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December 20, 2016
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September 18, 2006
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December 15, 1978
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E Apph tetbuFdr Release 2007/03/07 : CIA-RDP79T00975A03090 ret Central Intelligence National Intelligence Daily (Cable) State Dept. review completed Top Secret CG NIDC 78-0291C ecem er Approved For Release 2007/03/07 : CIA-RDP79T00975AO309000 124-1 COPY ~. , 25X1 Approved For Release 2007/03/07 : CIA-RDP79T00975AO30900010124-1 Approved For Release 2007/03/07 : CIA-RDP79T00975AO30900010124-1 Approved For Release 2007/03/07 : CIA-RDP79T00975A03090001'942ret National Intelligence Daily (Cable) CONTENTS IRAN : Domestic Situation . . . . . . . . . . . . . 1 MOROCCO: Challenge to Hassan . . . . . . . . . . . 3 CUBA-AFGHANISTAN: Coordination . . . . . . . . . . 4 UK: Survives Vote of Confidence . . . . . . . . . 5 BRIEF . . . . . . . . . . . . . . . . . . . . . . . 6 Japan FEATURE ARTICLE . . . . . . . . . . . . . . . . . . 7 JAPAN: Changing Economic Signals LATE ITEM . . . . . . . . . . . . . . . . . . . . . 10 ARGENTINA-CHILE: Beagle Channel Approved For Release 2007/03/07 : CIA-RDP79T00975A030900010124-1 Approved For Release 2007/03/07 : CIA-RDP79T00975A0309000fD*2 etret //The Shah of Iran is trying to seize the initiative from his domestic opponents by meeting with independent and opposition political figures. The military govern- ment is also orchestrating pro-Shah demonstrations and encouraging religious leaders to break with the opposi- tion. The Shah's initiatives are unlikely to have any real impact unless he is willing to make some fundamen- tal concessions that would sharply reduce--if not eli- minate--his role in ruling Iran.// 25X1 The Shah met yesterday with former Prime Minister Ali Amini amid widespread speculation that he may name Amini Prime Minister soon. It is unlikely, however, that a government headed by Amini would appease any signifi- cant element of the opposition. He is not a member of an opposition group, and his appointment as Prime Mini- ster in 1962 is po larly believed to have been at the request of the US. //Conversations between US officials and members of the National Front indicate, moreover, that the oppo- sition is not considering any conciliatory strategy and is continuing to insist that the Shah give up virtually all his powers. Indeed, National Front leader Karim San- jabi on Wednesday told the press after meeting with the Shah that he had rejected an offer to form a coalition government.// Relatively small pro-Shah demonstrations have been held during the last two days in many provincial capi- tals, and pro- and anti-Shah demonstrators have report- edly clashed in the streets of Shiraz and Tabriz. Oil production has been running at about 1.1 or 1.2 million barrels per day since 11 December, compared with 5.9 million barrels per day at the beginning of the month oil company executives are pessimistic about the possi bility of near-term increases in output, and the few Ira- nian workers still on the job have told supervisors they 25X1 are willing to produce only enough crude to meet domes- tic requirements, although it is not clear whether oil workers could obtain information on domestic needs. These workers have threatened to walk out, and some strikers have threatened violence, if the consortium of iIproved For Release 2007/03/07 : CIA-RDP79T00975A030900010124-1 oil companies that produces most of Iran's oil attempts to increase production or if military technicians are brought in to work with them. About 150 naval technicians are now manning two oilfields by themselves. The labor problems at the major refinery at Abadan threaten a serious deterioration in the supply of petro- leum products to the domestic market; local shortages of gasoline, oil, and kerosene have already developed. Some imports are trickling in, but these will not be enough if production at the Abadan refinery is much reduced. fl Approved For Release 2007/03/07 : CIA-RDP79T00975AO30900010124-1 Top Secret 2 Approved For Release 2007/03/07 : CIA-RDP79T00975AO30900010124-1 Approved For Release 2007/03/07 : CIA-RDP79T00975A0309000 ret MOROCCO: Challenge to Hassan Moroccan King Hassan is facing the first signifi- cant demand that he Loosen his firm grip on power since he Launched a program of political Liberalization three years ago. The Leftist Socialist Union of Popular Forces, one of Morocco's two major parties, has made a bold caZZ for modifications of the monarch's heretofore unques- tioned authority. The assertiveness of the Socialist Union may be symptomatic of problems that seem likely to surface in Morocco next year. 0 25X1 The Socialist Union made its move in a declaration unveiled at the end of the congress the party held this week. The government's initial reaction was to seize the party's newspaper to prevent publication of the declara- tion, which in effect characterized the monarchy as feudal. If the Socialist Union does not pull back from its challenge, however, the King will not hesitate to revert to the repression of the early 1970s, when he or- dered the arrest of several hundred dissidents. II 25X1 Press reports indicate that Hassan has abruptly postponed his private visit to France allegedly because of illness. He may in fact want to monitor the situation personally. II The Socialist Union has privately lobbied for polit25X1 ical and economic reforms that would substantially re- duce the King's autocratic powers, but until now has is- sued no public call for fear of provoking the King. The decision to attack the previously sacrosanct monarchy was made by party militants who are said to be embittered by the government's manipulation of the na- tional and regional elections last year. I 25X1 The Socialist Union may have overestimated its pop- ular support and acted prematurely. The party recently formed a labor organization and has influence in the Na- tional Student Union, but it has a long way to go in strengthening these organizations and regaining the pop- ular following it had in the 1960s. 25X1 Hassan's base of popular support is largely built on one issue--his success in forcing Spain in 1975 to relinquish its Saharan province to Morocco and Mauritania. Approved For Release 2007/03/07 : CIA-RDP79T00975A030900 10124-1 Ton Secret Approved For Release 2007/03/07 : CIA-RDP79T00975AO30900010124-1 I That venture, however, has proved costly in both men and resources. Popular enthusiasm has cooled, and the issue is unlikely to divert public opinion much longer from the chronic problems of inflation and declining wages, which are already causing labor unrest. //The visit of Cuban Foreign Minister Malmierca to Afghanistan late last month apparently resulted in agree- ment by the two governments to coordinate their foreign policies, to increase cultural exchanges, and Later to discuss Cuban technical, scienti ic, and military assis- Lance to Afghanistan.// //The basic reason for Malmierca's visit was to get Afghan support for Cuban positions at the summit meeting of the nonaligned movement scheduled for Havana next September. He was also interested in solidifying the close relationship developed after Cuba's immediate re- cognition of the new Afghan Government following the coup in April.// //Malmierca is said to have given Afghan officials the impression that Cuba is prepared to provide signifi- cant civilian technical assistance in a variety of fields. This possibility is given added weight by the appointment this fall of Raul Garcia Pelaez--a member of the Cuban Communist Party Central Committee and a former member of the party Secretariat--as Ambassador to Kabul.// //Afghan Foreign Minister Amin has publicly asserted that his government would seek "from all our revolution- ary friends" any assistance necessary to thwart threats to the regime. This could well be an invitation to the Cubans, who we believe would be willing to provide at least limited security assistance or counterinsurgency traininq if requested.// Approved For Release 2007/03/07 : CIA-RDP79T00975AO30900010124-1 Approved For Release 2007/03/07 : CIA-RDP79T00975A030900 //Britain's minority Labor government narrowly sur- vived a vote of confidence in Parliament Last night that climaxed two difficult days for Prime Minister Callaghan. In the long run, it could prove to have been a hollow victory because the events of the past two days may have seriously damaged the government's credibility and ef- fectiveness in carrying out its economic policies and in dealing with the trade unions. Prospects that the govern- ment will be able to survive until its mandate expires next October are substantially reduced.// 25X1 //Support and abstensions from minor parties helped the government; these parties feared, they would suffer heavy losses if a general election were called now. Dis- enchanted leftwing Laborites, whose abstentions on votes earlier this week helped block parliamentary endorsement of Callaghan's pay policy, were also unprepared to let the government fall. December public opinion polls in- dicate that the government would not fare well if an 25X1 election took place now; the Conservatives have regained their lead over Labor, and dissatisfaction with the gov- ernment's economic policies has increased sharply.// 0 //The most important development of the past two days is that significant parts of Callaghan's economic strategy now appear to be in shambles and that he may not be able to pick up the pieces. Early in yesterday's debate, Callaghan--in a pitch for support--confirmed that the government had abandoned the use of sanctions against firms that breach the pay guidelines and hinted that it would try other approaches--presumably restric- tive fiscal and monetary policies.// //The government's ability to control inflation and to deal with union demands over the next several months, however, is at best uncertain. The Conservatives are likely to step up their attacks on Callaghan's handling of the economy and to attempt to exploit any issue that will embarrass the government.// 1 -1 25X1 5 Top Secret 25X1 Approved For Release 2007/03/07 : CIA-RDP79T00975A030900 - 0 Japan Approved For Release 2007/03/07 : CIA-RDP79T00975AO30900010124-1 The Japanese Government is apparently contributing $60 million to a program for developing by 1990 fully automated factories incorporating various building-bloc machine tool systems. The funding, matched by another $60 million from four private Japanese companies, will cover .a developmental period extending from 1977 to //Each of the four companies has already developed a machine tool subsystem designed to form a modular machine tool system when combined with the other three subsystems. These units have high-precision, self-adjust- ing controls that compensate for tool wear and provide finer control than conventional machine tools. The sec- ond phase of the program, which has already begun, will add high-performance laser cuttincr and to the system in the next two years.// //If successful, this program could virtually double the level of precision achieved by current machine tool operations--partly because of advances in real-time sensing technology--and the work force involved could be cut in half. In addition, retooling a factory for a new product line could be accomplished in days or weeks rather than the present months or years.// I Approved For Release 2007/03/07 : CIA-RDP79T00975AO30900010124-1 Approved For Release 2007/03/07 : CIA-RDP79T00975AO3090~ JAPAN: Changing Economic Signals //The makeup of Prime Minister Masayoshi Ohira's first cabinet may foreshadow a change in Japan's economic direction. Although the cabinet was chosen largely for political balance, the economic views of the new minis- ters may indicate an eventual move away from big budget deficits. Some ministers will probably push for intro- duction of a value-added tax--an indirect tax levied on each stage of production and affecting consumers much like a sales tax--to boost tax revenues. The ministers apparently agree on a target of about 6 percent GNP growth over the next few year but the fer over the means to attain that goal.// r tff 25X1 The list of economic appointments, in rough order of importance to Ohira's economic purposes, include: -- Ippei Kaneko, 65, Finance Minister. A tax special- ist with excellent credentials, Kaneko favors implementing the value-added tax to boost gov- ernment revenues and to avoid a wider budget deficit. I 25X1 -- Masumi Esaki, 62, Minister of International Trade and Industry. Esaki has strong ties to business and to former Prime Minister Tanaka. He will push for high, domestic-led growth. -- Tokusaboro Kosaka, 61, Director of the Economic Planning Agency. 25X6 25X6 He has substantial influence with old-line big business. Ohira probably selected Kosaka to be a spokesman for Japan in foreign economic affairs. 0 25X1 -- Michio Watanabe, 54, Minister of Agriculture. Ohira's choice to coopt.the political power of the far right wing of the Liberal Democratic Party, Watanabe will probably have the smallest role in economic policy formulation. II 25X1 7 Top Secret 25X1 Approved For Release 2007/03/07 : CIA-RDP79T00975AO3090 //Beyond his immediate cabinet, Ohira may seek eco- nomic advice from Toshio Komoto, Chairman of the Liberal Democratic Party's influential Policy Affairs Research Council. The only Ohira appointee with previous experi- ence in a cabinet-level economic position, Komoto will probably use his post to continue to push for more gov- ernment economic stimulation.// //Ohira's search for solutions to Japan's economic problems will probably extend to academicians as well as the business community. Ohira abolished the post of Ex- ternal Economic Affairs Minister held by Nobuhiko Ushiba but is seeking to retain Ushiba at least until Japan completes negotiations in the multilateral trade negotia- tions.// //Ohira will want to reduce the huge government bud- get deficits and current account surpluses that derailed former Prime Minister Fukuda's five-year economic plan after just three years. Fukuda avoided a value-added tax because of resistance from the opposition parties and his concern over its inflationary effect; without the tax, deficit spending soared. Japan's budget deficit as a proportion of GNP is now more than twice the US or West German deficit.// //On the trade front, Ohira will certainly want to keep the surplus with the US on a steady, if slow, de- cline. He has made no promise, however, to seek a global current account balance. Fukuda had promised to strive for "equilibrium" in Japan's global balance of payments by 1979--a promise that implied a reduced current ac- count sur lus offset by long-term capital outflows.// I //Ohira will have difficulty coming up with a plan that simultaneously meets the goals for sustained growth, more balanced trade, and reduced budget deficits. The new government needs time before it can adopt a coherent game plan. As a whole, the cabinet is less experienced in economic olic aking than the outgoing Fukuda cabi- net.// //For the near term, Ohira will have to live with growing budget deficits to keep the economy going. Ohira's fiscal year 1979 budget, which will be drafted by January, will probably call for growth in excess of Approved For Release 2007/03/07 : CIA-RDP79T00975A030900010124-1 Top Secret 8 Approved For Release 2007/03/07 : CIA-RDP79T00975A030900010124-1 Approved For Release 2007/03/07 : CIA-RDP79T00975A0309000'~c4et 6 percent. Government outlays on the general account may rise 16 percent over the revised 1978 figure, pushing the deficit financing requirement to over 37 percent of the total budget.// A new medium-term plan including, perhaps, a pro- posal for the value-added tax should be completed before the major countries' economic summit next spring. Be- cause the tax will not apply to goods sold abroad, it could have a beneficial impact on exports. In addition, it could help finance the housing and other social wel- fare expenditures needed over the longer term. Ohira also may give special consideration to private investment by cutting corporate taxes at the same time he imposes the value-added tax. I 25X1 9 Top Secret Approved For Release 2007/03/07 : CIA-RDP79T00975A0309000 T S t 25X1 LATE ITEM Approved For Release 2007/03/07 : CIA-RDP79T00975AO30900010124-1 ARGENTINA-CHILE: Beagle Channel //No major changes have occurred in the Argentine- ChiZean situation since the coZZapse of diplomatic efforts Lo resolve the Beagle Channel dispute, but both sides are continuing preparations for possible hostilities. Both countries insist they are still open to possible compro- mise, but no concrete steps have been taken to avert a conflict.// //The balance of forces favors Argentina, which should be able to carry the day in any conflict. In the southern region, Chile's 6,000 men would have to contend with about 21,000 Argentine soldiers, and Argentina also has the advantage in ships, aircraft and ground force weapons and equipment.// //Although Argentina could begin operations as early as today, the bulk of its fleet probably will not arrive in the Beagle Channel area before late toda and Army troops are still being deployed.// //The possibility of a clash is generating alarm in other South American capitals. Peru and Bolivia are watch- ing the situation closely, but have indicated that they will remain neutral unless military activity spills over their borders. Brazil also intends to keep out of the dispute and has formally called on both Argentina and Chile to redouble their diplomatic efforts.// 1 :1 Approved For Release 2007/03/07 : CIA-RDP79T00975AO30900010124-1 Approved For Release 2007/03/07 : CIA-RDP79T00975AO30900010124-1 Top Secret Top Secret Approved For Release 2007/03/07 : CIA-RDP79T00975AO30900010124-1