NATIONAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A028200010006-2
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 20
• Document Creation Date: December 20, 2016
• Document Release Date: March 28, 2006
• Sequence Number: 6
• Publication Date: October 22, 1975
• Content Type: REPORT

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Top Secret
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EMIAMOM,
National Intelligence
Bulletin
State Dept. review completed
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Top Secret
Q
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National Intelligence Bulletin
October 22, 1975
CONTENTS
LEBANON: Efforts to find
political solution faltering ..................................... 1
PORTUGAL: Government
bolstering its position ......................................... 2
VIETNAM: Communists claim
US tricked refugees into exile ................................... 4
JAPAN: Election fever ....................................... 5
YUGOSLAVIA: Tito may
crack down on domestic opponents ............................ 13
ITALY: Socialists
approve party platform ...................................... 14
WEST GERMANY: Economic forecast .......................... 16
INTERNATIONAL MONETARY: European
bankers discuss New York's finances ............................ 17
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ANNEX: Spain after Franco
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National Intelligence Bulletin October 22, 1975
Violence in Beirut yesterday took the form of small-scale fire fights between
Muslim and Christian militiamen and sporadic sniping. All roads were again declared
unsafe, because both sides were using mobile roadblocks as a means of kidnaping
members of opposing groups.
Efforts to find a political solution are as faltering as ever. Phalangist leader
Pierre Jumayyil has threatened to pull his right-wing organization out of the national
dialogue committee, on the ground that attacks on Christian areas of Beirut were an
effort to force the Christians to make concessions. Saib Salarn, a former prime
minister and a moderate Muslim leader, has warned that if reforms are not made
soon, "the whole system will be swept away."
Kamal Jumblatt and other Lebanese leftists were in Damascus yesterday,
meeting with Palestine Liberation Organization leader Yasir Arafat, Saiqa chief
Zuhayr Muhsin, and Popular Democratic Front for the Liberation of Palestine leader
Nayif Hawatmah. Jumblatt was scheduled to meet yesterday with Syrian President
Asad.
On the economic front, the fighting is rapidly causing Beirut to lose status as
the business center of the Middle East.
Some firms, like McDonnell Douglas and Bechtel Corporation, have already
pulled up stakes; others, like Bank of America, First National City Bank, and
General Motors, have evacuated employees and their families. No major firms, to our
knowledge, are operating out of Beirut at full strength.
A clear cessation of hostilities probably would bring back most of the
evacuated firms. There simply is no readily available alternative to the Lebanese
capital as a Middle East business center. Athens is too far from the Middle East,
Cairo is overtaxed and over-bureaucratized, and Amman, Kuwait, and other Gulf
cities that would like to replace Beirut cannot match Beirut's communications
network, highly trained work force, or housing and educational facilities.
If the fighting goes on, some companies are likely to consider controlling their
Middle East operations from outside the region. Eventually, it may prove feasible to
bypass Beirut altogether.
The impact of such a shift would be disastrous for Lebanon. Physical
destruction and lost tourist and trade earnings are already estimated at some $3.5
billion-nearly a full year's gross national product. A loss of earnings from financial
services, transit fees, and other commercial services would turn Lebanon's usual
trade surplus into a chronic deficit. Two thirds of the country's gross national
product is drawn from its services, primarily banking, commerce, and tourism.
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National Intelligence Bulletin
October 22, 1975
The Portuguese government, as well as its Communist and far-left antagonists,
appears to be bolstering its position in preparation for more confrontations that
could come later this week.
The government announced on Monday that it had removed four district
governors-in Lisbon, Braga in the conservative north, Castelo Branco in rural
eastern Portugal, and Faro on the southern coast. The removals, one in each of the
country's four military regions, suggest the government may be warning its
opponents that it is prepared to exercise its authority wherever it is challenged. The
action is the first step in fulfilling a promise made earlier by Prime Minister Azevedo
that leftist local administrators who seized office after the April 25, 1974 coup
would be replaced. The new governors, who will undoubtedly reflect the views of
the present government, have not yet been named.
The government took another step on Monday to lessen the Communists' hold
on the media. Libel proceedings were instituted against a Lisbon paper controlled by
pro-Communist workers, following an attack on General Melo Egidio, head of the
new military intervention force set up to restore military discipline and maintain
public order. The paper had accused the general of murdering "dozens of
Mozambicans" during a recent tour of duty in Africa.
Control of the media is critical at this stage because news reports appear to
have aided key opposition groups by exaggerating their strength and importance.
One such group, Soldiers United Will Win, according to Revolutionary Council
member Vitor Alves, actually numbers only 300 or 400. This group has been
principally responsible for inciting demonstrations opposing government efforts to
restore military discipline.
To further the opposition's plans, it was announced on Monday that a
companion workers' organization, Workers United Will Win, has been organized. The
new group, which claims to represent workers from 23 corporations in the Lisbon
area, advocates arming the workers and overthrowing the government in favor of a
more revolutionary one.
In addition to the attack on General Melo Egidio, the opposition continues to
criticize the commander of the Northern Military Region, General Pires Veloso.
Veloso, whose attempts to maintain military discipline in his command have made
him the focal point of anti-government demonstrations, has been accused of trying
to undermine a compromise reached last week between rebellious troops in the
north and army Chief of Staff Fabiao. The opposition's accusations could in fact
have some basis, in light of reports that the government is displeased with Fabiao's
compromise measures and may soon be replaced.
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National Intelligence Bulletin
As positions continue to harden, pro-government military figures have begun to
zero in on the opposition. Captain Vasco Lourenco, a key member of the
Revolutionary Council, has put the blame for insubordination in the military on the
Communists and the far left. Colonel Jaime Neves, commander of the crack
commando regiment that will form the backbone of the new security force, has
referred to an opposition plot that will surely lead to armed clashes.
The chances for such clashes will increase later this week. On Thursday, the
Communists and the far left are planning a major anti-government demonstration in
Lisbon. On Friday, the findings of an inquiry into recent incidents of violence in
Porto are due, and Saturday is the deadline set by Costa Gomes for turning in
illegally held arms. According to press reports, the security forces said yesterday that
not a single weapon had been surrendered in response to the appeal, which was
October 22, 1975
issued four days ago.
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National Intelligence Bulletin
October 22, 1975
The Vietnamese communists are attempting to exploit the return of the 1,600
refugees now en route from Guam to Vietnam to wage political warfare against the
US and to embarrass Washington over its alleged mistreatment of refugees in the US.
The communists' principal motive probably is to "settle accounts" with the US over
the massive exodus of refugees last April that outraged and embarrassed the Hanoi
leadership.
The main thrust of communist propaganda is that the US "tricked" thousands
of Vietnamese into exile by "raising the scare of a bloodbath." Hanoi and Saigon
claim that Washington has now been obliged to accept the "legitimate demand" of
the Guam refugees to return home. The communists complain, however, that the US
has denied its responsibility for the "crime" of creating the refugee problem and has
decided unilaterally to return the 1,600 Vietnamese without obtaining
"authorization" from the Saigon authorities.
The claim that this unilateral action by the US "violates Vietnam's
sovereignty" raises the possibility that Saigon will refuse to allow the refugees to
disembark unless the US acknowledges its "responsibility" for all the refugees and
agrees to general arrangements for future repatriation. The communists appear to be
claiming that many others now living in US "concentration camps" will request
repatriation.
Despite their denunciation of the "unilateral" action of the US, the Vietnamese
communists have thus far stopped short of any call for direct talks between Saigon
and the US on the refugee question. They may, however, be tempted to do this,
reasoning that considerable propaganda advantage could be derived from a US
refusal to deal with Saigon.
The communists' apparent determination to bring the entire refugee question
to a head was reflected in their warning Sunday to UN Secretary General Waldheim
that they reject the US decision to return the refugees from Guam and that they will
not be responsible for anything that might happen.
In what may be an attempt to contrast the alleged irresponsibility of the US
and its disregard of the refugees' welfare with communist generosity and good will,
Hanoi announced on Monday that the Provisional Revolutionary Government in
Saigon will release Americans and other foreigners, most of whom have been denied
permission to leave South Vietnam since the communist victory last April. Hanoi
stated that the UN High Commissioner for Refugees has agreed to assist this
repatriation, which "may be carried out in late October or early November."
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The timing of the release, however, raises the possibility that Hanoi will make
the departure of the Americans and other foreigners conditional on a "satisfactory"
acknowledgment by the US of its responsibility for resolving the general Vietnamese
refugee problem.
An ambiguous statement by Prime Minister Miki last week has again touched
off speculation in Tokyo that a general election will be held soon, perhaps as early as
December or January. Miki subsequently denied any intention of calling an election
"at this time," a remark many also view as equivocal.
Election fever has been simmering since last summer. It has been fueled by
opposition party calls for national elections, younger Diet members and would-be
candidates who are already out campaigning, and the view of most politicians that
Miki himself, despite his public statements, wants an election sooner rather than
later. Miki assumed power as a compromise choice within the ruling Liberal
Democratic Party last December and he needs an election-even one in which the
party does only fairly well-to give him a claim to a popular mandate and improve
his tenuous position.
Still, the Prime Minister and most conservative leaders recognize that without
some upswing in Japan's economy, voter discontent could well damage the Liberal
Democrats' electoral fortunes. The party also has serious money problems. It is
deeply in debt-even its headquarters is mortgaged-and major fund-raising efforts
appear to be just getting off the ground.
A wait-and-see attitude thus still prevails among most party leaders. But it
could erode-especially if they conclude that the economy is unlikely to improve
sufficiently by next spring, the last real possibility for an election. Indeed, economic
projections over the next six months were recently revised downward.
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National Intelligence Bulletin October 22, 1975
President Tito may soon move decisively against his domestic opponents, with
pro-Soviet, Stalinist elements his principal targets.
Widespread rumors in Belgrade claim that a major show trial of so-called
Cominformists will take place in the near future. An East European diplomat has
told the US embassy that one or two "prominent personalities" will be arrested for
Cominformist activities.
Last week, the top party leadership met to discuss domestic subversion. The
party simultaneously issued a stern warning in its weekly Komunist, both against
unconscious supporters of Stalinism and those who actually "follow the road of
national betrayal and counterrevolution." In the past, the latter charge has presaged
very stiff punishment of dissidents.
The threat of a major purge has been growing since last summer, when Tito
gave the internal security department heads unspecified "specific tasks" for the
future. With the recent examples of Portugal and Spain presumably in mind, the
83-year-old President may well be determined to clear the slate-before it is too
late-of those regime opponents hovering on the fringe of outright opposition.
In addition to Stalinist subversives-12 more of whom have reportedly been
arrested-the likely candidates for arrest include supporters of Tito's former
heir-apparent, Aleksandr Rankovic, and possibly a sprinkling of pro-Western liberals
like Milovan Djilas.
The pro-Western dissidents would be included in the sweep for both domestic
and foreign reasons. At home, Tito does not want any moves against Stalinists to
raise the hopes of the liberal reformers he sacked in 1972 and 1973. Externally,
Belgrade presumably wants to avoid a serious deterioration in relations with
Moscow, already strained by differences over the European communist party
conference preparations and improving Yugoslav-Chinese ties.
There is little doubt, however, that the main focus will be on real or potential
domestic sources of Soviet influence. The Yugoslavs might even be tempted to
include Vlado Dapcevic, an emigre exile who has had Soviet connections, in a show
trial. Dapcevic reportedly was kidnaped by the Yugoslav secret police during a
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National Intelligence Bulletin October 22, 1975
The Italian Socialist Party last week approved a platform designed to
distinguish the party from both the Christian Democrats and the Communists and to
reinforce its pivotal position between them. The platform was put together in
strategy sessions held by the Socialist central committee to prepare for the party
congress now scheduled for early February.
Socialist chief De Martino practically ruled out his party's return to full
participation in the national government before the -next parliamentary election,
which must be held by the spring of 1977. In the meantime, the Socialists seem
willing to continue their crucial parliamentary support for some kind of interim
government, such as Prime Minister Moro's Christian Democratic - Republican
coalition. Socialist support for Moro will be reviewed, however, after the passage of
emergency anti-recession measures and the conclusion of talks between government
and labor on major contract renewals.
In any event, the Socialists categorically exclude a return to the formula that
has been the basis for most Italian governments since 1963-a center-left coalition
dominated by the Christian Democrats. De Martino left the door open to renewed
collaboration with the Christian Democrats after the next election, provided they
accept Socialist proposals and agree to a mechanism that would obligate the
Communists to support the government's programs in parliament.
The Communists' refusal so far to consider the latter idea-which is intended to
minimize the advantages of their opposition status-has strained relations with the
Socialists. While De Martino noted that the Communists had adopted a number of
democratic policies in recent years, he put more emphasis on the contradiction
between that trend and the Communists' continuing ties to Moscow. That was one
of the reasons cited by De Martino in ruling out a Communist-Socialist alliance at
the national level.
The Socialists also went on record against the "historic compromise"-
Communist leader Berlinguer's proposal for an agreement between his party and the
Christian Democrats. Berlinguer says the Socialists would be invited to participate in
such an arrangement, but they fear it would relegate them to a marginal role in the
Italian political life.
The Socialists, by adopting these policies, are attempting to apply the lessons
they drew from the outcome and aftermath of the regional and local elections last
June. The Socialists advanced only moderately in those contests while the
Communists scored unprecedented gains-a development the Socialists attribute to
their long association with the Christian Democrats in the government.
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At the same time, the Socialists' experience in the many local coalitions they
formed with the Communists after the elections has revived the Socialists' fear of
ultimately being absorbed by the stronger and better organized Communists. By
keeping their distance from the Christian Democrats, the Socialists hope to compete
on an equal footing with the Communists for the votes of dissatisfied Italians in. the
next election.
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October 22, 1975
Five major West German economic institutes foresee about 4-percent real
growth in West Germany's gross national product next year-slightly lower than the
5 to 6 percent Bonn has been projecting.
We believe their forecast is overly optimistic. New industrial orders are flat and
economic activity remains depressed in West Germany's European trading partners.
In their semiannual forecast, the institutes argue that the amplitude and
duration of the economic upswing hinge critically on private investment. Real
investment has fallen for nine consecutive quarters through the first half of this year,
and the institutes do not see much of a revival in 1976. Industry is operating at
about 75 percent of capacity, and profits are shrinking.
Most of the institutes believe that wage increases of no more than 5 to 6
percent are a vital first step toward arresting the investment slump and achieving the
predicted 4-percent growth. Such modest wage settlements would boost profits, if
capacity utilization picked up sufficiently in coming months to yield big
productivity increases. Iron and steel workers in the states of Rhineland-Westphalia
and Bremen currently are asking for an 8-percent wage hike, and the institutes'
report comes at a critical time in the negotiations.
Projections call for inflation to fall to 5.5 percent next year, compared with an
estimated 6 percent in 1975. Exports and imports are expected to grow at about 12
to 13 percent in nominal terms, implying an even larger trade surplus than the $20
billion estimated for this year.
The five economic institutes have erred on the side of optimism in each of their
last three forecasts. This spring, for example, they called for a real growth of about 1
percent this year. The institutes now expect a fall of at least 4 percent. The
economic institutes have tried to remove some of the rosiness from the government
estimate while retaining an optimistic tone. In doing so, they avoid criticism by
Chancellor Schmidt, who sees a favorable psychological climate as a key ingredient
to economic growth.
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National Intelligence Bulletin
October 22, 1975
Discussions of New York's financial plight dominated the meeting of central
bankers at the Bank for International Settlements last week. The Europeans
expressed concern that New York's problems may cause severe difficulties for the
international banking community and may erode foreign confidence in US financial
stability.
Foreign central bankers are concerned that the loss of confidence in New
York's notes would spread to other US municipal issues and cause a decline of
foreign confidence in US Treasury issues. They lamented the potential impact of the
city's plight on the solvency of US banks and the stability of the US financial
market. The Europeans cited New York's problem as one cause of the dollar's recent
weakness.
In a separate development, the bankers discussed selling International Monetary
Fund gold stocks but reached no conclusions. There was general agreement that
ratification of new articles legalizing the sale of gold is as much as two years away.
Paris stressed the need for concerted action to prevent gold sales from driving down
the free market price. The Germans urged that the Fund's gold be sold even before
ratification of new articles. The bankers will discuss the issue again when they meet
next month.
Prospects for economic recovery in major industrial countries were also
discussed. All participants thought that the turning point had been reached by late
summer and that recovery is under way. None foresaw the implementation of
additional stimulative policies in their countries in the near term.F---
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National Intelligence Bulletin
October 22, 1975
Government spokesmen, probably in an effort to keep from the public the
gravity of Franco's illness, continue to report that he is recovering. Similar efforts
were made in 1974.
Franco's death-or complete incapacitation-will come at a time when the deep
divisions within Spain are more evident than ever. For the moment, at least, the
shock of his death-although certainly not unexpected-plus the Spanish sense of
propriety and pride will probably overcome the divisions in the country sufficiently
to permit the carefully planned transition to be effected largely as intended.
The succession law of 1969 stipulates that Prince Juan Carlos will become chief
of state (king) within eight days after Franco dies or is declared incapacitated. In the
interim, power will be assumed in Juan Carlos' -name by a Regency Council
composed of a senior member of parliament, a church official, and a military man.
Juan Carlos also will inherit Franco's position as supreme commander of the armed
forces, but in the king's case, exercise of this function is expected to be symbolic.
Juan Carlos will have neither the personal prestige nor the legal foundation to
exercise the absolute power Franco has wielded for almost four decades. An annex
to the Organic Law of 1967-one of seven Fundamental Laws which as a group
comprise the constitution-prescribes that Franco's special powers will lapse with
the implementation of the Law of Succession.
Unlike Franco, Juan Carlos must share power with others in the government,
particularly the prime minister or "President of the Government." The Organic Law
states that all decisions taken by the head of state must be countersigned either by
the prime minister, another minister whose office is involved in the decision, the
president of the Cortes (the legislature), or the president of the Council of the
Realm, a 17-member senior advisory body. Despite such limitations, Juan Carlos will
have more power than any other Western constitutional monarch.
Al
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National Intelligence Bulletin
October 22, 1975
A majority of highly placed Spaniards recognize that their society needs to be
freer, but they are divided over how free it should be, and at what pace freedom
should be introduced. Differences on these matters are spread unevenly over the
main sectors of the establishment.
The church, for example, has been in the vanguard of those seeking to promote
social and political change, so much so in fact that the Spanish episcopate barely
qualifies any longer as part of the establishment.
The great bulk of the officer corps is conservative; a small percentage is
ultraconservative. Most reports portray the military as interested primarily in
maintaining order. There are indications, however, that some junior officers are
talking more openly than heretofore about the merits of a sound democratic system.
Organized political activity within the military is banned, but
some junior officers favor rapid liberal social change for Spain and are
interested in the Portuguese example.
Political figures, who make up another important segment of the establishment,
have had very little experience in organizing in such a way as to appeal to a
constituency. They have concentrated on developing close ties to Franco, who has
been the source of all power.
Politics have been changing slowly
since
the
authorization
of political
associations (quasi-parties) in January
1975.
Two
of the more
significant
associations are the Spanish Democratic Union, a moderate Catholic-oriented group
under former cabinet minister Federico Silva Munoz, and the Union of Spanish
People, a rightist group under the head of Franco's National Movement, Jose Solis
Ruiz.
All members of the establishment, including bureaucrats, financiers, and
industrialists, will want to maintain their privileges. They will all cooperate,
therefore, with Juan Carlos and Arias to arrange an orderly transition.
Such people will soon disagree over what parts of Franco's system should be
preserved and what should be liberalized. Their disagreements may make it easier for
the illegal opposition to enter politics openly. The various political groups that make
up the illegal opposition are more interested in dismantling Franco's system than in
altering it.
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The Illegal Opposition
October 22, 1975
The absence of free political activity-elections, rallies, mass meetings-makes it
difficult to estimate popular support for the parties that have existed illegally. It is
apparent that they have some appeal among youth, intellectuals, and workers, It is
also clear that the parties are divided. There are, for example, two national and three
regional Christian Democratic parties and at least three rival Socialist parties.
The Spanish Communist Party, in organizational terms if not in numbers, is the
strongest party in the illegal opposition. It exercises considerable influence in the
labor movement because of its control of the Workers' Commissions. It has support
in the universities and is said to have good connections in the media. The
Communists have tried without much success to form a popular front of political
parties, but they probably will renew their efforts.
The Spanish Communist Party has been led for many years by Santiago
Carrillo, who makes his headquarters in Paris. He has maintained considerable
independence from Moscow and, like the Italian Communists, strongly criticized the
Soviet invasion of Czechoslovakia. These positions have caused considerable hostility
between Carrillo and his Portuguese counterparts, who have always supported
Moscow's policies.
Regionalism
It is reasonable to assume that pressures for regional self-rule will increase in
the post-Franco period. The Basque people, who occupy four provinces in the north,
and the Catalan, who live in four provinces in the northeast, will press hard for a
greater voice in running their own affairs. The populations of both areas feel
discriminated against culturally and economically, but this sentiment is especially
strong-and better organized-in the Basque region.
Most Basques would be satisfied with greater autonomy rather than a complete
break with Madrid. The Basque terrorist organization wants immediate and complete
independence from Madrid, and it has used and will continue to use violence to
achieve this goal.
Basque terrorists, together with members of the Antifascist Patriotic
Revolutionary Front who are committed to the violent overthrow of the
government, will be as serious a problem for Juan Carlos as they have been for
Franco during the latter days of his rule.
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Foreign Relations
Although Spanish officials will be concerned primarily with the orderly transfer
of power and the domestic effects of Franco's death, Spain's foreign relations
cannot be ignored for even a short period of time. Madrid, for example, must still
complete negotations on the future of US bases in the country. Some Spaniards may
now be tempted to hold out for more advantageous terms, but the majority will not
want to alienate the US at such a time.
There will probably be no change in the post-Franco period in Madrid's
decision to withdraw from Spanish Sahara peacefully if possible. Spanish officials
probably will reinforce this point with Rabat to avoid any rash action on the part of
those Moroccans who believe that Spain is preoccupied with the transfer of power.
Madrid's effort to pursue closer ties with Western Europe, set back sharply by
the recent anti-Franco demonstrations abroad, is likely to meet with greater success.
Most of Europe would be anxious to give Spain's new leaders a chance. I
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