CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A026000120001-9
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 16
• Document Creation Date: December 15, 2016
• Document Release Date: March 19, 2004
• Sequence Number: 1
• Publication Date: January 19, 1974
• Content Type: REPORT

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Central Intelligence Bulletin
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RETURN TO ARCHIVES & RECORDS CENTER
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January 19, 1974
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January 19, 1974
Central Intelligence Bulletin
CONTENTS
MIDDLE EAST: President Sadat takes his case to other
Arab states. (Page 1)
CHINA - SOUTH VIETNAM: Clash occurs in the Paracels.
(Page 2)
BELGIUM: Government resignation follows Iranian can-
cell a of proposed refinery project. (Page 11)
INTERNATIONAL MONETARY, DEVELOPMENTS: Dollar gains
in major European markets. (Page 12)
JAPAN: Government lifts restrictions on borrowing
abroad by industrial firms. (Page 13)
CUBA-ECUADOR: Havana seeking closer ties with Quito.
(Page 14 )
BOLIVIA: Consumer shortage could weaken President
Ban zer=s political position. (Page 15)
FOR THE RECORD: (Page 16)
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MIDDLE EAST: ]?resident Sadat left for Saudi
Arabia last night, beginning a tour that over the
weekend will also take him to several Persian Gulf
states and Syria. In Damascus, Sadat will make an
effort to convince President Asad that Egypt is not
seeking a unilateral settlement with Israel.
Public Egyptian comments on the disengagement
agreement signed on January 18 have been designed to
allay Syrian misgivings. Sadat said yesterday that
the negotiations should concentrate on Syrian-Israeli
disengagement prior to the resumption of the Geneva
conference. By implying that the conference may not
be reconvened until Syria has achieved progress to
match Egypt's, Sadat probably hopes to make it clear
to Syria and the other Arab states that Cairo will
not act except in concert with all Arabs. Indicative
of the kind of problem which Sadat may encounter from
some Arabs, a fedayeen broadcast from Baghdad last
night bitterly attacked Cairo's disengagement agree-
ment with Tel Aviv as being treasonous and a capitula-
tion to "US imperialism and the Zionist enemy."
Sadat's statement may quiet Syrian suspicions
of an Egyptian sell-out. Syrian Foreign Minister
Khaddam insisted earlier this week that the disengage-
ment of forces on the Egyptian and Syrian fronts must
occur simultaneously and be linked to an overall Is-
raeli commitment to withdraw from all occupied Arab
territory.
Egyptian leaders have always demanded that dis-
engagement be linked to future Israeli withdrawals.
Syria's willingness to enter into talks with Tel Aviv
may hinge in large part on whether Damascus is satis-
fied with whatever understanding Sadat has reached on
this point.
According to an Iraqi broadcast, the Syrian Gov-
ernment has denied an earlier press report that Da-
mascus threatened on Thursday to sever relations with
Cairo over the terms the Egyptian-Israeli agree-
ment.
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C CHINA - SOUTH VIETNAM: Early this morning Chi-
nese and South Vietnamese troops clashed on an island
in the Paracels believed to be Duncan Island.
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174 marines landed on the island and were
surrounded by about two companies of Chinese troops.
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The South Vietnamese have reported three marines
killed and two wounded, and have now pulled their
forces from the island. Saigon has also recalled
naval and troop reinforcements that had set out from
Da Nang.
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The South Vietnamese are unlikely to seek further
combat in view of the apparent Chinese determination
to use force. Each side will accuse the other of
starting the fighting, but it is unlikely that either
seeks a prolonged military confrontation over the
islands.
Both sides have long maintained some presence in
the Paracels. The current flare-up appears to have
been touched off by a recent renewal of conflicting
claims to islands in the South China Sea. Last fall,
the South Vietnamese repeated their claim to the
Spratly Islands, a group south of the Paracels, prompt-
ing a Chinese Foreign Ministry statement earlier this
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Cmonth that reaffirmed China's claim. At the same
time, Peking repeated its claim to other island group-
ings in the South China Sea, including the Paracels,
as well as "the natural resources in the sea around
them."
While it is not unusual for China to spotlight
its territorial claims in response to initiatives
by other governments, rumors in recent years--so far
unsubstantiated--of oil in the vicinity of the
Spratlys, may have added a new dimension to the prob-
lem. China may have felt it necessary to reassert
its interests because'of recent concessions Saigon
has awarded to Western companies for offshore oil
exploration.
Jan 19, 1974
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CBELGIUM: The resignation of Prime Minister
Leburton's government yesterday, following Iran's
cancellation of a proposed joint Belgo-Iranian re-
finery project in Belgium, does not necessarily mean
that new national elections will be held.
The political crisis came to a head when Iran
announced withdrawal from the joint $200-million
refinery project slated for an area near Lieges.
The refinery would have been particularly beneficial
for the economically depressed region of Wallonia,
the region with which Leburton and the majority of
his Socialist Party colleagues identify. The proj-
ect would also have been a noteworthy success for
Leburton in facing the energy crisis.
The Prime Minister appears to be gambling that
public concern over the energy crisis will strengthen
his bargaining position in negotiating with the
Liberals and Social Christians to form a new coali-
tion government. Should this gamble fail, Leburton
can then take his case to the people, where he may
also use the concern over oil supplies to try to
win more seats in Parliament.
The Social Christians, under the leadership of
Deputy Prime Minister Tindemans, played a key role
in scuttling the agreement by raising last-minute
demands in the negotiations. Tindemans, whose party
is predominantly Flemish, apparently hoped to win
new concessions on issues sensitive to his home re-
gion in return for going along with the refinery.
Jan 19, 1974
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Percent Change In the Value of the US Dollar
Relative to Selected Foreign Currencies
Compared With January 2 1973
British Pound
Change in the Trade-Weighted
Average Value of the Dollar*/,
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"Relative to 16 major currencies
555095 1-74
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INTERNATIONAL MONETARY DEVELOPMENTS: The dol-
lar showed another net gain in major European markets
this week. The Europeans' reluctance to draw down
dollar reserves to bolster their currencies contrib-
uted to the dollar's continuing strength, as did the
expected uneven impact of higher oil prices.
The dollar's greatest gains were recorded against
sterling and the Italian lira. Both fell to record
lows by midweek, before strengthening slightly.
Sterling's decline is caused by the continuing dete-
rioration in Britain's economic outlook as well as
by uncertainties surrounding the possibility of an
early election. In spite of sterling's rapid drop,
however, British intervention was relatively low--
roughly $200 million this week. The British appar-
ently are willing to accept the inflationary impact
of a weakening pound rather than see a further de-
cline in domestic economic activity caused by the
tight money that would follow in the wake of massive
dollar sales.
The Bank of France also intervened this week,
selling $150 million to limit the franc's decline.
The dollar strengthened against the mark during
the week, although it remains below the levels reached
early last week. The Bundesbank, in an attempt to
offset tight money caused by previous dollar sales,
injected funds into the economy. The resulting de-
cline in some German interest rates keyed a shift
out of marks. According to press reports, Germany
is unwilling to continue to reduce holdings, poten-
tially needed for oil purchases, to maintain market
stability.
In Tokyo, the Bank of Japan sold over $450 mil-
lion during the week. Pressure on the yen reflected
the traditional January weakness in the trade bal-
ance as well as the dollar's strength in Europe.
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JAPAN: Japanese industrial firms are being
permitted to borrow abroad for the first time in
several years. This will allow them to continue
expanding international operations without drain-
ing Japan's foreign exchange reserves.
Last month Tokyo announced that industrial firms
would be allowed to float bonds abroad on a case-by-
case basis, and so far 120 applications have been
forwarded to the Ministry of Finance. Although the
Eurodollar market will be tapped first, it is likely
that borrowing in the US will follow. The first
bonds probably will. not be issued until April.
Initially, funds raised abroad were to be used
only to finance overseas operations, but power com-
panies recently were given permission to bring such
funds into Japan. This will generate some capital
inflows by midyear. If large balance-of-payments
deficits occur early this year, as seems likely,
permission to bring in foreign funds will probably
be broadened to include other industries, acceler-
ating the inflow.
These moves, combined with new restrictions on
the movement of capital abroad, probably will reduce
net capital outflows from the approximately $9.5
billion registered last year. Tokyo hopes to cut
the outflow to about $4 billion this year to conserve
its already reduced foreign exchange holdings.
Jan 19 , 1974 Central Intelligence Bulletin
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CUBA-ECUADOR: The Cuban Government reportedly
has undertaken several initiatives to gain closer
ties with Quito. These include a proposal for a
university exchange agreement, invitations to Ecua-
dorean journalists and to the navy to send delega-
tions to Cuba, and a request for the reopening of
Prensa Latina's office in Quito.
These initiatives probably result from a desire
to restore the momentum of Cuba's campaign against
the OAS policy of isolation. The Castro regime
viewed the Chilean coup as a major setback, and also
has demonstrated concern over Peron's actions against
the Argentine left. In addition, Cuba probably is
worried that the new Venezuelan administration will
avoid further movement toward full diplomatic rela-
tions with Havana. The Cuban approach may also have
been motivated by concern that Secretary Kissinger's
forthcoming meeting with the Latin American foreign
ministers might undermine Havana's efforts to aggra-
vate US - Latin American differences.
It is unlikely that Ecuadorean President Rod-
riguez is considering re-establishing full formal
relations with Cuba in the near future. Expanding
contacts with Castro's regime would mollify some of
the more leftist officers in the government, how-
ever, and enable Rodriguez to point to specific
steps he has taken to assert Ecuador's "independent
foreign policy."
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BOLIVIA: Shortages of basic consumer goods--
notably wheat--could further weaken President Banzer's
political position.
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The wheat shortage has been caused by a vari-
ety of factors. Argentina reportedly is not meeting
its supply commitments, and shipping from Peruvian
ports has been slowed by strikes. It also appears
that a good deal of wheat has been smuggled out of
Bolivia and sold on external black markets--possibly
with the connivance of some Bolivian officials. To
stem this outflow, the government reportedly is
planning to raise domestic prices, thus making black
market sales less profitable.
According to the US Embassy, the shortage of
foodstuffs, including sugar, meat, and cooking oil,
has become a "principal topic of conversation," and
there are long lines of shoppers at stores all over
La Paz. The embassy also reports that at least one
demonstration by workers protesting shortages and
high prices was broken up by police.
The shortages and proposed price hikes come at
a time when Banzer can ill afford a new political
challenge. Many of his former supporters in the
military and the two main political parties have
gone into some form of opposition. The President
recently exiled former president Victor Paz Estens-
soro, the nation's most prestigious political figure,
who was accused of actively plotting against the
regime. The supply situation could arouse consumers
and stimulate more active coup plotting both within
the country and among exiles.
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Venezuela: Caracas has, imposed new conservation
rules that may reduce petroleum production, currently
3.4 million b/d, by 200,000 b/d, or 6 percent.
'These items were prepared by CIA without consulta-
tion with the Departments of State and Defense.
Jan 19 , 1974 Central Intelligence Bulletin
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