NATIONAL INTELLIGENCE DAILY (CABLE)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A031200220001-0
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 14
• Document Creation Date: December 15, 2016
• Document Release Date: April 22, 2004
• Sequence Number: 1
• Publication Date: March 26, 1979
• Content Type: REPORT

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Intelligence 25X1
National Intelligence Daily
(Cable)
State Dept. review completed
Top Secret
Top Secret
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National Intelligence Daily (Cable)
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China: Political Drive Against Taiwan .
USSR: Hard Currency Debt . . . . . . . . . . . 4
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USSR-Syria: Gromyko Visit . . . . . . . . . . . 5
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Guatemala: Assassination . . . . . . . . . . . 6
EC: Agricultural Negotiations . . . . . . . . . 6
Special Analysis
Argentina: Government Strengthened, But
Beset by Problems . . . . . . . . . .
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CHINA: Political Drive Against Taiwan
China has intensified its "united front" campaign
against Taiwan and has forced the government there to go
on the defensive. The move is part of China's attempt
to capitalize on the increased sense of political isola-
tion in Taipei since the normalization of US-China rela-
tions.
The campaign was outlined last month in a New Year's
appeal to Taiwan for reconciliation. The message called
for negotiations to end the military confrontation in
the Taiwan Strait, the establishment of postal and tele-
communications connections and trade ties, and the facili-
tation of travel between Taiwan and the mainland. It
also pledged to respect the economic and social status
quo on the island. To back up its appeal, China uni-
laterally ended its propaganda leaflet shelling of the
Taiwan-held offshore islands, permitted telephone and
telegraph services to Taiwan, and allowed the use of
passports bearing Taiwan's visas.
//Taiwan, however, has rejected all these proposals
and at this stage has been made to appear intransigent.
Over the past year--beginning before Sino-US normaliza-
tion--Taiwan has made a few minor concessions on nonoffi-
cial contacts between individuals on Taiwan and the main-
land, but is unlikely soon to go further.
//Contacts with China too soon might raise questions
about Taipei's resolve to maintain its claim to sover-
eignty and raise doubts about its economic future. More-
over, the mainlander-dominated Kuomintang probably is
aware that ethnic Taiwanese politicians and businessmen
fear that the mainlanders might attempt to secure their
future political domination by arriving at a modus
vivendi with China. Such a decision could dash Taiwanese
hopes for a slice of national political power and cause
a reaction among those, and there are probably many, who
believe that in the lon run Taiwan should be an inde-
pendent nation.//
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USSR: Hard Currency Debt
Itie nave reduced our estimates of
Z.ae s net nara currencu debt from 16 billion to
V11 billion. F I
The revised estimates do not change our perception
of the USSR's financial position. Most of the reduction
stems from a revised treatment of CEMA Bank liabilities,
which are now excluded from the Soviet debt. General
concern over Soviet borrowing in 1975 and 1976 stemmed
more from the rate and manner in which the Soviets in-
creased their debt than from the absolute level. Over
the past two years, the USSR has substantially improved
its payments position; the current account has been
brought into surplus by stepped-up oil exports, a slow-
ing of import expansion, and large sales of arms and
gold. The USSR markedly improved its credit rating with
Western bankers as the growth of its hard currency debt
slowed, especially the portion depending on commercial
bank financing.
The Soviets should be able to handle this debt
through 1980 without threatening priority imports.
Thanks to the conservative financial policy of the past
two years, which included substantial Eurodollar loan
prepayments and refinancing, debt service should require
a lesser portion of hard currency revenues. Soviet fi-
nancial assets in the West stand at an alltime high.
Furthermore, the Soviets have ample borrowing capacity
for the near term. At the end of 1978, Western govern-
ments had com-mii.ted nearly $10 billion to finance future
exports to the USSR, and another $4 billion was available
through unused general lines of credit from commercial
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USSR-SYRIA: Gromyko Visit
Soviet Foreign Minister Gromyko arrived in Damascus
on Saturday for a previously unannounced three-day visit.
His visit is probably intended to exploit Syrian opposi-
tion to the Egyptian-Israeli treaty and to improve bilat-
eral relations, which have been under a strain in recent
months. So far, Gromyko has conferred twice with Syrian
President Assad and with Palestine Liberation Organization
leader Arafat and Syrian Communist Party officials.
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//The assassination last week in Guatemala of promi-
nent leftist politician Manuel Colom Argueta typifies the
rising political violence under President Lucas' eight-
month-old administration. Colom became a credible threat
to the ruling military-dominated coalition when the gov-
ernment recently registered his party; its registration
had been denied for years. Many Guatemalans will read
his murder as further substantiation of rumors that the
government is behind the activities of the Secret Anti-
Communist Army (ESA), a vigilante group that targeted
many leftists for elimination last year. Lucas is in-
creasingly viewed as incompetent and unless he can take
some effective action on the terrorist problem, radicals
on both the left and right will be further encouraged to
use violence for their own ends,//
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EC: Agricultural Negotiations
//The EC agriculture ministers begin an intensive
effort today to resolve their differences over the Common
Agricultural Policy. Among other issues, they will con-
sider a controversial EC Commission proposal for a general
freeze on farm support prices. The freeze is staunchly
supported by the British, who have been insisting on agri-
cultural reform as a way of reducing Britain's net con-
tribution to the EC budget. If the ministers fail to
agree this week, their agreement in principle on other
agricultural issues--which allowed the new European mone-
tary system to start two weeks ago--might fall apart.
Tensions flowing from the UK and Italian Government dif-
ficulties and from the coming direct elections to the
European Parliament would add to the crisis atmosphere,
possibly making EC approval of the Multilateral Trade
Negotiations accords, scheduled for next week, more dif-
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25X1 ARGENTINA: Government Strengthened, But Beset
by Problems
The government headed by President Videla and a
three-man military junta has been strengthened by recent
high-level Army command changes and by the Vatican's agree-
ment in late January to mediate the Beagle Channel dis-
pute with Chile. Even so, uncertainty over the outcome
of the mediation effort, as well as unchecked inflation--
which may provoke labor unrest--could create serious
.stresses within the government in the next few months.
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In December, when Argentina and Chile seemed close
to hostilities over the Beagle Channel, Videla's handling
of the situation set off a spate of coup rumors. Since
then, Army Commander Viola has neutralized some of the
government's harshest critics in the armed forces. First
Corps Commander General Suarez Mason, an outspoken critic
of the government, was named Army chief of staff--thus
depriving him of a sensitive field command and placing
him under the close scrutiny of General Viola. Two of
the four corps commanders are now considered Videla-Viola
loyalists. Another critic, Major General Santiago Omar
Rivero, was reassigned to the Inter-American Defense
Board. Further appointments have tightened Viola's con-
trol of key operational units.
Although the changes strengthen Viola's hand as well
as Videla's, the Army Commander is not a rival for power.
He has privately announced his intention to retire from
public life at the end of this year and in recent months
has been the President's strongest er. This was
arly true in December when
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creasing y impa forts to seek a ne-
gotiated settlement and strongly favored a military solu-
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For the time being, at least, Videla's approach has
been vindicated. It averted war with a usually friendly
neighbor that could have poisoned bilateral relations for
generations. On the other hand, the mediation process,
which will probably begin formally next month in Rome,
is likely to be protracted, and a breakdown in the talks
or an unsatisfactory outcome for the Argentines could
pose dangers for Videla. F__ I 25X1
In an apparent effort to disarm his opponents, Vi-
dela has attempted to put the best face on the mediation.
Government officials have apparently led military officers
to believe that the Papal good offices have overcome
Chilean intransigence and that Argentina's territorial
aspirations will be respected. They also have averred
that Chile is prepared to renegotiate the World Court's 25X1
arbitral award of the three Beagle Channel islands; this
seems most unlikely because Chile has shown little trac-
tability on any territorial issue.
A compromise of some sort is the only realistic
solution, but it would be likely to fall far short of the
Argentine Government's inflated assurances. Should the
mediation results be unacceptable to the military, or
should the talks break down, Videla will come under se-
vere criticism for not having taken military action in
December. His failure to order the seizure of some of
the disputed islands could still ultimately cost him
Another and perhaps more immediate problem for Videla
is the economy. For the past three years, Argentina has
had the world's highest rate of inflation--170 percent
in 1978 and 21.2 percent for the first two months of this
year. The depressed level of real wages has made organized
labor increasingly restive. Low consumer demand and con-
cern that tariff reductions enacted earlier this year
will disrupt Argentina's industrial growth and cause unem-
ployment are prompting some business leaders to cooperate
with labor in an attempt to force changes in economic
policies. Some military officers may be encouraging these
efforts.
Videla's continued support of controversial Economy
Minister Martinez de Hoz could trigger a general strike
in the next month or so. General Viola is confident that
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the government can contain any labor unrest, but strong
repressive measures against union activists will worsen
Argentina's reputation as one of the foremost violators
of human rights in South America and further mobilize
world opinion against the government.
Although Videla seems inclined to grant Martinez de
Hoz more time to rein in inflation, the combined pressure
of labor and industry could force the Economy Minister's
resignation in the next few months. Such a change could
well do more harm than good because the absence of any
well thought out alternative to present policies would
exacerbate economic uncertainty and probably further re-
25X1 tard recovery. F77 I
A new trade union law now in preparation may help
the government ride out the storm. The law, which may
be promulgated within 90 days, could add a further measure
of stability by granting greater trade union freedom and
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Top Secret
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