WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A011400180001-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 25
• Document Creation Date: December 21, 2016
• Document Release Date: February 25, 2008
• Sequence Number: 1
• Publication Date: October 22, 1976
• Content Type: SUMMARY

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Secret
Weekly Summary
DEPARTMENT OF STATE REVIEW COMPLETED
DIA REVIEW COMPLETED
Secret
CI WS 76-043
No. 0043/76
October 22, 1976
Copy N! 1416
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CONTENTS
I Middle East
Lebanon; Egypt-USSR;
Egypt
2 Africa
Rhodesia
3 Europe
Italy; Poland; Currency Float;
USSR; USSR-China
6 For East
China; Thailand
Canada; Cuba; Guyana;
9 Libya: Military Program
12 Cuba: Institutionalization Progresses
14 Argentina: Junta Relations with Labor
16 EC: Divisive Fisheries Issue
19 International Impact of Oil Price Rise
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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 presidents Sadat (l) of Egypt and Asad of Syria
with p
adh, King Khalid (r) of Saudi Arabia chats
At summit in Ray maneuver The Syrians' Christian allies will
l reluctant to go
did buy some time and room to probably be extreme y
and has managed at least temporarily to along with all the provisions of the Riyadh
osition as head of the agreement and have reportedly expressed
hang on to his p Ian will work.
m that the p
i
i
s
c
F b
1111 1 PLO and Fatah. private skept
I -
thlstwek
As a first step, the Riyadh peace plan ~.& October Their forces continued to shell Palestinian
calls fora general cease-fire by positions in Beirut and Alayh Mari U tin an
LEBANON / 21 and subsequent withdrawals of all nd to press an ass stronghold on Y
l or areas of leftist in
combatants from the major important
Syrian President Asad scored a major fighting within another 5 to 10 days. The southeastern Lebanon n
this week arer ntly the
have at a a freer job of supervising these withdrawals and border. The Israelis app
political victory Riyadh, at the es party the cease fire has bee minimum provided assigned
Riy gaining rovided these Christian forces
Arab summit in enforcing in
force of h artillery support from the Israeli side
Arab League wit
hand for Syria to bring the L to an expanded
ebanese civil ostensibly under the con-
war to an end on its own terms. 30,000 men, of the border.
, along with the heads of state of trol of Lebanese President certainly Sarkis. make otherwise, all sides seem to be marking
AsaEgypt,dSaudi Arabia, Kuwait, and can consult with their
Syrian forces will almost cert take time until they Baghdad after the
Lebanon, and Palestine Liberation and allies. Arafat flew to with
Iraqi
Organization chairman Yasir Arafat, their the bulk instructions of from this force t Damascu s. s. been Riyadh summit to confer with arms
nine-point for- their him
agreed on October 18 to a nine-p A full-scale Arab summit has been leaders, who have p
mula at for ending the Syrian forces a domi- scheduled for October r 2 e,m agreement and to try and men, and then to Damascus to talk
th
that in effect gives Syyri endorse the Riyadh ag with Palestinian leaders there.
Husayn
nant role. im lementation on track. stopped in Amman to brief King
Asad-mainly out of deference to the to keep P on the outcome of the summit and will
According to the present timetable, the
Saudis-papered over his bitter feud with probably meet with Lebanese Christian
provisions of the Cairo accord would be
Egyptian President Sadat. In doing so, representatives sometime soon.
succeeded in neutralizing applied only after the withd rawals are out the Riyadh
Asad apparently completed. If the accord is strictly en- Slippage in carrying
ment seems inevitable. or unity uld
Egyptian support for the PLO in ex forced, the Palestinians would be agree
mbolic conces camps and have give the Syrians any pp
change for the largely sY in Sadat's restricted to their eaao s In effect, Arafat g
sion of implicitly acknowledg g to give up their heavy avy wp to accuse him of bad faith, Asada would be
to renewal
their political ties
osition j ustify
i
ng
in a stronger p
claim to Arab leadership. the would be sever
tions a as a legitimate part
merged as they
The more radical
of military opera
with the Lebanese left.
The PLO appears to h have e
in role in
tain to resist this,
nce d peace g
bow
h
'
a
s en
of Syria
the main loser. Arafat has o in for
Syrian fedayeen groups are cer
the inevitability of a long-term
try to avoid Lebanon. The Syrians may h military presence stric- strict compliance in order to thwart iust such an excuse.
. Lebanotnhe red to and Arafat himself is lik eater coot of over
accept Syria as the enforcer of rian efforts to gain greater
Ka -
S
ta
he PLO. 25X1 25X1
Arafat
five Cairo accord presence in Lebanon,
Palestinian
1 \A/FFKLY SUMMARY Oct 22, 76
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EGYPT-USSR
Egyptian Foreign Minister Fahmi may
be planning a trip to Moscow soon,
possibly as early as next week.
Although Fahmi's deputy denied to the
US embassy on October 18 any
knowledge of a visit, an American jour-
nalist says he learned from another "high
official" that the visit is in the offing.
President Sadat has been under oc-
casional pressure from Fahmi and other
advisers to improve ties with the Soviets
in order both to counter the impression
that Egypt is wholly dependent on the US
and to induce Moscow to resume
deliveries of military equipment. Neither
the Soviets nor the Egyptians, however,
have followed through with any moves
toward a significant easing of tensions.
Throughout the past summer, Sadat
repeatedly attacked the Soviets in public
statements, often linking them to Libya's
subversive actions in Egypt and elsewhere
in the Arab world. Cairo may now feel it
advisable to reopen the channel to
Moscow in the period before the US
presidential election.
The Egyptians are counting on the US
to resume negotiations with Israel next
year on a Middle East settlement and to
consider substantial military aid for
Egypt. They probably hope to restore a
degree of amicability in their relations
with the USSR, however, lest diplomatic
and military assistance from the US not
materialize.
Egypt no doubt expects little from the
recent Soviet proposal to reconvene the
Middle East peace conference at Geneva,
but the Egyptians will want to appear to
be supporting it in order to maintain
pressure on the US to recommence peace
negotiations.
RHODESIA 5-
The British have delayed until October
28 the start of the Geneva conference on
the formation of an interim government in
Rhodesia to allow the participants more
time to prepare.
The "front-line" African presidents and
the Rhodesian nationalists are still in-
sisting publicly that the conference must
effect an immediate transfer of power to
the black majority and that Britain must
play a major role in Rhodesia during the
transition period. Rhodesian Prime
Minister Smith, on the other hand, con-
tinues to maintain that the settlement
terms he anpounced last month are non-
~, 4 Egypt Seeking Financial Support
Egypt is trying to muster an additional
$1 billion in balance-of-payments support
to prevent a substantial cutback in im-
ports and consumption in the coming
months.
Last year, Arab cash aid covered about
two thirds of Egypt's $3-billion external
financial gap. Only about $1 billion in
Arab aid has been disbursed so far this
year, and unless more cash aid is received
over the next two months Egypt may be
forced to cut back drastically on imports
of food, consumer durable goods, and in-
dustrial inputs.
Egypt has postponed payment on many
of its foreign debts to free cash for needed
imports. Last month, debt service arrears
totaled $700 million-equivalent to 70
percent of the balance-of-payments finan-
cing that Cairo is still seeking for 1976.
During the last several years, Egypt's
creditors have tolerated periodic delays in
repayment on the assumption that Arab
aid would be forthcoming. Now, with
both Saudi Arabia and Kuwait adver-
tising their dissatisfaction with Egyptian
financial practices, creditor patience is
waning. US banks reportedly are re-
luctant to refinance even relatively
small $1-million to $10-million 180-
day credits.
The newly established Gulf Organiza-
tion for Development in Egypt may
provide half the sum that is needed this
year. The organization probably will
guarantee $250 million in Western bank
loans and has offered an additional $250
million in direct balance-of-payments
support, although negotiations have bog-
ged down.
Egypt also hopes Iran will provide $250
million in loan guarantees. If all these
funds materialize, the remaining shortfall
could be financed with a rollover of
short-term debt or continued deferment of
repayments.
Egypt's balance-of-payments problems
will continue into 1977 even if Cairo ob-
tains the credits it is seeking. Population
growth and investment under the five-year
plan probably will inflate imports, and ex-
ports will be hampered by capacity con-
straints and Israeli harassment of offshore
oil development,
negotiable a .d _that the security forces
must remt#i uner white control
throughout the period of interim govern-
ment.
The "front-line" presidents are. aware
that continuing nationalist disunity could
threaten the transition to black rule by
allowing Smith to play off the rival fac-
Nkomo have publicly joined forces in a
temporary "patriotic front," and
Muzorewa may enter the alliance. The
three nationalist leaders continue to dis-
trust each other, however, and each will
be seeking opportunities to enhance his
own position.
2 WEEKLY SUMMARY Oct 22, 76
25X1
25X1
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SECRET
ZANU President Ndabaningi Sithole (r) at recent meeting in Dar es Salaam
with President Julius Nyerere of Tanzania
Earlier this week, the
British belatedly invited Sithole to par-
ticipate in the Geneva meetings at the re-
quest of the "front-line" presidents.
Sithole, although the founder of
ZANU, has lost influence within the
Prime Minister Giulio Andreotti and
Communist Party chief Enrico Berlinguer
both sought this week to rally support
from their respective parties for the
government's new economic program in
the face of a further assault on the lira and
continuing labor unrest over proposed
new austerity measures.
Andreotti told a meeting of the Chris-
tian Democratic directorate on October
18 that, while he would accept some
modification of individual measures in
Parliament, he would resign if the
stabilization program as a whole were
seriously challenged. The directorate, like
the party's national council before it,
passed a resolution unanimously ap-
proving the government's actions.
Addressing a meeting of the Com-
munist Party central committee that was
marked by dissension over Communist
cooperation with Andreotti, Berlinguer
suggested that the Communists have no
alternative but to abstain on the govern-
ment program. A vote against the
program, he implied, would be irresponsi-
ble and would bring the economy to the
brink of ruin, with grave consequences for
Italian workers.
The Communists, by virtue of their
parliamentary strength and their impor-
tant assets in the labor sector, have
become Andreotti's strongest ally in his
struggle to gain acceptance for the
stabilization measures. Last week, Com-
munist Party and labor officials
spearheaded a joint effort with Christian
Democratic and Republican labor leaders
to head off a nationwide general strike.
Although the general strike was averted,
localized work stoppages are being held
to dramatize the workers' displeasure.
Despite an apparent realization among
major labor leaders that the stabilization
measures are needed, Andreotti's task
remains gargantuan. When a two-week
emergency surcharge on foreign currency
purchases was lifted on October 18, the
lira plummeted, prompting strong in-
tervention by the Bank of Italy. The lira's
future remains cloudy, and most brokers
are forecasting further depreciation in
the coming weeks. At the Italian stock
exchange, the index hit a 19-year low.
Despite the new stabilization measures,
Italy will soon have to seek additional
credits abroad. An Italian delegation is
expected at the International Monetary
Fund within the next two weeks, and,
although it has been officially denied, An-
dreotti is rumored to be seeking massive
new foreign credits beyond the ap-
proximately $500 million he hopes to get
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SECRET
POLAND l ~_Z
Dissident intellectuals are keeping
pressure on the Gierek regime on behalf
of workers who have suffered reprisals for
their part in the demonstrations last June.
The US embassy in Warsaw believes this
campaign has been effective.
Last month, the intellectuals organized
a "Workers Defense League," which
issued an "Appeal to the People and
Authorities in Poland." The document,
signed by 14 well-known intellectuals,
declared that the workers have been
brutally persecuted for making demands
that, in fact, were backed by almost all
Poles. The appeal said that the only way
to defend the workers successfully is to
publicize government injustices.
In a subsequent "communique," the
League alleged that 126 persons had been
penalized by imprisonment or loss of jobs
at Ursus and that 25 persons had been
killed and more than 2,000 jailed in
Radom. These figures are much higher
than those reported before.
The communique presented a financial
statement for the League listing donations
received and the amounts needed to sup-
port jobless families. One dissident told a
US embassy officer that door-to-door
solicitations are being made and that
money is coming in through the mail.
Some members are reportedly optimistic
about the chances of civil liberties being
recognized in Poland. Others, however,
are warning that it is only the regime's
weakness in the face of an impatient and
unpredictable population that forces it to
tolerate this kind of activity.
The Polish regime has shown itself sen-
sitive to the criticism. In September, the
Supreme Court revoked the sentences of
seven workers who were given 3- to
I0-year jail terms for their part in the Ur-
sus demonstrations, and the regime has
postponed or canceled further trials.
Last week, party leader Gierek reacted
sharply to "opponents" who, he said,
close their eyes to Polish achievements
European Currency Float
and parade as "spokesmen of democracy, 25X1
protectors of national sovereignty, and
even of the economic and social rights of
the working people."
USSR p J, ~ 1
The USSR Supreme Soviet is sched-
uled to convene on October 27. Sessions
usually last one or two days. The meeting
is expected to approve the new five-year
plan, which was presented in skeletal form
to the party congress last spring. It will
also approve the annual plan and budget
for 1977. If protocol is followed, Premier
Kosygin will address the meeting and pre-
sent the plan.
The Supreme Soviet gathering, and the
more important meeting of the party's
Central Committee that will precede it,
will provide opportunities to announce
changes in the leadership. Reports that
Kosygin is recuperating from a heart at-
tack or stroke have intensified speculation
about possible important shifts at the
coming meetings, but in the past the
leadership has repeatedly passed by op-
portunities to make major changes.
General Secretary Brezhnev told Am-
bassador Averell Harriman last month
that Kosygin would be returning to work
"in several weeks." Last week, in his first
public appearance since July 22, Kosygin
greeted Mongolian party chief Tsedenbal
at Moscow airport.
Among the party shifts that may be an-
nounced at the Central Committee
plenum is the promotion to the Politburo
of Nikolay Tikhonov, who was recently
appointed first deputy premier, possibly
to lighten Kosygin's workload. Another is
the formal dropping of Defense Minister
Ustinov from the party Secretariat, a
move normally required by a ministerial
appointment. Ustinov, a membe1_QLtlie
The readjustment last weekend in the
parities at which the currencies of the
members of the European joint float are
officially maintained against one another
was probably a compromise solution. The
West German mark was revalued 2 per-
cent against the Belgian franc and the
Dutch guilder, 3 percent against the
Swedish and the Norwegian crowns, and 6
percent against the Danish crown.
By minimizing parity changes within
the snake, Belgium and the other smaller
members are trying to avoid some of the
costs of their more expansionary domestic
policies. West Germany is in essence
forced to pick up part of the bill for
these policies in the form of higher import
costs and support of the other members'
currencies in the exchange market. In
return for agreeing to small rate changes,
West Germany probably exacted
promises of closer economic policy coor-
dination from its snake partners.
Although the mark revaluation may
have a psychological impact, it may not
have lasting economic effects. Since the
last mark revaluation in June 1973, the
economic performances of the snake
members have diverged more than the 2
to 6 percent of the latest realignment.
The new realignment made up less than
one third of the difference in price in-
creases between West Germany and the
other joint float members since mid-1973.
Moreover, inflationary pressures still
diverge widely. For example, wages are
increasing three times as fast, on an
average, in the five smaller joint float
members than in West Germany.
The exchange markets are pessimistic
about the realignment. Bankers and
currency traders seem to think a change
of two to three times the magnitude of the
one made would be necessary to reflect
economic reality.
Politburo, became defense
April.
Yugoslav Por
Three Soviet war'
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helicopter carrier Leningrad, a
Kashin-class guided-missile destroyer,
and an F-class diesel-powered attack sub-
marine-left Split, Yugoslavia on Tues-
day after a five-day port visit.
The ships are under the command of
Rear Admiral Dvindenko, who is
probably the surface force commander of
the Soviet Mediterranean squadron. The
most recent previous Soviet port visit to
Split occurred last April when a
Sverdlov-class cruiser, a Kashin-class
destroyer, and an F-class submarine
called.
As a result of their eviction from Alex-
andria, Egypt, in April, the Soviets have
been actively seeking alternative port
facilities in the Mediterranean. During a
visit to Yugoslavia in August, Soviet navy
commander Admiral Gorshkov discussed
the use of Yugoslav ports for repair of
Soviet ships.
Even if the use of Yugoslav facilities for
Soviet naval repairs is expanded
somewhat, it cannot adequately compen-
sate for denial of access to the Alexandria
facilities. The Egyptians permitted the
Soviets free access to the large and
well-equipped shipyard that they used for
major repairs; it is unlikely the Yugoslavs
would agree to such an arrangement.
the number and type
of Soviet ships under repair in Yugoslav
shipyards may exceed what is permissible
under Yugoslav maritime law, which,
among other things, prohibits the repair
of naval ships in commercial ports. Three
Soviet naval auxiliaries-all apparently
declared as merchant ships-have recent-
ly been under repair at two commercial
ports. Two of them are still undergoing
repairs.
Two Soviet warships have been un-
dergoing repairs in Tivat, a designated
naval shipyard, for several months. A
third ship spent 18 days there in
September either under repair or visiting.
According to the law, not more than two
naval ships from the same country may be
repaired at one port simultaneously. The
same law restricts visits by foreign naval
ships to the ports of Split, Rijeka, and
Dubrovnik and sets a time limit of 10
days.
ya tisplit
Ql. n~
`rE=~ riYeP
USSR-CHINA 2,f -z,7
Last week, the Soviet "journalist" Vic-
tor Louis wrote an article for France-Soir
expressing Moscow's delight over the
ouster of China's leftists, particularly
Mao's widow, Chiang Ching. The article
was almost certainly authorized at a high
level.
Louis' main point was that if China's
moderates are inclined toward less hostile
relations with the USSR, they should give
some positive sign to Moscow within the
next month. He mentioned "new" an-
ti-Soviet statements by the Chinese
leadership, implying that a decrease of
such propaganda would be one ap-
propriate signal.
In a disingendous'invitation to China to
profit from the alleged political alignment
in the USSR, Louis asserts that older
Soviet leaders are inclined to give the
Chinese more time to sort themselves out
but are under pressure from younger, less
"sentimental" officials. Louis implied
that this could be China's last chance to
prevent hard liners in the USSR from get-
ting Moscow to make "irreversible"
decisions on China.
Louis also made a blatant appeal to
China's older military men whom he
credited with appreciating the Soviet role
in China's development and Soviet
military might.
By publicly setting a time limit and
making thinly veiled threats about irrever-
sible decisions, the Louis article is certain-
ly not conciliatory.
The
Soviets may
calculate,
however,
that
the Chinese
25X1
moderates
will be
more
responsive to
pressure now that they are unencumbered
by the ideologues. The Soviets must be
aware of reports over the years that some
moderates favor less confrontational tac-
tics in dealing with the USSR.
The Soviet tack worked once before. In
August 1969, an article by Louis about
the possibility of a pre-emptive Soviet
strike on China's nascent nuclear force
was undoubtedly a factor in China's deci-
sion to agree to the Sino-Soviet summit in
1969 and to participate in border talks.
Paae 5 WFFKI Y SI INAMARV nrt 97 7I
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Wall posters in Shanghai on October 17. Pictures are of the four purged party leaders: Wang Hung-wen
Chang Chun-chiao, Chiang Ching, and Yao Wen Yuan
CHINA >b ,2)
There has still been no official an-
nouncement of the appointment of Hua
Kuo-feng to succeed Mao Tse-tung or the
arrest of the four leading leftists on the
Politburo. The Chinese people are ob-
viously aware of both moves, and the
purge of the leftists has prompted
responses in several major cities.
Posters denouncing the leftists have
appeared in some cities, especially in the
leftist stronghold of Shanghai, and rallies
supporting the arrests have been held in
some areas. The most vicious of the poster
attacks seem to be reserved for Mao's
widely hated widow, Chiang Ching.
Some local officials in Shanghai are un-
der wall poster attack for their
relationship with the leading leftists in
Peking, three of whom come from
Shanghai. A roundup of other leftists has
extended to those areas where the left was
most influential-in the fields of
propaganda, education, and culture.
No official charges have been made
public against the leftists, but a People's
Daily editorial of October 19 seemed to
lay the groundwork for a charge-used
widely in the wall posters-that the left
was plotting a coup. The editorial at-
tacked unnamed persons who tried to
"usurp party leadership." An official
Chinese news release made a pointed
reference to Chiang Ching in an attack on
"snake-like scoundrels" who disguise
themselves as beautiful girls.
The move against the left may already
be having beneficial effects on those who
were in political trouble during the an-
tirightist campaign before Mao's death.
The minister of railways, who was
allegedly dismissed during that campaign,
has reportedly resumed his duties. Other
Chinese officials are now acting with
growing confidence.
The minister of foreign trade apologiz-
ed to foreigners that trade had come to a
standstill but promised that the situation
would change for the better and trade
would progress. The foreign trade policy
had been under attack during the an-
tirightist campaign.
n~
THAILAND ~ 4- 4
Thailand's ruling National Ad-
ministrative Reform Council shows in-
creasing signs of splintering into rival
cliques. The ambitious General Yot, dep-
uty army commander and recent comman-
der of the First Army, is largely respon-
sible. He has been maneuvering with his
First Army colleagues for a dominant
position in the Council. Admiral Sa-
ngat, chairman of the Council, clearly
fears he is losing control.
In his efforts to move the military into
the background,Sa-ngat has the support
of army commander General Soem, but
Soem himself appears to have little in-
fluence in the First Army. The support of
this unit, which is located in the Bangkok
area, is crucial to any future regime. For
the moment, Yot's attempts to dominate
the Council are restrained by Soem's rank-
ing position and by the apparent support
of the other regional commanders for
Sa-ngat.
Sa-ngat hopes to frustrate Yot's per-
sonal ambitions by putting together a
civilian administration rapidly. A cabinet
has been appointed, heavily weighted with
technocrats, and the new foreign minister,
Upadit Pachariyangkun-now am-
bassador in Washington-apparently was
chosen with an eye toward fostering better
relations with the US.
New Prime Minister Thanin
thoroughly aired his twin
obsessions-communism and corrup-
tion-in his initial speeches to the nation,25X1
and the ruling military council has already
launched a purge of leftist activists. The
left's potential for making trouble is fairly
limited, and although the roundup has
been more restrained than press coverage
would suggest, it is a campaign alien to
Thai tradition. If carried to excess, it
could swing public opinion against the
government. Few abuses by security
forces have come to light, but the oppor-
tunity for settling private scores as well as
for graft is obvious. 25X1
Thus far, public reaction to the purge
seems to range from apathy to approval.
Initial fears that substantial numbers 025X1
students and other urban activists would
join the rural insurgency appear to have
most of the former activist stu ent sseem
more interested in clearing their names
and remaining in school than in opting for
the rigors of the jungle.
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SECRET
CANADA 45- 5)
Canadian Prime Minister Trudeau en-
countered bad news on every front this
week. A Gallup poll released last weekend
showed that opposition Progressive
Conservative leader Joe Clark was
favored nationally over Trudeau by 36
percent to 28 percent. The poll under-
mined the Liberals' hope that Trudeau
remained the choice of the people and
could make up for the party's lack of
appeal.
The victories of the Progressive Conser-
vatives in two federal by-elections on Oc-
tober 18 underscored the extent of pop-
cgs
ular dissatisfaction with both the Liberals
and Trudeau. The loss of a seat in New-
foundland was expected, but loss of the
Ottawa-Carleton seat-which the Tories
had not won for 94 years-was especially
damaging.
Another gesture of nonconfidence in
Trudeau's policies was Quebec Liberal
Premier Bourassa's announcement on Oc-
tober 18 that there will be a provincial
election next month. Bourassa obviously
believes he must act now before the
national Liberal Party's sagging fortunes
and Quebec's deteriorating economy
work to undermine seriously his own pop-
ularity. Bourassa had earlier indicated
that he would go to the electorate if
Trudeau did not forcefully advocate
protection for French language interests.
Although the election will not be held
until November 15, both the Liberals and
the separatist Parti Quebecois have been
uPs
on the campaign trail for the past two
weeks.
CUBA
~5-
I
Speaking on October 15 at a mass rally
in Havana to pay tribute to the victims of
the bombing of a Cuban airliner, Prime
Minister Fidel Castro charged that the
US was directly involved. He offered to
discuss a solution to the terrorist problem
with the US, but said that such a discus-
sion could only take place if there is a
"definitive end" to all hostile and
aggressive acts against Cuba.
Castro said the US is incapable of
fulfilling the spirit and letter of the 1973
bilateral agreement on hijacking, and he
announced his decision to terminate it as
of April 15, 1977. He asserted, however,
that if a US commercial plane is hijacked
to Cuba after the agreement expires,
Cuba would return the aircraft, crew, and
passengers to the US and would not "put
up with" the hijackers.
He also said Cuba would continue to
honor fully the similar bilateral
agreements now in force with Canada,
Mexico, Colombia, and Venezuela.
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Castro's renunciation of the agreement
with the US appears to be little more than
a symbolic gesture designed to impress
the Cuban public and to put pressure on
the US to take action against Cuban exile
terrorists. The flimsiness of his charges
that the CIA was involved in the bombing
suggests that he finds the accusation
merely another convenient means of ex-
erting leverage on the US.
Castro also made a point of absolving
the Venezuelan government of any blame
in the bombing incident. His detailed
description of the role that Venezuelan
citizens and Cuban exiles in Venezuela
played in the bombing, however, and his
comment on the access some exiles have
to "certain political circles" in Venezuela
were probably intended to stress that
Cuba takes a dim view of the support and
freedom of action militant exiles have in
Venezuela.
The speech leaves the impression that
Castro, frustrated by a string of terrorist
incidents that have cost the lives of almost
80 people since last April, is seeking a
means of putting a stop to the violence.
(An analysis of the restructuring of the
Cuban government along lines set down at
first congress of the Cuban Communist
Party appears in the feature section of this
publication.)
Prime Minister/ lr'urnham of Guyana
sharply criticized the US in a major
speech honoring the victims of the Cuban
air crash off Barbados last week.
Burnham stopped short of accusing the
US of complicity in the terrorist act that
claimed the lives of I I Guyanese, but in-
sinuated that the US government was at
least morally responsible because of its
support for Cuban exile organizations.
The Prime Minister also used the occa-
sion to repeat allegations that since 1972
the US has tried to deter Guyana from
having friendly relations with Cuba and
embarking on its own "socialist" path. He
repeated charges that Guyana is threaten-
ed by a campaign of "destabilization."
Burnham seemed to invite
demonstrations against the US embassy
when he warned that "those who
perpetrate violence must now expect they
will have violence visited upon them." We
have no evidence, however, that the
government is planning a campaign of
harassment or violence against the em-
bassy or its personnel.
The Prime Minister's emotional
language reflected in part the fact that the
Guyanese victims were people he had per-
sonally selected for training in Cuba. He
was also irritated by what he considered
an inadequate effort by the US in curbing
exile activities.
Burnham's speech strongly
demonstrated the Guyanese leader's in-
creasing obsession with his personal
security and fears that he and other
government officials are targets for
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exile
Despite the Prime Minister's tough
talk, he probably realizes that in the
absence of significant economic and
financial assistance from his socialist
allies, he will need Western assistance,
principally from the US, to finance
economic development and to secure bad-
ly needed food crop loans.
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President Qadhaft's effort to make Libya a major military
power in the Middle East has resulted in a massive accumula-
tion of weaponry-and little else. The armed forces are so un-
dermanned and poorly trained that they cannot even maintain
much of their sophisticated equipment.
P,S
Libya: Military Program
President Qadhafi wants to create a
modern, powerful military that will
enable Libya to exercise major influence
in the Middle East, and he has sufficient
oil revenues to purchase seemingly endless
quantities of arms. About half of the six
to eight billion dollars a year that Libya
receives for its petroleum is spent on
economic development projects, leaving
more than ample funds for making
whatever military purchases Qadhafi
wants.
In recent years, Qadhafi has increasing-
ly turned to the USSR as his major arms
supplier. A 1974 arms deal, worth at least
$730 million, has already provided more
Soviet arms than the Libyan armed forces
can use, and substantial amounts remain
to be delivered. The contract includes
medium tanks, armored personnel
carriers, artillery, MIG-23 fighters,
TU-22 medium bombers, naval craft, and
surface-to-air and Scud missiles.
East European deliveries since 1974 ac-
count for an additional $110 million in
equipment, including well over 400 tanks
from Czechoslovakia and Poland.
In addition to Soviet and East Euro-
pean arms, Libya has purchased some
$970 million in equipment from Western
nations in the past two and a half years.
Italian corvettes, French guided-missile
patrol boats, Spanish-built submarines,
and French Mirage F-I fighters make up
the bulk of the total value. This equip-
ment should be delivered within the next
five years.
In pursuit of his military program,
Qadhafi has made the Libyan armed
forces the most heavily equipped in North
Africa. Libya may eventually match or
even surpass Egypt in numbers of tanks
and modern jet fighters.
The rapid growth in Libya's arms in-
ventory, however, has not been matched
by an equivalent advance in the numbers
or capabilities of its armed forces per-
sonnel. The undermanned and poorly
trained Libyan military remains ineffec-
tive as a combat force. A severe shortage
of trained, experienced technicians makes
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it virtually impossible for Libya to main-
tain much of the modern weaponry that it
purchases.
As a result, Libya's ability to affect the
outcome of any future Arab-Israeli war
by direct use of its military forces will be
limited, although it could play a role as a
supplier of military equipment. Of more
immediate concern to Qadhafi is the fact
that his weapons acquisitions have done
little to alter Libya's strategic military in-
feriority to Egypt, while exacerbating
Egypt's suspicions about the intentions of
its volatile neighbor.
The Army
The army is the dominant military ser-
vice and the primary recipient of the arms
buildup. At the time of King Idris' ouster
25X1 in 1969, the Libyan army had 6 tanks,
some 100 armored personnel carriers, and
about 35 field guns.
Libya now has over 1, m ium
tanks, nearly 1,100 armored personnel
carriers, and about 200 artillery pieces.
The approximately 25,000-man army,
currently organized into five combat
brigades, is not large enough to absorb
this equipment. As a result, most of the
tanks and over half of the armored per-
sonnel carriers are in storage.
Poor training compounds the army's
lack of personnel to use its modern equip-
ment and attain a high level of combat
proficiency. There are indications that the
army has difficulty finding adequate
numbers of qualified instructors, a
problem that will worsen as the army ex-
pands.
The Libyan army also suffers from an
inefficient logistic system. The main
storage depots in Benghazi and Tripoli
contain ample reserves of most items of
equipment and probably sufficient
supplies of ammunition and spare parts.
The haphazard distribution system and a
poor transportation network make it im-
possible to move large amounts of
supplies quickly, and the Libyans would
have problems adequately resupplying un-
its in the field.
The Soviets could provide much of the
assistance the Libyan army needs to solve
its training and logistic problems, but
Qadhafi deeply distrusts the Soviets and
will not allow Soviet military advisers to
work with the Libyan army.
The Air Force
The Libyan air force, which had some
10 combat planes in 1969, now possesses
nearly 190 jet fighters, bombers, and
trainers. Libya has received 57 MIG-23
fighters, the most modern fighter aircraft
the USSR now exports. This is more than
double the number of MIG-23s sold
Egypt. Of Middle East countries,
only Iraq, with 83, has received more
MIG-23s. We do not know how many
more MIG-23s Tripoli may have on order.
The Libyans also have some 95 Mirage
5 aircraft, ordered from France in the ear-
ly 1970s,
Soviet-built TU-22 jet bombers;
Out of an estimated 4,000 Libyan air
force personnel, only about 80 to 100
pilots are jet qualified, and less than a
quarter of them probably are qualified to
fly in combat. The air force already has
more combat aircraft than it can use.
Monthly flying time is scarcely sufficient
to meet safety standards and maintain
basic skills, much less to develop expertise
in combat maneuvers. Training is almost
always conducted in daylight during good
weather and seldom under realistic com-
bat conditions.
The air force probably can perform
some ground-controlled intercepts and air
combat maneuvers, but it does not have
an effective overall air defense or ground
support capability.
ya must rely heavily on foreign
technicians-mainly French, Soviet, and
Pakistani-to maintain its aircraft. The
proportion of Libyan aircraft in commis-
sion at a given time is low.
In addition to an insufficient number of
foreign technicians, Libyan aircraft
maintenance is hampered by limited
repair facilities and difficulty in procuring
spare parts for some of the Western air-
craft. For several months, Libya has been
otor
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attempting to buy spare parts for its US-
built C-130 transports through European
sources, and it is also trying to circumvent
US-imposed sanctions by purchasing ad-
ditional C-130 aircraft illegally.
The Navy
Libya now has a frigate, three fast, light
guided-missile boats, one guided-missile
patrol boat, and 15 other patrol boats.?
New ships are unlikely to improve the
navy's combat capabilities substantially in
the near future. The navy has only 2,700
men, and some units reportedly are un-
derstrength. It must compete with the
other services for the already limited
supply of manpower; adding new ships
will only aggravate personnel shortages.
As with the other services, the navy suf-
fers from inadequate training. Libya also
lacks major naval support facilities, and it
probably will be several years before
planned expansion and improvements of
installations can be implemented. For the
foreseeable future, the navy will have only
a limited capability to perform even a
coastal defense mission.
The Air Defense Forces
The air defense command was es-
tablished as a separate branch in the early
1970s and is still in the process of forma-
tion. Although equipped with modern
Soviet- and French-designed surface-
to-air missiles and Soviet antiaircraft ar-
tillery, the command has not attained a
high degree of combat proficiency. It is
handicapped by a lack of trained per-
sonnel, poor coordination with the army
and air force, and the fact that much of
the newer equipment is not operational.
Military Outlook
It is unlikely that the Libyan armed
forces will ever become strong enough to
put Libya on a par with such Middle East
powers as Egypt and Syria. Continued
deliveries of sophisticated military
hardware, while improving Libya's
SA-3 missiles appear in anniversary parade in Tripoli on Septembe
holdings, also increase its maintenance
and training problems and do little to im-
prove force capabilities.
Qadhafi has attempted for years to ex-
pand his armed forces to man the growing
stocks of Soviet and Western weaponry.
IQadhafi is un-
likely to succeed. Libya has a small pop-
ulation-about 2.5 million-and few
eligible males not already employed in es-
sential civilian jobs have the technical
skills needed for military service.
Making the Soviets Libya's principal
arms supplier also poses special problems
for Qadhafi. Despite his distrust of
Moscow, he may have to accept more
Soviet advisers into Libya, or his armed
forces will not be able to maintain and
operate their new and expensive Soviet
hardware adequately.
Many Arabs, including some Libyans,
question the wisdom of Qadhafi's large
military purchases and foreign adven-
turism. As the Libyan arms inventory
grows, Qadhafi's potential as a
dangerously destabilizing element in the
Arab world also increases. This has tend-
ed to isolate Libya and encourage those
who would welcome, and support,
Qadhafi's ouster.
Libya stores substantial amounts of its
unused tanks, armored personnel carriers,
artillery, and trucks in Benghazi-offer-
ing an equipment-short Egyptian army a
very tempting target in the event of
hostilities between the two quarreling
neighbors.
This equipment could easily be
assimilated into the Egyptian army, and it
would alleviate some of the problems
caused by the cessation of Soviet aid to
standing a determined Egyptian assault
across northeastern Libya. Cairo would,
however, have to add substantially to its
two lightly armed special forces brigades
currently in western Egypt to ensure the
success of a major offensive in eastern
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Major changes are being made in the government's struc-
ture. As far as the average Cuban citizen is concerned, however,
the changes will mean little.
Cuba: Institutionalization Progresses
Cuba is in the final stage of restruc-
turing its governmental apparatus in line
with the decisions proclaimed last
December at the first congress of the
Cuban Communist Party.
The changes, some six years in gesta-
tion, are designed in theory to in-
stitutionalize Cuba's governmental
system and permit the Communist Party
to perpetuate its control whoever happens
to be Cuba's leader. In fact, however, we
do not expect any early reduction in
Prime Minister Fidel Castro's political
power.
The changes are designed also to im-
prove administrative efficiency and to
give the public a sense of greater control
in local affairs. Here again, results are not
likely to come up to expectations.
The current phase of the process of in-
stitutionalization began on Sunday, Oc-
tober 10, with the election of delegates to
people's assemblies at the municipal, the
lowest, level. The process will come to a
close in early December when the first
National People's Assembly-the
national legislative authority-will be
convened in Havana to reorganize the
governmental leadership, approve a
scaled-down version of the five-year
economic plan for 1976-80, and put a new
constitution into effect.
The National People's Assembly will
appoint a Council of State to function in
its stead when the assembly-which is
required to meet twice annually-is not in
session. The council will have a president
as chairman, a first vice president, five ad-
ditional vice presidents, 23 officers, and
one secretary.
Under the new constitution, which was
approved by the party congress in
December and by a public referendum in
February, the president of the Council of
State will not only be head of state and
head of government, but will also have the
power to take over the direction of any
government ministry or central office and
to assume command of the armed forces.
Fidel Castro is not likely to entrust such a
concentration of power to anyone but
himself. First Deputy Prime Minister
Raul Castro is likely to move into the new
post of first vice president.
Political Bureau
Present members of the Communist
Party's Political Bureau will most likely
be named to the five other vice presiden-
tial posts, and others among the party
elite will fill the 23 other positions. The
post of secretary, not included in the
original plans for the council, was
probably created specifically for Celia
Sanchez Manduley, a confidante of Fidel
who has served as his personal aide since
the guerrilla days in the Sierra Maestra.
Important posts doubtless will be found
for Osvaldo Dorticos, now the president,
and for Carlos Rafael Rodriguez, the pre-
sent vice prime minister for foreign af-
fairs-a brilliant administrator and
theoretician whose close ties to Moscow
date back more than 30 years.
Elsewhere within the leadership elite,
responsibilities may change hands, but the
faces will remain the same. Castro's loyal
supporters from the early days of his
political career will continue to rule, rein-
forced by a strong representation from the
prerevolutionary communist party.
Farther down the chain of command
the story may be different. Ministries and
government agencies are probably in for
some streamlining in the interests of
greater efficiency, and this is likely to
make some personnel-,officers as well as
functionaries-surplus. In addition, some
heads are likely to roll as Castro seeks
scapegoats for economic problems. In-
competent bureaucrats may well be
sacked in favor of rising technocrats who
have proved their mettle.
Some government officials at the
national level have already become
scapegoats for the recent economic
decline. Four senior officials who
negotiated contracts for Cuban purchases
abroad were put on trial earlier this year
for "economic crimes." They appear to
have erred by approving a contract with a
price escalation clause that eventually
cost the government an additional 12 per-
cent for Austrian irrigation equipment.
They compounded their sin by accepting
over the past several years the usual token
gifts from representatives of Western
companies at contract-signing time.
Although the Cuban press made no
mention of the trial, the proceedings were
held in a hotel ballroom and recorded on
film. Officials from other government
agencies that deal with foreign companies
were compelled to attend. The unfor-
tunate four were given 20-year
sentences-an object lesson that will not
be lost on the bureaucracy.
A New Political Map
Streamlining of the government will
also take place below the national level.
The current 6 provinces, 55 regions, and
400-plus municipalities will be replaced by
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14 provinces and 169 municipalities,
eliminating at one stroke almost 300
governing entities. One objective is more
efficient utilization of Cuba's scanty sup-
ply of administrative personnel, and
another is the creation of more
manageable political-administrative
jurisdictions. One unheralded result will
be the dissolution of Oriente Province,
known in Cuban history as the birthplace
of revolutions.
Because the party and the mass
organizations are also organized accor-
ding to the present political-ad-
ministrative structure of the country, all
will have to be restructured. The party's
youth arm has scheduled a congress for
next April to accomplish this; the
National Small-Farm Owners
Association-the mass organization for
peasants and rural communities-will do
it in January. No date for the party
reorganization has been made public.
Some officials will be promoted, but a
large number will have their areas of
jurisdiction reduced or eliminated
altogether.
The elections on October 10, the 108th
anniversary of the beginning of Cuba's
wars for independence, decided the ap-
pointment of over 7,900 delegates to
municipal assemblies, but 2,800 others
had to await run-off elections on October
17. On October 31, the 10,725 delegates
will meet in their respective municpal
people's assemblies to elect delegates to
the assemblies at the provincial level. In
early November they will meet a second
time to elect deputies to the National
People's Assembly.
The candidates for the provincial and
national bodies will be nominated by
special panels made up of representatives
of the party, its youth arm, and the mass
organizations-belying the regime's
assertion that candidates for national of-
fice are nominated by the public at large.
The candidates do not have to be
municipal delegates, which provides a se-
cond chance for those loyal to Castro who
do not fare well in popular elections or
who through some oversight are not
nominated at the municipal level.
Of the elected municipal delegates, 69
percent are members of the party, accor-
ding to press reports. Despite the strong
urging of top regime leaders that women
be well represented, only 8 percent of
those elected are women. Voting was not
compulsory, but strong social pressure
resulted in a turn-out on October 10 of
95.2 percent of the more than 5.6 million
registered voters.
The municipal assemblies will be
responsible, at least in theory, for the
operation and performance of virtually all
government facilities, enterprises, and ser-
vices at the local level. The provincial
assemblies will assume pertinent respon-
sibilities at their level. Castro has already
warned that no one should expect this ef-
fort. at decentralization to result in any
dramatic improvement in government.
Castro's warning suggests he is fearful
that all the fanfare associated with the
changes may have raised expectations at
the very time the government's ability to
satisfy them has taken a turn for the
worse. He is clearly concerned at the
worsened economic outlook and is
probably anguished at the cutbacks that
must be made in the five-year plan. The
treatment accorded the four officials put
on trial for economic crimes suggests that
Castro realizes there is an urgent need to
revive flagging revolutionary enthusiasm
and to instill a willingness to sacrifice.
Although the process of in-
stitutionalization will theoretically draw
to a close on December 2 with the conven-
ing of the National People's Assembly,
the inauguration of the new constitution,
and the readjustment of internal boun-
daries, much will remain to be done
before this stage of Castro's revolution
can be concluded.
Much of what was so carefully planned
may prove to be confusing or impractical
upon implementation, and it is likely to be
some time before the population can
digest the rapid changes. The
organizational changes may eventually
improve efficiency, but the Cuban tenden-
cy toward burgeoning bureaucracy is like-
ly to dilute the gains considerably. Fre-
quent antibureaucracy campaigns in the
past, although not so sweeping as the pre-
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sent one, have rarely resulted in substan-
tial long-term savings.
Austerity, perhaps tinged with repres-
sion, will probably be the most outstand-
ing characteristic of the Cuban domestic
scene for some time to come, and dis-
gruntlement is likely to come to the sur-
face despite the facade of democracy that
is now being erected. The Cuban press has
increased its crime reporting in recent
months, suggesting a rise in incidence suf-
ficient to provoke an official reaction.
Refugees are again beginning-though in
very small numbers-to look to small
boats and the fenceline at the US Naval
Base at Guantanamo Bay as means of es-
cape.
Castro at one time may have hoped that
giving the people some control over local
affairs would deflect criticism from the
administration in Havana. If so, he is like-
ly to be disappointed. The people have
become so accustomed to looking to
Havana and to him personally for
solutions and leadership that they are not
likely to change now.
Organized labor, long a formidable political power in
Argentina, is growing restive after six months of restrictive
military government. Military leaders are divided on whether to
crack down on or seek an accommodation with labor.
Argentina: Junta Relations with Labor
After six months of tight wage limits
and stringent political controls, Argen-
tina's heavily politicized labor unions are
becoming increasingly restive. Light and
power workers have been striking in the
nation's capital; earlier, thousands of dis-
gruntled auto workers laid down their
tools in a number of major plants. The
highly organized workers are probably a
more formidable potential opponent than
even the leftist terrorists, and the recent
strikes are the most serious challenge yet
faced by the junta,
Worker dissatisfaction poses a vexing
problem for the generals. The junta,
which banned all strikes after it seized
power last March, is loath to alienate
labor irretrievably by using force against
the workers. At the same time, it cannot
afford to allow its decrees to be disobeyed
with impunity. Thus far, the government
has limited its response to arresting or
ordering the dismissals of strike leaders.
Labor restiveness will complicate and
add urgency to a divisive debate that has
been going on for some time within the
armed forces. The more vindictive officers
argue for dismantling the labor move-
ment, the biggest and best organized in
Latin America. The more con-
ciliatory-and this group includes Presi-
dent Videla-advocate some degree of ac-
commodation relatively soon.
Policy Drift
The government has yet to decide what
course to take. Last March, the junta
placed federal administrators in key un-
ions and in the Peronist labor confedera-
tion, and jailed or exiled the most corrupt
unionists. At the same time, the junta
launched a determined effort to reverse
economic deterioration. The resulting
austerity measures hit the workers harder
than any other group.
The military probably doubted that the
workers would remain intimidated in-
definitely. Many officers, in fact,
probably were surprised that workers
waited as long as they did before
protesting.
The search for a permanent labor
policy is greatly complicated by the
emotionalism that surrounds
military-labor relations. Juan Peron, the
man who gave labor its political
awareness and made it a force to be
reckoned with, was a military man, but he
was ultimately deposed by the military.
Workers to this day retain a strong loyal-
ty to Peron and see the armed forces as
unalterably opposed to his populism.
Many officers, on the other hand, blame
the Peronists and unionism for virtually
all the ills Argentina has suffered for more
than a generation.
The junta's policies to date have, if
anything, added to the distrust that
workers feel toward the military. Workers
have been unable to keep up with the ris-
ing cost of living because wages are being
strictly controlled while prices are not.
Unemployment increased, although less
than originally anticipated, in the face of
declining demand. Incentives for business
and agriculture have added to worker
skepticism.
Efforts by the left to exploit worker
frustration have been largely unsuccessful
thus far, but the appeal of the left could be
enhanced if labor came to view the junta
as hopelessly antilabor.
The government's delay in imple-
menting a definite policy may be con-
tributing to its image of indecisiveness
and inviting further challenge. Continued
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delay could embolden the President's con-
servative military critics who are pushing
for a harsh line toward labor. At the
same time, labor itself may take the
junta's hesitation as an invitation to
press its demands more strenuously.
New Labor Leaders
A new crop of labor leaders has
supplanted those displaced by the coup.
The newcomers are busy trying to es-
tablish themselves in the eyes of both the
workers and the military. They are fully
aware that they could play an influential
role if the junta decides to bring labor
back into the national decision-making
process.
These leaders face a dilemma. They
must earn the support of the rank and file,
and perhaps the only way to do this is to
produce some tangible gains for the un-
ions. Even this would not assure success,
however, because workers have become
highly suspicious of union leaders, often
regarding them as corrupt and unable or
unwilling to deliver on their promises.
On the other hand, labor's current
leaders cannot afford to become identified
with too much worker activism lest the
junta conclude they cannot keep the lid on
disruptive activity.
Labor's success or failure in walking
this fine line could tip the balance of
military opinion for or against those who
favor an accommodation with labor.
Declarations of the government's intent
to "normalize" relations with labor have
become more frequent in recent months
but are couched in vague terms. Thus far,
the junta has not altered the basic laws
governing labor; it has merely set them
aside temporarily. Until it decides either
to reaffirm these laws or to scrap them for
new ones, labor will remain in a state of
political limbo that is frustrating for
workers and therefore potentially
dangerous for the junta.
Some Signs of Optimism
Top unionists express optimism that
reform of the basic laws governing labor
is in progress and that the final product
will not drastically alter the union struc-
ture. The union bosses are betting that the
military, in the final analysis, will con-
clude that any effort to break up the un-
ions would irretrievably alienate workers
and ultimately radicalize them. Labor
leaders lose no opportunity to impress
upon the military the belief that the un-
ions are now relatively conservative and
stand as a bulwark against communism
and other leftist influence.
Opinion within the Labor Ministry
echoes this optimism. According to the
US embassy in Buenos Aires, ministry of-
ficials generally believe the junta will
eventually decide to retain the basic labor
principles now in effect:
? Maintenance of a single labor
central, the General Confederation of
Workers.
? Adherence to the practice of hav-
ing only one union in any industry.
? Prohibition of company unions.
The embassy reports, however, that it is
widely assumed that there will be
measures to limit labor's political role.
The government, for example, may put
strict controls on union funds, possibly
assuming some of the social service func-
tions long performed by the unions.
Videla knows as well as anyone else
that organized labor, more than any other
group, has the potential to undo much of
what the junta is striving to accomplish.
By being off the job, workers reduce badly
needed productivity. Worse than that
from the government's viewpoint, strikes
could undermine the junta's authority in a
way nothing else could. This in turn would
stiffen the resolve of those officers who
call for punitive action against unions.
Videla wants at all costs to keep the na-
tion from once again entering this vicious
circle.
The President will probably opt for
further token wage hikes, perhaps at
shortened intervals, and gradual restora-
tion of normal activity in some carefully
selected unions. Not even the relatively
liberal Videla, however, would
countenance a return to the freewheeling
ways that characterized labor before the
coup.
Videla will probably be strengthened in
his efforts by the recent creation of the
Ministry of Planning, which will coor-
dinate the policies of all the other
ministries and increase Videla's authority
over the government as a whole. The
President will also benefit from naming
the tough General Diaz Bessone to head
the new ministry. Military conserva-25X1
tives, with one of their own in the cab-
inet, will not attempt to undermine
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Failure of the UN Conference on the Law of the Sea to
make significant progress last summer has led the EC to push
for the declaration of a 200-mile EC fisheries zone in the Atlan-
tic and North Sea. The EC Nine are seriously divided, however,
over how to allocate the catches among themselves.
EC: Divisive Fisheries Issue
The dispute over fishing rights in
prospective EC waters threatens to divide
the Community more deeply than any
other issue in recent years. It also
promises to have a significant impact on
EC relations with most countries that fish
in the waters to be regulated by the EC.
EC foreign ministers failed to adopt a
resolution this week establishing a 200-
nautical mile (370-kilometer) fisheries
zone because of Irish insistence that the
Nine reach agreement simultaneously on
an internal fisheries policy and on
guidelines for negotiating fishing
agreements with third countries.
Ireland, as well as the UK, opposes
Commission proposals calling for an ex-
clusive 12-mile (22-kilometer) coastal
zone, arguing that a zone of up to 50 miles
(93 kilometers) is necessary to protect
their domestic fishing industries. The UK,
while willing to negotiate this issue
separately, has considered blocking Com-
munity farm price increases next spring if
the EC balks at a 50-mile fishing zone.
The UK and West Germany are most
anxious that negotiations with Iceland,
Norway, the US, and Canada get under
way as soon as possible. They, and most
other EC members, will probably press
the Irish hard when the foreign ministers
meet in special session later this month to
break the deadlock.
The EC Commission wants member
states to declare a 200-mile exclusive
fishing zone in the North Atlantic and the
North Sea beginning January 1. Exten-
ding the EC zone from 12 miles to 200
miles would enable the Commission:
? To negotiate more effectively to
ensure access for EC fishermen to
other countries' 200-mile zones.
? To regulate, and in some cases ex-
clude, third-country fishing in EC
waters.
? To adopt appropriate conserva-
tion policies.
The EC Commission proposes to im-
plement conservation policies by setting
limits on catches for each state. Under the
quota system, all EC members would suf-
fer a major reduction in the size of their
catches. Restrictions would be even more
stringent on third countries, and some
would be excluded totally from EC
waters.
Management of the EC's common
fisheries policy will require a bureaucracy
comparable to the one that now serves the
Community's common agricultural
policy. Although the Commission will
assume responsibility for setting catch
quotas and negotiating with third coun-
tries, enforcement will probably be left up
to individual member states.
The 200-mile Declaration
The European Council-the EC heads
of government-indicated last July that a
decision to establish a 200-mile zone
would be taken only in accord with the
results of the UN Conference on the Law
of the Sea. The Conference failed to make
any substantial progress during its most
recent session, however, and the Dutch
and the West Germans have agreed to
support the UK position that action must
be taken now if the legitimate interests of
Community fishermen are to be
protected.
The UK and Ireland have pushed
hardest for a 200-mile zone, arguing that
foreign trawlers will flock to EC waters as
other countries with rich coastal fishing
grounds extend their fishing zones un-
ilaterally in the North Atlantic to 200
miles. Iceland has already declared a
200-mile zone; Canada and Norway plan
to do so on January 1; and the US will
follow suit on March 1.
British fishermen say Soviet, Roma-
nian, Bulgarian, and, possibly, Cuban
boats are already catching mackerel in
large quantities off the Cornish coast.
Soviet and East European trawlers pose
the greatest threat to EC fish stocks
because their suction-operated scoops in-
discriminately harvest all fish in the area.
Earlier this month, the Irish impounded
a large Soviet trawler and a Bulgarian
factory ship for fishing within 12 miles of
the coast. The Irish navy estimates that
there are several hundred trawlers now off
its shore, and Irish Foreign Minister
FitzGerald has vowed to press his case
strongly.
The Commission is proposing the ex-
tension of a 200-mile zone only in the
North Atlantic and the North Sea
because it sees no threat, at this time, of a
Baltic or Mediterranean state declaring a
200-mile zone. Swedish fishermen,
however, are asking their government to
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declare a 200-mile zone in the Baltic, and
the Danes will probably push the EC for
similar action in order to protect their
Bornholm fleet, which regularly fishes the
Baltic for salmon, cod, and herring.
The EC declaration would pertain only
to fishing; it would not establish an ex-
clusive economic zone extending control
over the seabed resources. The Nine have
made considerable progress recently in
developing common positions on most
issues relating to the exclusive economic
zone-pollution, shipping, navigation,
and research rights. Differing claims to oil
and mineral rights on the shelf, however,
could still spark heated debate among the
Nine.
Establishment of a 200-mile zone will
depend on the ability of the member states
to pass necesary implementing legislation
in time to meet the January 1 deadline.
France is the only member so far that has
completed the legal process, although the
UK and Denmark have begun to prepare
appropriate legislation.
Internal Fisheries Policy
Fish stocks, particularly in the North
Atlantic and the North Sea, are rapidly
being depleted. The herring catch, for ex-
ample, is only 20 percent of what it was 15
years ago. Arctic herring is virtually ex-
tinct, and scientists insist that a complete
ban on fishing North Sea herring will be
necessary if that species is to survive.
The Commission is proposing a quota
system restricting the quantity and species
of fish that can be caught for a period to
allow for a recovery of stocks. The Com-
mission is also proposing complementary
measures to regulate fleets and ban
fishing in some areas.
The catch allocated to each member
would be based on several criteria, in-
cluding traditional fishing practices and
the size of its catch in non-EC waters. The
Irish, who catch most of their fish within
50 miles of their coast, view the proposed
quota system as a serious threat to their
nascent fishing industry.
The UK has labeled the quota system
unworkable and unfair. The UK and Italy
take almost no fish from the waters of
other members, and 60 percent of the fish
the EC proposes to divide up would be
within Britain's 200-mile zone. A 12-mile
zone, according to the UK, would encom-
pass only 25 percent of its resources, a
25-mile zone some 50 percent, and a 50-
mile zone over 70 percent. The UK, with
the support only of the Irish, has launched
a spirited campaign for a 50-mile ex-
clusive national zone.
UK Foreign Secretary Crosland, who
represents one of his country's foremost
fishing ports-Grimsby-in Parliament,
doubts that the dispute over an internal
fisheries regime can be resolved before the
end of the year. A delay might favor the
British, who will be in a somewhat
stronger position in January when they
assume the EC presidency for six months.
The seven other EC members, led by
France, support the principle of equal
Proposed EC 200-Mile Zone
access for all Community fishermen and
have opposed even a 12-mile national
zone, although in the end they would
probably be willing to accept it. Denmark,
in particular, is strongly opposed because
approximately 70 percent of the Danish
catch is taken within 50 miles of the UK
coastline.
The original six EC members contend,
moreover, that there is no legal basis to
extend the zone beyond 12 miles and that
the UK and Ireland passed up their
chance to negotiate this issue in 1973
when they signed the Treaty of Accession
to the EC. The UK, on the other hand,
argues that this policy was adopted "in in-
decent haste" just before negotiations on
the enlargement of the Community began.
The seven opposed to the British and
Irish positions believe the supplementary
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Catch in
1,000 tons
Catch in own
territorial Catch in Catch in
waters and other EC zones of
adjacent na- members' third
tional zone* zones* countries*
Denmark
1,453
68
18
14
UK
1,049
63
1
36
France
594
27
46
27
West Germany
418
5
27
68
Italy
290
66
--
34
Netherlands
220
36
61
3
Ireland
80
90
10
--
Belgium
49
53
31
16
EC total
4,153
+based on 1973 figures
*percentages, assuming a 200-mile zone
quotas and financial aid the Commission
has proposed as compensation for states
that would be adversely affected by the
new regime are more than adequate.
Higher quotas would be granted on the
basis of past fishing practices, social and
economic impact, and losses sustained by
a state excluded from non-EC
waters-such as off the coast of Iceland.
According to the Commission, about
$480 million would be allocated from the
agricultural fund over five years for
restructuring the fishing industry and for
marine research. The Commission is also
looking to the EC social and regional
development funds and the European
Investment Bank to assist those
fishermen-particularly in northern
England, Scotland, and Ireland-hit
hardest by the new policies.
The Community takes 27 percent of its
fish from non-EC waters. If the Nine lost
all fishing rights in waters adjacent to
other countries and excluded all third
countries from EC waters, the total catch
of Community fishermen would be
roughly unchanged.
In terms of value, however, the EC
would be a net loser. Over half the cod the
EC catches, for example, comes from
non-EC waters while most of the fish
caught in EC waters is used for fertilizer
and livestock feed. Within the EC, the
UK would suffer most, followed by Den-
mark and West Germany.
The West Germans argue that EC
failure to reach agreement on an internal
fisheries policy should in no way impede
negotiations with third countries. The
Germans fear they will be excluded from
non-EC waters-where they catch two
thirds of their fish-and have threatened
to initiate bilateral talks with the US,
Canada, and Norway if the Nine fail to
approve negotiating mandates for the
Commission by January 1.
Negotiations with Third Countries
The Commission proposes to notify all
third countries that fish in EC waters that
they may continue to do so only if they
negotiate a fisheries agreement with the
Community. The Commission is now
seeking the foreign ministers' approval of
guidelines setting out general principles
for "framework agreements"; specific
tonnages or quotas would be fixed later
during annual negotiations.
The Commission expects few problems
with the US and Canada, once
negotiations are initiated, because neither
is seeking reciprocal fishing rights in EC
waters. The EC has substantial interests
off the North American coast; many
vessels have been expensively equipped for
fishing these waters.
The EC recently concluded an
economic cooperation agreement with
Canada and Ottawa has already promised
the Nine that quotas previously
negotiated with the International Com-
mission for North Atlantic Fisheries will
not be significantly changed. French
claims to exclusive fishing rights in waters
off the French islands near New-
foundland, however, could cause some
problems among the Nine.
Negotiations with Iceland and Norway
will be more difficult. Both the Commis-
sion and the UK are anxious to begin for-
mal talks with Iceland as soon as possible
because the bilateral fishing agreement
between the UK and Iceland, which
brought a temporary halt to the "cod
war," expires on November 30. The Com-
mission has made very little progress in
exploratory talks on an EC pact that
would replace the temporary accord and
is hoping, perhaps too optimistically, that
Iceland will agree to renew the six-month
pact.
The Commission proposes to compen-
sate Britain for its fishing losses off the
Icelandic coast by offering additional
quotas within EC waters-an offer that
may not sit well with some EC members.
Iceland is afraid the Nine may threaten to
drop the tariff concessions it now receives
in order to encourage a more conciliatory
stance in the talks. The Icelandic govern-
ment, however, has already warned that it
considers the tariff concessions
irrevocable.
The EC hopes to conclude a reciprocal
fishing agreement with Norway-which
catches 14 percent of its fish in EC
waters-before it declares a 200-mile
zone. Norway's desire to protect its
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waters from West European fishermen
was a major reason for deciding not to
join the Community in 1973. German and
French fishing in Norwegian waters has
recently risen to UK levels, and Oslo will
be seeking some reduction in the EC's
total catch.
Denmark, responding to mounting
political pressure from the Faeroe
Islanders, plans to declare a 200-mile
zone around the islands on January 1.
Current fishing agreements with EC
members, Norway, Poland, Iceland, and
Canada will be terminated in six months
and the Faeroese-who are not EC
members-will have to negotiate new
agreements separately.
Greenland, which is bound to the EC
through Denmark, will probably declare a
200-mile zone in concert with the Nine,
although the growing debate over home
rule could complicate such plans. Once a
200-mile zone is established, however,
Greenland will move to exclude most
third-country fishermen in order to
protect its shrimp and codfish stocks,
which are being rapidly depleted.
The USSR has become increasingly
dependent on fish as an alternative source
of protein; the current five-year plan calls
for an even higher fish catch. About 19
percent of the total Soviet catch comes
from EC waters-more than ten times the
EC catch in Soviet waters. The Commis-
sion is willing to discuss a reciprocal deal,
but the USSR has customarily refused
formally to recognize the authority of the
EC to negotiate for the Nine.
A 15 percent rise in oil prices would hit the major
developed countries with varying severity, but economic growth
rates would decline and inflation would rise in all of them.
Economic recovery would probably not be threatened in Japan
and West Germany, but France and-especially-Italy would
face tough sledding.
The Commission, however, is in the
position where it can wait for the Soviets
and the East Europeans to make the first
approach. The EC may be able to use its
relatively strong bargaining position on
this question to secure better terms in
future negotiations on an EC-CEMA
agreement.
The Commission has proposed that
those states in whose waters EC fishermen
have little interest-Spain, Sweden,
Finland, and the East European coun-
tries-should be gradually excluded from
the EC's 200-mile zone. The Danes are in-
terested in fishing the Baltic Sea,
however, and they may argue for granting
the Swedes, Poles, and East Germans
some North Sea fishing rights in return.
ItIIUMMAJII xi 1111MOcc:c vi vii rric& rnibu
A 15-percent increase in oil
prices-likely to be announced at the
Organization of Petroleum Exporting
Countries ministerial meeting in
December-would probably reduce the
real gross national product in the seven
major industrialized countries-the US,
the UK, France, West Germany, Italy,
Canada, and Japan-approximately $32
billion below what it would otherwise
have been in 1977. Oil-related income
losses would reduce the real GNP growth
next year to 4.5 percent compared with an
almost 5.4 percent projected rise without
higher oil prices.
This calculation assumes that
governments take no fiscal policy moves
reinforcing the contractionary impact on
demand, as they did following the 1973
price hikes, and that monetary policies
are adjusted to take account of the
oil-related rise in inflation rates and
reduced rates of real growth.
The impact could be worse if
households increase savings in response to
the higher inflation and any oil-related job
losses. The 0.8-percent loss in GNP does
take account of offsetting gains from their
increased exports to OPEC countries due
to the additional revenues higher oil prices
bring the OPEC group.
Italy would be hardest hit with a GNP
loss of 1.4 percent followed by Japan (1.2)
and France (1.0). The seriousness of the
impact reflects the fact that the rise in oil
prices since 1973 has roughly tripled the
importance of oil in each of the major
economies.
Although difficult to quantify, these
GNP losses could add as much as 0.5 per-
cent to unemployment in Western
Europe. France, Italy, and the UK are in
the poorest position to absorb the job im-
pact; unemployment in 1977 in those
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countries would be at politically sensitive
levels even without the oil-related losses.
Inflationary Impact
Higher oil prices would increase the
rate of inflation by nearly one sixth in
major countries, adding about 1 percent
to consumer prices. The UK and Italy,
countries where inflation still is stubborn-
ly high, would experience the largest
oil-related price rises..
The US would be more vulnerable to
the inflationary impact than in the past,
because imports now account for 40 per-
cent of US oil supplies. For Japan and
Western Europe, the inflationary effects
of a 15-percent oil price increase would be
comparable to those of a 30-percent hike
three years ago.
The oil price hike would cause an $11
billion deterioration in the current ac-
count balance of the seven major in-
dustrial countries. Their net oil import bill
would increase by roughly $15 billion;
part of these added costs would be offset
by increased sales to OPEC.
OPEC countries probably would in-
crease their purchases from the seven
countries by $3 billion because of ad-
ditional revenues earned from higher oil
prices. Major countries' trade balances
with non-OPEC areas would improve by
at least $500 million because the
oil-related loss in their import demand
would exceed the loss in export sales to
non-OPEC areas. Smaller developed
countries would experience more than a
$3 billion deterioration in their oil and
non-oil trade balance.
For non-OPEC developing countries
the chief impact of higher oil prices would
be on their foreign economic position.
Raising oil prices by 15 percent would add
$1.9 billion to the net oil import bill for
the group as a whole, bringing it to $15
billion in 1977.
Oil-induced price increases in
developed economies would add another
$1.3 billion to nonfuel import costs; it is
possible that non-OPEC developing coun-
try import prices for foodstuffs, in-
termediate products, and finished goods
would increase 1.2 percent on the average.
The non-OPEC group would experience
an estimated 2 percent deterioration in
terms of trade.
The oil-related loss in developed coun-
try real GNP would almost certainly have
an adverse impact on non-OPEC develop-
ing country export volume by reducing de-
mand for industrial raw materials below
what it would have been. The volume
losses associated with a 0.8 percentage
point reduction in developed countries'
GNP could cost non-OPEC developing
countries $500 million.
Some of these countries would more
than compensate for volume losses by
raising export prices. This offset would
accrue primarily to South Korea, Taiwan,
Brazil, and Mexico. Raw material ex-
porters may face softer markets because
of oil-weakened demand in major coun-
tries.
Policy Response
The policy response of major countries
will be an important factor determining
how seriously higher oil prices affect
growth and trade. If governments try to
counter the inflationary impact, as they
did in 1973 to 1974, the real GNP loss
could be considerably larger than the
average 0.8 percentage point loss. On the
other hand, the stimulative fiscal
measures needed to offset the contrac-
tionary impact of oil prices would be
relatively small.
The fiscal stimulus needed to recoup
oil-related income losses would be greater
if only one or a few countries were to act.
For example, to regain the oil-related
reduction in real GNP, Japan would have
to increase government spending $1.4
billion if other major countries took
similar action. If Japan acted alone, it
would have to increase spending almost
twice as much.
In addition to fiscal adjustments,
monetary policy would have to take ac-
count of higher inflation rates. Otherwise,
the slower growth in real money stock
would tend to raise interest rates and
depress investment further.
The larger industrial countries-the
US, Japan, and West Germany-face
relatively little risk to their economic
recoveries even without stimulative
measures. West German real growth
would still average about 4 percent next
year. Japanese real growth would average
6 percent or better.
Japan might prefer to shift a sizable
portion of its higher oil bill abroad by tak-
ing no fiscal measures to offset the
oil-related reduction in domestic demand.
Given West Germany's concern about in-
flation, it might also be inclined to avoid
offsetting fiscal action.
France and Italy, on the other hand,
would face tough sledding if the larger
economies, particularly West Germany,
stand pat on the fiscal front. With un-
employment a major political issue,
France would be in a bad position to ab-
sorb any oil-related job losses. Acting
alone to compensate for these losses,
however, would add some half billion
dollars to France's already large current
account deficit.
Italy would be in an even worse situa-
tion. If Rome were to offset the 1.4
percentage point real GNP loss caused by
the oil price hike while others took no ac-
tion, its already large current account
deficit would increase an estimated $500
million. While letting real growth slip to
under 2 percent would entail high political
risks, the real question is whether Italy
will be able to
payments costs
growth.
finance the balance-of-
of avoiding a slip in
Other Countries
Non-OPEC developing countries, for
their part, would need at least $3.5 billion
in foreign borrowing to maintain imports
and not suffer further losses in consump-
tion and growth. We expect ithat, at most,
OPEC countries would increase their aid
flows by $1.0 billion.
Since developing countries would be
unable to draw down exchange reserves
much, private financial institutions, in-
dustrial country aid, and multilateral
lenders would have to finance the rest.
Given the large developing countries'
current account deficit and huge external 25X1
debt, it remains far from certain that the 25X1
funds necessary to maintain import
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