WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A009400050001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 30
• Document Creation Date: December 21, 2016
• Document Release Date: October 14, 2008
• Sequence Number: 1
• Publication Date: February 11, 1972
• Content Type: SUMMARY

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Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
State Dept. review completed
Secret
11 February 1972
No. 0356/72
Copy N! 46
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SE(JKt l'
CONTENTS
(Information as of 1200 EST, 10 February 1972)
Chile Moves on Debt Renegotiation
1
Vietnam: The Fighting Begins . . . . . . . . . . . . . . . . . . . 2
4
Cyprus: Arms for the Archbishop . . . . ? ? ? ? ? ? ? ? ?
South Asia . . . . . . . . . . . . . . .
Communist China: Moderates Gain . . . . . . . . . . . . . . . . . 8
Indochina . . .
12
New Zealand: New Government
.
Eastern Europe: Military Budgets Up . . . . . . . . . . . . . . . 13
14
EC-US Trade Accord Reached
Darkening Prospects m toy 16
Poland: Half a Loaf . . . . . . . . . . . . . .
MIDDLE EAST - AFRICA
17
Egypt: Letdown in Moscow . . . . . . . . . . . . . . . . . . 18
The Pot Simmers in Sudan . . . . . . . . . . . . . . . . . 18
Morocco: Hassan Procrastinates . . . . . . . . . . . . . . . . . . . . . . 19
International Oil . . . . . . . . . . . . . 29
Ghana: Debt Repudiation . . . . . . . . . . . . . . . . . . . 20
UN: Mixed Results in Addis Ababa . . . . . . . . . . . . . . . . .
WESTERN HEMISPHERE
Argentina: A Tougher Lanusse . . . . . . . . . . . . . . . . , 22 Ecuador: Velasco's Problems Increase . . . . . . . . . . . . . . 22
22
Nicaragua: Apathy at the Polls . . . . . . . . . . . . . . . . . . . . 24
Venezuela: Business Anxieties . . . . . . . . . . . . . . . . . 25
US Excluded from Bogota Meeting . . . . . . . . . . . . . . . . ... 25
Jamaican Elections . . . . . . . . . . . . . . . . . . . . .
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Vietnam: The Fighting Begins
The pace of military activity quickened this
week, and there are signs that heavier fighting
may develop soon.
In the northern provinces, the Communists
shelled the large allied base at Da Nang and car-
ried out a sharp ground attack against an artillery
base in Quang Nam Province. In Military Region
2, enemy units shelled or probed allied positions
at or near Pleiku, An Khe, Phu Cat, and Nha
Trang. The attacks have largely been the work of
small artillery and sapper forces. Casualties and
damages have been light so far.
Heavier action seems imminent in the central
highlands. Farther north, in Military Region 1,
Communist preparations for Tet attacks
against selected targets in Quang Nam are under
way.
Near Saigon,
small reconnaissance, sapper, and artillery
elements from each of the three main COSVN
divisions now in Cambodia-the 5th, 7th and
9th-are operating inside South Vietnam in Ta
Ninh, Binh Duong, and Hau Nghia provinces.
increased logistic operations in the area, as
reflected in the recent discovery of several large
food caches, together with the rising number of
small-unit contacts, strongly suggest that at least
some of these elements are operating within the
region. There still is no firm indication, however,
that the three major divisions themselves are pre-
paring to move back into South Vietnam. South
Vietnamese military commanders still tend to dis-
count such a main-force threat, and they feel
confident that government forces are sufficient to
handle any likely attack.
Farther south, some additional combat ele-
ments have reportedly infiltrated into the delta
area from Cambodia. The move may have freed
several Viet Cong units to move closer to My Tho
city, identified by some sources as a target for the
dry-season campaign. South Vietnamese com-
manders in the area are also concerned about the
possibility that the Communists may try to move
elements of their Phuoc Long Front from Cambo-
dia to Chau Doc Province to tie up South Viet-
namese units there. Allied forces throughout the
region have been put on alert.
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Chile Moves on Debt Renegotiation
Chile has asked its major creditors for a
moratorium until 31 December 1974 on $998
million in debt service payments due between 9
November 1971 and that date. This would be
followed by a ten-year deferred payment sched-
ule. Santiago also requested that debts contracted
after Allende's inauguration and those owed to
other Latin American countries be excluded from
renegotiation.
The latter request was generally opposed be-
cause such exclusion would involve a dis-
criminatory "political distinction" between cred-
itors. Representatives of the US, Canada, the UK,
West Germany, Italy, the Netherlands, Japan,
Belgium, Denmark, Spain, and Switzerland gen-
erally supported the French suggestion that only
a one-year moratorium be granted because of the
lack of longer range forecasts on Chile's balance
of payments. US attempts to link the copper
compensation issue with debt renegotiation re-
ceived strongest support from Germany, Canada,
and the Netherlands but were opposed by France
and Spain. Technical discussions on the amounts
due for repayment, the portion to be rescheduled,
and new debt terms will begin next week.
Chile's foreign exchange crunch derives both
from a shortfall in export receipts and from in-
flated imports. Lower world prices and pro-
duction difficulties after the government take-over
of the copper mines brought a 20-percent drop in
copper export earnings in 1971. At the same
time, import requirements rose as a result of
government policies that produced a consumer
spending spree. Imports of industrial consumer
goods increased and an even greater increase oc-
curred in food imports as land reform policies
disrupted food output. Even so, shortages of food
and manufactured goods were becoming more
apparent by late 1971. The worsening political
and economic atmosphere produced a reversal in
capital flows from a large net surplus to a
$100-million deficit, despite the cutoff in US
copper company remittances abroad. By late
1971, net foreign reserves had fallen to $45
million from a record high of $378 million when
Allende came to power.
Chile's ability to import this year will
depend most heavily on its ability to attract new
foreign capital. Total net direct investment flows
can be expected to be zero at best, and no new
US credits of any kind are likely under fore-
seeable circumstances. On the other hand,
Allende probably will pay virtually nothing for
the nationalized US companies and as little as
possible to the US Government. As long as such
moves do not frighten potential Japanese and
West European creditors, he has little to lose. The
decision to undertake foreign debt renegotiation
has subjected Chile's creditworthiness to close
world-wide scrutiny, and many potential creditors
probably will conclude that Chile's future abil-
ity-or willingness-to repay new loans is ques-
tionable. Western Europe and Japan will continue
to provide some suppliers' credits in an effort to
increase their share of the Chilean import market,
but these credits are unlikely to exceed $50 mil-
lion in 1972.
Soviet and East European aid probably will
increase, but it is doubtful that Communist as-
sistance will add to Chile's import capacity by
more than $150 million this year. With Cuba as
an example to be avoided, both Allende and the
Soviets want to limit the degree of Chilean de-
pendence, and thus far virtually nothing has been
drawn on the large project loans and suppliers'
credits already provided.
Chile will face serious balance-of-payments
difficulties over the next year or so, even if it
succeeds in obtaining substantial debt relief in
negotiations with its creditors. Imports this year
almost certainly will not be significantly above
last year's $1.1 billion level and they may be cut
substantially. Stagnant or reduced import ca-
pacity will force Allende to choose between pla-
cating the Chilean consumer and making badly
needed investments in the economy. He cannot
do both, and shortfalls on either side will carry
political costs.
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Cyprus: Arms for the Archbishop
President Makarios has just received a ship-
ment of Czech arms, and he apparently intends to
distribute them to a special force he is organizing
to counter the supporters of retired Greek Gen-
eral Grivas. The introduction of more weapons
into Cyprus at this time increases the danger of
armed conflict between the Greek and Turkish
Cypriots, and has alarmed both Ankara and
Athens.
Makarios began to move actively in mid-
January after the general's supporters stole weap-
ons from a National Guard armory. Following
that incident, the palace guard was given special
training, an additional 130 special constables were
added to the Cyprus police, and special police
units were selected to guard armories throughout
the island. The Czech arms, which arrived late last
month, consisted of approximately 2,000 weap-
ons-rifles, machine guns, and mortars-and
ammunition. The arms are to be used by a special
force being organized by Makarios. The force is to
number from 1,000 to 2,000 men.
The Archbishop appears convinced that
Grivas intends to begin a terrorist campaign soon.
Following the arms delivery, ten Greek Cypriot
civilians, believed to be Grivas men, were arrested
in the area where the weapons were stored.
The Greek Government has protested the
arms shipment and demanded that it be turned
over to the National Guard, which Athens main-
tains is the only authorized Greek Cypriot de-
fense force. Makarios will probably not comply.
He is deeply suspicious of the National Guard,
which is controlled by mainland Greek officers.
Athens suspects that the Makarios special force
will be drawn mainly from leftists and Commu-
nists. The Greek suspicion probably results from
the fact that Makarios is supported by most leftist
elements in Cyprus.
Page 4
Ankara fears that if fighting breaks out
within the Greek community, it could easily be
turned against Turkish Cypriots. The semi-annual
rotation of Turkish troops to Cyprus is scheduled
to begin on 23 February.
The heightened tension on the island is a
matter of deep concern to the approximately
3,000-man UN force in Cyprus, which has often
been forced to intervene in intercommunal inci-
dents. Its ranks depleted by the recent withdrawal
of 270 men from the Irish contingent, the UN
force views the upcoming rotation of Turkish
troops as an especially critical period. The re-
newal of the force's mandate comes before the
Security Council in June, and now seems likely to
receive a favorable vote. The force has been run-
ning up chronic deficits, however, and troop con-
tributors and major donor states may opt to cut
back the force substantially.
So far, Greek-Turkish relations have not
suffered as a result of these developments on
Cyprus. The Greeks have made clear to Ankara
that they had no prior knowledge of the arms
delivery. Ankara recently reached an agreement
with the UN Secretariat to begin five-party talks
on the island. These would involve the Greeks,
the Turks, the UN, and the Greek and Turkish
Cypriots. The Turkish foreign minister has told
the US ambassador in Ankara that he hopes the
arms shipment will not harm chances for con-
vening such talks sometime this month.
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South Asia
President Bhutto came away from his two-
day visit to Peking with tepid pledges of Chinese
support and with the evident understanding that
China is keeping its options open on the Asian
subcontinent. The joint communique marking the
end of the visit contained a plea by President
Bhutto that all states refrain from taking precip-
itous action that would "legitimize Indian aggres-
sion," such as the recognition of Bangladesh. The
communique also records that Premier Chou En-
lai's response was limited to expressing his under-
standing and respect for Pakistan's position.
Bhutto did succeed in coaxing economic gestures
out of Peking. The Chinese agreed to convert into
grants three previous loans and to defer for 20
years payment on the 1970 loan of $200 million.
An estimated $63 million of this aid originally
committed to projects in East Pakistan is unused
and will remain available to Islamabad. Peking
also pledged to continue to supply military equip-
ment.
The communique reflected Peking's earlier
decision not to increase the level of its political
support for Pakistan. Both sides condemned
Indian aggression, called upon India to withdraw
Page 5
its troops from o _cupied territory, and urged New
Delhi to fulfill its Geneva Convention obligations
for the safety of Pakistani prisoners of war. The
language was moderate and did not represent an
intensification of earlier Chinese propaganda at-
tacks on India.
The Chinese had appeared reluctant to play
host to the Pakistani President and probably
accommodated h m in order to bolster his polit-
ical position at home and to maintain some pres-
sure on India to reach a modus vivendi with him.
Islamabad was waned long ago that Peking means
to improve its relations with India, a goal that
probably has assumed greater importance in view
of India's new pre-eminence on the subcontinent
and Pakistan's fa-ling usefulness to China as a
bulwark against increased Soviet influence in the
region. Bhutto's vsit offers further evidence that
Peking is unwilling to let its "special relationship"
with Islamabad hinder moves to advance wider
Chinese interests n South Asia.
9-he meeting in Calcutta last weekend be-
tween Prime Minister Gandhi and Sheik Mujibur
Rahman resulted in an agreement that the with-
drawal of Indian t,oops from Bangladesh would
be completed by 25 March, the first anniversary
of Pakistan's military crackdown against Bengali
separatists. Presumably, the schedule could be
changed if the security situation in Bangladesh,
where Indian troops assumed a major role in
maintaining law and order after the war, were to
deteriorate. Indian troop withdrawal would re-
move a major obstacle to eventual bilateral Pak-
istani negotiations with Bangladesh and with
India, as well as trilateral negotiations on the
repatriation of prisoners of war. President Bhutto
has claimed publicly that the Bengalis cannot
negotiate meaningfully as long as Indian forces
remain.
Indo-Pakistani Negotiations
Indian officials, meanwhile, are making a
determined effort to convince foreign diplomats
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51i,UKL 1
of New Delhi's readiness for talks with Pakistan
on all outstanding differences at any time, level,
or place without pre-conditions. This recent
Indian emphasis on early negotiations is probably
designed in part to offset Bhutto's attempts to
internationalize the situation. He has called, so far
unsuccessfully, for a UN Security Council meet-
ing and the stationing of UN observers along the
cease-fire line between India and West Pakistan.
New Delhi repeatedly has warned against bringing
outside powers or the UN into the controversy.
New Delhi's earlier reported stipulation that
as a prelude to negotiations Pakistan must first
accept the "reality" of Bangladesh appears to
have been at least partially satisfied by Bhutto's
recent communication with Mujib on the status
of the Biharis in Bangladesh. Bhutto's letter in-
cluded an offer to open a "dialogue with you or
communication on this and other connected
matters." Thus far, Mujib has shown little interest
in establishing direct contact with leaders in
Islamabad, though he has indicated that negotia-
tions are possible under conditions of full
equality.
Many Indian officials remain suspicious of
Bhutto and doubt his capability to establish him-
self in Pakistan. At the same time, they profess to
recognize his domestic political difficulties, and
some Indians reacted favorably to Bhutto's mod-
erate statements on South Asia during his recent
visit to Peking. The Indians probably believe that
the relatively weak backing Peking gave Bhutto,
combined with economic problems and public
pressure within Pakistan for the return of some
90,000 prisoners of war, will cause Bhutto to
quicken his pace toward the peace table.
These negotiations will be crucial to
Bhutto's political future. Although Indian offi-
cials deny the existence of pre-conditions, ulti-
mate Indian objectives almost certainly remain
unchanged. These include acceptance of the
status quo in Kashmir, agreement on an inter-
national border along the present cease-fire line
with minor rectifications, and an end to Pak-
istan's "policy of confrontation." Bhutto may be
willing to negotiate on these issues, but he would
face unpredictable political consequences at home
if he were too accommodating, particularly re-
garding Kashmir.
In Bangladesh, the army and police have
been moving since 4 February to confiscate
weapons from residents of the Bihari enclave of
Mirpur and to consolidate the government's con-
trol there. Most resistance apparently has ended,
but Bengali-Bihari antagonism remains strong and
further trouble is still possible. So far, govern-
ment forces have arrested at least 1,500 men
suspected of collaboration with Pakistan and have
evacuated about 10,000 women, children, and old
persons to temporary camps in order to facilitate
the search for arms within Mirpur.
Government troops, in general, have been
maintaining discipline despite suffering casualties
of their own, and fighting has eased after the
intense initial clashes that broke out at the end of
January.
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'-- EURET
Communist China: Moderates Gain
The reappearance last week of long-absent
politburo member Hsu Shih-yu provides further
evidence that the more moderate elements in
China's ruling circles are gaining ground. The po-
litical fate of Hsu, a conservative regional military
leader, has been in question since he dropped
from view in June 1971, shortly after Lin Piao's
last public appearance. Although the regime has
offered no explanation for Hsu's long absence, his
disappearance probably was related to the events
that precipitated the Lin Piao affair. Hsu's future
almost certainly has been a major issue in the
factional wrangling that has complicated the
working out of new equations within the ruling
elite and the filling of top military vacancies.
Hsu Shih-yu appeared on 1 February at a
rally in Nanking, Kiangsu Province. The report of
the event accorded Hsu all his previous titles:
member of the politburo, commander of the
Nanking Military Region, and first secretary of
the Kiangsu Provincial Party Committee. The
rally also marked the return of the second-ranking
party leader in Kiangsu, a strong ally of Hsu, who
had been out of the limelight since August.
The confirmation of Hsu's position coincides
with increased public activity by two other con-
servative military veterans in Peking, Hsu Hsiang-
chien and Nieh Jung-then, one-time politburo
members who failed to gain re-election at the
Ninth Party Congress in 1969. Both men were
strongly defended by Premier Chou En-lai against
radical attacks during the Cultural Revolution and
probably are responsive to Chou now. Their polit-
ical resurrection, the return of Hsu Shih-yu, and
the continued prominence of former marshal Yeh
Chien-ying suggests that the military voice in
regime councils has not been drastically reduced
as a result of the purge of China's four top mili-
tary leaders last fall though the nature of that
voice may have been changed.
The Lin affair appears to have led to an even
closer working alliance between Chou En-lai and
China's military moderates and to a correspond-
ing reduction in the influence of both civilian and
military radicals. A pattern is clearly discernible
in the provinces. Despite the current drive to
upgrade civilian authority in local administra-
tions, most moderate military leaders have re-
tained their political positions while several
officers with radical backgrounds have been
demoted or purged. Moreover, since the turn of
the year, the remaining radical civilian members
of the politburo have played a noticeably reduced
Hsu Shih-vu: All Smiles Again
public role. This reduced pattern of appearances
does not necessarily mean the civilian radicals are
in serious trouble, but it does appear to be yet
another sign that the political sands are shifting
away from the left.
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Indochina
VERSAILLES RALLY
Over 1,200 delegates of Communist and left-
ist anti-war groups from Europe and elsewhere are
gathering in Versailles for a conference this week-
end to protest US involvement in Indochina.
Hoang Quoc Viet, a North Vietnamese labor of-
ficial, heads the list of keynote speakers, who
include delegates of the Viet Cong's Provisional
Revolutionary Government and of Laotian and
Cambodian front organizations. Some representa-
tives of US families with sons or relatives missing
in Indochina are on hand.
APPREHENSION IN SAIGON ABOUT PEACE
TALK
Anxiety is growing in Saigon over intima-
tions of flexibility in the latest allied peace pro-
posals. Initially, most South Vietnamese reacted
favorably because they believed the offers would
be rejected by the Communists and because they
viewed the proposals primarily as effective propa-
ganda. On further thought, however, some Viet-
namese have concluded that the proposals might
actually open the door to a peace settlement and
a Communist take-over.
The conference is being sponsored by some
50 French coordinating groups with the active
behind-the-scenes support of North Vietnam. Its
timing suggests that it may be designed to upstage
President Nixon's trip to China and to provide a
sounding board for Communist activities on the
battlefield around the Tet holidays. The con-
ference is part of an intense diplomatic effort by
North Vietnam aimed at lining up additional
support for Hanoi both within the Communist
camp and elsewhere.
Many of the conference sponsors do not
expect it to measure up to earlier hopes, and one
leading participant claims that disclosure of the
US eight-point package has upset their plans. Ten-
sions between French Communist groups have
marred preparations for the meeting and may
force cancellation of scheduled street demon-
strations.
Both pro-government and opposition ele-
ments have publicly charged in recent days that
the proposals are unconstitutional
According to the US Embassy in Saigon,
there is growing concern that the US might agree
to a peace settlement that would sell out South
Vietnam's interests. Some prominent figures, in-
cluding high government officials, have indicated
that they consider Secretary of State Rogers'
recent remarks about a flexible approach to a
political settlement in South Vietnam to be
"unwarranted interference" in the country's
internal affairs. The government has planted
stories critical of the secretary's remarks in the
Saigon press. The current anxieties probably are
being fed by uncertainties over the expected
enemy offensive and the outcome of President
Nixon's trip to China.
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`uang Prabang
t
? Government-held location
? Communist-held location
THAILAND
Overrun by NV
Dong He /
9.
THAI AND
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j verrun by Communists Tha Tam
BI ng
%uong Kassy Sam Thdg,
Government forces ong
regrouping ieng
231`
ver men
retre Ling
Bolovens
Plateau
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VL\/1~L 1
While the North Vietnamese are continuing
their preparations for another assault on the Long
Tieng - Sam Thong complex, Vang Pao has
launched a major operation to harass Communist
lines of communications. On 5 February, over
5,000 irregulars began moving overland north and
east from the Meo base at Pha Dong toward the
Plaine des Jarres. Vang Pao clearly believes that at
this juncture the best defense is a good offense.
Rather than digging in at Long Tieng for a
costly head-to-head struggle with the North Viet-
namese, he has chosen to divide his force, leaving
a 7,000-man contingent to defend the Long Tieng
area and sending the remainder to probe deeply
into the Communist rear areas. Vang Pao hopes to
recapture the initiative and rekindle the fighting
spirit of his forces while forcing the Communists
to divert troops from Long Tieng to protect their
supply corridors. The operation is risky. The
Communists could take advantage of the draw-
down from the Long Tieng area to move quickly
against the base. Moreover, the current venture
could so weaken Vang Pao's offensive force that
its future usefulness would be impaired should
the operation fail to reduce the pressure on Long
Tieng.
West of the Long Tieng area, Pathet Lao and
"Patriotic Neutralist" forces, probably numbering
no more than 1,000 men, pushed several
dispirited government battalions from Muong
Kassy on 3 February. Government commanders
are now attempting to rally their forces for a
counteroffensive before the Communists can
launch further attacks down Route 13 toward
Vang Vieng, an important refugee center.
Page 10
In south Laos, the government has suffered
more setbacks. On 7 February, a North Vietnam-
ese battalion with armor support overran the
town of Dong Hene on Route 9. Farther south,
two Lao Army battalions abandoned their posi-
tions along Route 23 west of the Bolovens Pla-
teau. The morale of Lao Army units in this area is
extremely low, and the North Vietnamese should
have few problems pushing to the junction of
Routes 23 and 231. Occupation of this crossroads
would give the Communists control of virtually
all roads in the area of the Bolovens Plateau.
Souphanouvong Prods Souvanna on Talks
With his troops on the move, Lao Commu-
nist leader Souphanouvong made a bid to resume
a dialogue with the government on 24 January.
His message refers to earlier Communist demands
and does not signal any fundamental change in
the Communist negotiating position. It omits,
however, any specific call for a US bombing halt
in Laos, indicating that it was meant to be some-
what more acceptable to Souvanna, who has long
insisted that he could not agree to such a halt as a
pre-condition to negotiations.
The message reiterates the long-standing
Communist formulation that the Lao war must be
settled in accordance with the 1962 Geneva Ac-
cords and the "realities" of the current situation.
It promises that if Souvanna adopts an "equiva-
lent attitude," the Communists' special envoy
would return to Vientiane after a six-month
absence to "continue our contacts."
The Communists may want to begin talking
with Souvanna again to probe for some give in his
position. As in the past, the Communists also are
probably interested in projecting a sense of their
own reasonableness at the very time that they are
pressing hard militarily.
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The spate of rumors circulating recently in
Phnom Penh that the North Vietnamese had
proposed a settlement to the Cambodian conflict
have been put to rest-if only for the moment.
Both Phnom Penh and Hanoi issued official
denials that they were attempting to arrange a
separate peace. Even Prime Minister Lon Nol's
brother, Lon Non, whose contacts with the Soviet
Embassy fed the rumor mill, dismissed the stories
as untrue. The rumors were embarrassing to
Hanoi, which has been claiming it stands four-
square behind Sihanouk's exile government and
has pushed the line that the Indochinese people
must settle the war in each country on the basis
of mutual respect for each other's sovereignty and
integrity.
According to the rumors, the North Viet-
namese had offered to withdraw from all other
parts of Cambodia if they could remain in the
northeastern border areas and ship supplies
through Kompong Som (Sihanoukville). While at
this time, Hanoi might welcome an arrangement
that would allow it to concentrate on the struggle
in South Vietnam, we have no independent evi-
dence that such a proposal was ever forwarded to
the Cambodians. The rumors, nevertheless, did
generate peace talk in the capital and a number of
public figures and newspapers openly expressed
the view that a compromise settlement might be
the best Cambodia could hope for.
Anguish at Angkor
The government, moving cautiously to en-
circle and isolate Communist forces at Angkor
Wat, has assembled eight battalions in the area.
The government apparently intends to retake the
historic site. Any major fighting in this area
would violate self-imposed restraints regarding
military activity in the vicinity of Angkor Park
and risks possible damage to the monuments.
The operation was initiated in response to an
increase in Communist harassment along Route 6
and against the nearby provincial capital of Siem
Reap. Apprehension that the Communists were
planning some new initiative had been heightened
by the sudden halt of restoration work at the
ruins. Since occupying the temple complex in
mid-1970, the Communists have allowed a Cam-
bodian work force under French direction to
continue limited work on the temples. In late
January, the Communists arrested a number of
the workers and denied further access to the
monument grounds. The move rekindled Cam-
bodian fears that the Communists intended to
establish Sihanouk's government at Angkor Park.
Such fears are probably exaggerated. In addition
to the numerous problems associated with cre-
ating a convincing governmental facade capable of
challenging Phnom Penh's legitimacy, the Com-
munists could well lose considerable face by po-
liticizing Angkor.
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New Zealand: New Government
John Marshall, the new prime minister who
assumed office on 7 February, is not likely to
make any significant changes in government
policy. He has retained former prime minister
Holyoake in the foreign affairs portfolio, and the
able Robert Muldoon, now deputy prime min-
ister, remains minister of finance. Several new and
younger faces presumably are intended to give the
government a revitalized appearance in the face of
what are expected to be close national elections
later this year. With elections in mind, Marshall
has already announced a greater emphasis on
economic problems-inflation, labor unrest, and
social welfare-and has created two new port-
folios, environment and
social welfare.
Marshall is a spe-
cialist in economic mat-
ters. He has been deputy
prime minister and has
held a number of cabinet
posts during the past
eleven years of National
Party government. He
earned especially high
marks in 1970-71 when,
as minister for overseas
trade, he did much to
safeguard New Zealand's trade interests in nego-
tiations on UK entry into the European Com-
munit .
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Eastern Europe: Military Budgets Up
Planned increases in Warsaw Pact defense
spending for this year are slightly smaller than
those budgeted for 1971. The increases range
from a low of three percent for Hungary to six
percent for Poland and East Germany. In general,
military spending will claim a smaller share of
East European budgetary expenditures than last
year.
The increases planned for 1972 are a good
deal smaller than increases in the late 1960s. This
may reflect, in part, the cyclical nature of defense
expenditures. The costs of introducing new mili-
tary equipment are spread unevenly over a span
of years, usually keyed to the five-year economic
plans. After very large increases in defense spend-
ing in the late 1960s, the East Europeans should
be able to "coast" for a few years, barring a
breakthrough in Soviet weaponry that could be
passed along. In the wake of popular unrest, such
as erupted in Poland in.1970-71, and the pressure
from the populace for more and better consumer
goods, the slight easing of the growth of defense
expenditures is probably welcome to governments
and populace alike.
Yugoslavia and Albania are not members of
the Warsaw Pact and their defense spending levels
do not necessarily follow the trend of the pact
countries. The relatively large 26 percent increase
planned by Belgrade reflects a glaring need to
replace outdated equipment. Modernization plans
may have been stimulated by real or imagined
threats of Soviet military intervention in Yugo-
slavia and the consequent desire to maintain a
high level of military preparedness. The portion
of the total budget accounted for by defense
spending is substantially larger in Yugoslavia than
in other East European countries. Belgrade's fed-
eral budget actually accounts for little more than
half of total government expenditures and does
not include investmerts.
The general trend of defense expenditures in
Eastern Europe is believed to be indicated in
published military budgets, although these are not
comprehensive statements of all military-related
expenditures. The major categories included in
the defense budgets are payments to military
personnel, procurement costs of equipment and
supplies, and maintenance costs for equipment
Eastern Europe: Budgeted Military Expenditures (in local currercy)
1971 Percentage
1972 Pe centage
Military Expenditures as
Percentage of Total Budget
Country (currency)
Change From 1970
Change From 1971
1971
1972
+6/ 1
+ 1.8
9.1
8.7
Bulgaria (leva)
NA
+13.0
l 5
Czechoslovakia (crowns)
c. 15,030
15,920
+ 5.9
+ A
7,200
7,625
+ 6-7
+ *.9
8.4
8.2
Hungary (lorints)
9,440
9,715
+ 6 1
+ C9
4.8
4.5
Poland (zlotys)
37,700
39,861
+ 6.8
+ ,.7
11.5
9.8
Romania (lei)
7,495
7,845
+ 6.:3
+ 4.7
5.4
5.2
Yugoslavia (dinars)
8,838
11,180
+11,8
+, ri.5
48.3
46.1
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and buildings. Expenditures for research and
development, which in any case are not a major
component of military spending in Eastern
Europe, probably are hidden elsewhere in the
budget.
EC-US Trade Accord Reached
In the third round of the trade talks initiated
last December as an adjunct to the Smithsonian
currency arrangements, US and EC negotiators
late last week agreed on short-term concessions to
the US and a longer term program of interna-
tional trade negotiations. The concessions, along
with those being negotiated with Japan and
Canada, are considered part of an understanding
to increase the price of gold from $35 to $38 an
ounce.
The concessions are a slight improvement
over the community's initial offers, but the dif-
ficulty in reaching them generally reflects the
problems the EC still has in reconciling the vary-
ing interests of its six members. Some of the US
demands-that the EC hold the line on com-
munity grain prices and safeguard US interests in
the upcoming negotiations between the EC and
the EFTA countries not joining the community as
full members-were regarded by the community
as "interference" in sensitive internal matters.
The EC did agree to increase its grain stock-
piles and to use restraint in subsidizing grain
exports. Some improvement was also gained for
US exports of citrus fruits. It was agreed that
talks could be held if a pending community
tobacco tax had an adverse effect on US exports.
Some of these concessions resulted from the
council's "sweetening" of the commission's nego-
tiating mandate following the second round of
EC-US talks.
Meager as the community concessions are,
Paris held up its approval of the agreement in
order to register its strong disapproval of the
commission's failure to exact reciprocal con-
cessions from the US, as it had been instructed to
do by the council. The French will use their claim
that the commission exceeded its power in these
negotiations as justification for keeping a tighter
rein on it in future trade negotiations, particularly
with the US.
The long-term aspect of the agreement con-
sists of a joint declaration on a 1972-73 schedule
for trade negotiations. This is likely to become
the most important outcome of the talks. Canada,
Japan, and others are expected to associate them-
selves with the joint declaration. It commits the
US and the community-"subject to such internal
authorization as may be required"--to make an
effort in 1972 under the auspices of the General
Agreement on Tariffs and Trade to settle specific
trade problems both in industry and agriculture.
The groundwork will also be laid in 1972 for
further, more comprehensive trade talks that will
begin in 1973. These international talks, the first
such talks since the Kennedy Round ended in
1967, will be held under GATT auspices and will
probably emphasize non-tariff barriers. Much
preparatory work will be necessary to reach agree-
ment on specific approaches to the 1973 nego-
tiations.
Current GATT work may be significantly
advanced by the 1972 talks. GATT's Committee
on Trade in Industrial Products is already making
progress on non-tariff barriers, and agreements
could be reached this year by the working groups
on standards and licensing. Such agreements
would subsequently be incorporated into an over-
all package on non-tariff barriers. The Agricul-
tural Committee is deadlocked over priorities,
although the EC representative is likely to make
additional proposals on specific agricultural trade
problems at a meeting later this month. Failure to
make some early progress on agricultural issues
could jeopardize other negotiations./
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parliament and the calling of early elections have
thus become more likely.
Although consultations have been nearly
constant since Prime Minister Colombo resigned
in mid-January, the four center-left parties that
have governed Italy for the past decade have
made no progress toward agreement. The stickiest
issues are economic reform and an impending
referendum aimed at abrogating the country's
divorce law. Agreements on these are prereq-
uisites for a new government.
Giulio And reotti, Christian Democratic
leader in the Chamber of Deputies, has been try-
ing to achieve such agreements. He conceded fail-
ure on 10 February, and President Leone may call
for a caretaker government that would prepare
for elections this spring, one year ahead of
schedule.
Elections so far in advance are unprece-
dented in Italy, bur they would at least have the
advantage of causing the referendum on divorce
to be postponed for at least a year. They might
also enable the Christian Democrats to avoid a
redistricting, required by the 1971 census, for the
time being. The redistricting will at least mini-
mally cut into the party's electoral strength when
it takes effect.
Darkening Prospects in Italy
Center-left political leaders would have an
additional reason for early elections, if they judge
that the economy will not pick up substantially
this year. Such a judgment seems likely as Italy's
official economic planning institute has forecast
that "in the best of events" national income will
rise only 2-2.5 percent this year, compared with
the annual average of almost six percent during
the 1960s. Considerable spare capacity in in-
dustry, sluggish export demand, and a poor
psychological climate in the business community
Political and economic uncertainties underlie all argue against a strong revival of private invest-
the continuing failure of the Italian center-left ment, the weakest element in the economy last
parties to form a new government. Dissolution of year.
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SLUKJS 1
Andreotti Leaving Presidential Palace
Government promises to increase investment
spending substantially are generally viewed with
skepticism. Moreover, despite the dialogue be-
tween leaders of management and labor, a more
militant union stance may emerge this year. The
major labor confederations seem to be preparing a
joint position for contract negotiations affecting
some four million workers this year. It is likely
that the unions will call for higher wages, reduced
working hours, and, in some instances, guaranteed
salaries. These demands will be hard to
meet.
Poland: Half a Loaf
The 18th Writers' Union Congress on 4-5
February reflected the resourcefulness and tact
that has marked relations between Polish authori-
ties and the intellectuals since Edward Gierek
assumed power 14 months ago. Although the
writers blasted censorship, they also accepted the
realities of limited artistic freedom as defined by
government spokesmen at the congress.
Gierek's softer cultural policy has allowed
many writers who were banned during the suf-
focating Gomulka era to appear in print again.
Gierek has appointed a new minister of culture
and art, Stanislaw Wronski, and has given over-all
responsibility for cultural affairs to the most lib-
eral member of the hierarchy, Jozef Tejchma.
Gierek apparently concluded that he has
enough problems, particularly in the economy,
without antagonizing the intellectuals. Instead, he
would like to enlist their help in inspiring opti-
mism in Poland's future. Thus, regime spokesmen
have stressed the need for contemporary literary
heroes who would encourage citizens to overcome
the hardships of present-day life in Poland. The
chairman of the Writers' Union echoed this theme
at the congress when he said, "Polish readers are
still waiting for a grand novel with a full-blooded
hero to attack the key problems of Polish
society."
Although the party has eased certain re-
straints, the premise of fundamental party control
over expression remains intact. Minister Wronski
made this clear at the congress when he said, "We
will continue to prevent literary works that are
hostile to socialism or challenge our fraternal al-
liances with socialist countries." Apart from these
basic considerations, Wronski said that "the free-
dom of artists will not be restricted in any way."
Many Polish writers, particularly of the older
generation, accept these terms. The grand old
man of Polish letters, Antoni Slonimski, and
Jerzy Andrzejewski, a highly regarded novelist,
have both written articles that suggest it would be
a pity to waste this chance for a compromise with
the authorities because it is the only chance
Polish culture has. Their quiescence may not ex-
tend to the younger generation, however. Indeed,
the regime's policy of relaxing censorship may
simply whet younger appetites for an end to all 25X1
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Egypt: Letdown in Moscow
President Sadat's hurried trip to Moscow last
week did little to bolster his stock. He came away
without any tangible sign of new Soviet political
or military commitments. Sadat had gone in-
timating he would press for additional arms to
counter "depth for depth" the additional Phan-
toms he believes Israel is getting. He had declared
that he would set the "zero hour" for resuming
the battle on his return.
Phis may have been another case of Sadat's
rhetoric getting too far in front of realities. The
tone of the post-visit communique suggests that
the Soviets are still cautioning against precipitate
military action. The communique reiterated sup-
port for UN special envoy Gunnar Jarring, calling
for an immediate resumption of his mission. Ref-
erences to the possibility of further arms de-
liveries were notably vague. The communique said
that the strengthening of Egypt's defense capacity
was "again considered" and that a number of
concrete steps in this direction were "outlined."
Although the publicly available information
about Sadat's Moscow journey provides Arab ob-
servers faint hope for any dramatic increase in
Soviet military support to Egypt, the information
is imprecise enough to allow Cairo to describe the
visit positively. The visit has been termed "an
important turning point" in the Middle East im-
passe. Egypt's semi-official newspaper, al-Ahram,
portrayed the talks as a "great success" even
though the results are "not now intended to be
made public." Cairo radio, naturally, highlighted
the portion of the communique stating that
Egypt's capacity to repel Israeli aggression would
be increased.
The lack of any apparent military or dip-
lomatic breakthrough during Sadat's trip will not
please those Egyptians who have been protesting
the "no war-no peace" situation. There are now
few political or military alternatives that offer
much hope of success, and Sadat can only hope
to buy time by putting the best face possible on
his Moscow visit while awaiting more favorable
political or military developments.
Moscow made the most of a visit it probably
did not want. The Soviets took the opportunity
to reaffirm their support for a political settlement
and to take the edge off Sadat's more bellicose
statements. Soviet leaders, uncomfortable with
the US monopoly on efforts to arrange a set-
tlement, may ever: have received some satisfaction
that Moscow would not be cut out of any future
discussions between Cairo and Washington. At
least, the US proposal for "proximity" talks was
left unmentioned in the Moscow communi-
que.
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The Pot Simmers in Sudan
The calm that prevailed in Khartoum since
the frantic coup week last July has, in the past
month, given way to turbulence more in keeping
with normal Sudanese politics. President
Numayri's position is being shaken by a conflict
between the military regime's pro-Egyptian fac-
tion and a nationalist clique that favors
pragmatic, Sudan-first policies. For the moment,
Numayri seems to have appeased the first group
by dutifully expounding stock pan-Arab slogans
and the second by seeking remedies for chronic
economic ills from the West.
There are signs, however, that the standoff
between the contending forces may break down.
The resignation late last month of the anti-
Egyptian national security chief and his replace-
ment by a man more sympathetic to Cairo may
very well have been prompted by discord over
Sudan's proper role in Arab affairs. Furthermore,
the appointment of a number of Arab nationalists
to the newly formed political bureau of the
Sudan Socialist Union-the country's only legal
political organization-seems certain to antago-
nize conservative army officers. On top of this,
the appearance in the past few weeks of Sudan
Communist Party leaflets attacking the "blood-
thirsty Numayri regime" is a reminder that the
Communists are down but not out and that they
are ready to exploit feuding between the major
factions.
Egyptian lobbying in Khartoum, with an as-
sist from Libya last week, is adding to these
strains. The two are urging Numayri to mend
Sudan's fences with Moscow and adhere to the
Confederation of Arab Republics. Numayri has
refused, thus far, to join the confederation or to
forget his differences with the Soviets. This has
exasperated the Egyptians, and their next move
could well be to use the regime's pro-Egyptian
faction to put more heat on Numayri.
If Numayri caves in to these pressures,be-
comes more actively engaged in the struggle
against Israel and neglects domestic priorities, he
will provoke the nationalist clique. These men,
drawing confidence from the popularity of their
Sudan-first, pro-West views since the failure of the
pro-Communist coup last July, might even be
tempted to try their hand at running the country
themselves. For the moment, they are dissuaded
by Numayri's popularity and his apparent deter-
mination to concentrate on domestic problems
while paying lip-service to the "battle of destiny"
with Israel.
Morocco: Hassan Procrastinates
The pace of King Hassan's political consulta-
tions quickened early this month, but he still has
not divulged the precise nature of the reforms he
is contemplating. Following consultations with
the National Front and a meeting with leaders of 25X1
Morocco's principal labor organization, the King
summoned a group of deputies on 2 February
The National Front, a coalition of left-wing
and conservative elements, claims to represent a
broad spectrum of Moroccan political opinion. It
is somewhat put out that the King has met with
other political leaders; the front has been con-
ferring with the King and his emissaries since
mid-November. It is pressing for the formation of
a transitional government which it would
dominate and which would draft the
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constitutional changes. Front leaders, aware that
their negotiations with the King badly strain their
credibility with young adherents, are highly suspi-
cious of Hassan's motives and are demanding as a
minimum the establishment of a broadly based
government, curtailment of the King's absolute
power, and free parliamentary elections. There
are, however, serious divisions between the Front
partners with regard to precise objectives and
timing. The conservative Istiglal-the party that
won independence from France-is more im-
patient and less flexible than the leftist National
Union of Popular Forces.
Meanwhile, the King's principal source of
power, the military, appears to be wary of a
government in which the opposition might play a
considerable role. Presumably, the King has also
consulted with military leaders. Ironically,
25X1 General Oufkir, traditional nemesis of the op-
position, will probably be assigned the task of
keeping the military in line if the King brings the
politicians back into the government.
International Oil
Talks between the oil companies and Libya
on increased revenues to compensate for dollar
devaluation are growing tougher as negotiators at
the ministerial level take over from technicians.
The companies have proposed a settlement con-
forming with the Geneva agreement concluded
last month with Persian Gulf producers. The ac-
cord increased their revenues by about 8.5 per-
cent. It also contained a provision for renego-
tiating the price of Persian Gulf oil piped to
Mediterranean outlets if a Mediterranean
producer achieves a greater increase. Libya wants
more than 8.5 percent, but its tactics may be
modified by its experience in attempting to pro-
duce and market oil from the British Petroleum
operations that were nationalized recently.
Company efforts to block shipment have thus far
prevented the Libyan state oil company from
marketing the nationalized crude.
Elsewhere, the Saudi Arabian oil minister,
ostensibly the spokesman for Persian Gulf oil
producers, continues to spar with oil company
representatives on the issue of participation in
company operations. His authority is somewhat
diluted by separate talks under way between Iraq
and members of the oil consortium that operates
in that country. Furthermore, the Shah of Iran,
currently discussing this year's oil production
program with Western companies, indicates he
prefers to explore participation bilaterally rather
than throw h the Or anization of Oil Producing
States
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Ji V1\L, 1
Ghana: Debt Repudiation
The new military government has embarked
on a risky though relatively balanced economic
program. The program's key features are the im-
mediate repudiation of a portion of Ghana's
external debts, a bid for long-term relief on the
remainder, and a mixed package of benefits for
wage earners and consumers which seeks to retain
the essentials of austerity.
The ruling National Redemption Council
suppressed its initial inclination to kill all aus-
terity policies of the Busia regime and moved
only after listening to an array of competent
civilian economic specialists. Colonel Acheam-
pong's final decision, announced on 5 February,
does not amount to a wholesale abandonment of
the conservative economic principles that guided
the two preceding governments. The debt state-
ment does, however, break sharply with previous
policy toward the large medium-term debts in-
herited from the Nkrumah era. Both previous
governments had failed to obtain long-term relief
and had settled for short repayment moratoriums
from Western creditors who hold the bulk of the
debts. The council has rejected these earlier re-
schedulings, including the interest accrued under
them, and repudiated outright about a third of
the outstanding principal on the grounds that the
basic contracts were tainted by illegality or were
breached by the contractors. The $95 million in
repudiated debts was initially contracted with
four British companies. The remainder of the
medium-term obligations are to be honored only
if the lenders can demonstrate that the underlying
contracts are "valid" and relate to economically
viable projects. The statement announced that
debts meeting these criteria would be repaid over
a fifty-year period that would include a ten-year
moratorium.
The council's statement did include a com-
mitment to accept international arbitration of
disputes arising from the new polio
Ghana's
medium-term obligations am e up on y a out one
third of its external debt, and the council has
accepted the remainder, but the Bank of Ghana
has been instructed to revise payment of short-
term debts to meet its ability to pay.
In a move aimed at solidifying support from
middle-class wage earners, the council eliminated
a recently imposed tax on wages and reinstituted
fringe benefits for civil servants. Price controls on
essential food items have been instituted to lift
some of the burden from lower paid urban
workers. The junta also moved to dampen the
inflation of recent weeks. The council reduced
Busia's 48-percent devaluation of the country's
currency to 20 percent but balanced this by re-
imposing strict import controls.
These measures have evoked a favorable
response in Accra, but they are likely to be only
short-term palliatives. The debt repudiation,
domestically the most popular move, seems cer-
tain to exacerbate relations with the UK and
could severely damage Ghana's credit rating, at
least in the short run. The benefits to urban
consumers of the currency revaluation and price
controls are likely to be quickly offset by higher
prices on items covered by import controls.
Urban Ghanaians may soon find they are little
better off than they were under the Busia govern-
UN: Mixed Results in Addis Ababa
Meeting in special session at Addis Ababa on
the usual African issues, the UN Security Council
last week adopted four resolutions; a fifth-
pertaining to Rhodesian settlement prospects-
was vetoed by London.
The resolution vetoed by the UK urged Lon-
don to desist from implementing the proposed
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settlement with Salisbury and to convene
"without delay" a constitutional conference in
which black residents would participate. The
British had served notice that they could not
accept such a proposal, but the majority of the
Organization of African Unity drafting group-
abetted by Soviet and Chinese desires to provoke
a veto-refused to soften the proposed language.
An outcome more palatable to London-defeat of
the resolution through seven abstentions rather
than a veto-was possible, but the two Latin
American members of the council, Argentina and
Panama, refused to provide the critical votes.
The Argentine refusal was motivated in part
by its interest in getting African support for its
resolution on South-West Africa. In any event,
the resolution, calling for Secretary General
Waldheim in consultation with three non-
permanent members of the council to initiate
contacts with Pretoria, was passed 14-0. China
refused to vote. Waldheim this week announced
that he hoped to go to South Africa soon. and
Prime Minister Vorster has said he will be wel-
come. The council also adopted a second res-
Emperor Haile Selassie Addresses Council in Addis Ababa
olution on South-West Africa which reiterated
previous UN decisions terming South African oc-
cupation of the territory illegal.
No new ground was broken in the debates
either on the Portuguese territories or on apart-
heid in South Africa. A resolution condemning
Portuguese activity was passed 9-0-6, the Western
bloc providing the abstentions. A pro forma reit-
eration of "total opposition" to South African
domestic policies in the human rights area also
passed. The only surprise in the vote was the UK
decision to support the resolution rather than
abstain, a consequence of London's desire to bal-
ance insofar as possible its other votes during the
special session.
Panamanian delegate Boyd used the Addis
meeting to take the US to task on the canal
negotiations issue. He may soon follow this up
with a formal request for council consideration of
the problem, or he may wait to raise the matter in
the General Assembly next fall.F-
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Argentina: A Tougher Lanusse
President Lanusse came across much tougher
in meetings last week with his top military of-
ficers and in subsequent talks with labor repre-
sentatives. The military, which has been con-
cerned over an alleged drift in Lanusse's policies,
is reacting favorably to the tougher line, but labor
is talking about the adoption of confrontation
tactics.
The Argentines were put on notice that Pres-
ident Lanusse was going to get tough when he
flatly rejected the General Confederation of
Labor's demand for higher wages and the rein-
stitution of collective bargaining. Labor leaders
told the US Embassy that they were shocked with
Lanusse's decision to adhere strictly to the eco-
nomic program put into effect on 1 January.
Early last month Lanusse had indicated that he
might be open to some changes in his wage
policy, which called for a 15-percent increase in
January to be followed by a 10-percent increase
in July. In his meeting with the labor leaders,
however, he said that any changes would be
inflationary and therefore unacceptable. The
inflation rate in January was 11.3 percent on a
seasonally adjusted basis, considerably higher
than the government had expected.
Lanusse warned the labor leaders that retali-
atory action from them would be met with the
"total force dictated by the circumstances."
Despite this warning, the Peronist 62 Organiza-
tions, a major power bloc within the General
Confederation of Labor, called for a 48-hour gen-
eral strike in early March. Tha confederation's
executive committee will almost certainly ap-
prove this action and will decide whether it is to
be an active or passive strike.
In a two-day series of meetings with top
officers of the three armed services prior to his
discussion with the labor leaders, President
Lanusse outlined his tougher line on labor matters
and assured his colleagues that he would control
the national elections scheduled for March 1973.
Leaks of the President's statements at this
meeting are beginning to stir reactions among
civilian politicians. While none of them is so naive
as to believe that some deal with the military can
be avoided, neither will many of them be content
to remain docile puppets of the armed forces.
Press reports of Lanusse's meetings with his mili-
tary colleagues-many of them slanted to put the
President in the worst light-will doubtless com-
plicate his efforts to move toward elections next
March. The President's honeymoon with labor
may also have finally run its course. The next two
or three months will be increasingly difficult for
Lanusse's campaign to get the military out of the
direct business of governing without creating a
major upheaval.
Ecuador: Velasco's Problems Increase
The prospects that President Velasco will
serve out his term grow dimmer as pressure in-
creases for him to do something to prevent
populist politician Assad Bucaram from cam-
paigning in the June presidential election.
Bucaram is anathema to Velasco, the oligarchy,
and leaders of the military, although he has some
support among junior officers. The government
has attempted to prove that Bucaram, who is of
Lebanese descent, does not meet the constitu-
tional qualifications for Ecuadorean citizenship.
The Supreme Court has asked the President to
excuse it from making a decision on the question.
Having lost this easy way out, the President
is faced with several choices. He can prohibit
Bucaram from campaigning; he can cancel the
presidential election and throw the decision into
the congress to be elected in June, which would
be unlikely to support Bucaram; he can turn the
government over to the military either now or
when his term of office expires on 31 August.
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Velasco, who was ousted three of the four previ-
ous times he held the presidency, would prefer to
complete his term and then turn the government
over to a military regime. The armed forces, how-
ever, believe that such action would place them in
the position of overthrowing the popular choice
for president-presumably Bucaram. They would
like to take over now and cancel the election.
i he matter is becoming urgent because
Bucaram, whose political strength is based around
coastal Guayaquil, is scheduled to visit Quito on
18 February. Military officials fear that he will
obtain so much support in that area that any
move against him would cause too much public
dissatisfaction. The other political groups have
been unable to compromise their differences
enough to present a strong, unified challenge to
Bucaram.
While these domestic problems intensify, the
government's relations with the US show no signs
of improving. As the tuna move out of Ecuador's
claimed 200 miles of territorial waters, actual
clashes over fishing rights should stop for now. At
the same time, the government has not modified
its position, and Velasco is unlikely to com-
promise on this issue while he is under such
intense pressure at home. The armed forces,
especially the navy, have backed the President
strongly on this issue, and a military regime
would probably continue his policy.
Yet another irritant to friendly relations has
appeared with the expropriation by the govern-
ment of land belonging to All-America Cables and
Radio, a subsidiary of the International Tele-
phone and Telegraph Corporation. The action
comes barely two months after an agreement was
reached on payment for other All-America facili-
ties expropriated in 1970. The US Embassy fears
that the negotiations on compensation for this
land will reopen decisions made in the course of
the previous agreement.
In addition, legislation before the US Con-
gress to require a negative US vote on multilateral
loans to countries seizing US fishing boats has
caused a public outcry in Ecuador. The Foreign
Ministry issued a ~~tatement rejecting "any policy
of threat or retaliation aimed at restricting the use
of natural resources essential to developing na-
tions." Enactmert of the proposed !egislation
would be certain to cause even more problems
between the two :countries.
Nicaragua: Apathy at the Polls
As the first step in the formation of an
interim governm,mt to succeed the Somoza
administration, Nicaraguans went to the polls on
6 February to elect a constituent assembly.
Voting was peace-ul, but initial returns gave the
government such a heavy lead that public an-
nouncements were suspended pending arrange-
ment of an opposition percentage acceptable to
both sides. The --onservative Party, humiliated
and angry, has cha-ged fraud.
Indifference -o the election was general and
reflected the feeling that there was really nothing
to vote for and -hat the entire interim govern-
ment charade, arranged in a pact between Somoza
and Conservative eader Aguero, merely provides
the President with a means of getting around a
constitutional prohibition against his immediate
re-election. US Embassy officers estimated that
Somoza's Liberal Party had at least a four-to-one
edge over the Conservatives, the only opposition
party allowed to participate; early returns gave
the Liberals a 15-to-1 lead. Nevertheless, the
agreement allots 4J of the 100 assembly seats to
the Conservatives. The assembly's main duties will
be to revise the =onstitution, elect a three-man
executive, and act as a legislature during the
interim government. The revisions to the constitu-
tion, like the struc-ure of the interim government,
have already beer agreed on, and the assembly
will be presented with a draft for ratification
when it convenes on 15 April. One important
feature of the new charter will make Somoza
eligible to run for resident in 1974.
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The members of the interim executive (two
Liberals and one Conservative) will be dictated by
the parties, and the assembly will merely go
through the formality of electing them. As for the
legislative function, the Nicaraguan legislature is,
and always has been, subservient to the executive.
Though there will be a multiple executive until
1974, it will be controlled by Somoza through
the majority Liberal Party.
At least three opposition parties were denied
legal status and thus barred from participating in
the election. Although together they constitute
only a small slice of the political pie, they have
Before the results are officially announced
on 27 February, Somoza will probably juggle the
figures to shrink the government's lead to believa-
ble proportions and preserve Aguero's credibility
as an opposition leader. A very poor showing by
the Conservatives could prompt them to de-
nounce the pact, but Aguero's sense of defeat
would have to be strong indeed to cause him to
throw away over two years of certain atronage
and participation in government.
Venezuela: Business Anxieties
The Caldera government's program of in-
creasing control over foreign-owned firms is seri-
ously undermining the confidence of US business-
men. While only the oil companies have so far felt
a real bite in profits and significant interference in
day-to-day operations, other investors feel threat-
ened by the rising tide of economic nationalism.
Competition among politicians to be more nation-
alist than others is becoming more fervent as the
1973 election campaign approaches, and the
unique popular support for "reining in" foreign
businesses means that the political virtue of such
nationalism glosses over the economic risks.
Oil production has declined in the wake of
Caldera's nationalist legislation last year. Leftist
opposition parties are proposing nationalization
of the oil companies, which they say are reducing
production in reprisal for the legislation. Presi-
dent Caldera does not endorse nationalization at
this time, but he speaks out strongly against the
companies and against the decline ire production.
The belief is widespread that Creole, a
Standard of New Jersey affiliate and the largest
and least loved oil company in Venezuela, is
Caldera's principal intended victim. Relations
between Creole and the government are already
poor, and the company stands out in the current
controversy as the only one openly defying the
newly legislated export quotas. All the companies
find the quota principle a dangerous precedent
that might be picked up in the Middle East, but
most firms are making an effort to work out some
compromise. Creole stubbornly insists that it
cannot meet government norms because of warm
weather and market conditions, whereas Caldera
and his advisers are certain that Creole's policy is
one of deliberate reprisal. The other companies
are also under severe pressure from their home
offices to "do something," but all agree that to be
"too tough" would lead to expropriation.
In a recent meeting with other US busi-
nessmen in Caracas, the US ambassador found
deep concern over pending legislation. A major
area of concern was a proposed foreign in-
vestment code requiring rapid divestment in
certain cases and further restrictions on new
investment in others. The cumulative effect of
recent oil legislation, the denunciation of the
trade agreement with the US, and the increasing
popularity of economic nationalism have caused
rising anxiety among US investors. All noted the
ability of even minor parties to push the gov-
ernment to extreme measures against foreign busi-
nesses and fear that any intent of Caldera's to be
reasonable will dissolve in the political
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US Excluded from Bogota Meeting
At Venezuelan insistence, the US was not
invited to the current meeting of Caribbean na-
tions in Bogota to prepare for their Law of the
Sea conference to be held in Santo Domingo in
April. Venezuela, which threatened to withdraw
from the Bogota meeting if the US was invited,
probably will oppose US attendance at the Santo
Domingo meeting as well.
The motivation for Venezuela's action prob-
ably stems from Foreign Minister Calvani's hope
that, with Venezuelan leadership, the Caribbean
states can agree on a middle position between
that held by the US and the hard-line position of
the South American countries that claim full
sovereignty over a 200-mile territorial sea. Calvani
claims that he will have a better chance to sell a
more moderate line to such nations as Peru and
Brazil if the US has not been involved in working
out the Caribbean position. He is also well aware
of the prestige he would gain if he were able to
sell a compromise position to the US and the
Latin American 200-mile club, and thus produce
a unified Western Hemisphere position for the
UN-sponsored Law of the Sea Conference in
1973.
Many of the Caribbean states, including
Venezuela, favor a "patrimonial sea" concept to
resolve the current confusion and disputes sur-
rounding the teritorial waters question. The
concept generally envisions a 12-mile territorial
sea with the riparian state retaining certain rights
of conservation, exploration, and exploitation for
distances up to 200 miles. The patrimonial sea
and other similar .oncepts that fall between the
views of South f~merican countries favoring a
200-mile limit and the current US negotiating
position are begirning to attract support from
other countries around the world, particularly
those in underdeveloped areas. The General
Assembly seabeds committee, charged with mak-
ing preparations for the 1973 conference, con-
venes in New York on 28 February and should
provide a better gauge of the likelihood of success
for these approaches.
JAMAICAN ELECTIONS
The general election scheduled for 29 February is shaping up as a very close race. The ruling
Jamaica Labor Party, led by Hugh Shearer, holds a slight edge. Baring serious mistakes or the
emergence of a controversial election issue, it should be returned to office. The government's
election chances have been bolstered by moderate success in reducing crime, primarily through
beefed-up police and military patrols. Moreover, unemployment, another persistent problem, has
been declining recently and is not likely to be an issue on which Shearer will fall.
The Shearer administration's over-all good record, however, has been marred by hints of
scandal and press criticism of corruption in the cabinet. Internal squabbling has also embarrassed
the government and may have weakened its position with the public. The opposition, led by
Michael Manley, has attempted to capitalize on these deficiencies. The main thrust of its campaign,
however, is on the need for a change after more than nine years.
Although both parties have pledged non-violence during the campaign, a few incidents have
occurred and others are likely. Jamaican security forces should be able to control the situation.
Regardless of the outcome, the country's domestic and foreign policies are unlikely to change
significantly.
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