WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000300020028-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 28
• Document Creation Date: December 22, 2016
• Document Release Date: March 1, 2011
• Sequence Number: 28
• Publication Date: June 20, 1975
• Content Type: SUMMARY

 Declassified in Part - Sanitized Copy Approved for Release 2011/11/15: CIA-RDP86T00608R000300020028-8
Secret 25X1
Weekly Summary
Secret
No. 0025/75
June 20, 1:75
Copy N2
1387
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The WEEltl-'f SUMMARY, iaauod ovary Friday morninci by the
Office of Current Intoll;rlonco, reports and analyzes sign;ticant
developments of the week through noon on 'T'hursday. It fro-
quentl, includes rn.atorlal coordinated with or propered by the
Office of Economic Research, the Office of Strr.;tegic
Research. the Office; of Geographic and Cartographic
Research, and the Director:.-ate of Science and 'fochnology.
"topics requiring more comprehensive treatment and
therefore published ::eparalo(y as Special Roport:o are listed
in the contents.
CONTENTS (June 20, 1975)
MIDDLE EAST
AFRICA
1 Portugal: Key Decisions Expected
2 Brazil-US: Nuclear Plans Pose Problems
3 Turkey: Status of US Bases
4 Syria-Jordan: Asad's Visit
5 USSR-Egypt: A Downhill Slide
6 Italy: Swinging to the Left
7 EC - Arab States:
Substantive Dialogue Begins
9 Greece: Aspiring to the
10 Western Europe's Aircraft Industry
11 Rumania: Ceausescu's Travels
12 USSR: Playing Hedgehog
13 The Soviets and Portuguese Africa
14 CEMA Ministerial Meeting
15 Lebanon: Troubles for Karami
16 Malagasy Republic: New Government
17 Somalia-USSR: Berbera Activity
17 India: Double Setback
19 Persian Gulf: Diplomatic Developments
EAST ASIA
PACIFIC
20 China: Arms for the Balkan:
21 Thailand: Consolidating Power
WESTERN
HEMISPHERE
22 Argentina: Agreement with Labor
23 Chile: Disputing Economic Policy
24 Colombia: State of Siege
24 Guatemala: Sandoval Loses
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Portugal: fey Decisions Expected
Portugal's ruling Revolutionary Council has
been meeting since June 13, apparently trying
to resolve the country's deepening political
The Movement else 'seems increasingly
worried that the popularly elected Constituent
Assembly will eyceed its authorityand.interfere
in national policy. Last week the `Socialist-
crisis. A variety of reports suggests the council
may be nearing a decision on such critical issues
as the country's future political orientation, the
role of political parties, press freedom, and pos-
sibly even leadership changes in the Armed
Forces Movement itself.
Since the council's deliberations began,
there has been a flurry of charges by radical
leftists that the democratic parties are under-
mining Movement policies and sabotaging the
ecoromy. Along with such attacks, radical left..
ists have repeatedly appealed for the abolition
of the present four-party governing coalition in
favor of a non-party military government.
Even the Portuguese Communist Party
appears to be growing more anxious over such a
possibility. The Communists, while closely
statements, continue to emphasize the dif-
ferences between themselves and the other
dominated assembly rebuffed Communist ob-?
jections and voted overwhelmingly to set aside
an hour each day to discuss topics of national
concern. On June 17, some 8,000 leftists
demonstrated in Lisbon demanding the aboli-
tion of the Constituent Assembly, an end to the
coalition government, and arming of a' militia
drawn from popular councils or workers, sol-
diers, and sailors.
The dispute between the Socialist Party
and Communists over control of the Socialist
newspaper, Republica, has become a. rallying
point for all democratic forces. The Socialists,
realizing that not only a free press but also their
role in the government is at stake,' continue to
exert pressure on the Movement to restore the
paper to Socialist control. The Portuguese Cath-
olic Church is also raising its voice on` the issue
of press freedom.
Moreover, West European countries have
made vita?ly needed economic assistance con-
tingent upon the preservation of political parties
and a free press.. These freedoms, however
tinuing role in policy-making in the event the
coalition is dissolved.
Deputy director of Republica discussing pivotal issue of newspaper closure with officers of security forces
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inherently promote criticism of Movement
policies:, which Movement radicals not only find
intolerable, but which they also feel gravely
undermine efforts to revolutionize the country.
Leading members of the Revolutionary
Council appear to be divided over the country's
future course. Three major types of government
are being considered: a pro-European pluralistic
model. supported by Movement moderates; an
East European - style people's democracy, sup-
ported by Prime Minister Goncalves and his radi-
cal supporters; and a non-party nationalist re-
gime, with direct ties to the people through
"popular councils," supported by Rosa Cou-
tinho, General Otelo de Carvalho and others.
Most Movement leaders reportedly believe this
stalemate must be overcome now if the country
is to begin solving its ever-increasing problems.
Brazil-US:Nuclear Plans Pose Problems
Brazil's intention to become a nuclear
power poses a fundamental challenge to tradi-
tionally amicable US-Brazilian relations. Official
spokesmen have strongly denounced what they
regard as US efforts to prevent the signing of a
nuclear cooperation agreement with West Ger-
many scheduled for next week.
Since 1967, Brazil has refused to sign the
Nuclear Non-Proliferation Treaty, despite US
pressure to do so, on the grounds that it dis-
criminates against non-nuclear powers. Brazilian
intransigence on this issue stems not only from
apprehension over the lead of neighboring
Argentina in nuclear technology, but from a
conviction that as an emerging world power,
Brazil should not restrict its options.
Brazil also sees atomic energy as an im-
portant factor in supplying its future energy
requirements. It already imports three fourths
of its oil, its known petroleum resources are
small, and demand is growing. Although known
uranium reserves are modest, extensive explora-
tion efforts are under way. Brazilian deposits of
thorium (which can be converted in reactors to
form a new fissionable fuel, Uranium 233) are
second only to India's.
West German officials also view recent US
objections to the projected sale of a full nuclear
fuel cycle with consternation. They have not
only taken precautions to ensure that Brazil will
comply with the safeguard procedures of the
International Atomic Energy Agency, but have
agreed to satisfy some if not all of the major
concerns voiced by four US experts who visited
Bonn last May.
Brazil has made it clear that the negative
US reaction will have no effect on its signing of
the agreement. When Foreign Minister Silveira
assumed office last year, he said that Brazil
would not automatically align itself with US
foreign policy and expressed he belief that Bra-
zil would acquire more influence internationally
if it could effectively demonstrate its indepen-
dence on major political and economic issues.
The government's attitude toward what it
obviously regards as outside interference could
affect future bilateral relations with the US,
especially since the contract negotiations re-
stilting from the agreement are expected to drag
Oil for the next several years. Many prominent
Brazilians who are unhappy with recent US
trade legislation probably also view criticism of
the nuclear cooperation agreement as part of a
US effort to inhibit Brazil's Jevelop-
rent.
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'T'urkey: status of US Bases
In a note to the US embassy in Ankara the
Turkish government this week outlined its posi-
tion on existing bilateral agreements with the
US concerning common defense installations.
The note provides a 30-day grace period-until
July 17-for the US to lift its embargo on arms
to Turkey, in effect since last February. If
action is not taken during this time, Ankara will
consider its agreements with the US on military
facilities no longer in force. Negotiations will
then be necessary for new agreements that will
reflect the changed relationship.
Foreign Minister Caglayangil subsequently
told the press that, while the grace period pro-
vides time for the embargo to be lifted, Turkish
officials in Washington have taken soundings
and are not optimistic. Caglayarigil confirmed
that the status of US bases would remain un-
changed during the 30-day period.
The foreign minister noted that once dis-
cussions begin-at the "expert" level-US in-
stallations will be brought under a provisional
status. He said this provisional framework will
determine which installations will continue to
operate, implying that some US bases may be
closed pending the outcome of the negotiations.
The note represents a retreat of sorts by
Ankara from earlier hints that Prime Minister
Demirel was prepared to take strong retaliatory
action and might even consider withdrawal from
NATO's military structure. Demirel probably
hoped to bring pressure on the US to change its
policy on the arms embargo and to build up his
role as defender of Turkey's national interest.
Ankara is clearly still reluctant to sever military
ties with the US.
The note made no reference to NATO, and
a later public statement by Caglayangil empha-
sized that whatever the ultimate decision on the
arr;:3 embargo and US facilities, the Turks will
try to avoid any serious repercussions in their
r-Mations with the US on other matters,
Foreign Minister Caglayangil
There appeared to be little domestic pres-
sure on Demirel to act at this time, which sug-
gested that the deadline should be viewed pri-
marily as a pressure tactic. The military had
apparently concluded that Turkey had no alter-
native to its alliance with the US and Europe
and should, therefore, take no irreversible steps.
Even Demirel's political opposition was playing
the issue in low key.
Within a few hours after the foreign minis-
ter's statement, however, opposition leader
Bulent Ecevit issued a press release criticizing
the softness of the government's response to the
arms embargo. Ecevit has apparently been wait-
ing for Demirel to commit himself on an issue
related to Cyprus where his own public image is
strongest and will stand him in good stead in
any national debate. After backpedaling on the
question of retaliatory measures since the arms
embargo was imposed last February, the Demi-
rel administration has now publicly committed
itself to renegotiating US base rights and appears
to be in a position where it can not easily back
down if the embargo remains in force.
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military command, hand on dealing with Egyptian rest en a a
f t' + romote
e o
lea era an a is
joint committee. to "coordinate military, polit standpoint.' Both Husayn and Asad hope to
ical, economic, and cultural , policies." The capitalize on their open courtship to bolster
Jordanians apparently fended off Syrian over- their positions in the jockeying now going on
tures for a formal political union or a joint amonc the Arabs. In order to strengthen his
P 'd t S d t
Syrian President Asad's. highly publicized Military contingency planning was almost
talks with King Husayn in Jordan last week, certainly discussed in some detail, but judging
resulted in closer personal ties between the two by the outcome of the talks, the visit was more
d d n a ream-n+ to establish a suprene important from a political and psychological
Syria-Jordan: Asad's Visit
The visit-the first by any Syrian leader to
Jordan since 1956-may also have ho'Jed soften
Jordanian antagonism stemming from Syria's
invasion' of Jordan during the 1970 civil war
p
Asad has been trying or some im
closer ties with Jordan, as well as with the
Palestine Liberation Organization. Jordan's
friendship has assumed added importance as
Asad's reiiitions with theBaathist regime in
Baghdad have gone, from bad to worse'n recent
clearly anxious to give Asad a, warm welcome
and political For W~.-'part, Husayn still! wants to gain..
and were ready to discuss closer economic cooperation. They clearly were not-, some say in the ultimate'disposition of the West
prepared to agree, however, to any arrangements Bank. Although he has formally relinquished
that might significantly limit Amman's freedom Jordan's negotiating role to the PLO,.his hopes '
of action. have been kept alive by the inability of PLO
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chieftain Yasir Arafat to obtain an invitation to
the Geneva peace conference. The Joruanians
p;-cbably told Asad, as they have told Sadat,
that they are not interested in going to Geneva
unless the other Arabs, in effect, formally ask
Jordan to attend. If they were hoping to elicit
Syrian support for such a position, it is unlikely
that ASad gave them much encouragement.
During his stay, Asad was given the
standard VIP tour of "front line areas" in the
Jordan Valley and of other Jordanian military
installations. Husayn may have been seeking to
impress upon his Syrian guests Jordan's vulner-
ability to attack by Israel in order to build a
case against concluding any formal arrange-
Moscow's relations with Cairo seem to
have sunk to a now low in recent weeks. The
latest downturn was triggered by Moscow's
recent dealings with Libya which, among
other things, Sadat sees as a potential threat
to himself.
The Egyptians are concerned about
what Qadhafi will do with the weaponry he
is getting from the Soviets and about reports
the Libyans will allow the Soviet Mediter-
ranean fleet to use Libyan port facilities. In
response, Cairo has restricted Soviet naval
access to Egypt,
Anotner symptom of the poor state of
Soviet-Egypti'n relations was the snub given
the Soviet nu,,y at the ceremonies opening
the Suez Canal. Soviet officials were visibly
menus, such as a joint command, that Jordan
might not be able to live urn to later. 25X6
annoyed when the flagship of the US Sixth
Fleet was the only fcreign naval vessel per-
mitted to participate.
In reaction to needling by Cairo, Mos-
cow has:
? Issued a sharp denial it-. Pravda of
Egyptian charges that Moscow plans to
establish bases in Libya.
? Leaked word that there is little
chance of a visit to Cairo by General
Secretary Brezhnev this year.
? Suggested that revenues from the
Suez Canal should now enable Cairo to
pay its debts to the USSR.
The Soviets are still shying away, how-
ever, from the kind of confrontation that
might lead to a complete rupture of rela-
tions. For the present, at least, they have no
satisfactory alternative to using the Egyp-
tian ports, and over the longer term they
hope to regain a position of influence in
Cairo. In the meantime, each side has less
inflammatory economic and military pres-
sures it can exert on the other, and neither
seems reticent about doing so.F___
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Communist supporters cheer outside party headquarters as returns show strong gains
1 i Ai Y: SWINGING TO THE LEFT
The returns from regional, provincial, 'and;:
municipal ejections held on June 15-16 shower.'
amarked shift to the left. The Christian Demo.1
crats remain' the number one party only by a
slim margin; their .35.3 percent of the vote
hovered barely above the low registered in 1946.
The neo-Fascists and the parties on the right
declined.
The Communists, Socialists, and the more
extreme left polled 46 percent of the vote in the
provincial contests.,anrl over 47 percent in the
regional races. This represents a gain of up to 6
percent over their .snowing in the 1972 parlia
mentary and 1970;regional elections.
end Bologna. The strong 'Communist showing is
likely to add new..waIght_-to the, Communist
proposal for an "historic comprurriise" designed
to b; ing the party into the national government.
The Socialist Prty, with. 12 percent of the
regional vote, picked up about 2 percent over its
1970 and 1972,,showings.This increase is all the
more significant because the Socialist Party is
the on:y one in the center-left majority that
advanced and at the same time an important
barrier to Communist entry into the national
government. At the local level, the Socialists
now. have the choice. in some'localities of joining,
the Christian' Democrats to form center-left gov-
ern ments or cooperating with,-the Communists
The: lion's share went to the Communists. in establishing "frontist" administrations., At the
who reached on all-time high of 33.4 Percent in national level, the-party will probably behave as
the, regional races.. Even in their most optimistic if the parliamentarybalance had shifted in it`
prjections the party had not expected more favor.
than -30 percent,:a figure of'immense symbolism
for .the'.Communists because they had not The Christian Democratsmust choose be-
The, reached,; it in local 'elections since 195: tween agreeing with the strengthened Socialists
-party 'cook first place ir. 'Milan, Naples, and on the terms for "a new center-left government
.
Venice and strengthened its control of Florence and moving toward early national elections T
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former seems most likely, but it will not be
easy.
Both parties are divided on how to deal
with the other. Some Socialists want to drive a
hard bargain for a much greater share of the
national government. Others argue that the elec-
tions have shown that opposition to the Chris-
tian Democrats is more profitable. For their
part, the Christian Democrats face a major in-
ternal battle over the party leadership and
policies. Party chief Fanfani-who bore the
brunt of leftist attacks-will almost certainly be
dropped. His successor will face a party divided
on how to halt the erosion of its support.
Political leaders, including the Commu-
nists, have not gone beyond their initial cautious
comments on what amounts to the largest shift
in voting patterns since 1946. Serious private
assessments began yesterday with a meeting of
the Christian Democrats' party directorate.
When the time comes for Italy's leaders to try to
make adjustments at the national level-to re-
flect the changes in relative party strengths-the
government crisis could be among the most dif-
ficult and protracted of the postwar period.
EC - Arab States
SUBSTANTIVE DIALOGUE BEGINS
The first meeting of EC-Arab experts in
Cairo last week was a success and apparently
opens the way for cooperation in a number of
f;elds. The experts skirted the three troublesome
topics of oil, Israel, and the Palestinians, which
have impeded discussions of the French-initiated
proposal over the past year and a half. A second
meeting is planned for late July and will he
similarly structured to deny specific representa-
tion to the Palestine Liberation Organization.
Italy, which is about to assume the EC
presidency for the remainder of the year, will
provide the chairman, much of the planning,
and probably a site near Rome. The West Get-
man adviser on the EC side has undertaken to
propose a viable and popularly appealing coop-
erative project that might be tabled to demon-
strate that progress is being made. There is evi-
dently no EC consensus as yet, however, on the
wisdom of moving so quickly.
Thy participants in the Cairo meeting pro-
posed six areas for future economic coopera-
tion: industrialization; basic infrastructure; agri-
culture and rural development; financial cooper-
ation; trade; and cooperation in the scientific,
technological, cultural, labor and social areas.
The political dimensions of the dialogue were
described simply as an effort to renew links
between the neighboring regions, to eliminate
misunderstandings, and to establish bases for
future cooperation.
The listing of labor and trade as areas for
cooperation was a concession by the EC, but the
community refused Arab demands that would
establish the principle of identical EC trade
treatment for all Arab states. The EC also re-
jected Arab demands that would have guaran-
teed training and equitable treatment for Arab
workers in Europe. Both topics are important in
the negotiation of specific corimunity agree-
ments with individual Arab states, which is si-
multaneously under way, and the EC does not
want to generalize the benefits given to one
state.
The major Arab concession, in addition to
the format of the meeting, was the omission
from the final confidential joint memorandum
of any reference to guarantees for Arab invest-
ments in Europe.
The Irish chairman of the EC side said that
the Arab League and the Palestinians present on
the Arab side were particularly anxious to rea'h
agreement on extending cooperation. Repr"?
sentatives of the oil-producing states seei,iea
somewhat indifferent and the Algerians were
negative "as usual." League Secretary General
Riyad was helpful in overcoming obstacles or
incipient obstruct ion isrn from his fellow Arabs.
The British embassy in Cairo commented that
the EC chairman's inclusion of a reference in the
joint memorandum to "a common cultural heri-
tage" of Europeans and Arabs had so pleased
the Arabs that it made the achievement of other
objectives easier.
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and some months ago offered to support
Athens' bid even t 1- : ugh economic interests
such as wine producers in France and other EC
states could be expected to make difficulties.
The Italians are concerned about the competi-
tion of other Mediterranean countries in agri-
cultural products, but reportedly believe that, in
the case of Greece, the major concessions have
already been made wider the EC-Greece associa-
tion agreement. The extension of the Mediter-
ranean sector of the EC has a basic appeal to
both French and Italian leaders who periodically
express concern that the community is weighted
too much to the "north."
GREECE: ASPIRING TO THE EC
Rapprochement between Greece and the
EC has been developing rapidly over the past
year after a seven-year hiatus. The EC is never-
theless unprepared to take early favorable action
on the request for full membership Athens sub-
mitted on June 12.
The Greece-EC association agreement,
which was negotiated in 1961, but frozen at the
time of the colonels' coup in 1967, was reacti-
vated last December. The EC released $57 mil-
lion in financial aid that had been approved
prior to the freeze. In April, Greece and the EC
agreed on expansion of the association agree-
ment to include the three countries that joined
the EC in 1973.
In a series of visit:: to EC capitals in recent
weeks, Greek leaders have been pressing their
case for acceptance as a full member of the
community. Paris has been the most receptive
Bonn, like the other EC members, wants to
strengthen Greek ties to the Western democ-
racies, but the West Germans would prefer to
hold to the original schedule, which proposed to
consider full membership in 1984. The inancial
burden of aid to Greece would-like other com-
munity expenses-fall most heavily on the West
Germans. Moreover, both the Germans and the
British believe that Turkey and Greece must be
t-,eated alike and therefore are inclined to delay
action. Also, Bonn does not want to give the
impression that it accepts the view that a Greek
link to the EC is in any way a substitute for ties
to NATO.
Athens, for its part, seems particularly in-
terested in the political aspects of EC member-
ship. Observers in both Athens and Ankara be-
lieve that the bid itself is designed to strengthen
Greece's ties with other West Europeans and
bolster its position in relation to Turk y.
In any case, negotiations are likely to be
difficult, lasting at least two or three years. Such
factors as the complexities of EC structure, the
relative backwardness of the Greek econon,,and the complicationn of trying to work Turkey
into the equation are almost certain to prolong
delay. Tien, a transition period of five years or
more would probably follow before Greece
would become a full-fledged member
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The decision of three EC members-Bel-
gium, the Netherlands, and Denmark-to choose
the US-designed F-16 fighter aircraft over the
French Mirage has brought home to the Euro-
peans the acute dilemma they face in trying to
strengthen coopers`ion among themselves as
long as they are dependent on the US for their
security. The Belgians, for example, have been
in the forefront of those urging the development
of an armaments policy as the natural out-
growth of moves toward European unity.
The F-16 decision has focussed attention
on both the civil and military aspects of the
aviation industry. EC members have begun to
re-examine the possibility of establishing
common policies and promoting multinational
projects. The French, of course, term the Mirage
a "European" aircraft, and after the consortium
members opted for the US plane, Chirac char-
acterized the decision as "profoundly regret-
table for the future of European aeronautics."
He noted that Paris intended to develop a new
generation of civil aircraft that could become "a
European project."
The EC Commission since 1970 has period-
ically taken up the problems of the European
aerospace industry. Last month the commission
presented a bleak report, which concluded that
unless the Nine moved quickly to adopt com-
mon policies, they would have to acquiesce in
continuing US dominance of the international
market for aircraft. The EC Council will meet in
October to discuss civil aviation problems, and
in the meantime it is giving urgent attention to
preparing recommendations on cost-cutUing.and
streamlining of the industrial system.
The continued viability of the European
aircraft industry depends on the ability of the
community to:
? Concentrate production in one or two
aircraft construction combines.
? Secure the commitment of EC govern-
ments to coordinate military requirements
for new aircraft types and concentrate civil
aircraft production on he short- and me-
dium-haul market.
Some European industrial leaders, for their
pert, believe that the choice of the F-16, under-
scoring as it does the US superiority in aircraft
production, will give a strong push to the Euro-
pean aerospace industry to cooperate in order to
compete.
? Develop specific types of aircraft on
the "European" level.
? Buy only "European" production of
certain types of aircraft over the long hun.
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? Obtain a commitment by European air-
lines to undertake a long-term conversion to
aircraft produced in Europe.
? Enhance the probability of sales to the
non-European market.
aircraft markets, seek closer cooperation with
the US in the design and production of high-
technology products, or join with their EC par :-
ners in long-range joint programs.F_
The controversy over selecting the F-16 or
the Mirage comes at a time when the Nine are
discussing aspects of defense policy. European
arms procurement is taken .gyp in zi NATO
forum-the Eurogroup in which France does not
participate-and defense matters have scarcely
been touched by the EC in the past. The Rome
Treaty, in fact, explicitly excludes armament
production and the arms trade from common
market jurisdiction.
Nevertheless, there has been a tendency
among Europeans recently to view production
of military hardware in the EC context. Last
month, for example, the EC commissioner re-
sponsible for industrial matters suggested the
creation of an ad hoc group that he felt could
become a European agency for military pur-
chases. The Dutch defense minister argued last
December for a "Europeanization" of the arms
industry that would entail a revision of the
treaty provision. Recent Belgian initiatives in
the Western European Union may also be aimed
at eventually seizing the EC with arms produc-
tion matters. The British and Germans, mean-
while, are not enthusiastic about any moves that
might dilute NATO's authority in defense
matters.
Meanwhile, the British, Germans, and Ital-
ians are jointly developing the Multi-Role
Combat Aircraft, which they speculate might
lay the groundwork for a pan-European military
aircraft combine. The British suggest, perhaps
somewhat optimistically, that the French might
be persuaded to drop plans to develop their own
super Mirage (Avion de Combat Futur-ACF)
and participate in developing the multi-role
craft.
A central question facing the European in-
dustry is whether France, and to a lesser degree
the UK, will decide to go it alone in world
ROMANIA: CEAUSESCU'S TRAVELS
Economic topics dominated President
Ceausescu's talks on his trip to Latin America,
the US, and the United Kingdom from June 4 to
12. The Romanian lead3r also praised non-
aligned concepts and stressed his country's de-
termination to pursue an independent foreign
policy.
In Brazil, Ceausescu signed several eco-
nomic agreements, including a $150-million
credit for metallurgical projects and an agree-
ment to import 25 million tons of iron ore to
Romania by 1985. The Romanians have long
sought to reduce their dependence on the So-
viets for this vital raw material.
En route to Mexico, Ceausescu paused in
Venezuela to sign an agreement calling for
Romanian participation in developing Vene-
zuela's petroleum industry. While in Mexico, he
and President Echeverria signed 11 scientific,
economic, and cultural agr;'ements, as well as j
"solemn declaration" on international relations
that focused on the independence, sovereignty, 25X1
and territorial integrity of all states. The Mexi-
can President reportedly was impressed by
Romania's independence of +he ioviets
Ceausescu's meeting with President Ford
on June 11 received front page coverage in the
Romanian press, which described the talks as
part of a continuing dialogue. Less prominent
coverage was given to Ceausescu's talks with
members of Congress and leaders of the US
Jewish community. Ceausescu also stopped in
London on June 12 for talks with Prime Minis-
ter Wilson and a number of British business-
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USSR: PLAYING HEDGEHOG
The republic election speeches recently
concluded by the Soviet leaders were conserva-
tive restatements of familiar Soviet domestic
and foreign policies. The hints of difference and
debate that added ?ntdrest to last year's "elec-
tioneering" in the national elections were nearly
indiscernible. Most members and candidate
members of the Politburo stuck close to their
areas of substantive specialty. Their collective
satisfaction with Soviet fortunes at home and
ab-ad was only occasionally qualified by refer-
ences to domestic shortcomings and foreign
p'tfalls.
Foreign Policy
General Secretary Brezhnev reaffirmed
Soviet interest in improved relations with the
West, but in the somewhat tougher tone
detected since the Central Committee plenum
last April. His specific references to the US and
to President Ford were favorable, and he praised
steps toward a new strategic arms limitation
agreement. He mentioned his forthcoming visit
to Washington "this year."
In a more negative vein, Brezhnev cau-
tioned that some Western politicians are paying
,~:ily lip service to detente, and he criticized
those who he said were trying to win over right-
wing circles by feigning suspicion of detente. By
implication, he called on supporters of detente
in the West to be more forthright in their
defense of it, but warned them not to look for
Soviet concessions to help them sell the concept
at home.
Brezhnev's calls for reductions in military
budgets and for banning the manufacture of
new weapons of mass destruction were intended
chiefly for propaganda value. Similar vague
proposals have been floated by the USSi< in the
past in other forums.
President Podgorny and Premier Kosygin
both added their voices to the chorus of praise
for Soviet foreign policy, but neither broke new
ground. Like Brezhnev, neither had much if
anything to say about such perennial focuses of
Soviet attention as China, the Middle East, or
even CSCE.
References to the economic and political
woes of the West were predictabl'j frequent, but
no one suggested that the long-awaited "final
crisis" was at hand. Kosygin denied that East-
West trade was of greater benefit to the socialist
economies, but he explicitly tied prospects for
Soviet economic development to improvement
of the international political climate.
Domestic Policy
Brezhnev's address was half the length of
his 1974 election speech, and he avoided even
passing reference to long-term planning, produc-
tion associations, reorganization of economic
management, and other issues he discussed last
year. Podgorny and Kosygin were only slightly
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more specific. Both mentioned long-term
planning, and Kosygin referred to a fifteen year
plan for Moscow. The two gave a remarkably
similar explanation of the Soviet economy's cur-
rent inability to accelerate the growth in con-
sumers goods production, arguing that a nation
cannot consume more than its production
capacity allows. Their remarks may be in
response to dissatisfaction with the 1975 plan
that projc, ?s a lower rate of growth for con-
sumers' goods than for producers' goods.
The other speeches tended to concentrate
on individual e)pertise. Minister of Agriculture
Polyansky, for example, discussed agriculture L..
the exclusion of almost all else. While his speech
last year concentrated on his specialty, he also
mentioned industrial management and other
potentially controversial topics which were
ignored this year, Demichev, Grechko, and
Gromyko followed the same pattern, although
the contrast between their present and past
speeches is not as great.
KGB chief Andropov, alone among he
leaders, fulfilled the role of i,;eological watch-
dog. His address contained a pointed attack or
proponents of civil liberties and ridiculed the
"right of workers" to protest in front of the
White House or Hyde Park in the face of West-
ern economic distress. He stated that "dem-
ocratic freedom" in the Soviet Union belonged
only to those whose interest coincided with
"society's," but he did admit the existence of
"shortcomings" in Soviet society.
THE SOVIETS AND PORTUGUESE AFRICA
The Soviets are paying more attention to
the former Portuguese colonies in Africa as
these nations have gained or are approaching
independence.
Moscow is the major source of weapons
and training in Guinea-Bissau and has provided
economic aid as well.
SECRET
The Soviets probably hope to use their ties
to Guinea-Bissau dS an entree to the Cape Verde
Islands, which become independent on July 5.
The rulers of Guii:,ea-Bissau, who in all likeli-
hood will be [lie dominant force on the islands,
have stated they do not intend to allow any
foreign bases in Guinea-Bissau or the Cape
Verdes. With a precipitous drop in Portuguese
aid, however, they may look to Moscow, and
the Soviets could angle for military-related
facilities in return.
The Soviets are also doing well in Mozam-
bique. The two countries will establish diplo-
matic relations and sign a trade agreement when
that colony gains independence on June 25.
-25X1
Mozambique's strategic location along the
Indian Ocean may arouse the Soviets' interest.
They probably will press fo, occasional access
to Mozambique's ports for their r;aval :end fish-
ing fleets.
Events in Angola are going less well for
Moscow, although the Soviet-backed Popular
Movement has recently made gains against its
major riva , the National Front. Front leaders
now claim the Soviets have deiivererl "heavy
arms," including armored cars, to the Move-
ment.
A strategic motive is clearly behind Soviet
policy in Portuguese Africa. Guinea-Bissau and
the Cape Verde Islands could be used to
strengthen Soviet naval capabilities in the South
Atlantic, and Mozambique could provide a fall-
back position in the western Indian Ocean if
something untoward happened in Somalia. But
Soviet policy is also motivated by political con-
siderations. It hopes to combat China's in-
fluence in the Third WotId and to show that its
interest in detente has not weakened its will to
be actively involved in these areas 1-125X1
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Government leaders from the nine full
members of the Council for Economic Mutual
Assistance are scheduled to hold their 29th min-
isterial session in Budapest on June 24. A key
issue will be the impact of Western inflation and
recession on their efforts to coordinate eco-
nomic plans for the next five years.
Most of the East European countries con-
tinue to run large trade deficits with the West
similar to these incurred in 1974. Recent hikes
in oil and raw material prices within CEMA have
benefited the USSR-and to a lesser degree,
Romania and Poland-but have compounded the
problems of the othe, countries. Although
Moscow has made some concessions, those East
European regimes hardest hit will be seeking
further relief.
The session will also probably examine cur-
rent joint efforts to exploit new raw material
resources-mostly in the USSR-and may ap-
prove new ventures. Construction of the
mammoth Orenburg natural gas pipeline from
the USSR to Eastern Europe may receive special
attention because some East European leaders
are already having troubl,: meeting their com-
mitments.
The participants are slated to decide
CEMA's next move toward establishment of a
dialogue with the European Community. Since
preliminary CEMA-EC talks in February fell
through, the Soviets have reportedly proposed a
measured three-stage approach to establishing
relations. The initiative would permit individual
East European countries to establish contact
with the EC only in the last stage. This approach
has stirred controversy within CEMA and had a
cool reception from the EC. The CEMA me n-
bers may also consider links with other non-
communist countries. Mexico, among others,
has been flirting with CEMA, and recently
reiterated its readiness to "expand" relatians.
The meeting may see some sharp exchanges
between the Romanians and the Soviets over the
nature and pace of CEMA integration. Recent
articles in the Romanian press have strongly
criticized any attempts to give CEMA or its
various organizations greater powers at the ex-
pense of individual member countries. Specific
issues involving Romania-and perhaps others-
could include defining CEMA's negotiating
mandate in future talks with the EC and how
much authority to give multinational enterprises
set up by CEMA member countries.
CEMA Executive Committc-: meeting in Moscow in April
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The Lebanese public is beginning to lose
confidence in the ability of Prime Ministsr -
designate Rashid Karami to end the protracted
government crisis. In three weeks of consulta-
tions he has been unable to wring concessions
prom leaders of the right-wing Phalanges Party,
who demand representation in a new cabinet, or
from leftist leaders, who insist that the Phalang-
ists be left out. The continuing delay in forming
a government has increased the chances that
widespread street fighting will resume.
Leftist leader Kamal Jumblatt has altered
his strategy somewhat; he now says that his
Progressive Socialist Party will not participate in
a new government. He hopes that this will force
Karami to exclude the Phalangists as well. The
two largest Christian parties-the Phalangists and
the National Liberals-however, are united
against this plan, and Karami cannot risk the
renewed fighting that would result from an
attempt to freeze The Phalangists out. For now,
he is attempting to persuade them to accept
being left out temporarily.
Syrian Foreign Minister Khaddam visited
Lebanon for two days this week to try to break
the impasse. Three weeks ago, he played a
central role in negotiating the resignation of the
military cabinet and the selection of Karami.
Khaddam's presence in Beirut this week prob-
ably reflected Damascus' growing apprehension
that Karami is losing support and that he might
soon be forced to abandon his efforts to
assemble a government.
Khaddam presumably urged Lebanese Pres-
ident Frarj.yah to elicit concessions from the
Phalangists. In return, he may have reassured
Franjiy:ji that Syria is attempting to rein in
Jumblatt, who traveled to Damascus for con-
sultations with President Asad on June 17. Both
Syria and Egypt-which weighed in with a letter
to Franjiyah from President Sadat-apparently
consider the inclusion of the Phalangists in a
new government as necessary to ensure stability
in Lebanon.
Karami's task has been complicated by his
difficult relations with Franjiyah, who appar-
ently is reinforcing the Phalangists' position
rather than forcing them to compromise. On
June 11 Franjiyah angered Karami's backers by
convening a session of the unpopular caretaker
military cabinet, a move they saw as an insulting
reminder that the military cabinet is still in
charge. Franjiyah would take some satisfaction
in seeing Karami fail; the President would then
be free to turn again to a weak Muslim politician
whom he could more easily dominate.
Karami has moved to protect himself
against the possibility he may not succeed in
forming a government by attempting in advance
to put some of the blame for such a failure on
Franjiyah. He has indirectly criticized the
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SECRET
President's handling of the situation by publicly
praising former president Shihab, who-with
Karami as prime minister-provided vigorous
and effective leadership after the 1958 civil war.
Recent developments have reduced
Franjiyah's political strength and popularity,
although he remains the dominant political
figure in the country. He has beer politically
embarrassed by having to recognize publicly the
failure of his military cabinet, the need to turn
to his long-time rival, Karami, and the con-
tinuing necessity to accommodate Syrian desires
when dealing with Lebanon's domestic prob-
The military directory that has been ruling
ineffectively in Tananarive since February
turned over power this week to naval Com-
mander Didier Ratsiraka, the leader of the
cumbersome junta's leftist faction. It was the
third change of leadership this year in Mada-
gascar, which has been troubled by a resurgence
of ethnic friction between the majority coastal
tribesmen and the more prosperous Merina
people of the central plateau.
Ratsiraka's peaceful accession as head of
state and government on June 15 concluded a
quiet struggle for influence with General Gilles
Andriamahazo, a political moderate and the
president of the 18-member directory that was
formed following the assassination of head of
state Richard Ratsimandrava. Coincident with
the investiture of the 39-year-old Ratsiraka as
head of a new Supreme Revolutionary Council,
the directory dissolved itself and. General
Andriamahazo stepped down to a minor post.
Ratsiraka was the chief architect of the
militant nonaligned policy adopted by the
Indian Ocean island country three years ago
following the ouster by the military of the pro-
French civilian regime of former president
Tsiranana. As foreign minister from 1972 until
early 1975, Ratsiraka weakened drastically
Madagascar's strong ties with France, cut its
controversial links with South Africa, and
established relations with communist countries.
He was also primarily responsible for the policy,
adopted in 1973, of barring all foreign warships
from the country's ports.
In domestic affairs, Ratsiraka favors social.
ist policies. In his first major policy statement
since taking office, he decreed the nationaliza-
tion of all banks and insurance companies.
Ratsiraka is the first coastal tribesman to
gain the top position since Tsiranana's fall and
will probably receive wide support from that
ethnic group, which had chafed under the
leadership of three successive Merina military
officers. The new head of state is surely aware,
however, that his most urgent task is to lessen
the ethnic tensions that have kept the country
politically unsettled for months and led to the
murder of Ratsimandrava after only six days in
office. The rivalry is particularly dangerous
because it poses the possibility of clashes
between the coastal-dominated gendarmerie and
the Merina-dominated army.
In the past, Ratsiraka has appeared to have
some ties to the Merina community, but they
may view him less favorably now that he has
replaced one of their own at the top. Many
Merina probably believe that Ratsiraka and
other coastal members of the directory were
behind the recent acquittal of all but three of a
large number of coastal tribesmen accuse. of
complicity in the assassination last February.
The new regime will probably increase the
volume of radical rhetoric coming from Mada-
gascar, and matters of concern to the US will
involve tough negotiations. For example, the
new leader will almost certainly demand a large
back-rent payment from the US as the price for
extending the agreement that permits NASA to
operate a tracking station on the island; the
agreement formally expired at the end of 1973.
Ratsiraka pressed for such a payment when he
was foreign minister and again last March as a
member of the directory
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SECRET
Recent satellite photography shows equip-
ment and supplies delivered to the Soviet missile
handling and storage facility in Berbera,
Somalia. The installation appears to be nearing
completion,
A single SS-N-2 Styx missile crate was
observed early this month in the checkout and
assembly area of the Berbera facility. Numerous
other boxes and crates-probably containing
equipment other than missiles-were seen at the
facility as well. Another Styx crate has been
seen at the Somali naval quay in the port area at
Berbera since April.
The purpose of the SS-N-2 in Somalia is
not clear. The Styx is carried on both Osa and
Komar patrol boats, but neither the small
Somali navy nor the Soviet fleet in the Indian
Ocean includes either of these boats. None of
the other Soviet ships that have operated in the
Indian Ocean so far has been equipped with the
SS-N-2.
The Soviets may intend to deliver Osas or
Komars to Berbera in the near future-either for
their own use or for the Somali navy.
The Berbera missile facility, however, is more
elaborate than would be required for Styr mis-
siles. We believe it is primarily intended to
handle larger naval cruise missiles.
A new airfield is being constructed near the
missile facility. Initial constr ction on six build-
ings was observed in May, and footings for
another building and nine POL tanks were seen
the first week in June. This support area is at
the end of the runway closest to the missile
storage facility. The photography indicates that
surfacing of the runway is also progressing.
Clearing for this airfield was first noted in
photography only last November. Construction
is moving along quickly and planes could be
using the field within a year.
Prime Minister Gandhi's political position
was seriously damaged last week when a court in
her home state convicted her of campaign viola-
tions in 1971 and her Congress Party was
defeated in a legislative election in the state of
Gujarat. Opposition leaders are demanding that
Mrs. Gandhi resign, but so far her party has
stood behind her and she has appeared deter-
mined to stay on. Her survival in office depends
on the Supreme Court's response to her planned
appeal of the lower court's verdict and on her
ability to fend off possible challenges from
within her troubled party. Whatever happens to
Mrs. Gandhi, the Congress Party-India's only
truly national party--is likely to continue
dominating the political scene.
On June 12, a state court judge ruled that
Mrs. Gandhi was guilty of illegal use of state
officials for campaign purposes. The penalty is a
six-year ban on holding public office, but the
judge granted a 20-day stay. Mrs. Gandhi's
appeal to the Supreme Court, which will prob-
ably be filed on June 20 an 23, will include a
request for an extension of the stay until a final
decision is rendered.
Many observers in India believe Mrs.
Gandhi will receive gentle treatment from the
Supreme Court; all 14 judges on the court are
her appoirtees. A reportedly pro-Congress
justice is now handling court business while the
court is in recess and presumabiv will rule on
her request for an extended stay. The chief
justice, elevated to the post by Mrs. Gandhi iii
1973 over three more senior jurists who then
resigned, could assist her by calling a special
session to hear her appeal before the court's
next scheduled meeting in mid-July.
In the event an extension of the stay is not
granted, or if an appeal appears likely to take
several months, Mrs. Gandhi could face con-
siderable pressure from her party to step down
pending a final ruling on her appeal. Party
leaders are concerned about the effect the con-
troversy over Mrs. Gandhi could have on the
party's showing in nationwide parliamentary
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MUST RESIGN
GORRiie~ riML t~~NIST~
Demonstrators march in front of Prime Minister Gandhi's home
elections that are constitutionally required by
early next spring. One alternative still legally
available to her would be to request the election
commissioner, a Gandhi appointee, to waive the
penalty barring her from holding office. This
move, however, would infuriate the opposition
and probably also be damaging at the polls.
The defeat of the Congress Party in Gujarat
was a major blow to the pari.y and demonstrated
that Mrs. Gandhi, who campaigned vigorously in
the state, is no longer the vote-getter she was in
1971 and 1972. The Congress Party, which won
140 of 168 seats in Gujarat's last state election
Three years ago, this time captured only 75 of
181 seats contested. A five-party non-com-
munist "People's Front" won 86 seats and was
able to form a state government.
The Gujarat election was the first major
test of the opposition parties' strategy of uniting
behind single candidates.. For over 20 years the
fragmentation of opposition vows has helped
the Congress Party prevail at both the state and
national levels. The Gujarat victory will stim-
ulate opposition efforts to cooperate on a
nationwide basis in preparation for the parlia-
mentary elections.
Since early 1974, a loose coalition of
generally conservative opposition parties led by
Jayaprakash Narayan, a 72-year-old disciple of
Mahatma Gandhi, has been campaigning against
corruption and other governmental abuses.
Following the state court decision, the op-
position coalition declared it no longer
recognizes Mrs. Gandhi as prime minister. It has
been staging sit-ins in New Delhi and has
scheduled a protest rally there this weekend.
The opposition's small parliamentary contingent
is planning to obstruct proceedings when
parliament reconvenes, possibly in mid-July. 25X1
There are a
number of veteran cabinet members and other
party leaders who might vie for her job if she is
forced to step down in favor of a temporary
replacement. One potential contender, Agricul-
ture Minister Jagjivan Ram, has a considerable
following within the party, but Mrs. Gandhi
would be reluctant: to see him take over because
he -night not be willirg to relinquish the post if
she is vindicated by the Supreme Court. Others
in the running might include Foreign Minister Y.
S. Chavan, Defense Minister Swaran Singh,
Congress Party President D. K. Barooah, and
West Bengal Chie?' Minister S. S. Ray.
Sk CRET
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SECRET
According to Iran's foreign minister, the
treaty opens the way for an expansion of coop-
eration between the two countries. A navigation
agreement for their southern river boundary and
a consular accord, which would facilitate the
travel of Iranian pilgr;ms to Shia Muslim shrines
in Iraq, are now being negotiated. Rapid prog-
ress on these and other outstanding issues is not
likely, however, because each side remains sus-
picious of the other's motives and objectives.
Late last week in Baghdad, the foreign min-
isters of Iran and Iraq signed a treaty and three
protocols formalizing the understanding reached
in Algiers in early March by the Shah and Iraqi
leader Saddam Husayn Tikriti. The Algerians,
who played a key role in bringing together the
long-estranged regimes in Tehran and Baghdad,
participated in the signing.
The treaty and protocols are the culmina-
tion of three months of work by joint commis-
sions. The protocols deal with the demarcation
of land and water boundaries and with security
arrangements to prevent border incidents and
the infiltration of subversives. Control posts set
up in each country to investigate complaints
have been withdrawn, and a new border com-
mission is to be established.
Conspicuous by its absence from the Ku-
wait communique was any direct mention of
Kuwaiti-Saudi water and land border questions
or of the long-standing and potentially much
more serious Iraqi claim to Kuwaiti territory.
The communique did, however, refer to efforts
to achieve greater cooperation and coordination
among Arabian Peninsula states. In what was
apparently a nod to recent expressions of in-
terest by Baghdad and Tehran for some form of
Persian Gulf security arrangement, the Kuwait
communique also expressed hope that develop-
ments in the region would lead to the attain-
ment of stability and security in the gulf with-
out foreign intervention.
On June 28 Fahd is scheduled to visit Te-
hran where the Shah will most likely raise the
matter of Persian Gulf security. Fahd is more
amenable to cooperation with Tehran than was
King Faysal, but the Saudis have yet to spell out
how far they are willing to go toward a formal
pact with their militarily superior neighbor
across the gulf.
Persian Gulf
DIPLOMATIC DEVELOPMENTS
Earlier this month, Saudi Crcwn Prince
Fahd visited Kuwait and Iraq, launching his first
venture in personal diplomacy since he took on
added responsibilities following the assassination
of King Faysal in March.
Although a variety of bilateral and regional
problems were discussed, no announcements
heralding substantive progress were forth-
coming. Fahd's visit to Baghdad ended without
even a joint communique. The Saudi leader,
nevertheless, was warmly received by both the
Kuwaitis and his Baath socialist hosts in Iraq.
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Romania and Albania recently obtained
jet combat aircraft from China.
that the Romanian air force had at least 19
IL-28 jet light bombers, 6 more than the original
13 received from the USSR. According to an
East European diplomat, reports are now cir-
culating in Bucharest that 10 to 12 Chinese
IL-28s have arrived in Romania.
The crates were probably
delivered by a large Chinese cargo ship that
transited the Bosphorus last fall for a brief
unannounced stop at Constanta, Romania,
before heading to its announced destination in
Albania.
Romania's acquisition of the Chinese air-
craft is another move to reduce its dependence
on the Soviet Union. The Romanians have had
problems in obtaining military materiel from
Moscow since at least 1966 and have tried, par-
ticularly in recent years, to diversify sources of
supply.
The bombers are the second major arms
deal between Bucharest and Peking. Chinese
designed gunboats have been built for two years
at a Romanian shipyard-the first non-Soviet
naval combatants acquired by Romania since
the end of World War II. The Romanian navy
now has about 14 naval combatants of Chinese
design, and more will probably be produced.
25X1
Bucharest has gone to unusual lengths to
conceal from Warsaw Pact allies this acquisition
of non-Soviet equipment. Security measures
designed to restrict foreign dipiomats, including
those from bloc countries, have been increased
during the past few months as political tensions
between Moscow and Bucharest have risen.
25X1
Albania has also received a recent shipment
of Chinese aircraft-MIG-19 iet finhtPrs-=25X1
LJA I
Chinese only crate these fighters for overseas
shipments. This MIG delivery, China's first to
Albania in almost five years, tends to undercut
recent rumors of a cooling in Sino-Albanian
relations.
China has for some time been actively
cultivating Romania and Yugoslavia-while
maintaining its long-standing ties with Albania-
as part of its anti-Soviet diplomacy. There may
well be other deals involving military and
economic assistance in tP,e works between China
and the Balkan states.
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Strikers and police face each other at a textile plant
Prime Minister Khukrit, given a slightly
less-than-even chance of lasting more than six
months when he took office last March, is be-
ginning to consolidate his power.
Khukrit strengthen:d his image among
Bangkok's civilian elita with his strong stand
against the US over the Mayac;uez affair. Al-
though this stand troubled many senior military
officers who favor a continued close relationship
with the US, nationalistic sentiment forced
them to identify themselves publicly with
Khukrit on this issue. Khukrit has subsequently
assured the military of h.'s intention to maintain
a close relationship with the US
More important, Khukrit's swift and adept
handling of a potentially troublesome labor
dispute appears to have won him the backing of
key army and police officers. His willingness to
back the police and military in coping with civil
unrest should mute grumbling among the mili-
tary, whose growing impatience with the govern..
ment's seeming "permissiveness" toward labor
and student agitation contributed to a recent
flurry of unsubstantiated coup rumors.
the crucial test
for the Khukrit government will occur this
August when the budget comes before the
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National Assembly. There is widespread specula-
tion in Bangkok that the assembly will make a
serious attem t tc cut back the military budget
this summer.
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ARGENTINA: AGREEMENT WITH LABOR
The agreement reached this week with
organized labor, allowing for substantial wage
increases, helped the administration defuse a
serious confrontation with workers but signaled
its lack of control over the labor movement.
Workers had been demonstrating and
engaging in work stoppages for two weeks to
protest sharp hikes in the prices of gasoline,
utilities, food, and a host of other items. The
Argentine military, already highly upset over
accelerating political and economic deteriora-
tion, viewed with alarm the prospect of massive
street demonstrations by disgruntled workers.
While the new agreement is likely to calm the
immediate fears of the officers, their basic
concern remains and may yet overcome their
hesitancy to intervene in the political process.
While the agreement is billed as a com-
promise, the outcome appears more a victory
for organized labor. Whereas the government
had tried to limit wage increases, first to 38 and
then to 45 percent, the unions now expect the
final contracts to average 50 percent.
The outcome of the negotiations may have
strengthened the positions of some of the top
leaders of the Peronist labor confederation, who
for some time have beer, under growing pressure
from rank and file members to press for sizable
demands. This is probably contrary to the hopes
of presidential adviser Lopez Rega, who was
almost cer+ainly trying to undermine their sup-
port in ai ffort to extend his influence still
further.
The sharp increases in prices, followed in
short order by large wage hikes, has serious
implications for the two-year-old agreement in
which labor and industry promised to limit their
respective demands. The agreement is part of
the so-called Social Pact worked out by the late
Juan Peron in 1973. While the recent increases
do not necessarily mean an end to the Social
Pact, they seem to signal the beginning of a new
wage and price spiral. That, along with the gov-
ernment's clearly weak position, inevitably will
invite increased demands from all politically
important sectors, while the prospects for na-
tional consensus recede still further.
President Peron speaks to hbor; Lopez Rega seated at far right
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Finance Minister Cauas
CHILE: DISPUTING ECONOMIC POLICY
forces' concern over. economic austerity meas-
ures, brit he'is reluctant to renege on his support.
President Pinochet is aware of the armed:
for the program and leave himself. open to
charges that the government's lack of commit-
ment led to failure.
If. the latest economic moves do not show
results by the :end of the year-and they prob
ably,:will not-prominent junta officials can be
expected to step up pressures for a shift. in
policies: With. the. prospect of a staggering cur-
rent account deficit of $1.2. billion, ,caused 'in
part by low. world prices for copper and in-
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creased petroleum import costs, as well as by
slight chances for foreign financing,.any suc
cussor economic team would have its hands full
in a search for solutions.
Sweetening the, Bitter Pill
In the face of a plethora of aconomic prob-
lems, the government is, trying to alleviate hard-
ships on those in the lower wage brackets with ,3
to soften the impact of economic austerity on
' Chile's poor, the program is probably inade-
quate to the task. The main points outlined by
the interior minister on June 10 are:
? A national minimum-wage employ-
ment program by local governments to ab-
sorb unskilled, unemployed workers.
? A nutrition program to augment the
diets of children.. r;der six.
A food ar,d housing program to assist
school-age children of the poor.
*,.A program to build and staff nurseries.
An emergency housing program to pro-
vide semi-permanent quarters for the home-
less:
? A supply and distribution program to
provide the needy with adequate food at
reasonable prices.
The major, drawback ',n this undertaking is
that most of the concepts have already been
tried with, little success. To make matters worse,
the. government is~ seriously hampered by the
budget cutbai
To offset the financial restraints, the gov-
ernment has requested PL 480 aid from the US.
The junta willprobably press for further assist
ance as it moves.to overcome the "economic'
e.ner gene .
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COLOMBIA: STATE OF SIEGE
Reacting t,) persistent, widespread public
disorders, President Alfonso Lopez Michelsen
has declared a state of siege in Atlantico,
Antioquia, and Valle departments, which in-
corporate three of the country's four largest
cities. Additional areas may be included as con-
ditions dictate.
volatile rise in public transportation fares. Such
an increase is likely to spark additional violence,
but will do the least political dams a if it occurs
while a state of siege is in effect
GUATEMALA: SANDOVAL LOSES
As expected, Vice President Sandoval's
National Liberation Movement lost out in its bid
to gain the presidency of the Congress. The
candidate supported by president Laugerud won
the post in the election on June 15. Sandoval's
threat to pull his party out of the two-party
governing coalition failed. The National Libera-
tion Movement's loss of this key post is likely to
increase discontent over Sandoval's leadership of
the party.
The army high command and former presi-
dent Arana fully supported Laugerud on the
isue.
SECRET
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With this move, Lopez has legalized the use
of army troops in a police role. Protests by the
army high command against the "illegal" use of
troops for this purpose had prompted Lopez last
month to relieve the army commander and to
censure several other generals and colonels.
Lopez has been reluctant to impose a state
of siege because of his campaign promise to
broaden civil liberties. He can now be expected
to impose strict controls on students, whose
violent demonstrations have mushroomed in
recent weeks, as well as on striking workers in
the medical services and construction industries.
He may also clamp down on low-income indi-
viduals who have been protesting generalized
economic hardships.
The President may also take this oppor-
tunity to permit a long-delayed, politically
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