected a coal board proposal offering wage incentives for increased productivity, militant miners demanded steep pay hikes as part of any overall agreement. Militants in the miners' union, as in other unions, are likely to continue to push their wage de- mands, to the detriment of their social contract and its voluntary restraints. These pressures should be evident at next week's conference, where an overwhelming majority of the voting delegates come from the trade unions. The new budget will also cause some con- troversy. The trade unions generally go along with it, but fear that the reduction of government subsidies to nationalized businesses will sharply increase prices. The left-wing Laborites resent ef- forts to aid industry and argue that the capital provided ailing industrial firms will cut into the funds available for social programs. Perhaps of greater significance, however, is the apparent change in Wilson's own attitude, and indications that he is prepared to use tough talk- and conceivably tough actions-to defend govern- ment policies against attacks by party rebels.] 44 e st budget, an- he Labor govern`rrnf's lat nouncced last week, will prevent some near-term unemployment but will not improve economic growth. Chancellor of the Exchequer Healey chose to give financial relief to the hard-pressed business sector, with the cost falling on personal consumption. The new budget is a cautious document which will not satisfy most economic factions. It corrects some growing distortions in the British economy. It gives aid to troubled industry with- out fully satisfying the appeals of businessmen; it hews to socialist control over economic activity while encouraging the private sector; it props up the economy while providing little net stimulus at a time of raging inflation and incipient slump. Faced with faltering private investment, spreading bankruptcies, and mounting unemploy- ment, Healey tailored his new budget to the ills of SECRET Page 9 WEEKLY SUMMARY Nov 22, 74 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 industry. Current corporate difficulties have been brought on by escalating costs, restrictive price controls, and heavy taxation. Inflated inventory values have kept up nominal profits while com- panies' financial positions deteriorated. At the same time, high interest rates and a collapsing stock market have dried up the L sual sources of capital. Easing price controls and lightening the corporate tax burden will improve the companies' cash situations and restore profitability some- what. The expanded loan facilities and a new National Enterprise Board, to provide equity financing for firms the government wishes to help, will ease corporate financing difficulties. In addition, the banking system has been directed to continue favoring industrial lending at the ex- pense of consumer loans. Phasing out subsidies to nationalized indus- tries means higher prices for electricity, natural gas, coal, trains, and postage. Under Healey's plans, prices in these industries will more realisti- cally reflect costs, saving the government $1.8 billion over the next year. On balance, the budget provides little stim- ulus to total demand. Reduced tax payments by companies will be offset by smaller deficits in the nationalized sector. Corporations will find busi- ness a little more profitable, but expanded sales will be difficult because a greater proportion of consumers' budgets will be spent on the higher priced products of the nationalized industries. The new price codes will provide some stimulus to investment, but, without the prospect of re- newed economic growth, this incentive will be weak. Overall, the government expects its borrow- ing requirement to swell from $6.5 billion in fiscal year 1974 to $14.5 billion in 1975. Large as it is, the expanded budget deficit will just about offset the contractionary effect of Britain's $9-billion current account deficit. Removal of exchange rate guarantees signals a willingness of British authorities to let the pound depreciate. The move itself will have little BUDGET HIGHLIGHTS Modification of price controls on private companies, tying price relief to new in- vestment. A $1.8-billion reduction of the corporate tax liability to soften the effect of inflation on corporate taxes. A $2.3-billion increase over the next two years in industrial investment funds through a quasi-public finance corporation. Prjce increases in nationalized industries to reduce public subsidies. An increase in the tax on gasoline. Increases in pensions and other benefits amounting to $460 million in the next year. The elimination at the end of this year of remaining exchange rate guarantees on of- ficial balances held in`London. direct effect on the exchange rate because the guaranteed balances are declining in importance, and sterling interest rates remain attractive. The competitiveness of British exports, however, has begun to slip as inflation in the UK outstrips that of its major competitors. Inasmuch as the govern- ment's economic strategy calls for maintaining export performance, some decline in the pound may be necessary. The budget is likely to jeopardize further the government's strained social contract with the trade unions. Planned price increases in the public sector will be large and highly visible. Prime Min- ister Wilson has warned the unions that recent pay settlements are threatening the social con- 25X1 tract guidelines. Even so, another spurt of ac- celerated inflation is sure to fuel union claims for still larger pay boosts. SECRET Page 10 WEEKLY SUMMARY Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 1#400f %",W PORTUGAL: RENEW D FRICTION Tensions which eveloped lafe last week with )n the governing Armed Forces Movement when moderates renewed attempts to curb the activities of left-wing militants have apparently subsided, at least for the moment. The immediate cause of the controversy was the most recent issue of Movement, the Armed Forces Movement's weekly bulletin, that attacked the economic policies of the provisional govern- ment. The bulletin, which the movement began publishing last month to explain its policies to the people, is largely staffed by left-wing movement activists and reflects their point of view. Moderate officers reportedly demanded the dissolution of the leftist-influenced Coordinating Committee of the movement. The US embassy in Lisbon reported that the Armed Forces Superior Council, an advisory group formed late last month to coordinate military activity in the gov- ernment, had also demanded dissolution. No ac- tion has been taken against the committee, how- ever, but there apparently has been some success in reconciling the moderates and the militants, at least for the time being. Page 11 The illness and possible resignation of Prime Minister Goncalves has added a new dimension to the continuing conflict within the movement. According to two embassy sources, Goncalves submitted his resignation on November 15 and each faction within the movement is maneuvering to have one Growing dissension within the movement is significant because the young officers had man- aged, in the past, to present a generally united front in opposition to former President Spinola's policies. Since Spinola's ouster, the moderate majority appears more willing to take its own stand and less willing to be led by left-wing activists. The political atmosphere in Lisbon is further troubled by renewed rumors of plots by loyalists of the Caetano regime against the provisional gov- ernment. Threats of a countercoup from the right have been used by the left in the past to unite their own forces against a "greater danger." Com- munist leader Alvaro Cunhal issued such a warn- ing last week. power triumvirate now in Lisbon. Although right-wing elements undoubtedly are planning moves that would return them to power, there are no indications of any action in the immediate future. The leadership also ap- parently does not believe there is any danger. Minister without Portfolio Melo Antunes left on a trip to Paris this week. Major Vitor Alves, who returned from a European tour last Saturday, is the only member of the Goncalves-Alves-Antunes 25X6 25X6 25X6 ITALY: STOPGAP SOLUTION ,Aldo Moro secu ed agreement this week on a formula that will give Italy a new government, but it leaves unresolved most of the economic and SECRET Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 Jtl.l~t political differences that brought down the pre- vious one. The small Republican Party has agreed to join Moro's Christian Democrats in a two-party coalition, while the other two center-left par- ties-the Socialists and Social Democrats-have agreed to provide the coalition with a parlia- mentary majority. Moro's government will be only a stopgap affair. Politicians settled on the two-party solu- tion only after two previous proposals had failed to draw sufficient support. During the initial phase of the seven-week-long stalemate, Christian Democratic Party boss Fanfani could not per- suade the four parties to join in another center- left coalition. More recently, Moro cut short an effort to set up an all - Christian Democratic cabi- net when the Social Democrats balked at the idea. The Social Democrats, in fact, were the least flexible of the four parties throughout the nego- tiations and managed to exert influence out of proportion to their parliamentary strength; they have less than 5 percent of the seats in the legisla- ture and their votes are not required for a center- left majority. The Social Democrats triggered the crisis in early October by accusing the Socialists of collusion with the Communists. Even after the Socialists moderated their position on the Com- munist issue to the satisfaction of the other par- ties, the Social Democrats would not change. They refused to endorse an all - Christian Demo- cratic cabinet, claiming that it would be "too open" to Communist influence. Increasingly isolated, the Social Democrats finally conceded when the Christian Democrats put the two-party proposal on the table. It was undoubtedly meant to be a face-saving device for the Social Democrats, who had not voiced public opposition to this alternative. The Social Democrats were able to hold out for so long mainly because of differences between left- and right-wing elements within the dominant Christian Democratic Party. Moro--who leads the Christian Democratic left-wanted to dump the Social Democrats when they declined to back a Christian Democratic cabinet; he already had majority support from the Socialists and Republi- cans. Center and right-wing Christian Democrats were reluctant, however, fearing that such a move would expose the party's right flank. Thus, the Christian Democrats were spared a potentially divisive decision when the Social Democrats fell in behind the two-party proposal. The fact that Christian Democratic unity is so fragile, however, casts doubt on the party's ability to reverse its sliding fortunes. Early this week, the party suffered another reversal when scattered local elections showed substantial Christian Democratic losses and notable gains for the So- cialists and Communists. Although these contests were of marginal significance nationally, the results are already being trumpeted by the left as further evidenceof the Christian Democratic decline. The Communists are probably satisfied with the outcome of the government crisis. Although they would welcome a major concession from the governing parties--such as formal consultations on legislative matters-they are not eager to be saddled with the responsibility of governing under present circumstances. They want to prepare for nationwide local elections in June, when they hope to secure further advances. The Commu- nists, moreover, have good relations with Moro. He is not about to make a deal with the Com- munists, but he will probably give more weight to their views than would most other Christian Democratic leaders. Moro hopes that tempers will cool enough to permit a later effort to revive the center-left coali- tion. Failing that, he will try to keep the lid on inter-party conflicts, at least until the local elec- tions in June. After that, all parties will reassess the situation. In the meantime, Moro's fragile coalition will have to cope with rising inflation, growing unemployment and continuing labor unrest. In addition, it appears that Italy will be hit this winter by a serious fuel oil shortage that will require rationing of electric power. SECRET Page 12 WEEKLY SUMMARY Nov 22, 74 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 NNW 6E(-;HE I THE EAST GERMAN RED CARPET (:5- 6~--4 ast week, President Tito made his first visit countries. The East Germans are likely to drag 25X1 to EJast Germany in nine years. Pankow provided their feet on this project, however, because of an unusually warm reception. All Politburo mem- their continued concern over ideological subver- bers were on hand for his arrival, and massive sion and escapes to the West. crowds turned out to greet the Yugoslav leader at every stop. Neues Deutschland, the party paper, set the tone of the highly favorable media cov- erage by running a banner headline greeting in The carefully arranged demonstration of friendship was clearly intended to bury old and bitter ideological differences. In addition, it served Soviet interests by attempting to counter- act the harmful effects of Moscow's abortive sup- port of the "Cominformist affair" in Yugoslavia. Tito, who openly questioned the spontaneity of his welcome, does not seem to have been taken The communique on the visit indicated that the Tito-Honecker talks focused on the develop- ment of economic relations and expanded co- operation but hinted at significant differences over cooperation in the communist movement. Apparently at Tito's request, the communique called for increased tourism between the two SOVIET NAVY DEPARTS RED SE The command ,hip for the Soviet mine- clea ing operations in the Strait of Gubal and three mine-sweepers began their return trip to Vladivostok this week, following completion of the mine clearing on November 10. These are the first to depart of the group of seven minesweepers and four to six support ships that arrived in mid-July. The remaining ships are scheduled to leave the Red Sea area before the end of the month according to Soviet authorities. The helicopter ship Leningrad and an escort- ing destroyer that joined the mine-clearing group at the end of July left in September. During the operations, the Leningrad's helicopters worked regularly as spotters and transporters. On two occasions, the helicopters seemed to be directly involved in minesweeping-once they appeared to be operating a radio-controlled sweep device, and another time they were sighted towing a pontoon float in shallow waters. Toward the end of August, the mine-clearing operations brought the Soviet ships and heli- copters into Israeli-occupied waters. An under- standing achieved through informal Israeli- Egyptian contacts at the UN prevented any con- frontation between Soviet and Israeli naval units. This week, four small Egyptian ships trav- eled through the canal and are now proceeding through the Gulf of Suez to the Red Sea-the first commercial ships to do so since June 1967. Large- scale transit is not likely to begin until sometime during the first half of 1975, when salvage and dredging operations now under way by US, Brit- ish, and French groups are completed. SECRET Page 13 WEEKLY SUMMARY Nov 22, 74 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 THE ROMANIAN PARTY CONGRESS IJIRomania's 11th Party Congress, which opens on onday, will be party boss Ceausescu's show from start to finish and will endorse Romania's maverick communism as enduring national policy. The congress may boost Ceausescu's per- sonality cult by electing him party secretary general for life. Delegates will approve a new party program that emphasizes the link between Romanian national interests and party policies and that molds Marxism-Leninism to fit specific Romanian conditions. Adoption of the program will lay Bucharest open to Soviet charges of "re- visionism" on several counts. Page 14 01) Both the Soviets and Chinese have been invited to attend, and both apparently have bowed to the Romanian condition that there be no polemics. A Soviet diplomat in Bucharest claims that because of the strong "ideological" overtones of the congress, Moscow will tailor its attendance accordingly. He presumably means that the Kremlin will send a medium- or even low-level delegation as a sign of its displeasure. I n an effort to strengthen its identity with the so-called progressive forces, Bucharest has also sent invitations to a wide array of third world countries, liberal movements, and leftist organiza- tions and parties in Western Europe. The congress will probably introduce several new faces at all levels of the party leadership. Multiple candidate lists are being used to elect new officials, and one third of the members of all party bodies-including the Central Committee- will probably be newcomers by the time the con- gress is over. The multiple candidate system is not so much a bow to social democracy as Ceau- sescu's way of breaking up regional fiefdoms, injecting new blood into the party, and attempt- ing to stimulate interest in party activity among the rank and file. The regime is tightly controlling information on exactly what and who will be changed. The public, while responsive to the regime's recent trumpeting of Romanian national interests in preparation for the congress, remains skeptical about much of what it hears. The man on the street, resigned to tight internal security and seeing no easing of his rather Spartan living condi- 25X1 tions, remains less than enthusiastic about the congress, the party program, and--to some ex- SECRET Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 1%001 1"00 Revisionism as Defined by Soviet Party Secretary Ponomarev Minimization of gression mention imperialist aggression. -Endorses cooperation with the West. 2. Denial of the leading role of the Soviet party 2. Stresses autonomy and independence of every communist party; asserts that Marx- ism-Leninism must be applied to`-the spe- cifics of each country. ejection of the class struggle and per- 3. Justifies postwar collaboration with the mitting collaboration between the classes bourgeoisie and the monarchy. In-troduces "socialist humanism," a concept focusing- on the individual, and not the class. 4. Social Democratism (the concept that capi- 4. Does not specifically call for a revolutionary talism can be overthrown by non-revolu- overthrow of capitalism; says only that capi- tionary means) talism has completed its historic role and now socialism must take over. 5. Denial of the dictatorship of the proletariat 5. See No, 3 above. 6. Rejection of a centralized, disciplined party 6. Not specifically mentioned, but the Roma nians endorse the concept of a centralized, disciplined party. 7. Lavishes praise on Romanian history, cut ture, and national heroes. The. party pro- ceeds "from the fact...that in communist society, the nation and the national state have a role of great importance fora long time." SECRET The Romanian Party Program of imperialist ag- 1. Warns against imperialism, but does not Page 15 WEEKLY SUMMARY Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 GREECE: KARAMA LISA BIG WINNER f Prime Minister amanlis ~ew Democracy Party won a decisive victory in last Sunday's election, winning almost 55 percent of the vote, for a parliamentary majority of 220 seats out of 300. The unprecedented majority in parliament- a result in large part of Greece's electoral law- will give Karamanlis both maneuverability and power to deal with problems at home and abroad. The centrist Center Union - New Forces led by George Mavros, the nearest rival and now the chief opposition party in parliament, received 20 percent of the vote and 60 seats. The Center Union was squeezed between left and right and lost heavily to the New Democracy Party. The voters rejected the extremes of both left and right. The rightist monarchist National Demo- cratic Union, which was widely viewed as crypto- juntaist, received less than 2 percent of the vote and no seats. Andreas Papandreou's Panhellenic Socialist Movement, which had conducted an anti-US, anti-NATO campaign, received 13 per cent and 12 seats; the communist United Left got 9 percent and 8 seats. Public fear of instability and the divisiveness of the left probably had a lot to do with the left's poor showing. The US embassy believes that Papandreou's frenzy in the final week of the campaign had the effect of driving undecided middle-class voters toward Karamanlis. The leftist defeat should reassure the right wing, which feared the legalization of the communists, and deprive diehard anti-communist officers in the army of a pretext to move against the government. The vote was above all a solid expression of confidence in Karamanlis' ability to handle the problems left over by the military regime that collapsed last July. Karamanlis successfully dis- armed potentially dangerous issues, such as the monarch and punishment of the junta, and broad- ened his conservative constituency. His party's strength was strongest in the Eastern Pelopon- nesus, but it also did well in Athens and Thes- saloniki. It was weakest in Crete, where the Center Union and Papandreou's party made their best showing. Karamanlis' impressive victory has given him greater flexibility on the Cyprus question and placed him in an improved position to deal with Archbishop Makarios, who is due in Athens soon. The Greeks are now ready to talk realistically in terms of a federation on the island divided along geographic lines. On the question of Athens' future relations with NATO, the Prime Minister said this week that "it depended on NATO," and he linked Greece's relations with NATO to a satis- factory settlement of the Cyprus issue. A plebiscite on the monarchy will be held on December 8. If, as expected, the monarchy is rejected, President Gizikis-one of the last hold- overs from the old junta-will resign, and parlia- ment will elect a provisional president to hold Karamanlis A comfortable majority SECRET Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 lkk~ JCk-.r7L I office until the electorate chooses a president on the basis of the new constitution. A draft con- stitution will be drawn up by the government now being formed by Karamanlis and submitted to parliament, which has three months to amend it. The constitution is expected to strengthen the executive branch. If the monarchy is restored, the strengthening will apply to the office of the prime minister; if the monarchy is rejected the presidency will become the most powerful office. Karamanlis will undoubtedly be elected president, probably in May or June, or assume a strength- ened prime .minister's post under the monarchy. TURKEY: IRMAK FA7elignat7d S CRUCIAL EST Prime Minister i Ir mak formed a cabinet and took over the reins of government this week but still faces the difficult task of obtaining a vote of confidence from par- liament. Irmak failed to entice Turkey's major political parties into a coalition and reluctantly formed a government made up almost entirely of independents and technocrats. To gain parlia- mentary approval, the Irmak government must devise a program that will be satisfactory to former prime minister Ecevit's Republican People's Party (RPP), as well as to the Justice Party, Turkey's second largest party. Irmak's cabinet, which took office after receiving President Koruturk's approval, is made up primarily of competent academicians and gov- ernment technicians, with the small Republican Reliance Party the only political faction providing cabinet ministers. The composition of the govern- ment indicates that it will be basically pro-US, with the Foreign Ministry headed by the long- time ambassador to the US, Melih Esenbel. The new government will have only a limited mandate to act on Turkey's growing political and eco- nomic problems, however, with only 6 of 27 cabinet ministers having been elected to any office. After being asked by the President to form a government, Irmak announced that he would try to form a broad coalition of all political parties. He failed, largely because the parties could not agree on the timing of new elections, which Irmak had labeled his first priority. The major center and rightist parties declined to commit themselves to a date, and Ecevit's party withdrew its sup- port from Irmak when he was unable to guarantee that new elections would be held no later than next June. Irmak is scheduled to present his program to parliament on November 24, and the vote of confidence on the program could come as early as November 29. Two of the smaller parties-the right-of-center Democratic Party and Ecevit's old coalition partner, the National Salvation Party- have already announced their opposition to the new government on grounds that it is unconstitu- tional. This means that Irmak, in order to win the confidence vote, must receive the support of both the RPP and the Justice Party. Those charged with drafting the government's program will no doubt sound out leaders of both parties, but it will be no easy task to come up with a program that will satisfy both. If Irmak succeeds, it will be because neither party was prepared to assume responsibility for prolonging the government crisis. If Irmak can surmount this hurdle, the non- political character of his government will free him from partisan political concerns in making deci- sions on controversial issues. The absence of a committed majority in parliament, however, will prevent him from launching any major new pro- grams or initiating any abrupt policy changes. If Irmak fails, he will continue as head of a care- taker government while the political parties try again to reach an agreement that will break the impasse. In this event, the political stalemate will continue to take its toll in terms of government inaction on several pressing problems. 25X1 25X1 SECRET Page 17 WEEKLY SUMMARY Nov 22, 74 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 JCUKt IRAQ: CABINET SHAKE-UP / -5E* (87 - g , ( 7, 9) B th ~ aa party strong man Sadda m Husayn Tikr i apparently is maintaining his control over the instruments of power in spite of continuing internal dissension about the prolonged war against the Kurds, with which he is closely identi- fied. Although President Bakr retained his post as minister of defense in a cabinet shuffle an- nounced last week the new ministerial finpil, suggests that Bakr is playing a TO a dam Husayn. There have been signs that Saddam Husayn has been subject to increasing criticism from within both the ruling Baath Party and the mili- tary as the campaign against the Kurds that began last March has dragged on, bringing mounting casualties and economic problems. Saddam Husayn had promised last spring to end the war by September, but it is now evident that the army faces a long winter fighting the Kurds in the northeast highlands. Nevertheless, the party strong man seems to have had his way in shaping the new cabinet; his control of the party security apparatus is a solid asset in keeping critics in check. The cabinet reshuffle was the most extensive since the Baathists took power in Iraq six years ago. Among eight new ministers are five party members believed to be close to Saddam Husayn. Only two or three ministers of the revamped cabinet are identified with Bakr, a former army man whose power base remains the officer corps. The remaining ministers are not thought to have close political ties with either of the two top leaders. The new cabinet demonstrates again that the Baath Party has no intention of sharing power with the Communists, Arab nationalists, or any other group. The naming of a number of well- qualified men, on the other hand, does point to a continuation of the trend toward pragmatic poli- cies that place emphasis on economic de- velopment. MOST EXTENSIVE RESHUFFLE SINCE THE BAATHISTS TOOK POWER SIX YEARS AGO. The US representative in Baghdad considers the appointment of US-educated Sadun Hammadi as foreign minister-he had been oil minister-a hopeful sign for Iraq's relations with the West. Hammadi will probably be the administrator rather than a major formulator of foreign policy, which is expected to lean toward nonalignment SECRET Page t8 WEEKLY SUMMARY Nov 22, 74 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 -4000, 0L_%..nL. I _1~ LATIN AMERICA TRIES TO EVALUATE QUITO The strong vi 'Os and bla e-placing that wereethe first reactions to the Quito meeting of OAS foreign ministers have begun to subside. Many Latin American governments and opinion makers are now settling into a sober examination of the state of inter-American relations. Serious concern over the divisions that surfaced at Quito is being felt by both the "winners" and "losers" on the Cuba sanctions issue. The judgment that the OAS is in crisis is denied only by a handful of optimists. Some tough policy questions face those governments that want to establish relations with Havana. The Latins had taken considerable pride in the unity they had brought to the new dialogue begun with the US early this year and had come to view their own cohesion as essential to effec- tive dealing with the US on broad issues. They fear that something vital has been lost, but seeing the embarrassment that befell the sponsors of the aborted resolution at Quito, many will be hesitant to make new proposals designed to correct the flaws in the dialogue.. Mexico and Venezuela, however, have gone a little further with their joint sponsorship of what they call a Latin American Economic System, a bloc that would include all Caribbean and Latin states, including Cuba, but not the US. Most countries have seemed cool to the idea, but their search for a useful vehicle through which to advance their interests may attract them more to this approach. Opinion is divided over the reform of the OAS. Some think the organization is so laden with bureaucracy and outworn tradition that re- structuring is a lost cause. Others feel -that a regional organization that includes the US is necessary to any real interplay on issues that involve "responsibilities" of the highly developed countries toward the less fortunate. These believe that reform of the OAS has become a truly urgent priority. The countries that delayed their recognition of Cuba so that the Quito meeting would free them of OAS obligations to the contrary are in a quandary. They seem to sense that it will reflect badly on them to act hastily after Quito failed them, and how and when to proceed are subjects of debate in high councils of government as well as in the media. One report has it that the Vene- zuelans will work for a common position with Colombia, Costa Rica, Ecuador, and Honduras, and would simultaneously announce relations with Havana. Both Quito and Tegucigalpa, how- ever, have denied that they will approach Havana. Cuba in the meantime has been reserved on the outcome of Quito-whether from a sense of diplomatic propriety or because of indecision is not yet clear. It seems likely that the soul-searching and review under way in Latin America will even- tually produce some fresh thinking on inter- American affairs. Most of the governments seem inclined to be constructive and anxious to re- capture a spirit of_consensus. SECRET Page 19 WEEKLY SUMMARY Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 PERU: POLICY DIFFICULTIE,.S l Ub tQ/ )Serious strains in Preside t Velasco's mili- tary government are becoming evident and are likely to have a marked effect on the regime's domestic policies and on certain aspects of its foreign affairs. Already there is evidence that the US is being singled out as a scapegoat for some of the difficulties Velasco is facing. Peruvian plans for dealing with Chile also are apparently being reassessed. Recent disagreements between individual cabinet ministers and between officers in dif- ferent services stem from: ? Velasco's efforts to force a number of high-ranking moderate officers into retire- ment and prevent General Morales Bermudez from assuming the post of prime minister next February; ? indications of widespread corruption in the ministries; ? strong public criticism of the terms of a loan agreement the government recently signed with Japan; ? uncertainty over the readiness of the armed forces to undertake a campaign against Chile. Doubts about the armed forces' prepared- ness for war probably are partly responsible for recent Peruvian attempts to portray an image of friendly neighborliness vis-a-vis Chile. Army Chief of Staff Morales Bermudez met with his Chilean counterpart near the border earlier this month, and troops from both nations this week held a Joint border ceremony highlighted by the planting of an olive tree. The militarily weaker Chileans welcome such opportunities to ease surface tensions, but are unlikely to conclude that the overtures reflect abandonment of Peru's historic revanchist goals. There is no reason to believe that Chilean military leaders are revising their assessment that they are faced with a real danger of Peruvian attack. Chilean army Chief of Staff Bravo reportedly used the meeting with Morales Bermudez to emphasize Chile's determination to "fight to the last man" if necessary. The Chileans regard Morales Bermudez as far more sensible than some of his colleagues, how- ever, and they appear to be hoping that there could be a genuine easing of tensions if he be- comes prime minister. Charges of IJS interference in Peruvian af- fairs are once again being voiced by Velasco per- sonally, through his cabinet, and via the press. While these charges reflect a genuine conviction that the US remains hostile to the Peruvian rev- olution, they are also apparently part of an effort to shift the blame for certain charges that have been leveled at the regime. For instance, in a recent press conference, the President suggested that the CIA might be behind the developing scandal involving the Ministry of Agriculture. Velasco also raised the specter of CIA involve- ment in charges that the government "sold out" in signing the agreement with Japan to finance part of the planned trans-Andean oil pipeline. Pro-government newspapers have echoed these charges and have alleged CIA involvement in Peace Corps activities in Peru. On November 4, the government formally requested that all Peace Corps programs be terminated. Allegations of US involvement in "counter- revolutionary" activity may also be laying the groundwork for further repressive measures against the press and other civilian groups critical of the regime. If the current situation continues, however, Velasco will need more than a foreign scapegoat 25X1 to stave off serious dissatisfaction with his leader- shi This situation will get worse un ess Ve asco is able to restore a sense of unity and purpose to his government. SECRET Page 20 WEEKLY SUMMARY Nov 22, 74 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 SECRET Velasco himself must take a good deal of the blame for the strains in the regime. His blatant efforts to tamper with military seniority pro- cedures and his hypersensitivity to criticism have caused much of the current unrest. In such a situation, and particularly if the corruption and Japanese loan controversies intensify, dissident groups may be emboldened to increase their ef- forts to disrupt the government in an attempt to cause Velasco's ouster. BRAZIL: OPPOSITION ELECTORAL GAINS Iln the wake of a substantial ilctloary in, last wee 's elections, leaders of the nominal opposi- tion Brazilian Democratic Movement (MDB) party are stressing their determination to work constructively with, rather than challenge, the governing system. MDB gains had been expected, but party leaders are surprised at the extent of their success. Although returns are still incomplete, the MDB may win nearly half the seats in the Chamber of Deputies, greatly increase its number of Senators, and obtain control of most of the important state assemblies. Spokesmen for the MDB are seeking to mollify extreme conservatives, especially in the military, who might react by increasing their criti- cism of President Geisel's moderate liberalization efforts. Party president Guimaraes, for example, pointed out that his colleagues will not follow a "negativist" line, while campaign leader Montoro stressed that an MDB victory should be put at the service of national goals, not individual gain. The success of the opposition is in large part the result of widespread discontent among both lower and upper income groups with the rapidly rising cost of living. The government had recently announced a wage boost and the easing of con- sumer credit, but the measures failed to dampen the appeal of voting for the MDB as a form of public protest. The vote may also indicate dis- satisfaction with the closed political system that has prevailed since 1964. President Geisel, who advocates some loosening of the strictures on political activity, allowed the election campaign to become un- usually freewheeling by recent Brazilian stan- dards. Moreover, he has shown no inclination to interfere with the vote count or suppress news of the government setback. Geisel may point to the large turnout of voters and the gains by the MDB-which has called for new policies-as a strong indication that change of the sort he advocates is widely desired. Indeed, he may stress this factor to any among the military who may press for a reversal of the liberalization trend. Finally, Geisel's attitude toward the election may signal a realization, at least on his part, that the military needs to seek a broader base of support now that its chief claim to fame-strong economic performance-is weak- ening fast. SECRET Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927A010900170001-5 Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5 Secret Secret Sanitized Copy Approved for Release 2009/11/09: CIA-RDP79-00927AO10900170001-5