NATIONAL INTELLIGENCE DAILY FRIDAY 28 OCTOBER 1983

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01094R000500020035-2
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 19
• Document Creation Date: December 27, 2016
• Document Release Date: July 26, 2010
• Sequence Number: 35
• Publication Date: October 28, 1983
• Content Type: REPORT

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Director of
Central
Intelligence
c~cpa s ~c ~~
National Intelligence Daily
Friday
28 October 1983
C'.PAR N/n R39F31X
28 October 1983
Copy 2 S
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Top Secret
Contents
Grenada: New Government To Be Formed ................... ....... 1
UK-US: Problems Over Grenada Action .......................... 2
Syria-US: Concern Over Reprisal ........................................... 3
International: Consensus Developing on COCOM Controls ..
USSR: Comments on Economic Reform
Philippines: Shortage of Imports ...........................................
USSR-Eastern Europe: MBFR Walkout Threatened .............
Peru: Military Concern About Terrorism
Lebanon: Financial Difficulties ............................................... 10
Oman-South Yemen: Resumption of Relations ..... 12
Special Analysis
USSR-Palestinians-Syria: Soviets Back Away From Arafat .. 13
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GRENADA: New Government To Be Formed
country's serious economic difficulties.
As the fighting winds down, plans are being formulated for the
establishment of a new interim government in Grenada. A major
problem facing the new leadership will be the resolution of the
policies.
According to Dominican Prime Minister Charles, Grenada's
Governor-General-the country's constitutional head of state-will
be asked to assume executive authority under the provisions of the
Constitution of 1973. She says the multinational Caribbean force will
remain in Grenada as police and peacekeeping forces until elections
are held. According to a close adviser to Jamaican Prime Minister
Seaga, the best possible candidates for an election to a new
government in Grenada would be former members of the New Jewel
Movement who disassociated themselves from the government of the
late Prime Minister Bishop after becoming disillusioned with his
Comment: Grenada's new government probably will request US
economic aid almost immediately. To maintain imports close to the
1982 level of $70 million, Grenada could need as much as $40 million
through 1984 to replace lost foreign exchange. In addition to the loss
of capital inflows from Grenada's former Marxist allies, tourism
revenues and loans from international banks are likely to drop
sharply. The longer the fighting lasts and the more extensive the harm
to the island's infrastructure a ri I r nd property, the greater
the import needs will be.
the invasion, citing the principle of nonintervention.
South American Reaction
Government reactions in the region have ranged from mild
criticism to sharp denunciation. Aside from Chile, which has remained
noncommittal, the most moderate response has come from
Venezuela. Although not condoning the intervention, Caracas has
noted the circumstances that precipitated US involvement and
highlighted the participation of troops from the Caribbean
democracies. Bolivia, Ecuador, Colombia, and Peru have condemned
Argentina and Brazil have formally criticized the US intervention,
but Paraguay has pledged Washington its support. Uruguayan
leaders have privately told the US Embassy that Montevideo will play
American governmen s resen w a ey see as a revival of US
military interventionism, but their reaction has been tempered by
concern about growing Cuban and Soviet influence in the region.
Criticism will abate when US troops are removed and a smooth
transition to democratic rule is under way.
Comment: (most South
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UK-US: Problems Over Grenada Action
severe criticism for her broad support of U5 policies.
The impression in the UK that the US did not take account of
Prime Minister Thatcher's views on Grenada has brought her under
denying on Monday that the US would invade.
Some Conservatives also worry that Foreign Secretary Howe's
standing has suffered from charges that he misled Parliament by
Close associates of the Prime Minister fear the invasion has
damaged her political standing, according to the US Embassy. The
associates say there is a widespread impression that the US did not
consult the UK early enough and disregarded British reservations.
line to take concerning Grenada.
Comment: Thatcher's problems are compounded by her
insistence in recent years that her close relationship with President
Reagan gives the UK special influence in Washington. The
government is also hampered by its inability, thus far, to decide what
even among Conservatives about joint control of INF.
for "dual-key" controls on INF. The Embassy reports that Defense
Secretary Heseltine is furious that US actions are reviving concerns
The opposition also is citing the Grenada operation as a rationale
Howe probably would have to resign if members of Parliament
were to believe that he misled them about knowledge of US plans. His
departure, following so soon after the resignation of Trade Secretary
Parkinson, would throw the Prim Mi ister's wing.of the Conservative
Party into disarray.
Thatcher and Howe probably will be able to ride out the storm,
but they will have to come up quickly with a strategy for dealing with
concerns in Parliament. The Prime Minister will strive not to allow
Caribbean disputes to disrupt relations with the US. She is likely to
take a particularly tough stand against any formal "dual key" for INF.
The British Government will face greater skepticism over its
support for US policies, however, and London may be less willing to
defend Washington against criticism by the other Western Allies.
Thatcher may find it expedient to display more independence from
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SYRIA-US: Concern Over Reprisal
Damascus appears increasingly concerned that the US will
retaliate aoainst Syrian or Lebanese targets for the bombings in Beirut.
Syria's government-controlled media are focusing on alleged
preparations by the US, the West European states, and Israel for an
attack on Syria. Several commentaries have cited the action in
Grenada as evidence that the US is willing to use force against Syria.
Syria sent diplomatic notes on Wednesday to West European
governments, urging them to discourage the US from taking military
action. The notes claim Damascus has information that the US is
planning such action in concert wi is trying to
involve some European countries.
Comment: President Assad almost certainly believes that a
threat of US military action would strengthen his claim to be the only
Arab leader opposing "Zionist-imperialist aggression." He is unlikely
to limit Syrian goals in Lebanon, but he may modify tactics to appear
more reasonable now.
Assad is probably concerned that the bombings will provoke an
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INTERNATIONAL: Consensus Developing on COCOM Controls
Members of COCOM appear ready to accept some US proposals
to tighten controls on computer exports to the USSR and its allies.
Dutch and Canadian delegates to COCOM have privately
indicated that their governments will conditionally agree to the US
proposal to add to the embargo list most of the computer items that
have been under negotiation for over a year. Both nations, however,
have flatly rejected the US attempt to control computer exports
automatically by the "red-line" approach, which specifies
perform d which no exceptions for export would be
granted.
France and the UK have expressed similar reservations about the
US proposals. Japan remains skeptical about limiting computer
exports without proof of possible military application by the
Communist nations.
Comment: The Dutch and Canadian attitudes contrast with
heated exchanges over computer controls in COCOM meetings two
weeks ago, when new US proposals were vigorously opposed. This
apparent change probably reflects a willingness to adopt some
previously discussed controls on computer exports, provided
Washington in turn drops its insistence on more rigid controls.
The members are willing to listen to further US arguments on
computer exports in bilateral discussions next month after the current
COCOM sessions adjourn. They almost certainly will not modify.
however, their opposition to the red-line approach.
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Soviet officials recently provided insights on why the leadership is
moving cautiously in introducing economic reforms.
Fedor Burlatskiy, a Soviet political commentator with ties to
General Secretary Andropov, told US Embassy officials in Moscow
that economic reform has slowed primarily because the Soviet
leadership has not agreed on the replacement of personnel or on a
model for reform. He also says the leadership is concerned that
economic reforms would induce social change. He asserts that
concern in the USSR about the upheaval in Poland considerably
retarded the prospects for Soviet economic reform.
In a separate conversation, Izvestiya economic editor Borodin
told US Embassy officials that improved economic results for the first
three quarters of this year are inspiring "new confidence" that some
targets of the Five-Year Plan for 1981-85 can be achieved. He says
this would lead to more ambitious targets for 1984. He attributes the
improvement to the discipline campaign and doubts that major new
reforms will be in r d soon, partly because of international
tensions.
Comment: Andropov has publicly encouraged steady but
deliberate change in the economic mechanism but has met with
opposition in the Politburo and economic bureaucracy. He has called
for changes to be institutionalized as part of the Five-Year Plan for
1986-90, but statements by other leaders and reporting from other
Soviet political observers indicate that the Politburo is undecided on
the form and extent of such change.
Having served as Ambassador to Hungary, party overseer of
relations with Eastern Europe, and head of the KGB, Andropov will be
sensitive to events in Poland. Like his Politburo colleaaues, he is
concerned about the potential for social upheaval.
Burlatskiy's caution on the issue suggests that agreement within
the leadership is unlikely in the short term. The improvements in
economic performance may strengthen the position of those leaders
who have expressed reservations about the need for change.
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PHILIPPINES: Shortage of Imports
The collapse of credit for imports is deepening Manila's financial
crisis and could cause serious new economic disruptions and new
political problems for President Marcos in the weeks ahead.
The US Embassy reports that the banking system has stopped
issuing new letters of credit because of the shortage of foreign
exchange. Philippine officials are reportedly threatening to institute a
foreign exchange rationing system for importers if the banks do not
make more foreign exchange available in the next few days.
Shortages of imported goods are not yet evident, and there is an
80-day supply of oil. The US Embassy says, however, that the prices
of many goods sold from inventory stocks are rising rapidly in
anticipation of shortages later. The government has frozen the prices
for goods it considers to be affected by speculative buying or by the
21-percent devaluation earlier this month
The Labor Minister is warning that the government may ration oil
products to stretch supplies while prices are frozen. The Philippine
National Oil Company, meanwhile, continues to fall farther behind in
its payments to major US banks, and its efforts to raise new money to
finance oil imports have met with little success.
foreign exchange will remain scarce
roug a en o e year. entral Bank reserves have fallen from
slightly over $2 billion in mid-August to about $300 million. Interest
payments on the forei n debt are runnin about 180 million er
month
Comment: Manila has little choice but to tighten control over
foreign exchange if it wants to avoid serious economic disruption in
the weeks ahead. The public is becoming more angry about austerity,
and the government probably believes that some kind of foreign
exchange rationing system is preferable to further devaluation and
the political turbulence that would acc m ny severe shortages of
goods
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USSR-EASTERN EUROPE: MBFR Walkout Threatened
An East European military representative at the MBFR talks told a
Western delegate on Wednesday that there might be no Eastern
representatives in Vienna after 21 November, depending on the
outcome of the West German Bundestag debate on INF scheduled to
conclude on that date. On Tuesday, the East moved somewhat closer
to the West's positions on MBFR. It modified both its opposition to
specifying the number of troops needed to reduce Eastern and
Western forces to equal levels and its insistence that Western
observation of Eastern reductions would be by invitation only.
Comment: Although the East has threatened before #o walk out
of the negotiations if NATO INF deployments occur, this warning is
explicit and the first to give a specific date. The East may have timed
its moves on Tuesday to create the impression in Western Europe
that US intransigence on INF may force suspension of MBFR just as
progress is being made.
PERU: Military Concern About Terrorism
The Peruvian armed forces are again urging the civilian
government to let them undertake more aggressive counterterrorist
operations. Military leaders believe that attacks by Sendero Luminoso
insurgents this month in Lima and in the highlands emergency zone
are the start of a cam ai n to disru t munici al elections scheduled
for 13 November.
Comment: Recent actions by the insurgents have demonstrated
their ability to recover from heavy losses inflicted by the security
forces. The elections almost certainly will be held as planned, but the
likelihood of increasing violence over the next few weeks will add to a
growing climate of fear. This and continuing pressure from the military
probably will lead the government to give the armed forces even more
freedom of action.
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The Lebanese economy has declined rapidly in recent months,
according to a banking source of the US Embassy. Unforeseen
expenditures to resupply the Lebanese Army are expected to
increase more than twofold the projected government budget deficit.
Lebanese bankers, who already hold more than two-thirds of the
government's debt, reportedly are reluctant to make additional loans
to President Gemayel's government. Cash remittances from abroad,
the most important source of foreign exchange, have also dropped in
recent months to less than one-third their norm
$1.4 billion decline in foreign exchange reserves
Comment: The economy will continue to deteriorate unless the
national reconciliation talks make early progress. Even if an
agreement on power sharing were worked out, Lebanese and foreign
investors probably would want to wait until success of the agreement
was proven before investing in reconstruction.
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OMAN-SOUTH YEMEN: Resumption of Relations
The reestablishment of diplomatic relations between Oman and
South Yemen, announced yesterday, still leaves many bilateral
problems to be res Iv . T rder disputes are scheduled to
begin Saturday.
Comment: Both nations hope that the move will lead to new aid
from the Gulf Cooperation Council. The announcement, originally set
for August, was delayed by South Yemen's unhappiness over Oman's
military exercises with the US. Oman still distrusts Aden and is likely
to procrastinate on exchanging ambassadors and on negotiating on
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Special Analysis
USSR-PALESTINIANS-SYRIA: Soviets Back Away From Arafat
Moscow has distanced itself from embattled PLO chief Arafat as
the challenge to him from Syrian-backed radicals in the organization
has grown. The Soviets apparently still view Arafat as the preferred
PLO leader and do not relish the prospect of Syrian domination of the
organization. They do not, however, want to alienate President Assad
and thereby endanger what they view as their best remaining channel
for developing influence in the Middle East.
Arafat expressed bitterness early this month over what he termed
his abandonment by the USSR and the Arab world, according to a
source of the US Consulate in Jerusalem. Moscow ao~arently has not
responded
to is t in y vei a pu is plea last week for oviet aid
against Syria. In contrast to three visits by his top aides in June and
July, there have been no subsequent high-level visits to the USSR
since, and Soviet media recently have ignored the PLO's facti
struggles and have avoided referring to Arafat as PLO chief
The Soviets' Changing Position
Moscow began offering discreet support for Arafat's leadership a
few weeks after the PLO rebellion erupted last spring. The Soviet
media appealed for an end to the PLO dissension and indirectly
criticized Syrian and Libyan intervention in the dispute.
rav a s top i e ast commentator, after Arafat's expulsion from
Syria in late June, accused "some Ara fi ures" of aggravating the
PLO's internal strains.
Moscow's decision to move away from Arafat first became
evident during Foreign Minister Gromyko's talks in July with Faruq
Qadoumi, head of the PLO's Political Department. Soviet accounts
said Gromyko had suggested that the PLO cooperate with Svria.
intimating Arafat should make his peace with Assad.
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A subsequent radiobroadcast cited the PLO dissidents'
displeasure at the talks last spring between Arafat and Jordanian
King Hussein concerning possible PLO participation in the US-Middle
East peace initiative-a dissatisfaction Moscow itself had freauent~v
Weighing Soviet Interests
Moscow probably hoped its modest lobbying during the summer
on Arafat's behalf could help fend off Syrian control of the PLO. It
openly opposed Syrian efforts to dominate~the PLO during the
Lebanese civil war in 1975-7 ly still would like to avert
Syrian control of the PLO.
Moscow has tried to develop influence in the Arab world mainly
by supporting the Palestinian cause. Soviet leaders probably still
believe that the USSR's influence can best be enhanced if both Syria
and an independent PLO are committed to Soviet participation in an
Arab-Israeli peace settlement.
Moscow also appears concerned that Arafat's eclipse could
splinter the PLO and that Palestinians in the West Bank and Gaza
might then negotiate with Israel, either through Jordan or directly.
Nevertheless; the Soviets apparently concluded during the
summer that their efforts to reconcile Assad and Arafat were likely
only to alienate Damascus-Moscow's most im or
Arab world.
acknowledged that the Soviet mediation effort had failed.
Soviet concern presumably has been heightened by US-Syrian
discussions on Lebanon.
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Outlook
The Soviets are likely, at least for the time being, to continue their
hands-off approach toward the Assad-Arafat rift. They would attempt
a serious mediation effort only if Assad seemed receptive. Moscow
probably will avoid openly condemning Arafat's opponents, both to
maintain Soviet-Syrian ties and to avoid alienating PLO factions that
may emerge victorious.
If Arafat survives as PLO chief, Moscow is likely to bank on the
PLO's dependence on Soviet weaponry and on the widespread
hostility in the PLO toward the US Middle East peace plan to assure
that Arafat maintains close relations with the USSR. Moscow might
try to mollify him with increased military and diplomatic support
against Israel.
Nevertheless, in the long term, Soviet concern that Arafat will not
support their interests could induce Moscow to support more radical
PLO leaders committed to Soviet participation in resolving the Arab-
Israeli dispute. Such a shift would become likely if Moscow calculated
that a new leadership could dampen dissension within the PLO, assert
some measure of independence from Svria. and acquire broad
support in the Arab world
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