NATIONAL INTELLIGENCE DAILY (CABLE) 19 MARCH 1982

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84T00301R000200010067-2
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 18
• Document Creation Date: December 22, 2016
• Document Release Date: February 7, 2011
• Sequence Number: 67
• Publication Date: March 19, 1982
• Content Type: REPORT

~A ` ~ Top Secret
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`~ National Intelligence Daily
(Cable)
19 March 1982
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Top Secret
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Top Secret
Central America: Sandinistas Aeti7Je in Honduras .
Angola-Cuba: Cubans Increasing Combat Role 4
OPEC: Ministerial Meeting 5
west Germany: State Elections in Lower Saxonz~ 6
USSR: Industrial Production StiZZ Doun2 7
Mexico: Shifts in Economic Posts 8
Zambia - South Africa: Kaunda Offers To Meet With Botha 10
Syria-Iran: OiZ Agreement 10
south xorea: Anti-American Incident in Pusan 11
Special Analysis
Eastern Europe: Difficulties in Obtaining Credit 12
Top Secret
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Top Secret
purchases from Chile.//
//Nicaragua is increasing its subversive activ2ty in Honduras.
Resistance to the presidential election of General Guevara has
subsided in Guatemala, and some Christian Democrats may join the
new government. The Salvadoran military is exploring possible arms
Nicaragua.//
//Comment: //Recent Nicaraguan-sponsored subversive
activities in Honduras probably reflect a Sandinista
decision to retaliate against Honduran armed forces'
collusion in cross-border raids by Nicaraguan exiles.
In addition, Managua views with increasing concern the
growing willingness of the Honduran armed forces to
collaborate in counterinsurgency activities with the
Salvadoran military and to make a serious effort to
interdict arms shipments to the Salvadoran guerrillas.
Moreover, the Nicaraguan regime regards Colonel Alvarez
as a hardline anti-Sandinista, whose assumption to the
highest command position in the Honduran military in-
creases the chances of a regional united front against
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Opposition Role in Guatemalan Government
Christian Democratic Party President de Leon re-
portedly is under serious consideration for the position
of foreign minister. Other Christian Democrats are
opposed to close association with Guevara, but the party
will accept the congressional seats and mayoralties it
won in the recent election.
Comment: De Leon is likely to accept the offer,
although Guevara is unlikely to grant him wide authority.
The President-elect is probably interested in exploiting
de Leon's excellent contacts with Christian Democrats
in Latin America and Western Europe in hopes of improving
Guatemala's international image.
//A Salvadoran military officer visited Chile in early
March to discuss the possibility of purchasing armored
cars and aerial bombs. The bombs are designed for use
by helicopters and light aircraft. The Chileans, however,
may not be willing to provide long-term credit for the
deal.//
Comment: //In addition to Chile, the Salvadoran mili-
tary recently has been investigating the purchases of
weapons and ammunition from Argentina and Taiwan. The
high command may be seeking alternatives in case US mili-
tary aid should be reduced. Without favorable cry
terms, the chances of a major deal are slim.
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ANGOLA-CUBA: Cubans Increasing Combat Role
//Cuban ground and air units, probably operating from camps
in south-central Angola, reportedly are participating in operations
against insurgent forces of the National Union for the Total Inde-
pendence of Angola.//
the Angolans have been conducting large combat
operations against UNITA insurgents in the area from
Huambo to south of Menongue since early February. Cuban
ground units have been employed, and Cuban-piloted
MIG-21s reportedly have provided air support.
//Havana's decision to become more involved in com-
bat may be in response to Angolan criticism of the Cuban
troops' previous inactivity. The Cubans now are closer
to UNITA-controlled areas and are reinforcing Angola's
main defensive line. They remain sufficiently distant
from South Africa's present area of military activity,
however, to make a chance encounter unlikely.//
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OPEC: Ministerial Meeting
An informal OPEC ministerial conference begins in Vienna today
to discuss the proposed total. production ceiling of 18.5 million
barrels per day.
Comment: The conference probably will agree to an
informal scheme to allocate the output of each OPEC
member within the ceiling, The $34 benchmark price for
Arab light crude oil will be strongly defended, but the
prices of some other crudes are likely to be adjusted.
Libya and Iran probably will object to the plan,
if only to protest the comfortable position Saudi Arabia
has arranged for itself. If they decline to participate,
the other members may ignore them in the belief that
their combined production is unlikely to rise much above
the 2 million barrels per day allocated to them.
High Saudi production has been blamed for OPEC's
current market difficulties, and the Saudis will be urged
to make further reductions from their new ceiling of 7.5
million barrels per day. Although Riyadh would prefer to
keep output high, it has pledged to allow market condi-
tions to determine production levels.
A destructive new round of price cutting could re-
sult if no consensus is reached. Any agreement supported
by most of the members will be cited as reaffirming OPEC
unity.
A ceiling of 18.5 million barrels per day would
reduce OPEC production by about 1 million barrels per day.
Continued use of excess oil stocks is likely, however,
and this will tend to keep prices down at least through
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WEST GERMANY: State Elections in Lower Saxony
//The vote totals in the Lower Saxony election on Sunday and
the composition of the new state government there wiZ
important impact on the federal coalition in Bonn.//
Comment: //The Christian Democrats almost certainly
will get a plurality, and the Free Democrats will be
struggling to gain the 5-percent minimum needed for
representation in the state assembly--something they
failed to do in 1978. The Social Democrats probably
will continue to lose support, mostly to the environ-
mentalist "Greens," who are likely to win seats in Lower
Saxony for the first time.//
//If the Free Democrats win some seats, the Chris-
tian Democrats will probably form a coalition with them
to obtain a majority in the assembly. Chancellor Schmidt
would then count on the Free Democrats allied with him
at the national level to counsel their Lower Saxony col-
leagues not to oppose national policies--particularly
the higher value-added tax needed to finance an employ-
ment stimulus program.//
//Polls indicate that the Free Democrats probably
will receive 5 percent. Nonetheless, a poor performance
would intensify the feuding between Free Democrats who
believe that the party is endangered by its cooperation
with the Social Democrats in Bonn and those who oppose
forming a coalition with the Christian Democrats.//
//A drop in support for the Social Democrats will
add new heat to the current debate on party strategy that
is likely to concern the party congress next month. Party
Chairman Brandt believes that the Social Democrats will
have to reintegrate leftist dissidents into the party.
The moderates, however, argue that this would alienate
the party's traditional working-class constituency, which
already is unhappy because it believes the party is moving
to the left.//
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Civilian industrial production in the USSR continues
to lag, with output for January and February together
below the level prevailing in the same two-month period
last year. Production of rolled steel declined by
4 percent, and production of cement and of freight cars
dropped 12 and 10 percent respectively, The supply of
electric power and gas continues to rise, but declining
coal and oil production is keeping energy supplies tight.
The decline in oil production--0.2 percent below the
first two months of 1981--marks the first time on record
that monthly output has fallen below the level of the
previous year for two consecutive months.
Comment: There may be some recovery later this
year, but a record low annual rate of growth is becoming
a definite possibility for 1982.
Top Secret
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The recent resignations of Treasury Secretary Ibarra
and the Director of the Bank of Mexico apparently were
motivated by both personal and political considerations.
Ibarra rivaled Miguel de la Madrid for the ruling party's
presidential nomination and has not worked well with
President Lopez Portillo recently. Two close supportPrr__s
of de la Madrid have replaced the outgoing officials.
Comment: By appointing de la Madrid's associates
to fill policymaking positions, Lopez Portillo is striving
to ensure a smooth transition of power in December, unlike
his own experience six years ago. The moves also suggest
that he is beginning to share authority over economic
policy with his fiscally conservative successor, a view
supported by Lopez Portillo's recent reference to himself
as a "devalued president."
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President Kaunda told a South African journalist
yesterday that he is willing to meet with South African
Prime Minister Botha. Kaunda said that, if invited, he
would consider going to South Africa. He added that
such a meeting must not be secret. In 1975 Kaunda met
with South African Prime Minister Vorster in an unsuccess-
ful attempt to speed Rhodesia's independence.
Comment: It is unclear whether Kaunda's offer repre-
sents an offhand remark or a calculated gesture. Kaunda
recently has been worried about Zambia's security, and
he believes that South Africa is pursuing increasingly
aggressive policies aimed at subverting the Frontline
SYRIA-IRAN: Oil Agreement
According to initial press reports published on
Wednesday in Damascus and Tehran at the close of Syrian
Foreign Minister Khaddam's visit to Iran, the two sides
concluded a trade agreement under which Iran will begin
supplying the Syrians with 175,000 barrels of oil per
day--worth about $2 billion annually. The US Embassy in
Damascus notes that if the deal is as large as claimed,
it would end Syria's need for Iraqi oil. It also would
reduce Iraq's leverage in matters affecting the Syria-Iraq
pipeline, through, which Iran pumps about 50 percent of
its oil exports.
Comment: It is not clear how financially hard-pressed
Syria would be able to repay Iran even if Tehran has agreed
to extremely favorable terms.
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SOUTH KOREA: Anti-American Incident in Pusan
South Korean police have launched a massive search
for the unidentified arsonists who firebombed the US
Cultural Center in Pusan yesterday and who scattered
leaflets containing anti-US slogans elsewhere in the
city. No Americans were injured, but one Korean was
killed, three others injured, and the building was
heavily damaged. The last such incident occurred in
1980, when dissidents set fire to the US Cultural Center
in Kwangju.
Comment: //The arsonists probably were South Korean
dissidents, but North Korean involvement cannot be ruled
out. For the past year South Korean authorities have
been concerned about student and dissident use of anti-
American rhetoric stemming from their opposition to US
support for President Chun's regime. Attacks on US
targets will attract little popular support, but they
could encourage other dissidents to adopt similar tactics.//
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Difficulties in Obtaining Credit
East European countries are having increasing difficuZtz~ ob-
taining Western loans, and Hungary, East Germany, and Yugoslavia
may have to reschedule their debts b~ the end of the year, along
with Poland and Romania. The import reductions forced b~ the Zack
of credit will, at the least, depress domestic growth and living
standards in aZZ five of these countries and have serious implica-
tions for political stabiZitz~ in some. OnZz~ Bulgaria and Czecho-
slovakia, because of their policies of financial conservatism, seem
immune for the time being. The USSR, facing serious problems of
its orm, will not be able to provide enough help and in fact is
aggravating the problem bz~ cutting oil deliveries.
//The poor climate for borrowing faced by Eastern
Europe for more than a year results from bankers' re-
assessment of the creditworthiness of the countries in
the area as a consequence of the Polish and Romanian
financial crises and the growing concern over Eastern
Europe's economic problems in general. No East European
borrower can now obtain a syndicated hard currency loan
from Western bankers, and bankers are refusing to refi-
nance some debts as they come due. Even the export credit
agencies of some Western governments are not willing to
increase their lending.//
//Eastern Europe's borrowing problems would increase
if Western governments were to join the bankers in reduc-
ing loans they make available. This would prompt the
bankers to curtail their loans further to Eastern Europe.//
Credit Interdependent
//Although Poland's private debt rescheduling agree-
ment for 1981 apparently will be signed soon, it cannot
hope to earn a large trade surplus or to obtain enough
debt relief and credits to cover its debt service obliga-
tions of $10 billion for 1982. Even if Poland manages
to avert default, its financial problems are likely to
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luctant to draw from its gold stock, partly bec
damage the creditworthiness of other East European coun-
tries. A Polish default would delay and make even more
difficult the return of the other countries to Western
capital markets.//
//Romania is just beginning to negotiate the resched-
uling of its private debt. Even with debt relief, how-
ever, Bucharest would face a large gap between available
funds and its minimum requirements.//
//Romania cut imports substantially last year, leav-
ing few areas to cut further without damaging the already-
strained economy. Reserves are low, and Romania is re-
of it is obligated as collateral for loans.//
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Implications
//The East Europeans rely on Western credits to
strengthen and expand their economies and to assert some
independence from the Soviets. Loss of credit would
cause agricultural and industrial output to decline and
fewer consumer goods to be available. In most of these
countries, the public would tolerate a fall in living
standards, but in Romania and Yugoslavia the population
will add this problem to an increasing list of other
grievances.//
//Some regimes may reluctantly decide to turn to the
USSR for help, but Moscow will be able to offer little,
because it faces serious economic constraints of its own.
In fact, the USSR is cutting back on deliveries of oil
to Czechoslovakia, East Germany, and Hungary.//
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Top secret
Top Secret
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