CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A019400090001-7
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 10
• Document Creation Date: December 14, 2016
• Document Release Date: June 10, 2003
• Sequence Number: 1
• Publication Date: July 3, 1971
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
Central Intelligence Bulletin
Secret
State Dept. review completed
N2 040
3 July 1971
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No. 0158/71
3 July 1971
Central Intelligence Bulletin
CONTENTS
BRAZIL: The 200--mile territorial sea claim. (Page 1)
VENEZUELA: Pessimism in US business community.
Page 2)
USSR-SYRIA-EGYPT: Deliveries of fighter aircraft
and helicopters. (Page 3)
EUROPEAN COMMUNITIES: Measures to forestall foreign
exchange crises. (Page 4)
USSR-UN: Document on peacekeeping (Page 6)
JAPAN: Industrial production (Page 6)
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BRAZIL: The government, although refusing to
back off from its 200-mile territorial sea claim,
apparently has decided upon a relatively restrained
approach on the issue.
The progovernment political party reportedly
has been asked by the President to downplay the 200-
mile question. Press coverage also abated somewhat
last week, probably another indication of the gov-
ernment's wish to avoid inflaming the issue.
The Brazilians have exercised restraint since
the law went into effect on 1 June, and fishing boats
have been warned out of the area rather than taken
into custody. Government officials have indicated
that they intend to apply the law for the first time
against a boat operating within 12 miles of the
coast in the belief that exclusive fishing rights
in the zone are more generally recognized by other
countries. Some harassment of foreign fishing craft
has been reported; although the possibility of an
incident remains, Brazil seems more intent on imple-
menting its claim through diplomacy. Exploratory
talks with France and Trinidad-Tobago, whose flag
vessels fish the area, have already been held. Bra-
zil presumably will press for a fisheries agreement
that will at least imply recognition of its claim.
Brazil probably views the territorial seas is-
sue as one facet in its quest for leadership in
Latin America and among less developed countries
generally. On the territorial seas question, Brazil
apparently believes that it can forge and lead a
united bloc of third world countries at the 1973
Law of the Seas Conference, and thereby enhance its
own prestige.
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VENEZUELA: Many US businessmen are gloomy
about prospects for future investments.
At a meeting of the American Chamber of Commerce
on 1 July, one member said that a recent survey of
20 US companies showed no disposition to invest fur-
ther in Venezuela at this time.
Much of the pessimism results from the inability
of the businessmen to persuade Venezuelan legislators
to modify certain bills now before the congress. One
of these reserves to the government the development
of the natural gas industry and may involve expro-
priation without "just compensation" to the oil
companies. Another apparently would require foreign
petroleum companies to set aside ten percent of
their depreciation allowances each year to insure
that when the companies begin terminating their con-
cessions in 1983 their assets will be turned over
to Venezuela in good condition. Both bills are ex-
pected to be passed quickly and with little modifica-
tion.
The new mood of nationalism in Venezuela that
has resulted in the proposed legislation probably
will, discourage new foreign investment by making
business more difficult and less profitable. It has
by no means stopped it yet, however. US Steel re-
cently decided to move ahead with a $40-million ex-
pansion of its iron mining and processing facilities.
In addition, Japanese firms are actively seeking in-
vestment in aluminum and steel, and members of the
Chamber of Commerce believe that Venezuela will
find investment capital to develop natural as ex-
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USSR-SYRIA-EGYPT: Moscow has increased its de-
liveries of f =g ter aircraft and helicopters to
Syria and has maintained the flow of these aircraft
to Egypt.
Syria has received five SU-7 fighter-bombers,
21 MIG-21 interceptors, nine MIG-17s and 22 MI-8
helicopters since April, probably under an arms
agreement signed in February. Some of the MIG-21s
may be intended as replacements for older models,
while the relatively large number of helicopters may
presage the development of a heliborne capability.
The recent arrival of eight MIG-21s in Egypt
brings to almost 10Q the number of these aircraft
received since September 1970. By contrast, the
Egyptian Air Force received only 90 MIG-21s between
mid-1967 and mid-1970 and those were largely to re-
place combat losses suffered during the June War.
In addition, the arrival of 16 MI-8 helicopters dur-
ing June brings the number received since early 1970
to almost 80.
At least some of the fighter aircraft probably
are intended to bring the Egyptian MIG-21 squadrons
up to full strength. The additional helicopters
probably are intended to bolster Egypt's heliborne
capabilities first evident during 1970, and at least
some therefore are likely to be armed.
I I
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EUROPEAN COMMUNITIES: The EC finance ministers
have made notable progress toward agreement on meas-
ures designed to forestall future foreign exchange
crises, but a definitive West German commitment. to
end the float of the mark has not been made.
The greater flexibility demonstrated by both
the Germans and the French to move toward a common
position vis-a-vis the US dollar is historically
significant. The Germans indicated an unprecedented
willingness to implement stiff control measures to
curb short-term capital inflows when necessary.
This would be contingent, however, upon the formal
adoption of a plan by the EC countries to permit
their currencies to fluctuate in unison against the
dollar within a substantially wider band than now
allowed by the International Monetary Fund (IMF).
For their part, the French have conceded that some
greater flexibility against the dollar might be use-
ful in conjunction with other short-term capital
controls but insisted that the Germans must set a
date for restoring a fixed parity for the mark be-
fore the French will agree to a wider-band pact.
The entire agreement package now revolves
around Bonn's plans to terminate the float of the
mark, a decision the Germans want to.postpone. Al-
though discussions bogged down on this point at
Brussels, Bonn and Paris should be able to work out
their differences in the near future. If a new
agreement is reached, it would serve as the basis
for a proposal for widening the exchange rate bands
between EC currencies and the dollar at the annual
IMF meeting at Washington in September.
Adoption of this proposal would require closer
cooperation among EC central banks, and may bring
about some reduction in the use of dollars in intra-
EC transactions. Moreover, it would reduce the im-
pact. of interest rate differentials on capital flows
between the US and Europe and would tend to discour-
age the massive speculative movements that occurred
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NOTES
USSR-UN: A Soviet document on UN peacekeeping
guidelines, which was given to the US Mission at
the UN on 23 June, marks no compromise in the USSR's
position. The document reiterates Moscow's tradi-
tional attitude that a peacekeeping mission must be
completely under the aegis of the Security Council,
subject to veto by the permanent members. It also
states that the Secretary General's actions would
be confined to "auxiliary functions of administra-
tive nature." It is not clear whether or not the
Soviets regard the text as a formal response to the
1970 US proposals designed to resolve US-Soviet dif-
ferences over Peacekeeping guidelines.
JAPAN: Industrial production declined 4.5 per-
cent in May from the previous month, marking the
largest monthly drop in a decade. Tokyo is con-
cerned that sluggish domestic demand might spur manu-
facturers to step up exports, thus undercutting the
government's current campaign to slow down export
growth. This concern is illustrated by the fact
that despite a significant decline in automobile and
television production, exports of both items have
increased dramatically thus far this year.
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Secret
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