NATIONAL INTELLIGENCE DAILY (CABLE)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A031100050002-9
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 12
• Document Creation Date: December 15, 2016
• Document Release Date: April 29, 2004
• Sequence Number: 2
• Publication Date: February 6, 1979
• Content Type: REPORT

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~~ [ntelligence
National Intelligence Daily
(Cable)
State Dept. review completed
Top Secret
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National Intelligence Daily (Cable)
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Briefs and Comments
Kenya-Ethiopia-Somalia: Relations
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Uganda: Trouble in Capital.
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Egypt-Yugoslavia: Aircraft Assistan
ce
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Malta: Economic Aid
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Congo: President's Removal
4
Special Analysis
Iran: Revenue Needs and OiZ Output. .
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Kenyan arad Ethiopian forces reportedly plan joint
military action this meek against Somali guerrillas
operating along the border; Ethiopian troops are to
sweep the area. north of the border while Kenyan forces
stand by to block guerrillas attempting to flee through
Kenya. This operation, larger than similar ones in the
past, may be t:he first significant result of Kenyan
President Moirs meeting in Addis Ababa with Ethiopian
leader Mengistu Zast week when the ttvo rea firmed a Zon -
standing mutual defense agreement.
//Moi--in his first trip to an African country since
succeeding to the presidency last August--also signed a
new 10-year friendship treaty and a joint .communique,
both clearly aimed at Somalia, and several additional
technical accords.
Kenya's deep distrust of Somalia's intentions
toward its northeastern area, which has a large ethnic
Somali population, .dominates its foreign policy. Moi
has reiterated. his predecessor's insistence that nothing
short of a public Somali renunciation of any territorial
claims in Kenya would. be acce table as a relude to im-
proving bilateral relations.
Kenya and Ethiopia have little in common but their
shared concern over Somali irredentism. Kenya is fully
aware of its m.ilitar weakness and ho es to find Ethiopia
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Somali leaders, in private remarks
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o. e of visa because it undercut recent efforts to
encourage a Kenyan-.Somali rapprochement. They are also
25X1 offended by the degree to which the Kenyans aligned them-
selves with Ethiopian views and Kenya's seemn a roval
of the Soviet-Cuban resence in Ethiopia.
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UGANDA: Trouble in Capital
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The West German Ambassador, who represents US
interests in Uganda, reported yesterday that shooting
was continuing in Kampala and that power, fuel, and
water supplies had been disrupted. Although it is still
not clear who is behind the trouble or whether President
Amin's position is threatened, the Ambassador is concerned
-the situation will deteriorate. He may soon recommend
implementation of contingency plans for the evacuation
of West German and US dependents from Kampala.
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//The Egyptians reportedly are turning to Yugoslavia
for assistance in maintaining their MIG-21 aircraft.
Yugoslavia recently overhauled four Egyptian helicopters,
and the Egyptians were pleased with the results. The
MIG-21s--the mainstay of Egypt's fighter force--have
been severely affected by the virtual-cutoff of Soviet-
built engines and spare parts. This problem probably
was a factor in Egypt's decision to obtain Chinese-
produced MIG-19s, an aircraft inferior to the MIG-21. 25X1
The Egyptians' slipshod maintenance practices, however,
will sap the benefits of Yugoslav assistance, as the
have in the case of Western assistance.//
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Italy, France, West Germany, and Libya have proposed
a $40 million - $50. million aid package for Malta. Only
$5 million each from the Libyans and the Italians would
be direct budgetary support. The rest would take the
form of grants and loans, including $ZO million offered
by the Libyans to continue the favorable oil price ar-
rangements already in effect. The total might even drop
if current friction between Malta and West Germany per-
sists. This combined offer is far less than what Prime
Minister Mintoff has demanded, but by consulting among
themselves the four. donors have reduced Mintoff's ability
to play one off against the others. Niintoff has few op-
tions except to threaten to turn to the Soviets--which
would be risky bath for his domestic political position
and for his inde endent foreign policy.
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Based on an announcement yesterday from the Congo-
lese party committee meeting, it appears that President
Yhomby Opango, a northerner, has been removed from power,
presumably by southern opponents. As an interim measure
the committee established a four-member presidium and
placed day-to-day government operations in the hands of
the Prime Minister, .presumably Sylvain Goma--a south-
erner--until a special party congress 1-ate next month.
The status of Yhomby Opango, who has considerable sup-
- port among the militar is not clear. Brazzaville a -
25X1 pears to be calm.
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IRAN: Revenue Needs and Oil Output
Regardless of who eventually controls Iran, any
Iranian Government zvi.ZZ be forced to slash public spend-
ing as u~eZZ as resume sizable oil exports to avoid a
crippling budgetary crunch. OiZ exports, zvhieh had been
providing more than two-thirds of government revenues,
have been cut off since Zate December, and difficult poZit-
ieaZ, labor, and technical problems must be tackled be-
fore production and exports recover substantially. The 25X1
reduced ZeveZ of oil production and the need to bolster
domestic revenue are ZikeZy to make uture Iranian Gov-
ernments fauor higher oil prices.
Iran would need to produce some 4.5 million barrels
of oil per day to meet even sharply scaled-down govern-
ment expenditures without resorting to massive budget
deficits or currency devaluations. If a government were
willing to tolerate substantially accelerated inflation,
an austere budget might be met by a production level of
3.5 million barrels per day. Any lower level of output 25X1
would demand some combination of massive inflation,
severe austerity involving wage rollbacks and layoffs,
and major drawdowns of international assets.
Government Expenditures
Current expenditures, budgeted at $25 billion in
the 1978 fiscal year, will be difficult to cut in the
1979 fiscal year. An estimated 50 percent of the 1978
expenditures were budgeted for personnel. Pay raises,
plus increases in fringe benefits and pension payments
granted to government civilian and military employees
in September, are estimated to have added 22 percent to
budgeted personnel costs. A further pay raise of 12.5
percent is scheduled at the start of the-new fiscal year
on 21 March. Major cuts in personnel costs would require
rollbacks of recently granted benefits or sizable reduc-
tions of civil servants and military personnel.
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ing social services and agricultural spending.
goods and services. Another $2 billion could probably
be pared from the other ministries even while maintain-
Spending in other categories could be trimmed with
less political fallout. Perhaps as much as $3 billion
could be slashed from the military and police budgets.
The military ha,s already recognized the need for cut-
backs and has submitted a draft memorandum of understand-
ing to cancel more than $6 billion worth of US military
The government has much more flexibility in cutting
capital spending. Investment expenditures, including
the nuclear power program, have already been cut back.
Other projects that probably will be cut include the high-
way and railroad projects between Qom and Bandar Shahpur,
and the new Tehran airport and metro system. .Government
investment abroad, which has been running at about $1
billion a year out of general expenditures, is likely to
be eliminated. Altogether, at least two-thirds of 1978
budgeted capital expenditures of $17.5 billion could
25X1 probably be slashed.
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Revenues
Non-oil revenue in recent years has accounted for a
quarter of total government receipts. Non-oil revenues,
including those from natural gas sales, are projected to
total no more-than $',8 billion. Taxes are the major non-
oil revenue source. The personal income tax cut of last
September is likely to reduce revenue from this source
by 50 percent once tax collection resumes. After the
backlog of goods in 'port gets worked off, receipts from
taxes on international trade will fall as well. With
the economic outlook uncertain, consumer spending and
the resultin domestic consum tion taxes are not likely
to increase.
Three-quarters of the government's revenue comes
from oil. The government would receive an average of
$13.79 for each barrel of oil in the next fiscal year if
the production cost 'allowance of 30 cents a barrel is
maintained and the consortium profit of 22 cents a barrel
were eliminated. At this price, the government would need 25X1
to export on the order of 4 million barrels per day to
balance the postulated budget without a currency devalua-
tion. An additional 500,000 barrels er da would be
needed for domestic needs.
--continued
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Options
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If the government were unable or unwilling to pro-
duce 4.5 million barrels per day, it would have to choose
among various tradeoffs in terms of unem to ment infla-
tion, and foreign exchange costs:
-- Further reductions in public expenditures.
-- Devaluation of the rial. This would increase 25X1
the rial value of a given amount of oil income 25X1
but would also increase the cost of im orted
goods and hence feed inflation.
-- Budget deficits that would probably brin on a
severe acceleration in inflation.
Iran probably could finance at most a $5-billion 25X1
budget deficit without sparking a crippling inflationary
spiral. In these circumstances, Iran would need some
$15 billion in revenues from oil exports, implying oil
production of almost 3.5 million barrels per day. This
would require a decision by an Iranian Government to in-
crease oil ex orts b about 3 illion barrels per day.
Short-Term Outlook
With about a two-month lag in oil revenues, govern-
ment income has been declining since the downturn in oil
exports in October. The government is reported to be
meeting its payroll obligations, partially through
printing rials. For the 12 months ending 22 October,
currency in circulation was already up 50 percent. If
the government wishes to retain its foreign exchange
reserves--reportedly around $10 billion with an esti-
mated $3 billion in exchange arrears--it probably will
have to print even more currency.
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