CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A019900010001-0
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 15
• Document Creation Date: December 15, 2016
• Document Release Date: February 26, 2004
• Sequence Number: 1
• Publication Date: August 27, 1971
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
Central Intelligence Bulletin
Secret
State Department review completed N2 42
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27 August 1971
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No. 0205/71
27 August 1971
Central Intelligence Bulletin
CONTENTS
LAOS: Proposal to neutralize the Plaine des Jarres.
Page 1)
COMMUNIST CHINA: Provincial party committees.
(Page 3)
INTERNATIONAL ECONOMIC DEVELOPMENTS: Heavy dollar
selling in Japan. (Page 5)
ARGENTINA: No movement toward a viable economic
policy. (Page 6)
COLOMBIA-CHILE: Allende's visit. (Page 7)
EL SALVADOR: The teachers' strike. (Page 8)
UN-GAZA: Israeli thinning out of Arab refugee areas.
(Page 9)
PAKISTAN: The foreign debt situation. (Page 10)
SAUDI ARABIA: The new budget (Page 11)
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LAOS: Prime Minister Souvanna has underlined
the conEciliatory aspects of his government's posi-
tion on possible Lao peace talks and made explicit
some of his thinking on neutralizing the Plaine des
Jarres.
In an interview with the Lao Press Agency, Sou-
vanna said that if the Communists accepted his pro-
posal to "neutralize" the Plaine, government attacks
in that area could "easily come to an end," and for
the first time he made explicit that all units of
both sides would withdraw, under proper controls.
The Prime Minister, who is about to depart for a
six-week foreign vacation and visits to Thailand,
France, and the US, did not go into full details on
his proposed neutralization and withdrawal plan.
Souvanna took pains to mention that his absence
from the country would in no way hinder any forward
progress on talks, noting that his plenipotentiary
representative would be able to contact him at all
times. In order to facilitate a meeting with the
Communists, Souvanna said his representative was
ready to begin contacts in Khang Khay--his former
neutralist headquarters on the Plaine--which he
noted would be a propitious location if the proposed
neutralization took place.
Souvanna gave no evidence of any intention to
elaborate on his proposal to neutralize and with-
draw from the Plaine in a formal message to the
Communist side--which.presently owes him a letter
in the continuing exchange of messages on possible
Lao peace talks. It is uncertain whether the Pathet
Lao and the North-Vietnamese will choose to react
to this press interview. In previous messages the
Communists had made clear that they envisioned no
progress on possible talks until they again con-
trolled the Plaine. This presentation by Souvanna
does, however, offer the Communists an opportunity
27 Aug 71
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to show whether they have any new interest in de-
taching the war in north Laos from their infiltra-
tion corridor concerns in south Laos and in reach-
ing an accommodation on the part of the Lao war
that is less directly related to their principal
ob'ectives in South Vietnam and Cambodia.
27 Aug 71 Central Intelligence Bulletin 2
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COMMUNIST CHINA: The recent formation of four
provincial party committees brings the arduous, nine--
month process of reconstructing the provincial-level
party apparatus to a close.
Analysis of the over-all committee leadership
indicates that it is heavily weighted in favor of
moderate elements, although political compromise be-
tween divergent interests is still the order of the
day. The first party committees to be formed ap-
peared merely to represent perfunctory endorsements
of leadership arrangements which had been hammered
out during the Cultural Revolution. By late spring,
however, the regime began to encounter serious lead-
ership controversies in some of the remaining prov-
inces--disputes that reportedly extended into the
ranks of the central leadership itself.
Hard bargaining between conflicting interest
groups resulted in the appointment of new provincial
chiefs in a majority of these troublesome units.
Although the provincial heads who were ousted during
this process represented a wide spectrum of polit-
ical affiliations, the majority of those dropped
were aligned with forces associated with the more
radical policies of the Cultural Revolution.
The top leadership of the new party committees
frequently parallels that of the provincial admin-
istrative bodies set up during the Cultural Revolu-
tion, but there are significant differences. The
military, which was already the dominant element,
has clearly strengthened its influence; the armed
forces have expanded their numerical representation
in the ranking positions on the new committees to
over 60 percent. Rehabilitated party veterans--in-
cluding several who were bitterly attacked during
the Cultural Revolution--have likewise proliferated,
occupying about 30 percent of the major party posts.
In the meantime, the representation of "leftist"
activists, often the largest single group on the
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original governing bodies, has been reduced to a
single post on most party committees. In those prov-
inces that have had chronic factional violence, ac-
tivists have in fact been excluded altogether.
Although the party restructuring process is now
formally completed, there are still many questions
to be answered. For instance, although the new party
committees have been declared the leading bodies in
the province, the revolutionary committees estab-
lished earlier still exist and the actual division
of labor between the two components is by no means
certain. Another complicating factor is the expanded
role of the military and the resulting thorny problem
of civilian versus military control of the party
structure. Until the regime begins to address these
problems in an authoritative manner, there will be
little chance for the new party apparatus to regain
its pre-1966 image as an infallible monolith and as
an essentially civilian structure which "commands
the gun."
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INTERNATIONAL ECONOMIC DEVELOPMENTS: Dollar
selling is heavy on the Tokyo foreign exchange mar-
ket after the Bank of Japan relaxed restrictions on
the amount of dollars Japanese commercial banks are
required to hold. The Bank of Japan purchased about
$600 million yesterday and $400 million during the
first hour of trading today to clear the market of
unwanted dollars.
Meanwhile, the Council of the General Agree-
ment on Tariffs and Trade (GATT) yesterday estab-
lished a working party to consider the US import
surcharge. The study group, which is to report to
the Council by 20 September, will confer with the
International Monetary Fund to determine the nature
of the US balance-of-payments difficulties.
The developing countries reluctantly agreed
to a restriction of the scope of the study, thereby
excluding examination of why their products should
not be exempt from the surcharge. If a determina-
tion is made that the surcharge is not justified,
member countries will be less restrained from re-
taliating against the US.
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ARGENTINA: There are few indications that the
Lanusse government is moving toward a viable economic
policy, despite a recent small devaluation of the
peso.
The government has seized on this time of con-
fusion in international monetary circles to devalue
its currency from 4.70 to 5 to the dollar. A major
devaluation is still badly needed, but the President
and most of his military colleagues continue to view
such action as a blow to the prestige of the military-
led government.
The stagnating economy, with inflation running
at an annual rate of more than 40 percent, is b far
President Lanusse's most serious problem. I _J
the President
has no clear economic philosophy or policy and there
is little chance that this will change. Lanusse has
subordinated economic policy to his political plan
to return the nation to an elected government. One
example of this is his willingness to accede to de-
mands for wage increases in order to avoid the devel-
opment of labor opposition to his government. Lanusse
is also convinced that any real retreat from the eco-
nomic nationalism espoused by his predecessor would
provoke unfavorable political repercussions.
The recent appointment of the capable Carlos
Brignone as president of the central bank provides
some hope that President Lanusse will receive sound
advice on economic matters in the future. Brignone's
predecessor, however, was asked to resign when he
told reporters that acceding to new wage demands
would necessitate a devaluation of the peso.
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COLOMBIA-CHILE: President Allende's intention
to maintain political neutrality during his visit
to Bogota tomorrow through Monday will be difficult
to carry off amid the cross currents of Colombian
politics.
Gustavo Rojas Pinilla, leader of the opposi-
tion National Popular Alliance (ANAPO), can be ex-
pected to spare no effort. to capitalize on the Al-
lende visit, especially in view of divisions within
the ruling Liberal-Conservative coalition. The
ANAPO welcome may be blunted by flamboyant Senator
Jose Ignacio Vives, who was expelled by ANAPO in
1970 and who is attempting to organize a pro-Allende
demonstration of his own.
The leaders of Pastrana's own Conservative
Party sought to persuade the President to cancel
the invitation to Allende, claiming that the Conser-
vatives would derive no benefit from it. Pastrana
countered that the visit would be a convenient bal-
ance to his recent meeting with Brazilian President.
Medici, and that it would strengthen Colombia's po-
sition in the Andean Group and in the border. dispute
with Venezuela. The Conservative leaders are appar-
ently going to use the Allende visit as a wedge to
drive between the indecisive Pastrana and the bulk
of his party support.
The Colombian Communist Party (PCC) has been
planning for months to show its strength by organ-
izing a large and impressive welcome for Allende,
possibly capitalizing on the turnout staged by
ANAPO or Vives followers. The PCC would like to
use this event to further the formation of a coali-
tion of opposition groups. Pastrana is likely to
forestall any advantage falling to the PCC or the
ANAPO--and keep his Conservative house as much in
order as possible--by limiting Allende's public ex-
posure and restricting his private activities as
much as practicable. F77 I
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EL SALVADOR: Disorders erupted on 25 August
as striking teachers rejected the government's set-
tlement offer. Further demonstrations are planned
for today.
Earlier this week the government offered teach-
ers a package deal, including a pay increase, in ex-
change for an immediate end to the seven-week-old
strike. The teachers rejected the government's
proffered concessions as insufficient, and some
three thousand demonstrators turned out in support
of their position.
Most of the property damage, including broken
windows at the US Embassy and the Legislative Assem-
bly, was done by participating university students,
among whom were a number of Communist agitators.
Security forces did not intervene, but warned union
leaders and known Communist trouble-makers that fur-
ther violence would not be tolerated. As a result,
today's demonstration may receive little support.
There is increasing evidence that public sup-
port for the strikers is waning because of their
intransigence. On the other hand, the government..
is gaining a favorable image because of its will-
ingness to negotiate and the restrained manner in
which demonstrations thus far have been handled.
The government apparently is carefully laying the
groundwork for a strong crackdo on future dis-
orders.
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UN-GAZA: The head of the UN Relief and Works
Agency UNRWA) is deeply concerned over the implica-
tions of recent Israeli "thinning out" actions taken
in the face of continued security problems in the
Arab refugee areas of the Gaza Strip.
UNRWA Commissioner General Rennie told the US
earlier this week that he feels the resettlement
at least 2,300 refugee families had been affected
as of 18 August--has been conducted in a precipitous
manner. Red Cross officials on the scene reportedly
describe the measures taken as going far beyond the
security precautions that the Israelis claim are
their sole motivation. Jerusalem radio claims that
the operation has drastically reduced the number of
terrorist incidents.
Apparently, the Israelis plan to rehouse most
of the refugees in four new areas to be constructed
soon near the major towns of the Strip. Rennie has
also received reports that the Israeli military gov-
ernor in Gaza is talking about using vacant West Bank
camp housing. Arab protests would certainly become
more heated if any significant number of refugees
were forced there.
Those evicted refugees who have moved deeper
into the Sinai are now outside UNRWA jurisdiction
and are no longer being fed by the agency. Rennie
fears that the Israelis will use this development
as an excuse to take over more of UNRWA's functions
in the occupied territories.
Egypt has already protested the Israeli actions
to Secretary General Thant, and the issue is certain
to provoke heated debate during the upcoming UN Gen-
eral Assembly session. The Arabs will try to link
the operations and the recent "annexationist" remarks
of Israeli Defense Minister Dayan. Rennie has told
the US that his letter to the Assembly on the subject
will condemn the Israeli operations. The upshot may
be a further erosion of support for UNRWA, now facing
a continuing fiscal crisis and the need to have its
mandate extended by th Assembly.
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PAKISTAN: Islamabad is placing top priority on
straightening out its foreign debt situation.
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the government is considering making payments on e
overdue debt resulting from its unilateral six-month
moratorium imposed in May. In return, creditors
would be asked to extend a one-year moratorium. Sev-
eral representatives of the major Western creditors
have indicated that their countries would be willing
to consider a Pakistani request for debt relief even
though they have shown no enthusiasm for extending
any new aid.
The halt in debt repayments, together with re-
duced imports, increased West Pakistani exports, and
possibly some assistance from friendly Arab nations,
has kept Pakistan's foreign exchange holdings at
fairly constant levels despite the sharp drop in ex-
port earnings from the East wing. These holdings
amounted to $208 million in early August, about $50
million less than a year earlier.
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NOTES
SAUDI ARABIA: The $2.4-billion budget for the
new fiscal year, which began on 22 August, shows a
69-percent rise over last year's budget. The in-
crease reflects anticipated revenues of $2.2 billion
as a result of recent settlements with the oil com-
panies as well as rapidly increasing petroleum out-
put. The bulk of the increased expenditures is al-
located to development. Defense expenditures also
are to increase, but their share of the budget de-
clined from 40 to 32 percent. The oil receipts will
easily finance the sharp rise in expenditures de-
spite proposed elimination of some business taxes
and the "jihad tax" on personal. incomes and the re-
duction of an exercise tax on gasoline. The higher
expenditures, coupled with the tax reductions, will
n
b
ee
give a major boost to the economy, which has
sluggish during the past two years.
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