NATIONAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A028500010036-6
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 17
• Document Creation Date: December 20, 2016
• Document Release Date: June 28, 2005
• Sequence Number: 36
• Publication Date: January 22, 1976
• Content Type: REPORT

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National 1 n~el1 igence
Bullletin
DIA review(s) completed.
Top Secret
January 22, 1976
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National Intellligence Bulletin
January 22, 1976
PORTUGAL: West
European aid
WEST GERMANY: Approval
of multirole aircraft likely
3
4
ITALY: Government suspends
official quotations on lira
7
SOUTH KOREA: Opposition
leader indicted
9
-FOR THE RECORD
12
ANNEX: New Foreign Policy
Directions for Australia
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National Intelligence B~~Illetin
January 22, 1976
West Europeans are planning to provide Portugal with additional financial and
economic aid to show support for the Azevedo government.
The West Germans are negotiating .a loan which may total $250 million. Such a
loan would help ease Lisbon's balance-of-payments difficulties and enable the
Azevedo government to avoid, or at least postpone, some of the unpopular austerity
measures that would only benefit the left in the elections in April.
West European bilateral assistance to Portugal last year totaled more than $40
million. West Germany and the Netherlands were the principal contributors, with
Denmark, Norway, and Sweden also providing aicl. This year, in addition to the large
loan, the West Germans are negotiating a bilateral agreement to guarantee private
German investment in Portugal.
Portugal is negotiating another loan from the Bank of International
Settlements. This, added to the West (~erman loan, should provide Portugal with
sufficient liquidity to finance its balance-of-payments deficit at least through June.
The UK is interested in providing Lisbon with some aid, but London will be
severely limited by its own financial problems. 1"he most the British can afford will
be a capital loan of $20 million and tokE~n grants.
Norway, Luxembourg, and the Netherlands are considering how they can help.
The Belgians were considering a $100-million package, but the proposal was shelved;
Brussels is now exploring other means o1- securing bilateral funds for Portugal.
France and Italy have not made significant bilateral commitments. French aid
has been limited almost entirely to dependencies and former colonies of France.
French and Italian leaders are presumably sensitive about supporting a Portuguese
government in which the Communists p~~rticipate.
French policy on aid to Portugal may change, especially with the political
situation in Lisbon apparently stabilized. Paris may offer loan guarantees for
industrial projects, a program to encourage private investment in Portugal, and
possibly credits for food.
The EC, which last year committed about $175 million to finance specific
projects in Portugal, has agreed in principle to renegotiate the 1973 EC-Portugal
agreement, which authorized Portugal to borrow $59 million from the European
Investment Bank. Some of this money may be in Portuguese hands by March.
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National
ntelligence Bulletin
January 22, 1976
The updated trade agreement will also provides social security benefits for
migrant workers, as well as tariff reductions and some concessions on textiles.
Largely because of French and Italian objections, the E:C is unlikely to reduce tariffs
cn Portuguese wine and certain agricultural products.
Progress has been made in the EC toward offering help in power, transport, and
ether industries, as well as in agriculture, tourism, anti domestic marketing. The EC
may also draw from existing stockpiles of powdered skim milk, beef, and butter to
provide additional food aid.
The seven members of the European Free Trade Association are planning a
$100-million industrial development fund for Portugal. The seven have agreed in
principle to ease import regulations on some Portuguese agricultural goods and not
to oppose higher Portuguese tariffs on certain industrial exports from the free trariP
countries.
The legislature is expected to approve production of the controversial multirole
combat aircraft (M RCA).
The German decision on the British -Italian -West German M RCA is expected
in May. There will no doubt continue to be opposition to the project owing to its
Lost, but the recent favorable vote by the Social Democratic Party parliamentary
caucus almost assures approval. This vote, added to reports from London that the
E3ritish interceptor version of the aircraft will not be scrapped in the current round
caf budget cutting, considerably brightens prospects for the program.
Although the plane has been plagued by developmental problems-primarily
with the Rolls Royce engine-the flight of the fifth prototype in Italy on December
5 means that all three consortium members are now flight-testing the aircraft. Some
West German air force officials last year approached US representatives and
expressed interest in the General Electric engine to be used in the US navy's F-18.
~~-he use of another engine, however, would reportedlly require structural airframe
changes, driving costs even higher.
The Social Democrats' decision was probably driven by a desire to support the
West German aerospace industry and avoid placing the Social Democratic -Free
Democratic coalition in the position of having to desert its partners on this bi est
of all European joint military hardware development proiects.
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National Intelligence ~IlJlleton January 22, 1976
Italy suspended foreign exchange intervention and official quotations on the
lira yesterday in the face of heavy selling pressure precipitated in part by the recent
government crisis.
The lira fell about 3 percent in London yesterday, closing at
roug y tote ollar. During the day, in markets typified by extremely light
volumes, it was traded as low as 815 in ;Zurich and 810 in Milan.
Rome took the action in an effort to cool off th
arran in financin to su ort further intervention
as ing on is eing as a to ma e
available some funds under existing 3-billion central bank credit lines.
Italian officials have not decided when they will resume making official
quotations on the lira; they will probaialy wait until they are certain of substantial
additional financing. In the interim, e~:change transactions in the lira will continue
to take place without government support in Italy and on currency exchanges in
other European countries.
Rome has publicly promised its EC partners that it will not resort to new
exchange controls or import restrictions to alleviate the situation.
The closure of the exchange markets could give the Christian Democrats added
leverage in their efforts to get the Socialists to agree on a new government. The
Socialists were widely criticized 'for c~iusing the government to fall two weeks ago
and thereby interrupting the government's efforts to deal with the country's worst
postwar recession.
The Socialists, who want the next government to give more weight to their
economic views and establish an open s;onsultative relationship with the Comrreunist
opposition, met with Prime Minister -designate Moro on Tuesday. Yesterday
Socialist leader De Martino met with Commoanist chief Berlinguer while Prime
Minister -designate Moro held talks with the smaller center-left parties-the Social
Democrats and Republicans. Moro is scheduled t:o respond to the Socialists'demands
tomorrow.
7
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National Intelligence bulletin January 22, 1976 ,_
SOUTH KOREA
The leader of South Korea's main apposition party, Kim Yong-sam, was
indicted yesterday for violating a government emergency measure banning virtually
all public criticism of the regime.
The action is but the late:~t evidence of President Pak Chang-huff's
determination to silence his political opponents. Pak issued the emergency decree
last spring following the communist victories in Indochina, citing the need for strong
discipline because of the threat from North Korea.
Kim Yong-sam's alleged offense actually took place last August, but for most
of last year he refused to respond to a gavr:rnment summons to answer for his
critical remarks. It appeared to many observers that the government would not press
charges, but Kim spoke out strongly against they government again last week, and this
seems to have prompted the indictment.
It is still' not clear that the government will move quickly to prosecute Kim. In
the past, the regime has occasionally held court action against opposition figures in
abeyance as a means of curtailing their activities.
In recent weeks the government has prosecuted a number of its student and
Christian critics. Pak also reshuffled his cabinet, putting the one official with any
political standing on his own, Kim Chong-pil, on the sidelines, at least temporarily.
Kim Yong-sam and other oppa~sition forces are probably not in a position to
organize an effective protest over the: government action. Put aff balance by the war
scare in Seoul last spring and by the government's subsequent crackdown, the
opposition has remained generally in disarray. In fact, Kim himself has been
criticized by members of his own party for failing to provide effective leadership.
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National Intelligence Bulletin
January 22, 1976
VIETNAM: The Vietnamese communists took another step yesterday toward
normal reunification later this year by replacing Saigon's Military Management
~~ommittee with a civilian administration. Saigon, and many of the country's other
large urban areas, had been governed by military committees since the communist
victory last April. The announcement is probably intended to show that civilian
~~overnment will be restored in an orderly fashion to the country prior to
reunification. Other cities in the South probably will also soon announce similar
~:hanges.
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~lational Intelligence Bulletin
January 22, 1976
NEW FOREIGN POLICY DIRECTIONS FUR AUSTRALIA
Since coming to office six weeks ago, the Fraser government has underscored
the importance of Australia's ties with traditional allies, correcting what it saw as the
tendency of the Labor government to ignore such ties in the pursuit of Australian
rationalism.
The Liberal-Country government will not return ,4ustralia to the patron-client
relationship with the US that was a characteristic: of earlier Liberal-Country
administrations; the more independent stance adopted by the Whitlam government
is popular in Australia, and the Fraser government will retain many aspects of it. The
Fraser government has plainly stated, however, that it will give priority to ties with
the US, arguing that there is no need to feel defensive about the ANZUS
relationship.
Eraser's first initiative to strengthen the US connection was to back the US-UK
vase project for Diego Garcia Island in the Indian Ocean. The Whitlam government
had been strongly opposed to the project and had supported an Indian Ocean "zone
caf peace," appealing to world navies to stay out of the area. Fraser says this proposal
ignores the reality of the Soviet naval buildup there.
Beyond supporting US plans, Canberra will push ahead with the construction
cif a new naval base on the Indian Ocean coast of western Australia. Eraser's defense
~ayinister has announced that Australia's allies will be given access to this facility. On
tl~e matter of port calls by US nuclear-powered warships, Canberra is not expected
tra impose obstacles, once environmental safeguards to such visits become adequate.
The Fraser government is already working on ways to improve Australia's ties
it the Far East. It is supporting the members of the Association of Southeast Asian
Nations 1ASEANI in their efforts to build up that organization, but it is trying to do
s~~ in ways that will not be interpreted as intruding into ASEAN affairs.
The new government endorses Labor's opening of relations with Peking, and
Fraser plans to go to Peking and Tokyo this spring before visiting Washington. The
government hopes to repair the damage to relations with Japan caused by the
restrictive investment and trade policies of the Whitlam government. To this end,
Deputy Prime Minister Anthony will visit Japan next month. Although the Japanese
may discern a more hospitable investment climate, Canberra is reluctant to relax its
protective tariffs, believing that Australian industry still required such protection.
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National Intelligenee ~lJlllet~n January 22, 1976
Maintaining congenial relations with Indonesia is proving to be the Fraser
administration's first difficult foreign policy problem. Australian governments
consistently place considerable importance on friendly ties with their populous
northern neighbor, but Indonesia's military intervention in East Timor has created a
major complication. Although both Whitlam anti Fraser had clearly signaled their
willingness to accept a quick Indonesian stake-over? the take-over has not been quick,
and both the Labor and the Liberal-Country governments have felt compelled to
cater to Australian public sympathy For the leftist Fretilin forces' fight for
independence.
The Fraser government is particularly embarrassed by a leak to the press of a
confidential recommendation from the Australian ambassador in Jakarta that
Canberra accept Timor's integration into Indonesia-a recommendation that has now
been publicly rejected by Fraser. Foreign Minister Peacock minimized the problem
this week fallowing a brief visit to Jakarta, but popular sympathy in Australia for
Fretilin has significantly complicated Canberra's dialogue with Jakarta.
The government is apparently departing from Labor's ambivalent Middle East
policy. Whitlam had supported Israel's right to UfV membership but met with a PLO
representative invited to Australia by Labor leftists, antagonizing both Arabs and
Israelis. Fraser publicly promises to support Israel.
Qn the economic front, the new adiministration will provide a somewhat more
favorable investment climate and greater incentives for development of the country's
energy resources. Although the Liberal-Country government's foreign investment
objective is the same as Labor's-50-pere:ent Australian equity in new development
projects-the new government is likely to be more flexible in applying existing
guidelines.
Direct government involvement in 1:he mineral and energy field will be greatly
reduced by the Fraser government, a development which will tend to reassure
potential foreign investors. Canberra has already announced plans to divest itself of
investments acquired by the Whitlam government through the now defunct
Petroleum and Minerals Authority, including coal, copper, and natural gas projects.
The government will encourage the development of Australia's massive uranium
deposits. It has said it will permit exports of uranium oxide, but will watch carefully
to ensure that domestic needs are met and that a reasonable return is obtained. The
Labor government had banned uranium exports, awaiting higher prices.
Development of Australia's energy resources also should get a boost. The Fraser
government has promised incentives for oil exploration and production, including a
full write-off of exploration costs against current income and a special investment
allowance for development costs. The 'Whitlam government's energy policies had
brought oil exploration to a virtual standstill-only 14 oil wells were drilled durinc
the first nine months of 1975, compared with 135 in 1972. 25X1
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Top Secret
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