NATIONAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A026600010051-0
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 16
• Document Creation Date: December 20, 2016
• Document Release Date: October 23, 2006
• Sequence Number: 51
• Publication Date: June 13, 1974
• Content Type: REPORT

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I- I
National Intelligence
Bulletin
State Dept. review completed
DIA review(s) completed.
Top Secret
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National Intelligence Bulletin
June 13, 1974
CONTENTS
ITALY: No progress toward resolving economic policy dif-
ferences. (Page 1)
FRANCE: Government adopts austerity program. (Page 2)
WEST GERMANY: Defense Minister Leber studying ways to
extricate Bonn from European multirole combat aircraft
project. (Page 3)
ARGENTINA: Economic policy setbacks disturb Peron.
(Page 4)
CHINA-JAPAN: Negotiations for new fisheries agreement
deadlocked. (Page 7)
PERU: Military modernization under way. (Page 15)
THAILAND: Labor movement threatens general strike in
support of textile workers. (Page 17)
FOR THE RECORD: (Page 18)
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National Intelligence Bulletin June 13, 1974
The consultations that have followed the submission
of Prime Minister Rumor's resignation have produced no
compromise on the economic pol3.cy differences that brought
down the Italian government.
The Socialists continue to oppose the credit re-
straints that the Christian Democrats feel are necessary
to stabilize the faltering economy. For their part, the
labor unions have made it clear that they will press their
economic demands on any new government, although they have
indicated they would support a program that would equita-
bly distribute austerity and avoid unemployment.
President Leone has been consulting with political
leaders to find a solution. His consultations end today,
but there has not been the slightest sign so far of a
break in the deadlock or of candidates pressing forward
to patch together a new government.
Well-placed sources of the
US
embassy report that
Leone is considering submitting
the
issues that divide
the government to parliament for
an
open debate and a
vote. Leone may float: this idea
in
order to pressure
the Socialists--who would not want to bear the full onus
of the breakup of the center-left coalition--to make con-
cessions.
The Socialists, however, are not likely to yield.
They have been exuding confidernce over the Christian Dem-
ocrats' defeat in the recent referendum on divorce. The
Socialists interpreted this result as a sign of a basic
shift in Italian voter attitudes in favor of more rapid
social change. If, as expected, the regional election
in Sardinia next week results in Christian Democratic
losses and Socialist gains, the Socialists will probably
become even more intransigent.
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National Intelligence Bulletin June 13, 1974
The French government yesterday adopted an austerity
program designed to slow inflation, restore the balance
of payments, expand exports, and finance new social welfare
measures.
In a conversation with the US ambassador, President
Giscard characterized the program as "harsh." He said
he hoped to control inflation--expected to be about 15
percent in 1974--within 18 months.
The program, some of which requires parliamentary
approval, includes:
--a reduction of oil consumption by rationing heat-
ing supplies, which account for 40 percent of French
energy consumption;
--an 18-percent increase in corporate taxes for
1973;
--a special tax on companies that would have paid
no tax for 1973;
--an income tax surcharge of up to 15 percent for
individuals in the higher brackets, to be partially
reimbursed next year;
--a one-time 10-percent tax on real estate profits
for 1974;
--a tax designed to limit corporate capital gains
derived from inflation.
These tax measures would increase total tax collec-
tion for the year by 4 to 5 percent. Other items may in-
clude increased prices for gasoline and other fuels, as
well as additional measures designed to restrict credit.
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National Intelligence Bulletin
June 13, 1974
Some of the funds derived from the austerity program
will be used to finance the social welfare measures that
Giscard promised during his campaign. Significant prog-
ress in that area is necessary by fall if he is to main-
tain labor peace and appease the left.
The government will announce its social program
after the cabinet meeting next Wednesday. Public reac-
tion will then indicate whether the people believe the
social measures promised by the government are worth the
inconveniences of its economy ro ram.
Dissatisfaction in the West. German Defense Ministry
with the European multirole combat aircraft reportedly
now extends to Defense Minister Leber. According to a
recent press report, Leber is studying ways to disengage
the Federal Republic from the project without creating
severe frictions with its partners on the project--the
UK and Italy.
Rising costs of the aircraft plus its recent failure
to meet the schedule for its initial flight may well have
convinced Leber that the project: should be canceled.
None of the participating countries heretofore has
been willing to risk the political damage to nascent
European defense cooperation by withdrawing from the
project. Chancellor Schmidt's views on the project are
not known, but he has recently spoken of the need to
s.
foster European production of Weapons system
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National Intelligence Bulletin
ARGENTINA
June 13, 1974
President Peron, after earlier threatening to re-
sign, announced late yesterday that a ten-hour solidar-
ity strike called by Peronist labor and youth organiza-
tions had given him the backing he needed to stay on.
In a highly emotional address to the nation, the Presi-
dent had said he would quit if massive support was not
forthcoming.
Peron is disturbed by recent economic setbacks,
which he attributes to sabotage and sectarianism within
the Peronist movement. He promised to punish dissidents.
Peron's pique appears to have been precipitated by
violations of the Social Pact--an agreement dating from
May 1973 between Peronist labor, business, and political
leaders to hold down prices and wages in an effort to
halt inflation. The pact has come under increasing
strain in recent months, however, and a general wage in-
crease and price adjustments have been made ahead of
schedule. The adjustments in turn have created demands
for further wage increases.
Labor discipline within the Peronist movement has
been deteriorating rapidly during the past few weeks.
Wildcat strikers on several occasions ignored appeals
from their leaders to return to work.
Peron, in moments of frustration over the splits
and political fighting within his movement, has previously
intimated that he might resign. The fact that Peronist
supporters were ordered into the streets right after his
dramatic plea, followed by an equally dramatic announce-
ment that he would remain, suggests careful orchestra-
tion that could serve as a prelude to new austerity meas-
ures. The resignation of the cabinet, as reported in
press dispatches, may have been demanded by Peron as a
means of facilitating ministerial changes he has been
contemplating.
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National Intelligence Bulletin June 13, 1974
Sino-Japanese negotiations for a new fisheries agree-
ment covering the Yellow and East China seas are dead-
locked, according to a Japanese official. The major is-
sue appears to be Chinese insistence on a 200-mile coastal
fishing limit.
Details of the Chinese claim are not yet clear, but
the Chinese position on this and
o er matters, such as catch limitations and denial of
access to PRC "military zones," is very hard. Japanese
negotiators have predicted that there will be no agree-
ment on the fisheries problem before June 22, when the
current, unofficial pact expires.
Although Peking has voiced support for the 200-mile
economic zone concept when it has been broached by other
countries, it had in the past privately stated that the
principle would not be applied to its own coastal waters.
During the negotiations with the Japanese, Peking is keep-
ing in mind issues that will probably arise at the Law of
the Sea conference, which opens later this month in Vene-
zuela.
As self-proclaimed leader of the Third World coun-
tries, most of whom support the 200-mile economic zone
concept, Peking cannot afford to abandon the principle
in its own bilateral negotiations with another country.
As a result, the Chinese may attempt to stall in their
talks with the Japanese, at least until after the Law of
the Sea conference.
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Mariano
,Meigar Air Base
L
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Matarant..
a
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Mollendo
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National Intelligence Bulletin June 13, 1974
PERU
Plans to modernize the military continue at a steady
pace, reflecting the Velasco government's concern over
a perceived threat from Chile. Long-standing Peruvian
distrust of Chile has intensified since the overthrow of
President Allende.
Chilean leaders likewise are distrustful of Peruvian
motives, which they believe may be designed to recover
territory lost in the War of the Pacific almost 100 years
ago.
Peruvian authorities are particularly sensitive to
what they view as Chilean efforts to offset Peru's arms
lead. Peruvian military leaders have a deep sense of
inferiority vis-a-vis Chile and believe they must main-
tain a superior force as a deterrent.
To this end, recently acquired air force fighters
and army armaments, including Soviet T-55 medium tanks,
are being readied for operational status. Additional
purchases and improvements appear imminent.
The army is using navy ships and land convoys to
transport Soviet tanks and other arms and materiel from
Callao to the southern port of Matarani near a new army
installation at La Joya. Transshipment of the tanks
would be consistent with plans for improving military
capabilities in the south.
The eight Mirage V fighters which the air force pur-
chased from France last year have apparently arrived in
Lima and will eventually be permanently stationed at
Mariano Melgar Air Base, the new fighter group installa-
tion at. La Joya. Israel has provided a four-man techni-
cal team to prepare the aircraft for operational use and
may establish a more permanent mission to upgrade Peru-
vian maintenance capabilities.
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National Intelligence Bulletin
June 13, 1974
The navy also appears to be developing major military
installations in the La Joya area, which may eventually
become a joint. military complex. Mirages and Canberras
have already been using the airfield at Mariano Melgar
temporarily as other base facilities near completion.
Development of this complex around La Joya has been
planned for several years, because the area is well suited
for air and ground training. Since the complex is only
some 140 nautical miles from the Chilean border, it would
be a valuable staging area and operational base in the
event of hostilities with Chile.
The Chilean military will doubtless become aware of
Peru's movement of tanks south, heightening their concern
over Peruvian intentions. This will serve to reinforce
the suspicions of those military leaders who believe the
Peruvians themselves are planning an attack.
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National Intelligence Bulletin June 13, 1974
The Thai labor movement, throwing its support behind
striking textile workers, is threatening to launch a gen-
eral strike if the government does not accept demands for
changes in the labor law. The Sanya government has in-
dicated that it is sympathetic to some of the workers' de-
mands, the most important of which is an increase in the
minimum wage. It is likely that government acceptance
of this demand would largely defuse the protest, now in
its fifth day.
There is a danger, however, that if the government
does not move quickly, radical labor and student elements
will succeed in escalating the workers' demands beyond
the point the government is willing to go. 'Under such
circumstances, the government would face an unpalatable
choice between resorting to strong-arm measures against
the demonstrators or suffering a further loss of control
to the radicals--a situation that would antagonize the
military. While the military are reluctant to intervene
in the political process, their lack of support could
bring Prime Minister Sanya to the point of again offering
to resign. 25X1
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Tational Intelligence Bulletin
June 13, 1974
Portuguese Guinea: Cease-fire talks between Lisbon
and the Portuguese Guinea insurgents are scheduled to re-
open today in Algiers. The first round of talks, held in
London, was adjourned on May 31 to give the two sides time
to study each other's bargaining position. The insurgents
are demanding immediate independence for the territory as
the "Republic of Guinea-Bissau," which they proclaimed
last fall. While recognizing the possibility of indepen-
dence, Lisbon is insisting on a popular referendum that
will allow the inhabitants of Portuguese Guinea to deter-
mine the territory's political future. The insurgents
had requested that the talks be moved to Algiers. The
Algerian government is a strong backer of the insurgents
and is encouraging them to hold out for recognition before
agreeing to Lisbon's overriding desire to work out a cease-
Cambodia: Prime Minister Long Boret resigned this
morning, and President Lon Nol immediately appointed him
to form a new government. These moves, under discussion
I-or several days, are aimed at easing political quarrel-
inq in Phnom Penh. Boret's new cabinet will probably be
eniarged to bring in more officials acceptable to all
factions. The new government, likely to be formed in a
few days, will also include man holdovers, some with
different portfolios.
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