NATIONAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A030700010084-8
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 18
• Document Creation Date: December 20, 2016
• Document Release Date: August 21, 2006
• Sequence Number: 84
• Publication Date: June 30, 1978
• Content Type: REPORT

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Friday 30 June 1978 CG NIDC 78/152C
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National Intelligence Daily Cable for Friday, 30 June 1978,
The NID Cable is for the purpose of in orming
senior US officials.
CONTENTS
LEBANON: Internal Feuding
USSR-CHINA: Border Talks
NAMIBIA: Response to Demarche
WEST GERMANY: May Propose Tax Cut
INDIA: Home Minister Fired
URUGUAY: Military Purge
BRAZIL: Drought Slashes Output
BRIEFS:
USSR-Africa
Ethiopia-Somalia
Sudan-IMF
IMF
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The offer yesterday of the two main Eritrean guer-
rilla groups--the Eritrean Liberation Front and the Eritrean
People's Liberation Front--to begin direct and unconditional
peace talks with Ethiopia is an apparent effort to upstage the
Ethiopian Government, which has just concluded an 11-day semi-
nar to drum up mass support for its policy of military confron-
tation in Eritrea. The insurgents' proposal, unveiled at a
joint press conference in Beirut, reiterated their longstanding
position that any settlement of the 17-year-old conflict must
be based on self-determination for the Eritreans. The Mengistu
regime has steadfastly rejected this and appears firmly re-
solved to pursue the military option in Eritrea.
The guerrillas are trying to capitalize on widespread
international opposition to an Ethiopian offensive in Eritrea,
as well as almost certainly to undermine Ethiopian efforts to
place blame for the lack of negotiations squarely on the Eri-
treans. In a seminar session last week, Lt. Col. Berhanu Bayeh,
the ruling council member responsible for foreign affairs,
publicly disclosed a series of contacts between the government
and the EPLF, including several recent meetings in East Berlin.
These talks failed, according to Berhanu, because of the guer-
rillas' unreasonable demands for complete independence.
The 800 to 1,000 delegates to the government's semi-
nar included representatives of many sectors of Ethiopian po-
litical, diplomatic, and bureaucratic life. By associating
these leaders directly with its efforts in Eritrea, the Men-
gistu regime clearly hoped to mobilize public opinion and to
avoid internal opposition if the planned military drive in
Eritrea goes badly.
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I I The seminar seems to have reaffirmed the Mengistu
rega.me-s determination to forgo compromise in favor of a
full-scale military effort.'The participants repeatedly empha-
sized that there is no common ground on which to negotiate
with the guerrillas, and stressed the ruling military council's
theme that the guerrillas are reactionaries seeking to oppress
the Eritrean people. Government spokesmen, by arguing that the
guerrilla groups are not legitimate representatives of the
Eritrean population, attempted to justify the regime's refusal
to negotiate, as well as the need to wage a "war of national
liberation" against the insurgents.
Seminar speakers strongly rejected the idea that,
although he council and many guerrilla leaders are Marxists,
this provides the basis for a peaceful solution to the conflict.
The most strident criticism, in fact, was of the Marxist-
oriented EPLF, whose leaders were labeled false Marxists em-
ploying socialist rhetoric to mask their reactionary aims.
The government emphasized ideological justification
for its policy toward Eritrea in order to appeal to Communist
countries and to make it more difficult for the Soviets and the
Cubans to withhold support--particularly if the Ethiopian. of-
fensive in Eritrea falters. It was also an implicit rebuke to
the Soviet concept of a federation of Ethiopia, Eritrea, Somalia,
and Djibouti. By attempting to discredit the rebels' Marxist
credentials, the Ethiopians probably also hoped to undercut
some of the ideological rationale behind radical Arab support
for the Eritreans and to portray any such support as reaction-
ary.
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LEBANON: Internal Feuding
I The massacre of PhaZangists in northern Lebanon on
Wednesday was probably the opening round in ex-President
Sulayman Franjiyah's attempt to avenge the murder of his son,
Tony. Although evidence is scanty, the circumstances suggest
that Syrian President Assad's brother Rifaat, a close friend
of Tony Franjiyah, had a hand in'the.operation. The incident
will provoke others, and could well spill over-into violence
in Beirut--perhaps in the form of a clash between PhaZangist
fighters and Syrian "peacekeeping" forces.
A large-scale raid was carried out before dawn on
Wednesday against five predominantly Greek Catholic villages
in the northern Bekaa Valley. About 40 men were abducted; some
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were released, but at least 22 were killed.
The Phalangist militias led by Bashir Jumayyil are
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almost certain to react violently. Although those responsible
have not been firmly identified, the suspicion of Syrian com-
plicity is widespread, making Syrian troops prime targets.
Syrian-Christian clashes in February and May were bloody and
hard to bring under control, resulting in heavy Syrian casualties
and building up a backlog of scores to settle on both sides. The
situation is particularly volatile because the only troops avail-
able to contain such clashes are Syrian, and their intervention
is as likely to aggravate as it is to calm.
The cycle of violence and revenge that has become es-
tablished in Lebanon over the past few months is also highlight-
ing the impotence of the Sarkis government, which has been keep-
ing such troops, as it possesses on the sidelines. Since many are
supporters of the Phalanges, they could hardly be expected to .
play a constructive role in any case. Rival Christian factions,
which are engaging in a gangland-style struggle for power and
money, have had few restraints on their escalating activities.
I I Earlier reporting had indicated that Syrian President
Assad intended to try to steer clear of involvement in any re-
venge for the Franjiyah murder, but that Rifaat Assad had other
ideas. Any Syrian participation in the latest incident may well
have been Rifaat acting on his own, and cooler heads may still
do what they can to keep the Syrians from becoming further em-
broiled. The leadership may not succeed, however, particularly
if the Syrians find themselves the targets of concerted
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The recent round of Chinese-Soviet border talks
ended yesterday with the departure from Peking of Deputy For-
eign Minister IZichev, the chief Soviet negotiator. Propaganda
exchanges over the border dispute began to intensify even be-
fore IZichev arrived in Peking in late April, and a high-rank-
ing official in Moscow has characterized IZichev's latest mis-
sion as "useless. "
The Chinese rejected a Soviet proposal made in late
February to normalize state relations and accused the Soviets
of failing to honor a September 1969 understanding on maintain-
ing the status quo on the border and withdrawing troops from
disputed areas before beginning serious negotiations. The USSR
denied that any such understanding had ever been reached and
continued to attack China's intransigent position on a boundary
settlement.
Last month, the Chinese accused the Soviets of delib-
erately provoking a border incident when a contingent of naval
border guards entered Chinese territory and allegedly fired on
local inhabitants. China dismissed Soviet expressions of regret
over the incursion and briefly exploited it for propaganda pur-
poses.
NAMIBIA: Response to Demarche
The South African Government on Wednesday rebuffed
a move by the Western sponsors of a Namibian settlement to re-
solve the principal substantive issue--where the South African
residual force will be situated during the transition period.
Nevertheless, the detailed position paper that Foreign Minister
Botha submitted to the Western envoys appears designed to keep
the door open for a negotiated settlement.
The South Africans acted in response, to a Western
demarche last week that was intended to bridge the gap between
the Western settlement plan that Pretoria accepted in April
and the latest negotiating position of the South-West Africa
People's Organization. According to Tanzanian President Nyerere,
when the SWAPO leaders met with the frontline presidents in
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Luanda in mid-June, they agreed to accept the Western settle-
ment plan with one revision. The SWAPO leaders insisted that
the Western stipulation that the South African residual force
be restricted to "Grootfontein or Oshavello or both" be revised
to "one or two locations south of Windhoek."
Last week the Western envoys proposed, as a possible
compromise, that the residual force be restricted solely to
Grootfontein. This is presumably less objectionable to SWAPO
because it is farther than Oshavello from SWAPO's primary guer-
rilla bases in southern Angola.
The South African position paper argues that even
such a minor revision in the Western plan is unacceptable be-
cause Prime minister Vorster, when he announced acceptance of
the Western plan, assured Parliament that its terms are final
and definitive. Also, Foreign Minister Botha told the Western
envoys that a residual base at Oshavello is essential in order
to assure a quick response to any emergency in Ovamboland; the
Ovambos are by far the largest ethnic group in Namibia.
The position paper also spells out the government's
justification for a preemptive strike against SWAPO bases in
Angola in May, for arresting SWAPO leaders inside Namibia who
are suspected of inciting violence, and for going ahead with
voter registration in the absence of a UN representative. South
Africa argues it was essential to take these steps--despite
Western warnings against such unilateral actions--in order to
avert major disorders that would prevent a territory-wide elec-
tion according to the Western plan. The paper appeals for ar
early presentation of the Western plan to the UN Security Coun-
cil, but does not reassert earlier South African threat
conduct an election unilaterally if this is not done.
WEST GERMANY: May Propose Tax Cut
Political difficulties in West Germany may prevent
ear Ty ormu7,ation of the tax cut package that Bonn now says it
may adopt. West German Economics Minister Lambsdorff recently
3tal;ed that Bonn would consider a tax cut of about $6 billion
in return for US energy conservation measures, more trade con-
cessions from Japan, and curbs on protectionist measures by
tritain and France.
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Lambsdorff did not indicate what taxes would be cut.
oug this question, along with the date of implementation,
remains to be resolved, tax.cut legislation presumably could
be made retroactive.
Steering such legislation through the coalition
partners--the Social Democratic and Free Democratic Parties--
and then through the opposition-controlled Bundesrat is likely
to take some time. When parliament reconvenes on 18 September,
left-wing Social Democrats are likely to hold out against busi-
ness tax cuts and reductions in taxes on middle and upper in-
come groups. The Free Democrats and the opposition Christian
Democratic Union and Christian Social Union will, however, push
for the cuts.
Lambsdorff, a member of the free Democratic Party,
will argue for an early tax cut in an effort to bolster his
party's chances in coming state and national elections. The
party failed to gain the five percent of total votes required
for parliamentary representation in the recent Hamburg and
Lower Saxony elections and could well be fighting for its life.
Lambsdorff wants to accentuate the clear-cut differences between
his party and the Social Democrats on the tax issue. Free Demo-
cratic leaders may also hope that advocacy of early tax reform
will head off the formation of a "tax-protest" movement that
could draw further votes from its dwindling constituency.
The October state elections in Hesse, which may de-
cide the fate of the Bonn coalition, thus add some sense of
urgency to the tax cut negotiations. A victory there by the
Christian parties could give the opposition parties the two-
thirds majority in the Bundesrat necessary to block most fed-
eral legislation.
Indian Prime Minister Desai's dismissal yesterday of
Home Minister Charan Singh indicates both a new unity among the
remaining factions of the ruling Janata Party and a new deci-
siveness on the part of Desai. It remains unclear, however,
whether Singh retains enough support in his own faction to
topple Desai's government.
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I FIn a surprise move, Desai.requested the resignations
of both Singh,,. the second most important man in the cabinet
and an important leader of the ruling Janata Party, and Singh's
close associate, Health Minister Raj Narain. The cabinet gave
Desai absolute discretion to fire both men.
Singh, despite his slow recuperation from a,heart at-
tack in April, has been publicly challenging the other leaders
in the Janata Party. Through his mouthpiece Raj Narain, who
brought the suit against Prime Minister Gandhi that ultimately
resulted in her imposing emergency rule, Singh has called for
the resignation of party president Chandra Shekhar and the re-
organization of Janata's executive bodies.. Singh has also.crit-?
icized the government for its cautious approach in prosecuting
Gandhi. Both men persisted in these attacks despite explicit
instructions from the Prime Minister and the cabinet not to do
so.
The situation came to a head when Desai returned from
his trip To the US and openly rebuked Narain.When compromise
failed, the cabinet called a special session, and leaders of
all the Janata factions unanimously backed Desai.
I The cabinet vote represented a shift in intraparty
a lances. Previously, the Jana Sangh, the best organized fac-
tion within Janata, had entered into local alliances with Charan
Singh's supporters in the northern Indian states.:With the ex-
pulsion of Singh from the cabinet., the Jana Sangh,seems to have
lined up firmly with Desai. The US Embassy in New Delhi believes
Singh has very few firm supporters, and the government may con-
tinue in power with a secure parliamentary majority.
URUGUAY: Military Purge
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I IThe Army, which has controlled Uruguay since 1973,
as long been split over the issue of political liberaliza-
tion--even though it has tried to maintain a public appearance
of unity. This internal strife has thwarted all efforts to make
preparations for the election scheduled for 1981.
I Early this year, Alvarez promised to take steps
toward an election and to foster "economic well-being, authentic
democratic institutions, and unrestricted enjoyment of indi-
vidual rights." His efforts have been stymied, however, by
strong opposition among conservatives in the military. For the
past several months, Alvarez has been the target of a smear
campaign that has accused him, among other things, of being a
tool of the US Embassy.
Alvarez is scheduled to re- 25X1
tire next February and, although he insists he will exercise his
full authority until then, the other generals could increasingly
treat him as a "lame duck."
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BRAZIL: Drought Slashes Output
Southern Brazil's worst drought on record has reduced
production of several major crops by more than 15 percent this
year. We expect that Brazil--the world's third largest agri-
cultural exporter--will lose $1.2 billion in exports this year
and that imports of food products will increase by $400 million.
Brazil should nevertheless be able to avoid serious balance-of-
payments problems.
The drought that has plagued south-central Brazil
since late 1977 has cut production of most major grain crops
as well as cotton and coffee. Soybean production has fallen 22
percent this year, and corn production is estimated at 14.1
million tons--down from 18.8 million tons in 1977. We also ex-
pect cotton production to decline 16 percent and rice an esti-
mated 6 percent from the 1977 levels. Coffee production will
probably be slightly higher than a year ago, but down from ear-
lier estimates.
Despite recent rainfall, wheat planting for next year's
crop has lagged badly. Next year's coffee production, which
should have recovered fully from the 1975 frost, may suffer
another setback if drought damage to younger trees is severe.
I I The number'of cattle, which we had expected to increase
ue to nigher prices, is now likely~to decline as a result of
reduced capacity of dry pasturelands. An outbreak of African
swine fever has already spread from the state of Rio de Janeiro
to the south, where the bulk of Brazil's 40 million swine herd
is located.. .
Losses in agricultural revenues coupled with increased
food imports will probably cost Brazil about $1.9 billion in
foreign exchange during the next 12-months. Earnings from agri-
cultural exports in 1978 are expected to drop $1.2 billion
below the 1977 level, largely because of drought-related losses.
Soya exports--bean, meal, and oil--will show the largest abso-
lute decline.
Brazilian imports of agricultural products will in-
crease more than $400 million in 1978 as a result of production
losses. Wheat imports will increase by a million tons, while,
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corn and beef, normally export items, will be imported in an
effort to hold the line on prices and to meet domestic require-
ments.
In order to prevent a serious deterioration of its
trade balance, Brazil has maintained tight import restrictions
and encouraged exports of manufactured goods by continuing its
massive subsidy program and accelerating the pace of cruzeiro
devaluations. CIA estimates that, as a result of the effects of
the drought on the trade balance, Brazil's current account defi-
cit will increase sl ghtly this year to about $4.7 billion, com-
pared to $3.9 billion in 1977. Treasury, however, believes that
the 1978 current account deficit is likely to be closer to
$5.2 billion.
I Despite the agricultural losses, Brazil should be able
to register around a 4-percent increase in real GDP this year,
slightly below last year's performance. The continued growth in
GDP reflects the resiliency of the economy, which should be
able to rely on the manufacturing sector to supply the impetus
to growth. The agricultural setbacks nonetheless spell trouble
for Brazil's anti-inflation program; the government will prob-
ably be unable to hold inflation below last year's rate of 39
percent.
One week after the harshly worded Soviet Government
statement on Africa, President Brezhnev has reiterated Soviet
criticism of Western involvement in Africa--particularly of
NATO's interest in the creation of an inter-African military
force. Speaking at a Moscow reception yesterday for Madagascar
President Ratsiraka, Brezhnev charged that "no one had em-
powered" NATO to extend its "sphere of action" to Africa.
Last Friday, several Soviet officials in conversa-
tions wit US Embassy officers also struck hard at the idea
of an inter-African force and implied that Moscow was determined
to continue its current policies in Africa.
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The Soviets are citing the inter-African plan in order
to in uence African opinion against the West, but it is also
possible that Soviet leaders are concerned that the formation
of any alliance on the continent will work against their long-
term interests there.
Ethiopia-Somalia
Ethiopian planes attacked Belet Wen in central Somalia
yesterday--the third attack on Somalia in a week. The raids,
which President Siad has protested to the Organization of
African Unity, are in; response to continuing Somali-backed in-
surgent activity in the Ogaden.
Sudan has complied with all the terms neeaea to op- ZDAI
1:ain a million loan from the International Monetary Fund.
The loan will help to finance Sudan's current-account deficit--
estimated at $300 million this year. It is seeking additional