NATIONAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A030100010026-8
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 15
• Document Creation Date: December 20, 2016
• Document Release Date: April 18, 2006
• Sequence Number: 26
• Publication Date: May 16, 1977
• Content Type: REPORT

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Monday May 16, 1977 CG NIDC 77-113C
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 Approved For
National Intelligence Daily Cable for Monday, May 16, 1977.
The NID Ca e is for t o purpose o in orming
senior US officials.
CONTENTS
USSR:
Sluggish Industrial Production
Page 2
EGYPT-USSR: Bilateral Relations
Page 3
USSR:
Scheduled Central Committee Meeting
Page 3
AFRICA:
Multiracial Policy in Natal
Page 4
SPAIN:
Election Preparations
Page 5
PERU:
Government Talks
Page 7
ZAMBIA:
Threat of Rhodesian Attack
Page 8
UK: Pay Talks Continue
Page 9
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USSR: Sluggish Industrial Production
I I The Soviet industrial sector may be heading for a
second consecutive year of sluggish growth. Last year's growth
was the slowest since World War II; another poor year in 1977
could dampen Soviet hopes for achieving even the modest growth
goals of the 10th Five-Year Plan.
Official statistics recently released by the USSR
tor the irst quarter of 1977 lead us to estimate that indus-
trial output in the civilian sector grew by only 4.3 percent
over the same period last year. This slight improvement over
last year's increase of 4 percent may be attributed to a re-
bound in the production of industrially processed food after
a decline last year. Although overall food output turned up in
the first quarter, meat production remained below the compar-
able period of 1976.
I I Balanced against the acceleration in food production
is the continued slowdown in the growth of production in the
industrial materials sector. Growth in energy producing
branches--fuels and electric power--fell to an all-time low of
3.5 percent. This, in turn, may prevent recovery in the steel
and cement industries--two intensive energy users currently ex-
periencing production difficulties. Indeed, a recent editorial
in Trud has cited shortcomings in the supply of electric power
and fuel as a cause of insufficient cement production.
Soviet leaders also must be concerned by the 1-percent
drop in steel production--a performance which bodes ill for any
boost in the growth of machinery output later in the year. The
overall lackluster performance in the output of industrial ma-
terials probably reflects a failure of new plants to produce at
designed capacity and delays in introducing new capacity.
Even the machinery sector--usually a star performer-
-l not measure up to Soviet expectations. Civilian machinery,
which posted a seven-year low growth in 1976, sank even lower
during the first quarter of 1977, chiefly the result of a drop
in the growth of consumer durables.
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The output of producer durables kept pace with last
year's growth. The production of instruments and computers,
agricultural machinery, and equipment for the food industry in-
creased. Unless the output of ferrous metals rebounds substan-
tially in the next few months, however, by year's end even the
growth of producer durables may fall below last year's rate.
EGYPT-USSR: Bilateral Relations
Egyptian Foreign Minister Fahmi announced on Saturday
a a-ro has accepted a Soviet invitation to discuss bilat-
eral relations. Fahmi said he would meet with Soviet Foreign
Minister Gromyko on June 9 and 10 "somewhere in Europe."
I Fahmi took a generally conciliatory line in his pre-
pared remarks to the Egyptian parliament; he characterized the
Soviet move as "constructive." He again criticized Soviet ac-
tivities in Africa, however, and labeled the Soviets' recent
strong demarche over Libya a "mistake."
Both sides appear to want improved relations because
they an icipate the Geneva peace talks will resume later this
year. The Egyptians' primary concern, as President Sadat indi-
cated recently, is that the Soviets might decide to play an
obstructionist role in the negotiations.
I Sadat would thus like to mute Soviet-Egyptian differ-
ences a re negotiations; he apparently ho es to encourage
Moscow to take a positive role in Geneva.
USSR: Scheduled Central Committee Meeting
The Soviet party Central Committee may meet soon.
A Yugoslav diplomat in Moscow has informed the US em-
bassy that the plenary session is scheduled for next Sunday--
the Central Committee, however, has not held scheduled meetings
on Sunday. There are also reports that the Warsaw Pact foreign
ministers will meet in Moscow about the same time.
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I ISoviet Foreign Minister Gromyko recently told the US
ambassador that he must be back in Moscow no later than Saturday
evening. The foreign minister will meet with Secretary Vance
this week in Geneva. Gromyko would attend both the plenum and
the foreign ministers' meeting.
AFRICA: Multiracial Policy in Natal
The Natal provincial government in South Africa is
pus zng or greater freedom in multiracial affairs at the local
level, but the central government seems unlikely to agree to
any request to relax its strict apartheid policies.
The Natal Provincial Council has asked Prime Minister
orster to allow it and the three other provincial governments
to run local affairs on a multiracial basis. The Natal council,
which is dominated by the English-speaking United Party, has
also requested that Vorster discuss the council's recent motion
asking for a province-wide local government that would allow
cooperation between black and white areas.
Under this plan, the national government would retain
responsibility for foreign affairs, defense, post and telegraph,
railways, and general agricultural matters; the provincial
administrations would have autonomy in other government func-
tions, including racial matters.
The Natal leaders believe that if Vorster re' t h
e
c s L. eir
request the s
government may be throwing away the last opportunity
to deal with blacks who are still willing to negotiate. Blacks
outnumber whites by nearly five to one in Natal, and the local
Indian community is larger than the white one. The United Party
leaders believe that for the whites to survive in Natal there
must be more consultation and cooperation among the races.
I iThey also realize that with sections of Kwazu].u, the
u u Nomeated for eventual independence and geographi-
cally scattered throughout the province, local laws will be al-
most impossible to administer unless blacks and whites can
agree on a uniform set of regulations. The United Party in the
province also wants to run its own show as free as possible
from interference by the Afrikaner-dominated government.
Approv
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Though they have not been consulted about the details
o e proposal, both the Zulu leader, Chief Buthelezi, and the
local Indian leader had voiced cautious approval of the plan
before it was presented to the South African government.
Natal leaders have made it clear that they are not
attempting a deliberate confrontation with the government. They
justify their proposal as completely consistent with government
policies recently announced both in the African Homelands Auto-
nomy Bill now before parliament and in the government's propo-
sals for the multiracial Turnhalle conference in Namibia.
I IThe leaders thought they detected some hope for prog-
ress a ong racial lines when Vorster stated last month that
he did not object in principle to a multiracial consultative
body in Durban, one of three multiracial local advisory groups
that has evolved in Natal during the past two years.
The scope of the present proposal is so far-reaching,
however, hat the government probably will reject it outright
as contrary to its theories of separate development. Pretoria
has not officially responded to the proposal, but the minister
of finance, an English speaker who once belonged to the Natal
United Party, branded the initiative an attempt to secede from
South Africa and the beginning of "black majority rule."
he government may not respond officially for some
time, however, and could choose to avoid pronouncing on the
issue by appointing an investigative commission, as it has done
on past similar racial questions.
SPAIN: Election Preparations
The recent announcement that many of Spain's numerous
ega par ies have formed coalitions to contest next month's
parliamentary election has somewhat simplified the complex
electoral picture. Only 5 of the 18 coalitions have nationwide
appeal; they are likely to dominate the election. The decision
of major party Leaders to run in Madrid, rather than in the
relative safety of their home provinces, will give the election
in the capital considerable symbolic value and permit personali-
ties to dominate the race.
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Prime Minister Suarez' decision to run at the head
of the list in Madrid of the Union of the Democratic Center
gives this center-right coalition a boost that will most likely
enable it to win a plurality--with 30 to 40 percent--of the
vote. Suarez' popularity has been enhanced by favorable press
reaction to his speech announcing his candidacy as well as to
his meetings with top US officials.
The Democratic Center coalition faces various prob-
lems. Suarez' decision to head its list and the dominant role
of his representative Calvo-Sotelo in drawing up the list led
to sharp disputes over relegating some prominent centrists to
run in their native provinces. In addition, the choice of some
names linked to the Franco regime may result in the election of
conservatives less committed to reform than Suarez.
I I Suarez furthermore has the disadvantage of being
response le for maintaining order during the pre-election peri-
od. Demonstrations by Basques, who are demanding the release of
the remaining political prisoners in Spain, led to several
deaths over the weekend. If the government does not release the
prisoners, more violence may occur and radical Basque groups
might boycott the election. Recent police brutality in con-
trolling demonstrations has called attention to Suarez' in-
ability to reform the police. Several labor unions have called
a general strike today to protest police brutality.
I I The Democratic Center must also share the centrist
vores w14 another coalition of several Christian Democratic
factions. This alliance is led by Joaquin Ruiz Gimenez and is
known for its opposition to the Franco regime. This group re-
fused to join the Democratic Center because the latter organ-
ization contains too many groups of varying ideologies that
would not remain together after the election. Nevertheless, the
Christian Democrats have agreed to run joint lists with the
Democratic Center in some provinces. The Christian Democrats
could win around 8 to 15 percent of the votes.
The Democratic Center must contend on the right with
the Popular Alliance led by the well-known former minister
Manuel Fraga. Although he favors moderate reform, Fraga has
thrown in his lot with a number of rightist groups headed by
former ministers under Franco. This group is raising the alleged
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threat to order by the legalized Communist Party and will play
up any pre-election disorders to draw conservative votes. Latest
estimates give this group 15 to 24 percent of the votes.
The Socialist Workers Party of Felipe Gonzalez, which
has the support of West European socialist and social democratic
parties, represents the democratic left. It may obtain 15 to 21
percent of the vote. The second conference of socialist parties
of Southern Europe, held in Madrid on May 7-8 and attended by
French Socialist leader Mitterrand, Portuguese Prime Minister
Soares, and other Western socialist leaders, gave the Spanish
party some of the publicity it desires.
The remaining significant party is the Spanish Commu-
nist Party headed by Santiago Carrillo. He espouses a "Euro-
communist" moderate line but is handicapped by his widely pub-
licized involvement in a massacre during the Spanish Civil War.
It is estimated the party will receive only 5 to 10 percent of
the votes.
PERU: Government Talks
//Peruvian President Morales Bermudez is hold-
ing tat/es z party Leaders that could further his plan to
return the country to civilian rule by 1980. Any transfer of
power will be gradual, and Peru's uncertain economic situation
could delay its implementation.//
//Last month military leaders expressed their
confidence in Morales Bermudez by extending his presidential
term beyond the date early next year when he was to retire
from the military. Since then the President reportedly has been
discussing a return to representative government with a wide
range of political parties.//
I //Besides conferring with the Christian Demo-
crats and the Socialist Popular Action, both of which support
his government, Morales Bermudez also has met with Victor Haya
de la Torre's American Popular Revolutionary Alliance--the
Peruvian army's principal antagonist. Last Friday he was sched-
uled to meet with the Peruvian Communist Party and the Popular
Action of former president Belaunde, who was overthrown by a
military coup in 1968.//
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//During these exploratory talks, the parties
are setting tor h their views on presidential, parliamentary,
and municipal elections. A civilian advisory group reportedly
also has been working with the government to formulate political
strategy, draw up an agreement with the parties, and prepare a
new constitution. It is not clear at present how far the ruling
military is prepared to go in granting popular sovereignty.//
I //In addition to mollifying the military gov-
ernmen s domestic and foreign critics by demonstrating at
least a semblance of movement toward civilian rule, these con-
sultations also are likely to provide Morales Bermudez with
additional civilian political support for the stiff austerity
measures necessary to right the Peruvian economy. Such support
could also help to keep the President's potential rivals in
the military at bay.//
//Morales Bermudez' economic program is
threatened by a disagreement between his key economic advisers
and some military leaders over budget cuts demanded by the
International Monetary Fund as a prerequisite for badly needed
ZAMBIA: Threat of Rhodesian Attack
I I Zambian President Kaunda, in an address to the nation
o ay, will warn that the country is threatened by an attack
from Rhodesia. Zambian Foreign Minister MwaZe has informed
diplomats that Rhodesian Prime Minister Smith is threatening
to Launch pre-emptive strikes into Zambia on the pretext that
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Joshua Nkomo's Rhodesian nationalist forces are preparing to
use Zambian territory to stage an offensive. Reflecting concern
over the threat, Zambia has taken a number of precautionary
steps to improve its defenses.
I IMwale told the US embassy in Lusaka that the Rhodesians
a passe the threat to Zambia through British officials, who
he criticized for acting as intermediaries for the "rebel"
Smith government.
//Kaunda has long been concerned about possible
strikes into a is in response to Zambian support for the Rho-
desian nationalists. His fears probably are greater now because
Zambia's involvement in the war effort has increased in recent
months. Despite Smith's threat, however, Kaunda retains a strong
interest in Rhodesian settlement negotiations and the upcoming
round of consultations by British and US officials.//
UK: Pay Talks Continue
//Negotiations between the British Labor government
and the Trades Union Congress on the terms of a third year of
wage restraint are unlikely to produce an agreement until the
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last minute, if at all. In an apparent effort to give impetus
to the talks, Chancellor of the Exchequer Healey warned last
week that failure to get a new agreement would mean an early
election that would bring the Conservatives to power.//
//For the past several weeks, government ministers
have been stumping the country arguing the case for continued
wage restraint. They have stressed that the prize for breaking
the back of inflation would be greater than the short-term bur-
dens the workers must continue to bear.//
//It is proving to be a difficult--if not an impos-
si a--;asc to persuade trade unionists to begin another year
of restraint in August because real wages have declined recently.
Unions representing skilled workers, moreover, are pushing
strongly for a return to free collective bargaining because pre-
vious curbs have compressed carefully structured wage differ-
entials between craftsmen and unskilled labor.//
//The engineers' union, the country's second largest,
has voted to end pay restraint. The union might be willing to
reconsider if government and union negotiators are able to come
up with a satisfactory proposal on a third round to be voted
on at a special Trades Union Congress meeting perhaps this sum-
mer. Other unions, particularly the miners and those represent-
ing white collar workers, are likely to opt for a return to
free collective bargaining when they hold their annual confer-
ences between now and July.//
//Some cabinet ministers reportedly have argued
a wi much opposition to a new agreement, it would be
fruitless to try to impose a further period of restraint.//
//Without a "phase three" agreement, however, the
Labor government would have a difficult time remaining in power.
Strains would grow between the government and the unions, which
are demanding an increase in the money supply and a big boost
in public spending. The absence of an accord probably would
undermine foreign confidence in sterling. Because labor costs
account for about 40 percent of total production costs, a sub-
stantial wage increase would severely worsen short-term infla-
tionary prospects.//
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//The fear of precipitating an election befo
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b
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re
a
or
poiicies--h-a-ve had an opportunity to produce some
lid
so
signs of
economic recovery will probably induce Prime Minister Callaghan
to make concessions in areas other than wages to obtain union
agreement to further restraint. The most likely concessions
would involve tighter price controls and a reflationary mini-
budget in the fall. The Labor government currently is recom-
mending the establishment of permanent price controls to re-
place the prif-P ode which expires this July. F__
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