NATIONAL INTELLIGENCE DAILY (CABLE) 2 NOVEMBER 1982

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84T00301R000600010023-6
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 13
• Document Creation Date: December 22, 2016
• Document Release Date: August 16, 2010
• Sequence Number: 23
• Publication Date: November 2, 1982
• Content Type: REPORT

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S 4 Director of
Centrl
a Intelligence
National Intelligence Daily
(Cable)
2 November 1982
Top Secret
CPAS NIDC 82-2 6C
November
a w Copy 4 0 2
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Top Secret
El Salvador: Increasing Political Tensions . . . . . . . 2
Israel-Syria: Increasing Incidents . . . . . . . . . . . 3
Suriname: Leftist Charges Against the US . . . . . . . . 4
Poland: Winter Grain Crop Threatened . . . . . . . . . . 4
UK: Unions Rebuffing Their Leaders . . . . . . . . . . . 5
South Africa: Parliamentary ByeZections . . . . . . . . . 5
USSR - South Pacific: Soviet Ship Visits . . . . . . . . 6
Italy-Algeria: Gas Negotiations Stalled . . . . . . . . . 7
Special Analysis
International: Oil Market Trends . . . . . . . . . . . . 8
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EL SALVADOR: Increasing Political Tensions
Defense Minister Garcia, who is faced with new criticism of the
government's war effort and negotiating posture, is maneuvering against
Assembly President D'Aubuisson and his rightwing supporters.
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politicians are trying to forge a coalition with the
Christian Democrats. The aim of this grouping is to
oust D'Aubuisson from his legislative position and to
undermine rightist hardliners in the government and the
military.//
//Leaders of the Christian Democrats and the center-
right National Conciliation Party have told US Embassy
officials the efforts to form a coalition are part of
a larger plan to create a political center. They hope
this would make it easier for the government to put
reforms into effect and achieve a peaceful solution to
the war. Last week Assembly moderates scuttled a move
by D'Aubuisson's party to proscribe any government
attempts at negotiations or dialogue with the insurgent
left.//
Comment: Prospects remain poor for ousting
D'Aubuisson and building a centrist majority in the
Assembly. Moderate conservatives still distrust the
Christian Democrats and will be influenced by bribes
and intimidation on the part of D'Aubuisson loyalists.
Nonetheless, rightist efforts to gain control of the
government and military are forcing greater cooperation
among moderates.
Garcia thus far is containing his military critics,
but he probably believes his position will remain threat-
ened as long as D'Aubuisson heads the Assembly. Addi-
tional efforts to neutralize D'Aubuisson would give rise
to increasing tensions in the government and the armed
forces.
Top Secret
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ISRAEL-SYRIA: Increasing Incidents
Top Secret
An Israeli military spokesman characterized as a
"grave violation of the cease-fire" the firing on Sunday
of two surface-to-air missiles from Syria at an Israeli
reconnaissance flight over the Bekaa Valley. Although
the missiles missed their target, Tel Aviv cited the
incidents as another in a long list of alleged cease-
fire violations by Damascus. The Israelis also say
these incidents are encouraging Palestinian guerrilla
attacks on Israeli soldiers in southern Lebanon.
Comment: //Israel holds Syria responsible for all
violations of the cease-fire in Lebanon and has threat-
ened Syria with retaliation if they continue. Syria
probably is becoming increasingly frustrated with its
inability to oppose effectively the almost continuous
Israeli reconnaissance flights over its positions in
the Bekaa Valley. The missile firing may have been a
warning to Tel Aviv to scale down these flights, but it
could have the opposite effect.//
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SURINAME: Leftist Charges Against the US
//The US has come under fire from Surinamese leaders
for allegedly supporting moderate labor leader Daal,
who is trying to force the leftist government to change
its policies. Foreign Minister Naarendorp and Prime
Minister Neijhorst have publicly implied that the US and
particularly the CIA are trying to undermine Suriname's
"revolution" by aiding Daal's strike activities.
Comment: Leftists in Suriname are using the US as
a scapegoat to divert domestic attention away from Daal's
calls for free elections and a return to constitutional
rule. the recent arrival of the new Cuban
Ambassador to Paramarib, and the absence of the moderate
Deputy Army Commander apparently emboldened Surinamese
officials to proceed with their attacks against the US.
If Bouterse takes measures against Daal, the government
may seek to justify its actions by formally requesting
the withdrawal of some US Embassy officials. US personnel
appear to be in no immediate danger, but a breakdown in
public order would bring obvious risks.
POLAND: Winter Grain Crop Threatened
//Abnormally dry weather is threatening prospects
for Poland's winter grain crop. Since August, rainfall
in the major grain growin as has been more than 60
percent below normal.
Press reports
indicate dry soil conditions caused farmers in many areas
to delay planting until after optimum sowing dates.//
Comment: Winter grains normally account for about
60 percent of total grain production, and potential
yields have already been cut. Favorable weather during
the winter and early spring is needed to hold these
losses to a minimum.
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UK: Unions Rebuffing Their Leaders
//The government's political position probably has
been strengthened by the results of two recent union
votes on new wage contracts. Workers at the ailing
British Leyland automobile company have accepted by a
wide margin a two-year contract with annual raises of
about 6 percent. Early returns from the militant
National Union of Mineworkers indicate it will accept
the National Coal Board's offer of an 8- to 9-percent
increase. Leftwing union leader Scargill, who has vowed
to bring down Prime Minister Thatcher's government, has
been urging the union to strike.//
Comment: //A rebuff of Scargill by the mineworkers
would be the second this year. Union militancy has
moderated as a result of government firmness, high
unemployment, and the gradual drop in the rate of infla-
tion. Other unions are likely to continue accepting
moderate wage settlements, strengthening the case of
those in the government who want to call an election
next spring.//
SOUTH AFRICA: Parliamentary Byelections
The ruling National Party tomorrow faces its first
major electoral test since its right wing broke away
earlier this year to form the Conservative Party. Of
the four seats being contested, the one in the Orange
Free State is drawing the greatest attention. The Con-
servatives and another rightwing party are vying for
the support of conservative Afrikaners, who make up the
bulk of the state's electorate. The campaign has focused
almost entirely on Prime Minister Botha's proposals for
constitutional reforms that would grant limited politi-
cal rights to Coloreds and Asians.
Comment: //The National Party is likely to win the
seat in the Orange Free State, but perhaps with only
a plurality. A strong showing there by the Conservative
Party would solidify its claim to leadership of South
Africa's right wing and might force Botha to reassess
his proposed reforms.//
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USSR - SOUTH PACIFIC: Soviet Ship Visits
Leaders of two Pacific island nations suggest that
they might open their ports to Soviet ships. Prime
Minister Lini of Vanuatu says Soviet vessels that are
not nuclear powered or nuclear armed would be allowed
to call. Fiji's Foreign Minister said the ban on all
Soviet shipping, which was imposed in July after the
USSR was accused of funding opposition candidates for
parliament, might be lifted.
Comment: Soviet warships do not call at ports in
the area, but Soviet fishing and oceanographic ships are
active in the region. Moscow's occasional attempts to
establish influence in the region have not gotten far.
Most of the island nations would be reluctant to jeopard-
ize aid and investments from Australia, New Zealand, and
the West by being too friendly with the USSR. Although
Fiji and a few others welcome the income from occasional
visits by Soviet ships, they probably would not welcome
warships.
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ITALY-ALGERIA: Gas Negotiations Stalled
//Negotiations to sell Algerian natural gas to Italy
remain stalled. Negotiators for the two governments
reached agreement in principle in early October to raise
the price to $4.41 per million Btu, but the Italian dis-
tribution company has refused to sign the contract. The
company wants the Italian Government to pay the differ-
ence between the price of costly Algerian gas and that
of other imported gas in the Italian market--about $0.60
per million Btu. The USSR has indicated it is willing
to give Italy more time to negotiate for Soviet gas.//
Comment: //Rome and Algiers hope to sign a contract
by mid-November, but negotiations probably will drag
on much longer because both sides are showing signs of
inflexibility on a number of technical issues. Unanti-
cipated production problems are limiting Algeria's abil-
ity to meet export commitments and encouraging it to
maintain a hard line on the pricing issue. Opposition
is likely to increase in the Italian Government because
of the high cost to the Treasury. Prolonging the talks
with Algeria probably will further delay Italian nego-
tiations for Soviet gas, but a failure to reach a settle-
ment altogether would make Italy more likely to buy
Soviet gas.//
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Special Analysis
INTERNATIONAL: Oil Market Trends
Top Secret
The oil market remains depressed with no end in sight to the
decline in consumption, despite a recent increase in OPEC oil
production and a rise in spot prices. OPEC oil production in
October was nearly 2 million barrels per day above levels in August,
and spot crude oil prices have risen by $1 to $2 per barrel in
recent weeks to approximate official prices. Nevertheless, the
availability of excess production capacity, coupled with continued
aggressive marketing by some OPEC members and some other oil
exporters, will tend to hold contract prices down.
The rise in OPEC production is in response to the
normal seasonal increase in oil consumption and perhaps
to the end of the drawdown of excess commercial inven-
tories. Companies usually build inventories during the
summer, when consumption is low, to meet seasonal in-
creases during the winter season.
According to industry sources, the combination of
high carrying costs, surplus productive capacity, and
the increased flexibility of the refining system is
causing oil companies to carry smaller inventories and
keep their purchases more closely adjusted to the seasonal
pattern of oil consumption. As a result, OPEC production
probably will change throughout the year in response to
the seasonal rise and fall in consumption.
Demand for OPEC oil will rise slightly during the
remainder of the year--perhaps up to another 1 million
barrels per day. It is likely to remain at that level
through the first three months of 1983.
Disagreements Within OPEC
Despite the limited rise expected in output, soft
market conditions will prevent most OPEC countries from
realizing their desired level of production and will
keep the cartel in disarray. Disagreement on appropriate
price differentials between African and Persian Gulf
crudes and the determination of some OPEC countries,
including Iran, Libya, and Venezuela, to go their own
way have already divided OPEC.
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Earlier this month the OPEC states of Saudi Arabia,
Kuwait, the United Arab Emirates, and Qatar, which are
members of the six-nation Gulf Cooperation Council,
warned they might set their own prices and output levels
unilaterally if errant OPEC members continue to under-
price their oil. OPEC will try to resolve differences
on production and pricing at the next ministerial meeting
scheduled for 9 December in Lagos.
If companies succeed in shifting most of the burden
of seasonal adjustment to oil producers, demand for OPEC
oil could fall by up to 2 million barrels per day during
the second and third quarters of 1983. At the same time,
there is little prospect that much more oil will be
required as the result of an economic recovery. Most
observers do not expect strong economic growth in the
industrialized nations.
Market pressures would be further intensified if
Iran and Iraq were to raise production substantially
next spring. Mexico also may be tempted to increase
production, but softness in world demand--particularly
for the poor quality crude oil that Mexico could easily
deliver--will limit its ability to expand sales.
If the demand for OPEC oil falls by as much as
2 million barrels per day next spring, there will be
strong pressure to cut prices. Most industry sources
believe these problems will not lead to a collapse in
the price of oil, but some believe Saudi Arabia and
other politically moderate oil producers in the Persian
Gulf may lower prices slightly to regain market control.
This, however, would risk starting a price war.
The possibility of much lower prices cannot be
ruled out. The growing financial difficulties of such
producers as Mexico and Nigeria and the erratic behavior
of Iran and Libya could encourage aggressive competition.
Moreover, if oil consumption continues to decline next
year, the cartel will have a difficult time keeping
prices at their current level.
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