THE MALTA IMPASSE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00826A001600010043-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 22, 2016
• Document Release Date: July 5, 2012
• Sequence Number: 43
• Publication Date: February 2, 1967
• Content Type: IM

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Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
THE MALTA IMPASSE
Secret
23
2 February 19 67
No. 0791/67
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SECRF,T
CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
2 February 1967
INTELLIGENCE MEMORANDUM
The Malta Ia:;passe
Summary
Malta's abrogation of its defense agreer~2ent
with the UK is tied up in the island's internal pol-
icies, in the economic problems of both countries,
and in the frustrations of a newly independent nation.
The present bitter impasse has been caused by
Malta's allegation that London's decision to reduce
British military forces on the island by two thirds
violates the agreement, and that therefore all Brit-
ish forces must leave the island "forthwith." The
British action is in keeping with the letter of the
treaty, but the Maltese Government's reaction has
been unexpectedly abrupt. It seems almost a strik-
ing out in frustration with little regard for the
possible loss of UK~financial aid, even though the
Maltese must certainly have some hope they will be
able to force the UK to negotiate. Valletta no doubt
expects the US or NATO to fill any void left by the
British, but should the US fail to respond, Malta
has said it will seek aid elsewhere, presumably from
Communist or neutralist Arab states.
London, for its part, hopes that by playing the
matter down, and by pointing out that Bx~,tai,n's commit-
ment to provide Malta with extensive financial aid
is tied to retention of the defense agreement, the
Maltese Government will in time find a face-saving
way to retract its ultimatum.. The British have told
US officials, however, that any major harassment of.
their forces on Malta will cause them to consider
an immediate and complete withdrawal.
NOTE: This memorandum was produced solely by CIA.
It was prepared by the Office of Current ?ntel-
ligence and coordinated with the Office of Re-
search and Reports and with the Office of Na-
tional Estimates.
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MALTA
STATUTE MILES
48178
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Background
1. When Britain granted Malta its independence
in 1964, London agreed to retain full responsibili~~ty
for the island's defense and to provide extensive
financial assistance to help transform Malta from a
military base by developing industry and tourism.
The garrison economy of Malta--the small, strate-
gically located island south of Sicily (see map)--
had developed over 150 years of British rule, and
had given the island a higher standard of living
than many of its Mediterranean neighbors. In early
1966 London announced that as part of its efforts
to effect sharp reductions in defense spending over-
seas, it would cut British military forces in Malta
by two thirds and its expenditure there by one half,
with a consequent reduction in the number of Maltese
civilians it employs.
2. The reductions are to begin this spring.
There are now some 1,825 British Army, 1,000 shore-
based Royal Navy, and 1,540 Royal Air Force (RAF)
personnel on the island. By the end of 1967, the
Royal Navy presence in Malta will be reduced to a
small housekeeping unit, with the removal of all
navy shps,and i,he naval air squadron, and the clos-
ing of the fleet maintenance activity. Two Canberra
reconnaissance squadrons and a number of RAF main-
tenance facilities will also be phased out by 1969.
Finally, both the infantry battalions and their
support services on the island will depart by 1970.
One squadron of aircraft with additional air force
personnel--approximately 940 men--and ~o^~e 460 navy
men in various capacities will be left on the island.
3. The effect of these withdrawals on Malta's
already shaky economy will be severe. In addition
to a reduction of $21.5 million in direct British
military spending, the Maltese economy will be
jolted by the loss of some 1,400 military and 6,000
civilian jobs over the next four years. With an
unemployment rate now of about eight percent, Malta
will have 15 percent of its labor force out of work
in 1970 if no alternative employment is found. As
a result of earlier cuts, the three British services
have already reduced the number of their civilian
employees by some 4,500 since 1960. The effect of
such cuts is considerable in a total labor force of
just under 100,000.
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The Defense Agreement
4. Britain is on sound legal ground. Under
the Agreement ozi Mutual Defense and Assistance,
signed on 21 September 1964, Malta granted the UK
the right in peace and war to station armed forces
on Malta and to use base facilities there, In re-
turn London agreed to defend Malta, but was not
committed to maintain any specific level of forces
on the island. The British~asSert that this part
of the agreement remains unchanged, and that troops
necessary to reinforce those already on the island
could readily be airlifted from England. In the
agreement the UK also undertook to consult the
Maltese Government when major changes in British
forces in Malta were contemplated, The Bri~icish did
this, first a year ago when the cuts were initially
proposed, and again in mid-January of this year
when Commonwealth Secretary Bowden visited Malta.
5. It was London's refusal during the latest
series of talks to reconsider the planned cutback
of its forces on Malta that triggered Valletta's
denounciation of the defense agreement. The Brit-
ish did agree to stretch out the reductions over
four rather than two years, but would make no other
concessions. Actually, there appears to be little
difference in the timetable, except that the wi~Ltz-
drawals, which were to be accomplished in somethYng
less than three years, will now take a little more
than three years.
6. Td~e Maltese Government is dissatisfied with
another facet of the Western presence in Malta, the
NATO Mediterranean Command. Specifically, Valletta
is protesting part of a proposed NATO reorganization
plan which would subordinate the Commander in Chief
Allied Forces Mediterranean (CINCAFMED), now a ma-
jor NATO command reporting directly to SACEUR, to
the Commander in Chief Allied Forces Southern Eur-
ope. The Maltese suspect the reorganization is
only a prelude to the removal of CINCAFMED, which
will be redesignated Naval Command South (ICOMNAVSOUTH),
to Italy. NATO Secretary General Brosio has con-
sidered proposing such a move to NATO policy makers.
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7. It appears that the pro-Western govern-
ment of Malta's Prime Minister Borg Olivier con-
cluded it could best halt what it considered Western
disregard for the island's welfare only be taking
a strong initiative. Left to his own devices, Borg
Olivier would probably have moved more slowly, but
strong pressures were brought to bear on him by
former prime minister Dom Mintoff, left-leaning
leader of the opposition Malta Labor Party, and by
Attard Kingswell, leader of the General Workers'
Union (GWU). Although Kingswell is pro-West, he
is deeply concerned about the economic effects of
the British cuts on his 16,500-member union. Mintoff
would like to see Malta break its ties with the West
and align with the neutralist Arab states.
8. The abrogation of the defense agreement
with the UK appears certain to intensify Malta's
problems. Perhaps the Maltese Government believed
the planned reduction of the British presence would
itself be a national disaster and iihat it had to
gamble to force further negotiations. Nonetheless,
if the British do pull out now, Malta will suffer
direct economic losses that would have been spread
over a four-year period. Without British spending
the present unemployment rate of eight percent will
quickly double. Malta will face a huge balance-of-
payments deficit in addition to a large decline in
national income. In 1964, for example, UK military
expenditures and aid covered all but $3 million of
Malta's $57 million balance-of-payments deficit on
goods, services, and private transfers, excluding
UK military expenditures.
9. The most severe consequence, however, will
be the loss of $87 million in British financial aid
over the next seven years. In 1964, London agreed
to provide $140 million in development aid during
the first ten years of independence to help Malta
make the transition from a British-supported gar-
rison economy. London has already made $53 million
of that aid available. It is explictly stated that
the financial agreement, also signed in September
1964, is "subject at all times to the continued op-
eration of the defense agreement." During the cur-
rent dispute London has made it clear it considers
its defense and financial obligations unalterably
linked.
~cR~T
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10. The Maltese Government's immediate options
are very limited. Borg Olivier has said he will
seek US aid, and has suggested that should the US
fail to respond he or his successor will be forced
"to look elsewhere." He would like the US to station
military forces on the island or in lieu of that
to provide extensive economic aid. The Maltese might
also ask IrTATO to help out by increasing its contin-
gent on the island or by paying more for those al-
ready there. The prime minister's claim that he
could continue to secure Western military spending
for Malta, together with a timely visit by the US
Sixth Fleet, helped his successful 1966 election
campaign, His Nationalist Party holds 28 or the 50
seats in the Maltese Parliament. The remaining 22
are held by the Malta Labor Party.
11. Another possibility, but more long~~ange,
is greater commercial exploitation of Malta's large
dockyards and deep harbor. The dockyards, once used
almost exclusively for maintaining ships of the
Royal Navy, were turned over by London to private
interests in 1959. The dockyards are operating be-
low capacity and the excellent harbor, which is con-
trolled by the Government of Malta, has not been
developed to its full capacity. A number of foreign
interests--US, Italian, West German, and Japanese
among others--have shown interest in various schemes
for expanding the use of the port as well as for
developing new industry in Malta. The Maltese
Government allows 100 percent foreign ownership and
a ten-year tax holiday, and provides generous sub-
sidies to attract new industry. In time this ef-
fort might well prove worthwhile. A major effort
has been made to build up tourism, but this has had
only a limited economic effect.
12. Even though Borg Olivier says he might
seek aid from some country other than Britain or the
US, he no doubt prefers to remain with the West.
Opposition leader Mintoff, on the other hand, leaves
little doubt where he means to seek assistance. He
has long argued that Malta is undercompensated for
the Western presence, and has claimed he could ob-
tain economic assistance from Communist and neu-
tralist countries, He has visited Cairo, Algiers,
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and Moscow, and he has '.had contacts with other
Communist and nonaligned countries in recent years,
but there is no hard evidence he has gotten more
than vague promises of political support and limited
aid from any of them. The Egyptians and Algerians
cannot afford to provide sizable amounts of eco-
nomic aid, and the Soviets have shown little inter-
est in replacing the Western presence in Malta.
The Political Impact in Malta
13. Mintoff speculated to the US ambassador
on 29 January that the present situation, as it
develops, could lead to another election. An elec-
tion is not required until 1970. The government
might resign, but it shows no inclination to do so.
It could be voted out, but so far the Nationalists
appear to be holding together. It could be forced
out by strikes and demonstrations. Mintoff re-
signed as prime: minister in 1958 after a dispute
with London over the level of British economic aid,
and subsequently fomented a general strike which
caused London to suspend the constitution and rule
directly for the next four years.
14. Barring economic chaos, Mintoff would
find it hard to stir up demonstrations large or
violent enough to bring down the government, partly
because the Maltese are not given to violence.
The leadership of the powerful General Worker.s:'~
Union is moderate and, although it supports Mintoff's
Labor Par't'y, i:t.cannot be .counted on to do Mintoff's
bidding. Trie Maltese police force number's 1,100
and is fairly efficient, though it lacks modern
equipment. Many policemen are members of the Labor
Party, but most are also probably loyal to the gov-
ernment. In addition there is a national guard type
force, the Malta Land Forces, numbering 1,000 men,
and units of the Royal Malta Artillery, with 400
of its 1,170 men now stationed in the British Army
of the Rhine.
The British View
15. London has rejected Malta's abrogation of
their bilateral defense agreement, and has no imme-
diate plans to comply with Maltese demands for a
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withdrawal of all British military forces from the
island. The British hope that, by playing the matter
down and by hinting that Britain's commitment to
provide Malta with extensive financial assistance
for the next several years is tied to retention of
the defense agreement, the Maltese Government will
in time find a face-saving way to retract its ul-
timatum. The British have told US officials they
are prepared to live with minor pressure against
their forces on Malta, but that major harassment
will cause them to consider other alternatives for
their forces there, including an immediate and com-
plete withdrawal.
16. The Maltese have begun the test of nerves.
On 28 January, Maltese tugboat men boycotted the
British carrier Hermes, which put in and out of the
harbor with the help of a tug manned by British
naval personnel. On 30 January 16,000 employees
of the Maltese Government and their supporters
staged a silent march in Valletta to protest Brit-
ish defense cuts. On 31 January the Maltese cut
off the supply of duty-free aviation fuel, which
forced the grounding or diversion from Malta of
British military aircraft. Civilian aircraft were
not affected by the cut off. The Maltese Govern-
ment has drafted amendments to the Visiting Forces
Act which would remove the privileges and immunities
granted British forces on the island. Borg Olivier
has indicated to the US ambassador, however, that
he would prevent the amendments from coming to an
early vote.
Prospects
17. One way out of the present impasse might
be through greater involvement of NATO, which, by
virtue of its Mediterranean Command in Malta and
because of the island's strategic location, has a
vital interest in seeing that stability and a Western
orientation is maintained. The US Government has
suggested that NATO expand its planned study on the
implications for Malta of the reorganization of the
NATO command there to include a detailed review of
the consequences of the UK force reduction. Such
a study might last several months, and would, iz
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undertaken provide a needed cooling-off period and
time for the UK and Malta to reconsider their pres-
ently frozen positions and arrive at a compromise.
The Maltese Government leaders have indicated that
they would agree to such a cooling-off period if
Britain would not implement its planned reduction
while the study was being made. The British have
the question of a possible NATO study under active
consideration. London would probably not defer
action on the force reduction for an indefinite
period but might hold off for a short time. The
cuts are not scheduled to begin until ometime in
April. The US NATO representative thinks. that
there is a fair prospect the North Atlantic Council
will agree to study the consequences of the pro-
posed UK cutback if the council were informally
assured that it would be helpful in forestalling
precipitant Maltese actions.
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