WEEKLY SUMMARY

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A010700090001-6
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Weekly Summary
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Secret
Secret
15 March 1974
No. 0011/74
Copy N2 16
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Ee week through noon on Fhur.day_ It
of Economic Research, the Office of Siratecaic
Special Reports are Iiktetd in the
CONTENTS (March 15, 1974)
EAST ASIA
PACIFIC
I Syria-Israel
2 Israel: New Government and Negotiations
4 Arab States: On to Vienna
4 The EC Eyes Gold
5 West Europe - US: New Tensions
6 Cambodia: An Imperiled Enclave
7 Laos: Political Procrastination
8 South Korea: All's Quiet Now
8 Thailand: The Students Back Off
10 UK: Wilson Sets a Cautious Course
11 USSR-Japan: Siberian Development
MIDDLE EAST
AFRICA
13
1.4
15
16
17
18
Bulgaria Tightens Discipline
USSR-France
Communist Nuclear Power
USSR: Mars Probe; Subs
Portugal: African Policy Furor
Spain: Church-State Tension's Rise
Compromise "a la Beige"
19 Libya Seeks to Barter Oil
20 Oman-Iran: Tighter Bonds
21 Iran-Iraq: Cease-fire
21 Iraq: Kurdish Autonomy
22 South Africa: The Midas Touch
23 Ethiopia: Back to Work
WESTERN
HEMISPHERE
24 Guatemala: Election Aftermath
25 Cordoba Province: Peron's Policies
26 Venezuela: Orderly Inauguration
SPECIAL
REPORT (Published separately)
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Syria-Israel
Although Syria further strengthened its
forces on the Golan front this week, there are
signs that its military movements there have been
ordered at least in part for internal purposes.
In his Revolution Day speech on March 8,
President Asad took his usual stance on negotia-
tions with Tel Aviv, demanding-as he always has
since the October war-a full withdrawal of Israeli
forces from the Golan Heights and the restoration
of "Palestinian rights." Although Asad said Syria
will continue to maintain a state of war with
Israel until his goals are attained, he also said the
struggle has entered a political phase. The Syrians
had taken a similar position in the joint com-
munique issued at the conclusion of Soviet For-
eign Minister Gromyko's visit to Damascus on
March 7. Although the communique warned that
there could be a "new explosion" in the Middle
East if Syria's demands are ignored, both the
statement and Asad's speech suggest the Syrians
are still prepared to negotiate a disengagement
accord with Tel Aviv.
It now seems that Syrian activity on the
Golan front could be intended by Asad to keep
the pressure on Tel Aviv and to keep his own
military preoccupied with the Israeli threat. Asad
has reportedly ordered the Ministry of Foreign
Affairs and Syria's news media not to issue
inflammatory statements that Israel and other
states could interpret as Syrian intransigence.
Furthermore, tank squadron commanders were
recently assigned to Homs military academy to
take a six-month training course that they were
originally scheduled to attend before the October
war.
Exchanges of fire between Syrian and Israeli
forces have occurred daily during the past week.
The sharpest clash occurred on March 8 when
Syrian and Israeli gunners traded artillery and
tank fire for several hours. Another lengthy
artillery exchange was reported on March 13
along the northern edge of the Israeli-held salient
into Syria. 25X1
Israeli tank crews
Waiting at Golan
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The Israelis, for their part, have moved
troops to positions from which they can better
defend against any Syrian effort to pinch off the
salient. Some Israeli units in the Golan Heights
are now reportedly overstrength.
(I - J
Israel: New Government and Negotiations
-Israel's new government focused on foreign In her speech to the Knesset on March 10,
policy issues during its first week in office, after Mrs. Meir outlined the government's basic policy
muddling through a cabinet crisis stemming guidelines and indicated that no fundamental
primarily from domestic political disputes. change in foreign policy is contemplated. Both
Prime Minister Meir
Outlining policy
she and Defense Minister Dayan, however,
stressed the need for Israel to adopt a flexible
approach in the Middle East peace negotiations,
and to pursue further diplomatic contacts with
the Arabs. Emphasizing that she had chosen a
cabinet "without right-wingers," Mrs. Meir reit-
erated that Israel was willing to negotiate a peace
settlement with its Arab neighbors but said that
Tel Aviv will continue to insist on defensible
borders. This, she said, precluded a return to the
1967 lines as demanded by the Arabs. Deputy
Prime Minister Alon on March 12 outlined the
sequence of negotiations as envisaged by Tel Aviv;
an arrangement of a Syrian-Israeli separation of
forces, an interim arrangement with Jordan con-
cerning the West Bank, and a renewal of negotia-
tions with Egypt, then Syria and Jordan.
Mrs. Meir emphasized the government's sup-
port for the Geneva Middle East peace conference
as a negotiating "base" that allows Israel at the
same time to conduct bilateral talks with the
Arabs elsewhere-something the government had
preferred all along. The Prime Minister praised
Cairo's policy on disengagement and peace "even
if there are many ups and downs on the way,"
and said that the troop disengagement along the
Suez Canal had been carried out "to the letter
and the spirit" of the agreement arranged through
Secretary Kissinger.
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Dayan, too, said that Egypt was moving in
the right direction and that the present dis-
engagement line in the Sinai was clearly not the
final one to which Israel would withdraw. He
added, however, that he thought there should be
no further Israeli withdrawals until a peace treaty
had been reached with Cairo.
The cabinet will be focusing its attention
over the next several weeks on the Syrian troop
disengagement issue. Mrs. Meir told the Knesset
that the government will be able to present
detailed ideas on the problem within two weeks.
and is prepared to send an envoy to Washington
for this purpose. Foreign Minister Eban left for
the US on March 11, among other things to
discuss and review the planning for the Syrian
negotiations with Secretary Kissinger.
Mrs. Meir said the government is also
prepared to negotiate with Jordan concerning a
West Bank settlement. She reiterated, however,
that Tel Aviv would not negotiate with Pales-
tinian terrorist groups intent on destroying Israel,
and again emphasized the government's opposi-
tion to the creation of a separate Palestinian state
on the West Bank.
She repeated her earlier pledge that new
elections would be held before the government
signs any agreement involving Israeli territorial
concessions on the West Bank, if one of the
government's coalition partners demanded them.
The National Religious Party had asked for such a
statement as part of its price for joining the
coalition.
Meanwhile, the government is clearly
worried that Soviet Foreign Minister Gromyko's
recent swing through Cairo and Damascus may
have had a negative effect on the flexibility of
presidents Sadat and Asad in the peace negotia-
tions. Prime Minister Meir, Dayan, and one of the
country's leading commentators all publicly ex-
pressed doubts this week about Moscow's com-
mitment to peace. Mrs. Meir went so far as to say
ISRAELI LOSSES
7 Ilsrael this week published the names of
the 2,522 military personnel who died in the
October war-more than in the 1956 and
1967 wars combined.I[All but 190 of these
were reservists, one reason the October war
had such a profound effect on Israel's civilian
population. Approximately 23 percent of
those killed were officers. The high casualty
rate among officers can be attributed to Is-
raeli military tradition that calls for officers
to lead their troops into combat.
on March 12 that she is convinced the Soviet
Union does not seek peace in the Middle East.
The same day, Alon, evidently alluding to the US,
called on the "friends" of both the Arabs and
Israelis to exert their influence on the Arabs to
adopt more sober, realistic and long-range pol-
icies. He said that extreme Arab demands on Tel
Aviv will only serve to drive Israel into a corner
without leading to a solution.
The Knesset approved the new cabinet after
a lengthy debate on March 10 by a vote of 62 to
46, but there were nine abstentions-four of them
from members of parties in the governing coali-
tion. Mrs. Meir will probably have to spend more
time than she would like mediating factional
strife within her Labor Alignment and maintain-
ing the unity of her coalition.
As an initial measure, she expanded the
cabinet from 19 to 22 members, thereby allowing
her two coalition partners more ministerial port-
folios. This, however, prompted the Alignment's
Arab faction to ask for cabinet representation and
the leftist Mapam faction of the Alignment to
demand an additional post. The country's serious
economic difficulties will require early attention.
The Knesset votes on the budget several weeks
from now and the government's first major test
strength will probably come at that time.
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Arab States: On To Vienna
The meeting of Arab oil ministers in Tripoli
adjourned Wednesday evening without making
any announcement about the oil embargo or
future oil production levels. The Arabs will recon-
vene on Sunday in Vienna, where the Organiza-
tion of Petroleum Exporting Countries will be
meeting to consider oil pricing policy'.
;Although the Arab oil nations are main
taining an official silence on the future of the "oil
weapon," there are claims, attributed to partici-
pants at the meeting, that the oil ministers did, in
fact, reach an agreement to lift the embargo and
to restore oil production to pre-1973 war levels.
JAt the conclusion of the Tripoli session,
h owever, the conference chairman read a brief
communique stating that the meeting was being
adjourned until Sunday to give some of the minis-
ters a chance to consult their governmentsjlThis
I Lmay indicate that either new proposals were in-
troduced or that there was a deadlock among the
oil ministers.1
i c (According to an official Libyan news agency
report, the Algerians proposed, as a compromise
solution, the lifting of the embargo for a trial
period of two months. The embargo would be
reimposed presumably if no agreement on the
made in Vienna, having been delayed to spare the
feelings of the Libyans who favored maintaining
the embargo)
The EC Eyes Gold
,Soaring gold prices and the prospect of
balance-of-payments deficits resulting from higher
oil prices are increasing pressures in Europe for a
substantial increase in the official price of gold.
The official price has remained at $42.22 an
ounce since February 1973, while the free market
price recently hit $180. Italy and France are
pressing for early action by the EC to increase the
price of gold for transactions between central
banks. West Germany, the Netherlands, and
Britain are opposed to such action, hoping that
the International Monetary Fund will agree to
raise the price of gold later this year.
Italy and France would gain the most pro-
portionately from a price increase. At an official
price of $150 per ounce, for example, their com-
bined foreign reserves would increase by about
$20 billion, or over 130 percent. A strengthened
reserve position would benefit Italy particularly,
greatly improving its credit-worthiness, now
disengagement of forces in the Golan Heights
weakened by a $6-billion Eurodollar debt; it also
would free foreign exchange needed to finance an
expected 1974 trade deficit of $8 billion. Paris
favors the appreciation of gold because, in addi-
tion to welcoming a sharp rise in the value of
foreign reserves, it believes that gold should play
an active role in payments among central banks.
This change would be facilitated by giving gold a
higher official price.
The other three countries reject unilateral
EC action in part as an unnecessary slap at the
US. Bonn also is concerned about the inflationary
impact of increased reserves. The gold question
therefore remains under study in the EC mone-
tary committee.
Last week the EC monetary committee re-
portedly ruled out fixing a new gold price. They
are, however, considering a number of proposals
to internationalize the problem, using a country's
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gold reserves, for example, as collateral for Inter-
national Monetary Fund loans. Next month, the
committee will meet again to narrow the options.
Differences among the EC members and Ger-
many's strong position within the EC make uni-
lateral action unlikely before the June meeting of
the International Monetary Fund in Washington.
If the price of gold is not raised at that time, the
community will probably boost it unilaterally
later in the summer because of the pressure of
rising import costs.
West Europe - US: New Tensions
(American criticism of the EC Nine's decision
last week to pursue a European-Arab dialogue on
long-term economic and cultural cooperation has
met with understanding in some European official
and press circles. The predominant reaction, how-
ever, has been surprise and puzzlement over
"real" US motives, and worry about the implica-
tions for European unity. There are some willing
to concede that the US has been frustrated trying
to achieve meaningful consultations with the
Nine. They nevertheless appear dubious that the
extensive prior consultation the US desires on
community actions can be accomplished without
making a mockery of European efforts at com-
mon policy formulation.
Adverse US reactions to the EC-Arab pro-
posals have tended to be countered by European
arguments that
? the US knew about the European inten-
tion to talk with the Arab states since last
October's summit of the Nine in Copenhagen;
? the US was kept informed of the state of
the Nine's progress on this matter;
? the Nine had deliberately excluded ref-
erences to a European role in a Middle East
peace settlement and had made an ultimate
EC-Arab foreign ministers' meeting condi-
tional on agreements in working-level groups;
? the European effort is as likely to open
differences among the Arabs as it is to unify
them to resist the US mediating role in the
Middle East;
? the dialogue with the Arabs is a long-
term process that could bring to the surface
differences among the EC members them-
selves, and is thus not a real competitive
threat to the US;
? France's partners, while seconding EC-
Arab cooperation, partly in order not to
widen the breach with Paris opened by the
Washington Energy Conference, are still eager
to participate with the US in the work of the
conference-inspired energy coordinating
group.
Behind these arguments lies the fear of
France's partners that angry exchanges across the
Atlantic may be increasingly couched in terms
that will eventually force the Europeans to
choose between "Europe" and the US. They feel
that this "choice" is not only impossible but also
obscures the real issue for them-the struggle
between the Gaullist conception of a "Europe of
Fatherlands" and maintaining, however faintly,
momentum toward a supranational Europe. Not
many European officials are as outspoken as West
German State Secretary Apel, who, in a recent
interview, welcomed France's "plain talking," but
at the same time called for confronting France's
concept of Europe with Germany's desire for a
supranational Europe.
Chancellor Brandt has indicated he would
welcome an early presidential visit in order to try
to overcome US-European differences. The Ger-
mans are clearly not hopeful, however, that the
French will permit an explicit formula for politi-
cal consultations-given Paris' line that such com-
mitments would be tantamount to admitting a
tenth member to the community table.
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CAMBODIA: AN IMPERILED ENCLAVE
1 \Military activity was centered on Kampot ^ the Communists are also making a consider-
again this week as both sides raised the stakes at able investment at Kampot, apparently seeking a
that southwestern city. With the continued arrival victory to help offset their recent poor showing in
of reinforcements from Phnom Penh and else-
where, Cambodian Army strength at Kampot has
increased to over 3,000. These troops are being
supported by aircraft from the nearby base
Ream and a small flotilla of navy gunboatsi
the Phnom Penh region
In a manner reminiscent of the insurgent
at siege of Kompong Cham City last summer, Com-
munist propaganda broadcasts have been warning
,27 11
f
In a significant bid to improve the govern-
men 's situation at Kampot, the army high com-
mand removed the city's inept commander. His
replacement wasted little time attempting to
expand Kampot's tight defensive perimeter. By
mid-week, government troops had made some
gains, but the Communists were still within
mortar range of the city itself. Despite shortages
of food and water, civilian morale is holding up
government de
enders at Kampot of their inevi-
table defeat" and urging civilians to leave the city.1
,Elsewhere, government units in the Phnom
Penh area have reopened Route 4 between the
capital and the highway town of Kompong Speu.
They inflicted some heavy casualties on the Com-
munists in the process. Cambodian Army troops
have also made some progress in clearing Route 1
southwest of Phnom Penh
Domestic Difficulties
.~.,C Schools in Phnom Penh, which reopened on
March 6 after being closed for almost two
months, partially as a security precaution, shut
down again early this week. The latest closure
resulted from the determination of disgruntled
teachers to teach only the first ten days of the
month. Leaders of the national teachers' associa-
tion have vowed to stick to this policy until the
Ministry of Education explains more clearly what
the government is willing to do to meet their
economic demandsl
[Meanwhile, radical students in Phnom Penh
showed signs of stirring up fresh trouble for the
government. They reportedly are pressing for a
commemorative ceremony on March 17 for stu-
dent-teacher activists killed a year ago by govern-
ment security agents. The government has already
indicated that such a ceremony will not be
allowed because it would probably turn into an
antigovernment rally. In addition, the government
has vetoed public observances of the fourth
anniversary of Sihanouk's ouster on March 18.
City officials have been warned, however, that if
local disturbances should occur on either date,
they should refrain from usin firearms quell
the unrest.
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LAOS: POLITICAL PROCRASTINATION
I- 7 Prime Minister Souvanna has encountered
further delays in his efforts to form a new coali-
tion government. Much of the responsibility for
f t in the coalition
n um
tion without some form of prior approval by the
assemblq.
the recent loss o mome
negotiations rests wi the Lao Communist lead-,O Souvanna's evident discouragement over
ership in Sam NeuaJ Chief Pathet Lao negotiator thee events may be tempered somewhat [y the
Phoun Sipraseuth returned to Vientiane on March return to Vientiane this week of the North Viet-
9 after nearly two weeks of consultations in Sam namese ambassador after an effective absence of
Neua, but there are no indications as yet that he nearly 10 years. The Prime Minister will probably
brought back any new proposals that might break view this development as a further indication of
the stalemate.l Hanoi's support for a coalition government and of
L se fire He may
ea
h
"2.1 )Although Phoun is back, there is still no sign
of senior Lao Communist official Phoumi Vongvi-
chit. Souvanna has been hoping that Pathet Lao
chairman Prince Souphanouvong would soon re-
turn Phoun to Vientiane as his plenipotentiary
representative, with the promised list of Commu-
nist candidates for the coalition cabinet and its
quasi-legislative advisory political council. Mean-
while, the Pathet Lao negotiating delegation in
Vientiane, almost certainly taking its cue from
Sam Neua, is now demanding more effective im-
plementation of the procedures for neutralizing
the twin capitals of Vientiane and Luang Prabang
as the price for further progress toward forming
the coalition.1
J The Communists' intransigence has played
into the hands of Souvanna's conservative politi-
cal opponents in the National Assembly. They are
now demanding that the King convene a special
legislative session to address the constitutional
problems raised by Souvanna's plan to form the
new government by direct royal investiturlThe
deputies claim they are not trying to obstruct
Souvanna's scenario for forming the coalition,
and they actually appear to be chiefly concerned
with securing or maintaining positions in the new
government?In any event, the special session may
2?not materialize because the cabinet has advised
the King that the session would be unwarranted
inasmuch as the assembly formally reconvenes in
early May. To make matters more complicated
for the Prime Minister, however, there are indica-
tions that the King may be backpedaling from his
earlier assurances that he would invest the coali-
e aos c
its satisfaction with t
also calculate that the ambassador's reappearance
will inspire the Pathet Lao to be more flexible in
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SOUTH KOREA: ALL'S QUIET FOR NOW
lGovernment confidence that the tough
policies of the past few months would damp
domestic opposition was borne out last week as
Seoul's major universities reopened without in-
ciden
social action groups seeking to increase political
awareness among workers and thus bring them
into the mainstream of osition to Pak's ol-
icies.
The regime's heightened anti-Communist
campaign, which has focused on Pyongyang's
recent sinking of a South Korean fishing boat and
other "provocative" activity, has been a major
factor in defusing the situation: Many critics of
k1the government now believe tha't North Korean
hostility toward the South is undiminished, and
that backing for the President's tough domestic
policies is warranted. These critics include some
senior military officers who had questioned the
need fox draconian tactics against domestic dis-
sidentsIlThe same feeling of solidarity in the face
bf the Northern menace is reportedly evident on
-some campuses and is being buttressed by the
;.regime's continuing hard line in bilateral negotia-
tions with Pyongyang
IAlthough Pak's domestic problems have
eased, he is hardly out of the woods. Some stu-
dent protests are still likely this spring and could
provide a catalyst for political action by intellec-
tuals and Christians) The regime is alert to prevent
disturbances and is quietly arresting students at-
tempting to generate opposition's
Economic Problems Loom
) The regime is giving increased attention to
the plight of the economically hard-pressed urban
workers who have been hardest hit by the
doubling of the cost of living in the past year
,President Pak has taken a number of measures to
meet anticipated demands for higher wages and
better working conditions. His willingness to in-
volve himself directly in labor affairs reflects
growing concern that the demands of urban
workers could easily become linked with calls for
political reform)1ln the past two months, the
,regime has moved to crush efforts by Christian
THAILAND: THE STUDENTS BACK OFF
~` Unlike previous encounters, the Sanya gov-
ernment has gained the upper hand in its latest
wrangle with student activists. Former student
leader Thirayut Bunmi has called off further pro-
test activities pending results of a government
investigation into charges that government of-
ficials burned down a village suspected of sup-
porting Communist insurgents)
yy Thirayut's backpedaling reflects a growing
-Wva eness by the students that official and public
tolerance of their agitation is wearing thin. At the
height of Thirayut's campaign, Prime Minister
Sanya publicly expressed his "disappointment"
with Thirayut's activities, and the police implied
in interviews with Bangkok jour lists that he
might be a Communist sympathizer! While staying
in the background, key generals also let it be
known that the army was ready to crack down on
unruly studen{i
q('' SEven though the government seems to have
cowed student leaders, at least temporarily, it
must steer a careful course in handling the village
incident. If it tries to whitewash the affair, it risks
renewed student agitation; it must also deal care-
fully with military sensitivities, which have been
aroused by student charges of misconducfl
tj, ,. [Although the government's investigation is
)n
t
o ye
complete, press reports indicate that gov-
ernment investigators have already concluded that
the village was indeed a Communist base, and that
local defense volunteers were responsible for
destroying it. If the government accepts these
findings, both sides should be satisfied because
the blame would fall on local officials, and the
army would be absolved of any wrongdoing.
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he relatively moderate program outlined by
Zrim Minister Wilson's minority Labor govern-
ment this week is expected to be supported by
both wings of the Labor Party in addition to most
of the opposition groups. The government's mar-
gin of support will vary, depending on the issue
and the attitude of the opposition parties, with
the views of the Tories of greatest significance for
the survival of the government. ii,
sOn the domestic front, Willson plans to subsi-
dize some food products, improve pensions, and
increase home construction. He promised to re-
peal the Industrial Relations Act detested by the
unions and replace it with a conciliation and
arbitration service. The only nationalization sug-
gested was a pledge to prepare proposals for pub-
lic ownership of development land. Wilson did
not propose to nationalize any aspect of the
North Sea oil operations, although he did call for
"a much greater public share in the benefits."'
e . 3, The most controversial measure in the pro-
gram was Wilson's pledge to seek a "fundamen-
tal" renegotiation of EC entry terms and to put
the results before the British people. Labor's
strategy with respect to the EC is still unclear, but
Foreign Secretary Callaghan is scheduled to go to
Bonn next week to confer with Chancellor Brandt
and Foreign Minister Scheel, probably on EC mat-
ters. According to a press report, the British in-
tend to be present at all EC meetings, but they
would not approve any major political decisions
until the government works out its European
policies]
- i The first test of Britain's intentions may
comb at the meeting of EC agricultural ministers
that will probably take place next week. The
Community must reach agreement on farm prices
by April 1, and the French and German govern-
ments, in particular, are under strong pressure
from farmers to gain new--and higher-prices
quickly. Should the UK block agreement, consid-
erable turmoil among the farmers is likely and the
governments could take unilateral measures that
might-seal the fate of the common agricultural
policy
;LC agricultural commissioner Lardinois has
visited London and tried to explain various com-
promises that could satisfy UK interests without
wrecking the community's farm policy. Wilson
may try to take advantage of these, as well as
attempt to win agreement in principle for an
overall readjustment of Britain's financial burden
under the common agricultural policy:
On other foreign policy issues, Labor prom-
ised "full support" for NATO and the main-
tenance of "a modern and effective defense
system," but with defense expenditures reduced
after consultation with Britain's allies. The gov-
ernment also will "support the search for a just
and lasting peace in the Middle East" based on
UN resolutions calling for the withdrawal of Is-
raeli forces from occupied Arab territories.
lWilson can count on the support of the
Li'befals, as well as the Scottish and Welsh nation-
alists, for most of his domestic program, although
the latter may not always show up to vote on
issues not directly related to their own interests.
They also may become uncooperative if Wilson
does not meet their demands for increased self-
government in Scotland and Wales. Labor is ex-
pected to move cautiously on nationalization, in
view of the strong opposition of Tories, Liberals,
and the Ulster Protestants whose combined votes
could bring down the government.]
On the EC membership question, the Liber-
als and the Tories, with the exception of a few
followers of Enoch Powell, would oppose with-
drawal or any tough British stand. The national-
ists and the Ulster Protestants would favor with-
drawal. Wilson may not be able to count on all of
his own parliamentary Labor Party to support his
EC plans. There are now 75 Labor pro-marketeers
in parliament and if they defy party discipline, as
they did several years ago over the same issue,
they would bring down the government if the
issue was withdrawal from the EC.' ,t"--iWith the exception of a few Liberals who
would like to see an election sooner rather than
later, the bulk of the opposition members of
parliament are like) to coo erate with Wilson
over the near term.
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USSR-Japan
SIBERIAN DEVELOPMENT MOVES FORWARD
7 The USSR and Japan initialed a document
Ylat week that could pave the way for one of their
biggest economic deals since the end of the Sec-
ond World War. If a final agreement is reached,
the Japanese will provide a credit of more than
$400 million to help finance a coal mining project
in Yakutsk in eastern Siberia. In return, the Japa-
nese will get more than five million tons of coking
coal annually for 16 years beginning in 1983.1
1 -1 (The terms of the bank loans and the price of
he coal are among the important details that still
have to be worked out at negotiations that will
begin in Tokyo later this month. The Japanese,
who found the Soviets more eager to negotiate
than before, are con, ident that a final agreement
will soon be reached.
jC1 tThe Yakutsk coal project has been the most
promising of the five prospective Siberian pro-
jects. The outlook is not so favorable for joint
development of Siberian oil, gas, and timber. The
project with the next best chance of success in-
volves exploration for Sakhalin oil. Soviet trade
and banking officials are expected to go to Tokyo
I to determine the amount of capital that Japan
will provide for offshore exploration. The USSR
has been asking for $200 million in equipment
and services, and the Japanese have been offering
substantially less [The agreement on the Siberian coal project
is the first serious indication that the long dead-
lock over the plans to exploit Siberian resources
may be breaking. General Secretary Brezhnev sent
Prime Minister Tanaka a message urging joint de-
velopment in Siberia just before the Japanese
delegation arrived in Moscow to negotiate the
coal agreement. Soviet press commentary has also
chided the Japanese for delaying decisions on
Soviet-Japanese economic relations. This com-
mentary strongly suggested that the Soviets were
piqued by the fact that Tokyo's relations with
Moscow were taking a back seat to its relations
with Peking
Nevertheless, serious obstacles remain. The
~Ja~pa ese need US equipment to undertake the
Yakutsk oil and gas project, but US participation
is threatened by the prohibition of Export-Import
Bank financing for the Soviet Union. The Soviets,
for their part, appear to have some trepidation
about sharing their most vital resources. Moscow,
moreover, believes that Japan may be the country
that is hardest hit by the energy crisis and that it
will eventually have to come to terms with the
Soviets on a long-term basis.
Japanese Interested In Siberian Resources
asF/e
"Yakutsk
Oland
`Vffshore Oil
.,R
?,,;"and as
Fiifd
0 500
NAUTICAAL LM MILES
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BULGARIA TIGHT NS DISCIPLINE
The Bulgarian arty) has 4 een predictably
prorpt in supporting the Soviet idea that detente
calls for greater ideological discipline among Mos-
cow's East European allies. Now Sofia is having
trouble implementing the Soviet guidelines.
At the Prague conference of propaganda
specialists in January, for example, party secre-
tary Konstantin Tellalov strongly endorsed the
Soviet call for an "ideological offensive" which,
he said, should focus on the weaknesses of the
capitalist system. In mid-February, a party ple-
num exhorted the faithful to guard against the
dangers inherent in detente from "both the right
and the left," and to understand that "there is
not, and can never be, peaceful coexistence in
ideology."
Converting such exhortations into action,
however, is apparently another matter. In the
main speech at the plenum, party secretary
Aleksandur Lilov admitted that there is "weak-
ness" within party ranks, and scored those "even
in high positions" who hold mistaken views on
what detente and cooperation with the West is all
about.
Bulgarian propaganda subsequently took a
slightly harsher tone toward the West, though it is
still less caustic than it was a year ago, and news
features are focusing on the ills afflicting capital-
ist societies. Commentaries on some US policies,
however, are characterized more by lack of bal-
ance than by outright attacks on US actions.
Additionally, Sofia has begun more careful
screening of applicants for foreign travel, in keep-
ing with Lilov's call to mobilize Bulgarians as
traveling salesmen for socialism. There are, how-
ever, no indications that prospective travelers are
receiving any guidance on how to propagandize
socialist achievements abroad. On a personal level,
the drive has moved some Bulgarians to reduce
their contacts with US Embassy officials.
A national party conference is scheduled for
later this month, ostensibly to review progress
since the party congress and to discuss material
and cultural standards. The Bulgarian leaders, in
hopes of ending the current indecision among
party officials at all levels, may use the confer-
ence as a forum in which to spell out the details
and implications of the drive for greater ideologi-
cal discipline.
USSR-FRANCE
1Soviet-Frenh relations remain ruffled, Presi-
dent Pompidou's 24-hour visit to the USSR not-
withstanding. Both Pompidou and Brezhnev
lauded the exchange of views, but the absence of
the usual communique and the description of the
talks as "frank" and "realistic" suggest that sig-
nificant differences remain.
The European security talks at Geneva fig-
ured prominently among the wide variety of in-
ternational and bilateral topics discussed. Pompi-
dou agreed with Brezhnev that the conference be
concluded rapidly, but refused to endorse a sum-
mit-level finale unless it was justified by prior
progress. Although the Soviets had received fore-
warning of Pompidou's views during Gromyko's
visit to France last month, Pompidou's position is
still a painful rebuff to Brezhnev who has put
great personal store in the conference and in a
grande finale for it. As for the Middle East prob-
lem, Pompidou is said to have merely "taken
note" of Brezhnev's hints that France should in
some way associate itself with a peace settle-
ment. 25X1
Brezhnev and Pompidou
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COMMUNIST NUCLEAR POWER
The Soviet nuclear power program, lagging
far behind the US effort, is finally beginning to
get off the ground. Although nuclear power pro-
duces only a minute portion of electric power in
the USSR, its share is growing rapidly as the
result of a sizable construction program now
under way.
The first 440 megawatt reactor at the Kola
nuclear power plant on the Murmansk Peninsula
went into operation last year, bringing the total
capacity of Soviet nuclear power plants to 2,400
megawatts-about 10 percent of US capacity. So-
viet nuclear power capacity should double this
year with the addition of a second 440 megawatt
unit at the Kola plant and the planned start-up of
two 1,000 megawatt units at the Leningrad nu-
clear power plant.
Moscow is concentrating its nuclear power
plants in the European USSR, where 80 percent
of Soviet electric power is consumed. This will
reduce the need to transport fuel from Siberia for
conventional electric power generation and relieve
the pressure to develop the capability of trans-
mitting Siberian power to the European USSR.
Each 1,000 megawatts of nuclear capacity in the
European USSR will reduce the fuel needed from
the east by the equivalent of 2 million tons of
coal per year.
The USSR is also assisting Eastern Europe in
nuclear power plant construction. Nuclear capac-
ity in Eastern Europe, however, will remain neg-
ligible for some time.
? A 70 megawatt nuclear power plant
built with Soviet help has been in operation in
East Germany since 1966, and a Soviet 440
megawatt reactor began. operation there at the
end of 1973.
? Soviet technicians helped complete a
150 megawatt power plant in Czechoslovakia
in 1972, and nuclear power plants with Soviet
440 megawatt reactors are under construction
in Bulgaria, Czechoslovakia, East Germany,
and Hungary.
? Poland and Romania are scheduled to
have Soviet 440 megawatt reactors by
1970
1973
1974
1975
1980
Installed nuclear power
(Plan)
(Plan)
(Plan)
capacity (MN/)
925
2,400
4,864
8,000
30,000
Production of electricity
(billion kwh)
3.5
Share of total electricity
0.5
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The Soviets have been unusuallyy frank in
o
sing the fate of their latest series of Mars
discl
space probes. Mars 6, the last of the four probes
to reach Mars, passed the planet on March 12 and
released an instrument capsule in an attempt to
obtain data and TV pictures from the planet's
.7 / Two Soviet nuclear-powered submarines,
one V-class attack and the other a C-class cruise-
missile unit, were sighted in the Indian Ocean on
March 7. This is the first time th t submarines of
these types have been sent there. 1
surface. The instrument capsule transmitted data `~ 2. jThe submarines are believed to have left
during its descent but, according to a Tass an- Northern Fleet waters in January. When last
nouncement on March 14, radio contact broke sighted, they were in the Gulf of Aden headed
off just before it reached the surface. toward the Somali port of Berbera, where they
may take on fresh provisions. After operating in
Three days earlier, Mars 7 passed the planet
and also attempted to land an instrument capsule.
According to the Soviets, a malfunction occurred
and the capsule flew by the planet instead of
descending to the surface.
Last month Mars 4 and 5 arrived, intended
to orbit the planet, but Tass reported that only
Mars 5 went into orbit. These spacecraft were to
photograph Mars and relay data back to earth
from the instrument capsules to be released by
Mars 6 and 7.
The Tass announcements are terse and do
not provide any details concerning the nature of
the failures. In recent years Soviet scientists have
become increasingly willing to discuss failures in
the space program at international conferences,
but Tass has rarely admitted such failures.(
the Indian Ocean, the two submarines probably
will proceed east to become the first in their
classes to operate with the Soviet Pacific Fleet)
1 3 VThe C-class submarine, which has been used
to track US carriers in the Mediterranean, carries
eight SS-N-7 anti-ship missiles. These missiles can
be fired from underwater, using the submarine's
own sonar for target detection and tracking. The
V-class carries up to 32 torpedoes and is used
primarily for anti-submarine operations:)
The Soviet Indian Ocean naval group also
includes two F-class attack submarines. The
Soviet surface force there was recently augmented
by a Kresta II - class guided-missile cruiser, the
first time a ship of this class has been in the
Indian Ocean. In addition, the surface force in-
cludes a destroyer, two ocean escorts, two fleet
minesweepers, an amphibious ship, and several
C-class Cruise Missile Submarine
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PORTUGAL: AFRICAN POLICY FUROR
1 ' The internal dispute over Portugal's African
policy continues to send shock waves through the
Portuguese establishment. A four day military
alert, which confined troops to their barracks,
was lifted on March 12, but younger officers who
agree with General Spinola on the need for
greater autonomy for the overseas territories, are
being quietly posted as far away from Lisbon as
possiblei.
a
muc ecora a colonel who served wit~c-
tion under Spinola in Portuguese Guinea has been
reassigned there for a fourth tour. Another
Spinola supporter has been suddenly withdrawn
from the Army Staff College and assigned to an
obscure post in the northwestern corner of
Portugal. He reportedly was the spokesman for a
group of officers at the college who refused to
support a plan last December for a government
take-over by ultrarightistsl
1 ' \The transfer of these officers, and others like
them, suggests that rightists are attempting to
undercut Spinola's support within the military.
Once this is achieved, they may feel more secure
about disposing of Spinola himself.1
?7 [Spinola is at the center of the controversy
because of a book he published last month. It
argues that Portugal's current African policy
isolates it from the rest of the world, is too
expensive, and, as a practical matter, is not
working
7:a ( His thesis has found considerable support in
the officer corps, particularly among the junior
officers, who are tired of repeated African tours.
Reformist circles also are backing Spinola, along
with pragmatists who are concerned over the large
percentage of the national budget that is spent on
defense-.1
`) [Prime Minister Caetano has been trying to
appease both sides in the dispute but the pros-
pects for a compromise do not seem good, now
that the debate has been made public. A cabinet
reshuffle and changes in military commands may
be necessary to restore unity within the govern-
ment's
The reaction from Angola, one of the over-
seas territories, is mixed. Most civilian and mili-
tary leaders seem relieved that Spinola's argument
for self-determination has run into trouble. Some
officials, concerned about a regression to the
Salazar era, say that Portugal's African policy can
never be the same now that Spinola has spoken
out. The media in Angola have supported Prime
Minister Caetano's handling of the affair, al-
though one editorial criticized the National As-
sembly for endorsing Caetano's actions without
having fully debated the issues.
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SPAIN: CHURCH-STATE TENSIONS RISE
96, 1 pastoral letter calling for greater autonomy
for the Basque provinces has caused a major dispute
between church and state leaders. The pastoral,
which was authorized by Bishop Anoveras of Bilbao
and read from the pulpit on February 24, directly
challenged Premier Arias. In a speech to the Cortes
on February 12, Arias had warned the church to stay
out of politicsC
jThe Anoveras case has created a flurry of nego-
tiations involving the government, the Spanish Epis-
copate and the Vatican. The government wanted to
deport Anoveras, who was under house arrest during
the first week of the crisis, but was unable under the
terms of the Concordat to act against the bishop
without the Vatican's permission"(
h_, The government claims it has been in constant
communication with the Vatican. Police surveillance
around the bishop's house was withdrawn after a
hurried trip to Rome by the resident papal nuncio.
Anoveras was allowed to attend a meeting of the
Spanish Episcopate in Madrid, following a statement
on March 9 denying that Anoveras had any intention
of attacking national unity. The statement, which
can be loosely interpreted as an apology, may help
defuse the crisis]
)G1 The church has not backed down, however,
from its traditional stand on church-state relations in
Spain. The statement reiterated a number of basic
prerogatives enjoyed by the Spanish church under
the terms of the Concordat. The government was
reminded, for example, that each bishop had full
liberty to administer his diocese, to preach the gos-
pel based on concrete temporal problems, and that
the Vatican had the exclusive right of judging the
pastoral actions of bishops(
'the government has not yet responded to the
statement, but it may reply after a cabinet meeting
on March 15. It is widely rumored that Franco has
been personally involved in the case, and he is said to
have been responsible for mediating the deep differ-
ences that have been reported in the cabinet over
this issue. The Anoveras case, therefore, has not only
disrupted church-state relations, it has again brought
to the fore the question of who will arbitrate dif-
ferences in the government after Franco is
gone.
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COMPROMISE "A LA BELGE"
IThe Belgian parliamentary elections of
March 10 checked and partially reversed trends
set during the past two elections. The meteoric
rise of the ethnic parties was halted, and the three
old-line parties more or less held their own. These
results could be interpreted to mean that eco-
nomic issues have overtaken regionalism as the
most important concern in Belgian politics. It is
more likely, however, to reflecta general feeling
that the time has come to reach a compromise "a
la beige" on the central problem of regional au-
tonomy, which threatens to tear the country into
three insignificant entitiel
ernized" platforms in which they stressed their
commitment to increased autonomy for the re-
gions. Unlike previous elections, moreover, pre-
liminary assessments indicate that local issues and
personalities had a strong impact on voting pat-
terns. The realization that essentially parochial
ethnic parties are less able to cope with the eco-
nomic and social problems manifestly besetting
the country undoubtedly also played a part. In
this vein, the looming showdown between the
Belgian Government and the multinational oil
companies may have influenced voters to opt for
the more "national" parties
1 Ironically, the moderate Social Christians,
wI o had opposed early elections, were the only The King, after consulting party leaders, will
party to benefit. The Social Christians scored name a formateur of a government-probably a
gains in both Flanders and Wallonia for the first Social Christian/Socialist coalition. Although the
time in 16 years and increased their parliamentary Liberal votes are needed to produce the two-
lead by 5 seats. Thus strengthened and virtually' ''thirds majority essential for regional reforms, the
assured of leadership in the next coalition, the conservative views of the party are unpopular,
Social Christians are in a good position to domi- especially with the Socialists. The chairman of the
nate the Socialists, in spite of the latter's greater y Flemish wing of the Social Christians has already
party disciplined announced that his party has "written off" the
, - Liberals as a coalition partner)
,, i The Socialists who
ambled t
i
g
,-
o ga
n domi
nance in a new coalition by bringing down the
first Socialist-led government in 15 years, lost two
seats, widening the gap between the two major
parties to 131
The linguistic parties, catering to ethnic de-
manls for more rapid and far-reaching regional
,autonomy, failed to increase their strength. This
mediocre showing will decrease their chances of
paricipating in the next governrnenf]
,)]The chastened Socialist Party will have less
authority to push its economic reforms as a pre-
condition to coalition, and there will be pressure
from its left wing to stay out of the new govern-
ment. However, the left wing has been weakened
by Social Christian gains in Wallonia, and many
Socialists, disgruntled by the lukewarm response
to the left wing's radicalized platform, may favor
cutting their losses by staying in the government.i
lThe swing back to the old-line parties may fr )4he alternative to a "traditional" coalition
repr4sent a vote of confidence for the relatively would be a grouping of Social Christians, Liberals
moderate plans for regionalization embodied in and ethnic parties. Such a coalition was rejected
the December 1970 constitutional reforms. The by the Wallonian wing of the Social Christian
Socialists, who have most to lose from radical3) Party in January when Leo Tindemans was
-decentralization and most to gain from concen- charged with putting together a makeshift govern-
tration on national social and' ' economic issues, ment in order to stave off elections. Unless the
have interpreted the results to mean that regional- Wallonian wing were willing to give ground, an-
ization is no longer the cornerstone of Belgian other attempt along these lines could exacerbate
nolitirs i .. .. -.
The three old-line parties successfully dulled
the edge of ethnic rivalries by presenting "mod-
wings and bring on a complete split. In any event,
a government comprising such disparate groups
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VAW SEUNb I IWO,
'[/,Libyan Premier Jallud's recent junket to
European capitals was motivated largely by com-
mercial considerations. As a result of the national-
ization of some foreign oil interests, the govern-
ment is faced with the task of marketing up to 70
percent of Libyan crude oil output. Moreover,
unlike many other major oil producers, Libya
continues to show strong interest in barter deals]
In recent months, preliminary agreements,
Sweden, and negotiations are in progress with
1J' West Germany. In Eastern Europe barter arrange-
ments with Romania and Bulgaria have been re-
newed and new barter contracts have been signed
with Poland, Czechoslovakia, and Hungary.(
JJ~ ` Libya's strong commitment to the principle
df dil barter sales predates the October war. Dis-
illusionment with cash sales stemmed initially
from the loss of foreign reserves resulting from
the US dollar devaluation. Subsequently, nation-
alization of the BP/Bunker Hunt oil concessions
and the ensuing threat by the former operators to
take legal action against the sale of nationalized
oil spurred a Libyan search for barter markets.
The search accelerated last summer following the
Libyan take-over of 51 percent of the assets of
the other foreign oil companies operating in
Libya. By the time war broke out, Libya had
concluded oil barter deals with the USSR,
Romania, Bulgaria, Brazil, and a number of devel-
oping countries. Libyan representatives also had
visited state oil companies in France and Italy
seeking to arrange long-term agreements covering
the exchange of Libyan oil for capital goods,
technical assistance, and arms. 25X1
`% / JIn view of the general softening of oil prices
and Libya's cavalier attitude toward contracts,
some of these barter deals are likely to fall
through. Libya continues to shop among the
developed countries for the goods it wants, and it
may renege on some contracts in favor of others
for either economic or political reasons. Arrange-
ments with the East European countries-with the
possible exception of Romania, which offers
advanced oil technology-will be particularly
vulnerable because of Libya's low opinion of
most East European goods. The developing coun-
tries that have almost nothing to offer but polit-
ical support may fare worst of all, especially if
Libya achieves better accommodation with other
Arab states
Italy and France, however, may reap fringe
benefits. In the wake of recent barter agreements,
affiliates of both the Italian and French state oil
firms have secured sizable new oil concessions in
Libya. The agreements, which involve joint opera-
tion with the Libyan state oil company, will
entitle the European firms to about 20 percent of
any oil discovered. plus a preferential claim on
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OMAN-IRAN: TIGHTER BONDS
Ties between Muscat and Tehran were
strengthened significantly as a result of Sultan
Qabus' visit to Iran earlier this month. The Shah
gained the first public commitment by another
Persian Gulf littoral state to his call for regional
security cooperation).
In the final communique, the two countries
announced their determination to act jointly to
meet any threat to the security of either and to
keep the Strait of Hormuz and adjacent seas free
for navigationj `I The statement is a considerable
victory for the Shah whose efforts to conclude
some type of mutual security arrangement with
other gulf leaders have been unsuccessful. Qabus
UNITED 4R'AB
Abu Dhab ,
SAUDI ARABIA
Dhofar
YEMEN
(Aden)
Salala h
Muscat
is well aware that his closer cooperation with the
Shah risks alienating his Arab neighbors, espe-
cially Saudi Arabia, who are suspicious of Te-
hran's intentions in the lower gulf. The Sultan has
an overriding interest, however, in ensuring that
more Iranian help will be available if needed to
combat leftist guerrillas in Oman's Dhofar Prov-
ince. An Iranian force of some 1,400 men is
currently in Oman supporting the Sultan's effort.;
he Iranians are said
to have accepted Muscat's claim to the Quoin
Islands and agreed that the waters between the
islands and the Omani mainland should be con-
sidered Omani internal waters. Both points had
been causes of disagreement between the two
countries during median line discussions in
Geneva last fallI
- In addition, Iran agreed to establish an
Iranian bank in Muscat, to initiate weekly air
service between the two capitals, and to provide
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Fighting on the long-troubled Iran-Iraq bor- ination of Luis Weckmann, Mexican ambassador
der as virtually stopped, following the cease-fire to Bonn, as the observer, but Tehran has not yet
arranged last week by Iraqi Baathist leader Sad- responded\[From 1967-69 Weckmann served as
dam Husayn al-Tikriti and the new Iranian ambas-7 his country's envoy to Israel, and the Iranians
sador in Baghdadi' Forces of both sides remain may fear he will lean over backwards to prove he
concentrated in the area, however, and in the is not anti-Arab.
absence of a broader rapprochement, new border
skirmishes could occur at any time),
r~,(t (Diplomatic relations between Baghdad and
eh an, re-established in October, have remained
intact despite the major border clash a month ago
and the serious fighting at scattered locations last
week. Representatives of the two countries have
maintained a dialogue and were finally able to
agree on the wording of a UN Security Council
consensus statement, issued in response to Iraq's
formal complaint. The two sides may begin nego-
tiations soon on border demarcation and other
fundamental problems, but real progress is likely
to be slow because of historic enmity and con-
tinuing mutual suspicion j
((1 Iran would probably like to keep Iraqi forces
occ pied on the border, believing that it would
then be more difficult for Baghdad to settle its
Kurdish problem and concentrate on subversion
in the Persian Gulf and within Iran. At the same
time, however, the Shah is anxious to establish his
good faith and fairness in dealing with Iraq in
order to prevent erosion of his carefully nurtured
policy of cooperation with the Arabs. Moreover,
the restoration of relations between the two
neighbors was widely popular among Iranians
who see it as opening the way for pilgrimages to
the most important Shia shrines, which are in
Iraq. These considerations give Tehran a real in-
terest in limiting the consequences of border
clashes
1k Meanwhile, UN Secretary General Waldheim
is mmoving to implement the February 28 Security
Council consensus statement, which called for a
report on the border situation by an independent
observer. Baghdad has approved Waldheim's nom-
_ f
The Iraqi ii ~bvern ent on March 11 moved
to irhpose its plan for limited self rule on the
Kurdish minority in northern Iraq. Baghdad acted
amid considerable fanfare, when it became clear
that month-long negotiations with Kurdish lead-
ers had broken down. March 11 was the deadline
for granting autonomy set by an agreement in
1970 between Baghdad and the Kurdish leaders.
The Kurds, led by Mulla Mustafa Barzani, have
publicly rejected the government's plan as "inade-
quate."
The autonomy law provides for limited self-
government in the area of northern Iraq having a
Kurdish majority-to be determined by a census
yet to be taken. The autonomous region, adminis-
tered from its capital in Irbil, would continue to
be an integral part of the Iraqi Republic.
The Kurds objected particularly to articles
that limit their judicial independence, and allow
the Iraqi president to dissolve the Kurdish legis-
lature, and appoint and dismiss the Kurdish chief
executive. They also find unacceptable provisions
for merging Kurdish police and security forces
into the government's forces and for a national
supervisory authority with the power of final
decision over the Kurdish government.
The imposition of the autonomy plan
prompted a number of serious local clashes.
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Both sides are reported to be highly mobil-
ized and ready for combat. The government nor-
mally has at least two mountain divisions de-
ployed in the Kurdish area, and it has been devel-
oping an airmobile strike force that can be sent in
by helicopter. During recent weeks, the govern-
ment has also moved additional forces, including
armor, into the northeast, possibly to try to cut
off supply routes from Iran.
Heavy fighting could break out at any time,
but both sides appear to be moving cautiously.
Barzani has ordered his forces to take defensive
action only, and the government forces appear to
be limiting themselves to clearing the Kurds from
sensitive areas and to taking over strategic oosi-
SOUTH AFRICA: THE MIDAS TOUCH
Proceeds from old sales la 0t year reached a
record $2.6 billion, paying half of South Africa's
total import bill. The steep rise in international
gold prices since mid-January portends a healthier
South African balance of payments this year,
despite a tripling of oil import costs.
Last year, South African mines produced
852 metric tons of gold, of which Pretoria mar-
keted about 824 tons at prices averaging $95-100
an ounce. Foreign reserves, nevertheless, were
drawn down 44 percent in the last half of the
year to offset an expanding trade deficit and
growing movements of capital abroad. In January
and February 1974, the steep rise in gold prices
to as much as $184 an ounce reversed the foreign
exchange drain without an increase in the volume
of gold sales.
South Africa's oil bill in 1974 will probably
more than triple to at least $1 billion. South
Africa relies on imports for all of its oil needs,
which come to about 350,000 barrels per day,
including supplies for re-export. If strictly en-
forced, the Arab embargo would cut the oil im-
ports by about 50 percent, but Pretoria's readi-
ness to pay the going international prices has
minimized the dropoff. Gasoline rationing, which
had been scheduled for March 1, has been post-
poned indefinitely.
The ballooning oil costs on top of expected
strong demand for other imports could push total
import growth in 1974 substantially beyond last
year's 22 percent expansion. All in all, South
Africa's total foreign payments will probably ap-
proach $8 billion. Capital movements into the
country and earnings from exports other than
gold will cover about $4.5 to $5.0 billion. Pre-
toria can make up the difference without drawing
on foreign reserves if gold sales from current
production bring at least $115 an ounce.
South African gold production this year is
projected at about 820 tons, almost 60 percent of
world gold output. Demand for gold will be bol-
stered by continued uncertainty in money mar-
kets, as the energy crisis and international in-
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ETHIOPIA: BACK TO WORK
(( ~~'~ tei f2 C ( S
The ending of a fouday-old general s rike
on March 10 removed one direct threat to the
government, but continuing unrest among other
dissatisfied groups will prevent an early return of
stability. The attitude of the military remains the
critical factor. At present, it is not completely
unified in its aims, but a majority of those who
participated in the rebellion now appear to be
supporting the new government.
The agreement between the government and
the Ethiopian Labor Confederation promises im-
portant concessions to all the workers' demands,
but it will be some time before any tangible
benefits reach them. The government agreed in
principle to establish a minimum wage higher
than the current average wage.
The strike was free of violence; workers
heeded their leaders' request to stay off the
streets and avoid trouble. Twice during the week,
student demonstrations were dispersed by the
police. The students are continuing calls for elec-
tions and the ouster of Prime Minister Endalkat-
chew.
Meanwhile, elementary and secondary
school teachers are continuing their strike, now in
its third week, until the government meets their
demands for higher pay and a review of educa-
tional policies. The government agreed as part of
the settlement with the labor confederation to
reach a decision on the teachers' demands before
March 19. 1
Emperor Haile Selassie continues to demon-
strate a willingness to make concessions. At a
news conference on March 11, he said he would
accept the formation of political parties, although
he considered a single party system best for Ethi-
opia. He said the monarchy will remain as a
symbol of national unity, but indicated that the
emperor's powers would be adapted to the new
political realities. Haile Selassie also said promised
constitutional changes would be decided by a
special committee being set up by the Prime Min-
ister.
Moderate military leaders probably see some
value in Endalkatchew's government. Its members
come from the elite group that has traditionally
ruled Ethiopia, and therefore may have some
chance of overcoming resistance from the die-
hard conservatives. At the same time, the new
ministers are mostly younger men who support
progressive reforms.
Militants within the military, however, view
the new cabinet as only a slight improvement over
previous ones; they consider the new ministers
too closely identified with the conservatives.
The moderates are working to bring the mili-
tants under control. A radio broadcast in the
name of the armed forces on March 10 disclaimed
responsibility for antigovernment leaflets circu-
lating in the capital. The broadcast warned that
direct action would be taken against any indi-
vidual circulating leaflets suggesting the army
would support a popular rebellion against the
government. Continuing unrest in the air force,
especially among some enlisted men, poses the
most immediate test of the moderates' ability to
control the situation.
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ruatemala remains tense in the aftermath of
the disputed presidential election. Police have
been able to control demonstrations thus far, but
government officials fear that student protests
may spread and become more violentl
\The assassination of a leftist political activist
in the capital on March 11 by gunmen believed to
be sponsored by the government is adding to the
tension.IIThe victim, a former Communist Party
.official and, more recently, head of a university
legal aid office, had been fingered for elimination
by the government some months ago) The murder
provoked anger among students, who clashed
with police after the victim's funeral the next
day. The government is trying to convince the
public that the murder was done by leftists to
produce a martyr[
had before the killing. He added that assassination
or kidnaping attempts might be made against gov-
ernment officials.
Meanwhile, General Efrain Rios Montt, the
defe'ated presidential candidate, is saying publicly
that protesting the government fraud is futile. At
a news conference on March 13, he said he was
retiring to private life, adding that he would not
support a popular uprising or a coup in his favor.
Privately, however, he may be urging his followers
Jon. If low-key demonstrations can be maintained
over an extended period, unrest may grow'?
`l'ower ranks of the army, he would have only an
outside chance of provoking a coup on his behalf.
President Arana has the firm backing of the top
generals, and remains determined to turn over the
presidency to General Kjell Laugerud on July 1.1'
1 -_ Shortly after the assassination, a high-level)l
'government official told the US Embassy that
agitators intend to arm students with pistols and
Molotov cocktails. The official stated that police
had orders to control disturbances with as little
use of force as possible, although the government
fears the students will now seek conflicts with
police, rather than try to avoid violence as they F
Presidential office
Object of dispute
Arana will call on the military to assume
control of the government only if public order
deteriorates seriously.
~If the
tinny oes in ervene, it wou pro a y install a
general of Arana's choosing as a caretaker chief of
state for an indefinite period. Arana, would, in
effect, retain control:
i`17fWhile tension grew during the week, the
administrative details of the election were cleared
away in short order. The congressional commis-
sion set up to recount the vote announced its
findings on March 11 over the protests of nine
opposition members who resigned in anticipation
of the results. To the surprise of no one, the
commission ruled Laugerud the winner. On March
12, the Congress chose Laugerud over Rios, com-
Il `$ pleting the formalities required by the constitu-
;I tion since no candidate was credited with a malor-
ity, of the votes.
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Cordoba Province
BATTLEGROUND FOR PERON'S POL CIES
The Peron governmbnt continues t have
scant success in defusing the inflammatory situa-
tion in Cordoba, where intermittent violence ex-
tended into a second week, following a police
revolt that toppled the leftist administration of
the province. The appointment of a rightist fed-
eral trustee or interventor to take over the prov-
ince may provoke increased violence and clashes
between left and right. It will certainly evoke
strong protests from left-leaning Peronists, and
possibly new defections from the President's fac-
tionalized movement.
The government interventor, Duilio
Brunello, comes from the Ministry of Social Wel-
fare where he was closely associated with Minister
Lopez Rega, a confidant of Peron and an arch-
enemy of the left. Brunello, a Peronist since 1945
and a relative unknown on the national political
scene, is likely to have difficulty restoring order.
His links to Lopez Rega, who, along with Vice
President Madame Peron, may have had a hand in
influencing Peron's decision, will make him anath-
ema to leftists of all stripes. Moreover, Peron's
choice may rankle opposition Radical Party
leaders who suspect Lopez Rega of playing a
major role in the bungled Cordoba affair.
The first reaction to the naming of an inter-
ventor was the resignation of Cordoba police
Ex-Governor Obregon Cano
chief Navarro, whose ouster of Governor Obregon
Cano set in motion the chain of events that led to
federal intervention. Navarro's decision to step
down was not unexpected, since Peron apparently
bowed to opposition demands that the instigator
of the maladroit insurrection be tried for sedition.
It is still unclear, however, whether Peron really
intends to sacrifice Navarro or to find some face-
saving means to avoid aggravating political
passions with a trial. In any case, Navarro
achieved what he set out to accomplish-to bring
down the leftist-controlled labor and government
administrations in Cordoba.
Peron's handling of the Cordoba situation is
obviously uppermost in the minds of socialist-
oriented Peronist youth, who have issued their
harshest criticism of his policies to date. At a rally
of almost 50,000 young Peronists commemo-
rating the first anniversary of President Campora's
election last March, speakers were critical of the
government, and particularly of conservatives
closely aligned with Peron. The large turnout
shows how unsuccessful Peron has been in ousting
the leadership of the "revolutionary tendency" of
Peronist youth from the main body of his young
leftist supporters and replacing them with leaders
more amenable to his control.
Meanwhile, bombings and other violent dis-
turbances have continued to rock the provincial
capital as extremists seek to maintain tension in
the highly politicized atmosphere of the city.
Members of the outlawed Marxist People's Rev-
olutionary Army-Argentina's largest and most
active terrorist organization-reportedly have
been involved in some of the turbulence.
The prospects for an early end to the vio-
lence will depend largely on how the federal
administrator chooses to deal with the precarious
situation in the province. If he fails to come to
grips with the problem through conciliation, the
government may be forced to call on the armed
forces to restore order. Such action, which would
be distasteful to the military, would also increase
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-IPresident Carlos Andres Perez was in-
augurated this week in ceremonies attended by
delegations from over 76 countries, including
large representations from the Communist states.
Reports that leftist extremists would attempt to
mar the orderly transfer of political power from
the outgoing Social Christian party to Perez's
Democratic Action Party proved unfounded.;
In his inaugural address, Perez focused on
oil, the issue of most concern to his administra-
tion and to Venezuelans. As expected, he em-
phasized the necessity for an early reversion of oil
company concessions to the state but avoided
setting a rigid timetable for such action. In sharp
contrast to recent statements on the subject by
the outgoing Caldera administration, Perez'
remarks were non-polemical. Perez promised that
reversion would be speeded up, but he cautioned
that the "softer the tone of our voice, the more
likely will we be heard and understood." Perez
President Perez
and his predecessor
said that he intended to go forward with his plan
to appoint a broadly based commission to study
possible alternatives for the operation of the in-
dustry. In a conciliatory gesture to the opposition
parties, Perez added that the Congress would ob-
viously have the last word and could debate his
government's proposals; this would amount to a
formality, however, because his Democratic Ac-
tion party has an absolute majority in both
houses of Congress
('y In a private conversation this week with a
visiting member of the US delegation to the in-
augural, Perez said that his government would
welcome concrete recommendations from the US
oil companies concerning the terms of a new
working arrangement with the government. He
promised that his administration would respond
to their proposals and would begin negotiations
regarding their present concessions and their
future role in the exploitation and development
of new petroleum reserves in the country(
0j Although US oil companies have avoided
public comment on the future of their investment
in Venezuela, in private statements they have
been optimistic that they will be able to secure
terms that will afford some protection to their
$1.5-billion investment. They are convinced that
foreign firms have a definite role to play in the
future of Venezuelan oil. Venezuela, they feel,
does not have the ability to manage the entire
industry without foreign help. Several companies
have reportedly already made tentative ap-
proaches to officials of the new administration. A
senior official of Exxon's Venezuela subsidiary
(Creole Petroleum Company) said recently that
he believes that even when nationalization comes,
companies will_ be able to reach agreements with
the government
j( -
' The oil officials' optimism may well have
been increased with the appointment this week of
Valentin Hernandez Acosta as petroleum minister
in the new administration. Hernandez, Venezue-
la's ambassador to Austria and to OPEC, is a
petroleum engineer-diplomat who has spent his
professional career in studies relating to petro-
leum and international affairs and spent some
time working for Creole Petroleum Corporation
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Secret
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'" err wr
Secret
Weekly Summary
Special Report
Brazil- Geirel Takes Over
Secret
N2 16
March 15, 1974
No. 0011/74A
ARCHIVAL RECORD
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r.-rw JtUN17I
BRAZIL
Geisel Takes Over
Ernesto Geisel is the fourth army general to
assume the presidency since the 1964 revolution.
His inauguration marks the culmination of a pro-
cess begun well over a year ago and developed
without the air of tension that accompanied all
previous changes of government since the revolu-
tion. Basic policy directions -top priority to eco-
nomic development, continued stress on rooting
out subversion, and further attention to expand-
ing Brazil's international prestige-are likely to
remain unchanged. The new President will have
ample opportunity to demonstrate his consider-
able competence in dealing with a number of
economic and, to a lesser extent, political
challenges.
Special Report - 1 -
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Background
Geisel was formally confirmed as president
on January 15 by a special electoral college com-
posed of the national congress and a number of
state legislators. He had earlier been designated by
Medici, in consultation with leading members of
the military establishment. The smooth transition
to Geisel differs markedly from earlier successions
since 1964. In 1967, Costa e Silva had maneu-
vered himself into the presidency by becoming
the spokesman for officers who called for harsher
Castello Branco ('64-67)
Special Report
policies than those of Castello Branco, first of the
military presidents. When Costa e Silva was inca-
pacitated by a stroke in 1969, wrangling among
generals who wanted the presidency led to the
installation of Emilio Medici as a compromise
candidate.
Medici undoubtedly had all this in mind
when he began to plan for the succession, and he
laid the groundwork carefully. Several factors en-
abled him to deal from a position of strength his
predecessors did not enjoy. One is the
Costa e Silva ('67-69)
Medici ('69-74)
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performance of his administration. Sustained eco-
nomic growth and virtual cessation of serious
terrorist activity solidified support behind him.
His demonstrable success prevented the emer-
gence of a serious challenger who could appeal for
support to military officers dissatisfied with the
regime's performance. Then there is Medici's
choice of Ernesto Geisel, highly regarded by the
military establishment as well qualified to admin-
ister the next phase of the revolution.
The presidency of Brazil caps a career that
has included a variety of high posts. A retired
four-star general, the 65-year-old Geisel most re-
cently headed Petrobras, the national oil enter-
prise. Under his guidance the company pursued
highly aggressive policies to help fulfill the needs
of an increasingly oil-thirsty nation. Because Bra-
zil has relatively little oil of its own, the company
undertook numerous ventures overseas and, in the
process, became Latin America's largest corpora-
tion.
Geisel also served as a judge on the Supreme
Military Tribunal, which has jurisdiction over
cases involving national security matters. In that
capacity he delivered tough, well-articulated
Reis Velloso
Minister of Planning
opinions. A leader of the movement that ousted
left-leaning President Goulart in 1964, Geisel
served as chief military adviser in the cabinet of
President Castello Branco.
The most frequently heard observation on
Geisel's character is that he is taciturn and re-
served, and prefers to remain out of the public
eye as much as possible. Like his brother Orlando,
the powerful outgoing army minister, he is re-
garded as a man of considerable discipline, who
fully supports an authoritarian approach to gov-
ernment. Ironically, there is speculation, fueled
largely by hopeful politicians, that Geisel's view
of politics is a bit more liberal than that of
Medici, who has virtually ignored congress and
politicians. Other than naming a trio of legislators
to his cabinet, Geisel has given no public indica-
tion that this is really so.
It appears that Geisel's cabinet will be hard-
working, competent, and entirely trustworthy.
None of the ministers has an independent power
base, and all are expected to be responsive and
subordinate to the President. Geisel is accustomed
to running his own show and, unlike his predeces-
sor, will keep a firm grip on the day-to-day for-
mulation and execution of policy. Some observers
also feel that Geisel will be more nationalistic
Shigeaki Ueki
Minister of'Mines and Energy
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New refinery, the sixth built by Petrobras
One of the largest petrochemical
complexes in South America at Santo Andre
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Mario Simonsen
Minister of Finance
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than Medici, especially with respect to the terms
governing foreign enterprises wishing to operate
in the country.
To implement economic policy, Geisel has
chosen as finance minister Mario Henrique Simon-
sen, a 39-year-old economist who is highly accom-
plished in academic, business, and government
undertakings. Simonsen, like his predecessor,
favors the energetic pursuit of growth rather than
redistribution of income. Another important
member of the economic team is the current
planning minister, Reis Velloso, also an able econ-
omist, who will remain in that post. Geisel's chief
financial adviser at Petrobras, Shigeaki Ueki, will
join the cabinet as minister of mines and energy.
Even though Brazil's economy has been
booming for several years and is in no apparent
danger in the near-term, it is possible to discern
areas of concern to the new administration. One
is inflation, which the incoming finance minister
views as a serious domestic problem. Last year the
cost-of-living increase exceeded the regime's
stated goal of 12 percent, the first time Medici
had failed to hold it to the mark set. Rising
import prices, as well as unusually large increases
in the money supply, fueled the inflation. Espe-
cially hard hit were prices of staples such as rice,
beans, beef, and milk. In an effort to stem the
upward trend, the government put controls on
prices, limited food exports, and imported some
basic items that were in particularly short supply.
Nonetheless, there have been shortages in food
stores. Geisel's selection of several agricultural
experts for cabinet posts suggests that he intends
to place great emphasis on increasing Brazil's food
yield as one way of dealing with shortages and
inflation.
Since Brazil must import most of its oil and
consumption is constantly rising, the sharply
higher price of crude also contributes heavily to
inflationary pressures. Already this year there
have been two substantial price hikes for gasoline.
Inasmuch as the new President has a specialized
knowledge of oil and the oil industry, Brazil will
certainly continue to improve its techniques in
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the quest for more petroleum. Innovations may
include barter deals exchanging such commodities
as sugar, rice, and soybeans for crude. Geisel may
even call on foreign oil firms to assist in difficult
and expensive exploration within Brazil. In a na-
tion traditionally wary of allowing foreign explor-
ation, Geisel's credentials as an oil expert and a
strong nationalist would place him in a far better
position than any other Brazilian to consider such
a move.
The high price of imported oil has caused
some decline in Brazil's foreign reserve holdings.
The drop prompted the government to abandon a
40-percent deposit requirement that it had im-
posed on the heavy influx of foreign loans last
year as a means of curbing inflationary pressures
Brazil hopes that the relaxation will encourage
foreign lenders, who have lately shown some hesi-
tation in dealing with Brazilian enterprises. Since
the country's foreign reserves are considerable, no
real threat is seen for the short term. Careful
management may be needed, however, to avert
more serious, long-run consequences.
Brazil's practice of relatively frequent "mini
devaluations" of the cruzeiro is apparently being
altered and may undergo further changes. There
have already been two devaluations this year,
both larger than usual. Brazil's exporters have
claimed for some time that the cruzeiro is over-
valued relative to other world currencies, perhaps
by as much as 10 percent, thus reducing their
ability to compete. The Geisel administration
may further step up the pace and scale of devalua-
tions to assure a competitive edge in trade.
There is also a possibility that the govern-
ment program of incentives to export industr es
may be revamped. The LIS is considering counter-
vailing duties on Brazilian shoes, which have made
large inroads in the US market, claiming Brazilian
subsidies to the industry give it an unfair advan-
tage. If such a move is carried out, Brasilia fears
similar measures against its other manufactured
exports. The incoming finance minister report-
edly favors less direct subsidies and greater use of
exchange rate adjustment to encourage exports.
Special Report
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Geisel is not likely to make any significant
changes in Brazil's independent but essentially
pro-Western foreign policy. Outside Latin Amer-
ica, and especially in international forums, Bra-
silia will continue to pursue commercial advan-
tages aggressively and seek to play an increasing
role in international affairs.
In inter-American conclaves, Brazilian diplo-
macy is now attracting a bloc of conservative
countries that includes Chile, Bolivia, Uruguay,
Paraguay, and most of Central America. At the
same time, Foreign Ministry officials will remain
alert to any attempt by the Peron government in
Argentina to isolate Brazil from the Spanish-
speaking countries, particularly those in the
Andean Pact.
The new foreign minister, Antonio Azeredo
da Silveira, is a "Brazil firster," an ardent nation-
alist. He has served since 1969 as ambassador to
Buenos Aires and is considered an expert on River
Plate affairs. He does not, however, appear to
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`..rte Jtuh I
have the personal stature to shape bold new
policy directions on his own. Brazil already has
strong economic ties with neighboring countries
and will continue to be sensitive to their fears of
its growing power.
(A forthcoming Special Report will be de-
voted to Brazilian Foreign Policy.)
undesirables-largely old style politicians-had
their political rights suspended. They thus be-
come eligible, in theory, to re-enter public life. At
least one of them, former President Juscelino
Kubitschek, remains well-known and popular.
Geisel might decide to extend the period of sus-
pension, but he is more likely simply to warn
them to remain inconspicuous.
The revolution has all but eliminated the old
style, free-wheeling politics, which the military
judged to be overly cynical and corrupt. Within
the narrow confines of the "system" now in
effect, however, Geisel will need to make a num-
ber of essentially political decisions, some of
which could be more than routine.
One decision concerns senatorial and guber-
natorial elections scheduled for later this year.
Geisel, as his predecessors did, will pass on the
acceptability of candidates. He has already begun
preliminary groundwork in the state of Rio
Grande do Sul, where he recently prevailed on the
announced senatorial candidate-whom Geisel
deemed a weak entry-to withdraw publicly from
the race. The man Geisel apparently favors, how-
ever, reportedly may be unwilling to run. Geisel
can be expected to continue his close scrutiny of
Rio Grande do Sul, both because it is his home
state and because the factionalized official party
experienced setbacks there in recent local elec-
tions.
There have been extensive rumors-
nourished largely by those who stand to benefit-
that Geisel may undertake some sort of general
liberalization regarding censorship, relations with
the church, and restrictions on political activity.
Geisel, however, is well aware that despite prom-
ises by his two immediate predecessors to "hu-
manize the revolution" and to "restore full
democracy," neither felt confident enough to
take steps in this direction. Thus, Geisel, in keep-
ing with his reserved ways, has made no such
public promises. He has avoided direct comment
on the matter, stressing instead the need for hard
work and continued vigilance, especially in the
face of continued violence in other countries.
Yet the successes of the Medici regime-
which all but eliminated the terrorist threat-have
created conditions in which the military establish-
ment might well go along with a very limited
liberalization. In fact, Geisel's reputation and the
respect in which he is held by civilians and mili-
tary alike place him in a position from which he
could, should he choose, carry out a modest
This year marks the expiration of a ten-year
period during which a large number of political
Special Report -7-
SECRET
March 15, 1974
Approved For Release 2008/04/15: CIA-RDP79-00927A010700090001-6
 Approved For Release 2008/04/15: CIA-RDP79-00927A010700090001-6
Secret
Secret
Approved For Release 2008/04/15: CIA-RDP79-00927A010700090001-6