NATIONAL INTELLIGENCE DAILY SATURDAY 14 JULY 1979

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP81T00368R000300020036-0
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 22
• Document Creation Date: December 22, 2016
• Document Release Date: May 10, 2012
• Sequence Number: 36
• Publication Date: July 14, 1979
• Content Type: REPORT

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)61"?Central
ZOA-I
Intelligence
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Contents
Situation Report
Nicaragua 1
Briefs and Comments
Israel: Operation in Southern Lebanon ? ? ? 2
3
Egypt-China: Chinese SAMs to Egypt 4
Canada: Aid for Indochinese Refugees 4
Ghana: Political Situation 5
USSR-Uganda: Soviet Personnel Return 5
Portugal:
New Elections
Special Analyses
International: The Future of the World Oil
Market
7
China: National People's Congress 11
Overnight Reports 14
The Overnight Reports, printed on yellow paper as the
final section, will often contain materials that update
other articles in the Daily.
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14 July 1979
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ET GUCIGALPA
Hondu
Chinandega.f
7,5
Kilometers
MANAGUA
Msa'Y'a
Rivas
\
Penas Blancai?
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SITUATION REPORT
NICARAGUA
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President Somoza's trip to Guatemala yesterday to
meet with the Presidents of Guatemala, El Salvador, and
Honduras probably represented a last-ditch attempt to ob-
tain assurances of military assistance for the National
Guard after Somoza steps down. The Guard is holding near
Rivas, but the Sandinistas are advancing elsewhere.
The three Central American leaders reportedly told
Somoza on 28 June that they would not send troops to sup-
port the Guard. They are unlikely to reverse this deci-
sion but may well agree to increase arms shipments to the
Guard once Somoza leaves and presumably will offer to
provide safe haven to Guard personnel who seek it.
A US company apparently has provided Nicaragua with
two additional T-28s. The aircraft were scheduled to
arrive in Nicaragua Thursday night and probably were
among the four recently arrived T-28s that the
yesterday. The total number of T-28s in Nicaraguan hands
is still not certain.
On Thursday--for the second consecutive day--the
Nicaraguan Air Force reportedly bombed highway bridges
and other targets in Costa Rica south of Penas Blancas.
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Palestinian Controlled
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BRIEFS AND COMMENTS
ISRAEL: Operations in Southern Lebanon
A high-level UN official has confided to US offi-
cials that he was convinced the Israelis considered them-
selves free to intervene within the UN area of opera-
tions. He emphasized that the Israeli raids had antago-
nized the countries contributing troops to the UN force.
The official said that if the Israelis continued their
search-and-destroy policy within the UN zone, he ulti-
mately might recommend to the Security Council a with-
drawal of the UN force.
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PORTUGAL: New Elections
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By opting to dissolve parliament and hold early
elections in the fall, Portuguese President Eanes has
alienated the country's major political force, the So-
cialist Party. The Socialists are embittered by Eanes'
repeated refusals to let them end the current crisis by
forming a government. The election campaign is 'likely
to be acrimonious; the results are not expected to re-
solve Portugal's deep-seated problems and, in any case,
elections must be repeated next year.
A senior Socialist official told a US Embassy offi-
cer earlier this week that if Eanes refused to allow the
Socialists to form a government they would campaign for
his resignation. The Socialists charge that Eanes has
defied democratic procedures by withholding support for
the majority government they proposed to form with the
dissident Social Democrats.
In his efforts to resolve the government crisis,
Eanes also offended the conservative Center Democrats
by leaving them out of his proposals for forming a govern-
ment. Moreover, he took on the military's Revolutionary
Council, which reportedly was split over whether to ap-
prove the dissolution of parliament but nevertheless
approved Eanes' decision.
In a broadcast last night, Eanes justified his deci-
sion on the ?grounds that no stable government alterna-
tive was possible. He made a slight concession to the
left by announcing that he would appoint a noncontrover-
sial figure to serve as interim prime minister in place
of the unpopular Mota Pinto.
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EGYPT-CHINA: Chinese SANS to Egypt
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China is providing Egypt with two batteries of its
version of the Soviet-designed SA-2 surface-to-air mis-
sile system, according to sources of the US defense at-
tache in Cairo. Earlier this year, China delivered
nearly half of an Egyptian order for 40 Chinese-built
F-6 fighter aircraft, which Egyptian pilots have recently
begun to fly. Like the aircraft, the significance of
the missiles is more political than military; the arrival
of token amounts of equipment from China, the West, and
Romania will increase President Sadat's prestige with
the armed forces, at least in the short term. All of
Egypt's more than 60 older, Soviet-supplied SA-2 batter-
ies have deteriorated steadily since the USSR cut off
aid, and Egypt will soon need to replace many of them.
CANADA: Aid for Indochinese Refugees
Canada plans to accept as many Indochinese refugees
as possible and to urge that other countries apply po-
litical pressure on Vietnam by condemning its actions.
Mounting Canadian public interest in the refugees and the
increase in private sponsors now seem likely to push the
intake of refugees well beyond the 12,000 target the gov-
ernment set three weeks ago. The Province of Quebec has
agreed to accept up to 4,000 refugees, and Alberta plans
to donate $1 million to the UN refugee program.
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GHANA: Political Situation
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Lieutenant Rawlings, chairman of the Armed Forces
Revolutionary Council, told a Ghanaian student delega-
tion on Thursday that President-elect Hilla Limann must
purge his People's National Party of persons the Council
considers corrupt as a prerequisite for the military's
support when Limann takes office in October. Sources of
the US Embassy in Accra report that the Council in par-
ticular wants several senior party officials removed.
Rawlings' statement is the first indication that the
Council is ready to extend its housecleaning campaign
to former civilian politicians. The removal of the
party's old guard would allow Limann to establish his
own authority over the party. Rawlings' move may be an
attempt to preoccupy the students and prevent them from
making common cause with the more radical members of the
Council--largely enlisted men. He also may hope that
the purge will satisfy extremist students who are push-
ing for the resumption of executions.
USSR-UGANDA: Soviet Personnel Return
The USSR is bringing its Embassy, trade mission,
and information offices in Kampala back to full strength,
Soviet personnel were
evacuated in April during the conflict with Tanzania.
/ The So-
viet charge signaled Moscow's willingness in May to con-
tinue relations with the new Ugandan Government in accord-
ance with previous political and cultural agreements.
The return of the Soviet staff presumably will pave the
way for improved relations. The new government of Presi-
dent Binaisa is more leftist than its short-lived prede-
cessor, but we have no evidence that it has yet made any
overtures to the Soviets.
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Million b/d
Oil Supplies Available
to OECD Countries
1980
1978
1979
1982
OPEC production 2
30.4
30.6
30.2
30.2
OPEC consumption
2.2
2.3
2.5
2.9
OPEC exports
28.2
28.3
27.7
27.3
Net imports of:
Non-OPEC LDCs
2.8
2.8
2.7
2.6
Other developed
countries '
0.7
0.6
0.8
0.9
Net exports of Communist
countries
1.0
0.8
0.4
-0.7
Oil available for import
to OECD
25.7
25.7
24.5
23.1
OECD production
13.7
14.3
14.5
14.8
Stock drawdown
0.3
OECD oil consumption
39.7
40.0
39.0
37.9
' Excluding Australia and New Zealand. Because of rounding,
components may not add to the total shown.
2 Including natural gas liquids.
' Including Australia, Israel, New Zealand, and South Africa.
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SPECIAL ANALYSES
INTERNATIONAL: The Future of the World Oil Market
Total oil supplies available to the major industrial
countries over the next few years are unlikely to in-
crease significantly and may well fall. Alternative
energy sources will help take up some of the slack dur-
ing the 1980s, but not quickly enough to prevent a sig-
nificant Lowering of economic growth in the major indus-
trialized countries. Opportunities will multiply gradu-
ally for energy conservation and for the development of
substitutes for oil. For the next decade, however, the
adjustments are likely to be extremely difficult.
Members of the Organization of Petroleum Exporting
Countries as a group are not likely to increase their
oil production for the foreseeable future. For the Per-
sian Gulf producers with ample oil reserves--Saudi Ara-
bia, the United Arab Emirates, Kuwait, Iraq, and Iran--
productive capacity and output will be constrained by
policy considerations rather than by technical factors.
For most other members of OPEC, technical constraints
and limited reserves will impose upper limits on the
amount of oil produced.
On balance, OPEC oil production probably will re-
main near 30 million barrels per day over the next sev-
eral years. If so, exports will drop as domestic needs
grow. Although several members of OPEC together would
have the capacity to increase production by 3.5 million
to 4 million barrels per day, they are not likely to
make this oil available to the world market except for
compelling foreign policy reasons.
Outside OPEC, changes in production and capacity
will tend to offset each other. There is likely to be:
--continued
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-- A marked increase in North Sea oil production,
which probably will peak in 1982 or 1983.
-- A decline in US production.
-- An increase in production in less developed
countries outside OPEC, especially Mexico and
Egypt; most of the increase, however, will be
offset by a rise in consumption in the develop-
ing countries.
-- A decline in the net exports of oil from Commu-
nist countries as Soviet production peaks and
then begins to decline. (DIA does not agree
that Soviet oil production will peak and drop
over the next several years.)
With traditional oil supplies thus restricted, the
importance of alternative energy sources--tar sands,
shale oil, natural gas, coal, and nuclear energy--will
increase. Except for natural gas, the resource base for
alternative energy sources is sufficient to allow a large
expansion of output, but there are severe cost and envi-
ronmental constraints. Moreover, even with the enhanced
profitability resulting from higher real oil prices,
large-scale development of these resources would take
many years.
Even if coal supplies increase by 2 million barrels
per day oil equivalent and there are no further delays
in nuclear power programs in the member countries of the
Organization of Economic Cooperation and Development
over the next three to four years--an optimistic projec-
tion of nonoil energy production--total energy supplies
for those countries would grow only 1 to 1.5 percent
annually.
The consuming countries will find it very difficult
to adjust to such a slow growth of energy supply. Hold-
ing energy demand to projected supply levels without low-
ering economic growth of OECD countries below the 3- to
--continued
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3.5-percent rates generally considered acceptable would
require unprecedented rates of conservation. Although
government policies could help, most conservation is
likely to be imposed by market forces.
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If consumer countries continue supporting economic
growth and producing countries continue to limit produc-
tion, this will operate to push up the price of oil.
Higher oil prices in turn will slowly stimulate energy
production and conservation. During the next few years
at least, the higher oil prices will work to cut demand
by holding down the economic growth of the OECD coun-
tries--to perhaps 2.5 percent annually or less on the
average.
Higher oil prices will depress economic activity
over the next two years; in turn, real oil prices could
stabilize or even decline slightly. Weak demand thus
may mask the worsening energy situation, as was the case
between 1975 and 1978. The problem of public perception
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is complicated by the fact that very small swings in pro-
duction or consumption can create enough slack in the oil
market to create the illusion of ample oil supplies.
The oil market may be either tightened or eased by
the policy reactions of both oil exporters and oil im-
porters to these events. At the same time, other con-
tingencies would almost certainly make things worse
rather than better. The political situation in Iran
remains extremely unstable, and exports f-om that coun-
try could fall or even cease. Unexpected supply inter-
ruptions could occur elsewhere as well.
In a basically tight energy market, even such com-
mon events as a harsh winter or a coal strike could cre-
ate disruptive energy shortages and higher prices. Use
of oil as a political weapon by one or more producers
also would cause economic dislocations.
The oil supply problem is likely to get worse later
in the 1980s. Although higher prices will stimulate oil
--continued
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exploration and development, enhanced recovery, and pro-
duction of heavy and shale oil, progress in these areas
will take time. The predominant view among geologists
is that the chances of discovering enough quickly ex-
ploitable oil to offset declines in the known fields are
slim. If the Persian Gulf countries and some non-OPEC
producers continue to limit production, as we expect
they will, world oil production probably will begin to
decline in the mid-1980s.
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CHINA: National People's Congress
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The latest session of China's National People's Con-
gress, which ended early this month, focused on economic
issues and resulted in greater influence for leaders
with economic expertise. On domestic issues, the Con-
gress adopted a number of policies that interest Vice
Premier Deng Xiaoping, but other, more controversial poli-
cies especially important to him remain unresolved. Pre-
mier Hua Guofeng reiterated the pragmatic line on foreign
policy established by Mao Zedong and Zhou Enlai in the
early 1970s and avoided revolutionary rhetoric.
The Congress established a high-powered commission
to oversee the economic "readjustment" program and pre-
sumably to prevent faulty planning in the future. Party
vice chairman Chen Yun, head of the commission and archi-
tect of the readjustment, has emerged clearly as China's
economic czar. The elderly and frail Chen, however, is
likely to leave much of the day-to-day work to younger
economic specialists who have become increasingly impor-
tant in the leadership as China concentrates on problems
of economic development.
Political Aspects
The Congress also highlighted the growing prominence
of some older officials who were purged from senior posi-
tions in the 1960s and recently awarded important jobs.
Significantly, however, Beijing did not reveal their
place in the "pecking order"; it chose to obscure the
sensitive protocol problem involving these veteran offi-
cials and younger, less-experienced officials in simi-
larly high-ranking posts.
Although Vice Premier Deng Xiaoping probably favored
many of these personnel appointments, his closest asso-
ciates did not win government positions; Deng does not
appear to have benefited personally from the Congress.
Indeed, the Congress is the only major meeting in which
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Deng did not play an active role since he returned to
office two years ago. He did not speak at the Congress,
and only one of his appearances there was publicized.
Deng, however, clearly exerted behind-the-scenes in-
fluence. He probably helped draft and undoubtedly was
cheered by proposals designed to protect individuals
from indiscriminate arrest, to give them a greater sense
of participation in the government, and particularly to
allow more open discussion and criticism of the govern-
ment and its policies. The endorsement of "democratic"
activity was a partial vindication of Deng, who had been
criticized earlier for advocating democracy at the ex-
pense of social order. The Congress, on the other hand,
failed to act on some policies especially important to
Deng, including a detailed reappraisal of Mao, an assess-
ment of the Cultural Revolution of the mid-1960s, and
the removal of some officials who cling to the Maoist
past.
The party did not hold a Central Committee meeting
before the Congress, a sign that it is not close to re-
solving these issues. In the major address to the Con-
gress, Premier Hua endorsed Deng's pragmatic approach to
decisionmaking but did not support the position that Mao
was fallible and neither praised nor condemned the Cul-
tural Revolution.
Foreign Affairs
During his speech, Hua reaffirmed that China would
continue the basic foreign policy set in motion by Mao
and Zhou Enlai. Hostility to the USSR, closer relations
with the West, .including the US and Japan, and the pur-
suit of influence in the Third World remain cornerstones
of Chinese foreign policy. Hua advocated a cautious,
even defensive foreign policy designed to increase
China's security and assist in its economic moderniza-
tion. The Congress issued a separate resolution affirm-
ing the correctness of policies toward the US, the USSR,
and Vietnam. This unusual move suggests the Chinese
leaders have had disagreements concerning these policies.
--continued
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If Hua has become less polemical, his discussion of
Soviet expansionism and Sino-Soviet relations leaves no
doubt that the USSR remains China's principal enemy. Al-
though he used more muted terms than last year, Hua con-
tinued to press for international cooperation to contain
the USSR. Hua noted that the Sino-Soviet talks proposed
by China should be directed at solving "outstanding prob-
lems." He thus left open the possibility that during the
negotiations China might resurrect such thorny issues as
the withdrawal of Soviet military units from Mongolia.
The Premier cautioned that prospects for Sino-Soviet ne-
gotiations also depend on a change in the Soviet position
on China's principle of antihegemony.
Hua's treatment of Vietnam fully reflected the de-
terioration in mutual relations. Whereas his 1978 re-
port only implicitly criticized Hanoi's conduct toward
its neighbors and did not link Vietnam and the USSR as
countries seeking hegemony, Hua this year made the link-
age explicit. He did not, however, threaten Hanoi with
a second "lesson."
The Premier's temperate handling of Sino-US rela-
tions imparted a US tilt to the foreign policy overview.
He sounded mildly optimistic about future relations with
Washington, but he implicitly warned that the US should
not pursue a policy toward Taiwan that is harmful to
China's interest. Hua probably was signaling the US that
it should carefully consider its position on continued
military sales to Taiwan. His comments evidently also
were designed to minimize any domestic criticism of
Beijing's policy toward US-Taiwan relations.
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OVERNIGHT REPORTS
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(The items in the Overnight Reports section have not
been coordinated within the Intelligence Community.
They are prepared overnight by the Office of Current
Operations with analyst comment where possible from the
production offices of NFAC.)
Turkey
Four Palestinians of the extremist "Eagles of the
Revolution" guerrilla group continued to hold 16 hostages
in the Egyptian Embassy in Ankara this morning after
three hostages escaped and a fourth died as a result of
a leap from the top of the Embassy building. The ter-
rorists demand the release of two of their comrades im-
prisoned in Egypt, Turkish recognition of the "Palestine
State," severance of Turkish diplomatic relations with
Egypt and Israel, and safe passage to a friendly Arab
country. Although they threatened to blow up the Embassy
if their demands were not met, early this morning they
reportedly agreed to postpone their deadline indefinitely.
Turkish officials and Arab diplomats remained in contact
with the guerrillas during the night, but no details were
available on the status of negotiations.
Spain
A communique issued by the political-military wing
of the Basque separatist group ETA said it would suspend
its campaign of bombings in Spanish resort areas while
Basque leaders and the central government discuss draft
plans for Basque autonomy. According to a news report,
the ETA also claimed responsibility for the shooting of
a member of parliament last week and for a $2 million
bank robbery. The member of parliament was a member of
the Union of the Democratic Center, which opposes the
autonomy plan.
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Ghana
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Military leaders have resumed secret trials after
suspending them for eight days during the presidential
election period. According to an official announcement,
three former senior military officers were convicted of
amassing wealth illegally, ordered to forfeit their as-
sets to the state, and sentenced to a total of 28 years
imprisonment. These were the first prison sentences
meted out by the Revolutionary Council; previously, eight
top military officers, including three former heads of
state, were sentenced to death. (See Page 5 for a
current assessment of the situation in Ghana.)
Peru
The military regime of President Morales Bermudez
declared yesterday that it accepted the new draft con-
stitution but, contrary to the wishes of the 100-member
Constituent Assembly which drafted it, refused to make
any of its provisions effective before the transfer of
power to a new civilian government in July 1980. The
military objected to immediate adoption of articles that
would abolish the death penalty, recognize the UN decla-
rations of human and political rights, and limit the
power of military courts to try civilians.
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