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December 16, 2016
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June 16, 2005
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June 11, 1977
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PV Adiv AAW AW AAW 1 0 AppqRMWRele ase 2005108' 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. 25X1 Access to this document will be restricted to those approved for the following specific activities: Saturday June 11, 1977 CG NIDC '77-135C w 25X1 NATIONAL SECURITY INFORMATION Unauthorized Disclosure Subject to Criminal Sanctions Top Secret Approved For Release 2005/06/30: CIA-RDP79T00975AOOobt~l0 s' i a i .J~ AV 1AW AV 1AW Aar Aar Adw A0 CIA-RDP79T00975A03020 100 -3 op ecret 2217 AV AV AV AV AV Ar 25X1 Approved For Release 2005/06/30 : CIA-RDP79T00975AO30200010020-3 Approved For Release 2005/06/30 : CIA-RDP79T00975AO30200010020-3 25X1 Approved For 25X1 National Intelligence Daily Cable for Saturday, June 11, 1977. 25X1 The NID Cable is for the purpose o intorming senior o icials. ITALY: Interparty Political Talks Page 1 25X1 CANADA-JAPAN: Vancouver Meeting Page 4 25X1 Page 8 25X1 Page 10 Page 11 25X1 25X1 Approved For (Release 2005/06/30 : CIA-RDP79T00975A0$0200010020-3 Approved For ITALY: Interparty Political Talks Hard bargaining marked this week's bilateral talks by Italy's ruling Christian Democrats with the Communists and with the four other parties that abstain in parliament and thereby keep the government of Prime Minister Andreotti in of- fice. The talks, which are being held mainly in response to Communist pressure for a more direct role in government policy- making, were to have entered a final phase this week with a series of roundtable conferences involving the six party lead- ers. No dates have been set for these meetings, however, be- cause of continuing interparty differences that came to light in negotiations at the technical level late last week. The Communists in particular are anxious to switch to the roundtable format because it would graphically empha- size the political significance of a program agreement in which the party is formally included. The Communists, however, now appear to be bargaining more aggressively, and new diffi- culties have arisen, even in areas where the Communists and Christian Democrats seemed close to agreement last week. I IFor example, while the Communists remain favorably disposed to the tougher law-and-order measures proposed by the Christian Democrats, the two parties are having difficulty re- solving differences on the most sensitive questions, such as whether to grant police the power of preventive detention. I I The negotiations are also complicated by the Social- ists, tendency to take a more strident line than the Commu- nists--a tactic that makes it more difficult for the Commu- nists to compromise with the Christian Democrats. Both leftist parties are putting renewed stress on the need for some polit:i- cal."guarantee" that an agreed program would actually be im- plemented, but the Socialists' demands go much further than those of the Communists. I IThe Communists would evidently be satisfied with a relatively minor symbolic step and are again raising the pos- sibility of including in the cabinet a few technocrats con- sidered sympathetic to the left. But the Socialists are asking for the formation of at new government, which--even if it did not differ in composition from the present one--would formally Approved For 25X1 Approved Fair Release 2005/06/30 : CIA-RDP79T00971A030200010020-3 include the Communists in its parliamentary majority. The Christian Democrats have consistently refused to go that far, and the Communists themselves appear to consider the proposal unrealistic in present circumstances. I I Complex motives are behind the Socialists' militant posture, but in general it reflects the party's desire to pre- vent the Communists from being the sole spokesmen for the left in the negotiations with the Christian Democrats. The Social- ists are seeking also to ensure that the Communists are unable to avoid responsibility for government actions. Finally, the Socialists hope to capitalize on the discontent of some Com- munist supporters over the party's tendency to cooperate with the government. The Christian Democrats, meanwhile, seem increasingly concerned with the problem of minimizing the political impli- cations of a formal program agreement involving the Communists. Throughout the talks, the Christian Democrats have sought to keep the discussion of substantive issues separate from specu- lation about future political formulas, but increasing pres- sure from the left is making it difficult to maintain the dis- tinction. I IThe party, moreover, seems divided over how to re- spond o the left's demands. Some Christian Democrats, such as Andreotti, are open to the idea of a cabinet shuffle bringing in more technocrats. Other leaders, such as party president Moro, regard such a move as politically dangerous, because a parliamentary confidence vote might be required if the changes are extensive. Thus, no clear end is in sight for the negotiations, which have preoccupied Italian party leaders since late April. Andreotti hopes that an agreement can be reached within the next two to three weeks--enabling his government to survive at least until the fall--but others in the party suggest that the talks could drag on into July. Approved For Release 2005/06/30 : CIA-RDP79T00975A010200010020-3 25X1 25X1 25X1 Approved For Release 2005/06/30 : CIA-RDP79T00975AO30200010020-3 Approved For Release 2005/06/30 : CIA-RDP79T00975AO30200010020-3 Approved Fot Release 2005/06/30 : CIA-RDP79T009V5A030200010020-3 CANADA-JAPAN: Vancouver Meeting //Canadian Foreign Minister Jamieson and Japanese Foreign Minister Hatoyama will discuss a wide range of economic and political issues during their talks on Monday and Tuesday in Vancouver, British Columbia. This will be the first meeting of the Canada-Japan Joint Economic Committee established last Oc- tober. Although the conference ostensibly will focus on eco- nomic matters, the major issue is certain to be Canada's in- sistence that Japan accept tough nuclear safeguards in return for a resumption of uranium shipments.// I //The "Framework for Economic Cooperation" signed last year in Tokyo by Prime Minister Trudeau reflects Trudeau's effort to foster economic and political ties with nations other than the US--the so-called "third option."// //The accord is similar to the "contractual link" Canada signed earlier last year with the EC, and has as its goal expanding the $4 billion worth of annual trade between the two countries by increasing exports of Canadian-manufactured goods. Neither agreement, however, has provided the boost in economic relations sought by Ottawa, largely because Japan and the EC are more interested in Canadian raw materials than in- dustrial products.// //At Vancouver, the Canadians will be pressing for increased Japanese investment in energy-related fields, such as the development of coal deposits in British Columbia and oil ex- traction technology for the tar sands in Alberta.// Approved Fpr Release 2005/06/30 : CIA-RDP79T009V5A030200010020-3 Approved For Release 2005/06/30 : CIA-RDP79T0097fA030200010020-3 //The Japanese can be expected to seek assurances o continued access to raw material supplies, particularly min- erals, and to lobby for less restrictive government controls over foreign investment. Japanese businessmen have long argued that Canadian limitations on foreign ownership strongly dis- courage investment from abroad.// I //The hard bargaining, however, is certain to be over nuc ear safeguards and uranium shipments. The Canadians suspended uranium shipments to Japan in January because of Tokyo's refusal to go along with Ottawa's insistence on main- taining control over the transfer of nuclear materials and sub- sequently developed nuclear-related technology to third coun- tries. The two countries apparently were near agreement when the Canadians added the caveat that their safeguards would ap- ply even to Canadian uranium sold to Japan and undergoing en- richment in the US.// //Foreign Minister Jamieson has implied that Ottawa may be prepared to back off somewhat from the latter condition. He indicated on Thursday that Canada and Japan should be able to work out their differences at the talks next week. The Japa- nese apparently had earlier hinted that Hatoyama might not at- tend the Vancouver talks in light of the breakdown of the nu- clear negotiations unless the Canadians were willing to give ground.// sectors of the nuclear industry are pressing the government to 25X1 give greater consideration to economic and energy factors in shaping nuclear export policies. Approved For Pelease 2005/06/30 : CIA-RDP79T009754030200010020-3 25X1 25X1 Approved For Release 2005/06/30 : CIA-RDP79T00975AO30200010020-3 Next 1 Page(s) In Document Exempt Approved For Release 2005/06/30 : CIA-RDP79T00975AO30200010020-3 Approved Igor Release 2005/06/30 : CIA-RDP79T009V5A030200010020-3 I The USSR is planning an overall cut in trade with the West this year and next because of a severe trade deficit with the US and other countries. US officials learned of the plan at a meeting of the joint US-USSR Commercial Commission, which ended yesterday in Washington. Soviet officials said the cuts would affect both agricultural and non-agricuZturaZ products and indicated that they would apply to all Western trading partners. The Soviets gave no indication that it was in any way directed against the US. Last year, Moscow's hard-currency trade deficit with Western countries was $4.9 billion; trade with the US accounted Approved For Release 2005/06/30 : CIA-RDP79T00g75A030200010020-3 Approved For P,,elease 2005/06/30 : CIA-RDP79T0097f for nearly half of the deficit, according to Soviet statistics. Grain imports valued at an estimated $3 billion--half from the US--were a leading factor in the deficit. The grain imports were necessary because of the poor Soviet harvest in 1975. Last year's record harvest allows Moscow to reduce the cos of its grain imports this year by an estimated $2 bil- lion; early indications for another good harvest this year sug- gest that Moscow may be able to keep its grain imports at mini- mum levels next year as well. These imports will largely reflect the USSR's commitment to purchase 6 million tons of grain from the US, worth roughly $700 million, per year through 1980. A Soviet grain delegation in Washington last month would only say that Moscow would meet the minimum requirement in purchasing grain from the US this year. So far, there is no sign that a trade cutback has be- gun. Soviet statistics for the first quarter of this year show a 5.4-percent increase in total trade with hard-currency Western countries. Soviet orders for Western plant and equipment, more- over, remain strong. 25X1 Approved For (Release 2005/06/30 : CIA-RDP79T009~5A030200010020-3 Approved Forj Release 2005/06/30 : CIA-RDP79T009754030200010020-3 //A banking crisis in the United Arab Emirates has led the government to close two banks and impose controls on credit expansion. To avoid recurring crises, the individual emirates will have to cede enough power to the federal govern- ment to give it effective control over the banking sector.// //The UAE has tried in the past two years to establish itself as a financial center. To encourage local banking operations, the government has avoided tight controls on the banks. The UAE's Currency Board oversees banking ac- tivities.// //The number of banks in the UAE has risen sharply because of the loose controls and high-yielding credit opportunities afforded by the area's booming economy. Many banks are undercapitalized and have become involved in specula- tive ventures; interbank lending has often been used to create needed reserves.// The government has become increasingly alarmed at such unsound banking practices; in late May it forced two banks that had severely overcommitted their resources to close by can- celing their clearing privileges. Approved F Approved ForiRelease 2005/06/30 : CIA-RDP79T009l5A030200010020-3 I //UAE President Zayid has reacted to the banking problems by implementing some long-awaited policy measures to slow credit expansion and to force banks to operate on a sound basis. The government has banned the establishment of any new financial institutions, raised the reserve requirement from 5 percent to 7.5 percent, required a ratio of no less than 1 to 15 of a bank's capital. and reserves to total liabilities,. and brought all financial institutions under the control of the Currency Board.// //These regulations will help solve the im- mediate banking crisis and will hamper some of the free--wheel- ing tactics of the local banks. The controls on credit expan- sion, however, have already caused a down turn in the local building industry and could adversely affect other sectors of the economy as well.// //The new banking regulations still leave most oca ants wi a competitive edge over branches of foreign- based financial institutions. Many of the local banks, however, may have to merge to achieve a larger capital base.// Gradually recovering world copper prices and rising noncopper exports should permit Chile some relief from the harsh fiscal and monetary measures of recent years. The ruling military junta plans a 24-percent increase in imports this year. The gain will spur a recovery in real gross national product from the severely depressed 1975-76 ZeveZs and should further aid in reducing Chile''s triple-digit inflation. Approved For Pelease 2005/06/30 : CIA-RDP79T0097fA030200010020-3 Approved Folr Release 2005/06/30 : CIA-RDP79T009y5A030200010020-3 Unlike most countries of comparable development and sophistication, Chile had to slash imports--and thus domestic income and employment--to cope with the payments problems stem- ming from rising oil prices and world recession. Until recently, its extremely weak international credit rating practically ruled out access to commercial funds. World criticism of Chilean hu- man rights practices severely limited new official economic as- sistance and made foreign debt renegotiation difficult at best. The Chilean populace has complained little about the austerity because of the threat of government repression and, more importantly, because many citizens--if not most--still feel they are better off than under the Allende regime. The balance of payments had improved considerably by mid-1976 because of rising earnings from noncopper exports, booming copper production, moderate recovery in world copper prices, and short-term capital inflows attracted by soaring in- terest rates. The junta took advantage of the improvement to terminate its foreign debt renegotiation efforts and to rebuild foreign reserves. Although peso devaluation was slowed and tar- iffs were further cut, other fiscal and monetary measures caused imports for the year as a whole to drop an additional 8 percent. I This year the military government intends to use its improve oreign reserve position and the small additional gain expected in export earnings to permit an increase in imports sufficient to restore real gross national product to the 1974 level. Although this will require some easing of austerity, the government hopes that increased supply will permit continued progress against inflation. It also intends to avoid debt re- negotiations and to assert its independence of the US and other critics of its human rights practices by sharply reducing bor- rowing from governments and international agencies. Exports are likely to rise about 7 percent in 1977, to $2.1 billion. Copper shipments will remain roughly at last year's level of 980,000 tons, but an expected rise in average copper prices will boost earnings moderately. Stronger demand for noncopper exports in markets developed since 1973 should allow sales of such goods to rise to $820 million, despite an expected weakening in Chile's competitive position because of slower peso devaluation. Approved For Release 2005/06/30 : CIA-RDP79T00P75AO30200010020-3 Approved Fot Release 2005/06/30 : CIA-RDP79T0097~5A030200010020-3 I IThe government's reduction of US and International monetary and aid this year will lead to a cut in official capital inflows to around $180 million, compared with $460 mil- lion in 1976. Chilean missions to the US and Western Europe are seeking commercial bank loans to help fill the gap. I IDirect investment will remain low, mainly because of past bureaucratic delays in approving new projects. Full debt amortization payments for 1977 will require $555 million, slightly more than in 1976. Total net capital inflows will consequently shrink to about $170 million, compared with $680 million in 1976. I IChile is expected to increase imports to about $2 billion. Higher domestic wheat yields and low wheat import prices will permit a reduction in spending for food imports. Most of the increase in imports will come in fuels, raw mate- rials, and goods for industry. Bringing total imports to the target level will require about $175 million more than Chile now expects to receive from trade and capital flows. Given the recent improvement in the Chilean credit rating, we be- lieve that Chile can raise this additional amount from pri- vate sources. Although the junta is still pursuing a strong anti-inflation policy, it intends to ease austerity. Real wages are to be increased about 5 percent. The junta began a slight relaxation of its restrictive monetary policy in the first quarter. It announced a moderate program of tax reductions, increased social spending, and wage increases for government workers on May 1. These steps are expected to result in a government deficit of around 12 percent of expenditures this year--well below the 17-percent deficit of 1976. Growth in the money supply is expected to decline from last year. The attack on inflation was also aided by a two-month voluntary price freeze by private industry that ended in May. On balance, we estimate that inflation will decline in 1977. I With somewhat stronger demand, real gross domestic product should grow 6.5 to 7 percent this year. Finished Approved Folr Release 2005/06/30 : CIA-RDP79T00P75A030200010020-3 Approved For goods inventories in some industries are likely to hold in- dustrial growth to 10 percent, compared with 12.2 percent last year. Good weather should permit agricultural produc- tion to rise as much as 7 percent above last year. Construc- tion activity, which began picking up late last year, should grow this year for the first time since 1974. Employment will rise some 4.5 percent this year. The unemployment rate will decline only slightly, to 12.2 percent. 25X1 Approved For (Release 2005/06/30 : CIA-RDP79T00915A030200010020-3 25X1 Approved For Release 2005/06/30 : CIA-RDP79T00975AO30200010020-3 Approved For Release 2005/06/30 : CIA-RDP79T00975AO30200010020-3 Approved For Release 2005/06/30 : CIA-RDP79T00975AO30200010020-3 Top Secret (Security Classification) 7 1 O 1 1 1 1 1 1 0 1 1 Top Secret (Security Mg silica ion 01 AA