NATIONAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A029400010020-3
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 16
• Document Creation Date: December 20, 2016
• Document Release Date: March 24, 2006
• Sequence Number: 20
• Publication Date: October 13, 1976
• Content Type: REPORT

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Wednesday October 13, 1976 CI NIDC 76-240C
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National Intelligence Daily Cable for Wednesday, October 13, 1976.
e NiD a e is tor the purp
os
e o informing
senior US officials.
CHINA: No Public Announcement Yet
Page 1
LEBANON: Situation Report
Page 2
USSR: Gribkov Appointment
Page 4
CUBA: Anti-US Pr
op
aganda
Page 5
EGYPT: Financial
C
risis
Page 5
EC-IRAN: Negotia
ti
ons Back on Track
Page 6
ITALY: Austerity
M
easures
Page 8
BRAZIL-CHILE: Mi
li
tary Relations
Page 11
SOUTH KOREA: Str
on
g Economic Recovery
Page 12
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A Chinese official has confirmed to Western newsmen
a ua Kuo-feng has been elevated to the posts of chairman
of the party and of the military affairs commission, but there
has been no public announcement of the move. There has also
been no statement on the reported arrest of the four "leftist"
members of the Politburo.
The four are Chiang Ching, Mao's widow; party vice
chairman Wang Hung-wen; fourth-ranked party leader Chang Chun-
chiao; and party propagandist Yao Wen-yuan. An official's re-
sponse of "no comment" to journalists' questions on the matter
is tantamount to acknowledgment that the arrests have occurred.
Announcements on these and other subjects are likely to be made
only at the conclusion of the Central Committee plenum which is
apparently now in session.
I I One Western news report, citing "sources close to the
Chinese government" says that over 30 persons have been arrested,
including Mao's nephew, Mao Yuan-hsin, who apparently acted as
head of Mao's personal secretariat in the final days of the
chairman's life. This report claims that those arrested have
been charged with "forging" Mao's will. There is no direct evi-
dence supporting this claim, but it seems plausible.
//Several Western embassies in Peking have heard
that one of the charges against the leftists is that they "dis-
torted" Mao's writings and had concocted a slogan, "act accord-
ing to the instructions laid down," which has been widely used
in Chinese propaganda since Mao's death.//
The Central Committee is probably reviewing the
charges against the leftists. The leading leftists are widely
and deeply disliked, and if the record of the past ten years
is reviewed, as seems likely, the list of "crimes" is certain
to be a long one.
The plenum may also be considering the case of Li
Te-sheng, the one regional military commander who has unequivo-
cally espoused leftist positions since the fall of Teng Hsiao-
ping. Li, a member of the Politburo, appears to be in serious
trouble, but he commands troops and his "case" is probably a
delicate one.
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The plenum is likely also to be considering the ap- 25X1
pointment of a reconstituted Politburo, depleted by the deaths
of five members as well as by the recent purge and the earlier
dismissal of Teng Hsiao-ping.
LEBANON: Situation Report
Syrian forces based in Jazzin launched a two-pronged
attack on Palestinian positions early yesterday in what appears
to be the first phase of their offensive in southern Lebanon.
The attacks--which came only hours after Arab League mediator
Hasan Sabri al-Khuli announced that Palestinian and Syrian rep-
resentatives had reached a new tentative cease-fire agreement--
will seriously damage the credibility of President Sarkis, who
had been primarily responsible for convening the settlement
talks.
A Western journalist in the area reported
late yesterday that most of the defenders of Rum had begun re-
treating and that Syrian forces were continuing to move west
along the main road to the coast.
to Hatura in what appears to be a drive toward the Palestinian
redoubt at Nabatiyah.
I Althouqh Christian forces south of Marl Uyun have
been shelling Palestinian positions since last week, there is
no evidence yet that the Christians have assumed a major role
Syrian troops reportedly nave also movea soutn
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Palestinian leaders believe Syria is determined to seek a mil-
itary solution in the absence of a complete Palestinian capitu-
lation. Yasir Arafat and other moderate Palestinians reportedly
feel they submitted their "final" position during recent nego-
tiations at Shaturah and that any further compromises would de-
stroy the independence and the present leadership of the PLO.//
Palestinian leaders have little confidence they can hold
their positions near the major coastal cities of Sidon, Tyre,
and Beirut, and that they are resigned to the fall of their po-
sitions in Tripoli if the Syrians and Christians press their
advantage there.//
Palestin-
ian leaders concede that they l not hold out against a pro-
longed Syrian blockade of Beirut and Sidon, but are hoping that
under such circumstances they would be rescued by international
intervention.//
I The Palestinians issued an urgent request yesterday
or an emergency meeting of the Arab League foreign ministers
and will presumably follow up with direct appeals to the Egyp-
tians and Soviets for help. Arab League mediator al-Khuli left
Lebanon for Damascus yesterday, probably on his way to Cairo.
Syria's actions have thoroughly discredited the
League's mediation effort and could scuttle plans for a summit
meeting now scheduled for October 18. The resumption of the
Syrian offensive suggests that Sarkis and al-Khuli were misled,
perhaps intentionally, by Syrian representatives to the negotia-
tions over the weekend. Few Lebanese are likely to accept sug-
gestions in the Syrian media that Syria's actions were taken
in response to the weekend Palestinian attacks on several of
Syria's embassies.
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USSR: Gribkov Appointment
The Soviet news agency Tass announced yesterday that
Colonel General Anatoly Gribkov has been appointed First Deputy
Commander in Chief and Chief of Staff of the Warsaw Pact forces,
filling the position left vacant by the death of Army General
Shtemenko last April. Judging from past experience, Gribkov
will also serve as a First Deputy Chief of the General Staff
of the Soviet Armed Forces.
//The delay in naming a replacement for Shte-
menko suggests the Soviets had some difficulty finding an of-
ficer with the proper military uali ications who
litically acceptable.
1 The recent "Shield-76" exercise in Poland may have
given 5Soviet Defense Minister Ustinov an opportunity to discuss
the issue with his East European counterparts and perhaps set-
tle Gribkov's nomination.
I I During World War II Gribkov served as a major in the
corps o the General Staff officers who were sent to field
units as representatives of the General Staff. In 1967, he was
elected to the Supreme Soviet of Armenia. Since 1973, Gribkov
has commanded the key Leningrad Military District, and in June,
he directed the much publicized exercise "Sever"--the second
Soviet exercise announced in compliance with the Helsinki ac-
cords.
During the 25th Party Congress earlier this year the
57-year-old Gribkov was elected a candidate member of the Cen-
tral Committee.
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CUBA: Anti-US Propaganda
//Cuba apparently intends to mount a major propa-
ganda attack on the US over the crash of a Cuban airliner last
week.//
I I Cuban media have highlighted a Miami-based exile or-
ganizati.on's claim that it was responsible for the crash. The
Cubans allege that the US has given explosives and other aid to
counterrevolutionary organizations to attack Cuban personnel
and installations.
Cuban Prime Minister Castro may take the opportunity
of a mass rally in Havana today to accuse the US of direct in-
volvement in exile attacks. In the past several months, Castro
has threatened to renounce the 1973 US-Cuba Memorandum of Under-
standin on hilacking and to respond in kind to terrorist ac-
tions.
//Egypt is trying to muster an additional $1 bil-
lion in balance-of-payments support to prevent a substantial
cutback in imports and consumption in the coming months.//
//Last year Arab cash aid covered about two thirds
ot Egypt's billion external financial gap. Only about $1 bil-
lion in Arab aid has been disbursed so far this year, and unless
more cash aid is received over the next two months Egypt may be
forced to cut back drastically on imports of food, consumer
durable goods, and industrial inputs.//
//Egypt has postponed payment on many of its for-
eign e s to free cash for needed imports. Last month, debt
service arrears totaled $700 million--equivalent to 70 percent
of the balance-of-payments financing that Cairo is still seek-
ing for 1976.//
I //During the last several years Egypt's creditors
have tolerated periodic delays in repayment on the assumption
that Arab aid would be forthcoming. Now, with both Saudi Arabia
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and Kuwait advertising their dissatisfaction with Egyptian fi-
nancial practices, creditor patience is waning. US banks report-
edly are reluctant to refinance even small, $1 to $10 million
180-day credits.//
//The newly established Gulf Organization for De-
velopment in Egypt may provide half the sum that is needed this
year. The organization probably will guarantee $250 million in
Western bank loans and has offered an additional $250 million
in direct balance-of-payments support, although negotiations
have bogged down.//
//Egypt also hopes Iran will provide $250 million
in loan guarantees. If all these funds materialize, the remain-
ing shortfall could be financed with a rollover of short-term
debt or continued deferment of repayments.//
//Egypt's balance-of-payments problems will con-
tinue into 1977 even if it obtains the credits it is seeking.
Population growth and investment under the five-year plan prob-
ably will inflate imports, and exports will be hampered by ca-
pacity constraints and Israeli harassment of offshore develop-
EC-IRAN: Negotiations Back on Track
//French President Giscard's visit to Iran this
weer as c eare the way for early negotiations between the EC
and Iran on a nonpreferential trade agreement. Giscard had ob-
jected to the EC Commission's proposals and refused to go along
with resumption of the stalemated talks until he had discussed
the issue personally with the Shah.//
//The Shah, taking advantage of his country's
enhanced political and economic importance, had been seeking
broad trade preferences similar to those the EC has granted to
most Mediterranean countries. He may now be willing to settle
for the more modest relationship the EC Commission has proposed,
which is modeled on the EC-Canada cooperation agreement that
came into force last week.//
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 //The EC foreign ministers plan to take up the
Commission's guidelines for the negotiations with Iran when
they meet in Brussels on October 18 and 19. The Commission has
suggested an agreement, of unlimited duration, which would:
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--Enhance Iran's access to the EC market for certain in-
dustrial goods, including refined petroleum products, un-
der the Community's generalized system of -trade preferences
for developing states.
--Grant most-favored-nation status to both parties.
--Promote industrial, scientific, and environmental coop-
eration.
--Encourage mutual investments and joint industrial ven-
tures.
--Establish a joint commission to consider trade problems
and guide the future evolution of the pact.//
//The Community is also expected to ask for a
firm commitment that Iran will continue to supply crude oil to
its members, even in the event of renewed hostilities in the
Middle East. Iran is the EC's second most important supplier
after Saudi Arabia, accounting for 18 percent of the Community's
crude oil imports.//
//The Nine believe an agreement would also as-
sure improved access to the Iranian market, which they expect
will expand greatly over the next decade.//
//France and Denmark strongly advocated accep-
tance of the Shah's initial demands for trade preferences on
the grounds that the EC could not afford to antagonize an im-
portant oil supplier.//
//Despite public expressions of support for
Iran, most other EC members--led by the UK--have opposed pref-
erential treatment for Iran in private. They cite Commission
arguments that granting preferences would open the door to sim-
ilar requests from other countries and violate commitments made
to the US on the nonproliferation of special trading arrange-
ments.//
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//Although the Commission now seems to have the
genera support of the Nine for its proposals, there are some
outstanding difficulties. Some members--Italy and the Nether-
lands for example--are apprehensive that increased imports of
refined petroleum products from Iran would further aggravate
their present. problem of excess refinery capacity. Others point
to Iran's potentially high degree of competitiveness in some
industrial sectors.//
//Some members are also concerned that the use
of the Community's generalized system of preferences for Iran
would dilute benefits going to the poorer developing states,
and may constitute a misuse of the system by undermining the
EC's flexibility to determine what preferences will be offered
on a year-by-year basis.//
//Despite these problems, the Commission will
probably get a green light to open negotiations before the end
of the year. The talks could be protracted, particularly if the
Shah continues to insist on special treatment for such products
as petrochemicals, metals, shoes, and textiles. The Community
is currently in no position, either economically or political) ,
to permit easier access such highly competitive goods. 25X1
ITALY: Austerity Measures
//The austerity measures announced by Italian
Prime Minister Andreotti on Friday probably will not have a
significant impact on inflation--currently running at an annual
rate of 17 percent. The government apparently believed, how-
ever, that stronger measures would have less chance of accep-
tance by the labor unions and by the Communist Party, whose
cooperation in Parliament is essential. A temporary program
was instituted on October 1 to brake the plunge of the lira
and shore up business confidence.//
Most of the measures were discussed extensively in
e press prior to the cabinet meeting last Friday, but some
of the measures, including a tax that will raise the price of
gasoline by 25 percent, came as a surprise.
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I I Apparently, Andreotti, under pressure from the Com-
munists, had agreed earlier that measures such as these would
go into effect only after consideration by Parliament. Although
Andreotti said over the weekend that he would accept "improve-
ments" by Parliament, the Prime Minister hinted that he would
resign if the measures are watered down.
I He appears to be gambling that none of his critics
wi wan to risk public disapproval for precipitating the fall
of the government.
D
The government actions, many of which will force up
consumer prices even more, include:
--A 15-percent increase in fertilizer prices.
--Adjustment of motor vehicle taxes in favor of smaller
cars.
--An immediate increase in postal and telegraph rates as
well as a 10-percent increase in rail fares effective
December 1.
--An increase in the withholding tax on dividend payments.
A decision on electricity and telephone rates was deferred
to allow more time for consultations with the Communists and
the unions.
//In a weak attempt to curb the inflationary im-
pact o rising wages, Italy also announced a two-year freeze on
cost-of-living wage increases for upper income workers. Middle-
income salary earners will have half of their cost-of-living
adjustments frozen.//
//This move will do little to slow the rise
in
labor
costs, however, since it will only affect about
25
per-
cent
of the work force. Industrial wages probably will
rise
more
than 20 percent this year mainly because they are
linked
to the consumer price index.//
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I The Communist-dominated labor union is officially
supporting most aspects of the program, with the notable excep-
tion of the proposed gasoline price increase. The Communists
normally exercise predominant influence in the labor movement,
but in this instance they are having trouble convincing their
own rank and file and some of the non-Communist unions to go
along.
I I Rank-and-file discontent with the austerity measures
has produced wildcat strikes in cities such as Turin, Bologna,
and Milan and a call by militant metalworkers for a general
strike. In response, Communist officials have been dispatched
to key industrial centers to explain the necessity for auster-
ity measures and the reasons behind the substantial Communist
support for the program.
Nevertheless, the federation that represents all of
Italy's major unions may be forced against Communist wishes to
call a general strike in order to placate worker discontent.
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BRAZIL-CHILE: Military Relations
I I The recent official visit of Brazilian Army Minister
Frota to Chile reaffirmed the countries' traditionally close
ties and may have laid the groundwork for an expansion of
Brazil's military assistance and sales program.
Frota went to Santiago on the occasion of the 166th
anniversary of Chilean independence, but there is good reason
to believe that his private discussions with Chilean officials
focused on an increase in the sale of Brazilian arms and mili-
tary equipment to Chile. The Bank of Brazil last month report-
edly approved a new $40-million credit to Chile for military
purchases.
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I I Such arrangements are attractive to both coun-
tries .or economic and strategic reasons. Brazil is trying to
ease its balance-of-payments problems by promoting exports and
is especially interested in establishing its fledgling armaments
industry on a firm footing. Chile is aggressively seeking new
foreign sources of arms now that US military assistance has
ended.
1A member of the Brazilian Foreign Ministry has told
US embassy officials that Brazil prefers to restrict high-level
exchanges with Chile to military channels, and, for the sake of
international appearances, politely to stall on Chilean over-
tures for an exchange of presidential visits.
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SOUTH KOREA: Strong Economic Recovery
I I South Korea's export-led recovery is surpassing all
earlier forecasts. Paced by a two-thirds rise in exports, real
gross national product grew 17.4 percent in the first half of
the year. Government officials now project a 14 percent growth
in GNP for 1976, up from earlier estimates of 9 percent.
South Korean exports have taken advantage of the con-
sumer-led recovery in the US and have successfully penetrated
the lucrative Middle East market. Import growth, has been more
moderate, partly due to prospects for a bumper grain harvest
and Seoul's effective energy conservation program. As a result,
South Korea's current-account deficit probably will fall to
about $0.5 billion this year from $2 billion in both 1974 and
1975.
The pace of the recovery, while remaining brisk, is
likely to slow somewhat during the remainder of the year. New
export orders have already begun to slow. Trade barriers in
importing countries and the recent weakening in the US economy
also will moderate export growth.
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