CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A019800050001-7
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 12
• Document Creation Date: December 15, 2016
• Document Release Date: February 26, 2004
• Sequence Number: 1
• Publication Date: August 19, 1971
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
Central Intelligence Bulletin
State Department review completed. On file Department of
Commerce release instructions apply.
Secret
N2 42
19 August 1971
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No. 0198/71
19 August 1971
Central Intelligence Bulletin
CONTENTS
INTERNATIONAL ECONOMIC SITUATION: Developments in
Japan and Europe. (Page
CHILE: Extremists are challenging Allende's cautious
pol ties. (Page 3)
BARBADOS: The general election scheduled for 9
Septe er . (Page 4)
AUSTRIA-SWITZERLAND: Cooperation in defense.
(Page
MALAYSIA - COMMUNIST CHINA: Chinese trade delega-
tion. Page
PERU: French nuclear testing (Page 7)
VENEZUELA: Government development of gas exports
(Page'
ARMS CONTROL: Draft convention on biological weapons
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INTERNATIONAL ECONOMIC SITUATION: The Japanese
central bank absorbed less than 300 million on the
Tokyo exchange market yesterday, down from $600 mil-
lion on Monday and $700 million on Tuesday. Finance
Ministry officials stated that the market would be
open again today.
Despite statements that the government will
maintain the present yen-dollar rate, signs of flex-
ibility are beginning to appear. Even though the
Japanese probably intend to maintain the present rate
until they have some indication of European inten-
tions, Prime Minister Sato reportedly has asked the
Finance Ministry to study the possibility of widening
the margin within which the dollar would be allowed
to fluctuate. Any adjustment in the exchange rate
would be much easier for the beleaguered Sato gov-
ernment if it appeared to be the inevitable result
of depreciation of the dollar on European exchange
markets, thus avoiding the impression that Tokyo is
bowing to pressure from Washington.
The search by the EC finance ministers, meeting
in Brussels this afternoon, for a mutually acceptable
common policy vis-a-vis the US dollar has been handi-
capped by the refusal of Paris to float the franc.
The EC monetary committee had concluded earlier that
a coordinated float of the five EC currencies against
the dollar would be the most likely course of action,
but the French delegate had then been unable to speak
because his government's official position had not
yet been determined. The French will table an al-
ternative proposal involving the establishment of a
dual rate system, similar to that practiced with
some success by the Belgians. Under such a scheme,
a floating exchange rate would apply to capital
transactions, but central banks would continue to
support.fixed dollar - EC currency parities for com-
mercial transactions.
(continued)
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A Bonn Foreign Office official maintains that
West Germany still holds that the EC should move
promptly to act in cooperation with the US and
should avoid any retaliatory measures. Both Eco-
nomics Minister Schiller and EC Commissioner Dahren-
dorf, however, have hinted that "protective" meas-
ures, such as subsidies to certain export-oriented
industries, might be in order.
A Canadian delegation, headed by Finance Min-
ister Benson, is scheduled to arrive in Washington
today hoping to obtain exemption from the ten-per-
cent import surcharge. The US Commerce Department
estimates that 23 percent of Canada's exports to
the US are affected by the surcharge.
The strong international reaction against the
surtax indicates that the US will be subject to
rough questioning when this issue comes up in the
GATT council, tentatively scheduled for 24 August.
A high GATT official believes the council will act
to have a working party examine the question with
GATT Director General Long possibly serving as chair-
man. A GATT decision that the surcharge is warranted
on balance-of-payments grounds could constrain other
countries from retaliating against the US by with-
drawin equivalent tariff concessions. 25X1
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CHILE: Extremists are again challenging the
low-risk, cautious policies of President Allende and
the Communists.
The Movement of the Revolutionary Left (MIR) is
stepping up its effort to prove that violence is the
only effective route to revolution and continues to
preach that Allende's preference for constitutional
channels obstructs progress to real socialism. The
MIR has led frequent illegal armed seizures of farms
and factories in recent months and boasts of inroads
in the armed forces, where officers reportedly are
concerned over rumored stockpiling of arms by the
revolutionary group.
The powerful Communist Party (PCCh) considers
the MIR a dangerous enemy to its own political influ-
ence and believes the MIR'-s insistence on the inevit-
ability of armed struggle could provoke a rightist
or military coup attempt against the Popular Unity
(UP) government.
The rivalry is also one aspect of the dissension
between the PCCh and its chief rival and partner in
the UP, the Socialist Party. Some Socialists were
original sponsors of the MIR. The argument surfaced
again when Socialists defeated a PCCh attempt to pre-
vent the use of the Chilean Trade Union Confederation
building to honor a top MIR leader who died this week.
The ideological and political struggle between the
PCCh and the MIR has recently intensified in the labor
field, which the PCCh considers its particular baili-
wick.
Allende's own growing estrangement from the MIR,
which he once hoped to co-opt by encouragement, has
resulted in stronger police action against MIR-led
activists and in differences with some of his hard-
line fellow Socialists.
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BARBADOS: Prime Minister Barrow's ruling Demo-
cratic Labor Party (DLP) may face a strong challenge
to its ten-year reign in the general election sched-
uled for 9 September.
A.number of prominent political figures, pri-
marily from the DLP, have announced plans to retire.
In addition, recent changes in the electoral process
and in the electoral districts mean that the DLP and
its major opposition, the Barbados Labor Party, will
be more equally matched, and greater emphasis will
be placed on the candidate, rather than on the party.
Both parties are traditionally responsible so-
cialist parties with remarkably similar orientation.
They have each presented a slate of candidates com-
posed primarily of young barristers and businessmen
who reflect this moderation. There is no organized
radical challenge, although the minuscule People's
Progressive Movement may field a few candidates.
Election jitters were probably the reason be-
hind an emotional speech by Barrow in June in which
he attacked the US and Great Britain for alleged
meddling in the internal political affairs of Barba-
dos. The unusual outburst appears to have been an
attempt to discredit opposition leader Bernard St.
John by linking him to the vaguely defined interfer-
ence. Barrow charged that St. John had been asked
by a New York foundation to comment on a "confiden-
tial" report on Barbados before the report had been
submitted to the cabinet. The report allegedly was
given to St. John by the Twentieth Century Fund and
was said to have concerned a survey by the Inter-
American Development Bank. Although the incident
died down after opposition denials, similar charges
can be expected as the campaigning gains momentum.
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. AUSTRIA-SWITZERLAND: Austrian and Swiss offi-
cials are considering greater cooperation in arms
development and defense matters.
The Austrian press has revealed that Swiss Pres-
ident Rudolf Gnaegi proposed that an arms pool be
established by Switzerland, Austria, and Sweden.
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The proposal also would in-
volve a further synchronization of arms development
including the creation of an antitank system. Aus-
trian Chancellor Bruno Kreisky has described the
proposal as "very interesting" and said it deserves
further government study.
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e two
countries are exploring the possibility o allowing
Swiss military units to train at Austrian maneuver
areas, and both countries are already utilizing mili-
tary equipment produced by the other. Although Bern
recently rejected the Swedish SAAB 105 fighter for
its air force, Sweden's sophisticated armament in-
dustry would provide an additional source of military
technology which both the continental neutrals could
tap. The Austrians are especially dependent on out-
side sources, and the Swiss would welcome this type
of interchange because Switzerland's laws restrict
the sale of its manufactured arms to governments
that are stable and not likely to be involved in war.
More importantly, Gnaegi's proposal reflects
Bern's concern over the decline in Austria's military
credibility since Kreisky-'s army reform legislation
reduced the term of military service from nine to
six months. The Swiss have repeatedly irritated
Kreisky by expressing their fears of a "military
vacuum" in Austria, but the Austrian chancellor may
find Bern`s offer useful to counter similar criti-
cism from domestic critics prior to the national
elections scheduled for 11 October.
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MALAYSIA - COMMUNIST CHINA: Malaysia's incip-
ient rapprochement with communist China may well re-
ceive a new impetus from the visit of a Communist
Chinese trade delegation next week.
The delegation, led by a senior Chinese offi-
cial, presumably plans to settle the details of the
previously negotiated sale of Malaysian rubber to
Peking. Other possible trade items, principally oil
and timber, will also be discussed.
Although ostensibly confined to commercial mat-
ters, the talks are bound to have political over-
tones, if only because this is the first official
Chinese delegation to visit Malaysia. Kuala Lumpur
has indicated its interest in improving relations
with Peking, but probably will not initiate any of-
ficial political negotiations at this time. From
the Malaysian point of view, China's continuing prop-
aganda support for insurgents in West Malaysia re-
mains a major block to any diplomatic ties.
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NOTES
PERU: The government has threatened to break
diplomatic relations with France unless the present
series of nuclear tests in the Pacific is suspended.
According to press reports, on 17 August President
Velasco informed President Pompidou that Peru would
"deplore" a break but would be forced to take such
action if. the protest were ignored. Chile, as well
as some Asian countries, has protested the French
tests, but the Peruvian initiative is the strongest.
reaction so far. Two more explosions are scheduled
for next month, and the French are unlikely to change
this program because of the Peruvian protest.
VENEZUELA: Congress' approved version of Pres-
ident Calderars bill for public sector development
of gas exports may not be as damaging to the petro-
leum industry as originally feared by the oil com-
panies. According to the final provisions, the gov-
ernment apparently will take only gas the companies
are flaring off (burning). Government compensation
to the companies, however, will be limited to their
costs in collecting the gas to be turned over. Al-
though passage of. the bill is a political gain for
Caldera, he still may decide to. return the legisla-
tion to congress because of amendments added by op-
position political parties. The amendments could
restrict the government.to building only one gas
plant instead. of the two Caldera had proposed, which
would seriously weaken the project's viability.
(continued)
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ARMS CONTROL: The nonaligned participants in
the Geneva disarmament talks have responded to the
US-USSR draft convention curbing biological weapons
(BW) in a more positive manner than had earlier
seemed likely. Their proposed amendments, formally
introduced Tuesday, still seek to obligate the su-
perpowers to negotiate an agreement on chemical
weapons (CW), a commitment the nonaligned have long
desired. The paper.does not, however, challenge the
US contention that the Geneva Protocol of 1925 does
not ban the use of tear gas and herbicides in war.
Because of the favorable nonaligned attitude, the
US and Soviet delegations plan to recommend some of
the nonaligned amendments to the draft BW convention
for consideration in their capitals.
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