NATIONAL INTELLIGENCE DAILY SATURDAY 26 MARCH 1983

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01094R000200010041-9
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 18
• Document Creation Date: December 22, 2016
• Document Release Date: July 13, 2010
• Sequence Number: 41
• Publication Date: March 26, 1983
• Content Type: REPORT

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~`"`~""~ Director of ~-
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CY # 28?.a
National Intelligence Daily
Saturday
26 March 1983
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Contents
Western Europe: Reactions to President's Speech ................ 1
USSR-Nicaragua: Andropov's Meeting With Ortega .............. 2
UN-USSR-Afghanistan: UN Secretary General's Visit .......... 3
Nicaragua-Honduras: Border Tensions Increase ................. 4
Guatemala: Political Activity Resumes .................................... 5
Bahrain-US: High-Level Visit .................................................. 6
v~~n-~9yP~: irn~ruviny neiau~n5 .....................................:.... i
Ecuador: Continued Labor Unrest .......................................... 9
Special Analysis
USSR: Implications of Falling Oil Prices .................................. 10
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WESTERN EUROPE: Reactions to President's Speech
Allied governments publicly have welcomed the President's
speech as a sign the US will improve its military capabilities but
believe it is premature to make detailed comments on ro osals to
develop new defenses against ballistic missiles.
West German Defense Minister Woerner cautioned that the new
proposals would not solve the security problems that NATO faces
today and stressed that the Alliance will continue its current strategy
for the next 10 to 15 years. He also said the West will have to continue
its efforts to achieve balanced disarmament agreements for all
categories of weapons.0
British officials privately questioned whether research on space-
based defensive weapons violates the Antiballistic Missile Treaty.
They are concerned that such new systems would increase the
vulnerability of the UK's small deterrent force and encourage
opponents of the new Trident nuclear submarines. They also expect
the Labor Party to question the extent of London's consultations with
Washington on plans affecting vital British defense interests.0
An Italian Foreign Ministry official said it was too early for his
government to provide a definitive reaction to the speech. He
questioned, however, whether the USSR would now begin similar
antiballistic missile programs. A Norwegian military official, speaking
privately, said he believes the West should not pursue the
technological research described by the President.0
Comment: Allied governments do not believe the US is changing
its deterrent strategy. They hope that if a change does take place, it
would be closely coordinated with them. The UK and France
particularly would object to the development of a strategy by the US
that called into uestion the survivabilit of their independent nuclear
deterrents.
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USSR-NICARAGUA: Andropov's Meeting With Ortega
General Secretary Andropov's meeting with Sandinista leader
Ortega in Moscow yesterday was his first public appearance since the
rumors earlier this week concerning his health. 0 25X1
Ortega's stopover followed visits to Mongolia and the Nonaligned
Summit in New Delhi. Andropov expressed great sympathy for
Nicaragua but said he is confident of the Sandinistas' ability to defend
themselves. The conversation was described as "friend) "and
characterized by "complete mutual understanding." ~ 25X1
Comment: The meeting seems timed to show Soviet support as
the Sandinistas are facing a growing insurgency but does not suggest
Moscow is willing to provide substantial additional assistance. The
Soviets, however, are conducting a propaganda campaign
condemning the recent US naval exercises in the Caribbean-
claiming they were designed to intimidate Nicaragua. They also are
accusing the US of supporting anti-Sandinista insurgents operating
from Honduras.0 ~ 25X1
Andro ov has a eared ever 10 to 12 da s for the ast two
months.
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The Soviet leader has begun to engage in more intense political
activity. He probably took part in the Politburo meeting on Thursday.
Rumors in Moscow indicate a Central Committee plenum could be
held as early as next week 25X1
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UN-USSR-AFGHANISTAN: UN Secretary General's Visit
The Soviets probably will try to convey an impression of flexibility
on Afghanistan in talks next week with UN S re r General Perez de
Cuellar, but major concessions are unlikely.
Perez de Cuellar, who arrives in Moscow tomorrow to meet
General Secretary Andropov for the first time, ex ects UN ne otiatin
efforts on Afghanistan to be the main subject.
Comment: Andropov probably wants to alleviate international
criticism of the USSR's role in Afghanistan. He is thus likely to try to
convince Perez de Cuellar that Moscow is seriously looking for a
political wa out of its involvement and values the UN's continuing
help.
The Soviet leader may want to see if UN mediation can be
exploited to ensure the survival of apro-Soviet Marxist regime in
Kabul at less cost to Moscow. He also may hope a deteriorating
domestic situation in Pakistan will make President Zia more willing to
accept such a regime.
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NICARAGUA-HONDURAS: Border Tensions Increase
The Sandinistas probably will try to use recent border clashes to
support theirr chi at the UN Security Council of Honduran
aggression.
The Honduran military says that some shots were exchanged at
the border crossing at EI Espino on Thursday and that the Sandinistas
responded by sending some 800 additional troops to the area.
Honduras placed some forces on alert and sent another 150 troops to
Choluteca, about 50 kilometers from EI Espino. A Honduran military
officer re orts that, as of yesterday, the situation at EI Espino was
quiet.
Earlier in the week Managua protested to Tegucigalpa over an
exchange of mortar fire at another border site. It also charged anti-
Sandinista insurgents were attackin from Honduran territory into
Nueva Segovia Department.
Most delegates at the Securit Council sessions thi
ported the Nicaraouans.
Comment: The Sandinistas appear to have engaged the
Hondurans at EI Espino after mistaking them for anti-Sandinista
insurgents. Although incidents of this kind have become more
frequent in recent months, the Nicaraguans probably will exploit the
one at EI Espino to support their accusation that their problems are
caused by external forces.
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GUATEMALA: Political Activity Resumes
The lifting of the state of siege and the promulgation of political
laws by President Rios Montt will revive partisan activity althou h Rios
Montt has made no commitment to an election schedule.
The law governing the inscription of political parties reduces the
number of signatures needed from 50,000 to 4,000, but it also
requires that the parties have viable organizations in at least 12 of
Guatemala's 22 departments. One official says 18 political parties are
beginning organizational work, including the leftist Democratic
Socialist Party.
The President was backed by an array of senior military officers
when he made the announcement. He emphasized political activity is
still restricted to recruiting and registering party members. He also
announced a 30-da unconditional amnesty for insurgents would
begin next week.
The insurgents have done nothing to prevent the government
Comment: Although party leaders have denounced the
President's failure to set an election timetable, they privately admit
his program may lead to honest elections. The participation of the
formerly repressed Social Democrats suggests the believe Rios
Montt is sincere in his commitment to elections.
Nevertheless, Rios Montt probably realizes political activity has to
be monitored in order to prevent radicalization of new groups by the
left and preemptive repression by extreme rightists. The presence of
the military officers during the announcement apparently was
designed to remind those who might try to exploit the new freedoms
that the Army retains ultimate control. It presumably also was
intended to demonstrate military unity and dispel coup rumors.
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Crown Prince Hamad
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Foreign Minister Muh;immad
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BAHRAIN-US: High-Level Visit
Crown Prince Hamad and Foreign Minister Muhammad will visit
Washington next week to discuss military equipment purchases, US
proposals for ex anded access to Bahraini facilities, and the US
peace initiative. ~
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The US Embassy in Manama reports Hamad is particularly
interested in probing US willingness to sell F-16 fighter aircraft and
other military equipment to Bahrain and the other five states of the
Gulf Cooperation Council. In November the Council agreed to fund as
much as $1.8 billion for military purchases by Bahrain.
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The Bahrainis have indicated the Crown Prince will respond to US
requests in December both for increased use of port and warehouse
facilities by the US Navy's Middle East Force and for the storage of
military equipment. Hamad told Embassy officials that the Force helps
assure the security of the Persian Gulf and that Bahrain wants it to
remain.0
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Hamad also will want to exchange views on the war between Iran
and Iraq and the Arab-Israeli issue. Bahrain has generally supported
US efforts to advance the Middle East peace process and has urged
other Arabs to participate.
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Comment: Bahrain's ruling Khalifa family hopes to avoid renewed
criticism from Arab radicals, Iran, and domestic factions unhappy with
the country's close links to the US. As a result, Hamad will not be
likely to agree to restoring formal home port arrangements for the US
fleet-a privilege ended in the mid-1970s-or to provide a base for
the forward operating element of the new Central Command. Hamad
probably will agree, however, to more days in port for US Navy ships
an
onal warehouse space for the storage of military equipment.
0
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Bahrain was the target of an Iranian-sponsored coup plot in 1981,
and Hamad will seek assurances of US assistance against any Iranian
or Soviet subversion. Manama sees the presence of the Middle East
Force, which has used the port facilities in Bahrain since 1949, as
symbolic support against such threats.
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USSR-EGYPT: Improving Relations
Soviet Navy chief Gorshkov stopped at Cairo airport on Tuesd
while on his wa to South Yemen and
was met by his Eavptian counterpart.
Comment: Gorshkov's visit is part of Moscow's new effort to
court Cairo. Egypt favors improved ties in order to demonstrate that
its friendship with the US does not preclude normal relations with
other major powers. Mubarak and other top Egyptian officials for
several months have been preparing domestic and international
opinion for the restoration of full bilateral ties
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Labor leaders, who are angered by the government's refusal to
offer immediate concessions on its economic austerity program, have
extended indefinitely the general strike that began on Wednesday.
The largest labor organization is demanding the dismissal of the
government's economic team and cancellation of the recent
devaluation and price hikes for consumer goods. So far, the strike has
led to limited violence.
Comment: Labor probably expected the government would back
down in order to forestall a possible coup. If President Hurtado
continues to stand firm, however, labor militants could adopt tougher
tactics. Military plotters probably will wait to see the extent of
violence rovoked by the strike before deciding whether to move.
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Additional Exports Required Tal
Maintain Hard Currency Oil
Revenues at Level of 1982$
Million b/d
r,~. a~~ ~~., vim,.
Hard Currency Earnings if
Exports Remain at 1.1 Million
Barrels Per Day"
Billion US $
16
14
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0 At: $32.5 $30 $25 $2(I $15 per barrel
eAbove the estimated i.l million barrels
per day exported in 1982
bEstimated for 1982
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Special Analysis
USSR: Implications of Falling Oil Prices
Lower oil prices are threatening to cancel the recent improvement
in the USSR's hard currency position and cause a new shortage of
hard currency this year. Since mid-December the spot price for Soviet
crude oil on the world market has dropped about $5 to below $28 a
barrel. Moscow presumably is concerned there is little prospect for a
substantial recovery in prices soon. 0
The USSR's balance of payments is closely tied to the hard
currency it earns from sales. Oil exports accounted for rou hly 40
percent of all Soviet foreign exchange receipts in 1982.
Moscow's frequent appeals since early February to the OPEC
community to close ranks on prices reflect its concern about the
adverse consequences to the Soviet economy of a drop in oil prices.
For every dollar per barrel the price declines, the USSR stands to lose
$400 million in revenues over a year. The recent drop of $5 per barrel
could mean a $2 billion loss in foreign exchange earnings in 1983.
At the same time that the Soviets are voicing concern, there is no
evidence they have embarked on a campaign to undercut OPEC
prices. The USSR is only a minor supplier in the international market,
and it has to match any OPEC price drop simply to remain
competitive.0
Indirect Repercussions
In addition to the direct loss of oil receipts, the USSR's payments
position also is likely to be weakened by lower prices for other major
export earners. Gas earnings will be hurt because prices under
contracts with Western Europe are tied to a number of oil products.
The $3.35 per million BTUs price that Italy recently agreed to pay the
Soviets is roughly $1.35 below the base price negotiated in late 1981.
0
Lower petroleum prices also have been reflected in a weakened
gold market. In the last two months, gold prices have slipped
approximately $100 an ounce. Moscow's revenues from gold sales
could fall nearl $1 billion, assuming exports remain at about 300 tons
this year.
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Hard currency receipts from arms sales also may decline because
three of the USSR's larger customers-Algeria, Libya, and Iraq-will
be less able to pay cash as a result of their decreased oil earnings.
Even before the latest drop in oil prices, financial difficulties had
caused some arms customers to seek deferred payment terms.0
Soviet Options
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Soviet economic planners probably will react as they did last year
when they decided to increase oil sales to hard currency customers in
order to compensate for lower oil prices. Petroleum deliveries to all
hard currency customers in 1982 are believed to have totaled 1.1 to
1.2 million barrels per day as compared with 920,000 in 1981. Even
with a 10-percent drop in price, oil revenues last year were probably
1981 a~$13-14 billion, as compared with $12 billion earned in 25X1
Some Western trade sources are telling the press that Moscow is
again trying to increase oil sales to compensate for price reductions.
If Soviet economic planners decide to try to match hard currency
revenues earned by oil sales in 1982, a $5-per-barrel price drop would
require an additional 200,000 barrels per day in sales to hard
currency customers.0 25X1
Although Moscow evidently could increase deliveries by this
much, sizable diversions would be necessary from East European
countries and from the domestic econom Moscow probably would
be willing to accept the political cost. 25X1
The shortages that would result from increasing exports much
above this level could reduce gross national production in Eastern
Europe, with potentially unacceptable political repercussions there.
The performance of the Soviet economy would be hurt. Moscow,
however, might try to free some additional oil for sale to hard
currency customers by cutting deliveries to its barter customers, such
as Cuba, as it did by a slight amount in 1982. 25X1
Soviet planners are likely to try to adjust to an unfavorable hard
currency balance of payments by reducing imports from the West.
Grain imports may be reduced in 1983-84. The prospective shortage
of hard currency is likely to be so large that machiner and industri I
materials imports also will have to be reduced.
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