CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A015700080001-9
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 15
• Document Creation Date: December 14, 2016
• Document Release Date: April 16, 2003
• Sequence Number: 1
• Publication Date: March 7, 1970
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
Central Intelligence Bulletin
DIA review(s) completed.
Secret
51
7 March 1970
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No. 0057/70
7 March 1970
Central Intelligence Bulletin
CONTENTS
Laos: The Communists have outlined their most ex-
plicit terms to date for ending the war. (Page 1)
Philippines: Monetary instability has added another
irritant to the unstable political situation. (Page 4)
International Aviation: Discussions have not yet
uncovered any promising international safety meas-
ures. (Page 5)
Guatemala: Communists demand release of four pris-
oners in exchange for US Embassy official. (Page 6)
West Germany: The Bundesbank has raised its dis-
count rate to a postwar high. (Page 7)
European Communities: Early agreement on reducing
agricultural surpluses seems remote. (Page 8)
India: Government efforts to redirect private in-
vestment could slow economic growth. (Page 9)
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USSR: SA-4 missiles (Page 11)
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*Laos: The Communists have outlined their most
explicit terms to date for ending the war.
A Lao Communist statement issued in Hanoi on
6 March asserts that as a precondition to a polit-
ical settlement, the US must "stop escalating the
war, cease the bombing of Lao territory without con-
ditions, and withdraw all US advisers and military
personnel from Laos." These demands are not new,
but the statement then goes well beyond previous
pronouncements in spelling out what the Communists
are prepared to do to end hostilities. By having
this. statement made in Hanoi and by broadcasting it
internationally over the official North Vietnamese
news agency, Hanoi has demonstrated that the state-
ment carries its full endorsement.
Specifically, the Lao Communists have indicated
that once the bombing is halted, they are prepared
to accept a cease-fire. During this period, the
Communists propose that a "consultative political
conference composed of representatives of all Lao
parties.. .set up. a provisional coalition government."
The conference would take place in a "security zone"
to prevent pressures from within or outside of the
country. This reflects the Communists' sensitivity
to their past experiences in trying to participate
in a government in rightist-controlled Vientiane.
While the proposal for a cease-fire may be
welcome news in Vientiane, it is not without a
price. The Pathet Lao are insisting that once a
stand-down in military operations has been achieved,
the "pro-American forces" must withdraw from areas
they have "illegally" occupied and resettle all the
refugees who have fled from Communist-controlled
areas of Laos.
The timing of the statement may provide some
clues as to its purpose. It was issued after the
retrieval of the Plaine des Jarres, which until
Vang Pao's offensive last year had been in Communist
hands since 19639 but before the Communists pushed
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into sensitive government-held areas. Thus, at
present neither side can claim a distinct or clear-
cut territorial advantage. Before they moved to-
ward negotiations, the Communists had been expected,
for example, to reintroduce their presence into all
areas that were under their control in 1962. They
have not yet done so, and today control fewer people
and no more strategic territory than they did in
1962 or 1963.
This lends some credibility to their offer to
seek a "political solution," and it probably will
increase the bid's acceptability in Vientiane. At
the same time, however, by issuing the statement now,
the Communists provide themselves with a political
justification for intensified military activity,
particularly should Souvanna reject it out of hand.
The Communists presumably felt that they had to make
some positive-sounding response to Souvanna's polit-
ical offers, first to "neutralize" the Plaine des
Jarres and more recently, to reconvene the signers
of the 1962 declaration.
In making a "complete" cessation of US bombing
in Laos a precondition to talks between the Lao fac-
tions--something that Hanoi must calculate would be
unacceptable to Washington--the North Vietnamese
may hope to achieve a number of purposes. They may
hope to drive a wedge between Souvanna and the US,
perhaps even causing Souvanna to publicly call for
a cessation of US bombing. But Souvanna has made
it clear both in statements to the North Vietnamese
ambassador last year and in a press conference only
yesterday, that what happens in the infiltration
corridor is a subject for settlement between the
US and North Vietnam.
Even if Souvanna does not lend himself to such
manipulation, the North Vietnamese no doubt hope
that the offer will provide them with a decided po-
litical and propaganda advantage on the issue of
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Laos and its relation to the war in South Vietnam.
The overture is clearly designed to play on growing
fears in the US that the Laos war is getting out of
hand.
It may reflect more, however, than simply a
North Vietnamese effort to embarrass the US or to
maneuver Washington into stopping the bombing in
the infiltration corridor. It is conceivable, for
example, that North Vietnam really wants to tamp
down the fighting in North Laos. In the past two
years the fighting has been extremely costly in
North Vietnamese lives and material and has demanded
an ever growing number of front-line troops to
achieve relatively limited gains.
*Because of the shortage of time for preparation of this item, the analytic
interpretation presented here has been produced by the Central Intelli-
gence Agency without the participation of the Bureau of Intelligence and
Research, Department of State or of the Defense Intelligence Agency,
Department of Defense.
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Philippines: Monetary instability has added
another irritant to the unstable political situation.
The de facto devaluation of the peso on 21
February has resulted in a sharp rise in domestic
prices, and shortages of imported goods as Philippine
consumers buy in anticipation of even higher prices.
Bus companies and jeepney drivers, who participated
in recent political demonstrations, are demanding
higher fares, and oil companies are talking about a
30 percent increase in gasoline prices. Because of
the rising living costs, industrial workers are
pressing hard for more than a 50 percent increase
in the minimum wage.
Any major pay boosts, however, would seriously
limit the effectiveness of the devaluation on the
reduction of imports by injecting additional pur-
chasing power into the economy. On the other hand,
a rejection of these demands would broaden discon-
tent with the Marcos administration and could con-
tribute to further demonstrations. Meanwhile, the
value of the peso in terms of other currencies con-
tinues to decline sharply. By 6 March it had fallen
by nearly 40 percent. If the decline continues,
the Central Bank will be forced to stabilize the
situation by buying up pesos with its already Pre-
cariously low foreign exchange holdings.
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International Aviation: Intensive discussions
have not yet uncovered any promising international
measures that might soon be taken to deal with the
problem of civil aviation safety.
Twenty representatives to the European Civil
Aviation Commission met in emergency session in Paris
earlier this week at the request of West Germany and
the Benelux countries. After two days of debate, the
delegates could only call on their individual govern-
ments to set up "airport security committees" to counter
sabotage and hijacking attempts. Although they also
unanimously resolved to request the Secretary-General
of the 116-member International Civil Aviation Organ-
ization (ICAO) to convene an extraordinary meeting of
the ICAO Assembly, the Assembly is unlikely to meet
before May.
The Swiss and the Austrians have been the primary
proponents of an ICAO Assembly session. Austria has
also sought to place the issue on the agenda of the
current session of the UN Commission on Human Rights
but has not gained much support for this move. The
Arabs have warned that, should the Commission decide
to consider air safety problems, they would emphasize
the Israeli raids on the Abu Zabel metal factory and
the Beirut airport.
The most likely form of international action may
be a movement to secure early and widespread rati-
fication of the 1963 Tokyo Convention--20 ICAO mem-
bers are now parties to it--requiring a state in which
a hijacked plane lands to restore control of the plane,
passengers, crew, and cargo to the aircraft commander
and to facilitate its onward flight. A new convention
being developed within ICAO to make hijacking a pun-
ishable offense may be extended to include air bombings
and to provide for some harmonization of airport se-
curity measures.
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I Guatemala: Communist terrorists are demanding
the release of four prisoners in exchange for a US
Embassy official kidnaped yesterday.
The Cuban-oriented Rebel Armed Forces obtained
the release of a guerrilla last week after abducting
the foreign minister, and the Communists have engaged
in a series of terrorist activities designed to dis-
rupt the presidential succession scheduled for 1
July.
The Guatemalan electorate gave a plurality, but
not the majority required for victory, to opposition
rightist presidential candidate Carlos Arana, whose
succession now depends on congressional ratification.
The post-electoral calm has been threatened by of-
ficial party attempts to deprive Arana of his legis-
lative confirmation as president-elect.
The Communist groups probably hope to exploit
current political tensions by continuing the terror-
ist campaign launched during the election campaign.
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West Germany : The Bundesbank yesterday raised
its discount rate from 6 percent to 7.5 percent, the
highest rate in the postwar period.
This sharp rise, immediately after the reduction
in the UK discount rate from 8 percent to 7.5 percent,
dramatizes the Bundesbank's concern over accelerating
inflationary pressures in the economy. The cost of
living index in January 1970 was up 3.5 percent from
the year before, and the index of industrial prices
4.7 percent.
Economics Minister Schiller proposed prepayment
of taxes to counter these tendencies, but he was over-
ruled in the cabinet on political grounds. The
Bundesbank's action can therefore also be seen as a
reaction to the government's failure to take stronger
fiscal measures.
The immediate impact of the move is psychological.
It serves as an unmistakable warning to business and
labor to moderate their price and wage demands, and
to the government to intensify its anti-inflationary
measures. The interest rates throughout the economy
will undoubtedly rise as a result of the increase in
the discount rate. The impact on credit, however,
is likely to be less severe than other monetary policy
measures would be such as an increase in the minimum
reserve requirements of the commercial banks. The
Bundesbank is clearly stepping on the brake, but it
has been careful not to lock the wheels. Indeed,
some bankers and economists anticipate a cooling-off
of the economy later this year without new restrictive
measures, and they fear that too much restrictive
action could lead to a recession.
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European Communities: Early agreement on ways
to reduce the EC's mounting agricultural surpluses
seems increasingly remote.
The EC agricultural ministers this week failed
to agree on the Commission's proposal for price ad-
justments aimed at reducing production of some sur-
plus commodities and increasing production of some
products that the EC must now import. Each member
was willing to buy part of the Commission's plan but
could not agree on price decreases in commodities that
would most affect its own farmers.
In spite of the general agreement among the mem-
bers that something must be done to cut the expensive
surpluses, there are some big obstacles. These are
rooted in the domestic political problems of the six
governments and in their varying approaches to the
future nature of the common agricultural policy (CAP).
The crisis in the Italian Government has limited
the negotiating ability of its representatives. Al-
though Bonn would like a major revision of the CAP,
it has not been able to agree internally on how to do
this. The French want price cuts for some commodities,
but are opposed to any major change in the CAP. Con-
tinuing surpluses could complicate entry negotiations
with the UK, but it is also possible that the negoti-
ations could provide the stimulus necessary to reform
the CAP.
Failure of the EC to attack its surplus problem
would restrict its ability to participate in any inter-
national efforts to regulate agricultural production.
The Canadians recently took the initiative in this
area by unilaterally cutting back the acreage that
they will devote to wheat production this year. Ottawa
has proposed that the EC, Australia, Argentina, and the
US discuss action that might be taken internationally
to complement its measures.
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India: The government's efforts to redirect
private investment from large to small enterprises
may reduce the level of private investment and
could lead to a slackening of economic growth.
Major private investors in large industries are
facing a more cumbersome government licensing con-
trol system. New Delhi. also has announced its in-
tention to enlarge progressively its direct manage-
ment role in large, private firms. Simultaneously,
the relatively inefficient small-scale private sec-
tor has been given further encouragement. The gov-
ernment has eliminated a number of restrictive
licensing requirements and has reserved more in-
dustries exclusively for small enterprise develop-
ment.
Before 1966 almost; all large, private firms
operated under an exhaustive system of government
controls that eliminated competition among producers
and stifled the incentive to innovate and reduce
costs. At the urging of the World Bank, India then
adopted a policy of progressively relaxing controls.
The industrial recession of 1966-68, however, pre-
vented an adequate test of this policy's benefits
before New Delhi again tightened restrictions.
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Soviet SA-4 Ganef Mobile Surface-to-Air Missile (in Moscow parade)
IOC . . .1967
Range - . ? 25-30 nm
Altitude ? ? . 1,000 to 65000 feet
Speed - - Mach 2.9
1 1
97809 3-70 CIA
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USSR: The Soviets have probably begun deploying
the SA-4 Ganef mobile surface-to-air missile system
with their ground forces in Hungary. The US defense
attache recently observed what appeared to be SA-4
equipment at a Soviet ground forces installation
there. The track-mounted SAM was initially deployed
with ground forces in the Soviet Union in 1967, and
SA-4 equipment was first observed at Soviet instal-
lations in East Germany in early 1969.
7 Mar 70 Central Intelligence Bulletin 11
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