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February 7, 1975
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,classified in Part - Sanitized Copy Approved for Release 2011/11/07 : -RDP86T00608R000300020007-1 Secret Weekly Summary Secret No. 0006/75 February 7, 1975 Copy N2 65 )eclassified in Part - Sanitized Copy Approved for Release 2011/11/07 : A-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 CONTENTS (February 7,1975) The WEEKLY SUMMARY, issued every Friday morning by the Office of Current Intelligence, reports and analyzes signif- icant developments of the week through noon on T hursday. I t frequently includes materi,i coordinated with or preparr'd by the Office of Economic Research, the Office of Strategic MIDDLE EAST Research, and the Directorate of Science and Technology. AFRICA Topics requiring more comprehensive treatment and therefore published separately as Special Reports are listed in the contents. 25X1 EAST ASIA PACIFIC WESTERN HEMISPHERE 1 Brezhnev Absence Causing Unease 2 Portugal: Political Turbulence 4 Vietnam: More Action Ahead 5 Gromyko's Middle East Travels 6 Ethiopia: Fighting in Eritrea 7 Iraq: No Kurdish Counter-Offensive 8 Mozambique: Five Months to Go 9 Cambodia: A Turn for the Worse 10 Thailand: Search for a Government 10 South Korea: Pak's Referendum 11 North Korea: Troubles with Trade 13 Indonesia: The Timor Problem 14 China: Putting It Together 18 EC: Developing Tie:; 19 Spain: Political Stirrings 20 Latin America: Derailed Dialogue 21 Venezuela: Image Building 22 Argentina: Lopez Rega Controversy 23 Chile: Still Trying 24 Brazil: Hitting the Communists 25 Oil: Paying the Bills Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 : A-RDP86T00608R000300020007-1 SECRET ',25X6 Br, ezhnev's Absence Causing Unease Soviet party leader Brezhnev's absence from public view has now stretched to almost seven weeks. His apparent inability to take part in the daily affairs of the party has probably resulted in some erosion of his personal authority and caused some unease within the party, but there has been no evidence of any challenge to his position. Brezhnev last appeared in public on Decem- ber 24. and since then he has mace only two semi-public appearances. There has been no offi- cial explanation for his absence Around mid- January, however, the emphasis in the rumors about Brezhnev began to shift from speculation about his health to his political well-being. Specu- lation in this direction fed on the setbacks to policies closely associated with Brezhnev: abroga- tion of the 1972 US-Soviet trade agreement, and the decision by the December plenum of the Central Committee to emphasize producer-goods industries over consumer-good: industries in the 1975 economic plan. On January 8, an unusual Tass statement denied Western reports of political instability in the USSR and ridiculed those who publicize them. This has been followed by a concerted effort to keep Brezhnev's name before the public, with emphasis on his contribution to detente and on the importance of his role in past aid future summit meetings. Recent speeches by Brezhnev's Politburo colleagues have also endorsed detente and have referred favorably to the General Secre- tary's personal role in the conduct of Soviet af- fairs. Meanwhile, Soviet leaders have attempted to create an atmosphere of normality in Moscow. Last month, three members of the Politburo made previously scheduled trips abroad, and Prime Minister Kosygin apparently spent most of January on vacation in the Caucasus. This week, Foreign Minister Gromyko made a swing through the Middle East, and other political leaders also seem to be following a business-as-usual routine. In spite of the atmosphere of normality, there have been some indications that Brezhnev's Zil limousine on Kutuzovsky a ospekt, January 30 AP speculates that Brezhnev could be the passenger Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 IA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07: CIA-RDP86T00608R000300020007-1 continued absence from the helm is causing con- cern among the ranks, and that the first tentative steps at political maneuvering within the leader- ship may have begun. On January 21, Pravda published a long article noting that the strength of the leadership is its collectivity. The article is somewhat ambiguous, but it may have been in- tended to reassure the rank and We that no one is indispensable and that continuity of leadership is assured by the collective, even in the absence of one of its members. The author's favorable refer- ence to long-range planning-which implies sta- bility and continuity-tends to support this interpretation, as do references by other leaders to Moscow's determination to continue detente. In Brezhnev's absence, leaders outside the charmed circle of the Kremlin have received varied treatment in the Soviet press. V. V. Shcherbitsky, Ukrainian party first secretary and a full member of the Politburo, appeared in Pravda last month in an unfavorable light. Pravda reported that it had received a letter from the Ukrainian leader acknowledging the correctness of earlier criticism of affairs in his republic. On the other hand, the newspaper carried an article by G. V. Romanov, first secretary of the regional party organization in Leningrad and a can,, 4Mate member of the Politburo, whi: h touted his region's economic success in 1974. Shcherbitsky and Romanov have sometime been listed among possible successors to Brezhnev, and Pravdt!'s dif- ferent treatment of the two men may be t'ne first indication that there is maneuvering for v~osition within the leadership. Such maneuvering, never far beneath the sur- face, can be expected to increase in the coming months as preparations begin for the next party congress, which should be held early in 976. The picture is complicated, however, by th,a length of Brezhnev's absence, by his recent political set- backs, and by the doubts that have been raised about his physical well-being. On prv..vious occa- sions, Brezhnev hay disappeared for .;c;veral weeks and then reappeared without any alparent dim- inution of his authority, but if he hcpes to regain the momentum he seems to have lost this time and to write the script for the next congress, he must reassert his political vigor fairly soon. 25X1 PORTUGAL: Political Turbulence Rumors of coups and cabinet reshuffles con- tinue to circulate in Lisbon as virtually all of Portugal's main ruling bodies deliberate what has been described as "revolutionary" legislation. The outcome of these deliberations, and particularly the final form of the economic plan, should pro- vide some insights into the relative strengths of leftists and moderates in Portugal. The Armed Forces Movement's Superior Council met often in the past week to draft the ground rules for the election campaign-due to begin on March 4-and to discuss the economic plan. The council also is expected to define "pluralistic democracy" and the country's "antimonopolistic nature." The council's deci- sions will, in turn, be presented for approval to Page 2 the cabinet and to the Movement's 200-member General Assembly late this we':k. Press accounts of the assembly's agenda indicate that it will discuss the economic plan and the establishment of the Movement as a permanent institution as well as its role in the constituent assembly. The draft economic plan has been the sub- ject of bitter debate for many months. Leftists have argued for the nationalization of most private industry and for redistribution of the country's arable land. Moderates acknowledge that too much of the country's wealth is con- cen?-:.i'c' in too few h, nds, but have argued for gradual solutions tha: will avoid upsetting the nation's fragile economy. SECRET Feb 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07: CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 : 25X1 Anti-NATO demonstrators in Lisbon to these conflicts, the Movement's leftist- oriented Coordinating Committee has submitted a draft proposal to the Council of State outlining changes in the constitution. The proposal would vastly increase the powers of the origina: seven- man junta, giving it the authority to legislate, to outlaw organizations not in sympathy,with the "progressive forces," and authority to punish "reactionary" elements. The leftists may hope that such an arrangement would allow them to circumvent and thus neutralize the power of moderates in the Superior Council and assembly. Presumably, they believe that the junta's smaller size would make it more manageable and easier to influence. A report that the Soviets have asked for port facilities for their Atlantic fishing fleet has been denied by the Portuguese Foreign Ministry and by Moscow. The Portuguese are seeking advice on the restructuring of their fishing indust.?y, and it is possible this subject was explored with the Soviets. A Norwegian mission arrived in Lisbon on February 3 to study the problems of the Portuguese fishing industry. A NATO naval exercise off the Portuguese coast, meanwhile, provided ultra-leftists with an excuse to demonstrate against what they billed as an act of political intimidation. The Com- munist-dominated press has reported the ma- neuvers in a sensational fashion, but moderate papers have been restrained in their comments. Separate statements explaining the exercises- issued by Minister Without Portfolio Alves and by the Armed Forces General Staff-put the issue in proper perspective. SECRET E Page 3 WEEKLY SUMMARY Feb 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07: CIA-RDP86T00608R000300020007-1 I SECRET 25X1 25X1 VIETNAM: More Action Ahead The week before Tet, the three-day Lunar New Year holiday beginning on February 11, witnessed a temporary lull in fighting, but most indications point to intensified action resuming again in the weeks ahead with heavy Communist attacks directed at several vulnerable areas throughout the country. The principal area of concern focuses on Tay Ninh City. Communist propaganda has been warning residents of heavy attacks. There are also tentative indications that units from the Commu- nists' 9th Division are shifting from their present positions in Binh Duong Province to spearhead the attacks. While tho-o reports cannot be con- firmed, the 9th is the only Communist unit in the regiun that has not seen combat recently and its units are believed fresh. Several reports also indicate that Viet Cong sapper units are making preparations for terrorist actions in Saigon. Members of these units report- edly are currently stocking supplies and muni- tions, identifying targets, and improving access routes into and out of the capital. While the government has taken steps to contain such activ- ity, it would be neariy impossible to prevent scattered attacks. There also are inclicatijns that the Commu- nists are preparing attacks against the Kien Tuon rovincial capital of Moc Hoa. In the northern section of the country, gov- ernment commanders are worried about poten- tially heavy Communist assaults against provincial capitals in the central highlands near the Cam- bodian border. The recent deployment of the North Vietnamese 968th Division into the Kon- tum/Pleiku province area has heightened this con- cern, along with tentative indications that another division--the 320th-may be moving south to at- tack targets in Darlac and Quang Duc provinces. In Military Region 1, some intensified action is anticipated in Quang Nam and Quang Ngai prov- inces, but government commanders remain confi- dent that if the Communists do not reinforce units in position, they can contain the attacks. 25X1 Weather conditions will pose no :onstraints. Good fighting weather will continue from the highland provinces to the southern delta until April or May. The heavy monsoon in the northern coastal areas will begin tapering off soon, and good weather will begin in March-7--l Rice paddies and canals in the delta SECRET ? Page 4 WEEKLY SUMMARY Feb 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07: CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 ?: SECRET GROMYKO'S MIDDLE EAST TRAVELS Foreign Minister Gromyko appears to have made little progress in bridging the differences between the USSR and Egypt during his visit in Cairo this week. He avoided acrimonious ex- changes with President Sadat that could have led to a further deterioration of relations, but the USSR and Egypt remain apart on key issues such as the Geneva conference and Soviet arms ship- ments. Although the Soviets seem resigned to the possibility of a new Egyptian-Israeli disengage- ment agreement, Moscow is still seeking some commitment from the Egyptians that the Soviets will be accorded a significant negotiating role in the subsequent rounds of negotiations. Earlier in the week, in an attempt to put pressure on Cairo, Gromyko and the Syrians had called for a re- sumption of the' Geneva talks within one month. The Egyptians, however, resisted this Soviet gam- bit and agre-sd only to a less specific formula- tion-the "immediate" resumption of the talks. In the statement marking the end of the Cairo visit, the Egyptians conceded that Moscow should have a role in all aspects of the Middle East settlement. Sadat, nevertheless, made plain that he intended to continue to rely on Washing- ton's step-by-step approach to negotiations. Im- mediately after meeting with Gromyko, Sadat publicly stated that he continued to welcome the visit of Secretary Kissinger. Sadat noted that progress had been made on some bilateral issues, but added that others would have to wait until General Secretary Brezhnev visits Egypt. Gromyko clearly was unwilling to make any firm commitment regarding a future Brezhnev trip to Egypt; the joint statement on the Gromyko visit refers only to the importance of Brezhnev-Sadat exchanges. Sadat's public re- marks suggest that Cairo is once again making an issue out of a Brezhnev visit. One of the unresolved issues Sadat un- doubtedly had in mind was his demand for new Soviet agreements on arms. Although Moscow has said it would deliver arms ordered prior to the October war-and apparently did deliver some MIG-23s on the eve of Gromyko's arrival-it has refused to make new commitments. The issue of Egyptian payment of its arms debt also appears to remain unsettled. Gromyko's stay in Damascus seemed mainly aimed at strengthening his hand for his subse- quent discussions in Cairo. Although Gromyko reiterated the Soviet commitment to Syria's de- fense and signed some previously negotiated eco- nomic and scientific agreements, apparently no new aid was promised. While in Damascus, Gro- myko met with fedayeen leader Yasir Arafat and in a banquet speech referred, for the first time, to a Palestinian "state." At other times during his trip, however, Gromyko reverted to the usual vague Soviet formulations. This suggests that, at least for the present, Moscow is not initiating a major ush on this issue. MALAGASY REPUBLIC: NEW LEADER 25X1 General Ramanantsoa, head of the Mala- gasy government since 1972, stepped down on February 5. He handed over full executive powers to Lt. Colonel Richard Ratsiman- drava, head of the gendarmerie and former interior minister. Ramanantsoa had dis:..olved his cabinet late last month to diminish mounting political tensions caused in part by a resurgence of differences between the coastal tribes and the Merina tribes of central Madagascar. Early in January, officers from the coastal tribes had unsuccessfully attempted a coup. In addition, the economic situation was getting worse, and personal rivalries within the government were growing more acute. Ratsimandrava, though a Merina, has good relations with the coastal tribes that dominated the government until Ramanant- soa came to power. These tribes have been given greater representation in the new cabi- net. The new government's relations with the US are not expected to undergo any funda- mental change. Ratsimandrava has said pub- licly that he will continue Ramanantsoa's nonaligned policies. SECRET D- c wFFKI v ci I K A K A A v Feb 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 : ETHIOPIA: FIGHTING IN ERITREA Serious fighting between government forces and insurgents broke out again in Erirrea Province last weekend after a lull of many months. Neither side is likely to score a decisive victory in the near future, and the resumed fighting could last for months if not years. In the fighting this week, the army suffered serious setbacks, forcing the ruling military coun- cil in Addis Ababa to send reinforcements. Gov- ernment forces will probably be able to maintain control of the provincial capital, Asmara, but they are not capable of preventing continued insurgent infiltration and terrorist attacks. The rebels probably have the capacity for increased activity, especially now that their twc rival fac- tion~ are apparently cooperating against the gov- ernment. Their next targets may be the Red Sea ports of Massawa and Assab. A rebel attack on Ethiopian troops and installations in Asmara started the hostilities. The attack was evidently designed to pre-empt a re- sumption of operations by the army. Two days earlier, the council had announced it was ready to use force against the rebels. The army overreacted and went on a shoot- ing spree, firing indiscriminately at civilians and buildings. Casualties reportedly ran into the hundreds. Troops conducted a house-to-house search for arms and rebels, detaining many Eri- treans, and also engaged in considerable looting. Most of the firing in the city ended by February 3, although sporadic shootinj continued. Asmara's electricity and water systems were dis- abled; by the end of the week, the water shortage was becoming critical, and food supplies were running low. On February 1, the army began attacking rebel concentrations in the environs of Asmara. Air force planes made numerous sorties and bombed some villages. Most of the heavy fighting took place north of the city. The army suffered heavy casualties attempting to dislodge the rebels, who have spent the past several months estab- lishing strong positions around Asmara. An armored column with an estimated 600 reinforce- ments, which had left Addis Ababa before the fighting began, was stalled by an ambush about 20 miles southwest of Asmara. The army has airlifted as many as 1,500 troops into Asmara, however, brinring the total strength of regulars in the province to about 11,000-about one third of the army. Most of the reinforcements came from the Addis Ababa area, but some were also brought in from other north- ern provinces. Fighter aircraft were sent from the main air base near Addis Ababa. Serious deficiencies in the Ethiopian army have been pointed up by the new fighting. Lead- ership reportedly is poor, and units have had difficulty coordinating their activities. Troop dis- cipline has been a problem, too. The army chief of staff apparently has arrived in Asmara to make a personal effort to remedy these deficiencies. For the provisional military government, the Eritrean conflict has become an acid test of lead- ership. A serious defeat in the field would almost certainly trigger a military revolt against the present rulers. In addition, the transfer of a large number of troops from Addis Ababa might en- courage some opponents of the council to at- tempt a coup regardless of how the fighting goes. Despite the dangers inherent in the Eritrean situation, the council is pushing ahead with its plans to impose a socialist regim.D on Ethiopia. A policy statement issued on February 3 announced the nationalization of 72 businesses and the acquisition of a controlling interest in 29 others. The edict aff3cts textile, metal, and other enter- prises. The declaration condemns the middle class as the principal prop of the old regime and glorifies the workers, peasants, soldiers, and intel- ligentsia as spearheading the Ethiopian revolution. While inviting foreign participation in the econ. omy, the declaration accuses foreign investors of exploiting Ethiopia in the past and states the government's intention to maintain strict control over their activities in the future. SECRET I Page 6 WEEKLY SUMMARY Feb 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07: CIA-RDP86T00608R000300020007-1 IRAQ: NO KURDISH COUNTER-OFFENSIVE Kurdish forces apparently will not launch a major winter counter-offensive to retake ground lost to government troops last summer and fall, as they have done in past Iraqi-Kurdish wars. This time, both sides seem content to stay in their present positions and wait for spring. The rebels apparently continue to pin their hopes on forcing a change in Baghdad's Kurdish policy, or perhaps even a change in regime, by Page 7 inflicting an unacceptable level of casualties through shellings, brief attacks on Iraqi forward positions, and guerrilla actions in rear areas. The Kurds also occupy good defensive positions and dislodging them would be costly. Baghdad seems intent on winning a military victory, however, and appears ready to resume its offensive in the spring. Kurdish military inactivity this winter will make the role of Iran even more crucial in the coming months. The flow of refugees, like the fighting, has slowed considerably. Local officials expect it to resume when the weather improves. Some refugees from northwestern Kurdistan were caught on the Iraqi side of the border by the onset of winter weather. There are now an es- timated 137,000 Kurdish refugees in camps in northwestern Iran. 25X1 SECRET WEEKLY SUMMARY Feb 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07: CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 : CIA-RDP86T00608R000300020007-1 SECRET MOZAMBIQUE: FIVE MONTHS TO GO Prime Minister Chissano and other leaders of the four-month-old transitional government are projecting an image of calm purposefulness as the territory moves toward independence, scheduled for June 25. The future, however, is clouded with political and economic uncertainties. The Front for the Liberation of Mozam- bique-the nationalist group that dominates the transitional government-has been trying to broaden its political base in the territory. Front officials are giving high priority to political mobilization, and party functionaries are fanning out over the countryside preaching "Unity, Work, and Vigilance" and pushing literacy and health campaigns. These efforts apparently have won the Front some new backers. alth~, _;l~ many people may support the organization only because it is the sole legal political party. In recent weeks, the government has devoted much of its time to economic matters. A Portu- guese delegation arrived on January 0 to discuss economic issues, including the estahlishment of a central bank and the future development of the Cabora Bassa hydroelectric project. The UN also is sending an economic survey team to the ter- ritory, but specialists in Lisbon and Lourenco Marques are reportedly encountering difficulties in collecting reliable statistics for potential donors of aid. Meanwhile, signs of economic decline are becoming visible throughout the territory, accord- ing to the US consul general. Focd staples are in short supply, transportation facilities are con- gested, and industries are unable to obtain spare parts and raw materials. Unemployment and labor unrest are widespread in the major urban centers. In rural areas, farmers are cutting back on planting, and many white-owned farms and rural stores are being abandoned. Chissano's public statements have been marked by pragmatism and moderation, and the government has urged everyone to work for a strong, multiracis! society. Nonetheless, there has been a significant exodus of whites-perhaps in excess of 20,000-since Portugal agreed last September to turn over political power to the Front. This exodus has seriously drained the ter- ritory of professional and technically skilled people as well as of needed white- and blue-collar workers. The government hopes many whites will come back if the security situation remains calm and the economy picks up. Its efforts to encour- age their return have not been helped, however, by vague allusions from officials to future eco- nomic and social changes and by statements from Front President Samora Machel that reflect a predilection for Marxism. Machel will probably become the first president of Mozambique when it gains independence. Public order has not beef) seriously disturbed since a short-lived outbreak of violence last Octo- ber that was sparked by a clash between Portu- guese commandos and troops of the Front. Portu- guese forces are being gradually withdrawn on schedule and will be gone by June. Meanwhile, Front and Portuguese troops are cooperating in enforcing strict security measures. Many blacks and whites have been detained on vague charges of "opposing the decolonization process." For the most part, these charges are leveled at mem- bers of anti-Front political groups that emerged following the coup in Lisbon last year and are now defunct. Racial tensions remain a potentially serious problem for the government, particularly in northern Mozambique where suspicions between the two races have always been strong. There, many whites have abandoned the towns and cities. Anti-white wa!I slogans are becoming com- mon, and curfews are being imposed against whites in certain areas. In such an atmosphere, rumors or a minor incident could s ark a serious racial clash. 25X1 SECRET Page 8 WEEKLY SUMMARY Feb 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 : CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 CAMBODIA: A TURN FOR THE WORSE Government fortunes sagged this week as the Khmer Communists began mining the Mekong River. On February 3, :nines destroyed three tugs in a convoy returning to South Vietnam and two days later, mines sank three more tugs in a small convoy attempting the run upriver. The remnants of the latest convoy turned back to South Viet- nam. Civilian crews and shipowners may now refuse to risk the trip upriver, no matter what monetary incentives are offered. Cambodian navy personnel could man civilian vessels, but getting the permission of civilian owners for them to do so could be difficult. Even if civilian owners turn their vessels over to the navy, the Cambodians will have trouble accumulating enough tugs and cargo vessels to move the necessary supplies upstream. Already, three tankers, two coastal steamers, six tugs, and a number of barges, junks, and navy craft have been lost. Most of the vessels that made it through have been heavily damaged. The region is being scoured for more cargo barges-which are less vulnerable to shellings than ships-but it may be impossible to round up enough to carry all of Phnom Penh's supply requirements. US officials have informed the government that a major airlift of supplies into Phrom Penh is not a realistic alternative to the Mekong supply route, and military commanders can be expected to make a major effort to improve security along the river. Beachheads along the lower reaches of the river will probably be reinforced, and the navy will use what little mine-sweeping equip- ment it has to try to clear the shipping channel. A massive infusion of manpower could probably push the insurgents back from the river banks, but unless Communist pressure against Phnom Penh's outer defenses eases, such large numbers of troops will not be available. The Khmer Communists have been on the attack in the Phnom Penh area for almost five weeks. The Cambodian army has done a credit- able job in containing the insurgents in most sectors around the capital, but has been unable to gain the upper hand. Some army units-particu- larly the 7th Division manning the city's north. western defenses-are being chewed up. Govern- ment commanders are shoring up weak points with units from less active fronts. Reinforcements will begin to run short, however, if the Commu- nists sustain their attacks. From their footholds near the city, insurgent gunners have launched daily attacks against Phnom Penh proper and outlying facilities- -including Pochentong airport. Nearly 500 rock- ets have hit in and around Phnom Penh since the beginning of the year, according to government figures. Given the volume of fire, damage has been relatively light, but the psychological impact is beginning to show. On February 5, the French embassy began advising members of the capital's sizable French community to be prepared to evac- uate dependents. The departure of large numbers of French could precipitate an exodus of foreign- ers that would cause government morale to drop further. The supply situation in Phnom Penh is still tolerable, but will not remain so for long. The three convoys in January delivered about a two weeks' supply of ammunition and rice. Ammuni- tion stocks on January 31 were sufficient to sus- tain the current level of fighting for three weeks, and stocks are being supplemented by air deliv- eries. With rationing, enough rice is on hand to meet military and civilian needs for over five weeks. Stocks of most fuels will last through the end of the month. Unless these stocks are replen- ished soon, the government will have to take drastic steps, such as closing rice-distribution cen- ters and ordering sharp cutbacks in civilian fuel consumption. Civilian morale will sink as such measures are implemented. The government's op- tions for conserving military supplies are more limited. If the situation deteriorates further, it may have to consider abandoning territory in the countryside in order to concentrate its resources on the defense of Phnom Penh and the Me- kong. 25X1 SECRET Page 9 WEEKLY SUMMARY Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 : CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 Thailand's newly elected National Assembly officially convened on February 5 amid con- tinuing behind-the-scenes negotiations aimed at forming a coalition government. Although Democrat Party leader Seni Pramot was given assurances of support from the political right last week in his efforts to form a government, he ran into trouble over the distribution of cabinet portfolios. One of the key prospective members of Seni's coalition, the conservative Thai Nation Party, threatened to stay out of the government unless given the powerful Ministry of Interior, a demand that the Democrats are unwilling to accept. Seni received another setback on Feb- ruary 6 when the Democrat Party's candidate for speaker of the lower house lost out to Prasit Kanchanawat, the candidate of the political right. Although the Democrats won the largest number of seats in the 269-man assembly-72- and may still be able to prevail upon parties of the political center and left to join in a coalition 25X1 in an effort to keep the conservatives out of office, it seems clear that their chances of doing so have eroded. Should the conservatives' maneuvers suc- ceed, chances for political stability over the short run would significantly increase. Although a con- servative coalition would be unpalatable to large segments of the press and intellectual community, it would enjoy the support of the military, a factor that is no less important today than when Thailand was governed by military rule. A Democrat-led coalition, lacking crucial conserva- tive support, would be extremely vulnerable to challenges from the conservative bloc in the lnwpr house of the assembl The government has taken careful measures over the past two weeks to ensure solid endorse- ment of "the major policies of President Pak" in the national referendum scheduled for February 12. Pak's reasons for seeking at least the appear- ance of voter approval at this time are apparently tactical. He hopes to: ? Put his domestic opponents on the defensive; they had been planning a major anti-government campaign this spring. ? Lay the public relations groundwork for new suppressive measures if an opposition campaign materializes. ? Demonstrate to audiences at home and abroad-particularly in the US-that his op- position, though vocal, has relatively little support nationally. The government program to assure Pak of his mandate has three main facets. The first is an all-out, though essentially conventional, effort to advertise the importance to the nation of Pak's leadership. This will be coupled with traditional political inducements, including bribes, to special interest groups. The second is an absolute prohibi- tion on public presentation of opposing view- points. 25X1 A basic defect of Pak's referendum process, of course, is that it will solve none of his political headaches. His opponents will continue to demand limitations on his power, no matter what the final vote tally. SECRET Page 10 WEEKLY SUMMARY Feb 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 : CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 SE U K E. is NORTH KOREA: TROUBLES WITH TRADE ----? Pyongyang is having difficulties financing its trade with Western countries. These problems could reverse North Korea's recent economic tilt toward the West as well as seriously dampen prospects for Pyongyang's ambitious industrializa- tion program. North Korea's success in industrialization has been linked to its ability to acquire foreign industrial equipment and technology on credit. In the past, the availability of Soviet and Chinese loans fluctuated with the changing political cli- mate, while the North's bellicose attitude toward South Korea during the 1950s and 1960s in- hibited financial arrangements with the West. In recent years, however, North Korea's persistent efforts to expand trade ties and its more flexible posture in a changing international environment have led to greater access to Western credit. Since early 1970, the North Koreans have signed contracts with firms in Japan and Western Europe for nearly $600 million worth of indus- trial plants and related equipment, most of which is being financed by medium-term credits. Credit financing for capital imports, as well as for record grain imports from France, Canada, and Argentina, permitted North Korea to run a 1973 trade deficit of almost $170 million with non-Communist countries. A surge in equipment deliveries raised the deficit to at least $300 mil- lion last year. In 1970 and 1971, this trade was roughly in balance. In the past several months, reports of Pyong- yang's payments problems have been increasing. By December, for example, North Korea was in arrears on a large number of letters of credit issued to Japanese and West European banks. In addition, in late 1974, reluctance by the French government to authorize further credits to North Korea was holding up the sale of French hel- icopters, and by the end of the year, North Korea was delinquent in the payment of $40 million in outstanding loans from French banks. In January, therefore, several West European banks were reducing loans to North Korea because it is a poor credit risk, and the Japanese Export-Import Bank had temporar;ly halted new plant credits to North Korea. Rising import payments and lower than ex- pected earnings from metals exports probably are major causes underlying Pyongyang's difficulties in handling payments to Western creditors. The North Koreans' inexperience in Western trade and finance has been compounded by the rising cost of Western machinery and credit over the past two years. Pyongyang probably also overes- timated its ability to expand export earnings, which did well until the Western industrial boom turned sour and prices for some of the North's principal export commodities fell. SECRET Page 11 WEEKLY SUMMARY Feb 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07: CIA-RDP86T00608R000300020007-1 ^ JCli1'S1= 1 PHILIPPINES Manadoj~ IIAI MAKE RA ` 7 TIMOR Djajapura PAPUA NEW A GUINEA 400 Darwin M., AUSTRALIA r' SECRET Page 12 WEEKLY SUMMARY Feb 7, 75 J~ A AO .J 1 '"+j'' IND N Area of map Declassified in Part - Sanitized Copy Approved for Release 2011/11/07: CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 : CIA-RDP86T00608R000300020007-1 INDONESIA: THE TIMOR PROBLEM Lisbon's decision to dismantle its colonial empire has rekindled irredentist feelings in Ja- karta toward Portuguese possessions on Timor Island. In addition to an emotional belief that Portuguese Timor rightfully belongs to Indonesia by virtue of geography and history, Jakarta's leaders fear that an independent Timor state would be inherently unstable and thus a threat to Indonesia's national security. Last year, President Suharto assigned his close confidant General Ali Murtopo the task of arranging the peaceful ab- sorption of Timor into Indonesia. Murtopo's assignment was to engineer the victory of pro- Indonesia forces in a plebiscite on the future status of Timor planned by Lisbon for sometime in 1975. Despite several months of clandestine effort by Murtopo's operators, the fortunes of Timorese elements favoring merger with Indonesia have not improved. Indeed, their cause was recently set back when the two largest political groups in Timor announced on January 22 that they were forming a united front to work for independence. Last week, a delegation of government offi- cials, businessmen, and political party representa- tives from Timor went to Lisbon to discuss the future of the overseas province. Jakarta has re- ports that the governor of Portuguese Timor has designated this group as a "constituent as- sembly," and the Indonesians fear that Lisbon may negotiate with the delegation for the im- mediate independence of Timor. The pro- Indonesia party boycotted the delegation to avoid being associated with any adverse decision it might reach. Jakarta is at a disadvantage in dealing with Lisbon. Indonesia has no embassy in Portugal and has only recently reopened diplomatic relations, wLich were severed in 1964 by Sukarno in protest over Portuguese colonial policies. Jakarta's lack of first-hand information on the situation in Lisbon fuels its concern about recent political develop- ments there. Indonesian leaders believe that the Communists are gaining ever greater influence in the Portuguese government and that this will ultimately spread to Timor as well. Inflammatory reporting by the Indonesian consul in Dili about an allegedly deteriorating situation there has reinforced Jakarta's fears about radical influence in Timor. The consul claims that pro-Indonesia Timorese are being terrorized and forced to flee, that consulate of- ficials are in danger and dependents should be evacuated, and that a group of leftist Portuguese noncommissioned officers is forming a revolu- tionary army in preparation for a coup. The recent developments in Timor and Lisbon can only strengthen the hand of those among Suharto's advisers who have been ad- vocating a military take-over of the province. In the past, Suharto has fended them off on the grounds that force would be unnecessary and could cause an adverse international reaction. If Lisbon's present discussions with the visiting Timorese delegates result in approval for early independence, however, the pressure on Suharto will intensify, and he may succumb to arguments that national security interests override possible diplomatic problems. SECRET I Page 13 WEEKLY SUMMARY Feb 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 SECRET CHINA: PUTTING IT TOGETHER Peking has appointed a new armed forces chief of staff and a head of the political depart- ment, thereby filling virtually all top military posts, most of which were vacated immediately after the fall of former defense minister Lin Piao in September 1971. There is still no formally designated head of the logistics department, but an aging military veteran has apparently been filling this slot for over a year. The two new appointees are civilians, which is unusual, but the move is consistent with the drive to strengthen party control over the mili- tary. The movement of civilians into the posts does not in itself assure the downgrading of mili- tary political power. Military men, especially in the provinces, have been tenaciously hanging on to their political influence despite strong pressure, in part from Chairman Mao personally, who still appears anxious to press the military to the limit. The risk of a showdown with the military ap- peared to be more than Premier Chou En-lai was willing to run last summer, and he and his sup- porters apparently chose to concentrate on completing preparations for the recently con- cluded National People's Congress. Now that the government house has been put in order, further maneuvering against provincial military com- mands may occur. The new chief of staff, Teng Hsiao-ping, is the ranking vice premier and has been filling in for Premier Chou En-lai since he entered the hospital last year. Teng had a distinguished mili- tary career during the civil war, but has been a party and government administrator since then. Teng has a well-earned reputation as a disciplinar- ian. Chang Chun-chiao, the new head of the Gen- eral Political Department, rose to the top party post in Shanghai as a result of the Cultural Revo- lution. He appears to .`lave been working fairly closely with moderate elements in the leadership in the past several years. A considerable number of Chinese officials have also reported that he has moved toward the political center. Chang has been the first political commissar of the Nanking Military Region since 1967, but he does not have an extensive military background. He is reported to have clashed on a number of occasions with powerful professional military figures in the Nanking region. Both Teng and Chang are members of the Politburo standing committee, and Teng was ele- vated to the rank of party vice chairman at a party plenum earlier this month. Their unusually high rank lends emphasis to the party's desire to assert control over the military establishment. Furthermore, Teng had been reappointed to the Politburo and named a vice chairman of the par- ty's military commission in conjunction with an earlier move to undercut military political power--the late December 1973 rotation of the military region commanders. 25X1 Teng's appointment appears to reflect the wishes of Chairman Mao Tse-tun Teng will probably enlarge his role in mili- tary policy-making, but it is not yet clear whether he will take a firm hand in day-to-day military affairs. His broad government duties would seem to demand much of his time, unless Premier Chou's health permits him to resume a more active role in government affairs. It is also possi- ble that Teng will rely heavily on his eight deputy chiefs of staff, several of whom possess the neces- sary experience to fill the job themselves. Chang Chun-chiao is now one of the handful of leaders who hold top party, government, and army posts. He seems to have been acting as party secretary general, but his new military duties do not conflict with his performance of this impor- tant party function. The concentration of power tends to increase central control, but it could create problems over the longer term if the in- cumbents depart the political stage, thus creating a number of vacancies that may be difficult to fill. 25X1 SECRET Page 14 WEEKLY SUMMARY Feb 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 ICIA-RDP86T00608R000300020007-1 Turkey has said it will review its ties with NATO and is considering retaliatory moves against certain US defense facilities in response to the cutoff of US military assistance that went into effect on February 5. At the same time, the Turks appear to be hardening their line toward Cyprus and may decide to proclaim the part of the island under their control an independent Turkish Cypriot state. In a press conference in Nicosia on February 5, Turkish Cypriot leader Rauf Denktash said that if Ankara agreed, he was ready to form an in- dependent state in the northern part of the island. He indicated that such a Turkish Cypriot state would exist autonomously until such time as it might be confederated with whatever the Greek Cypriots establish in the southern part of the island. A Turkish Foreign Ministry official sub- sequently claimed that Turkey had received no such proposal from Denktash but that Ankara was studying the text of the Turkish Cypriot leader's press statement. Strong indications that the Turks intend to harden their position on Cyprus in response to the US aid halt, coupled with a statement from former prime minister Turkish Cypriot Leader Denktash Ready to form an independent state Ecevit that "the legal framework of the Turkish Cypriot state should be established" before talks on a final settlement, suggest Ankara may favor the move. 25X1 were placed on alert in "antici- pation of announcements to be made on Feb- ruary 5." This suggests that the Turkish com- mander on Cyprus may have expected a procla- mation of independence and was prepared to make some adjustments in the cease-fire lines, possibly to create more secure boundaries or to include some desirable areas in the Turkish sector. In addition to considering what action to take on Cyprus, the Turkish government is study- ing various other retaliatory moves against the US for the Iialt in military assistance. Prime Minister Irmak's initial reaction was to lash out at the US Congress, terming the aid halt a unilateral aban- donment of obligations required by a military defense alliance and, therefore, an "unlawful act." He said the action would necessitate changes in Turkey's contribution to NATO, but the main impact would he on the US presence in Turkey. 25X1 Various possibilities appear to be under con- sideration, ranging from charging rent for US use of Turkish facilities to canceling some US base ri hts. the most likely reaction will be to extract rent payments from the US to offset the cost of purchasing military equipment elsewhere. The press in Ankara is reporting that other measures are under consideration, including call for an emergency meeting of the NATO defense committee and a ban on US Sixth Fleet calls at Turkish ports. Most observers expect a rapid rise in anti- Americanism that could bring demonstrations directed against US installations or personnel. So far, however, there has been no great public outcry, although the press has carried several hard-hitting stories and editorials. SECRET M Done 1L WFFUI V CI IMMMRV Feb 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 25X6 Next 1 Page(s) In Document Denied Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 EC: DEVELOPING TIES The EC completed negotiations last week on a comprehensive five-year trade-and-aid package with 46 African, Caribbean, and Pacific countries. It was immediately hailed by community officials as a model for the West's future relations with the Third World. Leaders on both sides expect the signing of the agreement in Lome. Togo, on Feb- ruary 28 to mark an important step toward the "equality" of re;ati,)ns hetween rich and poor nations. The agreement, to be known as the Lome Convention, provides for free entry to the EC of all industrial products and 96 percent of the agri- cultural exports of the 46 developing countries. Additional protocols were negotiated on indus- trial cooperation, financial aid, and-perhaps most significant as a precedent-a program that guaran- tees developing countries "stable" earnings from key commodity exports. EC association agreements. European industry has also become increasingly aware of its need to secure access to raw materials as well as to expand its overseas markets. EC trade with the African, Caribbean, and Pacific states is already substan- tial; the community absorbs over 50 percent of their exports, and supplies more than 40 percent of their imports. The most innovative provision of the new convention is the program designed to protect the developing countries from deteriorating terms of trade by stabilizing their export earnings. Twelve agricultural products and iron ore have been included in this scheme. In addition, over the next five years the EC will provide $4.1 billion in development assistance. This replaces the Third European Development Fund, which since 1969 has made almost $1 billion available to the signa- tories of the Yaounde Convention. Led by Senegal and Nigeria, the 46 were remarkably cohesive throughout the negotiations, given the complexity of the economic issues and the political diversity among them-in particular between the French- and English-speaking Afri- cans. This explains, in great part, the "generosity" of the community in the new arrangements. The agreement replaces the Yaounde Con- vention, which expired on January 31 tend linked the Nine with 19 African states. The Lome agree- ment establishes new ties between the Nine and 18 commonwealth countries that became eligihle for preferential treatment under the terms of Britain's accession to the EC. Also participating in the negotiations were Kenya, Uganda, and Tan- zania, which were already linked to the EC by a 1969 accord, and six independent African states, which had had no previous ties to the EC. The need for a new agreement grew out of the recognition that the addition of three new members to the community in January 1973 would require the renegotiation of the existing The most difficult negotiations centered on the price the EC will pay for imported sugar. Caribbean sugar producers, hoping to take advan- tage of still high world sugar prices, initially demanded four times the current EC price and guarantees on future sugar imports. Responding to pressure from UK refiners of cane sugar, the community agreed to guarantee the import of 1.4 million tons of sugar yearly at a price not lower than the EC support price. In separate negotia- tions, the UK agreed to pay more for its sugar than the community, but this was only about half that demanded by the sugar producers. Preferences for EC exports in the devel- oping-country markets-opposed by the US-were a highly political issue in the negotiations. In the face of French opposition, the 46 succeeded in eliminating any such reciprocal obligations from the new agreement. It is now up to the developing countries to grant reverse preferences it they wish, but only Senegal, the Ivory Coast, and pos- sibly one or two other states will do so. Both sides will meet regularly at the min- isterial and the ambassadorial level to administer SECRET Page 18 WEEKLY SUMMARY Feb 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 : CIA-RDP86T00608R000300020007-1 eclassified in Part - Sanitized Copy Approved for Release 2011/11/07 : Cl the agreement. In addition, they will also estab- lish a consultative assembly composed of mem- bers of the European Parliament and representa- tives a ointed by the developing stated. lend momentum to Arias' new law permitting associations. The law on such associations became effertive on January 12, but no significant group has vet applied. Moderate and liberal groups fear that their activities would be restricted by Franco's National Movement, to which the statute assigns supervisory responsibilities. If Fraga makes his move, however, several other prominent politicians may form their own asso- ciations. Prime Minister Arias must soon make a decision to expedite formation of political as.. sociations if they are to provide the means for liberalizing the political system as he intends. Meanwhile, his government's crackdown on strikers has helped diminish labor agitation, al- though this let-up may be only temporary. Meanwhile, the government's carrot-and- stick approach to labor problems may have been a factor in reducing the strike wave. The interior minister's declaration three weeks ago that the government will maintain labor peace and prevent labor disputes from disrupting public order has had an inhibiting effect on the workers. Manuel Fraga Iribarne, an ambitioLIs, reform- minded politician who is now Spain's ambassador to London, is reported to be ready to form a political association. He is holding up any an- nouncement, however, while awaiting a formal response from Prime Minister Arias to his demands for progress on a wide range of political, economic, and social reforms. It is not clear whether chief of state Franco is aware of Fraga's intentions, but Franco in the past has turned a deaf ear to such proposals. Fraga sounded out prominent government, military, and other figures during a visit to Madrid last month. He concluded that the government was favorably disposed toward his project and that Arras would provide guarantees assuring freedom of action. Fraga may settle for less than his maximum demands howeve If he is satisfied with the guarantees Arias offers, Fraga plans to return to Madrid later this month to announce his intentions. 25X1 Prime Minister Arias would like to see some- one of Fraga's stature launch an association to At the same tin,7, the government has been granting a significant number of compulsory arbitration decisions more or less favorable to the workers' demands. The government also unveiled its long-promised bill on labor relations, which will go to the Cortes for debate. Although the bill provides for improvements in working conditions and strengthens the workers' legal rights, it omits any reference to the right to strike or to worker participation in management. These key issues reportedly will be dealt with in future laws. One of the bitterest strikes-at an auto plant in Barcelona-has ended, reportedly because Spanish Communist Party members withdrew. They were the dominant element in the Workers Commission that was promoting the strike. The Communisis evidently decided that further strike activity at this time would be too costly. But the key grievance-the workers' charge that the of- ficial shop stewards elected four years ago no longer represented their interests-has not been settled. Although strike activity may taper off as more labor contracts are concluded, the failure to settle important grievances makes further flare- ups of labor unrest like) . SECRET eclassified in Part - Sanitized Copy Approved for Release 2011/11/07: * ' ' - Cl Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-R DP86T00608R000300020007-1 SECRET Latin America TRADE ACT DERAILS DIALOGUE n n The Latin Americans' continuing reaction against the newly passed US Trade Reform Act demonstrates their commitment to regional sol- 1 idarity, their rebellion against the traditional I 4q i ` t: world economic "order," and their impatience "" + x with US policy and priorities. A recent OAS res- olution against the act has mobilized further Latin pressure on this and other issues. 7,1 Clashing with the US-a technique favored ?~.. *.-~ `* by the more assertive governments in the area- discomfits some of the Latin countries, such as Chile and the smaller republics, but even these ~-.have come to value the force of a united stand. Consensus is difficult to rally among the Latins, - =, however, given their great differences in political outlook and economic conditions. But an issue like the trade act commands easy agreement as a symbol of all that is wrong, in their eyes, with USA treatment of the rest of the hemisphere. Specific grievances vary from country to country, but all ? generally fall under the broad notion that the OAS meeting in Atlanta, 1974 industrialized world makes a conscious effort to perpetuate a status quo in which the Third World Andean Pact, the Inter-American Economic and is denied access to power and development. Only Social Council, and a proposed summit meeting two Latin governments are affected by the trade of Latin and Caribbean presidents. act's provisions against OPEC, yet all are offended by the principle of retaliation, and many view the The next scheduled forum in which the overall character of the legislation as protec- Latins will meet en masse with the US is the OAS tionist. General Assembly in April. Although the OAS is widely regarded as an ineffectual organization, Even more than a reaction to the trade act the nLxt assembly promises to be lively. The itself, the unanimous OAS condemnation on agenda will encompass not only continuing issues January 23 was an expression of frustration over between the Latins and the US, but the still the non-productiveness of the "dialogue"-the touchy Cuba problem as well as plans to revitalize informal sessions with the US secretary of state the OAS and the election of a new secretary from which the Latins initially expected rapid general, whose role many would like to re-define. and dramatic results. The Argentines, weighing the possibility for a constructive dialogue against the risks of confrontation over the trade act and Some Latins still see promise for a rekindled the Cuba issue, decided-as host-to postpone the "dialogue" in the projected visit to several coun- next foreign ministers meeting set for March. tries by the US secretary of state. Even Peru, Most of the governments seem content to relegate whose relations with the US are under continuing inter-American discussion with the US to the strain and whose President prefers a "dialogue in OAS; they think it is up to the US, not Latin Spanish" among the Latins without the US and America, to set the dialogue back on track. The Brazil, has made a point of keeping an invitation trade act, meanwhile, has been placed on the en to the secretary. agendas of several all-Latin forums such as the 25X1 SECRET Pave 20 WEEKLY SUMMARY Feb 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 SECRET VENEZUELA: IMAGE BUILDING President Carlos Andres Perez' drive for Latin American leadership is gathering momen- tum, but his relations with the US are under severe strain. The Venezuelans are publicly elated with their recent success in rallying Latin Amer- ican condemnation of the US Trade Reform Act and the subsequent postponement of the foreign ministers conference, which is interpreted in Caracas as further enhancing Perez' prestige as a hemispheric leader. Local political support has been unanimous in describing the government's efforts as a "diplomatic triumph." Thus far, there has been little reaction in Venezuela to the two amendments recently introduced in the US Congress that would exempt Venezuela and Ecuador from provisions of the trade act, bit a few politicians have claimed that even with tu,e amendments, the act would still apply against other OPEC members and that the move was an obvious attempt to break OPEC unity. In the present atmosphere of suspicion and confrontation, this point could find official favor. Perez does not intend to back down in the dispute with Washington. Rather, there are indica- tions that he intends to pursue these issues at a number of forums this year. He has already an- nounced ie will attend thee OPEC summit meet- ing in Algiers, scheduled for early next month. The meeting is expected to focus on developing coordina,ked OPEC positions for discussions with oil importers. The gathering will give Perez an opportunity to achieve maximum publicity in seeking OPEC support for his current dispute with the US. In a related move, Perez has advanced the 'rimetable for a summit meeting of all Latin Amer- ican chiefs of state to be held in Caracas in March. An agenda has not yet been circulated, but Perez probabiy intends to have the gathering focus on proposals for reorganizing the OAS, establishing a permanent forum where Latin leaders can meet to discuss common problems, setting a fair market price for Latin raw material exports, and creating a Latin American economic system. At the meet- ing of Central American presidents last December in Puerto Ordaz in Venezuela, President Perez circulated the first elaboration of the proposal for a new, exclusively Latin economic organization that was launched by Mexican President Echeverria last summer. The group w..uld have a mandate to promote economic cooperation and development among Latin nations through regional programs and policy coordination. Perez undoubtedly sees it as an umbrella for various Perez addressing Puerto Ordaz meeting SECRET Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 : CIA-RDP86T00608R000300020007-1 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 : Venezuelan bilateral and multilateral initiatives as well as being a forum for discussions of the Latin American position on economic issues relating to the industrialized countries, particularly the US. But such a new organization, clearly identified with Venezuelan leadership, would also enhance Perez' efforts to establish himself more firmly as a Latin American leader. Notwithstanding the present controversy with Washington, Perez is intelligent enough not to want to jeopardize the economic interests of his country in a prolonged and venomous dispute with the US. Venezuela will need access to US technology, if riot capital, and the US will con- tinue to be the natural market for Venezuelan oil. Secure at home and with his international image enhanced, Perez can be expected to devote a large amount of his time in the next few months not only to the OPEC and Latin summit meetings but also to developing closer bilateral contacts with Third World and Latin nations. Several trips to Latin countries are already planned as well as visits to Paris, and possibly other European cap- itals. Relations with the US will probably con- tinue to be strained until a new relationshi has been worked out. ARGENTINA: LOPEZ REGA CONTROVERSY An effort probably was made List week, while Argentine President Maria Estela Peron was at an Atlantic beach resort, to clip the wings of her controversial adviser, Lopez Rega. The effort was apparently spearheaded by the military high command, which voiced concern about his ac- tivities to the President and appealed for a lessen- ing of his visibility in order to allay fears that he is running the country. The military leaders probably did not-and will not-press their case very hard because they fear this might cause Mrs. Peron to step down. Such a develournent could well present the armed forces with political problems that they still prefer to avoid. In any case, government sources are attempting to play down Lopez Rega's in- fluence and are lashing out about "rumor- mongering." Several ministers have denied that there was a struggle over the issue. Meanwhile, there is no evidence that Lopez Rega's power has, in fact, been curtailed. By his own statement, the President's chief aide has tried to dispel charges against him by denying that he has any political function, stress- ing that he is on an equal footing with other ministers, and insisting that his relations with the military are good. While he tried to assure the public that he intends to confine himself to his proper duties, the US embassy believes that his interpretation was based more on subterfuge than on fact. The President will probably ask Interior Min- ister Rocamora to take a more prominent hand in government affairs in order to move the spotlight from Lopez Rega. She has used this tactic in the past when the sniping at the presidential secretary threatened to undermine confidence in her gov- ernment. Indeed, an interview with the interior minister published on February 2 seemed to indicate that his standing had been boosted, ostensibly at Lopez Rega's expense. At the same time, Rocamora brushed aside charges that the formation of the new presidential secretariat was an exercise in empire-building. He explained that because Lopez Rega is the President's closest con- fidant, he is bound to come into conflict with others. It is very probable that Rocamora was acting at Mrs. Peron's behest to quash damaging rumors implying that a rift exists within the government. The major political actors, however, are not going to be fooled by cosmetic changes. As long as Lopez Rega maintains his hold over the President, he will cause strains amon the country's politiral forces. 25X1 SECRET Page 22 WEEKLY SUMMARY FeL 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 : Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 CHILE: STILL TRYING The military government's continuing effort to improve its international image has picked up some momentum as Santiago mounts strenuous diplomatic efforts to blunt attacks at the Geneva meeting of the UN Human Rights Commission. Twenty-six detainees, including several leaders of the Radical Party whose freedom had been actively sought by Venezuela, were tabbed for release and deportation to Caracas this week. Another list of 17 who have been processed for exile was disclosed, and the government an- nounced that 70 of the 100 persons on a previous list already have left the country. The prisoner release program thus far has almost exclusively benefited "detainees"-those arrested under the state of siege but not charged with specific offenses or brought to trial. The government apparently plans to broaden the pro- gram to include at least 1,000 persons already convicted and sentenced. Arrangements for the commutation of jail sentences to expulsion may already be in the works and recipient countries are being sought. The government also is trying to speed judicial processes-mainly in military courts-against persons charged and awaiting trial. There are indications that pressure is build- ing within the government to rein in the free- wheeling Directorate of National Intelligence, a security arm subordinate onl to the presidency Progress on prisoners and efforts to curb abusive practices notwithstanding, however, the government is far from complacent where internal security is concerned. Dragnet sweeps for common criminals and leftist fugitives were undertaken in Santiago late last month after a half-year hiatus. President Pinochet has promised new interim security legislation this month. It will probably be des;gned to fill gaps in existing laws until the eventual promulgation of an omnibus legal code. President Pinochet The Human Rights Commission meeting may help bring a modification in the state of sier;e and a restoration of procedural safeguards sus- pended since the military take-over almost a year and a half ago. The success of Chilean efforts to avoid a condemnatory resolution at the meeting probably will hinge, however, on Santiago's will- ingness to accept yet another international fact- finding mission. Previous government policy was one of almost automatic acceptance of such groups, but there have been recent intimations that future fact-finders must also demonstrate access to the Soviet Union and Cuba. The final decision on this sensitive point undoubtedly will be made personally by President SECRET Page 23 WEEKLY SUMMARY Feb 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 : Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 CIA-RDP86T00608R000300020007-1 SECRET Page 24 WEEKLY SUMMARY Feb 7, 75 Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 : BRAZIL: HITTING THE COMMUNISTS A recent crackdown on the Communist Party represents President Geisel's response to military hard liners who have been dissatisfied with what they perceive as his laxness in security matters. At the same time, Goisel may be using the opportunity to centralize his authority over internal security organizations and to warn those who take undue advantage of his modest liberal- ization efforts. Justice Minister Falcao, in a televised ad- dress, highlighted the recent capture of a number of members of the illegal Brazilian Communist Party and the seizure of printing presses used to produce the party's newspaper. Falcao urged all Brazilians to familiarize themselves with the de- tails of the government's action, which are being published. Although the Moscow-oriented party has long been docile, the aovernment at times moves to suppress it still further. By playing up its actions against the Communists, the government is going out of its way to praise the security forces. This, in turn, is meant to reassure hard liners that security interests are still receiving high priority. The US embassy reports press speculation that the justice minister's prominent role in an- nouncing the arrests signals the government's in- tention to centralize the administration of secu- rity matters. Until now, such problems have been primarily the domain of the armed services. A desire to centralize control of the many security organizations would be consistent with Geisel's operating style in other areas. Moreover, such a move would enable E r:silia to correct abuses of operational authority oy regional commanders now operating with virtual autonomy. Finally, Falcao's statement that the recent raids turned up information proving the party's "participation" in the elections could be designed as a warning to any congressman-elect contem- plating some provocative or controversial action- particularly when congress convenes in March. The same claim might also be used at some future time to buttress the government's case should it opt to remove a politician deemed unacceptable. 25X1 eclassified in Part - Sanitized Copy Approved for Release 2011/11/07 : Cl StUllt I OIL: PAYING THE BILLS Among the major developed countries, only Italy had a substantial problem paying its in- creased oil bill in 1974. The status of sterling in the international monetary system and London's role as a financial center enabled the UK to finesse the problem. France, partly because of its ties with Arab states, was able to cover its deficit easily. Canada, West Germany, and Japan main- tained relatively strong current-account positions, despite the oil price hikes. Italy, which had payments difficulties before the o i i price increase, encountered serious financing problems last year. It was able to bor- row only $2.5 billion from private financial markets, far short of enough to cover its $8-bil- lion current-account deficit. The balance was financed from official sources, including a $2-bil- lion, gold-secured loan from Wert Germany and a $1.9-billion credit from the E(.'. The IMF also loaned $1.7 billion, including $826 million from its oil credit facility. The United Kingdom had to deal with a deteriorating non-oil trade position in 1974, as well as a $5-billion increase in its oil bill. Its $12.1-billion trade deficit was partly offset by a $3.4-billion surplus on services. The remaining $8.7-billion current-account deficit was financed by an increase of more than $4 billion in OPEC sterlinq holdings and Eurodollar borrowing in excess of $2 billion. In addition, London used $400 million of a $1.2-billion loan from Iran as well as substantial amounts of private capital from abroad, obtained in part for North Sea oil development, to finance the current-account deficit. Japan was able to meet the $14-billion in- crease in its 1974 oil bill without serious dif- ficulty. Tokyo borrowed about $8 billion in the US and Europe to cover its deficit in the first half of the year. Later, slack domestic demand and favorable price trends for Japanese exports and non-oil imports permitted the non-oil trade bal- ance to be improved by nearly $13 billion. Tokyo also discouraged investment abroad, causing capital movement out of the country to fall sharply, and began to attract OPEC funds, both directly and in the form of deposits in Japanese banks abroad. France encountered little difficulty in meet- ing its $9-billion oil bill last year. The costs were partly offset by a $3.3-billion surplus in non-oil trade and services. Paris also relied heavily on Eurodollar borrowing and bilateral deals with OPEC to fund its current-account deticit of $5-7 billion. Early in the year, the French treasury floated a $1.5-billion loan that reportedly brought in $800 million from external sources, including OPEC states. Later, state agencies bor- rowed nearly $2.5 billion in the Eurodollar market, and $300 million against future exports to Iran. West Germany and Canada experienced no major financing problems as a result of higher oil prices. Bonn's huge $34-billion surplus in non-oil trade more than covered its $10-billion oil bill and a $14-billion deficit in services. Bonn has, in fact, been preoccupied with preventing capital from entering the country, to reduce upward pressure on the mark. As a net oil exporter, Canada benefited from the rise in prices. Its surplus in the oil trade helped keep the current- account deficit to less than $2 billion. British Chancellor of the Exchequer Healey's recent efforts to have the IMF-based credit facil- ity for oil-deficit countries expanded as quickly as possible accurately reflect British payments pros- pects for 1975. The current-account deficit will probably increase this year, while private bankers and OPEC monetary officials, who together pro- vided $5 billion in credit to London last year, will probably be much less forthcoming. Italy's position is tenuous. Utilization of for- eign credits already arranged, borrowing from the new IMF credit facility, and the culmination of one or more of the bilateral deals that are being discussed with OPEC members may prove suf- ficient to cover Italy's needs. None of the others will be applying for multilateral assistance in SECRET Declassified in Part - Sanitized Copy Approved for Release 2011/11/07 :