WEEKLY SUMMARY

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Secret
Weekly Summary
Secret
CI WS 76-011
No. 0011/76
March 12, 1976
Copy N4 64
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The WEEKLY SUMMARY, issued every Friday morning by the
Office of Current Intelligence, report, and analyzes signifi-
Cant developments of the week through noon on 'T'hursday. It
9
~regaently includes material coordinated with or prepared
by the Office of Economic Research, the Office of Strategic
Research+, the Office of Geographic and Cartographic
Research, and the Directorate of Science and Technology.
EAST ASIA
PACIFIC
1 Lebanon: Turn for the Worse
2 Rhodesia: Pressure Rising; Soviets Wary
4 Morocco-Algeria: Diplomatic Break
5 Israel: New Party Forum
6 Iran: Anti-corruption Drive
7 Spain: Government Under Pressure
8 Italy: Socialists Set Terms
9 Iceland-UK: Mediation Continues
10 MBFR: West Weighs Soviet Response
11 EC: Position on Law of the Sea
12 EC: Agricultural Policy
13 USSR: Stability Reigns in Moscow
13 Yugoslavia: Tito Takes a Trip
14 China: A Campaign Pronouncement
16 Japan: Liberal Democrats in Crisis
17 Japan-Australia: Mending Fences
18 Philippines: Rebellion in the South
19 South Korea: Pak's Foes
21 Venezuela: Worried About Guyana
21 Argentina: Economic Plan Opposed
22 Bolivia: Renewed Unrest
23 OPEC: Import Prices Drop
23 Trends in Natural Gas
Comments and queries on the contents of this
publication are welcome. They may be
directed to the editor of the Weekly
CONTENTS (March 12, 1976)
MIDDLE EAST
AFRICA
WESTERN
HEMISPHERE
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LEBANON: TURN FOR THE WORSE
The occupation by renegade Muslim soldiers
of several Lebanese army bases this week has led
to another political crisis in Beirut and to fears
that the six-week-old cease-fire may collapse.
Christian and leftist leaders have reverted to
tougher positions in the negotiations on forming
an expanded cabinet, and Prime Minister Karami
has again threatened to resign. The deteriorating
security situation has led to an increase in the
number of violent incidents in northern Lebanon
and in the capital, and to an increase in tension on
Lebanon's southern border, where the Israelis are
carefully watching for any buildup of Syrian-con-
trolled Palestinian forces.
Karami's threat to resign was included in a
March 11 statement expressing his frustration
with the obstinate stands adopted by politicians
on both sides of the Lebanese dispute. He almost
certainly hopes that neither President Franjiyah
nor the Syrians will allow him to follow through
with his threat. Karami presumably wants Fran-
jiyah to accept and marshal Christian support for
Karami's preferred strategy of offering a general
amnesty to all army deserters. He wants` the
Syrians either to force Lieutenant Ahmad Khatib,
leader of the rebels, to accept an amnesty or to
use Syrian-controlled Palestinian troops to take
military action against Khatib's forces.
On March 10, the commander of Lebanon's
army did offer amnesty to "those who are now
outside the army," but it was not clear whether
his offer would include the leaders of the dissi-
dent Muslim forces. The rebel leaders have
replied only that they will await evidence that the
army command will make good on its promises.
The dissidents are apprehensive that those who
accept amnesty will in fact be imprisoned and are
doubtful that the army will follow through on its
implied commitment to adopt a more aggressive
stand toward Israel. In the hope of placating the
rebels, the army commander said in his March 10
statement that the "army of the future will defend
Lebanon's borders."
Israeli leaders are closely monitoring events
in southern Lebanon, where the dissidents have
seized several military bases, but so far the Israelis
have refrained from any comment or move that
would inflame the situation. They fear that the
spread of the mutiny to the border region will
draw additional Palestinian forces into the area.
Previously, Israeli leaders had indicated that they
would consider the presence of major non-
Lebanese forces in southern Lebanon a direct
threat to Israel's security.
The Syrians, who are aware of Israel's ap-
prehensions and desirous of avoiding confronta-
tion with Israeli forces, still appear determined to
contain or ultimately put down the Muslim army
revolt with Palestinian troops. Both independent
and Syrian-controlled Palestinian forces have the
military capability to end the army revolt. They
have been reluctant to do so, however, because
Khatib is a hero to many Muslims. Moreover, the
revolt serves as a reminder to the Christians that
they are dependent on the Syrians and
Palestinians to maintain order in most parts of
Lebanon, and must cooperate in implementing a
political settlement to secure a permanent peace.
Now that the revolt has reached the point
that it complicates rather than facilitates
negotiations, however, the Syrians and
Palestinians probably will follow through with
more forceful action to stop it. The Syrians are still
committed to enforcing the cease-fire and have a
long-term interest in seeing the Lebanese army
strengthened rather than destroyed.
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RHODESIA: J ' / 9
Pressure Increasing
Mozambique's closure of its borders with
Rhodesia last week has stepped up the economic
and military pressures on Prime Minister Ian
Smith's white minority regime. The Rhodesian
settlers are now more dependent than ever on
the support of the South African government.
Mozambican President Machel has cut all the
substantial ties with Rhodesia that his country in-
herited. from the Portuguese when it became in-
dependent last year. Machel has not only blocked
the Rhodesian transit traffic through ports in
Mozambique, but also stopped all local trade and
communications between the two countries and
prohibited Mozambicans from going to Rhodesia
for work.
Such a total boycott will be very costly for
both countries. Roughly half of Rhodesia's
overseas trade had been funneled through
Salisbury
RHODESIA
MOZAMBI 4U E
SOUTH
AFRICA "a
Pretoria I'
Mozambique's ports. Machel's already serious
financial problems will be worsened by the loss of
foreign currency hitherto derived from handling
Rhodesian traffic and from the remittances of
some 200,000 Mozambicans who have been work-
ing on Rhodesian plantations. Sharp increases in
unemployment and likely food shortages
resulting from the boycott will intensify existing
social tensions.
The South African transportation network is
physically capable of handling a significant por-
tion of the Rhodesian traffic that had been going
through Mozambique, giving Vorster a new op-
portunity to bring pressure on Smith to cooperate
with his efforts to resolve the Rhodesian conflict.
Vorster has been quietly pushing Smith to com-
promise with the black nationalists since late 1974,
and he no doubt is more anxious now than ever
to bring about a settlement that might head off
an escalating insurgency that might eventually be
supported by Cuban troops.
Vorster's reinforced leverage over Smith,
however, must be used discreetly. The Mozam-
bican boycott is an application of the UN sanc-
tions against Smith that are anathema to white
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South Africans, and Vorster must avoid any move
that would appear to be going along with UN
sanctions. On the other hand, an emergency
rerouting of Rhodesian trade would involve some
costly disruptions in South Africa's normal traffic
patterns-a politically acceptable explanation for
rationing aid to Smith.
Machel's action has locked him into further
support for the Rhodesian nationalists, who are
determined to overthrow Smith unless he agrees
to an early transfer of power to the black majority.
Machel is already heavily involved with other
southern African leaders in joint military
preparations for backing the Rhodesian in-
surgents based in Mozambique, who are starting
to expand their guerrilla operations inside
Rhodesia.
Soviets Wary
;LI3
Moscow is being cautious in both its public
and private statements on the volatile situation in
southern Africa. This may reflect the Kremlin's
sensitivity to African desires-particularly on the
part of Mozambique's Samora Machel and Tan-
zania's Nyerere-that the liberation effort against
the "White Redoubt" remain firmly in African
hands.
General Secretary Brezhnev strongly reaf-
firmed Soviet support for national liberation
struggles in his keynote address to the party con-
gress, but said nothing about liberating "racist
Africa." Moreover, delegates to the congress
responded unenthusiastically to speeches by of-
ficials from a number of pro-Soviet African leftist
regimes and insurgent organizations.
Not surprisingly, the second-echelon
representatives from the Popular Movement in
Angola, the Congo, Guinea-Bissau, the South
African Communist Party, and the South-West
Africa People's Organization expounded on the
need to support national liberation movements
and to oppose white minority regimes in southern
Africa. The subdued audience reaction to their
ideas suggests the Soviets were less interested in
hearing about local conditions in Africa than in
listening to the speakers' praise of past and future
Soviet influence on the continent. Nevertheless,
there was greater African representation at this
congress than in 1971, including-for the first
time-black nationalist delegations from
Rhodesia and Namibia.
Soviet media, also, have been taking a
cautious approach toward developments in
southern Africa. They did not, for example, replay
those portions of the recent saber-rattling speech
by Popular Movement leader Neto in which he
pledged all-out support for liberation groups
targeted against Rhodesia and Namibia. Instead,
the Soviet press hailed the normalization of
relations between Angola and Zaire and
emphasized Neto's willingness to cooperate with
his African neighbors.
Soviet diplomats abroad have been putting
out a similarly bland line on Southern Africa. On
several recent occasions, Soviet personnel assign-
ed to the UN told US officials that they anticipated
no Soviet-Cuban role in Rhodesia. They observed
that one potential problem for Moscow and
Havana in supporting guerrilla operations against
the Smith regime was the absence of a
well-organized local liberation movement. The
Soviet and Romanian ambassadors to Tanzania
have seconded this view. Both recently told the
US ambassador in Dar es Salaam that they saw no
likelihood that the present Soviet and Cuban
presence in Angola would be shifted to either
Rhodesia or Namibia.
Such expressions of Soviet diffidence cannot
be accepted at face value, particularly in light of
unconfirmed reports that some Cuban troops and
surplus Soviet military equipment may have
recently been transferred from Angola to support
Rhodesian guerrillas based in Mozambique.
Nevertheless, they do suggest that Moscow has
not yet geared up its machinery to justify an asser-
tive policy toward Rhodesia, Namibia, and South
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MOROCCO-ALGERIA: DIPLOMATIC BREAK
Morocco and Mauritania severed diplomatic
ties with Algeria this week as the dispute between
the three countries over Western Sahara con-
tinued. The move does not seem to presage any
military escalation by either Morocco or Algeria.
Rabat's communique announcing the break
explained that it was prompted by Algeria's for-
mal recognition on March 6 of the Saharan
Democratic Arab Republic, which was proclaim-
ed on February 27 by the Algerian-backed
Polisario Front. Algeria's recognition followed the
Front's announcement last week that it had form-
ed a "government" headed by a native Saharan,
Mohamed Lamine Ould Ahmed.
IRabat's
action was designed primarily to warn other states
not to recognize the Polisario entity if they value
their relations with Morocco. Morocco and
Mauritania have partitioned the former Spanish
dependency, and each considers its portion to be
now part of its sovereign territory.
Thus far, only Burundi, Madagascar, and
Benin, in addition to Algeria, have recognized the
Polisario "state." An East European diplomat in
Rabat claims that the USSR and other East Euro-
pean countries are not planning to extend
recognition under present circumstances.
Mauritanian President Ould Daddah
probably followed Morocco's lead reluctantly.
Although some of his ministers have been urging
him to break relations for the past month, Ould
Daddah apparently hoped to work out a face-
saving accommodation with Algiers on the con-
tentious Saharan self-determination issue. He
recently stated that he was not opposed to a free
and honest referendum, expressing confidence
that the people of Western Sahara would opt for
Mauritanian citizenship if given their choice.
The statement seemed to move him some
distance toward Algiers' insistence on a UN-
supervised popular vote in the territory. Ould
Daddah's commitment to retaining Mauritania's
sovereignty over the southern Sahara and his
heavy military dependence on Morocco,
however, left him with little choice but to show
diplomatic solidarity with Rabat.
Although the formal break will complicate
future efforts to mediate the Moroccan-Algerian
dispute, there are other public and private
channels for direct communications between
Rabat and Algiers. Moreover, the two countries
probably will maintain official representation at
the consular level or an interests sections in a
third country embassy because there are still
some 25,000 Algerians in Morocco and more than
250,000 Moroccans in Algeria.
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ISRAEL: NEW PARTY FORUM
Top Labor Party leaders moved last week to
curb the growing dissatisfaction with Prime
Minister Rabin's party leadership by creating a
high level consultative forum that includes former
prime minister Golda Meir. The new forum is in
part intended to strengthen Rabin's standing
within the party and to help him prepare for the
party's national convention, now scheduled for
October. In the short run, Rabin's active par-
ticipation in the forum is likely to silence many of
those who have been sniping at his "autocratic"
style, but the new body could also prove a liability
for him if he fails to secure Meir's full support.
Rabin has come under heavy fire recently
from party leaders who claim that he has failed to
consult and coordinate with them adequately on
broad questions of policy. By bringing the party's
important power centers together, the new forum
is intended to dampen this criticism. In addition
to the party's three principal factions and Meir-a
power in her own right-the new body includes
the secretary general of the party and the Labor
leaders who head the general labor federation
and the World Zionist Organization. Foreign
Minister Allon's status has not yet been clarified,
but it seems probable that, as a leading member
of the government and a prominent spokesman
for party moderates, he will participate.
The new forum has already achieved a
measure of success in generating greater cohe-
sion within the party. In response to the group's
formation, Meir Zarmi, the party's
secretary-general, withdrew his recent resigna-
tion, stating that Rabin had satisfied his main de-
mand that the party resume its traditional role as a
partner in the policy-making process.
For the future, much will depend upon the
role played by Meir. As still one of the party's
most respected leaders, she has the stature to
help re-establish party unity. If she cooperates ac-
tively with Rabin, the Prime Minister's position as
party leader will be strengthened, and he could
hope to secure stronger support for the platform
he will present at the party's convention.
Prime Minister Rabin p
On the other hand, if Meir is unwilling to
lend her prestige to Rabin and instead seeks to
push through her own policies, the Prime
Minister's position will be further weakened and
could eventually become untenable. Already,
some Labor Knesset members have expressed
their opposition to Meir's inclusion in the new
forum, protesting that it will only further confuse
the party leadership problem. They also fear that
her presence will give the impression that Rabin
himself has admitted his inability to establish firm
leadership over the party.
As presently envisioned, the new forum will
serve as the party's senior policy-coordinating
body. It will not have a formal power of decision,
but will instead submit its recommendations to
the party's larger leadership bureau. One of the
group's first tasks reportedly will be to arrange for
internal party elections to prepare for the party's
national convention. It is also expected to try to
hammer out an agreed party position toward the
illegal settlement attempt near Sebastia on the
West Bank.
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The elections and the convention represent
matters of vital importance for Rabin, because
they will be the first occasions for him to put his
stamp on the party platform. The convention will
decide on the party's positions for future peace
negotiations and various domestic issues in
preparation for the 1977 national elections.
The formation of the new group will not
satisfy all of Rabin's party critics. The party's youth
faction as well as the backers of ex-ministers Eban
and Dayan are unrepresented in the new body.
They will resent their exclusion and will probably
continue to criticize Rabin. Moreover, Labor
moderates fear that the participation of such a
well-known hard liner as Meir will strengthen
party conservatives opposed to further territorial
withdrawals, especially in the West Bank, during
future peace negotiations with the Arabs.
IRAN: ANTI-CORRUPTION DRIVE
The Shah's current anti-corruption campaign
appears to be a serious effort to alter traditional
business practices. Politically, the campaign is part
of the Shah's continuing effort to identify the
palace with reform and with action to ensure a
more equitable distribution of Iran's wealth.
The Shah's periodic denunciations of Iranian
social ills took a more serious turn last fall when
he launched an anti-profiteering drive that
resulted in the arrest and fining of hundreds of
businessmen, including some prominent persons.
The drive against price-gougers was subsequently
enshrined as a principle of the "Shah-People
Revolution," putting Iran's political and
economic elite on notice that this was not to be
the usual perfunctory attack on corruption.
Late last year, Iran's semi-official press reveal-
ed that nearly 50 military and civilian officials
were in custody following investigations into the
awarding of trade and defense-related contracts.
Those convicted so far include the chief of Iran's
navy and 23 other military officers; prison terms
ranging up to five years have been meted out. Ad-
ditional important regime figures may yet be im-
plicated.
Private Iranian and foreign business firms
have also been targets. Some have been formally
charged with defrauding the government and
black-listed from doing further business in Iran,
according to reports in Iranian newspapers. Early
this month, Prime Minister Hoveyda bluntly
denounced foreign business practices in Iran to a
visiting group of US business leaders.
As the campaign continues, the initial focus
on bribe-taking is gradually giving way to a more
general theme of misconduct throughout govern-
ment. The definition of corruption is being infor-
mally broadened by those implementing the cam-
paign to include negligence and inertia in the
bureaucracy. Investigative commissions have
been set up in government offices in Tehran and
the provinces. Iran's single political party is also
involved in the investigations. Much of the activi-
ty, of course, is posturing by underlings to impress
the Shah with their vigor in executing his orders.
Regime critics, ranging from the terrorists to
the intellectual community, have charged that
Iran's elite is siphoning off the bulk of the coun-
try's wealth for personal use, and the Shah is
wasting it on needless military purchases. The
Shah's campaign is designed to neutralize the
issue as much as possible. His tactics closely
resemble those used in 1963 when he launched
his program of land and social reform in an effort
to undermine his critics. At the same time, the
campaign enables the Shah to reassert his authori-
ty over an increasingly powerful and in-
dependent-minded business community and to
play to the economic interests of the middle and
lower classes, probably in the hope of forestalling
increased demands from those quarters for
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SPAIN: GOVERNMENT UNDER PRESSURE
The violence that flared up in the Basque
provinces last week appears to have died down,
and the new Spanish government has weathered
its most serious challenge to date without altering
its measured pace of political reform. The
regional turbulence and labor strife, however,
will strengthen the hand of ultra rightists who op-
pose liberalization.
The trouble was touched off on March 3
when rioting broke out in the Basque provincial
capital of Vitoria during a "day of struggle
organized by clandestine labor organizations to
dramatize local strikes. The rioting was the most
serious breakdown of public order since the new
government took over last December and
suggests that leftist agitators are improving their
tactics. The strike that initiated the violence
reflected a high degree of coordination by
clandestine labor organizations; the
demonstrations rapidly escalated into systematic
violence even though tension was not believed to
be unduly high. Small extremist groups have
reportedly infiltrated some local labor groups in
the Basque area and were probably the main in-
stigators of the violence.
Police finally restored order in Vitoria, but
the confrontation spawned protest demonstra-
tion and strikes throughout the Basque region.
The most effective and widespread general strike
since the Civil War brought economic activity in
the heavily industrialized Basque provinces to a
virtual standstill on March 8, when an estimated
300,000 workers protested the deaths of four
demonstrators in Vitoria. Economic activity in the
Basque region is returning to normal, but the
success of the general strike there will encourage
leftists who are reportedly planning a national
general strike for later this month.
There are already signs that the far right will
use the breakdown of public order to attack the
government's cautious reform program.
Ultra-rightists will particularly seek to blame
Interior Minister Fraga-the chief architect of the
program and the man responsible for domestic
security-in an effort to weaken his position in
the government. Four of Fraga's' closest
collaborators told the US embassy in Madrid that
Fraga would have to pay some kind of "political
price" for Vitoria.
In addition to pressure from labor,
regionalists, and far rightists, the government this
week faced the first public airing of dissension
within the military. The controversial court-mar-
tial of ten military officers accused of belonging to
the illegal Military Democratic Union lasted only
two days and ended with most of the defendants
receiving harsh sentences ranging from two to
eight years imprisonment and dismissal from the
service.
The sentences are likely to provoke dis-
satisfaction in the armed forces. The Military
Democratic Union, which is reported to have
between 300 and 400 members and some 1,000
sympathizers, advocates political reforms and
thus represents a threat to the Spanish military's
long-standing determination to stay out of
politics. Hard-line military leaders were intent on
making an example of the ten in order to dis-
courage any dabbling in politics by younger of-
ficers who, like the rest of Spanish society, are
becoming more politically aware. Other senior
generals argued that harsh measures would only
serve further to politicize younger officers who
already resent the die-hard conservatism per-
vading the upper echelons.
These problems did not deter the govern-
ment from taking its first concrete steps toward
political liberalization in submitting to parliament
two major pieces of legislation designed to
legalize political activity by organized groups. The
first bill would codify the government's more per-
missive attitude toward political assembly, while
the second would clear the way for freer forma-
tion of political associations- arties in all but
name. 25X1
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ITALY: SOCIALISTS SET TERMS
3
If the Socialist Party has its way, the party con-
gress that concluded this week will mark the for-
mal end of a political era in Italy. In their final
congress document, the Socialists declared
"finished and buried" the center-left coalition
formula-Christian Democrats, Socialists, Social
Democrats, and Republicans-that has provided
the basis for most Italian governments put
together during the last 12 years. Although the
Socialists did not rule out another coalition with
the Christian Democratic Party, they made clear
their determination to insist on terms that would
end Christian Democratic dominance of the
alliance.
The Socialists' strategy is aimed at protecting
the party's pivotal position in Italian politics and
ensuring that the Socialists are not relegated to a
marginal role by the Christian Democrats and
Communists. In spelling out their strategy, the
Socialists thus sought to distinguish themselves
from both the Christian Democrats and the Communists.
The Socialists drew a distinction between
their long term objectives and their short term
tactics. They emphasized, for example, that the
party's long range goal is a grouping of leftist
forces, including the Communists, that would
replace the Christian Democrats as the major
political force. This is posed as a leftist alternative
to Communist chief Berlinguer's proposal for an
eventual governing alliance between the Com-
munists and the Christian Democrats-the so--
called "historic compromise."
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u PI
Italian Socialist Party congress
The idea of making a deal with the Christian
Democrats still troubles more militant lef-
tists-including some Communists-and Socialist
leader De Martino probably hopes that his
strategy will make more sense to them. De Mar-
tino emphasized, however, that the leftist alter-
native would not be politically feasible until the
Socialists have increased their electoral strength
with respect to the Communists and until the
latter have severed their remaining ties to
Moscow.
For the near term, the Socialists said they
would be prepared to join another coalition with
the Christian Democrats, but not before the next
parliamentary election, now scheduled for May
1977. They made it clear that they want more in-
fluence in any new government and they stood by
their demand for closer relations between the
government and the Communist opposition.
De Martino did, however, back away from his
earlier insistence on a formalized consultative
relationship between the government and the
Communists, saying only that the Socialists will
refuse to join any government "prejudicially
closed to or conceived as an antithesis to" the
Communists. While that formulation offers more
room for compromise with the Christian Demo-
crats, its effect may be diminished by the ten-
dency at the Socialist congress to portray a
new Christian Democratic - Socialist govern-
ment as a mere stop along the way to a leftist
coalition.
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Regardless of how the Socialists phrase the
demand, they are determined to force the Chris-
tian Democrats to abandon the practice of seek-
ing behind-the-scenes support from the Com-
munists in parliament, while professing opposi-
tion to them publicly. In the Socialist view, this in-
formal coordination process allows the Com-
munists to put their stamp on government
programs while retaining their freedom to
criticize from the opposition.
The Socialists believe their own long record
of participation in Christian Democratic-led
governments is largely responsible for the fact
that the Communists' are benefitting more than
the Socialists from the shift to the left that appears
to be taking place in the Italian electorate. The
Socialists see in this the potential for their own
decline and for the consummation of the alliance
that Communist leader Berlinguer wants with the
Christian Democrats.
The line taken by the Socialists complicates
the task the Christian Democrats face in trying to
formulate a strategy at their congress, which
opens on March 19. The Christian Democrats will
be troubled in particular by the Socialist decision
not to enter another government before the next
election. As a result, the Christian Democrats will
go into the election bearing the major respon-
sibility for governing the country and subject to
criticism from all sides. This may lead many Chris-
tian Democrats to favor an early election, on the
assumption that their party would fare better in
an election held this summer or fall than in one
held after more than a year at the head of another
weak and ineffective government.
The Christian Democrats, moreover, are still
far from agreement on how to respond to the
Socialist demand for more open relations with the
Communists. The Christian Democratic position
will be influenced heavily by the outcome of a
leadership struggle now under way between the
supporters of Christian Democratic chief Zac-
cagnini, who favors an open "dialogue" with the
Communist opposition, and the party's center-
right leaders, who are convinced that such a
policy would add to the Communists' increasing
respectability and lead inevitably to broader
ICELAND: MEDIATION CONTINUES
Norwegian Foreign Minister Frydenlund is
continuing behind-the-scenes proposals for a
compromise settlement in the dispute between
Iceland and the UK. The Icelandic government
has not responded to the proposals so far,
however, and incidents at sea continue between
Icelandic patrol boats and British naval vessels.
Frydenlund contacted British and Icelandic
leaders, including Prime Minister Hallgrimsson,
last weekend. Hallgrimsson agreed to present to
his coalition cabinet a proposal that would permit
20 British trawlers to fish in the disputed area dur-
ing negotiations. London wants the figure raised
to 25 and also insists that Iceland "guarantee" not
to harass the trawlers.
Hallgrimsson returned to Iceland on Sunday
from a Nordic Council meeting in Copenhagen,
but has not formally presented the proposal to his
cabinet. He may hope the delay will cause the
British to back down on the number of trawlers.
Meanwhile, the cabinet has discussed seek-
ing additional patrol boats from the US. A com-
mittee to arrange for the purchase of patrol
vessels has already been turned down by Norway,
and if the US balks, the committee has threatened
to go to the Soviet Union for patrol boats that can
match the speed of the British frigates. An indica-
tion that Moscow might be cool to such a request
was provided when the Soviet news agency in
Reykjavik asked why Iceland approached
governments for boats, rather than simply
purchasing them through private channels.
Foreign Minister Agustsson told journalists
last week that Iceland would consider withdraw-
ing from NATO and closing the US-manned base
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at Keflavik if the UK does not withdraw its
warships. Probably hoping to pressure the US to
intercede with the British, he said he thought that
"whatever the outcome of the fishing conflict, the
agreement on the base will be canceled within a
certain amount of time." Although Agustsson
decribed this as his personal view, it contrasts with
a televised statement last month in which he
declared the need to keep separate the fishing
dispute and Iceland's role in NATO.
In what is seen as a move to embarrass the
government, the Communist-dominated People's
Alliance-the major opposition party-in-
troduced a bill this week that would levy a 25-per-
cent duty on all British imports. The additional
revenue would be used to finance the expansion
of the Icelandic coast guard. The bill is likely to be
pigeonholed since Iceland would suffer more
than the UK through such a tariff.
Meanwhile, the British trawlers continue to
fish in Iceland's unilaterally declared conservation
zones, and London reportedly has added a fifth
frigate to its force in the area. Further incidents,
such as the one recently in which an Icelandic
patrol boat forced an emergency breakaway dur-
ing a refueling operation between British naval
ships, will probably occur and may eventually
cause a serious accident that would be almost cer-
tain to preclude the resumption of negotiations.
53-
I
MBFR: WEST WEIGHS SOVIET RESPONSE
At the force-reduction talks in Vienna, the
NATO allies have reacted for the most, part
negatively to the Soviet answer last month to the
West's nuclear proposal. The Soviet counter-
proposal contains some new elements but no
basic departure from past Soviet positions.
The most prominent new element of the
Soviet proposal is its apparent acceptance of the
Western view that force reductions take place in
stages, with the US and the Soviets reducing first.
The Soviets have emphasized this feature as a
response to the West's offer of a one-time
withdrawal of some US nuclear elements.
The West has in fact decided that the new
Soviet "concession" does not amount to much.
Most importantly, it does not appear to change
the Soviet desire for sub-ceilings on national
forces. This feature, when combined with a
proposa: that the forces not being reduced be
frozen at their existing levels, preserves what the
West sees as the two basic Soviet goals in the
negotiations: to obtain formal Western ac-
quiescence in Soviet force superiority in Europe,
and to deny individual West European coun-
tries-the West Germans in particular-the ability
to improve their forces.
Perhaps the most intriguing feature of the
Soviet offer has been the shift to an equal percen-
tage formula for determining the size of
first-stage reductions of US and Soviet manpower.
The new stress on a percentage formula un-
derscores the need to agree on a common data
base for the existing forces in the reduction area.
The West can now press more aggressively for a
data exchange, which it feels will demonstrate the
existing force disparities and help document its
case for greater reductions on the Eastern side. A
Soviet decision to exchange data could thus
signify a serious desire for progress in the
negotiations.
The allies have still not taken a definitive
position on the Eastern proposal as a whole, in
part because many aspects of the proposal still re-
main unclear. The deeper problem, however, is
that there is still little sign of movement by the
Soviets toward the basic Western demand for
parity in ground forces. For this reason, some
allies have suggested that the proposal is intended
primarily as a tactic designed to counter the
public effect of the allied proposal and give the
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EC: POSITION ON LAW OF THE SEA
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EC members are showing increasing interest
in developing a Community position as they
prepare for the next round of negotiations at the
UN Law of the Sea Conference that opens in New
York on March 15.
Denmark and the UK have been pushing
hardest for a common policy, arguing that this
would considerably enhance the Nine's bargain-
ing power. Other EC members are supporting a
drive for the EC to sign the treaty as an indepen-
dent entity, on the grounds that the Community
could more effectively represent the member
states in bilateral negotiations, primarily on
fishery issues, that would follow a Law of the Sea
treaty.
The Nine will probably try, at an early stage of
the talks, to insert a clause in the general articles
to establish the Community's status in the
negotiations. Community competence in such
areas as fishing, pollution, and marine research
would thus be acknowledged.
EC members appear to be moving toward a
common position on the issue of mining the deep
seabed. The Nine-none of which currently has
the technology to mine the valuable seabed
nodules-are united in their desire to prohibit
unrestricted access to seabed sites by the US, but
they want to avoid measures that would restrict
their own access.
The British had previously pushed the idea of
quotas to limit the number of seabed sites any
single country could mine, but they may now be
modifying this stand. The French continue to
press for a quota system.
Fisheries Policy
Although the Community has made good
progress toward revising its fisheries policy in an-
ticipation of a conference agreement to establish
a 200-mile economic zone, several problems re-
main.
The EC Commission presented proposals on
the fisheries question to the Council earlier this
week that would:
? Extend the exclusive national fishing
zones to 12 miles.
? Give the EC competence to
negotiate member-state fishing rights with
third countries.
? Create a community system to
manage fishing within the EC's 200-mile
zone through the use of catch quotas.
Quota System
Catch quotas are needed to prevent EC fish
stocks from being depleted as community
fishermen, increasingly shut out of third-country
waters, are forced to fish the home grounds more
intensively.
National quotas would be calculated on the
basis of past catch figures, losses suffered follow-
ing the establishment of the economic zones by
third countries, and gains to Community
fishermen from the reduction of third-country
fishing from the "community pond."
Dublin objects strongly to this formula on the
grounds that it would hamper efforts to develop
Ireland's fishing industry. The Danes support the
Irish, arguing that an EC policy must take the
members' traditional fishing areas more into con-
sideration.
The UK and Ireland are insisting on 25- or
50-mile national zones rather than 12, and on
other preferential riparian rights. Other EC states,
however, have resisted even the proposed 12-
mile limit, since the Community is already com-
mitted to equal access for all EC fishermen in
Community waters. The French, among others,
want the principle of equal access extended to in-
clude the 200-mile zone, should this be adopted.
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55-G6
EC: AGRICULTURAL POLICY
The EC Council of Agriculture Ministers last
week worked its way through a long, tough agen-
da, concluding with the perennially difficult task
of setting annual support prices for agricultural
products. The outcome again made clear that
political considerations dictate the maintenance
of a high support level and prevent any extensive
reform to correct the notorious shortcomings of
the Common Agricultural Policy.
Although Bonn, as at last year's session, back-
ed away from a showdown over the horrendous
costs of the Common Agricultural Policy, parts of
the agreement-especially the rise in food
prices-have come under fierce attack by con-
sumer and other private organizations in Ger-
many. Paris, for its part, seems generally pleased
with the outcome, particularly because solutions
were found to the explosive problems of wine
and dairy products.
The council adopted the EC Commission-
recommended average price increase of 7.5 per-
cent for the 1976-77 marketing season, as against
the 10.6 percent called for by the powerful farm
lobby. Adjustments in the EC's system of units of
account used for farm prices, however, vary from
country to country. Italy will have the highest, and
Germany the lowest, price increases in terms of
national currencies. The farm support package
will, as usual, require a large supplementary
budget, but the costs involved have not yet been
tallied.
Seeking to settle the year-old "wine war"
between France and Italy, which had sparked
violent demonstrations in France last week and
resulted in numerous casualties, the Council
agreed on a hefty increase in price supports for
Italian wine, a discontinuation of Paris' illegal
border tax on wine imports from Italy, and a com-
munity-subsidized storage and distillation
scheme. While these steps-together with EC
measures aimed at structural reforms of
viticulture-have bought time for France to cope
with the volatile situation, the basic problems of
the winegrowers have not been solved.
Despite a strong US demarche and a warning
that Washington would take the matter to GATT,
the Council approved a plan to reduce a non-fat
dry milk stockpile of well over a million tons
through the compulsory purchase by consumers
of 400,000 metric tons for use in animal feed. US
producers expect that this will sharply reduce the
EC's soybean imports. Skim milk powder allotted
the food aid program was increased from 55,000
to 200,000 tons. Commission President Ortoli had
earlier told the US ambassador to the EC that the
Commission believes its proposals are consistent
with GATT rules and that the impact on trade will
be negligible.
The Council tasked the Commission to come
up with a proposal, before fall, for a systemunder
which producers would assume some financial
responsibility for structural surpluses. The com-
mon price system of the Common Agricultural
Policy was originally envisaged as, a way to
enhance competition and-through farm moder-
nization and job retraining-bring about a func-
tional reorganization of agriculture. Price sup-
ports have instead led to overproduction and
massive stockpiling of many agricultural products
including dairy items-which currently account
for over 40 percent of the farm fund budget.
Sporadic attempts to deal with the farm surplus
and other problems have failed in the face
of member state protectionism.
Ireland, for example, will deplore the adverse
effects of the new grain prices on freer trade in
farm commodities but bowed to pressure from its
own farmers. Rome accepts such higher prices in
order to secure high support levels for its olive oil,
citrus, and wine. Common Agricultural Policy ad-
vocates argue that the policy guarantees a sub-
stantial degree of food self-sufficiency at stable
prices. The argument sounded more convincing
when world farm prices were generally above EC
levels in 1973-74 than now when world market
vices have di ed below those in the EC.
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STABILITY REIGNS IN MOSCOW
Soviet leaders shunned change both within
their own ranks and in the Central Committee as
they closed the party congress last week. General
Secretary Brezhnev's public stature reached a
new high at the congress, but he will evidently
continue a consensus type of leadership in con-
junction with the old guard of senior leaders. The
congress offered no sign that preparations were
being made for the succession when Brezhnev
leaves office. Rejuvenation was not attempted in
either the Central Committee or the Politburo;
the average age of its full members is still 66.
Two candidate members of the Politburo
were promoted to full membership. The elevation
of party secretary Ustinov, in charge of the
defense industry and space, completes the
representation on the Politburo of officials
responsible for foreign policy and defense. He
joins there Foreign Minister Gromyko, Defense
Minister Grechko, and KGB chairman Andropov.
The other new full member, Leningrad party chief
Romanov, represents the country's second largest
city and is a spokesman for innovation in
economic organization. Azerbaydzhan party
chief Aliyev became a candidate member. The
Caucasus republics had lacked representation
since Georgian party boss Mzhavanadze was
dropped in 1972. Agricultural Minister Polyansky,
who was a full member, was dropped completely,
a scapegoat for the harvest failures.
Two new faces were added to the party
secretariat. Pravda chief editor Zimyanin will
presumably oversee cultural affairs and the in-
telligentsia, a post vacant since Petr Demichev was
demoted to minister of culture in 1974. The other
new secretary is Konstantin Chernenko, a long-
time confidant of Brezhnev. As chief of the Cen-
tral Committee's general department, he has
been executive secretary to the Politburo.
The survival rate of Central Committee
members was over 80 percent-higher than at any
congress since the 1930s and perhaps the highest
in the party's history. The number of full members
was raised to 287, an increase of 46 over the
number elected at the last congress in 1971. Many
party officials were promoted from candidate to
full membership on the Central Committee,
strengthening the party in relation to the govern-
ment apparatus and presumably also strengthen-
ing Brezhnev.
Most of the full-time party functionaries as
well as some additional government officials who
were added to the Central Committee come from
the Russian Republic. The RSFSR's share of Cen-
tral Committee members thus increased
significantly in comparison with that of the other
republics.
Several USSR ministers responsible for con-
sumer-oriented industries moved up to full Cen-
tral Committee membership despite criticism of
the consumer sector at the congress. The rising
importance of oil to the economy is reflected in
the promotion to full membership of three
ministers connected with the petroleum industry.
YUGOSLAVIA: TITO TAKES A TRIP
During his ten-day visit to three Latin
American countries, President Tito will be trying
to enhance Yugoslav influence in the Western
Hemisphere's nonaligned countries. In Mexico,
Panama, and Venezuela, he will lobby hard for
support of Belgrade's efforts to restrain the more
radical third-world elements from taking divisive
stands at the nonaligned summit in Sri Lanka this
summer.
The 83-year-old Yugoslav leader began a
four-day visit to Mexico on March 10. In a pre-trip
interview with the Mexican press, Tito lauded
President Echeverria and stressed the need for in-
creased nonaligned activity by the Latin American
countries.
Tito's talks in Panama, from March 14 to 17,
will probably be the most delicate of his trip. He is
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expected to reiterate previous Yugoslav promises
to support Panama "fully and unconditionally" on
the Canal issue. Tito's commitment to nonalign-
ment presumably requires such rhetoric, but
Belgrade will be watching closely for
Washington's reaction.
Tito's goals in Venezuela, a stop added in the
later stages of planning for his tour, are less clear.
He is expected to preach nonalignment and may
CHINA: A CAMPAIGN PRONOUNCEMENT
Peking's most authoritative statement to date
on the campaign to criticize Teng Hsiao-ping,
while linking Mao Tse-tung directly to the effort,
still reflects differences within the party over how
far to pursue the current campaign. A People's
Daily editorial of March 10 quotes Mao on the
need to "narrow the target" of the attack, imply-
ing that Teng alone should be criticized, but it
leaves the door open for criticism of other of-
ficials who are associated with Teng and who, like
him, were returned to public office after being
ousted a decade ago. While the editorial stops
short of calling for Teng to be overthrown, he is
separated from other officials who, the editorial
notes, should be "helped" to correct their past
mistakes.
The party's left wing will undoubtedly use
one of the statements in the editorial, which is
linked directly to Mao, to broaden the attack to
include many of the rehabilitees who once again
hold important positions. The editorial
nevertheless calls for people to remain
"coolheaded" and strictly prohibits the kind of
disruptive political activity that characterized the
Cultural Revolution.
These prohibitions, which are at the heart of
the editorial, strongly suggest that more
moderate-leaning members of the leadership still
retain a major voice in defining the scope of the
campaign. These leaders almost certainly prefer
also push Yugoslavia's view that OPEC countries,
like Venezuela, have an obligation to help im-
prove economic conditions in the less developed
countries.
On the return leg of his trip, Tito will meet
briefly with Portuguese President Costa Gomes,
apparently while his plane is being refueled at
Faro on the southern coast of Portugal.
? 3- ~ e,~'
to limit the attacks to Teng himself and to keep
the campaign from gaining enough momentum
to encompass large numbers of rehabilitated of-
ficials and to undercut major domestic and
foreign policies. The restrictions may be par-
ticularly important in view of the greater iden-
tification of Mao with the leftist cause in general
and with the attacks on Teng in particular. The
editorial introduces two new "quotations" from
the Chairman which tie him closer to the cam-
paign. But even this new invocation of the Chair-
man's authority is somewhat ambiguous. The
editorial states the campaign is being conducted
under the direction of the "central committee
headed" by Mao-a power-sharing formulation
that was conspicuously absent throughout the
Cultural Revolution and only regularly rein-
troduced after the Lin Piao incident, when the
central authorities were unsure of army loyalty
and Mao was somewhat tarnished by his previous
relationship with the disgraced defense minister.
The central authorities also seem to be mak-
ing other efforts to define the scope of the cam-
paign. In a briefing for foreign diplomats in Pek-
ing on March 6, a university official stated that
Teng is the only target of the current attack and
implied that he could remain in power if he
agreed to admit his mistakes. He added, however,
that Teng had not yet done so. The official refused
to be drawn out on what Teng's ultimate fate
would be or on his current status, but the general
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CAMERA... R SS LoKO~+u
low-key tenor of his comments suggests that Pek-
ing is making a concerted effort to play down the
campaign for foreign audiences-and that impor-
tant elements in the leadership are concerned
about the possible impact abroad of indications of
political instability. This briefing is unprecedented
and represents a major departure from practice
during previous political campaigns.
A senior communist official in Hong Kong
also gave a relaxed explanation of the campaign
to an American diplomat and suggested that
those leaders in Peking who oppose the current
campaign will eventually be heard from. One
possible indication of this is the recent report that
wall posters appeared in Canton attacking Chiang
Ching, Mao's leftist wife.
Posters in Shanghai and in Kwangtung
Province are calling for Teng's ouster. One report
claims central authority for a call to "strike down"
not only Teng but other, unspecified "reha-
bilities." Moreover, some reports of the attacks
on Teng carry the implication that the late Chou
En-lai is also to blame for his role in returning
Teng to power. If this line is pursued there is
likely to be a strong anti-leftist backlash from
Chou's many former supporters and adherents.
Equally important, there are signs that civilian
leftists are courting the military as allies in the
current campaign. The military was conspicuously
absent during the campaign's initial stages, but
some units are now beginning to participate in
the criticism of Teng. In what seems to be a direct
appeal to China's powerful regional military com-
manders in the provinces, wall posters reportedly
have accused Teng of seeking to undercut the
authority of these regional commanders by con-
centrating military power in Peking and more par-
ticularly in his own hands.
Military support would give a boost to those
who are most actively pursuing the current cam-
paign because at present they do not appear to
have the muscle to enforce their demands. In the
Cultural Revolution, support from Lin Piao and
other central military authorities was crucial to
the development of the campaign. The support of
the military is equally as important to those who
would like to keep the current campaign from
getting out of hand. It is reasonable to assume
that civilians on both sides of the issue are trying
to line up military support, but the military thus
far has not decisively tilted toward either side.
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JAPAN: LIBERAL DEMOCRATS IN CRISIS
With the Lockheed affair having developed
crisis proportions in Japan over the past six weeks,
Prime Minister Miki is now coming under in-
creasing pressure as Washington prepares to
transmit pertinent data to Tokyo.
Immediately at issue is how the government
handles the evidence. In an effort to dispell any
notion that a coverup was under way, Miki had
previously promised full disclosure. Other
members of the ruling Liberal Democratic Party
argued that releasing names in Japan's
superheated atmosphere without first thoroughly
investigating the evidence would be tantamount
to character assassination. Miki subsequently
modified his stand, and late last week US officials
proposed that the evidence be disclosed only in
the context of prosecuting specific individuals.
As a result, Miki is now under fire from
members of his own party for having promised
too much and from the opposition parties and the
press for failing to fulfill that promise. The opposi-
tion has used this issue to stall Diet proceedings
while continuing to press for full disclosure and
criticizing US restrictions on use of the evidence.
As a result of the legislative impasse, one
leading conservative recently suggested that Miki
might have to dissolve the Diet and hold an early
election. The opposition will resist an early elec-
tion because it wants to exploit the Lockheed af-
fair and believefthat an election this spring would
tend to end the issue prematurely. For their part,
conservatives would almost certainly prefer to
avoid an election in the current atmosphere,
although an election must be held sometime this
year.
Uncertainty about what revelations are in
store has generated considerable anxiety and fac-
tional maneuvering in the party. Miki, widely
considered to be innocent of any wrongdoing,
views the affair as an opportunity to strengthen
his own position by cleaning up the party, but he
operates on a narrow base of personal support,
faces stronger contenders for his job, and is saddl-
ed with the responsibility of conducting a convin-
cing investigation. At times, Deputy Prime
Minister Fukuda has tended to support Miki since
a purge would most likely damage his longtime
rival, former prime minister Tanaka. Asa potential
prime minister, however, Fukuda may also be
looking for an opportunity to ease Miki out of of-
fice. The net result has been an uneasy consensus
to pursue a "damage-limiting" strategy pending a
decision in Washington to transfer the available
evidence.
The eventual outcome of the current crisis
hinges largely on the evidence received from the
US and the manner in which Tokyo handles it.
Possible developments range from virtually no
disclosures at all to the implication of a powerful
faction leader such as Tanaka. In either of these
cases, the Miki cabinet would be jeopardized. An
optimum outcome from the government's point
of view would probably involve the indictment of
Prime Minister Miki QcL
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a few relatively minor officials. Alternately, the
government might be unable to maintain the
confidentiality of the evidence while conducting
its investigation and opt for an early election in an
effort to cut its losses.
JAPAN-AUSTRALIA: MENDING FENCES
Japanese-Australian relations seem likely to
improve, following a relatively abrasive period
caused by the economic recession and the
policies of the former Whitlam government.
Although Tokyo is still cautious, the recent visit by
Australian Deputy Prime Minister Anthony has
given Japanese leaders a clear impression that the
new Fraser government is considerably more
eager than its predecessor to encourage a
Japanese economic role in Australia, particularly
in the development of natural resources. Trade
problems will remain, but should diminish in in-
tensity.
Anthony's trip, the first overseas visit by any
senior minister in Prime Minister Fraser's cabinet,
seemed designed to underscore the importance
the new Australian government attaches to
relations with Japan-Australia's largest trading
partner. The Japanese responded with a top-level
reception. Anthony met with most of Japan's top
cabinet ministers, including Prime Minister Miki.
During the Whitlam administration, trade
and the development of Australian resources
were contentious issues in relations with Japan.
Some of the difficulties stemmed from Japan's
desire for guaranteed access to Australian raw
materials, and at the same time, a relatively un-
hindered market for Japanese manufactured
goods. These objectives have run headlong into
Australia's traditionally protectionist policies on
manufactured products and, more recently, have
conflicted with growing nationalistic sentiment
against foreign "exploitation" of Australia's
natural wealth.
Both sides engaged in discriminatory trade
practices, partly in an effort to counter
recessionary pressures. Tokyo caused an uproar in
1974 by banning imports of Australian beef, clos-
ing off a major market for Australian producers.
Last year, some imports were resumed, but not
nearly enough to satisfy Canberra. Japanese com-
panies caused additional irritation by asking
Australian mineral producers to cut back agreed-
upon shipments because of the downturn in the
Japanese economy.
The Japanese, for their part, have been un-
happy over Canberra's efforts to influence prices
in contract negotiations between private Japanese
and Australian companies. Tokyo is also vexed
over import restrictions imposed by Canberra on
a wide range of products, particularly
automobiles. The trade balance is heavily in
Canberra's favor, which adds to Japanese dis-
satisfaction.
Much to the pleasure of Japanese leaders,
Anthony indicated that the Fraser government is
committed to private development of
resources-including uranium, which was off
limits to foreign participation under Whitlam.
Anthony also expressed his government's inten-
tion to try to improve trade relations.
One Australian embassy official admitted that
Anthony's description of Australian-Japanese
economic interdependence as a source of
strength, rather than vulnerability, constituted a
significant evolution in Canberra's thinking.
Japanese officials for their part seem generally op-
timistic about the Fraser government's "pro-
business" attitude as well as Anthony's frequent
references to "market prices and forces" in his
conversations with Japanese leaders. Another
source of encouragement to Tokyo is Canberra's
renewed desire to conclude a basic relations trea-
ty. Talks on a treaty have foundered for several
years because of differences over economic
issues.
There is some concern in Tokyo that the
Japanese business community will overreact to
the conservative victory in Australia and fail to
give due regard to the basic nationalistic under-
current still running strong in Australia. Insen-
sitive behavior by Japanese firms in the difficult
negotiations coming up on raw materials prices,
for example, could diminish the good will of the
new Australian government.
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PHILIPPINES: REBELLION IN THE SOUTH
The Muslim rebellion in the southern Philip-
pines has intensified after a lull of several months.
The commander of the Philippine armed forces in
the southwest, who had been publicly saying that
the Muslim threat had tapered off, now has his
troops on full alert.
The government is capable of keeping this
resurgence of activity from getting out of hand,
but is not able to quell completely the Muslims.
There is no end in sight to the rebellion. The
Muslim-Christian conflict in the south has existed
for centuries, and most Filipinos regard bloodsh-
ed as the normal state of affairs in Mindanao-Sulu.
The Muslims, who are concentrated on the
island of Mindanao and the Sulu archipelago,
believe that the Christian majority and govern-
ment will eventually obliterate Islamic culture and
society. The continuing encroachment by Chris-
tian immigrants into traditional Muslim lands,
Manila's discrimination in providing government
services, and the Muslims' underrepresentation in
the armed forces and elsewhere in government
provide considerable justification for Muslim ap-
prehensions.
Although the Moro National Liberation Front
ostensibly represents all Muslim rebels, the
Muslims are divided and leaders rarely agree on
goals or tactics. The Front probably has from 300
to 500 cadre and 3,000 to 5,000 full-time soldiers or
support personnel backed by thousands more
who may from time to time fight government
forces if ammunition is available.
The Muslim provinces on western Mindanao
are plagued by grenade attacks, hijackings, am-
bushes, kidnapings, incidents between Muslim
and Christian civilians, as well as some attacks on
Philippine armed forces units. Most of this
violence is the result of banditry and quarrels
between the large local Christian and Muslim
communities, aggravated by intense clan rivalries.
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The government has stationed four fifths of
its combat battalions in Muslim areas. The most
serious combat in recent months has come from
search and destroy operations, particularly on
Jolo Island. It is estimated that the Philippine arm-
ed forces suffered an average of 100 killed in ac-
tion and 300 wounded each month during 1975.
Despite this substantial commitment, the troops
in the south are not strong enough to stamp out
the Muslim rebellion. The armed forces,
moreover, are poorly trained, ill equipped, and
lack discipline.
President Marcos is aware that major offen-
sive operations in the past resulted in adverse
press commentary in Muslim countries. Too
much of this kind of publicity could endanger the
Philippines' supply of Middle Eastern oil.
With one eye on the international audience,
Manila has for years been engaged in a well
publicized on and off again campaign to en-
courage defections from the badly factionalized
Muslim movement. Claims that some 10,000
rebels have surrendered and that the Muslim
organization has become unraveled appear vastly
exaggerated. The government has also given sub-
stantial publicity to its impressive array of
programs designed to benefit the Muslims.
Implementation of these programs has been slow,
and in reality the government has done little to
deal with Muslim grievances.
Marcos seems to have no intention of engag-
ing in any serious negotiations to discuss demands
for autonomy with Muslim dissident leaders.
Government representatives, however, from time
to time engage in "peace talks" in another effort
to give the impression of movement and
reasonableness. Marcos, like all other Philippine
presidents before him, is committed to the con-
cept of a unitary state and is unwilling to accede
to Muslim demands for even limited autonomy.
The Muslim rebels for years have received
weapons and funds from Libya and elsewhere,
funneled through the Malaysian state of Sabah. A
lull in the fighting during the second half of last
year and the forced resignation of Sabah's chief
minister Tun Mustapha, who has been the prin-
cipal foreign backer of the Philippine Muslims,
raised some hopes in Manila that external support
was dwindling. Tun Mustapha, however, remains
a political power in Sabah and is probably still in-
volved in arranging arms shipments to the
SOUTH KOREA: PAK'S FOES
The Pak government has reacted sharply to
the latest opposition protests in Seoul, but the
controversy appears unlikely to lead to a serious
challenge to the authority of President Pak.
The strongly worded statement critical of the
Pak regime issued last week by a group of leading
anti-government figures-including Kim
Tae-chung, Pak's respected opponent in the 1971
presidential election-was intended to fan
criticism of the government in the US and Japan
and spark a renewal of activism among Korean
students, Christians, and intellectuals. The state-
ment was timed to coincide with the return of
students to the campuses for the spring session,
often a time of political unrest in South Korea.
So far, the effort is falling well short of this
goal. Over the past several years, and especially
since the fall of Indochina last spring, the system
of legal and extralegal controls established by the
Pak regime has undermined and enervated its op-
ponents. The government has moved quickly to
detain most of those responsible for last week's
statement, including Kim Tae-chung, and they
will be prosecuted for plotting the "overthrow of
the government."
Although an overreaction by the regime-for
example a harsh sentence for Kim-is possible,
Pak's top aides at least seem aware that this could
prove counterproductive and provide the
regime's critics the kind of emotional issue they
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VENEZUELA: WORRIED ABOUT GUYANA
Cuba's intervention in African affairs has
stirred concern in Caracas over Havana's growing
influence in Guyana. In recent weeks, the Caracas
press has given heavy play to allegations that
Guyana, with Cuban assistance, is engaged in a
military buildup along its disputed border with
Venezuela. The reports, which first appeared in
the influential conservative weekly Resumen,
claim that upwards of 200 Cubans were serving as
advisers to Guyanese paramilitary forces
operating from camps recently established in the
interior and in the area in dispute.
The Guyanese ambassador in Caracas public-
ly denied these reports, and Prime Minister
Forbes Burnham in a major speech on February 23
dismissed them as fabrications by "foreign
hawks" bent on discrediting his country. There is
no evidence to confirm a Cuban military presence
in Guyana, but the issue refuses to go away. As a
result, many influential people in Venezuela, in-
cluding some leaders of President Perez' gover-
ning Democratic Action Party, believe the reports
to be true and are pressuring the government to
take a hard line with Cuba and Guyana.
The issue also gave conservative nationalists
in Venezuela a basis for questioning the wisdom
of Perez' highly publicized policy of rapproche-
ment with Cuba and Guyana. These people are
attempting to revive the clamor for a return of
Venezuela's "lost territory." They are also seeking
to discredit domestic leftists. For his part, Perez
has reacted in low key, in sharp contrast to the
emotional excesses of some of the local press.
Nevertheless, he has made quite clear to Havana
and Georgetown his displeasure over
developments in Angola and Guyana.
Perez is troubled by Cuba's demonstrated
capacity and will to mount and support a
large-scale military force several thousand miles
from home. Such power could just as easily be
manifested in the politically unstable Caribbean,
where Venezuela has major political and
economic interests. Guyana's willingness to
provide Cuba with refueling and transit rights for
its Angola airlift has further accentuated Perez'
concern that the Cuban presence in Guyana
could eventually become a major Cuban toehold
on the continent. Such a development would
jeopardize the stability of the region, provide a
source of regional political discord-which Perez'
policy of Latin American solidarity seeks at all
costs to avoid-and complicate the handling of
the delicate border problem with Guyana.
While the Perez government tries to con-
vince both Cuba and Guyana of the seriousness
with which it views recent developments, it is also
busy improving its military ca abilit
border area.
On March 2, in a significant gesture aimed at
cooling the situation, Guyana's minister of infor-
mation instructed the government-controlled
media to play down its heavy coverage of
Guyana's ties with Cuba, the USSR, and China in
order to avoid further aggravating relations with
Venezuela and Brazil. In another move to
demonstrate that Guyana has nothing to hide, the
Burnham government has permitted at least one
US press representative to visit the interior, in-
cluding the paramilitary national service camps.
Although the current efforts may take some
of the steam out of the press campaign being
waged against Guyana in both Venezuela and
Brazil, the episode will feed Burnham's obsession
that his country faces a military threat from its
neighbors and could drive him to closer relations
ARGENTINA: ECONOMIC PLAN OPPOSED
Although top labor leaders have apparently
expressed support for President Peron's latest
economic austerity program, they apparently do
not have the backing of the rank and file.
Workers are continuing the strikes and work
stoppages begun earlier in the week to protest
the program, which included drastic price rises
and a minor wage increase. The auto industry was
particularly hard hit as thousands of workers
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walked off the job in Cordoba and Santa Fe, as
well as in Buenos Aires. Maverick Peronist labor
boss and Buenos Aires governor Calabro broke
his recent silence to label the new plan a "fraud"
that penalizes workers.
Strong opposition was also voiced by key
congressmen, including members of Peron's own
party, and by the nation's most influential
businessmen's group. Some of the critics claim
that the reforms were forced on Argentina by ex-
ternal pressures, emanating principally from the
International Monetary Fund.
As a result of worker pressure, the ad-
ministration agreed at midweek to augment its
original wage increase significantly. Even the
20-percent increase subsequently granted,
however, is not likely to satisfy workers whose
salaries are ravaged by soaring inflation and who
are unaccustomed to sacrifice. The prospect is for
still more pressure from below on the top un-
ionists and for further striking.
The administration is hardly in a position to
stand up to massive strikes. In the final analysis,
Peron will probably be obliged to grant a further
wage increase in order to keep the workers in the
factories. Another failure by the government to
deliver economic reform could convince the
militar still poised to intervene, of the need to
move.
224-.21`7
BOLIVIA: RENEWED UNREST
A year of relative political calm has given way
to a resurgence of anti-government strikes and
demonstrations by students and miners. President
Banzer has already begun to retaliate and is likely
to profit from government allegations of a
widespread subversive plot.
The trouble started almost a month ago when
students in La Paz began to agitate for
democratization in the university system and to
demand the release of students detained for
suspected subversive activities. Street
demonstrations quickly became pitched battles
with police, and violence spread to the university
in the country's second largest city of Cochabam-
ba. The government responded by closing the un-
iversities, an action that provoked the powerful
miners federation, which represents 30,000
workers throughout the country, to stage a
24-hour sympathy strike.
Earlier, workers at the two largest mines had
elected Marxist union leaders in open defiance of
a government ban. Officials of the state mining
monopoly have asked the government to take im-
mediate and decisive action to quell disruptive
forces. Citing work slowdowns and mineral thefts
as signs of growing rebellion, the officials also
point out that several radio stations are aiding the
dissidents by broadcasting speeches and
resolutions urging workers to maintain a united
front against management.
The interior minister has assured mining of-
ficials that "severe measures will be taken." Presi-
dent Banzer has already jailed hundreds of
protesters and has forced into exile several
middle-grade officers who have been involved in
previous conspiracies against him.
The government now claims to have proof
that leftist extremists, supported by groups out-
side the country, are fanning the discontent.
There are also allegations that foreign
governments are fostering the current agitation in
i_ J*.-,---.:- r.4f?rte to
obtain an access to the sea.
It makes little difference whether these
reports are true. Banzer often has manufactured
evidence in the past to suit his own political ends
and generally attributes domestic political tur-
bulence to international conspiracies. He will
almost certainly use the "evidence" to solidify
military support behind him and to justify an even
firmer crackdown on protesters. He can also now
argue that foreign countries have obstructed his
attempts to obtain a corridor to the sea and use
this argument_ as a plausible excuse for failure to
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2 4-125
OPEC: IMPORT PRICES DROP
The prices of OPEC imports, which oil
producers have used to justify price hikes, have
declined at an 8-percent annual rate since March
1975, reversing the trend of the past two years.
This should make it easier for Saudi Arabia and
like-minded OPEC countries if they choose to
resist or restrain a midyear oil price hike when the
oil ministers meet in Jakarta in late May.
The dollar prices OPEC countries paid for
their imports averaged only about 6 percent
above the previous year-a far cry from the 27
percent jump in 1974. Whereas OPEC import
prices had climbed steadily throughout 1974, we
estimate that they actually declined at an 8-per-
cent annual rate in April-December 1975. Our es-
timates are based on export prices of the seven
major developed countries, which supply more
than 70 percent of OPEC's merchandise imports.
Three factors seem to have contributed to the
downward trend:
? sluggish domestic demand and sub-
stantial unused capacity apparently induced
industrial suppliers to cut prices to foreign
markets;
? wholesale price inflation fell to
about half the 1974 rate in most industrial
countries; and
? the dollar appreciated in 1975, mak-
ing imports from non-US suppliers less ex-
pensive in dollar terms.
The total value of OPEC merchandise imports
increased about 60 percent, to $56 billion, in 1975.
Most of the growth occurred in the first two
quarters; the value of these imports declined in
July-September and just barely recovered to the
second-quarter level in October-December.
Prices of OPEC imports supplied by the seven
major OECD countries at the end of 1975 stood
about 24 percent above the level that prevailed in
the third quarter of 1973-just prior to the oil
price hikes.
OPEC Countries: Imports'
Index: 1973 111=100
0.??" Volume
I I I I I I I I I
1972 1973 1974
1 Based on US dollars.
The volume of OPEC imports rose 54 percent
in 1975, compared with 47 percent in 1974. Most
of the increase took place in the first six months of
the year. In the third and fourth quarters of 1975
the import volume increased at only a 12- to
13-percent annual rate as administrative and
transportation, bottlenecks and smaller current
account surpluses constrained OPEC's spending
spree. Each of the seven largest importers in
OPEC approached limits of one type or another
on foreign purchases during 1975; port capacity
and sluggish customs procedures impeded im-
ports in Iran, Nigeria, Iraq, and Saudi Arabia;
Algeria ran a current account deficit; and the sur-
pluses of Venezuela and Indonesia declined at a
precipitous rate.
_-Z 2c~o-12 ~'
TRENDS IN THE NATURAL GAS MARKET
The natural gas market in the major
developed countries has been shaken by
wide-ranging changes in the use and production
of gas. During the past two years, gas export
prices have climbed rapidly in pursuit of parity
with oil prices. Nine of the major energy-con-
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suming countries-Canada, Japan, Belgium,.Lux-
embourg, France, Italy, Netherlands, the UK, and
West Germany-have increased their use of
natural gas in the past two years, primarily as a
substitute for oil, and now account for one fourth
of non-communist gas consumption. By contrast,
gas consumption in the US has shown a sharp
reduction. The US nonetheless still accounts for
two thirds of non-communist gas production and
consumption and is the largest single importer,
being supplied mainly by Canada.
Trade in natural gas remains small. Only 10
percent of the gas consumed by non-communist
countries is imported. Imports for these countries
in 1975 amounted to about 4 trillion cubic feet or
the equivalent of 2 million barrels per day of oil.
The bulk of non-communist international gas
sales is concentrated in producing regions near
big markets-that is, shipments from the
Netherlands to other European countries and
from Canada to the US.
The decline in natural gas output in the major
developed countries accelerated last year, with
production falling to 27.8 trillion cubic feet, the
US accounting for most of the decline. Natural gas
consumption in these countries fell 4 percent to
27.4 trillion cubic feet, following a slight gain in
1974. The seven West European countries in-
creased their gas use despite a slump in total
energy consumption. Over the past two years,
Western Europe has replaced the equivalent of
250,000 barrels per day of oil with gas.
Natural gas export prices have risen sharply
but are still substantially lower than for oil. The
Netherlands and Canada are the largest suppliers,
providing roughly 50 percent and 25 percent,
respectively, of total non-communist exports.
Both countries are planning price increases this
year to augment earnings, space out production
from existing fields, and encourage exploration.
The Netherlands raised its prices 30 percent in
1974 and 40 percent in 1975. Canadian prices lagg-
ed until last year when they were raised several
times. Canadian prices averaged only 54 cents in
1974, but reached $1.60 per thousand cubic feet
by the end of 1975. Even at this price, gas sells for
one fifth less than oil of equivalent energy value.
In 1976, we expect US output and use of
natural gas to decline still further, while in
Western Europe its use will continue to rise
because it is cleaner burning than oil, supplies are
ample, and prices are relatively low; the gradual
economic recovery will add impetus to the rise.
The expected 10-percent rise in Dutch output
alone this year will supplant about 150,000 barrels
per day in oil demand. The expected completion
of the pipeline in midyear from Ekofisk in the
Norwegian sector of the North Sea to Emden will
provide an additional 1 billion cubic feet of gas
per day to the West German market. In addition,
West European natural gas imports from North
Africa and the USSR are expected to continue
growing, while Japanese liquefied natural gas im-
ports will probably increase with the completion
of the Das Island project in Abu Dhabi later this
year.
Canadian gas prospects have improved
because of expanding gas field development
resulting from higher prices. Large increases in
supplies are not expected from the Arctic until
pipelines are completed in the early 1980s. In the
meantime, additional supplies are likely from an
increase in drilling of shallow gas deposits in
Alberta and British Columbia. Canadian output
and consumption nevertheless are expected to
rise only slightly this year while the decline in ex-
ports to the US will continue.
Natural gas export prices will continue rising
toward parity with oil. An additional 50-percent
hike in the Dutch price is likely in 1976. Canadian
natural gas export prices may rise again later this
year, perhaps by about 15 cents-to $1.75 per
thousand cubic feet or $9.84 per barrel of oil
equivalent, roughly 90 percent of current heavy
fuel oil prices in the US spot market.
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