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September 20, 1976
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1 0 0 TO: NAME AND ADDRESS DATE INITIALS 1 2 3 4 ACTION DIRECT REPLY PREPA RE REPLY APPROVAL DISPATCH RECOM MENDATION COMMENT FILE RETUR N CONCURRENCE INFORMATION SIGNATURE REMARKS: FROM: NAME, ADDRESS, AND PHONE NO. DATE (Security Classification) CONTROL NO. Access to this document will be restricted to those approved for the following specific activities: 1 r 1 1 Monday September 20, 1976 CI NIDC 76-221C NATIONAL SECURITY INFORMATION Unauthorized Disclosure Subject to Criminal Sanctions State Dept. review completed Top Secret 0 0 Approved For Release 2007/03/06 :CIA-RDP79T00975A0/ aoA i 'Cation CIA-RDP79T A02930100Se -1cret Ton 25X1 Approved For Release 2007/03/06 : CIA-RDP79T00975AO29300010032-1 Approved For Release 2007/03/06 : CIA-RDP79T00975AO29300010032-1 Approved For Ro National Intelligence Daily Cable for Monday, September 20, 1976 CONTENTS 25X1 LEBANON: Situation Report CHINA: Leadership Appearance Page 1 Page 4 PORTUGAL: Moving Against Squatters Page 4 PANAMA: Weekend Calm Page 7 CHILE: Problems With Andean Pact Page 8 USSR: Yakubovsky Ill Page 9 USSR - EAST GERMANY: New Tank Page 10 EAST GERMANY: Credits for Grain Purchases Page 10 Page 12 SWEDEN: Social Democrats Upset Page 13 Approved For Wlease 2007/03/06 : CIA-RDP79T00975A049300010032-1 Approved For Re LEBANON: Situation Report I I The failure of yesterday's tripartite Lebanese talks s arp y reduces the prospects that the Syrians and Palestinians will be able to reach any kind of accommodation without further fighting. President-elect Sarkis, Palestine Liberation organiza- tion chief Yasir Arafat, and Syrian Deputy Defense Minister Jamil have announced that they will meet again on Friday after Sarkis' inauguration ceremony but this announcement was proba- bly intended only to mask the fact that their talks had ended in a deadlock. I I Arab League mediator al-Khuli admitted privately be- tore the session yesterday that he had tried in vain to per- suade Arafat to agree to an unconditional withdrawal of Pales- tinian forces from the Mount Lebanon area. Both Sarkis, repre- senting the Christian side, and the Syrians reportedly had in- sisted on that provision being included in any new cease-fire accord. Al-Khuli indicated that he did not believe Arafat possesse the strength to impose such a compromise on his own forces because of opposition from extremist members of the Re- jection Front and from Fatah hard-liners lead by Salah Khalaf. Each side apparently only rehashed its standard posi- tion at yesterday's meeting. Baghdad radio reported that Arafat offered to withdraw from the mountains but only if the Syrians and Christians would make comparable withdrawals and agree to allow displaced persons to return to their own areas, particu- larly to the Tall Zatar refugee camp overrun by the Christians last month. Neither the Syrians nor the Christians could be ex- pected to agree to such a,condition. Yet another meeting to resolve the Lebanese conflict ILLY JDe- U er consideration, this time in Saudi Arabia. An-Nahar, a reputable and usually well-informed Lebanese newspaper, re- ported yesterday that Sarkis and several other prominent Leba- nese leaders who visited Cairo recently are pressing for a Approved For Pelease 2007/03/06 : CIA-RDP79T00975A0293P00010032-1 Approved For R4 four-power Arab summit conference in Jidda to promote a recon- ciliation between Egypt and Syria that would facilitate efforts to end the Lebanese civil war. I I Presidents Sadat and Asad are said to be agreeable to such an approach, under the auspices of the Saudi and Kuwaiti monarchs, who have been trying for months to patch up relations between Egypt and Syria. An-Nahar said that no date had been set yet, but that Sadat had indicated he was willing to attend such a meeting on Friday or Saturday, immediately after Id al- Fitr, the Muslim holiday celebrating the breaking of the month of fasting, Ramadan. I ISarkis is also reported to have asked Sadat--allegedly with Syrian approval--to contribute troops to the Arab League peace-keeping force now in Lebanon. Should the proposed summit talks go well, Sarkis and Ara fa might be asked to join them, according to An-Nahar. Al- though Asad and Sadat may have agreed to meet, we are highly skeptical that they are ready to put aside their differences in order to resolve the Lebanese conflict. The article may reflect the wishful thinking of some Lebanese leaders, perhaps encouraged by the Egyptians. Sadat could well be receptive to such an idea because it would place him on a par with Asad as a final arbitrator in any Lebanese political settlement--a status that until now has eluded him. I IThe USSR is at least trying to create the impression that it is involved actively behind the scenes during the talks among Lebanese, Palestinian, and Syrian officials. PLO political chief Qaddumi left Moscow on Saturday, following several days of talks with Soviet officials, including Foreign Minister Gromyko. Soviet press commentary over the weekend suggests that Soviet spokesmen are urging the Palestinians to compromise in order to reach a negotiated settlement in Lebanon. Tass, in Approved For Re 25X1 Approved For P,,elease 2007/03/06 : CIA-RDP79T00975A02~ describing the talks, said that all progressive Arab forces must cooperate to end the crisis, which indicates that Palestin- ians as well as Syrians should be forthcoming at the talks. I Pravda has emphasized the importance of a political solution and made no mention of the need for a Syrian troop withdrawal, a major obstacle to any settlement. Soviet press commentary has recently been stressing the importance of a Syr- ian withdrawal, and Soviet officials have also been taking the same line in private. Moscow may have decided to importune the Palestinians at this juncture. I The USSR is also in touch with Syria. The Soviet rep- resentative at the Geneva conference on the Middle East, Vladi- mir Vinogradov, arrived in Syria on Friday and consulted with Deputy Prime Minister and Foreign Minister Khaddam the following day. Vinogradov customarily travels to the Middle East during periods of Arab negotiations so that Moscow can be informed of Arab policies. He performed this function during the disengage- ment talks in 1974 and 1975. Approved For R~Iease 2007/03/06 : CIA-RDP79T00975A0;9300010032-1 Approved For CHINA: Leadership Appearance All active members of the Politburo, including those based in the provinces, attended the memorial service for Mao on Saturday in Peking's Tienanmen Square. This was the first time since May 1971, Mao's last public appearance, that the en- tire leadership appeared before the Chinese people. The leaders were arranged in strict protocol order, revealing no changes in the alignment. Mao's unpopular wife, Chiang Ching, stood in political rank order with the rest of the leadership and was accorded no special status--for the public record, at least--as Mao's widow. I IPremier Hua Kuo-feng, who was identified as first vice cnairm. of the party and premier, posts he has held since April, delivered a 20-minute eulogy. Hua's remarks, touching on all aspects of the Chinese political scene, seemed designed to placate civilian and military leaders of all political stripes and suggested that no single faction in the leadership had the upper hand in drafting the eulogy. Hua included a low-key reference to the current cam- paign o criticize the ousted Teng Hsiao-ping, praised the mil- itary, took several swipes at the Soviet Union, and mentioned the need to carry on Mao's revolutionary foreign policy line--a codeword for the opening to the US. An abbreviated list of others who attended the memorial service shed no new light on the status of several officials who have come under attack since the anti-Teng campaign began. Although almost the entire party Central Committee, including most of the province chiefs, appeared in Peking during the mourn- ing period, very few were mentioned on the list. Presumably, most of these people attended the memorial service and will re- main in Peking for a major party meeting to begin the arduous process of arranging for a successor leadership. PORTUGAL: Moving Against Squatters //Portuguese Prime Minister Mario Soares is said to e preparing to evict pro-Communist farm workers from 25X1. Approved For Approved For land they illegally occupied after the 1974 coup. If he goes through with the plan, it would be his government's first important test of strength.// Soares' decision probably reflects the increasing pressure he has been under to show some progress in straighten- ing out the Portuguese economy. Although the squatters have generally maintained production, they evidently have run the farms very inefficiently and used the profits to subsidize Com- munist Party activities rather than repaying sizable agricul- tural loans to the state. The government approved legislation on September 14 authorizing forcible collection of these loans, thereby putting further pressure on the Communist rural workers' union. I ICommunist resistance on the farms themselves would not be the only problem for the government. The Communists will oppose the present plan in the parliament, where they control the agricultural committee. They could create further trouble in the Agriculture Ministry, where party members occupy some posts. The Communists might also use their influence in the Portuguese labor movement to stir up workers in other parts of the economy. Left-wing leaders in Soares' own Socialist Party-- led by Agriculture Minister Lopes Cardoso--reportedly are opposed to pressing the Communists too hard. Soares thus might even split his own party if the government moves forcefully. Approved For Pelease 2007/03/06 : CIA-RDP79T00975AO29P00010032-1 25X1 Approved For Release 2007/03/06 : CIA-RDP79T00975AO29300010032-1 Approved For Release 2007/03/06 : CIA-RDP79T00975AO29300010032-1 25X1 Approved For Release 2007/03/06 : CIA-RDP79T00975 //Panama was calm over the weekend as officials met with student leaders to explain the country's economic situation. The government softened its accusation that US in- telligence services were behind last week's disturbances. The US citizen arrested by the Panamanians is still being held.// /The four days of demonstrations against govern- men -impose price increases highlighted the growing economic difficulties, which may become Torrijos' most serious challenge.// //The protests by several thousand people were the largest an i-government demonstrations since General Torrijos came to power in 1968. The National Guard finally intervened to halt looting; property damage amounted to millions of dollars.// //Although students incited the protests, the dem- onstrations attracted significant additional support. Two organ- izations that generally back the government, the major student group and the communist-dominated labor federation, publicly called for price rollbacks.// Approved For Release 2007/03/06 : CIA-RDP79T00975AO Approved For /Some of Parama's economic problems are beyond orrijos control. The world recession triggered Panama's eco- nomic slump two years ago. Recently, a serious drought has dimmed prospects for the agricultural sector, the only area of significant economic growth last year.// //In addition, the government's uneasy relations with the private sector have probably contributed to the sharp drop in local investment. Large public expenditures and am- bitious long-term projects necessitated foreign borrowing, which will probably also contribute to the economic problems.// /Panama's public debt, most of it external, is already high and projected to rise to $250 million or $300 million by 1980--giving Panama one of the highest per capita debt rates in the world. According to the US embassy, direct debt service obligations would then amount to one third or more of central government revenues. Panama has initiated a number of major revenue-producing projects, but none will take effect before 1980.// //Panama's ability to secure foreign loans has emsen its financial burden in the past, but there could be growing questions about the government's creditworthiness. Re- cent, more pessimistic economic projections and the government's failure to conclude negotiations for a new canal treaty will complicate the search for loans.// //The government has tended to neglect its domes- tic problems, emphasizing instead Torrijos' forays abroad in search of support for Panama's stand on treaty issues. The demonstrations may persuade Torrijos that he must pay greater attention to domestic needs, convince the public that some belt- tightening is necessary, and--in the absence of an economic turnaround--secure a new canal treaty. CHILE: Problems With Andean Pact //Despite official denials, Chile reportedly has decided to quit the Andean Pact, the six-member common mar- ket that includes Bolivia, Colombia, Ecuador, Peru, and Vene- zuela.// 25X1 25X1 Approved Fob- Release 2007/03/06 : CIA-RDP79T00975A049300010032-1 Approved Ford Chile is convinced that Pact rules on foreign invest- ment have greatly hampered its ability to attract foreign capi- tal and that complete termination of controls on foreign in- vestment will be required to enable Chile to obtain the neces- sary foreign capital to accelerate economic growth. The Andean Pact Commission adjourned prematurely on Thursday after failing to resolve the impasse reached in early August when Chile resisted proposed compromises on delays in tariff reductions and on direct foreign investment controls. Pact officials have characterized the Chilean position as ir- reconcilable with those of the other members. I //During the past month, Chile has attempted to prepare public opinion for an early withdrawal from the Pact. At the same time, Chile is taking steps to increase economic ties with Argentina, Uruguay, Paraguay, and Brazil, countries with which Chile already has a strong political alignment.// Withdrawal from the Andean Pact will not cause Chile to tor eit the benefits of intra-common market trade concessions already received. USSR: Yakubovsky Ill Warsaw Pact Commander in Chief Marshal Yakubovsky was not mentioned in Soviet news coverage of the recently con- cluded Pact joint exercise, "Shield-76." This tends to corrob- orate a report that Yakubovsky has been seriously ill since spring. I IAn obituary for a retired general in Krasnaya Zvezda on September 14 has Yakubovsky's name in its usual position immediately after Minister of Defense Ustinov. This indicates that Yakubovsky has not been replaced as Soviet first deputy minister of defense and commander in chief of Pact armed forces. The Soviet reporting of "Shield-76" also fails to identify anyone occupying the late General Shtemenko's former post as first deputy commander in chief and chief of staff of Pact armed forces. Approved For P,,elease 2007/03/06 : CIA-RDP79T00975 Approved For RO It may be difficult to find replacements who have the proper military qualifications and who are also politically acceptable to non-Soviet Pact members. Defense Minister Ustinov and representatives of Pact member states probably used the opportunity presented by "Shield-76" to discuss the question. Even though there may be further delay in making the appoint- ments, the Soviet leadership will have the decisive voice. I lengthy delay in the selection of these replace- ments could further retard progress under way since 1969 to enhance the Pact's command and control posture. 25X1 the USSR's newest medium tan --th e T- --has been introduced into the Soviet ground forces in East Germany. The tanks were seen at Bernau just northeast of Berlin. This is the first time that the T-72 has been seen in units outside the Soviet Union.// ]the T-72 has a large-caliber, smooth-bore gun with an automatic loading sys- tem that requires one less crew member than other Soviet tanks. The tanks reportedly have improved armor and a better suspen- sion system and are lower and faster than the present tank models in East Germany. Development of the T-72 began in the 1960s, and full-scale production has been under way since 1974. I lEast Germany is reportedly seeking up to $400 million in cre i s from Western banks to finance large imports of grain and fodder. Severe drought has destroyed a large portion of this year's harvest. I We estimate East Germany's total grain import requirements to be at least 4 million tons, valued at $600 to $700 million. About 3 million tons will probably be acquired Approved For (Release 2007/03/06 : CIA-RDP79T009751A029300010032-1 Approved For from the US; purchases of US wheat and corn already exceed 2.2 million tons. The balance will have to come from other Western suppliers. The need to import large amounts of grain on credit will ad-d--substantially to East Germany's debt. Western banks may be willing to finance these purchases, although at higher rates than normally charged to East Germany. East Germany's hard currency debt has risen substan- tially in recent years--from $1 billion at the end of 1970 to $3.8 billion at the end of 1975. It still has a comparatively low debt service ratio and should have no difficulty meeting its current obligations. Approved For R~Iease 2007/03/06 : CIA-RDP79T00975A0P9300010032-1 Approved For Rel Thanom Kittakhachon's ordination as a Buddhist monk may dampen, student reaction to his return yesterday to Thai- land, prompted by the apparently imminent death of his father. The former prime minister was accepted into the monkhood within hours of his arrival. //Thanom's return was sanctioned by the govern- , w is approved a visit of seven days. His stay is likely to be indefinite, however, unless it leads to a repeat of the violence caused last month by the return of Thanom's former deputy, field marshal Praphat.// //Although leftist student leaders are considering demonstrations,// they may find it difficult to gather much support. Thanom never inspired the intense dislike that was felt toward Praphat. Thanom's entry into the monkhood is a gesture that undoubtedly meets with general approval, and one hard for the students to oppose. Moreover, the deaths and injuries that resulted from the confrontations last month should have reduced student ea- gerness to take to the streets. Some demonstrations will prob- ably take place, but they are not likely to create the turmoil that greeted Thanom's return two years ago. 25X1' Approved Foil Approved For SWEDEN: Social Democrats Upset I ISweden's Social Democrats suffered their first defeat in near y 44 years in yesterday's election. With approximately 90 percent of the vote counted, the three non-socialist parties appeared to have won a clear majority, although the final offi- cial tally will not be known until midweek. I IComputer projections give the Center, Liberal, and onserva ive parties a total of 180 seats, against 169 for the Social Democrats and their Communist Party allies, in the 349, seat parliament. Swedish election analysts claim the final re- sult is not likely to vary more than one or two seats from the computer projection. Thorbjorn Falldin, chairman of the Center Party, is almost certain to be named prime minister if the non-socialist parties can agree on a coalition. The Centrists' and Liberals' differences with the Conservatives have thwarted cooperation in the past. I] Recent statements by the leaders of the three parties, howev r, suggest that they will make every effort to put to- gether a government this time. Prime Minister Olaf Palme ap- peared convinced that their efforts would succeed when he all but conceded defeat in a statement late last night. I Some Social Democratic leaders blamed the loss on the opposition's concentration on the nuclear power issue. In Au- gust, Falldin focused on the government's elaborate and expen- sive plan for expanding nuclear energy throughout Sweden. Fiye nuclear plants are operational and several more are under con- struction. I IThe main issues, however, were high taxes and greater centralization of the government under successive Social Demp- cratic administrations. I IThe nuclear issue could complicate efforts of the non-soc list parties to cooperate among themselves. Some Con- servatives, for example, have supported nuclear expansion and may have difficulty rationalizing unified opposition to it. This is just one of a number of issues a non-socialist coalition may have to resolve in order to govern. Approved For R 25X1 Approved For P,,elease 2007/03/06 : CIA-RDP79T00975A~ The new government will be formally announced when parliament convenes on October 4. If the non-socialist parties succeed in forming a coalition headed by Falldin, he is likely to insist that deputy Center Party chairman Johannes Antonsson be his foreign minister. Speculation on other key cabinet posts in such a government include Conservative Party leader Gosta Bohman as defense minister and Per Ahlmark, head of the Liberal Party, as finance minister. F7 I 25X1 Approved For (Release 2007/03/06 : CIA-RDP79T0097AA029300010032-1 Pr / - - - - - 1 0 0 0 0 0 0 Top AecrecFor Release 2007/03/06 : CIA-RDP79T00975AO29300010032-1 (Security Classification) 1 1 1 1 0 0 0 0 :0 0 10 Top Secret 0 (Securij'PM53Yi iUi9fifelease 2007/03/06 : CIA-RDP79T00975AO29300010032-1 0 iAw Adw //////