BI-WEEKLY WARNING ISSUES FOR THE DCI

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91B00776R000400110021-3
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 6
• Document Creation Date: December 23, 2016
• Document Release Date: June 13, 2013
• Sequence Number: 21
• Publication Date: August 11, 1988
• Content Type: MISC

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BI-WEEKLY WARNING ISSUES
FOR THE DCI
. 11 August 1988
WARNING ISSUES
ECUADOR: Borja's Turn to the Left
SAUDI ARABIA/US: Drifting Away
SPECIAL WARNING TOPIC
IRAN/IRAQ: The Implications of Peace
Prepared by NIO/Warning and Staff
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WARNING ISSUES
ECUADOR: Borja's Turn to the Left
President Rodrigo Borja, who
assumed office on 10 August, appears
prepared to distance his country from
its present close association with the
United States. He intends to reestablish
diplomatic relations with Nicaragua and
to strengthen ties with Cuba, the Soviet
Union and Eastern Europe. He is also
likely to inaugurate a major shift away
from outgoing President Febres-Corde-
ro's free market economic policies. Borja
may well join with other regional leaders
to announce a plan that ties debt repay-
ments to export earnings.
Despite this swing leftward, Borja
has signaled that he is aware of the fears
of the military and business leaders con-
cerning his political and economic views
and has indicated that he will avoid radi-
cal policies, such as the nationalization of
banks or key industries. Moreover,
despite his bias against the United
States, Borja has expressed a willingness
to continue cooperation on some issues
with the United States, particularly the
narcotics area.
SAUDI ARABIA/US: Drifting Away
The Saudi Government's state-
ment last week that it reserves the
right to buy weapons from anywhere
"without restrictions or preconditions"
if Washington does not meet its mili-
tary needs is another sign that Riyadh
gradually is moving toward a more
independent posture and away from
the United States.
Saudi unhappiness with the United
States?particularly objections to Con-
gressional restrictions on weapons deliv-
eries--is likely to lead to still more deals
like the Chinese CSS-2 sale and Britain's
recent $30 billion long-term contract for
Tornados and other hardware. We expect
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Riyadh to consider purchasing Soviet
bloc military equipment?possibly soon;
neighboring and conservative Kuwait long
has bought bloc arms and Jordan
recently evaluated a Soviet offer of
sophisticated military aircraft. Over time,
the Saudis may respond to Moscow's
persistent diplomatic overtures, diversify
arms purchases more, and become less
pro-Western in orientation. Even some
senior Israeli officials publicly have
expressed concern over the US's
declining influence in the Arab world
and have urged their American friends
to compromise on restrictions on the
F-18/Maverick missile package for Kuwait
recently approved by Congress.
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SPECIAL WARNING TOPIC
IRAN/IRAQ: The Implications of Peace
An end of the war between Iran
and Iraq will bring major changes to
the Gulf region and have significant
implications reaching far beyond the
Middle East. The extent of post-war
changes remains unclear, but they will
have both positive and negative conse-
quences for US interests.
On the positive side, both
regimes are likely to abandon some of
their more radical positions, adopt more
balanced foreign policies, and reintegrate
themselves more fully into the world
political order. Ayatollah Khomeini's
retreat from his long-held position of
bringing down the Saddam Hussein
regime has been a significant setback for
radical elements. Iranian pragmatists
increasingly appear to be in charge--as
evidenced by recent improvements in
ties to Britain, France, and Canada--with
an accompanying opportunity for
gradually improved US/Iranian relations,
despite residual animosities. The Iraqis
may loosen ties with their major arms
supplier--the USSR. They probably will
also improve their political standing in
the world community as the stigma of
Baghdad's use of chemical weapons
fades.
Peace will give both sides a
chance to rebuild damaged industrial
facilities and infrastructure and to
improve the lot of their peoples--im-
proving overall trade prospects and
opportunities for billions of dollars worth
of Western nonmilitary sales; this need
for investment also will incidentally
increase opportunities to build political
influence as well. US allies in Western
Europe, as well as Japan and South
Korea, probably will have better chances
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at making inroads than the United States,
particularly in Iran.
The United States may be able to
improve further relations with Gulf Arabs
who have been reluctant--despite US
convoy efforts--to forge ties too closely
to the United States for fear of Iranian
retaliation. This possibility will continue
to be offset by the growing perception in
the region that the United States is an
unreliable arms supplier--and thereby
friend--a view strengthened by Saudi
Arabia's recent decision to turn to Britain
for $30 billion in military hardware, con-
struction, and services.
On the negative side, there are a
number of potentially serious adverse
implications of "peace" for the United
States:
o Cessation of combat may allow
Iraq, after a period of recuperation,
to direct its battle hardened forces
against other targets. Saddam
Hussein may revive Iraqi irreden-
tist claims on Kuwait to secure oil,
territory, and port facilities directly
on the Persian Gulf. Israel will be
alert for hostile Iraqi intent and
may be even more willing to
strike preemptively at Iraqi offen-
sive capabilities such as its mis-
siles and chemical weapons pro-
duction plants to disrupt a
possible joint Syrian/Iraqi attack--
in the unlikely event that Damas-
cus and Baghdad can resolve their
differences. The Israelis already
are expressing publicly their con-
cern. President Assad, however,
presumably is wary that Iraq may
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turn
-
turn on him for his lengthy sup-
port of Iran in the war. Israel is
likely to do its best to foster Syri-
an/Iraqi discord.
o "Peace" probably will give the
Soviets openings to improve ties
with Tehran at US expense. Dep-
uty Foreign Minister Vorontsov
has been in the region recently,
including Tehran. Moscow already
has offered to mediate a definitive
peace agreement in a Central
Asian city. The Soviets also may
use additional economic offers to
boost entree to Iran.
o World oil markets probably will be
volatile for some time. Traders
will be watching to see whether
Iran and Iraq will work more har-
moniously to ensure OPEC pro-
duction discipline--driving up
prices--or whether the reopening
of Iraqi sea lanes and the end to
air attacks on production facilities
will encourage greater exports and
lead to a price collapse. Lower
prices will increase the strain on
oil exporting Third World countries
and the international banking sys-
tem, while higher prices will tend,
among other things, to refire
inflation and cut economic growth
in consuming countries.
o Weapons suppliers who have
profited from the war since 1980
will seek other markets to main-
tain earnings. North Korea, Brazil,
China, and Eastern Europe all have
major hard currency shortages
that have been ameliorated in
recent years by munitions sales to
both sides. Reduced earnings
would increase economic troubles
domestically and payments prob-
lems could negatively affect inter-
national banks. A new push by
suppliers would accelerate arms
races in the Third World, espe-
cially, increasing the chances of
regional conflicts and diverting
resources from domestic pro-
grams.
o Iraq will no longer use so much of
the output of its chemical weap-
ons production capacity on the
battlefield. It may decide to sell
some output to raise cash or help
friends, accelerating the prolifera-
tion of chemical weapons. The
Iraqis also, perhaps more likely,
might provide technical assistance
to Third World states wanting to
develop their own chemical war-
fare programs.
o Kurdish rebels in both Iran and
Iraq are likely to be punished by
both sides for their actions during
the war in support of a Kurdish
nation. The Kurds could suffer
heavily and may ask the United
States for help. Conflict could
spill into southeastern Turkey,
exacerbating the difficult situation
there.
Either or both sides may use the
truce or even a peace agreement to
rest and recuperate prior to another
round of fighting. Iran--tired and
bloodied but with the larger resource
base--has more to gain by a respite.
Tehran may actively plan to resume the
war when it is stronger; recognition of
this possibility is a major factor driving
Iraq's suspicion of Iran's acceptance of
Resolution 598. An Iraqi seizure of Ira-
nian territory would virtually ensure Ira-
nian intent to resume the war eventually.
Iraqi recognition of this possibility, how-
ever, will continue to preoccupy Baghdad
and curtail its adventures elsewhere.
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C443
LOOKING AHEAD
Traditional Islamic 40-day mourning period for victims of Iran Air 655 ends on
13 August ... likely to be marked by demonstrations against the United States ...
could be occasion for terrorist retaliation, possibly by radicals unhappy with Tehran's
acceptance of Resolution 598.
Chile's junta to announce government presidential candidate on 30 August
with plebiscite likely in early October ... Pinochet probable candidate ... opposition
remains fragmented ... upsurge in violence likely during campaign.
Clashes along Angola/Namibia border could escalate into large-scale fight-
ing despite ceasefire agreement ... Castro came close recently to ordering Cuban
artillery attacks on major South African base in Namibia ... aggressive patrolling
along border likely to lead to more firefights ... South Africans boosting air strength,
reorganizing and strengthening ground forces into a combat division.
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