CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A020100080001-9
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 14
• Document Creation Date: December 14, 2016
• Document Release Date: July 18, 2003
• Sequence Number: 1
• Publication Date: September 30, 1971
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
Central Intelligence Bulletin
DIA and DOS review(s)
completed.
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No. 0234/71
30 September 1971
Central Intelligence Bulletin
COMMUNIST CHINA: Political situation apparently is
still far from being resolved. (Page 1)
USSR-INDIA: Prime Minister Gandhi's visit to Moscow.
(Page 3)
CHILE: Allende ready to risk showdown over compen-
sation for expropriated copper companies. (Page 5)
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CEYLON: Insurgency may be renewed. (Page 8)
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INDIA: Government: loses Italian firm's bid to move
plant to India (Page 10)
ITALY: Government. tactics on price freeze (Page 10)
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COMMUNIST CHINA: The eleventh-hour decision to
cancel this evening's National Day banquet suggests
that the current political situation is still far
from being resolved.
According to press reports, a Ministry of For-
eign Affairs spokesman announced that the banquet,
which usually features a speech by Premier Chou En-
lai and is well attended by the ruling politburo
members based in Peking, will be replaced by a one-
and-a-half hour reception sponsored by the Foreign
Ministry. The spokesman reportedly was unable to
affirm that Chou would speak at the reception; but
even if he does speak, it seems clear that Peking
may be departing from previous practice in order to
rationalize what may be only a limited turnout of
top leaders. Since the banquet. has not been at-
tended by either Mao Tse-tung or Defense Minister
Lin.Piao for some years, Peking may be seeking to
conceal recent significant changes in the politburo
below the level of :Mao, Lin, and Chou.
The impression that the prolonged power struggle
between moderate and radical forces on the politburo
has produced further breaks within the leadership
has been reinforced by Jack Chen, a regime publicist
in Hong Kong who recently circulated Peking's offi-
cial version of the current campaign against the
extremist "May 16 Corps." According to the US con-
sulate general, Chen is advising Western journalists
to focus on the possibility of leadership changes as
the cause for the unusual developments in China
rather than speculating on the death of Mao. Al-
though Chen's knowledge of current developments in
Peking is unconfirmed, his remarks, taken with the
continued public absence of several ranking military
leaders, an accumulation of rumors regarding inter-
necine quarreling at the top, and the cancellation
of tonight's banquet, all suggest that the power
struggle in Peking has entered a new and more seri-
ous phase which probably centers on the political
futures of China's top-ranking military leaders.
(continued)
30 Sep 71
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Whether this struggle has been precipitated by
the illness or sharp decline in the health or polit-
ical strength of Mao or heir-designate Lin Piao is
Preparations are going forward for low-key Na-
tional Day celebrations in Peking tomorrow.
Since mid-September, the Soviet press has been
cautious and noncommittal in treating internal af-
fairs in China. A brief TASS item on 25 September
indirectly refuted speculation that events in Peking
are somehow related to Sino-Soviet tensions. At a
public lecture in Moscow on 28 September, the Soviet
speaker conveyed the impression that the position of
the extremists in Peking has been weakened.
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USSR-INDIA: Prime Minister Gandhi's visit to
the USSR seems to have been fairly successful.
She was accorded the unusual honor of being
housed in the Kremlin and of having the top three
Soviet leaders take part in the discussions. There
is still no conclusive explanation for the unusual
activity that surrounded the beginning of her visit
or for the inclusion of Brezhnev and Podgorny in
talks that were originally to have involved only
Kosygin. It may be that the Soviet leaders wanted
to present a united front to Mrs. Gandhi in order
to underscore their message on the need for re-
straint.
The main topic of discussion during the visit
was clearly the unsettled situation on the subcon-
tinent. As Kosygin's luncheon speech and the final
communique indicate, the Soviets, although taking
the Indian side, clearly have not abandoned their
policy of trying to prevent another Indo-Pakistani
war. Kosygin, for example, was quite harsh in his
criticism of West Pakistan's actions in the East
wing and placed most of the onus for easing the ref-
ugee problem on West Pakistan. He was equally firm,
however, in his opposition to another Indo-Pakistani
war, maintaining that the USSR would do its utmost
to prevent another conflict.
Mrs. Gandhi, for her part, took a somewhat
different tack. She reiterated India's opposition
to war as a means of resolving the refugee problem
and pleaded for concerted international assistance
to help India cope with the influx. She went on,
however, to express the hope that Soviet efforts to
encourage the Pakistanis to work for a political
solution would bear fruit and reminded her audience
that "peace cannot be obtained by waiting and
hoping."
In the communique the Indians joined with Mos-
cow in "demanding" that the West Pakistanis take
"urgent measures to reach a political solution" to
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their problem with East Bengal. The language is
virtually identical with the appeal to Yahya made
by Soviet President Podgorny last April, however,
and consequently cannot have been especially en-
couraging to the Indians. The Indians also agreed
that all problems at issue in relations between
countries should be settled by "peaceful means."
Both parties agreed to further exchanges of views
on the East Bengal problem.
Another important topic on the agenda doubtless
was China. Just prior to Mrs. Gandhi's visit to the
USSR, Moscow sent a special envoy to New Delhi to
discuss future Soviet and Indian strategy at the UN.
Moscow is particularly interested in securing India's
cooperation against China should Peking gain admit-
tance to the UN and in getting a better reading of
recent Indian moves to improve Sino-Indian relations.
The communique indicates that the two sides
also discussed Indian Ocean matters. The Soviets
agreed with the Indians to study the question of
declaring the Indian Ocean "a zone of peace." The
two sides also agreed to establish a joint commis-
sion for economic, scientific, and technical coopera-
tion. Both Brezhnev and Kosygin accepted Mrs.
Gandhi's invitation to visit India, but no date was
fixed.
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CHILE; President Allende's very hard stand on
expropriated Kennecott and Anaconda copper operations
in Chile indicates that he is prepared to risk a
showdown with the US Government. over compensation.
.Allende's charge on 28 September that the com-
panies owe Chile $774 million in "excessive profits"
ensures a substantial negative indemnification bal-
ance when added to his government's excessive claim
of about $1 billion already made against the compa-
nies for alleged equipment deficiencies and mine
damage. The companies' remaining 49-percent inter-
est in their extensive Chilean copper operations was
taken over in July under a constitutional reform,
but Allende's promise to negotiate compensation has
not been kept.
The final reckoning will be announced on 15
October when the Chilean controller general, nomi-
nally a political independent, reveals his calcula-
tion of the net worth of the companies' Chilean
holdings. The announced claims will leave a nega-
tive balance that would more than cancel debts still
due the companies for the purchase of their first
51-percent interest during the Frei administration.
Such a balance could also be used by Allende to
justify reneging on his promise that Chile would
honor foreign debts incurred by the companies in
extensive copper production expansion programs only
recently completed. Finally, it could trigger claims
for extensive insurance the companies hold with the
Overseas Private Investment Corporation.
The Cerro Corporation probably will receive
compensation for its mine that started producing a
few months ago, as a gesture to indicate to poten-
tial sources of international credits that the Al-
lende government is reasonable and selective in its
dealings with investors. The $56-million compensa-
tion--already negotiated but not signed--would be a
small price for Chile to pay for Cerro's agreement
to serve as purchasing agent for equipment necessary
to maintain the larger companies' expropriated prop-
erties.
(continued)
30 Sep 71 Central Intelligence Bulletin
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Allende has successfully nurtured substantial
international cordiality toward his government as a
"worthy socialist experiment," although this has not
brought Chile the credits so desperately needed to
bail it out of increasing economic difficulties.
Allende apparently has decided that a hard stand on
the copper issue will strengthen his posture as
champion of underdeveloped countries willing to defy
large foreign investors.
Allende's action also may be an attempt to use
a nationalistic issue to strengthen further his in-
ternal political position in order to launch an over-
due domestic austerity program.
30 Sep 71 Central Intelligence Bulletin
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CEYLON: The security situation continues to
deteriora etet and a renewal of insurgency is possible.
Most current rebel activity seems directed at
obtaining arms and, according to the US defense
attache, the insurgents are starting to regroup in
the jungles. Their current strength is estimated
to be no higher than 400. Although the security
forces believe they could still control the situa-
tion, they already are spread thin and may soon be
confronted with additional difficulties. Some
14,000 youthful prisoners arrested last spring are
growing increasingly restive in their "rehabilita-
tion centers." The government had hinted at plans
to release a large number of detainees in connection
with a national holiday on 26 September, but very
few were actually freed, and escape attempts or ex-
plosive demonstrations by the prisoners are likely.
The coalition government, a tenuous alliance
of moderates and leftist extremists, has been able
to muddle through so far, but it appears incapable
of decisive action, and according to the defense
attache, military leaders are frequently asked when
they will take over and "set things right." The
military remains reluctant to get involved in pol-
itics, but the present government seems to be un-
able to improve the situation and the military's
prestige has never been higher.
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INDIA: New Delhi's indecision, which stems
from its concern over foreign-owned and -managed
plants, has resulted in the loss of an Italian
firm's bid to move its motor scooter plant to In-
dia along with a commitment to export all of its
production. India can ill afford to lose the deal,
which would have promoted ancillary industries, in-
creased employment opportunities, and earned foreign
exchange. Investment is already lagging and indus-
try is in the doldrums, with production having in-
creased barely 1.5 percent during the first half of
1971. A private Indian business delegation is sched-
uled to visit West Germany next month, primarily to
pursue offers from German manufacturers seeking for-
eign plant sites in order to reduce mounting labor
costs. New Delhi's attitude toward the Italian
firm, however, may dampen these manufacturers' in-
terest in relocating in India.
ITALY: The government, with a fine hand, has
given the impression that a price freeze for food-
stuffs and other basic commodities has been insti-
tuted without actually implementing price ceilings
or rollbacks. Rome has merely reminded provincial
officials of existing decrees, which were designed
to counter wartime price speculation and black mar-
keteering and which authorized them to control
prices. To date, however, the provincial prefects
have not attempted to use this old authority. By
publicizing the long-dormant statutes, Rome meant
to reassure the press, unions, and popular elements
that the government had the statutory power to con-
trol prices. The only real action taken in the
price field so far, however, has been a temporary
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suspension of increases in public service rates.
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