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February 21, 1975
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Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 Top Secret Weekly Review Top Secret February 21, 1975 Copy No 650 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 The WEEKLY REVIEW, issued every Friday morning by the Office of Current Intelligence, reports and analyzes significant developments of the week through noon on Thursday. It frequently Includes material coordinated with or prepared by the Office of Economic Research, the Office of Strategic Research, and the Directorate of Science and Technology. Topics requiring more comprehensive treatment and therefore pul.,iished separately as Special Reports are listed in the contents. CONTENTS (February 21, 1975) MIDDLE EAST AFRICA WESTERN HEMISPHERE EAST ASIA PACIFIC 1 Cyprus: Back to the UN; Moscow Reacts 2 Middle East: More Posturing 5 Denmark: Jorgensen Tries Again 13 Central America: Seeking Cooperation 14 Argentina: Anti-guerrilla Campaign 14 Peru: Shifting Gears 16 China's Foreign Trade in 1974 17 Japan: Anti-recession Program 18 Cambodia: Hard Decisions 19 Vietnam: New Attacks Expected 20 Burmese Insurgents Stalled Comments and queries on the contents of this publication are welcome. They may be directed to the editor of the Weekly Revlow,~ Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 otiul Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 r Cyprus The Cyprus problem moved back ?o the UN this week in response to a Greek Cypriot request that the Security Council meet to discuss the latest crisis brought about by the proclamation last week of a sepal ate Turkish Cypriot state in the north of the island. The Security Council held the first meeting on February 20 and will prob- ably consider the report of Secretary General Kurt Waldheim, who had earlier consulted with Greek and Turkish officials in Athens and Ankara. Greek and Greek Cypriot representatives at the UN are expected to press for a strong con- demnation of the Turkish Cypriot action and for the implementation of previous UN resolutions. They may also seek a more direct UN involve- ment in efforts to find a solution to the Cyprus problem, such as the dispatch of a UN Fact-find- ing mission to the island or a call for the creation of some type of broad conference including some or all members of the Security Council. Greek Defense Minister Averoff recently stated that despite the opposition of most Western countries to such an "internationalization" of the Cyprus issue, Athens novv feels that in light of the latest Turkish move, an international conference: would be the least humiliating alternative for Greece. Neither Greece nor the Greek Cypriots are particularly optimist;.: about the outcome of the council's meetings, but they see no other recourse in view of the Turkish Cypribt declaration and the lack of progress in the intercommunal talks. They apparently hope at least to gain a propa- ganda victory and to keep the issue in the inter- nation%,I limelight The council will likely reaffirm its earlier resolutions and may rebuke the Turkish Cypriots; it may also call for the continuation of the inter- communal talks. There have been suggestions that the talks theriselves be moved to New York, where they could more directly be carried out under UN aegis. President Makarios has 1?idicated, however, that the talks will not be resumed unless the Turkish Cypriot declaration is revoked, but he may eventually recant in view of the unlikeliness of this prospect. On Cyprus, meanwhile, efforts have already begun in the Turkish Cypriot sector to set up the constituent assembly that will serve as the legisla- tive body of the separate state. The international community has reacted coolly to the declaration of autonomy, and Mos- cow clearly does not like the -love by the Turkish Cypriots. Since the Cyprus crisis began last sum- mer, however, the USSR has not been inclined to allow support for a unified Cyprus to jeopardize its relations with Turkey, and now the cut-otf of US military aid to Turkey has brightened the prospect of getting Ankara to loosen its Western ties. The most authoritative Soviet omment ap- peared in the form of a Tass statement four days after the Turkish Cypriot announcement. The statement blamed "certain NATO circles" and the Turkish Cypriot leadership ' - trying to frustrate efforts to reach a settlement. Unlike statements issued last summer, the latest statement was not officially ascribed to the governui;ent and did not get front-page billing in Pravda. It predictably omitted any direct criticism of tie Turks. Soviet diplomatic maneuvering, meanwhile, appearc to be aimed at playing upon hopes in Athens and Nicosia that the USSR can somehow pull their chestnuts out of the fire. Moscow would like a direct role in the settlement process, but the gestures of support it night make are not likely to satisfy Makarios-and he Irn appreciates that fact. Page 1 WEEKLY REVIEW Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 ~tix1 classified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 Midd!e East: More Pasturing In the wake of Secretary Kissinger's explora- tory visit, both Arabs and Israelis have been act- ing out roles that have become familiar in the public scenario of interim peace negotiations. The Egyptians have projected optimism and self- confidence, with President Sadat reiterating his commitment to the step-by-step approach and Foreign Minister Fahmi declaring that there might be disengagement by Ju,ie on both the Sinai and Golan fronts. The Israelis have been more re- served, talking in terms of seeking only a limited second-stage agreement with Cairo if the Egyp- tians fail to provide Tel Aviv with an assurance of non-belligerency. The Syrians are saying they were "disappointed," while the Palestinians are weighing in with denunciations of "divisive" US strategy. Behind the posturing, there have been few public indications that the gap between the Israeli and Egyptian positions is nas rowing, and tl-a Egyptian press has sounded some apocalyptic notes to point up h. crucial the Secretary's next visit to the area will be for "defusing the explo- sive situation." Egyptian-Israeli Strategy Several Cairo papers this week called on the US to apply more pressure on Israel, and in a lengthy address to a committee of Egypt's People's Assembly, Foreign Minister Fahmi acknowledged that Cairo would inevitably have to resort to war if current negotiating effos-ts dead- lock. Fahmi reiterated that any agreement reach -d with Israel at this stage must be purkiiy military-a geographic extension of the troop dis- engagement that has already taken place. Fahmi's address, however, was largely a paean to Sadat's foreign policy and was probably aimed primarily at justifying Sadat's negotiating tactics to both domestic and other Arab critics. Sadat himself took a moderate line in a:. interview early this week with the Washington Post. His response to questions on Israeli demands for a guarantee of non-belligerency was to prom- ise that Egypt would not attack Israel so long as negotiations continue. He suggested, in effect, chat the US could serve as guarantor o-i Egypt's peaceful intentions. Sadat again appeared to be signaling the Israelis that they will have to con- tent themselves with some indirect foi m of politi- cal reassurance if a breakthrough is to be achieved. The Israelis continue to emphasize the politi- cal content of the next disengagement package as the crucial issue. Shortly after the Secretary's departure from Israel, Prime Minister Rabin gave a television interview in which he summed up the government's approach to negotiations with Egypt, and again defended the step-by-step ap- proach to negotiations. A resumption of the Geneva conference without prior preparation, he repeated, would lead to a deadlock. Rabin outlined two basic proposals for an agreement. The broader one involves an Israeli pullback of 30 to 50 kilometers in the Sinai and includes the demilitarization of the Gidi and Mitla passes and the return of the Abu Rudays oil fields to Egypt. Under the other, narrower option, Israel would not give up either the passes or the oil fields. In either case, Israel would demand Egyptian political concessions, including-as part of the brosJer option-Cairo's public and binding commitment to end the str,te of belligerency with Israel. Israel woulL.: not, insist on a formal declaration of non-belligerency, but would be satisfied if Cairo stated its intentions to "refrain trom war rare." Meanwhile, in a speech on February 18, Israeli Chief of Staff Gur implied that a political settlement with E_ypt is more important to Israel than the retention of the Gidi and Mitla passes. He said that abandonment of the passes would be risky, but that Israel has the strength to fight either offensive or defensive battles and need not base everthing on one concept. Gur's statement seems designed to refute charges by a growing number of Israeli conservative- that any with- drawal from the two passes without a peace agree- ment with Egypt would imperil Israel's security. 25X1 LOA-1 Page 2 Feb 21, 75 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 lassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 I I Gur, who is Israel's senior military officer, prob- abiy also intrnded to reassure the Israeli public, which has I en made somewhat uneasy by the conservative critics. He is no doubt well aware of the political ramifications of his statements, and presumably received prior clearance from the gov- ernment for his remarks. Syrian Pessimism and Palestinian Complaints Overt Syrian reactions to the Secretary's trip have been critical. An article in one Beirut daily reported considerable Syrian unhappiness over the prospect that a Sinai disengagement would not be accompanied by a simultaneous disengage- ment on the Golan Heights. The article, written by a journalist with access to well-placed sources in the Syrian hierarchy, claimed that Syria may be on the verge of a major policy reversal if Egyptian President Sadat continues to negotiate alone and ignores earlier pledges to keep in step with Syria. This means, according to the journal- ist, that both the Syrian government and the PLO moderates would increase their overtures to Iraq and the "Rejection Front" in a common effort to head off a "partial solution" of the Middle East conflict. The author also predicted that if any further disengagement occurs in Sinai, Syria would refuse to attend the next stage of the Geneva Conference. The Qatari leader stressed to a US official that the next move toward a settlement must include some withdrawal in Syria and on the West Bank, even if this is only a vague and cosmetic agree- ment in principle to to implemented at a later time. Palestine Liberation Organization officials and information media are also urging the other Arabs to resist what they see as the US strategy of dividing Egypt from Syria and enticing both to accept a partial Israeli withdrawal that would leave nothing for the Palestinians. As an alter- native, high PLO officials are calling for a re- sumption of the Geneva talks with a Palestinian delegation in attendence and a clear statement that the Palestinian problem wily be discussed. The Secretary's trap evoked ti:rt comment directly from Soviet party chief Brezhnev, who criticized "partial measures" by 'certain persons" hoping to lull and divide the Are hs. Soviet propa- ganda broadcasts played up the line that the US step-by-step approach is being implemented in the interests of Israel. Sinai disengagement agreement, but that has not kept them from trying to get the next round of negotiations into a Geneva forum where the can Behind the Soviet criticism is Moscow's ritual complaint that it is being cut out of the Middle East negotiating game and that, as a con- sequc.ice, its "natural interests" in the region are not being given sufficient weight. This was the approach taken last week by Foreign Minister Gromyko with the British ambassador in Moscow and by a Soviet Middle East specialist with Amba.;sador Stoessel. The Soviets recognize that they are not in a position to head off another Play a more direct r Page 3 Feb 21, 75 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09 : CIA-RDP85T00875R001000080009-0 THE EC PONDERS ENERGY PRICES The EC Energy Council meeting last week was as unproductive as its predecessors in setting specific common policies. The community may be forced to take a common stand on the US proposal for a minimum price for energy, how- ever, if it wishes to participate in the preparations for a consumer-producer conference. The energy ministers were meeting to put some flesh on the bones of a community plan- adopted last December-for reducing EC depen- dence on imported oil by 1985. They approved a directive that prohibits the construction of oil- fired electric generating plants and the conversion of existing power stations to oil without prior approval of the member states. Action on other major issues-energy conservation, minimum stock requirements, and a common trade policy for hydrocarbons-was put off until the next reg- ular meeting of the Energy Council, possibly in April. Discussion of the US proposal to set a floor price for energy in order to encourage invest- ments in alternate energy sources highlighted the problem of the community's relations with the International Energy Agency-where France is not represented. Several EC officials have said recently that this issue must be resolved if the EC is to have any influence on the agency's work. Should the Nine fail to agree on an approach to promoting alternative energy sources, it will con- firm the fears of EC officials that community energy policy can only follow the US lead in the international agency. France is prepared to discuss the concept of a floor price, but it will probably insist on a common EC position as a prerequisite to discus- sions in a broader forum. Paris wants internal community agreement in order to encourage EC decisions on related matters, such as policies gov- erning energy investments and pricing. The French, along with the EC Commission, have Page 4 WEEKLY REVIEW Feb 21, 75 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 1 advocated this for some time. Although France's EC partners are not prepared for these tough decisions, they are equally reluctant to leave any floor-price agreement to the broader international agency because France would then remain un- committed and thus able to take advantage of possible lower oil prices. The EC commissioner for en-argy, Henri Simonet-who will be in Washington next week to discuss the energy price floor idea-is spear- heading an effort to reach agreement among the Nine before the next meeting of the governing board of the international agency in early March. Simonet maintains that there are few differences between his own ideas and the US proposal. If he succeeds in uniting the Nine, however, those EC members that favor a relatively low floor price- because of their heavy dependence on imported oil-are likely to insist that they have their way in the international agency as well as in the Danish foreign policy will take a back seat as the new minority Social Democrat government, sworn in on February 13, prepares to tackle the county's economic problems. Denmark is experi- encing an annual inflation rate of 16 percent and unemployment is at the highest point in 20 years. Ariker Jorgensen, the new prime minister, presented his government's program to parliament on February 20. Jorgensen said reducing unem- ployment was his chief goal and called on Den- mark's ten political parties to cooperate in solving the country's economic problems. Controlling only 53 of the 179 seats in parliament, Jorgensen will have to compromise on many of his proposals in order to win support from the moderate op- position parties. In foreign policy, there will be changes in tone rather than substance. Nordic affairs and increased sympathy for Israel will receive more prominent attention. The new government will he more critical of US policies toward Southeast Asia and Chile than the Hartling government. Denmark's commitment to the EC will remain unaltered, unless the UK referendum in Jur.e leads to a British pullout. In that event, many Danes in all parties are in favor of holding their own referendum. The naming of Orla Moller as minister of defense augurs well for a continued strong NATO commitment. Moller is a strong supporter of close ties with the US and NATO, and he also favors purchase of the F-16 as a replacement for the F-104 fighter aircraft. The future of the new government is not bright. Jorgensen faces an impossible task in try- ing to push an effective economic plan through a parliament that is stacked against him. Neverthe- less, the growing impatience of most Danes with the recurring government crises as well as public pressure to get on with the country's business may enable the government to last out the year. 4V 25X1 Jorgensen opens recent party meeting. Page 5 WEEKLY REVIEW 25X1 Feb 21, 75 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09 : CIA-RDP85T00875R001000080009-0 25X6 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 sified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 USSR-UK: REMOVING THE CHILL Prime Minister Wi:son's visit to Moscow on February 13-17 was notable primarily for the return of General Secretary Brezhnev to the lime- light, but it alsc did much to remove the chill that had characterized British-Soviet relations since the British expeller] 105 Soviet officials on espionage charges in 1971. The final statement signed by the two sides spoke of "opening a new phase" in relations, and Wilson said the r"scu5- sions had brought about a "new era." - r~zhnev accepted a British invitation for a returi, visit, but no time was specified. At the end of the meetings, Wilson and the Soviet leaders signed several agreements, some of which had been prepared before the visit: ? A joint statement calling for the sys- tematic expansion of relations; it also includes declarations or various international issues, such as Cyprus, the Middle East, and the European security conference. ? A protocol on c:::isultations similar to those the USSR has with France and Italy. m A decf'ration on cuck:ar non.-prolifera- tion that expresses support for the concept but does not commit the two nations to any new action. ? Long-term agreements on the develop- ment of trade and industrial cooperation, and increased cooperation in science, technology, and medicine. British exports to the Soviet Union fell sharply after the 1971 incident and the trade agreements, which resemLle recent Soviet-French Wilson (with pipe) meets Soviet leaders. accords, give the British a chance to get back in the running. In his first official appearance in seven weeks, Brezhnev went out of his way io demon- strate before Soviet media and his foreign guests that he is fit and in good spirits. He reportedly did almost all the talking for the Soviet side, had a firm grasp of the details of the matters under discussion, and showed no sign, of fatigue during s,?veral lengthy sessions. 25X1 Despite Brezhnev's vigorous performance, questions about his physical and political health apparently remain. At least one high Soviet gov- ernment official, correctly anticipating that Brezhnev would see Wilson, reportedly told West- erners in Moscow that Brezhnev, nevertheless, has a serious illness that will prevent him from ever Page 7 Feb 21, 75 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 25X1 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 Q 0 Next le Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 1 Page(s) In Document Denied Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 I ETHIOPIA: FIGHTING FLARES AGAIN The independence-seeking Eritrean rebels showed their muscle again this week with a new wave of attacks on government military installa- tions in Asmara, the provincial capital. The ruling military council in Addis Ababa appears deter- mined, however, to keep Eritrea a part of Ethi- opia, wnatever the cost in men and other re- sources. As the fighting continues with little prospect for an early negotiated settlement, the rebels are getting increasing support from the Arab world. Rebel attacks in Asmara on February 18-the first major assault on the city in eight days-resulted in the heaviest exchange of gunfire since major fighting hegan in Eritrea late last month. Much of the action took place near the US consulate and the US Kagnew communica- tions complex. The Kagnew power plant was damaged, mostly by fire from defending govern- ment paratroopers. During the week, government forces and rebels clashed again northwest of Asmara and the Ethiopian air torte attacked suspected rebel con- centrations a!ong the road from Asmara to the Red Sea port of Massawa. On February 16, eight tanker Trucks carrying badly needed fuel got through to Asmara; the previous day, insurgents had .mbushed three tankers, destroying one and forcing the others to turn back. The go%. rnment continues to face serious supply difficulties, how- ever, and is currently relying heavily cn a costly airlift. Despite the many problems the, face in combating the insurgency, Ethiopia's military ruler! reportedly remain confident that govern- ment forces can win. Last week, a high Ethiopian official told the US embassy that the government would fight to preserve the country's unity "te the last oan and the last drop of blood." In an effort to mobilize d,mestic support and also to impress delegates attending a meeting of the Organization of African Unity in Addis Ababa, Page 10 WEEKLY REVIEW the council organized mass demonstrations against the insurgency. Criticism of Arab support for the rebels was a majo, theme of the demon- strators and has also become prominent in the official press. Sudanese President Numayri's peace initia- tive remains stalled. Osman Saleh Sabbe, the leader of the Popular Liberation Forces, the snia!ler but more effective of the rebel move- ment's two factions, reiterated this week his group's insistence that the government recognize Eritrea's right to independence before any talks begin. He ;ejected Numayri's call for an imme- diate cease-fire, apparently because he believes the rebels have the upper hand militarily. Are b countries are continuing to provide military and other support for the Eritrean rebels. At this time, most Arab governments are not solidly behind the rebels' demand for complete independence, but the continued fighting i, push- ing them in that direction. Sudan, especially, would like to avoid having to make a choice between all-out support for the rebels and main- taining aoou relations with the ruling council in Addis Ababa. Saudi Arabia, which gives some aid to the Popular Forces, still favors federation as a soluti^ to Lhe Eritrean problem. Even radical Iraq has not yet taken a strong public stand in favor of Eritrean independence, probably because it is aware of the parallels that could be drawn to its own Kurdish problem. Egypt's response to the latest outbreak of fighting has also been muted. Expressions of Arab support for the Eritre- ans are becoming more vehement, however. Syria last week issued a strong statement backing Eri- trean independence and condemning Ethiopian atrocities. On February 18, Kuwait announced its total military support for the rebels. The Arab information ministers meeting in Cairo this week called for Eritrean independence and character- ized the Ethio tan arm 's actions as a "war of annihilation." Feb 21, 75 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 classified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 I I Red) N Sea KUW I(\ % P.ralnn Gull (IV AIN 1-OAT 011111 [MIN ;ouTI AMU M slQUE.1 fodmuG(Muo YHODE IA Chtlrnl?i M IU.K.I 59 AI 7->? USSR INDIAN OCEAN NAVAL ACTIVITY Following a devastating storm that hit the island of Mauritius in early February, US, French, and Soviet ships visited the tiny republic and sent crews ashore to assist in disaster relief. The US carrier Enterprise and the French carrier Clemen- ceau were both in the area and able to render early assistance. As the Enterprise left Mauritius on February 15 on its way out of the Indian Ocean, the Soviet cruiser Dimitri Pozharskiy ar- rived. A high French offi,:ial announced that the Clemenceau was going io the island of Madagascar following reports of serious political strife there. There was apparently no danger to French citi- zens or economic interests in the Malagasy Republic, however, and the Clemenceau was re- ported in Port Louis, Mauritius, as of February 15. The French continue to keep the largest num- ber of naval ships in the Indian Ocean. The regu- lar group of about 16 ships has been augmented since last spring, most recently by the Clemen- CHINA P: .v! ('6inu ceau's five-ship task force. When this group leaves next month, it will be replaced by another, headed by the guided-missile frigate Suffren. The present Soviet contingent of six surface warships and one submarine, plus some aux- iliaries, does not differ significantly from the force Moscow has maintained in the Indian Ocean for over a year. One of the principal Soviet objec- tives apparently is to maintain a fairly regular patrol of the entrance to the Persian Gulf. Mos- cow may be motivated by a desire to balance the three US naval ships at Bahrain. Page 11 WEEKLY REVIEW Feb 21, 75 MALAYSIA INGAPOlJ Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 25X1 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 eclassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 1 CENTRAL AMERICA: SEEKING COOPERATION For the second time this year, the Cent. al Arrerican chiefs of state have met-this time in Nicaragua-and have declared their personal deter- mination to overcome long-standing obstacles to solidarity. In fulfilling their pledge to meet at least once a month, the leaders again focused on three main objectives: normalization of relations between El Salvador and Honduras; revitalization of the Common Market; and regional socio-eco- nomic integration. Interest in regional unity has waxed and waned since the first effort toward political union failed nearly a century and a half ago. The present drive for solidarity comes at a time when each of the republics has been hurt in varying degrees by worldwide inflation and recession. Thus, the ben- efits that could result from far-reaching economic integration seem much more attractive now than they have during the past six-year period of re- gional feuds and strident nationalism. Also, the worldwide trend toward alignments based on common economic or regional interests has had an impact on the Central Americans, who have never had a strong voice even in their own hemi- sphere, much less in world forums. Whether the leaders can realize their ambi- tious goals in the next few years depends largely on their ability to retain firm control at home. At present, none of the leaders is seriously threat- ened, but each is concerned about opposition groups and growing discontent. In fact, the five leaders may be hoping that the fanfare sur- rounding their summit meetings will soften public criticism at home. ? President Somoza, who inherited control of Nicaragua a decade ago, is faced with increas- ing disaffection and an opposition encouraged by the success of terrorists who seized government officials last December and bartered their free- dom for a flight to Cuba. ? Costa Rican President Oduber's popularity has diminished considerably since he was inaugu- rated last May with multi-partisan backing. Nearly all factions are criticizing the President's failure to understand, much less alleviate, Costa Rica's worsening economic situ-ifion. ? Guatemalan President Laugerud, who took office last July, enjoys the support of the army high command-the final political arbiter in the country-and government forces are strong enough to keep the lid on the security situation. Nevertheless, isolated successes by terrorists-- followed by government reprisals-could create a period of political instability. ? Last week, Honduran Chief of State Lopez Arellano finally fulfilled his promise to re-assign senior military and government officials. The changes seem to have decreased the dissidence among the Honduran officers corps, which had been building for months. ? Like Honduras, El Salvador has had a re- curring problem with military dissidence. Some peasant unrest, leftist violence, and student dem-. onstrations are likely to continue to challenge Salvadoran President Molina for the remaining half of his five-year term. Like his Honduran counterpart, however, Molina came to power through the military and knows we!l how to maintain its support. Both leaders have been gen- ercusly responsive to military demands, including pay raises, training, and re-assignments. The Central American leaders see.-n apt to continue meeting and trumpeting their interest in "unity. Sharp contrasts in economic achievement and sociological perspective, however, remain obstacles to meaninami peration. F__ 7 25X1 25X1 Page 13 WEEKLY REVIEW Feb 21, 75 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 1 Army General Anaya announces start of guerrilla operation. ARGENTINA: ANTI-GUERRILLA CAMPAIGN The army has begun a massi' a anti-guerrilla operation in the northern part of the country, but the only information on its progress is coming from communiques issued by military spokesmen. As usual, these reports consist only of the num- ber of arms caches destroyed and suspected guer- rillas detained. Soma 5,000 army troops and federal police are combing the jungles and mountains of Tucuman Province in search of about 4G0 mem- bers of the Marxist Peoples' Revolutionary Army. At leapt one skirmish occurred last week when guerrillas ambushed a patrol. One army officer and three ;nsurgents reportedly were killed in this clash. Army spokesmen are stressing that civilians in the area are cooperating with the troops by providing information, and one officer stated that several "foreigners" had been arrested. There has been no official announcement on how long the campaign will la"t, bill one guiteral c( Inrnent( el that the array worrlcl slay ill the ',tru(trll( is long as it considered nocnssary " Inlnrior Mini-,tor Rocarnora staled liv,t wnul< that the r,ounter-in- surgerlcy operation might raova into other prov- ince -Ilse extremist, have reslxrn(Je,(1 to the carn- paign by stepping up terrorist actions in 13neno', Aires. Last weekend, at least eight persons were killed in a new wave of attacks. Also, in a move to attract international attention and elnbarrirs; the government, the guerrillas declared a 1,500- square-arile area of Tucuman Province a "liber- ated area" and have called for international protection in accordance with the Geneva Con- vention. It is doubtful that the army's operation will turn up much. Rumors that it was to occur [rave been circulating for several weeks, so that the guerrillas have had plenty of time to prepare. Also, the army has not had a great deal of counter-insurgency training or experience. Unless small-unit commando tactics are used, the secu- rity forces are likely to have little luck in corner- in any real guerrillas. The civil distur'ounces in Linea two weeks ago have not caused President Velasco's military regime to change direction, but they have prompted it to shift gears. In a nationwide address on February 17, the President hinted that the government would embark on a plan to create its own mass political movement. The next day, it was announced that a committee had been formed to coordinate such an effort. This repre- sents a new stage in the military's long-standinc. but unsuccessful, effort to rally popular opinion in support of its programs. To date, the government's efforts along these lines have been disorganized and indecisive. The recent unrest, however, has poarently Page 14 WEEKLY REVIEW Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 lassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 1 rho govennnent'', elforls will he corn- plicated further as a resull of ad floc grout,', that have sprung up sincO l ehruary 5 to only support for the regime. The two most publi(.irecl groups, led by leftist labor leaflets ,utd jotnnali',t',, are alroac , vying for .iipporrt horn various rrt1ii:ary leaders. President Vel,u,co apparently recognises that, if allowed to expand, such groups might develop independent bases of support and try to force the regime into following an evert snore radical course. The new government corninittee apparently is the result of Velasco's desire to meld the various group,; ;,nd poi-oalities into single unit that would be more rn,iri jeable. In what appears to be another facet of the government's plan to build support and avert further massive unrest, regime spoke',rnen Iiave lambasted the American Popular llevoltitionary Alliance. President Velasccr irtd other, have charged that alliance leaders were behind the recent disutdurs. Although the alliance i', a perennial target of military criti *,rn, the extent n'J tenor of rccc t nffftaai i:(i,mmc'iit ugg%st some action may be taken against the alliance's leadership. After more than six years of military rule, the party remains Peril's only rn,rss-based political organisation and a harsh crackdown would certainly cause funther class, cislac.tion, particularly among the rnidclle class and certain labor groups. Extremists within the alliance apparently were involved ... the oti. ....(r Party radicals reportedly have also been involved in recent urban bombings. The established leader- ship of the alliance, under the venerable Victor born hostility to authoritarian military rule-even though benevolent-will continue to disrupt the El Correo newspaper building burns during recent rioting. illustrated lot overt the in)'.! nearsighted military lvad(:rs the extent ((I alai -government fooling among Clio p(,ptll,1I11)1I in genet al. Ili view of this, it appears that Vel,iS,c() is leaving ,the,ul with l.rl,trr, to build a fornt,tl, civili,ut-hosed hill ntilil,try-cort- trollc;cf political orgauintliott. ll(i', will he tto easy task, chic Io serious (h.")(11eentenls within the arrrled forces over the ideological heal of the organization and over the degree to whit h it will supplant tra(litional pc(lili(.,il parties. Ili addition, t'iere is the piohl(0nt (il who will or(lani;e x11(1 staff the rnovernel l t. Raul Naya do la Torre, probably has riot con- doned such activity. Nonetheless, the party is a :)clod scapegoat for Velasco, since most top of- ficers probably favor some action to lessen its popularity. If nothing else, the alliance has been an embarrassment to the military, which has been tnlable to match its widespread ap-roal. For the time being, the military apparently is united behind Volasco, but questions have been raised about his handling of the crisis. Differences within the armed forces almost certainly will in- crease in the coming weeks as plans for the pro- government movement solidify. Prime Minister Morales Bermudez is likely to play an important role in developing government policies to meet civilian unrest and to build a base of support for the regime. Despite indications that President Velasco is pleased with Morales Bermudez' counsel, there are ideological differ- ences between the two men. These intra-service cross-currents, coupled with the populace's stub- Page 15 WEEKLY REVIEW classified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 ' Chinn', 1n1oign ballot boon) fof l victim lc) II1e Orowilul prollunr, of th(! w')rld econo ny ill 1914. f olat trncl' ro'o only 27 purcont, to roughly billion, wall below the 67-par(e)d incre,c',o of 1')13; n)m,l at Il)o increa'( is the ra.ull of hi0I1oo price., with litl.lo or no growth ill velum('. Worldwide iII(laliot) I)lIited ill) ChiO','', impart hill, whip.) Hit! ocournnic slowdown in the Wcr',I ctrl dt,mand lot Chino.,(! exports. As it re',ull, Chin.( 11 ICI the In1015t 11.1(11, (loficit in its hi s!oty abool ',750 million overall and perhaps $1 billion with the nett-Colulnculist. world. China b(olntl III(inq steps to reliavo the fi? naocial squen/e IwA fall. Contr;icts for agricttltutnl prndn( I', weld dcletled Of (:,nlceled, and fertilizer dcliverios wr,te I"'tp1ned. Peking .Itso increased it', Its(. of shot I- ,u)(I Irw(liurn-terra ctodits'Intl sold .t portion of its Oold holdings. Chin..t's baton(.( of paym(mt% is good, however. Reserves are well in excess of Ihw bode deficit, th'l level of foreign del)f i', IIIIIge,Ible, Mid Poking's credit rating is excell(,nt. China: Foreign (trade, 1970-74 l1.1de will) IIntl-Comrn1Iii'l (o1 ill (0, po,tml lh1, Iarge,l Oaily, ncruunlio0 far nln)o5l 135 pcr- c1111I of Clrir)n'', tut,)I lrnde. Irnpnt I'. (toll) the developed West. ,hot up lo abotrl 'f.5 billion hunt '1,:3,4 billion in 1973, In,g('Iy hr'c:.nr,c of ill( waved III Ichase', of ngri(UlIt it ,ll I)Io(Jnc.t% )niI nine hitwiy. (:hill,)''. dclicil wills the (Jnvetoped col nth i1,'. was ronal)ly '62.5 billion, ..)inn?J,Ip.uro'.l (tnde j)tmp0(J 50 pt'tccot, to over $3 billic)11. China's irnpnrls, Inosled by ',i/,It.)le (lelivelic5 of tnachint;ry ,u)d egtliprrIent, exceeded expo) Is, by rnur'' Ihnt) ',500 million. China's export', of 4 mithon toils of rru(lo oil, worth about $388 r)Iilliou, )note that) offset the decline tit it . trodilionnl exports to .lnp,u). China', hnr.le will) the US t 1,tle(i ',922 mil- lion, .1 ?,rn,Illcr increase than nrtli( tpntld at mid- year !w(.,)u',e I)ekirl(l canceled cnnb,)(.1s, for US grain warlh nuaut $300 n)illioll. Wheal, ortl, O,hell, '.oybenn,, ancJ other agricOIltonl products crnnpa5('(I about 80 percent of lot it t)S expo) Is of '{,807 mill;or1. US machinery mid (eluipot(nt export', rose as delivery bcy,I.) nu ('(IIIiprnenl far the arnu)nni,i ptnnl, purcnn'eu it) 1913 and the secnr)d half of Ow $150?Im111,,,I Uoeirirl cotlltnrl was completed. Growing patch,);es of t Odell textiles helped boost US imports of Chinese goods la $115 )Million, up from $64 million in 1973. Pur(ha',c'. of agricultural produ( l,, rrrachin- cry, ,Ind Ir,nrsp )It equipme))t were Inrctely Iv%pnn- siblc for tl)c rJrowtlt of Chinas total irnpnrls. China cotrttaclt.'d for almost 10 million tons of train tit 19/4, lout shipping delays ,01(1 contract c,)nr(;Ilatiorr, dtapped actual deliv,.rr,,,, to just over I million tons, down from 7.1 trill 11)11 in 1973. Iligher gr.rin price,, however, pushed the cost up to over $1 billion. 11111)01 k of 5oyb1;an, Mid (odor) were up sut)slanlially from 1973. Machinery tit(] equipment import: 1(151 sharply .)s large-scale deliveric'', began oo the `.3,2.5 billion worth of whole plants and otht'r o(juiI)rnnt ordered in 1973. I ~ _O 1970 1071 1972 1973 1974 (Preliminary) China's exports rose by roughly $1 billion in 1974; petrolcunl accounted for alrno't half of the Page 16 WEEKLY REVIEW Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 increase. `)'ale', of crude oil and petroleums prod- ucl, to lapan, the Philippines, I-long Kong, arid I hailand anlotintecl to about 4.5 million to,ls v'worlh "11440 million. Rice exports benefited from ;sigh prices, but other traditional Chinese expert',, particularly silk and cotton textiles, faced declining delrland. slow further. fhe outlook for China's trade in 19/5 is for ',louver growth as Poking attempts reduce it! trade clefic:it. I_::xport growth will be small, reflect- ing poor sales of traditional products at the 1974 Canton lairs and recession-weakened demand in the West. An expected doubling of petroleum export', nlay do little more than off-,et the decline io other exports. Imports of machinery and equipment will he substantial as large-scale do- liverie0. continue on 1973 and 1974 contracts. the successful 1974 harvest and declining textile e eport', will permit cutbacks in grain and cotton imports. Mier less essential imports will be cur- tailed, and the pace of new plant contracts may Tokyo moved to shore up its sagging economy last week, but the anti-recession pro- grain, while serving as a bit of a cushion, is not very strong. It includes: ? increasing government fund; for un- enlploynlerrt compensation; ? easing investiTlent controls on plant con- ..rr ti and .:ipn1 nt; ? fewer restrictions on commercial bank loads to small industries arid housing; ? spending approxim;,'ely $5 billion on public works projects during the present quarter. The measures were taken in response to the charm deterioration in the economy in the past few months. Industrial production in the 'inal quarter of last year, for example, fell at a 20-per- cent annual rate. The number of bankruptcies in October, Novembber, and December broke previ- pus records. Unemployment at the end of Decem- ber reached one million for the first time in 20 years, up about 300,000 from November. Since December, the economic situation has continued to decline. Tokyo's new program veil; at best cushion the downturn. Direct government loans to ir!- dustry are basically airned at avoiding another' rash of bankruptcies, especially in politically powerful industries such as textiles. The public works spending essentially represents the funds the government had already allocated for the January through March period. Largely because of opposition from Deputy Prime Minister Fukcrda, Tokyo continues to keep a lid on public spending. Industry leaders, for example, have been pressing the government to spend at least part of the $2 billion in funds previously appro- priated but not yet spent. 25X1 Easing credit and investment controls is un- likely to stimulate any significant recovery in business spending. Demand for investment funds is already running below credit ceilings, largely because most industries are operating well below capacity. Excess capacity is now estimated at more than 20 percent, a postwar high, with some firms operating at as low as 50 percent of ca?? pacity. Even if demand picks up, output will probably respond slowly because of tinge excess inventories. Both in absolute terms arid as a share of sales, stocks of unsold goods are roughly dou- ble the level recorded during previous economic slowdowns in Japan. During the final quarter of last year, firms attempted to reduce excess stocks I>y crittinn nrndnc-tinn hilt failed hecause sales fell even faster. The short-term economic outlook remains gloomy, with further production cuts likely in corning months despite government efforts. Ex- ports, a major factor in holdinu up production last year, are now starting to slow down in re- sponse to the worldwide economic downturn, and domestic demand is unlikely to pick up until the employment situation improves. Tokyo. more- over, ren,ains concerned about a resurgence of inflation, and a major expansionary program is not likely until the conclusion of wage negotia- tions this spring. Page 17 WEEKLY REVIEW Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 assified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080009-0 CAMBODIA: HAD DECISIONS Tyre rrrilit.auy ~ilturtion rleteriorateol dUrirrq the past we.r