NATIONAL INTELLIGENCE DAILY MONDAY 6 JUNE 1983

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01094R000300010047-2
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 16
• Document Creation Date: December 22, 2016
• Document Release Date: July 14, 2010
• Sequence Number: 47
• Publication Date: June 6, 1983
• Content Type: REPORT

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Central
Intelligence
National Intelligence Daily
Monday
6 June 1983
i bpseere+-
CPAS NID 83-132JX
6 June 1983
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Contents
Palestinians: Significance of PLO Infighting 1
Nicaragua: Conflict With the Church ...................................... 2
International: Stalemate at UNCTAD VI ................................
Malawi: Pressure for Military Takeover ..................................
OAU: Summit Plans .................................................................. 7
Special Analyses
Cuba: Implications of Hard Currency Shortage ...................... 8
China: The Sixth National People's Congress ........................ 11
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Boundary representation is
not necessarily authoritative.
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PALESTINIANS: Significance of PLO Infighting
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The fighting in eastern Lebanon on Saturday between Fatah
rebels and forces loyal to PLO leader Arafat will increase pressure on
him to make concessions to dissidents despite his efforts to organize
international support for his position.
Hostilities reportedly began when the rebels fired on loyalists who
were attempting to remove a rebel roadblock in Ba'labakk.
Algerian President Bendjedid arrived in Damascus yesterday after
talks with Arafat in Algiers on Saturday. The Algerians believe that an
independent PLO united under Arafat is essential for progress in the
Middle East negotiations. Saudi Crown Prince Abdullah also is in
Damascus and is expected to argue the same line.
Meanwhile, a close aide to Arafat has been meeting with senior
Soviet officials in Moscow to seek support for the PLO leader in the
current factional dispute and to urge the Soviets to press Syria to
stop backing the rebels. The PLO news agency reported on Saturday
that General Secretary Andropov has sent Arafat a letter endorsing
his leadership.
Comment: The rebels' willingness to resort to combat escalates
their challenge to Arafat and further undermines his credibility. The
PLO leader is likely to face increased pressure within Fatah to
accommodate the rebels before more serious fighting occurs.
Syria and the rebels will be reluctant to move openly to oust
Arafat so long as he enjoys the backing of other Arab leaders.
Arafat's Arab supporters, however, probably cannot deter his
opponents from demanding major concessions as the price for
ending the rebellion.
The USSR probably believes that PLO factionalism and a struggle
between Arafat and Syrian President Assad could impede its efforts
to unite the Arabs against the Israeli-Lebanese accord, and the
Soviets may encourage Syria to reconcile its differences with the PLO.
Moscow will be careful, however, not to jeopardize relations with
Damascus. Although Arafat's weakness probably will move the USSR
to press for a tougher PLO stance on Arab-Israeli negotiations, it is
likely to continue backing Arafat's leadership and criticizing efforts to
worsen the PLO split.
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Church-state tensions are increasing as both the Catholic
Archbishop and the Sandinistas have adopted a tougher line.
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The Sandinista press has criticized statements made by the
Archbishop and the Pope during a visit last month by Nicaraguan
bishops to Rome. In another public attack, the government has
alleged that some priests are urging parishioners to join Eden
Pastora's insurgent forces. Interior Minister Borge claims that
religious freedom still exists in Nicaragua, but that the regime has the
right to prohibit antigovernment propaganda-even by churches.
Meanwhile, a Nicaraguan association of priests has dissolved
itself following pressures from the Vatican to restrict the group's
political role. As a result, the Catholic clergy will no longer be officially
represented in the quasi-legislative Council of State.
The dissolution of the priests' association strengthens the
position of the Archbishop and indicates that the Pope's support for
him is paying dividends. The strong backing of the Sandinistas by
activists in the association gave the regime a lever to use against the
Church hierarchy.
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2 6 June 1983
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INTERNATIONAL: Stalemate at UNCTAD VI
The stalemate in the North-South dialogue is likely to continue at
the Sixth Session of the UN Conference on Trade and Development,
which opens today in Belgrade.
The developing countries have assembled another long and
familiar list of proposals for aid increases, trade concessions, and
commodity price support schemes that the developed nations are
prepared to reject.
At the Nonaligned Summit in March, the developing countries
proposed holding an international conference on money and finance
for development. As envisioned, the meeting would address a much
broader range of issues than the monetary conference discussed at
the Williamsburg Summit.
Comment: With no prospect for agreement on major substantive
issues, many participating countries-including some US allies and
the Communist states-are likely to try to put the blame for a
deadlock of UNCTAD VI mainly on the US.
A deadlock may harden the rhetoric of the developing countries,
but the substance of the demands probably will not change. The
emphasis on proposals for immediate economic relief will continue in
subsequent North-South meetings because economic recovery in the
majority of developing countries will lag behind recovery in the
developed countries.
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6 6 June 1983
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MALAWI: Pressure for Military Takeover
Many Malawians want the popular Commander of the Army,
General Khanga, to seize control of the overnment
Public resentment toward President
Lffian as regime is sai to a wi espread because of the unexplained
deaths last month of four leading politicians, two of whom were
regarded as strong contenders to succeed the octogenarian
President. Most Malawians believe that the politicians were murdered
on the orders of senior government officials close to Banda. There
have been reports of scattered acts of civil unrest in the normally
placid country.
Comment: General Khanga appears reluctant to take action
against Banda, but he may feel compelled to move if unrest
intensifies. Further disorders could occur late this month when
legislative elections are scheduled. A military regime headed by
Khanga would probably continue Banda's strongly pro-Western
policies.
The OAU Summit is scheduled to open today in Addis Ababa, but
US Embassy reporting indicates no imminent solution to the question
of membership for the Polisario Front-the issue that prevented a
quorum at the planned summit last August. The Polisario insists on
attending but is under pressure from the host, Chairman Mengistu,
and other supporters to stay away in exchange for placing the
question of its membership on the agenda. Representatives of several
African governments are negotiating informally to try to reach a
compromise.
Comment: Morocco almost certainly will boycott the summit if
the Polisario is seated at the opening session. It is unclear whether
Rabat would be joined by a sufficient number of other moderate
opponents of the Polisario to prevent a quorum. Failure by the OAU to
hold the summit this time-the organization's third attempt in the
past year-could lead to an irreparable split between radicals and
moderates and could seriously weaken the OAU's position as
international spokesman for Africa and as regional mediator.F_~
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7 6 June 1983
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Cuba: Hard Currency Account Balances
1978
1979
1980
1981
1982
1983
1984
1985
'Data for 1978-82 are from Cuban Government publications.
Current account balances for 1983-85 are based on CIA
projections for export earnings and Cuban government
forecasts of imports. Because Cuba is not likely to be able to
obtain credits to finance the deficits in 1983 and 1984,
however, imports probably will be reduced.
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6`June 1983
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Special Analysis
CUBA: Implications of Hard Currency Shortage
Top Secret
The Cuban economy, despite the recent rescheduling of debt
repayments totaling more than $500 million, faces more hard currency
shortages during the next two years. These shortages will force
adjustments that will retard economic growth and reduce personal
consumption. The Castro regime shows no inclination, however, to
adopt more pragmatic policies that would spur productivity or reduce
hardships.
Cuba's position began to worsen in 1981 with the severe drop in
world sugar prices-the source of more than half of Havana's hard
currency earnings-and a substantial rise in debt service costs.
Last year, after Western financial institutions withdrew more than
$700 million in short-term deposits from Cuban banks, Havana had to
reschedule its medium- and long-term debts.
The principal effect of the hard currency shortage has been a
forced reduction-about 30 percent last year-of imports from
Western nations. Havana depends on these imports for high-quality
consumer and producer goods, some of which are unavailable from
CEMA. Cuba currently is concentrating on imports of essential raw
materials and other goods necessary to produce exports, at the
expense of capital investment and consumer goods.
Export growth almost certainly will be constrained, however, by
the reduction of imports. The government will do what it can to
support the production of sugar, tobacco, and nickel, the most
important foreign exchange earners. Nevertheless, all export
production will be hurt by the reduced output that already has
occurred in construction, steel, and transportation
Stagnation and Austerity
As a result of the foreign exchange shortage, Havana has little
hope of achieving any economic growth this year. The outlook
through 1985 is only slightly brighter.
Lack of construction materials will thwart Cuban efforts to build
new sugar mills, hotels, electric plants, and similar projects. In
addition, much capital equipment will not be replaced or repaired
when it should be, and increasing numbers of factories-particularly
in the nonexport sectors-will be forced to close or cut back
operations.
continued
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6 June 1983
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The austere standard of living is likely to be reduced further over
the next few years as a result of the hard currency shortage and
related economic stagnation. The availability of consumer goods will
dwindle, and food supplies also may be affected, as imports are cut
and domestic production reduced.
Economic Policy Measures
Although the economic situation probably will prompt new debate
in the leadership about economic policy, the regime is only likely to
adopt a few token reform measures. Havana seems intent mainly on
imposing new austerity measures. The government already is
preparing the population for tougher times through speeches and
newspaper articles urging the people to work harder and sacrifice
more.
The hardliners who dominate the leadership hold the view-and
probably will convince President Castro-that any measures
smacking of economic liberalization risk creating a groundswell of
demands for more. Only last spring the hardliners, using ideological
arguments, persuaded Castro to impose restrictions on the farmers'
free markets. Moreover, the events in Poland are likely to have
strengthened the President's concern over the dangers of ideological
deviation.
The increased austerity probably will not create any threat to
Castro's authority in the near future. The exodus from Mariel in 1980
purged the island of many potential troublemakers, and, although
incidents such as the sabotage announced by Havana last month may
continue, the vast majority of Cubans recognize that overt opposition
would be crushed quickly. Castro will be careful to continue ensuring
the loyalty of hiss rit forces b protecting their incomes and
standard of living
Future Financing Problems
Cuba will need to obtain about $300 million in new financing
this year and next year to import even the reduced amounts it has
planned. This will be difficult, however, because of the continued
wariness on the part of lenders and the ceiling on total debt-
$3.4 billion, or only $200 million above current levels-set in the
rescheduling agreement.
Havana cannot afford to cut further into its reserves. They
probably are already below the $180 million minimum established in
the rescheduling agreement. Imports thus are not likely to be above
the level of $880 million in 1982 and may even drop below this
amount.
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9 6 June 1983
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Cuba already has publicly indicated that it will request a
rescheduling of payments on principal due in 1984. In addition,
because of weather-related crop damage that has reduced hard
currency earnings this year, the Cubans may default on, or request a
rescheduling of, the estimated $200 million due in interest payments
this year. During the midterm review by its creditor monitoring
committee, Cuba is likely to ask for an adjustment of the targets set in
its rescheduling agreement, blaming the crop damage for its inability
to meet them.
Castro cannot count on the USSR to provide the necessary
foreign exchange. Nearly all Soviet aid to Cuba is in soft currency. The
hard currency shortage nevertheless will bind Cuba more closely to
the USSR and its allies as the soft currency source for needed
imports.
The USSR has eased Cuba's problems somewhat in recent years
by purchasing some sugar for hard currency and permitting the
resale, for foreign exchange, of Soviet-provided oil that Cuba has
been able to conserve. On the other hand, the Soviets' current
demand that Havana fill its sugar contracts with them underscores
Moscow's preoccupation with its own economic problems.
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10 6 June 1983
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Special Analysis
CHINA: The Sixth National People's Congress
Top Secret
The National People's Congress convening today in Beijing is
unlikely to produce any major departures from current economic and
political policies. As China's official ruling body, the Congress
probably will appoint a new president and a chairman of the new
Central Military Commission. The gathering also may clarify Beijing's
intentions regarding urgent economic problems and consider more
proposals by the leadership for bureaucratic reform. If things go
smoothly on these domestic issues, Deng Xiaoping and his allies
probably will find their hand strengthened in foreign policy as well.
The Congress reflects Beijing's organizational goals. For this sixth
term, composition of the 3,000-member body has been changed
demonstrate the regime's effort to co-opt the technocratic elite.
More than one-third of the delegates come from outside the
party, and intellectuals and professionals are represented in markedly
increased numbers. The Standina Committee of the Congress will
contain a host of new faces.
New Appointments
A two-day Central Committee work conference last week
approved candidates for national office who will be formally named at
the Congress. These include the Congress's own officers, who serve
five-year terms, and China's most prominent administrators-the
premier and his deputies; state councilors, ministers, and secretary
general of the State Council; and judicial officials., Premier Zhao
Ziyang, the two vice premiers, and most other incumbents will be
returned to office.
There has been considerable speculation about who will fill the
new constitutionally mandated posts of chief of state and chairman of
the Central Military Commission. Politburo Standing Committee
member Li Xiannian, 78, is widely expected to become China's first
chief of state since 1967. There is an outside chance, however, that he
will decline the lar el ceremonial post on the grounds of poor health.
Chairmanship of the potentially powerful Central Military
Commission almost certainly will go to Deng, who currently heads the
party's military commission. If not, it could go to one of Deng's
lieutenants, perhaps Politburo member Yang Shangkun.
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The creation of a government commission is part of an effort by
Deng and his reformist allies to end the close command relationship
between the Army and the party, which allowed a small group of
leaders to direct the military against its political enemies during the
Cultural Revolution. They also seek to allow commanders greater
freedom from party interference in routine military affairs and ensure
firm civilian oversight of the military budget.
Some old guard officers apparently have opposed creation of a
government organization that dilutes direct party control of the
military. As a result the central authorities may still be debating its
exact powers.
Economic Policy
Zhao's report on the government's performance since the last
Congress will be the most important of three economic reports
presented to the Congress. Although Zhao probably will stick to
current policy lines, his remarks will indicate whether Beijing is now
ready to provide stronger solutions to economic problems.
The Premier will again warn managers to keep investment within
the limits established by the current plan, and he probably will
criticize excessive growth in heavy industry. He also will urge closer
attention to productivity, a casualty of the too-rapid growth in output
during recent months. In addition, Zhao will be likely to call for a
continuation of Beijing's measured approach to economic
management reforms.
Most of the leadership agrees on the general thrust of current
reform policies but differs on questions of pace and scope. Many of
the leaders favoring increased investment and rapid growth of heavy
industry were eclipsed after the retrenchment in 1981. Some of their
arguments have regained currency, however, and senior leaders are
still trying to settle on an appropriate balance between investment
and consumption.
Organizational Reforms
Zhao may propose additional measures to restore momentum to
the ambitious attempt to streamline the bureaucracy. Last month the
first phase of provincial bureaucratic reforms came to a close after
26 of 29 top provincial-level administrators had been replaced
Media reporting-and the recent establishment of a new committee
to spur the reform of national-level organizations suggest that efforts
to eliminate redundant organizations and officials, to upgrade
personnel, and to rationalize administration have stalled in many
central ministries and are having trouble in getting under way at lower
levels.
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12 6 June 1983
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