WEEKLY SUMMARY

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A009700040001-2
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Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Secret
4 August 1972
No. 0381/72
ARCH tVA , R1+.CORI)
PLEASE RETUR
NCY ARCHIVES,
State Department review completed
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WU L" 5 1 1 t' , issue , , CONTENTS (4 August 1972)
" rid
me rn ~y C> to of Current Intelligence, reports
angl es s ni t e elope e~nts of . t he week
throu Thursda It frequently, inc~udes
~f ~~~ ~ ~~~ t a lsrI cp red tie office 1 South Asia: Advancing
From Simla
''*N-1'0" of Irate is
t ~ ~ ~ C k c 1J t1tr FAR EAST
~ F `~ ir e more i p sot ent
d Ire urspr t er as pcl R p~r5
are l to i. .e cot ->is pages"..
Y", 14 0
rti t f f~ a se c t 'e'- 11 te
t res. rte h a in of Title 18, ectio s 793
and 794, + f the code, a am nded Its tr .. s s
`sea ; or r~~ ; t`s contents rto 5r receipt ;y a
ou r s r t ya
3 Indochina
6 Philippines: The Rains Came
7 China: Out of the Dog House
9 West Germany Views China
Link
10 Second Annual Crimea Summit
11 Czechoslovakia: Trials
11 Malta: Talks with Mintoff
13 Egypt-Libya: Union
14 Iraq: On the Eve of Oil Talks
15 Fedayeen: Mission to Moscow
16 Panama: A Matter of Money
17 Argentina: Lanusse Blasts
Peron
17 Peru: The President Speaks
18 Canada: Trade Expansion
MIDDLE EAST
AFRICA
WESTERN
HEMISPHERE
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SOUTH ASIA: ADVANCING FROM SIMLA
Pakistan apparently is planning to recognize
Bangladesh within the next few weeks. On 27
July, a Pakistani spokesman announced that rec-
ognition will be on the agenda of the National
Assembly when it meets in mid-August and in-
dicated that the government expected a favorable
vote. The Pakistani press has been speculating
that President Bhutto may then fly to London to
meet with Prime Minister Mujib, although Bhutto
has publicly denied any plans to leave the coun-
try. Mujib, who is recuperating in London from a
gallstone operation, has long held that talks be-
tween the two countries on unsettled bilateral
issues cannot begin until the Bhutto government
recognizes Dacca.
Meanwhile, Bangladesh authorities are being
somewhat restrained on the sensitive issue of
Bengali determination to try Pakistani prisoners
accused of war crimes. According to the Bangla-
desh ambassador in New Delhi, his government
will not attempt to get such trials under way for
at least a few more weeks and in any event does
not intend to try more than a small number. The
Bengalis have no real alternative; India, which is
holding the prisoners, does not want to jeopardize
recent improvements in its relations with Pakistan
by a precipitate or excessive transfer of Pakistani
prisoners to Bangladesh.
The ambassador asserted that Bangladesh is
interested in having better relations with Pakistan.
He believed recognition would be followed
promptly by negotiations on bilateral issues such
as the exchange of minority groups and the divi-
sion of the assets and liabilities of the formerly
united Pakistan. He expected that trilateral dis-
cussions with New Delhi on repatriation of the
bulk of the prisoners to Pakistan would also begin
soon after recognition.
The Bhutto government might be willing to
acquiesce in some trials as long as they involved
only a small number of prisoners, were accom-
panied by a clear-cut commitment to return the
rest to Pakistan, and appeared to be directed at
individual soldiers rather than at Pakistan as a
nation. There are other stumbling blocks to a
normalization of relations. The apportioning of
assets and liabilities could prove complicated and
difficult. Bangladesh, moreover, might demand
war reparations, and Islamabad conceivably could
insist on compensation for private properties in
Bengal owned by West Pakistanis and confiscated
by Dacca. Bangladesh has indicated a willingness
to exchange members of its unpopular Bihari mi-
nority for Bengalis now detained in Pakistan, but
the Pakistanis are not eager to receive large num-
bers of impoverished Biharis.
Indo-Pakistani relations, meanwhile, are con-
tinuing gradually to improve. Hostile propaganda
has been greatly reduced, and both governments
have ratified the agreement reached at Simla in
July between Prime Minister Gandhi and Pres-
ident Bhutto. The Simla accord provided that
withdrawal of troops from all occupied terri-
tory-except in Kashmir-would take place within
30 days after the two sides had exchanged ratifi-
cation documents. The pullbacks are expected to
be carried out this month.
The Simla agreement also provided for an-
other summit meeting-probably during Sep-
tember or October in Pakistan-to take up the
problems bypassed at Simla; the most intractable
is Kashmir. India wants Pakistan to give up its
claim to that part of Kashmir the Indians have
held since 1949. At Simla, the two sides tempo-
rarily froze the issue by agreeing not to use force
to alter the status quo.
Mrs. Gandhi's government recognizes that
Bhutto could endanger his political position at
home if he moved too quickly to alter Pakistan's
long-established position on the disputed terri-
tory. New Delhi so far has avoided specifically
making the return of the prisoners-Islamabad's
primary objective-contingent upon formal Pak-
istani acceptance of the Indian position in Kash-
mir. The Indians have not set forth precise condi-
tions for returning the prisoners, but their general
requirement apparently is that some, additional
progress must be made toward establishing a
"durable peace" on the subcontinent, and this
almost inevitably must include some Pakistani
concessions on Kashmir.
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South Vietnamese and Communist forces ex-
changed heavy artillery fire throughout the week
in Quang Tri Province as friendly forces pushed
deeper into Communist-held territory in and
around the embattled provincial capital. South
Vietnamese Marines, who took over responsibility
for the city last week, have engaged Communist
units throughout the week. The Airborne Division
is active south of the city and west of Route 1.
Heavy fighting took place southwest of Hue
during the week, with elements of the South
Vietnamese 1st Division clashing with the North
Vietnamese 324B Division in the vicinity of Fire
Support Base Bastogne, which was reoccupied by
the South Vietnamese on 2 August.
Action Light Farther South
The government's drive to retake the north-
ern districts of Binh Dinh Province is sputtering
on as enemy resistance tapers off. The district
capital of Hoai An was recaptured by the South
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s em wi consis o ree sing e
pipelines between the Chinese border and Kep,
and a combination of a dual and a single line
between Kep and Hai Duong, where it will con-
nect to the extensive pipeline network that runs
south into South Vietnam and southern Laos.
When completed, the new system should be more
than adequate for Hanoi's petroleum import re-
quirements.
LAOS: COMMUNISTS IN THE NORTHWEST
The Lao Communists and their North Viet-
namese allies evidently continue to administer
northwest Laos despite the presence of Chinese
road-build in and infantr forces.
North Vietnamese advisers
Vietnamese, but later abandoned although the
Communists did not move back in.
Numerous small-scale enemy attacks have
been taking place in southern Tay Ninh Province.
While no large battles have developed, this ac-
tivity does tie down South Vietnamese forces.
Most of the Communist military action in the
delta during the week took place in Dinh Tuong
Province, where remote outposts and government
field positions were the targets of light shellings
and harassing attacks.
Pipeline System in North Vietnam
The petroleum pipeline system extending
from China into North Vietnam is being ex-
panded, but the system cannot be confirmed as
operational from aerial photography, primarily
because no pumping stations have been identified.
assist tTiZao ate provincial and district levels.
The Lao officials are authorized to act inde-
pendently in a few matters, but most actions
require the approval of the senior North Viet-
namese adviser.
North Vietnamese advisers also assist Pathet
Lao battalions and some companies. In addition,
small North Vietnamese units sometimes operate
with Pathet Lao units against Lao government
troops.
The Chinese, in contrast, do not seem to
venture far from their roads. They provide no
advisers to the Lao Communists in Oudomsai
Province, use only their own people for road
construction, levy no taxes on the villagers along
the road, and do not require the locals to perform
porterage or other duties. Contact is limited to
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LAOS
Bouam
Lon%
Chinese activities are designed to assist the Lao 25X1
people by preparing transport routes.
anoi is using some of
these roa s to supp y heir forces in northwest
Laos. Their trucks enter Laos from North Viet-
nam on Route 19 and may proceed at least as far
as Muong Houn on Route 46. Most supplies are
destined for North Vietnamese units in Laos, but
some are portered into Sayaboury Province for
use by the insurgents in Thailand. This is the
clearest evidence to date that Chinese-built roads
are used by the North Vietnamese to supply the
Thai Communists.
Stalled Everywhere
Lao government forces, north and south,
have made no progress in their efforts to re-
capture territory lost during the dry season.
In the south, irregular forces have managed
to consolidate their hold on Khong Sedone-
occupied seven weeks ago-but elements of the
55340 8-72 'CJA
? Government-held location
? Communist-held location
0 10
MILES
activities designed to cultivate good relations, as
in some areas where Chinese aid stations provide
medical attention to the Lao. On occasion, Chi-
nese construction crews use their equipment to
help local farmers clear fields.
The defectors were not able to provide any
real insight into the reasons for the Chinese
road-building projects. Lao Communist propa-
ganda teams push the line that the projects are
the result of agreements negotiated in the early
1960s between Vientiane and Peking. The propa-
gandists stress that the Chinese are not a threat,
that the Chinese have no intention of annexing
any territory or staying permanently, and that the
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39th North Vietnamese Regiment and one or two
independent battalions are still tenaciously de-
fending the mountain just west of the town as
well as villages less than ten miles to the north
and east. In the Bolovens Plateau area, the situa-
tion at the junction of Routes 23 and 231 has not
changed much in over a month. Government
forces have not attempted to advance since late
June, when elements of the 9th North Vietnam-
ese Regiment dispersed several irregular battalions
trying to push north on Route 231.
During the rainy season last year, govern-
ment forces retook Paksong and attempted to
establish themselves on the central portion of the
Bolovens Plateau; this year the Communists have
managed so far to tie down government forces in
the Khong Sedone area and at the 23/231 inter-
section and, thus, forestall any threat to the infil-
tration corridor farther east.
In the north, the government's effort to re-
capture the hills southwest of the Plaine des
Jarres has also ground to a halt. Irregular forces
attempting to move from the west toward Phou
Pha Sai, the strategic high ground overlooking the
southern Plaine, have not advanced because bad
weather has limited air support. Government
units that had been on the ridge just south of
Phou Pha Sai returned to Pha Dong after they
were attacked by small North Vietnamese units.
Sirik Matak's Republicans held the political
spotlight in Cambodia during the week, raising
fears in the Democratic Party that it may be
surpassed as the leading opposition party. The
Republicans appear to have largely overcome
their early organizational problems and, with the
difficult job of selecting the party's candidates for
the September assembly elections behind them,
are busy building up an organization in the coun-
tyside. They also seem to be cainin momentum
in the cities.
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There is some speculation in the capital that
the opposition parties will boycott the elections
to protest the election law, which it is generally
agreed, favors the government's candidates. The
Democrats in particular appear divided on the
issue, with some party leaders reportedly openly
opposing party chief In Tam's decision to par-
ticipate in the elections.
Meanwhile, the regime appears to be going
ahead with plans to promote the organization of
two minor parties for the purpose of splitting the
opposition vote. These, like the Pracheachon
Party, a formerly pro-Communist party sup-
pressed by Sihanouk a decade ago and recently
revived, appear tailored to appeal to particular
groups of voters who could be expected to sup-
port the opposition or not vote at all. These
parties are also probably intended to avoid the
appearance of one-party elections in the event the
opposition does indeed boycott the elections.
The Route 1 Operation
Military activity was at a moderate level
throughout most of the country during the week.
Forces assigned to the joint Cambodian - South
Vietnamese operation to reopen Route 1, the
main highway between Phnom Penh and Saigon,
were consolidating their positions around the
town of Kompong Trabek, recaptured the week
before. Present plans are to establish a logistical
base there before pushing on to the east. Gov-
ernment troops from the provincial capital at
Svay Rieng have reoccupied positions along the
highway west of the city to await the arrival of
their compatriots. The Communists have so far
offered only light resistance to all this activity,
but they are likely to react with greater strength
should they believe their supply lines into the
delta region of South Vietnam are threat-
ened.
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The worst floods in recent Philippine history
have hit central Luzon, dealing a sharp blow to
the national economy and carrying serious politi-
cal implications for the Marcos administration.
During July, tropical storms combined with the
normal southwest monsoon to dump over 90
inches of rain on central Luzon, the nation's rice
bowl and its most densely populated area. With
the rain still falling, the full extent of the damage
cannot be assessed, but already lost are thousands
of homes and public buildings, a large portion of
the newly planted rice crop, numerous irrigation
dikes, bridges, dams, communications, and miles
of roads.
The most immediate problem is the loss of
stored rice supplies needed to feed farmers and
consumers until the next harvest, which will now
be delayed until after November. The continuing
monsoon rains will hamper replanting. This must
be done soon in order for the rice to reach ma-
turity before the winter dry season. The Filipinos
had expected to import some 300,000 tons of
rice even before the floods and will now have to
find money to import substantially more--at a
time when the nation is facing a mounting bal-
ance-of -payments deficit.
The Marcos administration, already un-
popular with important segments of t!he popula-
tion, is being charged with contributing to the
disaster because it failed to complete flood con-
trol projects and permitted too many trees to be
cut down in the Luzon watershed area. The initial
slow response by government departments to the
disaster, as well as the squabbles between local
and national officials, hindered relief operations
in some areas and may cause further recrimina-
tions against the administration.
The President and his wife have tried to
convey their concern through highly visible mercy
missions to the flooded countryside. It may take
more than this to mitigate the fault finding.
Marcos also faces the enormous problem of
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providing relief to the hungry and the displaced
and of rebuilding the countryside once the emer-
gency situation is over. In addition to highly vocal
political critics, the Communist guerrillas in cen-
tral Luzon will be quick to exploit these diffi-
culties in order to score points with the flood
victims at the expense of the government.
Marcos has taken direct control of the agen-
cies most immediately involved in disaster relief,
and he will doubtless try to supervise the dis-
tribution of relief assistance in a way designed to
give him the credit. If the rehabilitation effort
bogs down--and past experience indicates this will
probably be the case-then he will get the
An authoritative Army Day editorial has
lifted the cloud of suspicion that lingered over the
armed forces since the purge of its former chief,
Defense Minister Lin Piao, last fall. The editorial,
issued jointly by China's three leading journals,
left unresolved several pressing questions about
army-party relations. No new top-level state or
military appointments were announced, though
all the active Peking-based members of the
politburo except Mao attended the Army Day
Festivities.
The fact that an editorial was released on
this occasion, whereas there were none on May
Day or the party anniversary on 1 July, suggests
that at least some progress has been made toward
resolving problems connected with the Lin affair
at the series of high-level meetings that were held
between late May and late June. Also pointing to
progress is the talk. in Peking that the long-
delayed National People's Congress-and possibly
a new party congress as well- will be held before
the end of the year.
Since the purge of Lin, a propaganda cam-
paign calling on the army to place itself under
firm party control had put the armed forces on
the defensive. The Army Day editorial states
flatly that the military is "loyal to the party and
the people" and that it is unified. Declaring that
any conspirator who wanted to undermine the
army-a clear reference to Lin-would be "only
daydreaming,'' the editorial gives the military its
cleanest bill of political health in a full year.
Significantly, Lin is not mentioned by name,
despite Peking's recent confirmation to foreigners
of the story about his attempted coup against
Mao and subsequent, abortive flight to the Soviet
Union. By officially endorsing this account,
which has been circulatinq within China since last
October, Peking may in part have hoped to take
some wind out of the sails of the Chinese Na-
tionalists, who recently have been publicizing the
story in a number of foreign capitals. In any
event, the roundabout method of releasing
official statements about Lin abroad would
require a decision at the highest levels, suggesting
that the regime is attempting to tie up loose ends
relating to the purge and to project an image of
public unity in the aftermath of the meetings
early this summer.
Peking, however, still has not identified
former Marshal Yeh Chien-ying as Lin's successor
in the post of defense minister, despite rumors
circulating in China that this would occur on
Army Day, nor has Peking filled a number of
other important military and civilian posts that
have been vacant in the central government for a
considerable period of time. Moreover, little
progress has been made in civilianizing provincial
party committees in which the military remains
deeply entrenched. Indeed, the joint editorial
carefully skirts the sensitive issue of what the
army's future political role ought to be. This
suggests that the difficult personnel and policy
issues that have been in dispute among the leader-
ship for some time have not yet been fully re-
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The Brandt government, whose controversial
reconciliation policy with the USSR and Eastern
Europe has led it to early elections, may soon
make an effort to normalize relations with Pe-
king. Following a fact-finding mission to China
last month by Gerhard Schroeder, a Christian
Democrat and shadow foreign minister, the
Brandt cabinet may authorize formal negotia-
tions, possibly beginning as early as September.
Government officials previously speculated that
such talks would be conducted by ambassadors in
a West European capital, but the dispatch of a
higher level Bonn official to Peking cannot be
ruled out. A move toward China would mark the
first departure from Brandt's conciliatory policy
toward the USSR.
Both the government and the opposition
parties agree on the desirability of a rapproche-
ment with Peking but until now have differed on
the timing of such a move. Before the Eastern
treaties were ratified in May, Brandt argued that
normalizing relations with Peking might antago-
nize Moscow and thereby jeopardize Bonn's bud-
ding relations with the USSR and Eastern Europe,
to which he attaches the highest priority. The
Christian Democrats, on the other hand, criticized
the narrow focus of Ostpolitik, and claimed that
"playing the China card" might even give Bonn
extra leverage in Moscow. Brandt may now agree.
The Soviets clearly are unhappy over the
prospect of improved Bonn-Peking ties. When
Brandt raised the subject in his meeting with
Brezhnev in the Crimea last fall, the Soviet party
chief lectured the German leader for an hour on
Chinese inequities. Soviet and East European
commentary on the Schroeder visit have been
negative, stressing the theme of Chinese collabora-
tion with German "reactionaries." The East Euro-
pean media-but not the Soviet-have also ques-
tioned Brandt's motives in endorsing the
Schroeder mission.
Although it is doubtful that Moscow will do
anything to lessen Brandt's chances in the Decem-
ber elections, it seems that the Soviets have not
yet decided to hel him either.
e oviet pro a y ju ge Brandts -prospects to
be favorable, and thus see no reason to make
concessions at this time.
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On 31 July, almost a year to the day after
the first summit meeting in Crimea, leaders of the
Soviet bloc countries gathered again at the Black
Sea resort area. Party chief Brezhnev and Presi-
dent Podgorny headed the Soviet delegation to
the conference; party leaders of all the other
Warsaw Pact states, plus Mongolia, attended.
Romania's Ceausescu, absent from last year's
meeting, was present this time. Romania's formal
relations with the bloc have obviously improved.
His presence also suggests that China was dis-
cussed only superficially. Romania normally de-
fends China at Communist conferences, and the
Page 10
communique spoke of "identity of views on all
subjects discussed."
Last year's announcement mentioned the
agenda. This year's did not. The presence of For-
eign Minister Gromyko, who did not attend last
year's gathering, at a meeting of party leaders,
suggests that Europe, as well as other interna-
tional affairs, was a priority topic. Gromyko re-
cently conferred with the Polish and East German
foreign ministers and visited Paris and the Bene-
lux countries. The meeting may have considered,
among other things, the question of whether
progress in the inter-German and West German -
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Czechoslovak talks should be a prerequisite for
establishment of relations with West Germany by
other East European countries.
Brezhnev probably briefed his counterparts
on the US-Soviet summit, although the Soviets
have informed their allies individually about the
results of the summit. The Soviets are also con-
cerned with coordinating bloc policy toward the
Conference on Security and Cooperation in Eu-
rope as the date for preparatory talks approaches.
Czechoslovakia
TRIALS AND TRIBULATIONS
The sentencing of Milan Huebl, one-time
adviser to Alexander Dubcek and former chief of
the party academy, to six and one half years in
prison is the latest conviction in a series of sub-
version trials that began on 17 July, two days
after party secretary Husak left on an extended
Soviet holiday. The West European press has been
harshly critical of the trials.
Although isolated trials of government
critics have taken place in recent years, the pres-
ent series is the largest since Dubcek was over-
thrown in 1968; it has already resulted in more
than 30 convictions on charges of subversion,
dissemination of dissident leaflets, or formulation
of a clandestine group "aimed at overthrowing
the socialist state system." Unconfirmed reports
from Prague say that the next major Dubcek
official to be put on trial will be Jaroslav Sabata,
former party chief in Brno.
Husak has pledged that there will be no
show trials similar to those of the early 1950s and
there have been none in the sense that those trials
involved forcefully extracted confessions, fic-
titious charges, lying witnesses, and savage sen-
tences. Husak declared at a recent congress of
journalists that purges following the short-lived
reformist rule of Dubcek have been relatively
mild. Husak's pledge that no one would be pros-
ecuted for political opinions, however, has always
been hedged with the proviso that if these opin-
ions were dissident, they would not save a law-
breaker from punishment.
The immediate impact of the trials on the
population has been minimal, and only scanty
reports of the proceedings and the sentencing
have appeared in the press. Western observers-
and many Czechoslovaks-see Vasil Bilak, the
conservative presidium member whose functions
include responsibility for security, as the moving
force behind the trials.
It is noteworthy that Husak began his hol-
iday in the USSR as the trials got under way; this
leads to speculation that he wants to disassociate
himself from them and thereby minimize crit-
icism of himself and his leadership. Moreover, the 25X1
trials may be timed to end upon his return to
Prague, so that he may take bows for being mer-
ciful and understanding.
Prime Minister Mintoff's London talks with 25X1
Prime Minister Heath and other British officials
on 27-28 July produced no surprises and were
described as an "exercise in good
The talks, which had been arranged at Min-
toff's request, focused on financial relations, such
as repayment of loans under the old UK-Malta
accord, and on technical assistance. Mintoff dis-
cussed the effect of the recent devaluation of the
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pound on Malta's compensation under the de-
fense agreement, but he did not demand a guar-
antee against devaluation. London merely agreed
to study the matter.
A highlight of the trip for Mintoff was his
apparent reconciliation with his estranged wife,
who has been living apart in Britain for almost
three years. She returned to Valletta with
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Presidents Qadhafi and Sadat have agreed to
unite their countries by 1 September 1973, but
the blueprints look far short of Qadhafi's hope
for immediate and complete unity. Although
Qadhafi will continue to press the Egyptians as
preparations for the merger go forward, Cairo
(and some Libyans) can be expected to move
cautiously toward the new relationship.
As conceived, the union is to be imple-
mented in stages and directed by a unified polit-
ical leadership that will recommend plans for
bringing the institutions of the two countries to-
gether. Joint committees will be set up to prepare
for the integration of political, economic, de-
fense, and national security systems. After ap-
proval by the leadership of both countries, the
final formula for the union will be submitted to
popular vote.
Still unresolved is how the new union will
relate to the Confederation of Arab Republics,
made up of Egypt, Libya, and Syria, which was
formed last September. The confederation has all
the trappings but little of the substance of a
unitary state.
Sadat does not want to rush headlong into
union, and the lead time is long. Qadhafi prob-
ably granted Sadat the delay, while Sadat agreed
to Qadhafi's scheme to avoid antagonizing an
important aid donor. The Egyptians remember
well the failure of the union of Egypt and Syria,
and Sadat is in no hurry to permit more than a
normal integration of the two countries' institu-
tions.
Whatever the eventual shape of the Egyp-
tian-Libyan union, however, Sadat will limit
Libyan interference in Egyptian affairs. The mili-
tant Qadhafi would like to wield greater influence
on the Middle East impasse, but Sadat will keep
his own counsel on any new policy initiatives.
Qadhafi's eagerness to press his scheme for
Arab unity could cause the Libyan leader serious
problems at home. Libya's close relations with
Sadat and Qadhafi
Egypt were a major cause of the serious discord
within Libya's collective leadership in July. Some
of the 12-member Revolutionary Command
Council favor a more cautious approach toward
Egypt and oppose Qadhafi's generous financial
assistance to Cairo. The degree of Libya's political
and financial commitment to the new union,
therefore, is likely to cause more dissension
within the council in the coming months and
could be a critical factor in its delicate balance.
Moreover, much of the Libyan public-especially
in the eastern province of Cyrenaica-resents the
increasing number of Egyptians in the country.
Union with Egypt could be difficult to sell to the
Libyans should the plans for merger ever reach
the referendum stage.
Qadhafi's program for rapid expansion of
the Libyan military could also be placed in
jeopardy. A French Government spokesman has
already expressed concern about the Mirage con-
tract with Libya, which prohibits use of the
planes by third countries.
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Negotiations between Baghdad and the
nationalized Iraq Petroleum Company are inching
closer. The co-mediators in the dispute-the secre-
tary general of the Organization of Petroleum
Exporting Countries and an official of the French
partner of the Iraq Petroleum Company-re-
portedly are in Baghdad ready to begin talks.
pany are about $550 million; $350 million of this
comes from the Basra Petroleum Company, which
has not been nationalized. The gap between im-
ports and exports probably will be met, at least in
part, by contributions from other Arab states.
The Organization of Arab Petroleum Exporting
Countries already has pledged about $140 mil-
lion.
Representatives of the companies are not
optimistic about the likelihood of early progress
in the discussions. They are hopeful, however,
that mediation efforts will keep the Iraqi dispute
quiet long enough for them to conclude an agree-
ment on concessions with the Shah of Iran and an
accord with Saudi Oil Minister Yamani on the
issue of participation. An unfavorable Iraq settle-
ment, they fear, would prejudice the negotiations
with the Shah and Yamani. The companies have
indicated a willingness to extend beyond 12
October their 90-day moratorium on legal action
against purchasers of the nationalized oil if the
talks in Baghdad are making progress.
Unless Iraq can sell the nationalized oil, the
country's foreign-exchange earnings will be re-
duced; the contested oil fields would have con-
tributed some $600-700 million this year. Several
shipments of "hot" oil went to Bulgaria and East
Germany in July, and one tanker load went to
Greece. Baghdad reportedly has resumed shipping
oil to the French partner of the Iraq Petroleum
Company while mediation is under way. Sales so
far represent only a tiny fraction of pre-national-
ization production.
Although dependent on the Iraq Petroleum
Company for about 40 percent of government
revenues and about 55 percent of foreign-ex-
change earnings, Iraq is not likely to face severe
financial difficulties for some time. Imports of
goods and services are currently running at about
$950 million a year. Foreign-exchange earnings
from sources other than the Iraq Petroleum Com-
Iraq's foreign-exchange reserves now stand at
$680 million. The government has taken strong
steps to conserve these reserves. The central bank
has limited the issuance of foreign-exchange
permits and other import controls have been
stiffened. The government also reduced the
development budget by about $340 million. In
addition, government workers are being required
to place a portion of their salaries-as high as 25
percent-in government bonds. Although these 25X1
measures will ensure Iraq's solvency, they will at
the same time dampen economic growth and re-
duce the standard of living.
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Yasir Arafat's latest visit to Moscow was
as unproductive as his three previous ones.
Pravda's announcement on 27 July at the end
of the fedayeen leader's ten-day sojourn was
low-keyed; it contained a weak pledge that
Soviet assistance to the fedayeen movement
would continue. The fedayeen have long
sought-but failed to get-recognition by the
Soviet Government as the official representa-
tives of the Palestinians. As before, Arafat's
trip was under the auspices of the Soviet
Afro-Asian Solidarity Committee, a non-
governmental body.
The fedayeen chieftain did not have any
public contact with high government officials.
It is likely that Arafat sought, as he did in
October 1971, to obtain armored personnel
carriers and anti-aircraft guns. He probably
was no more successful this year than last.
Soviet military aid to the fedayeen has hith-
erto consisted primarily of light arms-such as
assault rifles and machine guns-which are
b governments.
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INDIA: THE VAGARIES OF WEATHER
The spring in India was dry this year. The
usual seasonal showers failed to come, and the
monsoon was interrupted after only two weeks.
Drought now threatens a major part of the coun-
try. At the same time, severe floods in north-
eastern India, especially in Assam and in Orissa,
have destroyed crops. As a result, hopes that 118
million tons of grain would be harvested in the
year ending next June have been dashed. Rain
within the next two weeks could still prevent a
really serious crop failure.
Some of the less-important early crops, such
as spring rice and vegetables, have already failed.
The major fall crops are drying up in the fields or
have not even been planted. Food prices rose
sharply in June, and were 11 percent higher than
a year ago.
Intensive negotiations are under way con-
cerning the amount of compensation to be paid
for the US-owned power and light company, a
Boise-Cascade subsidiary that Panama has seized.
The two sides are still far apart, but the govern-
ment may be more flexible after legislative elec-
tions on 6 August.
The government is currently offering $14.2
million in 30-year government bonds bearing
6-percent interest and refusing to assume the
company's debts, estimated at $44.5
Athough the foodgrain crop for the year
that ended 30 June 1972 fell short of the antici-
pated 110-112 million tons, the government is
stressing that its eight-million-ton foodgrain re-
serve is adequate and available for emergency use.
New Delhi, the state governments, and voluntary
relief agencies already are moving to provide food
to drought areas and work for unemployed farm
laborers.
Bangladesh also had extensive floods in the
northeast, which delayed the pl' nting of the
major rice crop. Floods are also threatening the
northwest as water moves down from Assam. The
US mission earlier this year estimated that Bangla-
desh would need two million tons of foodgrains
before June 197.3 a al weather con-
ditions.
reached by mid-August, well within the 60-day
period decreed for the compensation talks. Ac-
cording to the decree, the government is au-
thorized to expropriate the company if the pur-
chase price and form of payment are not settled
by the end of August.
likely, however, both sides will exercise restraint.
Once the Panamanian elections are out of the
way, Torrijos' need to mine a nationalistic issue
of this sort should diminish. The government may
then become more circumspect in order to avoid
further damage to relations with the US, par-
ticularly the canal negotiations, and to maintain
an attractive investment climate in Pan-
Torrijos is keeping close tabs on the negotia-
tions. As with the canal treaty talks, his negotia-
tors are being kept on a very tight leash, operating
under rigid instructions and having to check back
frequently for guidance. One of the negotiators
has offered the opinion that agreement could be
ama.
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President Lanusse dropped his efforts to-
ward political conciliation last week and viciously
attacked Juan Peron in a speech to a large gather-
ing of top military officers. Lanusse's highly
touted Grand National Accord, which was to have
brought the Peronists back into national political
life, is now being abandoned and power politics
is coming to the fore. Both Peronists and anti-
Peronists are seeking to exploit the divisions that
have plagued Argentina for decades.
Lanusse's original plan was to outmaneuver
Peron and prove to his followers that Peron was
unwilling to return to Argentina. Failing that, the
President hoped to negotiate an agreement with
Peron that would take the old dictator out of the
presidential race and clear the way for his fol-
lowers to back a candidate acceptable to the
military. Peron refused to commit himself, how-
ever, and as time wore on Lanusse and his whole
plan were placed in increasing jeopardy.
It was the Peronists' refusal even to discuss
ground rules for the elections that finally forced
Lanusse to change tactics. When the old dictator
could be neither cajoled nor outmaneuvered, Gen-
eral Lanusse's military background dictated a
frontal aasault. With the nation listening in, he
launched a scathing personal attack on Peron,
charging him with cowardice and claiming he had
never been concerned with the welfare of Argen-
tina. The President challenged Peron to prove him
wrong by coming back at Lanusse's own expense.
Lanusse ridiculed Peron for keeping the remains
of Eva Peron in his Madrid home where he now
lives with his third wife, Isabel. Lanusse explained
that Peron persisted in this unwholesome ex-
ploitation of the dead out of fear that if he
moved her, Peronist pilgrims to Madrid would
bypass him altogether and go directly to Eva's
site.
President Lanusse's "revelations" about
Peron are unlikely to convince Peronists who do
not already believe much of what the President
said. From Madrid, Peron has already answered
with a list of impossible demands that must be
met before he will return. Top Peronist leaders
have charged Lanusse with trying to generate
chaos that could risk civil war.
This move away from conciliation and to-
ward polarization indicates that if the elections
take place as scheduled next March, orthodox
Peronists are likely to be deprived of a share of
power again as they have been in the past.
Lanusse's harsh warning of this prospect may,
however, improve the chances of neo-Peronist
groups such as Tecera del Franco's Union Popu-
lar, which advocates Peronism without Peron and
seems willing to work with the government.
President Velasco's independence day speech
on 28 July and another to armed forces leaders
on 30 July broke little new ground. In the
speeches, Velasco summarized past achievements
of the revolution, emphasized the need for in-
creased popular participation, and left Peruvian-
US relations pretty much as he found them.
The only new proposal he made was for the
creation of a "social property sector," which is to
participate in the economy along with private and
state enter rises. This conce t was not s elle
recis I
The implemen ing regu a-
ttons are s i m th afting stage, and changes
may still be made before they finally take effect.
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The closest Velasco came to criticizing the
US was when he spoke of the need for non-inter-
vention and self-determination with respect to
international relations. In addition, he cited the
renewal of diplomatic relations with Cuba as one
of the main achievements of his government dur-
ing the past year. He did not, however, censure
US actions in holding up loans from multilateral
organizations or accuse the "imperialists" of
interfering in Peru.
President Velasco emphasized the im-
portance of popular participation in the revolu-
tion. He accepted the inevitability of opposition,
but insisted that violence would be crushed. This
may have been an oblique reference to the recent
activities of small guerrilla and bandit groups that
have been operating in northern and eastern Peru.
President Velasco also told students that they had
an important part to play in the revolution. Stu-
dent disturbances in June and July worried the
government and almost led to the ouster of the
interior minister.
CANADA: TRADE EXPANSION
Canadian exports surged upward in the first
half of 1972 to reach $9.7 billion, 11 percent
above the comparable period in 1971. A 17-per-
cent increase in sales to the US, resulting mainly
from accelerated US economic growth, accounted
for almost all of the increase. The export gain has
bolstered Canada's 18-month-od economic re-
covery and has helped to stem the rise in un-
employment, which has averaged more than six
percent during the past two years.
Imports, however, increased some 60 per-
cent more than exports, reflecting strengthened
consumer demand and rapid inventory accumula-
tion. As a result, Ottawa's half-year trade sur-
plus-just under $500 million-was only half that
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of the same period in 1971. The entire surplus
was with the US. Increased imports from non-US
markets, sparked by a 61-percent rise in purchases
from Japan, caused the trade balance with these
other partners to shift to a small deficit from the
surplus of $650 million registered in the first half
of 1971.
Canada's trade should continue to grow
rapidly during the rest of the year. Sales will be
influenced by economic improvement in the US,
Western Europe, and Japan; imports will be
boosted by Canada's growth, projected by the
Organization for European Cooperation and
Development at six percent for the year. Re-
flecting higher Canadian purchases, the over-all
trade surplus for the full year probably will total
only $1 billion, about half that of last year.
Virtually all of this will again be accounted for by
the US.
I n a related development, Canadian Trade
Minister Pepin and US Treasury Secretary Shultz
recently held exploratory talks; bilateral trade
discussions have been suspended since early
February 1972. Continuing points of friction in-
clude modification of the important North
America automotive agreement, which regulates
trade in automobiles and automotive products;
duty-free allowances for tourists; defense pro-
duction sharing; and the US program of tax de-
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