THE PRESIDENT'S DAILY BRIEF 27 DECEMBER 1974

• Document Type: FOIA
• Collection: President's Daily Brief 1969-1977
• Document Number (FOIA) /ESDN (CREST): 0006007903
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 12
• Document Creation Date: August 14, 2016
• Document Release Date: August 24, 2016
• Publication Date: December 27, 1974

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The President's Daily Brief
December ,27, 1974
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Exempt from general
declassification schedule of E.O. 11652
exemption category 511(11.(2),(3)
declassified only on approval of
the Director of Central Intelligence
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December 27,. 1974
-Table ' of ' Contents
Egat-Istael: Sadat says he still agrees with step-
by-step approach to negotiations, (Page 1)'
Et-USSR: Cairo is sending Foreign Minister Fahmi
-to Moscow tomorrow. (Page 2)
Vietnam: Precis of National Intelligence Estimate.
(Page 4)
Japan:
(Page 6)
France-Iran: French agree to support Iran's bid
for preferential trade arrangement with the
EC. (Page 7)
Note: Thailand (Page 8)
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EGYPT-ISRAEL
President Sadat
last week that
he still agrees with the step-by-step
approach to negotiations. He stressed,
however, that two important events are
approaching and that significant prog-
ress should be made before they take
place. He pointed to Brezhnev's visit
to Egypt in mid-January, and the expira-
tion of the UN mandate--presumably the
UN emergency force mandate that expires
in late April.
that Sadat needs another disengagement
agreement with Israel before General Secretary
Brezhnev arrives. Sadat himself has said publicly
that he will make a key decision in the "very near
future" on whether to continue negotiations via
the bilateral approach or turn to multilateral
talks as favored by the Soviets.
Sadat's remarks suggest that the
Egyptians are backing off a bit. By mentioning
the expiration of the UN mandate in April, as well
as the Brezhnev visit, Sadat may have meant to
acknowledge tacitly that, even though there is
little prospect for real progress soon, this need
not mean abandonment of step-by-step negotiations.
Cairo had rejected re-
cent Israeli proposals for a second-stage with-
drawal because the Israelis would not pull back
far enough in the Sinai. .The Egyptian President
stressed that control of the key mountain passes,
which Israel proposes to retain, is essential to
protect the Suez Canal.
Meanwhile, Israeli Prime Minister Rabin's
speech Wednesday reinforces the impression that
Israel regards further military disengagement with
Egypt as the only negotiating avenue now open.
Rabin publicly reaffirmed Israel's refusal to
withdraw completely from the Golan Heights, even
if this "is required to obtain postponement of
war." Rabin thus moved closer to hard-line ele-
ments in his party.
The Syrians can be expected to use Rabin's
statement to press Sadat even more strongly to
avoid moving unilaterally to talks with Israel.
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EGYPT-USSR
Cairo is sending Foreign Minister
Fahmi to Moscow tomorrow. The trip was
not previously scheduled and comes only
two weeks before Soviet party chief
Brezhnev is to go to Cairo. The Fahmi
The Soviets may have requested a high-level
delegation because of concern,
, that the Egyptians are not mov-
ing ahead with plans for the Brezhnev visit. These
concerns evidently involve the mechanics of the
trip, but may extend to substantive matters. A
high-ranking Soviet economic delegation has been
in Cairo in recent weeks, and a return visit should
not be necessary unless some hitch has developed.
The Soviets and the Egyptians are sniping at
each other in public over the key question of Egyp-
tian methods and tactics for negotiating a Middle
East settlement. The Soviets seem sensitive to the
possibility that the Egyptians will arrange a fur-
ther pullback with Israel before the Brezhnev trip.
Cairo, indeed, has been attempting to achieve this
for some time, arguing that a deal would strengthen
Sadat's hand in discussions with Brezhnev.
? Fahmi will be accompanied by the new minister of
war, General Gamasy, and by the ministers of plan-
ning and finance
(continued)
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We have other evidence that Moscow is willing
to conclude agreements for assistance to Egypt's
steel and aluminum industries and for. rescheduling
Egypt's debts, but the possibility of a new military
aid pact has been less certain, The Soviet military
attache in Cairo, for example,
would not sign any new
agreement on military aid, and. that future military
deliveries would depend on Egyptian behavior?
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VIETNAM
Following is. the precis of the latest
National Intelligence Estimate on Vietnam,
which the US Intelligence Board approved
this week.
Communist military forces in South Vietnam are
more powerful than ever before.
The South Vietnamese Armed Forces are still
strong and resilient and have generally acquitted
themselves well since the cease-fire, but the de-
cline to the present level of US military aid
threatens to place them in a significantly weaker
logistic posture than the Communists.
Hanoi has a variety of military options, but
the evidence points toward a marked increase in
military action between now and mid-1975 designed
to:
--defeat the government of South Vietnam's
pacification program;
--inflict heavy casualties on the South Viet-
namese Armed Forces;
--gain control of many more South Vietnamese;
and
--force the government of South Vietnam into
new negotiations at a disadvantage.
At,a minimum the Communists will sharply in-
crease the tempo of fighting by making greater use
of their in-country forces and firepower. In this
case, their gains would be limited, but South Viet-
namese,stockpiles of ammunition and other critical
supplies would probably be depleted by April or
May below the 30-day reserve required for intensive
combat.
We believe that the Communists will commit
part of their strategic reserve to exploit major
vulnerabilities in the South Vietnamese position
or to maintain the momentum of their military ef-
fort.
(continued)
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Such a commitment would carry a greater risk
of major defeats for top South Vietnamese units
and a further compounding of manpower and lo-
gistic problems.
--Without an immediate increase in US military
assistance, the government's military situa-
tion would be parlous, and Saigon might explore
the possibility of new negotiations with the
Communists.
It is even possible--in response to a major
opportunity--that the Communists would move to an
all-out offensive by committing all or most of
their strategic reserve. But our best judgment
now is that they will not do so.
--Hanoi prefers to achieve its dry season
goals through a military-political campaign
that avoids the risks and losses of an all-
out offensive.
--Hanoi probably hopes that, by setting limits
on its military operations, there would be
less likelihood of a strong reaction from
Washington and that frictions with Moscow and
Peking would be minimized.
At currently appropriated levels of US mili-
tary assistance, however, the level of combat that
we do anticipate in the next six months will place
the Communists in a position of significant ad-
vantage over South Vietnamese Armed Forces in sub-
sequent fighting.
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JAPAN
Industrial production fell sharply in Novem-
ber, down 3 percent from the previous month and
13 percent from November 1973--the steepest de-
cline of any industrial country. Unemployment
also rose in November, and there was a record num-
ber of bankruptcies.
? Most other economic indicators point to fur-
ther production cuts in the months ahead.
--Inventories of finished goods continue to
rise, increasing nearly 2 percent last month.
--Consumer spending remains weak.
7-Investment, after recovering somewhat dur-
ing the summer, declined in October and No-
vember.
Despite the mounting pressure for a policy
change, Fukuda sees inflation as a more serious
problem. Consumer prices in, recent months have
been increasing at an annual rate of about 25 per-
cent; Fukuda wants to slow the pace to 15 percent
before wage negotiations begin next spring. Even
if tight policies are maintained, however, Japa-
nese labor unions will be unwilling to accept much
less than a 25-percent wage hike.
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FRANCE-IRAN
France has agreed to support Iran's
bid for a preferential trade arrangement
with the EC, according to the communiqug
issued following French Prime Minister
Chirac's visit to Iran last weekend. The
decision, which marks a change in French
policy, could provide the impetus neces-
sary to conclude an EC-Iran agreement
next year.
Denmark has pressed for favorable treatment
for Iran, and Italy supports a new EC economic
agreement with Iran but has not committed itself
to a preferential agreement. West Germany may
support France if Bonn's specific request for
duty-free entry of refined Iranian petroleum prod-
ucts into the EC is met. Contingent upon Bonn's
efforts to secure concessions in this area, Iran
has agreed to award West Germany a contract to
construct a large petroleum refinery.
The EC Commission, however,, and most of Ger-
many's partners oppose preferential treatment for
Iranian oil. The Commission in fact has "pledged"
that the community would not expand. its Mediterra-
nean preferential arrangements to include.periph-
eral countries such as Iran.. _Preferential treat-
ment would be difficult to explain in GATT, and
an excess in refinery capacity within the commu-
nity is anticipated by 1978.
Several EC members have expressed fear that
Arab oil producers would resent preferential
treatment to Iran and would seek similar conces-
sions. They are also aware of US opposition to
such an arrangement.
Bilateral French negotiations with Iran par-
allel similar approaches to Arab countries during
recent months as Paris tries to ensure a steady
oil supply and to redress the _substantial balance
of trade deficit with oil-producing countries.
According to the press, Chirac returned from Iran
with $7.7 billion in industrial. orders--$4.4 bil-
lion more than-he had expected.
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NOTE
Thailand: Former Thai premier Field Marshal
Thanom Kittikachon flew into Bangkok unannounced
early this morning, ostensibly to visit his ailing
father. Thanom has been in exile in the US since
student-led demonstrations in October 1973 brought
down his military regime. The US embassy in Bang-
kok reports that the national student center may
try to organize a protest against his return and
that a few students have already gathered near his
father's house. An emergency meeting of the Thai
cabinet has been called. There is an unconfirmed
report from Bangkok by the French press agency
that Thai police and military units have been
placed on full alert.
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t,
Top Secret
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