CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A022400050003-5
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 20
• Document Creation Date: December 14, 2016
• Document Release Date: June 16, 2003
• Sequence Number: 3
• Publication Date: July 26, 1972
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
Central Intelligence Bulletin
Secret
N2 042
26 July 1972
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No. 0178/72
26 July 1972
Central Intelligence Bulletin
SOUTH VIETNAM: Situation report. (Page 1)
JAPAN-US: Tanaka seeks to redress the growing
trade imbalance with the US. (Page 2)
CHILE: Allende acknowledges important economic
dif culties, (Page 4)
EUROPEAN COMMUNITIES - MIDDLE EAST: The EC shows
interest in increasing its involvement in the mid-
dle East. (Page 5)
UK: The underlying issues between the Heath gov-
ernment and labor remain unresolved. (Page 6)
SPAIN: New decrees extend regime?s control over
unI ersities. (Page 8)
INDIA: The government takes over a privately owned
major steel firm. (Page 9)
CHINA-EGYPT: Support for Sadat (Page 10)
WEST GERMANY: Trade liberalization (Page 10)
PANAMA: A Review of Recent Political Developments
Page 11)
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uang' tri City
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C SOUTH VIETNAM: South Vietnamese paratroops
moved into the Quang Tri City citadel yesterday;
the Communists apparently are preparing new posi-
tions north and west of the city.
Some South Vietnamese military spokesmen claim
the citadel is now under full government control,
but this has yet to be confirmed. The fortress is
the key to control of the provincial capital, which
was seized by the Communists on 1 May. The loss
of Quang Tri City would be a major psychological
setback to the Communists, although they appear
to be reforming their defenses in the province and
preparing for further action.
Action elsewhere in the northern provinces
remains fairly heavy. Communist gunners fired
more than 1,300 artillery and mortar rounds at
South Vietnamese defensive positions south and
west of Hue on 24 July and shelled the Hue citadel
for the second day in a row. The South Vietnamese
are continuing their push into northern Binh Dinh
Province and are now deploying at least company-
sized units in all three districts that were taken
by the Communists earlier this spring. In Mili-
tary Region 3, South Vietnamese engineers have not
yet cleared Route 13 south of An Lac of mines and
debris, but the road is officially open and some
light traffic is moving.
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JAPAN-US: Prime Minister Tanaka is clearly
determined d to redress Japan's growing trade imbal-
ance with the US.
Tanaka views an easing of economic strains as
a vital step in strengthening Tokyo's ties with
Washington, and he would undoubtedly like to de-
flate the trade issue before his meeting with Pres-
ident Nixon next month. Plans to increase purchases
from the US and to liberalize foreign access to
Japanese markets have been discussed for several
weeks in Tokyo in preparation for the bilateral
trade negotiations now under way. In addition to
proposals for large-scale purchases of American
grains and safeguarded enriched uranium, Tokyo is
considering increased imports of US commercial air-
craft and military hardware. It may also expand
import quotas on foodstuffs and computer products
and ease restrictions on foreign investment in re-
tail and wholesale outlets.
Conflicting bureaucratic and business interests,
which in the past have often precluded significant
trade concessions, must still be resolved. Some
higher echelons of the Ministry of International
Trade and Industry, together with the foreign and
finance ministries, favor import liberalization,
but they face strong opposition from middle-level
bureaucrats who represent business and agricultural
interests. Tanaka is in a stronger position than
former prime minister Sato to gain concessions and
to weather the controversy that might follow the
imposition of liberalization programs.
Even if the prime minister obtains agreement
to offer the US some of the concessions under con-
sideration, they are not likely to have any major
impact on the trade balance this year. Because of
logistical problems, large-scale purchases could
at most boost imports from the US by only a few
hundred million dollars. Other trade and investment
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measures being considered represent only a continua-
tion of Tokyo's policy of gradually opening up the
domestic market, which will have only a long-term
effect on the trade balance. 25X1
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CHILE: In a long-heralded major speech on the
countr s-economic problems, President Allende ac-
knowledged important difficulties, promised the work-
ers a larger share of goods and services, and warned
of future sacrifices.
The President first pointed out positive as-
pects of his economic policies increased employment
and industrial growth--but quickly turned to the
major problems facing the nation. Prime among these
is the shortage of foreign exchange, attributed to
lower copper prices, large debt payments, and a US
withholding of private and governmental credits.
Allende praised Latin America, Japan, Europe,
and especially the Soviet Union for coming to Chile's
aid with needed loans and credits. Allende admitted,
however, that these were insufficient to balance
losses caused by the disruption of traditional eco-
nomic patterns. As a partial remedy, Allende pre-
scribed a savings plan that would provide local in-
vestment funds and a soak-the-rich pricing scheme.
A general wage boost, to take effect in October,
was also announced, along with a vacation plan, de-
signed to give workers a domestic paid holiday.
Guarantees against expropriation were offered to
small businessmen and farmers. Lest some take his
optimistic tone too seriously, however, Allende
warned of further belt-tightening.
While the general outline of his programs had
been previously discussed, the specifics are new.
The government's performance to date and accelerating
economic pressures suggest that implementing this
policy will be difficult at best. Successful or not,
more stringent government controls on the economy
and on the spending habits of consumers seem certain.
The speech is one more aspect of the preparations for
the legislative elections less than eight months
away. Attacks on the US and the local oligarchy,
not now belabored, are likely to grow if the economy
does not improve.
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EUROPEAN.COMMUNITIES - MIDDLE EAST: The EC
continues to show cautious interest in measures that
might increase its long-term involvement in the Mid-
dle East.
A long-discussed plan to provide community as-
sistance to Palestinian refugees came up again last
week in The Hague in the EC forum for political con-
sultations. The plan, prepared by the EC Commission,
calls for spending $30-?40 million over a three to
five - year period for food, education, and develop-
ment aid. The political directors at last week's
meeting agreed that an early decision could be taken
to move ahead with the food program, which could be
justified on a humanitarian basis. Because of the
political implications involved, however, action on
the remainder of the plan was deferred until Septem-
ber, when it will be discussed by the foreign minis-
ters of the Ten.
Action taken by the EC Council last week should
permit the community to conclude this month the
preferential agreement with Egypt that has been un-
der negotiation for two years. A trade agreement
probably will also be concluded with Lebanon soon,
and Jordan has requested negotiations on a similar
agreement. Syria's relationship to Europe is now
scheduled to be taken up later in the context of
the community's political consultations. The EC is
discussing with Israel an updating of the existing
preferential arrangement.
While the EC as such can be expected to go slow
in extending its involvement in the Middle East much
beyond the commercial sphere, its network of trade
arrangements there and in the Mediterranean will
contribute to its "presence." Moreover, the view
is widely held by community members that Western
Europe's influence in the area is not now commen-
surate with its vital security and economic--espe-
cially oil--interests. This view should sustain in-
terest in the still tentative efforts to develop
common policies toward the area.
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UK: The underlying issues between the Heath
government and the labor unions remain unresolved.
The jailing of five London dockworkers last
weekend under provisions of the controversial Indus-
trial Relations Act was the immediate cause of the
walkouts that have shut down all UK ports and af-
fected other sectors of the economy. The official
solicitor, who acts independently of the Tory gov-
ernment, has announced that he will intervene in the
case. This could get the dockworkers out of jail
soon and diminish the protest strikes. The funda-
mental issue for the government, however, is whether
it can enforce the law.
The Tories hoped the Industrial Relations Act
would provide a legal framework for establishing an
orderly pattern of labor-management relations. In-
stead, left-wing labor elements have forced numerous
confrontations between the trade union movement and
both the National Industrial Relations Court and the
government. For example, the Trades Union Congress
leadership is not expected to endorse demands for a
one-day general strike on 31 July, but widespread
wildcat industrial action could still occur. Despite
heavy pressures, Prime Minister Heath has given no
sign that he is prepared to consider union demands
for suspension of the new law until it is given a
chance to work.
The government, whose standing in public opin-
ion polls has slipped severely in recent months, has
been hampered by its inability to mobilize traditional
British respect for the rule of law against union at-
tempts at coercion. The hand of labor moderates, who
recognize the need for reform and cooperation with
the government, would be strengthened if the govern-
ment were able to bring the pressure of public opin-
ion to bear on left-wing union leaders.
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The economic impact of the strikes at this time
is relatively minor. Sterling, though down slightly
on international foreign exchange markets, has not
been subject to hectic trading, and London stock
prices have stabilized after a small loss. No seri-
ous shortages of consumer goods or industrial mate-
rials have occurred.
If the strikes continue, however, the UK econ-
omy. would be seriously affected. Because Britain
depends heavily on imports for food and industrial
materials, a prolonged dock walkout would soon cause
shortages and industrial slowdowns, and boost con-
sumer goods prices--especially on food. More im-
portantly, a lengthy dock strike would probably lead
to loss of markets for :British exporters. Customers
abroad would have to find alternative sources to meet
current requirements. Furthermore, after the strike,
many might hesitate to resume ordering from Britain
so long as the unions retain the potential to inter-
rupt the orderly flow of goods.
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SPAIN: After extensive disorders during the
past academic year, which resulted in the closure
of several key universities, the regime has issued
new decrees extending its control over universities.
one decree permits the government, at the re-
quest of the education minister, to suspend tempo-
rarily the normal statutes of any university when-
ever a threat to academic order exists. The gov-
ernment can then issue such provisional rules as it
wishes. Such a measure is in accord with the re-
gime's tendency to provide a legal basis for harsh
control measures.
A second decree provides that, upon recommenda-
tion of the education minister, the government can
appoint university rectors. The regime can thereby
ignore the opinion of the faculties in choosing a
replacement for a rector who opposes government in-
tervention in campus disturbances. The decrees,
not yet published officially, are also expected to
include a wide variety of disciplinary measures
against students.
In June, strict disciplinarians replaced rank-
ing Education Ministry officials who were responsi-
ble for the educational reform program over the last
two years. The changes made clear the government's
determination to avoid serious academic disorders
in the upcoming term.
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INDIA: The take-over of one of the two remain-
ing privately owned major steel firms gives New
Delhi control of 75 percent of the country's steel
capacity.
The government justified its take-over of the
Indian Iron and Steel Company (IISCO) by citing the
continued decline in production, poor maintenance
and management, and increasing operating costs.
The firm is now operating at 60 percent of its one-
million ton capacity. Two of India's three publicly
owned steel plants, however, have been plagued with
similar operational difficulties and are currently
operating at lower rates of capacity than IISCO.
The steel industry's difficulties stem in large
part from labor indiscipline and the government's
failure to permit adequate imports of equipment and
supplies. Moreover, without operational improve-
ments and labor management reform, steel production
cannot be substantially increased.
Of the five major steel plants in the country
only the Tata Iron and. Steel Company remains in
private hands. Indian officials have stated that
this firm is not likely to be taken over.
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CHINA-EGYPT: Peking has given cautious offi-
cial support to President Sadat's decision to re-
quest the withdrawal of Soviet advisers. A joint
message of congratulations on Egypt's national day
from acting chief of state Tung Pi-wu and Premier
Chou En-lai refers to Sadat's speech of 18 July as
expressing Egypt's strong determination to fight
for justice. The message also pledges the support
of the Chinese Government and people for Egypt's
struggle to oppose "the aggression committed by Is-
raeli Zionism with the connivance and support of
the superpowers." This vague statement does not
commit Peking to any particular course of action,
but it leaves the Chinese free to take advantage
of the developing situation. Having profited from
Moscow's discomfiture in the Sudan last year, the
Chinese presumably now hgve to achieve similar po-
litical gains in Cairo.
WEST GERMANY: US hopes for EC trade liberali-
zation have received welcome support from a West
German trade association that represents more than
100,000 business establishments. The association
recently published a series of proposals designed
to counter the accelerating increase in living
costs, which reached an annual rate of 8.4 percent
in June. It called on the government to help boost
imports by advancing the date for reduction of duties
on imports from the four countries soon to join the
EC. The association also called for an earlier-than-
planned reduction in the EC's external tariffs, and
the removal of nontariff barriers. Although these
proposals are somewhat unrealistic in the EC con-
text, they serve as a reminder that important inter-
ests within West German continue to favor trade
liberalization.
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PANAMA: A Review of Recent Political Develop-
ments
The focus of political activity in recent months
has shifted from negotiation of a new canal treaty
to the legislative elections to be held on 6 August,
the first expression of the popular will since the
coup in 1968. Nevertheless, preoccupation with
Panama's international image remains at the core of
government policy. Deeply concerned that the coun-
try is considered merely an appendage of the US,
the current regime. is flaunting its nationalism and
of late has inched toward an independent, "third
world" position.
Government moves toward an independent foreign
policy stance have been many and varied. Panama
maintains commercial ties with Yugoslavia and Poland
and last year opened formal diplomatic relations
with Romania. It is deliberately expanding commer-
cial, sports, and cultural ties with Communist states
and strengthening its informal ties with Cuba. It
recently supported the Peruvian initiative to reduce
OAS sanctions against Cuba and reportedly supported
Cuban participation in the Caribbean Law of the Sea
Conference held last month in the Dominican Republic.
All of this posturing is, of course, secondary
to the canal treaty negotiations. The Torrijos gov-
ernment is determined to gain increased compensa-
tion, a reduction in the US military presence, full
jurisdiction over the Canal Zone, and the return of
a significant portion of the 647 square miles of
land and water area. However, nearly 13 months
after the current round of negotiations began, lit-
tle progress toward a new treaty has been made.
Indeed, the last formal negotiating session was in
late March. In large part, this extended recess
results from Panama's difficulty in drafting a coun-
teroffer.
(continued)
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The main stumbling block has been General Tor-
rijos, who has been unwilling to commit himself on
major treaty issues. Those working out the Panama-
nian position have been caught in a bind. On the
one hand, they feared their patriotism would be
questioned if they were too reasonable. At the
same time, the negotiating team seemed to recognize
that a position meeting the expectations of all
shades of Panamanian opinion would not advance the
negotiations. Although an agreed negotiating posi-
tion will probably be reached soon, it is unlikely
that Panama will compromise its objectives, and its
hopes for fruitful negotiations will continue to
center on gaining further US concessions.
The Panamanians periodically have attempted
to enlist international support of their treaty ob-
jectives and will continue to use selected interna-
tional forums for such efforts. At least for the
next few months, however, a serious attempt to gen-
erate pressure on the US or to inflame domestic
opinion on the canal issue seems unlikely. Although
formal negotiation may soon resume, Panama's leaders
believe that little can be accomplished on the
treaty until after the US elections in November and
that it is in their interest to wait. Torrijos,
moreover, is currently preoccupied with promoting
the legislative elections. After that, he may be
primarily concerned with ironing out the political
details associated with transforming the current
provisional junta government into a constitutional
government.
On 6 August, the voters will elect 505 repre-
sentatives to a new national legislature that in
turn will select the next president and vice presi-
dent and approve a new constitution. Although
these events are being billed by the government as
highly significant, the public has found no issues
to arouse its interest and even candidates have
been hard to find. The government has blocked the
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participation not only of the old politicians but
of any opposition at all, and the electorate knows
that General Torrijos will wield as much power after
the election as he does now. Even speculation that
significant personnel shifts might occur has ebbed
as Torrijos' speeches have hinted that he will re-
main as National Guard Commandant and that President
Lakas will continue in his present post.
The electoral exercise will nevertheless serve
to demonstrate the government's power and its con-
tinued ability to stage manage political events.
Local institutions will probably be strengthened
and a needed link between the national government
and the people will be created. It may also enhance
government authority to push ahead with domestic re-
forms. From Torrijos' point of view, moreover, the
election will reaffirm to the world Panama's polit-
ical stability and give his rule a new legitimacy
and respectability which he hopes will. strengthen
his hand in negotiations with the US.
Torrijos realizes the'need to maintain an at-
mosphere conducive to negotiations and. to keep US-
Panamanian relations on an even keel. Nevertheless,
he remains suspicious of US motives. A fervent na-
tionalist, he is quick to react to real or imagined
slights. Although he always draws back from moves
that would irrevocably impair relations with the US,
he has a thorough appreciation of the use of harass-
ment techniques that inject just the right amount
of strain in bilateral relations. Recently stung,
for example, by charges that Panama has not done
all it could to stop narcotics traffic, the Torrijos
government suddenly began rigid enforcement of Pana-
manian immigration laws to the considerable discom-
fiture of US travelers and of dependents of US offi-
cials serving in Panama.
Torrijos' need to demonstrate his independence
from the US and to revalidate his nationalistic
credentials manifests itself in other ways. Although
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he very cordially received visiting members of the
US National War College in April, he reportedly
fired the National Guard publicity chief for pub-
licizing this cordiality.
More important has been the government's han-
dling of its feud with the US-owned power and light
company. Although Torrijos had little interest in
taking on a new and expensive burden and did not
wish to scare off foreign investors, he reacted
sharply to pressure tactics that threatened to dis-
rupt electric service. The original 30-day govern-
ment take-over of the company was designed to force
compliance with Panamanian laws and ensure an ade-
quate investment program to keep up with growing
power requirements. Even though the company made
an effort to meet Panama half-way, rigidities on
both sides prevented a solution. Very favorable
press and public reaction to the government move,
moreover, apparently made Torrijos less and less
willing to back down. Arguments by President Lakas
and others about adverse economic and international
repercussions did not diminish Torrijos' interest
in milking a nationalistic issue, and the decision
was made to acquire the company by the end of August.
Despite the revolutionary rhetoric, the open-
ings to the left, and the cooperation with the local
Communist party, Torrijos retains a basically prag-
matic rather than ideological orientation. While
"social justice" and improvement of the lot of the
rural poor will continue as important government
goals in the short run, Torrijos' preference for the
big picture, the glamorous issue rather than the
hard work and drudgery of governing, may limit do-
mestic progress. He may attempt to play a larger
role on the world stage as a progressive, if not
slightly radical Latin American leader with good
channels to third world and Communist states.
(continued)
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The real test, of course, will be Torrijos'
ability to obtain a new canal treaty. If he achieves
an agreement that can be readily sold to the Panama-
nian public, his place in Panamanian history will
be assured. A failure, however, could finish him
politically. Torrijos' reluctance thus far to in-
volve himself personally in the negotiations
reflect a continued fear to cast the die.
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