WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A011300080001-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 29
• Document Creation Date: December 21, 2016
• Document Release Date: January 15, 2008
• Sequence Number: 1
• Publication Date: February 20, 1976
• Content Type: SUMMARY

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Secret
Weekly Summary
DOS review completed
Secret
CI WS 76-008
No. 0008/76
February 20, 1976
Copy N2 69
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'The WEEKLY SUMMARY, issued every Friday,-marning by the
Office of Current Intelligence, reports and analyzes signifi-
cont developments of the week through norart on Thursday. It
frequently includes material coordinated with or prepared
by the Office of Economic Research, the Office of Strategic
Research, the Office of Geographic and Cartographic
Research, and the Directorate of Science and Technology-
CONTENTS (February 20, 1976)
MIDDLE EAST
AFRICA
1 Angola: After the Deluge
2 Lebanon: Settlement Announced
4 Soviets Comment on FTAI
5 Morocco-Algeria: Oasis Flare-up
6 Nigeria: Abortive Coup Attempt
7 Syria: Oil Production Recovers
8 Iraq: Diversifying Arms Purchases
9 Kuwait: Loans to Third World
10 USSR: The 25th Party Congress
12 Poland: Constitutional Give and Take
13 USSR-China: Hua's Appointment
14 UK: Tories on the Offensive
14 Soyuz-20 Ends 91-day Mission
18 Hungary: A New Archbishop
18 Unemployment To Persist Abroad
EAST ASIA
PACIFIC
20 China: Teng Under Fire
21 Thailand: Energy Outlook
22 ASEAN: A Summit at Last
WESTERN
HEMISPHERE
23 Ecuador: An Inauspicious Start
24 Argentina: Peron Will Not Run
Comments and queries on the contents of thus
publication are welcome. They may be
directed to the editor of the Weekly
Summary,
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ANGOLA: AFTER THE DELUGE
After more than six months of civil war, the
Popular Movement has gained unchallenged mil-
itary control over the largest and richest of
Portugal's former African territories. Its rivals con-
ceded defeat in conventional combat and
retreated from the field-the National Front into
Zaire and the National Union into a remote area
of southern Angola. The countries that provided
the main support for the Popular Movement's
rivals-Zaire and South Africa-are seeking to
make their own peace with the Movement's
leader, Agostinho Neto. His government in Luan-
da now faces the complex task of consolidating
political control over a traumatized population of
more than 6 million people and of reconstructing
a once-thriving economy that has been shattered
by the fighting.
During the past week, the Soviet-equipped
Popular Movement and Cuban forces largely
completed their occupation of the country's ma-
jor towns and the route in Angola of the vital
Benguela Railroad. They encountered little op-
position from their defeated foes, who melted
away. For now, however, the victors appear to
have stopped their advance well short of the
positions just inside the southern Angolan border
occupied by some 4,000-5,000 South African
troops who are guarding the frontier and protec-
ting the important Cunene hydroelectric project.
National Union president Jonas Savimbi is still
vowing to wage guerrilla warfare indefinitely. He
has established a headquarters at Gago Coutinho,
in southeastern Angola. Some of his forces have
occcupied Calai, near the Namibian border, and
plan to turn it into a major resupply base.
Savimbi's chances of mounting a serious in-
surgency against the Popular Movement appear
dim, however. South Africa, his major backer, is
more interested in trying to secure a stable
Namibian-Angolan border than in harassing the
Popular Movement and is exploring the possibili-
ty of reaching an accommodation with the Neto
regime. Such a possibility was given a boost last
week when Neto's foreign minister stated that his
government "would be prepared to cooperate"
with Pretoria provided it recognizes the Popular
Movement's sovereignty over Angola. Pretoria
quickly announced that it was studying the state-
ment.
The Luanda government has already begun
to tighten its administrative grip over Angola's
major urban and economic centers. Officials of
the Popular Movement, which has always been an
urban-based organization, relate easily with
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SECRET
workers and intellectuals. For the time being, at
least, the Movement probably will leave the rural
population to fend for itself, much as Portugal
did.
Economically, the new regime's first tasks will
be to restore the flow of traffic along the
Benguela Railroad and resume oil production in
the enclave of Cabinda, which was suspended by
Gulf Oil in late December. It will probably rely
heavily on Cuban technicians to operate rail and
port facilities. The Popular Movement has
authorized Nigeria to negotiate on its behalf with
Gulf for the payment of taxes and royalties owed
Angola for production since independence last
November. Such negotiations will have to be
worked out to the new regime's satisfaction
before Gulf is invited to reclaim its concession in
Cabinda.
LEBANON: SETTLEMENT ANNOUNCED
President Franjiyah last weekend announced
political changes that meet most of the demands
of Lebanon's old-line Muslim leaders, yet
preserve the most important prerogatives of the
country's Christian minority. The reforms do not
include the fundamental political changes sought
by the Lebanese left, but they do promise the lef-
tists a variety of more limited political, social, and
economic gains. The Christians' endorsement of
the reforms may win Lebanon at least a few
months of peace.
In his speech outlining the reform package,
Franjiyah sought to balance concessions for the
Muslims with reassurances for the Christians. He
prol6sed the Muslims that Lebanon's constitution
will continue to "evolve by experience" to ac-
commodate needed changes in the political
system, that the government is committed to
social justice, and that the country will never
abandon its "Arab character." At the same time,
the President assured the Christians that the 1943
national covenant will be preserved, that the
Palestinians will be expected to adhere to their
past agreements with the Lebanese government,
and that Lebanon will retain its "sovereignty."
As outlined by Franjiyah, the most important
points of the package provide for:
? Continuing the existing system of
distributing the top political posts; the presi-
dent will be a Maronite Christian, the prime
minister a Sunni Muslim, and the speaker of
parliament a Shia Muslim.
? Equal representation for Christians
and Muslims in parliament and proportional
representation of sects within each major
religion.
? Election of the prime minister by
parliament, instead of his being selected by
the president.
? Transferring some power from the
president to the prime minister; all decrees
and bills will be issued jointly.
? Decentralizing the civil service and
establishing a merit system.
? Drafting a new defense policy and
strengthening the army.
Lebanon's old-line Muslim leaders, especially
Prime Minister Karami, gain most from the agree-
ment. Their major victory is in the increased
power of the prime minister relative to that of the
president. The traditionally dominant Sunni
Muslim politicians are not likely to attempt to use
the greater Muslim representation in parliament
to make that body significantly more powerful
than it has been in the past, primarily because the
reforms, if implemented equitably, would lead to
increased representation for the disadvantaged
Shia Muslims and the Lebanese leftists. According
to press reports, leading Christian and Muslim
politicians are now considering a plan that would
delay the reorganization of parliament by exten-
1) %A1 =1Z1 X/ OI IKAPAAnv Gch Or) 7ti
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ding the life of the existing legislature for one or
two years.
The Lebanese leftists and radical Muslim
religious leaders received no satisfaction of their
fundamental demands: that the Maronite
Christians give up the presidency and that the
religious basis of Lebanon's government be aban-
doned. Nevertheless, they are not likely to try to
spark new hostilities until they see whether or not
the government implements promised economic
and social reforms. I n the near term, at least, some
of the leftists will be satisfied with limited
measures; others will be cowed by the
overwhelming military presence in Lebanon of
the Syrian-controlled Palestine Liberation Army
and by the decision of the major fedayeen groups
to cooperate with the Liberation Army in enfor-
cing the cease-fire.
Leaders of the large Christian political parties
presumably decided that they could accept the
reform package because it perpetuates Christian
control of the presidency and-theoretically, at
least-leaves in force the 30-year-old national
covenant. Even before endorsing the final version
of the reforms, the Christians received a reaffir-
mation of Syria's commitment to guarantee
Palestinian respect for past agreements limiting
fedayeen activities in Lebanon.
The Christians, in theory, will be left with
much less power to initiate public policy after the
reforms are implemented because the president
will be forced to share his authority to issue
decrees with the prime minister. In practice this
will not change much; the fragility of Lebanon's
political system over the past several months has
already obliged Franjiyah to secure Karami's ap-
proval before taking any important step. The
Christians will in any case retain a veto, since the
president can withhold approval of proposals
backed by the prime minister. This is likely to
become important as the Christians attempt to
restrain the more powerful prime ministers, in-
cluding the assertive Karami, who will probably
push for extensive government programs in
education, health, and housing.
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SOVIETS COMMENT ON FTAI
Moscow last week broke its public silence on
recent developments in the French Territory of
the Afars and Issas (FTAI). Several articles in the
Soviet central press replayed Mogadiscio's ver-
sion of the confrontation early this month
between French forces and Somali border in-
surgents in the FTAI. Pravda cited a statement by
the Somali government that claimed the French
had retaliated for the insurgents' seizure of a
French school bus in the FTAI by crossing into
Somalia and bombarding the northern city of
Loyado, "causing numerous casualties."
Pravda also noted Somali President Siad's de-
mand for the complete withdrawal of French
forces from the FTAI and the liquidation of all
military bases there, as well as his call for an
urgent meeting of the UN Security Council to dis-
cuss the latest incident. Tass, meanwhile, replayed
several Western wire service reports that the
French were dispatching reinforcements to the
FTAI and three additional warships to the Indian
Ocean.
Moscow's press treatment does not commit
the Soviets to any particular outcome in FTAI, but
it is nonetheless a clear sign that the Soviets sup-
port the essentials of Siad's policy toward FTAI.
The Soviet ambassador in Somalia said as
much to a US diplomat earlier this month. He im-
plied that Moscow would support a "liberation
struggle" in FTAI if the French try to transfer
power to a government under the control of Ali
Aref, the present local government leader. The
Soviet also said that the USSR hoped Paris would
act in a way that would assure "peace and
stability" in the African horn-which may boil
down to giving Siad what he wants.
One reason for Moscow's public diffidence
over FTAI is that it wants to avoid an open dispute
with Paris. The Soviets are also reluctant to take
any public position that would anger the
Ethiopians, whom they regard as being on a
"progressive" course. Moscow is attempting to
reassure Addis Ababa that Ethiopian access to
Djibouti will not be affected by what the Soviets
regard as a "favorable" outcome in the French
territory. 25X1
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MOROCCO-ALGERIA: OASIS SHOOT-OUT
Fighting flared briefly in the Spanish Sahara
forces clashed at the oasis near Amgala.
the Algerians staged a hit-
and-run attack on a small Moroccan force guard-
ing Amgala on February 14, killing some 30
Moroccans and capturing several others. Algiers
has claimed that only Polisario guerrillas were in-
volved, but Rabat believes that the attack was
carried out by Algerian troops cut off several
weeks ago during the Moroccan sweep into
northeastern Sahara. The Algerians apparently
decided to avenge their defeat at Amgala late last
month before withdrawing across the border.
On February 15, Rabat announced that King
Hassan had sent a personal message to Algerian
President Boumediene, accusing him of again
breaking promises not to use Algerian troops in
the Sahara to fight the Moroccans. Hassan
challenged Boumediene to make known his in-
tentions about Spanish Sahara by either accepting
an internationally guaranteed peace or openly
declaring war on Morocco.
Algiers still appears determined to avoid any
all-out confrontation with Morocco in the Sahara,
although its official denial of any involvement in
the Amgala attack was equivocal. A government
statement said only that as of February 16 no
Algerian army units were present in the Sahara,
leaving it to the Algerian media to deny specifical-
ly that Algerians had participated in the attack on
February 14. The statement reiterated that Algeria
will continue to support the Front fully in its
struggle for independence for Spanish Sahara.
Boumediene remains adamantly opposed to the
Moroccan-Mauritanian take-over of the disputed
territory and continues to insist that a referendum
on self-determination is the only basis for resolv-
ing the dispute. He reiterated this demand in a
letter to all nations on February 17 and called
upon world leaders to help reduce tensions in the
area.
Arab League Secretary General Riad this week
began an attempt to revive the flagging Arab
mediation effort in the dispute. There has been
no visible sign of progress from the mission of the
UN envoy who spent five days in Spanish Sahara
ed by the small numb er of civilians, especially
young Saharans, in population centers under
Moroccan and Mauritanian control. The UN will
probably try to limit its involvement in the dispute
to pro forma consideration of the envoy's report.
At the same time the Moroccans and the
Algerians were having their dustup, Mauritanian
troops were recapturing Ain Ben Tily in northern
Mauritania. The town had fallen to Polisario
forces in late January when the guerrillas
attempted to establish a supply corridor exten-
ding from the Algerian border through the
Spanish Sahara and Mauritania to the Atlantic
Ocean. Moroccan and Mauritanian forces now
occupy all key towns along the major infiltration
and supply routes in the contested areas.
the envoy was discourag-
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NIGERIA: ABORTIVE COUP ATTEMPT
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The motives of the plotters remain unclear.
The statement broadcast by Dimka during his
brief control of Lagos radio said only that
Muhammed's "hypocrisy" had been
"detected"-possibly an allusion to the
assassinated leader's punishment of others for of-
ficial corruption while long guilty of such
following his announcement, the coup leader
complained of corruption in the top leadership,
the recent promotions of senior officers, and
Nigeria's drift to the "left," citing Lagos' support
for the Angolan Popular Movement as an exam-
ple.
Dimka indicated he wanted to restore
General Gowon, who was deposed by Muhamm-
ed last year and is living in Britain. This week the
Nigerian government charged in effect that
Gowon was a party to Dimka's plot, but there is
no evidence that this was the case.
The appointment of Obasanjo was an-
nounced by the ruling 21-man Supreme Military
Council on February 14. To replace Obasanjo as
armed forces chief of staff-the number-two
position-the council named one of its more
junior members, Lieutenant Colonel Yar Adua;
he was also jumped two ranks to brigadier. The
elevation of Yar Adua, a member of a prominent
Hausa family, was reportedly a deliberate attempt
to reassure northern Muslims that the council in-
tends to preserve a regional and tribal balance.
Obasanjo, for his part, will almost certainly avoid
any suggestion of tribal favoritism.
There are indications, however, that
Muhammed's death and Obasanjo's succession
have sparked restiveness among northerners.
Some traditional leaders in the north reportedly
are expressing the view that Muhammed's
assassination shows that Christians intend to
eliminate Muslims from high places. In an attempt
to calm Muslim concern, the government stated
publicly on February 18 that the coup had neither
tribal or religious motivations and that Obasanjo
had also been marked for assassination. Privately,
the government is using northern state governors
Tribal and religious tensions, generally absent
from the Nigerian scene in recent years, appear to
have been rekindled by the assassination of the
head of state, Murtala Muhammed, a northern
Hausa tribesman, during an unsuccessful coup
attempt on February 13. So far, surviving members
of the military government that took power last
July seem united and in control of the situation
and working to defuse tensions. No immediate
changes in Nigerian foreign policy or relations
with the US are expected under Nigeria's new
leader, Lieutenant General Olusegun Obasanjo, a
Christian and member of the Yoruba tribe of
southern Nigeria.
Loyal troops in Lagos easily crushed the coup
attempt made by a group of middle-level officers
led by Lieutenant Colonel Dimka, a Christian and
staff officer at the Ministry of Defense. The coup
was poorly organized, and support for the rebels
was limited to a few units in Lagos and in Kwara
state, where the military governor was murdered.
Dimka managed to escape, however, and is still at
large.
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NOW SECRET
and senior Muslim civil servants to convey the
same message to northern leaders.
Nevertheless, some Hausas have been leaving
Lagos and Ibadan, both predominantly Yoruba
cities, and heading north. Yorubas in that area are
said to be keeping a low profile, remembering the
massacre of southern Ibos in the north in 1966.
Obasanjo's authority within the revamped
council is unclear, but he was a prime mover
behind Lagos' strong support for the Popular
Movement in Angola and the drive to project a
more decisive image of Nigerian leadership in
Africa. He can be expected to continue a hard
line on southern African issues. Recently, at a
foreign policy seminar for senior officers, he
SYRIA: OIL PRODUCTION RECOVERS
Syrian oil production has fully recovered
from the effects of the October 1973 war.
Production and refining capacity are expan-
ding rapidly, and the country is emerging as an
oil exporter.
Crude oil production reached 190,000
barrels per day in 1975, up 50 percent from the
prewar level. While most Syrian crude is of
poor quality and high in sulfur content, new
fields are yielding higher quality oil. Crude
from the newly developed Jibse Field, for ex-
ample, is low in sulfur content. All Syrian
production is exported, mostly to Italy,
Romania, and West Germany, at an average
price of about $9.50 per barrel Total sales in
1975 reached about $650 million, more than
two thirds of total Syrian exports. Syria refines
Iraqi crude for most of its own requirements,
now estimated at 70,000 barrels per day.
Petroleum facilities have been repaired,
and substantial new -construction is evident
throughout the country. A new refinery at
Baniyas, being built with Romanian help, will
triple Syria's crude oil refining capacity. The
suggested that Nigeria should consider using oil
as a lever in pursuit of its objectives.
The abortive coup has spawned widespread
rumors of foreign involvement, especially by the
US because of differences over Angola. During
the week, Nigerian students demonstrated against
the US embassy in Lagos and other US posts as
well as against the British chancery. The Nigerian
government has made no official accusations
against either Washington or London. Despite
differences with the US over Angola, the
government-controlled radio has been
highlighting the recent signing of a major
telecommunications contract with a US firm.
Romanians are reportedly seeking subcontrac-
ting bids from US and other Western
petroleum and engineering firms.
With reserves estimated at more than 2.8
billion barrels, Syrian production could be sub-
stantially increased. To develop these
resources, Syria has begun to turn to Western
firms. Damascus is dissatisfied with the pace of
seismic work being done by Hungarian and
Soviet technicians and with the quality of
Romanian and Soviet drilling and production
equipment. A number of contracts for ex-
ploration have been signed with US firms.
The Asad government has tried to assure
US investors that their interests would be
protected in the event of another war. Most
companies nonetheless are reluctant to go
much beyond making seismic studies and
providing oil field equipment. Damascus itself
has taken a cautious approach in contract talks,
undoubtedly reflecting uneasiness about large
joint ventures that would give Western firms a
solid stake in the economy.
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L-39 jet trainer
IRAQ: DIVERSIFYING ARMS PURCHASES
Iraq is using some of its greatly increased oil
revenues to increase its purchases of arms from
non-Communist sources. Baghdad is trying to
reduce its dependence on Soviet arms because it
fears that Moscow might use arms as a political
weapon against Iraq as it did Egypt. Nevertheless,
Iraq is likely to continue to buy most of its ad-
vanced weapons from the USSR for some time to
come.
Iraq ordered $1.7-billion worth of arms dur-
ing the past two years. About half, mostly am-
munition and support equipment, came from the
West and Yugoslavia. Until 1974, Western
suppliers had sold only about $5-million worth of
arms annually to Iraq.
France is providing almost $500-million worth
of modern arms including Super Frelon and
Alouette helicopters, some armored vehicles, and
the Milan and Harpon antitank missile systems.
Italy, the second largest West European supplier,
contracted to deliver $40-million worth of military
and transportation aircraft and howitzers. Orders
were placed in Belgium for large amounts of am-
munition and communications equipment, in the
UK for Leyland vehicles, and in Spain for 106-mm.
recoilless rifles. Even India agreed to provide
about $35 million worth of aircraft ammunition,
rockets, and napalm. Most of the larger pieces of
ground equipment and aircraft are yet to be
delivered.
Iraq purchased nearly $200-million worth of
equipment from Yugoslavia, mainly mortars, ar-
tillery, ammunition, gas masks, and military sup-
port equipment. Major deliveries from Eastern
Europe included Czech L-39 jet trainers--the first
to a non - Warsaw Pact country-some older L-29
jet trainers, and Czech and Hungarian armored
vehicles and artillery.
Under arms agreements signed with the
Soviets since 1973, Baghdad has received MIG-23
jet fighters, the SA-6 surface-to-air missile system,
OSA II and ZHUK patrol boats, Yevgenia-class
minesweepers, 180-mm. field guns, and the
FROG-7 tactical surface-to-surface rockets. Iraq
became the third country in the Middle
East-after Egypt and Syria-to get the SCUD sur-
face-to-surface missile system. Moscow also rein-
troduced the SA-2 surface-to-air missile system,
which had been delivered in the early 1960s but
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was transferred to Egypt because Iraq did not
have the technical capability to operate it.
Until recently Moscow sold Iraq arms at low
prices on favorable credit terms. Discounts of one
third from list price often were allowed for
weapons systems, and repayments ranged from
five to ten years, at 2 to 2.5 percent interest. Since
1973, the Soviets may have raised their list prices,
dropped discounts, and hardened their repay-
ment terms. Unlike Egypt and Syria, which have
received Arab financial assistance for arms
purchases since the October War, Iraq has suf-
ficient foreign exchange reserves to pay its own
KUWAIT: LOANS TO THE THIRD WORLD
Bilateral Kuwaiti loans to and investments in
the Third World totaled about $1.1 billion at the
end of 1975, up from only $100 million at the end
of 1974. More than 90 percent went to Arab coun-
tries. About 95 percent was made at market rates,
with concessionary loans accounting for the
remainder.
Last year, the Ministry of Finance provided
loans totaling $835 million to Egypt for financing
balance-of-payments deficits and development
projects and to Sudan for asugar refinery. In addi-
tion, more than $100 million was provided to
governmental bodies in Sudan, Zaire, Mexico,
and Brazil through one of the Kuwaiti quasi-
public investment institutions. All these loans
have repayment periods ranging from 5 to 10
years at commercial interest rates.
Kuwaiti investment companies have set up
several foreign joint ventures for specialized in-
vestment. The Arab-Brazil Investment Company,
capitalized at $300 million, is the largest of these
joint venture companies. Smaller ones have been
formed in Egypt, Pakistan, Sudan, Senegal, Mali,
Mauritania, and Mexico. The newest joint ven-
ture-the Pacific Financial Company, which has
Japanese, Canadian, and British investment house
participation-is looking to channel Kuwaiti
money into promising private projects in the Far
East.
So far, the new investment institutions have
done little more than carry out feasibility studies
and furnish capital for local investment banks.
About $9 million has been funneled through joint
ventures. The Kuwaitis have also purchased
several small commercial properties in the Third
World.
In 1975, the Kuwaiti Fund for Arab Economic
Development disbursed $75 million to eight
third-world countries at concessionary rates.
Repayments were extended over 15 or more
years, starting after a few years' grace period at 3-
to 4-percent interest rates. This totally
Kuwaiti-owned development fund was establish-
ed in 1961 to provide low-interest loans exclusive-
ly to Arab countries. In July 1974, its charter was
broadened to cover loans to all developing coun-
tries. Priority is given to projects in such general
public sectors as power, transportation, and
irrigation. The major recipients have been
Bahrain, Egypt, Morocco, Sudan, and North and
South Yemen.
Kuwait is anxious to find more investment
outlets in the Third World but is having problems
identifying viable private projects. Kuwaiti finan-
cial involvement will continue to be inhibited by
red tape, a questionable political environment,
stringent investment laws, and the bleak
short-term economic outlook for most develop-
ing countries.
Kuwaiti commercial loans and investments in
the Third World this year will continue at about
the 1975 level. Kuwait is committed to $900
million in third-world projects. We expect a
decline in Ministry of Finance loans to be offset
by placements through the joint venture com- 25X1
panies. Drawings against the outstanding con-
cessionary loans are expected to increase as work
on projects picks up momentum.
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USSR: THE 25th PARTY CONGRESS
The 25th Party Congress, which opens Tues-
day, is expected to reconfirm General Secretary
Brezhnev and the core of leaders around him and
to reaffirm the basic outlines of their present
policies. Shifts among second-echelon leaders, as
well as some innovations in domestic programs,
are possible. They could offer some clues as to
how policy and the succession problem may
develop in the post-congress period.
Brezhnev appears secure and determined to
continue in office. The policy disappointments at
home and abroad over the past 18 months have
not seriously damaged his status. His health and
stamina have stabilized in recent months, and he
is able to function effectively, albeit at a reduced
pace. Rumor and speculation-some from Soviet
officials-that Brezhnev would soon retire have
abated. At the republic congresses, Brezhnev was
accorded a full portion of praise and honor.
Major changes in the rest of the leadership
are also unlikely. The extremely small turnover of
officials with Central Committee status who have
been elected at the lower party meetings
preceding the congress suggests continued
stability at the top.
The leadership is likely to make some ad-
justments in its membership at the secondary
level. RSFSR Premier Solomentsev and Leningrad
party boss Romanov are among leaders who have
some claim to promotion to full membership on
the Politburo. Departures are also possible. Arvid
Pelshe, 77 and not influential, may retire
honorably. The leadership has avoided
recriminations over the harvest disaster, but it still
may offer up someone-perhaps Agricultural
Minister Polyansky-as a scapegoat.
If a top leader should go, Premier Kosygin
seems to be the most likely. Periodically, reports
have circulated that he would like to retire. His
health has been indifferent recently. Over the
years his governmental apparatus has suffered at-
tacks and incursions from the party, including
Brezhnev, and reports of criticism cropped up
again in December. Moreover, Kosygin is the only
top leader who has an obvious successor, First
Deputy Premier Mazurov. Even so, his departure
is only a possibility, not a probability.
The congress will reaffirm the basic foreign
and domestic policies pursued by the leadership
since the last meeting. In his report, however,
Brezhnev will have to take into account some
policy disappointments. Last year's bad harvest
will force him to take a more sober line on
domestic prospects than on the international out-
look.
The fundamentals of Soviet foreign policy are
not seriously in question, and the overall tone as
well as the specifics of Brezhnev's report to the
congress will convey satisfaction and optimism.
This will be attributed in the first instance to the
growth of the USSR's military capabilities and the
increased respect which must consequently be
accorded Soviet demands throughout the world.
Brezhnev will find good things to say about
disarmament. Clearly a SALT II agreement would
have been a big help, but Brezhnev will still be
able to point with pride to SALT I and the other
agreements reached with the US in 1972. He will
come out for a new SALT agreement and may put
in a word in favor of future reductions, while
repeating his call for the banning of new weapons
of mass destruction. Brezhnev will probably note
that the MBFR negotiations were begun since the
24th congress and call for more rapid progress in
those talks.
The treatment of the US relationship will
probably be relatively sober. The problems of
SALT II, most-favored-nation status, credits, and
Angola have helped create an atmosphere that
would make it very difficult for the General
Secretary, even if he were so inclined, to give a
strongly positive cast to the US relationship. He
will note the increasing activity of "anti-detente
forces" in the US. At the same time, Brezhnev will
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SECRET
want to signal-particularly in a US election
year-that Soviet policy aims at placing detente
with the US back on track.
Brezhnev will probably be positive on the
USSR's progress vis-a-vis Western Europe,
although recent disappointments will give this
part of his report a more subdued tone than
would have been the case a year ago.
China may be a problem. In the past week or
so, Moscow has been unusually harsh in its treat-
ment of Peking; this could be a warm-up for a
blast at the congress. At the 24th congress,
Brezhnev treated China with remarkable
forebearance. One argument in favor of such an
approach this year is the recent leadership
changes in Peking. The Soviets are not optimistic,
but they might strike a moderate pose so as either
to encourage "pro-Soviet" elements in China or,
at least, to avoid giving additional ammunition to
Moscow's enemies there.
Brezhnev will probably emphasize Moscow's
support for the "struggle against imperialism"
and for national liberation movements. Com-
munist successes in Vietnam and Angola will be
prominent, not only because they are
"successes," but because Brezhnev will be seek-
ing to underline the point that detente has not
prevented the Soviet Union from carrying out its
international obligations within the Communist
movement.
The Economy
Most of Brezhnev's ambitious plans to put his
stamp on the country's future at this congress will
come to naught. A long-term economic plan
(1976-90) and a new constitution, which he had
promised for this congress, are evidently far from
ready. His rather vague calls for a comprehensive
rationalization of agricultural and industrial
management have generated little response.
The leadership will try to gloss over present
economic difficulties and to retain the verbal
commitment to a consumer program that has, for
the time being, lost much of its substance. Quality
and efficiency will be stressed over quantitative
growth. Besides calling for more discipline and
AP
Soviet leaders Podgorny, Kosygin, and Brezhnev
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socialist competition, Brezhnev may be tempted
to launch proposals for some modest reorganiza-
tion of management in agriculture or industry to
create a more convincing image of initiative in
these areas.
In the ideological sphere, he will convey the
message that detente and the CSCE agreements
do not mean a slackening of the ideological
struggle or of internal discipline.
The Succession Problem
Although Brezhnev will remain at the helm,
the congress proceedings may give some indica-
tion that the leadership is beginning to address
the problem of succession. Brezhnev has so far
made no move to establish a long-term successor,
and most present candidates lack a good claim to
his mantle. Shifts among junior leaders-for ex-
ample, enhancing party secretary Kulakov's status
or bringing Ukrainian party chief Shcherbitsky to
Moscow-could signal that succession maneuver-
ing has begun and suggest who might be a front-
POLAND: CONSTITUTIONAL GIVE AND TAKE
The Polish parliament last week approved
amendments to the country's 1952 constitution
that bring the document more into line with the
East European pattern. Public discussion of the
amendments again showed both the political
strength of the Polish Catholic Church and certain
intellectuals and the regime's flexibility and
willingness to seek compromise rather than con-
frontation with its critics.
The amendments were first unveiled last
September, and in the ensuing months a debate,
often heated, developed over several of the
proposals. Numerous petitions were circulated
among intellectuals and then sent to party and
state leaders. Stefan Cardinal Wyszynski devoted
three sermons to the amendments, and church
officials lobbied hard behind the scenes.
The regime backed away from some of the
more politically sensitive formulations, but held
firm on the need for several basic changes. The
revised constitution thus, now declares Poland to
be a "socialist state" rather than merely a people's
democracy, but the country will continue to be
known as the Polish People's Republic.
Elsewhere, the constitution breaks new ground
by citing the party as the "leading political force"
in Polish society. The church insisted on adding
the word "political" to avoid giving the impres-
sion that the party is the leading force in all sec-
tors of life. Compromise language also softened
the linkage between a citizen's rights and duties
as well as Poland's relationship with the "socialist
commonwealth." Moreover, the regime agreed
to delete a clause that would have made "misuse"
of religious freedom a criminal offense.
This remarkable process of give-and-take
shows that the Gierek leadership as well as its
critics know their respective strengths and
weaknesses. Polish church officials have indicated
their grudging willingness to accept the changes,
thereby implicitly acknowledging that the regime
holds the levers of power to ram any change it
wants through the parliament. Continuing pop-
ular tensions brought on by economic conditions,
particularly the specter of price hikes for food and
shortages of consumer goods, also undoubtedly
contributed to the leadership's willingness to
compromise. Gierek is keenly aware that a con-
frontation with the church and intellectuals
would deflect attention from critical economic
tasks.
During the course of the nationwide debate,
the government's critics were divided into those
willing to reach a compromise and those who,
"on principle," opposed all the changes. Now
that the amendments have been adopted,
however, the regime may decide to be less gentle
should the more radical opponents misinterpret
the compromises as weakness and try to harass it
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USSR-CHINA
I Z_
Soviets Approve of Hua
The Soviet media have reacted favorably to
the appointment of Hua Kuo-feng, whom they
term a "moderate," as China's acting premier. A
Soviet embassy official in Peking has commented
that one point in Hua's favor is that he has no
specific history of "anti-Sovietism."
Moscow's coverage of the new wall poster
campaign in Peking suggests dismay over the
ijparent show of leftist strength. Although not
Hua Kuo-feng
U Pi
mentioning Vice Premier Teng by name, one
broadcast noted that the new campaign seemed
to be aimed at rehabilitated cadre without whom
China's economy and administration could not
function. The Soviets do not like Teng or the lef-
tists, but Teng, in contrast to the leftists, is at least
a known quantity and an adversary who the
Soviets believe appreciates the power balance
between China and the USSR.
Despite reservations about what is now
happening in China, the Soviets still seem inclin-
ed to see a brighter side for them. A commentary
in Pravda last week referred to Hua's promotion
as a sign that the Chinese "moderates," despite
the fulminations of the leftist-controlled
propaganda organs, are "gaining currency." The
same commentary also explicitly referred to
"representatives" of the Chinese military es-
tablishment who were linked to the moderates.
Moscow seems especially sensitive about its
image vis-a-vis China now that the party congress
is close at hand. Three times in recent weeks the
Soviets have denied the implication of a Chinese
broadcast in early February that there had been
trouble along the Sino-Soviet border opposite
China's Sinkiang Province. Tass labeled the
broadcast a lie from beginning to end.
The Soviet denials were doubtless aimed at
several audiences. For the Soviet public, it was in-
tended to reassure. The denial came only three
days after Soviet television carried a rare
documentary on China that played up the
allegedly militaristic nature of Mao's domestic
and foreign policies. For the West, the denial was
aimed at heading off speculation that the
Sino-Soviet dispute is intensifying or that Moscow
is putting pressure on China during the succes-
sion period. For the Chinese, the message seemed
to be that the Soviets will not abet those in China
who want to exaggerate the Soviet threat for their
own political purposes. All the denials noted that
the Chinese propagandists have in the past
resorted to these kinds of "concoctions" when
there was political turmoil in Peking.
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UK: TORIES ON THE OFFENSIVE
The Labor government faces the prospect of
more aggressive opposition by the Tories, who
seem ready to challenge the government
vigorously on a number of issues during the
current session of Parliament.
Until recently, Labor usually won key con-
tests because the Tory leadership hesitated to at-
tack the government on anything but a rhetorical
level. Last week, however, the Tories pulled out
all stops and produced an almost complete turn-
out of Conservative MPs in an attempt to defeat
the government on a controversial trade union
bill. The Tories even brought back their European
Parliament representatives from Strasbourg.
Despite this more aggressive behavior, Labor
handily turned back the Conservatives' first
all-out parliamentary maneuver in over a year.
The effort failed, even though the Conservatives
were joined on four separate votes by an assort-
ment of Liberals, Ulster Unionists, and Scottish
Nationalists, because Labor's factions closed ranks
to support the government. The only defections
were two Laborites currently under criminal in-
dictment, one of whom has voluntarily dis-
qualified himself from parliamentary activities un-
til his legal problems have ended.
SOYUZ-20 ENDS 91-DAY MISSION
The unmanned Soyuz-20 spacecraft
separated from the Salyut-4 space station on
Monday and returned to the USSR after 91 days
in orbit. This mission was very likely a prelude
to the launch of a manned spacecraft that will
probably attempt to establish a new record for
manned space flights.
Soyuz-20 was launched on November 17
and docked with the space station two days
later. There is no indication that new systems or
operational techniques were tested, but the
Soviets have announced that biological ex-
periments with different plants and living
organisms were conducted. The spacecraft was
pressurized to sea level conditions indicating
The Tories had more luck later in the week as
Labor floor managers in Commons let down their
guard. As a result, the government suffered
harmless, but embarrassing, defeats on two
relatively insignificant bills.
While the Conservative victories were a
fluke, the cumulative effect of last week's
aggressive opposition performance was an impor-
tant psychological victory for the Tories. They
probably did not expect to topple Wilson, but
their effort served to reinforce Margaret
Thatcher's leadership with the party rank and file,
who have probably felt somewhat uneasy about
the lackluster performance of Tory MPs
throughout most of 1975.
The Conservatives will continue to assert
themselves in the months ahead, but barring
massive defections from the Labor left, the op-
position is not likely to be able to defeat the
Wilson government on any major issues. Tory
successes on minor legislative matters, however,
serve as a warning to Labor leaders to be alert to
an opposition that will continue to seek oppor-
tunities to embarrass the government, which has
only a one seat majority in Parliament.
that one of the mission's objectives was to test
life support systems for a lengthy manned mis-
sion. The longest Soviet manned space mission
to date was conducted last year when the
Soyuz-18 crew remained in orbit for 63 days.
No major problems developed during the
flight.
In view of the apparent success of the
Soyuz-20 mission, the Soviets, after
replenishing or replacing the Salyut-4 space
station, will probably attempt to launch a
manned spacecraft within the next few months.
That mission will probably last about 90 days
and thus set a new record for manned space
flights. The US Skylab-3 crew was in orbit for 84
days in 1974.
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THE SOVIET PACIFIC FLEET
The position of the Soviet navy in Far Eastern
waters has been getting considerable attention
lately in South Korean and Japanese newspapers.
The papers were reacting to recent congressional
testimony by the US Chief of Naval Operations.
The Soviets are the strongest naval power in
the Sea of Japan. The USSR's Pacific Ocean fleet
over the past few years has been strengthened by
the addition of newer submarines and surface
ships. It now has about 110-submarines, 60 major
surface ships, and about 325 naval aircraft, mostly
based along the Sea of Japan. Much of the Soviet
naval activity in the Sea of Japan is easily detected
by the South Koreans and Japanese. Soviet surface
ships leaving this sea and moving to stations in the
Pacific and the Indian oceans, for example, must
pass through straits bounded by Japanese or
South Korean territory.
Soviet naval bombers, as well as recon-
naissance and antisubmarine warfare aircraft, are
frequently in the air over the Sea of Japan and ad-
jacent waters. Last September, the Japanese
Foreign Ministry lodged a protest with Moscow
over Soviet violations of Japanese airspace. Dur-
ing their infrequent visits to the Sea of Japan, ma-
jor US surface ships are kept under nearly cons-
tant surveillance by the Soviets.
North Korea's present naval superiority over
the South makes Seoul sensitive to any apparent
diminution of US strength in the Sea of Japan. The
South Korean press has recently pointed out that
the Korean war ended successfully only because
the high seas were under US control. The in-
ference is clear that this might not be the case if
another war breaks out on the peninsula.
At least one newspaper offered a remedy,
urging Seoul to improve its antisubmarine warfare
capabilities and build a submarine fleet to match
North Korea's. Seoul is already taking steps to im-
prove its antisubmarine capabilities. It is relying
heavily on ship- and shore-based helicopters and
fixed-wing aircraft. The South Koreans had con-
sidered acquiring their own attack submarines to
counter those of the North, but-after discussions
with senior US officials-chose instead to develop
air and surface antisubmarine techniques.
Seoul appears not to have completely aban- 25X1
doned the idea of acquiring submarines, and the
recent press stories may be inspired in part to
keep this option open.
25X1
...and in Japan
The implications of the Soviet presence in the
Sea of Japan are not as serious for Tokyo as they
are for Seoul, but the Japanese, too, are concern-
ed about the impact of any apparent erosion of
US military strength in the Far East. Japan's modest
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navy is oriented toward coastal defense, with an-
tisubmarine warfare a major focus of naval
operations. The Japanese are modernizing their
antisubmarine warfare capability, and defense of-
ficials acknowledge that future defense planning
may have to include provisions for a greater
Japanese role in protecting key sea lanes near
home.
The current scandal in Tokyo over alleged
payments to Japanese officials by the Lockheed
Corporation, however, has delayed the
goverment's plans for improving its antisub-
marine warfare forces. Tokyo had decided to
purchase more than 100 antisubmarine aircraft
from Lockheed, but the government has an-
nounced that the decision is now under review.
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HUNGARY: A NEW ARCHBISHOP
The Vatican's appointment last week of a
successor to the late Jozsef Cardinal Mindszenty
as Archbishop of Esztergom will improve its
relations not only with Hungary but with other
East European states as well.
The new Archbishop of Esztergom-tradi-
tionally the Primate of Hungary-is Laszlo Lekai,
a 65-year-old bishop who at one time was
Mindszenty's secretary. Lekai, who will clearly
never match his mentor's outspoken perform-
ance, has apparently not been a member of the
regime-sponsored "peace priest" movement
and has quietly worked in the lower church
ranks for most of his career. Budapest un-
doubtedly hopes that he will provide a model of
church-state cooperation that will help erase
the bitter anti-communist legacy left by
Mindszenty. The Vatican, for its part, wants to
see the church in Hungary strengthened, but
without controversy or collaborationist over-
tones.
Both sides have been cautiously optimistic
about diplomatic ties, which, if established, would
be the Vatican's first formal relations with a War-
saw Pact country. Budapest probably calculates
that diplomatic relations would provide useful
evidence of its commitment to the Helsinki sum-
mit accord and would also be a popular move
on the domestic front. Party leader Kadar will,
however, proceed with the measured delibera-
tion that has marked his foreign policy.
The Vatican-which has cautiously been
seeking improved relations with Eastern
Europe-will probably want to secure other gains
for the church in Hungary before entering into
formal relations. The Holy See may also feel that it
would be politically imprudent to do this at a time
when the Vatican has stiffened its opposition to
cooperation between the Communists and other
parties in Italy.
The Vatican may deem it more appropriate to
establish diplomatic relations with Poland first.
The Polish church is the largest and the most
powerful in Eastern Europe and Warsaw has es-
tablished a stronger dialogue with the Holy See
than has Budapest. Any Polish-Vatican move
toward formal ties, however, must take into ac-
count the views of Polish Cardinal Wyszynski,
who is anxious to preserve his prerogatives as
primate of Poland and to serve as the conduit for
any contacts between the Polish government and
the Vatican. 25X1
UNEMPLOYMENT TO PERSIST ABROAD
In six of the major developed coun-
tries-Canada, West Germany, the UK, France,
Japan, and Italy-economic recovery will
probably not be sufficient to make sizable inroads
into unemployment this year or next. Govern-
ment reluctance to take strong stimulative
measures-in the face of persistent inflation and
mounting budget deficits-will likely prevent a
rapid recovery. In Western Europe, large-scale
unemployment may well persist into the 1980s,
but Japan and Canada may experience labor shor-
tages over the next decade. If this assessment
proves correct, political pressures on variousWest
European governments to adopt vigorous
re-employment measures will mount.
Taking the six countries as a group, un-
employment in 1975 affected over 5 million per-
sons, more than 2 million above the previous
highs in the 1960s and 1970s. Furthermore, the
number of persons on short-time work schedules
multiplied rapidly.
? Canada had the highest unemploy-
ment rate, some 7 percent of the labor force
in 1975.
? In West Germany, the 4.2-percent
rate was five times the average for 1963-73.
? The 3.5-percent rate in Britain ex-
ceeded peaks of 1972 and 1974 when coal
strikes severely curtailed employment in the
winter months.
? The 3.7-percent rate in France ex-
ceeded by 2 percentage points the rate
posted in 1968 when economic activity was
disrupted by riots and demonstrations.
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? Japan, even with its tradition of
lifetime employment, saw unemployment
rise to 1.9 percent of the labor force;
joblessness is particularly severe among
youth and the less educated.
? Italy, through extensive use of
short-timing, held down unemployment
rises better than the other three West Euro-
pean countries; even so, the average 1975
rate of 3.6 percent was close to the record of
the past 15 years.
Given the high level of outright joblessness
and the large amount of underemployment, a
return to anywhere near pre-1974 unemployment
levels is unlikely this year or next. In West Ger-
many, Britain, and Italy, employment is likely to
continue to decline this year as firms more fully
utilize workers already on payrolls. In 1977, these
countries seem likely to post only slight gains in
employment at best. If, as seems probable, infla-
tion accelerates in 1977, governments will in-
stitute restrictive policies; these will prevent a
sharp strengthening in recovery or lessen its dura-
tion. Consequently, unemployment is expected
to rise in Italy and Britain; it may hold steady in
West Germany because of an expected exodus of
300,000 foreign workers this year.
Some growth in employment is expected in
the other three countries in 1976 and 1977.
Canada seems likely to achieve the strongest gain,
2 percent in each year, while gains in France and
Japan will be at or below 1 percent per year. Only
in Japan will employment increases outstrip labor
force rises.
The most severe unemployment pressures
seem likely in West Germany, Britain, and Italy.
From 1960 through 1975, all three of these coun-
tries have had almost no change in employment.
In this period, the labor force did not grow. In the
next 10 years, however, growth of the
working-age population will accelerate strongly,
particularly in 1981-85. The number of young peo-
ple entering the labor force will remain high, and
exits from the labor force will decline as the age
group depleted by World War 11 passes into
retirement. In France, a less pronounced
acceleration of working-age population growth,
combined with a stronger growth trend in
employment indicates joblessness will be only
slightly higher than in the decade before the pre-
sent recession.
The projected unemployment rates, and par-
ticularly the high level of unemployment among
young people, promises trouble for West Euro-
pean governments and societies. To some extent,
the working of the labor market will alleviate the
problem; for example, the recession has already
led to an exodus of foreign workers, mainly
Greeks, Spaniards, Yugoslavs, and Turks, from
West Germany and France. A continuation of this
exodus would clearly ease the unemployment
problem in West Germany and France, but it
would aggravate unemployment and balance-of-
payments problems in the workers' home coun-
tries.
In West Germany, unemployment will be an
issue in the federal election this October, in part
because there are few other economic problems.
Chancellor Schmidt is trying to defuse un-
employment as the issue by a job-training
program designed to benefit 120,000 young Ger-
mans, an age group hit particularly hard.
In France, the government, which does not
face an election until 1978, has concentrated on
fighting inflation and allowing unemployment to
rise. While the left has attempted to seize on the
issue, the workers at large have not yet been will-
ing to take to the streets. French President Giscard
is clearly counting on international economic
recovery to pull up the French economy. It is our
judgment, however, that even with moderate
economic recovery, French unemployment may
remain high throughout this decade.
In Britain, Prime Minister Wilson has also
decided to bring rising prices under control
before taking significant measures to stimulate
the economy and create jobs. So far, this course
has not encountered heavy resistance from the
labor unions because the high level of unemploy-
ment makes workers cautious. Now however, un-
ion leaders are beginning to grow restive, and if,
as could well occur, unemployment shows no
signs of substantial abatement, the government
and the unions could clash.
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CHINA: TENG UNDER FIRE
Teng Hsiao-ping, China's erstwhile successor
to chou En-lai as premier, has come under inten-
sified attack since the designation earlier this
month of Hua Kuo-feng as "acting premier." In
an apparently coordinated effort, the official
media and political wall posters, appearing mainly
in universities, have accused Teng of reversing the
policies of the Cultural Revolution, forming
"cliques" around himself, splitting the party cen-
tral committee, and promoting economic prog-
ress at the expense of politics.
These attacks are a reaction to the great
power Teng accumulated after returning from the
political exile imposed on him in the Cultural
Revolution a decade ago. His various detractors
may have different goals in mind in promoting
these attacks, and for that reason it is difficult to
predict what eventually will become of him. Some
of his opponents undoubtedly want to purge him
again if only because he represents everything
they tried to eradicate during the Cultural
Revolution. Others, who rank just below Teng in
political standing, may be willing to settle for a
reduction of his power if some of that power falls
into their hands. There is also the question of
policy, and there presumably are differences
within the leadership over what policies to pursue
and at what pace.
Some in the leadership probably recognize
that Teng's ouster would leave thousands of other
rehabilitated officials at all levels of the Chinese
hierarchy vulnerable to similar treatment. Should
widespread attacks on rehabilitated officials oc-
cur-and there is evidence that at least two other
lower level officials are being criticized-the
result would be political turmoil and perhaps
even violence throughout the country. For that
reason alone, some officials may be opposing
drastic action against Teng. Similar considerations
may have come into play when another top party
official came under severe attack in 1974 and was
eventually demoted from a party vice chairman to
an ordinary member of the Politburo. The demo-
tion apparently silenced his critics.
Although Teng has been denied the
premiership, he apparently has not yet lost any of
his party, government, or military positions. The
Chinese Foreign Ministry has said he remains a
vice premier in government, and the Ministry of
Defense has confirmed that he is still chief of staff.
Most Chinese officials abroad are confident that
he also retains his high party position. They have
obviously received no official word that Teng is
politically finished. In fact, most Chinese officials
abroad who have offered an opinion on Teng's
current troubles see the balance of power in the
leadership as clearly favoring the pragmatists
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associated with Teng. Although they may not
have access to inside information and may be bas-
ing their judgment on Teng's strong showing last
year-and on the fact that many of his supporters
are now in important posts-it is perhaps signifi-
cant that they are for the most part optimistic
about Teng's future and do not expect foreign or
domestic policy to swing to the left as a result of
the current situation.
A large party meeting convened shortly after
Chou En-lai's death, presumably to choose a new
premier, apparently broke up early without
reaching a decision. It was left to the ruling Polit-
buro to designate an acting premier. The relative-
ly few appearances by Politburo members in re-
cent weeks suggest the Politburo may still be
meeting, with Teng's status likely on the agenda.
Teng's image has clearly been tarnished by the at-
tacks on him, but should he survive his current
troubles, he will still be a force-albeit somewhat
chastened-to be reckoned with. In that event,
those who are currently orchestrating the effort
to oust him may themselves fall on political hard
times
THAILAND: ENERGY OUTLOOK
Government plans for eventually reducing oil
imports have been set back by failure to find com-
mercially exploitable quantities of oil in the Gulf
of Thailand. Further exploration has been
hindered by the uncertain political environment
that followed the fall of Indochina. Thailand will
have to continue relying heavily on imported oil,
mostly from Middle Eastern suppliers.
Oil consumption grew 19 percent annually
during 1965-73 but declined in 1974-75 because of
sharply higher prices, which the government
passed on to consumers, and the cessation of In-
dochinese military operations. We expect oil im-
ports to grow very slowly over the next five years,
not rising much beyond the record 151,000 barrels
per day of 1971
The Thai government has until recently relied
mainly on price changes in adjusting to the higher
costs of imported oil. Prices have been raised on
petroleum products and electricity to reflect ac-
tual costs to consumers. Subsidies on diesel and
other refined products designed to stimulate
economic development have been eliminated.
The government has restricted commercial and
street lighting and has raised taxes on energy-
consuming appliances. Because of its heavy
reliance on oil, industry has been particularly
affected by the higher prices. Industrial produc-
tion fell off sharply, and the growth of real gross
national product slowed from 10.3 percent in 1973
to 3.3 percent in 1974. Oil price rises have also
been a major factor in Thai inflation and conse-
quent labor unrest. The latest rise in OPEC prices
in October 1975 has not been passed on to con-
sumers for fear of political repercussions before
the April elections.
The government has sought to exploit
available domestic energy sources by converting
some power plants to lignite, but this saved less
than 3,000 barrels per day in 1974. An aggressive
diplomatic search for new oil suppliers has
resulted in small contracts for Chinese diesel and
crude. Thailand is currently attempting to obtain
more oil at favorable prices from neighboring In-
donesia in order to reduce dependence on Mid-
dle East oil.
Thailand is utilizing less than one third of its
hydroelectric power potential. The government is
not prepared to provide the massive investment
in dams and equipment needed to boost capacity
within the next 3 to 5 years. Nuclear power plants
are in the planning stage; they will produce less
than 1 percent of energy requirements when they
become operative in 1982. Shale oil deposits, es-
timated to contain 1.8 billion barrels of oil, could
be developed within 10 years if technology and
prices make extraction commercially attractive.
The one bright spot resulting from exploration in
the Gulf of Thailand was the discovery in 1974 of a
natural gas deposit in the Gulf estimated at 1
trillion cubic feet, which could supply 10 percent
of Thai energy needs by 1985.
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Indonesian President Suharto, who will be the host
ASEAN: A SUMMIT AT LAST
After nine years of halting development and
several false starts toward a summit meeting, the
Association of Southeast Asian Nations (ASEAN)
will hold its first summit in Bali next week. The
agreement of the five leaders from Malaysia,
Singapore, Indonesia, the Philippines, and
Thailand to meet together and to issue a common
declaration is itself a major achievement con-
sidering the conflicting national outlooks and the
personal animosities that exist between some of
them. The brief history of the association has
been marked by the frequent indifference of
some members to the concerns of the others, and
a common view of regional cooperation has been
slow in developing.
Conflicting reactions to the fundamental
political and security changes that have occurred
in the region over the past few years constitute
one general line of division within ASEAN. The
mainland states of Malaysia and Thailand well
before the end of the Indochina war began to see
the value in a more evenly balanced foreign
policy based on rapprochement with China and,
if possible, with their Indochinese communist
neighbors.
Indonesia, however, has been far more in-
terested in promoting itself as a natural bulwark
against further communist expansion in the
region. Jakarta was unhappy with the decisions by
Malaysia, Thailand, and the Philippines to es-
tablish diplomatic relations with China and has
adamantly resisted any suggestion that ASEAN's
doors be opened to the Indochinese states.
Instead, Jakarta, with little regard to Thai and
Malaysian sensitivities, has been pressing for
mutual security understandings within the ASEAN
framework that would inevitably carry anti-com-
munist connotations.
Singapore, with support from the Philippines,
has been actively promoting increased economic
ties among the ASEAN nations and has recently
stepped up efforts to form an ASEAN free trade
area. Indonesia, the most populous and
economically backward of the ASEAN states,
views Singapore's motives as self-serving and
argues that a tariff-free arrangement would lead
to Singaporean domination in area markets for a
wide range of consumer products. Even gradual
reductions in tariffs for selected commodities are
likely to be opposed by Jakarta at Bali.
Ina move to establish a permanent head-
quarters and secretariat in Jakarta, the members
have informally agreed to name an Indonesian to
be the first secretary general.
Paae 29 WFFKI V QI I A AAOV C:-k On -7r_
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I `7
ECUADOR: AN INAUSPICIOUS START
Ecuador's new supreme council of govern-
ment already appears headed for trouble.
Minister of Natural Resources Rene Vargas' plan
to alter the current modus vivendi with the Tex-
aco-Gulf petroleum consortium is facing the
government with a potentially disastrous
problem. Since taking over the ministry on
January 11, Vargas, under the guise of expanding
petroleum production and exploration, has been
trying to raise the price for Ecuadorean crude and
purchase a majority voice for the government in
the consortium.
Both schemes as currently envisioned are un-
acceptable to the consortium, which has
threatened to sell out completely rather than bow
to Vargas' demands. As an alternative, the com-
pany has offered to operate the facilities and
market the oil on a service contract basis, but
Rene Vargas
agreement would be difficult to reach with Vargas
in control. Admiral Poveda, president of the
supreme council of government, has called for
talks between the two parties. In the event that
the consortium pulls out, or alternatively, if
Ecuador is able to purchase a controlling interest,
the political and economic prospects of the coun-
try will be eroded.
Nationalizing Texaco-Gulf appeals to Vargas
and apparently to General Duran, the army
member of the triumvirate. The action also is ap-
parently favored by certain colonels within the
army who support Vargas and forced his appoint-
ment on an unwilling Poveda. These colonels
appear to have strong influence on the ruling jun-
ta and may have enough power to veto certain
appointments or policies.
Admiral Poveda recognizes that Ecuador
lacks the know-how to run the petroleum fields
or market the product. Despite his misgivings
about Vargas and his plans for the petroleum in-
dustry, however, Poveda is in a weak position to
challenge Vargas head-on. The navy is the junior
service in Ecuador and is no match for the army in
a showdown. Moreover, if the matter were put to
a vote within the supreme council of government,
Poveda almost certainly would lose to his two
colleagues. Poveda is probably aware that his
position is weak and knows that as long as Vargas
remains in his powerful position, the chances for
reaching an accommodation with Texaco-Gulf
are slim.
Vargas' actions are likely to diminish the
prospects of further foreign investment in the
petroleum industry, magnifying the country's
severe economic problems. Leaders of the coun-
try's civilian opposition have already questioned
the triumvirate's competence and called for a
return to democratic rule. As they become more
aware of Vargas' machinations they will begin to
oppose the military rulers more forcefully. ^",I
Pang ',o 1A/PPVl V cl Ir A A A OV
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ARGENTINA: PERON WILL NOT RUN
President Peron's announcement on
February 18 that she will not seek re-election
appears to have eased the pressure for her im-
mediate ouster. In a brief address to the nation,
she declared she was "not interested in running
for the next constitutional term." She again re-
jected, however, the idea of stepping down
before her current term expires in May of next
year, citing an "historical mandate" to complete
the term. To step down, she said, would only play
into the hands of the left and cause "popular dis-
ruption."
The President was forced to make the an-
nouncement when the Peronist labor movement
and members of her own party threatened to join
her opponents in protesting controversial moves
she had made earlier in the week. Peron had ad-
journed congress, closed down a critical
newspaper, and called for major revisions-of the
constitution.
Peron sought to head off a move by congress
to declare her "unable" to carry out her presiden-
tial duties. Top labor leaders, increasingly at odds
with the President, were reportedly giving serious
consideration to supporting such a motion.
Peron's declaration that she will not run for elec-
tion should take the steam out of this effort.
Indeed, the government late on Wednesday an-
nounced it would reconvene congress next week.
Top Peronist party officials, apparently satisfied
with the President's latest moves, said they "fully
support" her.
Military leaders, eager to avoid the need to
intervene directly, undoubtedly added to the
pressure on the President in the last few days.
That she has yielded even partially comes as a
relief to the officers, who, though apparently
poised to make a move, nonetheless have con-
sistently expressed their preference for a civilian
President Peron at recent meeting with labor leaders
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