WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A010800090002-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 28
• Document Creation Date: December 21, 2016
• Document Release Date: February 12, 2008
• Sequence Number: 2
• Publication Date: May 24, 1974
• Content Type: SUMMARY

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~- .r
Secret
Weekly Summary
State Dept. review
completed
Secret
24 May 1974
No. 0021/74
Copy N2 58
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1 The Indian Nuclear Test
4 USSR-US: Detente Despite Concerns
5 USSR: Views on Law of the Sea
i he WEEKLY SUMMARY, issued every Friday morning by
he Office of Current Intelligence, reports and analyzes signif-
int d
' r of the week through noon on Thursday, It
re,quently includes material coordinated with or prepared by
i)e Office of Economic Research, the Office of Strategic
search, and the Directorate of Science and Technology.
pics requiring more comprehensive treatment and therefore
MIDDLE EAST
AFRICA
6 Israel-Syria-Lebanon: Punitive Raids
6 Israel: Coalition and Fedayeen
8 USSR - Middle East: Quest for Friends
EAST ASIA
PACIFIC
France: From Gaullism to Giscardism
Denmark: A Cliffhanger
Concern over Eurodollar Market
Portugal: The Junta Settles In
Yugoslavia: Tito
15 USSR-China: Keeping the Lid On
16 South Vietnam: Fighting Tapers Off
17 Cambodia: Warfare and Agitation
18 Bangkok Beckons but Hanoi Demurs
18 Laos: Power Politics
19 Australia: Labor Squeaks By
WESTERN
HEMISPHERE
20 Cuba: The Sugar Bonanza
21 Venezuela: Nationalization Policies
22 Dominican Republic: Balaguer Re-elected
Comments and queries on the contents of this
[Publicitionareweicome._Summarv~e --eotedtQ
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The Indian Nuclear Test
.' India became the world's sixth nuclear
power on May 18, when it detonated an under-
ground nuclear device. The event occurred in the
western part of the Great Indian Desert in Rajas-
Indian AEC Chairman Sethna and PM Gandhi
Announcing the test
According to the chairman of India's
Atomic Energy Commission, Dr. H.N. Sethna, the
"implosion" device was developed entirely by
India, and all components, including the pluto-
nium, were produced locally.
I Indian officials told reporters that the device
was Iburied at a depth of slightly more than 100
meters, and was fully contained. Nevertheless, in
view of the yield and depth at which the device
was detonated, it is likely that some venting of
radioactive debris occurred. The wind may have
blown some of this debris toward Pakistan'
J'Indian officials were quoted as saying that
the purpose of the test was to develop atomic
devices for peaceful uses, such as in mining, canal
construction, and the deepening and widening of
ports. Although the New Delhi press has reported
that a series of nuclear explosions will be carried
out, Dr. Sethria was noncommittal when asked if
any more tests were planned. Addressing a news
conference in Bombay last Monday, he said it25X1
would take six months to process the data col-
lected from the May 18 test 25X1
'/- IThe nuclear materials for the test almost
certainly came from the Canadian-built Cl RU
research reactor
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help meet the soaring costs of imported petro-
leum, grain, and fertilizer. The Indians will prob-
ably also ask for rescheduling of existing debts.
he only reactor safeguard agreed to by New
Delhi was a written statement to the Canadians
that the reactor and its products would be used
only for peaceful purposes. Canada has long held
that any explosion would be a violation of this
agreement, but India has never accepted this
interpretationI
2, New Delhi continues to deny any intention
of producing nuclear weapons, but the step from
exploding a nuclear device to that of producing a
primitive bomb deliverable by aircraft is not a
great one. Pressures on the Gandhi government to
develop a military capability almost certainly will
be great.
I Development of long-range delivery systems
for nuclear weapons would be a difficult and
expensive problem for India because it does not
have either bombers or missiles suitable for
reaching distant targets. India's modest space
program has concentrated on the development of
sounding rockets and, based on its present level of
technology, India probably could not develop an
intermediate-range missile within the next ten
years without substantial outside help/
Initial reaction in India has been euphoric.
Except for predictable criticism from one com-
munist faction, the event has evoked widespread
enthusiasm. This enthusiasm, however, is likely to
dissipate before long because of the hardships
imposed by growing inflation and food shortages.
India's economic problems may even get worse if,
because of the test, the country runs into trouble
securing new help from abroad. New Delhi hopes
to receive more than $1 billion in aid this year to
(c Jfhe slow movement in recent months to-
ward improved Indo-Pakistani relations may be
interrupted as a result of the test. Prospects for an
early resumption of trade and diplomatic rela-
tions are poorer than they were. Islamabad has
said it will ask the permanent members of the UN
Security Council to provide Pakistan with a
"nuclear umbrella," but the Pakistanis are likely
to concentrate on getting support and reassurance
from China and the US. While the Pakistanis will
probably not go so far as to seek a formal defense
treaty with China, they will certainly press Peking
to reiterate as strongly as possible China's support
of Pakistan's territorial integrity. Prime Minister
Bhutto no doubt would like the CENTO coun-
tries to issue a joint condemnation of the Indian
test, but his government will not place much
reliance on CENTO itself to protect Pakistan's
security]
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IMoscow's desire to maintain close relations
with New Delhi will color the way it handles
India's decision to join the nuclear club, but the
Soviets too will worry about the implications.]
On the surface, it would appear that India's
move is a net plus for the USSR. Moscow and
New Delhi are close and the move will enhance
India's position vis-a-vis China. Soviet leaders,
however, share the concern that as more nations
acquire the capacity to develop nuclear weapons,
there is a greater danger these weapons may some
day be used. They lobbied hard, though unsuc-
cessfully, to get India to sign the Non-Prolifera-
tion Treaty, and kept on trvina to dissuadp India
from oin nuclear
The Soviets therefore are probably also con-
cerned that, with India's entry into the nuclear
club, a close relationship with the USSR may
become less useful in Indian eyes. That relation-
ship owes much to India's fear of China; with a
nuclear explosion behind them, the Indians may
come to feel somewhat better able to stand up to
Peking.
S1 The Soviet press will put the best possible
-face on India's move. Behind the scenes, however,
the Soviets will seek reassurance that New Delhi
meant what it said when it announced that India
would not develop nuclear weapons
Peking will presumably conclude that India
has become a more important security problem
than before the explosion. An India hostile to
China, close to the USSR, and eventually with
some kind of nuclear weapons delivery capability
could in the long run complicate Peking's
strategic situation. The Indian nuclear test thus
may add some urgency to China's already evident
desire to normalize relations on the subcontinent
and improve Peking's position there. Early last
week, Chou En-lai had told Bhutto that Peking
intends to improve relations with both India and
Bangladeshi
\Chinese instincts in favor of a US naval
presence in the Indian Ocean and warmer US-
Indian ties are likely to be strengthened too. At
the same time, Peking almost certainly would
hope that the US presence would continue to
serve as a restraint on India and the USSR and as
an assurance to Pakistan against a nuclear India.?
Japan
Tokyo has openly criticized India's test and
will probably deliver an official protest shortly.
The Japanese are concerned that other countries,
particularly Israel, will be tempted to go nuclear.
Many Japanese believe Moscow encouraged
India's move in order to challenge China. The
Japanese also are openly skeptical of the "peace-
ful" thrust of India's nuclear program. The Indian
test will strengthen opponents of the Non-Prolif-
eration Treaty in Japan
1 LAIthough the Shah is unlikely to allow the
Indian test to affect newly improved relations
with New Delhi, he may be miffed at being
upstaged by India. Even before the Indian test,
the Shah had expressed interest in cooperating
with the US to develop major nuclear energy
facilities in Iran. So far, Iran has shown no inter-
est in developing weapons-related technology. Un-
like In ia, Iran has signed the Non-Proliferation
Treaty.
I [Last summer, Canada informed India that
Ottawa would no longer provide technology,
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StUHb I
heavy water, fuel, or any equipment designed for
use in power reactors that are not covered by
safeguard arrangements. Ottawa took this action
because New Delhi has refused to sign the Non-
Proliferation Treaty
I Canada is assisting in the construction of a
power plant in Rajasthan State, where one reactor
was completed in 1973 and a second is scheduled
to go into service in 1976. Further Canadian
participation in the Indian atomic energy pro-
gram, however, is uncertain. This week, Ottawa
announced that it was suspending shipment of all
nuclear equipment and material to India. External
Affairs Minister Sharp said that the suspension
would continue until Ottawa completed a full
review of its relations with India.)
In Brazil, the Indian test is likely to spur
nuclear research and development. To many
Brazilians, India has demonstrated that a de-
veloping country can achieve at least this at-
tribute of great power status, and comment in the
Brazilian press is tinged with admiration. The
reaction in Argentina will probably be similar.
Neither government has signed the Non-Pro-
USSR-US: Detente Despite Concerns
he Soviets are showing
ng more concern about
I plications of the Watergate affair, but they
continue to take an optimistic line on the durabil-
ity of US-Soviet detente)
Prominent Americanologist Georgy Arbatov
told Ambassador Stoessel last week that the inter-
nal situation in the US was causing uneasiness
within the leadership, and the embassy reports
that there have been other signs of increased
Soviet concern. For example, Soviet officials are
showing great interest in the state of US prepara-
for the June summit.)
tions
1 IMoscow continues to support the President
on Watergate while treating the matter with cir-
cumspection. On May 16, in the Soviets' first
:;public report on Watergate since the release of the
transcripts in late April, Tass summarized the
President's interview in the Washington Star-
News, noting his statement that he would not
resign under any circumstances. Tass said that the
Watergate affair is being blown out of proportion
by the President's political adversaries. A public
lecturer in Leningrad echoed this line on May 19,
blaming opponents of detente, bent on blocking
the forthcoming summit, for the President's
"very, very difficult position.
Prompted by their Watergate concerns, the
Soviets are giving new emphasis to the "histori-
cal" factors that lie behind US-Soviet detente.
Pravda on May 18 reiterated the Soviet view that
detente enjoys the support of most Americans,
including business and political leaders. This
broad consensus, according to Pravda, permits
"US leadership circles" to pursue a policy of
improved relations with the USSR despite opposi-
tion by "the military-industrial complex, Zionists,
and extremist right-wing circles," and despite the
"complexities and -contradictions of the internal
political situation.
the Soviets are evidently anxious to
stfen then this consensus, especially in Congress.
Last month, they rolled out the red carpet during
the visit of Senators Scott and Kennedy. This
week, they dispatched a high-level Supreme So-
viet delegation to Washington to inaugurate a
parliamentary exchange program. On his arrival in
the US, Boris Ponomarev, head of the Soviet
delegation and a ranking member of the CPSU,
stressed the importance of closer ties between the
parliamentarians of both countries "in the pres-
ent-day conditions."1
{ Moscow seems resolved to ride out this un-
settled period without fundamental changes in
policy toward the US. According to Arbatov, a
strong proponent of detente, the Soviet leader-
ship recognizes the uncertainties and complexities
introduced by political developments in the West,
but remains determined to "make irreversible"
the relaxation of international tension. Arbatov
noted that in six months or a year, detente may
resume its earlier pace, and that, meanwhile, it is
important to preserve the gains that have already
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USSR:
Views on Law of the Sea
`,.-With the Law of the Sea conference in
Caracas less than a month away, the Soviets
appeared anxious during recent consultations
with US officials to cooperate in establishing
mutually acceptable positions. Moscow is in sub-
stantial agreement with the US on most Law of
the Sea issues, although it is still working out the
specifics of its policy. For example, the Soviets
noted that they were still studying how the sea-
bed limits should be defined,
In recent weeks the Soviets have made a
significant shift by agreeing to accept a 200-mile
economic zone in return for the coastal states'
acceptance of a 12-mile limit to territorial waters,
freedom of navigation through international
straits, and Freedom of scientific research. As a
world naval power, the Soviets appear committed
to retaining as much freedom of navigation and of
economic use of the sea as possible..
! Under the Soviet proposal on the 200-mile
economic zone, which has already been presented
to several third-world countries, the coastal state
could take as much fish as it wanted from its
zone. This concept probably caused some bureau-
cratic discord in Moscow, since it is conceivable
that some coastal states might eventually harvest
so much of their fish resources that little would
be left for the Soviets in some of their traditional
fishing areas. The Soviets probably calculate that
most coastal states do not yet have this fishing
capacity, however, and hope that this concession
will make some of the developing coastal states
more amenable to Soviet desires on other issues?
The US-Soviet consultations devoted con-
siderable attention to other aspects of the fish-
eries problem. While the Soviets are willing to
accept coastal-state jurisdiction within 200 miles,
they do not want any form of coastal-state au-
thority or preferential rights beyond that limit.
The Soviets also insist on absolute right of access
to the unused portion of the allowable catch
within the 200-mile zone. At present, the Soviets
seem to believe that this allowable catch should
be based on the recommendation of an "interna-
tional fisheries organization,'' but they apparently
do not foresee any enforcement power for such a
body. The Soviets also are concerned about the
problem of imprisonment of their fishermen.
They expressed preference for a US proposal for
coastal-state right of inspection and arrest, after
which the vessel would be returned to the flag
state for trial and punishment
,) t) The Soviets were also eager to avoid any
abrogation of the principle of freedom to conduct
marine scientific research. They envisioned the
exclusion of scientific research installations from
rules governing other offshore installations in the
200-mile economic zone. The Soviets even men-
tioned giving less-developed countries research
vessels or training to deter them from trying to
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Beirut
he focus of fighting on the northern front
shifted this week from the Syrian sector to Leba-
non as the Israelis continued punitive strikes on
fedayeen bases and facilities in the wake of the
May 15 terrorist attack at Maalot/
Israeli aircraft attacked fedayeen targets in
southern Lebanon and near Mount Hermon sev-
eral times. An Israeli military spokesman said the
attacks were part of a new phase" in Israel's war
against Arab guerrillas, an indication that Tel Aviv
intends to continue strikes at fedayeen forces
inside Lebanon!
Over the weekend, Israeli naval patrol boats
shelled the Palestinian refugee camp at Ar Rashid-
iyah, the second largest camp in Lebanon. At
least five persons were killed in the attack and
twelve were wounded. Beirut claimed to have
damaged at least one of the Israeli vessels, but Tel
Aviv reported that all ships returned safely to
port. Israeli and Lebanese troops also skirmished
several times during the week, but only light
casualties were reported. Casualty figures from
the Israeli raids on Palestinian camps late last
week indicate that around 50 people were killed
and perhaps 250 wounded
,- x Ground fighting this week between Syrian
.and Israeli forces was light, with exchanges con-
fined to sporadic tank, artillery, and mortar fire.
Israeli aircraft also flew reconnaissance missions
and defensive patrols over the Golan Heights and
[The ruling Labor Party's central committee
on May 19 overwhelmingly approved Prime Minis-
ter - designate Rabin's plan to form a narrow
Labor-led coalition government with the Inde-
pendent Liberal Party and the Citizens Rights
Movement. Labor Party negotiators spent much
)555908 5-74 CIA
of the rest of the week attempting to hammer out
an agreement on a new cabinet. Rabin's mandate
to come up with a government expires on May
24, but he can ask President Katzir to grant him
up to 14 additional days to complete the jobI
The central committee left the door open
for te National Religious Party to participate in
the government later should it be willing to ac-
cept a compromise solution on the religious con-
version issue. Rabin will leave three cabinet posi-
tions open for the Religious Party for at least
three months. The committee, however, voted
against further concessions on the conversion
issuel
The Labor central committee rejected by a
large' majority proposals for a continuation of
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Mrs. Meir's caretaker government until new elec- army patrols, and search operations by helicop-
tions, and it defeated a call to include the con- ter-were instituted throughout much of the
servative Likud bloc in the government. Rabin country and in the occupied territories. Israeli
had contended that inclusion of the Likud would Army engineers laid additional minefields, and
hamper progress toward a peace settlement built more fences and watchtowers along the
Israeli-Lebanese border. The government also ex-
horted the Israeli populace to join recently re-
Rabin told the committee that his proposed established armed civil guard forces to help patrol
coalition could govern effectively even though it schools, factories, and public gathering places]
would have only a one-vote majority in the Knes- The growing anti-Arab mood of the Israeli popu-
set?rThe survival in office of such a coalition 7lace contributed to a noticeable increase in ten-
-would clearly depend on Rabin's ability to main- Sion between Arabs and Israelis and led to numer-
tain internal Labor Party discipline and keep the ous minor incidents between the two groups./
coalition partners in harness. Rabin would, there-
fore, probably avoid initiating any radical changes
in previous governmental policies. J,1,, [As might be expected, the government is
clearly not satisfied with adopting only passive
_nce
defensive measures to stop terrorist activity/Li
#?- )Rabin's main task at present is to reconcile the terrorist attack in Qiryat Shemona last
the competing demands of the various factions) month, Israeli authorities have arrested several
and coalition partners that, in Israeli practice, hundred suspected Arab terrorists and sympa-
choose the candidates for ministerial posts. Since thizers in the occupied West Bank. These arrests
the old leadership groups remain intact, Rabin's have sparked widespread protests from West Bank
cabinet is likely to consist largely of holdovers Arab mayors and led., to demonstrations in two
from Mrs. Meir's out-going government, a'though large West Bank towns.1
many may be heading different ministries.
7 a )The major change is likely to occur in the
Ministry of Defense. Moshe Dayan is expected to
leave the government and to be replaced as de
fense minister by his Rafi factio ,.colleague, Infor-
/mation Minister Shimon PeresIlForeign Minister
Eban will probably stay on, despite personal dif-
ferences with Rabin, in order to provide the ap-
pearance of continuity in this vital area./
During the past week, the caretaker govern-
ment, intensified its efforts to prevent further
fedayeen terrorist activity in Israel and the occu-
pied territories. Strict security measures-includ-
ing roadblocks, curfews, reinforced police and
'[Israeli military raids on Palestinian camps in
Lebanon during the week are also part of the
effort to strike directly at the fedayeenflSpeaking
Ito the Knesset on May 20, Prime Minister Meir
said that the government's anti-terrorist campaign
must be systematic, continuous and daring. De-
fense Minister Dayan added that the government
cannot succumb to blackmail by the terrorists
and is better off to kill them.I
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USSR - MIDDLE EAST
"jThe Soviets showed a new dimension of
their Middle East policy last week in wooing
Libya, a country about which they have had little
good to say in recent years. Moscow's objectives
seem clear enough-to reverse the ebb of their
over-all influence in the region by establishing
new relationships and to isolate, and hence bring
pressure on Egypt:l
Moscow's new tactics became evident last
week during Libyan Prime Minister Jallud's six-
day visit. Jallud had numerous discussions with
top Soviet leaders, including Brezhnev and Kosy-
gin. While the concrete results of these discussions
were apparently not great, they had the effect of
putting the Egyptians on notice that Moscow was
prepared to make friends with Cairo's Arab rival
y' [Both Libya and the USSR seemed to be
searching for common ground during the Jallud
visit, but given their differing views on the Middle
East and the world in general, it was not easy.
The final communique lacked any specifics on the
Middle East, mentioning only that "frank" discus-
sions yielded a "proximity of positions." The
wording makes it clear that Moscow and Tripoli
continue to differ on political tactics in the re-
gion. The Soviets, for example, have given full
support to the Geneva conference, but the
Libyan have opposed any negotiations with the
Israelis.
to the Middle East was a highly publicized trip to
Iraq in late March, which also seemed to be asso-
ciated with Moscow's effort to display an active
role in Middle Eastern affairs./
=> [Grechko will undoubtedly discuss the
laggi g Soviet military aid program in Algeria.
Although the USSR is Algeria's main arms sup-
plier, Algiers has drawn few Soviet military aid
credits in the last two years. Moscow may view a
revitalized military aid program as a way to
strengthen its influence in Algeria. The Soviets
may also feel the need to solidify their position in
Algeria because of reports that Algiers will soon
restore relations with the US.)
he Egyptians will be somewhat reassured
by the noncommittal tone of the Soviet-Libyan
communique, but they will still interpret the new
Moscow-Tripoli relationship as a bad omen for
Egypti
`7 fAs the Egyptians see it, the Soviets' principal
'aim in Libya is to isolate Egypt and the other
4 Arab states with friendly ties to the US Cairo
.accuses Moscow of attempting to link Libya, Iraq,
and possibly Syria against Egypt~lmplicit in these
apprehensions is a particular concern that Libya
and the Soviets will together succeed in aborting
'/the Syrian-Israeli disengagement talks.
/ During the week, press reports from Moscow
speculated that the visit would result in military
and economic aid agreements. To date, only a
trade accord has been announced, and there was
no reference in the communique to military aid
or cooperation.
Another development probably aimed at in-
creasing Egypt's isolation in the Arab world was
the announcement by Tass early in the week that
Defense Minister Grechko would visit Algeria at
the end of May. No details have been given, but it
seems likely that the purpose of the visit will be
as much political as military. Grechko's last visit
fave been urging the Syrians to be intransigent,
and the failure of negotiations would leave Egypt
open to attack as the only Arab state to have
compromised with the Israeli enemy Cairo
editorialists have criticized President Qadhafi's
"new wedding" with Moscow, but criticism of
Moscow has been more cautious. Although the
Arab Socialist Union recently resurrected the
charge that the Soviets oppose military action
against Israel, President Sadat himself spoke more
hopefully last weekend of a "more positive
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FRANCE: FROM GAULIJSM TO GISCARDISM
L_I /
The electioP on-May 19 of Independent Re-
publican Valery Giscard d'Estaing does not por-
tend dramatic change for France. Throughout the
campaign, he identified himself with Gaullist for-
eign policy, which had received high marks from
the electorate. In the domestic field, however, the
voters clearly expect him to make some changes.
The left and the unions see the new Presi-
dent as the symbol of the conservative right and
will not be likely to make his task easier. Labor
unrest could erupt in the fall if the left and the
unions are not satisfied with his implementation
of social and economic reforms. Giscard is aware
of the problem and is prepared to act quickly on
moderate social welfare programs.
? increase benefits for the elderly, fami-
lies, women, and the unemployed;
? give high priority to public transport,
housing, and hospitals;
? decrease the gap between the lowest and
highest wage scales;
? decentralize government activities and
responsibilities.
In foreign affairs, Giscard is expected to
improve the tone of Franco-US relations, but not
to change basic foreign and defense policies,
which are based on national interests. He will
probably strive to maintain French "independ-
formally and to appoint his prime minister on
May 27. The members of the government will be
named before the first cabinet meeting scheduled
for May 29. Parliament will then resume its nor-
mal spring session, and the prime minister will
probably address the assembly with a general
policy speech. This declaration does not require a
vote of confidence and real debate on the new
government's program may not begin until the
p a r l i a m e n$ reconvenes in October.
'7 ? Despite the precarious position of his minor-
ity overnment, Prime Minister Poul Hartling,
with the support of the non-Socialist parties,
managed to push controversial tax measures
through parliament last week. The tax increases,
which went into effect on May 17, caused wide-
spread unrest among the normally undemonstra-
tive Danes. A wave of strikes and worker demon-
strations swept the country following parlia-
mentary approval of the proposals
II .;? \The tax measures, which will remain in ef-
fect through this year, raise the price of some
items such as cars, household appliances, liquor,
and cigarettes by as much as 25 percent. The new
taxes will primarily affect imports and were in-
troduced to remedy Denmark's balance of pay-
ments deficit, which has doubled over the past
year.
4 ' (After a week of tortuous on-again/off-again
negotiations aimed at reaching a compromise and
of threats by Hartling to call elections if his
once" of the super powers and French "leader-~ S proposals were voted down, the government
"
in Europe. He is likely to be somewhat
ship
more willing than his predecessors to make the con-
cessions necessary for the European Commu-
nities--and the political consultations in particu-
Jar-to be more effective.
managed to put together a majority of 106 in the
179-seat parliament. The Prime Minister's success
does not reflect general approval of the tax pack-
age, but was possible because several of the par-
ties are sharply divided and fear elections.
The President's immediate intentions will be- ,i After the Social Democrats decided to vote
come clearer next week after he names his cabi- acai st the bill, it became clear that Mogens
net. Giscard has said he intends to take office Glistrup's Progressive Party, Denmark's second
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largest, held the key to the outcome. Glistrup
contributed to the suspense by announcing early
in the negotiations that his party would not ab-
stain on the final vote. Placed in the position of
holding the government's fate in his hands, how-
ever, Glistrup probably did not want to be
blamed for Hartling's downfalls and the Progres-
sives voted for the tax measures.)
( tj The Social Democrats, who hold the largest
humer of parliamentary seats, originally planned
to abstain on the tax issue. They were aware that
new elections would probably lead to the forma-
tion of a minority Social Democratic government
and feared they would be forced to introduce
measures similar to Hartling's to deal with Den-
mark's chronic trade deficit. The labor move-
ment's unexpected vocal protest forced the party
to vote against the bill, however, to appease its
traditional source of support:
j ; j I The government's most active supporters
throughout the crisis, the Center Democrats and
the Conservatives, feared the disastrous con-
sequences of an election. Recent polls indicate
that both parties have slipped badly since the last
election`? 25X1
I {Hartling's Moderate Liberals control only 22
seats. The parliamentary line-up makes the gov-
ernment's prospects dim and early elections a
probability.. At the root of the instability is the
recent proliferation of splinter parties. In the elec-
tion last December, the number of parties in
parliament doubled from five to ten, primarily as
a result of defections from the traditional parties.
CONCERN OVER EURODOLLAR MARKET
i ? 1 --t /
The turbulent growth of the Eurodollar mar-
ket as a consequence of the deposit of oil pro-
ducers' funds and related lending has heightened
concern among many bankers that the market is
overextended.
Oil producers' surplus funds continue to
flow into the Eurodollar market in large amounts.
If present trends continue, the value of Euro-
dollar assets and liabilities will jump nearly 50
percent by the end of this year to about $150
billion. This rapid growth is causing many finan-
cial analysts to re-evaluate the market's weak-
nesses, which include:
? the potential instability of the deposit
base, particularly when a few oil producers
control a substantial and growing proportion
of the market's deposits;
? the absence of a lender of last resort to
assist a bank in the event of an unexpected
drawdown of deposits or other development
that would erode the bank's liquidity;
? the extremely low and continually de-
clining equity ratios of most of the bank-
active in the market;
Although the failure of a major Eurodollar
bank is still unlikely, the potential has increased.
US parent banks with access to the Federal
Reserve as a lender of last resort would probably
support imperiled overseas branches, but would
be under no legal obligation to do so. Parent
banks of other nationalities might have more dif-
ficulty in securing assistance, and again will be
under no obligation to support their Eurodollar
banking affiliates.
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lr Interim constitutionalyuireasures promulgated
by tie junta last week have made the military the
ultimate authority in Portugal during the life of
the provisional government. President Spinola has
been given the principal role in overseeing the
various instruments of government that will exer-
cise power before general elections are held in
19751
r The constitutional amendments make the
arm d forces completely independent of the pro-
visional government, while placing the chief of
staff of the armed forces on an organizational par
with the prime minister. They also separate politi-
cal authority among six government entities, with
the more important ones dominated by the
military
"-f he junta, composed of seven senior military
men, will continue. It is vested with the mandate
of the Armed Forces Movement, which overthrew
the Caetano regime. The junta's main respon-
sibility is to ensure compliance with the program
of the Armed Forces Movement and to uphold
the constitution
Foreign Minister Soares
Contacting the rebels
-" The council of state, which was virtually
mor bund during the days of Salazar and Caetano,
has been expanded and given new life. It consists
of the seven junta members, seven representatives
of the Armed Forces Movement, and seven citi-
zens "of recognized merit" to be named by Presi-
dent Spinola. The provisional government must
obtain the approval of the council of state on all
significant matters of policy. The council of state
may also declare any act of the provisional gov-
ernment unconstitutional.
?, "1 The presidency has emerged as a separate
government entity, with Spinola the most power-
ful figure in Portugal. He will preside over the
junta, the council of state, and the provisional
government. He has been authorized to dismiss
members of the provisional government, to direct
foreign policy, and to serve as commander in
chief of the armed forces. He can declare (in
consultation with the council of state) a state of
emergency and can suspend constitutional guar-
antees.1
1 The 15 ministers in the provisional govern-
mene-the fourth government component-will be
responsible for day-to-day activities. The govern-
ment will also nominate, by the end of this
month, a commission to draft the electoral law. It
will specify how the constituent assembly, the
fifth organization, will be elected. The draft of
the electoral law must be submitted to the coun-
cil of state for approval before November 151
V1 [Elections to the constituent assembly will
take place no later than March 31, 1975, with the
actual date to be set by the President. The assem-
bly will meet within 15 days of its election and
will draw up and approve a constitution within 90
days. Once the new constitution is approved, the
assembly will disband, and general elections pre-
sumably will be held
fhe courts have been designated as the sixth
instrument of government. Not much attention
has been given to their duties and it appears that
military and civilian courts will continue to func-
tion much as they have in the past.
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6L KL I
SEEKING ACCOMMODATION IN AFRICA
Lisbon, meanwhile, apparently expects that
its policy of self-determination for the African
territories will produce widely differing results.
_' General Costa Gomes, the number-two man in the
junta, expressed such a view privately to US offi-
cials on May 20. The general appeared committed
to offering the territories a genuinely free choice.
I i Costa Gomes was optimistic about the direc-
tion being taken by relations between Lisbon and
the rebels in Portuguese Guinea. Following con-
tacts between rebel leaders and Foreign Minister
Soares in Dakar last week, representatives from
both sides are scheduled to open cease-fire nego-
tiations in London on May 25. Lisbon recognizes
the fact that the rebel organization is the only
one of any consequence in Portuguese Guinea and
apparently would be willing to agree to arrange-
ments that would lead to rebel control of the
entire territory in exchange for Portuguese reten-
tion of the Cape Verde Islands. Over the years,
the rebel movement has claimed it also represents
the islands.A
y Costa Gomes professed to believe that An-
gola s Africans may opt for some form of con-
tinued relationship with Portugal when given an
opportunity to exercise self-determination. He
based his view on the fact that antagonism be-
tween races and ethnic groups in the territory is
minimal and that none of the three liberation
groups is politically dominant or militarily strong
enough to seriously challenge Portuguese forces?
About Mozambique, however, Costa Gomes
was quite pessimistic; its black majority, he felt,
would probably choose independence. The gen-
eral noted that relations between the races have
deteriorated rapidly since he was military com-
mander there some five years ago. Costa Gomes
also saw "Chinese influence" within the only sig-
nificant liberation movement, the Front for the
Liberation of Mozambique, as working against
any continued association with Lisbon. He ex-
pressed concern that independence for Mozam-
bique might lead eventually to civil war because
of bitter ethnic rivalries among the Africans.)
C, [A delegation of former political prisoners
from Mozambique, purportedly sent to Tanzania
,by the Portuguese to contact the insurgents, is
now in Dar es Salaam. The insurgents have pub-
licly denied any such contacts, however, and con-
tinue to pr ss their military effort in central
Mozambique
he provisional government's commitment
to serf-determination for the territories, including
the option of independence, was emphasized pub-
licly this week by Interterritorial Minister Santos
during a fact-finding tour of Mozambique and
Angola. In a press conference in Lourenco
Marques on May 21, Santos also promised revi-
sion of the law governing trade between Lisbon
and the territories. The present law has allowed
Lisbon to exploit the territories and has led to
intense bitterness among local businessmen and
consumers. Santos stated that the provisional gov-
ernment will create a "temporary instrument" to
arbitrate labor disputes, a clear attempt to end
the strikes that have spread throughout Angola
and Mozambique in recent weeks.
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Celebrations of President Tito's 82nd birth-
day on May 25 are certain to include a public
outpouring of adoration even more effusive than
last year's. The event will be used to boost the
morale of Yugoslavs still w.Qrried about a possibly
Only last week, Belgrade took steps to guar-
atee a smooth transfer of power by installing a
new collective presidency, reduced to nine mem-
bers from the cumbersome 22-man body set up in
1971. It is headed by Tito, who broke precedent
to accept the Federal Assembly's offer of life
tenure as president. The remaining eight members
are senior party officials, one from each of the six
republics and two provinces. The new constitu-
tion, enacted in February, invests the collective
with all the powers needed to take full charge
when Tito dies. Tito's successor in the top federal
party post will automatically als become a mem-
ber of the collective presidency.
Other pre-succession preparations included
the Installation of a new bicameral Federal As-
sembly, whose primary role will be to help resolve
regional differences through inter-republic "coor-
dination commissions." The presence in the as-
sembly of prestigious party leaders like Kiro Gli-
gorov, a top-ranking economic theoretician,
stresses the importance the regime attaches to
ensuring that potentially destabilizing regional
differences are resolved in ways acceptable to the
party. I
[The regime also invested the internal secu-
rity apparatus with new muscle. Both the minister
of interior and the federal public prosecutor are
now army generals on active duty. This seeming
breach of last year's emphasis on civilian control
over the military may signal a new effort to
improve collaboration between the civilian leaders
and the army, which is one of the strongest unify-
ing forces in the nation. The regime's main mes-
sage, however, is that any subversive activity by
dissenters at home or emigres abroad will face
stern reventive measures and prosecution-army
style. I
Ifs The same themes are expected to dominate
the 'ugoslav party's tenth congress that opens on
May 27. Speeches at the gathering will emphasize
the unity and discipline of the million-plus mem-
inaeed been galvanized over the past two years
organizational changes in the federal and regional
parties, to be ratified at the congress, promise to
give the party leaders in Belgrade even more di-
rect control over grass-roots politics. The main
instrument of this control will be the federal
party's executive committee headed by Stane
Dolanc, the committee's senior secretary and a
prime candidate to succeed Tito as party leader]
The congress will be closely watched for
evidence that Tito has finally chosen a party
successor. Up to now, he has steadfastly refused
to make his choice clear for fear of risking an-
other conflict with an impatient and ambitious
heir, as he had with Aleksandr Rankovic in 1966.
Nevertheless, the urgency of dispelling the uncer-
tainties of the succession could induce him to
change his mind?
'` [The congress will also endorse Tito's efforts
to improve ties with the Soviets and their allies.
Unlike the last congress in 1969, the conclave
next week will be attended by high-level delega-
tions from all the loyalist Warsaw Pact countries.
Andrey Kirilenko, a Politburo member who often
substitutes for Brezhnev, will head the Soviet
delegation. Romania, on the other hand, is down-
grading its delegation this time. In 1969, the two
parties were in close agreement on the need to
actively reject Soviet influence, but recent dis-
agreements over the Middle East and Tito's
warmer relations with Moscow have marred this
relationship
Tito will be physically taxed by the birthday
ceremonies and the three-day congress. He is
scheduled to give the opening address, and he will
undoubtedly try to see as many of the 70-odd
foreign delegation chiefs as he can. After the
congress, he will rest for two weeks before leaving
for Bonn in mid-June. Tito then will take a two-
month vacation, twice as Iona as his normal slim-
mer respite.
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I-Aw JLlsflL I -
USSR-CHINA: KEEPING THE LID ON
-1;t- 4
[The Soviet Union~sought last week to lessen
the chance of any additional flare-up with China
prior to the coming Soviet-US summit. On May
15, Moscow signed its annual trade agreement
with Peking, and two days later the Soviets
turned to the International Red Cross for assist-
ance in obtaining access to the three-man Soviet
helicopter crew that the Chinese have held since
March. Perhaps the most significant move, how-
ever, was the publication of an article in the
government newspaper Izvestia on May 16 that
argued for a cautious, restrained policy toward
China.
The article began with the standard Soviet
attack on China's foreign policy, but it went on
to say that there are "many indications" that not
all Chinese leaders support Mao's anti-Sovietism.
Claims by Moscow of dissent at leadership levels
in Peking are unusual. Whether or not the Krem-
lin believes pro-Soviet forces exist in Peking, the
allegation that they do-and might eventually
come to power-can be used to counter argu-
ments for a tougher line against Peking.
The article also catalogued Moscow's alleged
attempts to improve relations between the two
countries. It revealed that Peking turned down an
offer by Moscow in June 1973 to hold summit-
level talks, but added that the June offer and all
other Soviet proposals still stand, including such
offers as a nonaggression pact. The article glossed
over the helicopter incident, citing it merely as
proof that the Maoists would use "any pretext"
to mask their own failings.
The article was signed by a regular and not
particularly prestigious commentator on Sino-
Soviet affairs, but the frequent references to the
directives of the CPSU Central Committee prob-
ably were designed to give it a more authoritative
ring. It probably was intended to balance the
emotional anti-Chinese articles on the helicopter
incident that appeared in Red Star and Literary
Gazette two weeks ago. Those articles, and the
mildly threatening language of the third Soviet
protest note to the Chinese in early May, had
raised the possibility that Moscow might be pre-
paring a full-fledged anti-Chinese propaganda
campaign.
By the end of this week, in fact, Literary
Gazette had toned down its handling of the inci-
dent. It carried letters-ostensibly from ordinary
citizens-that seem to have been carefully worded
to avoid fanning popular prejudices against all
Chinese. The key point made is that China should
settle the matter "quietly, without hysteria and
hullabaloo."
One complicating factor in Moscow's over-all
moderate approach, however, was the USSR's de-
cision to publish the response it regularly makes
when China annually challenges Soviet sover-
eignty over the strategically located island oppo-
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JCUriC I
SOUTH VIETNAM: THE FIGHTING TAPERS OFF
;The upsurge in Communist military action
that 'began late last week has tapered off in some
areas, but is continuing in other regions. Of the
five northern provinces of Military Region 1, only
Quang Tri has remained untouched as the Com-
munists hit resettlement sites, urban centers, and
a number of military targets. In Quang Tin Prov-
ince, stiff Communist opposition forced South
Vietnamese troo to abandon their efforts to
regain lost ground
In the central provinces of MR 2, there is a
temporary lull in ground action following the fall
on May 16 of the government border base of Dak
Pek, which is located deep within Communist
territory. In coastal Binh Dinh Province, the Com-
munists attacked the air base at Phu Cat, from
which air strikes were being flown against North
Vietnamese targets in Kontum in retaliation for
the loss of Dak Pek. The Communists fired a
number of rockets at the base and seized four
nearby outposts. Just to the west, however, South
Vietnamese Rangers scored a victory over a bat-
talion-sized enemy forcer
To the north of Saigon, two South Vietna-
mese divisions have frustrated major efforts by
.elements of the North Vietnamese 7th and 9th
divisions to push salients into government-held
territory at Ben Cat and Phu Ciao in Binh Duong
Province. The initial Communist attacks were
directed against small outposts and villages-
manned by territorial forces-which have been
under Saigon's control since the cease-fire. The
attacks probably were designed to lure govern-
ment regulars out of their well-defended base
camps in order to inflict heavy casualities on
them. Buoyed by the good showing of govern-
ment troops in the fighting to date, senior South
Vietnamese military officers believe that any new
Communist attacks can be contained/
The increase in military action in MR 4 has
been centered in the southern delta, where Com-
munist attacks resulted in the loss of a number of
territorial force positions. Small-scale harassing
attacks and increased terrorism remain the rule in
the northern delta provinces)
Bridge blown up by sappers During this latest round of military action,
We Communists have used a mix of regular and
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local infantry units as well as guerrillas and
sappers. Main force North Vietnamese combat
units were involved in the fighting at Dak Pek and
in Quang Tin Province as well as in the action
north of Saigon. Most of the other fighting was
conducted by provincial force infantry units.
Sappers were responsible for the sabotage of sev-
eral bridges and roadways, and the relatively un-
successful attack on the Nha Be fuel storage com-
nlax iuct outside Saigon early in the wee
s the dry season draws to a close, tie
Khmr Communists are continuing to pursue
their camp ign against government enclaves in the
countryside.
Action this week was centered on the stretch
of Route 4 between Kompong Speu and the sea-
port of Kompong Som. Insurgent ground units
have begun to close in on Kompong Seila, one of
two remaining garrison towns in this area, and
there are signs that the Communists are trying to
move artillery within range of the air base at
Ream
In the north, government defenders at the
provincial capital of Kompong Thom continue to
bear up well under Communist attacks. The build-
up of Communist forces near Kompong Thom
suggests that heavier fighting is likely. East of
Phnom Penh, the provincial capital of Prey Veng
also remains under pressure, but government
troops there have been getting the best of the
skirmishing along the city's defensive perimeter.,
Closer to Phnom Penh, government forces
hay capitalized on Communist withdrawals to
advance several miles north of Route 5. Lead
units are now within six miles of the abandoned
beachhead at the Tonle Sap River at Kompong
Luong. These troops destroyed several barricades
the Communists had placed across the Tonle Sap
1 f j 4 I
Kompong Luo 4
Government
'Air Bas
ry
Prey
Veng
to prevent the movement of foodstuffs to Phnom
Penh]
25X1
25X1
ACADEMIC AGITATION
rStudent and teacher activists in Phnom Penh
are still grumbling, but their protests thus far have
not posed any serious problem for the govern-
ment. The teachers took the lead late last week
by issuing a declaration of no confidence in the
government. They have also held several press
conferences to air familiar economic grievances.
The teachers did not hold their planned congress
in the capital on May 17, however, and the threat
of another general teachers' strike appears to be
dissipating. The government has moved additional
army units into the capital to help contain possi-
ble disorders, but it has ordered the troops to
avoid confrontations with the students and teach-
ers should they take to the streets.
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IDuring the Vietnam war, Hanoi regarded
Thailand as a staunch ally of the US and hence an
implacable enemy of North Vietnam. With the
end of the war and the establishment of the
Sanya government in Bangkok, the North Viet-
namese reduced somewhat the vehemence of their
propaganda attacks on the Thai and began to
speak openly about the possibility of closer con-
tacts. Through the first months of 1974, nothing
resulted from this change, but there now appears
to be some movement in the Hanoi-Bangkok rela-
tionship as a result of recent Thai initiatives.
Hanoi has responded by further toning down its
anti-Thai polemics but has stopped short of
softening its tough conditions for better relationsa
.
/ The catalyst in the current behind-the-scenes
maneuvering appears to be Bangkok's Deputy
Foreign Minister Chartchai, who has long been an
active promoter of closer relations with Asian
Communist states.
'IChartchai's history of exaggerating both
Thai diplomatic initiatives and his own role in
them makes it difficult to evaluate the current
status of Thai - North Vietnamese relations. He
floated a series of optimistic but misleading re-
ports after his 1973 trip to Peking, for example,
raising expectations that a Chinese-Thai rap-,
prochement was imminent.
I The North Vietnamese may have taken
implicit note of the Thai initiativas in a May 12
editorial in the party newspaper Nhan Darr. The
editorial basically reiterated Hanoi's standard line
that the North Vietnamese were willing to con-
sider improved relations if the Thai would be
forthcoming on two points:
? resolution of the problem of ethnic Viet-
namese in Thailand;
? restriction of Thai military cooperation
with the US, specifically the dismantling of
US B-52 bases.
mands to bring about any real warming in rela-
The editorial, however, refrained from the sort of
acerbic language that Hanoi frequently aims at
Bangkok. It was notably milder in tone, for ex-
ample, than Hanoi's recent response to a Thai
official's statement that North Vietnamese troops
in Laos were a threat to Thailand.?
Although Chartchai may succeed, as lie did
wit the Chinese, in getting an emissary to Hanoi,
North Vietnam's adamant line probably precludes
any significant advance toward the establishment
of diplomatic relations, It would almost certainly
take a considerable scaling down of Hanoi's de-
`Lhe Lao Communists continue to hold the
initiative in the seven-week-old coalition gov-
ernment. Deputy Premier and Foreign Minister
Phoumi Vongvichit has been a dynamic force in
cabinet deliberations, and the Advisory Political
Council's chairman, Prince Souphanouvong, has
completely dominated the proceedings of that
body. Buoyed by their success in preventing the
opening of the rightist-oriented National
Assembly two weeks ago, the Pathet Lao are
pressing ahead with plans for a comprehensive
national political program for the new coalition-
including a new or substantially revised con-
stitution that will better reflect their view of
current political realities.'
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Senior political and military leaders on the
Vientiane side are already pessimistic about the
non-Communists' ability to compete successfully
in the new coalition environment.
(this characterization of the non-Commu-
nists is very close to the mark. Their leadership
problem is particularly acute. The non-Commu-
r .-nists have long been accustomed to following
Souvanna's determined lead, but under the pres-
ent coalition arrangement, Souvanna sees himself
essentially as a middleman and mediator. Con-
sequently, the Prime Minister has made it clear
that he will at times find it necessary to rule
against rightist political interests-as he did on the
assembly issue.
AUSTRALIA: LABOR SQUEAKS BY
e'' )
The narrow margin' of he Labor govern-
ment's presumed win in the elections on May 18
will have a marked effect on its style. Its pre-
carious parliamentary position will inhibit the
government from taking any new initiatives in
either the domestic or foreign field. With a
whittled-down majority in the House of Repre-
sentatives and the prospect of another opposition-
controlled Senate, Labor will have to abandon or
postpone a significant portion of its legislative
program, already stalled in the previous parlia-
ment by opposition control of the upper house.
Under the complex Australian system of
preferential voting, which involves the weighing
of voters' second and third choices, vote counting
is ponderously slow. The final line-up of the
House of Representatives may not be known until
late next week, and some of the Senate races may
not be resolved until next month. Absentee bal-
SECRET
Prime Minister Whitlam
A narrow squeak
lots, which will decide some close contests, can-
not be counted until after May 28. All voting is
by paper ballot, and the insistence of party repre-
sentatives on verifying each ballot further draws
out the tallying.
Prime Minister Whitlam appears sobered by
the closeness of the outcome. Besides watching
his legislative program founder, Whitlam may be
forced to curb his free-wheeling ways. A slim
Labor majority in the lower house will make his
own vote essential to the survival of the govern-
ment, and this could cut into his schedule of
foreign junkets. All Labor members of parliament
will be under pressure to attend all sessions, since
the absence of even a few Laborites could give the
opposition an opportunity to bring down the
government.
The opposition Liberal - Country Party
coalition has characterized Labor's slender margin
of victory as a warning light from, the voters, and
it has served notice that it will flex its parliamen-
tary muscles. The Labor government's tenuous
hold, plus the opposition's aggressive mood, could
lead to new elections within the next 12
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CUBA: TH SUGAR BONANZA
IRecor world sugar prices and an improved
harvest could boost Cuba's export earnings by
some 40 percent this year to an estimated $2
billion. The gain would erase most of Cuba's
perennially large trade deficit and could possibly
balance Havana's trade for the first time since the
Castro take-over in 1959.
The 1974 Cuban sugar harvest, now in its
final stages, will probably total nearly 6 million
tons, some 10 percent above last year. Most of
the gain reflects expanded acreage, increased use
of fertilizers, and replantings.
Cuban sugar earnings this year could reach
$1.7 billion, up 70 percent over last year.
Although the volume of sugar sold on the world
market will rise only slightly, the proceeds from
these sales will more than double to some $900
million because of the record prices. The price of
sugar on the world market has soared from 10
cents a pound in 1973 to almost 25 cents a
pound. Sugar sales to the Communist world will
also record a substantial increase, rising 15
percent in volume and somewhat in average price
as well.
The sugar bonanza could lead to a shift in
the direction of Havana's trade. The increase in
hard currency earnings together with some $1.2
billion in credits recently granted by Argentina
point to an increase in trade with Cuba's non-
Communist trading partners. Nevertheless, the
Cuban economy will remain closely tied to the
Communist world.
The Spartan lifestyle of the average Cuban is
not likely to change significantly as a result of the
improved trade picture. Although the supply of
imported goods will undoubtedly increase, part of
Harvesting sugar cane
A rc'cord crop
the gain in earnings will probably be used to
reduce Cuba's large trade deficit and to repay
outstanding debt. Moreover, Havana's continuing
emphasis on investment and local development
projects precludes major improvements in the
availability of consumer goods at the same
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low JCI..IiC I Naw
President Perez has moved boldly to speed
the nationalization of petroleum and iron ore,
and to extend government control over a number
of other areas of intensive foreign investment. He
has appointed a 36-member Petroleum Reversion
Commission to oversee the take-over of oil com-
pany assets and has established a Superintendency
of Foreign Investment to ensure that Venezuelans
own 80-percent of three broad areas of public
services within three years. Negotiations for na-
tionalizing the iron-ore industry, which are appar-
ently to be managed by a team drawn from sev-
eral government departments, have already begun.)
In his two major speeches on nationaliza-
tion--on April 29 and May 16--Perez gave few
details of the process he envisions. This vagueness
is very likely calculated to generate as much
domestic political support as possible, as well as
to reassure the foreign interests involved that the
nationalizations will be carefully studied and
negotiated before implementation.'
[in two points, however, Perez has been
clear. Venezuela's intention is to acquire only the
assets of the foreign petroleum and iron-ore com-
panies, and to consider net book value, with
/adjustments for outstanding debts, as the basis for
compensation. This suggests that foreign partici-
pation will continue in management and distribu-
tion. The priority interest of the private com-
panies is to maintain their access to the raw
material. Thus, progress in the negotiations on
compensation is likely to reflect the degree of
access guaranteed by Venezuela]
?"' After a brief period of shock and uncer-
tain , the foreign companies seem to have
adopted a cautiously optimistic attitude. Petro-
leum executives--Exxon, Shell, Gulf, and Mobil
are the largest affected companies-and represent-
atives of US Steel and Bethlehem Steel appear to
be concerned' more about the indefinite timetable
(-:than other aspects of nationalization. The Petro-
leum Reversion Commission has been charged
with determining a compensation formula within
six months. Beyond the life of the commission,
there are likely to be several more months of
negotiations directly with the companies. The
actual process of oil nationalization may not
begin until late 1974 or early 1975. The take-over
of iron ore will probably be somewhat more
rapid, if for no other reason than the absence of a
study commission for that industry and the fact
that direct negotiations are already under way.
In fact, Perez appears to be using reactions
to t e incipient nationalization of iron ore as a
guide for his moves on petroleum. To some ex-
tent, he may also be pushing the iron ore issue to
forestall the demand of his more radical support-
ers for immediate action on oil. Although elected
by a large majority last December, and with his
Democratic Action party in control of both
houses of congress, Perez is moving cautiously
is economic measures have received broad
support from all parties of the left and from
organized labor. The recently defeated Social
Christian Party of former president Caldera, how-
ever, has opposed the means by which Perez
intends to implement his goals, although the
party supports the goals themselves. Perez is
especially eager not to force the powerful local
business community into an opposition role. In
this regard, the minister of development recently
issued a public statement denying rumors that the
government will eventually make ''drastic"
changes in the private sector)
he prospect of nationalizations has drawn
the most attention but is only part of Perez'
economic package. He has also called for a broad
restructuring of the domestic economy to ensure
a more equitable distribution of wealth. His first
step toward this new structure has been to ask
congress for authority to issue economic decrees
affecting wages, banking, and such "national
enterprises" as utilities, broadcasting, printed
news media, and marketing.
q fIt is the sweeping nature of these proposed
domestic programs that will slow Perez' over-all
economic package, including nationalizations.
Even the friendly congress is teary of too much of
a good thing. It will give Perez the authority he
(seeks, but it has already moved to require him to
account in detail for his exercise of that author-
ity. Thus, Perez' nationalization of foreign com-
panies will be restrained by political realities at
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JtUNt I
Dominican Republic
BALAGUER RE-ELECTED
jI y= Despite heavy rains and a boycott by the
major opposition groups, Joaquin Balaguer was
elected to his third consecutive term as president
on May 16.)
Although 48 percent of the 2 million per-
sonsl registered to vote did not cast ballots, Bala-
guer was able to win about 200,000 more votes
than he did in 1970. The only other presidential
candidate, Lajara Burgos of the small right-wing
People's Democratic Party, received about 15 per-
cent of the vote,
Unofficial returns show that Balaguer's Re-
formist Party, under the country's proportional
representation legislative system, could receive 85
of the 91 seats in the Chamber of Deputies. All
27 seats in the Senate apparently were won by
the Reformist Party and its youth affiliate.]
XThe President's major opposition, the Sane
tiago Accord coalition, dropped out of the race at
the last minute after charging that the govern-
ment would not guarantee honest elections. Two
other presidential candidates had pulled out of
the race earlier after an opinion poll had shown
them to have only a few percentage points of the
votes.!
The Accord, a mix of right- and left-wing
parties, is claiming that the low voter turnout is
evidence of general dissatisfaction with Balaguer
and his two administrations. The Accord has al-
ready fired a verbal broadside at the government,
charging that the lack of any meaningful opposi-
tion at the polls places in question the govern-
ment's legitimacy. The secretary general of the
Dominican Revolutionary Party, the strongest
party in the coalition, has gone into hiding to
dramatize alleged government plans "to consoli-
date the dictatorship" by killing him
IS antics by the opposition probably will
cause only minor problems for the government.
The security forces appear to be ready to move
against any left-wing terrorists who are stirred to
action by clamorous post-election speechmakers-.1
The immediate challenge that Balaguer will
face' during his third administration is the high
President Balaguer
/another victor},
rate of inflation, caused mainly by increases in
the cost of petroleum and food. The President has
indicated that his first approach to the problem
will he to readjust price and wage control meas-
ures that were too touchy to handle of e the
election.
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SECRET
necessary to stimulate growth have an immediate
inflationary impact
I (From January through April, the cost of
living index jumped 87 percent, forcing the junta
to abandon its goal of keeping inflation under
1100 percent for the year. Much of the impetus to
higher prices initially came from rising petroleum
and food costs and from a rapid expansion of the
Compensatory wage adjustments
l
su
ne
y.
pp
mo
y
have added to the inflationary pressure, although 25
real wages remain slightly below January levels.
Moreover,
unemployment is about 10 percent an 25
could double during the year as businesses con-
tinue reducing employment to increase efficiency.
CHILE: INFLATION WOES
lEconorric recovery is proving to be a diffi-
cult process. The military government's policy of
permitting much of the economy to operate un-
der free market conditions in order to stimulate
production has contributed to an unexpectedly
virulent inflation. If inflation continues unabated,
prices could increase as much as 500 percent this
year. The dilemma facing the government is that
measures to curb inflation tend to slow economic
growth, while the investment expenditures so
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SEUNE I
INTERNATIONAL: TALKING ABOUT DISARMAMENT
The spring session of the Conference of the
Committee on Disarmament in Geneva concluded
on May 23, with the Indian nuclear test of last
week dramatically pointing up the conference's
failure to halt a proliferation of nuclear explo-
sions, even by one of its own nonaligned partici-
pants. No progress was registered on any of the
perennial disarmament questions-the comprehen-
sive nuclear test ban, the encouragement of more
accessions to the Non-Proliferation Treaty, or the
ratification of the biological weapons conven-
tion--although all were touched on in the
speeches of the delegates.
The major topic of discussion at this session
was revised chemical warfare treaty tabled by
Japan. The Japanese draft attempted to accom-
modate both the nonaligned and the developed
countries represented at the conference: the
former by the draft's emphasis on a comprehen-
sive ban on chemical agents; and the latter by its
gradual and discretionary approach to the de-
struction of chemical agents. The Japanese initia-
tive is an effort to conclude a long, contentious,
and so far fruitless endeavor to bring modern
chemical warfare under international control.
Most delegates welcome this new attempt to keep
alive consideration of the subject, although the
draft has not resolved contending interests"
[The nonaligned still argue that the treaty's
provisions allowing an indefinite period for de-
struction of chemical agents, would afford the
major powers an opportunity to effectively
!negate progress toward disarmament. They also
assert that, like the nuclear Non-Proliferation
Treaty, the Japanese draft discriminates against
"have-not" states-1
Z_--'Ache proposed Japanese treaty allows those
possessing chemical warfare agents to determine
when their stockpiles should be destroyed, while
prohibiting those not having such a capability
from developing one. The list of agents to be
banned is, initially at least, negotiable and this
likewise does little to reassure the nonaligned
about the intentions of the major powers to elimi-
nate chemical warfare agents./
The US and its allies, on the other hand,
have continued to assert the treaty must incor-
porate-effective verification procedures. The Japa-
nese treaty gives national verification agencies the
prime responsibility for ensuring compliance with
stockpile destruction and the ban on chemical
agents. The enforcement responsibility of an in-
ternational verification agency would remain to
be negotiated. The US will not accept any system
that does not accord primary verification and
enforcement responsibilities to an international
agency; from the US point of view, the Japanese
treaty remains unsatisfactory. The issue of verifi-
cation will probably be raised when technical
experts meet this summer.1
Enlargement of the conference's member-
ship'was also a principal question at this session
.
The two Germanies had earlier indicated their
desire to join. In order to maintain the geograph-
ical and bloc balance in the 26-member com-
mittee, three nonaligned members--one each from
Africa, Asia, and Latin America-will also be
admitted, probably at the July session, with later
pro forma approval of the committee's enlarged
membership by the 29th General Assembly. In
discussing the proposed enlargement, all countries
emphasized the desirability of maintaining the
limited size of the conference to preserve its nego-
tiating character, but a number of nonaligned
states also expressed interest in restructuring the
forum. By eliminating the co-chairmanship held
by the US and the USSR, the nonaligned coun-
tries believe that the conference could become
more democratic and less subject to the nego-
tiating initiatives the super powers.
F_ ~
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