WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001000030002-2
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 32
• Document Creation Date: December 21, 2016
• Document Release Date: April 21, 2009
• Sequence Number: 2
• Publication Date: February 8, 1974
• Content Type: REPORT

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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!
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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
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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
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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
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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
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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.
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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
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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
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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.
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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
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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
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roland //
p5 i?
yip
East Germi..-y
1973
Prellminbry
1974
Plan
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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,
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Feb 8, 74
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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
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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
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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.
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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.
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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.
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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).
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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.
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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.
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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
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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?
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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
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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
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'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
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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
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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.
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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
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Feb. 8, 74
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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.
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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.
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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
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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;
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