NATIONAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A029300010016-9
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 21
• Document Creation Date: December 20, 2016
• Document Release Date: May 11, 2006
• Sequence Number: 16
• Publication Date: September 10, 1976
• Content Type: REPORT

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NATIONAL INTELLIGENCE DAILY CABLE
Friday September 10, 1976 CI NIDC 76-213C
NATIONAL SECURITY INFORMATION
Unauthorized Disclosure Subject to Criminal Sanctions
State Dept, review completed
Top Secret
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National Intelligence Daily Cable for Friday, September 10, 1976
e NID Cable is for the purpose o in orming
senior U o icials.
CONTENTS
CHINA: Transition after Mao
USSR-CHINA: Condolences for Mao
USSR: Grain Production Outlook
JAPAN-USSR: Frictions Mount Over MIG-25
Page 1
Page 4
Page 4
Page 6
LEBANON: Situation Report
UK: Sterling Falls Sharply
PORTUGAL-ANGOLA: Re-establishing Relations
Page 10
Page 10
Page 11
UN: Status of P
uerto Rico
Page 12
Page 14
Page 16
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The Chinese leadership has handled the immediate
pro ems posed by Mao's death--funeral arrangements and mourn-
ing ceremonies--quietly and efficiently.
Within hours after Mao's death yesterday, Peking is-
sued a lengthy and carefully worded obituary notice that made
reference to all the slogans in current usage, including those
associated with the anti-Teng campaign. The notice mentioned
the need to continue Mao's revolutionary foreign policy line,
a codeword for the opening to the US.
All recreational activities have been suspended for the nine-
day mourning period, which ends with a memorial service on
September 18.
The mourning ceremonies, announced in detail yester-
day, are a step above those for Chou En-lai. Mao will lie in
state from September 11 to 17, compared with two days for Chou.
The entire nation will observe a simultaneous three-
minute silent tribute. The memorial service may be held out-of-
doors in Peking's Tienanmen Square, which can hold far more
than the 5,000 people who attended Chou En-lai's funeral. For-
eign countries have been asked not to send delegations to the
funeral.
I The party Central Committee, which apparently
met in late August, will probably reconvene after Mao's funeral
for a first round of political wrangling over the post-Mao lead-
ership alignment. Peking has shown its usual signs of sensitiv-
ity about revealing who stands where in the hierarchy after the
death of a leader. The roll of members of the funeral committee,
announced yesterday, listed the Politburo in the Chinese equiv-
alent of alphabetical order. Only the four members of the Pol-
itburo's elite standing committee were listed in order of po-
litical rank.
L Both of the principal contending political factions
in the leadership have been weakened in the past year. The more
conservative elements, with the loss of Chou En-lai and Teng
Hsiao-ping, lack a strong and widely respected leader around
whom to rally. Defense Minister Yeh Chien-ying, in his late
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70s, is now the leader of this group. His age precludes him
from being a serious contender for the party leadership, but
he will continue to exercise a moderating influence as long as
he lives.
I IPremier Hua Kuo-feng is not a charter member of this
group, a though he seems to lean more toward the conservatives
than he does toward the left. He has not had time, in his brief
tenure as premier and first vice chairman of the party, to es-
tablish solid ties or a wide base of support. Moderates may
calculate that Hua is not sufficiently strong for them to put
all their eggs in his basket.
I Lacking a strong leader, the moderates may be tempted
to try to bring Teng back into the political picture. Any such
move would be strongly opposed by the left, and could well fail.
The campaign against Teng has been toned down but not turned
off. He has been so thoroughly vilified that, although the
rightists may look wistfully toward him, he would be a hard
man to reinstate.
I I The left, too, has taken some blows this year. Mao's
ea as not helped their cause. Their current leader, stand-
ing committee member Chang Chun-chiao, is now probably less ac-
ceptable than previously to centrists because of his close iden-
tification with the leftist move against Teng earlier this year.
This distrust of Chang has always existed to some extent, al-
though centrists may have once found him less objectionable
than some of his unreconstructed leftist associates.
The party seemed on the verge of naming Chang secre-
tary general in 1973, but he was never officially given the
title. Although he probably performs the functions of that
powerful office, his failure to be named formally may have
resulted from some opposition to him.
//More recently, Chang seemed to be the main chal-
lenger to eng Hsiao-ping for the premiership. Since neither
he nor Teng had the overwhelming endorsement of the party needed
to act effectively in the job, Hua Kuo-feng was chosen as an
apparent compromise.//
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I IDespite their respective weaknesses, both Hua and
ang are likely to make a run for the party leadership. Pre-
cisely because of thr"ir weaknesses, both men and any other
civilian contenders will have to court the military who are in
an excellent position to extract major concessions from the
.civilians.
I I Not the least among these concessions would probably
be an assurance that top positions in the military bureaucracy,
such as chief of staff and head of the army's general political
department, would be filled by military men. The general politi-
cal department is currently headed by Chang Chun-chiao, a ci-
vilian, and the chief of staff job has been vacant since Teng
Hsiao-ping's ouster.
I lAmbitious military men, such as Politburo member Cheri
si- ien, will be eager to secure for themselves a continuing
role in politics. Although civilians of all political stripes
are wary of allowing the army too much political power, the
army could exploit differences among the civilians for its own
ends.
Civilians, however, are sufficiently wary of the
military to be on guard against a possible coup attempt. The
person in the best position to try such a move is Chen Hsi-lien,
who commands the troops in the Peking Military Region. A coup
attempt is most unlikely, and Chen seems more inclined to en-
gage in hard bargaining to improve his personal political stand-
ing than in a naked power grab.
I IThe division of labor among the leadership is probably
going to 4e difficult to work out and subject to considerable
horse trading. Should Premier Hua be formally declared head of
the party, for example, he would be under pressure to relinquish
the premiership.
One of the many problems the left had with Teng Hsiao-
ping was that he not only acted for Chou En-lai as premier but
seemed also to be in charge of the party's day-to-day affairs.
There are enough ambitious men who have waited a long time for
their chance in the sun that any attempt to consolidate the
party leadership and the premiership into the hands of one
person would be strongly opposed.
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I The obituary notice, which contained a strong plea
tor unity, suggests that, despite deep-seated differences, the
hierarchy will attempt to weather the immediate transitional
period through the exercise of collegial leadership.
I Formal discussion of the parceling out of the Maoist
legacy will almost certainly be postponed until after the memo-
rial service on September 18. No decisions may in fact be taken
for some time, and there are many factors--internal and exter-
nal--which will encourage the current members of the Politburo
to work together. The leadership is fundamentally too divided
and too inherently unstable, however, to remain harnessed to-
gether for very long.
USSR-CHINA: Condolences for Mao
The Soviet Central Committee's message of condolences
to the Chinese is the highest level message yet sent on the
death of any Chinese leader and the first public party-to-
party message to China since 1966.
L The wording of the message for Mao is virtually iden-
ica to that sent when Premier Chou En-lai died last January,
but it is less warm than that sent when Chu Te died in July.
The Soviets praised Chu as "an outstanding revolutionary."
L If the Soviets follow protocol, General Secretary
rez nev, as head of the Soviet Central Committee, would make
the condolence call at the Chinese embassy in Moscow. The So-
viets almost certainly want to make a conciliatory gesture to
the Chinese, and it therefore is not out of the question that
Brezhnev himself would do the honors despite all the invective
that the Soviets have heaped on Mao over the years.
The next ranking officials in the party hierarchy
are Politburo members Kirilenko, who is on vacation and Sus-
lov.
USSR: Grain Production Outlook
We now estimate Soviet grain production this year at
2OU million metric tons, up 5 million tons from our estimate
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in early August. Because of a near-record lateness in ripening
and harvesting, the final crop remains uncertain. Beginning in
early September, poor harvesting conditions--including the pos-
sibility of early frost and snow--often prevail.
A crop of 200 million tons would exceed last year's
y some million tons and would be second only to the record
Soviet crop of 222.5 million tons in 1973.
I I The US Department of Agriculture currently estimates
the Soviet crop at 205 million tons.
Recent statements by Soviet leaders reflect a favor-
able outlook. Speaking at Alma-Ata last week, General. Secretary
Brezhnev acknowledged food shortages but said that, despite
problems, "The grain yield figures have been pleasing. They
show that the country will have enough grain this year."
First Secretary of Kazakhstan Kunayev said that this
important grain-producing region might produce more than 27
million tons of grain, just 2 million tons short of the region's
record crop.
Soviet Agriculture Minister Mesyats reportedly told
a Yugoslav delegation in August that this year's grain crop
would exceed 200 million tons.
Weather conditions during the balance of the harvest
wi play an abnormally large role in determining the size and
quality of the crop. Cool, wet weather in much of European Rus-
sia throughout the summer has delayed harvesting. By September 1,
only 52 percent of the area sown to grain had been harvested,
compared to a five-year average of 62 percent.
Time is growing short for completing the harvest on
e remaining 65 million hectares of grain crops. Even before
October 1 there is considerable risk of severe frost or snow
that could reduce yields in areas with relatively short growing
seasons. Light frosts have already occurred in West Siberia.
Continuing rains during the harvest and an early onset of winter
could lead to losses if the pace of the harvest does not quicken.
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Grain quality may be a problem in any event. A large
Snare of he cereal grains harvested in European USSR is ex-
pected to be unsuitable for flour milling because of wetness.
This problem is intensified in "wet" years by the shortage of
high-capacity mechanical dryers to dry the grain before storage.
If favorable grain crop prospects hold, Soviet grain
purchases abroad should not exceed 14 million tons, a little
more than half the amount bought in 1975. A Soviet grain trade
official implied last month that the USSR's grain purchases
would total about 13.5 million tons. Purchases of this size
would cost roughly $3.5 billion, compared with the nearly $4.5
billion spent for grain last year.
I So far this year, the Soviets have bought 10.5 mil-
lion tons of grain--5 million tons of wheat and 5.5 million
tons of feedgrain--and 2 million tons of soybeans. Of this
amount, about 9 million tons will come from the US and the re-
mainder from Canada, Australia, Brazil, and New Zealand. Moscow
is still obligated to take 1.6 million tons more of US grain
to meet the 6-million-ton minimum stipulated under the first
year of the US-USSR grain agreement.
I IThe Soviet purchases have been made in three rounds;
the first was in late April and early May, the second during
the first half of July, and the third is currently under way.
According to market speculation, Moscow will contract this time
for 2 to 2.5 million tons of grain from the US and perhaps 1 to
2 million tons from other sources. This could end the Soviet
purchases for the year unless severe quality problems with the
domestic crop drive Moscow back into the market for additional
wheat.
Friction between Tokyo and Moscow over the handling
o e MI-25 mounted yesterday with the delivery of a harshly
worded Soviet protest.
I Shortly before Soviet defector Belenko left for the
U , Ambassador Polyansky delivered a written statement to Deputy
Foreign Minister Arita which:
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--Noted that Japan had not yet replied to repeated Soviet
demands for prompt return of the pilot and the plane.
--Termed Belenko's arrival in Japan the result of an emer-
gency landing and his request for asylum a Japanese fabri-
cation.
--Accused Japanese authorities of forcibly moving Belenko
to Tokyo.
--Alleged that denial of Soviet access to Belenko violated
bilateral consular agreements.
--Described Japanese actions as unfriendly to the Soviet
Union.
--Warned Tokyo not to be influenced by third countries.
I uIn response, Arita affirmed that Belenko would be al-
owe o seek asylum in the US, that a Soviet official could
see Belenko prior to his departure (a meeting was subsequently
held), and "took note" of Moscow's desire for an early return
of the plane. Arita also reminded Polyansky that Tokyo wanted
a satisfactory explanation of the violation of Japan's territo-
rial airspace.
I The Soviet statement is being publicized in Tokyo and
wi pro ably have.a negative effect on public opinion. Under
coaching from the Foreign Ministry, the Japanese press has al-
ready begun to stress the theme that the violation of Japanese
airspace makes it imperative for Moscow to take a conciliatory
attitude before negotiations begin over return of the plane. A
Foreign Ministry spokesman also has been quoted as saying that
once talks with the Soviets are under way, the plane probably
could be returned in about a month.
I So far, the intense political infighting over Prime
Minister Miki's tenure in office does not seem to have had a
major impact on Tokyo's handling of the affair. Foreign Minis-
ter Miyazawa and Defense Agency Director Sakata are serving as
the government's major spokesmen; Miyazawa has so far deflected
Soviet demands, while Sakata has argued forcefully for a thor-
ough inspection of the MIG-25 by the Defense Agency.
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For his part, Miki has been more cautious. He publicly
instruc e his foreign minister yesterday to handle the inci-
dent "carefully" and to ensure that Belenko indeed wished to
defect.
I The incident, in fact, could contribute to a continu-
ation o he political impasse. Miki had earlier threatened to
force a showdown with his challengers at a cabinet meeting to-
day, but the need to address the Soviet problem and the general
inclination of both Miki and his opponents to avoid taking an
irrevocable step in their political competition should serve to
maintain the deadlock a while longer.
Moscow evidently believes that it has a chance of
getting the plane back and of persuading the Japanese to limit
its availability to the US. The Soviets may also be attempting
to use the incident to put the Japanese on the defensive regard-
ing Soviet-Japanese relations. The idea would be to make it
that much harder for Tokyo to move ahead with peace-treaty ne-
gotiations with China or to renew pressure on the northern ter-
ritories issue.
The MIG-25 incident came at a time when the Soviets
have been making some attempt to breathe fresh life into eco-
nomic dealings with Japan. Last month, General Secretary Brezh-
nev received Japanese industrialists during his Crimean vaca-
tion, and the Soviet media have been featuring material extoll-
ing prospects for Soviet-Japanese economic cooperation and de-
signed to show that the Soviet Union would be a more reliable
trading partner than China. The MIG-25 incident will probably
put these efforts on the shelf for the time being.
I The Soviets evidently are putting out phony stories
in Europe that Tokyo will be acting aberrantly if it makes the
MIG-25 available to the US. Soviet "journalist" Victor Louis
has a story in a French newspaper asserting that the normal
"usage" is to forgo passing such equipment to US experts.
I Louis even claims that Israel has followed this
course, despite its extensive opportunities. In trying to es-
tablish this "principle" of proper behavior, the Soviets may
hope to salvage something out of the MIG-25 affair that can be
put to use in the future.
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LEBANON: Situation Report
The principal Lebanese Christian leaders have completed
their talks with Syrian President Asad. We have no details on
the talks, but the two sides appear to have agreed to postpone
any political or military initiatives until after the transfer
of power to president-elect Sarkis on September 23.
UK: Sterling Falls Sharply
//The British pound fell more than three cents to
$1.73 yesterday morning before recovering to end the day at
$1.74, down 1.4 percent from Wednesday. Sterling's fall took
less than 20 minutes after the Bank of England apparently aban-
doned its support point of $1.77.//
//The sharp decline came as London banks quickly
discounted the pound when the Bank's move became apparent. Brit-
ish monetary authorities appear to have changed tactics to pre-
vent a further deterioration of monetary reserves and to avoid
further heavy drawings on their $5.3-billion standby credit.//
//London currency dealers estimated that the Bank
may have spent $40 to $50 million in support of the pound before
withdrawing, possibly bringing its total intervention so far
this month to over $400 million.//
//Currency traders appear to have been moving out
of sterling because of the impending strike by British seamen,
which could undermine prospects for Britain's economic recovery.
The seamen's strike, announced yesterday, is the most serious
challenge to date of the Labor government's anti-inflation
program.//
//Senior Trades Union Congress officials have con-
emne the strike plans and are making an all-out effort to
head off the walkout. Congress officials met with the seamen's
leaders throughout the day yesterday, but with little evidence
of progress. More talks are scheduled for today.//
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//Although the Labor government has so far refrained
from ulce-mc. intervention in the dispute, the cabinet has met in
special session to discuss a declaration of emergency in the
event of a strike. Prime Minister Callaghan has delayed the
start of an official visit to Canada, perhaps to stand by for
a personal intervention should the seamen ignore the pleas of
their fellow trade unionists.//
/The Bank of England's change in tactics created
tense currency conditions elsewhere in Europe, including a sharp
advance by the German mark and increased pressure on the Euro-
pean joint float. The Belgian franc, Danish crown, and Norwegian
crown were at their lower intervention points against the mark
at the close of Frankfurt trading. The value of the Japanese yen
also rose sharply. F_ I
PORTUGAL-ANGOLA: Re-establishing Relations
I I Lisbon has announced that the Portuguese and Angolan
oreign ministers will meet "as soon as possible" to work out
details for re-establishing diplomatic relations.
I A senior official of the Portuguese Socialist Party
to a sador Carlucci on Tuesday that rapid progress is
being made toward resuming relations with Angola and that am-
bassadors could be in place by the end of September. The Por-
tuguese Foreign Office will send an administrative specialist
to Luanda next week to determine the requirements of a diplo-
matic mission in the Angolan capital. His visit will be fol-
lowed by a team of economics specialists.
The Socialist official, who was a member of the party
delegation that visited Luanda last week, stressed--as had Prime
Minister Snares in a recent talk with Ambassador Carlucci--the
apparent eagerness of Angolan officials to renew ties with Por-
tugal. They want Portuguese technical assistance as well as
Lisbon's help in building contacts with Western Europe and the
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be considered by the UN General Assembly at its session begin-
ning on September 21 was avoided when the Cubans agreed this
week not to table their draft resolution in the UN Committee
on Decolonization.
The dispute over whether Puerto Rico's status should
I lIt would have reaffirmed Puerto Rico's right to in-
urged the US to abide by the UN resolution on the
right of self-determination, and requested the US to refrain
from "repressive" and "colonial" maneuvers in Puerto Rico.
I The Cubans, anticipating defeat on their resolution,
went along with the rest of the committee in accepting a Nor-
wegian proposal to assign a rapporteur the task of updating the
committee's report of 1974 on Puerto Rico. The Cubans probably
hope that since the updating of the report will be assigned to
Syria--a relatively radical committee member--there will be an
opportunity to renew attacks on US administration of the island
and a possibility of getting a condemnatory report.
The committee participants also agreed to consider
of ow-up measures to the committee's previous resolutions on
Puerto Rico when discussion of this issue resumes next year.
//The Castro regime has undoubtedly been
aisappointed byby the lack of support it has received on Puerto
Rico from many Latin American countries. The Cubans are tak-
ing a long view of this issue, however, and will continue to
harass the US on the question of Puerto Rican inde endence.//
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LIBYA: Oil Production Down
I //Erratic government policies have sharply reduced
Libyan oil production over the past five years. After hitting
a peak of 3.7 million barrels per day in April 1970, produc-
tion fell to about 2.2 million barrels per day in 1972, largely
because of Tripoli's restrictions on oil companies.//
//Output has continued to decline, hitting a low
of about 920,000 barrels per day in February 1975, because
Libyan crude was substantially overpriced in a period of ex-
tremely weak demand. The government responded by cutting prices
and putting pressure on the companies to boost output and for-
eign sales.//
//After production recovered to 2.1 million bar-
re is per day in the summer of 1975, Tripoli made another about-
face by ordering major foreign firms to cut production by more
than one fourth. Although conservation was given as the justi-
fication, the key reasons were to prevent stockpiling of Libyan
oil prior to the anticipated OPEC price increase in October 1975
and to forestall criticism from the other cartel members for
the earlier price cuts.//
Nationalization has also contributed to the fall in
production. By early 1974 the Qadhafi regime had taken over 65
percent of the industry. As a result of the takeover and Trip-
oli's wavering production policies, exploration and development
activity remains depressed. Last year, for example, only 89
wells were drilled, compared with about 280 a year in the late
1960s.
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I //The government is once again giving companies
the go-ahead to increase production. Libyan oil policy this
year is aimed at increasing output to an average of 2.2 to
2.3 million barrels per day.//
//Production almost certainly will fall short of
the government's target for 1976 by several hundred thousand
barrels per day. During the next four years, we believe output
is unlikely to exceed 2.3 million barrels per day. Although
proved and probable reserves--estimated at 27 billion barrels--
are sufficient to support 2.5 million barrels per day annually
for about 30 years, expansion will be hampered by continued
technical problems, bureaucratic indecision, and political in-
stability under the current regime.//
//Spurred by high demand for its crude, Tripoli
could opt for a complete nationalization of the industry--
patterned after the evolving trend within OPEC. The government
would then have to decide on a case-by-case basis whether to
retain the services of the foreign oil companies currently
operating in Libya or to bring in new firms under service con-
tracts.//
//Although we have no evidence that Tripoli is
emplating further takeovers, the foreign operators
cannot rule this out, given the record of the Qadhafi regime.// 25X1
Libya, the fifth largest OPEC oil producer, in July
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I Portuguese Prime Minister Soares last night announced
new stabilization measures he said would help save the country
from economic collapse.
he package appears to be the first step toward re-
gaining some control over the ailing economy. Soares pledged:
--To reduce Portugal's balance-of-payments deficit by in-
creasing taxes on imports, banning imports of luxury goods,
and boosting exports through special credits.
--To curb inflation by setting up a wage and price commis-
sion and by holding down prices on essential goods.
--To fight unemployment by sharply increased public works
spending and by prohibiting workers from holding more than
one job.
--To restore labor discipline and stimulate productivity
by banning political meetings on the job, limiting strikes,
and denying wages to striking workers.
--To reverse the illegal seizure of farmland.
I Soares, whose cabinet and advisers were divided over
how strong the measures should be, reportedly looked very tired
when making the announcement and stammered at points.
I His decision to take the tough line advocated by more
ve advisers will probably please most Portuguese, who
appear willing to accept some sacrifice as the price for ending
the political and economic chaos of the past two years.
1 4 In what was widely considered to be the first real
tesL or he minority government's authority and determination,
Soares blamed the Communists and the far left for problems in
the areas of agrarian reform and nationalized industries. The
Communists can be expected to use their influence in labor to
take advantage of whatever unfavorable worker reaction there
might be to the measures, but Soares vowed to put an end to Com-
munist trouble making.
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I Soares said that 80 percent of Portugal's gold and
oreign currency reserves had been exhausted since the 1974
coup, but he expressed confidence that his program would attract
more Western aid.
I I He is counting on the promise of foreign loans, espe-
cially from the US, and may hope foreign support will enable
him to get the economy moving and at the same time avoid tougher
and more unpopular austerity measures.
I Soares' stabilization program will help the balance
o payments and reduce unemployment but will do little to stim-
ulate private investment or agricultural production.
L -1 Stringent wage controls, higher tariffs, and the ban
011 TuXU17 imports should slow the outflow of foreign exchange.
Wage controls and export credits would aid export industries
that have been badly hurt by rising costs. Imports have been
running about double exports.
I I The measures prescribed by Soares probably will not
stimulate foreign and domestic private investment as much as is
needed, given Portugal's 15-percent unemployment rate and a 10-
percent drop in gross national product last year. Investors will
need further assurance that they can operate without undue in-
terference from the government or from Communist-led unions.
I In addition, Soares' efforts to restore labor disci-
pline must be followed through, and businessmen will need ef-
fective guarantees that managerial prerogatives will not be
usurped by workers. Wage and price controls must allow an ade-
quate return on investment as well.
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