NATIONAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A030600010010-0
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 17
• Document Creation Date: December 20, 2016
• Document Release Date: February 16, 2006
• Sequence Number: 10
• Publication Date: March 6, 1978
• Content Type: REPORT

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NATIONAL SECURITY INFORMATION
Unauthorized Disclosure Subject to Criminal Sanctions
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Monday 6 March 1978 CG NIDC 78/053C
CIA-RDP79T00975A03060 j cret wj 1 S
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National Intelligence Daily Cable for Monday, 6 March 1978
25X1
The NID Cable is for the purpose o in orming
senior US officials.
CONTENTS
ITALY: Programmatic Majority
WEST GERMANY - US: Relations
CHINA: Government Appointments
Page 2
Page 3
Page 5
USSR: Jewish Emigration Increase
USSR: Hard Currency Position
PORTUGAL-AZORES: Autonomy
NICARAGUA: Political Change
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Page 11
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ITALY: Programmatic Majority
I _7 Now that Italian Prime Minister - designate
An reotti has won permission from his Christian Democrats to
include the Communist Party in a new government's parliamentary
majority, he is focusing on programmatic differences among
the major parties. Although the parties have been sharply at
odds on several issues, Andreotti is likely to find this phase
of his talks less troublesome than the protracted negotiations
over the Communists' political rote.
Ithe,Communists evidently were satisfied with the Christian
Democratic directorate's invitation last week to join in a
"programmatic-parliamentary majority." The Christian Democrats
may use this formulation to continue asserting that the Com-
munists are only part of a "program majority" as opposed to a
"political" one, but for all practical purposes the Communists
appear to have attained the goal they had in mind when they
brought down the government early this year.
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I In the meantime, Andreotti's meeting of party leaders
over the weekend to discuss future government policy drew posi-
tive comments from most of the participants. According to a
Social Democratic official, a compromise may even be near on
police unionization, one of the most controversial issues facing
Andreotti. The Christian Democrats are open to the idea of a
unionized police force but have strongly resisted proposals
from the left to organize the police under the existing labor
federation, in which the Communists are the most influential
party.
I I Although the Republican Party has some reservations
about n reotti's program, the Liberals are the only party he
is courting that is unlikely to support a new government. This
worries the Christian Democrats even though Andreotti does not
need Liberal support to have a majority.
25X1 I The small, conservative Liberal Party's support has
been slipping in recent years, and it believes Andreotti's con-
cessions to the Communists offer it a chance to capitalize
politically by moving into the opposition. The Liberals, in
fact, would be the only legitimate party remaining in the oppo-
sition, since the neo-fascists and leftwing splinter groups are
considered politically untouchable.
25X1 I lAndreotti will hold a series of meetings with labor,
business, and political leaders today and tomorrow in prepara-
tion for nnnt-hpr le conference of party chiefs on Wednes-
25X1 day.
WEST GERMANY - US: Relations
//West German Chancellor Schmidt, in a speech Friday
in Hamburg, reaffirmed his country's close alliance with the us.
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He echoed other Leading figures of his government who have tried
to moderate the West German media's criticism of US influence,
especiaZZy in West German economic and monetary affairs. The
slide of the dollar, however, has stimulated more criticism
of US leadership.//
//In his speech, Schmidt emphasized that the US is
West Germany's most important trading partner. He implied some
disagreement over economic policy but stressed that the two
governments agree that the industrial nations should seek non-
inflationary growth. Bonn and Washington also agree on energy
policy and the North-South dialogue, he said, and they believe
one of their most important tasks is to avoid protectionism.//
West Germany
cision about the production of nuclear weapons. He said, however,
that Bonn is opposed to nuclear weapons and is trying to influ-
ence other nonnuclear states not to acquire them.//
ing nuclear power in NATO, to provide West Germany with necessary
nuclear protection and to take its interests into account. He
noted that this makes possible Bonn's commitment to NATO's
"purely defensive" character and the "total integration" of West
German forces in the Alliance.//
//Schmidt reiterated that Bonn would help decide
now a neu ron bomb might be introduced into NATO, noting that
the allies have a role to play in "developing" modernized nu-
clear weapons," should that become necessary."//
//Regarding the neutron bomb, Schmidt said that
is not a nuclear power and thus cannot make a de-
//The Chancellor said he expects the US, as the lead-
//The Chancellor declared, however, that the possi-
bility of progress in disarmament negotiations must be considered
along with NATO's requirements for security. He stressed West
Germany's support for arms control and disarmament and said
that all possibilities of achieving "substantial progress, par-
ticularly in the MBFR negotiations," must be exhausted. Schmidt,
however', dropped a phrase from his prepared text stressing
that "exhaustive" exploration of disarmament possibilities
should be a prerequisite for deployment of the neutron bomb.//
//Schmidt said his main purpose in delivering such
extensive comments on US - West German relations was to try to
contradict the "many irritations" that have recently been made
public.. F77 I
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CHINA: Government Appointments
The government named at yesterday's closing session
of China's National People's Congress is composed of experienced
veteran officials committed to pursuing the country's ambitious
economic development program. The leadership seems to have opted
for compromise regarding potentially controversial appointments;
it avoided choosing officials whose candidacies may have en-
countered strong opposition from some quarters. On balance, the
Congress yielded mixed results for senior Vice Premier Teng
Hsiao-ping, Premier Hua Kuo-feng's main rival.
Hua Kuo-feng, for example, retained the position of
L_ I
Premier. Although no one before Hua had ever held both the
premiership and the position of party chairman, it was appar-
ently less divisive to leave him in place than to name a new
premier. Teng Hsiao-ping had a strong claim on the premiership
by virtue of having been chosen for the post by the late Chou
En-lai, but he evidently angered some important officials by
his vindictive pursuit of old adversaries.
I J It seems likely, however, that Teng and Vice Premier
Li Hsien-nien will continue, as in the past, to share most of
the duties of the premiership despite Hua's retention of the
title.
L
The choice of Politburo member and old marshal Hsu
Hsiang-chien as the new Defense Minister seems also to be a
_ I
compromise. The two leading candidates for the job were highly
controversial. One was a strong ally of Teng Hsiao-ping and the
other, who filled in on the job two years ago, was probably op-
posed by Teng.
I Former Defense Minister Yeh Chien-ying, who is nearly
80 an, was moved up to chairman of the National People's
Congress, a post roughly equivalent to head of state. The job
is prestigious but less taxing than the defense portfolio.
Appointments to the 35 government ministries were
notable tor the replacement in several cases of military men
by civilians, thus continuing the effort to remove military
men from strictly civilian functions. Most of the new govern-
ment ministers were purged in the mid-1960s and returned in
recent years to public life. Two of them are newly rehabili-
tated.
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Five of the seven ministries that oversee the pro-
duction of military-related equipment received new leaders.
This could reflect on the standing of Politburo member and mili-
tary man Chen Hsi-lien, who is believed to be in overall charge
of the seven ministries. Chen, who is an opponent of Teng Hsiao-
ping, was one of the unsuccessful candidates for Defense Minis-
ter and dropped from third to sixth among the vice premiers.
Other probable enemies of Teng also retained their
posts but slipped in the standings. Peking party boss Wu Te
went from third to fifth in rank among the vice chairmen of the
National People's Congress. Alternate Politburo member Saifudin,
who has been under official criticism, dropped from fifth to 14th
on the same list. He is now outranked by several officials who
are not on the Politburo, suggesting that he has lost his Polit-
buro position. Party vice chairman Wang Tung-hsing, who did not
hold a position in the government, was again excluded.
I I Teng's enemies were successful in denying him the
premiership, and he was unsuccessful in removing them from their
government positions. He saw them slightly demoted, however, and
was also able to get some very close associates named to such
posts as the important public security job once held by Hua
Kuo-feng and to the newly established academy of social sciences.
Six new ministries, most of them restored from the
mid-1960s, were added to the 29 that were established at the
.last congress in 1975. The new ministries focus on such matters
as science, economic planning, ethnic minorities, and areas such
as textiles that are important export items.
//DIA does not believe that there have been any
significant compromises in the election of a new state leader-
ship, as this article suggests. It is that agency's opinion
that a division`of responsibilities and roles between Hua Kuo-
feng and Teng Hsiao-ping and other key leaders was worked out
during last year's Party plenary sessions. Moreover, it seems
highly unlikely that Peking would have elected to hold the Fifth
National People's Congress, without first dispensing with such
a critical matter as the power relationship between leading
political figures.//
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USSR: Jewish Emigration Increase
The rate of Jewish emigration from the USSR increased
substantially during the eight-month period ending 28 February.
During that time, emigration was almost 35 percent above the
comparable period a year ago. The rate may increase even more.
In view of the unyielding, highly visible campaign
against certain dissidents, Soviet authorities presumably do
not expect Western government and press criticism to abate
merely because emigration is made easier. Soviet officials,
moreover, have not attempted to exploit the policy shift for
propaganda advantage or used it as a counter to Western crit-
icism of their actions.
The shift on emigration appears to be tied more
closely to domestic than foreign policy considerations. By im-
proving exit opportunities for the majority of Jews while crack-
ing down on the'more vocal dissident leadership, Soviet author-
ities are underscoring the message that the weight of the So-
viet system will be thrown against those who seek to publicize
their grievances against it. Such a policy, in addition, should
lessen the emigration pressures that have built up since 1973.
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USSR: Hard Currency Position
I I The record hard-currency deficit in 1975 hurt So-
viet cre it-worthiness. For the first time, the USSR had to
borrow heavily in the Eurodollar market--more than $4 billion--
doubling its hard-currency debt to $10 billion. This put some
major Western banks close to their legal or self-imposed lending
limits to the USSR, and they started to demand higher interest
rates from Moscow.
The USSR began to reduce its hard currency trade
deficit in 1976 by boosting oil exports. It achieved a further
reduction in 1977 by holding imports steady and expanding ex-
ports by 10 to 15 percent. Despite large orders for Western
grain, we estimate that Soviet hard currency grain imports fell
from a record high of $2.6 billion in 1976 to about $2 billion.
This drop, however, was offset by an increase in machinery and
equipment imports.
Average annual prices were higher for oil, diamonds, timber,
and platinum-group metals. Hard currency earnings from other
sources--arms sales, tourism, and transportation services--have
also risen rapidly over the past two years.
I I Moscow has sharply curtailed the growth in its hard
currency net borrowing over the past two years. By the end of
1977, hard currency debt to the West stood at about $16 billion.
Soviet exports in 1977 generally benefited more from
rising world prices than from substantial increases in volume.
//The USSR has sought to reduce its reliance on
Western banks in an effort to counter adverse publicity on the
size of its debt and to avoid paying what it considers unac-
ceptable interest rates on further bank loans. Over the past
two years, the Soviets havee increased the use of government-
backed credits, postpo d some payments to suppliers, and
stepped up gold sales.
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The hard currency trade deficit is likely to be re-
uce urther in 1978, and the hard currency current account
could even go into the black for the first time since 1974.
Because repayments on past loans are catching up to new draw-
ings, the growth in debt should be further slowed this year.
The expected decline in machinery imports should more than off-
set any rise in grain imports. Because of a slightly improved
economic outlook for the West, we also expect Soviet non-oil
exports to grow this year at the same rate as in 1977.
The volume of hard currency oil exports may decline
after rising substantially in 1976 and remaining at a high
level last year. A further slowing in the growth of oil produc-
tion appears almost certain this year, and oil exports to the
West may decline unless the Soviets are willing to pay the cost
of further economies in domestic oil consumption. The other
alternative, a reduction in oil exports to Eastern Europe, is
probably seen by Moscow as less desirable.
PORTUGAL-AZORES: Autonomy
Portugal has instructed the regional government
in the Azores to submit by 15 March a specific plan for eco-
nomic decentralization and political and administrative au-
tonomy. Most Azorean leaders believe this indicates a new in-
terest on Lisbon's part in improving relations after months
of bitter quarreling. Lisbon is also planning to replace its
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unpopular chief representative in the Azores. Both moves
should help quiet Azorean discontent and separatist ambitions
that could prove disruptive to negotiations on a new US base
agreement.
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Amaral expects to have no difficulty in meeting the 15 March
deadline. After talks with Portuguese President Eanes and other
leaders, Amaral and his colleagues believe that the present
Lisbon government will be more receptive than its predecessor
to Azorean autonomy proposals and that the government will im-
prove on the existing provisional autonomy statute.//
In the past Azorean ambitions have outstripped Lis-
//Azorean Regional Government President Mota
bon's willingness to give; relations nearly reached the break-
ing point in 1976. Recent rounds of recrimination seemed to
rekindle separatist fervor, which had been declining.
//Amaral would like Lisbon, to transfer most min-
isterial functions as they relate to the Azores to the regional
government. He also wants to insulate the Azores from Portu-
gal's economic problems and its austerity program. The regional
government has already passed measures that would://
Establish a separate foreign exchange budget.
-- Give Azoreans authority to open domestic banking
agencies.
-- Allow independent interest rates in the Azores.
Delay implementation of objectionable legislation
written by the central government.
The Azoreans will probably gauge Lisbon's stand on
i ,
it deals with these bills. The regional govern-
h
ow
autonomy by
ment, composed of Social Democrats, has no partisan support in
the Socialist-Center Democratic national government. A combina-
tion of' .person-to-person contacts and a potential for disrup-
tive action in the islands should, however, win serious con-
sideration for its views.
//The Azoreans also want more effective participa-
i
tion in negotiations with the, US on a new base agreement. They
strongly support the US presnce but dislike having to channel
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some of their major dealings with the base through Lisbon. They
are interested in the working conditions of Azoreans employed
on the base and in obtaining control over their share of eco-
nomic assistance received by Portugal as a result of a new
base deal. The Azoreans could try to disrupt negotiations if
their demands are not satisfied.//
The recent decision to replace General Galvao de
Figueiredo as Minister of the Republic to the Azores is viewed
in the islands as a favorable omen. Figueiredo has been unsym-
pathetic to Azorean interests and has become a focal point for
local discontent. F_ I
NICARAGUA: Political Change
//The explosion of Zong pent-up discontent
in Nicaragua, sparked by the murder in January of newspaper
editor Pedro Joaquin Chamorro, has set the country irreversibly
on a path to political change. Although Marxist guerrillas are
inciting much of the violence, it has become obvious that many
weZZ-to-do Nicaraguans also now believe that the anachronistic
paternalism of the 45-year-Zong Somoza dynasty must be altered.
A growing number of Nicaraguans would, if necessary, even sup-
port violent change.//
//It appears that the movement toward change
of some kind has been encouraged by the belief that the US is
providing Zess support to Somoza than heretofore. Somoza prob-
ably has a better than even chance of finishing his term in
1981, but there is some possibility that the situation could de-
teriorate more quickly.//
//Somoza's ability to engineer an orderly
evolution ?owa new competitive system is being undermined
by the rebels' success in creating turmoil. Somoza has been
receptive to discussions with critics of the establishment and
has demonstrated restraint even toward the Marxist revolution-
aries. His stabs at statesmanship, however--for example, his
offer of constitutional changes--are treated by the opposition
with skepticism born of many years frustration.//
I //It is increasingly evident that younger,
well-educated Nicaraguans and determined to make the most of the
present situation. These young nationalists do not trust Somoza,
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and they are not likely to sit still for any gradual changes to
the political system fashioned by Somoza and his family. In ad-
dition to their awareness of the country's political backward-
ness, the younger Nicaraguans are concerned over the fact that
an entrenched entrepreneurial class has reaped most of Nicara-
gua's economic profits.//
//In addition to his domestic challenges,
omoza aces e prospect of increasing international criticism
of his regime. In this regard, the US stand on human rights
works both to encourage Somoza's opponents and to reduce his
room for maneuver.//
//Somoza's ability to temporize may diminish
further as his government's energies are increasingly devoted
to trying to curb the campaign of violence now being waged by
two factions of the splintered Sandinist National Liberation
Front, a Marxist organization. The National Guard will be spread
thin by a prolonged period of rebel violence. This is likely to
demoralize the President's frontline security forces, which in
turn could weaken their loyalty to the regime.//
//Somoza's decision to give the Guard a free
hand militarily in attempting to quash the rebels may backfire.
The inevitable casualties will intensify the human rights issue
and prompt greater international concern. At the same time, some
besieged Nicaraguan townspeople--who may or may not be sympa-
thetic to the rebels--will almost certainly lodge new grievances
against Somoza's security forces.//
//Somoza's best chances for survival until
1981 lie with the members of the Nicaraguan establishment, whose
vested interests largely parallel his own. The threat of young
radicals shaping events may be enough to convince the President's
political antagonists within the establishment that they should
accept his invitation to work together for a controlled tran-
sition period. Somoza can still count--at least in the short
term--on a loyal and effective security force, and his supporters
in the Liberal Party have not lost faith in his judgment and his
ability to control events.//
//An alliance involving political groups,
the National Guard, and prominent businessmen may not hold up,
however, if the revolutionaries seem to be gaining ground. While
Somoza still appears to be in a position to control events, the
situation could quickly deteriorate to the Point where
have to surrender power. 25X1
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