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December 14, 2016
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July 18, 2003
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September 30, 1971
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Approved For Release 2003/08/21 : CIA-RDP79T00975A02010S,et 25X1 DIRECTORATE OF INTELLIGENCE Central Intelligence Bulletin DIA and DOS review(s) completed. Secret N2 042 Approved For Release 2003/08/21 : CIA-RDP79T00975AO2010Q$09% 0-ember 19 71 25X1 Approved For Release 2003/08/21 : CIA-RDP79T00975AO20100080001-9 Approved For Release 2003/08/21 : CIA-RDP79T00975AO20100080001-9 Approved For Release 2003/08f IJP79T00975A020100080001-9 No. 0234/71 30 September 1971 Central Intelligence Bulletin COMMUNIST CHINA: Political situation apparently is still far from being resolved. (Page 1) USSR-INDIA: Prime Minister Gandhi's visit to Moscow. (Page 3) CHILE: Allende ready to risk showdown over compen- sation for expropriated copper companies. (Page 5) 25X1 CEYLON: Insurgency may be renewed. (Page 8) 25X1 INDIA: Government: loses Italian firm's bid to move plant to India (Page 10) ITALY: Government. tactics on price freeze (Page 10) Approved For Release 2003/08M#C f RLDP79T00975A020100080001-9 Approved For Release 2003/] DP79T00975A020100080001-9 COMMUNIST CHINA: The eleventh-hour decision to cancel this evening's National Day banquet suggests that the current political situation is still far from being resolved. According to press reports, a Ministry of For- eign Affairs spokesman announced that the banquet, which usually features a speech by Premier Chou En- lai and is well attended by the ruling politburo members based in Peking, will be replaced by a one- and-a-half hour reception sponsored by the Foreign Ministry. The spokesman reportedly was unable to affirm that Chou would speak at the reception; but even if he does speak, it seems clear that Peking may be departing from previous practice in order to rationalize what may be only a limited turnout of top leaders. Since the banquet. has not been at- tended by either Mao Tse-tung or Defense Minister Lin.Piao for some years, Peking may be seeking to conceal recent significant changes in the politburo below the level of :Mao, Lin, and Chou. The impression that the prolonged power struggle between moderate and radical forces on the politburo has produced further breaks within the leadership has been reinforced by Jack Chen, a regime publicist in Hong Kong who recently circulated Peking's offi- cial version of the current campaign against the extremist "May 16 Corps." According to the US con- sulate general, Chen is advising Western journalists to focus on the possibility of leadership changes as the cause for the unusual developments in China rather than speculating on the death of Mao. Al- though Chen's knowledge of current developments in Peking is unconfirmed, his remarks, taken with the continued public absence of several ranking military leaders, an accumulation of rumors regarding inter- necine quarreling at the top, and the cancellation of tonight's banquet, all suggest that the power struggle in Peking has entered a new and more seri- ous phase which probably centers on the political futures of China's top-ranking military leaders. (continued) 30 Sep 71 Central Intelligence Bulletin Approved For Release 200 ~re .J -RDP79T00975A020100080001-9 Approved For Release 2003/08/21 : CIA-RDP79T00975AO20100080001-9 SECRET Whether this struggle has been precipitated by the illness or sharp decline in the health or polit- ical strength of Mao or heir-designate Lin Piao is Preparations are going forward for low-key Na- tional Day celebrations in Peking tomorrow. Since mid-September, the Soviet press has been cautious and noncommittal in treating internal af- fairs in China. A brief TASS item on 25 September indirectly refuted speculation that events in Peking are somehow related to Sino-Soviet tensions. At a public lecture in Moscow on 28 September, the Soviet speaker conveyed the impression that the position of the extremists in Peking has been weakened. 30 Sep 71 Central Intelligence Bulletin 25X1 25X1 Approved For Release 2003/08/21 : CIA-RDP79T00975AO20100080001-9 SECRET Approved For Release 2003/08/SE4ZRFR'UP79T00975A020100080001-9 USSR-INDIA: Prime Minister Gandhi's visit to the USSR seems to have been fairly successful. She was accorded the unusual honor of being housed in the Kremlin and of having the top three Soviet leaders take part in the discussions. There is still no conclusive explanation for the unusual activity that surrounded the beginning of her visit or for the inclusion of Brezhnev and Podgorny in talks that were originally to have involved only Kosygin. It may be that the Soviet leaders wanted to present a united front to Mrs. Gandhi in order to underscore their message on the need for re- straint. The main topic of discussion during the visit was clearly the unsettled situation on the subcon- tinent. As Kosygin's luncheon speech and the final communique indicate, the Soviets, although taking the Indian side, clearly have not abandoned their policy of trying to prevent another Indo-Pakistani war. Kosygin, for example, was quite harsh in his criticism of West Pakistan's actions in the East wing and placed most of the onus for easing the ref- ugee problem on West Pakistan. He was equally firm, however, in his opposition to another Indo-Pakistani war, maintaining that the USSR would do its utmost to prevent another conflict. Mrs. Gandhi, for her part, took a somewhat different tack. She reiterated India's opposition to war as a means of resolving the refugee problem and pleaded for concerted international assistance to help India cope with the influx. She went on, however, to express the hope that Soviet efforts to encourage the Pakistanis to work for a political solution would bear fruit and reminded her audience that "peace cannot be obtained by waiting and hoping." In the communique the Indians joined with Mos- cow in "demanding" that the West Pakistanis take "urgent measures to reach a political solution" to 30 Sep 71 Central Intelligence Bulletin Approved For Release 2003/08k V-C $2'bP79T00975A020100080001-9 Approved For Release 2003/08/216 Tfi9T00975A020100080001-9 their problem with East Bengal. The language is virtually identical with the appeal to Yahya made by Soviet President Podgorny last April, however, and consequently cannot have been especially en- couraging to the Indians. The Indians also agreed that all problems at issue in relations between countries should be settled by "peaceful means." Both parties agreed to further exchanges of views on the East Bengal problem. Another important topic on the agenda doubtless was China. Just prior to Mrs. Gandhi's visit to the USSR, Moscow sent a special envoy to New Delhi to discuss future Soviet and Indian strategy at the UN. Moscow is particularly interested in securing India's cooperation against China should Peking gain admit- tance to the UN and in getting a better reading of recent Indian moves to improve Sino-Indian relations. The communique indicates that the two sides also discussed Indian Ocean matters. The Soviets agreed with the Indians to study the question of declaring the Indian Ocean "a zone of peace." The two sides also agreed to establish a joint commis- sion for economic, scientific, and technical coopera- tion. Both Brezhnev and Kosygin accepted Mrs. Gandhi's invitation to visit India, but no date was fixed. 30 Sep 71 Central Intelligence Bulletin 25X1 Approved For Release 2003/08/21 Rfi1 'RY9T00975A020100080001-9 Approved For Release 2003/dW ' lkDP79T00975A020100080001-9 CHILE; President Allende's very hard stand on expropriated Kennecott and Anaconda copper operations in Chile indicates that he is prepared to risk a showdown with the US Government. over compensation. .Allende's charge on 28 September that the com- panies owe Chile $774 million in "excessive profits" ensures a substantial negative indemnification bal- ance when added to his government's excessive claim of about $1 billion already made against the compa- nies for alleged equipment deficiencies and mine damage. The companies' remaining 49-percent inter- est in their extensive Chilean copper operations was taken over in July under a constitutional reform, but Allende's promise to negotiate compensation has not been kept. The final reckoning will be announced on 15 October when the Chilean controller general, nomi- nally a political independent, reveals his calcula- tion of the net worth of the companies' Chilean holdings. The announced claims will leave a nega- tive balance that would more than cancel debts still due the companies for the purchase of their first 51-percent interest during the Frei administration. Such a balance could also be used by Allende to justify reneging on his promise that Chile would honor foreign debts incurred by the companies in extensive copper production expansion programs only recently completed. Finally, it could trigger claims for extensive insurance the companies hold with the Overseas Private Investment Corporation. The Cerro Corporation probably will receive compensation for its mine that started producing a few months ago, as a gesture to indicate to poten- tial sources of international credits that the Al- lende government is reasonable and selective in its dealings with investors. The $56-million compensa- tion--already negotiated but not signed--would be a small price for Chile to pay for Cerro's agreement to serve as purchasing agent for equipment necessary to maintain the larger companies' expropriated prop- erties. (continued) 30 Sep 71 Central Intelligence Bulletin Approved For Release 2003/&WIMARDP79T00975A020100080001-9 Approved For Release 2003/08,1CP ,UCFIDP79T00975A020100080001-9 Allende has successfully nurtured substantial international cordiality toward his government as a "worthy socialist experiment," although this has not brought Chile the credits so desperately needed to bail it out of increasing economic difficulties. Allende apparently has decided that a hard stand on the copper issue will strengthen his posture as champion of underdeveloped countries willing to defy large foreign investors. Allende's action also may be an attempt to use a nationalistic issue to strengthen further his in- ternal political position in order to launch an over- due domestic austerity program. 30 Sep 71 Central Intelligence Bulletin 25X1 Approved For Release 2003/0$J*](;J lRbP79T00975A020100080001-9 25X1 Approved For Release 2003/08/21 : CIA-RDP79T00975AO20100080001-9 Approved For Release 2003/08/21 : CIA-RDP79T00975AO20100080001-9 Approved For Release 2003/08/R: 9 P79T00975A020100080001-9 CEYLON: The security situation continues to deteriora etet and a renewal of insurgency is possible. Most current rebel activity seems directed at obtaining arms and, according to the US defense attache, the insurgents are starting to regroup in the jungles. Their current strength is estimated to be no higher than 400. Although the security forces believe they could still control the situa- tion, they already are spread thin and may soon be confronted with additional difficulties. Some 14,000 youthful prisoners arrested last spring are growing increasingly restive in their "rehabilita- tion centers." The government had hinted at plans to release a large number of detainees in connection with a national holiday on 26 September, but very few were actually freed, and escape attempts or ex- plosive demonstrations by the prisoners are likely. The coalition government, a tenuous alliance of moderates and leftist extremists, has been able to muddle through so far, but it appears incapable of decisive action, and according to the defense attache, military leaders are frequently asked when they will take over and "set things right." The military remains reluctant to get involved in pol- itics, but the present government seems to be un- able to improve the situation and the military's prestige has never been higher. 30 Sep 71 Central Intelligence Bulletin 25X1 Approved For Release 2003/0 4 )P79T00975A020100080001-9 25X1 Approved For Release 2003/08/21 : CIA-RDP79T00975AO20100080001-9 Approved For Release 2003/08/21 : CIA-RDP79T00975AO20100080001-9 Approved For Release 2003/OINEC. RIE-'PP79T00975AO20100080001-9 INDIA: New Delhi's indecision, which stems from its concern over foreign-owned and -managed plants, has resulted in the loss of an Italian firm's bid to move its motor scooter plant to In- dia along with a commitment to export all of its production. India can ill afford to lose the deal, which would have promoted ancillary industries, in- creased employment opportunities, and earned foreign exchange. Investment is already lagging and indus- try is in the doldrums, with production having in- creased barely 1.5 percent during the first half of 1971. A private Indian business delegation is sched- uled to visit West Germany next month, primarily to pursue offers from German manufacturers seeking for- eign plant sites in order to reduce mounting labor costs. New Delhi's attitude toward the Italian firm, however, may dampen these manufacturers' in- terest in relocating in India. ITALY: The government, with a fine hand, has given the impression that a price freeze for food- stuffs and other basic commodities has been insti- tuted without actually implementing price ceilings or rollbacks. Rome has merely reminded provincial officials of existing decrees, which were designed to counter wartime price speculation and black mar- keteering and which authorized them to control prices. To date, however, the provincial prefects have not attempted to use this old authority. By publicizing the long-dormant statutes, Rome meant to reassure the press, unions, and popular elements that the government had the statutory power to con- trol prices. The only real action taken in the price field so far, however, has been a temporary 25X1 suspension of increases in public service rates. 30 Sep 71 Central Intelligence Bulletin 25X1 Approved For Release 2003/0 i1EQRJ 'bP79T00975A020100080001-9 SecI roved For Release 2003/08/21 : CIA-RDP79T00975AO20100080001-9 Secret Approved For Release 2003/08/21 : CIA-RDP79T00975AO20100080001-9