DCI BRIEFING FOR SENATE ARMED SERVICES COMMITTEE 10:00 A.M. 24 JANUARY 1974 ROOM 212, OLD SENATE OFFICE BUILDING

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01099A002200010001-2
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 68
• Document Creation Date: December 20, 2016
• Document Release Date: March 8, 2006
• Sequence Number: 1
• Publication Date: January 22, 1974
• Content Type: BRIEF

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22 January 1974
DCI BRIEFING
SENATE ARMED
FOR
SERVICES
COMMITTEE
10:00 A.M.
24
January
1674
Room 212,
Old
Senate
Office Building
Soviet Strategic Forces
ICBM Test Programs
New Silo Programs
Ballistic Missile Submarines
Antisubmarine Warfare
ABM Defenses
SALT and MBFR Verification
Soviet Defense Expenditures
China
Domestic Scene
Foreign Policy
Strategic Weapons
War With Russia?
The Military Situation in the Middle East
Suez Front
Syrian Front
Arms Inventories
Other Arab States
The Oil Situation
US-European Relations
Indochina
Vietnam
Cambodia
Laos
Thailand
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18 January 1974
DCI CONGRESSIONAL BRIEFING
THE SOVIET UNION AND DETENTE
I. Mr. C1-airman, before discussing Soviet strategic
weapons, I would like to say a few words about
the Soviet foreign policy developments we have
come to call detente. The Russians are still
holding to this policy, which is increasingly
identified with General Secretary Brezhnev.
When we speak of their policy of detente,
however, a careful definition is in order.
Detente does not mean a change of heart. Nor
does it mean that Moscow has abandoned its
basic objectives.
1. We see continuity most clearly in the
strategic field, as will become evident
when I discuss weapons development.
B. Detente does mean that the Soviets have made a
reassessment of their situation, sorted out
their priorities more carefully, and adjusted
their behavior accordingly.
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II. This reassessment has highlighted two basic facts
for them.
A. One is the fact that they are not closing the
technological gap. They have now acknowledged
to themselves that, if they are to begin closing
it, they need to import and absorb large amounts
of Western technology.
1. They are trying to do this in a number of
ways. One is normal trade. Another is the
project method, in which a Western firm
contracts to build and bring into operation
an entire plant. A third is the exchange
of technological data with individual
Western companies.
2. As one measure of this effort, Soviet
orders for Western machinery and equipment
hit $2.5 billion last year--a 60 percent
increase over 1972. The US is a major
recipient of such orders, but we by no
means monopolize the field. Only some
$435 million of that $2.5 billion was
placed with American firms.
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B. The second basic fact is that Moscow sees
China as holding a single-minded hostility
toward the USSR.
1. Peking has rebuffed all Soviet overtures
for an improvement of Sino-Soviet rela-
tions, and the border negotiations remain
at square one.
2. China devotes the energies of its new
diplomacy to countering Soviet policy in
every area of international politics.,
3. Moscow realizes that this attitude is not
just a peculiarity of Mao's personality,
which will disappear when he does.
III. Both the economic factor and the Chinese factor
are thus fairly long-term ones, and both work in
the same direction on Soviet foreign policy.
A. Obviously, normal and amicable relations with
the West are necessary if the Soviets are to
promote their economic objectives. Major
confrontations over Berlin, or Cuba, or the
Middle East would undermine the chances for
technological gain.
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B. Tense relations with the West would also expose
the USSR to the risk of pressure on two fronts:
Western and Eastern. So long as China remains
actively hostile, the Soviets have a strong
interest in keeping relations with the West
on an even keel.
1. In particular, they want to give as little
encouragement as possible to cooperation
between China and the US--which appears to
them as collusion against the Soviet Union.
C. There are positive political incentives as
well. Detente provides a useful climate for
the extension of Soviet influence in Western
Europe. It also promotes the concept of So-
viet equality with the US and Moscow's claim
of its right to be involved in all interna-
tional questions.
IV. These current priorities have some impact on re-
lations with the US. Moscow is no longer so ac-
tive and automatic in opposing US policy in every
corner of the globe.
A. This has helped, for example, to get a Viet-
nam settlement and to bring about negotiations
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in the Middle East. It has not, of course,
solved major problems in either area, nor
do the Soviets intend to do that.
B. Brezhnev's personal prestige is commited to
detente. Last year he made his biggest gains
with his trips to Bonn and Washington.
1. All Brezhnev's politburo colleagues now
acknowledge his preeminent position but
he is aware he cannot get too far ahead
of them, and must show some fruits of
detente.
2. Coping with Solzhentsyn and other dissi-
dents poses a continuing dilemma of how
to square the needs of domestic discipline
with foreign policy considerations.
C. Record grain production led the economy to a
comeback from a dismal 1972 showing, but Mos-
cow's goal of overtaking the US remains as dis-
tant as ever. The USSR still produces only
about half as much as the US with a labor
force 50 percent larger.
V. Logically, detente should also lead to a further
easing of the arms race. But this has not happened
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yet. The Soviet strategic programs which I shall
describe do not violate the SALT agreements, but
they represent a powerful competitive thrust in
the areas not covered by those agreements, mainly
in the area of qualitative improvement.
A. Thus far, Moscow seems to believe that it can
proceed on a vigorous program of weapons
modernization while simultaneously getting
the political and economic benefits of detente.
B. The Russians will probably hold to this course
unless they are persuaded of two things:
--that if they try to push past a relationship
strategic equality, they will provoke US reac-
tions which will deny them any strategic gain
and perhaps even worsen their position; and
--that Soviet restraint would be reciprocated
on terms that would give the USSR both the
image and the substance of equality.
DETENTE-6
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21 January 1974
DCI CONGRESSIONAL BRIEFING
SOVIET DEFENSE EXPENDITURES
I. I would like to conclude this overview of the So-
viet military effort with a brief discussion of a
subject that this committee is familiar with--the
costs of military programs. Our evidence indicates
that the Soviet leaders, too, pay close attention
to their defense spending. They apparently be-
lieve, however, that their economy is capable of
sustaining or even accelerating the pace of defense
spending.
A. Our calculations of the absolute values of So-
viet defense costs contain uncertainties, but
we can depict overall trends in defense spend-
ing with some confidence. Since 1960, the
trend has been generally upward, increasing
at an average annual rate of about 3 percent.
1. For the last few years, however, ruble
spending has remained at essentially the
same level, reflecting the fact that the
SOpV EXP-1
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USSR is between major strategic procure-
ment cycles.
a. Procurement of weapon systems developed
in the 1960s, and now deployed, was
largely completed by the end of 1970,
and procurement of the strategic sys-
tems now under development has not
yet begun.
2. The USSR recently announced that defense
spending would decline by about one per-
cent in 1974. We regard this announced
cut as largely a political gesture, rather
than an indicator of actual spending.
3. Our estimates of Soviet spending for 1974--
which are based on observed and projected
changes in military and space programs and
forces--show a slight increase in total
defense outlays.
4. Moreover, we expect to see--if not a spend-
ing splurge--at least a substantial upswing
in Soviet expenditures for procurement in
1975 and 1976. By then, production of the
new strategic systems now under development
should begin.
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5. The share of total defense funds allo-
cated to military R&D and space has
grown steadily over the last five years.
In fact, outlays for these purposes have
been the fastest rising element of de-
fense spending and now account for about
one-third of the total. We expect growth
in military R&D to moderate over the next
few years, however, as the USSR begins
procurement of new strategic systems.
6. As for manpower, the Soviets devote less
than 40 percent of their defense spend-
ing to this purpose--as opposed to more
than 50 percent for the United States.
The shares for active duty pay and al-
lowances, however, are much closer. Never-
theless, the Soviets are able to keep 65
percent more men under arms--simply by
paying their conscripts much less than
we pay our soldiers.
II. We measure the Soviet defense effort in dollars-
calculating as if their purchases had been made
in the US--in order to compare the magnitude of
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their defense effort with ours. By this calcula-
tion, the defense efforts of the two countries
are about the same size.
A. From the. late 1950s until 1970, the dollar
value of US defense outlays exceeded those
of the USSR. Since 1970 the Soviet effort,
measured in dollars, has exceeded that of
the US.
1. This catching up is a result of steady
increases in Soviet spending, while US
spending--measured in constant prices--
has been declining since 1968.
B. In terms of the structure of defense spend-
ing measured in dollars, the US and USSR
present a similar picture. In 1973, the
amount of resources allocated to procurement
was about the same. The dollar value of So-
viet spending for operating their forces ex-
ceeded US expenditures slightly. We estimate
that the dollar value of the Soviet R&D ef-
fort also exceeded that of the US in 1973.
1. I would point out, however, that Soviet
R&D spending is more difficult for us to
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measure precisely than other defense ex-
penditures because of the fragmentary data
available in this area.
C. While the comparison between the dollar values
of Soviet and US spending reflects levels of
effort, I want to emphasize that spending is
not the sole measure of military capabilities,
and does not necessarily result in equal ef-
fectiveness of troops or equipment.
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18 January 1974
DCI CONGRESSIONAL BRIEFING
CHINA
I. One can hardly mention the Soviet Union without
thinking of China. I would like to bring you up
to date on the internal political situation, for-
eign policy trends, the progress the Chinese are
making toward a nuclear deterrent, and chances of
hostilities with the Soviet Union.
The Domestic Scene
II. As you know, the Tenth Party Congress took place
last August, and it has given us a new basis for
assessing the domestic political scene.
A. The congress was the shortest since the Com-
munists gained power in 1949, suggesting that
the leadership wanted to avoid a full discus-
sion of many controversial policy issues.
The meeting focused on reconstructing the top
organs of the party after the disruptions of
the Lin Piao affair and the earlier Cultural
Revolution.
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1. The congress adopted a revised party con-
stitution, which deleted a specific refer-
ence in the previous version to Lin as
Mao's designated successor but did not
name a new heir.
C. The new Politburo, like its predecessor, had--
until very recently--21 full members and four
alternates. It is a mix of moderate officials,
radical ideologues, military men and elder
statesmen--a coalition of divergent interests
that seems roughly balanced between moderates
and ultraleftists.
1. All of the active members of the previous
Politburo retained their positions, and
nine new faces appeared.
2. Within the last two weeks, one more name
has been added. Teng Hsiao-ping, a former
secretary-general of the party who was
purged during the Cultural Revolution and
then rehabilitated last year, regained
the seat he used to have on the Politburo.
a. His reinstatement is an indication
that other rehabilitated party and
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government officials who were vic-
tims of the Cultural Revolution will
again be given positions of respon-
sibility.
D. Chou En-lai is clearly the number two man in
China, but he is only one of five vice chair-
men elected at the congress.
1. The others are two military men, an aging
radical who is largely inactive, and the
rising young official from Shanghai, Wang
Hung-wen. Wang is only in his mid-thirties,
and was a radical during the Cultural Revo-
lution. His elevation is the leadership's
acknowledgement that there must be new blood
in the highest councils.
2. This group presumably will serve as a col-
lective leadership when Mao dies, although
the revised party constitution did not so
stipulate.
III. The army's role in politics has been a controver-
sial issue.
A. Army leaders were thrust into politics simply
because the party and civil administrations
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were shattered by the Cultural Revolution. As
soon as the dust of that phenomenon began to
settle, and particularly after the Lin Piao
affair, the civilian authorities started to
reassert their control over the military.
B. On New Year's Day Peking revealed a massive
reshuffle, affecting the commanders of seven
of the 11 military regions and the head of
the army's General Political Department.
1. The transfers separated the leaders from
their provincial power bases in which all
but one had concurrently headed the pro-
vincial party committee.
C. The reinstatement of Teng Hsiao-ping also is
important to this move as he has been assigned,
even though a civilian, to the party's Mili-
tary Commission.
IV. Let me, finally, say a few words about "Confucius."
A. In August 1973 Peking's major propaganda out-
lets began to feature articles attacking the
ancient sage Confucius (around 550 B.C.) and
his followers. They were depicted as conser-
vative, tradition-bound forces who were
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successfully opposed at crucial periods of
Chinese history by more progressive elements.
1. It is clear that this campaign has direct
relevance to what is going on-today in
China, and that "Confucius" is some actual
person. There is much speculation among
China specialists--and among the Chinese
themselves--about the purpose of the
whole affair.
2. Some observers see the campaign as an
attempt to reinvigorate the populace with
the "revolutionary" spirit so dear to Mao.
3. Another view holds that the campaign is
part of a bitter feud between radical
and moderate forces in the party's top
leadership. The radicals--led by Madame
Mao--are said to be attacking Chou En-lai
in an effort to protect the leftist poli-
cies of the Cultural Revolution.
4. Our analysts see the campaign as the open-
ing round in the succession struggle. They
believe Chou En-lai and Madame Mao differ
sharply over the conduct of foreign and
CHINA-5
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domestic policy, and see the campaign as
Chou's effort to keep Chinese policy on
the moderate course that he was able to
set--with Mao's support--after the Cul-
tural Revolution.
5. Madame Mao has limited political power
of her own, but is apparently the rally-
ing point for disaffected elements in
the power structure, especially those
military leaders who are unhappy over
their diminishing political power.
B. The campaign is of major political importance,
but we do not believe it will escalate into
the chaos of another Cultural Revolution.
1. Chou En-lai is in the strongest position
of his long political career, and is
firmly opposed to excessive measures.
The 75-year-old Chou, however, will not
be around indefinitely.
Chinese Foreign Policy
V. In foreign policy, Peking remains on the course
mapped out two or three years ago. The main con-
cern of Chou En-lai is to counter Soviet efforts
to isolate China.
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A. One of his and Mao's main weapons is "detente"
with the United States.
1. Secretary Kissinger's visit last autumn
gave Peking an opportunity to demonstrate
the importance it attaches to detente.
2. Mao's long meeting with the Secretary--
nearly two hours--set the seal of high-
est authority on the policy of continuing--
and improving--relations with Washington.
B. The Chinese also seem anxious to forestall
any significant improvement of relations be-
tween Japan and the Soviet Union.
1. Peking would like to limit possible So-
viet-Japanese cooperation in exploiting
economic resources in Siberia.
C. In Indochina, Peking seems to be trying to
reduce the potential for friction with the
1. It is taking a constructive line in Laos,
encouraging the formation of a coalition
government.
2. The Chinese--as I shall discuss later--
have also begun to scale down their
CHINA-7
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military presence in North Laos.
D. US actions and attitudes during the recent
Mideast fighting seem to have favorably im-
pressed the Chinese.
1. Behind the scenes, they have urged re-
straint and caution on the Arabs in po-
litical and military matters, as well
as on the question of the oil embargo.
E. Peking has been particularly concerned over
the possible effects of the embargo on West-
ern Europe. The Chinese do not want to see
this area weakened as a counterweight to the
Soviet Union.
1. Chinese diplomats continue to caution
European governments against Soviet
blandishments, and are stressing the
importance of NATO in the world balance.
Chinese Strategic Weapons
VI. Turning to the Chinese military establishment,
we see that the strategic weapons program which
has moved forward, although not forcefully, over
the years. Today China is a nuclear power. It
can deliver nuclear weapons against targets on
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its periphery--but not to the US mainland--by
both missiles and bombers.
CHINA-9
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Will There Be War With Russia?
XI. The question naturally arises as to whether these
Chinese weapons programs are increasing the likeli-
hood of war between China and the Soviet Union.
:Last month Premier Kosygin aptly described Sino-
Soviet relations as "frozen," and Moscow makes
frequent references to "the Chinese threat." On
the other side, there is genuine fear in Peking
that the Soviets might spring a surprise attack.
In spite of all this, we do not foresee a major
military move by either side.
A. Chinese deployments show an awareness of So-
viet military superiority, and are focused
on defense.
1. Having learned the virtues of restraint
from their difficulties along the border
in 1969, the Chinese seem likely to re-
sist any temptation to test Moscow's
tolerance.
B. From the Soviet side, there are strong mili-
CHINA-14
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tary and political considerations that would
make a premeditated attack unlikely.
1. Moscow has told its people that a dis-
arming nuclear strike against Chinese
strategic missile launchers would not
be without retaliation.
2. A land invasion could very well get
bogged down.
3. Politically, a major Soviet move would
end any possibility of reconciliation
with China, and could jeopardize detente
with the US.
C. On a lower level of combat, however, the So-
viets might try to punish and humiliate Chi-
nese border forces patrolling in disputed ter-
ritory.
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22 January 1974
DCI CONGRESSIONAL BRIEFING
THE MILITARY SITUATION IN THE MIDDLE EAST
I. When the Israeli-Egyptian disengagement agreement was
signed last week, the armed forces of both countries
were deployed on a war footing. They may well remain
in this posture for some time, while preparing for
actual disengagement.
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22 January 1974
OTHER ARAB STATES
I. Looking elsewhere in the Middle East, we see that
Libya's potentially troublesome. President Qadhafi
is isolated as a result of the Arab decision to go
to Geneva. Nevertheless, his history of erratic
behavior suggests that he will find some way to
rock the boat.
A. His denunciation of the conduct of the war,
the acceptance of the cease-fire, and the
disengagement talks, have strained his re-
lations with Egypt.
1. An open break has been avoided, but the
merger is dead. Libyan aid to Egypt and
military cooperation has dwindled.
2. His latest merger proposal--with Tunisia--
will probably never get off the ground.
3. Qadhafi's extreme position has reduced
his influence in other Arab capitals.
B. Libya, however, has drawn closer to radical
fedayeen elements, and may have increased its
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aid to them. Specifically, the Libyans are
being linked to the terrorist attack at Rome
airport last December.
1. Qadhafi formerly favored terrorism aimed
directly at Israel, but now seems to ap-
prove of anything that might sabotage a
negotiated settlement.
II. Within Libya, Qadhafi's policies are seldom
challenged by his colleagues on the ruling
Revolutionary Command Council.
A. President Sadat--once a moderating influence
on his neighbor--now appears too occupied
to help control Qadhafi's activism.
B. Even if Qadhafi were replaced, his most logi-
cal successor--Prime Minister Jallud--shows
signs of being only slightly more manageable.
III. We are also concerned about the Persian Gulf
area. Its vast oil reserves make its stability
a matter of great importance to the United States.
A. Saudi Arabia and Iran are relatively stable,
and probably will remain so for the next sev-
eral years. Both countries. have made succes-
sion arrangements, and their polices probably
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will not change greatly after the present
leaders disappear.
B. The picture in the smaller gulf states is
mixed.
1. Oman is facing an active rebellion by
a group of Marxist guerrillas, who are
heavily supported by neighboring Yemen
(Aden) and have received arms indirectly
from the USSR.
2. The United Arab Emirates--now two years
old--looks more viable than many expected.
Its seven sheikdoms--pasted together by
the British just before their departure--
have been in continual rivalry. A recent
governmental shakeup, however, holds at
least the promise of a more effective cen-
tral government.
3. Bahrain has recently elected its first
parliament, and it has a large leftist
contingent. Hence the decision taken
during the Middle East war to terminate
the agreement by which US naval forces
in the area can use the former British
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base is unlikely to be reversed.
C. Elsewhere on the Arabian Peninsula, the sit-
uation between the two Yemens--Sana and Aden--
remains troubled, although less so then in
the fall of 1972 when war seemed possible.
D. Countries in the Persian Gulf have taken some
hesitant steps toward regional security coop-
eration, partly in response to our prodding.
But the old rivalries and cultural differences
die very slowly.
1. The Saudis are suspicious of Iran's inten-
tions on the Arab side of the Gulf, while
the smaller Arab states fear that any re-
gional security arrangement would be dom-
inated by Saudi Arabia or Iran, and swallow
them up.
E. The USSR has a growing interest in the Gulf,
fanned by Western dependence on oil and pos-
sibly by interest in Iraq's shore facilities
for Soviet naval forces. Moscow has tried--
unsuccessfully--to establish relations with
the Saudis or to open diplomatic posts in
the lower Gulf States.
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F, Iraq, however, receives substantial economic
aid and is almost entirely dependent on the
Soviets for major military hardware.
G. In addition to their activities in the Persian
Gulf, the Soviets keep a modest naval force
(usually a destroyer or cruiser, a diesel
submarine, and a few minesweepers and auxil-
laries) in the Indian Ocean. They demonstrated
a capability to increase this presence during
the Indo-Pakistani war in 1971, and in the
aftermath of the Middle East war last fall.
1. The Soviets have broad cooperation treaties
with India and Iraq, and "arrangements"
with South Yemen and Somalia. They have
built naval support facilities near Berbera,
in Somalia.
2. We expect this Soviet naval present to grow
gradually--regardless of whether the Suez
Canal is reopened. The Indian Ocean is not
a high priority area for the Soviets, how-
ever, and how they expand their presence will
depend, in large measure, on what the US does.
We believe they would make every effort to
match a US buildup.
ARABS - 5
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18 January 1974
DCI CONGRESSIONAL BRIEFING
THE OIL SITUATION
I. You of course noted that in discussing the sit-
uation in the Middle East, I made scant refer-
ence to the oil problem. Let me now point out
some of the ramifications of the Arab' use of
oil as a weapon.
II.. Arab oil production is now up slightly, and there
are some prospects for an end of the embargo.
Consequently, the high price rather than the supply
of oil becomes the most important energy problem
facing the United States and the other consuming
nations.
A. The Persian Gulf producers have raised taxes
to about $7.00 a barrel--up 360% in less than
one year.
1. The other major exporters have also upped
taxes.
B. This year's world oil bill will increase by
$70 billion, to a total of over $110 billion
at current production levels.
1. The United States' bill will rise by
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$16 billion, to $25 million this year. For
Western Europe, the jump will be $33 billion
to $55 billion, and Japan's price will increase
by $11 billion, to $18 billion.
2. It will be difficult for consuming coun-
tries to provide this purchasing power,
and some industrial countries may not meet
the challenge.
C. Some lesser developed countries will be ex-
tremely hard hit.
1. Oil payments will take 40% of India's ex-
port earnings, for example.
2. The oil states have initially turned a deaf
ear to pleas from these countries for lower
prices, but they may provide some fi-
nancing aid.
D. While the consumers are shelling out, oil
revenues of the OPEC countries will nearly
quadruple this year--$90 billion, compared
with about $25 billion in 1973.
1. The Arab countries alone will receive al-
most $50 billion even if their production
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remains at the current level. They may
end 1974 with a current account surplus
of about $40 billion--much of which will
be deposited in Western banks.
E. Prices may be lowered later in the year if
a world-wide recession appears in the offing.
1. The Shah of Iran was largely responsible
for the record price hikes, but it was
Saudi acquiescence that made them stick.
2. The Saudis feel the price is much too
high and will have disastrous effects
on the world economy.
3. The Saudis could eventally force prices
down by raising output substantially.
Other producers are pleased with present
prices and any move to reduce them would
be politically unpopular.
F. The economies of the oil importing nations will
be severely strained by the massive price increase.
Oil importing nations face reduced rates of
economic growth and increased unemployment unless
expansionary measures are taken.
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1. Governments will be cautious in inflating
demand, however, because of the already
high inflation and the uncertain impact
of the energy supply constraint on produc-
tive capacity.
2. Major governments will be hesitant to
move forward on reform issues until
economic prospects become clearer.
3. Attempts to improve deteriorating trade
balances--through import restraints or
competitive devaluation--could aggravate
international economic tensions.
III. The use of cutbacks in oil production as a political
weapon is being undermined by oil company diversions,
and is slowly being abandoned.
A. The world-wide rationing system instituted
by the oil companies has greatly reduced the
difference between "hostile," "neutral," and
"favored" nations.
1. The Netherlands, theoretically embargoed,
has not been hit much harder than other
European countries.
2. The United States is receiving more oil
than would be the case if the embargo
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ware fully implemented.
3. On the other hand, many favored countries--
particularly Spain and those of Black
Africa--have complained that they are
not receiving their full share of imports
as promised by the Arabs.
B. There has also been some leakage of Arab oil,
but we do not know the exact amounts.
1. Libya, for example, with no interest in
promoting a .Middle East settlement, may be
allowing some of its oil to reach the United
States through Caribbean refineries.
C. The steady expansion of the Arabs' favored
nation list will soon require production in-
creases if all of these nations are to re-
ceive the promised amounts of oil.
1. The list now includes France, the United
Kingdom, Belgium, Spain, Japan, Brazil,
India, the Philippines, Taiwan, all Mos-
lem nations, and those African states
that have broken with Israel.
2. The Arabs are allowing oil to transit
Rotterdam, and may allow the Dutch to
refine Arab crude for other countries.
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D. Several Arab leaders have'stressed that the
oil weapon is a temporary diplomatic maneuver
that will be modified as soon as progress is
made on Arab-Israeli issues.
1. There are persistent rumors that the
Saudis may unilaterally drop the embargo
against the United States.
E. if the embargo against the United States and
the Netherlands is dropped, those against
South Africa, Rhodesia, and Portugal may be
maintained as a favor to the Arabs' African
supporters.
IV. Moscow, for its part, undoubtedly sees benefits in
the Arab oil boycott, but also has some misgivings.
A. The Soviets had virtually no control over
the Arab decision to curtail oil flow.
1. Soviet propaganda has hailed the action.,
however, and-encouraged nationalization
of more Western holdings.
B. The Russians have welcomed strains in US
relations with Europe and Japan caused by
the boycott and price increases.
1. They have also pointed to the boycott
as another reason for Western firms to
help develop Soviet energy resources.
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C. Moscow is concerned, however, that the oil
weapon could backfire and harm relations with
the US and Europe.
1. The Soviets have testily denied specula-
tion that they are behind the Arab ac-
tion, and have not been gloating over
the problems it has caused in the West.
2. They have kept up their oil deliveries
to Western Europe despite Arab cries
that they are undercutting the boycott.
V. As for future oil developments, we believe that
there is a better than even chance that in 1974:
.-Production will exceed the 1973 level.
--A marked slowdown in economic activities world-
wide will put substantial pressure on the oil
producers to lower prices.
--There is likely to be a new polarization; the
oil producers with their enormous new wealth on
one side and the consuming world on the other.
--The national scramble for oil will continue as
countries seek assured supplies. These countries
cannot, however, protect themselves from the im-
pact of high oil prices.
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--Efforts to develop substitutes for imported oil
will receive world-wide support.
--Other basic resource producers will be tempted
to hold up consumers.
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22 January 1974
DCI CONGRESSIONAL BRIEFING
US -EUROPEAN RELATIONS
I. Mr. Chairman, I would like to touch on US-Euro-
pean relations. These relations are, of course,
a compound of political, security, economic, and
monetary concerns--all inter-connected. Our prob-
lems with the Europeans will not be sorted out
either easily or quickly.
II. The ambivalence in our current relationship with
Europe was illustrated by the sharply differing
responses of Europe and the US to the Mid-East
conflict. Our differences in this crisis ac-
celerated reassessments of Atlantic solidarity--
reassessments which had long been under way.
A. Both sides saw new reasons for questioning
the adequacy of existing consultation pro-
cedures.
1. The Europeans claimed the US took action
that could have endangered their security
without consulting them.
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2. The US felt the Europeans did not sup-
port measures to counter a Soviet threat
to both American and European interests.
B. The frequent US-Soviet communications dur-
ing and after the conflict created further
doubt in European minds as to whether the
US still gives priority to the Alliance over
US-Soviet arrangements.
III. Nevertheless, the reciminations of last fall have
now moderated in the face of widespread desire to
keep Alliance relations from deteriorating further.
A. Soviet actions in the Middle East have reminded
the Europeans of the Russian threat--and the
basic purpose of NATO.
B. The December NATO meetings in Brussels helped
to improve the atmosphere.
1. New procedures for NATO political consul-
tations--although perhaps not exactly
what the US has suggested--may result.
C. Work on two Atlantic declarations--one to be
issued with the European Community and one
the result of NATO deliberations--is again
proceeding.
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1. Europeans expect the documents to be
ready to sign in conjunction with NATO's
25th anniversary in April--when Presi-
dent Nixon may possibly make a visit.
3. As for the US-EC declaration, the Euro-
peans are trying to meet the US request
for a shorter, less legalistic, and more
inspiring document.
IV. The energy crisis has surfaced conflicting impulses
from the Europeans.
A. They are scrambling for bilateral deals with
the oil producers that will assure future
supplies.
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1. The French, in particular, will never-
theless want to minimize US leadership
of such efforts, and assure an eventual
role for Europe vis-a-vis the producers.
C. The Europeans will want to take a new look
at the coming trade and monetary negotiations.
1. The trade talks may be threatened by an
increase in protectionist sentiment--
arising from balance of payments pres-
sures attributable to the rising costs
of oil.
a. There may also be sentiment, however,
for focusing on world-wide commodity
agreements to restrain the future use
of raw material supplies to achieve
political goals.
2. Progress toward US-European agreement on
overall international monetary reform
will be delayed further by the financial
effects of the energy crunch.
a. But there will be increased incentive
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for international cooperation to handle
the balance of payments pressures on
all the industrialized countries.
V. While these complicated issues are under discussion,
Atlantic ties are being tested on several other
fronts as well.
A. The Jackson-Nunn amendment has heightened con-
cern about US troop withdrawals, but neverthe-
less the outlook for multilateral burdensharing
is not good.
1. The Europeans believe that US forces in
Europe help the US as much as Europe. In
any case, they claim they cannot satisfy
US burdensharing requirements.
a. They argue that, given the new strength
of the dollar and their own deteriorating
balance of payments positions, they will
find it difficult to sustain even cur-
rent defense expenditures.
.B. At the Geneva European security conference the
Allies want the US to be more forceful in seek-
ing concessions from the Soviet Union, parti-
cularly on the key issue of freer communication
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between East and West.
C. In the Vienna force-reduction negotiations
the Allies maintained a united front during
the first round, but West European skepticism
about the venture has increased.
1. Many Europeans once viewed the negotia-
tions as a good opportunity to reduce
their own forces, but now most are con-
cerned that the negotiations could con-
strain future European cooperation on
defense.
2. The Soviets interest in cutting West Ger-
man forces has made even the detente-
minded Germans more cautious about the
extent to which West European forces
should be included in'the reductions.
3. Given these concerns, the Europeans can
be expected to favor a go-slow approach
to the negotiations.
VI. US relations with Europe are also troubled by the
very difficult problem of finding a valid inter-
locutor.
A. The European system suffers from an inadequate
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institutional basis--despite the determina-
tion of the Community to increase coordina-
tion of foreign policies on such matters as
Atlantic relations, the Middle East, and
East-West detente. Consequently "European"
positions are often the lowest common denom-
inator of the various national positions.
B. Furthermore, many of the European governments
are in poor health politically.
1. Germany, which will chair the EC's in-
stitutions during the next six months,
hopes to get things moving, but recently
the steam seems to have gone out of Willy
Brandt's government.
2. France's political malaise reflects a
struggle among forces already contest-
ing Pompidou's successorship, and deci-
sive decisions are few and far between.
3. The British government is fighting to
reassert control over a potentially
critical economic and social situation,
and must continue to cope with consid-
erable anti-EC sentiment among the voters.
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4. Italy's coalition government system is
perpetually fragile. The present gov-
ernment is more preoccupied with domes-
tic issues than with Europe, but seems
unable to move effectively in either
the foreign or domestic spheres.
D. Despite the shortcomings of the major West
European governments, and the ineffective-
ness of the EC as an agent of unified action,
there is strong sentiment in Europe for unity.
1. As we see the situation, the problems in
US-European relations--complicated enough
in themselves--will be compounded by the
question of whether "Europe" will speak
and act as a community, or as individual
nation states, on any given issue.
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19 January 1974
DCI CONGRESSIONAL BRIEFING
INDOCHINA
Vietnam
I. Turning to Indochina, Mr. Chairman, we see that
the war in South Vietnam still sputters a year
after the Paris accord was signed.
A. It is worth noting, however, that the level
of fighting has dropped since the signing of
the accord.
1. Casualties in the last year, for example,
while still high, were down significantly
compared with the previous year.
a. On the Communist side, they declined
from over 160,000 to about 41,000.
b. Government losses dropped from 36,000
killed to around 15,000.
B. Significant fighting continues, however, and
engagements are sometimes intense.
1. Two of the peak periods last year were
just after the cease-fire was signed on
January 28th, and just before the second
agreement on June 15th that tightened it up,
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2. In both periods, the fighting resulted
largely from last-minute Communist ef-
forts to grab additional territory that
they hoped to keep permanently if the
cease-fire proved effective.
3. In most cases, however, the South Viet-
namese were able to push the Communists
back, and Saigon probably controls more
territory today than it did a year ago.
C. The larger battles have been fought primarily
over remote government outposts in areas
the Communist use for supply movements.
II. The question remains whether the North Vietnamese
will launch a major offensive in the current dry
season, which ends in May.
A. Hanoi's intention to gain control of the South,
by military force if necessary, remains unchanged.
B. Late last year we concluded, after a thorough
examination, that it was a close choice whether
an offensive would occur this dry season.
C. Since then, although analysts still differ,
there is general agreement that the chances of
an offensive have declined.
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D. Our evidence over the past several months
has had many conflicting strands.
1. On the one hand, Hanoi has moved large
quantities of war materiel into South Vietnam.
It also has more troops in the South than
it did at the start of the 1972 offensive.
2. On the other hand, infiltration of replacements
for anticipated losses,. which in previous years
has been one of our most dependable indicators
of Communist intentions--has been less this
dry season than we might have expected.
a. So far only about 22,000 regular combat
troops have set out for South Vietnam--
mostly for the central highlands and the
southern part of the country.
b. Infiltration rates have fluctuated
greatly in earlier years, but they
have not been this. low at a
comparable point in the dry season
for at least five years.
c. Moreover, it appears that the mili-
tary conscription effort in the North
was smaller in 1973.
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d. Hanoi could still move enough troops
south to sustain an offensive this
dry season. In fact, since the first of
the year troops have been moving through
the infiltration system at a fairly brisk-
pace--approaching 500 men a day.
3. Inside South Vietnam, Communist briefers
have recently asserted that no offensive
is planned.
III. The level of fighting is likely to increase as both sides
probe for weaknesses along the ill-defined lines that
separate them.
A. The danger of heavy combat is greatest in the
far north of the country where the Communist forces
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are strongest, and in the central provinces where
they are seeking better access to populated areas.
B. For its part, the government is thinking of
recapturing land lost in the western border regions
last year. The Communists are sure to resist
especially at strategic locations and along
key transport routes.
IV. Talks on a political settlement between the Thieu
government and the Viet Cong have made little
headway.
A. Both sides have been mainly concerned with
gaining propaganda advantage, and have
shown little inclination to compromise
their positions.
V. The Thieu government has improved its
position vis-a-vis its Communist and non-
Communist opponents during the past year.
A. Senate elections last summer gave Thieu
firm control over both houses of the
legislature for the first time.
B. The President has continued to develop his
Democracy Party to strengthen his political
apparatus throughout the country.
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C. A presidential decree on political parties
early last year has served to further
weaken the already factionalized
opposition parties.
D. The opposition has been unable to do much more than
complain loudly about three constitutional
amendments enacted last week. These will permit
Thieu to run for a third term, and strengthen
the powers of the presidency.
E. The government is implementing a broad
program of admimistrati?ve reforms to
improve its performance and standing in
rural areas, although the program is be-
hind schedule and its scope has been
reduced.
VI. The most serious problem is in the country's economy.
A. South Vietnam still depends heavily on
foreign economic aid, although it has
been trying to diversify its sources of
aid through agreements with countries
such as Japan and France.
B. Inflation is a chronic problem, and prices
rose some 67 percent last year.
C. The government, however, staved off the
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most severe threat of serious rice shortages
late last year.
Cambodia
VII. In Cambodia, the Khmer Communists continue to
threaten the Lon Nol government's survival.
They are now in the first phases of their dry
season offensive.
A. Fighting has centered in the immediate Phnom Penh
area, particularly against the capital's north-
western defenses.
1. Government forces have contained this effort,
but the city and its airport still get sporadic
-rocket and mortar fire.
B. The Communists, meanwhile, are preparing for a
major move against Phnom Penh's southern defenses.
1. They are planning coordinated attacks along a
ten-mile front below the city.
2. The Communists'. deadline for these attacks
has already slipped, however.
3. Many Communist units in this sector have had serious
manpower problems, and have suffered from supply
shortages.
4. The Cambodian Army is shoring up its southern
defenses in anticipation of the Communist
attacks.
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C. In the countryside, the Communists' strategy
of cutting off Phnom Penh's overland supply
lines has had considerable success.
VIII. The Communists' dry season combat capabilities
have been improved by a recent substantial
delivery of Vietnamese Communist military
equipment.
A. Hanoi is giving the insurgents 900 tons of
arms, ammunition, and other equipment, plus
296 trucks, in exchange for 5,000 tons of
rice.
B. The evidence suggests that the equipment
is the bulk of North Vietnam's contribution
to the Khmer Communists for this dry season.
1. Hanoi may Judge that this'-level of
support is enough to retain its
leverage with the insurgents--but not
enough for a decided military edge over
Phnom Penh.
Laos
IX. In Laos, the coalition government called for
by the September protocol to the February 1973
peace agreement is nowhere in sight. The cease-
fire, however, is holding remarkably well.
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A. Prime Minister Souvanna is doing all he
can to get negotiations on track.
1. He has been communicating with his
half-brother, Lao Communist leader
Prince Souphanovong, and trying to
get the Pathet Lao to negotiate seriously.
2. He believes, however, that Hanoi will
keep the Pathet Lao from negotiating
seriously until the end of the current
dry season, because of the importance
of the Ho Chi Minh trail supply
network in support of Communist
military activities in South Vietnam
and Cambodia.
B. The delay in formation of the new government
has produced growing frustration and un-
easiness on both sides.
1. Coup rumblings allegedly involving
disgruntled conservatives have been
making the rounds in Vientiane, but
there is no hard evidence.that any
serious plotting is underway.
C. Hanoi has withdrawn some of its forces since the
cease-fire went into effect.
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1. As many as three North Vietnamese combat
regiments have redeployed from southern
Laos--at least one back to North Vietnam. There
are indications that additional redeployments
may soon occur.
2. More recently, the first significant withdrawals
of North Vietnamese combat units from northern
Laos were detected. Major elements of the North
Vietnamese 316th Division returned to the
fatherland in December.
3. However, an estimated 62,000 North Vietnamese
troops are still in Laos--33,000 in combat
units, and another 29,000 in logistic and
administrative outfits.
D. The Chinese have also begun to scale down their
military presence in northern Laos.
1. During the past two month, virtually all of
their air defense troops have returned to
China, and there are preparations for the
withdrawal of the two infantry regiments which
have provided ground security for Chinese
roadbui lders .
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Thailand
X. Although Thailand, strictly speaking, is not part
of Indochina, I would like to touch on recent
developments in that country.
A. Prime Minister Sanya's new civilian government
has made slow but steady progress toward
constitutional government since the student
uprising ousted the Thanom-Praphat military regime
last October.
1. A constitutional drafting committee was quickly
formed, and the government apparently intends
to live up to promises of early promulgation.
2. The King's appointment last month of a broadly
based interim assembly promises to broaden
popular participation in the emerging civilian
political system.
B. The King's unprecedented emergence into the political
arena is a salient feature of the new situation.
1. His immense prestige will help the still
somewhat timorous civilian administration in
guiding Thailand toward a more democratic
system of government.
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C. The military appears resigned to a diminished
role, and has shown a willingness to give the
new government time to prove itself.
D. Preoccupation with domestic problems has caused
Bangkok to limit its foreign policy initiatives to
the resumption of a dialogue with China. Bangkok
is heartened by a friendly Chinese attitude, but
still seems inclined to defer diplomatic relations.
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18 January 1974
DCI.CONGRESSIONAL BRIEFING
A GLANCE AT LATIN AMERICA
I. I would like to conclude this prepared statement
with a short overview of Latin America, covering
the relations of these countries with the US as a
group. Then, very briefly, I will discuss develop-
ments in a few of the countries.
A. During the question period this afternoon, I
will be glad to return to these countries in
more detail, or look at others not mentioned
this morning.
II. Latin Americans hope that regional relations with
the US, in their view far from fruitful over the
last few years, are about to improve. In general,
they have felt excluded from the range of US interests.
A. Secretary Kissinger's offer to meet with their
foreign ministers is guardedly interpreted as a
signal that the US is now ready to give serious
attention to hemispheric concerns.
B. The Latin Americans regard their "Document of
Bogota"--hammered out last November for the
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meeting with Secretary Kissinger--as a useful
contribution toward a constructive dialogue.
(It did produce an unusual consensus for a
responsible position paper.)
C. Opportunities for a sustained exchange are
seen in the February conference with Kissinger,
a possible Kissinger follow-up trip through
Latin America, and the meeting of the OAS
General Assembly in Atlanta in April.
III. Most of the larger, more important nations are
primarily interested in bilateral relations with
the US, and in some cases relations have, in fact,
improved during the past year.
A. Chile's strongly antagonistic stance has changed
under the military junta that overturned Allende.
B. The long controversy with Mexico over the salinity
of the Colorado River was settled last summer.
C. Prospects for a new Canal treaty have toned
down the anti-US rhetoric from Panama.
D. Serious problems remain to be solved, however,
involving such matters as protection of US
investments, territorial seas issues, including
fishing rights, and narcotics enforcement.
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Chile
IV. In Chile, the armed forces and police have been
consolidating their hold since seizing power last
September. The government is dealing sternly with
those who oppose it. Supporters of the late
President Allende are reorganizing, but resistance
to the new government has been limited to sporadic
acts of sabotage and scattered attacks on security
forces.
A. There have been some signs of minor friction among the
junta members, but junta President Pinochet appears
firmly installed as "first among equals."
B. Personal conflicts and different opinions on
how to reach vaguely defined goals have begun
to surface at lower levels of the regime, but we
do not expect to see serious rifts.
C. Considerable progress has been made toward
restoring economic order and returning the
country to a market economy.
1. Several hundred private businesses are being
returned to their owners. Of the 45 US firms
expropriated by Allende, 12 have been returned.
The economic recovery program has been harshly
austere and the burden is being borne primarily
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by the poor and the lower middle class.
1. Food prices have risen by 200 to 400 percent
since the coup.
E. The government recognizes that resentment of its
economic policies could build to the point of
precipitating worker protests.
1. Wage increases of 60 percent effective this
month will bring some relief, even though
they fall far short of the rise in living costs.
Mexico
V. In Mexico President Echeverria is now at mid-point in
his six-year term. During the past several months he
had to face bitter criticism from the business
community, and an upsurge in urban guerrilla
violence. Both have subsided in recent weeks.
A. It is clear, however, that the important and
influential business sector is still discon-
tented, and suspicious of Echeverria because
of increasing terrorism and some government
policies considered inimical to business
interests.
B. More kidnappings, killings, and other acts
of violence by guerrilla groups are likely
and they will continue to cause embarrassment
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to the Mexican government.
C. There are still enormous problems of poverty
and uneven development, aggravated by rapid
population growth. Any substantial reduction
of poverty will take decades, perhaps generations.
D. Of more immediate concern is increasing inflation.
The cost of living in Mexico City rose 21 percent
during the first 10 months of 1973. A campaign
to do something about this began in September,
but has made little progress.
E. Good relations with the United States are
still of paramount importance. Close to 70
percent of Mexico's exports go to the United
States, and this dependence is likely to
continue despite efforts to diversify the
export market.
1. Recent foreign investment laws potentially
expand government control over foreign
business. Echeverria gives every indica-
tion, however, that enforcement will be
moderate and that foreign investment will
be welcome as long as it is channeled into
areas where development is most needed.
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"s Panama
VI. Panama's General Torrijos is pleased over progress
being made toward solving his most pressing
problem--the canal issue. He considered Ambassador
Bunker's designation as negotiator to be"a sign of
US seriousness.
A. He believes a new canal treaty would have broad
benefits, beyond assuring him a high place in
the list of national heroes.
1. Increased revenues from the canal would
provide funds for domestic reform programs,
and make it easier to service the foreign
debt.
B. Ambassador Bunker's visits in November 1973 and
this January produced an agreement on eight
broad negotiating principles, and signs that
the Panamanians may moderate some of their
previous demands when detailed negotiations
begin.
C. The central Panamanian goal of early and full
sovereignty over the canal is unlikely to
change, however. Torrijos' nationalism and
his concern about signing a treaty which his
critics could label a "sellout" are likely
to remain the biggest obstacles.
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Argentina
VII. In Argentina, Peron's return to power has by no
means brought renewed stability.
A. Terrorism, particularly as directed at foreign
businessmen, impedes efforts to revive the economy.
B. Deep rifts in Peron's own disparate movement show
no signs of healing.
C. Above all, there is uncertainty over how long his
health will permit him to lead the country. Now
78, he was seriously ill in November, and has a
number of chronic ailments.
Brazil
VIII. In Brazil, the military leaders are maintaining a
stable security situation and the country's economy
continues to grow.
A. Urban terrorists have been routed, and potential
political opponents are generally apathetic.
B. The economy has been growing by about 10 percent
a year, and inflation kept down to about 15 percent--
low for Brazil and for much of Latin America.
C. President Medici will be succeeded in office by
General Geisel on March 15, but we anticipate no
significant policy changes.
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Peru
IX. With Allende gone from Chile, Peru's military govern-
ment is the most radical in South America.
A. Under Moscow's first arms agreement in the
hemisphere (except for Cuba), Peru received some
Soviet medium tanks last November.
1. The Peruvians are interested in getting other
military equipment from Moscow, but President
Velasco apparently wants to keep open the
Washington option.
B. Contention could grow over the succession to
Velasco, who was seriously ill last year.
1. The more radical officers are apprehensive over
the rise of the moderate former finance minister
General Morales Bermudez, who is designated
to become prime minister at the end of this year.
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