CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A019000080001-2
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 19
• Document Creation Date: December 15, 2016
• Document Release Date: June 10, 2003
• Sequence Number: 1
• Publication Date: May 15, 1971
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
Central Intelligence Bulletin
Secret
N?_ 040
15 May 19 7:L
State Dept. review completed
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No. 0116/71
15 May 1971
Central Intelligence Bulletin
CONTENTS
EGYPT: There is no overt sign of resistance to Pres-
i'ent Sadat's bloodless purge. (Page 1)
USSR: Brezhnev's proposal on force reductions.
Page 3)
NORTH VIETNAM: Hanoi's latest move on the POW issue
does not presage any breakthroughs. (Page 4)
JAPAN-CHINA: Tokyo is considering a relaxation of
trade restrictions . (Page 6)
HUNGARY-US: Hungary wants "a new positive phase"
n rela ons. (Page 7)
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FRANCE: The Bank of France has raised its discount
rate. (Page 9)
INDIA: Nationalization of the insurance business.
(Page 10)
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COMMUNIST CHINA - IRAN: Negotiations on diplomatic
relations Page 1
PAKISTAN: Guerrilla operation (Page 13)
EAST GERMANY: Personnel change (Page 13)
NATO: European Defense Improvement Program (Page 14)
NETHERLANDS: Post-election negotiations (Page 14)
AFRICA: OAU meeting site (Page 15)
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C EGYPT: There is no overt sign of resistance
to Print Sadat's bloodless purge.
In his speech to the nation yesterday, Sadat
claimed to have foiled a coup attempt by his oppo-
nents. He accused Ali Sabri and former minister of
interior Sharawi Goma of engineering the plot and
said they had sent men to the radio station on Thurs-
day night to prevent him from announcing a referendum
on reforming the Arab Socialist Union (ASU). There
is no other information to confirm Sadat's charges.
A major theme of the speech derived from Sadat's
pledge to launch a new era by democratizing Egypt's
political institutions. Previous indications that
Sadat intended to dismantle the ASU were strengthened
by his remarks that "sooner or later" the party would
be dissolved and a new body elected. He vowed that
free elections would be held from "top to bottom"'
under his personal supervision.
Following Sadat's address to the nation yester-
day, the formation of a new cabinet was announced.
Many of the key figures in the previous government
were retained, including Prime Minister Fawzi and
Foreign Minister Riad. Most of the ousted ministers
were replaced with men who at first glance appear to
have been chosen for their technical and professional
qualifications.
Sadat appears to be laying the groundwork for
the harassment and even the prosecution of at least
some of the deposed officials, particularly former
minister of interior Goma.
Sadat's instructions to the Minister of Justice
to "investigate some elements... working against the
interest of the masses" and his well-publicized
decision to curb internal security practices are
clearly designed to exploit popular grievances
against Goma, who as Egypt's chief security office
had drawn criticism from various segments of the
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populace, but particularly the country's youth.
Sadat's moves have, in fact, received broad popular
support, according to press reports from Cairo. The
purge continued yesterday with the National Assembly
withdrawing the memberships of 17 of their number
and electing Social Affairs Minister Hofiz Badawi as
the new speaker.
The Soviets probably have been taken aback by
Sadat's bold move, and undoubtedly are now assessing
the significance of the dismissals for their own po-
sition in Egypt. For the short term, Moscow is
likely to allow the dust to settle somewhat and
maintain a low profile, the same approach followed
after Nasir's sudden death last year. But should
Sadat's moves appear at some point to endanger or
diminish the Soviet position in Egypt, Moscow would be
?li,kely to feel compelled to take a more active hand in
15 May 71 Central Intelligence Bulletin
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USSR: Soviet party leader Brezhnev's proposal
Friday to "start negotiations" on Mutual Balanced
Force Reductions (MBFR) probably was keyed to the
June NATO ministerial meeting in Lisbon.
The Soviets are aware that the US and some of
its allies have cited Moscow's reluctance to engage
in substantive discussions on MBFR as a reason to
move cautiously in responding to Moscow's pet project
for a Conference on European Security (CES).
Brezhnev's latest remarks appear aimed at shifting
the burden of the dialogue to NATO.
Speaking in Tbilisi, Brezhnev said the Soviets
are ready to "make clear" their position on MBFR,
but said that the West must first decide to enter
negotiations. The Soviet position on MBFR, as stated
by Brezhnev in his speech to the 24th party congress
in March, is that Moscow favors the reduction of
"armed forces and armaments" in areas of dangerous
confrontation, particularly in central Europe. His
latest remarks add nothing to the. substance of that
position, and Soviet diplomats have said recently
that it is incumbent on the Western sponsors of MBFR
to frame a detailed proposal.
Nevertheless, it is not clear from Brezhnev's
remarks when or in what forum the Soviets would pro-
pose to conduct talks on MBFR. In the past the So-
viets have said that MBFR could be discussed in a
body to be established by a CES or, alternatively,
in any other forum acceptable to all interested par-
ties.
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NORTH VIETNAM: Hanoi's latest move on the
prisoner-of-war issue does not presage any break-
throughs.
The North Vietnamese gambit, contained in a
statement Thursday by Hanoi's news agency, is a reply
to a South Vietnamese offer last month to release
1,770 North Vietnamese prisoners. Saigon has an-
nounced that of the 1,770, 570 were sick and wounded
men who could be released directly to North Vietnam;
the other 1,200 were able-bodied prisoners who had
been held four years or more, and the South Vietnam-
ese proposed that they be interned in a neutral coun-
try.
The North Vietnamese reply takes the standard
Communist line that the prisoners are "patriots il-
legally arrested and detained by the US and its pup-
pets," and it recalls Communist offers made last De-
cember to receive any of the "patriots" who want to
go North. No reference is made to the internment
aspect of Saigon's offer. Hanoi's reply then lays
down conditions for a prisoner turnover that are
more specific than the Communists have previously
proposed in advance but are not much more stringent
than those under which past transfers have actually
taken place.
This announcement seems designed mainly to take
some of the steam out of recent allied initiatives
on the prisoner issue. Many North Vietnamese pris-
oners held in South Vietnam in fact, remain subject
to the discipline of the Communist apparatus, through
which they may be enjoined to refuse repatriation.
Because Saigon apparently will have trouble
producing 570 sick and wounded willing to be repa-
triated, Hanoi probably thinks it may be able to
brand the South Vietnamese offer as a propaganda
ploy.
(continued)
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In any event, the North Vietnamese statement is
concerned solely with Vietnamese prisoners. There
is no implication of a change in Communist policy on
US prisoners held in North Vietnam, and it is highly
unlikely that Hanoi would release Americans as a
reciprocal gesture even if the South Vietnamese pro-
posal is fully implemented.
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JAPAN-CHINA: Tokyo is considering relaxation
of restrictlo son trade with China.
According to a member of Prime Minister Sato's
faction within the ruling party, high-level consider-
ation is being given to facilitating Japanese Export-
Import Bank loans to finance trade with Communist
China. The tactic under consideration involves re-
vising the Export-Import Bank law so that government
approval will not be required for such loans. In
recent years, approval has never been granted, and
the government has sought to dodge this sensitive
issue.
In a, similar vein, Trade Minister Miyazawa on
11 May told the Diet that the so-called "Yoshida
letter," in which Tokyo in 1964 informally agreed to
avoid trade in strategic items and refrain from ex-
tending government approved credits to Peking, is
no longer valid. He claimed it was only effective
for the 1964 fiscal year.
Trade ministry officials denied publicly that
this represented a change in policy, but Prime Min-
ister Sato and his colleagues on the right wing of
the ruling conservative party clearly are under heavy
pressure from big business, public opinion, and the
party's left wing to allow Export-Import Bank fi-
nancing of exports to China. The formula under con-
sideration is probably viewed by Sato as a practical
way to satisfy these pressures without directly re-
pudiating the Yoshida letter or compromising basic
support of Taipei.
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HUNGARY-US: The Hungarian Government has said
it is will ng to enter a new positive phase" in re-
lations with the US.
Hungarian Foreign Minister Peter met with Ambas-
sador Puhan for an hour on Thursday and repeatedly
stressed the Hungarians' desire for improved ties.
Peter expressed his regrets that Hungarian statements
on international issues, presumably including his own
ill-conceived speech to the UN last fall, have given
a negative impression. He promised that his govern-
ment would reciprocate for the lifting by the US of
restrictions on information activities, although he
did not say when. Peter also conveyed party leader
Kadar's regrets that he had not received Ambassador
Puhan up to now and said that Kadar would meet with
him after the Ambassador's return from the US.
Peter's forthcoming remarks may have been timed
to influence the Ambassador's consultations in Wash-
ington. The groundwork for the changed attitude was
in effect laid last March during Kadar's surprisingly
moderate comments on US ties in a press interview.
Until Peter's presentation, however, there had been
little indication that the Hungarians were preparing
to follow through on Kadar's pronouncement.
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FRANCE: Seeking to apply the brakes harder to
retarddomestic inflation, the Bank of France has
raised its discount rate by one quarter percent, to
6.75 percent.
Inflation is emerging as a primary concern.
Consumer prices are climbing at an annual rate of
five to six percent and the cost of nearly a third
of French imports are up slightly as a result of
the higher exchange costs of the Deutschemark,
guilder, and Swiss franc. The use of only a small
increase in the discount rate reflects concern that
the restrictive policy should not excessively dampen
the upswing in consumer outlays, presently the most
dynamic element in French economic growth.
Although higher interest rates will tend to at-
tract foreign funds and thus expand the credit base,
inflows can be limited by France's strict exchange
control system. Demonstrating France's ability to
implement domestic monetary policies free from ex-
ternal influence, the monetary authorities used the
discount rate as a restrictive measure against in-
flation.
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INDIA: Prime Minister Gandhi should have lit-
tle trouble gaining parliamentary approval for her
decision to nationalize general insurance companies,
thus completing the government's take-over of the
insurance business.
Over 100 firms, including 42 foreign firms,
with $320 million in assets will be affected by the
new move. Included are four US firms earning about
$130,000 annually on premium income of about $1.3
million. New Delhi has agreed to compensate the
firms, but determination of the fair value may cause
problems.
Nationalization of general insurance will be
of. little economic benefit to the country and, in
fact, will tend to dampen private foreign investor
interest. Nevertheless, the measure will probably
be well received as was domestic bank nationaliza-
tion in 1969. The take-over represents one of a
number of measures that Mrs. Gandhi could have taken
to fulfill campaign promises to bring "progressive
government" to the people.
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COMMUNIST CHINA - IRAN: Communist China and
Iran will announce the establishment of diplomatic
relations during the first week of June
Iran s
primary motivation for recognizing Communist China
is its fear of being left behind in the trade and
political advantages it expects will accrue to those
nations getting on the recognition bandwagon. Al-
though representations by Taipei might cause some
delay, in the end Iran will probably agree to a rec-
ognition formula acceptable to Peking and not Taipei.
Iran's quick conclusion of negotiations with the Pe-
ing regime may parallel similar prompt action by
Turkey, and impel other countries now considering
diplomatic ties with Peking to begin talks soon.
15 May 71 Central Intelligence Bulletin
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Area ............ 56,000 sq. miles
Population ........ 70 million
Population density ...1,250 per sq. mile
Farakka
INDIA
DACCA
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PAKISTAN: On 11 and 12 May, Bengali national-
ists.in the area near Gopalganj used small boats to
capture eight river barges, about $400,000 worth of
jute, and a steamer with 300 passengers. Transpor-
tation officials have now decided not to use this
route--the only one open between Khulna and Dacca
during the rainy season--until it is secured by the
army. The guerrilla operation was the most success-
ful and by far the most significant the Bengalis
have carried out. Most of their military effort so
far had gone into futile attempts to hold territor
EAST GERMANY: Erich Honecker yesterday made
the first significant personnel change in the gov-
ernment since he assumed power. He named politburo
member and economics expert Horst Sindermann as
first deputy to Premier Willi Stoph, replacing Al-
fred Neumann, also a politburo member. Sindermann
is party first secretary of the industrially impor-
tant Halle district and brings considerable economic
skill to his new post. Presumably Neumann retains
his politburo membership. The move probably stems
in part from Honecker's desire to demonstrate his
authority and partly from his commitment to the new
five-year economic plan, which is characterized by
rationality and gradual growth, rather than the un-
realistic "forced-draft" plans that had been sup-
ported by Ulbricht.
(continued)
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NATO: The Eurogroup members to date have been
able to subscribe only $388 million of the $420 mil-
lion they pledged last December to the infrastructure
portion of the European Defense Improvement Program
(EDIP), but concern over possible US force reductions
will increase pressures on them to make up the dif-
ference. Failure of the Belgians to plan sufficient
funds in their current defense budget accounts for
most of the shortfall. It appears that the West
Germans, who are already directly or indirectly fi-
nancing most of the EDIP, may have to pick up the
Belgian shorfall if they want to ensure full sub-
scription by the time the NATO defense ministers meet
later this month in. Brussels. The current status of
the Eurogroup effort will be reviewed by NATO on 17
NETHERLANDS: The lower house's failure on
Wednesday to select a government formateur fore-
shadows a lengthy period of post-election negotia-
tions to form a new government. The governing four-
party coalition of the three confessional parties
and the Liberal Party is at present bargaining with
a right-wing socialist party--the Democratic Social-
ists '70--but the latter's program of strict govern-
mental austerity is anathema to the prolabor wings
of the confessional parties. In this situation the
Queen will now nominate someone to take soundings
among the parties in an attempt to reconcile the
differences among them. Many observers expect Pro-
fessor Steenkamp, the intellectual mentor of the
Catholic party, to be given this task, but antici-
pate also that he will be only -~h- first in a series.
(continued)
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AFRICA: President Kaunda of Zambia, chairman
of the Organization of African Unity (OAU) for this
year, has announced that the heads of state meeting
will convene on 21 June in Addis Ababa rather than
in Kampala, Uganda, as originally planned. It is
not clear how many governments actually responded
to Kaunda's earlier proposal to move the summit to
Addia Ababa. The Zambians have announced that a
majority of those who replied were in favor, however,
thus enabling Kaunda to claim an end to the debate
on the location that has been dragging on since
February.
President Amin of Uganda has not yet reacted
publicly, but he might be willing to accept the move
in return for uncontested admission to the confer-
ence, although he presently has no such guarantee.
Seating the Amin government remains a highly con-
troversial issue that could provoke sufficient dis-
sension at the preliminary foreign ministers meet-
ing in mid-June to threaten- a postponement of the
eighth annual OAU session.
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