WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A011100170001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 22
• Document Creation Date: December 21, 2016
• Document Release Date: May 27, 2008
• Sequence Number: 1
• Publication Date: September 5, 1975
• Content Type: SUMMARY

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Weekly Summary
STATE DEPARTMENT REVIEW COMPLETE
Secret
Secret
No. 0036/ 75
September 5, 1975
Copy ~~ ~ 9
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~~EEt{~Y 5UM?ulAR1' issued every Friday morniflg by the
of Current intelligence, reports efld anaiy~es significant.
s~pents of the weak thrtitagh nc;'on on Thursday: tt fre-
eludes materlat coardirtsted with ar prepared:by the:..
of Eaanornic Research,- the dffice ofi strategic
~~rch, ;the Office of Geographic 8fld' GartagraphiG
are putrlish~a ~ffi~arateiy as 5pecia! Reports alra listed
nrvw
CONTENTS (September 5,1975)
MIDDLE EAST
AFRICA
WESTERN
HEMISPHERE
1 Portugal: Gonsalves the Issue
2 USSR-Egypt: Playing Tough
3 Spain: Crackdown on Dissent
6 The Middle East: Accord; Soviets
8 Angola: Lisbon Still Trying
9 Peru: A New President
10 Argentina: Widening Splits
11 Ecuador: Short-Lived Rebellion
EAST ASIA
PACIFIC
13 China: Fertilizer Prospects
14 Timor: Dynamic Inaction
15 Papua New Guinea: Separatism
16 Nonaligned: On to Sri Lanka
17 Developing Countries: Payments Problems
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PORTUGAL: ISSUE STILL GONCALVES
President Costa Gomes' attempt to retain
pro-Communist former prime minister Vasco
Gonsalves as armed forces chief of staff has been
met by intensified efforts to purge Gonsalves en-
tirely from the government. Although Gonsalves'
antagonists-the Antunes group and the
democratic parties-still hope to succeed by
political means, a military confrontation with
Gonsalves' supporters remains a possibility.
The announcement on August 29 that Gon-
salves would be replaced as prime minister by
Naval Chief of Staff Azevedo has prompted some
negative comment from the anti-Goncafves
forces, but they have reserved their heaviest fire
for the appointment of Goncafves as head of the
armed forces. The apparent realization that such a
step could increase rather than diminish Gon-
salves' power and foster the growth of Com-
munist influence in the armed forces has caused
some key officers to close ranks behind the An-
tunes faction.
In addition to the commanders of the central
and southern military regions, who were among
the original signers of the Antunes document,
such political fence-straddlers as security forces
chief Carvalho, Army Chief of Staff Fabiao, and
even Air Force Chief Morais da Silva have now
attested to the undesirability of confirming Gon-
cafves in his new position.
The support of such important military
figures has given a strong boost to the Antunes
group, which has been pursuing a joint strategy
with the Socialist and Popular Democratic parties
to force Gonsalves out peacefully. The dissident
officers hope to outflank Goncafves by ger-
rymandering the army and air force delegations
to the armed forces general assembly meeting on
September 5. The assembly is expected to revise
the membership of the Revolutionary Council
and, by implication, decide Goncafves' future.
the meeting were not announced, press reports
quoted well-informed sources as saying the vote
went heavily against Gonsalves. Although the air
force chief of staff has publicly condemned the
Gonsalves appointment, there are conflicting
reports on how the other air force representatives
will vote. The navy earlier endorsed Gonsalves'
bid to remain prime minister, and its assembly,
which is under Admiral Azevedo, is expected to
give Gonsalves another vote of confidence.
Meanwhile, the Socialist and Popular
Democratic parties have refused to participate in
the Azevedo government as long as Gonsalves
remains in a position of influence. They have
remained faithful to the joint strategy in spite of
reportedly attractive offers of key ministerial
posts.
If the Antunes group fails to achieve its aims
by political maneuvering, a variety of reports now
suggest that they will resort to military force. Their
The army assembly reportedly met for this
purpose on Tuesday, and although the results of
AtJ~ntic Porto'
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most likely military strategy would be r.o join up
with units in which they enjoy strong support, as
in the Central Military Region, and progressively
isolate Lisbon and other strongly pro-Communist
areas from the rest of the country.
On the other hand, if the political efforts
against Goncalves succeed, there is a good
chance that the Socialists and Popular Democrats
will agree to join the Azevedo government. It is
too early to predict, however, just what the com-
position and overall political coloration of such a
25X1 government would be.
USSR-EGYPT: PLAYING TOUGH
One issue irritating Moscow is Egypt's deci-
sion to permit minesweeping operations in the
Port Said area by the US navy. The Soviet military
attache in Cairo recently remarked that Moscow
was "furious" over the decision and regarded the
action as a violation of an agreement under which
Egypt would not make Soviet-supplied military
equipment available to a third state without
Moscow's permission. According to Egyptian
Foreign Minister Fahmi, the Soviets have formally
protested this activity.
The Soviets may find the US role particularly
galling, since they themselves sought to under-
takethis venture last winter. At that time, Moscow
publicly announced that, in response to an Egyp-
tian request, it would sweep the port free of
charge. The Egyptians subsequently denied
privately that they had ever made such a request.
In what may well be another aspect of the
Soviet campaign against Cairo, an anti-Sadat
manifesto attributed to the central secretariat of
the Egyptian Communist Party appeared last
month in a radical newspaper in Beirut. The
manifesto, which presented a detailed indictment
of Sadat's foreign and domestic policies, said that
while the Communist Party did not have the
overthrow of Sadat as a goal, it would seek to
stimulate and organize opposition to his policies.
Egyptian Prime Minister Salim recently confirmed
that the document was drafted and circulated by
some Egyptian Communists.
The Egyptian Communist Party was formally
disbanded in 1965, and its members joined the
ruling Arab Socialist Union. It is not clear whether
the party, which is illegal but has existed as a loose
underground grouping, has formally
reconstituted itself. It may be that Communist
Party members, with Soviet encouragement,
prepared the manifesto to threaten Sadat with the
possibility of the party's re-emergence. If indeed
this is the Soviet game, it has not rattled Cairo.
Salim dismissed the manifesto as insignificant, say-
ing Egyptian Communists are under control.
Moscow's distaste for Sadat's policies, par-
ticularly his increasing ties with the US, is so in-
tense that the Soviets are willing to risk further
restrictions on their remaining privileges in Egypt,
particularly their naval access to Alexandria and
its dockyards. Moscow must certainly realize that,
in light of the success of the current disengage-
ment talks, Sadat will be in a stronger position.
The Soviets, however, have not burned all their
bridges; for example, they have not engaged in
direct personal invective against Sadat.
25X1
25X1
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SPAIN: CRACKDOWN ON DISSENT
The contradictions between Prime Minister
Arias' public commitment to political liberaliza-
tion and the government's turn toward tougher
restrictions ancf controls are becoming in-
creasingly apparent in Spain. The recent
crackdown on terrorism and political dissent, in
particular, has raised a gathering storm of protest
that could test the cohesiveness of Spain's domi-
nant political and military forces.
The tough new anti-terrorist law, which took
effect last week, imposes an automatic death
penalty on anyone convicted of killing a member
of the security farces or a hostage. Despite
government denials that the law will be applied
retroactively, some 20 terrorists awaiting trial are
now more likely to receive the death sentence.
Two Basque terrorists convicted last week of kill-
ing amember of the paramilitary civil guard have
already been sentenced to death. The verdict has
been appealed, and Spain's supreme military
court must reach a decision before the end of
next week.
The case is being compared to the famous
Burgos trial of 1970 that became a testing ground
between hard-liners and those who favor a liberal-
ization of the regime. At that time six Basque
terrorists were condemned to death. Franco
commuted the sentences to 30-years' imprison-
ment, but not before there had been strong
protests from abroad and widespread
demonstrations in Spain involving students,
workers, and the church. More importantly, the
Burgos affair revealed serious disagreements
among various sectors of the power elite-the
government, the military, and the church-over
how the disturbances should be handled and
what path Spain should follow in its future evolu-
tion.
The conviction of the two Basque terrorists
last week had already sparked domestic and inter-
national reactions:
? The Spanish Communist Party and the
Communist-dominated Spanish Democratic
Junta have called for mass popular action to
prevent the executions.
? There have been strikes and violent
demonstrations in the Basque provinces of
Spain, resulting in one demonstrator being
killed by police and several others wounded.
? Violent demonstrations directed
primarily against Spanish consulates and
businesses have also taken place in France,
Belgium, and Portugal.
The governments of Italy, Sweden,
Portugal, and the Netherlands and several
international organizations have asked Fran-
co to intervene and commute the sentences.
Meanwhile, provisions in the anti-terrorist
law for closing newspapers that show sympathy
for the terrorists, as well as the government's re-
cent threat of legal action against papers
spreading rumors about Franco stepping down,
are likely to add fuel to opposition protests and
may divide regime supporters. Editions of five of
Spain's leading weekly newspapers were con-
fiscated after the new law came into effect last
week. Since then some political columnists have
responded sarcastically by writing on arcane
topics like "On the Subject of Alligators" or "Let
Us Talk about Thailand."
No visible cracks have appeared yet in Fran-
co's power structure, but the strain imposed by
the new law could be compounded by any
publicity given to the recent arrests of military of-
ficers for illegal political activity. Should the
defense decide to focus international attention
on the case, it could highlight important divisions
in the armed forces and the government between
hard-liners who oppose any political evolution
and those who favor a gradual liberalization.
Within the government, the tough approach
has clearly been in the ascendancy recently. A
sharp reaction to the anti-terrorist law or to the
trial of the military officers, however, could lead
to a more forceful stand by those, such as Prime
Minister Arias, who advocate liberalization of the
political system, who are seeking to improve
Spain's image abroad, and who believe the only
way to achieve a smooth transfer of power is to
begin now to ease political restric-
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EAST EUROPEAN GRAIN CROP AVERAGE
Eastern Europe's grain production will reach
about 86 million tons and grain import re-
quirementsabout 9 million tons, both close to the
average of recent years. Because of poor harvest
prospects in the USSR, Eastern Europe is looking
to the West, mainly the US, for the bulk of its
grain imports. By last week, Eastern Europe had
contracted for some 4 million tons of US grain for
this fiscal year. Last year, the US sold about 2.5
million tons of grain to Eastern Europe.
Above-average harvests are expected in
Czechoslovakia, East Germany, and Hungary,
where major grain areas have escaped extensive
weather damage. hieavy rains fast fall limited
planting of winter grains elsewhere in Eastern
Europe, and subsequent planting of lower yielding
spring grains has covered only part of the deficit.
Yields were lowered this summer by floods
and drought. Further reduction in corn yields in
Bulgaria and fodder crops in East Germany and
Poland may result if the drought continues.
East Germany and Poland, usually the largest
importers of grain, are likely to have higher than
average requirements this year. Although the
number of livestock is up only slightly over last
year, reduced output of forage crops and poor
pasture conditions point to a need for more feed
grains than usual. The Czechoslovaks, also large
importers, have privately estimated their grain im-
port requirements at about the same as last year.
Romania, normally a grain exporter, will
probably require 600,000 tons of grain to replace
flood losses. Bulgaria will probably require some
corn and other feed grains because of a second
year of drought, and Hungary is likely to import
its usual amount of barley.
Only Hungary will harvest enough grain to
permit net exports, but an unexpectedly poor
wheat crop will limit exports to corn. Hungarian
corn will probably meet about 500,000 tons of the
total import requirements of other East European
countries.
The USSR usually supplies about one half of
Eastern Europe's grain imports. This year, accord-
ing to one report, Moscow has asked East Euro-
pean governments to purchase all of their grain in
the West. The request is unprecedented, but
plausible because of poor harvest prospects in the
USSR and the current US embargo on grain sales
to the Soviet Union.
In addition to their own requirements, East
Europeans may pick up grain for transshipment to
the USSR or to replace domestic grain shipped to
the Soviets. Yugoslavia is in the market for 500,000
to 700,000 tons of wheat. Neither our estimates
nor Belgrade's statements show a domestic need
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,aw~~~ ~
MIDDLE EAST: NEW SINAI ACCORD
Both Israeli and Egyptian leaders are engaged
in an intensive campaign to sell to their skeptical
constituents the second-stage disengagement
agreement the two parties initialed on September
1. For the Israelis, the worst is largely over; the
Knesset ratified the agreement on September 3 by
a 70-43 majority, and the widespread protest
demonstrations during Secretary Kissinger's mis-
sion have ceased. For Egypt, which has undercut
its leading position in the Arab struggle for the
next few years, the worst may be ~/et to come.
Disengagement Terms
The agreement commits the two parties to
refrain from the use and even the threat of force
for what amounts to an indefinite period. The
agreement is stipulated to be in effect until
superseded by another agreement, and it carries
an open-ended call for annual extensions of the
mandate for the UN buffer force. Egypt is openly
committed to permit the transit oif Israeli cargoes,
although not Israeli ships, through the Suez
Canal.
An annex to the agreement-which, unlike
the first disengagement in ,lanuani 1974, has been
made public-delineates zones on each side of
the buffer zone in which Egyptian and Israeli
forces will be limited to 8,000 troops, 75 tanks, and
72 artillery pieces. Weapons that can reach over
the buffer zone to the other side's territory are
prohibited in these limited arms areas.
Within the buffer zone, which covers the
strategic Gidi and Mitla passes, Fgypt and Israel
will each maintain an early warning station
monitored by US personnel. The IJS will maintain
three watch stations for the purpose of reporting
unauthorized movements of armed forces. Egypt
will gain access to the Abu Rudays oil fields on the
Suez Gulf coast. Access to the area will be con-
trolled by the UN, and no military personnel will
be. allowed in the area.
1-he agreement was signed by military
representatives of both Egypt and Israel in Geneva
on September 4. Within five days of that date, the
two sides must meet to draw up a protocol for im-
plementing the redeployments called for in the
agreement. The protocol must be concluded
within two weeks, and the agreement is to be fully
implemented within five months after that.
Opposition to the agreement in Israel has
been more strident than sizable. Despite
acrimonious debate and open opposition from
such prominent individuals as former defense
minister Moshe Dayan, the government had little
trouble in winning a majority of the Knesset over
to support of the agreement. Public opinion polls
also show lessening domestic opposition.
During the final negotiations and since,
Israeli leaders have conducted an intensive cam-
paign to justify the agreement and point out its
advantages. The benefits of the close US-Israeli
relationship that will result from the agreement
have been emphasized, and "objective" military
commentators have been enlisted to enumerate
for the press the military advantages of the ac-
cord. Defense Minister Peres and other officials
have attempted to minimize the effects of Israel's
withdrawal from the passes.
The government's hard-sell is in large
measure an effort at self-persuasion. Despite the
expressions of support and the justifications,
there is no elation in Israel over the agreement,
either within or outside the government. It is
looked on with resignation as an inevitability that,
in light of recent US pressures, will bring less
harm to Israel's long-term interests than would
have resulted from a refusal to negotiate. The
Israelis are aware that they will be under pressure
to repeat the performance with Syria, but their at-
titude toward the Egyptian agreement makes con-
cessions tc~ Syria more problematical.
Egyptian officials are using the same
arguments to justify this agreement that they used
for the first disengagement-that it is a military
agreement that does not detract from, but in fact
gives impetus to, efforts to regain other Arab
territories. The Egyptians are unable to hide-and
not easily able to justify for the other Arabs-the
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SECRET
fact, however, that this agreement is radically
different Pram the first.
Despite Egypt's claims that the accord has no
political content, the agreement to renounce the
use of force is in fact a political step by which
Egypt effectively denies itself, at least for the next
few years, the right to use the one means of
leverage it has had with Israel. By thus taking itself
out of the fray, Egypt also undercuts the other
Arabs' ability to apply meaningful pressure on
Israel.
Arab Reaction
Whether in fact Egypt loses its ability to in-
fluence Arab politics and to continue as a
moderating factor in the Middle East will depend
almost entirely on who among the Arabs it can
line up either to endorse or at least to remain
silent about the agreement.
Saudi Arabia gave Egypt a considerable boost
by acclaiming the agreement, during Secretary
Kissinger's visit to Taif, as "a significant and im-
portant step toward the final settlement of the
Palestinian problem." Saudi Foreign Minister
Saud announced that the Saudis were deeply ap-
preciative of the US effort to effect a settlement.
Much of the favorable impact of the Saudi
endorsement will be negated, however, by the
Syrian Baath Party's official denunciation of the
agreement on September 3. Although the
Damascus press had earlier charged that the
agreement would only increase Israeli intran-
sigence, Syrian brickbats had until the Baathist
statement been few and directed at Israel and the
US rather than at Egypt. The statement, issued
after a party meeting with President Asad, con-
demned Egypt's commitment to refrain from the
use of force as a move that "freezes the Egyptian
front" and "practically and contractually ends the
state of war. The statement also condemned
Egypt, at least,indirectly, for ignoring past Arab in-
junctions against negotiating with Israel and for
"weakening the march of Arab solidarity."
The Palestinians have also been strident in
criticizing the accord, although less radical
elements have attempted to avoid direct attacks
on Egypt. Palestine Liberation Organization
leader Yasir Arafat has denounced the accord as
an "American solution" and called for coor-
dinated Arab action to thwart it. Arafat and other
PLO leaders are obviously uncomfortable that
their inability to benefit from negotiations leaves
them more vulnerable to attack from radical
Palestinians, and they are moving to cover their
flanks.
Soviets Negative on all Counts
The Soviets are clearly unhappy with the new
second-stage Sinai disengagement agreement.
Not only have they decided to boycott the formal
signing ceremony in Geneva, but they are also
taking an exceedingly tough line against any UN
participation there. Moreover, Moscow has
weighed in with its first authoritative comments
on the agreement since Secretary Kissinger's trip
to the Middle East began. The Soviets are predic-
tably negative on all counts.
A Soviet Foreign Ministry official told the
West German ambassador in Moscow last week
that, in ignoring the Syrians and the Palestinians,
the new Sinai agreement "does not help at all"
and serves only to "divide the Arabs further." He
criticized the West Germans and other West
Europeans for providing help to Secretary
Kissinger.
The Soviet official urged resumption of the
Geneva conference as the best forum for
reaching an overall settlement and conceded
that, in the end, Moscow will probably "take no
position one way or the other" on the new Sinai
accord.
The same message is being conveyed by
Soviet media. After a lengthy silence, Pravda, in a
major commentary, belittled the new Sinai agree-
ment, calling it "partial" and "limited in
significance" and arguing that it does not bring a
general political settlement any closer. The com-
mentary zeroed in on the "complicating
element posed by the expected presence of US
technical observers in the Sinai, claiming that
effective observation of the cease-fire is already
being prov' he resence of UN con-
tin tints.
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ANGOLA: LISBON STILL TRYING
With slightly over two months reimaining
before Angola is scheduled to become indepen-
dent, the Portuguese are making a last-ditch
attempt to establish a new coalition government
in the territory capable of assuming power on
November 11. Lisbon's plans conflict with those of
the liberation groups, however, particularly the
Popular Movement for the Liberation of Angola,
which appears determined to establish its own
political and military predominance.
A new Portuguese high commissioner for the
territory was sworn in on August 30 in Lisk-on and
should arrive in Luanda in the near future to take
up his duties. His appointment has been
denounced by the Popular Movement and the
National Front for the Liberation of Angola. Both
groups have refused to recognize the collapse of
the transitional government in which Lisbon
shared power with the three liberation
movements, although only the Popular Move-
ment still has official representatives in Luanda.
The new high commissioner will have broad
executive, judicial, and defense responsibilities
not assigned to his predecessor under the terms
of the agreement Portugal signed with the libera-
tion groups last January. The Portuguese formally
suspended that agreement last week hoping to
clear the way for the establishment of an "ad-
ministrative" government in which the liberation
groups would participate, but with diminished
Jonas Savimbi
UNITA Head
authority. Such a government would only barely
fill the political vacuum but, the Portuguese
calculate, would be enough of a structure to
assume political power and allow Lisbon to claim
it had carried out its duty toward decolonizing the
territory.
The major obstacle to Lisbon's plan is the
Popular Movement, which maintains that it alone
of Angola's liberation groups has lived up to its
responsibilities and that it expects to "assume
total responsibility far governing Angola" on
November 11. The Movement intends to gain
military and political control over as much of
Angola as possible between now and in-
dependence so the Portuguese will be forced to
admit that it is the only group capable of running
the country.
The National Front and the National Union
for the Total Independence of Angola have been
preoccupied with maintaining their military
credibility in the face of the gains made by the
Popular Movement in recent weeks. The National
Front announced from Zaire earlier this week that
its troops have advanced to within 10 miles of
Luanda. The Front reportedly does not plan to
force its way back into the capital. Rather, it hopes
that its military presence close to the capital will
discredit the Popular Movement's claim of
military dominance and force the Portuguese to
overrule any opposition by the Movement to a
renewed Front political presence in Luanda.
The National Union is isolated in central and
southern Angola. It is attempting to buy time to
build its military capabilities by negotiating a
cease-fire with the Popular Movement.
In the final analysis, both the National Front
and the National Union, to succeed, must main-
tain enough political and military strength to con-
vince the Portuguese and the Popular Movement
that all three liberation groups must share respon-
sibility in Angola's independent government. So
far, however, the Popular Movement has the up-
per hand and it ma be too late to r ess the
balance.
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PERU: A NEW PRESIDENT
After taking over the presidency last Friday,
General Morales Bermudez has appointed the
first civilian cabinet minif Ilednseveralmothe
-took power in 1968, orters, and
cabinet-level posts with his own supp
loosened restraints on the media and civilian
critics of the regime. The President's actions thus
far indicate an roerams, althouth thenconducthof
predecessor's p g g
affairs will be more businesslike and less
b urstill arm s IengthelrPlationship with the US. us,
Morales Bermudez' acce eriod of d ssatisfa c
post came after an extended p
tion with former president Velasco's radical and
often arbitrary exercise of power. The smooth
seizure of the presidency clearly rested on cQ~tant
planning and came olice leaders had declared
military and national p
their support. Morales Bermudez had been
assuming more important decision-makinogb awned
since last February and had already
Velasco's blessing as his eventual successor. In the
end, the former president's continued predilec-
tion for personalistic rule, repressive domestic
measures, and radical foreign policy actions ap-
parently galvanized military support fora com-
plete take-over.
There has been no indication a Mo~alesa Ber-
more radical officers will oPP enerall
mudez, and civilian reactionolh cab gr ups have
favorable. Some civilian p
publicly welcomed the change in leadership, and
even the communist-controlled laoborof the new
tion has declared itself in supp
President. Certainol ersVelasco'stouste~,eand the
probably uneasy
communist group's declaration may reflect more
pragmatism than conviction. Nevertheless, for the
time being, Morales Bermudez' broad military
backing and his decisivos Lion t ~aery oult hs
place .him in a strong p
programs.
ede Publc ationdse tooreopenloandrepe mit
clos P
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deported civilian critics to return are a clear in-
dication of his sensitivity to the military's con-
tinued inability to attract needed civilian support.
Although Morales Bermudez remains committed
to Velasco's goat of restructuring Peruvian society
along socialist fines, his pragmatism and less ex-
treme political views presage a more open and
presumably more effective government.
Another aspect of this approach may be seen
in his appointment of a civilian economist as
minister of economy and finance. This apparently
reflects a conclusion that the economic expertise
necessary to resolve the country's serious
problems cannot be found in the armed forces.
These moves do not signal a rapid return to
civilian rule, but pragmatic and political reasons
may dictate further increasing civilian participa-
tion in national policy making. At the same time,
Morales Bermudez' sensitivity to concerns of
other officers, including more radical generals
who supported Velasco, augurs against a chanee
in the militarv's basic programs.
ARGENTINA: WIDENING SPLITS
The crises that have rocked Argentina recent-
ly have weakened the unity of conservative
Peronist groups that still profess loyalty to Presi-
dent Peron. Politicians and labor leaders are
attempting to preserve a strong image, but events
of the past week demonstrate that this is only a
facade.
Peronist party leaders, elected in a conven-
tion last week, are calling for a return to "consen-
sus politics"-the dialogue with political allies
that was begun by )uan Peron. The directive that
is to accomplish this, however, contains no
guidelines for reconciling groups that are openly
antagonistic toward each other. In addition, the
leaders ignore the fact that Peronists who disap-
proved the party slate have organized a rival
group called the "Peronist Affirmation." This
appears to be the first time in Peronist history that
any group has formally challenged the leaders
without resigning from the party.
Meanwhile, tensions within the Peronist
labor movement-long the dominant civilian
political force in the country-have been exacer-
bated by the recent conflict between President
Peron and the military over the appointment of
an army officer as minister of interior. According
to re{fable press reports, the leaders of the two
major union organizations, Casildo Herreras and
Lorenzo Miguel, disagreed strongly last week on
the issue of taking sides in the dispute and are un-
likely to reconcile their differences. Although
Herreras and Miguel have generally cooperated
on important issues, their relationship is a con-
fusing one since the organizations they head
overlap each other in terms of political respon-
sibilities. In addition, the future of both union
bosses is in jeopardy because of their past ties to
the now-discredited Lopez Rega and their inabili-
ty to prevent price hikes and to curb rising un-
employment.
Their latest disagreement will probably be
papered over publicly, but behind the scenes it
appears that Miguel, who backed President Peron
during her most recent confrontation with the
military high command, has lost political ground
to Herreras. A protracted fight could seriously
weaken the movement by causing a collapse of
union discipline.
phis latest flare-up is a further indication of
the lack of organization cohesiveness that
prevents labor as well as the military from exer-
cising the leadership needed to cope with major
political and economic problems. Although
power passed to military and labor leaders two
months ago with the downfall of Lopez Rega, they
have been unable to work effectively with Mrs.
Peron, are unwilling to oust her, and cannot agree
among themselves on a course of ac-
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ECUADOR: SHORT-LIVED COUP
The first armed effort to oust the three-
and-a-half-year-old Rodriguez regime oc-
curred on September 1 when a small group of
senior army officers led by joint command chief
of staff General Raul Gonzalez Aivear captured
the presidential palace and held it briefly.
The poorly conceived plan was doomed
when navy, air force, and other army units did not
join in with the small armored force supporting
Gonzalez. The rebels failed to capture Rodriguez,
who promptly began to marshal support in
Riobamba, a hundred miles south of Quito. The
rebels also inexplicably failed to secure key
transportation and communication centers in
Quito, thus permitting loyalist units stationed
near the airport to rally a successful countermove.
Several dozen officers and civilian sym-
pathizers have been arrested-, and Gonzalez has
taken asylum in the Chilean. embassy. Other op-
ponents of the regime have gone into hiding in
anticipation of a government crackdown. Press
censorship and a strict dusk-to-dawn curfew in
Quito and Guayaquil helped maintain calm
following the attempted coup. The loyalties of
several troop commanders remained ambiguous
at week's end, leaving open a small chance of
further tensions and possible troop movements.
Although there has been no other armed
move against the Rodriguez regime, there have
been periodic reports of plotting by conservative
business and political leaders. Conservative back-
ing for the rebel officerswas apparent in the~word-
ing of a communique issued by Gonzalez at-
tacking the President for mismanaging the coun-
try's oil resources and making other economic
and political errors. The communique also
pledged to abolish a recent 60-percent surtax
on imports, carry out an economic reform
program, and hold elections in two years-
promises that echoed demands often heard from
the conservative business community.
Since the coup attempt, Rodriguez has begun
to strike out at these critics of his government,
Rebels temporarily occupy the national palace in Qnito
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particularly at their spokesmen among the coun-
try's civilian politicians. In his first public state-
ment on returning to Quito on Monday, he
charged that "treasonous and disloyal politicians"
instigated the rebellion, obliquely recalling the
concerted civilian plotting that surfaced last
March. Courts-martial are likely to be convened
against those individuals--both military and
civilian-who tried to oust Rodriguez.
How these events will affect the
government's disputed economic policies is a
matter on which Rodriguez has not commented.
He has always been fairly responsive to criticism,
however, and had already begun moderating
some policies several months ago. He will
probably continue in that direction and may now
make some cabinet changes in an effort to deflect
further criticism from himself. A new minister of
industries and commerce was appointed Ist
month; now the ministers of finance and natural
resources, the former a civilian and the latter a
naval officer, appear to be handy scapegoats. The
main " thrust of government policy making-
regarding petroleum, tuna fishing, foreign oil
companies and tuna boats, and foreign policy
in eeneral-is unlikely to change significantly.
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CHINA: FERTILIZER PROSPECTS
Because of its inability to expand production
sufficiently through domestic industries, China
began in fate 1972 to contract with US, Dutch,
French, and Japanese firms for 13 of the world's
largest ammonia-urea complexes. Each of the am-
monia plants will have a daily capacity of 1,000
tons, which will serve as feedstock to associated
urea plants, each to produce 1,600 or more tons
per day. Upon completion, these plants will
provide an additional 3.5 million tons of nitrogen
annually to the more than 3.2 million tons
produced in 1974.
Increased emphasis in the Chinese press on
production and use of organic fertilizer suggests
there is little official hope of any substantial in-
crease soon in the supply of chemical fertilizer.
Over the longer term, the key to increased output
is prompt completion of the imported plants. The
first of these will operate in early 1977, with
completion of the remainder scheduled for 1978_
Construction lags and a lack of sufficiently
trained technicians may prevent rapid implemen-
tation of full plant production. Moreover,
maintenance of an accelerated growth rate far
production will depend on the ability of com-
plementary industries-chemical, machine tool,
and metals-to provide additional chemical
equipment. Nevertheless, the output from the
new plants, added to production from existing
plants, should enable China to produce 8 million
tons of nitrogen fertilizer annually by 1980,
removing the need to import nitrogenous fer-
tilizers.
China's production of fertilizer will fall about
20 percent short of the goal unless dramatic in-
creases can be made during the remainder of the
year. Peking expected output to reach 35 million
tons in 1975, the last year of the fourth five-year
plan.
Despite a more than doubling of production
since 19b9, China has been unable to supply the
agricultural sector with enough fertilizer. The in-
crease in domestic production of chemical fer-
tilizer last year was negligible, as increases in
nitrogenous and potassium output were offset by
a sharp decline in the production of phosphorus,
a result of a quadrupling of the price of imported
phosphate rock. Disruptions related to the cam-
paign to criticize Lin Piao and Confucius caused
transportation bottlenecks and shortages of coal,
a major raw material for the nitrogenous fertilizer
industry.
Imports of fertilizer have also lagged. Last
year they fell by one third because of
skyrocketing prices and a shortage of foreign ex-
change. Purchases were cut back even more the
first half of this year. Nevertheless, China is still
among the world's largest importers of fertilizer.
Peking has recently signed or is negotiating new
contracts as fertilizer prices are falling. Much of
this, however, will be delivered too late for use
this crop year.
This massive expansion could result in rapid
increases in agricultural output by the end of this
decade. Full utilization of the increased supply of
fertilizer, however, will depend on development
of other inputs. Without improved water control
and advanced seed strains, returns on unit fer-
tilizer applications will decline. The most suitable
of China's arable lands are already under water
control. Much of the remainder, moreover, is
either unsuitable for such projects or, as in North
China, will require large, multipurpose
works-high dams, extensive reservoir and
delivery systems, and soil conservation
programs
^ Probable plant location
0 Miles 500 - ~--
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TIMOR: DYNAMIC INACTION
Indonesian military forces are poised to in-
tervene in Portuguese Timor, but President
Suharto has not authorized an invasion. He is
awaiting the outcome of negotiations by Por-
tuguese special envoy Almeida Santos to organize
a multinational effort-including Australia,
Malaysia, Indonesia, and Portugal-to restore
order in Timor. For domestic political reasons,
Lisbon does not believe it can publicly sanction
unilateral Indonesian intervention. Portuguese
President Costa Gomes evidently fears that Jakarta
will be too heavy-handed in dealing with
Timorese dissidents and increase rather than end
the bloodshed.
During discussions in Jakarta last week, San-
tos and the Indonesians worked out a proposal
for afour-party peacekeeping effort. Indonesia
under the general guidance of the others would
send in forces to restore order.. The four powers
would then jointly supervise the peace and guide
the decolonization process in accord with the
arrangements worked out in Macao last June.
Lisbon`s initial reaction to the proposal was
negative; President Costa Gomes probably wants
firmer guarantees that Jakarta will not deal too
roughly with the Timorese.
Over the weekend, Santos visited Canberra
to sound' out Prime Minister Whitiam on
Australian participation in the propoed joint ef-
fort. Whitiam is unlikely to agree to direct
Australian participation in a military intervention
but government spokesmen left open the
possibility that Canberra might participate in a
multilateraN supervisory body. Whitiam has been
criticized recently by members of his own party
and by the opposition for his allegedly indifferent
attitude about the fate of the Timorese. From
Canberra, Santos flew to Timor for consultations
with the governor, currently headquartered on a
small island off the Timor coast. At the end of the
week he is scheduled to return to Jakarta.
The possibility that same sort of multinational
peacekeeping effort may be forthcoming has
strengthened Suharto's hand against his top
military advisers, who believe that immediate un-
ilateral action is necessary.
Fretflin guerrillas during recent action in Dili
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PAPAU NEW GUINEA: SEPARATISM
Two weeks short of independence on
September 16, Papua New Guinea is already
threatened with schism. The announcement of
secession by Bougainville separatists on
September 1 illustrates the deep-seated divisions
that will plague the new nation.
The separatists hope that the announcement
will underscore their contention that the copper-
rich island, which contributes heavily to the cen-
tral treasury, is not getting its share of central
government development funds. Few workers
stayed off the job on the proclaimed in-
dependence day, however, and celebrations were
orderly.
Authorities in the Papua New Guinean capital
of Port Moresby are taking a relaxed view of the
Bougainville situation in the belief that it will blow
over. Centro( government offices in Bougainville
remain open, and the island police are still under
central control.
Although Bougainville independence lacks
island-wide support and one leading separatist
admits that the goal of being a separate state is a
long way off, the breakaway movement is
better-defined and better-fed than similar groups
elsewhere in the country, such as the one in
Papua. As a sop to local sentiment, Bougainville
was granted provincial status last year. No other
region in Papua New Guinea has comparable
status, and it has given the separatists added ex-
perience in handling island affairs.
So far, the separatists have stopped short of
any action that would impel the central govern-
ment to intervene. The separatists contend,
however, that the giant Bougainville Copper
Limited must come to terms with the new
"independent government." The separatists are
confident of union leadership support and may
take a tough line with the copper combine. Any
move to divert substantial copper tax revenues
now paid to the central government would force
Port Moresby to act.
Bougainville has been unable to muster any
international support. Australia, which has ad-
ministered Papua New Guinea as a UN trust
territory, has made clear its disapproval of the
separatists, and a plea far Bougainville in-
dependence to the UN trusteeship council was
unanimously rejected. But lack of such support is
unlikely to deter the separatists, who see
prospects of self-sufficiency from copper profits.
Some separatists may accept Chief Minister
Somare's offer of further discussion of the island's
grievances, but an early damping down of
separatist activity does not seem in the off-
ing.
WEEKLY SUMMARY Sep 5, 75
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NONALIGNED: ON TO SRI LANKA
Fraternal secrecy fortified the facade of non-
aligned unity, but bitter differences were aired at
the meetings of foreign ministers at Lima. The
controversy and confusion that permeated the
closed sessions, and particularly the bad blood
between the African group and a bloc of Arabs
and some Asians, seem to promise further
fireworks when Sri Lanka hosts the nonaligned
summit next August. Public solidarity
nevertheless seems likely to endure.
The Arabs' style of ramrodding their own pet
issues while cavalierly dismissing the interests of
the poorer Africans has created deep resentment
and evidently the beginning of some resistance.
Syrian militancy on the expulsion of Israel from
the UN failed at Lima, and this defeat of the hard
line perhaps will stiffen the resolve of the Africans
and other nonradical members to think positively
about defending their positions in future non-
aligned assemblies.
Tt:e relative mildness-in the Third-World
context-of the Document of Lima, however,
only partly reflects a revolt by the more conser-
vative in the movement. Discord within the Arab
bloc itself may have been the strongest brake on
the radical steamroller, and outside con-
siderations served also to temper the hard line.
Forward movement in the Middle East
negotiations certainly affected the Israeli issue. In
the economic sphere, signs that the developed
world was beginning to accept some of the prin-
ciples formulated by the have-not nations also
had an impact. Algeria`s standard-bearer of
Third-World radicalism, Foreign Minister
Bouteflika, for example, spoke at Lima in
measured and conciliatory terms that suggested
he anticipated the start of constructive com-
promise with the industrialized nations.
While the radical bloc withdrew or suffered
losses on certain key questions, overall, the hard
The opening session of the conference
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SECRET
line carried the conference. Extreme positions
were maintained on most purely political issues,
with heavy rhetoric launched against imperialism,
Zionism, racism, and other code words selected
for the West and its allies. The cause of
"evenhandedness" toward applicants for
membership among the nonaligned suffered bad-
ly. North Korea was enthusiastically admitted,
while Seoul's bid was rejected. The Philippines
were permitted to attend only in thie category of
"invited guest."
Given the tight security that characterizes
nonaligned meetings, specific points of dissent
and friction will begin to leak only slowly and
piecemeal as the nonaligned delegates review
their experiences at Lima. An Austrian diplomatic
guest and frequent apologist for the nonaligned
described the atmosphere of the conference as
"wild" and asserts that the four new Asians in-
volved-Cambodia, the two Vietnams, and North
Korea-will move the group another notch to the
left.
DEVELOPING COUNTRIES
Payments Problems
The payments position of those developing
countries that do not export oil deteriorated
rapidly in the first six months of this year. Changes
in bank borrowing, aid flows, and reserve levels
indicate that their current account deficit taken as
a group increased by $4 to 6 billion.
We estimate that the deficit in the last half of
1974 was about $16 billion. Because the current
level of their borrowing is unsustainable, they
have already begun to cut back on imports. Thus
the deficit in the second half of this year, while
still formidable, will decline. Some debt
rescheduling is inevitable, and exchange holdings
will continue to dwindle.
Preliminary statistics on trade alone indicate
that the developing countries' deficit with the
major developed countries increased $2.7 billion
in the first half of 1975. Indirect evidence indicates
that the current account balance deteriorated by
roughly $5 billion.
Based on data through May, we estimate the
developing countries borrowed a net $5.5 billion
from US commercial banks in the first half of 1975.
South Korea and Mexico borrowed nearly $500
million each and Chile about $100 million. In-
complete data for 1975 on developing countries'
borrowing from commercial banks in London, the
other major market, show a surge of new credits,
perhaps amounting to $3.5 billion net.
Owing to increases in concessionary lending,
total aid flows to the developing countries rose by
roughly $2 billion in the first half of 1975. OPEC
accounted for most of the increase, growing from
$3 billion for the whole of 1974 to an estimated
$3.5 billion in January through June of 1975.
Muslim countries received about 70 percent of
the OPEC total. We estimate aid from the
remainder of the world, mainly from OECD coun-
tries, at $5.5 billion compared with roughly $5
billion in second half of 1974.
The rate of lending by the International
Monetary Fund declined from last year's record
pace. On balance, the developing countries
withdrew $570 million from the IMF in the first
half of 1975, compared with $1.1 billion in the se-
cond half of 1974. The new oil facility accounted
for 130 percent of the 1975 total.
Foreign Reserves Fall
Despite the increased aid and borrowing the
developing countries' foreign reserves fell from
$30.1 billion at the end of 1974 to $29.6 billion by
May 1975. Aid flows are unlikely to increase sub-
stantially in the second half of 1975. Any increases
will probably be concentrated in those Muslim
countries that received the bulk of OPEC aid in
the first half. We expect export earnings to pick
up moderately as raw material prices start to
recover. A substantial increase in volume,
however, will not happen until the economic up-
turn in the developed countries picks up steam.
The developing countries are under pressure
to reduce the size of their current account deficits
during the remainder of the year, if only because
they cannot continue to borrow at the same rate
from US and UK banks. Most of the cut in the
deficit will have to be accomplished by reducing
imports. Some governments have already taken
steps to cut back foreign purchases.
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