WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A011300030001-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 31
• Document Creation Date: December 21, 2016
• Document Release Date: June 12, 2008
• Sequence Number: 1
• Publication Date: January 16, 1976
• Content Type: SUMMARY

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Secret
Weekly Summary
Secret
No. 0003/76
January 16, 1976
CI WS 76-003
Copy
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The WEEKLY SIMWARY, issued every Friday Morning by the
Office of Current Intelligence, reports and analyzes signifi=
cant developments of the week trough noon an Thursday. It
freq=rently includes material coordinated with or prepared
by the Office of Economic Research, the Offiee of Strategic
Research, the Office of Geaaphic and Cartographic
Research, and the Directorate of Science and Technology.
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CONTENTS (January 16, 1976)
MIDDLE EAST
AFRICA
EAST ASIA
PACIFIC
1 Lebanon: Fighting Spreads
2 Angola: Fighting; OAU; Soviets
6 Spanish Sahara: Gobbled Up
7 Israel: Missile Boat Patrols
7 Morocco Releases Soviet Trawler
8 Ethiopia: Trouble All Around
15 Spain: Labor Unrest Spreads
10 USSR: Electric Power; CPSU Congress
11 Soviets Invite Observers
12 Iceland: Break with UK Looms
12 EC: Tindemans Submits His Report
14 Italy: More Problems for Moro
18 Japan-USSR: Gromyko Visit
19 China: Mourning Chou En-lai
20 Thailand: New Elections
?1 Ecuador: New Faces; Old Problems
22 Venezuela: Oil Jitters
24 Latin American Arms Purchases
25 Violence in Jamaica
Comments and queries on the contents of this
publication are welcome. They may be
directed to the editor of the Weekly
Summary
WESTERN
HEMISPHERE
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LEBANON: FIGHTING SPREADS
The fighting between the Christians and their
Muslim and leftist foes grew all-out civil wad
the situation is approaching
Clashes have spread to all areas of Beirut, to
traditional trouble spots in northern and eastern
Lebanon, and to previously unaffected towns in
the mountains outside the capital and in the
south. As a result, confessional lines have
sharpened to the point that Christian and Muslim
leaders have abandoned attempts to negotiate
among themselves. They are concentrating in-
stead on strengthening their positions before
entering another round of talks with the Syrians
on the five-point peace program proposed
President Asad last month.
blockade of two Palestinian
tinuin
g
The con
refugee camps by Christian forces and their
take-over this week of a third camp have drawn in
greater numbers of armed Palestinians; until this
week, the fedayeen had largely stayed on the
sidelines. The major Palestinian leaders had
hoped to avoid a resumption of heavy fighting
out of concern that such a development would
play into the hands of the Israelis at the UN
Security Council debate on the Middle East that
began on January 12.
The fall of Dibayah camp has prompted
charges from the Palestinians that the Lebanese
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xSi% ?..
Palestinian guerrillas move into battle positions in eastern suburbs of Beirut
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Franjiyah is expected to take a hard stand
with Asad on the issue of Palestinian intervention
in Lebanese affairs, but has hinted he may be
more flexible on Muslim political demands. These
hints of concessions are probably only tactical
moves intended to persuade Syria not to permit
more armed Palestinians into Lebanon. Franjiyah
will also use the temporary military advantage the
Christians have gained through the blockades to
press an earlier Christian proposal that any com-
prehensive agreement be guaranteed by an inter-
national police force that includes Saudis and
Kuwaitis as well as Syrians.
ANGOLA
This week the Popular Movement for the
Liberation of Angola advanced deep into the
tribal heartland of the rival National Front for the
Liberation of Angola. The Movement's gains vir-
tually closed out the battlefront in northwestern
Angola and opened the way for new drives
southeast from the Movement's key positions in
the central sector. At the special summit meeting
of the Organization of African Unity that ended
on January 13, the Popular Movement failed to
win recognition as the sole legitimate govern-
ment of Angola, but it is close to gaining formal
acceptance by a majority of OAU members. The
Movement continues to receive extensive
material support from Moscow and Havana, in-
cluding increasing numbers of Cuban combat
troops.
army aided the Christian militiamen who took the
camp. In the past, the Palestinians have ex-
aggerated the army's involvement in the fighting,
but there is growing evidence that the army is
now siding more openly with the Christians. Army
units appear to be supporting Christians in Zahlah
and in the Tripoli-Zagharta area where clashes are
especially heavy.
Although the involvement of the
predominantly Christian-officered army is still
limited, it has accentuated the strictly religious
aspects of the dispute and will provide the
Muslims and Palestinians justification for bringing
in more fedayeen units. If main-line Palestinian
forces do step in, this would erode the last con-
straints to all-out civil war.
With the resurgence of fighting, Syria is trying
harder to find a solution to the dispute. The
Syrians played host this week to leading Christian
figures and representatives of the major Lebanese
leftist and Muslim groups in preparation for a
meeting in Damascus between President Fran-
jiyah and Asad this weekend.
Military Situation
The National Front's attempt to hold off ad-
vancing Popular Movement forces in the north
collapsed abruptly late last week as Front forces
gave up one position after another and fled in
panic toward Zaire. Ambriz, the Front's main
headquarters in Angola since last spring, fell
before the weekend. Toto and Bessa Monteiro
were taken over by rapidly moving Popular
Movement troops on January 11. Ambrizete,
another key Front stronghold on the coast, was
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evacuated by Front troops the following day as
was Sao Salvador, close to the Zairian border.
Movement forces raced on toward Tomboco and
Santo Antonio do Zaire as the rout continued.
Cuban troops were apparently primarily respon-
sible for the Movement's gains.
With the defeat of the Front in the north,
Popular Movement leaders and their advisers will
probably quickly divert more resources to central
Angola, where South African troops and
mercenaries have been supporting forces of the
Front and its southern-based ally, the National
Union for the Total Independence of Angola.
Popular Movement troops moving out of
strongholds at Quibala and Malanje apparently
made gains in several directions during the week;
South African press reports mentioned heavy
fighting around Gabela and Mussende in par-
ticular.
Uneasy Allies
As the Popular Movement presses south it
stands to profit from serious friction between
National Front forces in central and southern
Angola and those of the National Union. These
Front forces are not really responsive to that
organization's top leader-Holden Roberto-but
are personally loyal to Daniel Chipenda, a former
Popular Movement military commander who
nominally joined the Front last year. An ambitious
free-wheeler, Chipenda is also a tribal rival of the
National Union's Jonas Savimbi.
OAU Deadlocks
The OAU emergency summit that convened
in Addis Ababa on January 10 adjourned three
days later with partisans and opponents of the
Popular Movement among the 46 member states
totally deadlocked. Unable to act, the con-
ference, which was attended by some 20 heads of
state or government, in effect pigeonholed the
problem until the next regular summit convenes
in Mauritius later this year.
The impasse at Addis Ababa is something of a
victory for the National Front and the National
Union inasmuch as the Luanda-based regime of
Popular Movement leader Agostinho Neto was
not seated. The failure of the conferees to reach
an acceptable compromise, however, rules out,
for now at least, any collective African role in the
search for a settlement of the Angolan conflict.
For Africa, the summit heightened tensions
among OAU members and severely damaged the
prestige of their regional organization.
The standoff developed early in the meeting
as representatives of 44 countries split evenly in
lining up behind pro- and anti-Popular Move-
ment draft resolutions, both of which provided
for explicit condemnation of South Africa's in-
volvement in the Angolan civil war. The draft sub-
mitted by Neto's supporters named his regime as
the legal government of Angola. The opposing
draft denounced all foreign intervention and call-
ed on the three warring Angolan groups to con-
clude a cease-fire and agree on a government of
national unity. Uganda, because of President
Amin's role as OAU chairman, and Ethiopia, the
host country, refrained from taking sides formally.
As the conference proceeded amidst
sometimes bruising exchanges among a succes-
sion of speakers for the two sides, numerous
attempts at compromise were made. Although
ea
Ben
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Holden Roberto (1) and Jonas Savimbi at OAU summit
leading partisans-for example, pro-Neto Nigeria
and anti-Neto Zambia-displayed considerable
give, all of the attempts failed, including a final ef-
fort by a 10-country negotiating committee form-
ed during the early hours of January 13. Neto's
hard-line supporters-Algeria, Guinea, and
Mozambique-seem to have finally pulled back
on the recognition issue, but those states and
others refused to accept demands for an im-
mediate cease-fire and withdrawal of all foreign
forces by the hard liners on the other side,
notably Ivory Coast and Senegal.
A high-level Cuban delegation sent to Addis
Ababa especially for the meeting may have
helped stiffen resistance to a compromise by the
Popular Movement's staunchest backers. The
Cubans lobbied hard throughout the session on
behalf of Neto and reportedly counseled his
African friends that no summit decision would be
better than a bad one.
In the end, the turbulent meeting produced
neither a resolution nor even a consensus state-
ment and was simply declared adjourned by
Amin. Pretoria thus escaped any formal condem-
nation for its role in Angola. An OAU spokesman
who announced the closure said that a committee
of nine African leaders established by last year's
summit had been asked to continue to follow the
problem closely, but early action by the group is
not likely.
The summit's failure in effect leaves OAU
members not committed to the Popular Move-
ment free to follow their own course, including
continued neutrality. Neto's main backers will
almost certainly step up their campaign for
recognition of his regime with a view to forcing
the issue to a successful conclusiori at the next
summit. With the action of Niger and the Comoro
Islands last week and Ethiopia on January 15, at
least 22 OAU members have now officially en-
dorsed the Luanda government. No government
has recognized the joint regime proclaimed by
the National Front and the National Union.
Some of Neto's African supporters, frustrated
by the summit's outcome, may try to blame it on
the US. One OAU official insisted, in contacts
with officers of the US embassy in Addis Ababa
after the conference, that the US could get the
South Africans out of Angola but didn't want to.
The embassy has heard reports that Nigeria,
Mozambique, and Tanzania may also be casting
the US in the role of scapegoat.
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AFRICAN LINEUP ON
DRAFT ANGOLA RESOLUTIONS
Algeria
Benin
Burundi
Cape Verde
Comoros
Congo
Ghana
Guinea
Gu inea-Bissau
Equatorial-Guinea
Libya
Mauritius
Madagascar
Mali
Mozambique
Niger
Nigeria
Sao Tome
Somalia
Sudan
Chad
Tanzania
Botswana
Cameroon
Ivory Coast
Egypt
Gambia
Gabon
Upper Volta
Kenya
Liberia
Lesotho
Malawi
Morocco
Mauritania
Rwanda
Central African Republic
Senegal
Sierra Leone
Swaziland
Togo
Tunisia
Zaire
Zambia
Soviets Disappointed with the OAU
Publicly, the Soviets have shown disappoint-
ment over the inconclusive results of the OAU
summit conference on Angola. Except for the
OAU's failure to call for the withdrawal of all
foreign forces, including Soviet and Cuban, from
Angola, Moscow probably takes little comfort
from the summit's outcome. The conference had
been convened at the initiative of Popular Move-
ment supporters, with Somalia and other African
states sympathetic to Moscow in the lead. The
USSR had made a considerable diplomatic effort
to line up support for the Popular Movement, and
the Soviet media worked hard to give the impres-
sion that a Popular Movement bandwagon was
developing within the OAU.
Tass in an article later echoed by a Pravda,
commentator over Radio Moscow, blamed
"feverish" diplomatic and economic pressure by
the US and other "imperialist states" for helping
defeat an OAU resolution that would have
recognized the Soviet-backed Popular Movement
as the sole legitimate government in Angola.
Other Soviet commentary was even more explicit
in denouncing as "direct blackmail" the recent
African trip by Assistant Secretary Schaufele and
President Ford's circular letter to African heads of
state on the eve of the OAU summit.
In its summit post-mortem, Tass implicitly re-
jected a resolution calling for a cease-fire and the
formation of a national unity government-which
also had failed to win OAU endorsement. Tass
described the National Front and National Union
as Angolan "splittists" that had discredited
themselves by virtue of their close alliance with
South Africa. Pravda, in its radio broadcast, ex-
pressed the hope that "progressive forces" in the
OAU will eventually prevail and that the African
organization will ultimately adopt the "only just
solution," recognition of the "lawful
government" of the MPLA.
Privately, however, the Soviets have been
putting out the line that some sort of coalition
formula for resolving the Angolan conflict might
eventually be acceptable to Moscow. V. V.
Zhurkin, a prominent Soviet academician
who-as deputy, director of the USA
Institute-closely follows the Kremlin's relations
with Washington, recently mentioned this
possibility to a Western diplomat in Moscow.
Zhurkin's comments were further refined early
this week by two other Soviets in Moscow, one of
them the director of the USSR's Africa Institute.
They told US embassy officials that a coalition
government of the Popular Movement and the
National Union, including National Union leader
Savimbi but presumably dominated by the
Popular Movement might be possible.
They ruled out inclusion of National Front
leader Roberto in a coalition on grounds that he
would never be acceptable to Popular Movement
"President" Neto and his colleagues. The officials,
however, left open the possibility of participation
in the coalition by other National Front leaders.
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SPANISH SAHARA. GOBBLED UP
Moroccan and Mauritanian forces further ex-
panded their occupation of Spanish Sahara this
week as Spain completed its military withdrawal.
The final transfer of administrative authority is to
take place by the end of February. Algeria,
meanwhile, is continuing its support to Polisario
Front guerrillas, who are carrying out harassing
actions against the occupiers over a wide area.
Both Moroccan and Mauritanian troops were
on hand as the last Spanish troops departed Villa
Cisneros, the territory's largest commercial
center. Spain had earlier promised to hand over
the town to Nouakchott, but Rabat probably in-
sisted on a joint take-over to secure the town
against possible occupation by the guerrillas.
Morocco's move probably was also influenced by
its interest in the lucrative commercial fishing in-
dustry located there.
The two countries have apparently not reach-
Ibis C.18Apr
Spin
MADRID
ed full agreement on how to divide the territory
Spain is abandoning, and they may well hold
differing views on the disposition of Villa
Cisneros. Moroccan media treatment of its oc-
cupation strongly suggested that Rabat intends to
stay.
For public consumption, Morocco is playing
down clashes with the guerrillas as minor police
operations. The Moroccans are sufficiently confi-
dent of their control of population centers that
they are inviting foreign journalists to visit the
territory.
Despite Moroccan control of most towns in
the north, the guerrillas continue to attack
Moroccan convoys and patrols both in the Sahara
and in southern Morocco. Their ambush tactics
and minelaying operations are beginning to take
a toll.
Fighting between Mauritanian and Polisario
forces has increased as Mauritanian troops ad-
vanced farther into southern Spanish Sahara.
Nouakchott has taken control of several towns
despite resistance by Front partisans. Isolated skir-
mishes arealso being reported inside Mauritania,
most recently across from the long eastern border
of the Sahara.
Algeria is prepared to back a long-term
guerrilla struggle. At present, Algiers is also ex-
ploring the possibilities of mediation of the dis-
pute, probably mainly with a view to delaying in-
ternational recognition of the Moroc-
can-Mauritanian take-over. The Algerians also
probably want to gain time to build up the
military strength and political credibility of the
Polisario Front.
In recent weeks, Algiers has had contacts
with Senegal looking to possible African media-
tion. Given the inconclusive outcome of the UN
General Assembly debate on Spanish
Sahara-two contradictory resolutions were pass-
ed last week-Algeria's only remaining move at
the UN would be an appeal to the Security Coun-
cil on grounds that the Saharan dispute con-
stitutes a threat to international security.
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Meanwhile, the Polisario Front this week
gained for the first time the open support of
Libya, which had maintained a public position of
neutrality in the dispute. In a speech on January
12, President Qadhafi announced that he had
been channeling weapons and ammunition to the
Front since 1973 and that he would continue to
support its "armed struggle" against Morocco
and Mauritania. Although less than a complete
commitment to Algeria, Tripoli's position is
almost certainly a reflection of a new closeness in
Libyan-Algerian relations ushered in by two
meetings between Qadhafi and Boumediene last
ISRAEL: MISSILE BOAT PATROLS
The Israeli navy may be planning to begin
naval patrols in the southern Red Sea. Two
Reshef-class guided-missile patrol boats were
observed off the coast of Ethiopia on December
24, according to the US naval attache in Tel Aviv.
It is likely the boats operated in the area for about
a week. The mission was probably for familiariza-
tion before the start of regular operations in the
Bab el Mandeb - Gulf of Aden area. Such
operations would be in accord with Israel's evolv-
ing naval strategy of extending protection over
Israeli shipping lanes in both the Mediterranean
and Red seas and of developing a capability of at-
tacking potential enemy forces in their home
waters.
Israel has long been concerned about the
Arabs' ability to close the Red Sea to ships carry-
ing Israeli cargos. About five years ago, Tel Aviv
began constructing six Reshef boats for use in the
Red Sea. Two boats were completed shortly
before the October 1973 war, but neither was in
the Red Sea at its outset, leaving Israel unable to
challenge Egypt's blockade of the Bab el Mandeb.
Since the war, four Reshefs plus two of the
smaller, French-built, Saar II missile boats have
MOROCCO RECEASES"SOVIET TRAWLER
The Soviet fishing trawler Sapfir, seized
December 30 by the Moroccan navy, was
released, last ,Saturday, according to the US
defense attache in Rabat. Morocco at first
believes?tfie._ship was supplying arms to the
Polisario Front. A search of the ship apparently
turned up only fish. The release reportedly was
ordered after a fine was levied, allegedly
because the snip was inside Morocco s 70-mile
economic zone.
been sent around Africa into the Red Sea. From
their home port of Sharm ash Shaykh, the Reshefs
could operate in the Bab el Mandeb and the Gulf
of Aden without refueling, although they would
be beyond the range of effective Israeli air cover.
The shorter range Saar Its would be limited to
operations closer to home port.
Israel has also taken steps to improve its naval
capabilities in the Mediterranean. Last year, Tel
Aviv purchased from the US a logistic ship
originally designed to support deep water drilling
operations which it intends to use after conver-
sion to support missile boat operations in the
Mediterranean. The ship is in Israel being
modified and reportedly will be ready in March. It
will enable Israeli missile boats to operate in the
central and western Mediterranean and will bring
within range Arab states such as Libya and Algeria,
which the Israelis believe will be major con-
tributors to any new round of fighting in the Mid-
dle East.
The size of Israel's missile boat force also is
being increased. Construction has been authoriz-
ed for at least six more Reshef boats, and work has
already begun on three of them. When all six are
commissioned, Israel will have 12 Reshef-class
missile boats and 12 Saar-class.F
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ETHIOPIA: TROUBLE ALL AROUND
The new year finds the ruling military council
hanging on in Addis Ababa, but its control over
the countryside is still being widely challenged.
Violence is occurring in nearly all of Ethiopia's 14
provinces.
The secessionist movement in Eritrea
Province remains the most serious of the
numerous insurgencies facing the government,
although the conflict has been stalemated for
some time. Fighting could pick up soon, but
neither the rebel nor the government side has the
ability to overcome the other.
Logistic problems, indiscipline, a shortage of
trained officers, and low morale have restrained
government military operations. A battalion of
reinforcements arrived in Eritrea last week, and
more troops may follow shortly. The arrival of the
reinforcements may signal an increase in govern-
ment operations against the rebels.
The insurgents are divided into two rival fac-
tions and their units seldom coordinate
operations against government forces. Their
leaders apparently have not devised a coherent
military strategy nor tried to apply theories of
modern guerrilla warfare.
Parts of four other northern provinces are
outside government control because of rebellions
led by landlords opposed to Addis Ababa's land
reform program and by prominent figures from
the old regime. A group called the Ethiopian
Democratic Union began an insurrection in
Begemdir Province in November. The group,
which reportedly is also active in Tigre Province,
periodically cuts a main road leading to the
Sudanese border. The group's two main leaders,
who are believed to have widespread support
throughout northern Ethiopia, are probably also
in contact with local notables who lead minor in-
surrections in Begemdir, Tigre, Gojjam, and Shoa
provinces.
In southern Eritrea and eastern Wollo
pravinces, a guerrilla force composed of
rebellious Afar tribesmen occasionally is able to
cut the road between Addis Ababa and Assab,
where Ethiopia's only oil refinery is located. Most
of the clashes between the Afars and government
forces are minor, but in December the Afars
reportedly executed 18 suspected government
sympathizers. Government troops promptly ex-
ecuted 40 Afars.
During the past six weeks, insurgents have
also become active in the Ogaden region, par-
ticularly Harar and Bale provinces. Both the
ethnic Somalis and the Ethiopian Gallas are in-
volved. Somalia has apparently aided the groups
with arms and training in guerrilla warfare.
Mogadiscio claims the Ogaden as part of "greater
Somalia."
In an attempt to deal with the growing
violence, Ethiopia's military rulers have begun ex-
panding the armed forces. Large numbers of
veterans have been recalled and local militia
forces are to be created. The new troops,
however, will be costly and will place additional
burdens on the government's already strained
logistic capabilities. Such new forces will enhance
the regime's ability to contain for a while longer
the various insurgencies, but will not significantly
improve its offensive military capability.
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ti
MOSCOW QUESTIONS PEKING'S MOTIVES
The Soviets are still not saying much either
publicly or privately about China's release of the
helicopter crew.
Their public diffidence may be partially ex-
plained by the desire to avoid anything that might
blur in the minds of the Soviet people the picture
of Chinese intransigence that now exists. Last
week a Moscow lecturer, having difficulty fielding
a question on the release, took refuge in an
allegation that one of the crewmen had been mis-
treated.
that of Politburo member Tung Pi-wu last year.
The only difference, which Krasheninnikov did
not mention, is that on this occasion the Soviet
press has noted that a condolence call was made
at the Chinese embassy. First Deputy Premier
Mazurov, who paid the visit on Wednesday,
January 14, was filling in for Premier Kos in, now
on vacation. 25X1
In private, the Soviets have been skeptical
about the meaning of the release. Two Soviet of-
ficials, in comments to Western officials, describ-
ed it as essentially a message to the US rather than
to the USSR. One cited the continuation of an-
ti-Soviet statements in the Chinese press as
evidence that Peking is not ready to lessen ten-
sion with the USSR.
In a recent conversation with a US embassy
official, Viktor Krasheninnikov of the Foreign
Ministry's First Far East Division did not mention
the US aspect but said that, the helicopter crew
release notwithstanding, it was still up to the
Chinese to demonstrate their interest in better
relations. He suggested they could do so by
responding favorably to Soviet suggestions for in-
creased trade and a renewal of cultural and scien-
tific exchanges.
Krasheninnikov implied that the Soviets feel
under no pressure to respond to China's gesture
and, contrary to a statement by a Sinologist at-
tached to the USA Institute, said he knew of no
current plan to send Deputy Foreign Minister
Ilichev, Moscow's negotiator for the border talks,
back to Peking. He also said that there would be
no change in Soviet treatment of China at the
coming party congress.
The Soviet diplomat seemed to be going out
of his way to emphasize that Moscow's "correct
and principled" policy regarding China would
continue and pointed out that Moscow had
handled Chou En-tai's death in the same way as
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tors will probably be sufficient to offset the short-
fall and maintain an overall balance.
The new plan provides for annual production
of 1,340 to 1,380 billion kilowatt hours of electrici-
ty by 1980, an increase of 29 to 33 percent over
1975. Total industrial output is to increase at a
faster rate, and industry's share of total power
consumption may be greater than in the past.
Since the rural economy will also seek to increase
its share of electric power, competition for elec-
tricity is likely. Regional power shortages almost
certainly will become more prevalent, especially
in the European USSR, which consumes 80 per-
cent of Soviet electricity but is deficient in energy
resources.
Machine sector of the
Toktogulskaya Hydropower Station
USSR
l
Electric Power Production
The goal for electric power production dur-
ing the tenth five-year plan (1976-80) may be op-
timistic, but a serious imbalance between power
production and requirements seems unlikely.
Even if goals for the electric power industry are
not fully realized, lags in power consuming sec-
Achievement of the goal for electric power
production depends on the installation of 67,000
to 70,000 megawatts of new generating capacity
and on the construction of high-voltage, long-
distance transmission lines. Nuclear-electric
power plants are to account for approximately 20
percent of the planned additions to
capacity-compared with about 7 percent in the
last five-year plan-with another 20 percent in
hydroelectric plants. The remainder will be in
conventional thermal power plants, some to be
built in the eastern regions of the country to
utilize cheap coal. All the nuclear capacity and
more than one third of the hydro capacity will be
added in the European USSR. Past performance
suggests that the addition of new capacity will fall
short of plans.
The plan also calls for installation of a large
number of gas turbines to meet demand for
power in hours of peak use. The Soviet equip-
ment industry has not mastered their production,
however, and the Ministry of Power has been
forced to seek them in the West. Because of the
large hard-currency deficit, recent negotiations
with General Electric for the purchase of equip-
ment, probably including gas turbines, have been
discontinued, and the problem of covering peak
demand may grow more severe.
Work on a unified transmission network for
the entire Soviet union will continue with con-
struction of main transmission lines carrying
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voltages of 500, 750, and 1,150 kilovolts and con-
nection of the Central Asian and Siberian
networks to the European network. The long-
discussed 1,500-kilovolt, direct-current transmis-
sion line that the Soviets plan to use to move large
amounts of electric power from eastern regions to
the European USSR is not included in the plan. As
a result, the location of generating facilities in
areas far from major western centers of power
consumption may still remain a problem.
Preparing for the 25th CPSU Congress
The Armenian and Lithuanian party con-
gresses meet on January 20, opening the final
stage of preparations for the 25th Congress of the
Communist Party of the Soviet Union (CPSU) on
February 24. All republics, except the
Russian-which does not have a republic-level
party organization-and Kirgizia and Latvia, have
announced the opening dates for their con-
gresses. Kirgizia and Latvia have, however,
published the agendas for their congresses.
In contrast to the confusion that accom-
panied preparations for the last congress, in 1971,
the lower level party meetings that have already
taken place have been orderly and uneventful.
There has been remarkable stability in party first
secretary assignments at the oblast level. The
small number of changes at lower levels during
1976 REPUBLIC PARTY CONGRESSES
January 20
January 22
January 23
January 27
January 28
January 29
February 3
February 4
February 10
Not announced
Armenia, Lithuania
Georgia
Turkmenistan
Tadzhikistan
Azerbaydzhan, Estonia
Moldavia
Uzbekistan
Belorussia, Kazakhstan
Ukraine
Kirgizia, Latvia
the pre-congress period suggests that stability and
Congress.
SOVIETS INVITE OBSERVERS
Moscow has invited the Greek and Turkish
military attaches to observe the Soviet military ex-
ercise to be held in the Caucasus from January 25
to February 6. Bulgaria and Romania from the
Warsaw Pact and Yugoslavia, which is nonaligned,
have also been invited to attend.
Invitations such as these, although among the
confidence-building measures of the Helsinki ac-
cord, are voluntary. The Soviets apparently desire
to counter Western criticism of Moscow's record
with regard to the accord and to improve the at-
mosphere for the force reductions talks that
resume in Vienna later this month. The Soviets'
first act of compliance with the confidence-
building measures was January 4, when they gave
notification-21 days in advance-of a maneuver
that involved about 25,000 troops within 250
kilometers of the border of a Helsinki par-
ticipatory state.
Moscow may 25X1
wan to avoi establishing a precedent for
across-the-board inter-bloc hospitality. Since the
Helsinki accord was signed, the Warsaw Pact
states have declined invitations to attend NATO
exercises.
The exercise will probably feature an air-
borne assault on an unspecified "deep objec-
tive," and either the combat-ready airborne divi-
sion at Kirovobad or the airmobile unit at Kutaisi
could be used. Elements of some of the five
motorized rifle divisions located near the exercise
area, and combat aircraft from the tactical air
force are also expected to participate.
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ICELAND: BREAK WITH UK LOOMS
Iceland is apparently prepared to break
relations with the UK, but may wait until after
NATO Secretary General Luns has had a chance to
air his proposals for settling the fisheries dispute
between the two allies. Luns arrived in Reykjavik
on January 14. Britain has suggested that, rather
than a trip to London, he meet with British
Foreign Secretary Callaghan on January 20 in
Brussels during the EC Foreign Ministers'
meeting.
The decision to send Luns, who helped
mediate a settlement of the last cod war in 1973,
was made at an emergency session of the North
Atlantic Council on January 12. Although Reyk-
javik did not receive the strong support it had ex-
pected at the NATO meeting, the majority of the
ambassadors called for a withdrawal of British
frigates from the contested waters as a first step
toward settling the dispute. Reykjavik has in-
dicated that it might call home its ambassador to
NATO, if the British continue to operate within
Iceland's 200-mile limit and the NATO allies take
no action.
Prime Minister Hallgrimsson insists that Luns'
visit should not be considered a mediation effort,
but rather a fact-finding mission prior to conven-
ing another NATO meeting to consider further
measures. Hallgrimsson claims that domestic opi-
nion is opposed to further negotiations while
British frigates remain in Icelandic waters.
Emotions are continuing to run high in
Iceland. Hallgrimsson told the US ambassador last
weekend that he believes anti-NATO sentiment
in Iceland is stronger now than during the
national debate in 1973 over renewing the treaty
governing the US-manned NATO base at
Keflavik. Angry fishermen blockaded two NATO
facilities outside the main Keflavik base last
weekend, charging that NATO had failed to de-
fend Iceland from British aggression.
The protracted dispute appears to be creating
political difficulties for Hallgrimsson who claims
that he is losing the support of his own
Independence Party, as well as that of the
Progressive Party, the junior coalition partner.
Hallgrimsson argues that he must take a stronger
position in the fisheries dispute to prevent the
Progressive Party from abandoning the coalition
and bringing down the government.
EC: TINDEMANS SUBMITS HIS REPORT
Europe's continuing effort to organize itself
has again taken center stage following publication
last week of Belgian Prime Minister Tindemans'
report on European union. The report has been
under preparation since late 1974, during which
time Tindemans discussed relevant issues with
government, party, business, and labor leaders in
the member countries.
The report, which provides a blueprint for
evolution toward union, is already controver-
sial-some regret its lack of originality, and others
complain that it goes too far, on defense policy
for example. The principal value of the report will
be to spur debate on Tindemans' underlying
thesis that European unity cannot be attained un-
less it reflects a consensus on political and security
issues as well as agreement on joint economic
policies. The debate will presumably gain
relevance because of the expectations that direct
elections to the European Parliament-scheduled
for 1978-will reinforce a sense of Community
self-awareness.
The Prime Minister, who set no deadlines for
specific actions, defines European union as a way
station between today's European Community
and a United States of Europe. It is thus seen as a
process characterized by increasing accord on
economic and foreign policies and a growing
assumption of authority by supranational Com-
munity institutions. The priority concerns seen by
Tindemans in foreign policy are the developing
world, relations with the US, security and defense
issues, and unstable political situations in Europe.
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Tindemans wants joint security policy to be
enhanced through regular consultations on
East-West matters. Defense policy itself, a sine qua
non for ultimate union, should be approached
now through cooperation in armaments
manufacture and, possibly, the creation of a Euro-
pean armaments agency. Defense should be a
major issue in proposed top-level discussions
between the US and one of the nine heads of
government representing the Community.
The report proposes that the economically
healthier members should go ahead with
economic and monetary union, leaving the
others-Ireland, the UK, and Italy-to catch up.
All the members, however, would participate in
deciding on the common goals.
Tindemans also calls for a substantial
strengthening of EC institutions. The parliament
should initiate policy along with the Commission,
and the Commission itself should have a
"political" president-selected by the heads of
government. The role of the European Coun-
cil-the heads of government of the Nine-and
its method of working should be more precisely
defined and the executive powers of the Council
of Ministers increased, with more of its decisions
reached by compulsory majority vote.
Initial official reaction to the report has been
mostly cautious and noncommittal. Press com-
mentary has been extensive, however, and seems
to reflect a widespread feeling that the report, at
the least, perceptively analyzes the obstacles to
European unity. It is evident, nevertheless, that
Tindemans has offered no magic formulas for
overcoming traditional differences among the
Nine.
The smaller countries have shown some
suspicion that consultation among the heads of
government is emphasized to the detriment of
Community institutions. Britain, Ireland, and Italy
are wary of the "second-class membership" im-
plications of Tindemans' economic proposals.
Both Denmark and the Netherlands are concern-
ed about the effects on NATO of premature Euro-
pean defense efforts. In France, meanwhile, both
the Gaullists and the Communists have railed
C(2S
against the implied loss of national independence
through European union.
It nevertheless seems unlikely that the report
will be "buried" as Tindemans seems to fear, if
only because the issues it addresses appear in-
creasingly ineluctable to most Europeans. Some
of the Nine have set in train parliamentary debate
as a prelude to the next European Council on
March 15-16 in Luxembourg, where the report
will be the centerpiece. The EC Council and Com-
mission are then likely to be asked to prepare
proposals for examination later this year. Early
changes in the Community's structure and com-
petence are unlikely, however, especially since
certain proposals, such as the formal incorpora-
tion of political consultations into the EC
framework, would require treaty amendments
and could also give rise to referenda in some
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ITALY: MORE PROBLEMS FOR MORO
With a new mandate from President Leone,
Aldo Moro has begun the process of trying to
patch together a government to replace the one
he headed until last week when the Socialist Party
forced him to resign by withdrawing its
parliamentary support.
Moro will reportedly try first to get all four
parties of the center-left-his Christian
Democrats, the Socialists, Social Democrats, and
Republicans-to resume full participation in the
government. An alliance among these parties has
been the basis for most Italian governments since
the "opening to the left" in 1963 that brought the
Socialists into the government. The alliance was
never very tranquil, but the differences among
the parties have been magnified by several recent
trends, such as the country's severe economic
problems and the growing influence of the Com-
munist Party. Following the collapse in late 1974 of
the last coalition in which all four parties par-
ticipated, only two-the Christian Democrats and
the Republicans-accepted positions in Moro's
cabinet. The Socialists and Social Democrats
limited their role to providing Moro the
parliamentary support he needed for a majority.
Differences among the parties have deep-
ened since then, leaving Moro with major hurdles
to clear in his effort to restore cooperation
among the four parties. One problem stems from
Socialist leader De Martino's assertion that his
party is entitled to be treated as a political equal
by the dominant Christian Democrats because of
the growing strength of the left.
Despite the relatively small representation De
Martino's party has in parliament, it is in a pivotal
position. Socialist votes alone are sufficient to give
the Christian Democrats the majority they need to
continue governing without the Communists.
That situation has led some Christian
Democrats and Socialists to urge in the past that
the two smaller parties of the center-left formula
be dropped or relegated to minor roles-a
suggestion that may resurface as the search for a
new government proceeds. As long as the Social
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Democrats' and Republicans are involved in the
bargaining, however, they are likely to resist any
Christian Democratic attempt to pacify the
Socialists with more ministries and more in-
fluence on economic and other policies.
The largest stumbling block in Moro's path,
however, is the Socialists' insistence that a more
open consultative relationship be established
between the government and the Communist op-
position. The Christian Democrats are strongly
opposed to any such agreement, but the Socialists
believe it is necessary to limit the Communists'
ability to capitalize on their opposition status.
Socialist chief De Martino has been backpedaling
on this issue, but he has yet to drop the demand
altogether.
The situation is complicated by the latest
Communist statement, in which the party says it
wants either to remain in opposition or to have
full membership in the government. The Com-
munists in the past have favored a formal con-
sultative relationship with the government,
presumably as a step toward establishing their
credentials as a governing party. Since the Com-
munists' sharp gains in the June elections,
however, the party has sought to avoid any
appearance of condoning the kind of govern-
ment it attacked with such success in those con-
tests.
The refusal of the Communists to be drawn
into an arrangement such as that proposed by the
Socialists could ease the way for a compromise
between the Socialists and the other parties. On
the other hand, the Communist move might rein-
force the tendency of some Socialists to view the
risks of an early parliamentary election as
preferable to being the only major party on the
left that has to defend government actions to the
voters.
SPAIN: LABOR UNREST SPREADS
Rapidly spreading strikes and labor violence
are forcing the government to adopt sterner con-
trol measures and may set back government plans
to introduce labor reforms and other liberaliza-
tion measures.
Early this week an estimated 200,000 workers
were idle throughout Spain. The construction,
metal, electronics, auto, textile, and banking in-
dustries were most affected. A slowdown also dis-
rupted telephone service in northern Spain.
Dockworkers went on strike in Barcelona, and
workers at power stations refused to make repairs
and threatened to cut off electricity to the city if
police intervened in their dispute.
Spanish government officials claim that the
Communists, encouraged by the turmoil of last
week's subway strike, are trying to use the current
wave of unrest to prepare for a general strike later
this month that would discredit the Juan Carlos
regime and upset the country's economy. Com-
munist labor leaders have reportedly taken the in-
itiative in organizing street incidents that have
resulted in confrontations with the police, but
attempts to politicize the strikes appear to have
had limited success to date. Although strike
appeals often contain some political
demands-amnesty for political prisoners, free
labor unions, legalization of political par-
ties-strikes have occurred primarily in industries
where economic or labor problems already ex-
isted, and particularly in those where new collec-
tive bargaining contracts are being negotiated.
The government has indicated that strikes
with purely economic goals will be
tolerated-even when they do not conform to the
strict controls required of a "legal" strike-but
Interior Minister Fraga warned that any public
disturbances would be dealt with firmly. Police
have on several occasions during the past week
resorted to tear gas and smoke bombs to disperse
unruly demonstrators and eject workers oc-
cupying work areas, offices, and churches.
The government has not interfered with
negotiations between striking workers and their
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Spanish riot police watch over striking bank workers
employers, although in the case of strikes
"disrupting public order" pressure has been ex-
erted to get the strikers back to work even if
negotiations have not been concluded. During
the five-day Madrid subway strike last week, in-
direct pressure was applied by bringing in special-
ly trained army personnel to keep the trains roll=
ing. An even more serious disruption caused by
the one-day postal strike in Madrid on January 13
was dealt with by placing postal workers tem-
porarily under the direct control of the area's
military commander and making them subject to
the code of military justice.
The strikes and demonstrations are increasing
pressure on the government to slow the planned
pace of liberalization. Rightist political leaders
have been meeting in an apparent effort to get
the government to crack down on labor. The con-
servative finance minister is calling for strict wage
controls, blaming large pay hikes of the past two
years for Spain's roughly 15-percent rate of infla-
tion. So far, the government has held to its policy
of restraint, but if the strikes and demonstrations
continue to spread, the government may find it
has no recourse but to adopt the harsh measures
of the Franco regime.
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JAPAN-USSR: GROMYKO VISIT
Foreign Minister Gromyko's visit to Tokyo
did nothing to improve bilateral relations. A brief
communique, issued after Gromyko had
departed, expressed the usual platitudes about
the desirability of expanding economic and
cultural relations, confirmed that the talks on a
peace treaty would continue, and announced that
Foreign Minister Miyazawa would go to the USSR
later this year.
One major stumbling block was Tokyo's
desire to include an explicit reference to the
Northern Territories issue. In line with Moscow's
current tough stance toward Japan, Gromyko
would not go beyond the statement included in
the Brezhnev-Tanaka communique of 1973,
which implied that the territorial issue would be
covered as part of the continuing negotiations on
a peace treaty. Gromyko raised the possibility of
an interim treaty of friendship and cooperation
that would not cover the Northern Territories
issue, but he reportedly did not press the
proposal when the Japanese demurred.
Foreign Minister Gromyko with Prime Minister Miki
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The Soviet foreign minister made some
attempt to put a more positive light on his visit.
He was relatively conciliatory on the fisheries
problem, saying that Moscow would soon release
32 Japanese fishermen detained in the USSR and
promising increased Soviet efforts to carry out the
fisheries agreement that the two sides signed last
summer.
Gromyko was especially harsh on the
Japanese for considering a treaty with Peking that
would include an anti-hegemony clause. He said
publicly that Moscow would have to review its
relations with Tokyo if the Japanese went ahead
with the treaty. Claiming that Peking seeks
hegemony in Asia, he attacked the Chinese for
pressing the Japanese to go along with an an-
ti-Soviet policy.
The Japanese, for their part, insisted that the an-
ti-hegemony clause is not aimed at the USSR and
moved quickly to dispel any idea that Soviet ob-
jections would dissuade Tokyo from further nor-
malizing its relations with Peking. Shortly after
Gromyko left, Prime Minister Miki said publicly
that Japan would continue working to conclude a
treaty with Peking, despite Soviet objections.
Miki's forthright stance was undoubtedly also
shaped by his domestic political calculations;
national elections are possible as early as this
spring, and Miki along with other conserva-
tive politicians would have been unlikely to
adopt a compromising posture on any of the long-
standing differences between Moscow and Tokyo.
Peking is no doubt delighted at Gromyko's
failure to stimulate any progress in
Soviet-Japanese relations. Ever since the visit was
announced, the Chinese have maintained a
steady drumbeat of press comment against
Moscow, charging that the Soviet refusal to return
the Northern Territories is an example of Soviet
"hegemonism" and that Gromyko's primary ob-
jective was to throw obstacles in the path of im-
proving Sino-Japanese relations. Peking will
highlight Miki's comments on the importance to
Tokyo of the proposed Sino-Japanese peace trea-
ty and may attempt to capitalize on the momen-
tum generated by the Gromyko visit by
suggesting a resumption of the long-stalled treaty
CHINA: MOURNING CHOU EN-LAI
As China devoted an unprecedented week to
official mourning for Chou En-lai, there was am-
ple evidence that most Chinese felt their country
had entered a period of transition. Condolence
messages from foreign governments, other than
those of the Soviet Union and its closest allies,
paid glowing tribute to the deceased premier,
and the official Chinese obituary termed his death
a "gigantic loss." Even the staid Chinese
leadership indulged in uncharacteristic displays of
emotion-some leaders were shown on national
television crying as they paid final respects to
Chou.
Peking had made no effort to hide Chou's ill-
ness now officially confirmed as cancer, from the
Chinese people. They were prepared for the mo-
ment of his death and accepted the news without
any visible signs of anxiety about the future but
with obvious grief. Hundreds of thousands of
people filed tearfully by as Chou lay in state.
Chinese leaders, including those from the
provinces, have been meeting in Peking every day
since Chou's death. One purpose of the meetings
undoubtedly is to confirm senior vice premier
Teng Hsiao-ping as Chou's successor. Teng has
been filling in for Chou for more than a year, but
his appointment to the premiership will not sit
well with the party's left wing, which was in-
strumental in ousting him in the mid-1960s. Most
Chinese leaders probably would like to confirm
Teng's appointment quickly, in order to convey
an image of continuity and smooth transition.
Prolonged wrangling over the issue could result
in growing political malaise.
Teng has moved vigorously over the past year
to consolidate his authority. He holds important
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posts in the party, state, and military
bureaucracies and has appointed close associates
to key jobs in each area. Teng lacks, however, the
overwhelming prestige and affection accorded to
Chou by the Chinese public and by many officials,
and he does not seem to possess Chou's talents
for conciliation and compromise. Indeed, Teng's
failure to take into account the views of the par-
ty's left wing, as well as the growing recognition
of Chou's imminent demise, probably con-
tributed in no small measure to the leftist
backlash that has appeared in the propaganda
since last month.
Teng appears, however, to have the con-
fidence of Mao Tse-tung, who along with Chou,
had a personal hand in bringing Teng back from
political disgrace. Although Teng has a
well-deserved reputation as an efficient and
tough-minded administrator, he lacks Chou's
broad perspective and depth of experience. As a
consequence, Chou's absence over time will
almost certainly have a subtle effect on the shape
and flexibility of Chinese foreign and domestic
policies. Teng appears, for example, to accept ful-
ly the rationale that led to Peking's partial rap-
prochement with Washington, but he was not
part of the leadership when that initiative was
made and his prestige is not so deeply bound up
with its success.
Chou's death underlines the age and uncer-
tain health of other Chinese leaders, particularly
Mao himself, who turned 82 last month and who
is obviously frail. Chou was the second party vice
chairman to die within one month and the third
member of the Politburo's elite standing com-
mittee to die in less than a year.
The meetings currently under way in Peking
may also be dealing with the question of
reconstituting the party's top echelon by moving
up some second-ranking figures and possibly
rearranging the pecking order. Chou's demise
leaves 40-year-old Wang Hung-wen as the
nominal number two man in the leadership, but
Wang has been rumored to have shown signs of
political immaturity during the past year, and Pek-
ing may want to move a more experienced official
THAILAND: NEW ELECTIONS
The political situation in Bangkok carne un-
stuck this week when Prime Minister Khukrit's ef-
forts to fend off a parliamentary challenge to his
government backfired. Unable to form a stable
coalition, he asked King Phumiphon to dissolve
the National Assembly and call for new elections,
which were requested by the King on January 12.
General elections, as required by the constitution,
will be held on April 4. Khukrit and the present
cabinet will remain in a caretaker status.
Khukrit had attempted to buy off his
parliamentary opponents by bringing them into
the cabinet. By doing so, however, he upset the
already delicate balance of his eight-party coali-
tion. Many rank-and-file members of the coali-
tion parties threatened to join the opposition in a
vote of no-confidence in protest over Khukrit's
cabinet reshuffle. Khukrit, faced with the
possibility of losing the vote and convinced that
none of his rivals stood a better chance of forming
a new government, played his final trump card
and called for the dissolution of the assembly.
Most observers do not believe that new elec-
tions will strengthen the parliamentary process.
During last January's election, 22 political parties
won seats in the assembly. There are still no
restrictions on the number of parties, and there
seems little likelihood that the new assembly will
be any less faction ridden.
The Prime Minister has announced that he
will stand for election. Presumably Khukrit will
exploit his control over the government's election
machinery to strengthen his own Social Action
Party, but it is not a foregone conclusion that he
will remain prime minister.
Retired army commander Krit Siwara, who
was instrumental in stimulating the parliamentary
challenge, is likely to run for a seat in the
assembly in order to become eligible for a cabinet
position or the prime ministership. Should he
win, Krit would be a leading candidate to form a
new government
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ECUADOR: NEW FACES; OLD PROBLEMS
The three-man military junta that took over
from former president Rodriguez Lara last
weekend may be no more stable than the ineffec-
tual and problem-ridden government it replaces.
On January 11, after months of political un-
certainty and internal disorders, a triumvirate
consisting of the armed forces chiefs replaced the
discredited four-year-old Rodriguez regime.
Their peaceful assumption of power-delayed
several hours so Rodriguez' daughter could be
married in the presidential palace-does not
presage any significant change in Ecuador's
domestic and foreign policies. Although the
move was apparently designed to remove the
focus of criticism by labor and students and near
continuous plotting by the military, the new
government is not likely to develop rapid
remedies to the problems that plague Ecuador.
The new leaders, with Admiral Alfredo Poveda
SRS
Burbano assuming the role of spokesman, say
they intend to adhere to the "revolutionary prin-
ciples and programs of the armed forces," in-
cluding a return to civilian rule by the end of 1977.
Critics of the military are already reacting to
the prospect of two more years of military rule.
Four ex-presidents have issued a call for the
return of the government to civilian hands, and
party leaders have informed US embassy officers
that they are working on a joint manifesto calling
for immediate general elections.
When it becomes clear that pressure will not
speed the return to civilian government, the op-
position is likely to adopt,the same tactics-strikes
and disorders-that paralyzed the Rodriguez
regime in its final weeks. Thus far, Ecuadoreans
seem to have accepted the news of the new
government quietly and with general in-
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difference, perhaps reflecting a belief that a few
new faces at the top will not improve things
much. Economic problems will continue to be
more important to Ecuadoreans than the
ramifications of a political shuffle.
Economically, the country is in poor shape.
The three-year-old oil boom is fizzling despite a
reduction in oil prices and an increase in exports.
Due to government ineptitude, petroleum
revenues have not kept pace with rising import
bills. The government's erratic treatment of the
foreign oil companies has frightened off other
potential foreign investors. Moreover, increased
government spending created a sizable deficit last
year that had to be covered with foreign loans.
Inflation has been on the rise since 1973 and has
been the cause of recent student and labor un-
rest; there is no immediate solution to this
problem.
The longevity of the military junta ultimately
will rest on its ability to work together; prospects
for this are not good. A simmering rivalry
between Poveda and army commander General
Duran threatens to continue factionalism within
the armed forces. Poveda's action allocating for
himself responsibility for the military and security
services while putting Duran in charge of
economic policy may fan the animosity between
them. Duran will consider the move an attempt to
undercut his support in the army by making him
the focus for discontent in the country.
Moreover, the army hold six posts in the new
cabinet while the navy and air force hold only two
each. Civilians hold the posts of finance, foreign
relations, and industry. Air Force chief Luis Leoro
Franco is expected to play a minor role in the
triumvirate. These rivalries will hinder the har-
monious execution of triumvirate policies. A solu-
tion to this difficulty is not readily apparent. The
emergence of a strong man from the junta would
certainly be opposed by other members and also
by the various services.
VENEZUELA: OIL JITTERS
President Carlos Andres Perez and other
government officials are warning that the oil
bonanza Venezuelans have taken for granted may
be short-lived and that a nationwide austerity
program must be implemented immediately if the
country's long-term economic development
programs are to be fulfilled.
In an unusually frank speech on the occasion
of the nationalization of the foreign-owned
petroleum industry, Perez berated Venezuelans
for squandering the country's oil wealth "on all
manner of junk" and maintained that unless this
mentality changes, nationalization will be a
failure. Perez' tough language reflects the private-
ly held views of many Venezuelan officials and
leaders of the governing Democratic Action Party
that nationalization has created some potentially
dangerous political pitfalls for Perez and that the
political fortunes of the party will ride or fall on
the ability of Venezuela's petroleum corporation
to maintain petroleum production.
Management problems will be legion. Added
to this are declining revenues stemming from the
government's insistence on maintaining OPEC
price levels in a depressed market. The opposition
parties have made clear their intention to main-
tain close watch and publicize any misstep in the
government's management of the country's two
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important extractive industries and major sources
of revenue-oil and iron ore.
Venezuelans expect many immediate social
and economic benefits from nationalization.
Thus, any government deficit that results will
diminish the government's popularity and create
a situation of political and labor unrest. Adding to
the self-doubt and trepidation is a genuine con-
cern over the government's ability to maintain
labor peace in this vital sector of the economy. In-
dustry-wide contract negotiations for some 24,000
highly paid petroleum workers begin in April and
will be difficult. Many of the tactics used by the
opposition political parties in provoking wildcat
strikes after the nationalization of the iron mines
last year apparently are being repeated among
the petroleum workers with some effect. To en-
sure labor peace, the Democratic Action Party is
making a strong bid to win control of the
petroleum workers federation in union elections
scheduled for the first week in February.
The government is also making a strenuous
effort to keep the decline in petroleum revenues
to a minimum. It is giving top priority to develop-
ing new markets.
The tough talk has undoubtedly come as a
shock to Venezuelans who have come to accept
as a matter of fact the oil riches of the past few
years. The changing petroleum situation has
probably had the salutary effect of stimulating the
government to face up more realistically to some
of its fundamental problems.
The new realism reflects the belief that even
though nationalism has been proclaimed and the
administration has wrapped up a sales and service
agreement with Creole (EXXON), the country's
largest major refiner/producer, the process of
putting the oil industry on a sound footing is far
from over. In fact, agreements with the other ma-
jor companies are still subject to settlement of
some sensitive details and are expected to drag on
for some time
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LATIN AMERICAN ARMS PURCHASES
In the late 1960s, many Latin American coun-
tries began major programs aimed at modernizing
their armed forces. These moves grew out of
national competition for hemispheric leadership,
the fueling of intra-regional rivalries, and the
desire of military governments to enhance their
prestige.
Purchases of foreign arms reached an average
of $600 million a year in the five-year period,
1970-74, a two-fold increase over the average in
the previous five-year period. Five coun-
tries-Argentina, Brazil, Chile, Peru, and
Venezuela-accounted for about 80 percent of
the total. Purchases in 1975 may reach a record
$1.2 billion because of large Venezuelan and
Argentine orders for ships and an Ecuadorean
deal for ground equipment.
Despite the large jump in procurement, Latin
America remains the smallest arms market among
the regions of the Third World and accounts for
only 8 percent of total military purchases by the
Third World. In the 1970s, Iran, Israel, and Saudi
Arabia each purchased more arms than all of Latin
America.
Like other developing countries, Latin
American states have sought costly, high
technology ordnance. Almost three fourths of
their orders have been for warships, including
destroyer escorts equipped with guided-missile
Argentina
11% Brazil
Chile
9%
Others
19%
Venezuela
14%6
Peru
18%
Others
7%
iper / France
Eur. e 17 %
Italy
West
Germany
12%
systems, and aircraft, including mach-2 jet
fighters.
West European countries have won two
thirds of the arms contracts awarded in the last six
years, moving into a market previously dominated
by the US. The substantial shift resulted from
aggressive European sales tactics, US restrictions
on sales and credit, and a concerted effort by ma-
jor Latin American purchasers to reduce their
dependence on the US.
West European countries, as a group, sold
$2.4 billion of arms to Latin America during the
past six years-mostly high cost, sophisticated
combat equipment. One half of the aircraft and
ground forces equipment and about 80 percent of
the naval ships have come from Western Europe.
The UK, France, West Germany, and Italy have
been the major suppliers. A new record for West
European arms sales to Latin America-over $1
billion-was probably reached in 1975.
The US still has a 24-percent share of the
market-the largest of any single country-mainly
because of sales of follow-on equipment and
spare parts for weapons already in Latin American
inventories. Despite its reduced role as an arms
supplier, the US remains the major source of
foreign technical services to Latin American arm-
ed forces through training missions, equipment
installation, and maintenance operations.
Less than 10 percent of Latin America's
foreign arms purchases have come from countries
outside of WesternEurope and the US. Peru so far
is the only non-communist country in Latin
America to sign a military agreement with
Moscow.
The more industrialized Latin American
nations are developing their own arms industries,
often through licensing and assembly agreements
with West European countries. Foreign com-
ponents are frequently used for all or part of the
finished weapons made in Latin America. These
arrangements are intended to save foreign ex-
change, to improve domestic technical
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capabilities, and to adapt weapons systems to
local needs. Although ten Latin American coun-
tries are able to manufacture a variety of infantry
weapons, small arms ammunition, and quarter-
master supplies, only Argentina and Brazil are ap-
proaching self-sufficiency.
Because Latin America has been remarkably
free of major military conflicts, Latin countries, as
a whole, have consistently spent a smaller propor-
tion of their gross national product on defense
than other developing nations. Between 1966 and
1972, the average annual outlay in Latin America
was about 2 percent; since then it has dropped to
less than 1.5 percent. Average expenditures of all
third-world nations were more than 5.5 percent,
and the figure for the Middle East was almost 12
percent.
Latin American military budgets typically
allow 10 to 15 percent of total expenditures for
procurement of foreign arms. By spreading
delivery and repayment over a number of years,
countries have made large arms purchases
without seriously straining their balance of
payments. Although the annual payment on the
military debt has increased to some $300 million
to $400 million during the past three years, Latin
American countries should be able to meet
current repayment schedules without jeopar-
dizing economic development.
We expect Latin American arms purchases to
run about $1 billion annually over the next five
years, two thirds above the last five. Higher out-
lays principally reflect increased prices for
sophisticated weapons systems and growing re-
quirements for follow-on support. We do not an-
ticipate any large increase in the quantities of
equipment ordered, primarily because of
balance-of-payments and other fiscal constraints.
Although Latin America has shown
preference for US aircraft, West European
suppliers will get a somewhat larger share of the
contracts because they offer a wider variety of
equipment and faster delivery. US government
restrictions on the sale of certain weapons
systems, as well as prior commitments to US
forces and Middle East customers, will help
t&
VIOLENCE IN JAMAICA
The partisan violence that erupted last week
in several Kingston slums and elsewhere in
Jamaica has subsided, but Prime Minister Manley
is taking advantage of the disturbances to
strengthen his position.
Conflict between supporters of Manley's
Peoples National Party and the opposition
Jamaican Labor Party has been endemic in West
Kingston's slums, but the level of tension has
recently increased as political bosses in both par-
ties tried to expand their area of control. A gang
led by Housing Minister Anthony Spaulding, a
leader of the left wing of Manley's party, has had a
major role in the turbulence. Spaulding has been
pressing Manley for some time to be more an-
ti-US and to speed the creation of a socialist state.
Manley's response to the violence can be in-
terpreted as a reaffirmation of his intention to
keep his government on a leftward course. He
refused to give security forces a free hand in
halting the rioting-which resulted in the deaths
of some 10 civilians and injured over 100-and
now appears to be trying to turn the situation to
his political advantage. He accused the Jamaican
Labor Party of "hiring armed gunmen to shoot
their way to power" and announced plans to
create a self-defense force within his own party.
The Prime Minister also called for a mass meeting
on January 29 of "those who will be going forward
to socialism in 1976."
The self-defense force is likely to be drawn
from the youth arm of the Peoples National Party,
an organization with close ties to Havana. Its
members last week joined with a Marxist-Leninist
labor group to protest the presence in Jamaica of
the CIA and "US imperialists" and to stone the US
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OPEC: HEAVY CRUDE SALES SLUMP
Iran, Venezuela, and Kuwait, producers of
most of the world's heavy, high-sulfur crude oil,
are having difficulty selling their oil. Consump-
tion of heavy fuel oil slumped with the drop in in-
dustrial output, particularly in Western Europe,
where most of OPEC's heavy crude is marketed,
causing refiners to accumulate large excess stocks
of heavy fuel oil. As a consequence, while overall
OPEC output has increased since the first half of
1975, output of heavy crudes has fallen.
Compared with the first half of 1975, output
of heavy crudes in Iran, Venezuela, and Kuwait
had fallen by 2.3 million barrels per day or 35 per-
cent. In contrast, output in other OPEC countries
has risen by 2.5 million barrels per day or 15 per-
cent. In Iran, output traditionally has consisted of
about half heavy oil and half light oil. In recent
months, heavy crude exports have been cut by
nearly half, whereas light crude sales have been at
near capacity levels.
The market is unlikely to provide any quick
relief for the heavy oil producers. The drop in
heavy crude consumption stems from the con-
tinuing recession in industrial countries.
Moreover, although relatively little substitution of
other fuels for OPEC oil has occurred, that which
has taken place has been at the expense of heavy
fuel oil. In Western Europe, natural gas from the
Netherlands and the North Sea is being used un-
der boilers to replace heavy oil, while growing
steam coal consumption in Japan, the US, and
Western Europe is reducing use of heavy oil by
utilities.
Light oil producers, on the other hand, are
enjoying strong demand for their low-sulfur
high-gravity crudes. They are taking steps to boost
prices above those set last October to reflect this
rise in demand. Nigeria has just boosted its prices
by an average of 40 cents a barrel.
The heavy oil producers are steadfastly refus-
ing to cut prices. OPEC countries are keenly
aware of the problem, which they view as mainly
one of differentials. We believe the problem is
more basic and that even if the heavy oil
producers reduce their prices to reflect current
market trends, they will probably continue to
have problems marketing their oil. Unless world
economic recovery is more rapid than we expect,
heavy fuel oil use will lag behind growth in con-
sumption of light oil products, and the demand
for heavy crude will remain low relative to lighter
crude.
Establishing and maintaining realistic oil
quality differentials has been one of OPEC's most
difficult problems. Disagreements over the
proper level of such adjustments have strained
cartel unity on several occasions, most recently at
the Vienna meeting in December, where most of
the members attacked Iraq for shaving prices by
offering inadequate quality and freight differen-
tials. In fact, most of the difficulties faced by Iran,
Venezuela, and Kuwait were caused by a sharp
shift in relative product prices, which had made
their crude oils uncompetitive. Had the meeting
not been disrupted by the kidnaping, the oil
ministers would probably have taken some steps
to remedy the growing gap between market
values and official differentials.
OPEC is likely to respond to the situation
over the next few months by a series of ad hoc
measures that will gradually widen existing gravity
differentials. Prices for heavy crude oils will be
lowered, while those for light crudes will rise.
Even if the price of Saudi benchmark oil remains
frozen through June-as OPEC announced
following the pricing decision of last
September-the overall cost of oil to consumers
will probably rise, since more light oil is being
produced.
The US will be particularly hard hit by a
re-arrangement of quality differentials, since it
imports primarily light crudes. The recent
Nigerian price boost may increase US annual oil
import costs by $130 million. If crude prices adjust
to reflect fully current product prices, total crude
oil to the US will rise by about $200 million per
year. Western Europe and Japan will face smaller
rises in their oil bills since they use more heavy
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