THE PRESIDENT'S DAILY BRIEF 3 JULY 1975

• Document Type: FOIA
• Collection: President's Daily Brief 1969-1977
• Document Number (FOIA) /ESDN (CREST): 0006014840
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 20
• Document Creation Date: August 14, 2016
• Document Release Date: August 24, 2016
• Publication Date: July 3, 1975

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The President's Daily Brief
July 3, 1975
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Exempt from general
declassification schedule of EQ. 11652
exemption category, 513(11.(2).13)
declassified on on approval of
the Director of Central Intelligence
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July 3, 1975
Table of Contents, ?
UK: Prime Minister Wilson is likely to remain head
of the party and government at least until
some time next year. (Page 1)
Azores: The Azorean Liberation Front reportedly is
seeking support in Western Europe. (Page 4)
Notes: Somalia; Laos; USSR; Australia; Jordan-PLO;
China-India; Lebanon (Pages 5, 6, and 7)
Annex: Libyan-Soviet Relations
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UK
The government's threat to limit wage
and price increases unless union and in-
dustrial leaders agree to voluntary re-
straints forces labor and industry to
consider inflationary control sooner
than expected. The government plans to
issue a white paper next week outlining
its economic program.
Chancellor of the Exchequer Healey announced
in Parliament earlier this week that the government
proposed to reduce the rate of inflation to 10 per-
cent. Unless voluntary restraints fall in line
with this target, the government will limit the
funds available to the nationalized industries for
wages and, through price controls already on the
books, limit the ability of private employers to
pass on pay increases. In this way, the government
could in practice control wages and prices without
having controversial wage-control measures on the
books. The unions would face a choice between
higher unemployment or limited wage increases.
The government probably will follow through
with its threat because a voluntary restraint pro-
gram appears doomed from the start. Leaders of the
Trades Union Congress have no control over individ-
ual unions, and union leaders are unable to keep
the rank and file in line. The miners are likely
to present the first problem with voluntary com-
pliance. They have already announced that they will
be seeking wage increases of up to 65 percent.
Healey may foresee a period of labor unrest
if the government acts. He commented yesterday that
the government opposes the application of criminal
sanctions against the unions or individual workers.
Political Consequences
Despite the magnitude of the problems he faces,
Prime Minister Wilson is likely to remain head of
the party and government at least until some time
next year.
(continued)
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--Wilson still has an effective majority of
one in Commons, and even if that seat--now in
jeopardy--is lost, he can rely on the support
of Scottish and Welsh nationalists and on one
Ulster vote for much of his legislation. Many
Tories too can be expected to vote with the
government on measures aimed at solving the
country's problems. Even if the left-wing
Laborites in Parliament disagree with Wilson's
proposals, they prefer him to a Tory prime
minister.
--Wilson himself is not likely to call an elec-
tion now. Although the Tories have offered no
alternative economic program, the general voter
dismay with the deteriorating economy would
lead to a defeat for Labor. Wilson got this
message through the Tory victory in a recent
by-election. He also remembers that former
prime minister Heath lost an election fought
over similar economic issues.
--Wilson is likely to remain party leader even
though many of the left wing would like to
dump him. The left has no candidate accept-
able to the rest of the party and to the elec-
torate at large. The party headed by a left-
winger would be at a disadvantage should it
face a general election.
--The Tories would not want to force an elec-
tion in the near future, even if they had the
parliamentary strength to do so. They cannot
agree on how to solve the country's economic
problems; two years ago when Heath imposed
statutory wage and price controls, many Tories
opposed his program. They also have a new and
untested leader in Margaret Thatcher. Many
Tories found her performance disappointing dur-
ing the campaign preceding the EC referendum.
--A coalition government composed of the
Labor, Conservative, and possibly the Liberal
parties is not in the cards at this time, al-
though the British press has been speculating
about such a possibility for over a year.
Britain's troubles are not of the magnitude
reached during the Great Depression or World
War II., and no politician hoping to lead his
or her party to victory is prepared to partic-
ipate in a coalition at this time.
(continued)
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Economic Consequences
The new anti-inflation policies proposed by
Healey would reinforce the current decline in de-
mand by limiting government spending. These poli-
cies would not have a substantial effect on key in-
dicators, however, until late this year or early
1976. Wages for most workers for the rest of this
year have already been negotiated, so tighter con-
trols would not begin to affect labor costs until
late in the fall. Cost increases already in the
pipeline, resulting from depreciation of the pound
and record wage settlements, have not fully filtered
through to consumers. As these costs are reflected
in market prices, the purchasing power of consumers
will be further squeezed.
Weak and declining demand, as well as the pos-
sibility that tighter wage-price controls will
squeeze corporate profits, make it unlikely that
the trend of increased unemployment will be reversed
soon. There are already 900,000 unemployed, and by
early 1976 there are likely to be 1.5 million Brit-
ons out of work. This would raise unemployment to
its highest level since the end of the depression.
Britain's best hope for recovery in the near future
lies in an upturn in the world economy that would
sharply increase exports from the UK.
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AZORES
The Azorean Liberation Front report-
edly is seeking support in Western Europe
for its plans to separate the Atlantic
islands from the Portuguese mainland by
force.
An emissary of the Front who traveled to West
Germany and France last week to seek financing and
armaments failed to obtain governmental support, but
claims he was promised assistance by representatives
of the conservative wing of the West German Chris?
tian Democratic Union/Christian Social Union. There
is no indication that the Christian Democrats have
decided to support the separatists, but
/Franz Josef
Strauss--chairman of the Christian Social Union--
said he was interested in Azorean independence. A
group of conservatives may try to.
obtain party support for the independence movement,
and if this fails they might provide some assistance
on their own.
The US consul in Ponta Delgada has been con-
tacted by Miranda, commander of the 18th Battalion,
who has been rumored to be supporting the separa-
tists. He said a group of radical officers were
trying to oust him and the military governor. He
gave no indication of his attitude toward the sepa-
ratist movement, but he asked somewhat cryptically
about US policy toward the Azores.
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NOTES
Lao demonstrators reportedly intend to attack
and possibly occupy part of the US embassy compound
in Vientiane tonight.
According to the US charge, several senior co-
alition government officials--including both Prime
Minister Souvanna Phouma and Lao communist leader
Souphanouvong, who almost certainly know of the pos-
sibility of demonstrations--are planning to absent
themselves from Vientiane today. Pathet Lao Deputy
Prime Minister Phoumi Vongvichit remains in the Lao
capital, but has been described by his aides as
"too tired" to see US officials. The US charge
has been trying to gain an audience with Phoumi to
secure his cooperation in heading off the threat-
ened demonstrations and to protest the week-long
occupation of four American installations in Vien-
tiane by Pathet Lao troops and armed civilian
demonstrators.
(continued)
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Australian Prime Minister Whitlam's firing
of Deputy Prime Minister Cairns from his cabinet
has put the Labor government under the most serious
strain it has experienced since assuming office
two and one half years ago.
Whitlam dismissed Cairns--the most prominent
member of the party's left wing--out of dissatis-
faction with his deputy's explanation of question-
able financial dealings. Adding to disarray in
the party, many Laborites are blaming Whitlam for
Labor's defeat in a by-election last weekend.
Tensions will increase if Whitlam tries to push
the party caucus to replace Cairns as deputy
party leader. The opposition Liberal-Country Party
coalition had not previously indicated an intention
to push for national elections. Should the Labor
Party's difficulties increase, however, it may try
to force the government to the polls.
?Jordan has rejected a request ? from
the' PaTiErne'Laberation Organization to permit,
Palestinian commandos to pass through Jordanian
territory to the West Bank.
This latest PLO initiative may be a reflection
of the Palestinians' frustration over the apparent
failure of the Jordanians to make any meaningful
concessions to the PLO during the talks between
King Husayn and Syrian President Asad last month.
(continued)
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China has sharply criticized Indian Prime Min-
ister Gandhi over events of the last few days,
leveling the harshest personal attack against her
for some time.
The Chinese stressed Soviet support for Gandhi's
moves, charging that she is attempting to act as
Moscow's "subregent" so that the USSR can maintain
its control of India and its influence in South Asia.
Peking may believe Gandhi's tactics and open Soviet
support will speed her departure from office and
that propaganda on these developments is much in
Peking's interest.
Fighting in Beirut diminished sharply yester-
day as the major Christian, Muslim, and Palestinian
groups dismantled their barricades and Lebanese
security forces flushed out snipers. Government
spokesmen announced that major roads are open and
called on civil servants to return to work.
Radicals backed by Libya and Iraq continue to
engage in hit-and-run attacks designed to foment
further clashes, but they are under pressure from
Palestinian and Syrian leaders to lay down their
arms. Violence continued beyond the cease-fire
deadline in other Lebanese cities--particularly
in the northern port of Tripoli--but by late yes-
terday afternoon had diminished significantly.
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LIBYAN-SOVIET RELATIONS
The relationship that has developed
between Libya and the Soviet Union dur-
ing the past year adds a new and poten-
tially unsettling element to the Middle
East situation. The concern of Egypt and
other Arab moderates over Libyan-Soviet
cooperation is such that it could hinder
progress in peace negotiations. The size
of the most recent arms agreements--al-
though exaggerated in most accounts--
raises the broader question of whether
Moscow will gain a new strategic foot-
hold in the Mediterranean.
Premier Kosygin's visit to Tripoli in mid-May
and news that a 1974 military agreement between
Libya and the Soviet Union had been expanded pro-
duced rumors, especially in Egypt, of massive arms
contracts and Soviet acquisition of base rights in
Libya.
We discount the multi-billion dollar price tag
and we have reservations
about some of the equipment they say the Soviets
will send. Nevertheless, we think Moscow has prom-
ised Libya substantial amounts of additional equip-
ment, including:
--additional MIG-23s;
--missile patrol boats;
--several artillery battalions;
--several hundred advanced tanks;
--more SAMs.
The Soviets have already delivered at least
a dozen MIG-23s, several hundred tanks, and air de-
fense equipment. The Libyans last year also or-
dered six submarines and some supersonic jet bomb-
ers.
(continued)
Al
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Based on preliminary calculations, we estimate
that the arms agreements negotiated in 1974 and
1975 total nearly $1 billion worth of military goods
and services.
Moscow's sales commitments do not guarantee
that Tripoli will receive all the weapons it wants,
and it could take at least two or three years for
most of the transfers of equipment to be completed.
If the deal is fully carried out, however, it will
provide the Libyans with far more equipment than they
can possibly operate and will permit the Soviets to
increase their physical presence in the area. It
will create an arms pool that could be drawn on by
Arab belligerents in any future war with Israel.
Moscow's Interests
The Soviet Union's deteriorating relationship
with Egypt has almost certainly been the main rea-
son behind Soviet responsiveness to Libyan arms re-
quests. The Soviets want to keep Sadat on notice
that they have other options open to them in the
Middle East and that they expect to gain leverage
on him by dealing with Libya. The Soviets hope the
contrast between their military generosity in Trip-
oli and their tight-fistedness in Cairo will have
a useful educational effect on present or prospec-
tive clients. Moscow, however, has a realistic ap-
preciation of Libya's status as an Arab political
outcast and almost certainly does not see it as a
satisfactory anchor for the Soviet position in the
region.
Despite professions of unconcern about a sub-
stantial flow of weapons into Libya, the USSR is
probably somewhat uneasy about Qadhafi's intentions.
Military boss Grechko once branded him a "madman
on top of a pile of gold." The Soviets may think
they will have some influence over Qadhafi through
their control of spare parts, ammunition, and train-
ing. Furthermore, should war break out, the Lib-
yans would be dependent on Soviet air transport to
move substantial amounts of heavy equipment to the
Arab belligerents.
(continued)
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Military Bases
The Soviets appear to have won some concessions
from Tripoli regarding access to Libyan naval facil-
ities. Tripoli apparently has decided to permit
Moscow occasional port calls for bunkering and re-
plenishment under tight Libyan controls. The Lib-
yans also may be dangling the prospect of greater
concessions in return for Soviet help in building
Libyan naval facilities at Tobruk.
So far, however, no Soviet naval ships have been
detected in Libyan waters. The last visit to Libya
by a Soviet naval combatant occurred in 1969.
Moscow certainly recognizes that Libya's stra-
tegic location on the southern rim of the Mediter-
ranean could be of advantage to the Soviet fleet
if it is shut out of Egypt. Nevertheless, Tobruk
is undeveloped and Libya's other ports have nothing
comparable to the dockyard Soviet ships now use in
Alexandria.
Should the Soviets gain unrestricted military
use of Libya, they could build the necessary naval
facilities. Moreover, the former US air base at
Wheelus Field near Tripoli could give them the
naval reconnaissance and strike capability they
lost when they were ousted from Egypt in 1972.
In view of Libya's continuing opposition to
foreign military bases, it is unlikely that Moscow
counts on significant military use of Libya any
time soon. If the Soviet Union has persuaded Libya
to drop its opposition to Soviet naval visits, how-
ever, it certainly will press for further conces-
sions.
Qadhafi's Motives
In negotiating the agreements, President Qadhafi
is motivated chiefly by his desire to challenge Is-
rael, its supporters, and those Arab leaders willing
to accept a negotiated settlement. His swing toward
Moscow is made easier by what he sees as Washington's
(continued)
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unresponsiveness to Tripoli's recent diplomatic over-
tures, its footdragging on the release of US-manu-
factured and licensed arms, and its threatening pos-
ture toward Arab oil fields.
Qadhafi sees negotiation with Israel as danger-
ous and doomed to eventual failure. He, therefore,
wants a well-equipped arsenal to fight a war he be-
lieves ?is inevitable. In the meantime, he plans to
use his weapons to unnerve Israel and to try to
block peace negotiations. In this campaign, Presi-
dent Sadat and Egyptian policy are his primary tar-
gets.
/The changed emphasis of the
Egyptian media from personalized attacks on Qadhafi
to serious consideration of his actions and their
implications suggests anxiety that his strategy
could succeed.
Qadhafi may hope eventually to use Soviet arms
to buy his way into another unity project with
Egypt. His fixation on unity with Egypt often
matches his desire to defeat Israel.
Whatever the state of his relations with Sadat,
Qadhafi would support the Egyptian military fully
in the event of renewed hostilities with Israel.
He did so during the 1973 war, despite his fury
over Sadat's rejection only a month earlier of
union plans.
Libyan Trouble-Makin%
Soviet cooperation with Libya may also encour-
age Tripoli's adventurism elsewhere in the Middle
East and in the Muslim world. The fedayeen--already
beneficiaries of Libyan financial and military aid--
are regarded by Qadhafi as an important anti-Israeli
(continued)
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instrument. Some of the Soviet arms going into
Libya are, therefore, likely to end up in terrorist
hands.
Attitudes Toward the New. Relationship
Libya and the Soviet Union have not signifi-
cantly narrowed their differences on such matters
as the nature of communism, the right of Israel to
exist, or the outlines of a Middle East settlement.
Both are, nevertheless, prepared to overlook these
fundamental differences for opportunistic, shorter
term goals that center on their common desire to
influence Egypt.
/ Qadhafi wants to hold the line on the num-
ber of Soviet advisers and technicians in Libya
and is willing to sacrifice efficiency and perhaps
a great deal of equipment to do so. With the deep-
seated xenophobia of the Libyan people working for
him, he will continue to isolate Soviet personnel
wherever possible. Nevertheless, the Libyan lead-
er's brash confidence, impatience, and near blind-
ness to some political realities may leave him vul-
nerable both to his own actions and to his new
patron.
Soviet Prospects
The course of Soviet relations with Egypt will
influence Soviet policy in Libya. The Soviets do
not want to foreclose the possibility of restoring
their position in Cairo. While they will continue
to nettle Sadat with the prospect of closer ties
(continued)
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with Libya they are unlikely to risk an open break
with Egypt by pushing ahead with Libya too rapidly.
But if relations with Sadat go further downhill,
Moscow will intensify its efforts in Tripoli.
But Moscow faces obstacles. Libyan suspicion
of the Soviets remains strong. Russians have not
been able to establish good relations with more
moderate Arabs and are much less likely to succeed
with the Libyans. The relationship is based on op-
portunism rather than a parallel approach to the
Middle East situation, and friction probably will
be more or less constant. Moscow will have to
remember that if the Libyans become dissatisfied,
they have the financial resources and the political
flexibility to seek alternate sources for essential
military needs.
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