CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A015700060001-1
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 13
• Document Creation Date: December 14, 2016
• Document Release Date: April 29, 2003
• Sequence Number: 1
• Publication Date: March 5, 1970
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
Central Intelligence Bulletin
.STATE review(s) completed.
Secret
50
5 March 1970
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No. 0055/70
5 March 1970
Central Intelligence Bulletin
CONTENTS
Communist China: Morale problems among veteran of-
ficials are undermining civilian leadership. (Page 1)
Australia: Parliament reconvened with the prospect
of stormy sessions ahead. (Page 2)
Guatemala: The possibility of an electoral crisis
has receded. (Page 3)
Peru: The military government may be moving toward
greater repression. (Page 4)
Hungary: Budapest is drafting a foreign investment
law. (Page 5)
East Germany - West Germany: Trade is not expected
to grow much this year. (Page 6)
NPT: The treaty will enter into force today. (Page 7)
Finland-UN: The Finns have launched an initiative
to strengthen the Security Council. (Page 8)
USSR - Middle East: Policy views (Page 9)
Italy: Coalition (Page 9)
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Communist China: Serious morale problems among
veteran officials are still undermining the restora-
tion of effective civilian leadership in many local-
itieso
A series of recent: broadcasts reflects foot-
dragging by cadres who had been criticized during
the Cultural Revolution and subsequently reinstated
in official positions. A broadcast from Hupeh Prov-
ince on 1 March, for example,, complained that vet-
eran cadres there are refusing to take any action
for fear that they will make mistakes again. Last
month an authoritative People's Daily article voiced
a similar complaint, saying g that cadres are afraid
to become involved because they might offend people
and put themselves in jjeopardy,,
Apparently Peking's heavy crackdown over the
past few months on radical ex - Red Guards, the pri-
mary tormentors of the veteran cadres, has done lit-
tle to reassure many local officials. Although Pe-
king is currently trying to pursue policies aimed at
political and economic stabilization, resistance by
radicals to these policies, and to the officials as-
sociated with them, is still strong.
Current cadre fears are not unfounded. From
time to time supporters of former Red Guard faction-
alists in various areas issue statements suggesting
that they still enjoy some high-level support in Pe-
king. Moreover, many cadres, including veterans and
those elevated from the Red Guards, are now being
caught up in the "anticorruption" campaign that is
sweeping China. According to reports from
Kwangtung Province, for example, large numbers of
officials have been purged at public trials and sent
to labor reform camps, in
some instances officials awaiting trial have com-
mitted suicide--a phenomenon that has seldom been
reported since the height of the Cultural Revolution,
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Australia: Parliament reconvened on 3 March
with the prospect of stormy sessions ahead.
The Liberal-Country government has a majority
of seven in the 125-member house. It faces a reju-
venated opposition Labor Party that is already pre-
dicting gains in the Senate election late this year
and a parliamentary victory in 1972. As a result,
the Liberal Party lacks confidence, and many back-
benchers are believed to be waiting for an opportun-
ity to embarrass and perhaps to replace Prime Min-
ister Gorton.
The government's opening address, read by Gov-
ernor General Hasluck, while focusing chiefly on do-
mestic affairs, reaffirmed Australia's commitment to
Malaysia-Singapore defense and to cooperation with
the US in Vietnam. Hasluck stated that some Austra-
lian troops would be included in any new major with-
drawal of allied forces and promised a comprehensive
government statement on defense policy in the near
future.
This statement is likely to draw a major Labor
Party attack because it presumably will repeat a
number of policies that Labor has consistently op-
posed. These include Vietnam, Malaysia-Singapore
defense, and conscription. Labor probably will claim
that Australia's defense commitments are out of step
with the Nixon Doctrine and that Australia has no
business keep in round forces in Asia when the US
is withdrawing.
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Guatemala: The possibility of an electoral cri-
sis has receded.
The lead by the rightist opposition in the presi-
dential race and its possible majority in the new con-
gress are evidence of the honesty of the vote count.
Both opposition parties were prepared to claim fraud
if the government had won, and the administration was
especially fearful that the military would not remain
loyal in a crisis.
The presidential election technically is still
undecided because Colonel Carlos Arana won a plural-
ity rather than a majority. Formal acknowledgement
of his victory now depends on a choice by congress
between Arana and the runnerup, government candidate
Mario Fuentes Pieruccini. Some diehards in the gov-
ernment party have contemplated using their majority
in the incumbent legislature to elect Fuentes, since
the constitution does not specify whether the old or
new congress is responsible for the selection. In
the light of Arana's 40,000-vote lead over Fuentes,
however, and the congratulatory message sent to
Arana by the Christian Democratic candidate, who
captured more than 20 percent of the vote, the con-
gress seems unlikely to tamper with the voters' re-
pudiation of the present government.
Arana's political bent has been unequivocally
rightist. As president he nevertheless may develop
a more moderate position than many expect, according
to the US Embassy. He may also experience difficulty
in reining in some of the extremist elements that
support him. Arana's reputation as Guatemala's fore-
most anti-Communist and his promised campaign against
crime and terrorism may incite subversive groups to
terrorism before he takes office on 1 July.
Arana has taken a tough line on defending Guate-
mala's claims to British Honduras. This threatens
to reverse the modest efforts made by the present
government toward seeking a compromise with the UK
allowing for the colony's independence.
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Peru: The Velasco government's arrest of five
oppose ion labor leaders and the expropriation of
two Lima newspapers may signal a general move toward
greater repression by the military government.
Five key leaders of the National Federation of
Sugar Workers, controlled by the military's tradi-
tional enemy APRA, were arrested last week end for
allegedly impeding implementation of the agrarian
reform law. The union leaders had called a strike
on a government-run sugar plantation to protest po-
lice
action
against the workers on 24 February.
That
action
resulted in several injuries and one
death
when
police broke up a rally of sugar workers
just
before
APRA Party leader Haya de la Torre was
scheduled to speak. Many Peruvians fear that the
decision to try the accused labor leaders before a
military tribunal could result in a showdown
In another move to silence its critics, the
military government seized two opposition newspapers
on 4 March and promised to turn them over to a
workers' cooperative. The cooperative is apparently
being formed by the Communist-dominated union at the
company that published the influential Expreso and
Extra. If the Communists gain control of the cooper-
ative, as appears likely, it could provide the party
with an excellent vehicle for its propaganda activi-
ties. The expropriation will probably be greeted by
outrage from other Lima newspapers, but it will nev-
ertheless serve the government's purpose of demon-
strating that there is a limit to how far opposition
can go.
The crackdown on APRA and the expropriation of
the newspapers will create fears of further repres-
sion and will almost certainly set back the govern-
ment's efforts to regain the confidence of private
businessmen, which is needed to rejuvenate the Peru-
vian economy.
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Hungary: Budapest is drafting a ,foreign in-
vestment law that might allow up to 50 percent for-
eign ownership of certain economic enterprises.
It is doubtful that the law will be approved
this year because Budapest apparently wants to es-
tablish a model company first to assess the results
of co-ownership. Hungarian firms have offered such
an opportunity to a US firm that produces tractors
and automobiles as well as to another that would op-
erate a computer data center.
Such an approach would help Budapest upgrade
its economy with smaller initial hard-currency ex-
penditures. Hungary already has some coproduction
ventures with Western commercial firms. In these
cases, however, the Western partner provides the
capital and entrepreneurship, but has nO ownership
rights. Budapest supplies the plant, labor, and
raw materials and retains ownership Other joint
marketing arrangements have involved partial Hun-
garian ownership, but these have been located in
Western countries.
The Hungarians may be able to rationalize the
ideological difficulties that foreign ownership pre-
sents, but they would have a tough time convincing
the Soviets that the move does not represent a dan-
gerous concession to Western interests,
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East Germany - West German : Trade is not ex-
pecte to grow much this year a ter reaching a re-
cord $1 billion in 1969.
Total trade grew by about one third last year,
largely because of increased East German purchases
made on West German credit. As a result, Pankow's
indebtedness to Bonn now exceeds $240 million. This
does not include outstanding private credits of more
than $190 million. As much as one half of the total
may have to be repaid or refinanced this year.
The high level of existing credit indebtedness
probably will inhibit further trade growth. Even if
Pankow is able to increase sales to Bonn by as much
as 15 percent, imports probably will have to be re-
duced below the 1969 level in order to permit credit
repayments due in 1970. The Federal Government has
thus far refused to finance an additional swing
credit to help stimulate West German sales this year.
If, however, East German firms succeed in getting
substantial new private commercial credits with ex-
tended repayment terms, purchases of West German
goods could rise above the 1969 level.
Pankow has been trying to reduce its dependence
on Bonn for goods essential to its economic develop-
ment. A sharp reduction in imports from Bonn, how-
ever, would have adverse effects on industrial ex-
pansion and on the output of East German export in-
dustries, including those that earn hard currency.
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NPT: The Nonproliferation Treaty (NPT) will enter
into force today, but several of its important provi-
sions are not likely to become effective for some time.
Although all the EURATOM countries except France
have signed the NPT, their ratification depends on the
satisfactory conclusion of negotiations between the
International Atomic Energy Agency (IAEA) and EURATOM
on safeguards arrangemen s. The IAEA Board of Gover-
nors failed to reach agreement last week on how to
begin planning for negotiations, further evidence that
the talks will be long and tough.
There are two provisions on which the non-nuclear
states will be looking for progress in talks between
the US and the USSR. One is the treaty's statement
on procedures for making the benefits of peaceful ap-
plications of nuclear explosions available to the non-
nuclear countries. The other is the promise to con-
tinue negotiations on nuclear disarmament.
To date neither France nor Communist China has
shown any interest in becoming a nuclear party to the
agreement. Two threshold countries, Japan and Aus-
tralia, have recently signed the treaty. Prospects
remain poor, however, that either India or Israel will
sign.
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Finland-UN: The Finns have launched an initia-
tive to strengthen the Security Council.
The Finnish ambassador to the UN has presented
an aide-memoire which calls for periodic, closed meet-
ings of the Security Council. Such regularized meet-
ings could provide a forum for a discreet exchange of
views on controversial issues without fear of acri-
monious public debate that at present often deters
the convening of Security Council meetings.
The suggestion has received favorable reaction
from Security General Thant and US Ambassador Yost,
and the Soviet representative at least has not re-
sponded negatively. The Finnish ambassador plans to
consult with all the current Security Council members
about the proposal during the next ten days.
The move constitutes further evidence that Hel-
sinki has undertaken a more active foreign policy
aimed at buttressing its independence without annoying
the Soviets. The selection of Helsinki as site for
the strategic arms limitation talks has been held up
as evidence that this policy is paying off. Another
recent example was Finland's effort to drum up support
for a European security conference in Helsinki; the
Finns hope to keep this alive with a further initi-
ative in the near future.
The Finns were probably also motivated in putting
forward this proposal by the discussions now going on
about ways to strengthen the UN on its upcoming 25th
anniversary. It also fits in with renewed consid-
eration of the Soviet resolution on "strengthening
international security" that was introduced at the
General Assembly last fall and referred to the next
session which opens in September.
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NOTES
USSR - Middle East: A Soviet deputy premier--
the highest-ranking Jew in the hierarchy--denied at
a Foreign Ministry press conference yesterday that
Egypt has asked the Soviet Union for "MIG-23s." He
sidestepped a question on providing Soviet pilots to
Egypt, but acknowledged the presence of Soviet advis-
ers there. The conference apparently was intended to
demonstrate that Soviet Jewry is united behind Moscow's
policy, and a number of prominent Jews participated.
They had signed a statement castigating Israeli aggres-
sion,-which was read at the beginning of the confer-
ence.
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Italy: The mandate given former premier Moro
provides more flexibility. Unlike caretaker Premier
Rumor, who failed last week in a mandate that limited
him to forming only a center-left coalition including
all four parties, Moro may explore any possibilities
within the general context of a center-left framework.
His options therefore range from a coalition of all or
some of the parties to an all-Christian Democratic
government supported by the center-left. The fact that
all parties know that Moro has this flexibility and can
withdraw from his task without losing face if they make
unreasonable demands, may ease his efforts to find an
acceptable formula. 25X1
Central Intelligence Bulletin
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