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Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
State Dept. review completed
0-0
Secret
19 January 1973
No. 0353/73
Copy NO
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The WEEKLY- SUMMARY, issued every Friday morning by
the Office of Current intelligence, reports and analyzes signif-
icant developments of the week through noon on Thursday.
It frequently includes material coordinated with or prepared
by the Office of Economic Research, the Office of Strategic
Research, and the Directorate of Science and Technology.
Topics requiring more comprehensive treatment and there-
fore published separately as Special Reports are listed in the
contents,
CONTENTS (19 January 1973)
WESTERN
HEMISPHERE
1 Indochina
4 China: Youth; US Trade
6 Philippine Prestidigitator
7 Taiwan: A Growing Economy
L1 The CEMA Investment Bank
11 Malta: A Breathing Spell
12 Iceland: Base Talks to Begin
13 Spain: The Strain Is Plain
14 The Netherlands: Impasse
9 USSR:Lunokhod
Guatemala: Government Candidates
Chile: Never a Dull Moment
Costa Rica: "Pepe" Under the Gun
Uruguay: The Military Role
L9 Senegal: Rocky Road Ahead
20 Zambia-Rhodesia: Blockading
21 Zanzibar: Bring Back the Party
22 Morocco: The King Gets Tough
23 Turkey: Prospects for Reform
SPECIAL
REPORT (Published separately)
MIDDLE EAST
AFRICA
A Soviet Farm Problems Slow
Economic Pace
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Amid intense speculation in Vietnam that a
cease-fire is coming soon, indications from a vari-
ety of sources show the Communists keeping
their forces in a position of readiness for a pos-
sible military push just before a cease-fire comes
into effect. They apparently anticipate a period
of uncertainty and confusion accompanying the
cease-fire among the populace and some govern-
ment military forces and hope to take advantage
of it. If a cease-fire occurred around or in the
period of the lengthy Tet festivities in early Feb-
ruary, the Communists probably would count on
the government's guard being lowered even fur-
ther. The enemy motive would be to strengthen
its territorial position in advance of a stand down
by the military units of both sides.
populated areas that provide lucrative targets,
rather than to pull back into deep base areas.
In northern South Vietnam, the combat
potential of Communist forces just south of the
DMZ is probably higher than at any time since
early last summer. In the central highlands, the
Communists have recently carried out limited
offensive operations and, after achieving some of
their objectives, are probably not in a position to
mount a high level of operations any time soon.
Along the central coast, Communist main forc(-
units have probably recovered somewhat fron
losses suffered last summer and could undertake a
fair level of operations. In Military Region 3,
Communist forces are probably, on the whole, no
stronger than they were at the time of the
October offensive. In the delta, enemy forces
have been attemptinq t_o_refAF
Communists may attempt in conLunc
cease-fire announcement.
Despite the scope of these preparations, it is
hard to predict just how strong an offensive the
Much of this materiel is doubtless needed to
replace stocks lost in the course of the Com-
munist offensive in 1972. It could also be in-
tended to pad the level of equipment and sup-
plies, in case these levels are frozen in connection
with a cease-fire, but the materiel, along with this
dry season's infiltrators, will bolster the Com-
munists' ability to mount and sustain major
operations over the near term. With little combat
activity during the past several months, many
enemy main force units have been actively
engaged in resupply and refitting operations. The
main forces have attempted throughout most of
the country to maintain field positions near
seems most likely that the Communists would
like to launch countrywide attacks on a level well
above those of last October, but short of an
all-out offensive. The Communists realize that
they must preserve much of their strength for the
post - cease-fire period, or risk being gradually
overcome by the government.
Although the Communists probably could
not overrun any major population centers, some
district capitals and a variety of villages and ham-
lets near Communist strongholds are vulnerable.
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Rather than direct, heavy assaults along the lines
of the 1972 offensive, the Communists might well
attempt to break down some of their main forces
into small elements for use with the Viet Cong in
local attacks. Small-scale but widespread assaults,
backed by artillery, against lightly defended
population centers and government installations
could complicate the government response.
In the face of strong South Vietnamese
counteraction, it is questionable how long the
Communists could hold any territorial gains. In
their premature October offensive, they were
unable to retain overrun areas for longer than a
few days when challenged by government forces.
Moreover, the Communist ability to sustain any
new offensive will certainly be less than during
their spring offensive in 1972. It is evident that
the Communists will be trying to tie any opera-
tions very closely to the actual implementation of
a cease-fire, hoping thereby to deter government
efforts to retake lost ground after the truce goes
into effect.
[or their part, government forces now
appear to be in a significantly stronger combat
position than in October. The army has made
good most of the manpower losses it sustained
during the 1972 spring drive, and has gorse over to
relatively aggressive combat operations in several
key sectors of the country. The most important
government gains have come in the far north
where, despite the enemy rebuilding effort,
Saigon's forces have pushed the Communists back
from positions that provided access to the
populated lowlands. These operations have kept
the enemy on the defensive and doubtless will
hinder any offensive in connection with a cease-
fire.
The South Vietnamese are well aware of the
possibility that the Communists may try a cease-
fire offensive, and they have arranged their forces
with considerable care. Nevertheless, the Com-
munists are in a position to cause substantial
trouble.
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After two years of combat, military initia-
tive in Cambodia remains firmly in the hands of
the insurgents. in the past two weeks, the tempo
of the fighting has picked up considerably, and as
usual, the Communists are responsible. Beginning
on 1 January, predominantly Khmer Communist
forces attacked a series of government positions
along the two main highways south of Phnom
Penh.
One of the roads-,Route 2-is once again
closed between the capital and Takeo. Govern-
ment operations are under way to clear it, but
progress is slow. The government has fared better
in its efforts to drive the Khmer Communists
away from Route 3, in the vicinity of the town of
Tram Khnar. To the west, Communist harassing
attacks have prevented Cambodian reinforce-
ments from reaching the isolated town of Srang.
Having engaged the government's military
attention in the south, the Communists launched
some attacks in the Phnom Penh region. Insurgent
elements attacked Cambodian positions on Route
1 and forced government troops to fall back
toward their Mekong River base at Neak Luong.
At the same time, the Communists also drove
government troops from a number of small out-
posts on the east bank of the Mekong below Neak
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Luong. The attacks along Route 1 were the most
significant in the area since last October, when
the Communists thwarted government efforts to
reopen a short stretch of this highway.
Faced wit a
rea s vital river supply line from
South Vietnam, the government moved quickly
to clear both banks of the river below Neak
Luong. By midweek, government units had reoc-
cupied all of the abandoned positions and begun
to refortify them.
The upsurge in Khmer Communist activity is
designed in large part to demonstrate their in-
creased military prowess and underscore the
Cambodian Army's various deficiencies. The
Khmer Communists cannot stay on the attack
indefinitely. Besides the casualities it has pro-
duced, the present campaign has also put some
strain on the Communists' logistical resources.
The insurgents will undoubtedly have to with-
draw to rest and refit-as they have in the
past.
LAO PEACE TALKS LIMP ALONG
Lao Government and Communist nego-
tiators played another round of diplomatic
charades at the session of the Vientiane peace
talks this week. They were obviously waiting
developments on a possible Vietnam settlement,
and both sides avoided talking about specific
negotiating points. The Communists used their
time to castigate the US, and government repre-
sentatives responded by denouncing North Viet-
namese intervention in Laos. Immediately after
the meeting, five of the Communist negotiators,
including delegation chairman Phoune Sipraseuth,
left for Sam Neua via Hanoi for consultations.
They are expected to return to Vientiane for the
next regular session of the talks on 23 January.
Ito-
i La
Pruba,
arreses
Sot,,Phou? - Pl
Kh5u JrreS
n
uong Kossy
9 13
?Government-held location
?Communisl-held location
?:
~prDvtipe
The Military Scene in Laos
Government units that retreated from Sara-
vane last week in the face of heavy North Viet-
namese attacks are now regrouping for another
effort to retake the southern provincial capital.
The arrival of additional irregular and Lao Army
troops has swelled government strength in the
area west of Saravane to over 3,000. Despite
continued air strikes, the Communists are main-
taining a large force near Saravane.
In the north, Lao Communist troops still
control Route 13 for some distance north and
south of the road junction at Sala Phou Khoun.
In a rare use of armor late last week, the Com-
munists sent two tanks as far south as the airstrip
at Muong Kassy before government troops could
destroy them. Lao Army commanders are under'
considerable pressure from Vientiane to redress
the situation along Route 13, but so far have
failed to generate any sort of a move back toward
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CHINA: IN LEAGUE WITH THE PARTY
A recent issue of an English-language publi-
cation from Peking featured photo coverage of a
successful operation in which a severed right foot
was rejoined to a left leg. A similar operation is
now under way in the political sphere as Peking
tries to rejoin the "helping hand of the party,"
the Young Communist League, to the parent
organization.
Apparently in response to a directive from
Peking, party organizations in the provinces are
making preparations to re-establish Youth League
committees at the provincial level. According to a
number of provincial radio broadcasts, the opera-
tion is scheduled for completion "around 4 May,"
presumably to mark the anniversary of a youth
movement on that date in 1919.
Dismantled along with the parent party
apparatus during the Cultural Revolution, the
Youth League has been slow to rebuild. An effort
to reconstitute the league at the grassroots level
was begun last spring, but it foundered in the face
of more pressing political problems. As a number
of military province chiefs came under f .re and
dropped out of sight in the wake of the Lin Piao
affair, the task of rebuilding the league-always a
low priority item-was quietly shelved.
This time, the campaign seems to be under
way in earnest. Radio broadcasts have announced
unusually specific guidelines, setting age limita-
tions on league members-the problem of over-age
members has long been a touchy one-and
attempting to work out a modus vivendi with the
Red Guards, the youthful activists unleashed
against the establishment during the Cultural
Revolution. A loosely structured Red Guard
organization exists despite earlier signs that it
would dwindle away once the league was re-
activated. Red Guards have been invited to attend
league meetings as "observers,"' but their status
varies in each area. Shantung Province, for
example, has invited 50 Red Guard observers,
while the activist stronghold of Shanghai plans to
seat as many as 300 non-voting Red Guards.
By reasserting control over the league, the
party hopes to channel youthful energies toward
party-directed goals. The move is unpopular in
some official circles. Radical elements see the
league as a device to contain the enthusiasm and
idealism of youth, "special characteristics" that
should be left relatively free from organizational
discipline. Moderates insist that the truly special
feature of young people is their inexperience, and
the moderates view the league as the instrument
to lead youth to the appropriate political
the party has
launched a "youth a uca ion campaign," sug-
gesting that the moderates currently have the
upper hand.
Reactivation of the party's youth auxiliary is
likely to provide some outlet for the chronic
discontent among young people, especially those
forced to live and work in rural areas. Although
they will not be happy with the reimposition of
discipline that league membership brings, young
Chinese probably still view the Youth League as
one of the best avenues toward advancement.
The combination of intense interest gen-
erated by President Nixon's visit to the People's
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Republic of China, the gradual removal of po-
litical and legal barriers to trade, and the work of
Mother Nature that caused China to buy US grain
has resulted in a jump in China-US trade from $5
million in 1971 to an estimated $90 million in
1972.
Over 100 different Chinese products worth
about $33 million were brought into the US in
1972. About half of the imports was food and
crude materials, mainly hog bristles, raw silk, and
spices. The other half consisted of a wide variety
of light manufactured goods-such as fabrics,
clothing, and works of art.
A few large deals, mostly grain, accounted
By the end of
August, less than $750,000 worth of US goods
had been exported to China. Then a shortfall in
the Chinese grain harvest, the Canadian dock
strike, and a world-wide grain shortage made it
Sino-US trade in 1973 should take another
jump to possibly $250 million and place the US
well up among the leading Chinese trading
partners. Chinese sales to the US through 1973
may reach about $50 million for the year. US
exports, on the other hand, could be in the
neighborhood of $200 million.
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Last fall, when President Marcos proclaimed
martial law and the advent of a bright "New
Society," some of his more politically sophis-
ticated countrymen described it as a warm-.gyp for
tougher acts to follow. Their cynicism about
Marcos' ultimate goals was reinforced this week,
when he again dipped into his political bag of
tricks and produced new measures designed to
perpetuate his rule indefinitely.
Stung by growing criticism of the aging
"New Society," the President coined some new
"people's revolution" rhetoric and concocted new
ad hoc political structures called "citizens' assem-
blies." After holding a series of rigged consulta-
tions with the assemblies, Marcos announced on
17 January that they had approved his new con-
stitution. He added that the assemblies had called
for martial law to be continued for several years,
thereby postponing the implementation of the
new constitution's parliamentary system.
Marcos has signed the new constitution, and
he will now assume the expanded powers it grants
to the chief executive under a transitional govern-
ment. He will not, however, convene the interim
National Assembly provided for in the constitu-
tion. Instead, he evidently intends to rely on the
citizens' assemblies. He has already stated that a
national-level "People's Revolutionary Congress,"
which was attended last weekend by some 4,500
officials and civic leaders, will work with him as
the highest consultative group on local and
national issues. It will also formulate the guide-
lines for the citizens" assemblies. This network of
powerless town meetings clearly was fashicned to
provide a facade of popular participation in presi-
dential decision-making.
Thus far, Marcos has encountered little dif-
ficulty in carrying out his plans to concentrate
power in his own hands. Opposition party mem-
bers made a symbolic last ditch effort against
Marcos by asking the Supreme Court to nullify
the decisions of the citizens' assemblies on the
grounds that they were not constitutional bodies.
The court has demurred from making a judgment,
because recent events have placed it in an awk-
ward position. Technically, the old court system
carries over virtually unchanged under the new
constitution, but Marcos, as "prime minister," has
the power to change court membership if he
wishes.
Despite Marcos' unqualified success in
manipulating people and events in order to secure
total power, he remains concerned about possible
opposition. In preparation for an adverse public
reaction to the most recent manipulations,
Marcos has placed the armed forces on alert and
prepared a contingency plan for establishing a
military junta should serious open resistance
develop.
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Taiwan's economic performance last year
was one of the best on record, and the outlook
for this year is equally bright. Real economic
growth of over 11 percent came on the heels of
similar advances in the preceding two years. Gross
national product rose to $7.2 billion, and per
capita income topped $370, among the highest in
the Far East. A rapid growth in exports, a high
rate of investment, and continued industrial
expansion all contributed to this success. I
Taipei hopes to bring the rate of inflation-
which rose to about 5 percent in 1972-under 3
percent by increasing imports of items for which
demand is high. Rising wages, exports, and capital
inflows could, however, strengthen inflationary
pressures.
Exports rose 47 percent to about $3.1 bil-
lion, producing an estimated $280 million trad
surplus. This record helped boost Taiwan's for-
eign reserves to an estimated $750 million
equivalent to almost four months' worth o
imports. The leading export items-textiles an
electronics-scored major gains. The US remaine
Taiwan's leading trade partner, and bilateral trad
rose more than 40 percent. The trade surplus wit
the US rose to about $400 million, up a thin
compared with the previous year.
Despite Taiwan's attempts to reduce it
reliance on Japanese products, Japan was the
leading source of imports and Taiwan's second
most important trade partner. Taipei's continued
efforts to diversify its trade resulted in sharp gains
with the EC, especially West Germany, and
Canada.
Industrial output, paced by textiles and
electronics products, was up a record 26 percent.
Capital investment grew sharply, reflecting the
fact that foreign investor confidence stayed high.
Most overseas investors, including a few Japanese
firms, proceeded with their plans. The value of
government-approved new investments was not
far below 1971's record level. New US investment
approved by Taipei marked a yearly highF_
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President Pompidou and party chief Brezh-
nev ranged across the international spectrum dur-
ing their two-day meeting last week at a secluded
dacha outside Minsk. Although they found them-
selves in agreement on a number of issues, the
timing of the meeting was probably more impor-
tant for both than any specific business they may
have transacted.
The talks focused on Europe, and the sub-
stantive highlight was an exchange of views on a
European security conference and mutual force
reductions. Both reiterated long-held views that
progress on a security conference should not be
linked to the course of any other negotiations,
i.e., the force reduction talks. Advancing his sug-
gestion last month that Moscow was flexible on
Western proposals for the security conference,
Brezhnev indicated the Soviets would accept a
separate agenda item on "cultural questions." He
offered the first Soviet acceptance of including on
the security conference agenda confidence-build-
ing measures such as notification of military
movements. In one of the few areas of disagree-
ment, Brezhnev urged the French to take part in
the force-reduction negotiations. He may have
made some impact because Pompidou told the
press later, "We have agreed that we will speak
about it again." A French volte-face on this issue
is not likely in the near term.
The leaders also touched on economic rela-
tions. They reaffirmed the goal of doubling
Franco-Soviet trade during 1970-74 and promised
that agreements to implement: existing under-
standings on various cooperative ventures will be
signed soon. Pompidou also promised to review
and consult further on the Soviet bid for direct
contacts between the European Community and
East Europe's Council for Economic Mutual
Assistance-something Moscow strongly desires in
order to prop up CEMA.
The two leaders found themselves in close
agreement on Vietnam and the Middle East. The
communique treated the former in non-polemical
fashion and emphasized the need for a rapid set-
tlement. It was thus in line with earlier Brezhnev
remarks on the improved prospects for resolution
of the Vietnam problem.
From the Soviet standpoint, the visit and the
attendant publicity demonstrated the continuing
vitality of the special relationship with France,
which is consistently cited as the best example of
how the nations of Western Europe ought to
behave internationally. For Pompidou and the
Gaullists, the visit could help in what is looming
Brezhnev and Pompidou in Minsk
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as a difficult campaign
against the left coali-
tion that includes the
Communists. French
Communist leader Mar-
chais complained about
the timing of the visit
when he had his turn
with Brezhnev last
month, but the Soviets
have made it clear that
developing the relation-
ship with the Gaullist
government takes prior-
ity over assistance to
the French Communist
Part V.
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Early this week, the Soviets successfully
landed another rover vehicle, Lunokhod-2, on the
moon's surface. The new rover is expected to
operate for several months and to continue the
exploration program conducted by Lunokhod-1
in 1970 and 1971. The Lunokhod landing is the
latest in the series of unmanned lunar missions
that the Soviets have been conducting for the past
several years. No Soviet attempt at a manned
lunar landing is likely before the end of the
decade.
Lunokhod-2 was carried to the moon aboard
Luna 21, a space probe launched from Tyuratam
on 8 January. The landing occurred on 15 Janu-
ary in the Sea of Serenity, about 140 miles from
the area of the Apollo 17 mission last month.
Shortly after the probe landed, the new rover
rolled down a ramp onto the moon carrying a
Soviet flag and a likeness of Lenin.
The Soviets have released little information
about Lunokhod-2. It is believed to be similar to
the eight-wheeled Lunokhod-1, although it ap-
parently weighs almost 200 pounds more. Like
this predecessor, Lunokhod-2 will be driven re-
motely from a ground station in the Soviet Union
and will operate only during 'lunar days,' which
last about two weeks.
According to TASS, Lunokhod-2 will con-
tinue but not duplicate the work of the first
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moon rover. The earlier vehicle transmitted pic-
tures back to earth and conducted several scien-
tific experiments, including some to determine
the properties of lunar soil. Lunokhod-2 probably
will carry out similar experiments, although the
additional weight suggests that new programs
have been added. Like the first Lunokhod, the
second rover carries a French laser reflector that
will be used to measure distances between the
earth and the moon. The active life of Lunok-
hod-1 was more than ten months-far exceeding
Soviet expectations-and the new vehicle could
operate for about the same length of time.
The Lunokhods are part of the Soviet pro-
gram of unmanned lunar research that has been
under way since 1958. In addition to the rover
vehicles, this effort has included experiments con-
ducted from lunar orbit and two missions that
returned a few ounces of lunar soil. The Soviets
are not expected to attempt a manned lunar land-
ing until at least the late 1970s
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Loans totaling some $400 million have been
provided for at least 26 projects by the Interna-
tional Investment Bank, which began operations
in January 1971. The funds, designed to help
finance projects fostering production specializa-
tion within the nations of the Council for Mutual
Economic Assistance, have all been allocated to
East European countries. For its part, Moscow
has continued to use bilateral agreements with
East European countries to secure funds for the
development of natural resources that play a
major role in its trade with Eastern Europe.
The bank's total authorized capital is $1.3
billion-70 percent in rubles transferable among
members, the balance in hard currency. About
one third to one half of the subscription report-
edly had been paid in by the end of 1972.
Applications for loans have apparently out-
stripped available funds. During the first full year
of operation, the bank authorized loans of $219
million in transferable rubles and $68 million in
hard currency in support of 16 projects. Actual
disbursement has been less, as many of the loans
will be drawn down over a period of several years.
In 1972, at least ten new projects were approved,
involving over $100 million in bank funds. All 26
projects financed by these loans are in Eastern
Europe. Most of the loans will augment domestic
investments to modernize and expand manu-
facturing facilities.
...PROBABLY ONLY A MATTER OF
TIME BEFORE THE BANK SEEKS
LOANS FROM THE WEST.
Thus far, the bank has apparently not sought
funds in Western money markets, although it is
permitted by its charter to do so. Given the need
for Western equipment and technology, the type
of investment projects being financed, and the
paucity of hard-currency holdings by the member
countries, it seems only a matter of time before
the bank seeks loans from the West, particularly
Prime Minister Mintoff eased the tension
somewhat by agreeing to accept both the 1 Janu-
ary base rental payment from the British and the
supplemental payments from the allies. If all goes
well, the base pact will remain in full force until
the end of March, and British troops can carry on
business as usual. The UK and Malta still have
some bilateral issues to discuss, and Mintoff has
adjourned parliament until 29 January, thereby
giving himself more latitude in these dealings and
more freedom to travel abroad for talks.
Dom Mintoff
Likely to be recalcitrant
In the coming weeks, Mintoff will probably
focus his attention on the British, although he
will continue to press the other allies for guar-
antees against future devaluation losses. At the
first British and Maltese discussions of bilateral
issues last week, Valletta chose to deal primarily
with Maltese personnel working at British facili-
ties. Mintoff said he was "totally unsatisfied"
with the results. The British high commissioner
has opined that Mintoff will continue to be
recalcitrant and will try to escalate these meetings
to the ministerial level.
In a late note to Prime Minister Heath,
Mintoff suggested that he would propose ways
the UK could meet Malta's "just demands with-
out creating awkward precedents." Although
Mintoff's colleagues have not explained what he
meant, there are several possibilities. Mintoff
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would like the British to follow the allies' lead in
compensating him for losses caused by the ster-
ling float, and the Maltese governor general re-
cently proposed just such a move. London stead-
fastly refuses to do so.
From London's point of view, Mintoff is up
to his old tricks of dragging out negotiations in
the hope of extracting still more from the British
and other donors. As in the past, he gives every
evidence of being unable or unwilling to arrive at
a clear-cut solution. The Maltese leader does seem
to thrive on this sort of hue and cry, and, if the
base agreement runs its full term, the British and
the allies can count on recurring periods of ten-
Foreign Minister Agustsson is slated to lead
an Icelandic delegation to Washington next week
for preliminary talks on the Keflavik base agree-
ment. The visit ostensibly is to acquaint Agusts-
son with the importance of the US-manned
NATO base so that he will be able to rebut left
wing critics, who advocate complete US with-
drawal.
Agustsson is under considerable pressure
within the three-party coalition despite the nu-
merical preponderance of his Progressive Party.
The other two partners-the Communist Peoples
Alliance and the Organization of Liberals and
Leftists-have brought the coalition to the verge
of collapse on several occasions. The Communists
will probably bolt if the others agree to anything
short of complete withdrawal. Moreover, the
Organization of Liberals and Leftists has let it be
known that it will bring down the government in
the near future regardless of the base issue. As a
contingency, the base commander at Keflavik has
provided extensive briefings for the leaders of the
opposition Independence Party, as well as for
Agustsson, who may not be in the government
when real negotiations start.
If the government falls, the successor would
probably be made up of the opposition Inde-
pendence and Social Democratic parties plus the
Liberals and Leftists. The Progressives and, of
course, the Communists would be excluded.
Agustsson is doubtless aware of these pos-
sibilities and hopes to return from Washington
with something tangible to boost his party's
image. He recently asked the US Embassy to seek
the money to cover the cost of his party's "non-
negotiable" demands--separation of civilian and
military facilities at Keflavik Airport, restriction
of the base TV signal, and more jobs on the base
for Icelanders. Agustsson may want to nail down
such "minimum" concessions now, knowing that
the price is likely to drift upward if subsequent
negotiations include his coalition partners. Any
concessions he is able to extract next week will
benefit the Progressives no matter what happens
later.
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SPAIN: THE STRAIN IS PLAIN
The current spate of rumors about im-
pending cabinet changes has heightened political
tensions in the country. This speculation was
sparked by the government's intractable approach
to its dealings with key institutions. Rising dis-
cord between church and state, for example, has
centered on the attempts of the Council of
Bishops to formulate a policy statement on future
church-state relations. Last December, the
bishops approved in principle a watered-down
version of a draft that would have severed the
close ties between the two. Even in its present
version, the document is unacceptable to con-
servative government and church officials.
The present document calls for revision of
the 1953 Concordat between the Vatican and the
Franco regime. It would also end government
subsidies to the church and government participa-
tion in naming bishops. It calls for legal changes
to permit clergymen to cease serving in official
government bodies, such as the national legisla-
ture. It expresses church concern with the state's
punishment of political dissenters.
Because of government opposition, the
document has not yet been finally adopted, and it
stands little better than a fifty-fifty chance of
being published in its present form. Just after the
bishops adjourned, Vice Premier Carrero Blanco
accused the church hierarchy of ungrateful dis-
loyalty to Franco, and Franco himself in his
year-end speech cautioned the church. Foreign
Minister Lopez Bravo went to Rome last week to
discuss church-state tensions with Pope Paul.
The government has similarly antagonized
the legal profession. Last month, it vetoed five
candidates for election as officers of the highly
respected Madrid Bar Association. Although it
A Discussion of Church-State Tensions
Pope Paul VI
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Foreign Minister Lopez Bravo
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was generally conceded that the government-
favored candidates would win, the contest
aroused such political interest that the govern-
ment exercised its prerogative of vetoing the five.
All the other candidates then resigned in protest,
in effect canceling the election. The government
apparently had hoped iboth to discourage the bar
association from selecting anti-Franco officers
and from becoming a forum for political dis-
cussions. The result has been the alienation of
many staunch government supporters in the egal
profession throughout the country.
The discontent in Spanish universities over
stringent regime measures to control student pro-
tests creates further problems for the government.
The serious confrontation that appeared likely at
the beginning of the school year has not yet
materialized, although various departments in the
universities are closed. Sporadic student protests
involving over-crowding, cost-of-living rises, and
government controls continue.
These tensions will rise unless the regime
takes a more constructive attitude. If the govern-
ment persists in its present adamant stance, it will
only make matters more difficult for the govern-
ment to adjust to pent-up pressures for change
after the caudillo departs
THE NETHERLANDS: IMPASSE
Recent attempts to form a majority govern-
ment have failed, and the politicians are some-
what glumly speculating that a return to the polls
by early 1974 will be required.
Political fragmentation in the Netherlands
seems all but chronic, and it was aggravated by
the inconclusive results of the election ast
November. All intervening efforts to piece to-
gether a governing majority have been stymied.
Neither a left-center nor a center-right com-
bination of parties has proved feasible. The Dutch
may now turn to a minority coalition or an
extra-parliamentary cabinet less formally tied to a
bloc of parties, but there are serious obstacles to
both.
The key to the current deadlock is the
centrist Catholic People's Party, the nation's
second largest and a participant in every gov-
ernment since 1945. Without its collaboration,
neither the right nor the left can achieve a
parliamentary majority or expect to sustain a
minority government. Although the party retains
its pivotal position, it was badly shaken by severe
losses in November and is hampered by internal
discord. A swing to the left in support of a
"progressive" coalition is distasteful to the party's
moderate majority who, ideological misgivings
aside, are reluctant to become an auxiliary of the
Labor Party. Conversely, the Catholic left wing
has adamantly refused to serve in tandem with
the conservative Liberal Party.
The Catholics may eventually be persuaded
to support a minority coalition of the left or to
participate in a weak minority government of the
three confessional parties, but both possibilities
appear remote. The party sorely needs a period of
recuperation in which to bind up wounds and
reassess strategy. It clearly prefers an extra-
parliamentary interregnum, but Labor opposition
to this kind of solution looks insurmountable.
One proposed way out of the stalemate is an
early return to the polls. Such a move would be
opposed by the Catholics, but would presumably
be more attractive to Labor and the Liberals,
both of whom registered gains last November.
Accordingly, a growing number of politicians
would keep the present caretaker government in
place with the understanding that new elections
be held in late 1973 or early 1974. Elections may
help to resolve the impasse by sustaining the
recent trend to political polarization. This would
mean a further decline of the center parties, and
this could foreshadow erosion of the Netherlands'
steadfast friendship with the US.
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summit results, and pointed to the benefits for all
mankind of increased US-Soviet cooperation.
Subsequent commentary in Soviet media
and by Soviet officials has been similarly mixed.
On 27 December, for instance, a Pravda editorial
did not criticize US policy on Vietnam, but
stressed the policy of detente with the West,
including the US. On 5 January, Pravda carried an
article by Soviet publicist Yuriy Zhukov that
charged "hawks" in the US were bent on using
international detente to subvert the socialist
countries. In private conversations, various Soviet
officials have picked up Brezhnev's theme that
the development of US-Soviet relations will de-
pend on an improvement in the Vietnam situa-
tion.
US-USSR: THE HEAT STAYS LOW
Over the past several weeks, Moscow has let
it be known that it is not entirely happy with
US-Soviet relations, and not just because of Viet-
nam. Soviet media have been sharply critical of
US actions in Vietnam, but they have also reintro-
duced more general anti-American themes. They
are again stressing poverty, racism, and crime in a
"sick" American society. Soviet officials have sug-
gested disappointment at the way US-Soviet rela-
tions have been developing. Nevertheless, from
Brezhnev down, the Soviets have been careful to
balance their negative remarks with statements
that international tensions are easing and that
good US-Soviet relations are most valuable.
Brezhnev's speech at the USSR's 50th anni-
versary on 21 December set the tone. Brezhnev
called the Vietnam war the "dirtiest" in American
history, condemned Washington for its "barbar-
ian" acts, and said that as far as US-Soviet rela-
tions were concerned "much would depend" on
resolution of the Vietnam conflict. He set these
remarks off with some unusually positive ones on
the general state of US-Soviet relations. He noted
the "realistic" foreign policy being pursued by
the US in areas other than Vietnam, defended the
cerned about the US attitude toward economic 25X1
agreements-particularly the large oil and gas proj-
ects in Siberia-and the US position on SALT.
Through all this, the Soviets have been care-
ful to refrain from personal attacks on President
Nixon and have stressed they favor improvement
in US-Soviet relations.
Moscow thus seems to be saying that, Viet-
nam aside, it would like to see more rapid pro-
gress in bilateral negotiations, particularly on eco-
nomic issues. In this regard, Moscow may be
nervous about the recent changes in the US
Government. Officials in the Soviet Foreign Trade
Ministry, for instance, recently expressed uncer-
tainty to US Embassy officers over the re-
placement of several officials with whom they
had been dealing. Whatever the combination of
factors involved, the measured way in which the
US has been handled indicates that despite some
uneasiness, there has been no fundamental change
in Moscow's pursuit of detente with the
US.
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GUATEMALA: GOVERNMENT CANDIDATES
After months of debate within the govern-
ment, President Arana has formally announced
his choices to run for president and vice president
in the election next year.
The government's standard-bearer will be
General Kjell Laugerud, a 43-year-old officer who
served as minister of defense. Laugerud is a
fervent anti-Communist and takes a tough line on
terrorism and insurgency. Although he is con-
sidered a friend of the US, he is an extreme
nationalist, and this could make him more dif-
ficult to deal with than Arana. The vice presi-
dential candidate will be Mario Sandoval, presi-
dent of Congress and leader of the rightist Na-
tional Liberation Movement, the dominant party
General Kijell Laugerud
An ardent nationalist
Mario Sandoval
A taste for intrigue
in the government coalition. Although capable
and hard-working, Sandoval has a taste for
intrigue. He has long advocated the
The new demonstration of unity on the right
and the inclusion of Sandoval on the ticket will
undoubtedly spur the divided leftist opposition
parties to agreement on a single leftist presidential
candidate. Among those prominently mentioned
are Manuel Argueta Colom, the mayor of
Guatemala City, and Christian Democratic leader
Rene De Leon Schlotter. Since both of these
would probably be unacceptable to the Guate-
malan military, the leftists may in the end look
for a candidate among moderates within the mili-
ta ry.
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CHILE: NEVER A DULL MOMENT
The Allende government's new moves to
control food distribution have set off a political
brouhaha and raised military hackles.
On 10 January, Finance Minister Flores an-
nounced far-reaching government controls over
the production, distribution, and retail sale of
basic food products, most of them now in short
supply and obtainable only on the black market.
Flores termed the new system "programmed
supply," but the opposition press and politicians
called it rationing for government political pur-
poses and claimed it constituted the first steps
toward dictatorship. President Allende, ap-
parently stung by the attacks, has turned to the
newspapers and television to accuse opposition
interests of having brought on Chile's economic
woes, especially scarcities and black marketeering.
If the new measures are effectively im-
plemented, they will strengthen the government's
already substantial control over many phases of
Chilean economic life while undermining the op-
position's economic base. It is unlikely, however,
that the Popular Unity administration is capable
of the extensive and efficient organization that
will be needed to execute all Flores' plans. Irate
public reaction, including a general strike at
Chile's largest copper mine, will also probably
curtail application of the scheme. The new
scheme does give the administration another tool
to ensure better supplies for low-income and
other groups from which it hopes to secure votes
in the March congressional elections and, con-
versely, to deprive groups it cannot hope to
recruit. The scheme can also be useful in strength-
ening the authority of the neighborhood supply
boards that the Popular Unity is developing as a
political instrument.
These events have brought to a head the
frustration in the armed services over their role
since joining the cabinet in November. Specula-
tion is growing that the three military ministers
are considering resigning.
Prats himself does not want to resign, in-
sisting that his presence in the cabinet-even after
the March elections-is necessary to ensure
stability. He is probably motivated even more by
personal ambitions that make unpalatable a re-
turn to purely military responsibilities after less
than eleven weeks as interior minister. He does,
however, value the appearance of backing from all
the military and reportedly joined the other
service chiefs and military ministers in con-
fronting Allende last week over Flores' surprise
announcement.
The President spent little time in trying to
mollify the officers. He reminded them that they
knew his was a Marxist government when they
agreed to join the cabinet.
The military is in a dilemma over its growing
identification with-and dwindling voice in-a
controversial government. Some officers favor
withdrawal; this is balanced by a feeling of re-
sponsibility for guaranteeing free elections in
March. Some officers also fear that, if the military
pulled out, its budget would suffer. Prats'
personal predilection for power is an important
factor, since he still commands the largest and
most important service.
COSTA RICA: "PEPE" UNDER THE GUN
President Figueres, the grand old man of
Costa Rican politics, has come under vehement
criticism for cronyism and corruption, and his
off-the-cuff policy making has created a lack of
confidence that could result in defeat for his
governing National Liberation Party in the elec-
tion next year.
Specifically, Figueres has been attacked for
his efforts to make Costa Rica a tax haven for
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international investors some of dubious reputa-
tion-for favored treatment of the Comrrunist
Party, and for allowing the establishment of the
first Soviet embassy in Central America. His con-
troversial approach to the Soviets has mush-
roomed into a major campaign issue, but it is the
tax haven scheme, with its appearance of govern-
ment for personal profit, that most disturbs Costa
Ricans.
Robert Vesco, former head of Investors
Overseas Services, is the primary mover in
Figueres' tax haven scheme. Currently under in-
dictment by the US Security Exchange Com-
mission for defrauding American investors, Vesco
sought a refuge and found Figueres' inclination
for opportunistic financial dealing an open in-
vitation to shift his operations to San Jose.
Figueres' announcement last August that he
would establish an international financial district
was met with immediate and widespread op-
position, and the press had a field day speculating
about alleged shady deals between Vesco and the
financially strapped President. In the face of such
opposition, Figueres began immediately to dis-
sociate himself in public from the tax haven
scheme. Last October his reply to critics was as
expected, disavowal of the particular proposal but
not of the idea. He ridiculed his opponents, mis-
led his supporters, and managed to leave everyone
thoroughly confused about where the government
stood on the issue.
Fearing that he had not sufficiently calmed
his critics, Figueres tried a new tactic. Supporters
of the tax haven scheme began leaking rumors to
the press of large investments in bonds "which
would allow the government's autonomous
agencies to pay their Christmas bonuses," and of
Vesco's purchase of an additional $5 million in
bonds to help the nearly bankrupt public water
agency. Despite these diversions, the criticism has
riot abated, and there are indications that
Figueres' connections with Vesco are causing a
rift in his party.
Party youth leaders have antagonized central
committee members by filing a "contrabanding"
lawsuit against Vesco for bringing materials
through customs without complying with in-
spection or tax laws. The assembly has launched a
full-scale investigation into Vesco's activities.
Party leaders, including presidential candidate
Daniel Oduber, are concerned that Figueres'
financial dealings may be leading to some erosion
of the party's traditional rural power base-a con-
stituency that it must have if it is to defeat a
united opposition next year. The challenge for
Oduber, who needs Figueres' backing, is how to
dissociate himself from the administration's poor
record without openly breaking with the Presi-
dent.
The administration's involvement with
Vesco has naturally provided the opposition with
a ready target. But more importantly, the Vesco
affair reflects a mood of public concern that goes
deeper. The country at large is more disturbed
about government morality than at any time in
memory, and this concern will be the key issue as
the political campaign unfolds.
President Bordaberry's plan to appoint mili-
tary officers to the top jobs in some autonomous
state enterprises is likely to run into trouble when
he submits such nominations for congressional
approval. Civilian politicians have indicated
reluctance to share their political perquisites with
the military, especially in the case of state
agencies that are a major source of patronage
jobs.
Among the agencies to which military men
could be appointed are those controlling banks,
the telephone and electric systems, railways, and
public transportation in Montevideo. These con-
cerns have been buffeted by frequent strikes and
rising inefficiency, and it is conceivable that a bit
of military discipline could solve some of their
problems. More importantly, Bordaberry wants to
put more military men into state agencies to
satisfy the armed forces' increasing interest in
direct participation in government and fend off
military demands for a greater role in policy
decisions at the national level. The military has
responded favorably to Bordaberry's overture,
but the political factions in congress might unite
to veto such appointments in an effort to keep
the military out of a sector they have always been
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SECKE I
SENEGAL: ROCKY ROAD AHEAD
The political supremacy of Catholic Presi-
dent Leopold Senghor over predominantly Mus-
lim Senegal will win him his fourth term in the
elections on 28 January. There is, however, seri-
ous opposition to Senghor's authority, including
the growing hostility of powerful Muslim leaders
and insurgency within the President's own party.
Senghor's Muslim opponents did not put up a
candidate to oppose him, but they may urge a
President Senghor
boycott of the elections in order to embarrass the
President and demonstrate their influence.
Senghor was able to count on Muslim sup-
port and votes prior to the death in 1968 of his
close friend who was then the leader of the
Mourides, the wealthiest and most powerful Mus-
lim brotherhood. The new Mouride leadership,
under Caliph Abdou Lahat M'Backe and his
politically astute spokesman in Dakar, Cheikh
M'Backe, is hostile to Senghor. Various initiatives
by Senghor since last spring seeking accommoda-
tion with the Mourides all ended in failure. In
recent months, other major Muslim groups have
begun to join forces with the Mourides in what is
emerging as a broad Muslim opposition. At
present, this coalition is still a fragile one.
Cheikh M'Backe is working to strengthen it
and is seeking a respected Muslim figure to head
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The Muslim leaders generally see Senghor's
attempts to unify and modernize the country as a
direct threat to their own spiritual and temporal
authority. They oppose him on a variety of social
and political issues, including a new legal code on
family matters like marriage and divorce that
went into effect this month. The regulation of
such matters has always been the exclusive right
of Muslim holy men. The Mourides also hold
Senghor responsible for Senegal's weak economy.
Severe droughts coupled with poorly admin-
istered government agricultural programs have
reduced the total production of peanuts, Sene-
gal's major export crop, every year except one for
the last six years; this year's crop will be one of
the smallest ever. The Mourides control about 70
percent of Senegal's peanut production.
Senghor also faces troublesome problems
within his own party, the Senegalese Progressive
Union, where younger party and government
members have been trying to oust aging regional
bosses loyal to Senghor. The eighth party con-
gress, held last month, did nothing to resolve
party tensions. It did manage to postpone a show-
down by adding several younger men to top party
jobs while retaining all the old stalwarts as well.
The congress named Abdou Diouf, Senegal's
competent but colorless prime minister, to the
second highest party post, providing the most
persuasive indication so far that he is-as of
now-Senghor's choice as successor.
The boost for Diouf and the primacy given
to short-term advantage in the way the party
congress was run suggest that Senghor may be
contemplating retiring from the political scene at
or before the end of his new five-year term. In
1969, he told the US ambassador that he ex-
pected to be out of politics when he was 70-he is
now 66-and hoped to conduct a testing period
before then during which a successor would
emerge. The President has increasingly turned his
domestic duties over to Diouf in order to devote
the presidential ever ies to re Tonal and world
issues.
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Zambia-Rhodesia
WHO'S BLOCKADING WHOM?
A flurry of attacks in December and early
January by Zambia-based Rhodesian insurgents
triggered moves and countermoves by the Rho-
desian and Zambian governments. These have
escalated into a full-blown economic war. Each
side appears confident that it can prevail. A long
siege would have a serious impact on both coun-
tries, particularly Zambia which is taking the big-
gest risks.
Last week, Rhodesian Prime Minister Smith
announced that, except for Zambian copper,
Salisbury was closing the border until Lusaka
halted guerrilla operations from Zambian ter-
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Page 20 WEEKLY SUMMARY
4LUANDA
ritory. Rhodesian railways normally carry almost
half of Zambian copper as well as two thirds of
Zambian imports, and Smith apparently intended
to retain the earnings from copper shipments.
Zambian President Kaunda quickly reaffirmed his
strong support for southern African nationalists
and ordered the immediate rerouting of copper
exports away from Rhodesia.
Because copper is the source of one half of
Zambia's revenue and almost all of its foreign
exchange, Kaunda is taking a big gamble. He
appears confident that Zambia's foreign trade can
be readily diverted. When Rhodesia blocked
I ZAMIM UE
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Zambian petroleum imports in 1966, Zambia
began to reorient its economy away from de-
pendence on Rhodesian goods and transport
facilities, and government officials believe that
the program has progressed to the point that a
complete break can be made. They point to re-
cent improvements in alternate transport routes,
particularly an improved 1,000-mile road to Dar
es Salaam. The port of Dar es Salaam can prob-
ably handle the copper exports, but would have
difficulty handling Zambia's imports. None of the
possible alternate routes through Angola or
Malawi-Mozambique can handle a massive in-
crease right now. On top of this, Zambia is in
deep financial trouble as the result of the slump
in world copper prices. The government cannot
afford the increased transportation costs of using
these routes or of stockpiling large amounts of
copper over a long period.
Having struck a defiant pose, Kaunda is un-
likely to back down quickly even when the eco-
nomic realities begin to settle in, and his govern-
ment is pushing hard for international support.
Lusaka has already approached several Western
governments to bring diplomatic pressure on
Rhodesia, and a Zambian request for a UN Secu-
rity Council session may be in the offing. Kaunda
is also likely to seek economic assistance as the
impact of the border closing intensifies.
A complete stoppage of Zambian imports
and exports through Rhodesia will mean about a
five-percent reduction in Rhodesia's foreign ex-
change earnings. This will worsen Rhodesia's
shortage of foreign currency-already the most
telling effect of the long-standing international
sanctions against Salisbury. Now, however, white
Rhodesians appear confident that they can
weather a prolonged blockade better than the
Zambians, and Smith has led them to believe that
Zambian support for terrorist raids must be
stopped regardless of the cost.
Although there appears to be virtually no
chance of a compromise, Smith may yet respond
to pressure from Pretoria or Lisbon, where initial
reactions to the blockade were distinctly negative.
Portuguese authorities are particularly concerned
over the loss of earnings from Zambian goods
transiting the port of Beira in Mozambique, and
they have expressed willingness to assist Zambian
efforts to use alternate land routes to that port.
South Africans are discomfited over the inter-
ruption of their substantial trade with Zambia
and are seeking aircraft to carry needed mining
supplies. Both the Portuguese and South Africans
have expressed fears that a prolonged economic
crisis might make Kaunda more receptive to Com-
munist inroads and harden the opposition of
moderate black Africans to all the white govern-
ments in southern Africa.
President Aboud Jumbe, who is finally
emerging from the shadow of his assassinated
predecessor, is seeking to trim the power of the
ruling Revolutionary Council by reviving the long-
dormant Afro-Shirazi Party, constitutionally the
island's "supreme authority." Jumbe's predeces-
sor, the late Abeid Karume, shunted the party
into the background and ruled through the coun-
cil, a hodgepodge of army officers, radicals, and
hooligans swept into power by the 1964 revolu-
tion. The 27-man council was only established as
an interim body for the immediate post-revolu-
tion period, but by the time of Karume's assassin-
ation in April 1971, the council had become
firmly entrenched. It was and is thoroughly cor-
rupt, inefficient, and divided.
Shortly after taking over, Jumbe moved to
quiet public discontent over a number of major
problems created by Karume and the council,
such as chronic food shortages and mismanage-
ment of development projects. He also announced
plans for more housing and for expanded health
and education services. He has since sought, with
some success, to curb the excesses of the council,
which has long reflected Karume's brutal and
arbitrary rule.
In December, Jumbe held a party congress-
the first since the 1964 revolution-which
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confirmed his positions as president, finance
chairman of the party, and chairman of the coun-
cil. He was given undisputed authority to appoint
and relieve party officials, heads of government
departments--including the army and police, and
members of the council.
The congress adopted a new constitution,
expanding the party structure and giving it power
over all government departments. The most
important new provision, however, was one es-
tablishing a nine-member policy-making Political
Committee. Heretofore, policy has been es-
tablished by the Revolutionary Council. Jumbe
obviously intends to bypass the council in es-
tablishing policies and priorities rather than
abolish it outright.
Jumbe will have to move cautiously. He has
incurred the enmity of several council members,
including the deputy army commander and the
development chairman. Jumbe will probably not
carry out any major shakeups until he has
adequate support particularly within the police
and the army. The extent of that support shoud
become apparent when he announces the mem-
bership of the new Political Committee.
1-he execution last week of 11 air force
officers and enlisted men convicted of attempting
to assassinate King Hassan last August could well
intensify discontent in the armed forces.
Moroccans had expected the King to show
clemency, and many expressed shock when the
executions were carried out on the eve of a Mus-
lim holy day when the King usually grants a
number of pardons. Most of those executed last
week, as well as most of the putschists summarily
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Page 22 WEEKLY SUMMARY
shot after the coup attempt in July 1971, were
Berbers. This is bound to nourish bitterness
among the important Berber minority and par-
ticularly among Berber military officers, some of
whom are said to have sworn to avenge the deaths
of their fellow Berbers.
King Hassan has maintained personal com-
mand of the military and has refused to delegate
any real authority to his immediate subordinates.
In order to prevent another challenge to his rule
from the military, the King is instituting major
changes. He is fragmenting the command struc-
ture and reducing the size and capability of the
defense establishment. He obviously meant the
harsh punishment he dealt out last week to
demonstrate his control over the military.
Meanwhile, the regime is also taking a
tougher attitude toward restive students, teachers,
and laborers. Security forces were quick to crack
heads during a recent work slowdown at the port
of Casablanca, and riot control units in unusually
large numbers have been stationed at universities
and secondary schools. Hassan probably plans to
rely more and more on paramilitary units like
these as he whittles away the regular military
The Firing Squad Prepares
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TURKEY: PROSPECTS FOR REFORM
The tempo of politics is picking up as parlia-
ment is finally getting around to considering a
package of controversial reform proposals and as
civilian and military leaders stake out positions
for the elections this year.
Twenty-two months ago, military com-
manders forced out the conservative Justice Party
government, which had been ineffectual in
curbing the mounting violence of urban guerrillas.
Another civilian government was installed, after
the military let it be known it would take power
directly unless law and order were restored and
economic and social reforms were enacted. By
martial law, widespread, arrests, and military
tribunals, the terrorists have been brought largely
to heel. The government has made only limited
progress on the reform program, however, causing
some military circles to grumble about the "poli-
tics-as-usual" attitude in parliament.
With the military prodding them, the legisla-
tors have now worked out a timetable for the
consideration of reform proposals, which include
measures to reform agriculture, education, elec-
tions, and the judicial system. There is an ex-
pectation that most will be dealt with in the next
few months. Failure to do so may well jeopardize
the parliamentary elections set for October.
Passage of the reforms will be difficult, however,
because the Justice Party, which has a slight
majority in the national assembly, regards some
of them as leftist-inspired.
Turkey's parliament must also elect a new
president in March. As yet no front-runner has
emerged. Trial balloons have been floated on be-
half of several men, including the current chief of
the Turkish General Staff, Faruk Gurler. There
are signs that the choice will not be easy, and
some influential military officers are supporting
the idea of a constitutional amendment to pro-
long the term of the incumbent, Cevdet Sunay.
This might prove attractive as the least disruptive
action in a period of political ferment.
Although most Turks are pleased that
martial law-still in effect in 11 provinces-has
restored order and security, there is restlessness in
some circles about its duration and adminis-
tration. Indeed, the left-of-center Republican
Peoples Party has strongly criticized martial law,
and the press and the country's intellectuals have
demanded its quick end. Despite the complaints,
the military-backed government of Prime Minister
Melen will probably ask parliament to extend
martial law in late January.
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DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
Soviet Farm Problems Slow Economic Pace
Secret
N2 45
19 January 1973
No. 0353/73A
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Selected Indicators of Soviet Economic Performance
Actual average annual increase 1966-1970
Actual average annual increase
Planned average annual increase
Percent
1971-75 Plan
1971
1972
1971-75 Plan
1971
1972 7-.1
1971-75 Plan
1971
1972
1971-75 Plan
1971
1972
19 January 1973
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Soviet economic growth slowed drastically
in 1972 as gross national production grew by only
1.5 percent, the lowest rate since World War II.
An abrupt decline in farm output was largely
responsible for the slowdown, but rates of growth
in most major sectors of the economy were below
those achieved in the recent past. The farm set-
backs led the leadership to purchase unprece-
dented quantities of grain from the West. The
lingering effects of the poor agricultural year as
well as serious construction lags have forced sig-
nificant changes in the 1973 plan, although the
regime apparently hopes that a sharp recovery in
farm output and tightened control over the in-
vestment program will salvage most of the original
Five-Year Plan (1971-75). Consumer interests
have held their own in the battle for investment
funds. Prospects look poor for the fulfillment of
plan goals, especially in agriculture. The key to
the industrial goals, more rapid technological
progress, still eludes the Soviets.
Agriculture Bows To Bad Weather
Unusually poor weather last year throughout
the growing and harvesting seasons caused a 7-
percent drop in farm output, one of the worst
setbacks in the past 20 years. Still, Soviet farm
output had been rising steadily, so most crops last
year, including grain, were larger than those in
some of the relatively good years of the 1960s.
The bad luck began in January when the crop on
one third of the winter grain acreage was de-
stroyed by extreme cold and inadequate snow
cover. A large spring planting to compensate for
the winter losses was thwarted by the "worst
drought in 100 years" in European Russia.
Record crops in Kazakhstan and Siberia staved
off disaster. The crop there was late in ripening,
and unseasonably wet weather led to harvest
losses.
The most serious shortfalls in agricultural
production were in grain and potatoes-the core
Special Report
19 January 1973
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of the Soviet diet and essential to the production
of meat, milk, and eggs. Sugar beets and sun-
flower seeds, the primary source of vegetable oil
in the country, also suffered from the bad
weather. Lower output of some animal products
such as milk and wool reflected both fodder
shortages and the severe winter. Distress
slaughtering of livestock in anticipation of feed
shortages this winter may have been partly re-
sponsible for an increase in the supply of meat.
As the prospects for the grain harvest waned,
the USSR bought grain. By early August, it had
purchased about 25 million tons, mainly from the
US. After weather conditions got worse and it
became clear that there also would be a sharp
shortfall in potato production, the Soviets bought
more grain from a number of countries as well as
1 million tons of potatoes. All told their pur-
chases of grain for delivery by mid-1973 reached
about 29 million tons worth about $2 billion.
This amount is more than three times the
160 Million metric tons
140
120
100 106
quantity imported the previous year and is equiv-
alent to about one fifth of the Soviet grain crop
in 1971.
The record purchases also reflect the rising
demand for grain as animal feed. Since 1969,
Brezhnev's program to provide the consumer with
more meat and other livestock products has upset
the fragile balance between the amounts of grain
grown and consumed. While the quantity of grain
used for food has remained virtually the same
over the past decade, grain used for livestock feed
increased by about 40 percent between 1968 and
1971. Even after two bumper harvests in 1970
and 1971, the Soviets bought about 8 million
tons of grain worth nearly $500 million between
mid-1971 and mid-1972.
Industry Lags Too
In 1972, industrial growth fell to about 4.5
percent, the smallest annual increase since World
1961-65 1966-70
(average) (average)
1971 1972 1971-75 Plan
(average)
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0
1964 1965 1966 1967 1968 1969 1970
Fiscal year
War II. The industrial slowdown could be traced
largely to industry's failure to make planned pro-
ductivity gains and to install the required amount
of new plant and equipment-key factors in ful-
filling the Five-Year Plan. The combined produc-
tivity of labor and capital in industry rose by less
than .5 percent in 1971 and apparently did no
better in 1972. The trouble in agriculture was
another factor in the poor industrial performance.
The harvest failure reduced the flow of agricul-
tural raw materials to industry. Moreover, the
emergency requirements of a larger than usual
spring planting and the Brezhnev-directed cam-
paign in the fall to save the harvest in Siberia and
Kazakhstan diverted men and machinery from
industry and caused transportation tie-ups in all
sectors.
Although a number of industrial branches
shared in the decline, a lag in the production of
machinery and consumer goods had the greatest
impact on industrial growth. Within the ma-
Special Report
chinery category, there were shortfalls in the out-
put of some producer durables-especially equip-
ment for the chemical, petroleum, food, and light
industries. Unsatisfactory growth in the two
remaining components of the machinery cate-
gory-military equipment and consumer dura-
bles-also contributed to its general decline. The
output of military hardware grew at a very low
rate, but it grew. Large reductions in the output
of television sets and washing machines held back
the production of consumer durables in general.
The poor performance in soft goods and
processed foods can be attributed both to the
shortage of agricultural raw materials and to con-
struction difficulties. Although industrial mate-
rials generally kept pace with the plan schedule,
there were notable weak spots. The oil and gas
industries, for example, did not meet all of their
goals, largely because of a failure to plan for
sufficient replacement capacity to offset deple-
tion in older producing areas.
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The investment program is in serious
trouble. New projects readied for use in 1972 fell
5.7 billion rubles short of the planned 93.1 billion
rubles, adding another 6 percent to the backlog of
unfinished construction (10.5 percent had been
added the previous year). Some of the same prob-
lems that hit industry also hurt investment-the
diversion of resources to the agricultural sector
and shortfalls in the output of key machinery
items. The investment logjam may owe something
to a longer run problem-the dilution of control
over the allocation of investment funds, resulting
in a wasteful dispersiion of resources. The eco-
nomic reform of 1965, which allowed more in-
Exceeds Plan
(by more than 2.5%)
Sector
Fuels and power Coal
Ferrous metals
Forest products and paper
Construction materials
Chemicals
Special Report
vestment decisions at the local level, may be
partly at fault.
Last year was a disappointment to the Soviet
consumer. Per capita consumption rose by only
2.5 percent, about half the average annual rate of
increase in the preceding six years. Food con-
sumption increased hardly at all on a per capita
basis. Consumption of soft and durable goods
increased at about the same moderate pace as in
1971. The regime failed to follow through on part
of the welfare package promised for 1972. The
Meets Plan Falls Behind Plan
(within 2.5%) (by more than 2.5%)
Electric power; oil Natural gas
Steel; steel pipe;
finished rolled steel
Furniture; paper
Plastics & synthetic resins Caustic soda
Mineral fertilizer
Chemical pesticides
Soda ash
Chemical fibers
Tires
Sulfuric acid
Instruments & means of automation Main-line locomotives
Computers & calculating equ pment Trucks
Bulldozers Passenger cars
Tractors
Excavators
Watches
Television sets
Petroleum equipment
Food industry equipment
Main-line freight cars
Farm machinery
Radios & phonographs
Chemical equipment
Light industry equipment
Grain combines
Tractor trailers
Refrigerators
Cotton & wool fabric
Knitted wear; leather shoes
Fish, whole milk products
Vegetab e oil
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program included a rise in the minimum wage and
various income tax cuts, which have been resched-
uled for 1973.
USSR: Per Capita Consumption
Average Annual Rate of Growth
Although sporadic food shortages were of Total Per Capita Consumption
concern to the populace during the second half of -1972 consumption grew at half
the year, none went hungry. Daily per capita food the earlier rate
consumption amounted to about 3,000 calories. 6 Percent
It took extraordinary steps to ensure that food
supplies were adequate. In addition to the massive 5
grain purchases from the West, potatoes and some 4
vegetables were bought from Poland and East 3
Germany. The government also did its utmost to 2
extract potatoes and vegetables from the private 1
sector by allowing prices in collective farm 0
markets to rise dramatically and by other 1966-70 1971 1972
methods that amounted in many areas to forced
deliveries. At the same time, the leadership
launched a nationwide campaign to save bread,, Food
and rationed food sales selectively. -despite sporadic food shortages,
none went hungry
Nevertheless, there were some bright spots
for the consumer in 1972. More meat was avail-
able and sales of some consumer durables like
passenger cars and furniture increased signifi-
cantly. In addition, almost 108 million square
meters of housing were built in 1972 as in 1971,
the largest amounts since the peak year of 1960.
Even so, the average space available per person
was about 85 square feet, about 15 percent below
the minimum standard set soon after the Revolu-
tion.
Priorities Unchanged
Faced with these setbacks, Soviet economic
and political authorities grappled with the 1973
plan throughout the fall. The basic question was
whether to stick with the 1971-75 plan priorities
that placed consumer-related interests on a more
equal footing with investment and defense-
previously the heavily favored sectors. The leader-
ship came to terms with circumstances by
reducing many of the 1973 targets because of
capacity limitations and raw material shortages.
Nevertheless, the authorities seemed to regard last
year as a temporary setback from which the
economy could soon recover, and hope was held
that the Five-Year Plan goals could still be met. In
Durable Goods
-durables provided some bright
spots for the consumer
Special Report
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the battle for investment funds, the consumer
interests held their own.
The 1973 goals announced by State Planning
Chief Baybakov and Finance Minister Garbuzov
in December imply a growth in Gross National
Product of about 7 percent. The planned recovery
depends mainly on a 12.6-percent increase in
farm output and an acceleration in industrial out-
put. Goals for the oil and gas, consumer goods,
chemical, and machinery industries were cut.
Construction will be held at the 1971 level to
allow for regrouping in this sector.
Since the revised plans will limit the increase
in the supply of consumer goods and services, the
planners intend to hold down wage increases. If
successful, this policy will hold the growth in
personal income to about 5 percent this year, the
same growth rate planned for total retail sales.
Based on past experience, however, it will be
difficult to keep the growth of personal income
within the planned targets because of the com-
petition for workers in a tight labor market.
Zaporozhet cars arrive in Moscow
Consumer interests hold their own
Special Report
Industry
4.5
6.7
Construction
8.0
0
Agriculture
-7.1
12.6
Transportation and
communications
4.2
5.7
Domestic trade
7.1
5.0
Services
3.7
3.8
Industrial Goals Below Original Targets
(percentage growth in output)
Original
1973 Plan
New
1973 Plan
Oil
8.7
7.5
Gas
9.2
7.7
Chemicals
0.7
8.5
Machinery
1.4
10.4
Soft goods
6.7
4.0
Processed foods
5.7
2.0
While incomplete, the investment data
indicate no basic changes in priorities, but rather
a program to rectify past errors and maximize the
chances of attaining the original 1971-75 goals.
First, the plan calls for a stringent limit on new
project starts so that investment resources can be
concentrated on projects "decisive to the fulfill-
ment of the five-year plans." To this end, the
growth in total investment in 1973 is to be held
to 3.5 percent compared with the nearly 9 per-
cent implied in the original plan. Secondly, more
investment resources will be allocated to those
parts of the economy where projects have been
most behind schedule. The consumer-oriented
sectors of the food industry and other light
industries are scheduled to receive a generous
volume of investment. Some of the increases are
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so large, however, that it is doubtful that they can
be carried out without causing extensive con-
fusion in the entire investment program.
Barring another farm failure, Soviet eco-
nomic growth in 1973 almost certainly will be
greater than in 1972, but the 7-percent goal prob-
ably cannot be attained. The consumer will con-
tinue to experience sporadic shortages of potatoes
and other vegetables before the next harvest, but
tighter controls over distribution and more
imports of agricultural products should help him
over the rough spots. Meat consumption, how-
ever, probably will level off or decline because of
the recent reduction in livestock herds and short-
ages of feed. Last year's grain purchases will strain
the Soviet hard-currency payments position this
year. About 24 million tons of grain worth about
$L5 billion remain to be delivered. The debts
probably will be paid through a combination of
gold sales, credits from the US, and short- and
medium-term credits available in Europe. In the
longer run, if average weather prevails over the
next three years, agriculture should rebound sub-
stantially permitting Gross National Product to
grow by some 5 or 6 percent during each of the
next three years. Even so, the average annual rate
of growth in the first half of the 1970s would be
significantly less than the rate in 1966-70.
The prospects do not look good for the
attainment of the major Five-Year Plan goals. The
harvest results of 1971-72 almost certainly doom
the agricultural goal of a 3.7-percent annual in-
crease. The planned annual average of 158 million
tons of usable grain (195 million tons on a gross
basis) in 1973-75 is virtually unattainable. In
order to hit this target, the Soviets would have to
harvest an annual average of 173 million tons in
the period. This would be 39 million tons more
than they gathered in 1972. Prospects are far
from bright for the 1973 crop. By the end of the
fall sowing, only about 80 percent of the planned
area had been sown to winter grains-a record
shortfall. Given only an average winterkill, the
Soviets will be in as poor a position as last year
when spring arrives. The meat production targets
for 1975 are realistic only if livestock inventories
are not drastically reduced this winter and more
grain is imported for feed. Even if the meat goal is
met, supply will fall far short of demand, in-
creasing consumer discontent.
Many of the industrial goals for 1971-75 are
more modest than in previous plans, but a num-
ber of problems threaten their realization.
? Continued agricultural difficulties will re-
strict the supply of raw materials to industry.
? The acceleration in industrial output
planned for 1974-75 depends upon the com-
pletion of major investment projects. Chronic
construction lags worsened in 1971 and 1972,
and the solutions planned are likely to be
ineffectual.
? The 1971-72 targets for economizing the
use of industrial raw materials fell by the
wayside. The Five-Year Plan in industry is a
taut one and depends upon these economies
to achieve a balance between input and out-
put.
? The most critical shortcoming has been
the failure to come close to productivity
goals. Technological progress was to be the
key to higher productivity, but enterprises
and ministries have been slow to adopt new
processes and products. In 1973, the Soviets
will again try their time-worn (and generally
ineffective) remedy, further centralization.
All in all, the Five-Year Plan in both agricul-
ture and industry seen in the perspective of last
year's setbacks looks all but unattainable.
Special Report
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