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• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A011400060001-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 17
• Document Creation Date: January 12, 2017
• Document Release Date: July 19, 2011
• Sequence Number: 1
• Publication Date: July 30, 1976
• Content Type: SUMMARY

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Secret
Weekly Summary
Secret
Cl WS 76-031
No. 0031/76
July 30, 1976
N2 71
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CONTENTS
1 Middle East
Lebanon
1 Europe
Italy; Portugal;
MBFR; USSR
Shortages
4 Western Hemisphere
Cuba-Angola; Peru
5 Far East
Japan; Thailand
SECRET
6 Africa
South Africa; Kenya-Uganda
7 International
Gold Prices Drop
8 Malta: Parliamentary Election
9 British Spending Cuts
10 The Thai Student Movement in Disrepute
11 Finland: Kekkonen To Visit US
Comments and queries on the contents of this
publication are welcome. They may be
Summary,
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JGVRIL I
Syrian and Palestinfan representatives,
meeting in Damascus this week, worked
out a draft reconciliation agreement that
calls for a truce to be implemented
throughout Lebanon within one week of
the accord's acceptance. Progress in the
talks helped lower the level of fighting in
most areas of the country. The lull,
however, may prove only temporary if
Syrian and Palestinian negotiators fail to
persuade their more militant allies to
accept the accord.
In addition to the provision for a
nationwide cease-fire, the agreement calls
for:
? Establishment of a Syrian-Pal-
estinian-Lebanese committee to super-
vise the truce, and the use of Arab
League and Syrian troops to enforce
it.
? Withdrawal of Palestinian forces
from the Mount Lebanon area and
strict adherence by the Palestinians to
the Cairo agreement of 1969.
? Roundtable negotiations among
the Lebanese under the auspices of
President-elect Sarkis and the forma-
tion of a "national union" cabinet to
carry out a reform program establish-
ed by the roundtable talks.
The Lebanese leftists and radical
Palestinians have predictably criticized
the draft accord for failing to include a
provision for the withdrawal of Syrian
forces from Lebanon. The leftists might
have to acquiesce because of their military
dependence on the Palestinians, but the
Palestinian leadership itself is badly divid-
ed over whether to accept the terms,
which clearly favor Syria.
The Christians have not yet m icate
whether they would accept the agreement.
Although the Syrians have made virtually
no concessions to the Palestinians and
have repeatedly reassured the Christians
that they will not even discuss a
withdrawal of Syrian troops, Camille
Shamun and other Christian militants
have hardened their positions after their
recent military victories. They would like
to see the complete disarmament of the
Palestinians in Lebanon, and seem deter-
mined to consolidate their territorial
holdings before entering into serious
negotiations.
A Christian offensive this week to oust
Palestinian forces from Christian villages
in the mountains east of Beirut made little
headway, primarily because of the rough
terrain. Christian militiamen tightened
their stranglehold on Tall Zatar refugee
camp by attacking the only remaining
leftist-Palestinian enclave in the area
near the camp
Italy's Christian Democrats this week
authorized prime minister designate An-
dreotti to form a temporary minority
government; its survival would depend on
Communist abstention in parliamentary
confidence votes. The Communists have
not held such a pivotal role since their
ejection from the government in 1947, and
have always voted against the government
in confidence votes.
Andreotti needs Communist abstention
because of his failure during consultations
on a new government to win parliamen-
tary support from the Christian
Democrats' three traditional governing
partners. The Socialists, Social Demo-
crats, and Republicans have all told An-
dreotti that the most he can expect from
them in a confidence vote is abstention.
Given the increased Communist
strength in the new parliament, the Chris-
tian Democrats could not command the
requisite majority of those voting unless
the Communists also abstained.
While giving Andreotti the go-ahead,
the Christian Democratic leadership
stopped just short of issuing the explicit
appeal for Communist assistance that the
Communists had demanded as a condi-
tion for their abstention.
What the Communists want, in effect,
is a formal admission by the Christian
Democrats that Italy cannot be governed
without Communist cooperation.
Influential right-wing Christian 25X1
Democrats opposed such an appeal to the
Communists on the grounds that it would
blur the distinction between the opposi-
tion and the government.
In the absence of realistic alternatives,
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SECRET
Christian Democratic leader Zaccagnini
sought this week to paper over differences
in his party with a formulation that meets
the Communists halfway. Rather than
appealing to the Communists alone, he
called on all parties consulted by Andreot-
ti to "render a service" by abstaining in a
vote of confidence.
The Communists will now have to
decide whether Zaccagnini has gone far
enough. They will probably be persuaded
to go along by the increased influence they
would acquire and by the Christian
Democrats' willingness to yield major
parliamentary posts to them.
25X1 Andreotti is drawing up a cabinet and
will reportedly be ready to face a con-
25X1 fidence vote next week.
PORTUGAL
that is far from assured.
The government is faced with the task
of reviving production and increasing
employment while at the same time con-
trolling inflation and reducing a sizable
balance-of-payments deficit. The acid test
for Soares' economic plan will come when
labor-a center of Communist
strength-faces the prospect of wage
restraints and legalized worker dismissals.
Portuguese workers have had relatively
little trouble in getting even their most ex-
treme demands approved since the
military seized power in April 1974.
President Eanes and Soares have
stressed that the new policies will be
backed by the full authority of the gov-
ernment, but several of the ministers
who will be expected to implement
these programs do not inspire confi-
dence. Labor Minister Marcelo Curto, a
member of the Socialist Party's left
wing and formerly secretary of state for
labor, was criticized by former labor min-
ister Tomas Rosa for being too soft on
Communist labor organizations.
Agriculture Minister Lopes Cardoso,
also a left-wing Socialist and a holdover
from the last cabinet, is anathema to
farmers in the north because of the stead-
The new Socialist minority government
of Prime Minister Mario Soares has set
Portugal's economic recovery as its top
priority. Soares is likely to obtain
parliamentary approval of his government
program next week, but success beyond
fast support he gave the agrarian reform
program and his failure to take strong ac-
tion to correct abuses by Communist farm
workers in the south. During the last ad-
ministration, northern farmers frequently
called for his resignation.
Soares apparently intends to keep a
close eye on all the ministries and has ap-
pointed two able ministers without port-
folio to help him. He will probably give
particular attention to foreign affairs and
reorient policy toward the US and
Western Europe. He hopes to benefit
from his close relations with West Euro-
pean government and political leaders.
The Socialist government will, in fact,
be relying heavily on foreign assistance to
help with Portugal's serious economic
problems. Soares campaigned heavily on
the theme that he was best equipped to ob-
tain the needed assistance.
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SECRET
.>
MBFR
The ninth round of the Vienna force
reduction talks concluded last week. The
East, for the first time, provided data on
its forces in Central Europe.
The figures provided by the East are
lower than NATO estimates. They repre-
sent no change in the Soviet position that
Warsaw Pact and NATO forces are
roughly equal and, consequently, force
reductions should be about equal. The
move, however, makes concrete dis-
cussions possible for the first time since
the talks began.
The West contends that, because War-
saw Pact forces in the reduction area are
larger than NATO's, there should be
asymmetrical reductions leading to a
common ceiling of about 700,000 for the
ground forces of each side.
The West European allies
responded by indicating they
have
want
attempt by the Soviets to maintain their
superiority in ground forces in the
technical discussions that will begin when
the West tables updated figures. The
allies-particularly the West Ger-
mans-are also anxious to ensure that the
discussions not include national force
totals, which would undermine the West's
demand for collective reduction com-
mitments.
The West's tabling of updated force
figures has been complicated by the
French refusal to allow the allies to in-
clude data on French forces. Some allies
have said they fear the French move
jeopardizes the negotiations. Although
Paris does not participate in the
negotiations and has disclaimed any resul-
tant obligations under an agreement, it
had previously allowed its forces to be in-
cluded in the Western totals. Exclusion of
the French forces would make it more dif-
ficult to negotiate a collective figure for
each side. The West is delaying presenta-
tion of its revised figures in the hope that
some compromise can be found.
Paris' view that there is an increased
likelihood of reductions in overall Euro-
pean armaments has revived French con-
cern over its ability to deploy French
any25X1orces.
USSR: Continuing Food Shortages 3~ ~7
US embassy officers who have recently
visited a number of Soviet cities from
Tallinn on the Baltic to Irkutsk in Siberia
report continuing food shortages, some of
them worse than those observed a month
or two ago.
Vegetables and fruit
available from this year's harvest, but
meat, eggs, and butter are in shorter sup-
ply. Residents in small towns through-
out the country say these products are
either very difficult to find or "totally
unavailable."
Since last winter, consumers have suf-
fered the worst food shortages in more
than a decade; meat shortages, at least,
will continue. Meat processing in June
was down 29 percent from a year ago and
is not likely to pick up before fall.
Sausage-a favorite meat product-is
still in short supply, despite attempts to
make the most of available meat by ad-
ding dried milk, protein extracts, and
potato and wheat flour.
There have been no major disturbances
over the food shortages, although grum-
bling appears to be particularly bitter
this summer. The government's failure
to purchase substantial quantities of
meat abroad suggests it does not believe
civil disorder is likely.
Soviet diets have improved markedly
over the past decade, and there is no
eating more meat than it did in 1970.
Pans WFFKI V qI IAAAAAPV I,~I '2( 7ti
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SECRET
One of five Cuban merchant ships, the Vietnam Heroico, photographed returning from Angola on July 24
CUBA-ANGOLA
With Angolan President Agostinho
Neto looking on, Cuban Prime Minister
Fidel Castro, in his annual address on
July 26, pledged that Cuban military units
and weapons will remain in Angola until
that country's armed forces are organiz-
ed, equipped, trained, and capable of
guaranteeing national security.
Castro acknowledged that he is
withdrawing military personnel no longer
needed in Angola but gave no hint as to
the number involved or the pace of the
pull-out. He promised Neto that. troops
would be sent again if the need arose, but
he stressed Havana's intention to provide
technical cooperation in a variety of fields
to help Angola rebuild and eventually
overcome underdevelopment. In a speech
that preceded Castro's, Neto said large
numbers of troops are no longer required,
but he emphasized his country's need for
Cuban advisers and technical experts.
Both leaders seemed to be making a
deliberate effort to play down the Cuban
involvement in Angola, presumably
because of their sensitivity to the fact it
is not entirely accepted by the Cuban pop-
ulation. Castro said there now are several
hundred Cuban technicians working in
Angola and "it may be necessary to have
2,000 or 3,000 Cubans" working there
in public health, construction, education,
fishing, agriculture, and the sugar and
coffee industries.
We believe 3,000 Cuban technicians
may already have arrived, and we expect
this figure to climb rapidly, in part as a
result of Neto's visit. Judging from the
composition of the large Neto delegation,
considerable planning for the future
Cuban role in Angola has been taking
place since the delegation's arrival on July
22. Neto brought with him senior
political, economic, and military officials,
as well as representatives from local
government, unions, and mass
organizations.
Cuban Convoy from Angola
A convoy of five Cuban merchant ships
is bringing men and equipment from
Angola. Three of the ships have carried
troops before; men in fatigues were
sighted on the decks of several. The men
could be Cuban troops or Angolans being
sent to Cuba for advanced military train-
d
l
is is the third convoy, an
apparent
y
the largest, since the Cubans began using
the convoy system in May
75X1
25X1
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PERU 4 2 f ~-O
The Morales Bermudez government is
beginning to switch its priorities and
moderate the policies of Peru's eight-
year-old revolution. The shift is the out-
growth of the wide-ranging shakeup in the
government that occurred after the forced
departure of former prime minister Fer-
nandez Maldonado and some of his
radical supporters in mid-July. The
realignment of forces within the cabinet
and key government ministries has tilted
political power toward military officers
with more conservative leanings.
President Morales Bermudez' in-
dependence day address on July 28 reaf-
firmed the government's new course. He
repeatedly stressed that economic ef-
ficiency takes. precedence over ideological
experimentation.
The new cabinet seems disposed to im-
prove relations with the US and to soften
its advocacy of third-world positions. An
important gauge of its intentions will be
its handling of the long-standing Marcona
dispute with the US. The new prime
minister, General Arbulu Galliani, has
already told Ambassador Dean that he is
anxious to settle this and remove a major
impediment to better relations.
Military conservatives are growing in-
creasingly suspicious of the Cuban
presence in Peru, and relations with
Havana appear to be strained. The
Cubans are reportedly worried by the re-
cent trend in Lima and may attempt to
lower their profile. Relations with the
USSR may remain on track because of
the substantial. Peruvian investment in
Soviet arms.
The movement toward more pragmatic
policies is confirmed by several decrees
issued since the first meetings of the new
cabinet. The nationalized fishing industry
is to be returned to private ownership, and
petroleum concessions-suspended since
1973-will again be offered in inter-
national bidding.
The President will have to move cau-
tiously during this period of. change and
until he can build up his support within
the fragmented military establishment.
The latest changes do not imply any sub-
stantial modification in the authoritarian
character of the regime-at least not im-
mediately.
25X1
JAPAN J~- ~
The Lockheed affair and the intense
maneuvering it engendered in the ruling
Liberal Democratic Party have entered a
critical phase with the arrest of former
prime minister Tanaka.
Despite widespread suspicion of
Tanaka's involvement, his arrest has
shocked Japanese political circles and has
created a political scandal unprecedented
in postwar Japan, Days and perhaps
weeks of confusion and disarray can be
expected in the ruling party while the in-
vestigation continues.
Japanese prosecutors expect to arrest a
number of other prominent people soon.
If those implicated are mostly from
Tanaka's own faction, the ultimate
damage to the party may not be overly
severe. The party could even benefit
somewhat from renewed public con-
fidence in the government's will and abili-
ty to fight corruption, and from a belief
that the guilty have been punished.
If, on the other hand, many people
from various party factions are arrested,
the conservatives could be generally
tainted; the party's prospects in the
national election later this year would be
seriously damaged. Tanaka himself could
do great damage with a full-scale confes-
sion. He earlier threatened to do just that
if he were implicated, but he resigned
from the party shortly after his arrest and
now seems resigned to a quiet exit from
politics.
Within the party, concern about the
final outcome of the investigation has cer-
tainly increased. Similar apprehensions
prompted powerful party leaders, in-
eluding Tanaka, to try to oust Prime
Minister Miki last month. Miki
weathered the initial challenge by insisting
upon remaining in office until the probe is
completed.
Miki will derive additional popular
credit from Tanaka's arrest, but his
narrow base of support in the party is un-
likely to increase. He could decide to step
down in the near future, saying he has
fulfilled his responsibilities. If so, Deputy
Prime Minister Fukuda would almost cer-
tainly succeed him.
There are some signs, however, that
Miki has no intention of resigning and
that he hopes to maintain strong popular
support for his tenure by advocating
general party reforms in the wake of the
Lockheed affair. If so, he clearly runs the
risk of an open clash with other part
THAILAND 5-d
S/
Thai Foreign Minister Phichai leaves
for Vientiane and Hanoi this weekend
seeking normalization of relations with
Thailand's neighbors.
In Vientiane, Phichai will try to ease
the strained relationship of the past year
caused by clashes along the Mekong
River and Thailand's subsequent closure
of all but one point on the border. The
border closure has damaged the Lao
economy and, from Vientiane's point of
view, is the major obstacle to better
relations. Another source of contention is
Thai support for Lao resistance activities.
Thailand, equally concerned about Lao
support to Thai insurgents, is reluctant to
drop all restrictions to the movement of
goods and people across the border but
does seem prepared to offer the opening
of additional points of entry near major
commercial centers.
Phichai's obvious eagerness to establish
relations with Vietnam is disquieting to
conservative groups in Bangkok. Conser-
vative politicians and military officers are
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still upset over the departure of the US
troops and blame the Foreign Ministry.
They believe Thailand has alienated its
staunchest ally in exchange for an im-
provement in relations with communist
regimes in Indochina that are actively
supporting insurgencies in the north and
northeast.
If, during the negotiations in Hanoi, the
Vietnamese renew their claim to the air-
craft flown out of Vietnam last year, con-
servative opposition to such a return could
sidetrack the talks. If the Vietnamese are
25X1 willing to ignore this contentious issue,
the conservatives probably would not
stand in the way of establishing relations.
SOUTH AFRICA
')2-~
Scattered student disturbances in South
Africa last week indicate that some black
militants have been working to exploit the
heightened racial tensions that resulted
from extensive rioting in mid-June. The
new disorders, along with some arson in
widely separated localities, showed a
degree of concerted action that was not
apparent in June.
Soweto and the other black townships
around Johannesburg and Pretoria where
the rioting occurred last month have been
quiet since then because of stringent
security measures. Last week, student
riots broke out in several other black
townships farther from Johannesburg
after most of the country's black students
resumed studies at the end of the winter
recess. The disorders were quickly sup-
pressed after two youths were killed.
The government had announced that
black schools around Johannesburg and
Pretoria would remain closed indefinitely,
but reversed itself and allowed these
schools to reopen only two days later than
the others. The turnabout apparently
resulted from a meeting between govern-
ment leaders and a newly formed com-
mittee representing school principals and
other black officials from the affected
townships.
In other concessions, the government
announced earlier this month that it
would no longer compel the use of
Afrikaans as a medium of instruction for
black students and that electricity would
be provided by 1983 to all housing in
Soweto. These decisions also followed in-
formal consultations with authorized
black spokesmen, and government leaders
have intimated that the urban Bantu
councils-now only advisory bodies-are
to gain a voice in planning public services
in the black townships.
At the same time, the authorities are
trying to intimidate any blacks who have
gained prominence outside the limited
range of officially sponsored positions in
the urban black townships or the tribal
homelands. Those detained after the June
riots included not only activists in the
Black People's Convention and associated
student groups, but also some non-
political blacks.
At least 1,300 persons had been
arrested by late June for suspected in-
volvement in the rioting. Some 200 have
been brought to trial and others have been
released, but many are still being held un-
der security legislation authorizing in-
definite detention without trial of anyone
suspected of subversive action or intent.
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SECRET
KENYA-UGANDA
Concern continues in Nairobi that
Ugandan President Amin may order a
military move against Kenya. Despite
hints by Nairobi that it stands ready to
ease the dispute, Kenya appears deter-
mined to maintain economic and
diplomatic pressure on Amin.
Kenyan Foreign Minister Waiyaki said
this week that his government would be
willing to allow a resumption of
petroleum shipments to Uganda if Kam-
pala pays cash for the shipments.
Previously, Kenya had maintained that
deliveries of oil and other commodities
could not be resumed until Uganda had
met all its outstanding debts to Kenya.
At the same time, the foreign minister
listed several conditions he said Amin
must meet to ease tensions. He said Amin
must remove his troops from the border
area, drop claims to parts of Kenya, and
guarantee the safety of Kenyans in Ugan-
da who have been subjected to reprisals.
The foreign minister also said Amin must
stop confiscating goods bound from
Kenya for Rwanda, Burundi, and Zaire.
Within Uganda, the economic situation
has grown increasingly difficult. The
government has imposed strict conserva-
tion measures that have apparently had a
serious effect on military capabilities and
on civilians.
The secretary general of the Organiza-
tion of African Unity arrived in Nairobi
this week to look into the dispute. He was
expected to go on to Kampala. Amin last
week called for OAU and UN in-
vestigations of his problems with Kenya.
Amin, a Muslim, also is trying to line
up support among Islamic states. The
Arab League has agreed to discuss his
requests for oil and other supplies, but no
date has been set for a meeting.
The Kenyans have asked the US em-
bassy to ensure that current visits of US
military units to Kenya are given as little
US publicity as possible. The Kenyans,
who last week said the US presence has
played a role in deterring Amin from tak-
ing military action, are apparently trying
to avoid damage to Kenya's nonaligned
credentials.
The UK announced this week that it
has decided to break relations with Ugan-
da. The Callaghan government, which has
been under considerable pressure to "do
something" in the face of Amin's
provocations, had held off the break for
two weeks while about half of the 500
British subjects in Uganda were leaving
the country.
GOLD PRICES DROP
Gold prices plummeted to a two and
one half year low of $107.75 an ounce last
week in the wake of the July 14 Inter-
national Monetary Fund gold auction.
Although prices recovered to the
$1 l0-$1l3 range this week, many market
analysts are now predicting further
declines. European countries with exten-
sive public and private gold holdings may
soon seek US cooperation to defer further
IMF sales.
The recent price movements stem
mainly from a sharp increase in the supply
of new gold to markets in non-communist
countries. Since June 2, IMF sales-24
tons at 6-week intervals-have increased
the new gold supply by 17 percent.
production an saes, w ich had been
declining for several years, leveled off in
the first half of 1976 and are likely to in-
crease slightly in the second half. As a
result, the current rate of gold supply is at
least 25 percent above the pace in 1975.
The demand for gold has not kept pace
with the increase in supply. Industrial de-
mand, although recovering, remains well
below the peak it reached in 1971.
Many countries are undoubtedly con-
cerned over the price decline. The USSR,
facing a current-account deficit of $4 to
$6 billion this year, will find it increasing-
ly difficult and expensive to borrow on
private capital markets. Last year, the
USSR earned about $750 million from
gold sales. If the Soviets sell at a rate of
250 tons per year, each $1-per-ounce
decline in the gold price costs them about
$8 million annually.
South Africa, also in a payments bind,
earned $3.5 billion from gold sales in 1975
and would feel the effects of declining
gold prices even more sharply than the
USSR.
Several West European countries that
hold extensive public and private gold
stocks may become concerned over recent
price movements. Portugal and Italy have
used gold to back loans to meet payments
obligations. These two countries as well as
France and Switzerland have a vested in-
terest in a strong gold market.
Unless the IMF auctions are curtailed,
gold prices are unlikely to recover this
year. Industrial demand will continue to
recover but not enough to improve prices.
The USSR's financial needs will force it
to continue to sell gold, and South Africa
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SECRET
Malta's next parliamentary election,
mid-November, will test public reactio
Mintoffs sharp break from the co
traditions in for4ign policy.
due sometime before
i to Prime Minister
~try's pro-Western
Malta: Parliamentary Election
The approaching parliament ary elec-
tion in Malta is developing into a referen-
dum on Prime Minister Dom Mint.off's
nonaligned foreign policy. The economic
impact of the withdrawal of British forces,
to be completed by March 31, 1979, is
also likely to be a key issue.
Parliament must be dissolved by
mid-August and the election held before
the middle of November, but it could be
called sooner.
Since the return of his Labor Party to
power in 1971, Mintoff has stirred con-
troversy at home by moving Malta away
from its traditionally strong ties with the
UK, Europe, and NATO and toward a
closer identification with the third
world. Malta, a member of the nonalign-
ed movement since 1973, was admitted to
the Group of 77 in February of this year.
Foreign Policy
Shortly after assuming office, Mintoff
demanded removal of the small NATO
naval command from the island and re-
fused entry to US navy ships. In key votes
in international forums, particularly the
UN, Malta has taken anti-US and an-
ti-Western positions. Mintoff has careful-
ly cultivated a friendship with Libyan
leader Qadhafi, which in turn has led him
to adopt a sharply pro-Arab and an-
ti-Israel stance.
Such marked departures from
traditional Maltese policies have been un-
popular with many Maltese, who general-
ly remain pro-Western and view Mintoff's
flirtation with Qadhafi with suspicion.
One of Mintoffs major foreign policy
themes is his opposition to the presence of
US and Soviet fleets in the Mediterra-
nean. Last summer he almost brought the
European Security Conference to a
standstill by demanding an amendment to
the Mediterranean declaration calling for
the withdrawal of all US and Soviet ships
from the area.
He has capped his anti-US and an-
ti-Soviet stands by introducing a signifi-
cant Chinese technical presence into
Malta, coupled with strong support of
Peking's Asia policy.
Such policies have increased Maltese
anxieties about the island's political and
economic future after the British
withdrawal. Of major concern is the loss
to Malta's economy of some $80 million
annually from the NATO-financed
British base-rental payments and local
British expenditures.
The Opposition
The opposition pro-Western
Nationalist Party led by former prime
minister Georgio Borg Olivier may not be
able to capitalize sufficiently on public
dissatisfaction with Mintoff's policies to
win the election.
Borg Olivier is a weak and ineffectual
leader who has been able to muster only
token opposition in Parliament to most of
Labor's programs. The Nationalists'
problems could be compounded by ger-
rymandering of the election districts by
Mintoff last February.
The election results will be determined
in large part by Mintoff's success in con-
vincing voters that his widespread con-
tacts with world leaders and diplomatic
posturing can secure the necessary inter-
national commitments to keep Malta
afloat economically.
Need for Aid
There is little sympathy in Europe for
Mintoff. Many European leaders, already
irritated by his nonstop appeals for
economic aid, are likely to recognize that
even the suggestion of a pre-election com-
mitment from them to Mintoff could
assure his re-election. The Italians view
Mintoffs friendship with Qadhafi with
alarm and would prefer to see Malta tied
as closely to the NATO countries as
possible.
Whichever party wins the election,
Malta will be obliged to seek outside help.
Should the Nationalists win, however,
they have indicated that in exchange for
economic assistance they would restore
Malta's pro-Western orientation and
allow at least a token NATO presence on
the island.
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The spending cuts proposed by the British government last
week will reduce the need to borrow abroad and thus contribute
to controlling inflation. Prime Minister Callaghan has used
much of his political capital with the union leaders to get them
to go along.
British Chancellor of the Exchequer
Denis Healey last week announced $1.8
billion in spending cuts for the fiscal year
beginning April 1, 1977. The government
is likely to win parliamentary approval of
the cuts next week, despite the criticism of
left-wing Laborites. The opposition
Tories have called the cuts inadequate,
but acknowledge they are a step in the
right direction.
The proposed cuts, along with $1.6
billion in revenue from a 2-percent in-
crease in employers' contributions to the
national insurance program, should meet
any requirements the International
Monetary Fund might put on new lending
to the UK.
With more than $1 billion of the $5.3-
billion credit the UK received from the
Group of Ten already dissipated in sup-
port of the pound, a loan from the IMF to
repay the Group of Ten is beginning to
look increasingly likely in December.
The measures prompted little reaction
on the foreign exchange market. In Lon-
don, the pound dropped slightly.
The action may not give sterling the
boost the government hopes for because
the cuts concentrate as much on invest-
ment as on reductions in social programs.
Healey's proposals include:
? A $178-million cut in the defense
budget.
? A $280-million reduction in the
investment program of the national-
ized industries.
? A $155-million reduction in road
and transportation allocations.
? A $187-million drop in programs
British Spending Cuts
for trade, industry, and employment.
? A $142-million cut in food sub-
sidies.
? A $422-million reduction in hous-
ing, health, and social security spend-
ing.
Healey's measures are a step toward
reducing inflation. They should cut
borrowing from an estimated $20.5 billion
in this fiscal year to $16 billion in the next.
The latter amount would represent 6 per-
cent of national output, compared with 9
percent forecast for this fiscal year and 10
percent last year.
Prime Minister Callaghan has dis-
sipated much of his political capital with
the union leaders in trying to prevail on
the trade unions to go along with these
budget cuts.
If the Labor government eventually is
forced by a slide in sterling to consider ad-
ditional cuts in public spending,
Callaghan will have to show strong im-
provement in unemployment statistics to
persuade the unions to continue support
for his economic policies.
Defense Cuts
In a letter to NATO Secretary General
Luns last week, Defense Minister Mason
argued that his government's proposed
$178-million cut in defense spending
would have little impact on the British
military contribution to the Alliance. He
explained that he is determined not to
reduce "front line" forces committed to
NATO-a reference to the 56,000 British
ground troops stationed in Western
Europe.
Mason did not disclose specific areas
where cuts would be made, but he implied
they would be absorbed partly by allowing
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delays in some lower priority military
equipment and construction programs.
Spending for logistic support facilities,
military housing, and administrative of-
fices will reportedly also be reduced.
The defense minister's attempt to
minimize the effect of this latest reduction
on the flexibility and overall military
capability of the British armed forces
suggests the government expects strong
protests from its NATO allies.
Paac A %AIPr:vi V Of IRARAAnv
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The student movement in Thailand, once a power in
domestic politics, has lost public support. Its leaders have been
radicalized by the Communists, and the movement is weakened
by factionalism and the effects of rightist intimidation.
The Thai Student Movement in Disrepute
The Thai student movement today is in
disrepute, suffering from factionalism and
the effects of radical politics that have
alienated the mainstream of Thai society
as well as the student population it pur-
ports to represent. It is a far cry from the
student movement of 1973, the leaders of
which became instant folk heroes for their
role in toppling the Thanom military
regime, ending some 20 years of con-
tinuous military rule.
As faction-ridden as the student move-
ment is today, few doubt that it would
quickly rally to oppose any group attempt-
ing to return Thailand to martial law.
Student leaders have made it clear that
their opposition would be violent, and
even the military knows that a student
bloodbath is unacceptable to both the
King and the public at large.
The current low regard of the Thai stu-
dent movement comes from its attempt to
preserve its momentum after the fall of
the military government by frequent
street demonstrations. In 1973 and 1974,
students took to the streets to protest
Japanese economic influence, the lack of
strong civilian government, and the US
military presence. Such tactics succeeded
in keeping Bangkok in a state of almost
constant political turmoil, causing at one
point the collapse of the interim govern-
ment of Sanya Thammasak.
As 1974 came to an end, public
enthusiasm for the students waned, and
the Thai press attacked their disruptive
behavior and voiced the fear that con-
tinuation of such tactics might cause
public support for civilian rule to
evaporate.
Student leaders lost some of their
credibility because of their willingness to
accept the advice and guidance of the
Communist Party of Thailand. To many
of the university students of Chinese ex-
traction, Maoist rhetoric struck a respon-
sive chord. To the average Thai student,
the leftward drift of student leaders was
both alien and dangerous.
The Communist attempt to lead the stu-
dent movement to the left has had mixed
results. The student newspaper Athipat
has become little more than a Communist
mouthpiece, and the party has had a
significant impact on the thinking of the
student leaders, many of whom have
joined party-backed leftist political
groups upon graduation. On the other
hand, Communist success in radicalizing
the student leadership has had the over-
all effect of alienating the student rank
and file and weakening the political influ-
ence of the student movement as a whole.
The political right, sensing the erosion
of public support for the students, has
created groups of its own to counter the
university-based radicals. Violence-prone
vocational students, serving as the cat's
paw of conservative groups in the military
and government, now routinely disrupt
leftist rallies, and the clashes are often
bloody.
The assassination within the past year
of a handful of prominent student activists
and leftist politicians was probably in-
spired by military and police groups
determined to destroy the radicals. Fear
of right-wing violence has significantly
handicapped the ability of the radicals to
stage rallies and has led most student
leaders to conclude that the era of protest
marches is over.
Such right-wing intimidation, plus the
results of this year's general election in
which leftist candidates were soundly
defeated by scare tactics of the right,
seems to have convinced-some student ac-
tivists and politicians that efforts to work
for reform within the existing political
We doubt, however, that many le tists
see the insurgency as the best way to
change Thai society. The Communist
Party's doctrinaire approach, which pays
lip service to urban activities but still
stresses Maoist rural revolution, is not an
attractive alternative for sophisticated
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Finland's durable President Kekkonen has carefully nur-
tured his country's "special" relationship with the USSR while
maintaining its ties with the West.
Finnish President Urho K. Kekkonen,
who begins an official visit to Washington
on August 3, is one of the most durable
European political leaders. At 76, he has
served as president for more than 20
years; nearly all Finnish political parties
have already endorsed him for another
six-year term after his current one expires
in 1978.
Kekkonen's long domination of the
Finnish political scene is due in part to his
consummate skill as a politician, but
perhaps the decisive factor has been the
stable relationship he has established with
a succession of Soviet leaders.
He makes biannual visits to the Soviet
Union-a pilgrimage he has made for
years-spending part of the time hunting
with Soviet leaders and maintaining per-
sonal rapport with them. The President
cites his familiarity with the Soviet
leaders as the main reason for his success
in dealing with Moscow. Last month he
reportedly stated that his successor would
have difficulty gaining Moscow's con-
fidence and that there probably is no one
else who could do the job.
Foreign policy is the area in which the
Finnish leader has made his most out-
standing contributions. Finland is offi-
cially neutral, but because of its "spe-
cial" relationship with the USSR since
Finland- Kekkonen To Visit US
World War II, relations with Moscow
are its primary concern. Nearly all foreign
policy decisions are first measured against
their impact on relations with the USSR.
Basis for Relations with USSR
Soviet-Finnish relations are based on
the bilateral Agreement of Friendship,
Cooperation, and Mutual Assistance
signed in 1948. The agreement was in-
tended to convince the USSR of Finland's
desire to establish a relationship based on
trust and confidence after the bitter ex-
periences of the previous decade.
Article 2 of the agreement allows
Moscow to call for bilateral military con-
sultations if it feels threatened, after
which the two countries are to determine
jointly whether it is necessary to dispatch
Soviet forces to Finland to "assist" the
government. The USSR has invoked this
article only once, in 1961, after NATO
proposed that West Germany be included
in a joint Baltic Sea command force.
President Kekkonen met with Soviet
Premier Khrushchev, and the two leaders
concluded that military consultations
were not necessary and that Finnish
neutrality was not endangered.
Finland has generally maintained a
careful balance in its foreign relations. It
is an active member of the UN and its
numerous specialized agencies and par-
ticipates in UN peace-keeping activities
on Cyprus and in the Middle East.
Finland has a free-trade agreement
with the EC and participates actively in
the Nordic Council. It has played host to
numerous East-West meetings, including
the Conference on Security and Coopera-
tion in Europe a year ago.
Participation in Western organizations
is balanced by Finland's special coopera-
tion agreement with the Soviet-dominated
Council of Economic Mutual Assistance,
as well as by its repeated promotion of
various proposals favored by Moscow.
Finland was a strong supporter of the
Soviet proposal for a Conference on
Security and Cooperation in Europe and
for a nuclear-free zone in Scandinavia.
Despite the extraordinary record of
stability in the presidency, Finland has
averaged nearly one government a year
since independence in 1917. The present
government is a five-party center-left
coalition headed by Prime Minister Miet-
tunen. It tried to resign last spring, but
Kekkonen exercised his political influence
and persuaded the disparate partners to
continue the coalition.
One continuing issue is participation in
the government by the Finnish Com-
munist Party. Despite an attempted coup
by the Communists in 1948, several Fin-
nish governments have found it expedient
to encourage Communist participation.
Communists have been members of four
governments since 1948-including the
current one-but ideological differences
over whether party principles permit such
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participation have blunted their effec-
tiveness.
The dispute that threatened the Miet-
tunen government in May grew out of a
refusal by the Communists to approve a
government proposal to increase the sales
tax. The compromise worked out by
Kekkonen allowed the Communists to
register their dissent while the other four
coalition parties-which still commanded
a majority in Parliament-approved the
measure.
Kekkonen wants to keep the Com-
munists in the-government until after a
number of unpopular austerity measures
are enacted. A new test of the cohesion of
the coalition will occur this fall when
Parliament considers further restrictive
economic policies.
Economic Problems
Last year, a moderately strong demand
for imports, coupled with depressed
foreign markets for Finnish lumber and
machinery, led to a record $2-billion trade
deficit. Rising interest payments on the
foreign debt pushed the services account
7x}55
into the red. Altogether, the current-ac-
count deficit nearly doubled to $2.1
billion, equal to about 8.5 percent of gross
national product.
The government is committed to
holding the increase in government spend-
ing this year to 1 percent. It is also trying
to encourage the development of export
industries, in part by exempting them
from the general clampdown on credit
availability.
Finland's deficit in trade with the US
during the first five months of this year
was about half the $178-million deficit
recorded during the same period last year.
For 1975 as a whole, Finland's trade
deficit with the US reached $393 million,
nearly one fifth of the total deficit. Presi-
dent Kekkonen, in his discussions with
US officials, probably will point to this
imbalance. The Finns are concerned, for
example, that US quota restrictions on
specialty steels will inhibit Finnish exports
of this product, which they hope to begin
late this year.
Finland expects another year of
no-growth in its economy as a result of the
government's tightened monetary and
fiscal policies. These are accompanied by
limited wage and price controls. The
curbs are opposed by labor, which has
markedly stepped up strike activity.
In the face of mounting difficulty with
the economy, President Kekkonen
appears to be increasing his domestic
authority at the expense of the Prime
Minister and the cabinet. He has long
dominated Finland's foreign policy.
By most accounts, the President is in
fairly good physical condition for his age.
Despite a prostate operation last year,
Kekkonen skis, hunts, fishes, and main-
tains an impressive official schedule.
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