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December 20, 2016
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August 7, 2006
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August 19, 1977
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AW AW AW AW AW AW AW AW AW AP ppr elease 2007/03/06: CIA-RDP79T00975AO303OO1fl9016S-bcret 219 TO: 1 2 3 ACTION DIRECT REPLY PREPARE REPLY APPROVAL DISPATCH RECOMMENDATION COMMENT FILE RETURN CONCURRENCE INFORMATION SIGNATURE REMARKS: FROM: NAME, ADDRESS, AND PHONE NO. I DATE Access to this document will be restricted to those approved for the following specific activities: Friday August 19, 1977 CG NIDC 77-193C w NATIONAL SECURITY INFORMATION Unauthorized Disclosure Subject to Criminal Sanctions AhNNINNS State Dept. review completed Top Secret (Security la ifi ati n Approved For Release 2007/03/06 : CIA-RDP79T00975A030 0001 Q - (Security Classification) 1 1 25X1 Approved For Release 2007/03/06 : CIA-RDP79T00975AO30300010016-7 Approved For Release 2007/03/06 : CIA-RDP79T00975AO30300010016-7 Approved For Re Nakional Intelligence Daily Cable for Friday, 19 August 1977. Ze NID a le is tor e purpose o intorming senior US officials. FRANCE: Leftist Effect on Economy Page 1 Page 3 SOUTHERN AFRICA: A nti-Apartheid Conference Page 5 WEST GERMANY: Eco n omic Measures Page 6 UK: Tactical Missile Procurement Page 7 POLAND: Harvest O POLAND: US Engine u s tlook for MI-2 Helicopters Page 9 Page 11 YUGOSLAVIA-USSR: BRIEFS: R elations Page 11 Japan Chad Egypt UK Page 12 Approved For Release 2007/03/06 : CIA-RDP79T00975A030300p10016-7 Approved For Rel FRANCE: Leftist Effect on Economy I I The strong possibility that the Socialist- Communist a lance will win control in France next March so far appears to be having only moderate impact on investment decisions. The possibility of a leftist victory, however, has severely depressed stock market prices. I J To increase overall confidence, both the present governmen and the Patronat--the influential employers federa- tion--are pressing firms to invest now in the hope that the re- sulting boost to the economy will forestall a leftist election victory. The government's June survey indicates that French businessmen now expect to increase their nominal investment outlays about 14 percent this year. This corresponds to a real increase of 4 to 5 percent after allowing for inflation. Given the fact that excess capacity is still high in most in- dustries, existing investment prospects seem at least reason- ably satisfactory and indicate that political fears are not a major depressant. The motor vehicle, petroleum processing, chemical, and electrical construction sectors all expect large increases in investment spending this year. All four industries have sound reasons for investment. Large output gains over the past two years in motor vehicles and electrical construction have reduced excess production capacity. The petroleum sector must invest heavily in catalytic cracking equipment to meet an ex- pected shift in demand from heavy fuel oil to lighter products. Spokesmen for the chemical industry forecast that its firms will be unable to meet demand by 1980 unless they begin expan- sion programs now. I While some industries are rapidly expanding capacity, a numDer of others are cutting investment spending. These in- clude basic metals, paper, shipbuilding and aircraft, coal min- ing, leather, clothing, and textiles. This amounts to a roll call of the "problem children" of French industry--sectors that have poor to mediocre prospects in the near future regardless of the election outcome. Most are already receiving special government aid in some form. Approved For Relea Approved For Relo The case of basic metals--especially steel--is the clearest because France suffers from the same excess-capacity problems that affect most steel-producing countries. The paper industry, as well as the entire textiles sector, is plagued by high costs and skyrocketing imports of foreign products. Coal continues its inexorable decline simply because French reserves are running low. Shipbuilding must retrench because of its nearly total failure over the past 18 months to garner new or- ders, while aircraft producers are in a similar situation be- cause of poor sales of the Concorde and other civil airliners. Rumors of large-scale capital flight began to surface not long after the March 1976 local election, in which the Socialist.-Communist coalition made substantial gains. Partial data and press commentary indicate that France has experienced a net outflow of portfolio investment funds over the past year or so, but the amounts apparently involved point to a moderate shift in investor behavior rather than to anything that might be labeled capital flight. Data on overall short-term capital movements--available through the first quarter of this year-- also point to an absence of large-scale capital flight. //Also, a number of individuals have been ap- pre en e recently while attempting to carry large sums out of the country--though this may not be unusual for France, which has had exchange controls for a number of years.// I IFear of a leftist government clearly is depressing stock prices on the Paris Bourse. The average French stock can now be purchased for just half as many francs as in 1961, even though nominal gross national product is now six times the :1961 level. Stock indexes dipped in each of the last two years Approved For Rele Approved For Rel immediately after leftist victories in local elections. Signifi- cantly, the only stock category to resist the downtrend is made up of French firms with their principal business outside France. I This strong political impact on the stock market--in con to the comparatively weak effect on business invest- ment--may reflect mainly the influence of psychological factors on stock price movements. The Paris Bourse is a relatively thin market and thus is especially volatile; French firms rely on internal resources and borrowed funds, rather than equity financing, for the bulk of their capital requirements. Another possible cause of the divergence between stock prices and business investment may be that stockholders are behaving as owners while corporate managers are behaving as salaried em- ployees. Stockholders have valid reasons for fearing a leftist government. The Socialist-Communist alliance already has tar- geted nine major companies for nationalization, and pressure to extend the list is evident within the alliance. Leftist plans to boost social security charges and to allow big wage increases threaten corporate profits across the board. Finally, a leftist government would be likely sooner or later to increase personal income taxes on nonwage income such as dividends and capital gains. 125X1 CHILD: DINA Dissolved //Chilean President Pinochet's decision last week to a o z.s a e National Intelligence Directorate (DINA) appears to represent a genuine effort to curtail abuses of human rights and not just another cosmetic fix. Although the government's assurances cannot always be taken at face value, Pinochet has been under strong pressure from civilian and military advisers to clip DINA's wings.// /The new guidelines suggest that most of DINA's personnel will be absorbed by a National Information Center to be created under the Interior Ministry. DINA's arrest and de- tention powers are also being transferred to the national po- lice (Carabineros) and to the Judicial Police under the Defense Ministry. While illegal activity is still possible under this arrangement, it is our judgment that opportunities for repres- sive practices will be greatly reduced: Approved For Release 2007/03/06 : CIA-RDP79T00975AO303p0010016-7 Approved For Rel --The new agency apparently will not report directly to the President. --Both the Carabineros and the Judicial' _ Police are highly regarded, professional law-enforcement organizations. //Other moves to liberalize the regime may be pos- se e it the organization replacing DINA is restricted solely to information gathering and the President follows up on plans to reduce the state of siege and lift the curfew.// /The direction taken by Pinochet during the past month reflects an awareness that other military governments in South America are formulating plans to return to civilian rule. The debate stimulated by this trend is likely to sustain momen- tum for political change in Chile. //Most Chilean leaders appear to be gratified and encouraged by signs that the military at last is modifying the most severe aspects of repression. Even former president Frei, leader of the country's largest political party and a fervent critic of Pinochet, acknowledges that the dissolution of DINA might be a positive step.// //Despite official disclaimers to the contrary, Santiago has made substantial concessions to meet US recommen- dations on human rights improvements. This latest shift re- flects the government leaders' realization that Chile must strive to improve relations with the US if Chile is to improve its image in the world. Many countries have regarded Chile with contempt since the military seized power in 1973. The announce- ment of the abolition of DINA during the visit of US State De- partment official Todman appears to have been designed to have a maximum impact on Chile's relations with the US and to gain f b avora le interna publicity for the change. F77 -1 39KI Approved For Rllease 2007/03/06 : CIA-RDP79T00975AOP0300010016-7 Approved For R4 SOUTHERN AFRICA: Anti-Apartheid Conference JA five-day UN-sponsored world conference for action against apartheid opens Monday in Lagos, Nigeria. Representa- tives of almost all nations, as well as numerous international organizations, various liberation movements, and prominent individuals will attend. The meeting, which stems from a UN General Assembly resolution of Last November, is supposed to review actions taken by participants to oppose apartheid and to devise ways to eliminate it. I The conference, which will focus on Namibia and Rho- aesia well as South Africa, could prove more divisive than productive as moderates and militants promote their views on how to combat apartheid and seek to publicize issues extraneous to the meeting. The more militant participants will demand stringent economic and military sanctions against South Africa. The tone of the meeting will likely be set by Zambian President Kaunda who will give the principal keynote speech. L Nigeria, the conference host, reportedly is anxious to make e meeting an event commanding world attention and to have it free of confrontation and irrelevant issues. The Nigerians would like to see the conference adopt a declaration of princi- ples and a program of action that is hard-hitting, yet capable of receiving widespread support. Approved For Release 2007/03/06 : CIA-RDP79T00975A030;00010016-7 25X1 Nigerians, however, contains language unacceptable to Western nations, which have already proposed changes. The draft calls for what amounts to a mandatory arms embargo, the elimination of South Africa's rights under international law, the suspen- sion of loans to and investment in South Africa until apartheid is abolished, and the cessation of all nuclear cooperation with South Africa. References to the role of liberation groups go beyond what the US has agreed to in past UN Security Council resolutions. The Nigerians have indicated they will carefully consider the changes proposed by the West, but cautioned that they are under pressure from others to maintain a tough line. major target, and Tel Aviv has announced that it is boycotting the meeting. Arab militants, such as Syria and the Palestinians, can be expected to press--against opposition from Egypt and Saudi Arabia--for language in the final conference report that would equate Zionism with apartheid. In addition, strong at- tacks may be mounted against Israel for its military and pur- ported nuclear cooperation with South Africa. 25X1 a of stimulative economic measures than can be imple- Approved For Rele The proposed conference declaration drafted by the There are strong indications that Israel will be a The West German government is working to put together mented as quickly as possible. Until last week, Chancellor chnri.dt, Finance Minister Apel, and Economics Minister Friderichs, the ruling eoaZition~s economic triumvirate, had steadfastly rejected widespread domestic and foreign pressures for further demand stimulation. They had apparently counted on the infra- structure program to give the economy the needed lift. If serious difficulties within and between the Social Democratic and the Free Democratic parties can be worked out, the government probably will announce its economic package after the cabinet meeting scheduled for August 31. The package probably would involve temporary reductions in personal and corporate income taxes. Under Bonn's Stability and Growth Law, these measures could be implemented by decree, subject to parliamentary approval. Approved For Release 2007/03/06 : CIA-RDP79T00975A040300010016-7 Approved For Ro I Difficulties in getting the government's highly touted $6 billion to $7 billion multi-year infrastructure investment program off the ground help explain Bonn's search for additional measures. The recent series of disappointing employment and in- dustrial order statistics simply confirmed the picture that al- ready had emerged. The current slowdown in business activity finally forced the government to admit that its 1977 goal for 5 percent real growth is. no longer attainable. I lIt now appears likely that contracts let under the intrastructure program this year will fall significantly short of the $1.5 billion total that the government had earlier ex- pected to award. The Transport Ministry, which has been allo- cated some $330 million for additional investments this year, thus far has been able to approve projects for only $240 million. Most of the other ministries, with the exception of the Ministry of Housing, also report short-falls in project approvals. I J The principal problem is administrative. The program specifically restricts funding to new projects, those not previously included in federal, state, or local budgets. Identification of eligible projects, preparation of appropriate plans and designs, and approval by the authorities have turned out to be more time-consuming than envisioned. Further delays are likely as private citizens adversely affected by specific projects, such as the relocation of railroad crossings and con- struction of overpasses, which figure prominently in the federal government's program, seek judicial relief. I I 25X1 UK: Tactical Missile Procurement //The UK announced this week its decision to ac- quLre a mix ure of British- and US-built tactical missile sys- tems for its armed forces. The decision reflects the UK's con- tinuing preference for US weapons over similar European systems and demonstrates the government's desire to protect the future of ito own defense industry.// //Minister of State for Defense John Gilbert said Me wou buy US-made Sidewinder air-to-air missiles for several air force and navy fighter aircraft as well as TOW antitank missiles for use on the army's Lynx helicopters.// Approved For Release 2007/03/06 : CIA-RDP79T00975A010300010016-7 Approved For Rel //The Sidewinder was probably chosen be c ause L. i proven and effective weapon suitable for use on both the Royal Air Force's F-4s and the new Tornado air defense air- craft. Purchase of the TOW is a setback for the French and West Germans who have been pushing their jointly developed HOT mis- sile as a standard for NATO's European armies.// //Gilbert also said the air force would adopt a British-designed antiship missile--probably one still under development--for use on its Buccaneer and Tornado deep-strike aircraft. In addition, the government has decided to finance a program to improve the Sea Dart, the navy's standard surface- to-air missile.// //The announcement of government support for the two ritis projects will be welcome news to the UK's guided weapons industry. The projects will help the industry continue meaningful development work, keep its production lines and work force active, and maintain its design capability into the next decade.// 25X1 //In his remarks, Gilbert suggested the 'i- ment s aecisions were consistent with the UK's policy of seizing opportunities to standardize its weapons with those of other NATO countries. Britain's European allies and arms in- dustry competitors--especially France and West Germany--are likely to disagree, seeing it as a defeat rather than a vict 25X1 I I F_ for arms standardizati efforts. 125X1 25X1 Approved For R41ease 2007/03/06 : CIA-RDP79T009754&030300010016-7 Approved For Rele Recent heavy rains and floods in Poland have dimmed t.71 year's harvest outlook. As a result, the government could find It more difficult to boost livestock production and re- dace consumer grumblings over chronic meat shortages. Party leader G,ierek has indicated to Senator McGovern that Poland would like to purchase 5 million tons of US grain in 1977-1978 on favorable credit terms. Large grain purchases will exacer- bat,e Warsaw's hard currency balance-of-payments problems. I Rains and floods, which began in late July, hit south- ern and western Poland during the initial stage of the harvest. Almost half a million acres of farmland were reported flooded by August 12, mainly along the Odra and Bobr rivers. Heavy rains last weekend caused additional flooding in the western counties along the Baltic coast. The affected areas account for a quarter of total grain acreage. I Serious damage may also result from the grain having been knoc ed to the ground by wind and rain. The US agricul- tural attache reports that 30 to 50 percent of the grain was Approved For Relea Approved For Rele flattened in several major grain-producing counties in western Poland. As a result, much more of the grain crop will have to be harvested by hand this year. Continuing rains, however, have hampered hand harvesting. Polish officials indicate the grain harvest may drop below 20 million tons. Warsaw had expected a 22-million-ton harvest this year--1 million tons short of the 1974 record. In addition, Prime Minister Jaroszewicz has admitted that the production of potatoes--the major sources of hog feed--will fall short of the 1976 level of 50 million tons. I IAlthough the floods resulted in minimal livestock losses, a third consecutive poor harvest could jeopardize the regime's new program to boost livestock production and meat supplies to the population. Attempts last year to raise private farm production of hogs by making it more profitable have had some success this year. Continued progress, however, will depend on the availability of feed and fodder supplies over the fall and winter months. I I Jaroszewicz already had indicated that the large grain and o er imports of last year--7 million tons--may have to be repeated to sustain livestock numbers. Moscow is expected to provide 1 million to 2 million tons while most of the remainder will have to be purchased in the West, mainly from the US and Canada. I I In talks with Senator McGovern yesterday, Party leader sere indicated that Poland wants to purchase 5 million tons of US grain--twice its planned purchases--in 1977-1978 on easy credit termss. Warsaw will probably press later this year for increased US Commodity Credit Corporation credits, easier credit terms on previously extended CCC credits, and resumption of US PL 480 grain shipments to Poland. Poland's already strained hard-currency balance of payments necessitates the search for favorable credit terms. I I Even with large grain imports, livestock output could -alter it small private farmers--suffering from shortfalls in their own production of fodder crops, especially potatoes--do not receive adequate feed supplies from the state. In the past, they frequently have been on the tail end of the distribution system. Approved For Re Approved For Rel The floods will have little impact on meat availability tot the balance of the year. Nonetheless, we expect supplies to remain below 1976 levels--even with continued meat imports and reduced exports. Consumer dissatisfaction over the continuing meat shortages is likely to remain high throughout the year. In addition, flood-induced shortfalls in fruit and vegetable supplies could add to consumer dissatisfaction. POLAND: US Engines for MI-2 Helicopters I //Poland recently has expressed in- terest In o taining US engines for the Soviet--designed MI-2 helicopters produced in Poland. The US engines would signifi- cantly improve the performance of the military and civil ver- sions of the MI-2 helicopter and increase its marketability.// //Representatives of the Polish foreign aviation trade enterprise are interested in buying the US-made Allison turboshaft engine as a replacement for a Soviet-designed turboshaft engine produced under license in Poland. They al- ready have obtained and evaluated one of these engines. Two engines are used to power each of the 100 to 150 MI-2, helicop- ters produced in Poland annually.// //Both the Soviet and American engines produce about p, u the Allison engine weighs only half as much as the Soviet model and has about 30 percent greater fuel economy. The use of the Allison engines would increase the helicopter's range, payload capacity, and service ceiling, thus enhancing its sales potential.// //The Polish aviation industry cooper- ates closely with the Soviet Union, and the technology will probably be passed to the Soviets. Official talks between Yugoslav President Tito and Soviet President Brezhnev ended yesterday in Moscow. Tass said the communique is ready for release and I it may be issued today. Approved For Ro 25X1 25X1 Approved For Rele The atmosphere surrounding the talks suggests the visit has satisfied the mutual goal of reapplying a cordial gloss to bilateral relations. The Soviets rolled out the red carpet for Tito, and he responded warmly. There have only been the usual restatements of long- standing differences in the ceremonial speeches. The Yugoslav leader has adhered resolutely to nonaligned positions and has even criticized all great power interference in Africa, implic- itly including the Soviets'. He also took an independent stance in defending the principle of interparty autonomy within the communist movement. Tito is spending a few days resting in Siberia befor going on to Korea next week. I I 25X1 Japan has begun construction of a centrifuge pilot plant for uranium enrichment after a five-year research and development program. The plant, which is being built near the Ningyo-Toge uranium mine, will be capable of producing 10 tons of low-enriched uranium per year in 1980--an insignificant portion of the approximately 400 tons per year that Japanese nuclear power plants will require by that time. This pilot plant will be followed by a demonstration plant and, finally, by a full-scale commercial plant that is scheduled to be oper- ational in the early 1990s. I I The US embassy in Chad has confirmed that Libya re- cen y delivered fresh arms to Chadian Muslim rebels. During a Chadian army operation two weeks ago in eastern Chad south of Abeche, a truck convoy of Soviet arms originating in Libya was captured. One of the truck drivers said the arms had been air- lifted from Libya to Gouro--a town in territory held by Libyan- backed Toubou Muslim rebels in northern Chad--and trucked from there to eastern Chad for another Libyan-aided Muslim insurgent group. Approved For Rolease 2007/03/06 : CIA-RDP79T00975AQ30300010016-7 Approved For Some of the Libyan arms are doubtless for the Toubou rebels. The Chadian government fears that the Toubou may soon attack the main northern garrison at Faya-Largeau. I I A US news service, quoting the semi-official Cairo daily a,-Ahram reports that the Egyptian government is planning to cut food price subsidies while increasing the minimum wage. It is unknown why the Egyptian government would unilaterally make further cuts in subsidies beyond those required by the agreement signed earlier this year with the International Mone- tary Fund. The sit . nn m;;-,,- hp n1arified upon receipt of addi- tional information 4 The candidate from Britain's ruling Labor Party convinc- win a Fllo d t i g ay. o er on yes ing y won a parliamentary by-elect campaign marked by racial violence, the Labor candidate de- feated his Conservative Party rival by almost two to one. Conservatives have won ten of the sixteen by-elections since the 1974 general election. 25X1 25X1 Approved For RefIease 2007/03/06 : CIA-RDP79T00975AOP0300010016-7 7 A proved For Release 2007/03/06 : CIA-RDP79T00975AO30300010016-7 0 Top ecret (Security Classification) 0 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0 Top Secret 0 (Security &P 1 RM99ATr Release 2007/03/06 : CIA-RDP79T00975AO30300010016-7 0 'Aw 'Aw Adw 'Aw 'Aw low Adw 'Awr Aw Aj