WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A011400190001-7
• Release Decision: RIPPUB
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• Document Page Count: 20
• Document Creation Date: December 21, 2016
• Document Release Date: March 11, 2008
• Sequence Number: 1
• Publication Date: October 29, 1976
• Content Type: SUMMARY

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Weekly Summary
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DIA review completed.
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CI WS 76-044
No. 0044/76
October 29, 1976
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CONTENTS
1 Middle East
Lebanon; Egypt;
USSR-Syria; Egyptian
Election
3 Africa
Rhodesia
4 Europe
Spain; Italy; France;
USSR-China; USSR; Soviet
Harvest
7 Western Hemisphere
Chile; Uruguay
7 East Asia - Pacific
Japan; Malaysia; Australia
9 Oil: Anticipation of Price Increase
10 China: Leadership Moves Cautiously
11 Transkei: Nominal Independence
14 General Conference of UNESCO
Comments and queries on the content
publication are welcome. They may be
directed to the editor of the Weekly
Summary,
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LEBANON
The Arab summit conference that con-
vened in Cairo on October 25 endorsed
the Lebanon settlement worked out by the
leaders of five Arab states and the
Palestine Liberation Organization in
Riyadh last week. The full summit was
unable to agree, however, on the composi-
tion of the expanded Arab League
peacekeeping force that will police the
provisions of the accord, and the delay in
organizing the force has reduced the
chances that the combatants will begin
withdrawing voluntarily.
Arab League Secretary General Riyad
Golan
0 Kilometers 30
positions-which have become in-
creasingly indefensible-to Arab League
forces. They may balk, however, at giving
them up to peacekeeping units that are
almost entirely Syrian, and they are un-
likely to withdraw if the Christians make
it clear they will not reciprocate.
The Christians apparently expect-and
may well be hoping for-a renewal of the
fighting in another week or so. Shamun
has noted publicly that the five-day period
specified in the Riyadh accord for Palesti-
nian withdrawal from the mountains and
the south has now expired with no sign of
Palestinian compliance-an implicit
threat that the Christians may resume the
fight.
EGYPT Z,
The reconciliation between Egypt and
Syria during the summit meeting of six
Arab leaders in Riyadh last week was an
abrupt about-face for President Sadat.
The Egyptian President now appears anx-
ious to promote Arab solidarity before
attempting to press the US to resume
Middle East peace negotiations after the
presidential election.
Other moves by Sadat also seem
designed to put the US and Israel on
notice that Egypt will urge new
negotiations. Egypt's call on October 20
for the UN Security Council to discuss
Israel's "repressive measures" in the oc-
cupied territories is a gesture of solidarity
with the Arabs and a pressure tactic
against the US.
The Egyptians' efforts to arrange a
meeting between Foreign Minister Fahmi
and Soviet Foreign Minister Gromyko
are probably also intended in part to exert
pressure on the US for early movement in
negotiations.
Sadat's reconciliation with Syria is the
most significant of his recent moves. The
UN initiative and the overture to the
has been given the job of hammering out
arrangements for the peacekeeping force
with the countries that have offered
troops-Syria, both Yemens, the United
Arab Emirates, Sudan, Saudi Arabia,
Libya, and "Palestine"-and with
Lebanese President Sarkis, who osten-
sibly has the final say on who will be
allowed to join.
Regardless of the mix Riyad comes up
with, it seems clear the Arab leaders have
confirmed Syria's domination of the
force. The Arab states have not only
legitimized Syria's intervention in
Lebanon but even agreed to bankroll it:
the summit voted to provide some $62
million-largely from Saudi Arabia and
Kuwait-to meet expenses of the security
force over the next six months.
Despite sporadic shelling in all parts of
the country, the cease-fire has generally
held up during the past week everywhere
except in the south, where Christian
troops with some Israeli support-largely
in the form of artillery fire from inside
Israel's own border-have been fighting
to clear Palestinians and Lebanese
Muslims out of the border area. Although
the Christians have not yet succeeded in
taking Bint Jubayl or Mays al-Jabal,
which are under siege, they seem to have
successfully established effective control
of the area between Rumaysh and the
Arqub, which for years has been the prin-
cipal staging base for fedayeen operations
against Israel.
Signs of strain between the Syrians and
the Christians have begun to surface. Ex-
tremist Christian leader Camille Shamun
has stated publicly that he will refuse to
allow Arab peacekeeping forces-
presumably including Syrian troops
operating in that capacity-into areas
under Christian control, and the Chris-
tians have been talking of forming "se-
curity forces" of their own to police
their areas.
The Palestinians, for their part, seem
prepared to turn over their
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Foreign Minister Fahmi
Soviets are largely tactical steps that cost
Sadat little. The rapprochement with
Asad, however, has involved important
concessions.
Sadat has been able to carry off the
reconciliation gracefully; Asad apparently
did not during the Riyadh meeting
challenge Egypt's adherence to the second
Sinai agreement, a principal bone of con-
tention between the two. Sadat none-
theless in effect recognized Syria's
supremacy in Lebanon. His policies
toward both Syria and Lebanon have until
now been governed by a refusal to con-
cede this Syrian pre-eminence.
A number of factors probably con-
tributed to Sadat's turnaround. Saudi
pressure no doubt had some effect. Sadat
probably also concluded that his efforts to
stop Syria have been unavailing and have
done Egypt more harm than good.
The most important factor was Sadat's
realization-somewhat belated-that
only by cooperating with Syria could he
expect to achieve early progress in Middle
East peace negotiations.
He has undoubtedly hoped throughout
the last year to bring about that coopera-
tion on his own terms, but he now seems
to recognize that, with a new US
presidential term about to begin, there is
USSR-SYRIA
The Soviets may be trying to l5ress the
Syrians to stop military operations in
Lebanon.
The Soviet defense attache recently
remarked that the USSR is fulfilling its
present military contracts with the
Syrians, but he refused to be+drawn out on
the subject of new arms brders. Since
mid-July, seven Soviet arms carriers have
arrived at Syrian ports; the most recent
delivery was on October 4.
In public, Soviet criticism of the Syrian
role in Lebanon is couched in terms that
minimize Soviet-Syrian differences. The
Soviets presumably believe that a cessa-
tion of military deliveries, while not affec-
ting short-term Syrian capabilities against
the Palestinians, would have dire conse-
quences for their own relations with Syria.
EGYPTIAN ELECTION / I
On October 28, Egypt held its first
parliamentary election in which can-
didates were legally permitted to run on
opposition platforms.
Approximately 1,600 candidates vied
for 350 People's Assembly seats in a
carefully regulated experiment with
something akin to a multiparty system.
The Arab Socialist Union remains
Egypt's only legal political party, but
President Sadat early this year permitted
the formation of three distinct groups 25X1
within the party-a leftist, a rightist, and
a centrist organization. The centrist group
represents the government viewpoint.
The leftist and rightist groups represent
opposition viewpoints, but both are
tainted to some extent with an establish-
ment label. Largely for this reason, over
half the candidates shunned party spon-
sorship completely to run as in-25X1
dependents. Not even the government has
a clear picture of the political leanings of
all of the 852 independents.
The government avoided direct
manipulation of the campaign, and can-
didates were allowed considerable
freedom. The regime is now afraid leftists
may make substantial gains after appeal-
ing to voter discontent over economic
grievances.
There are enough controls built into
Egypt's political system, however, to
make a completely open election impossi-
ble. Leftist candidates, for instance, have
no dependable media organ through
which to make their views widely known.
The regime also made sure that a large
bloc of potentially antigovernment voters
was denied a voice in the election; the
military and the police, among whom ris-
ing discontent over economic problems
has become a problem, were disen-
franchised.
We doubt that openly identified opposi-
tion candidates will make substantial
gains in the election, but independents
may win 30 to 60 seats. Not all of these
will be opposition deputies, but the fact
that all of them have refused to run under
the auspices of the official party's three
organizations indicates a tendency to
resist government dictates.
Government policy would not be
seriously influenced by an Assembly in
which no more than 25 to 30 percent of
the deputies were oppositionists or in-
dependents. An Assembly constituted
along these lines would not, however, be
the rubber stamp its predecessors have
been.
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RHODESIA /'/t'
~ Rhodesia's rival black nationalist
leaders and Prime Minister Smith's white
minority government began formal
negotiations in Geneva this week on an in-
terim government to lead Rhodesia to
black rule. The positions taken by the two
sides are far apart, and much hard
bargaining lies ahead if an agreement is to
be reached.
The four black delegation
leaders-Joshua Nkomo, Robert
Mugabe, Ndabaningi Sithole, and Bishop
Abel Muzorewa-are trying to play down
their differences and cooperate in a com-
mon approach at the conference. Nkomo
and Muzorewa, who have little military
support, probably believe the talks must
succeed if they are to have a chance at
power in a black Rhodesian government.
They may feel it necessary to adopt a
tough position, however, to protect
G IQ M 04)q
black interests.
Mugabe may adopt a harder line
port of his faction's military wing, to
which most of the Rhodesian guerrillas
ome of the guerrilla commanders ap-
parently do not want the conference to
succeed because they believe they can
come to power soon through a military
victory. The guerrillas are likely to try to
intensify their efforts against Rhodesian
government forces while the conference is
going on.
If the negotiations progress to the point
of discussing the specifics of setting up an
COKE rte
r~~s
interim government, conflicting interests 25X1
and ambitions could intensify the rivalry
among the nationalist leaders. There is no 25X1
indication that the blacks have agreed on
how the positions in an interim govern- 25X1
ment would be divided up among them.
Ian Smith, for his part, apparently
hopes to retain a significant personal 25X1
political role at least through the period of
interim government. Smith wants to
appear reasonable at the conference, but
there is little sign thus far of much give in
his public position on a settlement.
Smith realizes, however, that the South
Africans, who have supported him,
strongly favor a negotiated settlement,
and he may adopt a more conciliatory
position rather than risk a purely military
solution. Rhodesian security and defense
chiefs have informed the Prime Minister
that the military outlook is bleak, and
most of them favor making the best deal
possible with the nationalists.
Smith probably calculates that, if the
conference breaks down, he would be able
to put the onus on the nationalists. In such 25X1
an event, he would hope-probably un-
realistically-to get new military aid from
A P
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SPAIN
The Spanish reform program has
entered a decisive phase as the Cortes
prepares to debate the government's
proposed constitutional amendments.
A subcommittee of the Cortes must
present its report no later than November
10, and the proposals will then be opened
to debate by the entire legislature.
Although no time limit has been set for
the plenary debate, Cortes President Fer-
nandez-Miranda-who has made clear his
support for the reforms-has the power to
call for a final vote when he sees fit. He
will almost certainly do so before
November 20, when massive right-wing
demonstrations are planned to com-
memorate the first anniversary of Fran-
co's death.
The debate is the last real opportunity
the Spanish far right will have to try to
head off the reforms. If the government
proposals are approved without substan-
tial alteration, the die will be cast for a
freely elected bicameral legislature that
will severely curtail what little legal power
the right still has.
Government officials still believe they
have enough leverage to win the battle in
the Cortes, but they admit it will be close.
Cabinet members have told the US em-
bassy that if the amendments fail to pass
or are watered down, King Juan Carlos
will dissolve the Cortes and take the
reforms to the people in a referendum.
Bypassing established channels in this
manner, however, would be dangerous. It
would link the future of the monarchy to
the success of the reform process and
could weaken crucial military support,
which has reportedly been contingent on
the reforms passing through the existing
Francoist institutions.
Grumbling from right-wing generals
who oppose political reform has already
spawned rumors of a military coup. Most
are no major breakdowns in public order of the party's key organization section.
ranking military officers, however, will In addition, Berlinguer put one of his
probably remain loyal to the King if there confidants, Giovanni Cervetti, in charge
and if the government refrains from
appeasing the opposition by legalizing the
Communist Party or granting greater
autonomy to the regions.
Most rightist politicians have probably
accepted the inevitability of change and
will hesitate to appear before the
public-portions of the Cortes debate will
be televised-as opponents of
democratization. The real issue during the
coming weeks is more likely to be whether
the government can stave off
modifications to its proposals that would
alienate those elements of the opposition
that are now inclined to participate in a
new political system.
Several government officials say that, if
the reforms pass the Cortes relatively un-
scathed, the government will set the
referendum for the middle of December
and hold a legislative election, possibly as
early as March.
ITALY 21-2
Leadership changes in the Italian Com-
munist Party made at last week's Central
Committee meeting indicate that party
chief Berlinguer is working to strengthen
his grip in the face of increasing dissent
over his policy of cooperation with the
Andreotti government.
The changes are consistent with
Berlinguer's effort since his election as
secretary general in 1972 to consolidate
his personal control of the party. At the
party congress last year, for example,
Berlinguer managed to eliminate the
Politburo-a preserve of the party's old
guard that had hindered his freedom to
maneuver. He also added more of his
allies to the party secretariat.
In the personnel shuffle last week,
Berlinguer reduced the secretariat from
nine to eight members and replaced two
men appointed in 1975 with two new-
comers who are reportedly even closer to
him.
Another secretariat member w o
appears close to Berlinguer was given
responsibility for the press and propagan-
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da section, which will play a key role in
dealing with rank-and-file misgivings
about the party line. Another Berlinguer
man was made director of the party's
newly created Center for the Problems of
the State. I
Despite dissenting views expressed dur-
ing the Central Committee meeting, the
session ended with an endorsement of
Berlinguer's policies. ,In his concluding
statement, Berlinguer assured the com-
mittee that he would insist on pledges
from the government of social and
economic reform and a larger policy-
making role in return for his cooperation.
Although internal dissent does not
appear to pose an immediate threat to
Berlinguer's leadership or policies, he
could come under heavier pressure if he
fails to win additional political con-
FRANCE
25-2 ~
The French have increased their ability
to support naval operations in the Indian
Ocean by adding a support ship to their
fleet there. The move is another indication
of France's determination to maintain its
sizable naval presence in the area.
US defense attaches in Paris report that
the maintenance and repair ship Jules
Verne, previously assigned to the Atlan-
tic, has been sent to Djibouti in the French
Territory of the Afars and Issas. Djibouti
is France's only remaining major naval
base in the Indian Ocean.
France may be asked to leave the base
in Djibouti after the FTAI achieves its in-
dependence next year. If so, the Jules
Verne and the remainder of the Djibouti
detachment will probably move to La
Reunion or Mayotte-French island
possessions in the South Indian Ocean.
The addition of the support ship will
improve the fleet's ability to operate in-
dependently of the extensive shore
facilities at Djibouti. It will be able to per-
form at sea most routine maintenance and
repair tasks needed by French surface
Indian
Ocean
J o Miles 1000
Ki nleI,r, 1000
ships in the area, but major overhauls or
repairs will still have to be made at French
bases or at ports with support facilities.
The French Indian Ocean fleet, the
largest Western fleet in the area,
strengthens France's image as a world
power able to influence events and protect
French interests in both Africa and the
Middle East. The fleet, normally con-
sisting of about 15 ships, also helps to
protect key oil transport routes to the
West and maintain surveillance of Soviet
naval activity in the region.
USSR-CHINA
Every official act of the USSR toward
China since the death of Mao Tse-tung
has been aimed at building a public record
of Soviet reasonableness and willingness
to do everything possible to improve
relations with China.
This week, General Secretary
Brezhnev's speech to the Central Com-
mittee plenum on October 25 and the
communique issued the same day at the
end of Mongolian party leader Tseden-
bal's visit to Moscow provided the Soviets
with further occasions to build on the
public record.
In his speech, Brezhnev implicitly
criticized Chinese foreign policy, but he
reiterated the USSR's four-year-old offer
to normalize relations with China and
hinted at its willingness to restore party-
to-party ties.
During Tsedenbal's visit, Brezhnev in-
dicated willingness to engage in a
"constructive dialogue" with anyone in-
terested in resolving Asian problems. His
language probably was intended to set the
stage for-or perhaps to rein-
force-private Soviet messages to the
Chinese on the need for some high-level
exchange aimed at improving relations.
Subsequently, Brezhnev sent a terse
congratulatory telegram to Hua Kuo-feng
on his assumption of the chairmanship of
the Chinese Communist Party. The
Chinese promptly rejected the note as
they had the earlier condolence note from
the Soviet Central Committee on the
death of Mao.
The Soviets are being cautious in public
and private about the significance for
them of the purge of China's four leading
leftists, but the event doubtless surprised
and pleased them. The Soviets have long
thought that the leftists gave an
ideological rigidity to Mao's unyielding
approach to the USSR.
The Soviets maintain, however, that the
Chinese moderates are ultimately no less
anti-Soviet than the leftists and that no 25X1
genuine improvement in relations can be
expected for at least 7 to 10 years. The
USSR is aware of reports, however, that
some important Chinese officials favor
less confrontation in dealing with the
USSR. The USSR doubtless hopes that
China's new leaders will be prepared to
take some steps to minimize chances of
clashes on the border and perhaps also to
improve state-to-state relations.
The Soviets are not willing to wait in-
definitely for a positive signal from China.
This was evident in Brezhnev's speech at
the plenum and the mid-October article in
France Soir in which Soviet "journalist"
Victor Louis warned the Chinese that they
have a month to show an interest in better
relations.
Louis subsequently told a US embassy
officer in Moscow that he was not
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C P -b
threatening the Chinese and that the time
limit is not literally one month. He added,
however, that Soviet patience is not in-
finite.
USSR 2 7 - z U
The Soviet Communist Party Central
Committee and the Supreme Soviet met
in Moscow this week to approve the new
five-year plan and next year's plan and
budget. Despite indications that some
changes in the top leadership might also
be made, only a few relatively minor ap-
pointments were announced.
The main event was General Secretary
Brezhnev's review of Soviet foreign and
domestic economic policy, which he
delivered to the opening session of the
Central Committee plenum on October
25.
The wide airing given Brezhnev's
speech breaks the precedent of over a
decade of generally unpublicized plenary
proceedings. The decision to make the
party chief's address public, especially
while the Central Committee meeting was
still under way, probably reflected the im-
portance the leadership attached to get-
ting its foreign policy positions on the
record, at an authoritative forum, in ad-
vance of the US election. Publication of
the text also, of course, focused attention
upon Brezhnev as the pre-eminent Soviet
leader.
The plenum closed the following day
with the election of a new member to the
Secretariat and the promotion of three
candidate members of the Central Com-
mittee to full membership.
The new party secretary is Yakov
Ryabov, the party first secretary of the
Sverdlovsk region in the Urals. Party
Secretary Kirilenko has career ties to this
area and is probably Ryabov's patron.
Ryabov, 48, has worked in industry and in
a series of party posts in Sverdlovsk, a
major center of heavy industries. His
duties on the Secretariat were not
specified.
The plenum was more notable for what
it failed to do than for what it ac-
complished. The plenum did not remove
Defense Minister Ustinov from the
Secretariat, as had been expected. Until
now under Brezhnev, Soviet leaders have
not held full-time party and government
posts simultaneously. The exception made
for Ustinov may mean that he will con-
tinue to oversee the defense industry for
the party.
Nikolay Tikhonov, who was promoted
to first deputy premier in early
September, was not awarded the Polit-
buro status that usually goes with the
post. A picture of the leadership last
month in the press, which showed
Tikhonov standing with full members of
the Politburo, indicated that an effort had
been under way to advance his candidacy.
The lack of action on moves for which
preparations seem to have been made may
reflect some disagreement among the
leaders as well as their long-evident reluc-
tance to make changes in the senior
leadership.
All Soviet leaders were on hand for the
opening of the Supreme Soviet on
Wednesday. Premier Kosygin,
however-although present-has evident-
ly not yet recovered sufficiently from his
recent illness to deliver the report on the
five-year plan to the Supreme Soviet. For
the first time under the present leadership,
Gosplan Chairman Baybakov made the
report.
SOVIET HARVEST
The bumper Soviet grain harvest an-
nounced by General Secretary Brezhnev
on October 25 should give the USSR
more flexibility in satisfying domestic
needs and arranging its grain trade.
Brezhnev reported that this year's grain
crop would "either very closely approach
the figures of the record year 1973, or
even surpass it." This suggests that total
grain output will be 222 million tons or
more. Brezhnev indicated that 216 million
tons had already been harvested-76
million tons above the disastrous harvest
of 1975. A harvest of 220 to 225 million
tons will provide the economy with a
much needed boost:
? Livestock herds, which were
reduced and put on short rations, can
be rebuilt toward the long-run goal of
putting more meat in the consumers'
diet.
? Grain reserves, depleted by two
years of declining production, can be
rebuilt 6y 5 to 10 million tons.
? The quality of a variety of bread
products can be improved.
The USSR now has the options of cur-
tailing additional grain purchases, expor-
ting some grain to the West, and shipping
more to traditional clients in the com-
munist countries.
The Soviets reportedly may sell some
barley to West European traders, who
have offered to buy 3 to 4 million tons "at
very attractive prices." The USSR,
however, must balance its desire to earn
hard currency with the repeated demands
for additional grain from Eastern Europe.
Despite the bumper grain crop, total
farm output should rise by only about 1.5
percent this year because of a sharp
decline in livestock production.
Agricultural growth is far from the
8.5-percent rebound planned this year and
will continue to depress the growth of
gross national product. Nevertheless, the
good crop will reduce the amount of hard
currency needed to pay for agricultural
imports and allow a considerable im-
provement in the livestock sector in 1977.
25X1
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CHILE
VC )
2 -4
Chile has informed US ofals that it
will no longer seek new US aid. In a re-
cent speech, President Pinochet said Chile
had rejected a US loan he described as
"linked to political conditions." Although
the Chilean government maintains public-
ly that it is rejecting new aid, it is actively
seeking a $15-million loan under PL 480
Title Ito bolster wheat supplies in view of
another projected poor harvest.
Because of world press criticism for
human rights abuses, Chile sees itself as
increasingly isolated from its traditional
allies outside South America. Two weeks
ago, in its report to the UN General
Assembly, the Ad Hoc Group on Human
Rights recommended that member
nations restrict trade and aid with Chile.
The Chilean government had refused to
accept the group's on-site investigation
team,
Encouraged by improved export
earnings this year, Chilean economic
managers apparently are now gambling
that Chile's international financial
obligations can be met without further
debt rescheduling and with minimal
reliance on foreign economic aid. This
year, for the first time since 1971, Chile
managed to avoid debt renegotiations.
A 33-percent increase in overall export
earnings and renewed foreign private
loans have caused a dramatic improve-
ment in Chile's foreign reserve
position-gross reserves quadrupled to
$445 million during the first eight months
URUGUAY
President Aparicio Mendez, who was
selected by the military just two months
ago to preside over the Uruguayan
government for the next five years, is en-
countering strong opposition from the
men who put him in office. Chances are a
little better than even that he will remain
as president for even as long as a few more
months.
The US embassy reports there were
widespread rumors last week that Mendez
had been ousted or was about to be. On
October 15, Mendez did have a long
meeting with all of the senior military
leaders. Although there are Several ver-
sions of what transpired? thg argument
that the military would look foolish
changing presidents so soon apparently
won Mendez a reprieve.
At another meeting last week, military
leaders are said to have discussed methods
for muzzling Mendez and restricting
further his freedom of action. A consensus
seems to have been reached, since Mendez
told the press over the weekend that he
had "decided to refrain from making
statements and to say something only
when it might be justified by the impor-
tance of the matter."
Many military leaders were opposed to
Mendez' selection in the first place, and
more have become disenchanted with him
because his government has done little
since taking office. Mendez is not entirely
to blame, however, because he is merely a
front for the 21 generals who rule
Uruguay under an ineffective collegial
25X1
With the Lower House election only
about five weeks away, Japan's ruling
Liberal Democrats have decided to forgo
a divisive leadership struggle in favor of
pre-election unity at their convention on
October 31.
Opponents of Prime Minister
Miki-who control nearly two thirds of
the party's delegates-late last week
publicly called for Deputy Prime Minister
Fukuda to replace Miki as party president
and prime minister., Fukuda, however,
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decided against forcing a showdown at the
convention, at least partly because of sen-
timent in the party that the issue be
resolved after, rather than before, the
election. Thus it is increasingly likely
Miki will remain in charge through the
election.
The endorsement of Fukuda's can-
didacy, however, demonstrates that the
balance of power in the party still favors
the deputy prime minister. A serious ef-
fort to replace Miki will probably be
made shortly after the election when, by
law, the entire cabinet must resign and a
new prime minister must be elected by the
Diet.
The Diet has already passed the vital
fiscal legislation on its agenda and will
probably be dissolved shortly after the
50th anniversary of the beginning of
Hirohito's reign as Emperor on
November 10. The election will most
likely fall on December 5.
MALAYSIA )z - J 7
Malaysia's national oil company,
Petronas, may reach a production-sharing
agreement with the major oil companies
In late September, the controversia
and highly nationalistic Petronas chief,
Tengku Razaleigh, resigned to devote full
time to his Finance Ministry portfolio. He
was replaced by the former secretary of
the government, Tan Sri Kadir, who is
more sympathetic to Hussein's desire to
accommodate foreign investors and to
conclude an agreement with the oil com-
panies.
Malaysia is seriously concerned that
failure to reach a satisfactory agreement
could scare off foreign investment in non-
oil sectors. The ambitious development
plan for 1976 to 1980 calls for continued
high dependence on foreign investment in
the private sector.
AUSTRALIA ~ ,3 7
Australia is gradually softening its posi-
tion toward Indonesian incorporation of
Portuguese East Timor, until now a major
irritant in relations with Indonesia.
Prime Minister Fraser's visit to In-
donesia earlier this month helped this
process along. Fraser did not reiterate
Australia's past insistence on an inter-
nationally supervised referendum in the
former colony, and he did not question
President Suharto's statement that East
Timor is now an inseparable part of In-
donesia.
Both the former Labor government and
Fraser's coalition have had to steer clear
of any endorsement of the Indonesian
takeover because of widespread
Australian public sympathy for Timorese
independence. President Suharto
recognizes that internal political con-
siderations prevent the Australians from
accepting Indonesian actions outright,
and he is willing to take Fraser's noncom-
mittal comments as tacit acceptance.
Australia's Labor opposition is still try-
ing to use Timor as a political issue and
has tried to present the Fraser
government's accommodation to In-
donesia as a sell-out. It is hard to make
this argument stick, however, because the
Labor government itself over a year ago
signaled Indonesia that it would acquiesce
in a quick Indonesian takeover of the Por-
tuguese colony.
Both Fraser and the Labor opposition
appear to recognize that Australian public
interest in Timor has declined, and the
amount of political advantage that might
be gained from a debate on the subject
does not justify further damage to
relations with Indonesia. Foreign
Minister Peacock's statement to Parlia-
ment last week that it does not serve
Australia's interests to aggravate its
largest neighbor is the most public indica-
tion so far that the Fraser government
would like to put the Timor issue to rest.
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A speculative surge in demand for crude oil from members
of the Organization of Petroleum Exporting Countries is
strengthening the argument of those OPEC members pushing
for a large price hike as of January 1.
Government officials from member
states of the Organization of Petroleum
Exporting Countries are now talking
more openly about the price rise expected
on January 1. They are suggesting that the
increase will probably be greater than 10
percent.
Fearful that the OPEC members will
prohibit excessive liftings immediately
preceding the price hike, oil companies
are lifting larger volumes now. The
resulting abnormal market conditions are
tending to strengthen the conviction of
many in OPEC that a large price hike is
warranted.
The Saudi commerce minister, visiting
Iran last week, informed Ambassador
Helms that Saudi Arabia had favored an
increase of about 10 percent but recent
trends in US - Middle East policies may
force Riyadh to rethink its position in
favor of a larger increase.
This is in accord with earlier statements
by United Arab Emirates Oil Minister
Utayba; Saudi Arabia and the UAE are
leading price moderates within OPEC.
The Venezuelan finance minister said re-
cently that the price rise would be no
less than 15 percent, based on a consen-
sus of the 13 OPEC members.
Oil: Anticipation of Price Increase
This may in part be a psychological
game that the OPEC states are playing
with the industrialized countries to
prepare them for the increase, to make
them feel relieved when the rise is not
larger, and possibly to extract some
political and economic concessions along
the way.
Greater Demand
The speculative surge in demand for
OPEC crude in the past several weeks is
causing most OPEC states to produce ex-
ceptionally large volumes. Iran is at near
record levels, and Saudi Arabia, Kuwait,
the UAE, and Venezuela are at or close to
government-set production ceilings.
Companies seeking to increase liftings
or conclude new purchase agreements in
the fourth quarter of this year are often
being rejected. Crude and product prices
in major international spot markets have
strengthened, while volumes available for
spot sale are becoming scarce.
The petroleum industry must pay ad-
ditional costs in order to lift crude oil
before the price hike.
? Monthly interest costs for financing
crude oil are about 8 cents per barrel.
OPEC states have recently shortened pay-
ment terms because of the tight crude
market, posing potential financing
problems for some companies not im-
mediately planning to process the crude.
? Monthly storage costs are also about
8 cents per barrel. This is likely to in-
crease as tankage facilities become tight.
? Surges in crude liftings tend to raise
spot tanker rates, which add to per-barrel
costs.
Based on these factors, each barrel
lifted this month for speculative reasons
will cost an additional 50 cents, and other
factors will further reduce the per-barrel
savings. 25X1
Some OPEC countries that offer price
discounts to former concessionaires may
not extend these terms for sales above a
given volume.
Higher spot prices, which directly affect
only a small portion of crude oil and
products traded, encourage producing
governments to raise prices by adjusting
crude differentials. 25X1
On balance, the cost of speculative buy-
ing will be considerable, but the practice
will still be profitable if the oil price hike
is 10 percent or more.
25X1
25X1
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The elevation of Hua Kuo-feng to the party chairmanship
and the purge of the party's leading leftists have evidently been
highly popular moves in China and we see no sign that the
decisions are being challenged in any significant way. Even so,
the leadership is moving cautiously and has apparently decided
to defer major new decisions.
China: Leadership Moves Cautiously
It is now evident that t e Chinese
leadership will avoid major new
decisions-even pressing ones-for some
time. The huge rally held in Peking on Oc-
tober 24 underlined the dramatic
developments of the past two weeks, but
signaled no new departure.
Wu Te, the Peking party boss and
Politburo member who was the principal
speaker at the rally, called it an occasion
to "celebrate Hua Kuo-feng's assumption
of office" as party chairman and chair-
man of the party's military affairs com-
mission, as well as to "hail the great vic-
tory" represented by the purge of China's
four leading leftists.
Wu said the decision to elevate Hua
was taken on October 7 by the party Cen-
tral Committee; in fact, the action on that
date was taken by the surviving members
of the Politburo, who "recommended"
Hua's promotion to chairman to the Cen-
tral Committee, which legally has respon-
sibility for such matters.
In fact, Hua and his current associates
appear to have deliberately avoided a for-
mal plenary session of the committee.
Although the committee, elected at the
10th party congress in 1973, has seemed
to be weighted solidly in favor of party
"centrists" and "rightists," party leaders
appear unwilling to take any chances in
the current fluid situation.
25X1 Fragile Situation
All this suggests that the leadership
considers the current situation to be
somewhat fragile and apparently plans to
feel its way cautiously. Thus, no one has
been named to the Politburo to replace
the fallen leftists or members who have
died in the past year. Restructuring of the
Politburo is legally entrusted to the Cen-
tral Committee.
In addition, the promotion of Li
Hsien-nien, currently the first vice
premier, to the post of premier-an action
that has been rumored since the fall of the
leftists and one that could easily be ac-
complished by the standing committee of
the National People's Congress, which is
in permanent session in Peking-has not
yet taken place. Hua Kuo-feng was iden-
tified as premier at the rally on October
24.
Remaining members of the Politburo,
including those who reside outside the
capital, appeared at the rally in the same
rank order they held prior to the arrest of
the four leftists.
Despite his apparent links with the left
and a report that he was being "detained"
in Peking, Li Te-sheng, the commander of
the Shenyang Military Region, appeared
with his Politburo colleagues. It is possi-
ble that he has been ordered to remain in
the capital while his relations with the lef-
tist quartet are investigated. This is a
practice frequently employed by the
Chinese.
Ni Chih-fu, an alternate member of the
Politburo who was reported in wall
posters to have
been given responsibility for "cleaning
up" the leftist stronghold of Shanghai,
was identified at the rally by his usual ti-
tle, secretary of the Peking party com-
mittee-an indication that no final deci-
sion has been taken to fill the leadership
vacuum in China's largest city caused by
the arrest of the leftists, three of whom are
from Shanghai.
Few New Challenges
Despite these signs of indecision and
uncertainty, there is still no indication
that Hua and the remaining leaders in
Peking are being challenged in any signifi-
cant fashion. Rallies hailing Hua's eleva-
tion and the purge of the leftists have been
held throughout China, apparently
without incident. The fall of the leftist
"gang" is an extremely popular develop-
ment, and a holiday mood has prevailed
throughout the country for much of the
past two weeks.
The new leadership, moreover, has
gone out of its way to underline the fact
that it has the backing of the bulk of
China's military establishment. Uni-
formed troops were greatly in evidence
at the rally on October 24, and Hua
himself wore a military uniform.
The new leaders have stressed the point
that the decision to elevate Hua to the
chairman's post was taken by Mao before
his death. Wu Te said in his speech at
the rally that Mao had sent a note last
spring stating that he could "rest peace-
fully" with Hua "in charge." An editorial
published jointly by China's leading jour-
nals on October 25 also quotes a series of
rebukes Mao issued to the leftist quartet
in 1974 and 1975.
The new regime is also wrapping itself
in the mantle of the late-and still
revered-Chou En-lai. The leftist "gang"
has been accused of plotting to attack
Chou and of attempting to undermine
China's economic development plans,
which are associated with the late
premier. Pictures of Chou were at the re-
cent rallies in Peking.
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South Africa gave independence to the tribal homeland of
Transkei in an effort to buttress its own apartheid policy.
Transkei will be totally dependent on South Africa, but there
are some circumstances under which the new state could cause
difficulties for South Africa.
~-g -~ ?
Transkei: Nominal Independence
Transkei is the first and largest o nine
self-governing tribal homelands-Ban-
tustans-that South Africa created to
justify its policy of apartheid. Transkei's
independence was proclaimed on October
26, and the South Africans are heralding
the event as proof that apartheid is
leading South Africa's entire black pop-
ulation to eventual independence.
Transkei is the best endowed of the
Bantustans but, even so, its basic
economic resources are so limited that it
appears fated to remain deeply dependent
on South Africa for the indefinite future.
Transkei is the only Bantustan that has
a consolidated territorial base and South
Africa's ruling National Party has no
plans to consolidate the scattered land
parcels that comprise the other tribal
homelands.
The New State
The territory that South Africa has ced-
ed to Transkei-approximately the size of
Denmark-is the ancestral homeland of
several tribes belonging to the Xhosa
ethnic group, which also includes tribes
that have been assigned to the adjacent
Ciskei Bantustan.
About two thirds of the 4.5 million
Xhosas belong to the tribes that make up
the Transkei "nation." No more than 1.7
million of some 3 million ethnic
Transkeians now live in Transkei, and
most of them are largely dependent on
relatives who work in the urban areas of
South Africa.
The constitution that went into effect
on Tuesday was drafted by South
Africans and adopted by the Transkei
legislature. In accordance with the
apartheid tenet that the traditional tribal
chiefs are the primary leaders of all South
African blacks, the newly formed
National Assembly has 75 seats for the
hereditary chiefs and 75 seats for com-
moners elected by all adult Transkei
citizens, including nonresidents.
The head of government is Prime
Minister Kaiser Matanzima, a hereditary
chief who has served as chief councilor of
the autonomous Transkei government
since 1963 with full backing from the
South African Ministry of Bantu Affairs.
All but 3 of the 75 hereditary chiefs in
the National Assembly belong to Matan-
zima's Transkei National Independence
Party, which won all but four of the 75
elective seats in a general election earlier
this month. Matanzima's triumph at the
polls may have been facilitated by his
detention of at least 13 opposition
politicians under South African security
regulations that apparently are to be
maintained.
Matanzima will continue to depend
heavily on South African expertise in the
day-to-day running of Transkei affairs.
Among the 300 or so officials assigned by
South Africa to Transkei are the com-
mander of the one-battalion army, the
commissioner of police, the chief justice,
and many top administrators.
Economic Dependency
At independence, Transkei is receiving
some 70 percent of its $156-million
budget from South Africa, as well as
almost $100 million to finance the bulk of
its development programs.
Transkei has potential for economic
growth, particularly in agriculture and
hydroelectric power. The absence of inter-
national recognition and foreign invest-
ment means, however, that development
for now can be realized only through
South Africa, either officially or by
private business.
The Transkei Development Corpora-
tion, five of whose nine board members
are appointed by the South African
government, has helped train and finance
black entrepreneurs and has arranged the
transfer of business ownership from
whites to blacks. The organization offers
low-interest loans, tax concessions, and
rebates on transportation charges to try to
attract potential investors, especially from
overseas. An industrial center has been es-
tablished at Butterworth with 23 small
and medium factories, but so far no
significant foreign investment has
appeared.
About 24 percent of the land is arable
and well watered, but according to the
South Africans nearly 90 percent of
Transkei's food needs are imported. The
hereditary chiefs rely on control of land
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tenure and land distribution for political
power, which contributes to gross inef-
ficiency in land use. Land holdings are
small and fragmented and there is little
prospect of any improvement.
Most young Transkeians leave to work
in South Africa more or less permanently.
The development corporation has provid-
ed only 4,500 new jobs annually, while
26,000 young blacks enter the job market
every year.
Economic growth will require con-
siderable development of the meager
transportation system. Only 8 percent of
the roads are paved, and there are less
than 100 miles of railway. Transkei has no
effective port and few roads to the coast.
A major airport at the capital, Umtata, is
nearing completion.
The Citizenship Issue
South Africa is preparing to use its
economic leverage to ensure that its
apartheid strategy is advanced through
the granting of independence to Transkei.
One principal tenet of apartheid is the ex-
clusion of blacks from the South African
political process.
This is justified by the promise that
every black will attain comparable
citizenship rights in his own homeland
when it becomes independent. In legisla-
tion passed last June granting in-
dependence to Transkei, the South
African Parliament stipulated that every
person of Transkeian ancestry is a
Transkei citizen and ceases to be a South
African citizen.
Matanzima, on the other hand, has
wanted birth in Transkei to be the
criterion of citizenship. He no doubt fears
that giving political rights to large
numbers of urbanized Transkeians would
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UPI
Prime Minister Matanzima (1, rear) and South African State President Nicolaas Diederichs (r, rear) inspect honor guard
upset the predominance of the hereditary
chiefs who hold sway over the largely
rural population through their control of
tribal land.
In response to Matanzima, the South
Africans have warned that Transkeians
whose citizenship is withheld may be
deprived of jobs in South Africa. Under
this pressure, the Transkei legislature
amended the draft constitution to state
that persons of Transkeian ancestry who
were born elsewhere are eligible for
citizenship if they choose to apply.
Matanzima did not, however, hold for a
matching revision of the South African
legislation.
Outlook
Transkei is likely to be an international
outcast for an indefinite period. No
foreign government, aside from South
Africa, appears ready to extend
diplomatic recognition. There is general
agreement that recognition of Transkei
would indicate approval of South Africa's
apartheid system.
It will be difficult for the Transkei
government to convince foreigners that it
is not linked with the repressive South
African system as long as the chiefs of its
security services are South Africans.
Anything Matanzima might do to
counteract some of the repressive
elements of apartheid, on the other hand,
will strengthen the case for extending in-
ternational support. Such support, in
turn, might enable Transkei to take a
stand independent of South Africa in
defiance of any threatened cutbacks in
South African support.
Perhaps the most critical test of in-
dependence will be the degree of support
that Matanzima gives to Transkeians in
South Africa who run afoul of apartheid's
more restrictive practices. If Transkei
gives citizenship to large numbers of ur-
ban blacks in South Africa, the impact on
Transkei's internal politics might even-
tually force Matanzima to take a more
aggressive stance.
Last August, most of the Bantustan
leaders met in Johannesburg to demand
redress of the grievances of urban blacks
and to reassert their refusal to accept in-
dependence on South Africa's terms.
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Matanzima was not present, and govern-
ment leaders in Pretoria no doubt hope
that dramatic improvements in Transkei's
situation following independence will in-
duce the troublesome Bantustan leaders
to emulate Matanzima.
The Transkei prototype, however, may
yet be a two-edged sword. The more
tempting the fruits of independence, the
more eager the leaders of the remaining
Bantustans will be to acquire the basic
prerequisite for a viable state-a con-
solidated territorial base. To give them
this, however, South Africa would have to
change the statutes that limit the total size
of all Bantustans to no more than 13 per-
cent of South Africa's territory.
The UNESCO general conference now under way in
Nairobi must come to grips with the difficulties resulting from
the anti-Israel resolutions adopted at the last general con-
ference two years ago.
The 19th general conference of the UN
Educational, Scientific, and Cultural
Organization that opened on October 26
in Nairobi, Kenya, may be the most im-
portant in the organization's 30-year
history.
The biennial session-which runs
through November 30-will consider im-
portant proposals on new directions and
priorities in the UNESCO program made
by the organization's director general,
Ahmadou M'Bow, a Senegalese who is
the first black African to head a major
UN body. This conference must also
come to grips with problems resulting
from the growing politicization of the
agency.
The 1974 Session
At the last meeting, in 1974, debate
focused primarily on Israel, and three
resolutions attacking the Jewish state
were adopted.
? In a move orchestrated by the Arab
states and the Soviets, the UNESCO
members rejected Israel's bid for
membership in the agency's European
regional group, leaving Israel the only
applicant so excluded. Regional groups
serve as caucusing forums to discuss
issues and decide upon regional can-
didates for UNESCO posts.
? The conference passed another
General Conference of UNESCO
resolution condemning Israel's
archaeological digging in Jerusalem on
the grounds that this destroys the Muslim
character of the city. The conference also
cut off all technical assistance funds until
the controversial excavations are halted.
? Finally, the conference instructed the
director general to "exercise full supervi-
sion of the operation of educational and
cultural institutions in the occupied Arab
territories."
These actions led, among other things,
to the suspension of the US con-
tribution-which amounts to 25 percent
of the agency's budget-by the US
Congress.
Problem of Support
Since assuming office at the last con-
ference, M'Bow has worked diligently to
arrest the dwindling support for
UNESCO activities on the part of many
Western developed states. He has per-
sonally taken the lead in trying to resolve
the regional membership issue, which he
wants settled in Israel's favor.
A year ago, M'Bow convinced his
African and Arab colleagues to acquiesce
in a recommendation to the general con-
ference that admission into a regional
group be decided only by the states in the
region concerned and not by the entire
UNESCO membership. Although accep-
tance of this recommendation in Nairobi
appears promising, full support for Israeli
membership by the European
group-which includes the East
Europeans and the Soviets-is by no
means assured.
Such a procedural move is designed
to avoid a vote on the assignment of Israel
to the European regional group. The
move could fail, however, if the Arab
countries refuse to accept the recommen-
dation that the decision be left to the
regions.
The controversies over the
archaeological digging and the occupied
territories are likely to foster the most
debate. Numerous archaelogical ex-
cavations are continuing in Jerusalem,
and Israel appears certain to be attacked
in Nairobi for these activities. The ex-
pected debate may lead to an escalation of
unreasonable demands directed toward
both the director general and Israel.
The Israeli government has adamantly
refused to accept any mission explicitly
linked to the UNESCO resolution on oc-
cupied Arab territories. Negotiations
between M'Bow and the Israelis,
however, appear to have found a way to
avoid the issue by suggesting that the
director general has complied with the
directive.
The Israelis agreed to admit two
representatives of the director general as a
"preliminary mission." Although these
representatives would be barred from ac-
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tually observing educational and cultural
facilities in the occupied territories, they
would be allowed to collect information
on the Israeli practices.
M'Bow, however, has decided not to
send a mission prior to the general con-
ference because he regards Israel's later
insistence that there be only one represen-
tative as politically unacceptable. Arab
intentions are unknown, and the situation
may be complicated as a result of the
proposed Security Council debate-at
Egypt's request-on the full range of
problems relating to the occupied
territories.
Despite encouraging indications that
some of the Middle East issues may be
either compromised or circumvented this
time around, other contentious topics on
the agenda may not be easily dispensed
with. Expected dissatisfaction with con-
ference actions on such topics as the con-
trol of the mass media, UNESCO's
budget, and agency contributions to im-
plementing the New International
Economic Order supported by the
developing countries may have a harmful
spillover effect on Israeli-related dis-
cussions.
The director general may be severely
criticized by the more radical states for
failing to move more quickly on a draft
declaration on racial prejudice that is ex-
pected to repeat the charge made in last
year's UN General Assembly that
Zionism is a form of racism. A request for
his report on the subject is included with
an agenda item on a mass media draft
declaration, and he may be unable to
avoid its discussion.
Mass Media
The Soviets took the initiative in 1970
on a declaration outlining "principles" to
govern the use of the mass media in dis-
seminating information. At a meeting in
Paris last December, the Yugoslavs in-
troduced an explicit reference in the mass
media draft to the Zionism-as-a-form-of-
racism resolution. This action prompted
the walk-out from the drafting sessions of
the US, the EC Nine, and some other
Western countries. However, the meeting
went on to adopt-by a narrow
margin-a one-sided declaration which
advocates state control of news reporting.
This will now be considered by the general
conference.
Apart from the reference to Zionism as
racism, the draft also presents other
serious problems for many states, in-
cluding some from the third world. It
places an excessive emphasis on the state's
right to censor information and to
C
manipulate reportin a ews dissemina-
tion.
Superficially at least, this appears to
parallel recent statements by some non-
aligned and third-world states regarding
domination of their media by the de-
veloped world. The current draft, how-
ever, goes too far even for some of
these states, and the Tuni-
sians-presumably with the backing of
other nonaligned states-have implicitly
refuted the Soviet-backed effort by sub-
mitting their own draft resolution on the
free flow of information.
The Tunisian draft primarily requests
the UNESCO secretariat to undertake
studies based on the communications
policy recommendations approved at last
August's nonaligned summit. However,
the underlying intent of the resolution-as
reflected in other nonaligned
proclamations on the issue-appears to be
to gain commitments from developed
countries to share technology with, and
provide training opportunities for,
third-world states in the establishment
and operation of satellite and media
systems.
Support for both the Tunisian effort
and for an alternative US - West German
draft declaration on the mass media-the
latter to be put forth only as a last resort
to defeat the current draft-will depend
on how strongly the Soviets press for con-
sideration of their draft in Nairobi.
A deferral move by the Western states
is likely to succeed only if it obtains the
full backing of the third world and non-
aligned nations. M'Bow is known to op-
pose the Soviet-backed draft, however,
and he may succeed in marshaling suf-
ficient opposition to its consideration
now.
Priorities and Objectives
Proposals defining UNESCO's
priorities and outlining the organization's
objectives during the next two years will
undoubtedly draw heavily on the ter-
minology of the New International
Economic Order, as M'Bow is known to
support its implementation strongly.
Debate on the economic question, which
some developed countries do not support,
is likely to highlight the agency's
calamitous budgetary situation.
The Arab states have granted sufficient
amounts of interest-free loans to cover the
agency's deficit. A significant increase in
its projected budget for the next two
years, however, is unlikely to sit well with
anyone and may lead to strong criticism
of the US for its failure to pay the full
amount of its dues.
D.,n., 1 c, %AI VI V CI IAAAAACIV flrt 7A 71;
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Secret
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