NATIONAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A030300010016-7
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 17
• Document Creation Date: December 20, 2016
• Document Release Date: August 7, 2006
• Sequence Number: 16
• Publication Date: August 19, 1977
• Content Type: REPORT

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Friday August 19, 1977 CG NIDC 77-193C
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NATIONAL SECURITY INFORMATION
Unauthorized Disclosure Subject to Criminal Sanctions
AhNNINNS
State Dept. review completed Top Secret
(Security la ifi ati n
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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
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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.
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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
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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:
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--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
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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.
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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 ser2.es of stimulative economic measures than can be imple-
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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.
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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.//
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//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.//
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//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
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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
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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.
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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.
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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.
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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.
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