EVENTS AND OER'S PREDICTION RECORD, SOME SUGGESTIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91M00696R001000100003-2
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 24
• Document Creation Date: December 16, 2016
• Document Release Date: December 16, 2004
• Sequence Number: 3
• Publication Date: September 5, 1975
• Content Type: MF

?
Approv
*400 *-Wi;~NHII h.
A 001000100003-2
5 September 1975
0
?
MEMORANDUM FOR: Deputy Director of Economic
Research
SUBJECT Events and OER's Prediction
Record, Some Suggestions
1965-75 Survival of Smith
regime in Rhodesia
despite economic
sanctions imposed
in 1965.
1969-71 Growing trade
problems between
US and Japan.
Allende elected in
Chile.
Predicted by OER on basis
of analysis of Rhodesia's
economic strengths and
weakness and impact of the
embargo.
Extensive alertive reporting.
Predicted early(2 years in
advance)by OER on basis of
deteriorating economic
conditions. See next note.
1971 Chile's expropriation Forecast well in advance of
of Anaconda and event
Kennecott copper
mines.
1971 World monetary Extensive forewarning in
crisis and read- OER reports.
justments.
1972 Rise in world sugar Accurately predicted, through
prices. analysis of Soviet require-
ments and worldwide supply
conditions.
1973 Soybean price rise Predicted by OER on basis
and shortages. of anchovy shortage off
coast of Peru, which was
first highlighted by OER.
Approve Est Q0'I IOF~001000100003-2
25X
25X
 Approved F
A"
Date Event
F, h
d 000100003-2
1973 Oil embargo and Did not predict.
quadrupling of
oil prices.
late 1973- Recession in developed OER, in contrast to OECD,
present countries. more accurately predicted
depth and duration of
recession.
1974 Large oil discov-
eries in Mexico.
Accurate alertive reporting,
1974-75 Financial crisis in OER, in opposition to other
UK and Italy and government agencies, gave
turmoil in inter- premonitory warning well in
national financial advance.
markets stemming
from higher oil
prices.
25X1
25X1
Chief
Industrial Nations Division
~a T ! V
Iffil"I
Approved For Release 2005/01/18 : CIA-RDP91 M00696R001000100003-2
 pnar~ye~ F R~ ECG 1
DEVELDPINC~ -NA'~fON 1
a0q%10Q90 2
INDONESIA:
1973 -- Predicted Indonesia would have sufficient
domestic food supplies in 1974 despite bad harvest and
requests for PL-480 aid.
INDIA:
1970 -- Projected agricultural output through 1980
which have been the most accurate of those made in the
early 1970s.
PHILIPPINES:
1971 -- Indicated demise'of Laurel-Langley Agreement
would have little impact on Philippine economy.
NORTH VIETNAM:
1965-68 -- Forecasted the effect of bombing of North
Vietnam and how long recovery would take.
1967-73 -- Predicted that the NVA had a sufficient
manpower pool to draw upon without seriously constraining
military operations.
1971 -- Predicted a 40% shortfall'in rice needs be-
cause of Red River floods.
1972 -- Predicted the impact of the mining of Haiphong
Harbor on North Vietnamese internal distribution patterns.
1966-1973 -- Predicted that the flow of material,
equipment, and manpower tb South Vietnam from North Vietnam
would continue despite bombing.
1965-1970 -- Underestimated flow of_goods coming into
Cambodia from North Vietnam.
25X
25X1
Approved For Release 20 #I llS 4 CIA-RDP91 M00696R0010001000q
 Approved For ReI / 1/18: CIA-RDP91 M00696R001000100003-2
1969-1971 -- Predicted that rice availabilities in
South Vietnam were unlikely to be affected by VC/NVA
operations.
EGYPT:
1971 -- Predicted that Egypt's immediate post-war
boomlet would turn into interwar stagnation.
1970-1973 -- Predicted that economic difficulties
and the fragility of Egypt's relations with other Arabs
would inspire Sadat to seek settlement with Israel in
exchange for Western aid.
ISRAEL:
1970 ---Indicated that the drain on manpower during
the 1969-70 war of attrition from casualties and reallo-
cation from civilian pursuits had little if any effect on
Israeli determination to resist or on military capabilities.
1970 -- Predicted that the economic impact of large
defense efforts in Egypt would hurt economic growth while
Israel's military spending would not affect their development- prospects.
1973 (Feb.) -- Pointed out the prospect of oil price
hikes by Iran; however, we did not anticipate the magnitude
of the price rise in January 1974.
RHODESIA:
1964 -- Predicted that UN sanctions against Rhodesia
would not force the Smith Regime to give up its newly
declared.. independence .
25X
25X1
Approved For Release 1 8: CIA-RDP91 M00696R001000
 Approved For ReL .
NORTH VIETNAM: (Continued)
1972 -- Predicted mining of Haiphong Harbor would
lead to overland shipments from China of significant
magnitude to support the North Vietnamese army in the
field.
SOUTH VIETNAM:
1975 (March) -- Indicated South Vietnam's Air
Force will not be able to supply the South Vietnamese
ground forces without massive US intervention.
Approved For Release 2flO /01/18
25X
25X1
 Approved For Releas ' ff 1j 8: CIA-RDP91 M00696RO010t0100003-2 25X
1967 -- Predicted Moscow will continue to provide
substantial amounts of military aissistance to Egypt.
1969 -- Predicted that if Allende was elected, he would
immediately nationalize the foreign-owned copper companies.
Also predicted that compensation payments would be unlikely
because of the expected foreign exchange crunch.
1970 -- Predicted that the Allende government would
move first against foreign-owned copper companies and banks.
1972 -- Predicted that the mounting foreign:,exchange
crunch would lead to drastically increased domestic poli-
tical turmoil.
VENEZUELA:
1975 (March) -- Predicted that oil revenues would
be insufficient to support 14rge foreign-aid schemes.
CUBA:
1963 -- Predicted that the US embargo would have
only a marginal import on the Cuban economy.
GUYANA
1973 -- Predicted that Guyana would nationalize the
properties of the Reynolds Metals Company subsidiary.
JAMAICA:
1974 -- Predicted that Jamaica had sufficient leverage
to greatly increase bauxite revenues from US aluminum company
subsidiaries and that its action would provoke similar actions
by other Caribbean bauxite producers.
25X1
Approved For Releas ' ' 18 : CIA-RDP91 M00696RO010001
 SEC
Approved For Release-2005/01i1
ZAMBIA:
1966 -- Projected that a cutoff of trade with the
Smith regime would inflict an unacceptable level of damage
on the Zambian economy without assuring the collapse of
Rhodesia's government.
ALGERIA:
1970 -- Predicted the nationalization
of French oil comapnies by Algeria if the French failed to
negotiate improved terms for Algeria in their bilaterial
oil relationship. Later predicted that neither Algeria nor
France would suffer from the rupture of their economic
ties.
1972 -- Predicted Algeria's borrowing of large sums
abroad but understated the extent of such borrowing.
LIBYA:
1972 -- Inaccurately predicted that the new leader-
ship in Libya would prefer to continue raising taxes and
royalty payments rather than nationalize foreign oil com-
panies.
PAKISTAN:
1969 -- Incorrectly predicted agricultural self-
sufficiency.
1971 -- Predicted that a break-up of Pakistan would
lead to an economically viable west wing and an economic
disaster in the East.
Approved For Release
v *r
01
25X
25X1
 25X1 Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
Next 1 Page(s) In Document Exempt
Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
 Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
USSR/EE Division
9/8/75
Alert/Prediction Record
Fall 1963 - Soviet Grain Crop Failure
Did not predict crop failure and extent of grain
purchases.
Fall 1965 - Soviet Grain Crop Failure
Did not predict crop failure (Soviets did not buy
much grain).
Fall 1972 - Soviet Crop Failure
Alerted policymakers to crop difficulties but
underestimated Soviet grain import requirements.
Fall 1973 - Hard Currency Trade
Predicted hard currency surplus in 1974, but Soviets
still had deficit in spite of substantial improvement
in hard currency payments position.
Spring/Summer 1975 - Soviet Crop Failure
Predicted poor crop and increased Soviet imports.
Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
 Approved For Release 2005/01/18 : CIA-RDP91 M00696R001000100003-2
8 September 1975
China: Effect of the Cultural Revolution on the Economy (1967-1968)
Starting in late 1966, we analyzed the current and possible
future effects of the Cultural Revolution on the economy, mostly
in qualitative terms. We distinguished between the relatively
minor effects on agricultural production and the relatively
serious troubles for industry and transportation.
China: Agricultural Imports
An unprecedented tightening of international commodity
markets in the summer of 1972 coincided with a poor Chinese
harvest. Since then we have predicted -- within a reasonable
degree of accuracy -- the timing and quantity of Chinese purchases
of grain and cotton and the likely suppliers of these commodities.
China: Whole Plant Imports
More than one year before China entered the World market in
1973 for complete industrial plants, we wrote several IM's
predicting that such would be the case. The prediction was based
on analyzing early negotiations between Chinese trading corporations
and firms in Western Europe and Japan. At that time, we pointed
out that a plant import program much larger than $400 million
would require China to accept medium-term credits. During the
past several years, the PRC has purchased more than $2 billion
worth of complete plants, mainly on medium-term credit.
China: Purchase of Large MOdern Fertilizer Plants
In November 1971 our analysis of the Chinese fertilizer
industry indicated that Peking would have to import modern
Approved For Release 2005/01/18 : CIA-RDP91 M00696R001000100003-2
 Approved For Release 2005/01/18 : CIA-RDP91 M00696R001000100003-2
fertilizer plants to be able to adequately expand output of
chemical fertilizer -- particularly nitrogenous fertilizers.
Between NOvember 1972 and May 1974 China concluded deals for
13 of the world's largest ammonia-urea complexes from US, Dutch,
French, and Japanese suppliers, the first of which should
become operational in 1977.
China: Oil Exports
Rapid increases in oil production in 1970 and 1971 led
OER to conclude that major Chinese oil exports were imminent.
We predicted in September 1971 that China would have "as much
as 10 million tons" available for annual export by 1975 --
a figure roughly equal to Peking's total sales this year.
Approved For Release 2005/01/18 : CIA-RDP91 M00696R001000100003-2
 Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
8 September 1975
North Korea: Balance of Payments
We predicted that the North Koreans were running into
severe balance of payments problems and would default on
payments to Western creditors. This has proved to be the
case with the result that (1) North Korea's credit rating
has dropped sharply in international financial circles, and
(2) industrial development plans have been set back.
Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
 25X1 Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
Next 5 Page(s) In Document Exempt
Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
 Approved For Release 2005/01/18 : CIA-RDP91 M00696R001000100003-2
1 SE E1
Successful OSI Predictions
1960 - 1965
Predicted Soviet S&T Manpower Increase - Begun in
the 1950s and continuing well into the 1960s these pre-
dictions resulted in legislative changes designed to
strengthen US S&T education.
Predicted in 1962 that the Soviets were planning to
introduce nuclear warheads into Cuba.
1965 - 1970
Alerted US policymakers in 1968 to a desert locust
infestation in Africa and the Middle East which was
threatening to develop into a plague potentially affecting
about 45 countries. The threat was successfully aborted
because of control measures instituted after this warning.
K1
For RITZ AWL
 Approved For Release 2005/01/18
Predicted in 1966 the deleterious effects of the
Cultural Revolution on S&T training and the S&T organization
in China.
?
Predicted in 1968 the advent of a manned Soviet space
station and described its characteristics.
Predicted the spread of schistosomiasis throughout
Egypt following the construction of the Aswan Dam. This
has occurred and Mr. Kissinger has proposed a program of
schistosomiasis eradication throughout the world before
the UN.
Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
25X1
25X
25
 Approved For Rel
1971 1975
Predicted in 1974 that the Soviets would not abrogate
the Limited Test Ban Treaty and conduct their silo vulner-
ability test in the atmosphere.
Predicted in 1972 that the USSR would experience
installation support and maintenance problems with the
RYAD computer. series development, problems which would
have the effect of drastically slowing down the utilization
of their 3rd generation computer series.
25
25
25X
Predicted the kinds of problems the Soviets would en-
counter in holding up their end of the Apollo-Soyuz Test
Project two years before the scheduled flight date, enabling
NASA to press the Soviets-vigorously for corrective measures.
TOP
Approved For Relea
se 26%M~
25X
 Approved For Release 2005/01/18 : CIA-RDP91 M00696R001000100003-2
DCI's Opening Statement for Pike Committee
11 September 1975
As I understand the purpose of this hearing, it is to review
the performance of intelligence in predicting various events abroad.
I welcome this opportunity to address the substantive aspects of
intelligence and to discuss with you what I consider the primary
purpose of intelligence. This purpose is much broader than the_
prediction of events abroad. It is to provide those officials in our
Government who are responsible for developing and implementing
national security policy with authoritative information and assess-
ments of what is going on abroad so that they can do their jobs.
Who are these officials? In the first instance they are the
President- and the other members of the National Security Council--
the Vice President, the Secretary of State, and the Secretary of
Defense. They include the members of the Staff of the National
Security Council and the appropriate staffs of the various members
of the Council itself. Members of certain committees of the Congress
are now being informed of foreign developments on a regular basis.
These committees include Subcommittees of the Armed Services and
Appropriations Committees of the Senate and the House and the
Approved For Release 2005/01/18 : CIA-RDP91 M00696R001000100003-2
 Approved For Release 2005/01/18 : CIA-RDP91 M00696R001000100003-2
Foreign Relations Committee of the Senate and the International
Affairs Committee of the House. Other Committees and Members
of the Congress are provided with intelligence on foreign develop-
ments in response to their specific requests.
The subject matter of intelligence has expanded from its
older focus on foreign military capabilities to include foreign
political dynamics, economic trends, scientific capabilities, and
sociological pressures. Today's intelligence deals with foreign
policy problems, ranging from the law of the seas to the oil boycott,
from defense policy to arms control.
Along with this expansion of the scope and role of intelligence
has come an increase in reliance on information acquired by
sophisticated technical devices and open literature and a decrease
in what the uninformed consider synonymous with the word
intelligence--clandestine collection and covert action. Clandestine
collection or espionage is now reserved for the most important
information which cannot be acquired by other means. It is focused
largely on the major closed societies, that could threaten our
security, that do not have a free press, and that screen their military
capabilities and much of their government process even from their
Approved For Release 2005/01/18 : CIA-RDP91 M00696R001000100003-2
 Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
Few would -argue -that. there have been no fundamental
changes in the world over the past three decades. So much has
been written about these changes that many of the descriptive
phrases have become cliches--the fragmentation of Stalin's
monolithic communism, nuclear parity, an era of negotiation
replacing an era of confrontation, shift from a bipolar to a multi-
polar world, increased consciousness of the third world, the growth
of the nuclear club, international economic competition replacing
the threat of nuclear war, the food-population problem, the growing
power of the oil-rich nations, and international terrorism..
Hackneyed as these expressions may be, they evoke the images
of change that have occurred in the last quarter century.
Against this backdrop of a changing world, this nation needs
the best information and judgments about what is going on abroad so
that it can survive and prosper--and its intelligence structure should
be in a position to satisfy this need. This nation needs a basic
understanding of the factors and trends that affect developments in
the world abroad. This must be based on research and analysis of
information from all sources, not just from secret and official sources
of information, but also from the cornucopia of open literature and
Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
 Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
academic research available on much of the developed world. Much
of this information is highly fragmentary and much of the academic
research is highly specialized. The task for intelligence is to analyze
and integrate this, material into assessments and judgments relevant
to our nation's concerns abroad. From these assessments of the
past and present must flow projections as far into the future as may
be needed to permit policy formulation and planning for negotiations
and action. And, a continuous flow of timely information and analyses
is needed to update these assessments and projections and to alert our
policy makers to new opportunities or potential crises so that they can
plan accordingly.
In meeting these needs the Intelligence Community must measure
up to a number of demanding standards. If intelligence is to provide
meaningful and timely support, its reporting and analysis must cover
and integrate all facets of foreign developments--military, political,
economic, scientific, and sociological.
Intelligence must also be responsible --clear-cut; sharp; neither
alarmist nor complacent--if it is to serve as a reliable basis for
decision.
Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
-4-
 Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
Effective intelligence must also avoid the bureaucratic
penchant for ambiguities or delphic generalities which by anticipating
all possible eventualities frustrate meaningful retrospective
examination.
Finally, intelligence must be responsible by being independent
of partisan preference or loyalty to preconceived judgments or
purposely supportive of budgetary desires.
The forms intelligence may take in giving the policy maker
the information he needs to do his job will vary. They range from
the dissemination of single raw,intelligence reports. to complex
analytical memoranda or national intelligence reports. They may
include oral briefings or daily publications on world-wide developments.
In fast-moving situations the intelligence community may issue special
memoranda alerting the policy maker to an imminent crisis. In actual
crisis situations special situation reports will be issued as frequently
as developments warrant.
The critical test of intelligence, however, is not the reporting
of observed events, but rather its early identification of future events.
Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
 Approved For Release 2005/01/18 : CIA-RDP91 M00696R001000100003-2
If it is doing its..job intelligence should be able to identify
and describe the forces at work which are shaping the future'.
And it should be able to do this far 'enough.in advance so. that
appropriate US policy or actions can be planned.
In looking at the future the problem of. predicting specific
events is only one aspect of the intelligence process. The
Intelligence Community should not be judged by the exactitude
with which it predicted a coup or the outbreak of a war. The
occurrence of an unfavorable event without some form' of'prior
alert is much more an indication of an intelligence failure than is
the failure to predict the precise date of a specific event.
Equally the Intelligence Community should not be a Cassandra
who by overwarning about events dulls the sensitivities of consumers.
The overriding need 'in intelligence is.to strike that-careful
balance between alerting policy officials to'pending developments
,that will impact on our national interests and forecasting the precise
timing of such events.
Since the members of the Intelligence Community are as
fallible as all mortals, we lay no claim to being soothsayers. Our
judgments on the future are of necessity probabilistic. We have and
Approved For Release 2005/01/18-JiA-RDP91 M00696R001000100003-2
 Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
we will make, errors, but as I review the performance of the
intelligence community I feel strongly that its overall record
is good and that it is serving its country well.
To give you some insight as to why I feel this way I would
like to report to you on a representative number of problems
examined by the community over the past few years.
--7-
Approved For Release 2005/01/18 : CIA-RDP91 M00696RO0100.0100003-2
 Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2
Next 45 Page(s) In Document Exempt
Approved For Release 2005/01/18 : CIA-RDP91 M00696RO01000100003-2