NATIONAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A030400010018-4
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 19
• Document Creation Date: December 20, 2016
• Document Release Date: December 7, 2006
• Sequence Number: 18
• Publication Date: October 25, 1977
• Content Type: REPORT

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Tuesday 25 October 1977
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CG NIDC 77/247C
NATIONAL SECURITY INFORMATION
Unauthorized Disclosure Subject to Criminal Sanctions
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National Intelligence Daily Cable for Tuesday, 25 October 1977.
The NID Cable is for the purpose of in orming
senior US officials.
Page 1
UK: Modest Economic Package
ZAMBIA: Economic Proposals
Page 3
Page 4
CEMA: Possible $800 Million Loan
HUNGARY-USSR: Energy
ITALY: Aggressive Arms Sales
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Page 12
Israel
Panama
Africa-UN
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USSR: Brezhnev Comments on SALT
Soviet President Brezhnev's remarks on SALT Friday at
a Kremlin dinner for Indian Prime Minister Desai appear to be
the most positive he has made on the subject this year.
Brezhnev said the Soviets "would like to bring these
negotiations to a successful conclusion without unnecessary de-
lays." In adding that this is quite attainable "given a realis-
tic and businesslike approach on the American side"--an impli-
cation that US concessions are necessary in the interest of such
"realism"--he was resorting to standard Soviet negotiating tac-
tics.
Brezhnev's toast also contained the common Soviet line
that an arms-control agreement was necessary to arrest the dan-
gerous arms race and to prevent a potential nuclear war. He termed
it "crazy logic" to continue to build up strategic forces.
I uIn his remarks on CSCE, Brezhnev omitted any reference
to contentious human rights issues now under discussion at the
Belgrade CSCE conference.
On Sunday, however, TASS strongly criticized US Am-
asses or oldberg's speeches in Belgrade, terming them "sermon-
izing" and tactless attempts to tell others how to manage their
domestic affairs. TASS added stridently that "attempts by US
diplomacy to achieve a confrontation" at Belgrade "can only im-
process of relaxation of international tensions."
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UK: Modest Economic Package
//British Chancellor of the Exchequer Healey will
announce a modest package of measures this week designed to
stimulate the economy. The proposals, mostly income tax cuts,
will probably amount to about $1.4 billion. The Labor govern-
ment hopes the package, by increasing workers' take-home pay,
will encourage trade unions to moderate their pay claims through
the fall and winter months. Healey has publicly hinted that more
reflationary measures are in store for the regular budget in
the spring if wage settlements do not rekindle inflation.//
I /Healey's announcement is expected to come to-
morrow w en t e House of Commons meets to close the present
parliamentary session. The new session will begin on 3 November
with the traditional speech from the throne outlining the
Callaghan government's objectives for the year to come.//
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//The Trades Union Congress has been pushing for
an increase in public spending, but Healey favors tax cuts as
the method having the most immediate impact on demand. The gov-
ernment may also opt to stimulate demand by granting a special
$17 Christmas bonus to old-age pensioners.//
//Since pay controls expired at the end of July,
there has been no major breach of the government's unilaterally
declared 10-percent pay guidelines. Neither has there been an
occasion for a key union to challenge the guidelines. This re-
spite will not last much longer. The government's position will
be put to a test over the next several weeks as auto workers at
Ford and the nationalized British Leyland firms react to manage-
ment pay offers.//
/The miners' union will probably pose the most
difficult obstacle to wage restraint. The miners' demand for a
90-percent wage boost starting on 1. November is a violation not
only of the government's guidelines but also of the Trades Union
Congress' backing for a 12-month gap between pay settlements.
The government's allies in the miners' union leadership, however,
are trying to head off a confrontation by substituting for the
huge pay demand a scheme that would tie wage increases
in productivity.
ZAMBIA: Economic Proposals
I Zambian President .Kaunda has announced new
economic proposa s designed to reduce dependence on copper
earnings and attain agricultural self-sufficiency. Kaunda, who
has made similar proposals before, is responding to criticism
of past economic policy, but such a program could Zead to
further discontent.
Kaunda's specific proposals include a reduction in
the number of civil servants, sending redundant government
workers and the unemployed to the countryside, and asking small
land holders to become self-sufficient in food production. A
goal for agricultural exports has been set at 50 percent of
total exports, up from a current level of about 8 percent.
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1//The copper industry currently accounts for
90 percent of Zambia's foreign exchange earnings and is the
country's largest private, nonagricultural employer. Stockpiles
of copper have been growing, even though Zambian mines have been
operating below capacity. World prices for copper are less than
60 cents a pound, barely above Zambian production costs.//
//Cuts in mine or civil service personnel, if they
occur, undoubtedly will be small, and long-term mine closures
seem unlikely. Closing the mines would be costly not only in
terms of lost foreign exchange earnings but also in unemploy-
ment--already a serious problem--and maintenance costs for the
shut--down mines. Forcing the unemployed or government workers
into the agricultural sector will aggravate--at least tempor-
arily--food shortages in the rural areas caused by a reduced
maize crop.//
/Kaunda's economic proposals apparently reflect
his sensitivity to growing charges that he has neglected Zam-
bia's domestic problems. Some Zambian political figures are
charging that the country's economic difficulties are due to
Kaunda's preoccupation with foreign policy--chiefly the Rhode-
sian situation.//
//If Kaunda implements his plans, however, he will
be faced with discontent among civil servants sent to the
countryside and miners who lose their jobs. Until now, the
government has not closed any copper mines because it has not
wanted to antagonize the miners. Kaunda considers the copper
belt Zambia's most politically sensitive region, and he would
not want to lose support in the area before the national elec-
tion scheduled for next year.//
Vice President Simon Kapwepwe to rejoin the ruling party. Kap-
wepwe is a leader of the country's largest tribal group, the
//Kaunda may think he recently strengthened his
position enough to risk some layoffs when he persuaded former
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Bemba, many members of which work in the copper mines. He had
o osi-
been viewed by some of Kaunda's critics as a potential
tion leader
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CEMA: Possible $800 Million Loan
/The international investment Bank, an agency
of the Soviet-Zed Council for Mutual Economic Assistance, is
negotiating an $800-million syndicated Zoan to be managed by
Chase Manhattan Bank. The ostensible purpose of the Zoan is to
pay for hard-currency purchases for the Orenburg pipeline--a
CEMA project to transport gas from the Orenburg gas field in
the USSR to the Soviet-Czechoslovak border.//
//The bank has already borrowed almost $1.5
billion from the West to finance the East European countries'
contribution to the pipeline project, thus bringing total funds
borrowed for the pipeline to almost $2.3 billion. If the loan
is approved, it will be the largest ever granted to a Communist
entity and the first time a US bank has led the consortium for
a loan to CEMA. The large Western banks apparently continue to
view borrowing by the International Investment Bank as an at-
tractive and secure business despite the East's rapidly rowin
hard-currency debt.
HUNGARY-USSR: Energy
ovse of exports to Hungary probably iZ increase
between 1980 and 1990. A doubling of Soviet gas deliveries and
a huge expansion of nuclear power production, however, will
permit the energy-poor Hungarians to maintain their present
3.5- to 4-percent annual growth rate of energy consumption.
During a recent lecture, the economist disclosed
that the Hungarian Government estimates that oil consumption
will increase during the decade ending in 1990 by only 90,000
barrels per day above the expected 1980 consumption of 270,000
barrels per day. Most, if not all,, of the increase will prob-
ably come from the Middle East through the future Pan Adriatic
pipeline. Imports from the Middle East, in fact, might increase
by more than 90,000 barrels per day and Soviet deliveries might
decline. Soviet oil exports to Hungary amounted to 170,000
barrels per day in 1976 and are scheduled to reach 180,000 to
200,000 barrels per day by 1980.
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I The reduced growth in the use of oil during the
1980s will reverse the historical trend of a rapid increases
in oil's share of Hungarian energy consumption. By 1990, oil
will account for 38 percent of total energy consumption, down
from a projected 42 percent in 1980.
//Soviet natural gas deliveries to Hungary
pparent y will increase from the planned 1980 level of 3.8
apparently-
billion cubic meters (equivalent to 64,000 barrels per day
of oil) to about 8 billion cubic meters (135,000 barrels per
day) by 1990. The additional gas may be delivered through
i eline that could be built ad'acent to the Orenburg line.
Nuclear power will climb from a negligible share
o energy consumption in 1980 to 10 percent by 1990. Hungary
plans to put its first nuclear reactor into operation in 1980
and to have an installed capacity of 4,400 megawatts by 1990,
supplying 30 percent of electric power needs. A major expansion
of nuclear power is necessary, because of limited indigeous re-
serves of oil, gas, and coal.
ITALY: Aggressive Arms Sales
//Italy ranks fifth among non-Communist arms sup-
p iers after the US, France, UK, and West Germany. The Italians
have been aggressive arms exporters, and the effort has paid
important dividends, including increased influence and good
will in client countries, improved foreign exchange earnings,
and more jobs. Exports help maintain a larger and more competi-
tive defense industry than would be warranted by the limited
demand from Italy's relatively small armed forces.//
//Italian arms sales from 1972 through the middle
of 1977 approached $3 billion; about three-fourths of the total
went to Latin America, the Middle East, and North Africa. After
a sharp decline last year, sales rebounded in the first half
of 1977, primarily because of a $425-million helicopter sale
to Iran.//
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//Italian military exports include small arms, am-
munition, an jet trainer aircraft. Italy also has become an
important supplier of light warships. Sales of destroyer escorts
to Peru and Venezuela and helicopters and aircraft equipment to
Iran and Libya rank high among recent orders.//
I //A large share of the exports consists of items
produced in Italy under foreign license, especially from the
US. Italian export policy is permissive, but foreign licensors
sometimes refuse to approve Italian sales. Although the Italians
have complained that US policy is too restrictive, they claim
to adhere to US restrictions on transfers. Recent Italian ef-
forts to export G-222 transport aircraft to Libya, for example,
have been stalled by US refusal to permit transfer of the Ameri-
can-designed engines.//
//In the past, Italians have been willing to vio-
late an embargo to gain a fast sale. Italian firms sold aircraft
and electronic equipment to South Africa in 1963 and helped the
South Africans establish their own aircraft industry.//
I //Italy would resist proposals for international
restraint on arms exports to Third World countries. Nevertheless,
in the unlikely event that all other major Western arms sup-
pliers agree to a program of international restraint, Italy
probably would go along rather than risk isolation from its
political and military allies. If the US were to reduce its arms
exports unilaterally, the Italians would try to increase their
market share as much as their high dependence on US technology,
patents, and licenses would allow.//
I Rome's attitude towards the arms industry is laissez-
aire. Arms exports are not regulated by legislation, but rather
by a special committee from the Defense, Foreign Trade, and
Finance Ministries. The committee seldom refuses export requests.
//Italy has also shown flexibility in arranging
payment. This year's big arms sale to Tehran is a barter deal
under which Italian helicopters will be swapped for Iranian
crude oil.//
//The government not only values the foreign ex-
change and employment generated by arms sales--the arms industry
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employs roughly 150,000 workers--but also believes that the ex-
ports improve Italy's position with Third World countries, es-
pecially with key Middle Eastern and African oil producers.
Most arms-producing firms belong to state holding companies and
are among the few state-owned firms currently showing profits.//
I /The Italian Communist Party is the main proponent
of restrictions on arms exports. Because Prime Minister Andreotti's
minority government stays in power by the grace of Communist ab-
stentions in parliament, the Communists probably could force
some curbs if they decided to do so. The party recently published
a proposal on the arms export issue that included an outline of
a new system for controlling export permits and a demand for
halting arms sales to "racist and authoritarian" states, but they
apparently do not intend to force the issue at this time. Chile
and South Africa are the nations most often cited by the Com-
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North Korea has failed thus far to make the economic
adjustments necessary to improve its international financial
position. Despite the rescheduling early this year of most of
its $1.4 billion external debt, Pyongyang has been unable to
meet the required interest payments. Large principal payments
will again start coming due late next year. Confidence in North
Korea's ability to pay is at an all-time low; even the optimis-
tic Swedes have pulled out in the Last stages of a major mining
project.
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Trade returns for the first half of 1977 indicate a
continuing decline in exports, reflecting general production
problems and the depressed market for such important export
items as nonferrous metals. Major changes in North Korea's trade
corporations last year and numerous exhortations by the govern-
ment have so far failed to stimulate export production.
I orth Korean exports to the West during the period
from January to June declined by 17 percent in value compared
with the first half of 1976. The drop in sales to these hard
currency countries has sharply reduced foreign exchange earnings
needed to meet interest payments and to purchase essential items.
I orth Korean imports from the West fell at a somewhat
slower pace than exports during the first half of this year,
preventing any improvement in the country's hard currency trade
deficit. In 1976, the cutoff of Western credit following large
scale defaults in 1975 resulted in a 37 percent drop in imports
from these countries; purchases of capital machinery fell to
half their former level. Imports from Communist countries also
declined, mainly in response to Pyongyang's failure to meet its
export commitments.
I Even if domestic production and exports pick up,
the top priority assigned to the military sector will robabl
forestall significant progress in debt repayment.
I orth Korea's international financial problems have
complicated the preparation of its Seven Year Economic Plan
(1978-1984). Billions of dollars worth of Western technology
and capital equipment will be needed to reach targets already
stated informally. Only a small fraction of this equipment is
likely to become available. The plan, already postponed for two
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The Israeli parliament voted 62 to 34 yesterday to
approve Yigael Yadin and three other members of the Democratic
Movement for Change to Prime Minister Begin's cabinet. Yadin
will serve as deputy prime minister, and his colleagues will
head the Ministries of Justice, Transport and Communications,
and Labor and Social Betterment.
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I erusalem Radio reported yesterday that Prime Minis-
ter Begin, in a surprise move, has nominated two ministers with-
out portfolio; one of them is from the Liberal faction of the
Likud Party and the other from its Herut faction. The nomina-
tions are a move by Begin to counteract the shift of power in
the cabinet accompanying the addition of the four members of
the Democratic Movement for Change.
jurisdictions.
and the yes vote is well above 50 percent in each of the 10
I The latest returns from Sunday's plebiscite indicate
that the Panama canal treaties were approved by slightly more
than a two-to-one margin. Final returns are to be announced
Thursday. The plebiscite appears to have been conducted smoothly,
igeria yesterday won a two-year term on the UN Secu-
rity Council after five ballots by members of the General Assem-
bly. Such contests are seldom necessary, as each regional caucus
group selects a single nominee for the rotating Security Council
seat accorded it. For a West African seat available this year,
however, Nigeria and Niger--which, unlike Nigeria, has never held
a Security Council seat--were locked in contest.
]The much smaller Niger won the endorsement of the
Organization of African Unity heads of state in July to replace
the incumbent, Benin. Nigerian Head of State Obasanjo subse-
quently decided that his country's aspirations to leadership
in Africa would be enhanced by Security Council membership,
but he was unable to persuade Niger to withdraw its candidacy.
Czechoslovakia, Bolivia, Gabon, and Kuwait were elected
routinely to the other regional Security Council seats for the
1978-79 term. They replace Romania, Panama, Pakistan, and Libya.
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