WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A011300090001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 29
• Document Creation Date: December 21, 2016
• Document Release Date: January 22, 2008
• Sequence Number: 1
• Publication Date: February 27, 1976
• Content Type: SUMMARY

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State Dept. review completed
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Secret
Weekly Summary
State Dept. review
completed
Secret
CI WS 76-009
No. 0009/76
February 27, 1976
Copy N2 70
2 .~ l 1~ 25X1
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Intelligence, repots oind r1ria.1-- 'e= si ri
material coordinated
Office of Geogrcphik
and the Directorate of S=-ience o-ad
rwrsdray. It
prepared
Strategic
Iraphic
noiogy.
SECRET
CONTENTS (February 27, 1976)
EUROPE
1 USSR: Brezhnev Reports
4 USSR: Arms Transfers
7 CEMA: Looking to the West
9 Iceland: Pondering the Next Move
10 Italy: Compromise Buys Time
11 Spain: Wooing Catalonia
12 Cyprus: No Breakthrough
EAST AS I A
PACIFIC
13 Japan: The Lockheed Connection
14 Japan: A New Export Drive
14 China: Leadership Struggle Goes On
15 Laos: Asking for Help with Thailand
MIDDLE EAST
AFRICA
16 Spanish Sahara: New Masters
17 Angola: Beginning To Govern
18 Ethiopia: More Arrests
19 Bangladesh-India: Still Uneasy
WESTERN
HEMISPHERE
21 Argentina: Last Chance for Peron
21 Brazil: Harnessing Security Forces
22 Colombia: Violence Increases
Comments and queries on the contents of this
publication are welcome. They may be
directed to the editor of the Weekly
Summary,
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USSR: BREZHNEV REPORTS
General Secretary Brezhnev opened the 25th
Soviet party congress in Moscow on February 24
before some 5,000 party delegates and 103
delegations of communist and leftist parties from
96 foreign countries-the largest domestic and in-
ternational audience ever assembled at such a
conclave. The congress, though a well-orches-
trated ritual not expected to produce surprises,
nevertheless serves to review the party's perform-
ance since the last such session in 1971, and
sets benchmarks and goals for the next five
years. While Brezhnev will stay at the helm, the
elections of the party's ruling bodies at the end of
the meeting may provide glimpses of relative
movement among the rest of the leadership.
Brezhnev gave an impressive performance;
his stamina, enunciation, and aura of command
seemed better than at any time in the past two
years, according to US embassy observers. He
paid unusual attention to the foreign policy por-
tion of his report, which was realistic and tough-
minded in substance. His essential theme was
continuity-that the USSR's detente policy has
been successful and will continue into the future.
Brezhnev pulled few punches regarding the
"complications" of Soviet policy, particularly the
difficulty detente has run into in the West. There
were few aspects that he addressed in which he
did not mention the negative side of the ledger.
Brezhnev offered a measured assessment of
relations with the US, balancing the ac-
complishments of the past five years with
reminders of problems clouding prospects for the
future. The Soviet party chief cited a reduced
danger of nuclear war as the "main outcome" of
the "generally positive" development of relations
in recent years. He rated the prospects for further
bilateral progress, "provided realism prevails," as
good.
Brezhnev repeated the familiar Soviet com-
plaint that "influential forces" in the US are seek-
ing to hamper detente and derided the notion of
a Soviet threat to the US. He gave no ground on
Angola and even argued that it was US "interven-
tion" there that had strained US-Soviet relations.
His sharpest criticism was directed at
"discriminatory" US trade measures.
On SALT, Brezhnev pressed for implemen-
ting the Vladivostok agreements of late 1974 but
made no prediction on the outcome of the
current negotiations. He attempted to portray the
US as not fully committed to arms control because
it rejected Soviet proposals to ban Trident, the B-I,
and similar, unspecified Soviet systems. In like
vein, he invited the US to join the USSR in not es-
tablishing military bases in the Indian Ocean.
Brezhnev's treatment of Peking was short and
tough. He said almost nothing about bilateral
relations and even omitted standard references to
an eventual rapprochement, implying that the
Chinese would have to make all the concessions.
He went a step further in outlining the Maoist
heresy, saying that it was no longer just "incom-
patible" with Marxism-Leninism, but was now
"hostile" to it.
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With respect to the rest of Asia, Brezhnev said
the usual positive things about the "victory" in In-
dochina, had many good words for India, and
suggested that China has replaced the US as the
main obstacle to better Soviet-Japanese relations.
Europe
Brezhnev's assessment of relations with the
West European countries was generally positive,
but far from euphoric. He spoke at some length
about the contributions of the European security
agreement, but without great enthusiasm. He
pledged Soviet efforts to implement the agree-
ment but alleged that the West is using it to make
mischief in the "socialist" community.
Brezhnev spoke at considerable length about
MBFR, providing substantial details of the reduc-
tion proposal presented by the Warsaw Pact on
February 17. While expressing continued interest
in reaching an agreement, he gave no hint of any
willingness to modify the Pact's basic negotiating
approach.
notes Soviet leadership of the communist world.
This clearly was meant as a retort to the French,
Italian, and other parties that have been making
increasing efforts to emphasize their
"independence" of Moscow. Brezhnev also
stated unequivocally that there can be no com-
promise on views that contradict communist
ideology, a probable reference to the French par-
ty's abjuring the "dictatorship of the proletariat."
The General Secretary indicated that Moscow
intends to press ahead on the long-delayed Euro-
pean communist party conference and even
raised the idea of holding a world communist
conference.
On the controversial question of proper
communist tactics, Brezhnev apparently
attempted to keep both the hard and soft liners
happy. Thus, he said that the "tragedy" in Chile
should not be interpreted to mean that the
peaceful route to revolution is not appropriate if
conditions permit. Chile did demonstrate,
however, that a revolution must know how to de-
fend itself.
In discussing the Middle East, Brezhnev in-
troduced two long-dormant themes in an
otherwise standard litany-
@ He said a way should be found to
end the arms race in the region, adding,
however, that discussions on arms
limitations could not precede a general
settlement.
? He said the UK and France could
join the US and USSR as guarantors of any
Middle East settlement. This may be an
attempt to preclude having all the UN
Security Council, including China, involved
as guarantors.
In domestic affairs, Brezhnev reasserted past
policies, lauded leadership successes, and was low
key in defending traditional ideological positions.
He went into unusual detail about the activity of
the Politburo and the party secretariat, focusing
on difficult situations in which he had triumphed.
Referring to the Central Committee meeting in
May 1972, which approved a US-Soviet summit in
Moscow despite events in Vietnam, Brezhnev
hinted that there was opposition at this "turning
point" and noted how correct the positive deci-
sion proved to be. He also mentioned the Soviet
agricultural difficulties of that year and his role
and that of the party in overcoming many of
them.
Brezhnev gave considerable emphasis to
"proletarian internationalism," a phrase that con-
Brezhnev's review of economic performance,
however, stressed themes that had been publicly
aired before-a general disappointment in last
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year's results, especially in the agricultural and
consumer sectors, and a promise to do better in
the 1976-80 five-year plan period. He gave no
evidence of new initiatives or changing priorities;
instead, he re-emphasized modernization of
plant, quality production, improved management
and planning, better use of science and
technology, and expansion of foreign trade.
Brezhnev as usual took a centrist line on
ideological matters that touch the ordinary
citizen. He said detente requires more domestic
vigilance and praised the secret police especially
for countering hostile intelligence services. At the
same time, he rioted that detente provides better
conditions for spreading "socialist" ideas abroad,
a theme reminiscent of his "victory through con-
tacts" speech at Alma Ata in August 1973.
He avoided criticizing the artistic intelligent-
sia, praised their accomplishments, and warned
against using "administrative methods," i.e., out-
right repression, to deal with problems in this
sphere. He also made a rare reference to the 20th
party congress in 1956, the de-Stalinization con-
gress, which led to the domestic "thaw" under
Khrushchev. Lest he be misunderstood, however,
Brezhnev rebutted domestic and foreign attacks
on Soviet violations of human rights and, with
domestic dissidents evidently in mind, labeled
harmful anything that would weaken Soviet
society.
Finally, Brezhnev referred to the promised
long-term (1976-90) plan and the new constitu-
tion, saying that work was continuing on both but
giving no deadline for completion.
The Palace of Congresses, site of 25th party congress
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The congress has now settled into several
days of "discussion" of Brezhnev's report, which
was kicked off as tradition calls for by the party
chiefs of Moscow, the Ukraine, Leningrad, and
Kazakhstan. Interrupted only briefly by greetings
from foreign delegates, the proceedings will give
way next week to a report by Premier Kosygin on
the five-year plan, followed by another discus-
sion. Brezhnev will probably preside at the final
session of the congress, where the results of the
previous day's elections to the party's leading
bodies are made public.
As usual, Moscow has been spruced up for
the congress, and most citizens including the
delegates view the event as a festivity. Soviet
authorities have taken steps, such as pre-emptive
arrests, to keep Jewish activists and other dis-
sidents out of sight through the congress, though
apparently not on the scale of past congresses.
Dissidents who remain at large are so far keeping
their word uring the meeting.
USSR: ARMS TRANSFERS
Over the past two decades, Moscow has
successfully used military aid to expand its in-
fluence in the Third World. Since 1956, the USSR
has extended almost $15 billion in military
hardware, support equipment, and ammunition
to 38 third-world countries. More than 60 percent
was provided in the 1970s as Moscow made
available large quantities of advanced weapon
systems, especially to the Middle East.
Moscow has been willing to provide military
equipment and training with a minimum of stated
conditions and on attractive financial terms. It has.
not turned down a single prospective arms client
and has shown that it can move rapidly to exploit
new opportunities. The military assistance
program has enabled Moscow to establish a
strong presence within recipient countries and
given it an opportunity to influence the recipient
through:
? Reliance on the USSR for logistic
support;
? Use of military technicians as in-
telligence operators; and
? Use of training programs to in-
troduce members of the recipient armed
forces to Marxist-Leninist philosophy.
Arab-Isaeli tensions, Indonesian territorial
conflicts with the Dutch, Pakistan's disputes with
India and Afghanistan, Nigeria's civil war, and
North Yemen's conflicts with its neighbors and
the UK are instances in which the arms supply
program provided Moscow with an opportunity
to establish positions of influence.
Negotiating Procedures
Negotiations between the USSR and the
potential arms recipient normally start with visits
by high dignitaries. During the discussions the
Soviets set the political price for arms. With
political matters resolved, the client's request is
reviewed and both parties sign an agreement in
principle. The review process includes a feasibility
study of the client's economic, political, and
military capabilities and provides the basis for ex-
amining the client's request in detail.
Soviet Arms Commitments
1959-75 1970-75
Latin America
erica Latin Amorica
'East
Asia
Middle East 18.1%
59.4%
South Asia
17.7%
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Although information on the Soviet review
process is limited, we believe that several criteria
affect the type and sophistication of equipment to
be provided:
? Political gains and consequences.
? Availability of equipment from
stockpiles.
? Production schedules in light of
Soviet and Warsaw Pact demands.
? Soviet ability to provide technical
support and training.
In the case of the belligerent Arab states, external
threat analysis and force comparability are also
major factors.
The USSR launched its military assistance
program in 1955-initially using Czechoslovakia
as an intermediary-when it began arms
shipments to Egypt. We estimate that 85 percent
of Soviet arms commitments had been delivered
by the end of 1975. Deliveries averaged about
$460 million annually during the late 1960s, then
jumped to an average of $1.2 billion in the 1970s.
Because the Soviet program is in part a
response to available opportunities and i3 in-
fluenced by the absorptive capacity of the
recipients, the annual magnitude and direction of
aid has been highly variable. Most commitments
since 1966 reflect the continuing arms buildup in
the Arab countries and new agreements with In-
dia, Iran, and Libya. Egypt, India, Iraq, and Syria
together have accounted for 65 percent of Soviet
arms transfers since 1955. Five other coun-
tries-Afghanistan, Algeria, Indonesia, Iran, and
Libya-have received most of the rest.
Soviet arms are priced lower than com-
parable Western equipment. The list price
appears to be based primarily on Soviet estimates
of what the market will bear and averages 16 to 28
percent below estimated US cost of production.
The differences between Soviet list prices and es-
timated US production costs are largest for newer
and more advanced equipment. Recent informa-
tion indicates that Moscow is raising the prices on
some equipment.
Moscow has generally sold its arms at
favorable terms. Payment usually has been over 8
to 10 years, after a grace period of 1 to 3 years, at
2- to 2.5-percent interest. Moreover, the USSR has
been willing to accept payment in commodities
or local currency and has frequently reduced or
postponed payments when the recipient was un-
able to meet them.
Discounts from list price-averaging about 40
percent over the last two decades but dropping to
less than 20 percent in the 1970s-are an intrinsic
feature of the Soviet arms program. Discounting is
probably determined on the basis of a client's
ability to pay as well as political considerations.
Afghanistan, for example, has received discounts
approximating 75 percent, while Iraq has received
about a 30-percent discount and Nigeria none.
Cash sales have accounted for an increasing
share of Soviet arms exports in recent years. They
made up only 5 percent of total agreements in
1955-69, jumping to 15 percent during the 1970s.
The major cash clients are Libya and Nigeria.
Spare parts and ammunition purchased outside a
general agreement are usually handled as cash
sales.
Modern Equipment Featured
The USSR has been the most accommodating
of the major arms suppliers in providing modern
equipment. Soviet arms deliveries have covered
the entire range of non-nuclear, tactical
weaponry. The USSR was the first exporter to in-
troduce jet fighters (1956), supersonic jet fighters
(1959), surface-to-air missiles (1961), guided-
missile patrol boats (1961), self-propelled radar-
controlled antiaircraft guns (1970), and surface-
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to-surface missiles (1973) to third-world arms in-
ventories.
Moscow could easily increase exports of a
wide variety of equipment. There is a surplus of
arms production capacity, and production on
current lines could be increased almost im-
mediately by employing a second shift. Large
quantities of reserve surplus equipment are also
available.
During the 1967 and 1973 Arab-Israeli wars
the Soviets encountered difficulties in meeting
client demands. In an attempt to maintain the
flow of supplies-particularly tanks-equipment
was stripped from Soviet units and sent to the
Middle East. Soviet armed forces' reserve stocks
of ammunition and spares may also have been
tapped. On these occasions, Moscow successfully
pressured its East European allies to make equip-
ment available to the Arab countries.
Arms exports have given Moscow con-
siderable influence and leverage in the Third
World. Soviet support of nationalist governments
has contributed to the weakening or elimination
of Western influence in many countries. Con-
comitantly, Soviet influence in the Middle East,
South Asia, and North Africa has expanded
significantly. A number of countries-notably
Afghanistan, Algeria, Egypt, Iraq, Somalia, South
Yemen, and Syria-are largely equipped with
Soviet weaponry and are dependent on the USSR
for logistic and technical' support.
Through its military technical assistance-in
conjunction with general technical assistance and
academic training-the USSR has exposed many
of the nationals of these countries to Soviet ideas
and techniques. Moreover, it has established im-
portant relationships with military leaders, as well
as junior officers who in the future may hold key
government positions.
While Moscow has not used its military
assistance program to acquire formal base rights,
it has obtained a variety of operating privileges. It
has acquired the use of the ports of Alexandria in
Egypt and of Latakia and Tartus in Syria to support
its Mediterranean fleet operations. Port facilities
in Berbera, Somalia, and in Umm Qasr, Iraq, have
enabled the Soviet fleet to operate more ef-
ficiently in the Indian Ocean. Moscow has ap-
parently used military aircraft landing rights in
Guinea, Somalia, and India for air and naval in-
telligence operations.
Moscow has gained some economic advan-
tages from the program. Arms repayments have
given the Soviets access to long-term commodity
commitments. Most important are the natural gas
arrangements with Afghanistan. The arms supply
relationship may also lead to oil supply
arrangements with Iraq and Libya. A few clients
pay for their arms in hard currency.
Moscow will likely continue to view its arms
transfer program as a major foreign policy tool.
The program's relatively small cost to the Soviet
economy and high political payoff have been
proved over time.
The impact of the Soviet military assistance
program, however, has not been completely
positive from the Soviet point of view. Soviet
military support for leftist regimes has frequently
alienated more conservative antagonists.
Moscow's cool relations with the Shah and
current difficulties with Morocco are cases in
point. The program has also led to demands for
increased support that the Soviets would just as
well have avoided. Soviet clients, in turn, have
become disillusioned when Moscow has not
offered the types and quantities of equipment
they thought they needed. Furthermore, the
overbearing manner of Soviet advisers has
repeatedly triggered resentment, and Soviet
attempts to manipulate delivery schedules and
shipments of spare parts for political purposes
has often been a source of friction. In the case of
Egypt, unhappiness with Moscow's military
assistance was a major factor leading to the ouster
of thp Sovip- _rrl~ ry presence in 1972.
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CEMA: LOOKING TO THE WEST
The Soviet-dominated Council for Mutual
Economic Assistance made a bid to enlarge its
role in European economic affairs last week by
presenting the draft of an "umbrella" coopera-
tion agreement to the European Community.
Initial EC reaction has been largely negative,
suggesting that any accord will come only after
lengthy, difficult negotiations.
Under the terms of the CEMA draft, the EC
and CEMA would:
? establish official relations and set up
a mixed commission;
? put trade on a most-favored-nation
basis and eliminate some non-tariff barriers;
? cooperate directly in such technical
areas as standards, the environment,
statistics, and economic forecasting; and
? agree to extend credits at the most
favorable rates.
The proposal would allow individual East
European states to negotiate directly with the EC
both in implementing this agreement and on
other issues. This is designed to accommodate EC
and Romanian objections that CEMA might
become the sole conduit for the CEMA countries'
contacts with the EC.
In return for this concession, the Soviets are
clearly seeking EC acknowledgement that CEMA
has a role to play in trade relations between
CEMA and EC countries-without, however,
spelling out the nature of that role. The proposal
also tries to undercut the EC's common commer-
cial policy by proposing that individual EC coun-
tries be allowed to deal directly with CEMA and
individual CEMA countries.
The Soviets are calling the proposed agree-
ment part of the bridge-building process en-
visioned by the Helsinki accord, hoping thereby
to make an outright EC rejection more difficult
and to gain propaganda advantage on the CSCE
implementation issue.
The EC finds major parts of the CEMA draft
unacceptable. The EC is unlikely to accept any
deal that does not respect the Commission's sole
competence in trade matters. The EC may try to
underscore this point by announcing the
already-planned trade talks with Peking, which
has not questioned the Commission's mandate.
The EC also could not accept the elimination
of all restrictions on trade, although it would
probably be amenable to the gradual elimination
of quantitative restrictions on imports.
Nevertheless, it would like to regularize relations
with the CEMA countries and can be expected to
probe Moscow's intentions. The Foreign
Ministers' Council will take up the matter next
week.
CEMA's International Investment Bank is
reportedly arranging a $600-million Eurodollar
loan to be managed by Dresdner Bank of West
Germany. The loan, which the bank hopes to
complete by mid-1976, would be the largest single
Communist borrowing to date. CEMA obtained a
$350-million Eurodollar credit last October.
The loans are needed to finance construction
of a natural gas pipeline being built from Oren-
burg in the USSR to Eastern Europe. The East
European CEMA countries, as part of their con-
tribution to construction of the pipeline, have
agreed to provide hard currency funds to the
Soviet Union through the CEMA Bank. The
Soviets are using the money to buy pipe, com-
pressors, and other equipment from the West.
Bank officials have said that they will borrow $1.3
billion on the Eurodollar market for this purpose,
implying that some $350 million more will be
sought. The bank, in fact, has tentative plans to
negotiate another loan of $200-300 million late
this year.
The International Investment Bank may have
been encouraged to seek such a large loan at this
time by the success it had with the October loan,
originally set at $240 million and subsequently
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oversubscribed. The previous credit carried an in-
terest rate of 1.25 percent over the London Inter-
bank Offer Rate and a five-year repayment
period. The present loan will be a six-year credit
with an interest rate spread of from 1.25 to 1.375
percent over the London Interbank offer rate.
Colombia is negotiating an economic
cooperation agreement with CEMA, according to
a Colombian Foreign Ministry official. An agree-
ment with Colombia would be CEMA's fourth
bilateral accord with a non-communist country. It
now has agreements with Finland, Iraq, and Mex-
ico.
The agreement-to be signed before the end
of the year-would be largely for show. Moscow
views expanded CEMA ties as a means to
demonstrate that the organization is more than a
Soviet-dominated group oriented toward Eastern
Europe and to support the argument that CEMA
should be considered an equal of its rival, the EC.
The Colombians view an agreement with
CEMA as an opportunity to show that they will
not be limited solely to a Latin American
economic grouping. At the same time, Colombia
is expanding its bilateral economic ties with in-
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ICELAND: PONDERING THE NEXT MOVE 25X1
The Icelandic government, which broke
relations with London on February 23, continues
to ignore efforts to find a peaceful solution to the
cod war with the UK. Despite attempts to get the
feuding parties back to the bargaining table,
Reykjavik has given no sign that it is ready to
resume talks.
Prime Minister Hallgrimsson's faction-ridden
coaltion won a vote of confidence on Tuesday
when the Icelandic parliament supported his
handling of the cod war thus far by a vote of 41 to
18. The vote split along government-opposition
lines, suggesting that internal differences over the
issue are not so great that the coalition members
are ready to end cooperation.
The vote was clearly a victory for
Hallgrimsson and the uncompromising attitude
he has taken toward the British.. The governing
parties may still disagree over the next step,
however, and the increase in incidents at sea this
week between Icelandic patrol boats and British
frigates would probably not allow Reykjavik to
take new diplomatic initiatives at this time. For
their part, the British protection vessels have also
become more aggressive and London has dis-
patched another frigate to the area. The earlier
threat to withdraw from NATO was tempered by
Hallgrimsson, who told parliament that the ques-
tion of Iceland's membership is solely related to
defense interests, not the fishing issue. Barring a
serious incident involving the loss of life or a ship,
the government has numerous steps it can take to
show its displeasure with NATO short of pulling
out of the Alliance.
A clue to Reykjavik's strategy toward a settle-
ment with the British appeared in Hallgrimsson's
remarks during the debate on the confidence
motion. He implied that his government expects
the UN Law of the Sea Conference this spring to
vindicate the Icelandic position on a 200-mile
limit. By winning the vote of confidence,
Hallgrimsson may still be able to agree to another
round of talks, especially since the British have
again reduced their demands. The attitude
reflected in the debate, however, suggests
] Iceland would be unlikely to concede much, and
any agreement would probably not extend much
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beyond the UN conference expected to end in
May.
The Hallgrimsson government also is plagued
with the largest general strike in Icelandic history.
The strike, which has idled more than half of the
country's work force of 80,000 since February 16,
was joined by other unions this week.
Negotiations between employers and union
leaders continue, but the fishing industry has
already suffered considerable economic loss due
to the idling of the fishing fleet. Strikers are
attempting to involve the US in their dispute and
this week pickets blocked gas pumps at the US-
manned Keflavik base. US authorities in Iceland
will protest the move celandic govern-
ment.
ITALY: COMPROMISE BUYS TIME
Economic matters will be the central
parliamentary issue now that Aldo Moro's minori-
ty Christian Democratic government has won its
vote of confidence. Severely diluted by com-
promises, Moro's economic stabilization program
seeks to reduce inflation, shield jobs, and halt the
erosion in the value of the lira. Although it will
probably be further weakened by amendments
proposed during the debate, the program is ex-
pected to be approved if the Socialists and
Republicans keep their promises to abstain in the
final voting.
The stabilization program is intended to lay
the groundwork for economic recovery by get-
ting Italians to live closer to their means. Over the
past few years, the government and its agencies
have been borrowing to cover current spending
as well as investment. Treasury borrowing re-
quirements rose from 8 percent of gross national
product in 1972 to nearly 15 percent last year, the
highest level in Europe. The escalation in public
financial needs occurred, moreover, at a time
when businessmen were encountering cash flow
problems resulting from an explosion in
wages-up 80 percent in the last three years. Part-
ly as a result of these factors, investment slumped,
productivity flagged, and inflation averaged 19
percent in 1974 and 17 percent in 1975.
To reduce public borrowing requirements,
the new program proposes improved revenue
collection, curbs on public spending, and some
rate adjustments for public utilities. The second
major element in the program is a compromise
effort to control the rise in wages and incomes.
Top managers might see their salaries frozen, and
high-level government workers could have their
wage increase withheld this year. All other
workers, many represented by strong labor un-
ions, escaped wage controls of any kind.
The stabilization plan comes on the heels of
several measures to discourage capital flight and
soak up excess liquidity. The political crisis and
shaky economic conditions had led to a 15 per-
cent slide in the value of the lira over the last
month. The discount rate has been raised two
percentage points-to 8 percent-and the gov-
ernment issued a decree reducing bank lend-
ing power by $1 billion. Rome also stiffened
controls over export. payments and import in-
voices in an effort to limit illegal currency out-
flows. On March 1 the Bank of Italy will resume
support of the lira in international markets.
The economic plan will be most valuable for
its psychological effect. Given the traditional
resilience of the economy even in the face of
gross mismanagement, the new government with
a new program should prop up the low level of
confidence at home and abroad. The stabilization
program nonetheless is far too compromised by
attempts to buy Socialist support and to avoid
labor union retaliation-ironically still a live
possibility. We expect the rate of inflation to drop
some, but still average a worrisome 15 percent
this year.
The budget measures alone will not ap-
preciably cut the massive borrowing needs of the
Italian government. Promises to improve tax
collection and curb spending growth have
seldom materialized in the past; implementation
of such measures by a weak minority government
is particularly suspect. Treasury borrowing needs
are apt to remain close to last year's record high.
The incomes policy is likewise too watered
down to be effective. Upper-income workers ac-
count for only a small part of industrial wage
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costs. More important, 10 million workers-in-
cluding 80 percent of those in industry and 70
percent of civil servants-will have their contracts
negotiated during the next six months. Most
observers expect unions to resist government
jawboning and to secure hefty pay raises.
The cheaper lira will also contribute to infla-
tion by raising the price of imported goods. Loss
d
in purchasing power of the lira alone is expecte
to raise domestic prices by 3 to 5 percent.
SPAIN: WOOING CATALONIA
King Juan Carlos appears to have made a
favorable impression during his official visit to
Catalonia February 16-21. He used the occasion to
announce some modest measures to deal with
regional pressures and Catalan complaints of
neglect by Madrid.
Beginning with his arrival statements, which
included a paragraph in the Catalan language, the
King played the role of a politician bent on selling
himself. Although Catalan leaders obviously feel
that Madrid has proceeded too slowly with
political reforms, the local populace responded
enthusiastically. Stressing the theme of Catalan
aspirations, the president of the Barcelona
assembly said in his welcoming remarks that the
visit came at a time when the Catalans are hopeful
of having their "cultural, administrative,
economic, and political personality recognized."
In a religious service at the Monserrat abbey-the
Catalan national religious shrine-the abbot
delivered a sermon in Catalan which dealt with
the need for national reconciliation in peace,
amnesty, and mutual understanding.
The visit to Catalonia took place against a
background of widespread labor unrest, notably
in the construction industry and among municipal
employees. The national government responded
on February 18 by placing striking traffic police
and firemen in Barcelona under military jurisdic-
tion, employing the same tactics that were
successful against striking railroad workers and
Madrid postmen a month ago. The situation calm-
ed after police broke up several demonstrations,
gP
Juan Carlos speaking at the start of his. Barcelona tour
but some 150,000 still remain on strike in
Catalonia.
In a move to demonstrate the government's
interest in Catalonia, the King presided at a
special cabinet meeting in Barcelona on February
20. The cabinet appointed a commission to con-
sider establishing a special administration for the
four Catalan provinces, a cautious gesture toward
some form of home rule. The commission will be
dominated by government officials, however, and
the gestures toward autonomy are unlikely to
satisfy the opposition parties who want to regain
the degree of federalism the region enjoyed un-
der the Second Republic in the 1930s.
The cabinet also took, immediate steps to
decentralize power by transferring some
decision-making to local representatives of the
ministries of public works, industry, education,
labor, and housing. The government announced
that Catalonia will receive $1.3 billion in funds for
public works projects.
The government also acted to remove some
of the irritants in relations between Madrid and
the various regions by authorizing birth
registrations in any of the regional languages and
released a progress report on teaching of Catalan
in the public schools. The government took the
first step in this direction last November when it
recognized the various regional languages as
national languages for use in all but official
deliberations, th removing earlier restrictions
on use in public. 25X1
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_ 33 7
CYPRUS: NO BREAKTHROUGH
The fifth round of the current cycle of
Cypriot intercommunal talks ended in Vienna last
Saturday without producing a breakthrough on
major issues. Unlike the last session, however, the
atmosphere was reasonably positive.
The negotiators, Greek Cypriot parliamentary
leader Clerides and Turkish Cypriot leader
Denktash, had been committed to an exchange of
views on all issues at stake-including the
territorial question, which the Turkish Cypriots
had refused to consider in earlier rounds. These
issues were discussed, although the five-day
meeting produced few concrete results. UN
Secretary General Waldheim did succeed in
securing agreement on a compromise formula for
future negotiations, which commits both sides to
exchange written proposals on pending issues
through Waldheim's special representative in
Nicosia within the next six weeks.
The generally positive atmosphere at the talks
in large part reflected the Turkish desire to deflect
international pressure and the Greek realization
that they must maintain contact with Denktash
and the Turks if they are to recoup any of their
losses. Both sides have sought to cast a positive
light on the proceedings. Clerides, for example,
was quoted in the Viennese press on Sunday as
saying that this round was the most successful of
any held so far. The negotiators will meet again
with Waldheim in Vienna in May to establish
agreements in principle on the various issues. The
texts then will be referred to mixed committees in
Cyprus to iron out details.
Earlier attempts to shift the negotiations to
Cyprus have failed, however, and-the positive
atmosphere in Vienna notwithstanding--the
prospects for progress in the period before the
next round in Vienna are poor. Mutual
suspicions, the reluctance of either side to be the
first to make concessions, and domestic political
considerations-particularly on the Turkish
side-will probably prevent the presentation of
reasonable proposals that could form or
successful negotiations.
Denktash (1) and Clerides (r) with Secretary General Waldheim at Vienna talks
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3 _46-4/-IZ.
JAPAN: THE LOCKHEED CONNECTION
13
The Miki government is working overtime to
dispel public suspicion that a coverup of the
Lockheed bribery scandal is under way.
Last week's Diet hearings failed to shed new
light on the identities and roles of Japanese of-
ficials allegedly involved. This week the govern-
ment took several new steps to give the
appearance of forward movement:
? Both houses of the Diet unanimously
passed resolutions calling for US release of
relevant Lockheed data, and scheduled ad-
ditional hearings.
? Prime Minister Miki sent a personal
letter to President Ford calling for full US
cooperation in clearing up the scandal.
? Miki also announced he was con-
sidering sending a special envoy to the US,
possibly Foreign Minister Miyazawa, to
follow up the request for data.
? Police and tax authorities launched a
joint investigation of the case by staging
raids at 26 locations to obtain evidence.
There are mixed emotions throughout
Japanese political circles on whether to pursue
the investigation to the point of revealing names
of those officials allegedly involved. Uncertainty
over what names might emerge and concern that
the scandal might not be confined to the
Lockheed affair are complicating factors. Most
members of the ruling Conservative Party ap-
parently would prefer to limit the investigation,
but Miki may not be averse to full disclosure. He
presumably was not involved in the payoffs and
may believe that some of his rivals in the par-
ty-possibly including former prime minister
Tanaka-could be directly implicated.
Defense Complications
The Lockheed scandal has also forced Tokyo
to review plans for acquiring a new antisubmarine
warfare aircraft. The choice of a new ASW aircraft
Japanese police search for evidence in connection with
has been a major issue facing Japanese defense
planners since the late 1960s.
Until the Lockheed revelations earlier this
month, Tokyo was well on the way to announcing
its official choice of the Lockheed P3C aircraft
sometime later this year and hoped to begin
deployment in 1978. The scandal has rein-
vigorated the lobbying campaign of the domestic
arms industry, which has begun again to press
hard for domestic development despite the
government's preference for the superior US air-
craft.
Even before the scandal, the Japanese were
exploring the possibility of domestic production,
but such a decision now would not allow them to
meet the 1978 deadline and would also be much
more expensive. Indeed, Japanese plans for
developing a patrol aircraft similar to the P3C
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reportedly have been pushed back another year
for lack of sufficient funding.
Tokyo has been careful to avoid any implica-
tion that the P3C deal has been killed outright; it
will probably be some time before the govern-
ment announces its final decision. Given the
problem surrounding domestic production,
Tokyo may again pursue the P3C, but probably
through a government-to-government arrange-
ment rather than through direct dealings with
Lockheed. Antisubmarine warfare is the major
focus of Japanese naval operations, and any ap-
preciable delay in acquiring the next generation
of ASW aircraft could seriously set back Japan's
'
rv modernization program.
-4S
JAPAN: NEW EXPORT DRIVE
Japanese firms are taking advantage of
economic recovery abroad with another export
push. Tokyo sees foreign sales as an important
means of bolstering domestic output and demand
at a time when recovery at home is flagging.
Japanese industries have set ambitious export
targets for this year. The auto industry hopes to
boost its overseas sales by at least 20 percent, and
steel wants a 5- to 10-percent increase, following a
12-percent decline last year. Sales of complete in-
dustrial plants to communist and OPEC countries
are expected to boost machinery exports
significantly. Exporters of chemicals and in-
termediate textile products expect only small
gains, while some exports, such as ships and fer-
tilizer, will decline.
If targets are met, export volume will increase
10 percent in 1976, double the expected growth in
world trade. Volume is already on a sharp upward
trend, gaining 20 percent since its low in June
1975. Most of the increase occurred in the fourth
quarter of 1975 and has been concentrated in the
US market. Gains in the US market this year are
likely to be 9 percent, while increases of 15- to
20-percent are anticipated in the expanding com-
munist and OPEC markets. OPEC countries now
take 15 percent of Japan's exports, up from 5 per-
cent in 1973.
Many Japanese industries are slashing export
prices to help strengthen their world market posi-
tion, although production costs in most industries
are rising. Exporters are willing to see profit
margins shrink in order to accelerate the export
push and maintain production levels. Most major
industries now export one fourth or more of their
output.
The government is moving on a number of
fronts to assist Japanese exporters. Tokyo is plan-
ning to increase government sponsored loans for
overseas sales this year by a record 80 percent.
Interest rates on certain official credits are also
being shaved. In another move to protect export
gains, Tokyo is intervening to keep the yen from
appreciating above 300 to the dollar.
The government, like industry, sees export
growth as essential to even moderate economic
recovery. In the second half of 1975, growth in ex-
port volume accounted for nearly 40 percent of
the estimated 3.5 percent gain in gross national
product. The proportion is likely to remain high
in the first half of 1976, when gross national
product is expected to ual rate of 4
percent.
CHINA: LEADERSHIP STRUGGLE CONTINUES
In his speech on February 22 welcoming
former president Nixon, acting Premier Hua
Kuo-feng became the first Chinese official to
comment publicly on the current leadership
struggle. Hua's remarks were relatively mild and
omitted any reference to "unrepentant capitalist
roaders in the party," a phrase that refers to Teng
Hsiao-ping. He reaffirmed China's interest in im-
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proving relations with the United States and in
maintaining a stiff anti-Soviet posture, thereby
signalling that the unsettled leadership situation
has not affected China's basic foreign policy line.
The attack on Teng continues, however, and
shows no signs of abating. He has reportedly been
criticized by name on wall posters in at least one
province, but Chinese officials have repeatedly
stated that he currently retains all of his art
overnment, and military ositions.
In any case Teng is not likely to go down
without a fi ht
IChina's 29 provinces
have been slow to pick up Peking's media attacks
on "capitalist roaders."
At present, it appears that the leadership is a
long way from resolving its differences and work-
ing out a satisfactory leadership arrangement.
Aside from some signs in propaganda that more
moderate leaders do not want the current attacks
on Teng to disrupt production, Peking has an-
nounced no new major decisions or taken
decisive actions.One Chinese official has said the
current struggle could go on for several months,
and it does indeed seem that China's leaders are
in fora prolonged period of wrangling
LAOS: ASKING FOR HELP WITH BANGKOK
The Lao are now asking Asian and third world
countries to intercede with Bangkok to reopen
more of the border with Laos. While it is unlikely
that any of the governments will approach
Bangkok, the Lao probably hope the initiative will
put Thailand on the defensive and create indirect
pressure for reopening the border. A Lao official
made similar overtures to several non-communist
diplomatic missions in Vientiane last December
when the entire border was closed.
The border restrictions are causing the Lao
severe economic difficulties, and they are also
asking the countries for humanitarian aid. Vien-
tiane is clearly willing to accept badly needed
economic assistance from any quarter, but con-
tinues to rely on its communist allies for the bulk
of foreign aid. Late last month a Lao delegation to
Moscow signed an aid agreement with the USSR
for 1976-77. Shortly thereafter, in an apparent ef-
fort not to slight Peking, the Lao held a ceremony
for the turnover of Chinese aid, much of which
had been Previously announced.
T e Lao are a so receiving a! shipments
rom East European countries, most recently from
Bulgaria and Albania.
Lao-Thai border talks are stalled. The Lao fail-
ed to respond to an offer by Thai Foreign Minister
Chatchai to visit Vientiane earlier this month and
are still insisting that the Thai reopen the entire
border before new talks begin. Moreover, Lao
Prime Minister Kaysone Phomvihan has hinted
that any substantial negotiations cannot be held
until after the Thai elections in early April.
The Thai also apparently see little reason to
negotiate seriously with the Lao until after the
elections. Aware that any concessions to the Lao
would nly add to the disaffection of Thai military
leaders
C atc ai has
said that the border will remain partially closed
and that further efforts to reduce tension with the
Lao can wait until elections are held.
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6SG7
SPANISH SAHARA: NEW MASTERS
Spain's role as co-administrator of Spanish
Sahara under the tripartite agreement it conclud-
ed with Morocco and Mauritania formally ends
on February 28. The legal status of the territory
remains a contentious issue, however, as Spain in-
sists that its transfer of administrative control does
not resolve the question of sovereignty. Algeria,
which has rejected the tripartite agreement en-
tirely, continues to demand a referendum on
self-determination and to support Polisario Front
guerrillas seeking independence for the territory.
Morocco has set up an extensive ad-
ministrative apparatus to demonstrate its control
as Spain completes its withdrawal in the Sahara.
After February 28, Morocco will divide the
northern Sahara into two provinces; the ad-
ministrative center along the coast will be El
Aaiun, while the northeastern portion will be
governed from Semara. The Mauritanians will ad-
minister their southern sector from
Dakhla-formerly Villa Cisneros.
Spain has consistently maintained that the
sovereignty issue can only be decided in "con-
sultation" with the people of Spanish Sahara.
Although the tripartite agreement provided for
such consultations through the territorial general
assembly, a Spanish official recently indicated
Madrid no longer supports this approach. The of-
ficial attributed the change to the lack of provi-
sion for a UN role and to Rabat's selection of
tribal leaders loyal to Morocco to replace the
considerable number of assembly members who
joined the Polisario Front. The official did not
elaborate on how the will of the Saharans should
now be determined.
This week, Morocco, which had argued
earlier that the Saharans were consulted via the
territorial assembly last November, called a
special meeting of the assembly for February 26 to
"express the will of the people." Rabat is now in-
sisting that this session of the assembly will meet
the requirements for consultations called for in
the resolution adopted by the UN General
Assembly last December that in effect endorsed
the tripartite agreement. In an obvious public
relations maneuver, assembly members "outside
the Sahara"'-a reference to those members who
defected to the Polisario Front-were invited to
participate in the session.
Algerian pressure on Spain is largely respon-
sible for Madrid's second thoughts about the con-
sultation process. Earlier this month, Algiers sent
messages to Spain and the UN laying out its case
that Spain cannot avoid its legal responsibility as
the administering state of a non-self-governing
territory.
The Algerians want to delay international
recognition of the Moroccan-Mauritanian
take-over of the Sahara by reopening the Sahara
dispute at the UN. A UN envoy recently visited
the Sahara and has apparently submitted his fact-
finding report to Secretary General Waldheim.
Although the envoy's mission was limited in
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scope, Algiers will try to exploit his findings to
push once again for a referendum on self-deter-
mination.
The Algerians are striving in every available
forum to enhance the political standing of the
Polisario Front. This week, they were expected to
lobby at the Organization of African Unity
ministerial meeting in Addis Ababa for recogni-
tion of the Front as the national liberation move-
ment of the Sahara. The OAU liberation com-
mittee, which is dominated by African militants,
recommended such recognition when it met last
month. The more politically balanced ministerial
body may be more sensitive to Moroccan and
Mauritanian objections and defer action.
Arab League Secretary General Riad con-
tinued his peacemaking mission to Algeria,
Morocco, and Mauritania this week. He arrived in
Rabat on February 22 following a three-day visit to
Algiers; he is expected to visit Mauritania later
this week. Algerian commentary after Riad's
departure claimed he met with Polisario
representatives. If this is true, he is likely to
receive a cold shoulder in Morocco and
Mauritania.
There were no confirmed clashes between
Moroccan and Algerian forces in the Sahara this
week. Polisario guerrillas continued to harass the
Moroccans in a few scattered areas, however,
and they may step up the pace of their activity on
the eve of the Moroccan-Mauritanian take-over.
ANGOLA: BEGINNING TO GOVERN
With the end of the conventional war, the
victorious Popular Movement regime is moving
quickly to impose its authority in the areas from
which it recently displaced its rivals and to get the
economy moving again. Early this week, the
foreign minister of the Movement's People's
Republic of Angola was seated at the Organiza-
tion of African Unity ministerial meeting that
convened in Addis Ababa. The Luanda govern-
ment has now won wide international accep-
tance, including an invitation from the EC to join
its association with 46 other developing countries.
Party officials, technicians, and policemen are
following Popular Movement and Cuban military
forces into the major urban and economic centers
the troops have occupied. In each locale, com-
mittees have been established to handle local ad-
ministration. The Movement has also announced
universal military conscription and stricter re-
quirements for admission to the Movement,
which has become the country's sole legal party
with the outlawing last weekend of the rival
National Front and National Union.
In the economic field, President Neto's
government has assigned high priority to getting
the Benguela Railroad back in operation. The
most serious problem is the rebuilding of several
bridges-one at the Zairian border. The line
carries better than half of the imports and exports
of Zaire and Zambia and brought in about $45
million in revenues in 1973. The government has
not yet indicated how it will deal with the
British-Belgian consortium that owns 90 percent
of the railroad.
Negotiations are under way with the com-
bine of South African, Belgian, British, and
American interests that has controlled diamond
mining in Angola. Prospects for Gulf Oil's return
to its concession in Cabinda improved last week
when the company obtained permission from
Washington to release royalty payments to the
Luanda regime. Gulf's operations have been the
largest single source of government revenues in
recent years.
The Popular Movement also launched a ma-
jor campaign last week to revive agricultural
production. Profitable coffee plantations in the
north and commercial agriculture in the central
highlands were almost completely disrupted by
the civil war.
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The continued presence of some 13,000
Cuban troops in Angola is likely to complicate
Luanda's foreign relations. Many African coun-
tries, and especially neighboring Zaire and Zam-
bia, have made it clear they are anxious to see the
Cuban soldiers depart, and even some staunch
African supporters of the Popular Movement are
becoming uneasy that the Neto regime will begin
to look like a Cuban puppet. The Movement's
statements that Angola is not under foreign in-
fluence seem increasingly defensive in tone,
suggesting that Popular Movement officials have
become more sensitive to criticism of the Cuban
presence.
South Africa apparently has pulled out most
of the troops it has been keeping on the Angolan
side of the border with Namibia. It is maintaining
several small garrisons to protect the Cunene
hydroelectric project, however. For now, the
Luanda regime appears willing to overlook their
presence.
The Neto regime's major external concern
continues to be Zaire, even though President
Mobutu is himself on the defensive and appears
to have no intention of becoming involved either
directly or indirectly in further military ventures
in Angola. At the OAU meeting this week, Neto's
foreign minister charged Zaire with violating the
OAU charter by having sent Zairian troops into
Angola to support the National Front. The state-
ment was probably a warning to Mobutu that the
Movement can muster political as well as military
support if Zaire attempts any future aggression.
Despite the minister's attack, there are indications
work out an accommodation.
`72-2~
ETHIOPIA: MORE ARRESTS
The arrest of at least 350 prominent
Ethiopians
thlaiopiansto
thrchtheronicpast two weeks appears to be
ted ovee
r power struggle within the
ruling military council. There are indications that
Major Mengistu Hailemariam, the regime's op-
portunistic first vice chairman, ordered the arrests
on his own with a view to regaining his former in-
fluence through the support of council radicals
and their civilian allies. A countermove-perhaps
bolstering the authority of Chairman Teferi Ben-
ti-by opponents of Mengistu and the radicals
could follow.
Among the persons imprisoned in the recent
roundup were a number of retired generals,
businessmen, high-level civil servants, and even
some widows of the senior military officers and
aristocrats executed in November 1974. They
were accused of having engaged in subversive ac-
tivity. The corrupt patriarch of the Ethiopian
Orthodox Church was also detained; he had lost
the support of much of the Christian community
earlier because of his failure to stand up to the
council.
Mengistu has been looking for a way to make
a political comeback, after realizing some months
ago that his position was eroding. He and his chief
rival-second vice chairman Lieutenant Colonel
Atnafu Abate-had both lost favor with other
council members because of their constant
maneuvering against each other. With their
decline, Teferi Benti's influence had increased.
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Mengistu's actions are said to have angered
many council members, although some of the dis-
content probably stems more from resentment
over his failure to consult them than from the
arrests themselves. Few members are willing to
make an issue of the detention of additional
wealthy conservatives. Others may have mis-
givings about the seemingly indiscriminate nature
of the arrests.
On the other hand, the council as a whole
has felt increasingly threatened by its many op-
ponents, and most members probably believed
some action was needed to intimidate their
critics. The military rulers are particularly con-
cerned about the Ethiopian Democratic Union, an
organization led by well-known members of the
country's former aristocracy. Some of the new
detainees are suspected of collaborating with the
Democratic Union, which has conducted guerrilla
operations in western Ethiopia and is believed to
have supporters elsewhere in the country. The
council believes the Union is gaining support in
the provinces.
Although the radicals' opponents on the
council and in the armed forces have not
attempted a counter move, they are not likely to
remain passive if Mengistu and the radicals
appear to be consolidating their power. Most
council members realize the council's support has
declined because of the socialist measures it has
already implemented, particularly the
nationalization of urban and rural land. They
would be reluctant to accept a further move to
the left, which would narrow the council's pop-
ular support and make it even more dependent
on repression to survive. Key military units out-
side Addis Ababa, which have been dissatisfied
with the ruling group's policies and
authoritarianism for some time, might break
openly with the council if the radicals clearly
become the dominant force.
The council unveiled a major government
reshuffle this week that appears largely unrelated
to the arrests and internal maneuvering. Seven
ministers were fired and 55 new officials were ap-
pointed, including four new ministers, three
provincial chief administrators, and six permanent
secretaries.
The changes were presented as part of a cam-
paign against bureaucratic timidity and inaction.
Most of the new officials are younger and more
committed to change than their predecessors,
many of whom held office under the old regime.
It is questionable, however, whether the new ap-
pointees will exercise more initiative than the of-
ficials they replaced. They will not be encouraged
by the latest arrests of civil servants, and there are
no indications that the council is prepared to Rive
BANGLADESH-INDIA: STILL UNEASY
Relations between Bangladesh and India
continue to be marked by frictions and mutual
suspicions, although tensions have eased con-
siderably since late, last year when the turmoil in
Bangladesh and the threat of Indian military in-
tervention peaked. Dacca, still troubled by the ac-
tivities of Indian-based Bengalee dissidents, has
now become exercised over a water-sharing dis-
pute. India, for its part, remains unsure of the
martial law administration in Dacca and continues
to maintain pressure on the Bengalees to prevent
a further shift away from the close collabora-
tion that existed under the former Mujib regime.
Late last month, Bengalee officials publicly
charged that Bengalee insurgents coming from
India had again raided several border outposts in
Bangladesh. The Bengalees claimed that the in-
surgents were supported by Indian paramilitary
forces in violation of assurances given in meetings
held last December between officials of the two
countries after a similar series of border incidents.
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New Delhi denied the charges and, in turn, ac-
cused Dacca of attempting to revive anti-Indian
feeling in Bangladesh.
Recent meetings between Bengalee and In-
dian border security officials helped ease the con-
troversy. A three-day conference in Dacca
produced an agreement to establish a joint team
to investigate the border incidents and report
back to the two governments. The two sides also
agreed to hold periodic meetings to resolve local
issues.
Despite the outwardly positive tone of the
sessions, more border problems are likely. Rein-
forced Indian paramilitary units remain in the
border area, and an Indian official has admitted
that, in the past, New Delhi has given aid to
Bengalee dissidents. With or without Indian sup-
port, the dissidents are probably capable of caus-
ing more trouble for the Dacca government.
The dispute over water sharing-a problem
with a long history-has been brought to the fore
by the approach of the March-May dry season.
The Bengalees claim that Indian diversion of the
waters of the Ganges at Farakka, where India
opened a new dam last year, has sharply lowered
the level of the river as it crosses into Bangladesh.
They predict navigational problems, a decline in
their crop production, and increasing salinity in
the delta. The Bengalee predictions appear ex-
aggerated. Bangladesh last week rejected an In-
dian proposal for talks on the issue. Dacca says it
sees no purpose for such talks until India halts
diversion of the water. The Indians, in turn, have
rejected this condition.
The public charges by Bangladesh on border
clashes and the diversion of the Ganges represent
a departure from Dacca's policy since last
December of generally avoiding statements likely
to irritate New Delhi and, at least in part, they
probably reflect sincere concern. Bengalee leader
General Zia ur-Rahman may also see a need,
however, to exploit an external threat to keep his
army behind him; his shaky martial law ad-
ministration has been troubled by military in-
discipline and rifts in the ~ officer corps. Zia
probably realizes the possible danger inherent in
whipping up the considerable anti-Indian senti-
ment in the army, but he may hope his popularity
among the enlisted men will allow him to channel
any reaction into support for the government.
The Bengalees may also have foreign policy
motives in publicizing their charges against India.
To the extent that their fears of Indian intentions
have been rekindled, they may be attempting to
elicit support from friendly countries, as they did
in a diplomatic campaign last fall when they were
most fearful of the possibility of Indian interven-
tion. Dacca may also believe that its emphasis on a
threat from across the border will -help it in its
quest for new military equipment from potential
suppliers.
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ARGENTINA: LAST CHANCE FOR PERON?
President Peron faced mounting pressure this
week from within her party for more changes in
her cabinet and the removal of her controversial
advisers. A number of top Peronist leaders finally
joined other civilian groups in the belief that only
by purging her administration can Peron avert a
military take-over that could well eliminate
civilian participation in the top ranks of govern-
ment.
Early in the week Peronist leaders met with
the President to demand the removal of her ad-
visers and the adoption of new economic policies.
They stressed to her the urgent need for a
"change of direction" by the government.
The national council of the Peronist par-
ty-the group's policy-making body-supported
the demands, but only after a bitter debate that
resulted in the resignations of six members loyal
to the President. The six, along with other top
Peronists still backing the President, heaped scorn
on their colleagues for betraying the chief ex-
ecutive and advocating "deceitful questioning of
the cabinet and government policies." The US
embassy calls the Peronist party "virtually frac-
tured" as a result of the dispute.
Peron subsequently displayed her now
familiar defiance by publicly rejecting the
proffered resignations of all the cabinet members
and reiterating her full confidence in them.
Nonetheless, it has since become apparent that at
least one, and probably more, cabinet shifts are in
the offing. Indeed, press accounts indicate that
Defense Minister Guardo is already preparing to
leave.
Cabinet shuffles have bought time for Peron
on many previous occasions and could again. It
seems more likely that only a purge of her inner
circle, which she consistently refuses, can satisfy
her massed opponents. Continued resistance on
this issue could impel congress, which reconven-
ed late Wednesday, to take up again a motion to
declare Peron unable to discharge her duties. For
several months military commanders have been
repeatedly warning civilian politicians that they
must resolve the political and economic chaos or
face a long period of military rule. The President's
stubbornness could spark the armed forces, now
more than ever oised to take over, to make their
move.
Y.5'_ 9 7
BRAZIL: HARNESSING SECURITY FORCES
President Geisel is taking additional steps to
bring recalcitrant security officials under control
and to strengthen his authority over the army.
Late last month Geisel dismissed the Second Army
commander following the death of a civilian
prisoner under military custody in Sao Paulo. Last
week he renewed his purge by sacking the chief
and deputy chief of the army's intelligence ser-
vice for failing to enforce presidents orders re-
garding internal sPcursty operations.
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Geisel has repeatedly ordered security forces
to curb such abuses as torture and illegal deten-
tions, but his demands have been largely ignored
by military conservatives who argue that strong
measures are necessary to prevent a recurrence of
the disruptive political activity and subversive
violence that characterized Brazil before 1968.
After the internationally publicized death of news
correspondent Vladimir Herzog in an army jail
last fall, however, Geisel committed his prestige
to a strong stand against abuses of human rights.
The President's initiatives have not met with
direct opposition and are unlikely to do so, but
there are indications that a whispering campaign
has begun against liberals and alleged subversives
who occupy prominent government positions.
sive posture, security specialists might well ex-
pand illegal death-squad operations-usually
employed against petty criminals-to include
those whom they view as political threats to the
regime.
in taking on the conservatives, Geisel is trying
to roll back an influential sector of the military
that has exerted strong pressure on every presi-
dent since 1964. If he succeeds, he will greatly
enhance his personal authority and ease the way
for further relaxation of political controls, a goal
Geisel has long professed but which he has made
little progress toward achieving. Failure, however,
would only add to his already considerable
political and economic difficulties, and could tie
his hands on more issues for the remaining three
years of his term.
COLOMBIA: VIOLENCE INCREASES
A sharp increase in terrorism, guerrilla activi-
ty, and common crime has forced President Lopez
to drop plans for lifting the nine-month-old state
of siege in time for the midterm elections in April.
The current unrest runs the gamut from
strikes to civil disorders and kidnapings. A variety
of causes, economic and political, and adherents
of both the right and left are involved. The con-
tinuing unrest has raised doubts that the country's
civilian leaders are sufficiently aware of the
potential gravity of the security situation or are
sufficiently concerned to take the necessary
measures to restore public order and confidence.
Not only is the government plagued by student
strikes and clashes with the police but a work
stoppage in Buenaventura, Colombia's leading
Pacific port, has crippled commercial activity in
that city. Civil strikes by bank employees and tax
collectors, serve only to confirm the general
public impression that the government is not
responding as vigorously as it should to the crisis
it is facing.
Adding to the increased concern has been
the highly publicized kidnaping of the veteran
head of the Colombia Workers Federation. His
abductors are claiming he will be "tried" for
crimes against the working class. Leaders of the
federation have threatened a massive strike to
protest the kidnaping, raising the threat of further
disorders.
Against this backdrop, the country is
preparing for departmental and municipal elec-
tions on April 18, usually an important barometer
of popular sentiment for the presidential election
two years later. There are tentative indications
that the voter turnout will be light even for an off-
year election. Party rallies have been sparsely
attended and voter registration is down. This
situation could favor extreme leftist candidates,
particularly in Bogota, at the expense of the two
major parties. Embassy sources blame the
widespread apathy and disaffection on the
government's inability to stem inflation or deal
with well-publicized scandals and corruption.
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Former Conservative President Pastrana has
zeroed in on the government's weak economic
performance, attacking President Lopez and the
Liberal Party for fiscal mismanagement, profligate
spending, and a budget deficit.
The Lockheed bribery scandal is adding to
the concern over corruption. Lopez has ap-
pointed a high-level team to investigate charges
that government and military officials were brib-
ed in connection with the purchase of three
CIEC: FIRST ROUND ENDS
Representatives of both the developed and
the developing countries are saying some
progress was made in Paris last week during the
first round of meetings of the four working com-
missions of the Conference on International
Economic Cooperation. Serious differences in ap-
proach and expectations remain, however, which
are likely to become more pronounced when the
second round of talks begins on March 18.
Discussion at this round centered almost en-
tirely on questions of procedure and agenda,
although talks were begun in the development
commission on two substantive issues-trade and
balance-of-payments problems of the developing
countries. Important differences on energy and
financial issues did not prevent agreement on the
future work programs of these two commissions,
but the commission on raw materials was less
successful; it will continue to debate an agenda
when it reconvenes next month.
The developed countries, citing the uncer-
tain economic outlook in the near term, were
generally unwilling to make any long-term com-
mitments. Lack of coordination of developed
country positions was a major problem, especially
in the raw materials and development com-
missions where the developed states lack the
preparatory work of the International Energy
Agency to fall back on.
C-130 aircraft in 1968-1969. A public report has
been promised.
Lopez will have to handle the issue with care.
He recognizes that the luster of his election vic-
tory has long since worn off, that economic
problems are mounting, and that the public's
sense of security is being eroded by daily
violence. If the situation continues to deteriorate
the military will almost certainly demand a larger
role for itself in putting an end to the disorders.
The EC and the Japanese, in particular, were
unprepared to begin substantive talks during this
round, seeking instead to postpone debate at
least until next month. EC internal decision-
making processes were also very cumbersome in
this session, although this will probably prove less
of a problem later.
Pressure will grow on the developed states to
show some progress in Paris before the Fourth UN
Conference on Trade and Development opens in
May in Nairobi, if only to temper an attitude of
confrontation which otherwise might arise there.
The developing countries appear determined
to use the talks in Paris to reach agreement on
specific and constructive proposals before the
UNCTAD meeting. This was most apparant in the
development commission which covers the topic
most critical to developing country in-
terests-trade.
While the developing states represented in
Paris may have been content to use the first ses-
dis-
sion of the commissions for procedural eel
cussions, some of them, at least, probably feel
they cannot afford to let the March session
proceed in the same way. An unproductive
meeting in March could discredit the argument
they made to other developing countries that the
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smaller Paris forum can be effectively used to ex-
tract concessions later from the developed coun-
tries at the UNCTAD meeting in Nairobi.
The developed states accomplished a major
objective when the energy commission agreed to
begin substantive discussions next month with a
general review of the world energy situation. The
developed states view such an analysis as fun-
damental to building a broad and factual
framework that can be drawn upon in future
sessions when specific topics are discussed. The
oil-exporting states had been pushing to begin
work immediately on specific topics to avoid any
discussion of the impact of high oil prices on
developing countries that must import oil.
The finance commission's discussions last
week focused on the causes of the world-wide
recession and the developing states' desire to shift
attention to basic structural problems in the world
economy. Both sides finally agreed to continue
next month a general discussion of the world
situation, placing specific emphasis on longer
term prospects.
In the commission on raw materials the
developing states continued to push for accep-
tance of the UNCTAD secretariat's integrated
program on commodities, which stresses specific
remedies such as buffer stocks, a common fund,
and indexation. The developed states, particularly
those in the EC, argued for a commodity-by-com-
modity approach, which could entail a discussion
of substantive commodity problems before
general agreement is reached on an overall ap-
proach to raw rn aterials trade.
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