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February 8, 1974
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Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Weekly Review C1/aCC/ CIWR Top Secret 4 25X1 DSR ril.F COPY RETU N PTO 111-1107 DIA review completed. State Dept. review completed Top Secret 8 February 1974 Copy N! Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 426 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 'I hr Wf;I..KL`r' RI_VICW, issued cvciy ridgy nruniinq by Ihr, Olfic.r of Current InlcIhgence, repot , and rnaly/cs ignif- ic.rnt r1evelnlunent', of the wcril< Ihrnirgh noon nn Thurxlay, II fr,:llluontly III( lnrlcs material cuorrhnated with or pr:p.rred by the ~)ffilr of I.IUnprrlll Re"earch, hr. Office of `.,hatr(ic mill thr, f)irr.(c orate of ;C ollce and 'I echnnlugy, I olm" rrrriuirini) more currrlnelrrrisive treatment .111(1 there- low truhlr,hcrl wp,lralely ,r', Special Ruporl', d11c li.,led in the content',. CONTENTS (/"iebruur)' 8, 1974) 5 The Energy Conference: Prelude 6 USSR: Economy[UNCODED_ 9 Eastern Europe: A Prospect of Prosperity 10 MBFR: Talks Bogged Down 11 Base Issue Stirs Iceland 12: Italy: Labor Draws the Line 25X1 25X1 16 Cambodia: More Inconclusive Combat 25X1 18 South Korea: Silencing Critics 15 Laos: Negotiations and Demonstrations 16 Vietnam: Diplomacy EAST ASIA PACIFIC MIDDLE EAST AFRICA 20 China: Poised for Oil Profits 21 Singapore: Oil vs. Israel 22 Libya: More Turmoil 23 Egypt: On the Home Front 24 Cuba-USSR: Brezhnev Goes Home 25 Costa Rica's New Broom 26 Chile: The Army Way 27 Peru-Chile: Anxieties Continue WESTERN HEMISPHERE Approved For Release 2009/04/21 : CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 South Vietnam: Quarreling Over Islands Chi d na an South Vietnam have stepped up their war of words over the Paracel and Spratly Islands, but thus far there are no signs that fight- ing will resume. This week, Peking reacted to Saigon's dispatch of a small naval task force to the Spratlys with a tough statement charging that the South Vietnamese action is a "new military provocation," and asserting that China will not tolerate such infringement of its territory. Sub- sequently, Saigon stated that its action in the Spratlys, which lie some 400 nautical miles south of the Paracels in the South China Sea, is a natural defensive measure following Chinese "aggression" in the Paracels. Saigon now has at least 200 troops in the Spratlys, and more troops may be on the way; South Vietnamese military spokesmen have stated that their troops are now on six of the islands. China has no forces in the area and has not patrolled the islands. Taiwan and the Philippines, which also claim the Spratlys, have had troops on several of the islands for some time, and both countries have protested Saigon's action. South Vietnam's reinforcement of the Spratlys is almost certainly designed to under- Paracel Islands Phlllpplnos r' S 0 1/ 7' II C II I N A S li A Spratly Islands score its claim in the event that oil exploration ever becomes a serious possibility. Saigon seems reasonably confident that under present circum- stances its action will not be contested, other than verbally. Military operations such as oc- curred in the Paracels would be hard for any of the claimants to undertake because the Spratlys lie near or beyond the outer reach of their mili- tary range, especially for air cover. A forceful reaction from mainland China cannot be ruled out, but there are no signs of preparation for such action. In addition to logistic difficulties, a military response would present complicated diplomatic problems for Peking. China wants to avoid a clash with Taiwan, which would risk involving the US and disrupt relations with China's neighbors in Southeast Asia. Trouble with Manila would also upset the countries of Southeast Asia. Cl inese patrol boat Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 25X1 25X1 King Husayn was forced to cut short a visit to London and hurry back to Amman this week to quell an army mutiny. The insurrection-or- ganized by disgruntled non-commissioned offi- cers-has developed into the most serious internal crisis for Husayn since the showdown with the fedayeen in September 1970. Thus far, the army's loyalty to the King has held firm and there has been no bloodshed. But the rebellious troops have made far-reaching de- mands that have won widespread sympathy among the lower ranks of the army and air force and apparently among the civilian population as well . The trouble started last weekend when en- listed personnel from the elite 40th Armored Bri- gade, which had just returned from Syria, muti- nied and demanded to see the King's brother, Crown Prince Hassan. The mutiny seemed to sub- side almost as quickly as it began after Hassan listened to the dissidents' grievances and promised to take their case to Husayn. Before the King returned, however, the insurrection picked up momentum again and spread to other units of the 3rd Armored Division, headquartered at Zarqa 15 miles north of Amman, and to armored, artillery, and antiaircraft units stationed in Amman and the port city of Aqaba. In addition to a pay raise and a gereral rollback of consumer prices, the mutinous troops are calling on Husayn to dismiss both the army's unpopular chief of staff, Sharif Zayd bin Shakir, and air force commander Brigadier Abbud Salim. Bin Shakir, who is at odds with many officers and men, is being blamed for all the army's ills, in- cluding corruption, an inability to obtain more advanced weapons from the US, and the lack of an adequate pay increase for enlisted personnel. The dissidents want Husayn to appoint Sharif Nasir, the King's uncle and an influential figure among Jordan's Bedouin tribesmen, as both commander in chief of the armed forces and prime minister. They are demanding the resigna- tion of Prime Minister Zaid Rifai and several Page 4 other civilian officials whom they hold respon- sible for escalating living costs. Since his return on February 5, Husayn has been making the rounds of rebellious army units trying to restore discipline and prevent a threat- ened march on Amman. Husayn has promised an immediate pay increase for the army and for the internal security service, but this step may not be enough to cool the situation. Unless the King dismisses Bin Shakir and Rifai, which he is appar- ently resisting, the two men will almost certainly continue to be the focus of smoldering resent- ment, not only among the rank-and-file but among those at higher levels in the army who also resent the chief of staff's and prime minister's aloofness and high style of living. Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875R001000030002-2 Most of the nations participating in the Washington energy conference next week favor some form of international cooperation on energy matters but are reluctant to undertake any ac- tions that might antagonize the oil. hroducing na- tions. Perhaps the subject of strongest common interest to the visiting participants-the EC-r.ine, Canada, Japan, Norway, and top officials of the EC and OECD-will be the proposals to develop alternative sources of energy. The most conten- tious issue is likely to be the question of whether the group of industrialized, oil-importing coun- tries should meet periodically to review energy- related problems. The opening plenary session on February 11, which will be devoted to the present energy situa- tion and its impact on the world economy, prom- ises to be time-consuming but non-controversial. EC officials expect to explain their view of the causes and consequences of the changed relation- ship between supply and demand as well as the basic causes and significance of price movements. The fact that others, including the US, may wish to cover much the same ground has added to skepticism about whether the two-day conference will be able to explore any new territory. Some may welcome a lack of time for debate; a senior British official, for example, has expressed the hope that ample time would be provided for the ministers to "talk themselves dry." A subsequent foreign ministers' session-in parallel with separate sessions of finance, energy, and technology officials-will have to deal with the repeatedly expressed anxieties of almost all participants over relations with the oil producers and the lesser developed countries. Paris may seek to crystallize these worries into support for the proposals for a special UN conference on energy. The EC position paper calls for discussions with developing and producing countries to begin by April 1, a decision apparently designed to get talks with producers under way before the next OPEC ministerial meeting later in April. The widespread desire to broaden the dis- cussions to include producers and developing countries will make it extremely difficult to reach any agreement on further high-level meetings of the February 11 group. The Nine have left the door open, however, for setting up short-term working groups to examine certain specific topics; the other participants would not balk at this. US proposals for a session of finance offi- cials have met widely varying reactions. Bonn was particularly favorable, although a senior German official hoped the meeting could discuss a roll- back of oil prices "as a means of reducing the complex and interrelated problems of oil pur- chase and international finance." Paris has been so negative that, as late as February 1, a con- cerned French official was unable "to ignite even a flicker of interest" in preparing for French participation. A proposed session devoted to emergency sharing, which is to be taken up along with con- servation, restraints on demand, and alternative sources of conventional fuels, could attra,-t par- ticular interest in view of the fact that the Nine agreed to include this topic in their position paper. Britain, however-along with Canada and Norway-is likely to favor discussion only of those supplies that enter international commerce. Participants in the proposed session on science and technology are likely to pursue their interest in gaining access to US technology for enriching uranium. A feasibility study is under way for a projected Canadian gaseous diffusion facility. The project has some Japanese and German financial support for its initial study, while the US Atomic Energy Commission is giving technical advice. The backers of the project would be interested in longer term US assistance. The French Atomic Energy Commission has opposed efforts to seek US help for the French- sponsored Eurodif consortium's facility but Italy and Belgium, who are also backers, are interested, as is the principal French utility company. Britain, the Netherlands, and West Germany co- operate in the rival-and more experimental- Urenco project for an enrichment facility using the centrifuge process. US technological help evi- dently would be particularly helpful to this 25X1 Page 5 Approved For Release 2009/04/21 : CIA-RDP85T00875R001000030002-2 1%, Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 The Soviet economy recovered sharply in 1973 from its exceptionally poor performance the previous year. An 8 percent surge in gross national product was largely due to the record performance in the agricultural sector. industry also recovered from its 1972 slowdown, with most of the gain occurring in the machinery sector. Substantial growth is scheduled for 1974, but Moscow's prospects for achieving the original goals of the 1971-1975 plan are extremely bleak. Exceptionally good weather and increased supplies of fertilizer were mainly responsible for the surge in farm output. The record grain har- vest, together with continuing grain imports, will enable the Soviets to rebuild stocks and to export some grain to non-communist countries. More- over, the bumper harvests of wheat and corn will help alleviate shortages of feed grains for the expanding livestock herds and promote increased meat production this year. The output of all industrial materials, except energy products, grew at higher rates than in 1972. Depletion of the more easily exploitable oil and gas reserves accelerated last year, requiring more new capacity to maintain previous levels of Annual Growth Rate (Percent) 1971 1972 1973 Major aggregates GNP 4.2 1.7 7.9 Industrial production 6.0 5.2 5.9 Agricultural production 0.3 -7.2 15.3 Energy Coal 2.7 2.2 2.0 Oil and Gas 6.9 7.3 6.9 Electric power 8.0 -7.1 6.7 Per capita consumption: 3.5 1.5 3.7 Food 3.2 0.1 3.9 Soft goods 3.3 1.3 2.1 Durable goods 4.2 6.0 5.3 Housing 2.3 2.4 2.1 New fixed investment 7.2 7.1 4.0 Gross additions to fixed capital 6.3 3.4 7.7 Volume of unfinished construction 10.3 12.6 2.8 Page 6 WEEKLY REVIEW Feb. 8, 74 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 25X1 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 output. The increases in fuels and power, how- ever, were enough to assure continued self- sufficiency in energy. In the machinery sector, gains in the pro- duction of passenger cars, vacuum cleaners, and furniture led the field of consumer durables while generators, instruments, and agricultural machin- ery posted the greatest gains for producer dura- bles. Consumer nondurables made a substantial recovery, aided primarily by large increases in soft goods. Soviet consumers benefited from substantial increases in food supplies-especially fruits, vege- tables, and dairy products. Meat consumption re- mained at about the 1972 level, as increases in rr m production apparently were deferred in jr ,to expand livestock herds. Consumption of soft goods recovered from near stagnation in 1972, and construction of new housing in 1973 more than offset the deterioration of existing housing and the population growth. The chronic economic problems of slow assimilation of new technology and delayed com- pletion of new facilities persisted in 1973. Never- theless, programs to curtail the proliferation of new construction projects and to concentrate investment in projects nearing completion were more successful than usual. Gross additions to new fixed capital stock increased at nearly twice the rate of the previous year, while the increase in unfinished construction dropped from 13 percent to less than 3 percent. Soviet trade with the developed West in- creased by about one third in 1973 after a 25- percent increase in 1972. Moscow's trade with the West grew faster than its trade with the com- munist countries; it exceeded $9 billion, including large imports of machinery, equipment, and grain. Soviet imports from the West continued to grow much faster than exports; the hard currency deficit in 1973 was a record $1.7 billion. The USSR financed this deficit by selling gold and by drawing on Western credits. Moscow's economic goals tor 1974 indicate that the economy will continue essentially on its present tack. The major thrust of the 1974 plan is to ensure an uninterrupted supply of fuel to in- dustry while providing an additional boost to consumer-goods production. Although the scheduled industrial goal (6.8 percent) is within reach, prospects for achieving the planned 7.3 percent gain in agricultural output are dim unless the above-average weather conditions of last year are matched in 1974. The original goals of the 1971-1975 plan called for continuous upward growth, with par- ticularly high rates sch3duled in the final two years. The 1972 slump delivered a severe blow to these plans, and the recovery last year only par- tially made up the deficit. Thus, despite the con- tinued expressions of optimism in the Soviet press, Moscow cannot realistically expect to achieve many of its original goals. Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875R001000030002-2 Soviet military aircraft deliveries to Third World countries last year were nearly double those in 1971 and 1972. A record 550 aircraft, worth more than $550 million, were delivered in 1973; about 80 percent of these were jet fighters. Deliveries in- cluded the first exports of the TU-22 supersonic medium bomber, the KA-25 helicopter, and an improved version of the SU-17 (Fitter B) fighter- bomber. The Middle East received the bulk of these aircraft; Syria alone received half. Damascus ob- tained some 150 jet fighter aircraft prior to the October war, and 100 more were delivered as part of the Soviet resupply effort. In addition, Syria received the KA-25 helicopter, which can be used in antisubmarine warfare as well as for reconnais- sance and utility missions. This is the first time this helicopter has been exported outside the War- saw Pact. The Syrians were also sent MI-8 helicop- ters and improved SU-17 swing-wing fighters. The only aircraft delivered to Egypt before hostilities broke out were a few MI-8 helicopters and a squadron of the new SU-17s. A:. part of the resupply operation, Egypt received about 100 jet fighters and six MI-8 helicopters. The decline in the number of jet fighters delivered during the first nine months of last year may have been caused in part by the fact that Egypt was having d' ficulty absorbing the 145 fighters delivered in 1972. Many of these remained in storage until mid-1973. Iraq became the fist country outside the USSR to receive the TU-22; 14 were delivered in September. The TU-22 is an improvement over the subsonic T11-16 bombers that Moscow pre- viously gave Iraq. Both aircraft have similar ranges and payloads, but the TU-22 has a supersonic- dash capability that improves its chances of pene- trating air defenses. In addition, Iraq received the new SU-17 and the 65-passenger MI-6 helicopter. Elsewhere in the Middle East, Yemen (Aden) re- ceived four MIG-21s, the first in its inventory, along with some MIG-17s and MI-8 helicopters. Besides aiding New Delhi's indigenous MIG- 21 production program by shipping sub-assem- blies and parts, Moscow delivered about 50 MIG- 21s. Some of these were replacements for losses suffered in the 1971 Indo-Pakistani War. India also received a few helicopters. The fledgling Bangladesh Air Force received its first Soviet air- craft-a squadron of MIG-21s, three transports, and five MI-8 helicopters. Guinea received two helicopters and Somalia two military transports from the U:JSR. After a hiatus of some five years, Moscow resumed air- craft deliveries to Ucanda. At least five MIG-17s were delivered to Ug?.;-ida via Mombasa, Kenya, in KA-25 helicopter Approved For Release 2009/04/21: CIA-RDP85T00875R001000030002-2 '25X1 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 The economies of the six members of the Council for Mutual Economic Cooperation in Eastern Europe grew rapidly last year and ambi- tious plans have been announced for 1974. Ful- fillment depends on avoiding balance-of-payments pressures as a result of higher world prices for raw materials and on achieving the substantial gains slated for agricultural output. The 1973 targets for national income, in- dustry, and agriculture generally were met or exceeded. Romania, Bulgaria, and Poland achieved the fastest growth rates; Czechoslovakia, East Germany, and Hungary recorded moderate growth. All countries had good harvests-even Bulgaria and Romania, which fell short of pro- duction goals. East European consumers came in for their share of the growth in 1973. Most of the coun- tries have increased domestic supplies of meat and consumer goods, and all of them continued to hold the line on retail prices. Retail trade is in- creasing faster than national output, however, and imports of consumer goods are on the rise throughout the area. These gains have helped to ease the pain of longer term problems such as the shortage of housing. Waiting time for apartments still approaches eleven years in some major cities and huge investments will be need 'd to reduce the lag noticeably. The consumer fares worst in Romania, where an increased output of consumer goods has been largely siphoned off into exports. Current plans reflect the successes of last year; even h;gher growth rates are earmarked for national income and industrial production than were planned for 1973. Meanwhile, as long as the results continue to be favorable, the governments of the East European countries are not likely to rock the boat by instituting economic reforms. The plans for this year should not be seriously affected by energy shortages, since the USSR will continue to supply almost all of Eastern Europe's oil needs under trade agreements due to run through 1975. Some conservation measures have petroleum and to deal with long-standing in- efficiencies in fuel consumption. Romania's ra- tioning pi ogram also is designed to generate more hard-currency oil exports. Impurt prices of agricultural products and other materials not related to the energy field are probably of more importance to the 1974 plan. Eastern Europe is banking on a good harvest to reduce its agricultural import bill, which almost doubled last year. Czechoslovakia is planning for a 33-percent increase in the price of imported raw materials, while Hungary and Romania expect similar increases. If prices increase faster, or if hat vests do not meet planned levels, balance- of-payments strains will occur. Some adjust- ments-such as cutting im:jorts of machinery and equipment or reducing consumer imports-might be necessary been taken to hold back hard-currency imports of 5552282-74 Communist Economic Growth 1972 Page 9 WEEKLY REVIEW roland // p5 i? yip East Germi..-y 1973 Prellminbry 1974 Plan Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 MBFR: TALKS BOGGED DOWN No progress has been made in resolving the major substantive differences at the force re- duction negotiations that resumed in Vienna on January 17. The NATO and Warsaw Pact partici- pants are each questioning whether the other is hardening its position. The Soviet delegates and Soviet party boss Brezhnev have signaled Mos- cow's impatience about the lack of progress and about what the Soviets believe is a reluctance on the part of the West Europeans to reduce their foi -.es. The Soviets, however, have done little to speed the pace of the talks. They initially rejected a proposal that the unproductive plenary sessions be curtailed and negotiations be conducted in informal meetings of small groups; the Soviets then reversed themselves and agreed to such a meeting this week. Nothing the Soviets and their allies have said suggests that they have altered their goals, the principal one being to obtain reductions of West European-and particularly West German-forces. In the plenary sessions, the Pact representatives have made two general points: ? they have examined carefully the West- ern proposals presented on November 22 and found them wanting; ? the Soviet draft agreement, submitted on November j, can serve as the basis for a rational reduction scheme that will not en- donger the security of any state. In particular, the Pact spokesmen have em- phasized that: ? all parties to an eventual agreement must simultaneously reduce their forces and partici- pate in all phases of reductions; ? the Pact's superiority in ground forces is balanced by NATO's superiority in nuclear and air forces; ? hence, air forces and nuclear weapons must be reduced; ? there should be sub-ceilings on individ- ual European as well as US and Soviet forces; ? with the exception of the US, the West- ern allies no longer appear interested in re- ducing their forces. Brezhnev's unusually negative comments on MBFR in a speech during his visit to Cuba, re- flected this reserved attitude toward force reduc- tions and the less enthusiastic Soviet approach to detente in general. In informal bilateral meetings, however, the Soviet delegates in Vienna have con- tinued to suggest that the Pact might accept the NATO proposal that a first phase of reductions involve only US and Soviet forces. The Soviets insist that they must receive iron-c,ad guarantees that there will be a second phase of reductions, and that the West Europ,cans-particularly the West Germans--will cut their forces. The Soviet representatives have also indi- cated interest in the NATO "common ceiling" approach, while continuing to stress that air force manpovver must be included if a common ceiling is to be established. They have also suggested that the common ceiling should be set at 800,000 men rather than 700,000 as NATO has proposf ;. A Soviet delegate has also admitted that, accc,rding to Soviet analysis, the Pact has about 50,000 more men under arms in central Europe than NATO does. The Western allies, for their part, have used the plenary sessions to present various aspects of their proposal in greater detail, but have pre- sented nothing new. Now that the Soviets have agreed to hold informal meetings, the allies will propose that the negotiators focus their attention on a first-phase agreement that would lead to reductions in US and Soviet ground forces. To win Soviet acceptance, the allies have agreed to inform the Soviets that a first-phase agreement could contain a provision for a second phase of negotiations and that the other direct partici- pants-the West Europeans-would participate in a second phase of reductions leading to a com- mon ceiling. The Soviets are having problems with some of their allies, particularly the Romanians. The latter have made clear to Western representatives tha': they are the odd men out on the Pact side, Page 10 WEEKLY REVIEW Feb 8, 74 ;; ;n Approved For Release 2009/04/21 : CIA-RDP85TOO875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 and, eventually, total withdrawal of US forces. This stimulated the party's dormant right wing, which backed the signature campaign, to increase support for the base against the wishes of the party majority. Progressive Prime Minister Johan- nesson is now desperately trying to keep the left, center, and right factions of his party together. Journalists and some politicians have sug- gested submitting the base issue to a referendum as a way of minimizing fragmentation within the parties, but most leaders are reluctant to face the finality of a referendum. Next to fishing rights, the base is the only foreign policy issue of any consequence in Iceland, and even the parties of the center have been able to use it to advantage in the past. The current situation seems to favor the supporters of the base. Although Foreign Minister Agustsson recently reiterated his hope that ways could be found to fulfill Iceland's NATO obliga- tion without having foreign troops in the country, a member of his party's right wing stressed the necessity and desirability of having the US forces remain. The leader of the Liberal Left Organi- zation said he believed that Iceland's defense prob- lems could still be handled best by the US and NATO, with perhaps some minor reductions. The opposition Independence Party-Ice- land's largest-favors retention of the base but it has not been in the forefront of the signature campaign in order to avoid "scaring off" moder- ates from other parties. The other opposition group, the small Social Democratic Party, is be- lieved to have drafted the pro-base petition. While not calling for maintainance of the status quo at the base, the Social Democrats probably seek only minor changes in the agreement with the US. According to Article VII of the US-Icelandic base agreement, either signatory must give a one- year notice before the forces can bc. withdrawn. If the current Icelandic Government is to honor its coalition agreement to have the defense force leave during the current tenure, it will have to make a decision about the base before summer because its mandate expires in June 19751 Page 11 WEEKLY REVIEW Feb. 8, 74 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 and have suggested that they would leave the talks if they were not included in discussions of substantive problems. On the Western side, the British remain the most skeptical about the nc' ct ations and are reluctant to concede anything to the Soviets. They have advocated submitting detailed informa- tion to demonstrate that the Soviets have greatly increased their forces in central Europe since 1968. Such a course of action would probably lead the Soviets to bring up allied force improve- ments and could lead to arguments about data BASE ISSUE STIRS ICELAND The question of whether to close the NATO base at Keflavik or simply reduce the number of US personnel is the consuming foreign policy issue in Iceland today. Unlike the fishing dispute with the UK, which united all Icelanders, the base issue has not only split the coalition but has also fragmented the political parties. The initial suc- cess of a pro-base petition campaign is worrying opponents of the base, particularly the Commu- nists, and has increased pressure on other govern- ment leaders to resolve intra-party differences and proceed with the base negotiations. Talks between the US and Iceland began last November in Reykjavik. The Icelandic side was represented by Foreign Minister Agustsson of the Progressive Party-the main partner in the three- party coalition that includes the Communist People's Alliance and the Liberal Left Organiza- tion. The talks were adjourned after a few days, however, and Iceland has postponed the secc'nd round three times. The pro-base petition has collected some 30,000 names since it was started in mid-January, leading the Communists to step up the tempo of their own anti-base drive. The signature campaign also prompted Progressive leaders to finally put together a counter-proposal to the US position. It calls for sharp reductions in base personnel now Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Labor leaders have reportedly lost confi- dence in Rumor's ability to resolve differences among the :oalition parties-a trend illustrated by one top union official's characterization of the Prime Minister as a "cadaver." In their view, Rumor's government is becoming increasingly preoccupied by issues unrelated to labor's prob- lems, such as the impending national referendum on legalized divorce. The government's failure to deliver on re- forms might also force the Communist Party to stiffen its opposition. Much of Communist chief Enrico Berlinguer's prestige is riding on his pro- gram of increasing cooperation with the governing parties. Continued refusal by the coalition to im- plement reforms would make this policy less de- fensible in the eyes of the party membership. The growing pressure on the Communist leadership fr'im the rank-and-file was reflected in the resolu- tion that emerged from the party's last direc- torate meeting. Although the resolution stopped short of calling for Rumor's ouster, it was the party's harshest attack so far on the government's shortcomings. Page 12 WEEKLY REVIEW Feb 8, 74 Approved For Release 2009/04/21 : CIA-RDP85T00875RO01000030002-2 Prima Minister Rumor's credibility with or- ganized labor is boing tested by top union leaders who are demanding faster progress on a broad range of social and oconoinic reforms. Italy's three major unions called a general strike this week in Milan and have threatened a nationwide strike if they are not satisfied with the results of a meeting with Rumor on February 8. Labor's continued cooperation is essential to Rumor's efforts to solve the country's serious economic problems. Since his center-loft coalition of Christian Democrats, Socialists, Social Demo- crats, and Republicans took office last summer, Rumor has benefited from labor's moderate policy of refraining from major strike activity and excessive wage demands. The main impetus for labor's restraint has come from the powerful Communist Party, which is seeking to demon- strate, through its influence with the unions, that Italy's economic and social problems cannot be solved without Communist participation. Labor leaders were able to defend this policy to their militant rank-and-file until the energy shortage wiped out some of the government's progress against inflation and began to erode ear- lier wage gains. As compensation for these set- backs and to keep the militants in check, union chiefs have been calling for the i;nmediate imple- mentatioc) of a series of social and economic reforms that would improve worker benefits and create more jobs. Action o-i reforms, however, has been held up by long-standing differences among the coali- tion parties. They differ over the priority that should be assigned to expensive social programs at a time when the government is trying to stimulate economic recovery. As usual, the main dispute is between the Socialists, who vigorously defend labor's demands, and the Republicans who, as advocates of budgetary austerity, insist that costly reforms be put off until the economic situation improves. Approved For Release 2009/04/21: CIA-RDP85T00875R001000030002-2 PEKING, MOSCOW, AND CONFUCIUS Pr'kinq's current propaganda c.a-npalgn against Mosc.rw is focusing largely on domestic political issues in both the USSR and China. Not only have the Chinese vociferously c:onden;ned Moscow's handling of its own internal affairs, but, more significantly, they have injected an anti. Soviet line into the still boiling "anti-Confucius campaign," an on-going political moverncnt within China that is almost certainly connected to differences within the Chinese leadership. The current round of attacks began with a blast against Moscow occasioned by the publica- tion in the West of Solzhenitsyn's Gulag A rchl? pelage. After having avoided comments on dissi- dents in the USSR for a number of years, Poking accused Moscow's leaders of being "fascists" and of administering a police state. While Solzhe- nitsyn was not mentioned by name, it is clear that they had him in mind and that they were intent on adding to the problems of the Soviets on this sensitive issue. This broadside was followed closely by the expulsion of five Soviet diplomats on espionage charges, the first such action since the Cultural Revolution. Peking drew special attention to this incident by publishing a lurid account of the case and followed with a harshly worded official note protesting Moscow's retaliato,y action of "ex- pelling" a Chinese diplomat already on his way home. Rubbing salt into the wounds, Ambassador Tolstikov was then involved in an auto accident which he-and many in the diplomatic commu- nity in Peking-considered to be a deliberate prov- ocation. Running through the Chinese polemics on the "spying" incident are charges that Moscow not only is conducting espionage against China, but that it is attempting to fish in troubled Chi- nese political waters. Just five days after the ex- pulsion of the Soviet diplomats, Peoples Daily republished an article charging that Moscow was "worshiping Confucius" as a means of subverting the Chinese regime, restoring capitalism, and turn- ing China into a Soviet "colony." "Worshiping" Confucius, the article added, was the equivalent of bac.kinq such modern Chinese Confucians as Liu Shao?chi and Lin Piao, both of whom were accused of having "pro-Soviet" views after their disgrace. Significantly, the recent diatribe against Italian film-maker Antonioni's 1972 video docu- mentary on China also charged the Italian film rnakvi with spying and with doing the bidding of the Soviet Union. These developments strongly suggest that the current, well-orchestrated accusations of So- viet meddling in Chinese domestic affairs may in part be designed to discredit elements within the Chinese political hierarchy, In the past several years, and particularly since the Tenth Party Con- gress last summer, Chinese officials have ex- pressed considerable concern that Moscow might try to exploit disagreements within Peking for its own ends. Peking may now be preparing to make specific allegations along these lines. This is at least one conclusion that could be drawn from a recent remark by Vice Foreign Minister Chiao Kuan-hua that Peking has "bigger fish to fry" in connection with the spying incident. Page 13 WEEKLY REVIEW Approved For Release 2009/04/21: CIA-RDP85T00875R001000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 LAOS: NEGOTIATIONS AND DEMONSTRATIONS the last major sticking poirit in the pro. traded negotiations over procecIures for neutraliz? inu Vientiane inl Luang Prahang has been ro- solved. for iine Minister Souva nna this wt,ek capita. toted Io Lao Cortinitill ist demands that tilt, Joint Police I-oic_e, called for untler the terms of the September 19/3 protocol, .1%.111111o all the Itifir. tions and responsibilities of the present govern. numt's urban police in both capitals, Negotiators on the government side had for weeks arguod that the me.tropoiitan police roust not be disbanded, and that the joint Police Force should limit itself prifIarily to protecting members of the new coati- bon government. Assuran,es loom aoth Phetrasy, con tiiitly the senior Palhet Lao represmitativc i;i Vientiane, that resolution (of the contentions neutralization issue coo d lead to the formation of a new coali- tion as early ,is February 21- the first anniversary of the Laos peace agreement apparently per- suaded Sotivanna that the time was ripe for some significant concessions. For their part, the Lao Coniniurusls have agreed to allow the rncumbe.nt civil achriIn istratots in the two capitals to f e-main in place after the now government is fortned. Meanwhile, the Prime Minister and other senior political and military officials 'ire, appre? herisive that student protest demonstrations may Spread from the pnovinices to Vientiane, possibly embarrassing the, government in its negotiations with the Pathet Lao. they are also worried that an unruly cierrionstration requir,rig the iriterveri- tion of Security forces might It,id to a clash be- tween flovoninionI and Palhet Lau: troops Ili and around the capital. Ilie normally quiescent Lao student cornmu? pity began peaceful tlermor.stnations against fuel shortages, inflation, and governmental corruption in the southern city of Pakse on January 23.24. The demonstrations have since spread to 5avanna- khet and Kengkok in central Laos and to Khong Island on the Lao-Cambodian border, LUaders of the Vientiane based Lao Student Federation, which has organized and supported the provincial protests, have threatened denionstratuo, , in the adnunisI'll ive capital unless Souva-ina pe. ,orally attencd% to their grievances. The Prnnc Mr'nster filet with federation leaders on February 5, and reportedly won assurances frorn them that no denionstrations woul't be. staged in Vientlac?r In fill, near future. I he frame Minister's decision to take a per. sonal hand ill moving the negotiations forward may also have been influenced by reports from Soviet Ar uh.w.adoi Vcluvin, who rcc.eilliy It!- turntwd to Vientiane following visits to Sam New and ihand Vdovrn said that after toe fern tog with tarp Lao Communist leaders. Prince Sou phariou? vong and Phoumr V,)Iigvlr-llll. lie was encouraged about the prospects for rapid progress toward form,-tlon of a new coalition. Although both sides now appear reasonat,ly conditlent that a new goverrim-nt can lane formed in the near ft?ture, implementation of the ,ieutral? rzation agreements may require considerable time. Moreover, the Palhet Lao have yet to return; their chief political negotiator, Phoun Slpraseuth, to Vientiane with a list of Lao Communist ministers for the new government. There I?. also the still unresolved question of whether trip new gc:ern- ment can be invested without constitutional ap- proval by the National Assemb'y, life recent exploits of students In 1 hallanc) have apparently had a profound Impact on the fedutatlon, and current econmirc difficulties rn Laos have provided c,invenient grist for their mill. there Is no ha'd evidc n:e that the Lao Cnnunu- nests are actively seeking to exploit the Lurrerit student unrcest, but there are indications that Sou- vanna'c opponents In the National Assembly may be pr''paring tt- lunip on the protest bandwagon In an effort to einbarras, hurl). Page 15 WEEKLY REVIEW Approved For Release 2009/04/21 : CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Saigon's Joint General Stal! believes the (,c,11111111r11;tc are pre.patillq for new 111110,11y action in the c.enhal highlands. staff officers expect Common's, diver. sionary attacks in Ouang Diu.- Province, with the plain thrust coming farther north in Kontunl and Pleiku ptiivim:ns, where the Coltlrilkill ists have North Vietnanlb stiffer dertlan(Is regarding recognition of the PftG appear related to de- ci;ions made in Hanoi tats, fill, At that time., the Vintn,vnese Comnnlnist s apparently decided to stress political action and diplomacy in ptil.,11ing their aims in the South and to forgo heavy milt. tary operations for the tulle being. One facet of this policy is to try to give the Viet Cong a shot in the arm by seeking expanded diplomatic rccngni? ,ion of the PiUG. I lanai has pressrid the issue hard ill oegrltiations with the. British, the Japanese., and several Luroln'ari countries. 25X1 25X1 These moves and plans lot the highlands appear aimed at discouraging furthet government prtrhes into the Connnunisl s' western redoubts. It seems unlikely that they will try to lake any of the major population centers. SUCH as Kontulvl ,111(1 Pleiku cities. Neither side has enough '?t?cn(Ith to deal a knockout punch ill the highlands, taut both have sufficient troops and firepower to r11a1,11a111 ,1 fairly intense rate of fighting for %('V- 4,1.11 weeks. Diplomacy and the Viet Cong H,inor's ha1(1 1 aolpalgrlulg to aurae 1 broader lot 1lgfiit14,11 1111 the, Viet Cum)', Provi'.1ona1 Rev- olutionary Government has met with no visible success, a'1.' ,.ay even have aggravated North Vietnam's r- .lions with Europe and Japan. At let agreeing in September to exchange arn- hassador, with the British and later accepting the diplomat designated b) the UK. Hanoi suddenly asked London in ((emus, r to delay the arrival of it, envoy, who was all !ady en rout". Hanoi .anted that arrangement, were not final bcca;r;c London had not yet rr,.ognited the PUG. Th.i North Vietnamese ,sleeted when the British threatened to do? engrado the envoy's title fr charge and to put .retie the incident. Nevertheless. although the P. rtis e ambassador entered North Vietnam on 1anuary 23. Hanoi has riot yet ac- cepted his credentials and apparently plans to delay doinl. t?o indefinitely. CAMBODIA: MORE INCONCLUSIVE COMBAT Camhndlahn Airily units 11la(1c moderate gains fill Phnom Pe!nh's southern hunt this week as Kholor Communist ground units showed Signs of v:cakemng. Ihe ,nsUrgttrlls t,f farad little r"slstanr to a flanking maneuver around Ihe western end of the ha!ete line along the Prek Thnaot Hive,. At mid-week, army units in the renter of the defense line had bottled up the fcw insurgent olenlents on the river's north bank. Communist artillery units in Ihe south re- mained within range of the capital, however, and rained shells on the city's southwestern sector en February 2. causing r, me civilian Castralt!nt. In- surgent mortar and ^coilless-rifle crews also carved out daily sr.elllogs of Phnom Penh's south- ern suburb of Takhrnau, adding to civilian losses. Page 1b WEEKLY REVIEW Approved For Release 2009/04/21 : CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875R001000030002-2 25X1 25X1 Khmcr ('ummunio priorncn On the domestic political front, the govern- ment's cautious strategy for containing student unrest was put to another test with the disclosure that four students detained by army personnel have been killed by their captors. The four had teen arrested on charges that they were inciting panic in Phnom Penh during intense shellings of the city late last month. The government's public pledge to investigate the incident fully and the arrest of the military men involved has helped to lessen tensions. The recent enactment of tough new decrees further curtailing such constitutional rights as freedom of assembly also helped keen Page 17 WEEKLY REVIEV. Approved For Release 2009/04/21 : CIA-RDP85T00875R001000030002-2 -.:...u_... Approved For Release 2009/04/21: CIA-RDP85T00875R001000030002-2 SOUTH KOREA: SILENCING CRITICS In the months since President Pak Chong?hui threatened to imprison critics of his regi(ne, (11(1;1 opposdian politicians and dissident intellectuals have sought the safety of the sidelines. Some militant clergy and sturlelits, however, chose to to -A the government's resolve and have serf leretl the consequences, Two leaders of a tefortt) (-am. paign have been sentenced to 15 years in prison the maximum allowable punishment under the current emergency decrees-and a number of stu? dents involved in a mid-January demonstration have received terms of up to ten years. More arrests and trials are certain. The government calculates that tough meas. ures like these will intimidate the opposition and prevent a resumption of campus unrest when the universities reopen late this month. Students are now viewed by President Pak as the central ele? ment in any effort to challenge his regime, Thus, government security agents are once again fncus? inq on student leaders and professors who sympa- thize with them. There are also contingency plans dh,nrders he to institcite martial law it %I,() (!(,I Loft)" ;er ioiis. Flak is increasingly concernr?tl about the ac' livitie; of ministers invo:vrd in Christian social. action) work. These tiergynu?n are trying to broaden the protest movement to include the many working-class people in Seoul who have not yet shared in the benefits of the South Korean "economic miracle.'' Moving to crush this brand of social activism, the government has arrested (t)ore than 20 ministers. Ili(, governttien1?con- trolle_d trade union federation has 1-een assigned the task of dismantling the newly loaned Protes? tant?Catholic Labor Affairs Council, which pin- braces 19 social-action groups. In the effort to undercut his opponents, Pak is willing to use. (t)ore subtle tactics as well. Itely? ing on tested formulas, he has launched an inten- sive alit i?cornnurn,st c ampaign using theme: c .11(l). laced to appeal to the religious inslmcts of Seoul's large Christian community. Anti?cornttitim m and the Northern) threat are also being used to justify arrest; and generally to discredit the apposition. In another political lack. Pak has flequri .1 wi'll' publicized anti-corruption campaign whic 11 he in? tends to 11(ess tnrytititl the lifnitcd efforts of the past. Fie can also use the campaign to li(mn) waver' irig government officials into line. Pak's mix of tactics has not impaired the resolve of student and Christian leaders to press for major governmental reform, but they are wor? tied by what they face. Pak clearly has the tipper hand at this time, and with the extensive powers at his command. it seems likely that he ran con? lain his critics over the next few months. Norie-- thetess. in Seoul's highly charged political d mo. phere, Pak runs the risk that some heavy-handed government move might bring on the sort of incident-the shooting of a student or the refusal of a military leader to sanction firing on demon- strators-that could swiftly jeopardize his com? Page 13 WEEKLY REVIEW Feb 8, 74 Approved For Release 2009/04/21 : CIA-RDP85T00875R001000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21 : CIA-RDP85T00875RO01000030002-2 Chines oil rcfincrv roduchmn at the rate of million )anels per (ay gives added ciedibrhty to reported Chinese pro- posal-, to increase crude oil exports to Japan from the 60.000 barrels per day scheduled for 1974 to 100.000, 1'hc' most recent proposal to increase exl-arts was put forward by Deputy Premier Teng Hsiau-ping on January 1 7. The Chinese have been quick to use their available production to profit from disruptions in the world petroleum market. For example, ex- ports of petroleum products to Hong Kong have been stepped up. Moreover, at the expiration of China's current contract with J: ,,an this March. Peking reportedly will rinse the price of crude nil to Japan horn 1,3 75 a barrel to $8.00 a hat r el . In earlier (Irscussions with the Jap. ;nw,e, Peking r'Rpres'.ed interest in some fori n of cooper- alive d1?velol,nncnt of China's oflshoio i prve,. There have been a number of reports that ne_gotia- trans are under way, but Peking has probably rna(Ie no final decision. It is possible that, rather than concluding a bilateral agrcement with the Japanese, the Chinese would prefer to deal with a consortium of Japanese, US. and Nr2sr European firms. Prime Minister Tanaka himself was promot- ing such an arrangement last fall. Peking's positive attitude toward cooperative ventures has been influenced by the alacrity with which the Ian ye international oil firms have moved into the East and South China seas an(] by pos- sible future developments in the Law of the Sea that could restrict Chinese access to these oil-rich areas. Peking is apprehensive that, unless it pro- ceeds with the development of these areas, it may Page 20 WEEKLY REVIEW Feb. 8, 74 Approved For Release 2009/04/21 : CIA-RDP85T00875R001000030002-2~ Approved For Release 2009/04/21: CIA-RDP85T00875R001000030002-2 a 25X1 lush out; recent clashes with the South Viet. naniese over control of the Paracel Islands suggest the degree of China's concern. Lacking the tech- nology tc' develop (Joel) offshore areas indepentl- ently, the Chinese are being forced to consider cooperative arrangements with foreign firms with the requisite technology. Domestic and interna- tional politics complicate China's choices with regard to cooperative ventures, but political prob. lams will have to be weighed against potential economic: gains. SINGAPORE: OIL ISRAEL The terrorist attack on ill oil facit y last week brought horse to Singapore the hazards of its relations with Israel. Besides maintaining dip- lomatic ties with Israel, Singapore has for the past eight years employed Israeli advisers in developing its eased forces. Although it has come to fear that their presence might jeopardize continued deliveries of Arab oil, it decided to keep on the 15 remaining Israelis because the training ar- rangement is ner!t ng completion and because the Arabs have not wade an issue of the Israeli aid. Singapore is particularly concerned that it, Israel' ties could become a liability in the energy crisis. The bulk of the crude oil refined in Singapore conies from the Persian Gulf, anti any disruption in these extensive refinery and ship bunkering operations would be a serious eco- nornic blow. This dependency has prompted Sing- apore to try to improve its image in the Arab world. It joined its partners in the Association of Southeast Asian Nations in deploring Israeli occu- pation of Arab territory, cnd Foreign Minister Rajaratna,n is now on a good will tour of the Middle East. Singapore's forbearance in the difficult and drawn-out negotiations with the terrorists also reflects a desire to avoid antagonizing the Arabs. Terrorist in ferry wheelhouse 25X1 25X1 Page 21 'I he four include two rnernbors of the Popular f=ront for the Liberation of Palestine and two members of the Japanese find Army, which has carried out terrorist acts elsewhere in support of the Palestinian cause. A Popular Front statement said the sabotage was a consequence of the ahe,iged anti-Arab stance of both the oil companies Feb 8, 74 Approved For Release 2009/04/21 : CIA-RDP85T00875R001000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875R001000030002-2 Haykal Ousted President Sadat moved against one of the most prominent men in the Arab world when he dismissed Al-Alzrcrm editor Muhammad Hasanayn Haykal last week. Haykal's contacts with ruling circles have been sporadic since Sadat assumed the presidency three years ago, but he was a power in Egyptian politics during the Nasir era, and he had retained his prominence in Egyptian and Arab press circles. Althouch Sadat has appointed Haykal as presidential press adviser, the assignment is only a polite cover for an effort to silence the increas- ingly outspoken journalist. The proximate cause of his dismissal from Al-Abram was probably a column he wrote on February 1 attacking the US, but Haykal has been giving Sadat cause for dis- comfort for some time. Since the cease-fire last October, Haykal has consistently been pessimistic about prospect., for a peace settlement and skepti- cal about US intentions-opinions that run coun- ter to Sadat's views and actions. Haykal may not be so easily quieted, and might well refuse the advisr' post Sadat is offer- ing. His ability to cause serious trouble for Sadat is limited, however, now that he has been d-- prived of his public voice by his dismissal from the newspaper. Any potential discontent in press circles should be eased by the appointment of Ali Amin to succeed Haykal as managing editor of Al- Ahram. Amin is a respected journalist whose re- turn two weeks ago from nine years of self- imposed exile evoked widespread acclaim in the Cairo press. His appointment may also mollify those among Al-Ahram's intellectual establish- ment who will be opposed to the paper's new board chairman, a position Haykal also had held. Deputy Prime Minister Hatim, an unpopular fig- ure because of his invo:vement in a press purge a year ago, now has the post. Cabinet Reorganization Possibly Postponed President Sadat may have decided to post- pone his planned cabinet reorganization. Promi- nent Cairo commentator Ihsan Abd al-Quddus noted in his weekly column on February 2 that extensive publicity on the cabinet consultation last month had given the mistaken impression that Egypt was in a "state of relaxation" mat would permit full concentration on reconstruc- tion to the detriment of continued efforts to regain Arab territory. The cabinet shuffle was expected to bring Economy Minister Hijazi to the prime minister- ship, which Sadat himself has held for the last year. Hijazi has been heavily involved in a revived program of economic liberalization that Sadat has been attempting to implement for some months, and Sadat's projected cabinet had been widely billed as a government of reconstruction. Quddus emphasized that his predictions of a postponement were his own opinion and, despite the fact that he often reflects Sadat's thinking, he does not always have the inside track with the President. He is correct in his assessment, how- ever, that Sadat does not want to give the impres- sion that Egypt regards the struggle with Israel as over and is ready to let down its military guard and concentrate solely on domestic moves. This is particularly important to Sadat at this time when he is suspected by many Arab states of having abandoned the Arab cause in order to seek a unilateral settlement with Israel. His attempts to convince the Arabs, particularly Syria, that this is not the case would lose some of their force if he proceeded with the establishment of a new cabinet that appeared to be geared only to Egypt's "postwar reconstruction." Sadat may thus feel it advisable to suspend the cabinet shuffle until after a Syrian-Israeli dis- engagement agreement has been reached. In the meantime, with or without a formal reorganiza- tion, he will probably continue, perhaps less os- tentatiously, with his plans for reconstruction and 25X1; Page 23 WEEKLY REVIEW Feb 8, 74 Yv, Approved For Release 2009/04/21 : CIA-RDP85T00875R001000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Brezhnev was less than enthusiastic about his trip to Cuba to begin with, but after a week of back-slapping and speech-making an obviously fatigued Gerrer, l Secretary could take solace that at least he made some headway with Castro. There were no dramatic breakthroughs, no major new agreements, and no evidence that Cuba would be any less of a drain on the Kremlin's treasury. Still, the visit did serve to tie Cuba more firmly to the Soviet orbit, and Brezhnev probably is now more confident than before that Castro can be brought to accept, however grudgingly, the Soviet view of the benefits of detente. Brezhnev's round of activity on the island resembled his triumphal tours of loyal East Euro- pean countries. That tone was evident in the final declaration, in which the two leaders expressed "complete identity of views with regard to the present world situation." The Soviet leader laid a wreath at the tomb of a revolutionary patriot, spoke at a mass rally, got an award and opened a vocational school in Havana. The declaration contained copious refer- ences to increasing the effectiveness of bilateral cooperation, wider contacts between Soviet and Cuban personnel, and the integration of the Cuban economy into CEMA. The Soviets clearl;j intend to keep close supervision over the Cuban economy. There was no mention of future mili- tary assistance, but Brezhnev probably agreed to co n s i d o r Cuban requests for more modern weapons. Cuban Armed Forces Minister Raul Castro fi/ to Moscow the day after Brezhnev arrived horse. There had been rumors that the Soviets would press Castro to improve relations with the US, and a Soviet news item released after Brezh- nev's departure hinted at this. Although Castro praised detente and Brezhnev's personal efforts toward this goal, neither leader publicly referred to US-Cuban relations. Castro seems to have been satisfied that Cuba's interests will not be com- promised in Moscow's bilateral dealings with the US. This is evident in the declaration's support for ending both the "blockade" of Cuba and the US presence at the Guantanamo naval base. Neither side criticized China by name, but Castro's implicit criticism of Peking and his en- dorsement of Moscow's Asian collective security proposal brought his regime closer to the Soviet viewpoint than ever before. While the declaration endorsed international communist unity, there was no mention of a world communist conference and no confirmation that a rumored meeting of Latin American communist leaders took place in Cuba during the visit. Moscow's restraining influence on Havana is most clearly reflected in the declaration's rejec- tion of the use of force in international relations and in its call for respect for sovereignty and territorial integrity in the Western Hemisphere. At the same time, this language falls short of the explicit rejection of communist export of revolu- tion, which Brezhnev included in his Havana speech. The declaration also includes a con- demnation of "imperialist" efforts to interfere in Latin American internal affairs, a statement to which both sides could warmly subscribe. Page 24 WEEKLY REVIEW Approved For Release 2009/04/21 : CIA-RDP85T00875RO01000030002-2 W+ ~ ` = al e Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 COSTA RICA'S NEW BROOM Daniel Oduber of the governing National Liberation Party emerged victorious in the elec- tion on February 3 and will be inaugurated on May 8 as Costa Rica's president for the next four years. His program is not expected to differ signif- icantly from that of the incumbent, Jose Fi- gueres. Oduber will, however, be concerned with streamlining, the bureaucracy to make it a more efficient instrument in promoting his party's social and economic programs. A possible hindrance to his objectives will be the lack of a majority in the legislature. Although the congressional votes will not be tallied for perhaps another week, most estimates give his party only 25 to 27 of the 57 seats-the first time in over two decades that it will not have con- trolled the legislature, even when it has lost the presidency. Oduber will, therefore, have to solicit support from other parties to get his program through congress. In developing his campaign platform, Odu- ber relied heavily on teams of specialists, and he will very likely staff his administration with many of these technocrats. Furthermore, his first vice president, Carlos Castillo, is a respected econo- mist and is expected to act as Oduber's executive officer. The years of 1 to 2 percent inflation are gone, but one objective of the new government will be to keep inflation well below the 15 to 20 percent experienced in 1973. Oduber's monetary and fiscal policies will therefore be more con- servative than those of Figueres, and he is ex- pected to support new tax measures. In dealing with rural poverty, he plans to continue many of the present administration's programs, especially the agricultural extension service. He will also concentrate on extension of credit, formation of cooperatives, and the creation of programs to deal with unemployment and under-employment. The task of making an efficient team out of Figueres' sprawling bureaucracy is one particu- larly suited to Oduber's talents. He is a good administrator and firm disciplinarian. As foreign minister from 1962 to 1964, he managed to pro- fessionalize Costa Rica's foreign service and tailor it to the needs of the nation. He has been de- scribed by US officials as a man of action and intellect. In addition to his personal qualifica- tions, he has a well-organized party-in which he swings considerable weight-firmly behind him. Costa Rica has been edging toward a foreign policy more independent of the US, and Oduber will probably not try to reverse this trend. Never- theless, he is friendly toward Washington, and the outlook for continued good relations is favorable. Because of the extensive influence exercised by some large US investors in the past, however, his government will very likely set some new round rules for future foreign investment. ,g Page 25 WEEKLY REVIEW Feb. 8, 74 For Release 2009/04/21: CIA-RDP85T00875R001000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 The junta is firming up its grasp on the levers of power. Civilian influence on the military gov- ernment, which has been limited, may be tuither restricted as a result. A major restructuring of the government bureaucracy is under way. Although lines of authority are not yet clearly defined, the "Advisory Committee" run by army colonel Julio Canessa is emerging as a key organization. The committee ostensibly functions as a governmental general staff for all the junta members, but Ca- nessa appears to be personally close to junta Presi- dent Pinochet. The committee has been at odds with the junta's cadre of civilian economic advisers over the effects of the economic recovery program, certain aspects of which it suspects are geared to benefit the civilians' personal interests. There are also indications that the committee is already crossing the line between neutral staff functions and the policy-makers' realm. It is recommending that the government ease the wage price squeeze on lower income groups and pay more than lip service to its goal of winning over urban workers and rural campesinos. Pinochet may be disenchanted with the recovery program and with the ivory tower thinking of the young tech- nocrats who designed it. The military's inclination to seek counsel within its own ranks may eventu- ally give Canessa's group the upper hand. The junta's determination to reconstruct Chile the military's way seems stronger than ever. Firm belief that the cause is "just" has begotten a military self-righteousness that leaves no room for political dissent and only a limited opening for civilian advice. Pinochet and the army apparently intend to retain their positions of dominance in the govern- ment. Prospects for a rotating junta presidency consequently have diminished. The navy, air force, and national police are unlikely to chal- lenge the army's claim to "first among equals" status. An intention to rotate the junta presidency was implicit in statements made by the junta members just after the coup. A one-year incum- bency reportedly had been agreed upon. Late last year, however, Pinochet apparently had to fend off a bid by Admiral Merino, the navy com- mander and a member of the junta, to advance the first rotation date to January 1. There are now indications that Pinochet meant a statement on the non-rotation of the presidency to be taken literally, and it is doubtful that he will step down on the first anniversary of the coup on September The army considers itself the armed fort'3s' premier service and reportedly considers perma- nent army control of the junta presidency to be both natural and proper. The other services may seek to increase their influence in the govern- ment, but they are unlikely to force a showdown over the junta presidency. Pinochet's tenure may thus be indefinite, at least as long as he continues 25X1 to enjoy the army's confidence arid avoids a seri- ous falling-out among the services. Page 26 WEEKLY REVIEW Approved For Release 2009/04/21 : CIA-RDP85T00875RO01000030002-2 25X1 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 PERU-CHILE: ANXIETIES CONTINUE Lima's of forts to acquire new arms, in- cluding Soviet surface-to-air missiles, are causing in,:reasing concern among Chile's military leaders. Santiago's anxieties most probably are com- pounded by what it sees as Cuban warnings to Peru to prepare for an attack by Chile. While Peru currently is looking at arms from a variety of countries, no firm commitments on deliveries appear to have been made since the arrival of Soviet tanks last November and of other undetermined military equipment in January. Peruvian generals remain wary of an influx of Soviet technicians, and this reportedly was the reason Lima recently rejected Moscow's offer of Osa patrol boats and Styx missiles. A number of Soviet military experts apparently are now in Lii,ia, however, and the US defense attache in Santiago reports that Chilean officers are con- cerned that the group may include missile as well as tank experts. Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Controls on capital movements have been relaxed in a number of European countries since mid-January in an effort to bring in more capital and help offset the higher cost of oil imports. In addition, Chile probably is worried that Peruvian President Velasco will listen to Fidel Castro, A Peruvian military delegation that visited Cuba early in January was shown a w'-fe variety of Soviet weap- ons. Castro is interested in having the Peruvian ? Bonn lowered the cost of foreign bor- rowing while doubling the amount that may be borrowed; ? Brussels suspended its prohibition against interest payments on bank accounts held by non-residents; ? Bern lifted its ban on foreign purchases of domestic securities; regime accept military advisers from Cuba and in maintaining access to that country's radical mili- tary leaders. Chile reacted cynically to Velasco's informal proposal last month that neighboring countries join Peru in an arms moratorium. Chilean military leaders reportedly are formulating contingency plans based on an assumption that Peru may attempt to regain territory lost to Chile in the War of the Pacific (1879.83). Chile fears that Peru might move against it as early as this year, while it still enjoys superiority in terms of equipment, but there is no evidence that Peru has committed itself to such a step. Chilean leaders also are considering non- military plans to meet the possibility of an attack by Peru. One scheme envisages creating a free port or ''international'' area in northern Chile that would incorporate large-scale foreign invest- ment, presumably to deter Peru from initiating action that might involve it in a conflict '',i'h other Latin Americas countries. The realization of such plans, however, is far down the road at best, and short-run prospects are for continued efforts by both countries to modernize and ? Paris relaxed restrictions on foreign bor- rowing and lowered the cost to French banks of accepting deposits from non-residents. These moves reverse the trend toward greater regulation of capital flows that was evident during the financial crises last year. The relaxation of controls on capital in- flows-coupled with the removal of US restric- tions on dollar outflows-was reflected in a weak- ening of the dollar on major exchange markets last week. The French franc has now returned to near its level prior to January 19 when Paris let the franc rloat, while other major European Page 27 WEEKLY REVIEW Approved For Release 2009/04/21: CIA-RDP85T00875R001000030002-2 r ti rencin; nil III" Italian lira liava stained Ilia Invnl% Ihpy Hold bnfrlrp flip ann(Unpment of oil price hike; by the O1'CC (1-ntlur ni ;, Over flip lunges tern). Ihn relaxation of con- trols will inr.rnasa capital mobility bnlwnnn domestic and flip Curocu-rency markets. this should (acibtaln a flow from flip Arab oil- ptoducinq coull It in". which have been accumu. lating restrvt+s since flit. oil price hikes, to oil. consuming countrit's that nxpprinncr, debcifs. Ihp bulk of flit, payinents deficits insulting from higher oil prices will probably In! financed in Ibis rnannnt as w ill as by gnvnrnrnant borrowing in flip 1. if., fffill,.r rllarkol. In a relalnd dnvnloprnnrlt, flip Intarnational Monetary I ruxl has rncrvptl to facilitate short.inrnl financing of oil-related balancn-of-paynnrlt; defi. it, In latp January, flip fund approved Ilia Itank for Intprnatirnlal Spltlnnlnnl; in (t, spl, Swi1>er, land, as a holder of special cirawing tight;. flip Swiss hank, oftc'n (inscribed as Ihp central hank for other central banks, will now be able to ar. cept special drawing rinhh as collalpfal in d% 111,111; Page 28 WEEKLY REVIEW Approved For Release 2009/04/21: CIA-RDP85T00875R001000030002-2 Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2 Next 7 Page(s) In Document Denied le Approved For Release 2009/04/21: CIA-RDP85T00875RO01000030002-2