NATIONAL INTELLIGENCE DAILY (CABLE) 1 MAY 1982

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84T00301R000300010003-1
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 17
• Document Creation Date: December 21, 2016
• Document Release Date: September 22, 2008
• Sequence Number: 3
• Publication Date: May 1, 1982
• Content Type: REPORT

uirecrorl or
Centra
Intelligence
National Intelligence Daily
(Cable)
11 Maw
Cony 402
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25X1
UK-Argentina: Bracing for Conflict . . . .
. . . . . . . .
1
Nicaragua-Honduras: Effort To Reduce Tension . . . . . . .
5
Cuba: Crackdown on Illegal Economic Activity . . . . . . .
6
Italy: Christian Democratic Congress . . . . . . . . . . .
7
USSR - The Yemens: Soviet Aid Programs . . . . . . . . . .
8
Greece-NATO: Withdrawal From Exercise . . . . . . . . . .
9
St. Lucia: Election Outlook . . . . . . . . . . . . . . .
11
Special Analysis
China-Taiwan: Accommodation Politics . . . . . . . . . . .
12
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Top Secret
UK-ARGENTINA: Bracing For Conflict
//Argentina was taken aback by US support for the UK. UK
Foreign Secretary Pym will arrive in Washington today to meet with
US and UN officials. Buenos Aires also appears intent on conveying
the impression that negotiations are still os but it con- 25X1
tinues to test British resolve at sea.// L7 I
//US press correspondents report that Argentina was
"stunned" by the announcement yesterday of US sanctions.
The government delayed disclosing the measures for two 25X1
hours and still has not responded to them.// F I
//In New York, Foreign Minister Costa Mendez reiterated
Argentina's readiness to comply with UN Security Council
Resolution 502 "in its entirety," but only if Argentine
sovereignty over the Falklands could be assured before
negotiations begin. He also claimed that Argentina had
not turned down the US proposals, stating that Buenos
Aires has made "observations" about the plan rather than
rejecting it outright.// 25X1
//British Foreign Secretary Pym welcomed Washington's
decision, expressing hope that US support for the UK
could still convince Buenos Aires to accept a negotiated
settlement. He was skeptical, however, of Costa Mendez's
statement that Buenos Aires would accept UN Resolution 502,
noting that it had "shown no signs of doing that at the
moment."// 25X1
//Pym will meet with US officials over the weekend to
discuss "the next steps." He also will go to New York
for meetings with the UN Secretary General.//
25X1
Comment: //The Argentines have been expecting the US
move, but the sanctions may not have been anticipated.
Costa Mendez's statement is a last-ditch effort to ensure
a public impression that Argentina remains amenable to
a diplomatic settlement. His response, however, repre-
sents no change in the Argentine position.// 25X1
25X1
--continued
Top Secret
1 25X1
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Argentine Military Activity
Press reports indicate that Argentine forces were
on "red alert" yesterda as the UK's total exclusion
zone went into effect.
Moves To Conserve Foreign Exchange
The Argentine Central Bank has notified all Argentine
financial institutions that neither payments abroad nor
commitments for future payments may be made without its
prior authorization. The government also announced strong
import controls.
25X1
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2 25X1
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Top Secret
Comment: The import controls were taken to guard
against a surge in shipments by businessmen who anticipate
a devaluation of the peso. An unrestrained acceleration
in imports would further damage Argentina's foreign
exchange position.
Venezuelan Sanctions
//The Venezuela
Against
n press q
the UK
uotes President Herrera as
saying that trade between Venezuela and the UK has halted
because of the Falkland crisis.
West German Position
25X1
//West Germany's official government spokesman earlier
25X1
this week stated that Bonn would continue to support EC
25X1
sanctions against Argentina onl as long as the UK did
not take militar action.
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China today assumes the presidency of the UN Secu-
rity Council for May. Beijing thus far has adhered to
the nonaligned movement's recognition of Argentina's
claim of sovereignty over the Falklands while stressing
the need for a diplomatic settlement. (C)
Comment: //As president, China is likely to maintain
an evenhanded approach to the dispute. Beijing remains
apprehensive over the potential impact of the dispute
on its relations with London and for the status of Taiwan
and Hong Kong. If hostilities do break out and Argentina
had strong Third World backing, however, China probabl
would support Argentina's position in the UN.//
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The Foreign Ministers of Nicaragua and Honduras are scheduled
to meet soon in Managua amid warnings from the Sandinistas about the
potential consequences of continued cross-border raids from Honduras
by antiregime insurgents.
The meeting will be the second recent attempt by
the two governments to reduce frictions. Last month in
Tegucigalpa, Nicaraguan Foreign Minister D'Escoto pushed
for a bilateral agreement that would initiate joint pa-
trols and force dismantling of "counterrevolutionary"
camps in Honduras. His Honduran counterpart responded
by reiterating the major points of a proposed regional
pact that would limit the Nicaraguan military buildup
and would end Managua's support for Honduran terrorists
and for Salvadoran and Guatemalan insurgents.
//The inability of the two sides to make progress
was underscored by their failure to issue a joint com-
munique. The two ministers did agree to meet again,
however, and to the return of Ambassadors recalled
earlier for consultations.//
//Insurgents operating from Honduras subsequently
have attacked several Nicaraguan border posts, and the
Sandinistas have threatened reprisals if the incidents
Comment: //Managua's moves are designed to intimi-
date Honduras into cracking down on anti-Sandinista
forces. Nicaragua's recent call for an immediate meet-
ing between the military commanders of both countries
apparently is a tactic to exert direct pressure.//
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CUBA: Crackdown on Illegal Economic Activity
The current "morality campaign" against illegal economic
activity suggests that the regime is deemphasizing recently intro-
duced liberalization measures meant to improve consumer satisfaction
and productivity.
A wide variety of scandals has been uncovered in
the past six weeks. Over 500 people have been arrested
thus far in the highly publicized crackdown.
//A massive inspection of the new free markets, where
farmers sell surplus crops, revealed that over 60 percent
of the produce had been stolen from government warehouses.
A number of store managers have been charged with forging
customer lists to obtain extra milk, which they then sold
for their own profit. Security officials also have begun
searching the homes of construction contractors to recover
stolen government property.//
Comment: President Castro, backing the hardline
position of "revolutionary purists," has hinted that the
liberalization measures sponsored by pragmatic technocrats
in the leadership may be revised if not ended altogether.
The growing number of licensed entrepreneurs who sell con-
sumer services for a profit could be the next target.
The regime's actions so far seem to have the approval
of the people, many of whom have been complaining about
the high prices at the farmers' markets. Closing them,
however, would cause serious consumer discontent and
an increase in black market activity. In addition,
productivity would decrease.
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ITALY: Christian Democratic Congress
Top Secret
The congress of the Christian Democratic Party, which opens
tomorrow, is likely to provoke a showdown between it and the other
four parties of Prime Minister SpadoZini's coalition, with the gov-
ernment's future hanging in the balance.
The Socialists, Social Democrats, and Liberals have
been urging a comprehensive review of the government's
program. The Christian Democrats are preoccupied with
internal party problems and fear that the smaller parties
would either insist upon a greater role in the government
or an early election, and the refused to participate
until after the congress. 25X1
//The congress will first select a new party secretary.
Party leaders agree only that whoever is chosen must be
able to rally the party's dispirited rank and file. The
three leading contenders; are Flaminio Piccoli, the incum-
bent; Arnaldo Forlani, the candidate of the center-right;
and Ciriaco De Mita, the candidate for the left. Former
Prime Minister Andreotti, who controls 15 percent of the
delegates, may be prepared to endorse De Mita or Forlani
but could seek the post himself.//
Comment: Andreotti seems likely to determine who
becomes party secretary. The delegates are almost certain
to reverse the decision of the last congress against po-
litical cooperation with the Communists because there is
widespread agreement that this has reduced to an unaccept-
able degree the party's room for maneuver and has helped
the Socialists. The party probably will remain committed
to the coalition but will be unprepared to make major
concessions to the smaller parties. 25X1
Socialist leader Craxi would be particularly upset
if the Christian Democratic left were to prevail because
it has long opposed his prime-ministerial ambitions.
Regardless of the outcome, the Socialists will be anxious
to demonstrate immediately after the Christian Democratic
congress that they are a force to be reckoned with, and
they will almost certainly move a ainst the Spadolini
government to prove their point.
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USSR - THE YEMENS: Soviet Aid Programs
The USSR is providing large amounts of modern armaments, in-
cluding over $250 million worth in 1981, to the unskilled armed
forces of North and South Yemen in order to increase its influence
in the region and to gain better access to the port facilities
//The Soviets have provided over $800 million worth
of equipment to Marxist-oriented South Yemen in the last
four years. SCUD missiles capable of reaching Sanaa
and Somalia's major port, Berbera, were introduced in
1981.//
//The Soviets' apparent willingness to finance Aden's
$75-100 million annual trade deficit with the USSR re-
flects Moscow's stake in South Yemen. Soviet-supplied
arms have enabled Aden to back the National Democratic
Front, an insurgent group that is attempting to gain
control of the government in Sanaa.//
At the same time, the USSR is trying to exploit
North Yemeni distrust of Saudi Arabia. The USSR shipped
$150 million worth of arms to Sanaa in 1981, including
30 MIG-21s, over 80 armored vehicles, and additional
SA-2 and Styx missiles, nearly completing deliveries
worth $750 million.
Last fall the USSR reportedly agreed to reschedule
some $600 million of Sanaa's arms debts and
is currently negotiating to provide
$300 million worth of additional arms. The USSR also
provided $55 million in new economic aid, its only devel-
opment credits last year to the Middle East.
Comment: //North Yemen President Salih is using the
Soviet aid to strengthen his support among the military
and to resist Riyadh's manipulation of the
Saudi-financed US military aid program. He probably also
hopes Moscow will persuade Aden to decrease its assistance
to the insurgents.//
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Top Secret
//The Greek Government announced yesterday that its
troops would not participate in a NATO exercise that
begins on Monday, because of problems with command and
control arrangements and flight security. Earlier this
week, NATO's Defense Planning Committee rejected Greece's
request to modify or cancel portions of the exercise that
Athens said could create "political problems" in the
region.//
changes affecting the Aegean area.//
that Spanish entry into NATO could result in command
Comment: //Although this is the first time that Prime
Minister Papandreou has objected to a NATO exercise, his
predecessors also refused to participate in some exercises
that did not give Greece total control of the airspace
over the Aegean. The Greeks probably are concerned that
sharing exercise responsibilities with Turkey would prej-
udice their claims in the Aegean. Papandreou also may
want to underscore his sensitivity to the possibility
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for 15 years until he was unseated by voters in 1979.
Top Secret
John Compton, leader of the moderate United Workers
Party, is heavily favored to win the election. Compton,
an able lawyer and economist, served as Prime Minister
Comment: //Antagonism between two leftwing competi-
tors--Peter Josie and George Odlum--has enhanced Compton's
chances for victory. The flamboyant radical posturing of
both men has discredited them among the basically conserv-
ative voters.
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//China--as part of its campaign for peaceful reunification
with Taiwan--has taken a number of steps designed to reduce tension
in the Taiwan Strait. Taiwan, in an attempt to deflect charges of
intransigence, has relaxed restrictions on contact with China but
has not lowered its military guard.//
//Taipei's approach is tactical and does not repre-
sent a softening of its opposition to reunification on
Beijing's terms. Indeed, Taipei continues to hope for a
modus vivendi that would include Beijing's tacit recogni-
tion of Taipei's sovereignty over the island. Despite
the divergent goals, the increased contacts and unwritten
agreements evolving between the two sides ultimately
could lead to more substantial steps toward some sort
of accommodation//.
Reducing Military Tension
//In 1979 Beijing reopened Xiamen, opposite Taiwan's
heavily garrisoned Chin-men Island, to civilians and
established a special economic zone in the area.
Taipei has not responded
directly, but in January 1981 it eliminated some of the
military-controlled "forbidden zones" on Taiwan.//
//Fighter aircraft from Taiwan still routinely patrol
the Taiwan Strait, and light aircraft occasionally enter
Top Secret
Chinese airspace
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Chinese
fighters, however, now remain over the mainland while
monitoring Taiwan's air patrols in the strait.//
//The Chinese naval presence in the strait is sub-
stantially lower than along the rest of China's coast,
but vessels from a nearby missile boat squadron are avail-
able. Last year, Taiwan alleged that Chinese ships had
begun patrolling close to the mainland instead of steaming
out to the midline in the strait or near Chin-men or Ma-
tsu. The Taiwan Navy has not changed its traditional
patrolling patterns.//
//Taipei has relaxed its policy against contacts
with China in those areas where Beijing has called for
flexibility--travel, academics, culture, sports, and
trade. The regime on Taiwan, however, is careful to
avoid any suggestion that its actions connote dealings
between a national capital at Beijing and a provincial
capital on Taiwan.//
representing Beijing, China, and Taipei, China.//
Olympic formulation that presents the contestants as
//Visits from Taiwan to the mainland, which once
were forbidden, are increasingly common. Representa-
tives from the two sides have been attending interna-
tional conferences with increasing frequency since 1978.
Sports teams from both sides began competing with each
other in third countries last year, usually under the
1 percent of the total indirect trade.
Indirect trade via Hong Kong and other entrepots,
estimated at more than $500 million last year, has in-
creased rapidly. Direct trade between the two sides is
still small, however, and probably amounts to less than
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