NATIONAL INTELLIGENCE DAILY MONDAY 29 SEPTEMBER 1980

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82T00466R000500010071-5
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 21
• Document Creation Date: December 27, 2016
• Document Release Date: April 5, 2010
• Sequence Number: 71
• Publication Date: September 29, 1980
• Content Type: REPORT

Declassified in Part - Sanitized Copy Approved
Director of
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Intelligence
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National Intelligence Daily
Monday
29 September 1980
CU All!) AIM RO 1101Y
29 September 1980
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Contents
Situation Reports
Poland
Briefs and Comments
Italy: Government Resigns 5
4
Egypt-Libya: Border Developments 7
South Korea: New Constitution 8
China: ICBM Deployment
International: Prospects of Nonoil Developing
Countries
10
Argentina-USSR: Grain Trade 11
Special Analysis
Turkey: Economic Outlook 12
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/--''--
Vilnius
U.S.S.R.
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Brest
Boundary representation is Hungary
not necessarily authoritative.
Kilometers
100
628144 9-80
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POLAND
Rumors that a large portion of the Soviet-Polish border has
been closed and that Polish ' tary Kania has gone to
Moscow cannot be confirmed.
The Swedish Embassy in Warsaw reported on Friday
that, according to an eyewitness who traveled half the
length of the Polish-Soviet border from Brest to Braniewo
on 24-25 September, all crossing points except the one
at Brest were closed to general traffic. Militia were
present in large numbers at these closed border crossing
points. The US Consulate in Leningrad reported that
similar rumors were heard on Friday from Soviet sources
in Vilnius, approximately 75 miles from the Polish
border.
There is no information to confirm these reports.
Although adverse weather conditions continue to hamper
overhead photography of many key areas,
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The Swedish Embassy also reported that Kania was on
his way to Moscow on Friday, and various Western corre-
spondents have heard rumors that he is there. The US
Embassy in Warsaw reported similar information, with one
source claiming that the Polish party plenum was post-
poned from Friday until today because of the trip.
Rumors of a Kania visit to Moscow first surfaced
in Warsaw two weeks ago. Such a trip normally would be
customary. New party leaders in Eastern Europe tradi-
tionally have traveled to the Kremlin to pay their re-
spects within a month of assuming power. A secret trip
by Kania prior to the party plenum, however, would indi-
cate either that he is having some difficulty imple-
menting personnel and policy changes or that the Soviets
are dissatisfied with the new Polish leadership's
progress in repairing the party's shaken authority.
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BRIEFS AND COMMENTS
ITALY: Government Resigns
Italian Prime Minister Cossiga's government resigned yesterday
after failing by a single vote Saturday to obtain?arliamentary ap-
proval of its controversial economic program.
The government won an earlier rollcall confidence
vote by a comfortable margin, but its subsequent defeat
on the secret ballot test of the economic program appar-
ently convinced the Prime Minister that future defections
from his Christian Democratic - Socialist - Republican
parliamentary majority would seriously hamper his coali-
tion's ability to govern.
The government's defeat represents a severe blow to
the aspirations of the moderate-conservative Christian
Democratic and Socialist leaders who had pinned their
hopes on the Cossiga government's ability to provide an
alternative to a government with Communist support. Con-
versely, this development can be interpreted as a victory
for leftwing Christian Democrats and Socialists who had
fought during Cossiga's tenure for greater cooperation
between the government and the Communists. The govern-
ment's resignation also can be seen as strengthening
Communist chief Berlinguer's arguments that no Italian
government can govern effectively without some assistance
from the Communists.
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Italian President Pertini now will likely tap Cossiga
to form a new government, and the Prime Minister's initial
efforts probably will be aimed at a cabinet reshuffle
among the partners of his current coalition. Cossiga,
however, reportedly has taken his parliamentary defeat
hard and may refuse to accept the charge if it is offered.
In this case, Pertini probably would designate another
Christian Democrat--perhaps Party Secretary Piccoli,
Party President Forlani, or Minister of Industry Bisaglia--
to try his hand. 25X1
The new Prime Minister - designate, whoever he is,
will almost certainly be forced to confront the interparty
tensions which led to the collapse of Cossiga's coalition.
He also will be faced with a revival of the question of
Communist participation in the national governing process. 25X1
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Malta
Cyprus
xsia
Mediterranean Sea
Lebanon
TRIPOLI
\. Tobruk
?.
4,c? Bardiyah
Nasir Airfield \
Bir Habatah Aiditild
, We'rn Military l
Al Jaghbub yDistrict !
\
Utham Airfield
---,
Siwab
Israel
,Jordon
CAIRO
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EGYPT-LIBYA: Border Developments
Recent satellite photography indicates that the Egyptians are
building another new fighter airbase in the Western Military District
and that the Libyans are continuing defensive preparations.
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The new airfield--apparently called Uthman--is
57 kilometers north of Siwah and is similar to the other
new fighter base under construction since early 1979 at
Bir Habatah. Uthman appears to be about six to eight
months behind Bir Habatah, which is now ready for opera-
tions.
The two new facilities will give the Egyptians four
major fighter bases near the Libyan border and demon-
strate Cairo's intention to station more combat aircraft
in the border area.
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The airbase construction program is part of Cairo's
efforts--undertaken largely since the Egyptian-Israeli
peace treaty was signed--to build up Egypt's permanent
military infrastructure near the Libyan border. The
Military developments in Libya along the Egyptian
border appear to reflect largely precautionary defensive
measures.
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SOUTH KOREA: New Constitution
The draft constitution, made public this morning, reflects
the Army's determination to mold political institutions according
to its own values and goals but is less authoritarian than the sys-
tem under President Park.
The constitution will take effect immediately upon
approval by a national referendum in late October, at
which time the National Assembly and political parties
will be dissolved. The Army-dominated Special Committee
for National Security Measures will serve as an interim
legislative body until a new four-year Assembly is con-
vened next summer.
The Special Committee will be empowered to establish
ground rules for the formation of political parties and
the election of the new Assembly. A large new progovern-
ment party--composed of retired officers and a fresh
generation of civilians--will be organized, but several
smaller parties, to be created from remnants of existing
parties, also will be permitted.
A political "purification" law will allow the gov-
ernment to screen all candidates for the new Assembly.
Martial law will be lifted or modified when the ground
rules are promulgated, and it is possible that political
activity will resume in late November.
The Army is determinted to set a precedent for the
peaceful transfer of power from one administration to the
next. The president will be limited to a single seven-
year term, and his emergency powers and ability to amend
the constitution to extend his time in office are to be
subject to National Assembly approval.
Past presidents and elder statesmen will be honored
by appointment to a presidential advisory council. The
president will still be elected indirectly, but political
party members will be permitted to run for the enlarged
5,000-person electoral college.
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U.S.S.R.
U.S.S.R.
Lake Barka]
Lake
Balkhash
BEIJING*
eadian
claim
China
.Luoning
East China
Sea .
AN
628139 9-80
Bay of Bengal
Hong Kong (U.K.)
Macao (Port.)
Soath China
Sea
690
Kilometers
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CHINA: ICBM Deployment
China's CSS-X-4 ICBM?the country's first weapon capable of
reaching an targets in both the USSR and the US--now may be
operational.
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The newly
loaded missile could be launched in an emergency, but
a thorough checkout of the system probably would require
at least several more weeks.
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Initial deployment of the missile apparently will
be limited. We have been able so far to detect the con-
struction of only the two silos at Luoning, and construc-
tion of additional silos--if begun now--would take at
least another four years. 25X1
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Non-OPEC LDCs: Current Account Deficits
Billion US $
60
50
40
Non-OPEC LDCs
30
20
Non-Oil Exporting LDCs
10
1970
1975
I I I
198-0
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INTERNATIONAL: Prospects of Nonoil Developing Countries
Oil-short developing countries that are represented at the
annual meeting of the World Bank and International Monetary Fund
starting tomorrow will call attention to their growing economic
plight?largely a result of increased oil costs--and theu will
demand consideration for their growing financial needs.
The combined economic growth of the nearly 100 de-
veloping countries that do not export oil will decline
for the second consecutive year to below the post-1973
average rate. The factors slowing growth--rising oil
prices, slackening export demand resulting from the re-
cession in industrialized countries, and rising prices
of nonfuel imports--also will result in steep increases
in their current account deficits, totaling close to
$60 billion. Higher import prices for oil and other
products as well as government policies designed to com-
bat slowed economic growth, furthermore, will push the
aggregate inflation rate of these countries to about
50 percent for 1980.
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Although most of the current account deficit again
is-being financed through private and official medium-
and long-term borrowing, a larger portion than usual
will be covered by high-cost short-term loans and by
drawing on foreign exchange reserves. The group's ag-
gregate external debt, not including short-term debts,
will rise to $300 billion by the end of the year, while
debt servicing costs will rise to $45-50 billion for
the year. Ten developing countries already have had to
seek to reschedule their debts this year. 25X1
Current account deficits probably will increase
next year, and inflationary pressures will remain high.
Financing is likely to be more difficult because of the
more cautious lending policies of Western banks and
because of the reluctance of both OPEC and the govern-
ments of industrialized countries to expand their aid
programs substantially.
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ARGENTINA-USSR: Grain Trade
Argentine exports of grain and soybeans to the USSR
during the year ending 30 September will reach 6.7 million
tons--3 million more than expected before the US embargo.
The 4.5-million-ton limit set by agreement between Wash-
ington and Buenos Aires on Argentine exports of corn,
sorghum, and soybeans to the USSR has been exceeded by
200,000 tons. Less corn but more sorghum and soybeans
were delivered than stipulated. An Argentine Foreign
Ministry delegation is to visit Washington this week to
discuss the size of next year's sales to the USSR.
Argentina already has made a 4.5-million-ton minimum
commitment and probably could deliver an additional
3.5 million tons or more, if the Soviets were to pay 25X1
premium prices.
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SPECIAL ANALYSIS
TURKEY: Economic Outlook
Turkey's economic outlook should improve in the near term be-
cause of the military takeover but will continue to hinge on firm
implementation of the stabilization program, backed by continued
foreign aid. Even with tight adherence to such austere economic
policies, however, Turkey will require at best two years before it
can get by without emergency aid. The balance-of-payment deficit
is too large to overcome quickly.
Soon after the coup, the military announced that
Turkey would continue former Prime Minister Demirel's
stabilization program and that Turkey would honor all
its foreign economic commitments. The military leaders
realize that the struggling economy is being kept afloat
by foreign aid, much of which is contingent on Turkey's
continuing to meet policy performance guidelines laid
down by the International Monetary Fund.
The new government probably will continue Demirel's
key innovation of frequent small devaluations to maintain
a competitive lira. In addition, Ankara has ordered
striking workers back to their jobs and may implement
by decree the tax reform that was bogged down in parlia-
ment. The military regime can put more pressure on
state firms to become more self-sufficient through price
increases and personnel reductions.
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Demirel's Stabilization Program
The generals will carry out the conservative, market-
oriented stabilization program more rigorously than
Demirel was able to do. The program, which was intro-
duced on 24 January, represented a sharp break with
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economic policy of recent years.
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The centerpiece of the program was a major deval-
uation of the lira. Other important elements included
a sharp cut in subsidies to State Economic Enterprises
and a concomitant reduction of the overall budget def-
icit; removal of price and interest rate controls; slower
monetary growth; increased export incentives; tax
reform; and o enin the economy to private foreign
investment.
Initial Encouraging Signs
The program evidently was beginning to work.
Demirel's initial devaluation of the lira on 24 January
was as large as the successful devaluation in 1970 and
much lar er than the failed devaluations in 1978 and
1979.
The devaluation put the lira at an economically
realistic level for the first time since the oil price
hikes in 1973. Furthermore, that position has been
maintained for the past six months by a series of small
devaluations, somethin no previous government had been
willing to do.
The balance of payments has improved since the
program began in January. Worker remittances rose
sharply--up 98 percent comparing the six-month period
following the devaluation with the previous six-month
period--to an annual rate of $2 billion.
Seasonally adjusted exports jumped 22 percent in
value in the first quarter, compared to fourth quarter
1979. They rose an additional 14 percent during the
second quarter to an annual rate of $2.6 billion. Imports
declined 3 percent during the first quarter, then rose
only 1 percent during the second to an annual rate of
$5.5 billion.
Shortages for the most part have been alleviated
due to the sizable amounts of foreign aid and to higher
prices bringing supply and demand back into balance.
Government subsidies to State Economic Enterprises are
lower and, as a result, the budget deficit has been
reduced.
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The stabilization program has had its most visible
impact on the inflation rate. Immediately after its
introduction, prices soared because controls were re-
moved and state sector prices were increased to levels
in line with costs. Since April both consumer and
wholesale prices have been rising at annual rates of
around 40 percent--about half the ?ace recorded during
the latter part of 1979.
The program has not done well in getting industrial
production back on track largely because of tight
credit and labor disruptions. The industrial slump,
a rapidly growing labor force, and the pressure on state
enterprises to lay off surplus workers means that unem-
ployment will continue to increase in the short term.
Officially the unemployment rate is now 15 percent;
unofficial estimates place it at 20 to 25 percent.
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Outlook
If the stabilization program is maintained, the
economy should continue its slow improvement. The road
ahead, however, is long and uncertain. Disruption of
Iranian and Iraqi oil supplies--on which Turkey is
heavily dependent--could nip economic recovery in the
bud.
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Assuming the recovery program is not derailed by
a cutoff of oil, Turkey still will need additional infusions
of foreign aid next spring. Turkey has enough aid
pledges to cover its financial gap in 1980, and donors
apparently will honor their commitments. By about
March, however, Turkey will need new aid pledges for
1981--particularly from the members of the Organization
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for Economic Cooperation and Development.
Prospects for fresh inflows of private capital re-
main poor. Private banks will remain reluctant to grant
new loans or to reschedule--for a second time--Turkey's
outstanding debts. The banks already feel overextended
in Turkey and two recent studies of international credit-
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