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Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Directorate of Secret Intelligence Peru-USSR: Implications of the Military Relationship OSD review completed DIA review completed. Secret . ALA 82-10174 December 1982 Copy 35 5 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006--2 Approved For Release 2008/05/02 : CIA-RDP83S00855R000200150006-2 OSD review completed Approved For Release 2008/05/02 : CIA-RDP83S00855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Directorate of Intelligence Peru-USSR: Implications of the Military Relationship OSD review completed This paper was prepared b Office of African and Latin American Analysis. It was coordinated with the Directorate of Operations and the National Intelligence Council. Comments and queries are welcome and may be directed to the Chief, South America Division, Secret ALA 82-10174 December 1982 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Secret Peru-USSR: Implications of the Military Relationship Key Judgments In the early 1970s, Peru, frustrated in its efforts to purchase modern US Information available military equipment, turned to the USSR as its primary arms supplier. as of 28 December 1982 Lima demanded increasingly sophisticated weapons because of its long- was used in this report. standing rivalry with Chile and Ecuador, and its perceived need to match or outclass neighboring military forces. We believe that Moscow, by getting established in this new market, hoped in the long run to gain some leverage on Peru's foreign and domestic policies, and to earn foreign exchange. The Soviets probably also hoped that their arms-supply relation- ship with Peru would create opportunities for expanding military sales to other South American countries. Lima-and to a lesser degree Moscow-appear to have achieved some of their aims through this continuing relationship. Peru's Soviet hardware has made its armored and air forces superior to those of its neighbors. Moscow's gains include the sale of approxi- mately $1.2 billion worth of hardware and technical assistance, exposure of thousands of Peruvian military personnel to Soviet training, the presence of Soviet advisers and technicians in Peru, and a virtually captive market for spare parts and maintenance services. We judge that the diplomatic, political, and economic impact of the Soviet military aid has been relatively small. Moscow has had little success influencing Lima's behavior in the diplomatic arena. Peruvian armed forces personnel trained in the USSR have not shown significant pro-Soviet leanings, Soviet advisers in Peru to our knowledge have no clout outside the military, and the advisers have drawn criticism from the Peruvian military for their reluctance to share technical expertise. We also believe that Soviet influence resulting from intelligence liaison has been limited. Regionally, Moscow has been unable to capitalize on its Peruvian connection to induce other South American military establishments to purchase weapons from the USSRJ OSD review completed Secret ALA 82-10174 December 1982 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83S00855R000200150006-2 We believe the heavy Peruvian commitment in both money and training, as well as the attractive financing that Moscow offers to arms clients, point toward a continued Peru-USSR military relationship-including purchases of new Soviet-made equipment-over at least the next several years. Nonetheless, Lima's recently reported decisions to buy fighter aircraft from France and armored vehicles from the United States-while simulta- neously continuing to order additional weapons from Moscow-in our view reflect the Peruvians' pragmatism toward their relationship with the Soviets. On balance, we judge that recent developments have prompted a shift away from nearly exclusive reliance on Soviet military assistance and have at least somewhat increased opportunities for Western military sales. We believe that Lima, desiring the best available weapons but constrained by finances and anxious to avoid depending too heavily on any one foreign nation for military assistance, will play potential sellers off against one another in the newly competitive environment. Approved For Release 2008/05/02 : CIA-RDP83S00855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Military Aid as a Source of Influence 6 Benefits and Drawbacks: The Peruvian Perspective 7 Cost-Effective Weapons 7 Problems With Maintenance and Spare Parts 8 Continuing Access to New Weapons Systems 9 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 OSD review completed Peru-USSR: Implications of the Military Relationship The arms supplier-client relationship between the Soviet Union and Peru is 10 years old. This presents an appropriate benchmark to assess the depth of the military links between the two countries and the spillover effect in other areas. In addition, partly because of the pro-West civilian administration in Peru since 1980 and partly because of the increasingly obvious limitations of an almost exclusive military relationship with Moscow, greater-but still circum- scribed-opportunities are now emerging for Western military sales to Peru. This study identifies the motives that led to the Peru- USSR military connection and examines the benefits to both parties. The study also treats, from the Peruvian perspective, the perceived strengths and weaknesses of Lima's arms commitment to Moscow and projects the potential for, and the contraints on, Western military sales in the next few years Even before the 1968 coup, which brought leftist Army officers to power, the US refusal to approve a sale of relatively advanced F-5A interceptor aircraft to the Peruvian Air Force had prompted the purchase of the French Mirage 5. Under the revolutionary military government of 1968-75, seizure of US fishing boats inside Peru's claimed 200-nautical-mile territo- rial limit led to a cutoff of US arms sales, and Lima's expropriation of foreign-owned enterprises further strained relations between the two countries Peru's shift to non-US military suppliers-initially West European countries and later the USSR-in our view reflected pragmatic as well as ideological consid- erations. Peru began buying from the Soviets in 1973 at least partly because Moscow offered quick delivery of relatively sophisticated weapons at low prices and on easy payment terms. As the only Soviet military client in South America, Peru demonstrated its deter- mination to circumvent US-imposed limits and pursue an independent foreign policy. Concurrent Peruvian diplomatic moves, such as exchanging ambassadors with Soviet Bloc nations and joining the Nonaligned Movement, underscored Lima's resolve to change During the 1970s Peru received major military assist- ance from the USSR, which largely supplanted the Peruvian armed forces' former reliance on US aid. While Peru has remained generally pro-Western in both its domestic and foreign policies, the Peruvian- Soviet military link-involving weapons sales, train- ing, and advice-has become institutionalized. The Shift Toward Moscow Lima's turn toward Moscow for military assistance in our estimation resulted both from restrictive US arms-sales policy and the Peruvian military's increas- ingly radical nationalism. Under these influences, Peru's military rulers, feeling excessively dependent on an unreliable arms supplier and threatened by longstanding rivalries with neighboring Andean coun- tries, sought to diversify their sources of foreign military equipment and training. direction. The more centrist military regime that took over in 1975, partly because of inefficiencies and failures in domestic revolutionary programs, moderated Peru's international stance but nonetheless accepted greatly increased military aid from Moscow. The civilian government elected in 1980, while continuing the Soviet military connection, has generally reaffirmed Peru's pro-Western orientation. In the UN, for exam- ple, despite Soviet attempts to garner support, Peru in both 1981 and 1982 voted in favor of General Assem- bly resolutions condemning Soviet intervention in Afghanistan. In 1982, Lima's UN representative vot- ed to reject the credentials of the Soviet-backed regime in Kampuchea. Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83S00855R000200150006-2 South America Falkland Islands (/slas Mai mas) (administered by U.K., claimed by Argentina) South Atlantic Ocean Approved For Release 2008/05/02 : CIA-RDP83S00855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Soviet Assistance Peru's turn toward Moscow resulted, between 1973 and 1980, in the purchase of a wide variety of Soviet- manufactured equipment, which now comprises much of Peru's inventory of major air and land weapons. Purchases from the USSR included: fighter-bomber and transport aircraft; troop-carrying helicopters; medium tanks; air defense and field artillery; surface- to-air, air-to-surface, and antitank missiles; other combat and combat support vehicles; and related electronic and support equipment. Only the more anti- Communist Navy fended off Soviet sales efforts and chose to rely on older US and European-supplied ships while ordering new submarines from West Germany and frigates from Italy. The Army and Air Force have acquired some Western-made items since 1973, including French tanks, US and West German armored personnel carriers, and US artillery pieces, but these purchases represent a small fraction of total procurement expenditures. Procurement of Soviet weapons has made Peru dependent on the USSR for training, maintenance, and spare parts. We believe that most of the Peruvian military personnel trained in the USSR have studied technical subjects related to use or maintenance of advisers also have provided technical training and support in Peru since the mid-1970s, according to US Embassy and military attache reports from Lima. The US Intelligence Community estimates that some 2,000 to 3,000 Peruvian military and intelligence personnel have trained in the USSR since the mid- 1970s, However, the annual number of trainees in the USSR has declined sharply from hundreds in the late 1970s to only a few dozen in recent months Table 1 Major Soviet Weapons and Equipment in Peruvian Inventory a Tanks Artillery AS-7 air-to-surface SU-22 fighter-bomber 49 AN-26 short-range transport 16 MI-8 medium-lift helicopter 29 MI-6 heavy-lift helicopter 6 SA-3 surface-to-air (launcher) 30 SA-7 surface-to-air 270 AT-3 antitank (launcher) 99 T-55 medium tank 300 M-46 130-mm field gun 36 D-30 122-mm howitzer 36 25X1 BM-21 122-mm self-propelled rocket launcher 12 ZSU-23-4 23-mm self-propelled 40 antiaircraft gun a Does not include other armored vehicles, utility vehicles, smaller weapons, radars, and other equipment. The Peruvians' need for continuing technical assist- ance has resulted in approximately 150 Soviet mili- tary advisers and technicians being stationed in Peru, according to the US Embassy, raising the total of Soviet diplomatic, economic, and military representa- tives to about 350. Neither government publicly ac- knowledges the presence of the military assistance personnel, who mainly perform supply and mainte- nance functions, according to the US Embassy and attaches in Lima, and are not known to be assigned to specific problems or install new equipment 25X1 25X1 25X1 ^ 25X1 25X1 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83S00855R000200150006-2 In recent years, Peruvians have assumed many of the instructional duties previously performed by Soviet advisers, and training in the USSR has been limited to specialized personnel. Last year, for example the number o Soviets assigned to an Air Force missile group had been reduced from 12 to four because they were providing only occasional technical assistance while Peruvians were setting up their own program of instruction in missile operations and maintenance. Although Peru and the USSR have divergent inter- ests, international alignments, and political and eco- nomic systems, each government perceives benefits from military and intelligence cooperation. Peru: Regional and Domestic Security The Peruvians have sought increasingly sophisticated weapons, according to Embassy and attache report- ing, mainly for defense against their traditional, neighboring adversaries, but also to help suppress a domestic insurgency and to satisfy a politically influ- ential military establishment External Threats. Above all, Embassy reports indicate that Peru aspires to strengthen its military forces and increase their mobility enough to fight a successful two-front war, if necessary, with Chile and Ecuador. As a result, the Peruvian military now nearly equals in manpower and weaponry the combined forces of both these countries. Furthermore, the it Force aims to stay well ahead of both the Chileans and the Ecuadoreans in aircraft technology. We believe that Peru's recently reported decision to buy 26 new Mirage 2000 interceptors from France was motivated partly by its neighbors' recent pur- chases of sophisticated fighter planes. We also judge Table 2 Military Balance: Peru-Chile-Ecuador Army personnel 75,000 53,000 27,600 Navy personnel 21,000 20,800 3,800 Air Force personnel 40,000 15,300 4,200 Tanks 466 270 195 Other armored vehicles 475 561 120 Field artillery 419 290 96 Naval combatants (including missile patrol boats) 22 13 14 Submarines (including combat- capable trainers) Helicopters that future potential military sales to the region-for instance, of main battle tanks to Chile-could have similar repercussions in Lima. Although Peruvian military planners worry most about Chile and Ecuador, we believe that any major military modernization in other neighboring countries would also fuel anxieties in Lima. Colombia, for example, is shopping for air defense weapons and fighter aircraft, according to the US Defense Attache in Bogota. Lima might view such acquisitions as a threat to Peru's thinly patrolled jungle border with Internal Conflict. While Peru's perceived need for military hardware relates mainly to external defense, growing official concern over domestic terrorism and the Army's increasingly active role in combating the insurgents could nromot or lend uraencv to additional procurement. Army contingency plans call for search-and-destroy operations by airmobile infantry units. In our view, Approved For Release 2008/05/02 : CIA-RDP83S00855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Secret Lima views Santiago as the chief potential adversary, even though we and the US Embassy believe that there is only a low risk of an unprovoked attack by Chile, most of whose military strength is deployed against Argentina. Peru's fear stems from Chile's conquest of territory in southern Peru and occupation of Lima a century ago. This habitual anxiety is today heightened by a perceived threat from the well- trained and -equipped Chilean armored and air 1978-has purchased major military equipment, in- cluding tanks and fighter aircraft. By last year Chile had received some 25 to 30 French AMX-30 main battle tanks, which are more modern and capable- though less numerous-than Peru's Soviet-built forces. Concern over the security of its northern border, in the isolated Amazon region, has also given impetus to Peru's military buildup. The region has been the focus of a long-smoldering territorial dispute with Ecuador, which erupted in full-scale military hostil- ities four decades ago and a briefer conflict last year. Despite clear overall superiority of its forces, Lima believes-with some justification-that tactical air superiority, as well as helicopters to deploy and support troops, are needed to guarantee its control Chile and Ecuador have aggravated concerns in Lima by acquiring new weapons equaling or surpassing the capability of those in the Peruvian arsenal. The US Embassy in Santiago notes that over the past several years Chile-mainly preparing for possible clashes with Argentina following an increase of tension in Chile also has bought 16 new French Mirage 50 fighters, which can at least match the performance of any aircraft currently operated by Peru. Ecuador, according to the US Mission in Quito, is also strengthening its defenses following its setback in the 1981 border clash with Peru. The Ecuadorean military recently took delivery of 12 Israeli Kfir fighters, roughly equivalent in performance to Peru's aging French-built Mirage 5 interceptors. A recent acquisition of integrated air defense radars will fur- ther enhance Ecuadorean capabilities against the Peruvian Air Force. such operations would require the armed forces to maintain and perhaps expand their largely Soviet- made inventory of helicopters. The government also reportedly has authorized acqui- sitions of new materiel for Peru's underequipped police forces which, despite having primary responsi- bility for suppressing terrorism, have had little success in this mission. Political and Economic Realities. Because of Peru's foreign currency shortage and fiscal deficit, financing will be the most serious constraint on arms purchases and the austerity rogram designed to deal with them 25X1 25X1 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 We judge that Belaunde-whose pre- vious administration in 1968 became one of eight ousted from office this century by military coup-has acceded to procurement requests by top officers main- ly to forestall discontent in the armed forces. Belaunde, we estimate, would rather hold back other categories of spending to sustain the arms budget than risk having the military reenter the political arena. The officially estimated defense budget for 1982 as reported by the US Defense Attache-about $903 million-represents a slight increase over the 1981 allocation. Moreover, the Air Force's reported choice of the Mirage 2000s-the highest priced fighter These actions indicate to us that civilian economic decisionmakers will allow the military at least some expensive procurement, provided that this can be financed over many years. USSR: A South American Opening We believe that in Peru, as elsewhere in South America, the USSR hopes-through diplomacy, trade, and aid-to gain respectability, backing for its international policies, and economic benefits. Military Aid as a Source of Influence. Moscow, in our judgment, regards the well-developed military link with Peru as the strongest element in their bilateral relations and intends to preserve it. The likelihood of the Soviets' attaining significant influ- ence on Peruvian foreign and domestic policies, on the other hand, has diminished since 1975-when the military government began to loosen its ties with Communist countries-and even more since the elec- We believe, however, that the institutionalized Peru- USSR relationship has enough momentum to survive these changes. In our judgment, Lima's continuing need to keep open the supply line from Moscow and service a large military debt to the USSR still gives the Soviets some leverage on Peru's procurement In addition to ensuring continuation of the Peruvian military relationship, the Soviets, we believe, hope to use Peru as an example for establishing military assistance ties to other countries in the re ion, al- though so far this goal has eluded them. the Bolivian Air 25X1 Force, which was described as eager to buy new fighter aircraft, had sent representatives to Peru for a showing of a Soviet-model fighter. To promote such military sales, Moscow was said by the US Embassy in Lima last year to be considering the installation. in Peru of a regional service center for Soviet equipment, making it more attractive to potential buyers. 25X1 25X1 25X1 ^ 25X1 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Secret believe is still outstanding. A top policymaker in Lima 25X1 told visiting US officials several months ago that Moscow had cut off spare parts to the Air Force- albeit only temporarily-after being notified that Peru would be unable to meet a payment on its debt to the USSR. He added that the Soviets had not re- sponded to a Peruvian request for debt rescheduling, whereas twice before-in 1978 and 1981-they had agreed to postpone repayments on the principal. 25X1 25X1 We believe that the Army and Air Force have compelling practical reasons for maintaining their connection with the USSR. Overall, Soviet military aid has created a favorable impression in Lima that will help Moscow make additional military sales. Peruvian officers generally believe that their Soviet- made hardware gives good value for the price and 25X1 access to at least some advanced technology that the West may be unwilling to sell. These perceived advan- tages more than offset negative impressions stemming from problems with spare parts and maintenance and Peruvian suspicions about the activities of Soviet In Search of Economic Gain. Economic consider- ations appear to be a secondary-though still signifi- cant-concern to Moscow. The USSR has continued to offer Peru concessionary financing on new arms sales to preserve the military-assistance relationship. Last year, for example, when the Peruvians were considering a purchase of fighter interceptors from several alternate suppliers including the United States, the USSR was offering fighters financed by a 10-year loan at 2-percent interest with a two- year deferral of initial payment; by contrast, he said, a French aircraft manufacturer was asking for a down- payment of 30 percent. Nonetheless, we judge that Moscow, in addition to seeking local and regional influence, hopes that for- eign currency earned from arms sales to Peru and other established military clients will in the long run help to offset declining revenues from nonmilitary exports. Moscow has shown signs of impatience at Peru's difficulties in paying off its previously contract- ed $1.2 billion debt to the Soviets, most of which we personnel in Peru. Cost-Effective Weapons While most weapons in the Peruvian inventory do not represent the latest Soviet technology-with a few exceptions, such as the AS-9 air-to-surface missiles delivered last year-we and the US Embassy in Lima judge that Peru's military leadership nonetheless finds them to be cost effective relative to comparable Western weapons. For example, last year the Army commander told a US Latin American specialist while on a visit to Washington that Peru's T-55 tanks-of early 1950s design-were excellent equip- ment, that they had cost one-fourth as much as a US model, and that the Soviet credit terms were gener- ous. Peruvian officials are generally satisfied with the flight performance of their supersonic SU-22 fighter-bomb- ers. The attractive price tag on an SU-22 purchase by 25X1 25X1 0 25X1 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Soviet-built T-55 medium tank of the Peruvian Army on Lima two years ago as $150 million for 16 aircraft at favorable repayment terms-was said to outweigh some Peruvian dissatisfaction with previ- ously acquired fighters of the same type. Both the tank and the airplane have been deemed acceptable despite having outdated electronic components in- cluding radios and fire-control systems, which, the Peruvian military has made equivalents. Problems With Maintenance and Spare Parts We note that Peruvian officers who work directly with Soviet equipment are concerned about quality and maintenance and sometimes draw unfavorable com- parisons with Western-manufactured equipment. For example, attache sources have indicated that Soviet aircraft and radars show far more corrosion than similar models supplied by the West; the problem reportedly caused the grounding of some fighter planes The most persistent maintenance problem in both the Air Force and the Arm~ has been limited availability of spare parts, which the Peruvians consequently are trying to buy elsewhere or produce locally. The Air Force's complement of SU-22 fighters and replacements reportedly take up to three years to arrive from the USSR. As a result, the Air Force is said to be seeking alternate suppliers. Last year F- in Lima that the Army had begun ma nu acturing parts for its T-55 tanks, to become less dependent on Moscow. The requirement to send components back to the USSR for major mechanical maintenance-a costly and time-consuming procedure-has led the Peruvi- ans to seek advanced technical training and complex tools from Moscow to service the equipment locally. A Peruvian officer told a US attache two years ago that periodic overhauls of jet-fighter engines in the USSR cost Peru $500,000 each, and servicing an engine of a transport plane or helicopter cost $250,000. Including overseas shipment, the job normally took one year, requiring the Air Force to keep many spare engines on Because of these problems, Peru negotiated a transfer-of-tec no ogy agreement with the USSR more than two years ago, which provided for training of Peruvian technicians in main- tenance of SU-22 fighter engines and the eventual manufacture of related tools, special equipment, and Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Secret Soviet-built SU-22fighter- bomber and MI-6 heavy trans- port helicopter, both of the Pe- ruvian Air Force, at an airfield spare parts in Peru. the Air Force maintenance depot, under Soviet a vis- ers' guidance, is scheduled to have an SU-22 engine- maintenance facility operational by the end of this yea We believe that the Peruvians may have made techni- cal aid a precondition for further arms procurement from the USSR, mainly because they suspect the Soviets of deliberately restricting the supply of parts and thus trying to influence Peru's politics and diplo- macy. A Peruvian military officer told a US counter- part in Panama two years ago that he and other officers believed that the Soviets as a matter of policy delayed delivery and limited the quantity of replace- ment parts destined for Peru. Continuing Access to New Weapons Systems Despite the Peruvians' misgivings, they have reason to keep open their channels to Moscow, where they know they can buy advanced weapons that might not be available from alternate suppliers. the Air Force already has agreed to purchase 14 Soviet MI-25 attack helicopters-an export version of the MI-24-which are among the world's most potent rotary-wing gunships and the first aircraft of this type acquired by any South American country. Delivery of the MI-25s, reportedly scheduled for 1983 and 1984, will both significantly expand Peru's tactical ground attack capability and demon- strate Lima's continuing interest in Moscow as a The Peruvians also appear interested in replacing Soviet-supplied items lost in accidents or in combat and, in some cases, augmenting substantially the stock of weapons acquired from Moscow. Peru recent- ly bought five new MI-8 troop-transport helicopters which have arrived in the country. 1150 new T-55 tanks were scheduled for delivery to the Army this year; a concurrent report appeared in a leading European journal on military affairs. Although we have not confirmed this acquisition, it would be a reasonable step because, according to the US Embassy, Peru needs more tanks to equip a newly formed armored division, roughly equivalent to a US brigade. The reported number of T-55s would approximately satis- fy this requirement. The Navy, which until now has refused to do business with Moscow, could at some point use the Soviet procurement option as a bargaining chip in talks with weapons supplier. 25X1 25X1 25X1 25X1 25X1 25X1 25X1 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Impact of Soviet Training The willingness of Peruvian military officers to con- tinue their connection with Moscow may have been enhanced by Soviet training, although technical rath- er than political reasons are dominant. Despite the political indoctrination included in the longer Soviet training courses, we believe that the Peruvian military establishment remains basically conservative and na- tionalistic. The Embassy noted two years ago that officers advocating radical domestic policies had been purged from the military as it retrenched its earlier revolutionary programs. Some officers who trained in the USSR have said that they felt imprisoned during their stay there, formed no friendships, and were eager to return home. Nonetheless, we judge that even politically conservative personnel who have become skilled in using or maintaining Soviet-made equip- ment may prefer to continue buying from Moscow rather than adapt their skills to Western hardware. Furthermore, while the current military leadership has had little firsthand exposure to Soviet instruction, Peruvians with such experience will assume influen- tial posts by the late 1980s and probably will advocate continuing assistance from the USSR. Peruvian military attitudes toward the Soviet pres- ence in Peru vary, according to attache reports, but most officers consider it necessary as long as Lima relies on Soviet-made hardware. In contrast to the frequently noted problems with replacements and factory service, an Army officer recently told a US counterpart that Soviet technicians in Peru would not let equipment fail and appeared to be striving to Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Secret Concern Over Clandestine Operations Senior Peruvian officials, civilian as well as military, suspect Soviet personnel in Peru of covert intelligence collection or supporting terrorists. In addition to the advisers, the US Embassy notes that more than 800 Soviet seamen assigned to the fishing fleet transit Peru each month, raising the Soviets' visibility in the Lima-Callao area and-we judge-aggravating the Peruvians' suspi- cions. We believe, however, that Moscow's larger equities in its relations with the government in Lima and the Peruvian terrorists' Maoist ideology make it highly unlikely that the Soviets have aided the insurgency. The Soviets have used their embassies in countries such as Mexico to cultivate contacts and funnel support to regional leftists operating elsewhere in Latin America. Moscow may be exploiting its pres- ence in Peru in a similar fashion, but we have no hard evidence of such activities. We have not identified any significant increase in the number of foreign Latin American leftists in Peru since the Soviet buildup exiled radicals from Argentina, Chile, and Uruguay have concentrated in Central America and Europe, where they have easier access to international leftist connections, rather than in the Andean region. The recent performance of US-made weapons in the Middle East, the superiority of modern Western technology demonstrated in the Falklands, and the current political climate in Lima appear to have increased Peruvian Air Force and Army willingness to procure equipment from the West, including the United States, although in our judgment this trend is likely to benefit European suppliers at least as much as US firms. The Air Force's reported decision to buy French Mirage 2000 interceptors indicates some 25X1 movement away from nearly exclusive dependence on Soviet equipment, but it also implies that the United States is unlikely to resume its former role as Peru's principal military supplier. Political and Diplomatic Climate President Belaunde, according to Embassy reporting, has clearly expressed to armed forces leaders his preference for closer ties with the United States, and we believe this will affect military sales. Although Peruvian armed forces commanders make military from nearly exclusive reliance on Soviet military assistance and have at least somewhat increased I procurement decisions and strongly influence budget- ing and appropriations, civilian officials allocate the government's limited foreign exchange holdings. Moreover, according to the Embassy, Israeli military successes in Lebanon impressed Peruvian military 25X1 leaders with the advantages of high-technology weap- ons, many of them US built. On balance, we judge that recent developments have prompted a shift away opportunities for Western military sales. This shift, albeit modest, appears to be reflected in the attitudes of several high-ranking officers. The com- manding general of the Army, politically the most influential service, told the US Ambassador early this year that he personally admired the quality and performance of US-made equipment and that he wanted to increase training of Peruvian personnel in US military institutions. The US Army Attache expects the next Army commander, slated to take There are also at least a few signs of thawing attitudes toward the United States in the Air Force. An officer previously viewed by the Embassy as the most anti- US general in the Air Force has become much 25X1 25X1 I 25X1 25X1 25X1 25X1 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 friendlier to Embassy personnel this year. The present Air Force commander reportedly dislikes the United States and is scheduled to retain his post until next year, but the officer in line to succeed him-as a high official predicted to the US Ambassador early this year-is more likely to procure US aircraft and thus reduce Air Force dependence on the USSR. A European Breakthrough Peru's biggest new weapons transaction-the recently reported decision to purchase 26 Mirage 2000 fighter aircraft (24 interceptors and two trainers) from France-in our view confirms the expanded opportu- nity for Western suppliers. The purchase also illus- trates how Peruvian procurement priorities are likely to determine future choices of military contractors. According to the Embassy in Lima, once it became apparent that the United States would not sell Peru the Air Force's first choice of a new interceptor-the F-16A-the Peruvians' list of alternatives included the French Mirage 2000, the US F-16/79, and- though at a much lower priority-the Soviet MIG-23. The reported decision this year to buy the Mirage strongly suggests that Peruvian leaders rated perform- ance and advanced technology above other factors. According to the US Air Attache, the Peruvians picked the Mirage 2000 primarily because of its advanced turbofan jet engine, newer and more capa- ble than the power plant in the F-16/79. Political sensitivities of Peruvian leaders also played a key role in the choice of the Mirage 2000 as an alternative to the unavailable F-16A. Washington's failure to respond to Peru's request for price and availability data on the F-16A-thereby signaling unwillingness to permit export of the aircraft to Peru-in the US Ambassador's view, handicapped further US efforts to compete for the fighter sale. A subsequent offer of the F-16/79, according to the Air Attache, prompted at least some Peruvian officials to disparage it as a second-rate airplane, contributing to its rejection in favor of the Mirage. Another factor probably working against the F-16/79 was Washing- ton's widely publicized decision to sell the more In our view, financing was another important variable favoring the French plane over the US candidate A Substantial Shopping List While the United States thus has lost the interceptor contract, some other large Peruvian military sales could go to US firms the US manufacturer of the CH-47 heavy-lift helicopter had been asked to submit a bid on a Peruvian Army contract for six of these aircraft. Possible Air Force acquisitions from US companies include transport and tanker aircraft, heli- copters, and air defense radars, according to the US Embassy the Peruvians are interested in buying 263 US-made M 113 armored personnel carriers, to augment their force of 150 and-we judge-to support the numer- ous Soviet and French tanks in the inventory. Financ- ing may prove an obstacle in this case, however, illustrating what we view as US suppliers' biggest European and other non-Communist suppliers also have promising opportunities in Peru, aside from the lucrative Mirage sale 25X1 25X1 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Secret iren asked to bid on a $400 million contract to build a Peruvian naval base-a contract for which Japanese and Canadian businessmen may compete. European manufacturers are also assisting Peru in taking first steps toward the establishment of a do- mestic arms industry-a long-term goal probably suggested to the Peruvians by the successful examples of Brazil, Argentina, and Chile. An Italian firm has agreed to coproduce advanced trainer aircraft with a Peruvian Government enterprise at a plant near Lima, for sale to the military and for export. The recent launching of a missile frigate, part of a joint project with another Italian company, indicates signif- icant Peruvian progress in using foreign assistance to develop domestic production of sophisticated weapons. Constraints on Peru's Options The primary obstacles to any major Peruvian shift to Western-made equipment are the combined factors of financing and feasibility. According to the US Em- bassy, Moscow is almost certain to offer more attrac- tive financing for new weapons purchases to the fiscally strapped government in Lima than US or Western suppliers could. To afford major procure- ment contracts, Peru-currently under an IMF re- striction on new medium-term government borrow- ing-almost certainly will be forced to seek long-term loans. The Air Attache has noted that US manufacturers will find it difficult or impossible to arrange such lenient financing. Although some European firms appear able to provide the legally stipulated repay- ment period, we doubt that they can match Soviet 25X1 2571' 25X1 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Other practical considerations will also inhibit Peru from rapidly shifting to non-Soviet suppliers. Diversi- fying sources of large items such as aircraft or tanks in our view would complicate Peruvian military logis- tics, already judged by the Embassy as deficient. In addition, diversification would require retraining of personnel and might introduce the problem of lack of operational compatibility-for example, between ra- dios manufactured in different countries-that could impair Peruvian forces' capabilities. Furthermore, Peru's Soviet-made equipment inven- tory requires a continuing supply of parts and service, more readily available from Moscow than elsewhere. The example of Egypt, which broke its military supply and advisory relationship with the USSR a decade ago, in our opinion has shown that sophisticated Soviet military hardware can be maintained with help from non-Soviet sources only with difficulty and at increased cost Outlook and Implications for the United States On balance, we judge that significant Soviet military assistance to Peru will continue at least over the medium term and that this aid probably will include major acquisitions such as new tanks or helicopters. We believe that the existing Peruvian investment in training and logistics for Soviet-made equipment will predispose the Air Force and Army to procure more hardware from Moscow. In addition, Peru will almost certainly want to keep the supply line open for parts and services related to equipment already purchased, which in our view will probably remain in service for at least another decade. Although the Soviets may want to raise prices and tighten up financial terms on future military con- tracts, we believe that their desire to maintain the arms-supply relationship with Peru will lead them to continue to offer concessionary financing, which- even at increased prices-will in many instances enable Moscow to underbid Western suppliers. In addition, we judge that the Soviets will more readily agree to loan extensions-in our view likely to be required by Peru's economic difficulties-if the Peru- vians concurrently place new orders with Moscow. The pro-Western civilian leadership can be expected to exert some restraining influence on the military's buying from the Soviets but is likely to go along with its higher priority procurement requests-from what- ever supplier-to assure armed forces loyalty to the government We believe that Western countries do have improved prospects in the Peruvian military market, although there is little chance that the USSR will be displaced as Lima's major source of military assistance. Argen- tina's defeat in the Falklands, according to US Em- bassy reports, has convinced Peruvian officers o eir need for sophisticated equipment. The reported choice of Mirage 2000 interceptors indicates to us that, in at least some cases of future arms procurement, Lima may seek the most advanced technology-generally recognized to be the strongest attraction of Western equipment-even if this means passing up the lowest price, quickest delivery, or best financing, which the Soviets usually can offer. Furthermore, according to Embassy~re- porting from Lima, the embargo on arms exports to Buenos Aires by leading Western suppliers during the Falklands conflict is likely to motivate Peru to diversi- fy foreign military suppliers as a hedge against possi- ble supply cutoffs. Coproduction of armaments in Peru and related transfers of technology might offer additional long-term business opportunities to West- ern firms-especially, as the Embassy points out, because such arrangements could help offset the high cost of financing arms procurement from the West compared with the USSR. The interest of the Peruvi- an Army's commanding general in sending more personnel to US military schools further reflects Lima's movement toward diversifying its military relationships. Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83S00855R000200150006-2 We doubt that over the next two to three years the USSR will succeed in using its military-assistance relationship with Peru as a means of penetrating other South American arms markets. Even if Moscow tries to promote the maintenance facilities being installed in Peru as a regional service center for Soviet-made weapons, neighboring states like Chile or Ecuador would see little point in depending on services to be performed within the national borders of a military rival. While Soviet arms transfers to Peru might spur these other Andean countries to compensate by in- creasing purchases of foreign weaponry, we judge that they would prefer to buy from traditional Western military suppliers. Other military establishments in the region also are strongly pro-West. Barring dra- matic internal changes, we estimate that for the period under examination they will be likely to make only selective weapons purchases-if any-from Moscow. Approved For Release 2008/05/02 : CIA-RDP83S00855R000200150006-2 Secret Secret Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Iq Next 3 Page(s) In Document Denied Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Secret Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2 Secret Approved For Release 2008/05/02 : CIA-RDP83SO0855R000200150006-2