CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A020800080001-2
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 17
• Document Creation Date: December 14, 2016
• Document Release Date: April 4, 2003
• Sequence Number: 1
• Publication Date: December 30, 1971
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
Central Intelligence Bulletin
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No. 0312/71
;30 December 1971
Central Intelligence Bulletin
LAOS: Government and enemy forces prepare for re-
newed action around Long Tieng. (Page 1)
EGYPT: Sadat's year-end statement finesses 1971
dea fine . (Page 3,)
CHILE: Evidence of military dissatisfaction with
Allende government. (Page 4)
UK-MALTA: Neither side backing away from ultimatums.
(Page 5 )
INTERNATIONAL MONETARY DEVELOPMENTS: About $1
KIM= in foreign currencies has been exchanged
for US dollars in major exchange markets. (Page 7)
YUGOSLAVIA: Dispute over allocation of foreign
exchange earnings has been resolved. (Page 8)
ITALY: Prospects for the Colombo government.
Page 9)
VENEZUELA: Government's new oil policies may lead
to showdown with major oil company. (Page 10)
BOLIVIA: President Banzer dismisses interior min-
i is er. (Page 12)
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LAOS: Both government and North Vietnamese
forces are moving into position for renewed action
around the Long Tieng complex.
A 320-man irregular force is moving three miles
north of Sam Thong to take up high ground positions
near Pakagnaung; so far it has met no resistance.
Two other irregular battalions are moving to close
the gap in the defensive line at Phou Pha Sai.
Balanced against these developments, however,
is the continuing evidence that the North Vietnamese
are gathering their forces for a drive against Long
Tienq. Enemy units are still in the Phou Pha Sai
area. In addition, captured documents indicate that
the North Vietnamese intend to employ their devas-
tatingly effective 130-mm. field guns to support a
ground assault on the Long Tieng complex.
Air observers report that Communist infiltra-
tion trails into the area southwest of the Plaine
are being heavily used. The North Vietnamese are
clearly continuing their effort to position men
and supplies before the government can regroup its
forces and dig in at key defensive sites.
In south Laos, elements of the four Neutralist
battalions that abandoned Paksong two days ago have
moved back into the town. They report enemy troops
on nearby high ground but no contact has occurred.
These four battalions, of dubious staying power,
now constitute the only defensive force in the
Paksong area since the irregular units have been
withdrawn to Pakse.
Communist units appear to be maneuvering into
position near Dong Hene on Route 9 in the western
panhandle. The town has been under sporadic rocket
attack for the last week and civilians reportedly
have begun to leave the area. Air observers have
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reported that Communist units appear to have by-
passed government blocking positions north and
south of Dong Hene. Patrol clashes have also in-
creased near Seno, farther west along Route 9, and
enemy units may also plan new raids against irreg-
ular training sites north of that town. Lao Army
commanders reportedly fear that the North Vietnamese
offensive is designed to disrupt the Lao National
Assembly elections scheduled for 2 January.
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EGYPT: In his year-end policy statement on
28 December, President Sadat attempted to back off
from his earlier emphasis on the "decisiveness" of
1971.
Although Sadat reiterated the theme of the in-
evitability of hostilities in the portion of his
speech published by al Ahram, he finessed his own
implied deadline for a resumption of hostilities
this year by stressing the need to mobilize all
resources on the domestic front. Sadat's explicit
refusal to be drawn out on the timing of the "bat-
tle," as well as his emphasis on the need for fur-
ther war preparedness measures, are thinly veiled
reminders to the Egyptian public that their country
is not ready to take on the Israelis.
In contrast to two particularly tough speeches
delivered late last month, Sadat devoted greater
attention to the need to pursue political efforts
along with strengthening the armed forces. He dis-
missed any consideration of abandoning diplomatic
moves, arguing that this would "paralyze" part of
the over-all effort,to reach a settlement. Although
he once again asserted that Washington's efforts to
promote negotiations had reached a dead end because
of the US bias toward Israel, Sadat foreclosed no
options and left the door open for "all diplomatic
contacts."
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CHILE: Discontent continues among some army
officers, but there is no evidence of a coherent
plan to move against the Allende government.
The latest incident between the military and
Allende stems from the President's demand for the
retirement of the outgoing commandant of the mili-
tary academy because of his recent provocative
speech on the need to defend democracy and liberty
in Chile. This presidential interference in inter-
nal military affairs is resented, even though the
officer in question, Colonel Labbe, is not popular
with some of his superiors. He is a controversial
figure whose promotion to general has been resisted
by several of his peers, and he reportedly has been
talking with other officers about the possibility
of a coup. In addition, his behavior apparently
annoyed Army Chief Prats, himself no great admirer
of Allende.
Chilean military commanders have displayed in-
creasing sensitivity to political pressure from
both government and opposition in recent months.
Many resist it. There is, however, growing evidence
of military dissatisfaction over conditions under
the Allende government, ranging from worried dis-
content to outright hostility.
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Some participants in the massive women's protest
march on 1 December against food shortages were of-
ficers' relatives.
Allende, always attuned closely to military
attitudes, is doubtlessly aware of most of the dis-
satisfaction and continues to make reassuring ges-
tures toward officers whom he finds receptive. Some
have been made advisers to government agencies or
nationalized industries at special salaries and
there is recurrent talk that military men will be
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E UK-MALTA: Neither London nor Valletta appears
willing ate this point to back down from ultimatums
which have led to a breakdown in defense and finan-
cial talks and a demand that UK forces be withdrawn
by 1 January.
After a series of heated diplomatic exchanges
over the amount of "rent" to be paid for a continued
British presence, London announced yesterday that it
is "setting in hand" preparations to withdraw its
troops. Britain has pointed out to Prime Minister
Mintoff, however, that no plans for withdrawal had
been considered previously and that it was certain
to require longer than several days. British offi-
cials are 'hoping that, if the pull-out could be
stalled sufficiently, the Maltese would realize the
economic consequences of such a move and put pres-
sure on Mintoff to reconsider.
Mintoff has already put into high gear his cam-
paign to convince the public of the correctness of
his moves. In a speech to the parliament yesterday,
the prime minister argued his case so as to make it
appear that. Britain had reneged on the informal
agreement reached in September. Mintoff lashed out
at the opposition party, which called for his resig-
nation and for new elections, and decried its "divi-
sive pro-British attitude." An opposition motion
to adjourn only until 31 December, rather than to 3
January, was defeated.
With parliament. not in session, the opposition
will find it very difficult to take any action in
these next crucial days. Moreover, the fact that
Mintoff appears to have the full support of his
cabinet, which approved the final defiant message
to London and which attended the parliamentary ses-
sion en masse, will strengthen his hand.. Finally,
even if all the details discussed by the two coun-
tries are made public, the Maltese leader probably
will be able to interpret them in a light unfavor-
able to .Britain.
(continued)
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E The UK presently has approximately 3,500 mili-
tary and about 7,000 dependents on Malta. The head-
quarters for NATO's southern naval command was re-
moved some months ago; thus,no NATO installations--
other than a few shared facilities with the British
such as radar--are involved.
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INTERNATIONAL MONETARY DEVELOPMENTS: About
$1 billion in foreign currencies has been exchanged
for US dollars in the major exchange markets of
Western Europe, Canada, and Japan since the agree-
ment on realignment of currencies.
Most of this activity reflects profit-taking
by speculators and corporate financial managers
who have reacquired the dollars they had converted
to other currencies during this year's monetary
uncertainty. The US dollar has strengthened in
nearly all major national markets, forcing some
central banks to intervene to prevent the dollar
from exceeding its newly established ceilings.
The heaviest outflow of dollars has occurred in
Japan, followed by France, Canada, and the UK. A
cut in the discount rate from 5.25 to 4.75 percent
by the Bank of Japan probably contributed to the
outflow of funds.
Some of the reacquired dollars have been in-
vested in the US, although the extent is not yet
known. The remainder have returned to the Euro-
dollar market. A larger switch into dollars is
expected early next year after many corporate cur-
rency holders complete their year-end bookkeeping.
There are estimates that as much as $10 billion
will flow from foreign markets back to the US over
the next few
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YUGOSLAVIA: Federal and republic governments
have resolved their long-standing dispute over al-
location of foreign exchange earnings. This will
boost the economy and should defuse a troublesome
issue facing the new Croatian leadership.
Exporters now will be permitted to retain a
minimum of 20 percent of their foreign exchange
earnings, compared with the previous base rate of
seven percent. The portion of earnings from tour-
ism which can be retained also will be increased
from 40 to 45 percent.
Croatian demands to retain a larger share of
hard currency earnings played a direct role in the
current shake-up of the republic's leadership. Stu-
dents in Zagreb pounced on the issue as an excuse
for a ten-day strike in late November and early De-
cember. The Croatians accused the federal govern-
ment of squandering these earnings on wasteful proj-
ects in the nation's underdeveloped areas, thereby
contributing to Yugoslavia's chronic hard currency
deficit and handicapping Croatia's ability to im-
port up-to-date technology. The less developed re-
publics contended that without hard currency and
contributions from the richer republics, they would
fall even further behind. The agreement, although
:Largely beneficial to Croatia, apparently will not
ignore the less developed republics. It promised
to reserve a special place--as yet unspecified--
for those regions in the new foreign exchange sys-
tem.
The basic agreement has yet to be translated
into specific laws and regulations, but it is an
important step forward in long-term economic liber-
alization. It also apparently will remove the final
obstacles to agreement on the new five-year plan
for 1971-75 and the economic policy resolution for
1972.
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ITALY: Newly installed President Leone's re-
jection of Prime Minister Colombo's pro forma resig-
nation yesterday averted an immediate cabinet crisis
but the government still faces serious obstacles.
Colombo faces dissension among the smaller
parties allied with the Christian Democrats in the
center-left bloc. They have been threatening to
demand a showdown on policy and perquisites in the
wake of the presidential election.
The small Republican Party is threatening to
The party holds
too few parliamentary seats to overturn the cabinet
by merely withdrawing its votes. The government
could feel obliged to resign, however, because all
four center-left parties agreed when the Colombo
government was formed that the withdrawal of one
party would bring about a cabinet resignation.
The Socialists may also be troublesome in the
longer run because of the gulf opened between them
and their center-left partners in the course of the
presidential election. But. they probably want to
stay in the government at least until their party
congress in late February.
The Christian Democrats, the major government
party, apparently would prefer to avoid a crisis
until after their own party congress in the early
spring, while the Social Democrats also appear in-
clined to avoid precipitous action.
Meanwhile, serious inflationary pressures per-
sist, while production and investment show no clear
signs of recovery. Colombo will try to release
backlogged public works funds, increase state en-
terprise investment, and implement. approved social
reforms. He will be hesitant to commit additional
funds for further ref rms because of the continuing
threat of inflation.
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VENEZUELA: A major oil company seems set for
a showdown with Caracas that could have world-wide
repercussions.
In a series of recent moves, Venezuela has
greatly increased tax reference values--the basis
of-oil company payments to the government--and es-
tablished quotas forcing the companies to maintain
exports at the 1970 level, plus or minus two per-
cent. According to the minister of mines, the new
policies will yield receipts equal to that of other
"short-haul" producing countries and will prevent
undue fluctuations in production and revenue. The
government presumably will raise the quota in case
of extraordinary demand for Venezuelan oil deriving
from "emergency situations" in other oil-producing
areas. The minister of mines has stated that, in
such an event, benefits would now accrue largely
to Venezuela.
Some companies--the most important is Creole
Petroleum, a Standard Oil of New Jersey subsidiary
and the country's largest oil company--maintain
that Venezuelan crude oil and products cannot be
sold profitably under the new policies. Although
Creole considers the new tax reference values to be
unrealistic, it is principally concerned with the
establishment of mandatory export levels. Accord-
ing to Creole spokesmen, the "whole philosophy" of
such quotas "is unacceptable and likely to under-
mine the entire basis on which private international
oil companies operate." The company says that even
if tax reference values and penalties for noncompli-
ance with the quotas were modified to ensure prof-
its, it would risk a showdown with the government
rather than accept export controls. It is taking
a strong stand because it fears that controls would
spread "like wildfire" to other producing countries.
The government appears to have an edge in the
showdown that Creole predicts will take place in
late January. Two international-oil companies-
Atlantic Richfield and Mobil--already have indicated
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they would probably go along with the export quotas
if the government modified its stand on tax refer-
ence values and penalties. Smaller firms, which
have only limited access to other oil supplies,
will have little choice but to do so. Moreover,
with 40 percent of Standard's foreign crude coming
from Venezuela, it is doubtful that Creole would
carry out its threat of shutting down its large,
profitable operation.
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BOLIVIA: President Banzer has removed one of
his strongest ministers in the first cabinet changes
since he seized power in August.
Interior Minister Andres Selich was among the
four ministers whose resignations were accepted on
28 December. Selich, who began the revolt against
President Torres in August after Banzer was arrested,
has been one of the most prominent figures of the
present government, but his personal ambitions re-
portedly disturbed Banzer. Selich has taken strong
measures against terrorism and guerrilla activity
and has been the target of charges of repression.
Before moving against Selich,B.anzer took the pre-
caution of requesting and then publicizing messages
of support from all armed forces units.
Selich's replacement is Colonel Mario Adet-
Zamora, an early ally of Banzer in plotting against
President Ovando in 1970. Like Selich, Adet-Zamora
is considered strongly anti-Communist. Banzer's
other cabinet changes involve ministers who had
;performed poorly. While improving the quality of
the cabinet, Banzer has maintained the distribution
of portfolios between the country's two major polit-
ical parties.
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