CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A022700120001-6
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 19
• Document Creation Date: December 14, 2016
• Document Release Date: June 26, 2003
• Sequence Number: 1
• Publication Date: September 14, 1972
• Content Type: REPORT

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DIRECTORATE OF
INTELLIGENCE
Central Intelligence Bulletin
Secret
N2 41
.4 September 1972
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No. 0221/72
14 September 1972
Central Intelligence Bulletin
VIETNAM: Heavy fighting continues in Quang Tri City.
(Page 1)
JAPAN: Tokyo will again pledge to reduce trade sur-
plus. (Page 2)
UK: Government, business, and labor leaders to meet
on inflation issue. (Page 3)
INDIA: Industrial production lags. (Page 4)
TURKEY: Leading army officer may take more active
role in politics. (Page 5)
CHINA-JAPAN: Peking to buy oil drilling equipment
from Japan (Page 6)
IRAQ-USSR: President Bakr will arrive in Moscow
today (Page 6)
CHILE: The largest private company in Chile defaults
on foreign loans (Page 7)
KOREA: A review of the negotiations and their pros-
pects. (Page 8)
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VIETNAM: Government forces attempting to re-
tak e citadel in Quang Tri City are encountering
intense resistance from Communist infantry and ar-
tillery.
Several hundred South Vietnamese Marines re-
portedly have fought their way into the citadel and
are holding positions near the eastern and southern
walls, despite heavy artillery and mortar barrages.
Three or four marine battalions outside the citadel
have advanced to within 200 yards of its outer wall
on three sides. The marines claim to have killed
about,,200 enemy while taking only light casualties.
On the southern outskirts of Quang Tri City near
the river, there was a sharp firefight which re-
sulted in the destruction of four enemy boats.
Government forces operating near Fire Support
Base Ross in Quang Nam Province engaged the Commu-
nists in several minor skirmishes. In the Tien
Phuoc area of Quang Tin Province, enemy pressure
forced South Vietnamese units to withdraw farther
to the east from the district town.
Activity was light and scattered in military
Region 3, where the Communists attacked isolated
government outposts. One outpost in Bien Hoa Prov-
ince was struck by fifty rounds of mortar fire on
both 12 and 13 September. In the delta, there was
a sharp increase in Communist activity primarily
directed against small outposts. Most of this ac-
tivity took place in the provinces that border on
the U Minh Forest. In Chuong Thien Province, alone,
more than a dozen outposts were attacked and commu-
nications have been lost with half of them. Sev-
eral outposts in Kien Giang Province reportedly
have f len to the Communists.
I I
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JAPAN: Tokyo hopes to offset expected criti-
cism of its foreign economic policies at meetings
of major international economic organizations later
this month by pledging a reduction in Japan's huge
trade surplus.
Japan intends to announce a goal of reducing
its current account surplus from the current 2.5
percent-share of gross national product to a one
percent-share by 1975. To help achieve this target,
a plan to reduce the trade gap has been promised by
the end of the month. Its main thrust reportedly
will be the "voluntary" restraint of exports.
Even if Tokyo realizes its goal, the trade sur-
plus will approach $7 billion in 1975, larger than
any year so far except for the $7.8 billion in 1971.
In view of Tokyo's failure in recent years to ef-
fectively pursue other programs designed to correct
the trade imbalance, other major trading partners
are unlikely to view this latest plan as an adequate
remedy. Moreover, Tokyo apparently remains unwill-
ing to change quickly practices that hold down im-
port growth, despite long-standing complaints from
the US, and recently rising criticism from West
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Prospects for increased inflation will
be homily influenced by the outcome of talks that
resume today in London among government officials,
labor leaders, and businessmen.
The outlook is not encouraging. The strong
position of left-wing members within the trade
Unions Congress will make it difficult for the
labor representatives to agree to any meaningful
restraints on wages. Barring agreement, unions
will feel no inhibition in continuing demands for
sizable wage increases, thereby stimulating further
inflation. More rapid inflation would pose a threat
to the UK's international competitive position,
especially starting next year when Britain will be
exposed increasingly to competition from other
Common Market countries as tariffs are mutually
reduced.
While Britain is currently experiencing its
lowest rate of inflation in two years, the poten-
tial for increased inflation is strong. Labor
contracts are soon to be renegotiated in several
key public sector industries, including power,
railways, and mining, where there could be wage
settlements substantially above the government's
norm of nine percent. Moreover, unless there are
signs of progress in the area of wage restraint,
the Heath government will have difficulty obtaining
an extension of the Confederation of British In-
dustries' voluntary price restraint commitment
beyond its 31 October termination date.
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INDIA: Lagging industrial production remains a
serious problem and government moves to clarify eco-
nomic policies may have only a limited impact.
Prime Minister Gandhi has called for a militant
national effort to overcome disappointing economic
progress. Her appeal follows an announcement by the
minister for Industrial Development and Mines that
a new industrial policy is being formulated. It ap-
parently will be designed to allay private sector
fears of government intervention in the private sec-
tor that have curbed industrial expansion. The pro-
gram reportedly will specify those industries that
are to be included in the public sector and those
that are to remain private. Where government and
private industry participate in joint activities,
private management will be retained.
Some uncertainty in the private business commu-
nity, however, remains. The government has not re-
versed its long-term commitment to reduce the con-
centration of economic power and dependence on for-
eign funds. Furthermore, New Delhi does not intend
to ease significantly the tight industrial licensing
policy for the country's largest industrial firms
and private foreign investors. These policies,
which have held back licenses to those firms intend-
ing to. expand production, have thwarted efforts to
get the industrial sector moving rapidly again.
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TU3KEY: General Gurler, the new chief of the
.gene ah l staff, is consolidating his position, pos-
sibly as a prelude to a more active role in politics.
Gurler's appointment as chief of staff last
month was preceded by intense controversy in mili-
tary and political circles. President Sunay and
previous chief of staff Tagmac reportedly attempted
to balance Gurler's appointment by filling other
key military positions with officers who are loyal
to them and presumably less "interventionist."
Gurler now has
begun to weed out as many o ese unay/Tagmac
supporters as he legally can, replacing them with
his own men. The process may involve as many as
25 high-ranking officers.
Although the reassignments may also be de-
signed to improve efficiency in the army, they seem
certain to increase concern among Turkish political
leaders that Gurler is laying the groundwork for
greater military intervention in politics. He has
a reputation for political activism, is an ardent
reformist, and reportedly has ambitions to succeed
to the presidency. Turkey's normally fractious
politicians, anxious to lay the groundwork for
elections next fall, have been working together
with relative effectiveness in an effort to hammer
out electoral reforms. They undoubtedly fear that
strong pressure from Gurler to speed up the reforms
could disrupt their efforts, and possibly even
delay the elections.
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NOTES
CHINA-JAPAN: Peking has agreed to make its
first known purchase of an off-shore petroleum drill-
ing rig from Japan at a price of almost $9 million,
according to press reports. The equipment, capable
of drilling to 15,000 feet in water depths up to 175
feet, probably will be used in the Gulf of Chih-li
where the prospects for development of commercial
oil production are considered very ,good. Thus far
in the Gulf China has undertaken only limited off-
shore drilling in shallow waters. In addition to
improving significantly China's off-shore drilling
capability, the rig could provide a prototype for
domestic manufacture of similar equipment. The
equipment, which includes the rig, a utility vessel,
and an 18-month supply of spare parts, is to be de-
livered early next year.
IRAQ-USSR: Iraqi President Bakr will arrive
in Moscow today accompanied by a large delegation.
Topics of discussion will probably include Soviet
military and economic assistance and-Soviet media-
tion efforts between Baghdad and Kurdish dissidents.
Soviet-Iraqi relations have been warming during the
past year and the Soviets will hope to strengthen
their foothold in Iraq in the wake of their setback
in Egypt. One of Bakr's primary concerns will be
to obtain assurances of continued Soviet assistance
in marketing Iraq's oil production, some of which
was nationalized three months ago.
(continued)
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CHILE: Chile's largest remaining private com-
pany--a manufacturer of paper products--has announced
that it is unable to make payments that are already
overdue on outstanding debts to foreign governments
firm
and international financial institutions. The Canada,
owes a total of $17 million to West Germany,
Sweden, the Inter-American Development Bank, and the
International Bank for Reconstruction and Development.
The company, apparently the victim of a deliberate
government policy of financial strangulation, has
been forced to cover sharp increases in wages and
other costs largely out of profits and reserves. Al-
though the firm's public threat to default may be an
effort to obtain permission to raise its prices and
to secure more favorable credit treatment, it will
editors
'
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s cr
further undermine the confidence of Chile
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KOREA: A Review of the Negotiations and Their
Prospects
The dialogue between North and South Korea
which has evolved over the past year took on tangi-
ble meaning for the South Korean populace this week
as representatives from Pyongyang arrived in Seoul
for the second plenary session of the Red Cross talks
on uniting divided families. Much interest, however,
will remain focused on the prospect of higher level
negotiations stemming from the 4 July communique in
which both sides pledged to work toward national
unification without foreign intervention or the use
of force while transcending differences in ideas,
ideology and system. The prospect that this agree-
ment will lead to meaningful political accommodation
in the near future is extremely slim, however, be-
cause both sides remain dedicated to using the dia-
logue to further political objectives that are funda-
mentally competitive and incompatible.
The two governments are, nonetheless, embarked
on a course that will be difficult to reverse and
which has already eased tensions on the peninsula
and set in motion steps toward humanitarian, cul-
tural and economic cooperation. Popular expectations
have been raised as never before and the action has
generally moved both Koreas in directions favored by
the major powers. The continuation and broadening
of the contact may, moreover, eventually have a
softening effect on the rigid political and ideolog-
ical differences that continue to divide the two
countries.
The Path to Dialogue
The willingness to enter a dialogue and end
the harsh rhetoric of more than two decades did not
come quickly or easily for either side. The changing
political climate in East Asia brought about by the
Guam doctrine, the Sino-US detente, and Peking's
entry into the UN were catalysts in moving both
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Koreas toward a more flexible and accommodating pos-
ture. Although Seoul and Pyongyang had at various
times in the past twenty years advancbd proposals
for bilateral negotiations--basically for propaganda
reasons--the two had never seemed interested in se-
rious exploration of an accommodation that could
moderate their expensive and at times explosive con-
frontation. By early 1970, however, both were forced
.to the realization that some change was in order.
Underlying Pyongyang's shift in tactics was the
recognition that its efforts to foment revolution in
the South through a combination of terrorism, sub-
version, and guerrilla raids had been counterproduc-
tive. Not only had these tactics failed, they had
actually served to strengthen the hand of. the South
Korean adversary.. The North Korean decision to
shift to diplomatic and political pressure to. draw
Seoul into a political dialogue which could hope-
fully open the door to greater North Korean leverage
in the South was influenced by China and the Chinese
success in promoting a moderate foreign policy image.
Pyongyang also hoped that greater flexibility and
moderation would enable it to enhance its interna-
tional acceptability and erode foreign recognition
and support of South Korea.
It was the US decision to reduce its military
involvement in Asia as well as the numerous signs
of major power realignments in Asia that prompted
Seoul to re-evaluate its rigidly anti-Communist in-
ternational position. The South Koreans felt that
the complete withdrawal of US forces would jeopardize
their security in coping. with a hostile North Korea
and believed that moves to establish political con-
tact with Pyongyang and other Communist states prior
to US withdrawal would improve their long term posi-
tion vis-a-vis Pyongyang. The 1971 presidential
election gave considerable impetus to this assess-
ment. The campaigning made it clear that there was
also considerable popular sentiment in the South for
opening contact with the North. Statements by Pres-
ident Pak Chong-hui in 1970 on the possibility of
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political contacts with the North may in fact have
stimulated the North Koreans to move on similar po-
litical and propaganda lines.
President Pak moved cautiously, however, and
waited until his re-election in the spring of 1971
before formulating plans for direct contact with
the North. In August 1971, Seoul proposed talks be-
tween the Red Cross organizations of the two coun-
tries and Pyongyang promptly accepted. The meetings,
which dragged on for more than nine months without
substantive agreements, provided the opportunity
for private discussions that eventually led to a
secret high-level dialogue between personal repre-
sentatives of the two leaders. Seoul, in the mean-
time, took steps to tighten domestic security to
guard against efforts by Pyongyang to exploit the
new mood of detente.
The Southern Perspective
In agreeing to enter into the public dialogue
with the North, President Pak undertook several po-
litical risks. He has, in effect, tacitly recognized
the North Korean regime, has agreed to principles
that call into question the continuation of the UN
and US presence in Korea, and has undercut the ra-
tionale for continuing repressive measures within
the ROK. Seoul has moved rapidly to minimize these
risks, however, by denying that the 4 July communi-
qug has any effect on the UN or US presence, and all
levels of the government have issued statements call-
ing for continued security and vigilance lest Pyong-
yang exploit the dialogue as a smokescreen to attack
the South.
Pak, nonetheless, believes that the advantages
the talks bring in terms of security, international
standing, and his own domestic political prospects
far outweigh the attendant problems. In particular,
the President probably calculates that he is on much
safer ground dealing with the North while US troops
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remain in South Korea and may hope that the existence
of the talks can prolong that presence. Pak may also
believe that the dialogue will enhance his image at
home as a national leader acting boldly in an ex-
tremely delicate period and thus strengthen the case
for extending his legal term of office.
Pak faces difficulties in balancing these con-
flicting factors. Some conservative elements within
the military are concerned that the rapid pace of
events will work to the disadvantage of the South,
particularly if opposition political elements, stu-
dents and intellectuals push for more rapid action.
Popular reaction in general, however, has been highly
favorable. Pak is cautious and has given every in-
dication that he will ensure that these talks move
only at a pace that will allow him to evaluate the
effects of each step as it is taken. Both Pak and
his principal negotiator, CIA Director Yi Hu-rak,
have not gone beyond expressions of praise for the
concept of unification and are carefully avoiding
any public impression that they are considering se-
rious discussion of political questions. They are
also arguing that the existence of the talks should
preclude discussion of the Korean Question at the
forthcoming session of the UN General Assembly. For
the moment, Seoul will use the dialogue to assess
Pyongyang's good faith, and will try to evaluate
North Korean willingness to make progress on prac-
tical issues associated with the Red Cross talks.
It is doubtful that Seoul has a clear view of where
the path leads from there. As its recent action in
pushing the Red Cross talks to the plenary stage
suggests, however, Seoul is fully capable of exploit-
ing any propaganda opening provided by Pyongyang and
this confidence in its ability to deal with the North
Koreans is likely to grow as the dialogue matures.
The outlook from Pyongyang
Pyongyang's immediate interest in entering ne-
gotiations is to gain de facto recognition from Seoul,
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enhance its international standing, end the UN role
in Korea and terminate the US military presence on
the peninsula. It has already moved with dispatch
to use Seoul's adherence to the principle of unifica-
tion "without reliance upon outside forces or its
interference" to press for such action. It has
coupled this tactic with a new and more flexible
policy toward the UN, suggesting that the interna-
tional body could play a constructive role in the
unification process, while at the same time arguing
that UN agencies operating in Korea must be dis-
solved and North Korea invited--without condition--
to be present for UN consideration of the question.
To bolster this position the North Koreans have pre-
pared a new, ostensibly more moderate draft resolu-
tion to be tabled by their allies at the UN this
month. The proposal is already attracting broader
support than similar efforts made on Pyongyang's
behalf in previous years.
The North Koreans are also attacking the US
presence as a violation of the spirit of the 4 July
communique and are intensifying their charges that
the American troops are now the single major ob-
stacle to meaningful progress toward unification.
This is likely to become the principal theme in
Pyongyang's propaganda over the next several months
as the North Koreans intensify their pressure on
the South to move the talks toward political issues.
At the same time, Pyongyang is pursuing longer
range objectives in the South. The North Koreans
have already pressed for expansion of the talks to
include representatives of trade unions, political
parties, and other social groupings. Pyongyang
wants to broaden its contacts with South Korean so-
ciety in order to exploit political differences that
may exist or any military and economic problems that
may arise. Premier Kim 1l-sung has indicated that
the process of dealing with the South and working
toward unification will be a long one, and he clearly
intends to use every opening provided by the present
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dialogue to expand Pyongyang's chances of influencing
the political forces at work in the South. South
Korea's ability over the past 20 years to resist
Pyongyang's subversive efforts suggests that this
will not be an easy task.
For the present, Kim appears to have some ad-
vantage in the dialogue. He can reasonably expect
to see an erosion of Seoul's international position
in the UN and eventual US military withdrawal. He
can also continue to press for rapid movement to
full scale political negotiations, knowing that the
South Koreans will move in this direction only with
the greatest caution. Moreover, Kim is better able
to handle the domestic difficulties created by an
ambiguous policy of broadened contact with the enemy
while maintaining extremely tight security at home.
This is not to say that by exposing the North Korean
population to the South, Kim does not run some risk
of weakening the underpinnings of his militant au-
thoritarian state. Like President Pak, Kim has em
phasized the threat of imminent attack. His capacity
to insulate his people from the developments of South
Korean society will be strained by the appearance of
groups of South Koreans in the North even under the
rigid Pyongyang security system.
The Road Ahead
As the talks move forward, Kim Il-sung is not
apt to lose sight of his ambition of unifying Korea
under his control. He may in fact be encouraged in
this direction by a lessening of UN involvement in
Korea and further US military withdrawals. Nonethe-
less, his prospects for achieving this end are
heavily circumscribed by the demonstrated ability
of the South to resist his blandishments--a factor
which contributes to Seoul's increasing self-con-
fidence in dealing with the North. In fact, Pyong-
yang may already be having some misgivings about its
capacity to fully control the pace and direction of
the discussions. Neither side, however, appears
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likely in the near term to take any action that would
terminate the dialogue. Although significant results
are unlikely to emerge at an early date, a continua-
tion of the talks under present circumstances may,
nonetheless, lead to various kinds of interim accom-
modations between the two countries.
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