CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A024800010001-5
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 13
• Document Creation Date: December 14, 2016
• Document Release Date: August 21, 2003
• Sequence Number: 1
• Publication Date: June 30, 1973
• Content Type: REPORT

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Central Intelligence Bulletin
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4M 04//
30 June 1973
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No. 0156/73
30 June 1973
Central Intelligence Bulletin
CONTENTS
CHILE: Allende stands to profit fromAll-conceived
WESTERN EUROPE: Most official r actions to the US-
Soviet summit h'Ave been positivbut extremely cau-
tious. (Page 2)"
INTERNATIONAL MONET.A Y DEV OPMENTS: Major European
currencies remain str g gainst dollar following
mark revaluation. (PacTiC 5)
VIETNAM: The PRG dais not intend to establish a
. (Pag .7)
capital in the Sou
Lo~
EC-US: Commiss`on will meet sin on US compensation
issue. (Page,)
NORWAY-EC:,/Free trade pact comes i' ::to force on 1
~
July. P
ge 9)
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CHI : President Allende stands to profit
from the ill-conceived military rebellion that
collapsed less than three hours after it began
yesterday morning.
The revolt was attempted by the Santiago-based
Second Armored Battalion in the apparent hope that
the rest of the military and the police would join.
Instead, the bulk of the army and the carabineros
came to the government's defense and the rebels
surrendered when loyal troops arrived at the pres-
idential palace.
Allende may now be able to purge known plotters
and other enemies from the armed forces. Army com-
mander Prats and other armed forces leaders will
emerge with an enhanced public image as defenders
of constitutional order. On the other hand, their
chances of obtaining major concessions for returning
to the cabinet may now be reduced. Allende could,
therefore, solve his current political crisis by
maneuvering the military back into the government
on his own terms.
Yesterday's events may also strengthen Allende's
hand in dealing with his increasingly obstreperous
Communist and Socialist supporters. He can now
claim to have survived an attempted military coup
without the aid of their street brigades.
The abortive revolt certainly will be dis-
heartening to those opposition elements who have
been trying to provoke military intervention by
fostering strikes violence, and economic dis-
ruption.
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WESTERN EUROPE: Reaction to the US-Soviet
summit has focused on the consequences for the
Western alliance of the trend toward closer US-
Soviet relations and of the provisions of the agree-
ment on prevention of nuclear war.
Most official. reactions have been positive, but
extremely cautious. Allied officials want more time
to assess the implications of what they see as an
obvious short-term success for US-Soviet bilateral
relations. In general, the summit results have in-
creased concern about the role Europe can play be-
tween the superpowers. They will also lend support
to those who argue that Europe must speed the move-
ment toward political unity in order to provide a
framework for some kind of West European defense
option.
The British official. and press reaction has
been generally positive. On 28 June, Foreign Sec-
retary Home told Commons that the UK "welcomed with
satisfaction" the summit outcome and judged that
the interests of the alliance had been fully pro-
tected. He looked forward to the Conference on
Security and Cooperation in Europe, however, as the
testing ground for Soviet willingness to turn "high-
sounding declarations" into practical improvements
in East-West relations.
The French, not surprisingly, were upset by
the summit. To Paris, the meeting strongly re-
emphasized superpower dominance in international
affairs and overshadowed the subsequent meeting
between Brezhnev and Pompidou. Shortly after the
final communique was issued, Paris officially
stated that France remained outside "bloc politics"
and would not be bound by the decisions of the
superpowers. Privately, the Quai director of pacts
and disarmament affairs said that the agreement on
prevention of nuclear war tended to diminish tFiZ!"'
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credibility of the US nuclear deterrent and sug-
ested that the US would prefer a protracted con-
ventional engagement in Europe to the early use of
nuclear weapons. French press reaction was also
generally negative.
West German officials are concerned that the
agreement on the prevention of nuclear war might be
construed as a "no first use" pledge that would
limit the US response in the event of a conventional
Soviet attack on Western Europe. Bonn has urged
Washington to head off such interpretations with a
prompt and unambiguous reaffirmation of the US com-
mitment to a nuclear defense of Europe. The West
Germans, just recently having hosted a Brezhnev
visit themselves, have not explicitly criticized
US-Soviet bilateralism. Official releases have
nevertheless stressed the need for "early consulta-
tions" in NATO, and government officials have been
anxious in private discussions about what they see
as intensifying US-Soviet bilateralism.
The initial reaction from other allies has con-
tained the same blend of satisfaction with the fur-
ther improvement in US-Soviet relations along with
apprehension over what this could an for the al-
liance.
30 Jun 73 Central Intelligence Bulletin
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SECRET
Exchange Rate Changes Relative to the Dollar Since
the European Joint Float was Introduced on 19 March
(Figures
in Percent)
7 May*
1 June
28 June
29 June
Mark
--0.9
+5.6
+14.3
+16.2
Guilder
-2.1
+3.9
+10.3
+10.2
French franc
-0.4
+5.0
+9.9
+9.7
Sterling
+1.3
+4.6
+5.0
+5.0
Swiss franc
0
+5.8
+7.8
+11.3
Yen
-0.3
+0.1
+0.2
+0.2
"DoZZar at strongest levels in recent months
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INTERNATIONAL MONETARY DEVELOPMENTS: The
major European currencies remained strong against
the dollar following the announcement of the re-
valuation of the mark yesterday morning. The mark
has now appreciated against the dollar by 17 per-
cent since early May, when the dollar was showing
some strength, and by about 50 percent since early
1971. The Swiss franc also moved up sharply against
the dollar. The major question for dealers is
whether the mark will continue to move up against
the dollar and leave the other European currencies
fairly stable, or whether these currencies will
move up substantially in line with the mark.
Bonn's action places the mark 5.5 percent
higher in terms of gold and Special Drawing Rights.
This is about the same percentage change as against
the currencies of France, Belgium, Luxembourg, the
Netherlands, Norway, Sweden, and Denmark--the other
participants in the European joint float--which will
continue to operate according to existing rules.
The value of the dollar in terms of marks will con-
tinue to be freely determined by market forces.
Bonn's decision yesterday came less than 24
hours after officials denied rumors of a revaluation.
Finance Minister Schmidt, who spoke out against re-
valuation on Thursday, admitted yesterday that the
Bundesbank had to buy about $900 million worth of
European currencies Thursday, for a total of $1.6
billion in the last two weeks or so, far more than
previous market estimates. These inflows, which
came mainly from Europe, were threatening Bonn's
new anti-inflation program.
German officials, in fact, had not expected
the program to have any significant impact on in-
flation until early next year, in any case; rapidly
growing foreign orders for German industrial products
are a serious threat to the effectiveness of the
anti-inflation plan. The theoretical effects of
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revaluation--an increase in the price of German
goods, reduction of import prices, and a decreased
trade surplus--would take place only over the long-
run. Indeed, the Finance Minister has cast doubt
on prospects for any near-term reduction of the
massive and growing trade surplus. Citing the
present worldwide economic boom, he holds little
hope for lower import prices or for a reduction
in demand for German goods. Trade results for
the month of May--withheld until after the revalua-
tion announcement for fear of setting off new spec-
ulation--support recent estimates that the 1973
trade surplus might reach an unprecedented $10-11
billion.
The revaluation will keep the joint float
intact for at least a while longer. It already
has brought the mark from the top to the bottom
of the European band and relieved pressures on
the band created by the mark's rapid climb. The
revaluation, however, represents another windfall
for money managers and speculators who bet on a
mark revaluation. It may encourage them to try
their hand again, thereby keeping the interna-
tional currency markets unsettled. The mark may
even remain the traders' favorite; it is little
more than three months since it was last revalued.
Tokyo may now face the prospect of European
pressure to have the yen appreciate further. Other-
wise, Japanese products are likely eventually to
enter European markets in even greater quantities.
The Bank of Japan is able to manage the yen-dollar
rate through its rigorous system of controls.
Since March, the Bank reportedly has sold $3 bil-
lion to keep the yen near its present rate. Heavy
demand for dollars in Japan reflects the large
volume of imports and capital outflows. Tokyo
recently announced a record balance-of-payments
deficit of $1.185 billion in May, up from $1.163
billion in April, in contrast to a small surplus
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LLUNAM: The Viet Cong's Provisional Revolu-
tionary Government (PRG) does not intend to estab-
lish a capital in South Vietnam, according to Le
Chan, North Vietnam's information chief in Paris.
The PRG's goal, he said, is not to divide the South
into two separate political "groups," but rather
to have one "government of national concord" with
a single capital.
Chan rejected the view that the PRG did not
want to set up a capital for fear the South Vietnam-
ese or the US would bomb it. He said US air inter-
vention in South Vietnam was now unlikely and that
the South Vietnamese would be discouraged by Commu-
nist antiaircraft installations.
There has been considerable speculation that
the PRG was on the verge of establishing a capital
in some area in the South under Communist control.
Rumors that such a declaration would be made reached
a peak just before the fourth anniversary of the
founding of the PRG on 6 June, when Liberation Radio
announced that several Communist and third-world
countries had sent ambassadors to an undisclosed
location in northern South Vietnam to present their
credentials to the PRG.
If the Vietnamese Communists ever did intend to
set up a PRG capital, there are several possible ex-
planations for their failure to follow through.
They may simply have decided that they had no site
worthy of the designation, or Hanoi may have passed
the word that establishment of such a capital was
not consistent with its contention that Vietnam is
one country. There is also a possibility that the
Communists backed off as a result of some develop-
ment in the Kissinger-Tho talks. At any rate, Le
Chan says that Hanoi, which has never formally rec-
ognized the PRG, now has no intention of doing so,
and the PRG may have to content itself with receiving
diplomatic visitors in an undisclose..ocation in
the South.
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EC-US: The EC Commission will meet on 2 July
with a committee of member-state trade officials as
part of an effort to get around French opposition
to granting the US compensation for trade damage
incurred as a result of the community's enlargement.
At this week's Council. meeting, the French
alone adamantly refused to reconsider the commis-
sion's present mandate that precludes negotiating
any compensation with the US. Although some member-
state officials believe that France will remain in-
flexible, others think it possible that Paris will
permit the commission to explore terms of an im-
proved EC offer with the US.
Whatever French intentions may be, the commis-
sion evidently plans to stretch its instructions
from the council in order to elicit other member-
state views on how the mandate might be improved.
Although not overly sanguine about this tactic,
commission officials say their efforts would be
aided by an effective US rebuttal in GATT of the
existing community case. The EC Council will acai
take up the compensation igsn 1on 23 July.
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NORWAY-EC: The free trade agreement between
the EC and Norway will come into force on 1 July
when the first stage of reciprocal tariff reduc-
tions is introduced. The agreement will permit
trade in industrial products to be conducted on
a tariff-free basis, subject to appropriate safe-
guards. Customs duties for most products will be
abolished over the next four years and, for cer-
tain sensitive Norwegian products--including
paper, most ferroalloys, unwrought aluminum,,
and semi-finished aluminum products--over a longer
period of time.
With the entry into force of this agreement,
all the countries of Western Europe, except Finland--
which has negotiated,but not yet signed a similar
agreement--will be connected to the EC by preferen-
tial trade links. The US objects to certain as-
pects of these arrangements, maintaining that they
are not fully consistent with GATT provisions re-
garding free trade areas and could impair the trade
interests of the US. Thus far in the on-going GATT
discussions, the EC has rejected the validity o
US claims.
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Secret
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