WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A006200070002-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 38
• Document Creation Date: December 20, 2016
• Document Release Date: June 19, 2006
• Sequence Number: 2
• Publication Date: January 26, 1968
• Content Type: SUMMARY

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Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
State Dept. review completed
Secret
41[
26 January 1968
pp04/68
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(Information as of noon EST, 25 January 1968)
THE WEEK IN PERSPECTIVE
VIETNAM
The Communists appear to have scheduled a country-
wide military campaign for late January. In Saigon,
there may be some easing of tensions between Thieu
and Ky. Hanoi has reduced its propaganda attention
to Foreign Minister Trinh's statement on talks with
the US.
NORTH KOREA PROVOKES NEW CONFRONTATION
North Korea's attempt to assassinate South Korean
President Pak and its seizure of the USS Pueblo prob-
ably are aimed primarily at generating diversionary
pressures on the US at a time when Communist forces
in South Vietnam are poised for a major offensive.
LAOTIAN GOVERNMENT FORCES SUFFER SEVERE SETBACK
The loss of Nam Bac represents one of the most severe
military defeats the government has suffered in five
years, but there are still no indications that the
Communists intend to press their advantage by a drive
into government-held areas.
PEKING EQUIVOCATES ON SUPPRESSION OF DISORDER
Major party journals in Peking have reprinted a tough
editorial from a Shanghai daily demanding firm action
against factionalists in "revolutionary" organizations
but despite the tough talk, there is no sign of will-
ingness to deal firmly with the militant groups creat-
ing most of the disorder.
THAILAND PRESSING. COUNTERINSURGENCY CAMPAIGN IN NORTH
Government troops have encountered strong resistance
in sweep operations against insurgent elements in the
rugged mountains of northern Thailand.
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THE WEEK IN PERSPECTIVE
USSR'S DEFENSE BUDGET INCREASE MAY REFLECT PAY RAISE 12
The 15-percent increase announced for the Soviet de-
fense budget for 1968 may provide for greater pay for
career military personnel, according to a recent com-
mentary in Red Star.
12
SOVIETS CONTINUE TO EXPAND AND IMPROVE ICBM FORCE
New-generation SS-9 and SS-11 ICBMs are augmenting
rather than replacing the elder SS-7s and -8s, with
newer and more sophisticated weapons under develop-
ment.
:EASTERN EUROPEAN COUNTRIES RAISE MILITARY EXPENDITURES 14
The military budget for each country is higher this
year than last, but changing budgetary practices may
account for part of the increase.
FRANCO-SOVIET SPACE PROGRAM CONTINUES 15
During recen- negotiations in Moscow, France and the
USSR agreed to place a French instrument package on
a Soviet space vehicle to be launched around the moon
late this year.
USSR'S AID AND TRADE WITH INDIA DECLINES 17
Premier Kosygin's visit to India this week will pro-
vide New Delhi with an opportunity to review its lag-
ging economic relations with the USSR.
YUGOSLAVIA'S FOREIGN TRADE SHOWS SERIOUS IMBALANCE 18
Belgrade already had a large trade surplus with East-
ern Europe, but a sharp rise in imports from the West
has now put its trade further out of balance.
DRAFT NPT MOVES TO NEXT STAGE OF NEGOTIATIONS 19
Although a number of problems remain to be negotiated,
the US-USSR draft nonproliferation treaty has met
many of the nonnuclear states' objections and is
likely to be! forwarded to the UN with at least a
majority endorsement.
,)EGRET
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Middle East - Africa
THE WEEK IN PERSPECTIVE
FEDERAL TROOPS ON THE MOVE IN NIGERIA'S CIVIL WAR
Federal forces are advancing in several areas but
stiff Biafran resistance continues. The already
superior federal air force will soon be augmented
by the acquisition from Egypt of IL-28 bombers.
SOUTH AFRICA THREATENS TO BREAK SEA DEFENSE LINK WITH UK
Because of the UK's continuing embargo on arms sales,
South Africa may abrogate the Simonstown Naval Agree-
ment, under which the British and South African
navies are jointly responsible for protecting the
cape sea route around Africa.
IRAN PLANS TO MODERNIZE FORCES IN PERSIAN GULF
The projected British withdrawal from the area has
aroused interest in and support for the Shah's five-
year program to re-equip Iran's armed forces.
Western Hemisphere
CHILEAN PRESIDENT PLANS DOMESTIC STRATEGY
Since regaining the support of his own Christian
Democratic Party, President Frei is taking a harder
anti-Communist line and is planning new moves to
revitalize the staggering economy.
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PERU FACES CRISIS OVER 1968 BUDGET
The finance minister has resigned following the
action of the opposition-controlled Congress :reject--
ing some of the administration's 1968 budget :pro-
posals.
GUATEMALA CITY QUIET THIS WEEK
The leftists are likely to remain in hiding until
security forces relax their vigilance, but the calm
could be shattered at any tine.
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FAR EAST
The contest in east Asia has taken on new di-
mensions with North Korea's audacious attempt to
assassinate South Korean President Pak and its sei-
zure of the USS Pueblo. These provocative ventures
appear to be aimed primarily at generating diver-
sionary pressure on the US at a time when Commu-
nist forces in South Vietnam are poised to launch
a major country-wide offensive.
The North Korean leaders' deliberate moves to
provoke a new crisis area reflect their readiness
to face a sharp confrontation along the 38th Paral-
lel. It seems likely, however, that they are count-
ing heavily on the US to restrain Seoul from mount-
ing unilateral reprisals and to prevent a military
escalation in Korea that would require a major
diversion of US military resources from Vietnam.
In South Vietnam, artillery and probing attacks
against the US Marine base at Khe Sanh apparently
mark the opening round of an ambitious Communist
winter offensive. The main weight of the campaign
probably will be directed at South Vietnam's north-
ern provinces, but there are indications of plans
for coordinated assaults in other parts of the coun-
try. With a major offensive in the offing, Hanoi
has reduced its propaganda attention to its late
December statement on talks with the US and has bit-
terly denounced President Johnson's remarks on Viet-
nam in his State of the Union message.
In Saigon, President Thieu made his second ma-
jor bid in ten days for a greater voice in allied
decisions. In a speech to the National Assembly,
Thieu insisted there could be no cessation of bomb-
ing until the Communists end their guerrilla attacks,
subversion, and terrorism in the South as well as
their infiltration from the North.
Armed struggles continue throughout China and
the army seems to be making no effort to intervene.
The apparent stalemate within the top leadership is
reflected in Peking's failure to repudiate or curb
militant "revolutionary" groups that are creating
most of the disorder. 25X1
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N
BURMA,
Co Gio Linh
Thien\ Demilifarized Zone
yi
Khe Sanh,
_, -- 111: CORPS
Capital Special Zone
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VIETNAM
Communist strategists ap-
parently plan to kick off a ma-
jor country-wide military cam-
paign sometime around Tet, the
lunar new year at the end of
January. The main pressure will
probably be mounted in the north-
ern provinces.
The opening round appar-
ently occurred in Quang Tri Prov-
ince on 19 January with a series
of probes against allied posi-
tions in the Khe Sanh area, fol-
lowed up later in the week with
large-scale mortar, rocket, and
artillery bombardments. Heavy
fighting also occurred near Gio
Linh in the northeastern corner
of the province, reflecting
enemy efforts to maintain pres-
sure and tie down US forces all
along the Demilitarized Zone
(DMZ). On the western end of the
DMZ, at least 16,000 North Viet-
namese regulars are in the hills
surrounding the Marine garrison
at Khe Sanh, while up to two
enemy divisions threaten allied
strongpoints in the eastern half
of the province.
25X1 claims that
25X1 e mission of his unit--the
North Vietnamese 325C Division--
is to overrun every US base be-
tween the Laotian border and
Con Thien before the Tet holi-
days. remarks 25X1
sugge enemy troops are
being given an especially heavy
dose of propaganda exhortation,
which is indicative of the major
significance the Communists ap-
pear to be placing on the pres-
ent offensive.
~laimed that 25X1
the Quang Tri campaign was of
such importance that it was be-
ing controlled directly by the
North Vietnamese Defense Minis-
try in Hanoi.
There are indications that
enemy operations in the northern
provinces may be coordinated with
attacks in the western highlands
and perhaps in northern III
Corps. There has been continued
maneuvering by subordinates of
the B-3 Front, both along the
Kontum-Pleiku provincial border
area and in the mountains of Kon-
tum adjacent to the Laos-Cam-
bodian border, where at least
five North Vietnamese regiments
have been identified. Several
recently captured documents
discuss plans to attack specific
targets in Pleiku--including the
province capital, possibly in
conjunction with actions in the
triborder area.
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Although fighting in north-
ern III Corps has slackened re-
cently, elements of three Com?-
munist divisions--the Viet Cong
5th and 9th, and the North Viet--
namese 7th--are in a position to
threaten several key points, in--
cludi.ng the Loc Ninh - Song Be
area.
Reinforcing the likelihood
of wide-ranging enemy offensive
operations before or soon after
Tet are the tapering off of the
northeastern monsoon in the DMZ
area and the new moor. cycle it-
self, both natural factors that
are known to create conditions
favorable to enemy initiatives.
Politics in Baron
There are tenuous indica-
tions that the strains between
President Thieu and Vice Presi-
dent Ky may be easing.
The government is continu-
ing to strengthen its position
in the Lower House. The commit-
tee chairmen elected on 18 Jan-
uary put probable government sup-
porters in charge of a majority
of the committees. This enhances
prospects of house cooperation
with the executive branch, and
results from a continued alli-
ance between deputies in the
progovernment Democratic Bloc
and those of the northern Catho-
lic-dominated Independence Bloc.
Hanoi Rejects Reciprocity
North Vietnam seems unwill-
ing at present. to go any further
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in publicly elaborating on its
position concerning talks with
the US. In contrast to its ef-
forts prior to President John-
son's State of the Union address
to underscore the reasonableness
of the Communist position, Hanoi
now seems bent on preventing
any exaggerated interpretations
of its intentions. After
strongly denouncing the Presi-
dent's restatement of the San
Antonio formula, North Vietnam-
ese media generally have concen-
trated on presenting Hanoi's
usual hard-line treatment of the
war and have ignored the issue
of negotiations. On 22 January,
the DRV representative in Paris
canceled a scheduled inter-
view with a New York Times of- 25X1
ficial on the grounds that he
had said everything he had to
say at this time.
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C; EGRET
NORTH KOREA PROVOKES NEW CONFRONTATION
North Korea's audacious a.c-
tions in attempting to assassinate
South Korean President Pak Chong-
hui and in seizing the USS Pueblo
and its crew were apparently in-
dividual, uncoordinated actions.
Both, however, probably were aimed
primarily at generating diver-
sionary pressures on the US at a
time when Communist forces in
South Vietnam are poised to launch
a major country-wide offensive.
In undertaking these risky
adventures, the North Koreans
were carrying out Premier Kim
Il-song's prescription for combat-
ing American power on a world-
wide scale. Over the past year,
he has repeatedly described Viet-
nam as the focal point of the
vTorlcL struggle and has urged all
Communist regimes to take "more
positive actions" to aid Hanoi by
forcing the US to "disperse" its
strength.
On 19 January, the day the
North Korean raiding party crossed
the Demilitarized Zone on its way
to Seoul, Pyongyang radio broad-
cast Kim's call for "blows" against
the US "in all parts of the world"
in order to "split its forces to
the maximum degree." Kim in-
sisted, "We must tie the US up
wherever it puts its feet, so that
it cannot move around freely."
Although the heavily armed.
North Korean raiding party failed
to execute its assigned mission
of blowing up the presidential
mansion, it managed to penetrate
to within 800 meters of Blue House
before being driven off by South
Korean police. The fact that
the Korean leaders ordered such
a highly provocative venture
indicates they were prepared
for a sharp confrontation on
the 38th Parallel, including at
least limited and localized mili-
tary action. It seems likely,
however, that Pyongyang was count-
ing heavily on the US to restrain
the South Koreans and to prevent
a military escalation in Korea
that would require a major diver-
sion of US military resources
from Vietnam.
The Pueblo incident, in North
Korea's view, appears to have been
a windfall opportunity to sharpen
the diversionary confrontation in
Korea, to stimulate US - South
Korean differences, and to put
greater pressures on US policy in
Asia. The seizure of the Pueblo
;probably was not part of an elab-
orate scenario prepared in ad-
vance.
North Korea has adopted a
defiant stand in the initial talks
at Panmunjom and appears determined
to prolong the confrontation for
some time. The senior North Korean
representative at the Military
Armistice Commission meeting on
24 January flatly rejected the US
demand for the immediate return of
the ship and its crew. He re-
mained silent on Pyongyang's
intentions regarding the disposi-
tion of the Pueblo.
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Despite this provocative stand,
the North Koreans probably are not
prepared to press events to the point
of an uncontrollable conflict. Pyong-
yang, moreover, is seeking to avoid
responsibility for the Seoul raid by
portraying it as part of the South
Korean people's "heroic struggle"
against the Pak regime.
These two incidents will sharply
increase pressure on the South Korean
Government to mount strong retali-
atory action. The seizure of the
Pueblo, following on the heels of
the Seoul raid, has deepened public
concern over North Korean intentions
and over the security situation in
the South. The success of the North
Korean team in penetrating Seoul has
generated loud criticism of the gov-
ernment. President Pak has urged the
cabinet and party leaders to "pre-
pare measures to counter and root
out once and for all such atrocious
activities" as the Seoul raid. De-
spite firm UN Command prohibitions
against unilateral South Korean
reprisals, Pak has permitted some
punitive raids against the North in
the past. Any further aggravation of
the confrontation might impel Pak to
authorize more extensive retaliatory
action and make it more difficult to
control the course of events.
LAOTIAN GOVERNMENT FORCES SUFFER SEVERE SETBACK
The loss of Nam Bac on
13 January represents one of the
most severe military setbacks
the Laotian Government has suf-
fered in five years, but there
are still no indications that
the Communists intend to press
their advantage by a drive into
government-held areas.
It will be some time before
total government casualties can
be determined, but losses will
probably be high. A full week
after the defensive perimeter
collapsed, less than half the
original complement of 3,500 is
accounted for. The enemy is still
harassing units as they attempt
to withdraw, and friendly guer-
rilla units and helicopters are
being moved in to help with the
evacuation. The government also
lost large stocks of heavy weap-
ons, ammunition, food, and equip-
ment.
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Communist propaganda empha-
sized that the attack against
Nam Bac was a response to the qov-?
ernment's "nibbling tactics," and
called on its forces to remain
resolute in "defense of liberated
areas." This line _s also being
pushed by the Pathet Lao repre-
sentative in Vientiane.
In addition, the Communists
captured the government position
at Muong Hiem on 23 January, sug-,
gesting that an early thrust may
be made against Na Khang, the
principal base for friendly guer-
rilla operations in northern
Xieng Khouang Province.
Meanwhile, the Communists
are closing in on the strategic
government guerrilla base at Phou
Pha Thi, which was the target of
the unsuccessful North Vietnamese
air strike on 12 January. The
enemy has taken a number of out-
lying posts in recent days, pos-
sibly in preparation for artil-
lery attacks on the airstrip.
The loss of. Phou Pha Thi, which
is only 15 miles from the North
Vietnam border, would seriously
dis:cupt government operations
in northern Houa Phan Province,
and would impair US air attacks
against North Vietnam.
In southern Laos, the enemy
continues to threaten some major
government bases, although no
large-scale attacks have been
reported in several weeks. The
Communists, however, have dis-
rupted US AID development pro-
grams in this part of the coun-
try. By tying substantial num-
bers of government troops to
static defensive positions, the
Communists also have already
achieved one of their primary
objectives in their current dry-
season campaign. 25X1
25X1
PEKING EQUIVOCATES ON SUPPRESSION OF DISORDER
Peking has joined provincial
propaganda media in denouncing
the "crimes" of people in "revo-
lutionary organizations " who in-
stigate conflicts and widen fac-
tio:zal splits. On 15 January,
the major central committee jour-
nals in Peking reprinted, without
comment, a tough editorial from
the Shanghai Wen Hu:L Pao demand-
ing that firm action be taken
against factionalists in "revalu-
tionary" organizations. At least
one provincial radio has told
'"revolutionary" organizations to
study the Wen Hui Pao editorial
and many others have denounced
the factionalists in similar
language.
The failure of the Peking
papers to publish the customary
editorial endorsement of a major
statement like this suggests that
militant forces around Mao are
unwilling to accord official back-
ing for such a forthright attack
aimed at militants in the provinces.
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"Armed struggles" and vio-
lent fighting, presumably insti-
gated by these groups, continue
to be reported from many areas.
Most fightin a ears to be
25X1 sporadic,
a s a e o anarchy has existed
activities.
for weeks in several cities in
southeast China. The army seems
to be making no effort to inter-
vene in these areas, even though
the fighting reportedly has
caused heavy casualties and
damage, and has virtually put a
stop to government and economic
Peking radio has announced
that Premier Chou En-lai appealed
to railway workers in early Janu-
ary to restore smooth operations,
but this appeal seems to have 25X1
been as ineffectual as the de-
nunciations of those who insti-
gate conflicts.
THAILAND PRESSING COUNTERINSURGENCY CAMPAIGN IN NORTH
Government troops have en-
countered strong Communist re-
sistance in their major sweep op-
eration begun in early December
against insurgent elements in
the rugged, mountainous terrain
of northern Nan Province. The
3,000-man police and army force
involved has suffered more than
60 casualties and has been se-
verely handicapped by poor intel-
ligence and inadequate logistic
support. The operation is tar-
geted against an estimated 200
Communist-led Meo tribesmen, who
have displayed considerable tac-
tical skill and discipline in
evading and harassing government
forces.
The Thai Communist Party has
been working with the northern
tribal people for several years
and has managed to extend its
influence over a number of vil-
la es.
the party as trained several
un red tribesmen in Laos and
6that smaller numbers have also re-
ceived guerrilla instructions at
the Hoa Binh training center in 25X1
North Vietnam. There are also indi-
cations that Communist cadre.
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frcm the northeast may have been
moved into the north.
The commitment of substantial
resources to the operation in Nan
Province, as well as the high-
level interest shown in Bangkok,
is evidence of the government's
belated recognition that it is
now also facing a substantial sub-
versive threat in northern Thai-
land. The heavy-handed treatment
of the tribal people during the
operation, however, and the con-
tinuing claims that. the dissi-
dence is foreign-inspired indicate
that Bangkok is not. yet ready to
acknowledge that its own tribal
policies have been largely re-
sponsible for creating a situa-
tion ripe for Communist exploita-
tion.
Meanwhile, Communist activ-
ity in the more critical north-
east has remained at a low level
since last spring. The guerrillas
there have generally limited
their activity to the confisca-
tion of food and to minor acts
of intimidation against villagers.
Armed clashes with security forces
continue, but. forced village meet-
ings have almost ceased. The
Communists have not attracted
much peasant support through ter-
rorism and, in the face of in-
creasing pressure from the gov-
ernment, may have decided for the
present to concentrate on low-
key political efforts.
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EUROPE
The Soviet leadership seemed to be having some
troubles with scheduling. Premier Kosygin changed
plans a second time and began a visit to India this
week. There is one report that he will go on to Hanoi
to be there during the Tet cease-fire. The central
committee meeting, reportedly scheduled for January,
now may not be held until next month, which suggests
that the leadership has still to make up its mind on
a number of issues.
President Tito, returning from Cambodia, ex-
tended a stopover in New Delhi for three days--osten-
sibly to get some rest. He was thus able to see Ko-
sygin as well as Mrs. Gandhi. Tito will visit Addis
Ababa and Cairo before going home.
There were some indications that the new lead-
ership in Czechoslovakia might be more cooperative
with the West than its predecessor. It granted Pan
American Airways' long-standing request to sell
tickets in Prague for hard currency. The Czechs were
also helpful to a West German trade mission that is
preparing to open a permanent office in Prague.
Czechoslovakia was one of the first states publicly
to approve the US-Soviet draft of the nonprolifera-
tion treaty.
In Denmark's elections, Prime Minister Krag's
Social Democrats suffered a clear defeat. Although
the non-Socialist parties now have a majority in
the 179-seat parliament, the balance of power is
held by the small Radical Liberal Party, elements
of which favor a referendum on the question of mem-
bership in NATO after 1969.
1 -1
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USSR'S DEFENSE BUDGET INCREASE MAY REFLECT PAY RAISE
?ay raises for military per.- would be receiving more than
i
90
il-
sonneL may be included in
the
et
15- percent of the total Sov
m
t
percent increase announced
the Soviet defense budget
for
for
itary pay, since conscripts
only nominal compensation.
ge
1968.
Although the published ver--.
sion of the newly instituted
universal military service law
contains no explicit provision
for greater pay for career mili-
Lary personnel, a recent commen -
Lary on the law implies there is
one. Military pay data normally
are considered classified informa-
tion by the Soviets.
Describing the law in Red
Star,. Marshal M. V. Zakharov,
chief of the general staff, re-
ported that changes aimed at "i:m-
prov__ng the material. and legal po-
;sitions" of officers and long-
term enlisted servicemen are be-
ing introduced. Even without.
an increase, these personnel
It is not clear how big a
raise is intended, but any sig-
nificant one would increase mil-
itary spending materially. An
increase of ten percent, for ex-
ample, would add about 350 mil-
lion rubles to the budget. This
would be about 16 percent of the
2..2-billion ruble increase the
Soviets announced will be made
in defense spending in 1968.
An increase could be consid-
erably more than ten percent. No
major revision of the Soviet mil-
itary pay structure has been de-
tected in over 20 years. The
wages of the civilian labor force
have nerrlv doubled during this
period.
SOVIETS CONTINUE TO EXPAND AND IMPROVE ICBM FORCE
't'he Soviets are continuing
to improve and strengthen their
straLtegic Rocket Forces. The new
generation SS-9 and SS-11 ICBMs
are augmenting rather than replac-
ing the older SS-7s and SS-8s.
The Soviets apparently intend to
raise the number of their deployed
ICBMs to close: to the more than
1,000 Minutemen and Titans de-
ployed by the US.
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Newer, more sophisticated
weapons are under development.
The fractional orbit bombardment
system showed a good test record
in 1967. This system could be-
come operational late this year,
although the booster probably is
not powerful enough to permit a
nuclear warhead to hit targets
in the US on the first orbit.
In another area of develop-
ment, a new solid-propellant ICBM
achieved ICBM range in October for
the first time. This missile will
probably not be operational for at
least another year.
SECRET
The most extensive Soviet stra-
tegic exercise ever held took place
in July, with the rocket forces
playing a leading role. This ex-
ercise featured the nearly simul-
taneous launch of five ICBMs
from five different complexes on
20 July.
An increasing amount of in-
formation on the Soviet Rocket
Forces has been published in the
USSR in recent months. The So-
viet public has been told for
the first time that military per-
sonnel are responsible for the
launch of even nonmilitary space-
craft, and a full-page article
on a new mobile missile system
was published in Red Star. In
the November parade, the Soviets
first displayed the SS-9 ICBM and
a new two-stage solid-propellant
MRBM for the Scam mobile system.
I al
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SEC
EASTERN EUROPE=AN COUNTRIES RAISE MILITARY EXPENDITURES
The Eastern European coun-
tries have all announced in-
creased military budgets for
1968, most of them for the third
consecutive year. The increases
range from between 4 and 11 per-
cent for Czechoslovakia, Ruma-
nia, Yugoslavia, Bulgaria, Po-
lanc., and Albania, to 15 percent
for Hungary, and about 60 per-
cent for East Germany. Except
for Rumania and Hungary, each
country has earmarked an equal
or larger percentage of its to-
tal 1968 budget for military
expenditures than in 1967.
Military spending has gen-
era_ly been understated in pub-
lished budget data. The prac-
tice of including some military
outlays elsewhere in the budget
and providing indirect subsidies
on some items purchased by the
military may be coming to an
end, however, at least in some
of these countries. The eco-
nomic reforms most are under-
taking include, complete over-
hauls of their budgets. It has
been assumed that stated mili-
tary budgets gave valid indica-
tions of the c(eneral trend of
defense expenditures. The con-
clusions to be drawn from the
:L968 budgets are not yet clear
and comparison with previous
years is, therefore, less mean-
ingful than in the past.
Although there is no evi-
dence of a large-scale military
build-up of East German forces,
as Pankow's announced 60-percent
increase in defense expenditures
would suggest, the figures may
EASTERN EUROPE: BUDGETED MILITARY EXPENDITURES
COUNTRY 1967 PLANNED
1968 PLANNED
1968
PERCENTAGE
PERCENTAGE OF TOTAL BUDGET
(and currency)
(in millions)
(in millions)
CHAN
GE FROM 1967
1967 1968
Albania (Leks)
3ulgaria (Leva)
247
264
6.9
6.0
6.0
Czechoslovakia (Crowns
12,400
12,900
+4.0
8.7
8.9
Fast Germany (UM)
about
3,600
5,800
61.0
5.0
8.7
Hlurigary (Forints)
5,437
6,400
15.5
5.2
4.6
Poland (Zlotys)
26,450
29,096
F10.0
8.4
9.5
Rumania (Lei)
4,960
5,200
+4.8
4.0
Yugoslavia (NewDinars)
5,382
6,030
+6.i
55.0
SECRE'l,
Approved Ford-l~gasg42007 ( 6,~C~ 9-009ZTAOjM200670002-7
 Approved For Wease 2007/03/
p(;II P79-00927A p6200070002-7
foreshadow an important increase
in defense spending. It is also
possible that the Eastern Euro-
pean countries are having to
pay some of the military costs
previously borne by the USSR.
Hungary cited rising prices
as an important factor in its
enlarged military budget. Ru-
mania :Last year announced a
program to produce military
equipment, but its military bud-
get is up less than 5 percent.
To make higher military
spending more palatable to the
public, the Eastern European re-
gimes usually blame increased
international tension. Other
reasons may also include any
combination of such factors as
more realistic budget planning,
surfacing of heretofore hidden
military expenditures, inflation,
higher costs for more sophisti-
cated equipment, price reforms,
or the assumption of defense
functions previousl borne by
the Soviet Union.
FRANCO-SOVIET SPACE PROGRAM CONTINUES
During recent negotiations
in Moscow, France and the USSR
agreed to place a French instru-
ment package on a Soviet space
vehicle to be launched around
the moon late this year.
The project involves the
use of French-built spectroscopic
equipment to search for a thin
atmosphere around the moon. A
successful mission would repre-
sent a significant step forward
in lunar research.
It is unclear whether the
Soviets intend to revive their
lunar orbiter program--inactive
for more than a year--for this
project. There are indications
they are embarking on a new
series of shots, including one
or more circumlunar flights that
will loop around the moon and
return to earth. The French
experiment might be included in
such a mission.
The bilateral talks in Mos-
cow also covered an earlier
agreement calling for the So-
viets to place a French scien-
tific satellite in a highly el-
liptical orbit around the earth.
This well-publicized program,
Project Roseau, was originally
scheduled for 1971 or 1972, but
the French science attache in
Moscow has indicated that the
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SEC 1E'1'
satellite will probably be
launched in 1973.
Contrary to press reports,
there was no discussion of So-
viet use of launchincr or track-
ing facilities in French Guiana.
France has announced that the
space launch site under con-
stru:~tion there will be avail-
able to other countries, but
it is too early to determine if
that invitation includes the
USSR.
The Soviets might seek to
establish space tracking facil-
ities in French Guiana to sup-
plement land-based tracking
stations in the USSR. French
Guiana is well situated for sup-
porting a variety of Soviet
space missions, including manned
flights. The USSR almost
certainly will not move any of
its major space programs to
French Guiana, but some Franco-
Soviet sounding rockets might
be Launched there.
Thus far, the only joint
space projects to reach the
launch pad have involved small
sounding rockets fired from Franz
Josef Land in the Soviet Arctic.
In late 1967, two Soviet sound-
ing rockets carried French in-
strument payloads in what ap-
pears to be the beginning of a
series of shots to investigate
the upper atmosphere,.
Franco-Soviet cooperation
in space research, one of sev-
E:ral joint scientific projects
involving the two countries,
began two years ago with formal
negotiations in Paris. Thus
far, the program has been char-
acterized more by talk than by
action. The main stumbling
block has been the unwillingness
of the French Government to
allocate the necessary funds.
There are no indications that
Paris intends to loosen the
purse strings for the program, 25X1
which probably will continue to
move at a leisurely ace over
the next few years.
S CRET
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USSR'S AID AND TRADE WITH INDIA DECLINES
Premier Kosygin's visit to
India this week will provide New
Delhi with an opportunity to re-
view its lagging economic rela-
tions with the USSR. Soviet trade
with India apparently declined
in 1967 for the second year in a
row and the Soviet aid program
is far behind schedule.
The trade goal for 1968 calls
for total trade of $400 million,
a modest increase of seven per-
cent, but probably will not be met.
India hopes to increase its ex-
ports of manufactured goods to the
Soviet Union while maintaining
exports of such traditional goods
as jute, tea, and hides at about
the same level as in 1967. Much
of the decline in trade stems from
the implementation of new economic
policies. by New Delhi, including
a 30-percent devaluation of India's
currency in June 1966. At that
time, India also liberalized for-
eign exchange regulations for
priority industries, permitting
importers to turn to Western
sources for goods they formerly
bought from the USSR for rupees.
In addition, two poor crop years
have reduced the availability of
agricultural products for export
to the USSR.
An economic recession in
India since 1966 has reduced the
funds available for investment in
the public sector and this has re-
sulted in a slowdown in aid de-
liveries from the USSR. Never-
theless, in 1966 the Soviets ex-
tended to India $333 million in
new project aid and an additional
$222 million in trade credits for
India's fourth five-year plan
(1966 to 1971). India also car-
ried over more than $200 million
in unused credits and another
$225 million in unused credits for
the Bokaro steel plant, which has
not progressed far. India thus
has about $900 million in unused
Soviet credits, of which only
about $40 million was drawn during
the past year.
Most Soviet project aid was
used for the. expansion of projects
begun under the third five-year
plan, such as the oil refineries
at Koyali and Barauni, the Bhilai
steel plant, and two electric
power plants. Progress at the
Bokaro steel plant, the Soviets'
largest aid project in India, was
held up because of Soviet-Indian
differences over cost and schedul-
ing, and because Indian suppliers
have been unable to meet contract
commitments. Some equipment has
been delivered to the site but
probably no more than $22 million
for equipment and technical serv-
ices has been expended on the
project so far..
Kosygin presumably will urge
New Delhi to improve operations at
plants built with Soviet aid and
to allocate more resources to the
public sector construction pro-
gram. This would increase India's
capacity to absorb scheduled So-
SECRET
P e 17 Y U Yy 26 Jan 68
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YUGOSLAVIA'S FOREIGN TRADE SHOWS SERIOUS IMBALANCE
As part of its economic re-
form program, Yugoslavia last
year removed restrictions on about:
half the products ii: imports, re-
sulting in a sharp and unexpected
upsurge in imports from the West.
This, plus Belgrade's large trade
surplus with Eastern Europe, has
necessitated a search for a new
bas:'_s of trade with these CEMA
members.
Yugoslav enterprises have
shown a strong preference for
Western goods, which are of higher
quality and are often lower priced
thart those from the Communist or
less-developed countries. Yugo-
slav imports last year from West-
ern hard-currency countries are
estimated to have increased 2.5
times more than exports to them.
Although Yugoslavia's Western
imports accounted for more than
half its total trade, the rush to
buy Western goods is expected to
ease this year. Belgrade is in
the process of raising its tariffs
on some imports from the West: and
has taken measures to increase im-
ports from Eastern Europe.
In addition, Yugoslavia prob-
ably will try to get more finan-
cial assistance from the West in
the form of debt deferments and
long-term credits. It will have
subs-:antial repayment: obligations
in 1968 and 1969, which could cut
deeply into its hard-currency re-
serves. Yugoslavia has received
no major financial assistance from
the West since 1966, but West
Germany--one of Belgrade's largest
creditors--has taken the lead in.
the European Economic Community
(EEC) in pressing the case for
special treatment. Italy, however,
has blocked negotiations for a
Yugoslav-EEC commercial agreement.
The Italians fear that, without
an enlarged EEC market resulting
from inclusion of the "northern"
candidates for membership, Yugo-
slavia--along with other Mediter-
ranean countries seeking special
community ties--would become overly
strong competitors in supplying
agricultural products to the EEC.
The shift in Yugoslavia's
trade toward the West has increased
the strain on Belgrade's economic
relations with Eastern Europe.
Yugoslav imports from CEMA have
been declining while exports have
increased, resulting in the build-up
of a trade surplus of $135 million
which the Yugoslav press has charac-
terized as "an interest-free
credit." Yugoslavia has reportedly
proposed various measures, includ-
ing settlement in hard currency,
if this surplus is not eliminated.
by 1970. The subject was probably
discussed at the recent CEMA meet-
ings in Budapest, but the reaction
of CEMA members to this proposal
is unknown. Unless a new basis
for trade with these countries is
found, Belgrade may have to fur-
ther regulate its trade with the
SECRET
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DRAFT NPT MOVES TO NEXT STAGE OF NEGOTIATIONS
The draft nonproliferation
treaty (NPT) submitted by the US
and USSR last week is now being
reviewed by the other members of
the Eighteen Nation Disarmament
Committee (ENDC).
World-wide response to the
draft has been generally favor-
able. Even the West Germans, who
had been among the most critical,
were positive, although they
noted that some problems remained.
Italy and Japan reacted similarly.
At a session of the ENDC on 23
January, however, only Britain,
Canada, and Czechoslovakia pub-
licly endorsed the draft treaty.
The nonaligned members of the
committee have remained silent.
Among the problems remaining
is the 25-year duration of the
treaty, which West Germany and
Italy may try to get shortened.
In addition, Italy and Spain want
the ten countries most advanced
in nuclear energy development to
have the veto on amendments, a
power that the present draft gives
to the International Atomic Energy
Agency (IAEA) board of governors.
Both countries would also like to
increase from 40 to 80 the number
of ratifications necessary to put
the NPT into effect. The Japanese
want a provision for an automatic
review conference to be held every
five years.
The Western European countries
question whether a verification
agreement between IAEA and Eura-
tom can be worked out in the two
years provided. Other nonnuclear
states want safeguards over the
peaceful nuclear activities of
the nuclear powers. The US and
UK, but not the USSR, have indi-
cated a willingness to accept IAEA
safeguards.
The Italians would like the
decision on providing nonnuclear
states with nuclear explosive de-
vices for peaceful purposes put
in the hands of an international
agency rather than left to the nu-
clear states. Underlying this and
other concerns of the nonnuclear
states is a belief that they are
being asked to give up a great
deal while the nuclear powers are
sacrificing very little.
The question of providing
security assurances to the non-
nuclear states remains to be worked
out. Such assurances, necessary
before India signs, will not be an
integral part of the treaty but
will probably take the form of
declarations by the nuclear states
and a UN resolution.
Despite the problems that
remain, the completed and revised
text has met many of the nonnuclear
states' objections, and it is
likely that the NPT will receive
at least a majority endorsement
from the ENDC before it is for-
warded to the UN.
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MIDDLE EAST - AFRICA
There was little progress during the week toward
an early resolution of the area's many crises.
Arab terrorists continue to hit at targets in
Israel and Israeli-occupied territories. An Israeli
counterstrike does not appear imminent, but continued
terrorism will probably draw Israeli retaliation
sooner or later.
The tripartite committee attempting to reconcile
differences between the Yemeni republicans and royal-
ists has so far failed. The military situation re-
mains stalemated with republican air power canceling
out the advantage the royalists have on the ground.
Nigerian federal troops have advanced in several
sectors against Biafran forces, but are encountering
stiff resistance from the Ibos. Lagos is adding a
few IL-28 bombers, acquired from Egypt, to the small
federal air force.
In Dahomey, the insecure new military government
may get another temporary reprieve from its pressing
financial problems. France appears to be relenting
on its decision to suspend budgetary support, and
may remit emergency funds at the end of the month
when Dahomey faces its next fiscal crisis.
The French-speaking nations of the moderate Afro-
Malagasy Common Organization, which appears to be in-
creasing in prestige and importance, held their an-
nual summit this week in Niger. The session was at-
tended by 13 of the 14 member chiefs of state. The
final communique indicated the organization will con-
tinue its quiet efforts to expand economic coopera-
tion among its members.
Some of the luster surrounding India's 18th Re-
public Day has been dimmed by disorders among south
Indians, who complain that recent language legisla-
tion fails to protect the rights of linguistic mi-
norities.
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Benin City r % ] \
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j Aba
BIGHT, O F B I A F R A
NIGERIA .
CAMEROON
,,,Santa Isabel
EQUATORIAL UINE
FERNANDO p0,
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SECRET
 Approved For Rele6e 2007/03/06 C6R[ 9-00927A00 00070002-7
FEDERAL TROOPS ON THE MOVE IN NIGERIA'S CIVIL WAR
Federal military forces are
beginning to gain new momentum in
several areas of Biafra against
severe opposition, as Ibo resist-
ance continues unabated.
The three brigades of the fed-
eral 2nd Division, moving down from
the north, have linked up west of
Enugu with the lst Division, and
the two forces are pushing south
in a line from Enugu to the Niger
River. Principal objectives are
Udi, Awka, and Onitsha, the capture
of which would significantly
shorten federal supply lines. The
defending Biafran brigades are put-
ting up fierce resistance, however,
and the federal advance is likely
to be slow.
sea and air from Lagos have mini-
mized the federal advance.
Lagos is adding IL-28 jet
light bombers to its air force-- 25X1
the first of this type to be ac-
quired anywhere in black Africa.
A prime target is likely to be Port
Harcourt and its airfield, Biafra's
only entry point for military sup-
plies and international travelers.
On the coast at Bonny, the
attacking Biafran units were re-
portedly finally stopped by the
federal 15th Brigade with the help
of naval patrol boats that cut
Biafran su 1 routes through the
creeks.
25X1
e era pa ro s
have recently penet
north as Port Harco
east at Calabar, fe
have moved about 25
rated as far
urt. To the
deral troops
miles to the
25X1 north and northwest, heading for
Ikot Okporo on the Cross River.
Effective Biafran counterattacks
and harassing action, however, as
well as the long supply line by
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SECRET
Luanda,* - )LaFc
WALVIS BAY
I REP. OF S.AF.)
Walvis Ba t
SWAZ)LANO
Bloemfontein.
Maseru
Cape Town
Simonstown Naval Base'
REPUBLIC OF \LE OTHO,9purban
*East London
'Port Elizabeth
20o aoo
MILES
Ile Eump~
(Fr.)
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SOUTH AFRICA THREATENS TO BREAK SEA DEFENSE LINK WITH UK
British Prime Minister Wil-
son'.s recent announcement that
the UK will continue its embargo
of military arms sales of all
types to South Africa has led
Pretoria to indicate that it
might abrogate the Simonstown
Naval Agreement. Under the
terms of that agreement, signed
in 1755, the British and South
African navies are jointly re-
sponsible for protecting the cape
sea route around the tip of Af-
rica.
The South African request
that sparked the trouble was an
order for maritime reconnaissance
jets, bombers, helicopters,
frigates, submarines, and sur-
face-to-air missiles. The South
Africans claim that these weap-
ons are required for the defense
of the route and that the Brit-
ish failure to supply them is
reason enough for Pretoria to
withdraw from the agreement.
Wilson announced the arms
embargo shortly after he took
office in 1964. It is designed
to prevent British arms from
being used against South Africa's
nonwhites. South Africa's pres-
ent shopping list touched off
bitter debate within the British
Government, where some officials
argued strenuously that the arms
requested are not of the kind
likely to be used against the
indigenous population. It was
also argued that it would be
economically unfavorable to turn
down the request, as South Africa
plans to spend at least $200 mil-
lion for arms in the near future.
Abrogation of the agreement
carries with it the possibility
that British warships will lose
docking privileges at South Af-
rican ports. South African Prime
Minister Vorster has implied that.
he will give France access to the
British naval base at Simonstown,.
but it is doubtful that the
French are interested. The Brit-'
ish hope to use this base to
fuel and supply ships returning
British troops and equipment from
east of Suez. After that with-
drawal is completed in 1971,
London probably will have little
interest in defending the cape
sea route.
The South Africans will prob-
ably turn to the French for arms,
as they did soon after the Wilson
embargo was promulgated. The French,
having convinced themselves that
the arms requested are not
for internal use, have not hesi-
tated to fill South Africa's or-
ders. Past sales have included
such items as Mirage aircraft,
Daphne-class submarines, and Pan-
hard armored cars.
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SECRET
IRAN PLANS TO MODERNIZE FORCES IN PERSIAN GULF
The projected British mili-
tary withdrawal from the Persian
Gulf has focused new attention
in Iran on the Shah's plans to
modernize the country's armed
forces. The Shah has maintained
for several years that Egyptian
President Nasir presents a threat
to Iranian security in the Per-
sian Gulf, and he has geared his
defense policy toward improving
Iran's naval and air capabilities
in that area. Iranian officials
expected the British withdrawal,
and have often served notice that
they intend to be prepared for
any security problems that arose
as a result.
The Shah's military program
for the next five years (1968-
1972) anticipates expenditures
of $600-800 million, aimed pri-
marily at bolstering Iranian de-
fenses in the Persian Gulf. The
British withdrawal from the area
is not likely to cause any sig-
nificant expansion, but will pro-
vide additional justification for
the large program that Iran had
intended to pursue in any case.
In early January, the Ira-
nian Parliament authorized the
government to borrow an additional
$266 million for the purchase of
military equipment. Prime Minis-
ter Hoveyda maintains that the
new five-year program is an abso-
lute necessity in view of the
"serious threat:" in the gulf.
Although Iran would prefer a co-
operative defense arrangement
with other gulf riparians, Hoveyda
thinks it likely that Iran will
bear most of the burden.
The Shah would prefer to
make most of his military pur-
chases in the US, and Iranian of-
ficials have been pressing for an
estimate of what they can expect
to buy during the next five years.
They are primarily interested in
jet fighter aircraft, modern tanks,
and artillery, and they are con-
cerned by evidence that US credits
for arms purchases will be further
reduced.
In addition, the Shah is con-
tinuing his efforts to diversify
Iran's sources of military equip-
ment. Iran has already purchased
an estimated $68.5 million in na-
val equipment and short-range
missiles from the UK, and has ex-
pressed an interest in British
k
25X1
25X1
eep
Shah also can be expected to
open the possibility of further
arms purchases from the Soviet
Union. Iran first purchased So- 25X1
v:iet equipment---estimated at 110
million--in 1967.
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Paqe 26 WEEKLY SUMMARY 26 Jan 68
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WESTERN HEMISPHERE
The specter of limited guerrilla activities
continued to haunt some Latin American governments
during the past week.
A Bolivian Special Forces unit is still search-
ing for the remnants of the band formerly led by Che
Guevara. The Bolivians believe at least five of
Guevara's men are still in the country.
The Colombian Army lost three soldiers in an
ambush in Santander and the government was organizing
a new counterinsurgency operation in Cordoba. There
is no reason to believe the insurgents in Santander
are connected with those in Cordoba.
Venezuelan troops had better luck than their
neighbors. On the plains of the southwest, they
captured six guerrillas and killed a seventh. Vene-
zuelan guerrillas usually operate in mountainous
regions, and this incident is the first of its size--
and the first in a long time of any size--to take
place on the plains.
Guatemala had no major incidents during the
past week, but security forces are still patrolling
Guatemala City in search of the murderers of the
two US military officers killed on 16 January.
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25X1
Page 27 WEEKLY SUMMARY 26 Jan 68
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CHILEAN PRESIDENT PLANS DOMESTIC STRATEGY
President Frei is continuing
to assess the political situation
in light of developments at the
convention early this month of
his Christian Democratic Party
(PDC). At that meeting, Frei was
instrumental in obtaining the
resignation of a left-wing direc-
torate and in installing one of
his strong supporters as presi-
dent of the party. Although these
changes have strengthened his hand
considerably, he realizes that he
still may not be able to get his
controversial wage-price legisla-
tion through the opposition-con-
trolled Senate.
Frei has taken a harder anti-
Communist line since the PDC con-
vention. In his year-end press
conference, shortly before the
convention, he intimated that there
was little to fear from the Chilean
Communists. At the convention,
however, he spoke strongly against
the Communists. He recently said
to visiting US senators that he
believes the Communists to be "im-
placably dedicated" r_o defeating
his program because Moscow needs
to prove that electoral action
The government reportedly
plans to shift its emphasis from
agrarian reform to construction
of housing, thus creating more
jobs and business activity. Frei
hopes that a general economic up-
turn can be translated into PDC
votes in the 1969 congressional
and 1970 presidential elections.
Frei has intimated that if
his wage-price program fails to
produce the necessary funds, he
may call on the US for financial
help rather than yield to pressure
from the left wing of the PDC and
from the leftist opposition par-
ties to try to get more money from
the US-based copper companies.
Frei realizes that any breach of
the present investment agreements
would reduce Chile's ability to
attract necessary foreign capita].,
thus i his economic pro-
gram.
SECRET
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PERU FACES CRISIS OVER 1968 BUDGET
President Belaunde and the
opposition-controlled Peruvian
Congress may be approaching an-
other serious confrontation.
Opposition party leaders
backed by important segments of
the business and financial com-
munity, have rejected the ad-
ministration's budget proposals
for 1968.
Stung by this rebuff, Finance
Minister De Andrea resigned on
23 January. In token support of
De Andrea, the entire cabinet
then presented its collective
resignation, which Belaunde de-
clined to accept. Nevertheless,
five high-ranking bank officials
including Fernando Schwalb, head
of the Central Reserve Bank,
have irrevocably resigned. Schwalb
protested the refusal of the op-
position parties to grant the
administration the resources nec-
essary to stave off the present
threats to economic stability
and the value of the sol.
SECRET
De Andrea has been a con-
troversial figure as finance min-
ister, incurring the enmity of
the business community and the
opposition parties. His departure
should improve Belaunde's chances
of working out an agreeable com-
promise with Congress.
There is no indication that
either the administration or the
Congress wants to upset Peru's
fragile political and economic
stability at this time--some face-
saving device will probably be
found to give each party the sem-
blance of a victory.
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SFCRIET
GUATEMALA CITY QUIET THIS WEEK
Last week's high level of
Communist terrorism has not been
repeated this week in Guatemala
City. The state of alert remains
in force and the capital has been
generally calm.
Security forces are patrol-
ling the city and are conducting
some house-to-house searches but
they appear to be acting with re-
straint. Suspects are being sum-
marily arrested and several prom-
inent Communists who were not in-
volved in the recent terrorism
have been arrested. Defense Min-
ister Arriaga is personally han-
dling the investigation of the
assassination of two US military
officers on 16 January. He as-
serts that the intensive search
for Communist leaders will con-
tinue and that when they are cap-
tured they will be executed.
SECRET
The leftists are likely to
remain in hiding until the se-
curity forces have relaxed their
vigilance in the capital. The
calm, however, could be shattered,
by leftist or rightist terror-
ists at any time.
British Honduran reaction
to the events in Guatemala has
been predictable in view of the
current talks between the UK
and Guatemala over its independ-
ence. The opposition, which ob- 25X1
jects to any ties with Guatemala,
has had a field day in its news-
paper, reporting the killings
and stressing the Castro involve-
ment. They have also attacked
Premier Price for "yearning to
integrate our country with the
Guatemalan system."
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