DIRECTORATE OF INTELLIGENCE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00287R001300340001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 11
• Document Creation Date: December 22, 2016
• Document Release Date: August 30, 2010
• Sequence Number: 1
• Publication Date: January 20, 1984
• Content Type: REPORT

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20 January 1984
the moderate
pro-Western regime of King Hassan--who is 54 years old--has been
faced with growing domestic challenges. While the regime appears
secure for now, deteriorating economic conditions coupled with
rising expectations among the burgeoning, youthful population are
Stiff austerity measures implemented in August 1983 have
trimmed inflation and reduced balance-of-payments and budget
deficits. Financial problems remain a troubling concern as the
economy continues to be buffeted by drought and a weak export
market for phosphates.
-- Rabat retains access to its $315 million IMF standby loan
but will have difficulty meeting the program's
performance targets.
-- Efforts to reschedule $1.5 billion in foreign debt
obligations payable in 1984 are nearly complete.
Additional rescheduling in 1985 and 1986 likely.
-- US assistance to Morocco in FY 1984 will total $292
million--$209 million in agricultural credits, $36
million in PL-480 aid, and $57 million in military
assistance--up slightly from the overall level in FY
1983.
-- Aid from Saudi Arabia probably won't exceed the. $220
million provided in 1983.
-- Foreign exchange reserves cover only a week of imports.
Economic and financial problems probably will remain acute
through 1986 limiting government investment and development.
-- The market for Morocco's phosphates--the nation's largest
source of export revenues--is likely to strengthen as the
world economy rebounds, but it will be several years
before Morocco reaps the benefits from its heavy
investment in the domestic phosphate industry. Morocco
controls about three-quarters of proved world phosphate
reserves. FV
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Necessary austerity measures, however, have slowed economic
growth, added to the ranks of unemployed, and created the
potential for the most serious disorder since independence.
--There is significant restiveness among key groups
particularly students, labor, and some religious
fundamentalists
-- In January, student strikes and isolated incidents of
violence occurred in several Moroccan cities. There is
the potential for nationwide civil disorder as the impact
of austerity measures are realized.
The government has taken some steps to defuse public concern
over the deteriorating economic situation.
-- In December, the King made a small cabinet shuffle
bringing the Socialist opposition party into government
for the first time, probably in hopes of muting criticism
of the regime's management of the economy. Hassan also
appointed Mohamed Karim Lamrani, a nonpartisan
businessman and a previous Prime Minister, to head the
cabinet.
-- The government has undertaken a consistent public
relations campaign to explain the need for austerity.
This strategy may be ineffective if new price increses
King Hassan has fairly effective security and military
establishments to deal with any unrest.
are implemented in the near term.
The King also is adept at playing off opponents against
issue, however, are not likely to change easily or
quickly and until solved, will continue to be a major
Foreign Relations
King Hassan and Algerian President Bendjedid met in February
1983 to discuss normalization of bilateral relations that were
cut in 1976 over the western Sahara dispute. Both leaders
recognize that regional stability serves their long term economic
and political interests and that those interests are threatened
by the Sahara dispute and the machinations of Libya.
-- The deeply held, incompatable views on the western Sahara
Hassan and Libyan leader Qadhafi met last July in Morocco
and relations between the two countries have improved
significantly at the expense of cooler relations with Algeria.
constraint on improvement in bilateral relations.
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King Hassan continues to play a significant role in Arab
politics and currently serves as chairman of both the Arab League
and the Organization of Islamic Conference, which held its summit
at Casablanca in January.
Western Sahara
Despite a more regular dialogue between Morocco and Algeria
over the eight-year-old Saharan dispute, a settlement in the near
term seems unlikely. Although acquisition of the Sahara remains
a popular cause among Moroccans, the seemingly "unwinnable" war
could eventually cause domestic trouble for the King.
-- There is growing uneasiness in Morocco regarding the
impact of the war on the economy. Rabat's serious
financial difficulties, caused in part by the war, may
increase discontent with the regime.
-- While Algeria, the Polisario Front's chief supporter, is
more amenable to a political settlement, it still insists
on direct Moroccan-Polisario negotiations. King Hassan
refuses to give the guerrillas this kind of recognition
and has generally been unwilling to take any substantial
risks in the OAU-sponsored negotiations. Informal talks
between Algiers and Rabat seem to be temporarily
stalemated.
-- Renewed Polisario military activity in recent months is
likely to continue as the Front attempts to force Morocco
into direct negotations.
Relations with the US
Moroccan-US relations are good, but expanding bilateral
ties, initially well received in Morocco, are beginning to be
questioned by some Moroccans who believe that the country's
material expectations are not being met.
-- In pursuit of Moroccan interests, King Hassan often
adopts foreign policies that parallel or coincide with US
interests.
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-- The King, during his visit to Washington in May 1982,
approved a Morroccan-US access and transit agreement for
US Rapid Deployment Forces.
-- The US is a major source of military equipment for the
Moroccan armed forces, but Morocco's inability to meet
FMS repayment obligations will be a recurrent problem.
-- King Hassan, Chairman of the Arab League and its Fez
peace committee, welcomed President Reagan's Middle East
initiative and has urged other Arabs to accept it as a
starting point for negotiations.
Outlook
Continued implementation of austerity measures is likely to
keep tensions high.
-- Rabat may have to choose between carrying out austerity
measures required by the IMF to ensure more financing and
risking serious disturbances similar to large-scale food-
price riots that occurred in 1981.
June.
Parliamentary elections are scheduled to be held early this
year if the domestic situation permits. They are likely to bring
charges of government interference as did communal elections last
We do not expect a near-term solution to the Western Sahara
conflict. Morocco's failure to hold an OAU mandated referendum
in Western Sahara at the end of last year may cause problems for
Rabat at the OAU summit scheduled for May.
-- Morocco's moderate African supporters, who thus far have
gone along with Rabat's insistance that the Polisario not
be seated as an OAU member are restive over Morocco's
position.
-- If the Polisario is seated at this year's OAU summit,
only a few members would be likely to follow Rabat in its
probable walkout.
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Morocco: Debt Service Ratio
Morocco: Current'Rccount Balance
CON I DENT I U
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DIRECTORATE OF INTELLIGENCE
20 January 1984
President Mubarak has continued to gain respect slowly, although
he still lacks broad popularity. Most observers believe that
Mubarak has grown in the job and seems more confident now than he
did a year or two ago.
-- Mubarak retains the support of his most important
constituency: the Egyptian armed forces.
-- Radical elements on both the left and the religious right
h
ave been contained by Egypt's security forces, although
isolated acts of terrorism are still possible.
Economic problems continue to be Mubarak's greatest domestic
challenge.
-- Egypt has moved closer to a foreign debt crisis over the
last several months, as indicated by its problems in
making FMS payment to the US.
-- Except for recent increases in electricity prices for
industrial users, the government has been postponing
economic reforms. An increase in bread prices at some
government-owned bakeries in September--later described
by Egyptian officials as a "trial run"--provoked
disturbances in Alexandria and was quickly rescinded.
-- Talks with the IMF concerning a standby agreement were
suspended in November after Cairo decided to postpone any
ove
ll i
i
ra
ncrease
n the price of bread.
The recent legalization of the New Wafd Party (a revived
version of the party that dominated Egyptian politics before the
1952 revolution) has injected new uncertainty into the Egyptian
political scene.
-- Although the extent of the New Wafd's support is still
unclear, Mubarak is very concerned about the challenge it
presents. He has been trying tb strengthen his own
National Democratic Party.
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Foreign Relations
PLO Chairman Arafat's visit to Cairo in December was the
most important event in Egyptian foreign relations during the
past year.
-- Egyptian officials consider the Mubarak-Arafat meeting to
have been a major breakthrough that significantly
improves the prospects for a comprehensive Middle East
peace settlement.
-- Cairo also hopes that the rapprochement with Arafat will
speed up Egypt's reintegration into the Arab world.
Egyptian-Israeli relations are still frosty, despite a
recent exchange of visits by senior foreign ministry officials.
-- The Egyptian ambassador has been absent from Tel Aviv
since September 1982.
President Nimeiri's Islamicization campaign and the unrest
in southern Sudan have been major Egyptian concerns, given
Sudan's strategic importance to Egypt.
-- Mubarak has had some success in persuading Nimeiri to
slow down Islamicization and to make other conciliatory
gestures toward the southern dissidents.
Current issues in US-Egyptian relations
Cairo's difficulty in repaying its military debt will be a
prime topic in US-Egyptian discussions during the next several
months.
-- Mubarak has told US officials that Egypt will suspend FMS
interest payments beginning in July.
-- Cairo is resisting any multilateral rescheduling of its
debt to Western donor countries. As a "special partner"
of the US, it instead seeks a bilateral arrangement with
a moratorium on FMS payments.
-- The administration's proposal to. furnish all future
military assistance to Egypt in the form of grants rather
than loans is, in Cairo's view, a step in the right
direction. Egypt considers the proposed amount of $1.175
billion for FY 85, however, to be inadequate and
inconsistent with the principle of equal treatment for
Egypt and Israel.
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-- US-Egyptian discussions on military cooperation have
continued smoothly, although there remain man issues to
resolve regarding US use of Ras Banas. 25X1
Looking Ahead
Cairo's principal foreign policy objective in the coming
months will be to maintain the momentum created by Arafat's
visit.
-- Egypt will concentrate on encouraging Arafat and King
Hussein to agree on a formula for negotiating with
Israel.
25X1
Domestically, the parliamentary elections (scheduled for 27
May) will preoccupy Mubarak.
efforts bog down.
-- Cairo still favors the US peace initiative of September
1982 as the most promising basis for a settlement.
Egyptian officials indicate, however, that they will turn
to other formulas, such as a revised version of the 1982
French-Egyptian Security Council resolution, if US peace
-- As the campaign heats up, there are likely to be further
.disputes between the government and the opposition over
whether the elections are being conducted fairly.
-- One or more of the older opposition parties may make good
on their threat to boycott the election, but we expect
the New Wafd to compete and to win representation in the
Peoples Assembly.
-- A strong showing by the Wafdists would not necessarily
alter Cairo's relationship with the US. It could,
however, be a major step toward genuine multiparty
democracy in Egypt.
Once the parliamentary elections are over, Mubarak will have
to face some of the hard economic choices, concerning subsidies
and consumer prices, that he has been.-Postponing.
-- Mubarak's dilemma is that the need for economic reforms
to reduce budget deficits and to limit imports conflicts
with popular expectations of improved living standards.
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-- The long-delayed increase in bread prices and some
progress on energy price reform might take place after
May. This involves a substantial risk of riots similar
to those that recently occurred in Tunisia and Morocco,
despite what are certain to be extensive security
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