WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A011400270001-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 17
• Document Creation Date: December 20, 2016
• Document Release Date: May 10, 2007
• Sequence Number: 1
• Publication Date: December 23, 1976
• Content Type: SUMMARY

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 25X1
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Weekly Summary
?IA review completer
Secret
CI WS 76-052
No. 0052 / 76
December 23, 1976
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repored
Middle East
Israel; Egypt-Syria;
Lebanon; Egypt-UK;
Israel-UK
3
International
OPEC; Wheat Prices
5
Africa
Zaire-Zambia
6
Europe
USSR; Spain
7
Western Hemisphere
Peru-Chile-Ecuador
8
Asia
Vietnam
9
Australia: Uranium Policy
10
Spain-NATO: Changing Relations
11
Brazil: Austerity Program Tightened
CONTENTS
publication are welcome. They may be
directed to the editor of the Weekly -
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ISRAEL
Prime Minister Rabin's break last
weekend with his Labor Party's conser-
vative coalition partner, the National
Religious Party, and his subsequent
resignation to force an early national elec-
tion are likely to reverse, at least in the
short run, a steady erosion of his strength
within his party and among the Israeli
electorate. Rabin will stay on as head of a
caretaker government pending the elec-
tion, which may be held in April or May.
Rabin will now try to secure broad
Labor Party backing for his continued
leadership. Although party conservatives
and some moderates had been leaning
toward the more hawkish Defense Minis-
ter Peres, they are likely now to unite
behind Rabin rather than precipitate a
bitter leadership struggle.
If Rabin succeeds in rallying the party
around him, he will probably seek a
moderate plank on Middle East peace
negotiations in the party platform. He
would apparently like a plank vague
enough to mollify party conservatives but
moderate enough in tone to satisfy Labor
doves and Labor's long-standing left-wing
coalition partner, Mapam.
The Israeli leader may also calculate
that such a stance could win back support
from moderate splinter groups, in-
dependents, and disgruntled Labor sup-
porters who are turning increasingly to
Yigael Yadin's new Democratic Move-
ment party.
Rabin has put Labor's main opponent,
the conservative Likud grouping, on the
defensive for the moment but, if his gam-
ble misfires, he risks losing the initiative
to Likud. Significant electoral gains by
Likud would undermine Labor's position;
a tactical alliance between Likud and the
National Religious Party even under the
present line-up in the Knesset would con-
trol 44 of the 120 seats and might attract
an additional few seats held by splinter
groups.
The political developments in Israel
this week are likely to have little impact
on the Arabs' overall negotiating strategy.
Although the principal Arab states realize
that Rabin will have little inclination to
resume serious negotiations until the elec-
tion is behind him, they will continue to
press for a resumption of the talks before,
or at least immediately after, the contest.
The Arabs will probably take en-
couragement from the fact that the elec-
tion has been moved up; they had
previously indicated concern that both
Israel and the US would try to delay the
negotiating effort until after the originally
scheduled date for the election, late Oc-
EGYPT-SYRIA . ' 4
Egyptian President Sadat and Syrian
President Asad-who feuded bitterly dur-
ing most of the past year-announced on
December 21 their intention to establish a
"unified political command" as the first
step toward an eventual union of their
countries. The statement came at the end
of a four-day visit by Asad to Cairo.
The plans will probably never come to
fruition, but the announcement un-
derscores the desire of the two sides to
show-primarily to the US and
Israel-that they are determined not to
allow themselves to become divided again
on tactics for Middle East peace
negotiations.
Egypt and Syria probably do not in fact
intend to work toward a full merger.
Although the political command is to es-
tablish committees to discuss integration
of policies in various areas ranging from
culture to foreign affairs and defense, the
committees are not likely to serve as
anything more than a framework for
coordination on key matters of mutual in-
terest, if that.
Neither Sadat nor Asad has any il-
lusions about the fate of past Arab unity
schemes. Both would resist full integra-
tion of policies, but both are particularly
interested now in coordinating strategies
and tactics for forthcoming peace
negotiations. Their statements clarifying
the unity declaration laid heavy stress on
the need for united Arab action as the
only effective means of achieving
negotiating progress.
The statements were clearly intended to
convey to Israel and the US the message
that, despite the inter-Arab wrangling of
the past year, the Arabs do not basically
differ on strategy and will not in the long
run fall prey to Israel's openly stated
policy of attempting to divide them on
tactics.
Asad and Sadat almost certainly still
harbor private suspicions about each
other, and each no doubt views the unified
political command as a useful mechanism
for keeping the other in line. This is par-
ticularly true of Asad, who undoubtedly
fears that Sadat, despite his disclaimers,
could again adopt an independent
negotiating policy, as he did last year
when he concluded the second Sinai
agreement. Asad probably looks on the
joint command as a device for preventing
Sadat from again moving too far ahead of
Syria and the other Arabs.
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LEBANON
Syrian-Iraqi tensions resurfaced in
Lebanon this week. Palestinians sup-
ported by the rival Baathist regimes clash-
ed in several refugee camps, prompting in-
tervention in camps near Beirut by troops
of the predominantly Syrian Arab
peacekeeping force. Syrian troops also
closed down newspapers subsidized by
Iraq.
Members of the pro-Syrian Saiqa
fedayeen group have been returning to
Lebanon since Syria's large military
presence there was endorsed by most
other Arab states at conferences in
Riyadh and Cairo last October. They
have clashed several times with members
of other fedayeen groups, particularly
with the "rejectionists" who, unlike Yasir
Arafat's more moderate Fatah group,
have not come to terms with Syria.
In a move to silence some of their more
vocal critics among Lebanon's
War-torn Beirut prepares for Christmas
traditionally free-wheeling newspapers,
Syrian troops on December 14 occupied
the offices of three Iraqi-influenced
papers. Four more papers-two of them
widely respected independents-were
closed in the next few days, possibly in
reaction to their editorial condemnation
of the initial Syrian move.
The Syrians may have acted with a view
to forcing the Lebanese government to in-
augurate press censorship, something
President Sarkis has been considering. He
has recently taken steps to bring the
government-owned radio and television
under the control of the Information
Ministry and had been pressuring the
press to come up with a system of
self-censorship.
Little progress has been made on the
major problem bedeviling the cease-
fire-the collection of heavy weapons
from the various Lebanese and Palesti-
nian militias involved in the civil war. The
quadripartite committee charged with
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overseeing the truce-representatives of
Syria, Egypt, Saudi Arabia, and
Kuwait-has so far failed to agree on a
course of action. All the parties have been
caching their weapons since the cease-fire,
and it is unlikely that any will volun-
tarily hand over substantial quantities.
The Syrians have made no effort to
send elements of the peacekeeping
force-either their own troops or some of
the limited number from other Arab
countries-to south Lebanon, where the
Palestinians retain considerable freedom
of activity. TheSyrians are, well aware, of
course, of the Israelis' continuing sen-
sitivity to the presence near their border
of Syrian troops in any capacity.
The border area has been generally
quiet in recent days, although some shell-
ing activity has taken place. On December
20, Israeli gunboats chasing a ship that
was trying to deliver supplies to the left-
ist-held port of Tyre was fired on from
leftist positions near the coast.
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EGYPT-UK
The Egyptians reportedly are making
substantial progress in negotiations they
have been conducting with various British
firms for weapons spare parts and
maintenance support. If significant
British assistance is obtained, Egypt may
soon be able to maintain large numbers of
its Soviet-designed medium tanks and
MIG-21 fighter aircraft despite Moscow's
cut-off of military aid. President Sadat
would then be under less pressure to make
political concessions to the USSR.
Since early this year, the Egyptians
have been negotiating with several British
firms for parts and electronic equipment
for tanks
Negotiations apparently are continuing
with British-and also Italian-com-
panies to replace the main gun of the
Egyptian T-54, T-55, and T-62 tanks with
a 105-mm. gun that will fire standard
NATO ammunition. Such a modification
would enable Egypt to obtain ammunition
and spare parts from Western sources.
The US defense attache in Cairo re-
ports that the Egyptians are making con-
siderable progress toward being able to
handle by themselves the overhaul of
MIG-21 engines, including the more ad-
vanced R-13 that powers most of Egypt's
MIG-21s. The Egyptian air force, along
with advisers from Rolls Royce, reported-
ly will overhaul 25 R-13 engines this year.
I ~ ---/ la
Egypt is still considering negotiating
for rights to produce, under license, the
British-built Hawk jet trainer and light-
attack plane, but must coordinate first
with the other three members of the Arab
Organization for Industrialization-
Saudi Arabia, the United Arab Emirates,
and Qatar. Representatives of the four
countries reportedly met in Cairo last
week to discuss feasibility studies for
Arab production of a fighter aircraft and
tactical missiles. The four countries are
also considering the French Mirage F-I.
Successful conclusion of Egypt's
negotiations with British and other poten-
tial West European suppliers might
enable the Egyptians to extend the
lifespan of some key hardware and
perhaps lay the groundwork for a
Israel-UK: Submarine Delivery
Israel recently took delivery of the first
of three 500-ton attack submarines
purchased from the UK. The submarine
reportedly sailed for Israel in late
November.
The other two submarines apparently
are scheduled for delivery in 1977. Israel
is considering purchasing more, after
evaluating the performance of the first
three.
The Israelis have had only one sub-
marine-a British-built boat of World
War I I vintage, It has been used primarily
for training and will probably be phased
out of service by 1980. The new sub-
marines probably will be based at Haifa
and used in the Mediterranean for coastal
defense and operations against Arab
navies and shipping in any future war.
Missile patrol boats will continue to be
the backbone of the Israeli navy for the
foreseeable future
domestic arms industry capable of
producing some sophisticated weapons.
At best, however, these measures can do
no more than help Egypt slow the erosion
of its military capabilities.
7
The oil ministers of the 13 countries
comprising the Organization of
Petroleum Exporting Countries were un-
able to agree, at their meeting last week in
Doha, Qatar, to a single percentage on
which to base a price hike effective
January 1. Saudi Arabia and the United
Arab Emirates will confine the price rise
on their crude to 5 percent. The other 1 l
OPEC members plan to raise prices by 10
percent on the first of the year and to con-
sider another 5-percent increase in
mid-1977.
The arrangement-an interim one to
prevent the oil cartel from breaking
apart-evidently was adopted as a last
resort once it became apparent that Saudi
Arabia and the UAE were not prepared to
agree to more than the nominal hike.
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The divergence on pricing probably
amounts to a test of wills that can be
decided only by the market. The Saudis
hold a strong hand. They can bring on
stream more than 2 million barrels per
day in underutilized productive capacity;
this would tend to depress the market and
make it difficult for some of the other
producers to maintain a 10-percent in-
crease.
In any case, demand will probably
weaken substantially in early 1977 as the
oil companies draw down excess stocks
built up in recent months in anticipation
of a price increase. This could reinforce
the Saudi position. The next few weeks
will likely be a period of moderate in-
stability for the cartel. Companies with
access to Saudi and UAE oil could gain
windfall profits.
The two-tiered price structure cannot
continue indefinitely. Competition to
avoid export declines will lead to price
shaving. Even a recovery of demand after
excess stocks are worked off would leave
the export earnings of some OPEC coun-
tries well below earlier levels
.~~
WHEAT PRICES
Record wheat harvests and overall
sluggish demand for wheat have increased
competition among exporters in the inter-
national market and lowered world-wide
prices.
The International Wheat Council is es-
timating world production at 410 million
tons for the 1976-1977 marketing year, a
16-percent increase over the previous
year. The council estimates that import
demand for wheat will fall to 60 million
tons this year from the 1975-1976 level of
67 million tons.
The most aggressive exporter now is
Argentina. Its record 12-million-ton
harvest has resulted in an exportable sur-
plus of 7 to 8 million tons. Unless exports
increase prior to its spring grain harvest,
Argentina will be faced with severe
storage problems.
Argentina has recently dominated
Brazilian import tenders and sold 500,000
tons to Chile and 200,000 tons to China.
There is market speculation that the
Soviets may substitute Argentine wheat
for as much as 500,000 tons of US corn.
Additional US sales to Eastern Europe
may be similarly affected.
Canada, a very aggressive seller during
its summer and fall harvest seasons, has
since backed off somewhat. Canadian ex-
ports will probably total 12.5 million
tons-a large share of which has already
been sold-from a bumper harvest of 23.5
million tons.
Late-season improvements in weather
conditions have raised estimates of
Australia's wheat harvest to about 10
million tons. With an exportable surplus
of 8 million tons, the Australians are like-
ly to become more aggressive in the inter-
national market. Australia recently com-
pleted sales of 500,000 tons to China un-
der an old agreement and has been
negotiating with the Chinese for a new
wheat purchase agreement.
In an effort to combat falling world
prices and protect traditional markets, the
EC recently increased export subsidies on
soft wheat and wheat flour. EC officials
are now forecasting 1976-1977 wheat ex-
ports at 5.6 million tons, up from earlier
forecasts of less than 5 million tons.
Vl P/
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ZAIRE-ZAMBIA 2 ?' - 0
Zairian President Mobutu and Zam-
bian President Kaunda-black southern
Africa's major moderate leaders-met in
Kinshasa last week. Mutual problems in-
volving their relations with the radical
Angolan regime and transportation
facilities for moving their countries' vital
exports probably dominated their dis-
cussions.
Mobutu's open opposition during
the Angolan civil war to Agostinho
Neto's Soviet- and Cuban-backed
Popular Movement has left the Zairian
leader concerned about the future of his
own regime and with little ability to in-
fluence events in southern Africa. He is
eager to break out of his semi-isolation
and is thus bent on mending fences with
the victorious Angolan faction.
He particularly wants to regain use of
the Benguela railroad whenever it is
reopened to international traffic. Through
service was halted last year by the war,
and the threat posed by guerrilla forces of
Jonas Savimbi's National Union since the
end of the conventional fighting continues
to prevent use of a segment of the route in
eastern Angola. Loss of access to the line
has forced Zaire to divert a large share of
its traffic to South African ports via rail
routes through Zambia and Rhodesia.
Mobutu also wants to discourage
Angolan or communist support for
Zairian dissidents, many of whom are in
exile in Angola.
The Zairian leader recently sent
assurances to Neto that he is not suppor-
ting the guerrilla operations being carried
out in northern Angola by remnants of
Holden Roberto's National Front, which
has been based in Zaire for more than a
decade. Mobutu apparently now wants to
wash his hands of the Front and give sub-
stance to his assurances by getting all
Front guerrillas to return to Angola.
Zambia's Kaunda, for his part, is also
interested in improving relations with the
Neto regime, partly for political reasons
and partly in the hope of expediting the
reopening of the Benguela railroad.
After Zambia adhered in 1973 to the
UN sanctions program against Rhodesia,
Kaunda shifted his country's trade
patterns so that half of Zambia's exports,
including most of its refined copper ex-
ports, moved over the line to the Angolan
port of Lobito. The closure of this route
forced Zambia to divert traffic to the Tan-
zam railroad and other less satis-
factory routes.
South
1\ f
Africa
Political relations between the Kaunda
and Neto governments have been slow to
develop because of Kaunda's long. support
for the National Union during the
Angolan nationalist insurgency against
the Portuguese and his partiality toward
Savimbi when the three Angolan leaders
were battling it out a year ago. Kaunda
did finally recognize Neto's regime some
months ago, and the two presidents, who
meet frequently in the councils of the
front-line states that are supporting the
Rhodesian nationalists, are reportedly
moving to open diplomatic missions soon.
F_ I
Zamb
Lusaka
r,Lake
, Nyasa
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USSR
The celebration last weekend of
General Secretary Brezhnev's 70th birth-
day clearly boosted his prestige--if not his
authority-as the top Soviet leader as well
as the major figure in the international
Communist movement. The outpourings
of personal praise and honors also called
attention to his status as a military com-
mander. Beneath it all, however, there
were some signs of concern to keep
Brezhnev's burgeoning cult of personality
under control.
In addition to the medals bestowed by
the East European leaders, Brezhnev
received from the Soviet party and the
state another Order of Lenin, the title
Hero of the Soviet Union for the second
time, and a ceremonial sword embossed
with the state seal. Tass commented that
the sword was presented to "Marshal
Brezhnev" in recognition of his "outstand-
ing services" in strengthening the
nation's military might; some observers
believe this award marks a revival of a
distinction that was conferred upon dis-
tinguished veteran Bolsheviks during the
early days of the Soviet regime.
Brezhnev, perhaps sensing that the
adulation could get out of hand, respond-
ed by claiming he was not one of those
"whose head can reel from praise." He
attempted to characterize himself as a
common man and accepted the awards in
the name of the Soviet party.
Brezhnev seemed, in fact, to be trying
to link his name directly with the party as
a whole. He made no mention of collec-
tive leadership as such and referred to the
Politburo and Central Committee only
once, when he pledged that their members
would continue to work toward Com-
munist goals.
Party secretary Mikhail Suslov, the
keynote speaker at the Kremlin reception,
sought to introduce a note of collectivity
into an otherwise one-man show. He
produced the laudatory rhetoric necessary
to the occasion, but also clearly under-
lined Brezhnev's role as servant of the
party and its Central Committee. He
President Podgorny pins award on party chief Brezhnev
during birthday celebration
LA P1
pointed out that the party had entrusted
Brezhnev with his job and that the Soviet
people saw in him the embodiment of the
party's collective reason and will. Suslov
may have made his most telling point
when he praised Brezhnev as a man able
to listen to the opinions 9f his com-
rades.
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2-
SPAIN r4O - 4 Z,
Spanish leaders may be preparing a
Christmas amnesty for additional
political prisoners that could save the life
of kidnaped government adviser Antonio
Maria de Oriol.
The kidnapers-members of a
little-known extreme leftist group-seized
Oriol two weeks ago and threatened to
kill him by December 17 if the govern-
ment failed to release 15 leftist terrorists.
The kidnapers eventually relented, but
maintained that they would not free Oriol
unless all remaining political prisoners in
Spanish jails are freed.
Around 400 political prisoners were
pardoned by royal decree last July. Some
200 others, many of them Basques, failed
to qualify because the decree specifically
excluded crimes connected with terrorism.
Since the kidnaping, the government has
insisted repeatedly that it will not submit
to blackmail. There have been hints,
however, that more prisoners-excluding
those accused of murder-might be
released on Christmas Eve.
The kidnaping could temporarily set
Cortes President
Torcuato Fernandez-Miranda
back Spanish progress toward
democracy. If Oriol is killed, rightist ex-
tremists might well carry out threats they
have made to "execute" prominent leftist
party leaders in retaliation, leading to a
spiral of violence and counter-violence.
Even if Oriol is freed, rightist anger and
frustration over the incident still seem
bound to find expression. On December
20, for example, a crowd of angry rightists
set upon Cortes President Torcuato Fer-
nandez-Miranda, accusing him of betray-
ing Francoism. The police were forced to
intervene.
The left in general and the Communists
in particular may also suffer politically
from the affair, damaging their prospects
in the legislative election to be held next
spring.
The government, buoyed by a smashing
victory in the December 15 national
referendum, appears to have handled the
present crisis with calm assurance. Prime
Minister Suarez, in fact, was sufficiently
confident of the outcome this week to
journey to Barcelona in another effort to
improve relations with the fractious
Catalans. His promise that the local
language would be officially recognized
for the first time since the civil war
seemed a romising further step in that
direction
Relations' between Peru and Chile and
between Peru and Ecuador have been un-
der new strain recently, but some efforts
are being made to relieve tensions.
The increased uneasiness between Peru
and Chile has been caused by a stalemate
in their talks on a proposed outlet to the
sea for Bolivia and by Peru's continuing
arms buildup. Since Chile, early this
month, bluntly rebuffed Peru's proposal
to establish a corridor to the sea for
Bolivia with a jointly administered coastal
enclave, there has been a hardening of
positions on both sides.
The foreign ministers of the two coun-
tries seem prepared to explore ways to
resume talks. Peruvian and Chilean
military leaders, on the other hand, may
be demanding a tougher stand, although
Peru's navy commander probably tried to
lower the tension level during a visit to
Chile late last week.
ECUA00R
Friction between Peru and Ecuador in-
creased last week when the Ecuadoreans
abruptly canceled a scheduled stopover by
Peruvian President Morales Bermudez
while he was en route home from a visit to
Colombia and Venezuela. The Peruvians
immediately recalled their ambassador.
Ecuador, in turn, seized on the recall and
rumors of a Peruvian mobilization near
the frontier with Ecuador as an excuse to
send Ecuadorean troops to the border
area.
Efforts are apparently under way,
however, to prevent the situation from
getting out of hand. Officials of the two
countries' foreign ministries are reported-
ly preparing a joint communique aimed at
easing tensions.
The alleged military threat from Peru
may have forestalled a move by
Ecuadorean military officers against
Ecuador's long-shaky Supreme Council
of Government. The council's political
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position has weakened perceptibly in re-
cent weeks. By last week, a majority of
the country's senior military officers had
reportedly agreed to replace the council
with a single military leader, but then
reluctantly decided to defer their move
VIETNAM
The Fourth National Congress of the
Vietnamese Communist Party--the first
in 16 years-ended on December 20.
Most top party leaders gave long
speeches during the week-long meeting;
preliminary press reports give no hint of
any departures from well-established
policy lines. Full texts of the speeches are
not yet generally available, however.
Hanoi's continuing problems with its
close communist neighbors were un-
derscored by the absence of any represen-
tative from Cambodia and by China's
perfunctory greeting to the congress. The
Soviets and the Laotians, on the other
hand, were given special treatment. Party
leader Le Duan met with both
delegations; other foreign party represen-
tatives were received only by lower rank-
ing officials.
Premier Pham Van Dong delivered a
long report on the country's second
five-year plan. Agriculture will apparently
be emphasized, but industry is still to get
the largest investment. The Premier is
reported to have acknowledged that the
plan includes large population
relocations-both from urban to rural
areas and between the north and the
south.
Le Duan is reported as saying there will
be some expulsions from the party at the
rank-and-file level. The congress changed
the name of the party from a workers'
party to a communist party, and broaden-
ed the Politburo to include veterans from
the military, the economy, and the party
in the south.
The leadership at the top is largely un-
changed, although military hero Vo
Nguyen Giap slipped a notch in the
hierarchy. One other Politburo member,
Hoang Van Hoan, was dropped from
both the hierarchy and the Central Com-
mittee, an unusual move for the Viet-
namese. Normally those top leaders who
fall into disfavor are allowed to keep a
place on the committee.
More than a dozen of the old com-
mittee members and many of the alter-
nates have been dropped. Although deaths
since the last congress in 1960 may ac-
count for some of these disappearances,
many of those who failed to be reap-
pointed may well have been dismissed.
The new Central Committee is more
than double the size of the old one. Some
of the new faces are probably party war
horses who worked in the south
clandestinely for years. The list of
members published in 1960 did not in-
clude known members assigned to secret
work in the south.
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Uranium development has become a hot political issue in
Australia. If Prime Minister Fraser has his way, the country
will soon become a major world supplier.
Australia: Uranium Policy
Prime Minister Fraser's year-old
government favors early development of
Australia's vast uranium resources. The
government is moving cautiously in
changing the restrictive policies of its
Labor predecessor on this highly con-
troversial issue, but has already allowed
resumption of some uranium mining.
If existing curbs on exports and on min-
ing in the Northern Territory are lifted,
Australia will become a major supplier of
uranium within the next decade. Con-
sumer countries are relying on these
supplies.
Australia has about one fifth of the
known uranium reserves outside com-
munist countries. With no plans for a
nuclear power industry within the next 10
years, the Australians could export nearly
all their uranium output. If the govern-
ment allows producers to carry out their
present plans, Australia could be export-
ing several thousand tons of uranium ox-
ide annually by the end of the decade.
Uranium then would become Australia's
number-one export, bringing in over $1
billion annually.
The uranium industry foundered
between 1972 and 1975 under the energy
policies of the Labor government. Ex-
ports were banned, exploration fell
off, and no mining occurred. In late
1974, the government established fed-
eral ownership of all deposits in the
Northern Territory-where 80 percent December, 1975, the Liberal-Country
of the country's reserves are located- government began lifting some of these
and banned additional foreign equity restrictions. Discarding the Labor
in uranium exploration and development. government's aim of eventual 100-percent
Shortly after taking office in government ownership of the uranium in-
Australia's Uranium Mine Resources
Darwin, 5Z Nabarlek (Queensland Mines)
Rum Jungle 5Z` ~3Z Jabiluka (Pancon/Gettyl
52 Koongara (Noranda)
South All,gator Ranger (Peko/fZ)
NORTHERN
{ TERRITORY
WESTERN
xYeehrie
(Western Mining)
NEW
SOUTH
WALES
'CANBERRA,
rASMANIA
'Hobart
5Z` Westmoreland
(Queensland Mines)
Mary Kathleen (CRA)
Mt. Ise (Queensland Mines)
I QUEENSLAND
Radium Hdl
Lace trome -A~
(Western Uranium and others)
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dustry, the new government instructed the
Australian Atomic Energy Commission
to sell the shares in uranium companies it
had acquired in 1974.
Last January, the government withdrew
from all uranium exploration and turned
the job over to private companies.
Uranium mining outside the Northern
Territory resumed in March, and the ban
on foreign investment in new uranium
projects was lifted the following month.
Foreign ownership still is limited to a
maximum of 25 percent. The government
also retains strict control over safeguards
and marketing regulations.
Uranium development has become one
of Australia's hottest public issues. Some
public opinion polls indicate that a ma-
jority of the population favors uranium
development for use in nuclear power;
others show that Australians think
nuclear development would have harmful
effects on future generations.
Many unions are vehemently opposed
to all uranium mining. This past summer,
unions prevented the Mary Kathleen
Uranium Company from shipping 45.4
tons of uranium oxide that the company
was committed to send to the US under a
contract signed in 1970. Rather than
forcing a showdown with the unions, the
government arranged to borrow uranium
oxide from a British stockpile to meet the
company's commitment.
The government has put off two
politically sensitive policy
decisions-whether to allow mining in the
Northern Territory and whether to permit
uranium exports-pending the outcome
of a special environmental inquiry by a
commission charged with forming
guidelines for Australian uranium policy.
The commission recently gave tacit ap-
proval for changing export policy and for
mining outside the Northern Territory but
also recommended stringent safeguards,
government controls, and further public
debate. A second report, dealing
specifically with the Northern Territory,
will not be ready until after the first of the
year.
The government, meanwhile, will con-
tinue removing impediments to uranium
development. Since the commission's first
report, Canberra has announced that ex-
isting export sales commitments will be
met, subject to the guidelines of the
Nuclear Non-Proliferation Treaty, and
that projects outside the Northern
Territory may proceed with environmen-
tal impact studies, a necessary prelude to
mining approval.
The NATO allies and Spanish officials are showing
cautious interest in the possibility of bringing Spain into the
Alliance. A number of obstacles stand in the way-including
the high cost of modernizing the Spanish armed forces to meet
NA TO standards.
The Spanish government s s eps toward
creating a democratic political system
have made Spain's entry into NATO
politically possible for the first time.
Bilateral contacts between Spain and
NATO members are increasing, and the
latter are becoming more comfortable
with Spain. A number of obstacles con-
tinue to block Spain's early acceptance
into the Alliance, however.
Cautious Interest
Many Spaniards probably would value
an invitation to join the Alliance as a
gesture of acceptance into Western
Europe. Reform-minded government and
military leaders favor NATO
membership on the grounds that in-
25X1 25X1
Spain-NATO: Changing Relations
25X1
creased contact with allied governments
and their armed forces will involve Spain
deeply in West European security affairs
and help to modernize its military equip-
ment, tactical doctrine, and training.
They also hope NATO membership
would provide a new mission for the
Spanish military, which lost much of its
sense of purpose when Spain withdrew
last February from Spanish Sahara. The
loss of the colonies has left the army with
little to do but worry about internal sub-
version-a situation that could, in time,
lead it to get involved in politics.
Only a few top leaders in the govern-
ment and the armed forces have come
down firmly in favor of NATO. The air
force and navy are more favorably dis-
posed than the deeply conservative and
insular army.
The Spanish government will not be
ready for practical consideration of the
issue before the country's first democratic
election next spring. In the meantime, an
effort is under way in the armed forces to
fashion an agreed position on NATO
membership. A group from the Spanish
War College recently visited SHAPE
Headquarters in Brussels and US and
NATO facilities in Italy and elsewhere to
review the potential advantages and dis-
advantages of membership.
The Costs of Membership
Influential people in Spain-including
many military leaders-question the
benefits of NATO membership. The most
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important consideration probably is the
cost of modernizing the armed forces to
meet NATO standards.
Spain's 201,000-man army is primarily
equipped with aging or obsolete weapons
in insufficient numbers for existing units.
The air force and navy are better
equipped; the air force has 65 modern
all-weather fighters and 35 ground attack
planes. Perhaps 40 of the navy's 160 ships
have the capability to support NATO
missions in the western Mediterranean
and the Atlantic approaches to Gibraltar.
Ambitious modernization programs are
under way or planned in all three services,
financed in part by the $735 million Spain
will receive from the US over the next
five years_ under the 1976 Treaty of
Friendship and Cooperation. The army
parachute battalion, one naval infantry
landing team, and any of the five modern
fighter squadrons could make an im-
mediate contribution to NATO missions.
Spanish maritime patrol aircraft and
naval vessels currently coordinate with
US and other NATO forces in patrolling
the western Mediterranean.
The army, more than the other services,
would require substantial amounts of new
equipment, improved training oppor-
tunities, structural reorganization, and
some change of mission for integration
into NATO defense plans.
Membership in NATO could offer
offsetting financial benefits, but Spanish
military leaders probably fear that the
burden of increased defense expenditures
would be too heavy for Spain's ailing
economy.
Even if the current level of defense
spending-3.5 percent of gross national
product-is increased, membership in
NATO is likely to bring further demands
to devote more resources to meeting
Alliance force goals. Spain's leaders
wonder, moreover, whether formal in-
tegration into NATO would bring any
special advantage over the current
bilateral relationship with the US in terms
of military assistance for equipment and
training.
Other Considerations
Spain's lack of a unified military com-
mand structure could seriously com-
plicate participation in NATO programs.
Deep-seated interservice rivalries have ap-
parently caused strong opposition within
the military hierarchy to such unifying
mechanisms as a ministry of defense and
improved coordination among the ser-
vices.
Far rightists, who are deeply en-
trenched in the upper ranks of the army,
are likely to oppose reorientation of
Spanish foreign policy and military effort
toward Europe. There would probably be
opposition, too, to the use of Spanish
troops in missions far from the country's
borders; NATO membership would likely
involve at least some formal commitment
of forces either to small "presence" mis-
sions or as a backup reserve.
Many senior Spanish officers are
evidently worried about the potential im-
pact of increased contacts with NATO
forces on the morale, unity, and discipline
of their own services. Most West Euro-
pean armies are better paid than Spain's,
and most have also been influenced by
leftist political sentiments and agitation
for unions to an extent that would not be
tolerated in Spain. Conservative Spanish
leaders appear concerned that NATO
membership could increase pressure from
some of the allies to allow the Communist
Party into the Spanish political system.
Finally, contention between the British
and the Spanish over Gibraltar could
prove a serious stumbling block to
membership. On the other hand, some
resolution of the issue might be reached in
connection with Spanish entry into
NATO.
Brazil has strengthened its program to combat runaway in-
flation and other serious economic ills, risking a possible halt in
economic growth next year.
9-7
Brazil: Austerity Program Tightened
1 -1
Brazil is again tightening economic
policy in an effort to curb inflation,
strengthen its balance of payments, and
prevent further erosion of its credit rating
abroad. While the economy will achieve a
7-percent increase in real gross national
product for 1976, inflation will be at its
highest level in 10 years.
Brazil's efforts to cope with serious
balance-of-payments problems over the
last two years have cut its current-account
deficit by only about $1 billion from the
oil-induced peak in 1974 and have con-
tributed heavily to a serious resurgence of
inflation. The moderate decline in import
volume, prompted by strict import con-
trols, and a rise in export earnings have
little more than offset higher interest
payments on foreign debt.
Because of its desire to maintain some
economic growth, Brazil has restrained
domestic demand only sporadically. This
policy was feasible because Brazil had
plentiful foreign reserves, a strong
borrowing capacity abroad, surplus
stocks of imported materials accumulated
in 1974, and some import substitution
capacity.
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Brazil: Selected Economic
Indicators (Percent Change)
1972 1973 1974 1979 19761
In the last two years, however, Brazil
has experienced a 60-percent rise in
medium- and long-term foreign debt to
about $27 billion and a rise in the inflation
rate from 29 percent in 1975 to nearly 50
percent this year. This has led to growing
strains on the country's credit standing.
Foreign reserves are now barely adequate
to cover current levels of imports and
short-term indebtedness. Inventories of
imported materials have been virtually ex-
hausted; shortages and black market ac-
tivity have become common in recent
months.
Recognizing that restraints on domestic
demand had become essential, Brazil
began to tighten its monetary policy this
year. Although wages increased more
than prices early in the year, a tightening
of the government's wage policy will
probably cut real wages by about 4 per-
cent for the year.
Austerity Program
To strengthen its austerity program, the
government plans to supplement current
wage and credit restrictions by making
major cuts in public sector investment
next year. Because of government curbs
on credit, private investment is likely to
grow more slowly than in recent years,
and overall investment probably will re-
main at about the 1976 level.
The public spending cuts will fall most
heavily on development projects in the
electric power, transportation, and com-
munications fields. Housing construction
will be curtailed, and some agricultural
development projects will be slowed. Only
government investments in petroleum and
iron and steel, two areas vital to Brazil's
import-substitution program, have been
left untouched.
Despite Brazil's assertion that some
economic growth will be achieved next
year, the austerity program, if fully
carried out, could halt economic growth
in 1977. Consumer spending has fallen
considerably in recent months, and the
new fiscal restraints will further weaken
demand. Virtual depletion of large stocks
of imported materials will contribute to
growing disruptions of industrial produc-
tion. Although the austerity measures are
likely to curtail economic activity more
than intended, Brazil probably will stick
to its program.
Impact on Inflation
The government probably will be un-
able to realize its goal of lowering the in-
flation rate to about 25 percent next year.
Prices are likely to increase by at least 30
percent, largely because Brazil's indexing
system-although modified-will tend to
sustain inflationary momentum. Rising
import prices-particularly for oil-in-
creasing shortages of some imported
goods, and higher interest rates also will
keep the price level under pressure.
Some success has already been achiev-
ed since mid-1976, however. After
reaching a seasonally adjusted annual rate
of 60 percent last summer, the inflation
rate had subsided to less than 40 percent
by October.
Import constraints, coupled with a sub-
stantial rise in exports, should reduce the
current-account deficit by another $1
billion next year to roughly $5 billion.
Sharply increased payments abroad and
moderate rises in other service payments
will prevent a greater decline in the trade
deficit. The value of imports will remain
close to this year's $12.3 billion because of
higher prices, notably for oil.
Exports
Exports next year should approach
$11.5 billion, compared with an expected
$9.8 billion this year. Export growth will
be somewhat faster than in 1976 despite
slow economic recovery abroad and an
overvalued currency. Earnings will be
boosted by increased coffee export prices,
steadily rising soybean exports, a boom-
ing cocoa market, and some recovery in
sugar export volume.
Brazil's credit position will remain a
problem, primarily because of its rising
debt service burden, which has increased
from 35 percent of goods and service ex-
ports in 1974 to about 44 percent this
year. Because of rapidly accumulating
foreign debt since 1973 and the shorter
term at which Brazil must now borrow,
debt service will continue to rise faster
than exports, boosting the ratio to 48 per-
cent in 1977
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