WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A010900170001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 25
• Document Creation Date: December 22, 2016
• Document Release Date: November 9, 2009
• Sequence Number: 1
• Publication Date: November 22, 1974
• Content Type: SUMMARY

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Secret
Weekly Summary
State Dept. review completed NAVY review completed.
Secret
No. 0047/74
22 November 1974
Copy N2
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The WEEKLY SUMMARY, issued every Friday morning by
the Office of Current Intelligence, reports and analyzes signif-
icant developments of the week through noon on Thursday. It
frequently includes material coordinated with or prepared by
the Office of Economic Research, the Office of Strategic
Research, and the Directorate of Science and Technology.
Topics requiring more comprehensive treatment and therefore
published separately as Special Reports are listed in the
contents.
CONTENTS (November 22,1974)
EAST ASIA
PACIFIC
MIDDLE EAST
AFRICA
WESTERN
HEMISPHERE
1 The Middle East: Palestinians;
Brinksmanship
5 Vietnam: Military Action Planned
7 South Korea: A Moratorium on Dissent
7 Japan: Tanaka Plans To Resign
8 Cambodia: Uncertainty at the UN
9 United Kingdom: Party Meeting;
Budget
11 Portugal: Renewed Frictions
11 Italy: Stopgap Solution
13 The East German Red Carpet
13 Soviet Navy Departs Red Sea
14 Romanian Party Congress
16 Greece: Karamanlis an Easy Winner
17 Turkey: Irmak Faces Crucial Test
18 Iraq: Cabinet Shake-up
19 Latin America Tries To Evaluate
Quito
20 Peru: Policy Difficulties
21 Brazil: Opposition Electoral Gains
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`NW, J C I. Ii C I '%"+
THE MIDDLE EAST
lis
he battle between the Palestinians and the
was fought on several fronts during the
Israe
past week. At the UN, a pro-Arab majority
pushed toward approval of an Arab-sponsored
resolution on the Palestine question. At home,
Israeli security forces grappled with pro-PLO
demonstrators on the West Bank and with terror-
ist infiltrators in the town of Beit Shean. To-
gether, these challenges forced Prime Minister
Rabin's government into a more defensive posi-
tion that will make it still more difficult for him
to produce concessions in future peace nego-
tiations.
On November 21 the Arabs were preparing
to introduce to the UN General Assembly a draft
resolution outlining the "inalienable rights" of
the Palestinians "in their homeland." The pro-
posal is almost certain to be approved by a wide
majority of member states.
The proposed resolution affirms the rights of
the Palestinians: to self-determination without ex-
ternal interference; to national independence and
sovereignty; to return to their homes and proper-
ties; and to use "all means" in accordance with
the UN charter to realize their objectives.
In addition, the proposal asserts that imple-
mentation of these rights is indispensable for a
just peace in the Middle East, and that the
Palestinian people must be a principal party to
the establishment of such a peace.
The resolution is primarily a restatement of
long-standing Palestinian policy goals. Because it
does not threaten Israel directly or explicitly
deny Israel's right to exist, the Arabs consider the
proposal to be moderate. Israel, however, will
interpret the resolution-particularly the refer-
ence to a Palestinian homeland-as a denial of its
right to exist.
The Arabs made their references to the
Palestinian homeland deliberately vague. Their
defense of the rights of Palestinians expelled
"since 1947," however, confirms that they will
continue, at least for bargaining purposes, to per-
petuate their historical claim to Israel proper.
In spite of this stand, the majority of Pales-
tinian leaders seem prepared to join most Arab
heads of state in settling for a Palestinian entity
limited to the West Bank and Gaza. PLO leaders
will not admit this in public, however, until Israel
indicates a willingness to negotiate with them or
until they realize other concrete gains through
negotiations.
Tel Aviv considers that UN approval of a
statement authorizing the Palestinians to use "all
means" to regain their rights would in effect be
an international endorsement of terrorism. The
Israelis are using this argument in attempts to
dissuade several delegations from supporting the
Arab proposal. The Arabs, for their part, clearly
intend that an element of threat remain in this
formulation. Some, including the Egyptians, have
argued that fedayeen strikes at Israel are carried
out in self defense, and are therefore legal under
provisions of the UN charter.
PLO representatives in New York have de-
clined to belabor this line of argument, appar-
ently in the hope that through avoiding too much
talk of violence they can win European backing
for the draft resolution. The Palestinians consider
that the PLO's willingness to give up its earlier
call for armed struggle and to restrict its methods
to those in accordance with the UN charter repre-
sent significant concessions.
In addition to spelling out Palestinian rights,
the draft resolution requests the UN Secretary
General to establish contact with the PLO "on all
matters concerning the question of Palestine."
This may be in anticipation of a second resolu-
tion, still being drafted, that would accord per-
manent observer status to the PLO.
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On the occupied West Bank, anti-Israeli
demonstrations that began in several towns fol-
lowing PLO leader Yasir Arafat's appearance
before the UN General Assembly on November
13 spread to East Jerusalem early this week. The
disturbances apparently are the result of a general
feeling among West Bankers that events are
moving in favor of the Palestinians. Most of the
demonstrators thus far have been Arab high
school students.
Israeli authorities have imposed a curfew on
several West Bank towns, closed some schools,
and arrested a number of demonstrators. They
have also warned local Arab leaders to maintain
order or Israeli military authorities would crack
down "unrestrainedly."
In the months ahead, Tel Aviv is likely to
find itself facing increased anti-Israeli sentiment
on the West Bank and Gaza. Recent soundings by
the US consul general in Jerusalem indicate that
Palestinian nationalist feelings on the West Bank
were given a strong boost by Arafat's speech at
the UN. Widespread resentment of Israel's
occupation was further reinforced by economic
austerity measures announced by Tel Aviv last
week.
In Israel proper, three Palestinian terrorists,
early on the morning of November 19, seized an
apartment house in Beit Shean, a town four miles
from the Jordanian border. Before Israeli troops
stormed the building and killed the guerrillas,
four Israeli civilians died and a number were
wounded. The terrorists apparently hoped to take
hostages to be exchanged for Arab prisoners held
by the Israelis. The Popular Democratic Front for
the Liberation of Palestine, a Marxist-oriented
group that has aligned itself with PLO leader
Yasir Arafat, claimed credit for the attack.
The attack reinforced the Israelis' conviction
that they have been right regarding the true na-
ture of the PLO. Israeli Information Minister
Yariv said that the attack proved that interna-
tional recognition would not lead the PLO toward
moderation, but, on the contrary, would only
encourage it to engage in terrorism. Defense Min-
ister Peres promised the Knesset that the security
forces of Israel would deal "unceasing blows" at
the terrorists "until the last one is liquidated."
Despite the fact that the attack was
mounted from Jordan, the Israelis, conscious of
Jordanian attempts to intercept terrorists crossing
Jordan to carry out operations in Israel or
Israeli border police with detained youthful demonstrators
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',J L_ V I \ L_ 1 ,400
Israeli-occupied territory, have this time appar-
ently decided to settle for warning the Jordanians
of retaliatory action should Amman fail to pre-
vent future attacks from Jordanian territory.
Yariv stated that while Israel would not conclude
that Jordan had begun assisting terrorist groups,
the onus was on Jordan to prove it had not
cooperated with the men who attacked Beit
Shean.
The most likely Israeli response is to con-
tinue and perhaps intensify the shellings, air
strikes, and shallow penetration raids they have
long been conducting against fedayeen bases in
southern Lebanon. Air strikes at Palestinian ref-
ugee camps in Lebanon are also possible. Follow-
ing the terrorist attack on Maalot last May, also
carried out by the Democratic Front, the Israelis
responded with heavy air strikes on two refugee
camps.I
DANGEROUS BRINKSMANSHIP
Military tension, sharply i creaseby Israel'
partial mobilization last weekend, has eased, but
the political war of nerves is likely to continue, at
least through the end of the month. The Israelis
said their action was a precautionary measure in
response to "advanced military preparations" in
Syria, but Tel Aviv almost certainly acted in part
to intimidate the Syrians into renewing the man-
date for the UN observer force, which expires on
November 30. Whether or not Syria had made
threatening military movements, Damascus' nega-
tive attitude toward extending the UN mandate
implies that Syria hopes to provoke a political
crisis in order to focus attention on its demands
for a further Israeli withdrawal on the Golan
Heights.
The atmosphere in Damascus and Cairo has
been remarkably calm, considering the circum-
stances. Officials and the media in both countries,
however, have charged Israel with fomenting a
war scare, and Arab fears of an attack on Syria or
Lebanon have undoubtedly increased. Moreover,
both Syria and Egypt probably have taken added
precautions against a surprise attack. Syria, in
particular, has been doing its utmost to train and
equip its armed forces for any contingency. Thus,
some local incident could trigger large-scale hos-
tilities with little or no warning, particularly in
the Golan Heights.
One positive effect of the war scare has been
the reaffirmation by all the parties of their com-
mitment to the cease-fire agreements. Syrian For-
eign Minister Khaddam has publicly stated Syria's
intention to abide by the cease-fire, and Israeli
Defense Minister Shimon Peres has said on na-
tional television that he expects any develop-
ments in the near future to be political rather
than military.
In elaborating on the reasons for Israel's
partial mobilization, Peres cited the decisions
taken at the Rabat summit conference, rumors
that Syria would not renew the UN force man-
date, and Arab assertions of Israeli economic
weaknesses as causes of Tel Aviv's concern. These
developments, along with the recent diplomatic
victory scored by the Palestine Liberation Organi-
zation at the UN, have left the Israelis feeling
beleaguered and pessimistic about future attempts
to achieve a negotiated settlement. Confronted
with this situation, Israel's mobilization serves
various political and military purposes:
? It gives a firm response to Arab pressures
for sweeping and immediate Israeli conces-
sions in disengagement negotiations.
? It puts Syria on notice that the removal
of the UN troops could expose Syria to im-
mediate attack.
? It raises the threat of an Israeli incursion
into Lebanon if fedayeen activities are not
curbed.
? It puts the Israeli forces in an even
better position to deter or counter an Arab
attack or launch an attack themselves.
? It underscores Israeli concern about So-
viet military support for Syria in anticipation
of the summit meeting between President
Ford and Soviet party chief Brezhnev.
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S L -
The Israelis, in fact, have repeatedly ex-
pressed their alarm about what they perceive as a
massive Soviet resupply effort to Syria. Prime
Minister Rabin implied that a principal reason for
the Israeli mobilization was a substantial increase
in the number of Soviet arms carriers that he said
were unloading at Latakia. The harbor apparently
is crowded to its capacity of 20 or so ships, but
not all of these are Soviet or East European
vessels. The Soviets have, however, made substan-
tial military deliveries to Syria over the past year.
The public Soviet reaction to the Israeli
mobilization has been relatively restrained and
cautious, suggesting that Moscow, on the eve of
the Vladivostok summit, had chosen not to ex-
ploit the new tensions in the region.
by recent indications that one element in the
tougher Arab negotiating stance is a growing be-
lief that the time has come for facing up to the
hard political questions involved in a Middle East
settlement and that Geneva is the best forum for
initiating this process. Press reports this week
suggested that the Syrians might insist on a quick
resumption of Geneva as a condition for renewing
the UN mandate, and Egyptian Foreign Minister
Fahmi said in a magazine interview that Cairo
refuses to discuss any new political initiatives
outside the scope of the Geneva conference.
Fahmi reportedly also said this week that he
expects a resumption of the Geneva conference
during February, after President Sadat meets with
both Soviet leader Brezhnev and President Ford
in January.
~,.7 3) The Soviets probably have been encouraged
Fahmi's statements probably are not so
much a reflection of Egyptian insistence on a
return to Geneva as they are of Cairo's sensitivity
to Damascus' refusal to support any step-by-step
approach to negotiations that allows Israel to
avoid dealing with Syria. Egypt probably would
still prefer to restore momentum to the nego-
tiating process by achieving a further Israeli pull-
back in the Sinai. Nevertheless, ever since the
Rabat summit, it has been clear that Cairo is
being hobbled by Syria's determination to fore-
stall a unilateral Egyptian-Israeli disengagement as
the next step and to press the issue of an Israeli
withdrawal on the Golan front.
Brezhnev responded promptly to a commu-
nication from Syrian President Asad that appar-
ently expressed Syrian concern. Brezhnev prob-
ably counseled restraint while indicating backing
for Damascus in the event of war. Moscow, mean-
while, announced the day after the Israeli alert
that a small flotilla headed by the Black Sea
commander would soon visit Syria. Moscow
appears to have timed its announcement as a
tangible indication of Soviet support.
The Soviets probably consider that the latest
episode will strengthen their hand in the region.
In contacts with the Arabs, Moscow will likely
argue that the Israeli action is further proof of the
Arabs' need to rely on Soviet political and mili-
tary backing to achieve a settlement. The Soviets
may calculate that it will increase pressure on
President Sadat to improve relations with Moscow
in order to obtain badly needed war supplies.
They will certainly point to the episode at the
Vladivostok summit to underscore their con-
tention that Moscow must be cut in on Middle
East diplomacy if a new war is to be avoided.
The Egyptians themselves last week under-
scored the need for another interim agreement
with Israel, providing for a further Israeli with-
drawal from the Sinai, by publicly linking the
issue to the reopening of the Suez Canal. Fahmi
asserted in a speech to a People's Assembly com-
mittee that the canal will be reopened only when
Israeli forces have withdrawn "enough distance"
from the waterway to safeguard shipping. The
canal will be technically ready to handle shipping
again in a few months.
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Restoration of momentum to the nego-
tiating process now appears to hinge primarily on
the ability of the various parties to find some
formula for mollifying the Syrians. There have
been suggestions in the press that Syria might yet
renew the UN mandate in return for a token
Israeli withdrawal in the Golan or for setting a
timetable for a reconvening at Geneva. All that is
clear about the Syrian position, however, is that
VIETNAM: MILITARY ACTION PLAA(NB8NN)ED
ecently issued COSVN inst ucfions for
1973 outline a Communist dry-season campaign,
running through June, that could amount to the
most serious military test for Saigon since the
cease-fire. The instructions call for widespread
and heavy action, apparently to achieve a maxi-
mum shock effect, throughout much of the South
Vietnamese countryside during the "first days" of
the campaign. Subsequent action is to be con-
centrated in a relatively few "vulnerable" areas.
The instructions emphasize that the campaign
must get under way as soon as possible-between
early and late December-in order to maintain the
element of surprise and pre-empt any possible
government dry-season attacks.
During the initial phase, the COSVN guide-
lines appear to prescribe a level of fighting below
that of the 1972 offensive. They suggest, how-
ever, that the Communists may be prepared to
commit the forces and firepower already in the
South more fully than they did during the fight-
ing last summer in the hope of achieving some
quick and dramatic victories.
Specifically, the instructions call for "in-
tense" fighting in central South Vietnam and the
commitment of all Communist units in Military
Region 3 to offensive action in the provinces
around Saigon. The Communists hope this will
force the government to pull one of its divisions
out of the delta.
Page 5
cause the Israelis may well interpret the Syrian
they are bent on playing the mandate issue for all
it is worth. If the Syrians do not get a satisfactory
response to their demands by the end of the
month, they are likely to let the mandate expire,
while reiterating their commitment to observe the
rest of the points in the cease-fire and dis-
engagement agreements. In this circumstance,
tensions are likely to continue to run high be-
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The guidelines do not cover Hanoi's military
plans for northern South Vietnam, an area where
Hanoi's strategic reserve could be brought to bear
with relatively little warning. Although the bad
weather conditions that persist in this area during
the winter do not favor heavy enemy action', the
Communists could mount enough pressure in the
north to prevent the movement of government
forces to more active battlefronts. Then, once the
weather improves, they may be prepared to strike
hard in order to follow up the Communist cam-
paign farther south or to exploit any major gov-
ernment reverses.
Utilizing only the forces at hand in the
South, the Communists probably would be able
to make and sustain major gains in only one
area-the central highlands. The North Viet-
namese could probably quickly isolate and bring
heavy pressure on both Pleiku and Kontum cities.
There could be considerable slippage in the
Communists' timetable. Moreover, with fore-
knowledge of the enemy's intentions, the govern-
ment may be able to mount some spoiling opera-
tions, particularly in Military Region 3, which
could also disrupt Communist battlefield prepara-
tions. Nevertheless, once the campaign is kicked
off, the government will probably suffer numer-
ous tactical reverses, especially if the Communists
make full use of their large inventory of tanks and
artillery. It seems unlikely, however, that such
reverses would lead to a major strategic break-
through for the Communists.
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 Preparing for action
Communist forces elsewhere in central South
Vietnam could tie down government forces by
threatening population centers along the coast.
The North Vietnamese could also use their fire-
power to capture some additional territory in the
provinces north of Saigon, but they do not appear
to have the forces necessary to sustain a pro-
tracted drive. After some initial losses in this area,
government resistance would probably stiffen and
Saigon would retain control over the bulk of the
people and the economically important land.
Fighting of the magnitude described in the
COSVN guidelines would appear to be within the
framework of the strategy Hanoi adopted toward
South Vietnam following the cease-fire. This stra-
tegy assumed that the Thieu government could
eventually be forced into making significant polit-
ical concessions to the Communists as a result of
declining American support for Saigon and care-
fully measured Communist military pressure on
government forces-pressure below the level that
would risk American military re-involvement. The
COSVN instructions make it clear that the Com-
munists are still following this gradualist ap-
proach. They present two options open to Hanoi:
a "political" track that features some escalation
of military pressure; or a "military" track in-
volving an all-out offensive. The guidelines clearly
come down in favor of the former.
Behind this reaffirmation appears to be a
judgment by the leaders in Hanoi that their
strategy following the cease-fire is finally be-
ginning to show signs of success. Hanoi's propa-
ganda has been vigorously touting the recent pub-
lic manifestations of opposition to Thieu in South
Vietnam, and, as might be expected, has been
egging it on. The North Vietnamese leaders now
appear to have decided that a further, if still
measured, increase in military action would serve
to encourage popular agitation in the South.
MORE CONSCRIPTION
/ianoi is conducting its second induction
campaign in fdur months. The new drive appears
This latest campaign began in October and
appears to be widespread, although there is no
sense of urgency in the reporting. Recent propa-
ganda suggests that, in general, localities are meet-
ing their assigned quotas, but earlier reports had
indicated that the North Vietnamese were having
some difficulty recruiting troops during the Au-
gust-September drive. This may be part of the
reason Hanoi has had to hold a second campaign
so soon. If successful in the current induction
drive, the North Vietnamese should have enough
manpower to sustain a moderate to heavy flow of
troops to the South this, dry season.
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SOUTH KOREA: PAK 1 CONTRO
N 2L) 7)
The government of Pak Chong-hui is very
muc in control as President Ford arrives in Seoul
today, but domestic dissent continues to build
and both Pak and his opponents seem ready for
yet another round of political struggle when the
visit ends.
Prospects for a relatively smooth presidential
visit improved during the week. Although minor
protests by student and Christian groups con-
tinued, opposition New Democratic Party leader
Kim Yong-sam felt compelled to call for a mora-
torium on demonstrations while President Ford is
in Seoul. At most, there may be some attempt by
Pak's critics-such as the protest by Korean
women and an American priest at the US embassy
yesterday-to dramatize their grievances in hopes
of influencing the US visitors to counsel Pak
toward moderation.
Following the Ford visit, however, the politi-
cal situation is likely to heat up once again. Pak's
opponents, despite fear of a governmental crack-
down once the visitors have left, apparently
intend to press on with their campaign for basic
political reform. One group, seeking outright
revision of Pak's 1972 constitution, plans to move
quickly to form a united front of opposition
elements. Kim Yong-sam plans to persist in his
campaign to secure National Assembly considera-
tion of constitutional changes. Kim apparently
believes that economic hardships during the
winter will reduce worker support for Pak, and
that the situation will become increasingly favor-
able for antigovernment forces. The students
remain unpredictable, but there will soon be a
semester break and this will work in the govern-
ment's favor.
The government also has plans to get much
tougher with the opposition, if necessary. Arrests
and detentions would become more numerous,
new security regulations would be imposed, and
reimposition of martial law is also a possibility.
The government, concerned over the worsening
economic situation, would not tolerate political
activity which attempted to exploit worker dis-
JAPAN: TANAKA PLANS TO RESIGNS
Prime
Minister Tanaka
will announce his resignation
early in the week of November 25, paving the
way for the ruling party to select a new head of
government before the Diet convenes in
December.
Tanaka decided to quit rather than face a
mud-slinging attack by the opposition parties. He
has been under heavy fire since October when an
influential magazine accused him of corrupt
financial dealings over a period of many years.
Pressures for Tanaka's resignation intensified
early this month, but the ruling Liberal Demo-
cratic Party called a nominal truce during the visit
of President Ford. Nevertheless, factional maneu-
vering and intra-party discussions continued
unabated all this week. The Liberal Democrats
have not yet been able to agree upon a successor
to Tanaka, however, and even the method of
choosing a successor is probably still under
debate. The party can select its new president
either by a consensus of its elder statesmen, or by
ballot at a convention.
Former finance minister Fukuda, one of the
key contenders for the top job, adamantly op-
poses a showdown in a convention vote. He is
pushing for selection by a panel of elders who,
with their conservative bias, might favor him.
The Prime Minister therefore supports the
convention route, which would allow him to
throw the weight of his own party faction behind
Finance Minister Ohira-who probably has the
votes to win. If the party cannot make a choice
between Fukuda and Ohira, it might feel com-
pelled to accept a caretaker leader until Tanaka's
regular term expires next July.
Whoever the successor, Japanese policy is
not likely to change. Both Fukuda and Ohira
would maintain Tokyo's close partnership with
the US.
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CAMBODIA: UNCERTAINTY AT THE UN
The timing of the N debate on Cambodian
representation will apparently be decided by a
battle of wills between General Assembly Presi-
dent Bouteflika and the chairman of the as-
sembly's political committee-and the timing may
well affect the outcome. The political committee
had earlier decided to debate the Korean issue
before Cambodia and had set November 25 for
the beginning of its deliberations on Korea. The
Korean issue was expected to be decided in early
December, after which the assembly would take
up the Cambodian question.
During the past week, however, Bouteflika
unsuccessfully pressed the chairman of the politi-
cal committee-Argentinian Ortez de Rozas-to
postpone debate on Korea so that the Cambodian
issue could be taken up immediately after the
debate on Palestine concludes, late this week or
early next week. Bouteflika and his nonaligned
colleagues apparently hope that an Arab victory
on Palestine, following the action on South
Africa, would create a more favorable climate for
Sihanouk's case. Phnom Penh's backers hope that
the debate on Korea will help dissipate some of
the nonaligned momentum, and they want to
adhere to the original schedule.
At midweek, neither Bouteflika nor the po-
litical committee chairman-who is increasingly
irritated at Bouteflika's high-handed methods-
had caved in, and the timing on the Cambodian
issue was still undecided. Phnom Penh's backers
are taking no chances. They are rushing their
lobbying campaign and are preparing for an early
vote on Cambodia. At the moment, it still appears
that the crucial vote on the priority of Phnom
Penh's resolution to defer once again UN action
on Cambodia will be so close that a fluke-such as
an unexpected absence or a miscast vote such as
Norway's last year-could decide the issue.
In Phnom Penh, it has become apparent that
a significant shake-up will occur in the govern-
ment next month no matter what the outcome at
the UN. If his government retains its seat, Prime
Minister Long Boret plans to push this advantage
to reorganize his cabinet, most notably by re-
placing the defense, interior, and finance
ministers.
These planned changes are minor compared
to the political upheaval that would probably
result from a government defeat at the UN. An
unfavorable vote would probably lead to a rapid
dissolution of the Long Boret government, and
recent reports indicate that the Prime Minister
holds few illusions on this score. Boret has said
that he would resign immediately. Finding a new
prime minister as capable as Long Boret, while
keeping the inevitable round of political infight-
ing within bounds, would be a major challenge for
President Lon Nol. There are indications that the
military would push for greater participation in
the government in the event of a_UN defeat.
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Wilson has, nevertheless, won some impor-
tant battles with Labor's left. Three left-wing
ministers who criticized joint naval exercises with
the South Africans submitted formal apologies to
Wilson-at his insistence-for breaching the doc-
trine of collective responsibility and failing to
support government policy. Last week, Labor's
parliamentary group elected moderate Cledwyn
Hughes as their chairman, defeating incumbent
Ian Mikardo, one of the leading leftist spokesmen
in Parliament. In addition, the leftists, who are
the primary source of sentiment against the Com-
mon Market in the Labor Party, took another
beating earlier this month in public opinion polls,
which showed that 53 percent of the voters fa-
vored remaining in the EC. This should put the
damper on efforts to push through a strong anti-
market resolution at the conference.
~fhe annual Labor Party c reference next
week, when party delegates review government
stewardship and debate policy, will be highlighted
by the continuing power struggle between left-
wing Laborites and the moderates led by Prime
Minister Wilson. This year's conference could be
heated in view of the rising challenge from the
left and signs that Wilson intends to take a
tougher line toward rebellious party members.
Most of the problems besetting the party are not
likely to be resolved, but the moderates have
picked up strength and could force the left to
regroup before mounting a serious challenge to
Wilson in Parliament.
The conference, from November 27 to 30,
will focus on the government's economic policy.
On the eve of his budget speech last week, Wilson
warned all Britons to cooperate with government
efforts to fight inflation. He cautioned trade
unions to abide by the voluntary wage restraints
of their "social contract" with the government.
Wilson's tough talk apparently has had little
effect on militant leaders of the coal miners'
union. Following a vote Monday that rejected a
coal board proposal offering wage incentives for
increased productivity, militant miners demanded
steep pay hikes as part of any overall agreement.
Militants in the miners' union, as in other unions,
are likely to continue to push their wage de-
mands, to the detriment of their social contract
and its voluntary restraints. These pressures
should be evident at next week's conference,
where an overwhelming majority of the voting
delegates come from the trade unions.
The new budget will also cause some con-
troversy. The trade unions generally go along with
it, but fear that the reduction of government
subsidies to nationalized businesses will sharply
increase prices. The left-wing Laborites resent ef-
forts to aid industry and argue that the capital
provided ailing industrial firms will cut into the
funds available for social programs.
Perhaps of greater significance, however, is
the apparent change in Wilson's own attitude, and
indications that he is prepared to use tough talk-
and conceivably tough actions-to defend govern-
ment policies against attacks by party rebels.]
44
e
st budget, an-
he Labor govern`rrnf's lat
nouncced last week, will prevent some near-term
unemployment but will not improve economic
growth. Chancellor of the Exchequer Healey
chose to give financial relief to the hard-pressed
business sector, with the cost falling on personal
consumption.
The new budget is a cautious document
which will not satisfy most economic factions. It
corrects some growing distortions in the British
economy. It gives aid to troubled industry with-
out fully satisfying the appeals of businessmen; it
hews to socialist control over economic activity
while encouraging the private sector; it props up
the economy while providing little net stimulus at
a time of raging inflation and incipient slump.
Faced with faltering private investment,
spreading bankruptcies, and mounting unemploy-
ment, Healey tailored his new budget to the ills of
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industry. Current corporate difficulties have been
brought on by escalating costs, restrictive price
controls, and heavy taxation. Inflated inventory
values have kept up nominal profits while com-
panies' financial positions deteriorated. At the
same time, high interest rates and a collapsing
stock market have dried up the L sual sources of
capital.
Easing price controls and lightening the
corporate tax burden will improve the companies'
cash situations and restore profitability some-
what. The expanded loan facilities and a new
National Enterprise Board, to provide equity
financing for firms the government wishes to
help, will ease corporate financing difficulties. In
addition, the banking system has been directed to
continue favoring industrial lending at the ex-
pense of consumer loans.
Phasing out subsidies to nationalized indus-
tries means higher prices for electricity, natural
gas, coal, trains, and postage. Under Healey's
plans, prices in these industries will more realisti-
cally reflect costs, saving the government $1.8
billion over the next year.
On balance, the budget provides little stim-
ulus to total demand. Reduced tax payments by
companies will be offset by smaller deficits in the
nationalized sector. Corporations will find busi-
ness a little more profitable, but expanded sales
will be difficult because a greater proportion of
consumers' budgets will be spent on the higher
priced products of the nationalized industries.
The new price codes will provide some stimulus
to investment, but, without the prospect of re-
newed economic growth, this incentive will be
weak.
Overall, the government expects its borrow-
ing requirement to swell from $6.5 billion in
fiscal year 1974 to $14.5 billion in 1975. Large as
it is, the expanded budget deficit will just about
offset the contractionary effect of Britain's
$9-billion current account deficit.
Removal of exchange rate guarantees signals
a willingness of British authorities to let the
pound depreciate. The move itself will have little
BUDGET HIGHLIGHTS
Modification of price controls on private
companies, tying price relief to new in-
vestment.
A $1.8-billion reduction of the corporate
tax liability to soften the effect of inflation
on corporate taxes.
A $2.3-billion increase over the next two
years in industrial investment funds through a
quasi-public finance corporation.
Prjce increases in nationalized industries
to reduce public subsidies.
An increase in the tax on gasoline.
Increases in pensions and other benefits
amounting to $460 million in the next year.
The elimination at the end of this year
of remaining exchange rate guarantees on of-
ficial balances held in`London.
direct effect on the exchange rate because the
guaranteed balances are declining in importance,
and sterling interest rates remain attractive. The
competitiveness of British exports, however, has
begun to slip as inflation in the UK outstrips that
of its major competitors. Inasmuch as the govern-
ment's economic strategy calls for maintaining
export performance, some decline in the pound
may be necessary.
The budget is likely to jeopardize further the
government's strained social contract with the
trade unions. Planned price increases in the public
sector will be large and highly visible. Prime Min-
ister Wilson has warned the unions that recent
pay settlements are threatening the social con- 25X1
tract guidelines. Even so, another spurt of ac-
celerated inflation is sure to fuel union claims for
still larger pay boosts.
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1#400f %",W
PORTUGAL: RENEW D FRICTION
Tensions which eveloped lafe last week
with )n the governing Armed Forces Movement
when moderates renewed attempts to curb the
activities of left-wing militants have apparently
subsided, at least for the moment.
The immediate cause of the controversy was
the most recent issue of Movement, the Armed
Forces Movement's weekly bulletin, that attacked
the economic policies of the provisional govern-
ment. The bulletin, which the movement began
publishing last month to explain its policies to the
people, is largely staffed by left-wing movement
activists and reflects their point of view.
Moderate officers reportedly demanded the
dissolution of the leftist-influenced Coordinating
Committee of the movement. The US embassy in
Lisbon reported that the Armed Forces Superior
Council, an advisory group formed late last
month to coordinate military activity in the gov-
ernment, had also demanded dissolution. No ac-
tion has been taken against the committee, how-
ever, but there apparently has been some success
in reconciling the moderates and the militants, at
least for the time being.
Page 11
The illness and possible resignation of Prime
Minister Goncalves has added a new dimension to
the continuing conflict within the movement.
According to two embassy sources, Goncalves
submitted his resignation on November 15
and each faction
within the movement is maneuvering to have one
Growing dissension within the movement is
significant because the young officers had man-
aged, in the past, to present a generally united
front in opposition to former President Spinola's
policies. Since Spinola's ouster, the moderate
majority appears more willing to take its own
stand and less willing to be led by left-wing
activists.
The political atmosphere in Lisbon is further
troubled by renewed rumors of plots by loyalists
of the Caetano regime against the provisional gov-
ernment. Threats of a countercoup from the right
have been used by the left in the past to unite
their own forces against a "greater danger." Com-
munist leader Alvaro Cunhal issued such a warn-
ing last week.
power triumvirate now in Lisbon.
Although right-wing elements undoubtedly
are planning moves that would return them to
power, there are no indications of any action in
the immediate future. The leadership also ap-
parently does not believe there is any danger.
Minister without Portfolio Melo Antunes left on a
trip to Paris this week. Major Vitor Alves, who
returned from a European tour last Saturday, is
the only member of the Goncalves-Alves-Antunes
25X6
25X6
25X6
ITALY: STOPGAP SOLUTION
,Aldo Moro secu ed agreement this week on a
formula that will give Italy a new government,
but it leaves unresolved most of the economic and
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Jtl.l~t
political differences that brought down the pre-
vious one.
The small Republican Party has agreed to
join Moro's Christian Democrats in a two-party
coalition, while the other two center-left par-
ties-the Socialists and Social Democrats-have
agreed to provide the coalition with a parlia-
mentary majority.
Moro's government will be only a stopgap
affair. Politicians settled on the two-party solu-
tion only after two previous proposals had failed
to draw sufficient support. During the initial
phase of the seven-week-long stalemate, Christian
Democratic Party boss Fanfani could not per-
suade the four parties to join in another center-
left coalition. More recently, Moro cut short an
effort to set up an all - Christian Democratic cabi-
net when the Social Democrats balked at the idea.
The Social Democrats, in fact, were the least
flexible of the four parties throughout the nego-
tiations and managed to exert influence out of
proportion to their parliamentary strength; they
have less than 5 percent of the seats in the legisla-
ture and their votes are not required for a center-
left majority. The Social Democrats triggered the
crisis in early October by accusing the Socialists
of collusion with the Communists. Even after the
Socialists moderated their position on the Com-
munist issue to the satisfaction of the other par-
ties, the Social Democrats would not change.
They refused to endorse an all - Christian Demo-
cratic cabinet, claiming that it would be "too
open" to Communist influence.
Increasingly isolated, the Social Democrats
finally conceded when the Christian Democrats
put the two-party proposal on the table. It was
undoubtedly meant to be a face-saving device for
the Social Democrats, who had not voiced public
opposition to this alternative.
The Social Democrats were able to hold out
for so long mainly because of differences between
left- and right-wing elements within the dominant
Christian Democratic Party. Moro--who leads the
Christian Democratic left-wanted to dump the
Social Democrats when they declined to back a
Christian Democratic cabinet; he already had
majority support from the Socialists and Republi-
cans. Center and right-wing Christian Democrats
were reluctant, however, fearing that such a move
would expose the party's right flank.
Thus, the Christian Democrats were spared a
potentially divisive decision when the Social
Democrats fell in behind the two-party proposal.
The fact that Christian Democratic unity is so
fragile, however, casts doubt on the party's ability
to reverse its sliding fortunes. Early this week, the
party suffered another reversal when scattered
local elections showed substantial Christian
Democratic losses and notable gains for the So-
cialists and Communists. Although these contests
were of marginal significance nationally, the
results are already being trumpeted by the left as
further evidenceof the Christian Democratic decline.
The Communists are probably satisfied with
the outcome of the government crisis. Although
they would welcome a major concession from the
governing parties--such as formal consultations on
legislative matters-they are not eager to be
saddled with the responsibility of governing under
present circumstances. They want to prepare for
nationwide local elections in June, when they
hope to secure further advances. The Commu-
nists, moreover, have good relations with Moro.
He is not about to make a deal with the Com-
munists, but he will probably give more weight to
their views than would most other Christian
Democratic leaders.
Moro hopes that tempers will cool enough to
permit a later effort to revive the center-left coali-
tion. Failing that, he will try to keep the lid on
inter-party conflicts, at least until the local elec-
tions in June. After that, all parties will reassess
the situation.
In the meantime, Moro's fragile coalition
will have to cope with rising inflation, growing
unemployment and continuing labor unrest. In
addition, it appears that Italy will be hit this
winter by a serious fuel oil shortage that will
require rationing of electric power.
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NNW 6E(-;HE I
THE EAST GERMAN RED CARPET (:5-
6~--4
ast week, President Tito made his first visit countries. The East Germans are likely to drag 25X1
to EJast Germany in nine years. Pankow provided their feet on this project, however, because of
an unusually warm reception. All Politburo mem- their continued concern over ideological subver-
bers were on hand for his arrival, and massive sion and escapes to the West.
crowds turned out to greet the Yugoslav leader at
every stop. Neues Deutschland, the party paper,
set the tone of the highly favorable media cov-
erage by running a banner headline greeting in
The carefully arranged demonstration of
friendship was clearly intended to bury old and
bitter ideological differences. In addition, it
served Soviet interests by attempting to counter-
act the harmful effects of Moscow's abortive sup-
port of the "Cominformist affair" in Yugoslavia.
Tito, who openly questioned the spontaneity of
his welcome, does not seem to have been taken
The communique on the visit indicated that
the Tito-Honecker talks focused on the develop-
ment of economic relations and expanded co-
operation but hinted at significant differences
over cooperation in the communist movement.
Apparently at Tito's request, the communique
called for increased tourism between the two
SOVIET NAVY DEPARTS RED SE
The command ,hip for the Soviet mine-
clea ing operations in the Strait of Gubal and
three mine-sweepers began their return trip to
Vladivostok this week, following completion of
the mine clearing on November 10. These are the
first to depart of the group of seven minesweepers
and four to six support ships that arrived in
mid-July. The remaining ships are scheduled to
leave the Red Sea area before the end of the
month according to Soviet authorities.
The helicopter ship Leningrad and an escort-
ing destroyer that joined the mine-clearing group
at the end of July left in September. During the
operations, the Leningrad's helicopters worked
regularly as spotters and transporters. On two
occasions, the helicopters seemed to be directly
involved in minesweeping-once they appeared to
be operating a radio-controlled sweep device, and
another time they were sighted towing a pontoon
float in shallow waters.
Toward the end of August, the mine-clearing
operations brought the Soviet ships and heli-
copters into Israeli-occupied waters. An under-
standing achieved through informal Israeli-
Egyptian contacts at the UN prevented any con-
frontation between Soviet and Israeli naval units.
This week, four small Egyptian ships trav-
eled through the canal and are now proceeding
through the Gulf of Suez to the Red Sea-the first
commercial ships to do so since June 1967. Large-
scale transit is not likely to begin until sometime
during the first half of 1975, when salvage and
dredging operations now under way by US, Brit-
ish, and French groups are completed.
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THE ROMANIAN PARTY CONGRESS
IJIRomania's 11th Party Congress, which opens
on onday, will be party boss Ceausescu's show
from start to finish and will endorse Romania's
maverick communism as enduring national policy.
The congress may boost Ceausescu's per-
sonality cult by electing him party secretary
general for life. Delegates will approve a new
party program that emphasizes the link between
Romanian national interests and party policies
and that molds Marxism-Leninism to fit specific
Romanian conditions. Adoption of the program
will lay Bucharest open to Soviet charges of "re-
visionism" on several counts.
Page 14
01)
Both the Soviets and Chinese have been
invited to attend, and both apparently have
bowed to the Romanian condition that there be
no polemics. A Soviet diplomat in Bucharest
claims that because of the strong "ideological"
overtones of the congress, Moscow will tailor its
attendance accordingly. He presumably means
that the Kremlin will send a medium- or even
low-level delegation as a sign of its displeasure.
I n an effort to strengthen its identity with
the so-called progressive forces, Bucharest has also
sent invitations to a wide array of third world
countries, liberal movements, and leftist organiza-
tions and parties in Western Europe.
The congress will probably introduce several
new faces at all levels of the party leadership.
Multiple candidate lists are being used to elect
new officials, and one third of the members of all
party bodies-including the Central Committee-
will probably be newcomers by the time the con-
gress is over. The multiple candidate system is not
so much a bow to social democracy as Ceau-
sescu's way of breaking up regional fiefdoms,
injecting new blood into the party, and attempt-
ing to stimulate interest in party activity among
the rank and file. The regime is tightly controlling
information on exactly what and who will be
changed.
The public, while responsive to the regime's
recent trumpeting of Romanian national interests
in preparation for the congress, remains skeptical
about much of what it hears. The man on the
street, resigned to tight internal security and
seeing no easing of his rather Spartan living condi- 25X1
tions, remains less than enthusiastic about the
congress, the party program, and--to some ex-
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1%001 1"00
Revisionism as Defined by
Soviet Party Secretary Ponomarev
Minimization of
gression
mention imperialist aggression. -Endorses
cooperation with the West.
2. Denial of the leading role of the Soviet party 2. Stresses autonomy and independence of
every communist party; asserts that Marx-
ism-Leninism must be applied to`-the spe-
cifics of each country.
ejection of the class struggle and per- 3. Justifies postwar collaboration with the
mitting collaboration between the classes bourgeoisie and the monarchy. In-troduces
"socialist humanism," a concept focusing-
on the individual, and not the class.
4. Social Democratism (the concept that capi- 4. Does not specifically call for a revolutionary
talism can be overthrown by non-revolu- overthrow of capitalism; says only that capi-
tionary means) talism has completed its historic role and
now socialism must take over.
5. Denial of the dictatorship of the proletariat 5. See No, 3 above.
6. Rejection of a centralized, disciplined party
6. Not specifically mentioned, but the Roma
nians endorse the concept of a centralized,
disciplined party.
7. Lavishes praise on Romanian history, cut
ture, and national heroes. The. party pro-
ceeds "from the fact...that in communist
society, the nation and the national state
have a role of great importance fora long
time."
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The Romanian Party Program
of imperialist ag- 1. Warns against imperialism, but does not
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GREECE: KARAMA LISA BIG WINNER
f
Prime Minister amanlis ~ew Democracy
Party won a decisive victory in last Sunday's
election, winning almost 55 percent of the vote,
for a parliamentary majority of 220 seats out of
300. The unprecedented majority in parliament-
a result in large part of Greece's electoral law-
will give Karamanlis both maneuverability and
power to deal with problems at home and abroad.
The centrist Center Union - New Forces led
by George Mavros, the nearest rival and now the
chief opposition party in parliament, received 20
percent of the vote and 60 seats. The Center
Union was squeezed between left and right and
lost heavily to the New Democracy Party.
The voters rejected the extremes of both left
and right. The rightist monarchist National Demo-
cratic Union, which was widely viewed as crypto-
juntaist, received less than 2 percent of the vote
and no seats. Andreas Papandreou's Panhellenic
Socialist Movement, which had conducted an
anti-US, anti-NATO campaign, received 13 per
cent and 12 seats; the communist United Left got
9 percent and 8 seats.
Public fear of instability and the divisiveness
of the left probably had a lot to do with the left's
poor showing. The US embassy believes that
Papandreou's frenzy in the final week of the
campaign had the effect of driving undecided
middle-class voters toward Karamanlis. The leftist
defeat should reassure the right wing, which
feared the legalization of the communists, and
deprive diehard anti-communist officers in the
army of a pretext to move against the government.
The vote was above all a solid expression of
confidence in Karamanlis' ability to handle the
problems left over by the military regime that
collapsed last July. Karamanlis successfully dis-
armed potentially dangerous issues, such as the
monarch and punishment of the junta, and broad-
ened his conservative constituency. His party's
strength was strongest in the Eastern Pelopon-
nesus, but it also did well in Athens and Thes-
saloniki. It was weakest in Crete, where the
Center Union and Papandreou's party made their
best showing.
Karamanlis' impressive victory has given him
greater flexibility on the Cyprus question and
placed him in an improved position to deal with
Archbishop Makarios, who is due in Athens soon.
The Greeks are now ready to talk realistically in
terms of a federation on the island divided along
geographic lines. On the question of Athens'
future relations with NATO, the Prime Minister
said this week that "it depended on NATO," and
he linked Greece's relations with NATO to a satis-
factory settlement of the Cyprus issue.
A plebiscite on the monarchy will be held on
December 8. If, as expected, the monarchy is
rejected, President Gizikis-one of the last hold-
overs from the old junta-will resign, and parlia-
ment will elect a provisional president to hold
Karamanlis
A comfortable majority
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lkk~ JCk-.r7L I
office until the electorate chooses a president on
the basis of the new constitution. A draft con-
stitution will be drawn up by the government
now being formed by Karamanlis and submitted
to parliament, which has three months to amend
it. The constitution is expected to strengthen the
executive branch. If the monarchy is restored,
the strengthening will apply to the office of the
prime minister; if the monarchy is rejected the
presidency will become the most powerful office.
Karamanlis will undoubtedly be elected president,
probably in May or June, or assume a strength-
ened prime .minister's post under the monarchy.
TURKEY: IRMAK FA7elignat7d S CRUCIAL EST
Prime Minister i Ir mak
formed a cabinet and took over the reins of
government this week but still faces the difficult
task of obtaining a vote of confidence from par-
liament. Irmak failed to entice Turkey's major
political parties into a coalition and reluctantly
formed a government made up almost entirely of
independents and technocrats. To gain parlia-
mentary approval, the Irmak government must
devise a program that will be satisfactory to
former prime minister Ecevit's Republican
People's Party (RPP), as well as to the Justice
Party, Turkey's second largest party.
Irmak's cabinet, which took office after
receiving President Koruturk's approval, is made
up primarily of competent academicians and gov-
ernment technicians, with the small Republican
Reliance Party the only political faction providing
cabinet ministers. The composition of the govern-
ment indicates that it will be basically pro-US,
with the Foreign Ministry headed by the long-
time ambassador to the US, Melih Esenbel. The
new government will have only a limited mandate
to act on Turkey's growing political and eco-
nomic problems, however, with only 6 of 27
cabinet ministers having been elected to any
office.
After being asked by the President to form a
government, Irmak announced that he would try
to form a broad coalition of all political parties.
He failed, largely because the parties could not
agree on the timing of new elections, which Irmak
had labeled his first priority. The major center and
rightist parties declined to commit themselves to
a date, and Ecevit's party withdrew its sup-
port from Irmak when he was unable to guarantee
that new elections would be held no later than
next June.
Irmak is scheduled to present his program to
parliament on November 24, and the vote of
confidence on the program could come as early as
November 29. Two of the smaller parties-the
right-of-center Democratic Party and Ecevit's old
coalition partner, the National Salvation Party-
have already announced their opposition to the
new government on grounds that it is unconstitu-
tional. This means that Irmak, in order to win the
confidence vote, must receive the support of both
the RPP and the Justice Party. Those charged
with drafting the government's program will no
doubt sound out leaders of both parties, but it
will be no easy task to come up with a program
that will satisfy both. If Irmak succeeds, it will be
because neither party was prepared to assume
responsibility for prolonging the government
crisis.
If Irmak can surmount this hurdle, the non-
political character of his government will free him
from partisan political concerns in making deci-
sions on controversial issues. The absence of a
committed majority in parliament, however, will
prevent him from launching any major new pro-
grams or initiating any abrupt policy changes. If
Irmak fails, he will continue as head of a care-
taker government while the political parties try
again to reach an agreement that will break the
impasse. In this event, the political stalemate will
continue to take its toll in terms of government
inaction on several pressing problems.
25X1 25X1
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JCUKt
IRAQ: CABINET SHAKE-UP / -5E* (87 - g ,
( 7, 9)
B
th
~
aa
party strong man Sadda m Husayn
Tikr i apparently is maintaining his control over
the instruments of power in spite of continuing
internal dissension about the prolonged war
against the Kurds, with which he is closely identi-
fied. Although President Bakr retained his post as
minister of defense in a cabinet shuffle an-
nounced last week the new ministerial finpil,
suggests that Bakr
is playing a
TO a dam Husayn.
There have been signs that Saddam Husayn
has been subject to increasing criticism from
within both the ruling Baath Party and the mili-
tary as the campaign against the Kurds that began
last March has dragged on, bringing mounting
casualties and economic problems. Saddam
Husayn had promised last spring to end the war
by September, but it is now evident that the army
faces a long winter fighting the Kurds in the
northeast highlands. Nevertheless, the party
strong man seems to have had his way in shaping
the new cabinet; his control of the party security
apparatus is a solid asset in keeping critics in
check.
The cabinet reshuffle was the most extensive
since the Baathists took power in Iraq six years
ago. Among eight new ministers are five party
members believed to be close to Saddam Husayn.
Only two or three ministers of the revamped
cabinet are identified with Bakr, a former army
man whose power base remains the officer corps.
The remaining ministers are not thought to have
close political ties with either of the two top
leaders.
The new cabinet demonstrates again that the
Baath Party has no intention of sharing power
with the Communists, Arab nationalists, or any
other group. The naming of a number of well-
qualified men, on the other hand, does point to a
continuation of the trend toward pragmatic poli-
cies that place emphasis on economic de-
velopment.
MOST EXTENSIVE RESHUFFLE SINCE
THE BAATHISTS TOOK POWER SIX
YEARS AGO.
The US representative in Baghdad considers
the appointment of US-educated Sadun Hammadi
as foreign minister-he had been oil minister-a
hopeful sign for Iraq's relations with the West.
Hammadi will probably be the administrator
rather than a major formulator of foreign policy,
which is expected to lean toward nonalignment
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LATIN AMERICA TRIES TO EVALUATE QUITO
The strong vi 'Os and bla e-placing that
wereethe first reactions to the Quito meeting of
OAS foreign ministers have begun to subside.
Many Latin American governments and opinion
makers are now settling into a sober examination
of the state of inter-American relations. Serious
concern over the divisions that surfaced at Quito
is being felt by both the "winners" and "losers"
on the Cuba sanctions issue. The judgment that
the OAS is in crisis is denied only by a handful of
optimists. Some tough policy questions face those
governments that want to establish relations with
Havana.
The Latins had taken considerable pride in
the unity they had brought to the new dialogue
begun with the US early this year and had come
to view their own cohesion as essential to effec-
tive dealing with the US on broad issues. They
fear that something vital has been lost, but seeing
the embarrassment that befell the sponsors of the
aborted resolution at Quito, many will be hesitant
to make new proposals designed to correct the
flaws in the dialogue.. Mexico and Venezuela,
however, have gone a little further with their joint
sponsorship of what they call a Latin American
Economic System, a bloc that would include all
Caribbean and Latin states, including Cuba, but
not the US. Most countries have seemed cool to
the idea, but their search for a useful vehicle
through which to advance their interests may
attract them more to this approach.
Opinion is divided over the reform of the
OAS. Some think the organization is so laden
with bureaucracy and outworn tradition that re-
structuring is a lost cause. Others feel -that a
regional organization that includes the US is
necessary to any real interplay on issues that
involve "responsibilities" of the highly developed
countries toward the less fortunate. These believe
that reform of the OAS has become a truly urgent
priority.
The countries that delayed their recognition
of Cuba so that the Quito meeting would free
them of OAS obligations to the contrary are in a
quandary. They seem to sense that it will reflect
badly on them to act hastily after Quito failed
them, and how and when to proceed are subjects
of debate in high councils of government as well
as in the media. One report has it that the Vene-
zuelans will work for a common position with
Colombia, Costa Rica, Ecuador, and Honduras,
and would simultaneously announce relations
with Havana. Both Quito and Tegucigalpa, how-
ever, have denied that they will approach Havana.
Cuba in the meantime has been reserved on
the outcome of Quito-whether from a sense of
diplomatic propriety or because of indecision is
not yet clear.
It seems likely that the soul-searching and
review under way in Latin America will even-
tually produce some fresh thinking on inter-
American affairs. Most of the governments seem
inclined to be constructive and anxious to re-
capture a spirit of_consensus.
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PERU: POLICY DIFFICULTIE,.S l
Ub tQ/
)Serious strains in Preside t Velasco's mili-
tary government are becoming evident and are
likely to have a marked effect on the regime's
domestic policies and on certain aspects of its
foreign affairs. Already there is evidence that the
US is being singled out as a scapegoat for some of
the difficulties Velasco is facing. Peruvian plans
for dealing with Chile also are apparently being
reassessed.
Recent disagreements between individual
cabinet ministers and between officers in dif-
ferent services stem from:
? Velasco's efforts to force a number of
high-ranking moderate officers into retire-
ment and prevent General Morales Bermudez
from assuming the post of prime minister
next February;
? indications of widespread corruption in
the ministries;
? strong public criticism of the terms of a
loan agreement the government recently
signed with Japan;
? uncertainty over the readiness of the
armed forces to undertake a campaign against
Chile.
Doubts about the armed forces' prepared-
ness for war probably are partly responsible for
recent Peruvian attempts to portray an image of
friendly neighborliness vis-a-vis Chile. Army Chief
of Staff Morales Bermudez met with his Chilean
counterpart near the border earlier this month,
and troops from both nations this week held a
Joint border ceremony highlighted by the planting
of an olive tree.
The militarily weaker Chileans welcome such
opportunities to ease surface tensions, but are
unlikely to conclude that the overtures reflect
abandonment of Peru's historic revanchist goals.
There is no reason to believe that Chilean military
leaders are revising their assessment that they are
faced with a real danger of Peruvian attack.
Chilean army Chief of Staff Bravo reportedly
used the meeting with Morales Bermudez to
emphasize Chile's determination to "fight to the
last man" if necessary.
The Chileans regard Morales Bermudez as far
more sensible than some of his colleagues, how-
ever, and they appear to be hoping that there
could be a genuine easing of tensions if he be-
comes prime minister.
Charges of IJS interference in Peruvian af-
fairs are once again being voiced by Velasco per-
sonally, through his cabinet, and via the press.
While these charges reflect a genuine conviction
that the US remains hostile to the Peruvian rev-
olution, they are also apparently part of an effort
to shift the blame for certain charges that have
been leveled at the regime. For instance, in a
recent press conference, the President suggested
that the CIA might be behind the developing
scandal involving the Ministry of Agriculture.
Velasco also raised the specter of CIA involve-
ment in charges that the government "sold out"
in signing the agreement with Japan to finance
part of the planned trans-Andean oil pipeline.
Pro-government newspapers have echoed these
charges and have alleged CIA involvement in
Peace Corps activities in Peru. On November 4,
the government formally requested that all Peace
Corps programs be terminated.
Allegations of US involvement in "counter-
revolutionary" activity may also be laying the
groundwork for further repressive measures
against the press and other civilian groups critical
of the regime.
If the current situation continues, however,
Velasco will need more than a foreign scapegoat 25X1
to stave off serious dissatisfaction with his leader-
shi
This situation will get worse un ess
Ve asco is able to restore a sense of unity and
purpose to his government.
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Velasco himself must take a good deal of the
blame for the strains in the regime. His blatant
efforts to tamper with military seniority pro-
cedures and his hypersensitivity to criticism have
caused much of the current unrest. In such a
situation, and particularly if the corruption and
Japanese loan controversies intensify, dissident
groups may be emboldened to increase their ef-
forts to disrupt the government in an attempt to
cause Velasco's ouster.
BRAZIL: OPPOSITION ELECTORAL GAINS
Iln the wake of a substantial ilctloary in, last
wee 's elections, leaders of the nominal opposi-
tion Brazilian Democratic Movement (MDB)
party are stressing their determination to work
constructively with, rather than challenge, the
governing system.
MDB gains had been expected, but party
leaders are surprised at the extent of their success.
Although returns are still incomplete, the MDB
may win nearly half the seats in the Chamber of
Deputies, greatly increase its number of Senators,
and obtain control of most of the important state
assemblies. Spokesmen for the MDB are seeking
to mollify extreme conservatives, especially in the
military, who might react by increasing their criti-
cism of President Geisel's moderate liberalization
efforts. Party president Guimaraes, for example,
pointed out that his colleagues will not follow a
"negativist" line, while campaign leader Montoro
stressed that an MDB victory should be put at the
service of national goals, not individual gain.
The success of the opposition is in large part
the result of widespread discontent among both
lower and upper income groups with the rapidly
rising cost of living. The government had recently
announced a wage boost and the easing of con-
sumer credit, but the measures failed to dampen
the appeal of voting for the MDB as a form of
public protest. The vote may also indicate dis-
satisfaction with the closed political system that
has prevailed since 1964.
President Geisel, who advocates some
loosening of the strictures on political activity,
allowed the election campaign to become un-
usually freewheeling by recent Brazilian stan-
dards. Moreover, he has shown no inclination to
interfere with the vote count or suppress news of
the government setback.
Geisel may point to the large turnout of
voters and the gains by the MDB-which has
called for new policies-as a strong indication that
change of the sort he advocates is widely desired.
Indeed, he may stress this factor to any among
the military who may press for a reversal of the
liberalization trend. Finally, Geisel's attitude
toward the election may signal a realization, at
least on his part, that the military needs to seek a
broader base of support now that its chief claim
to fame-strong economic performance-is weak-
ening fast.
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