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December 20, 2016
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September 18, 2006
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July 2, 1976
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pr AV AV AV Air A1r.AV Air Air Air Air ApprRMWMle aSe 200710031-00- TO: NAME AND ADDRESS DATE INITIALS i z 3 4 ACTION DIRECT REPLY PREPAR E REPLY APPROVAL DISPATCH RECOM MENDATION COMMENT FILE RETUR N CONCURRENCE INFORMATION SIGNATURE REMARKS: FROM: NAME, ADDRESS, AND PHONE NO. DATE CIA-RDP79TOO975AO2910 100 4 op ecret (Security Classification) 1 1 1 1 Access to this document will be restricted to those approved for the following specific activities: Friday July 2, 1976 CI NIDC 76-155C 1 1 1 1 NATIONAL SECURITY INFORMATION Unauthorized Disclosure Subject to Criminal Sanctions 25X1 DIA State Dept. review(s) review completed. completed Top Secret Approved For Release 2007/03/08 : CIA-RDP79T00975A029'ttYad'I Tul- s'fication 25X1 Approved For Release 2007/03/08 : CIA-RDP79T00975AO29100010004-4 Approved For Release 2007/03/08 : CIA-RDP79T00975AO29100010004-4 Approved For National Intelligence Daily Cable for Friday, July 2, 1976. 25X1 I IT he NID Cable is for the purpose of informing senior US officials. //Lebanese Christians yesterday launched what they expect to be the final attack on the Tall Zatar refugee camp. The Palestinian defenders of the camp, whom we estimate to num- ber 6,000, have reportedly been ordered not to surrender despite the fact that most Palestinian leaders expect the camp to fall soon.// Concern over Reprisals 25X1 Fear of Palestinian and leftist reprisals has gripped Beirut, as the battle for Tall Zatar enters its final stage. The greatest concern is for some 70,000 Christians living in Muslim- controlled areas of Beirut and its environs. 25X1 A high-ranking Christian militia officer told US offi- cials yesterday that he--and apparently others--are frustrated with the principal Christian leaders, who apparently have shown little concern over the repercussions of their actions. The offi- cer accused Camille Shamun and some Phalanges leaders of trying to establish partition, and in so doing, jeopardizing the lives of many of their fellow Christians. Approved Igor Release 2007/03/08 : CIA-RDP79T00975AO29100010004-4 Approved For Release 2007/03/08 : CIA-RDP79T00975AO29100010004-4 Muslim leftist leaders and Salah Khalaf--the ranking Palestinian leader during Yasir Arafat's absence from Lebanon-- are reportedly trying to prevent unauthorized acts of venegence. They have promised publicly that "peaceful" Christian enclaves will not be attacked. Neither Palestinian nor leftist leaders, however, are able to control the numerous undisciplined factions operating throughout Beirut, and they no doubt fear that they may soon be faced with a major cycle of uncontrollable violence. Jumblatt apparently told an Arab League official on Wednesday that he was prepared to consider any form of negotiation if the Christians would withdraw to their former positions around Tall Zatar. Arab League Efforts Arab League Secretary General Riyad and his two-man peace committee left for Beirut yesterday by way of Damascus, despite the fact that their call for a cease-fire yesterday has been completely disregarded. The committee will have virtually no impact on the situation until the Christians have achieved their victory over Tall Zatar, and even then the prospects for negotiating a truce are bleak. The Saudi and Sudanese contingents of the League's security force have entered Lebanon. Unconfirmed press reports say they were stationed yesterday on the outskirts of Beirut. The Saudis, however, have all but declared publicly that their chief concern is the safety of their troops--not the imposition of a cease-fire--and that they will not become embroiled in the fighting. The League apparently has called for other members who had not previously agreed to contribute to the peace-keeping force Approved q Approved For to send troops to Lebanon immediately. So far, only Iraq and, reportedly, North Yemen have indicated they would respond; the Iraqi offer, of course, would be unacceptable to both Syria and the Lebanese Christians. Soviets and Others Leave Beirut The plight of Beirut residents worsens daily, and oreigners as well as many Lebanese continue to leave the city. Only small quantities of drinking water are available in most areas of the city, and food, fuel, and medicine are in dangerously short supply. The American University Hospital has apparently been hard hit by shortages of water and electricity, and now depends on receiving its most urgently needed supplies overland from Damascus. A Soviet diplomat in Damascus told a US official yes- terday that the Soviets are planning to evacuate some of their nationals by sea from the southern city of Sidon. He gave no de- tails on the timing and size of the evacuation. According to the Reuter press service, which is generally accurate in its coverage of Lebanon, the Soviet evacuation was under way yesterday. //Earlier this week, the Soviet defense attache in Damascus told the US defense attache that the total number of official and unofficial Soviet citizens in Lebanon was no more than 100 and that most dependents and non-essential personnel had been sent home some time ago. The Soviet attache expressed his personal view that both the US and the USSR should try to maintain some sort of presence in Lebanon, despite the current difficulties.// The resignation yesterday of Prime Minister Arias, re- portedly at the bidding of King Juan Carlos, could give a boost to the Spanish government's reform program. The move came as a complete, surprise to the cabinet, which must also resign. The King probably hopes to make the cabinet more cohe- sive. Arias has reportedly been at loggerheads with key members of the government like Interior Minister Fraga and Foreign Min- ister Areilza over the reform program. Approved For Release 2007/03/08 : CIA-RDP79T00975 029100010004-4 Approved For I IJuan Carlos has reportedly been displeased for some time with Arias' failure to provide strong leadership for the govern- ment's liberalization efforts but has hesitated to replace him. The King must select a new prime minister from a slate of three names drawn up by the rightist-dominated Council of the Realm--a 17-man senior advisory body. When General Franco died last November, Juan Carlos was reportedly blocked in his attempt to replace Arias because he could not be sure that the Council would include a candidate on its list favorable toward reform. The King apparently feels more confident now that he can prevail on the Council to nominate a man of his choice. The Council, which met yesterday, must submit its list within 10 days. The King's secretary told Ambassador Stabler that the new prime minister would be a member of the present cabinet. The most likely candidate at this stage appears to be Fraga, the chief architect of she reform program and the dominant force in Arias' government. He has made many enemies with his forceful personality, however, and he has recently been criticized by both the right--for his strong support of liberalizing reform-- and the left--for his role as chief of the internal security forces. Areilza, another candidate, is more popular abroad than at home, where he is distrusted by the right and the military be- cause of his image as a strong liberal. If both men are cons=idered too liberal by the Council of the Realm, someone who is further to the right but still in favor of gradual reform might be chosen as a compromise candidate--for example, the young and dynamic minister of the National Movement, Adolfo Suarez. If the King is unable to get the civilian of his choice, he mig t opt for a progressive military leader like the new chief of the army general staff, Lieutenant General Gutierrez Mellado. Lieutenant General Santiago y Diaz de Mendivil, deputy prime minister and minister for defense affairs, has been named acting prime minister until a new one is sworn in. 25X1 Approved For Release 2007/03/08 : CIA-RDP79T00975AOP29100010004-4 25X1 Approved For Release 2007/03/08 : CIA-RDP79T00975AO29100010004-4 Next 1 Page(s) In Document Exempt Approved For Release 2007/03/08 : CIA-RDP79T00975AO29100010004-4 Approved For R lease 2007/03/08 : CIA-RDP79T00975A 9100010004-4 25X1 Violence erupted yesterday following the Peruvian gov- ernment s announcement of severe economic austerity measures. The military regime reacted swiftly to quell demonstrations and strikes in Lima and its port, Callao. By afternoon the disturb- ances had been brought under control. Some violence has occurred in the southern city of .Arequipa; a general strike is reported under way there. The violence does not appear to have been widespread; on y isolated and apparently uncoordinated incidents, such as the burning of buses and cars, rock-throwing, the setting of bonfires, and some looting, have been reported. The government has established a 30-day state of emer- gency which suspends certain personal freedoms. It also imposed a curfew for Lima and Callao and declared today a "non-work day." In addition, riot police and military armored cars are patrol- ling the capital. I cause further problems. The measures include: --Wage freezes for a year, after a small initial increase. --Lifting of price controls and removal of subsidies from many basic items. --Doubling the price for petroleum products and raised fares for public transportation. --A budget reduction of $218 million that will cause a drastic cut in public investment and eliminate new employ- ment and promotions.// //The government weathered yesterday's outbreaks we. , but workers idled by the "non-work day" may engage in fur- ther protests against the austerity program. The government may have to react harshly to control new anti-government demonstra- tions.// Approved Fo4 Release 2007/03/08 : CIA-RDP79T0097gA029100010004-4 //The unpopularity of the economic measures will Approved Fob The state of emergency imposed on June 19 appears to be hastening political polarization in Jamaica and solidifying Prime Minister Manley's alliance with the radical wing of his party. On June 26, Security Minister Munn announced that 353 persons had been arrested, of whom more than 130 have been im- prisoned. Many reportedly are leaders and organizers of the op- position Jamaica Labor Party. We know of only one official of Manley's People's National Party who has been detained. I ILabor Party leader Seaga has denounced the govern- ment's actions as a "political witch hunt" aimed at assuring a victory by Manley and a majority of his party's candidates in the election to be held by next spring. Pearnell Charles, a Labor Party senator and its deputy leader, has been arrested and indicted under the emergency orders. Seaga says three of his party's candidates and many of their workers have also been arrested. The blatantly partisan enforcement of the state of emergency is causing public opinion to turn against the govern- ment, in the opinion of the US embassy in Kingston. Manley's failure so far to establish a tribunal to review the cases of persons detained--as required by law--has damaged the govern- ment's credibility. Manley took the offensive against his critics on Tues- day in a televised speech in Parliament. He said the security forces have uncovered evidence of subversion and terrorism aimed at overthrowing his government. He read from documents that al- legedly brand him and the government as communist. A subsequent government-sponsored propaganda campaign has attempted to link the Labor Party with these "plots" against the government. Approved F Approved For Manley's campaign against Seaga and the Labor Party undoubtedly has been urged on him by the increasingly influen- tial radical wing of his party. A member of that group was sworn in as parliamentary secretary in the Ministry of National Defense on June 21. This is one step in what is likely to be a series of moves to bring the military and constabulary forces more under the control of the left wing of the government and Manley's party. I //Jamaica's economic problems--declines in bauxite output, reduced tourist trade, lower sugar prices, and a dearth of private investment--have resulted in serious foreign exchange difficulties and a further reduction in economic activity.// which would have no choice but to raise bauxite and alumina prices. We believe other Caribbean bauxite producers as well as Guinea would follow any price increase by Jamaica. These producers account for about 75 percent of US bauxite and alumina imports.// //The only easy recourse for Prime Minister Manley's government would be to raise taxes on the aluminum companies, //When the left-leaning Manley became prime minister in 1972, the country had excellent growth prospects, especially in aluminum and tourism. At first the economy did well under Manley, but in the past 18 months it has deteriorated rapidly: --Government pressure against the aluminum companies have caused a sharp decline in bauxite and alumina investment. --Manley's socialist rhetoric and his rapprochement with Cuba have scared other foreign investors away and led to large capital flight. --Strikes have brought on a 30-percent drop in bauxite and alumina output in the first half of 1976.// --Violent crime, on the rise for years, has recently taken an anti-foreign turn leading to a sharp drop in tourism. Approved Fora Release 2007/03/08 : CIA-RDP79T009754&029100010004-4 Approve //In the first half of 1976 the price of sugar, one of Jamaica's main exports, fell 50 percent from the 1975 level.// 25X1 I /The Jamaican economy slumped badly in 1975 when real gross national product dropped 2 percent, and the slump worsened this year.// Despite the government-imposed import restrictions, Jamaica had a record current-account deficit of $192 million during the first six months of 1976. vate business. These measures are intensifying the impact of im- port restrictions on business output and employment. The govern- ment has prevented unemployment from increasing beyond the 20 to 25 percent rate prevailing since 1970 only through padding public employment rolls by 40 percent. the hope of offsetting declines in business output. To limit inflationary pressures, he has increased income and property taxes and has instituted stringent controls on credits for pri- Manley has stepped up public investment spending in //Rising world demand for aluminum and the end of the bauxite strikes will probably allow bauxite and alumina exports to increase by 50 percent in the second half of this year. We expect no improvement in earnings from sugar; we anticipate a drop in tourism receipts. With continued import restrictions, the current-account deficit for the second half should fall by $100 million to perhaps $92 million.// Jamaica could finance this deficit with the recent $87-million loan from its Caribbean Common Market partners and additional aid from the World Bank and other official sources. This, however, would largely exhaust Jamaica's borrowing potent- ial and would leave imports 15 percent below the 1975 level. //In order to increase imports from present restricte levels, Jamaica will have no choice but to raise bauxite taxes and prices. An average price hike of 30 percent for bauxite would be required to allow imports to rise to the 1975 level. The likelihood of a price increase will grow with the approach of the national election late this year.// //The aluminum companies probably will not resist further tax increases, particularly in the face of rising demand. Approve Approved For R$Iease 2007/03/08 : CIA-RDP79T0097 In the short run, the companies cannot readily shift sources of supply, since US alumina refineries are built to process a part- icular type of ore. A large share of company alumina capacity is in the Caribbean--17 percent in Jamaica alone.// be passed on to consumers, particularly since bauxite is only about 15 percent of the total cost of aluminum metal. For example, a 30-percent rise in bauxite prices would increase //Company resistance would expose $850 million in investment to expropriation. In any event, increased costs can aluminum prices by 5 percent, or 2 cents a pound.// //The Pinochet government reportedly is gratified with the outcome of the recent meeting of the OAS General As- sembly in Santiago, from which it derived a measure of badly needed respectability. //The Chileans made a good impression on most of . the visitors, some of whom departed expressing skepticism about charges of human rights violations. The apparent order and sta- bility did much to convince Latin American delegates that alle- gations of continuing repression are exaggerated.// //During the meeting Chile also succeeded in forg- ing an informal alliance with countries having similar ideologi- cal leanings. Foreign ministry officials were pleased by the support Chile received from what they describe as the "anti- Marxist bloc" consisting of Brazil, Argentina, Uruguay, Para- guay, Bolivia, and Nicaragua. These groups can probably be counted on to come to Chile's defense on the human rights issue.// While international criticism of the Pinochet regime will continue to cause problems for Chile, it may begin to abate somewhat. The measures it has taken to ease up the worst aspects of its detention procedures and to release prisoners are likely to win it at least grudging acceptance. Approved For Approved Fq Judging by past performance, improvements in the , treatment of political prisoners and dissidents will be slow, and retrogression is a distinct possibility. Italy's Christian Democrats, in their first official proposal for a post-election government, have called for another coalition with the Socialist Party and offered the Communist op- position a limited consultative role in the formulation of gov- ernment policies. Christian Democratic chief Zaccagnini, in a statement , approved unanimously this week by the party directorate, said that such a coalition would also be open to the smaller parties except He emphasized, however, that the Socialists the neo-fascists . would be the Christian Democrats' key partner and promised the Socialists that they would be treated as political equals by the Christian Democrats--a recognition that only the Socialists, with about 10 percent of the seats in parliament, can guarantee the Christian Democrats a non-Communist majority. Zaccagnini made it clear that the Communists would be consu to on the new government's program but insisted that they would have to remain in the opposition rather than becoming part of the government's working majority in parliament, as the So- cialists have been demanding. The Socialists want to tie the Communists as closely as possible to the government's program in order to limit the Communists' ability to exploit their opposi- tion status. 'le Zacca nini was vague about the format for discus- Wh i V he implied that the negotiations would ith the Communists , sons w take place in parliament. The Christian Democrats have in the past resisted the idea of negotiating openly with the Communists in parliament on the grounds that such an arrangement would tend to blur the distinction between the governing majority and the opposition. an obvious effort to make the proposal more palat- I n Zaccagnini did not exclude the possi- ists C h , ommun e able for t bility of the Communists acquiring the presidency of either the Approved For Approved For senate or the chamber when the new parliament convenes on July 5. The Communists have insisted that their increased numbers in the legislature entitles them to one of these offices, which have al- ways been the preserve of the governing parties. The Christian Democratic leader argued against the in- stallation of a temporary caretaker government. 25X1 be willing to form the Christian Democrats would such a government if it appears that the So- cialists need more time to sort out their options. may emerge from a meeting of the party directorate today. The Socialists are likely to have trouble formulating a united response due to internal divisions stemming from their failure to score any gains in the election. There are increasing signs of a revolt against party leader De Martino, and an authoritative Socialist answer to the Christian Democrats may have to await the outcome of a leadership struggle in the party. Although serious negotiations will not begin until after parliament is seated, some indication of the Socialist attitude role in the next government. The Communists may take up the Christian Democratic proposal during a central committee meeting that opens today. The Communists have so far avoided committing themselves to specific formulas, although the party press has reacted favorably to sug- gestions that the Communists be given an indirect consultative More details are available about the disturbances in Poland last week over proposed price hikes on food. The mayor of Radom, where the party headquarters building was gutted, said Wednesday that 75 militiamen had been hurt in the "fighting." He added that two demonstrators were accidently killed by their own comrades but did not say how many dissidents had been injured. The mayor said that some of those detained had already been sentenced and all would be punished. The authorities appear to be avoiding general criticism of the demonstrators, concentrating instead on those incidents where violence was most evident. Approved Fo Approved F I The US embassy in Warsaw has received a report that wor ers took over one of the steelworks in Nowa Huta near Krakow and threatened to burn it down if police interfered. Polish party leader Gierek will make a "major" speech today in his home town of Katowice, according to a Polish foreign ministry official. It will be Gierek's first public appearance in Poland since the eve of the riots last Friday. The violence and the regime's decision to withdraw its price package have undoubtedly prompted Gierek to reassert personal leadership. He can be confident of a large and warm welcome in Katowice, where he was party chief for 13 years. He will probably defend the continuing need for price increases but will also say that party and government leaders are carefully considering workers' proposals. In addition, he is likely to criticize those who resorted to violence and to call on Poles to rally behind him and the part in these difficult times. Approved Approved For Fjelease 2007/03/08 : CIA-RDP79T00971 The USSR reportedly has bought about 1.5 million tons of US and Brazilian soybeans for delivery this fiscal year. It bought a similar amount from the US and Brazil during the fiscal year that ended on June 30. The new purchases are in addition to about 12 million tons of grain bought so far this calendar year. I IThe Soviets can use the imports to rebuild their live- stoc herds after the distress slaughtering of last year when inventories of hogs and poultry dropped 20 percent and 15 per- cent, respectively. Soybeans contain large amounts of protein that are particularly important for swine and poultry. The USSR also can use the soybeans to cover any shortfalls in vegetable oil output this year. Co bean prices have been strong recently, and we do y not expect them to drop soon. A recent pick-up in world demand, including a Chinese purchase of 100,000 tons of beans from Bra- zil, could have spurred the Soviets to buy now. Approved For (Release 2007/03/08 : CIA-RDP79T00975AO29100010004-4 Approved Forl African leaders who attend this year's summit meeting of the Organization of African Unity, which opens today in Mau- ritius, will focus primarily cn South Africa and Rhodesia. Only nine heads of state will be present; the others are to be repre- sented by stand-ins. I I The participants will include newly independent Sey- c e es, which has been admitted as the OAU's 48th member. In keeping with OAU tradition, the host, Mauritian Prime Minister Ramgoolam, will probably be named chairman of the organization for the coming year, replacing Uganda's President Amin. Proposals calling for tightened economic and political sanctions against South Africa and for increased support to Rho- desian, Namibian, and South African insurgents reportedly top the agenda drawn up by the foreign ministers in the preparatory conference that ended yesterday. South Africa was strongly con- demned for its handling of the recent riots. The ministers also proposed that an OAU fund be cre- ated to help compensate Mozambique for applying UN sanctions against Rhodesia. They recommended that Arab states be approached to provide the bulk of the financing. We do not know what, if any, measures the foreign min- isters recommended on Western Sahara and the French Territory of the Afars and Issas. Wrangling over diametrically opposed reso- lutions on the FTAI offered by Ethiopia and Somalia forced the ministers to extend their session by two extra days. South African Prime Minister Vorster's visit to Israel earlier this year had a strong impact in black Africa, and few African leaders would resist a move by Arab OAU members to have the summit endorse the resolut_.on equating Zionism with racism like the one adopted last year by the UN General Assembly. The summit will also review the proposals for closer Afro-Arab cooperation advanced last April at the Dakar confer- ence of Arab and African foreign ministers and may try to arrange a definite date for a future Afro-Arab summit uld put the proposals into action. Approved For Release 2007/03/08 : CIA-RDP79T00971AO29100010004-4 Approved Fclr Release 2007/03/08 : CIA-RDP79T009754&029100010004-4 uth Africa has been experiencing a foreign exchange S o bind that is likely to persist for several more months. I The government has little choice but to continue meas- ures to discourage imports and hope that gold prices do not sag further. The economy as a result will probably grow only about 2 percent this year. osition began to deteriorate nts ' p s payme South Africa in late 1974 as imports rose rapidly and nongold exports remained sened in early 1975 as gold prices i on wor stagnant. The situat began to fall, resulting in a record $1.1-billion current-account deficit in the first half of 1975. Even when South Africa devalued its currency by 4.8 percent in June 1975, the deficit remained high because gold prices continued to slide, and in September the government was forced to devalue by an additional 17.9 per- cent. I Foreign exchange reserves were rebuilt temporarily after devaluation, but this year conditions again deteriorated because of a drop in gold prices, continued weak demand for ex- ports, and a continuing high level of military purchases. t has borrowed heavily and rolled over The governmen short-term loans obtained in 1975 to increase capital inflows. tions in dealing with its payments 's o i f p ca r South A problems have narrowed. Shaky prospects for world gold prices rule out any abrupt increase in sales of gold from stocks. //The international market already is absorbing increased Soviet sales,// and periodic IMF auctions will add to internat30nalrsupplies. Industrial demand for gold is running roughly its 1971 peak level. Speculative demand, which accountedlfodown slightly more than half of free world demand last year, sharply because of moderation in inflation and. an upturn in real interest rates. With domestic inflation again edging upward to more to stimulate prices illin g than 10 percent, the government is unw further by another devaluation. It is also reluctant to impose Approved For Rp' Approved For additional import controls or to pile more restraints on a slug- gish economy. It already has stiffened monetary and fiscal measures during the past six months and has repeatedly tightened foreign exchange rules to relieve speculative pressures on its currency. It does not want to cut foreign military purchases. Exports probably will not begin accelerating appreci- ably until the fourth quarter. By then, the Western economic recovery may be making itself felt, and major new coal and iron ore export projects will have started paying off. By continued scrimping and borrowing, the government should be able to muddle through unless gold prices sag badly. Foreign borrowing will be more expensive, however, because South Africa's economic and political problems have weakened its credit rating. Ethiopia held a military exercise near its border with Somalia and the French Territory of the Afars and Issas on.Tues- day. Press reports from Addis Ababa say the exercise took place near Aysha, some 10 kilometers (6.2 miles) from the Somali bor- der. Ethiopia does not normally have units stationed in the tri- order area, but the US defense attache has reported that troops and materiel have been shipped there by rail from the capital over the past two weeks. The exercise was conducted pri- marily by Ethiopia's Third Division, located along the Somali border, and the air force reportedly provided air support. The presence of Ethiopian units in the tri-border area almost certainly concerns Somalia. A source of the US attache in Addis Ababa. says Somalia ordered three battalions to move to the -- The maneuvers apparently were to show Ethiopia' resolve to contest any Somali moves into the FTAI. 025X1 25X1' Approved For Release 2007/03/08 : CIA-RDP79T00175AO29100010004-4 Approved For //General Teferi Benti, the council's chairman, expressed Ethiopia's concern over Somalia's intention to Ambass- ador Hummel this week. Teferi said Mogadiscio has begun moving troops and making other preparations to take the territory by force. He also said that Somali-supported insurgent activity in southern Ethiopia is increasing. This was the first official Ethi- opian reference to the infiltration across the southern border.// //Teferi said the Ethiopians considered "less than satisfactory" private Soviet assurances to Addis Ababa that Moscow would do its best to restrain Somalia. He urged US-Soviet collaboration to preserve peace in the area.// FORN, ORCON) Approved For Release 2007/03/08 : CIA-RDP79T0097PA029100010004-4 V ADoo ed For Release 2007/03/08: CIA-RDP79T00975A029100010004-4 0 Top (Security Classification) 0 . 0 0 0 f 1 1 1 1 1 1 1 0 Top Secret 0 (Securityb 3%ffMiErgr Release 2007/03/08 : CIA-RDP79T00975AO29100010004-4