WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A011400070001-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 17
• Document Creation Date: December 21, 2016
• Document Release Date: January 31, 2008
• Sequence Number: 1
• Publication Date: August 6, 1976
• Content Type: SUMMARY

Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
Iq
Next 1 Page(s) In Document Denied
Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
 Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
Secret
Weekly Summary
State Dept. review completed
On file Department of Agriculture release instructions apply.
Secret
CI WS 76-032
No. 0032/76
August 6, 1976
Copy N2 71
Approved For Release 2008/01/31 : CIA-RDP79-00927A011400070001-0
 Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
The WEEKLY SUMMARY, issued every Friday morning by the
Office of Current Intelligence, reports and analyzes signifi-
cant developments of the week through noon on Thursday. It
frequently includes material coordinated with or prepared
by the Office of Economic Research, the Office of Strategic
Research, the Office of Geographic and Cartographic
Research, and the Directorate of Science and Technology.
CONTENTS
I Middle East - Africa
Lebanon; Syria; FTAI
2 Europe
Italy; USSR-CSCE; Spain
4 Western Hemisphere
Cuba; Jamaica; Brazil
6 Far East
Philippines; Japan
7 Japan-China: Harder Line Toward Peking
8 China: Problems for the Left
10 Eastern Europe: Drought Hurts Harvest
12 EC: Overhaul of Joint Float Proposed
Comments and queries on the contents of this
publication are welcome. They may be
- Approved For Release 2008/01/31 : CIA-RDP79-00927A011400070001-0
 Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
A nationwide cease-fire-the first step
in implementing the Syrian-Palestinian
accord concluded on July 29-was finally
arranged late this week by Arab League
mediators in Beirut. The accord, which
also calls for roundtable negotiations and
Palestinian adherence to the 1969 Cairo
agreement regulating fedayeen activities
in Lebanon, has won only lukewarm sup-
port from the other major warring parties.
Lebanese leftists and radical fedayeen
have scored the agreement for failing to
include a Syrian pledge to withdraw from
Lebanon and have urged PLO chief Yasir
Arafat to repudiate it. The Christians,
fearful that Syria may have reached a
secret understanding with the
Palestinians, are insisting that the
fedayeen adhere to even more stringent
~R um
%rJazzin
Beirut-Darnascu
Road
I Miles
a Nilo_r=eters
restrictions than in the past.
Despite leftist pressure, Arafat would
clearly like to end his feud with the
Syrians and seems to be trying to make
the agreement work. The Palestinians
sent their principal negotiator, Faruq
Qaddumi, back to Damascus this week to
help work out the terms of a general
cease-fire.
Damascus, in turn, has urged the
Christians to abide by the accord. The
Syrians particularly pressed Camille
Shamun to permit the evacuation this
week of some of the more than 1,000
wounded Palestinians trapped in the Tall
Zatar refugee camp.
Syrian Foreign Minister Khaddam may
go to Beirut soon to help oversee the truce
accord. If he does go, it could reflect a
Syrian decision to put more direct
pressure on the Christians to observe the
cease-fire terms.
The Syrians, however, are probably still
skeptical that Arafat will live up to his end
of the bargain. They have made no move
yet to pull back from Sawfar on the
Beirut-Damascus road, which the Pal-
estinians claim the Syrians promised to
do. Instead, Damascus has been rearm-
ing the Christians. Earlier this week the
Syrians attacked the village of Rum, an
important Palestinian-held position
between Jazzin and the port of Sidon
where the leftists and Palestinians con-
tinue to receive a steady flow of
"volunteers" and arms shipments by sea
via Libya and Egypt.
The Syrians also tried to drive a wedge
between the Palestinians and Egyptians
by unilaterally inserting a preamble into
the Syrian-Palestinian accord blaming the
second Sinai agreement between Egypt
and Israel for the war in Lebanon. Arafat
quickly dissociated himself from the
preamble. The Syrian maneuver appears
only to have reignited the propaganda
battle between Damascus and Cairo.
Stung by the charge, Cairo has accused
Syria of trying to annihilate Palestinian
and leftist forces in Lebanon and of con-
spiring with the Israelis in a plot to
SYRIA
The appointment of Major General
Abd Ar-Rahman Khulayfawi as Syria's
new prime minister reflects President
Asad's confidence in his domestic position
and in his foreign policies, especially
toward Lebanon.
The former prime minister, Mahmud
al-Ayyubi, had offered to resign after los-
ing his party post in elections last year.
Asad, however, believed that those who
were seeking to unseat Ayyubi were in
fact working to limit his own power, and
he refused to replace the prime minister in
order to avoid any appearance of yielding
to pressures.
With Syrian troops now entrenched in
Lebanon and domestic political and
security problems apparently under con-
trol, Asad presumably concluded that his
position was strong enough to go ahead
with the cabinet change.
Khulayfawi is expected to announce a
list of cabinet members late this week.
Several key ministers are likely to retain
their positions, underscoring Asad's in- 25X1
tention to continue his present policies. 25X1
Page 1 WEEKLY SUMMARY Aug 6, 76
Approved For Release 2008/01/31 : CIA-RDP79-00927A011400070001-0
 Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
Khulayfawi is a long-time confidant of
the President. He was a key supporter
when Asad took power in 1970, and
served as minister of interior and prime
minister until ill health forced him to
resign in late 1972. Well-regarded in both
party and military circles, Khulayfawi is a
strong, pragmatic administrator.
Syria's Baath Party newspaper has
suggested that Khulayfawi will draw on
his wide experience in dealing with
domestic issues, concentrating on
economic and financial problems. This
would better enable Asad to maintain his
focus on foreign affairs.
Like his predecessor, Khulayfawi is a
member of Syria's orthodox Sunni
Muslim majority. His selection preserves
the regional and confessional balance in
Asad's regime. The President and many
of his supporters in the army belong to the
small Alawite Muslim sect, centered in
Syria's coastal region. F_
Parliament this week began debate in
preparation for confidence votes in the
senate and chamber on Prime Minister
Andreotti's Christian Democratic minori-
ty government. Andreotti's government
will almost certainly be approved, but it
will be the first under the 1948 constitu-
tion to depend for its survival on Com-
munist cooperation in parliament.
The vote will be taken in the senate this
week and in the chamber next week. An-
dreotti must receive a majority from-those
voting in each house to complete the in-
stallation of his government, which was
sworn in by President Leone on July 30.
Because none of the major parties will
join the Christian Democrats in voting af-
French Territory of the Afars and Issas
A refusal by one of the principal
political parties in the French Territory of
the Afars and Issas to participate in a new
government has frustrated French efforts
to form a broad-based regime to lead the
territory to independence.
The legislative assembly elected Ab-
dallah Khamil Mohamed on July 29 to
serve as president of the new government.
Ali Aref Bourhan, the former president,
had resigned in mid-July after losing the
support of a majority of the assembly's
members.
Khamil, an Afar tribesman who had
been secretary of the territory's govern-
ing council under Aref, was elected by
only 24 of the assembly's 40 deputies.
Sixteen members of Aref's National
Independence Union walked out of the
assembly session without voting.
Khamil's ministerial appointments in-
cluded two members of the African
People's Independence League, a
predominantly Issa party. The League has
steadily gained strength over the past year
as a rallying point for Aref's opponents,
but it has no seats in the legislative
assembly. The other ministers are former
supporters of Aref in the legislative
assembly who broke with the ex-president
because they believed he was practicing
divisive ethnic politics.
France had hoped to form a broad co-
alition government capable of withstand-
ing efforts by Somalia, aided by its sup-
porters in the territory, to annex the
territory. The refusal by Aref's party to
support Khamil increases the likelihood
of instability as the FTAI approaches in-
dependence.
Aref contends that the Independence
League is simply a stalking horse for
Somalia. The League receives financial
support from Somalia, and militant
members support union with it, but the
French are hoping that the inclusion of
the League in the government will
strengthen the position of party members
who favor genuine independence.
firmatively, Andreotti will need Com-
munist abstention to survive the votes.
Although the Communists have been
hinting that they would abstain, the party
did not officially agree to do so until An-
dreotti presented his program in parlia-
ment late this week. The Communists had
earlier commented positively on the way
Andreotti drew up his program-he in-
cluded the Communists and organized
labor in the consultations-and on the
composition of his cabinet, which ex-
cludes Christian Democrats accused by
the Communists of corruption or in-
competence.
The Communists were probably en-
couraged to abstain also by the enhanced
influence they will acquire as the pivotal
party in the installation of Andreotti's
government. Once the Communists ab-
stain, the Christian Democrats-with
135 seats in the senate and 262 in the
chamber-will be able to muster a majori-
ty regardless of how the remaining parties
vote. The Communists will clearly have to
be consulted on any major government
programs and will cite their new role as
evidence that Italy cannot be governed
without Communist cooperation.
In drawing up his cabinet, Andreotti
has sought to freshen the Christian
Democrats' image by including more new
faces and technocrats than any recent
government. Eight of his 21 ministers are
new, including Italy's first woman cabinet
officer. For the first time in years, no
former prime ministers, other than An-
dreotti, are included in the cabinet.
Andreotti, meanwhile, received some
encouragement from abroad this week
when visiting French Justice Minister
Lecanuet conveyed the French
government's willingness to support An-
dreotti's efforts to deal with Italy's
economic problems. Lecanuet did not
publicly specify what form French sup-
port might take.
Currency Reserves ;
Since the elections in June, Italy has in-
creased its foreign currency reserves by
$1.12 billion through lira sales and repaid
all of the $500 million drawn on its swap
facility with the Federal Reserve Bank of
Page 2 WEEKLY SUMMARY Aug 6, 76
Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
 Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
SECRET
New York.
Major factors influencing the increase
in reserves appear to be the Christian
Democrats' retention of a plurality in the
general election, the prior deposit scheme,
and the normal influx of summer tourists.
An expected extension of the amnesty per-
mitting the return of capital illegally ex-
ported is also likely to encourage the
return of funds.
The import deposit plan has absorbed
liquidity and stabilized the exchange rate.
The scheme, which requires a 50-percent
noninterest-bearing deposit on most
foreign purchases, has been extended
three months. The high interest rates in
Italy have also helped the lira.
The exchange market intervention that
has accompanied the reserve increases has
kept the lira, which closed at 834.9 to the
dollar on August 4, remarkably stable
since the elections. In the last week, the
Italian currency has not varied by more
than one lira from the rate of 835.5 to the
dollar; nor has it varied from the 834 to
840 range since the beginning of July.
Italian authorities have intervened in
order to obtain reserves and to avoid
greater lira appreciation that could hurt
exports.
The lira still faces an uncertain future.
The $2 billion gold-backed credit granted
by West Germany is due in September.
While no decision on repayment has been
made, Italy may pay back $200 to $500
million in order to make it easier to
renegotiate the loan and to avoid having
to pledge more of its gold reserves as
collateral to counter the fall in gold prices.
The lira's prospects will be clouded by
uncertainties over the durability and
economic programs of the new govern-
ment, as well as by the high rate of in-
flation-currently at a 20 to 22 percent
annual rate, more than double the average
rate of Italy's major trading partners.
USSR-CSCE
Moscow marked the first anniversary
of the Conference on Security and
Cooperation in Europe with a spate of ar-
ticles proclaiming full Soviet compliance
with-and Western violation of-the
provisions of the final act. Moscow
emphasized its role in bringing about the
CSCE and what it sees as its major ac-
complishments: the establishment of the
principles of the inviolability of frontiers
and noninterference in the internal affairs
of others, and its contribution to
"detente."
The Soviets claim that they have im-
plemented the provisions of Basket III,
citing the relaxation of exit visa
procedures, increased sales of Western
newspapers, improved working conditions
for foreign journalists, and removal of
some travel restrictions for Western
businessmen. In general, however, they
have limited their discussion of Basket
III, concentrating instead on other
evidence of their compliance with the final
act: broader political contacts;
Brezhnev's proposal for a European con-
ference on the environment, transporta-
tion, and energy; and the advanced notice
they gave of two military exercises.
The Soviets contend it is the West that
has failed to comply with the final act.
There is greater use of Western cultural
materials in the Soviet Union than vice
versa, Moscow asserts, and a large
number of foreign visitors have come to
the CEMA countries.
Moscow attacks the West for:
? Interfering in the internal affairs
of the USSR and other countries, such
as Italy.
? Subversive, anti-Soviet activities
of Radio Free Europe and Radio
Liberty.
? Continuing to deploy new
weapons systems.
? Increasing defense expenditures.
The Warsaw Pact countries are using
the anniversary to repeat standard themes
on CSCE, but some differences in
emphasis are detectable. Warsaw's com-
mentaries skirt the issue of free exchange
of ideas. Prague, in a somewhat more
vigilant tone, reiterates that it will not
allow "ideological subversion" against the
socialist states. Bucharest drones on
about the principles of nonintervention
and sovereign equality applying equally to
all CSCE states. The Yugoslavs point to
the tough tasks ahead before real security
PROP -1 WEEKLY SUMMARY Aug 6, 76
Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
 Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
SECRET
..:..... :..
During demonstration in Barcelona earlier this year, marchers demand amnesty for political prisoners
SPAIN
The amnesty decree issued by King
Juan Carlos late last week is a positive
step toward the national reconciliation
promised by Prime Minister Suarez. The
initial reaction of opposition leaders and
the press has been favorable, although
some criticized limitations in the decree.
The amnesty is intended to boost the
government's political reform program by
enlisting the support of the previously il-
legal democratic opposition parties. These
parties have been vociferous in their
demands for a complete amnesty. Now
that the government has responded with
the decree, talks which Suarez has begun
with opposition leaders about the
government's plans for reform should be
facilitated.
The amnesty will free many of Spain's
remaining political prisoners and restore
civil rights to the Republicans who fought
against Franco in the Civil War.
Estimates of the number of political
prisoners affected by the decree vary
because implementation will be left to the
courts and the exact number will not be
known until all cases are reviewed.
When the amnesty was announced, the
minister of justice estimated their number
at some 200-a figure considerably less
than the 600 who are believed to be in
prison for political reasons. The US em-
bassy later reported that more than 400
are likely to be freed.
The amnesty covers all political crimes,
such as participation in previously illegal
political meetings and distribution of
propaganda.
Specifically excluded are persons
convicted of terrorism causing death or
injury and workers charged with organ-
izing or taking part in politically moti-
vated strikes.
The government had difficulty over-
coming the opposition of conservative
senior officers to including the military in
the amnesty, according to a Madrid of-
ficial.
The nine officers convicted earlier this
year of subversion because of member-
ship in the clandestine Military Dem-
ocratic Union will be released but for-
bidden to return to military service.
Jailed conscientious objectors will also be
freed, and armed forces members who
fought against Franco in the Civil War
will become eligible for pensions.
A substantial share of Cuba's trade
with noncommunist countries has gone to
US subsidiaries since the partial lifting of
the US embargo in August 1975.
In the past 10 months, Cuba has award-
ed these firms sales contracts totaling
$293 million-the equivalent of one fifth
of Cuba's estimated noncommunist im-
ports last year. About 60 percent of sales
have involved agricultural commodities.
Some 85 percent of the business went to
US subsidiaries in countries such as
Canada and Argentina, which are already
among Cuba's large trading partners.
Purchases from Cuba by US subsidiaries
thus far have been limited to about $2-
million worth of tobacco and molasses.
Approved For Release 2008/01/31 CIA-RDP79-00927A011400070001-0
 Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
SECRET
JAMAICA
Opposition Jamaica Labor Party leader
Edward Seaga apparently has backed
away from a threat made privately last
month to pull out of the coming national
election because of the government's
partisan enforcement of the state of
emergency.
In mid-July he told the US ambassador
that the Labor Party could not win under
existing conditions and that a decision on
whether to remain in contention would be
made at a party meeting on July 25. Now,
buoyed by a recent successful campaign
swing, Seaga says that he thinks his party
might still be able to win a "fair" election
notwithstanding the state of emergency.
He fears, however, that harassment of his
party will intensify as the election-which
must be held by next May-draws near.
Seaga's concern is warranted. The
potential for uncontrolled violence in
response to government provocation
poses a major threat. Labor Party leaders
have so far taken pains to keep their
gunmen on a short leash; even the arrest
of deputy party leader Pearnel
Charles-who remains in prison-did not
provoke retaliatory action.
The People's National Party headed by
Prime Minister Michael Manley and the
Labor Party traditionally have employed
violence to aid their cause. There is every
reason to believe that in the key "swing"
districts, the use of force will be more
savage than ever. Already the security
forces-even with all reserves on
duty-are stretched thin and morale is
low. It is doubtful that they will be able to
maintain order if violence escalates and
spreads beyond Kingston.
Meanwhile, Cuba and Jamaica have
continued a high level of interchange in
the past few weeks on a broad range of
issues. For the second year, Cuban
Political Bureau member Juan Almeida
headed a delegation that participated in
Jamaica's independence celebration on
August 2. There has been close contact all
summer between top officials of Manley's
party and a section of the Cuban Com-
munist Party staffed by personnel respon-
sible in the 1960s for efforts to export
Cuba's revolution.
Seaga claims that the chief of this
party section-who in the 1960s headed
Cuba's General Directorate of Intelligence
-will visit Jamaica in early August. In ad-
dition, the first contingent of Jamaican
youth that spent the past year in Cuba
studying construction techniques returned
home at the end of July. The 183 mem-
bers were hand-picked by Minister of
BRAZIL C'
Brazil's trade deficit fell to $1.3 billion
during the first six months of 1976 com-
pared with $1.8 billion in the same period
last year.
Exports should increase about 16 per-
cent in the second half of this year, com-
pared with 5 percent in the first half, for
an overall 11 percent for the year. The
trade deficit for the year should be 60 per-
cent lower than last year.
Despite rising interest payments on
foreign debt, the improved trade balance
is likely to reduce the current-account
deficit to $5 billion for the year-down
nearly $2 billion from 1975.
After a slow first quarter, caused by
reduced sugar sales, export earnings are
picking up rapidly this year. Foreign sales
in June climbed to $1 billion, a record
high monthly total.
A record value of coffee exports made
up nearly one third of the total. Sharply
rising world coffee prices contributed to
the jump. Increased soybean sales also
were a factor in Brazil's record June trade
performance.
Stringent import controls are an impor-
tant factor in the trade improvement.
Government organizations, which ac-
count for nearly half of all imports, have
been ordered to cut purchases abroad by
25 percent this year. In addition, the re-
quirement for a noninterest-bearing ad-
vance deposit with the Central Bank
equivalent to the value of an import has
been expanded to cover nearly one third
of Brazil's imports.
Overall import volume, already down
about 4 percent in the first six months, is
unlikely to exceed 90 percent of the 1975
level.
Record harvests for some crops and a
revival of industrial output prompted by
strengthened consumer demand in the
first half of the year should raise Brazil's
real economic growth rate slightly-to 5
percent-in 1976 despite import restric-
tions. This recovery still leaves the coun-
try well below the 10 percent annual
avera e of the boom period of 1968 to
1974.
Housing Anthony Spaulding, a promi-
nent radical, who had worked closely with
the ruling party's youth arm. They can
be expected to serve as political organ-
izers for the party during the campaign.
Another contingent of 300 is scheduled
to go to Cuba later this year.
Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
 Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
SECRET
Negotiations on the status of US bases
in the Philippines-now in their eighth
week-have made only limited progress.
The informal target date of late July for
completion of an agreement passed with
the resolution of only less contentious
points.
Manila is continuing to press for a clear
US acknowledgment of Philippine
sovereignty over the bases and for
elimination of what it considers to be
relics of US extraterritoriality. The
Philippine negotiating team is demanding
more than cosmetic control over the
bases; it wants a say in all operations
staged from them.
The team so far has avoided coming to
grips with the basic issue of compen-
sation-in the form of military aid-that
Manila wants for US use of the bases.
President Marcos has recently in-
dicated a disposition to defer serious
negotiation on this and other sensitive
issues until after the US presidential elec-
JAPAN
Tension and uncertainty pervade the
ruling Liberal Democratic Party, with
Japanese prosecutors now poised to arrest
additional politicians and officials im-
plicated in the Lockheed affair. Following
the dramatic arrest of former prime
minister Tanaka early last week, specula-
tion centered on LDP Secretary General
Nakasone as the next major figure to be
named.
Prime Minister Miki has not said
whether he would follow tradition by
resigning if a senior party official or
cabinet member is implicated, but he
nant denials followed quickly. This week,
the Socialists returned the favor by reviv-
ing questions about Miyamoto's involve-
ment in a pre - World War II murder
case.
Meanwhile, an initial public opinion
sampling has registered strong satisfac-
tion with the investigation so far, in-
cluding Tanaka's arrest. At the same
time, a majority hold the conservatives
responsible for the affair rather than
Tanaka as an individual. Finally,
overwhelming majorities of 90 percent or
more in polls believe that corruption ex-
ists in all political parties and that the im-
portance of money in politics will not
change a great deal as a result of the
Demonstrators demand names of Japanese officials involved in Lockheed scandal
would come under strong-perhaps
overwhelming-pressure to do so.
Without such a complication, Miki
appears determined to remain in office
while his opponents, assembling around
deputy prime minister Fukuda, seem
equally intent on ousting him. Even bar-
ring any additional major developments
in the investigation, a potentially explo-
sive clash between Miki and his rivals is
in the making.
Despite the obvious opening presented
by the Lockheed scandal, opposition par-
ties have once more taken to squabbling
among themselves. Last week, Commu-
nist Party chairman Miyamoto charged
the other three opposition parties with
taking bribes in exchange for cooperation
with the conservatives in the Diet; indig-
Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
 Approved For Release 2008/01/31 : CIA-RDP79-00927A011400070001-0
Foreign Minister Miyazawa is the architect of Tokyo's
harder line toward Peking. He has made a number of widely
publicized remarks that have led to a cooling of Sino-Japanese
relations.
Japan-China: Harder Line Toward Peking
C
Iq
T
After nearly a year of official op-
timism, Japan has lowered its expec-
tations and hardened its position in its
relations with China.
The changes suggest that in the near
term, Japan feels under no compulsion to
conclude a treaty of peace and friendship
with China and is prepared to accept what
it probably hopes will be only a temporary
deterioration in relations with Peking.
Page 7 WEEKLY SUMMARY
Miyazawa's Role
The architect of this shift in Tokyo's
position is Foreign Minister Miyazawa.
In widely publicized remarks over the past
few weeks he has:
? Warned the US against any im-
provements in its relations with China
that might adversely affect Taiwan's
security.
? Cautioned Peking about the an-
ti-Soviet statements of Chinese visitors
in Japan.
? Characterized the difference
between the attitudes of Japan and
China toward the USSR as the
primary obstacle to concluding a
Sino-Japanese peace and friendship
treaty.
Although Miyazawa's statements
reflect views on China policy that
Japanese government leaders have ex-
pressed privately, his decision to go
public-and become a target for Chinese
wrath-suggests that he is motivated by
personal as well as broader foreign policy
concerns.
Miyazawa is a relatively young and am-
bitious politician who calculates that his
remarks will strengthen his position dur-
ing this period of Liberal Democratic Par-
ty infighting. Although Miyazawa has
been regarded as a progressive throughout
his career, he has long been on good terms
with Deputy Prime Minister Fukuda, the
leader of the party's more conservative
wing. Since becoming foreign minister in
late 1974, Miyazawa's efforts to mend
relations with Taiwan and South Korea
have measurably improved his standing
with party conservatives.
Miyazawa may well share the widely
held view within the party that a
Fukuda-led government is likely to come
to power regardless of the political fallout
Aug 6, 76
Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
 Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
from the Lockheed affair. His actions on
China could strengthen his ties with
Fukuda by helping lay the groundwork
for Fukuda's foreign policy; as the next
prime minister, Fukuda would inherit a
notably stiffer policy toward Peking
without having to bear the onus for in-
stituting the change.
Prime Minister Miki, long hopeful of
concluding a treaty with Peking, reported-
ly was upset by Miyazawa's remarks.
Miki apparently has concluded, however,
that he is boxed in on the issue by the
current political balance in his party. In
discussing Sino-Japanese issues in the
Diet on July 28, Miki neither overruled
nor undercut Miyazawa's statements.
Thus, little forward movement in Tokyo's
ties with Peking is likely while Miyazawa
is foreign minister.
The Treaty Impasse
Broader considerations also have en-
couraged the change in Tokyo's outlook.
The most important has been increasing
Japanese pessimism over prospects for a
peace and friendship treaty, which is hung
up on the anti-Soviet "hegemony" clause
that Peking insists be included in the pact.
Despite a consensus in Japan in favor of
the treaty, Tokyo is concerned that un-
qualified acceptance of the antihegemony
principle would publicly identify Japan
with an overly extreme anti-Soviet
posture. This sensitivity, combined with
pressure from more conservative and
pro-Taiwan members of the Liberal
Democratic Party, has prompted
Japanese attempts to dilute the an-
tihegemony formula.
China's persistent failure to accom-
modate on this issue, its recent press
criticism of Miyazawa's position on the
treaty, and the current leadership struggle
in Peking have led Tokyo to conclude
there is little possibility for compromise in
the near future.
Taiwan and the US Angle
Given Japan's pessimistic view of the
prospects for a treaty, the timing of the
Sino-US normalization process has
assumed greater importance in Tokyo.
Japan is determined to maintain as good,
if not better, contacts with China than
does the US, and Miyazawa, concerned
that the US might formalize ties with
China before or after the November elec-
tion, has been cautioning US officials
since early June about any abrupt change
in Sino-US relations.
Miyazawa is not opposed to eventual
Sino-US normalization or to a new for-
mat for assuring Taiwan's security. But,
like others in Tokyo, he regards a US
guarantee for Taiwan's future as the ma-
jor issue in the Sino-US normalization
process. The Japanese have maintained a
considerable economic stake in Taiwan
since establishing relations with China in
1972. In Tokyo's view, a sudden break in
US relations with the Chinese
Nationalists might jeopardize Taiwan's
political stability, threaten Japan's
profitable trade and investment links with 25X1
the island, and complicate its relations
with China.
A recent article in Peking Review suggests by analogy that
the left has not made much political headway since Teng
Hsiao-ping's fall from power.
China: Problems for the Left
An unsigned article io ast month's
Peking Review has striking parallels with
the present political situation in China. It
may indicate that the left has encountered
substantial difficulty in making further
gains since Teng Hsiao-ping's fall from
power.
In particular, the leftists seem to be ad-
mitting that they lack support among the
military and among civilian leaders in the
provinces and that Mao's withdrawal
from public life has not helped their cause.
The article is an update of one publish-
ed during the anti-Confucius campaign in
1974 which contained some phrases that
have a moderate cast. The new version in-
cludes new material which may refer to
more recent events, such as Mao's declin-
ing health, and rewrites a number of
politically sensitive passages that give the
article a decidedly leftist thrust.
Significantly, both versions contain
strong attacks on provincial military and
civilian leaders. The fact that the article
has thus far been noted only in a foreign
language journal not readily available in
China could be an indication of the great
sensitivity of the subject matter.
Using historical analogy, the article
describes a power struggle between
"reformists" and "conservatives," two
factions that closely resemble today's lef-
tists and moderates. The article says that
conservatives in the national leadership
controlled access to the emperor (read
Mao) and ran the government in collusion
with provincial leaders. The reformists
were able to chip away at the conser-
vatives' power by demoting or removing
some conservatives from office, but ul-
timately the reformists could not dislodge
their opponents because they lacked
military power.
The article seems to be referring to the
ouster of Teng Hsiao-ping and possibly
some of his subordinates, but it also
suggests that the left cannot make further
Pace 8 WEEKLY SUMMARY Aug 6, 76
Approved For Release 2008/01/31 : CIA-RDP79-00927A011400070001-0
 Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
SECRET
headway without military support.
Indeed, the support of the military, es-
pecially of the powerful military region
commanders, is probably crucial in the
current power struggle. There is no
evidence that the majority of the military
is backing the left.
The article states that after the refor-
mists failed to gain the upper hand in the
national government, the conservatives
were able to strengthen their own position
by using the emperor's illness as a pretext
to force him to abdicate. This appears to
be an allusion to the party Central Com-
mittee's decision that Mao will no longer
meet foreigners because of ill health. It
suggests that the decision may have been
motivated by political as well as medical
considerations and that leftists were not in
agreement with it. Mao's absence from
public view certainly makes it difficult for
the left to use his name as a source of their
authority. New statements from him sup-
porting their position-and none have
appeared since Mao's seclusion-would
immediately be suspect if only because the
public has no way of knowing to what ex-
tent the Chairman is directly able,
physically or politically, to insert himself
in the political process.
The article contends that opposition to
the emperor has always come.from senior
provincial leaders rather than from of-
ficials at lower levels, where there is a
reservoir of leftist strength. Moreover,
provincial governors, with the support of
"haughty soldiers" and "fierce generals,"
openly defied orders from the national
government.
To rectify this situation, the reformists
in the analogy advocated abolishing
provincial governorships and appointing
trustworthy soldiers, thereby turning over
local administration to lower level of-
ficials. This seems to be a call to purge
provincial leaders and regional military
commanders, most of whom have not
been enthusiastic about the anti-Teng
campaign. Abolition of provincial gover-
norships bears some resemblance to an
idea floated late in 1974 to break up
China's 29 provinces into 51 units-a plan
never implemented.
The article on two occasions refers to a
five-month period during which the refor-
mists enjoyed a measure of political
power. Once the conservatives regained
power, high level officials in the reformist
camp were removed from office. Five
months is roughly the length of time
between the naming of Hua Kuo-feng as
"acting premier" and the publication of
the article itself. This could be a subtle
appeal to Hua Kuo-feng to side with the
left during the current struggle-he thus
far seems to have avoided firm factional
alliances-on the grounds that his
premiership could be short-lived if the lef-
tists lose out.
Some Chinese do feel that Teng Hsiao-
ping could make a comeback because he
is still a member of the party, Teng's par-
ty membership seems to be a sore point
with the left, which has argued for his dis-
missal from the party. The moderates
could indeed attempt to bring Teng back
should Mao die in the near future. A lef-
tist bid for Hua Kuo-feng's support on the
grounds that the popular Teng has not yet
been completely eliminated as a rival
could have some appeal to the Premier.
The left has clearly gone out on a limb
in this article by emphasizing its
differences not only with civilian but also
military leaders in the provinces. The arti-
cle could be read as a near declaration of
war against these important military
figures. The peculiarities of publication,
however, the choice of a foreign language
journal, and the lack of any reference to
the earlier version of the article or the
author suggest some disagreement in the
leftist camp over the exploitation of the
most sensitive charges raised in the arti-
cbe. Its generally defensive tone,
moreover, suggests that it may be more a 25X1
statement of principle than an attempt to
expand the campaign and may be an ad- 25X1
mission that the left must establish a
wider base of support.
Page 9 WFFKI V .CI InnnAAOV A.._ C
Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
 Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
SECRET
The spreading rought in Eastern Europe has hurt harvest
prospects for this yer, and output will be further reduced if it is
not broken very soot. Large US grain sales to the region seem
likely)-
Eastern Europe: Drought Hurts Harvest
The spreading drought in Eastern
Europe has hurt prospects for a record
grain harvest this year.
In mid-June, forecasts by the US
Department of Agriculture placed poten-
tial output at a record 93 million tons. As
a result of the continued hot, dry weather,
we now project this year's grain output at
about 89 million tons, only slightly better
than last year's mediocre crop.
Grain output at this level, coupled with
a serious reduction in fodder and forage
crops, suggests that imports of grain in
the marketing year ending June 30, 1977,
will remain near the record level of 12
million tons reached last year. If the US
retains its market share, exports to
Eastern Europe may again exceed 6
million tons, twice the level of the 1973 to
1974 period.
Drought conditions are worst in East
Germany. As of mid-July, soil moisture
had fallen to less than half of normal. Un-
til rain fell at the end of July, critically
low soil moisture levels also had existed in
western Poland, Czechoslovakia, and
Hungary. A second drought area centers
in Romania's main grain producing
region and extends into Bulgaria. Only
Yugoslavia has received adequate rainfall.
Crops there are reported in good condi-
tion.
The drought will have the least impact
on winter grains, reducing output by
about 5 percent. We expect the winter
wheat harvest to reach 31 million
tons-10 percent higher than last year,
but almost 3 million tons below the record
crop of 1974.
Drought damage will be more severe to
spring-sown grains, and to the fodder
crops, especially potatoes for feed use.
Pastures are also hard hit. The corn
harvest may reach 27 to 28 million tons,
roughly 5 to 10 percent below last year's
crop despite a somewhat larger area
planted this spring.
Output will be further reduced if the
drought is not broken very soon.
Premature harvesting of corn for silage,
rather than for grain, would lower our
projection even further.
Potatoes, important for both food and
fodder in the northern countries, will be in
short supply, contributing to the con-
tinued meat shortages. Fresh vegetables
and fruits also will fall short of consumer
needs.
East German grain production will fall
for the second year in a row. Dry con-
ditions have ruled over much of East Ger-
many since last September, and water
levels are now so low that some localities
are being supplied from water trucks. If
sufficient rains do not fall soon, East
Germany will have to cope with another
disastrous potato harvest. Last year, a
summer drought reduced the potato crop
by one third.
Grains in Poland survived the winter in
good condition, and timely rains fell in
May to offset a dry spring. The current
drought is confined to the western and
southwestern parts of the country.
Reports from Wroclaw indicate that
potato and sugar beet crops are stunted
and reflect concern over premature ripen-
ing of grain crops. In other areas, where
summer rainfall has been adequate, cool
temperatures will delay the start of the
harvest.
In Czechoslovakia, grain production
probably will be held to the 1975 level.
According to the US agricultural attache,
additional output from a 5 to 6 percent in-
crease in winter wheat acreage was
probably more than offset by damage
from freezes in early March. Potential
losses from the drought were moderated
by light rains in early July. Prospects for
the corn harvest are still uncertain;
corn has developed poorly, and more
rain is needed this month to avoid large
losses. Good rains still could save the
potato and sugar beet crops.
The drought hit Hungary later than
other East European countries and has
had a relatively small impact on wheat.
The moderate rainfall on July 21 and 22,
covering four fifths of the country, may
alleviate the situation. The most serious
damage is to fodder crops, meadows, and
pastures. The corn crop, more than half of
grain output, could be damaged if good
rains do not come soon. Hungarian of-
ficials already estimate that potential ex-
port availabilities of wheat and corn may
be cut by half, or I million tons.
Severe drought struck southeastern
Romania in early May. Many wheat fields
were plowed under and replanted with
corn, but the continuing drought suggests
the new effort will not succeed.
Little information is available on crop
conditions in Bulgaria. Much of the corn
is grown on irrigated land which will
temper the impact of the drought.
East European countries will have to in-
crease their purchases in foreign grain
markets. Among the major importing
countries, East Germany and
Czechoslovakia probably will boost their
grain imports to about 4 million tons and
2 million tons respectively. Even with
larger grain imports, East Germany will
not be able to avoid acute shortages of
animal feed.
1 /l %A/CCLII V cI Il A AAPY Aua 6. 76
Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
 Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
SECRET
GERMANY
SECRET
Eastern Europe
Drought Area
_ 100 MILES
100 KILOMETERS
TURKEY
rte'
Page 11 WEEKLY qI IAAAAA ov
Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
 Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
Polish grain imports will probably be
less than they were last year, but they may
run between 4 and 5 million tons, mostly
wheat and corn. The amount may depend
on whether Warsaw chooses to import
meat for immediate consumption or grain
to support livestock production.
East European purchases in the West,
particularly from the US, will depend
largely on the amount of grain the USSR
can supply. The USSR has provided in
the past as much as one half of East
European grain imports.
Last summer, Moscow suspended grain
shipments to Eastern Europe because of
its own poor harvest. The US inherited
The Hague has proposed a major overhaul of the Euro-
peanjoint float, but West Germany opposes it, and the UK and
Italy have reservations. The Netherlands may be receiving sup-
port from Paris and some of the smaller joint float countries.
most of the normal Soviet business,
providing about 6.5 million tons com-
pared with 3 million tons the previous
crop year. If the USSR supplies a
minimum amount-around 3 million
tons-US sales to Eastern Europe could
equal last year's level.
EC: Overhaul of Joint Float Proposed
The Netnertanas proposect a major
overhaul of the European joint float at
last week's meeting of European Com-
munity finance ministers, The proposal
calls for wider bands on joint-float curren-
cy fluctuations, more frequent ad-
justments in central rates, and constraints
on parity changes for nonparticipating EC
currencies.
The Dutch initiative reflected the
problems encountered in maintaining
parity between the guilder and the
stronger West German mark.
From its beginning in 1972, the EC
currency band-the "snake"-has been
beset by problems. Britain and Italy
dropped out of the arrangement within a
year of its inception. West Germany has
twice revalued relative to other float
currencies. France has left the snake
twice, most recently in March 1976.
The snake's chief problem has been its
inability to cope with differential rates of
inflation and shifts in short-term interest
rates among member countries. Bonn's
success in fighting inflation has made the
West German mark the strongest curren-
cy in the band. The heavy intervention
costs involved in keeping the mark and
weaker currencies within 2.25 percent of
one another-and members' resistance to
additional changes in central
rates-precipitated the withdrawal of the
pound, lira, and French franc.
The truncated snake has continued to
encounter similar problems. The West
German inflation rate of 5 percent is
about half the rates in other participating
countries. To maintain parity with the
mark, the smaller member countries have
been forced to maintain tighter fiscal and
monetary policies than they would prefer.
With unemployment ranging from 5.5
to 8 percent, the governments of Den-
mark, Belgium, and the Netherlands have
found the go-slow economic policies
politically painful. The Dutch proposal is
an attempt to dilute float rules sufficiently
to give the smaller participants an alter-
native to the disciplined German
economic policy stance.
As might be expected, West Germany
opposes the Dutch proposal on grounds
that its adoption would further lessen in-
centives for harmonizing economic
policies among EC members. The UK
and Italy also are skeptical. Both have
rates of inflation well above those in other
E:C countries and feel they need the flex-
ibility of floating to pursue domestic
policy goals.
Bonn and London succeeded at last
week's meeting in postponing serious dis-
cussion of the proposal until October. In
the meantime, the plan will be studied by
the EC monetary committee.
The Hague may be receiving support
from Paris and from some of the smaller
joint float countries. The Dutch proposal
parallels a reform package presented
earlier this year by France, prior to its
desertion from the joint float. Many of
the smaller countries, like the
Netherlands, have had trouble main-
taining parity with the strong West Ger-
man mark and probably favor a more
flexible system.
While Bonn has managed to prevail
against a reform for the time being, the
Schmidt government probably recognizes
that maintaining the snake will likely re-
quire changes in either the operating rules
or the central rates. On the basis of the
past West German record, we expect that
Bonn may opt for a moderate mark
revaluation, but only after the national
election in October. Until then, the
Schmidt government will want to avoid
charges that it has harmed West Ger-
many's chances for a sustained economic
Page 12 WEEKLY SUMMARY Aug 6, 76
Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
 Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
 Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0
Secret
Secret
Approved For Release 2008/01/31: CIA-RDP79-00927A011400070001-0