(Sanitized)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP81B00401R002500070021-8
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 17
• Document Creation Date: December 12, 2016
• Document Release Date: March 19, 2002
• Sequence Number: 21
• Publication Date: October 22, 1979
• Content Type: MF

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22 October 1979
MEMORANDUM FOR: Coordinator for Academic Relations, NFAC
SUBJECT . Request to Lecture at the Defense Institute for
Security Assistance Management
expenses will be borne by DoD.
I request approval to give a guest lecture at the Defense
Institute for Security Assistance Management, Wright-Patterson AFB,
Ohio on 15 November 1979. The lecture will deal with "The Threat From
the Third World: Myths vs. Realities" and will be unclassified. The
audience will be US military officers and the cost of travel and STATINTL
Attachment:
Text of Lecture
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 Approved For Rel#e 2002/05/07 : CIA-RDP81 800401 801000070021-8
NTL
SUBJECT: Request to Lecture at the Defense Institute for Security
Assistance Management
to-22.19
NTL
Off id
CONCUR:
NTL
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 3proved For.R se .2002/05107: CIA-RDP81-B00401 500070021-8 ,
i i /lt~./A121ts a N r~ PANEL 4
74V7 Gva~~H ,war .j
tt4Fi7J'
The Threat from the Third World:
Mounting Challenge to US and
Western Economic Superiority?
.. where the competition between the two superpowers is non-military, the
United States continues to enjoy a number of critical advantages: in industrial,
agricultural, technological, and diplomatic strength ....
Harold Brown, Department of Defense
Annual Report Fiscal Year 1979, p. 2.
Five years from now, will American Defense Secretaries make the same judgment?
Does the United States really hold, as our conference planners put it, "significant, long-
term advantages in most of the traditional, non-military elements of national power, in-
cluding the enormous strength of its worldwide economic position?" The accumulation
of vast dollar holdings by key members of OPEC, the dependence of all free world
countries on OPEC oil, the weakening position of the dollar and the deterioration in the
US balance of trade, and the growing assertiveness of key LDC's (less developed coun-
tries) on both international economic and political issues all raise significant questions
concerning US national security in its broadest sense.
So far, the economic and political trends noted above have complicated US relations
with a host of free world countries, especially in the so-called Third World. The growth
in power and influence of OPEC, of course, is the most obvious example of the changed
environment in which US foreign policy is now conducted. But th'e-issues which have
complicated foreign relations and have constrained US freedom of action reflect far
more than uncertainties about access to and future supplies of natural resources.
Diffusion of power-the growing political and economic multipolarity of international
relations despite the persistence of strategic bipolarity-has also been cited as an
important factor limiting US freedom of action on a global scale, especially in the areas
of human rights, North-South relations, Southern Africa, nuclear nonproliferation, and
antiterrorism policy. But what do these trends portend for national security? Do they
necessarily weaken the United States or erode the strength of its alliance network vis-a-
vis the Soviet Union?'
Author's Note: I have benefitted from the advice and thinking of many colleagues in preparing this paper,
especially Peter Clausen, Donald Goldstein, and Sidney Zabludoff. For the paper's shortcomings, however, I am
soley responsible. The views expressed herein, moreover, are not intended to represent official US Government
thinking or policy.
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 Approved For Release 2002/05/07 : CIA-RDP81B00401 R002500070021-8
THE LINKS BETWEEN--NATIAL SECURITY AND ECONOMIC ?OURCES
There are three major links between economic resources and security. The most
'direct is in the area of capabilities. Wealth makes possible the maintenance of ready
military forces and provides policymakers with the option of increasing these
capabilities. Wealth also correlates with the scope of alliance networks, adding important
strategic resources to national military power. But wealth, to the extent it depends on
such resources as expanding foreign markets and imported raw materials, also tends to
increase dependence on political and economic forces that a state may not be able to
control even if it possesses a preponderance of military power. It is this third aspect of
the link between economics and security that is of central concern here.
Starting with the monetary turmoil of the early 1970's and the fourfold increase in oil
prices, the US economy has been subjected to an unprecedented series of shocks it nei-
ther anticipated nor could control, and from whose effects it has by no means yet
recovered. Important structural changes have also occurred in the areas of trade and po-
litical relations, especially among the members of the OECD and NATO. While much has
been written by politicians and economists about these developments, they have
received relatively little systematic attention from students of national security policy.
Fortunately, two excellent essays have recently appeared that do explore the secu-
rity implications of recent changes in trade and monetary relations.2 Both essays reach
essentially the same conclusion; namely, that given the increasing sensitivity (i.e.,
"interdependence") of states to the economic actions of allies as well as adversaries,
governments will be beset by mounting domestic pressures which will inevitably require
exploiting the vulnerabilities of others. The principal implication of this finding for na-
tional security is that such sensitivities will tend to promote conflict rather than cooper-
ation, especially among allies.3
Since the essays from which this conclusion is drawn cover their fields so well, I
plan to focus the bulk of this paper on an area that still has received almost no attention
from students of national security: the so-called"threat from the Third World." Has the
politicization of international economic relations by demands of the developing countries
for a "New International Economic Order" and the polarization of other international is-
sues along "North-South" lines weakened US leadership and, thereby, threatened US se-
curity? Have these developments enhanced the power and influence of the Soviet
Union?
THE THREAT FROM THE THIRD WORLD
In September 1973, the near-moribund Non-Aligned Nations Movement was
transformed by the leadership of Algeria and Mexico into an effective negotiating bloc
within the UN system that launched, and to this day sustains, the momentum behind
what has come to be called the "North-South dialogue" between industrialized and
developing countries over the distribution of both wealth and political power in
international affairs. During 1975 and 1976, moreover, LDC demands for a "New
International Economic Order" (NIEO) were amplified by "threats" that OPEC would
determine future oil prices in part on progress toward the NIEO,4 that other LDC's would
form OPEC-style prer'ucer cartels that would demand (in return for assured supply) sub-
stantially higher .peas for their commodities, and that the LDCs' UN negotiating bloc
(the Group of 7"T) would hold multilateral negotiations-on such key global issues as
energy, nuclear nonproliferation, and law of the sea-hostage to the NIEO demands.
-.180
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 Some observers anticipated such "threats" and argued that they had the potential to
do real damage to US economic interests, especially in the context of OECD relations.5
The argument here was based partly on the. belief that other OPEC; 'S. could be formed,
partly on the growing sophistication and assertivenes of key LCD':, ~=ibo would in any
case want to exact higher costs for continued US access not only ip resources but also
to trade and investment opportunities, and partly on the disturbing impact that the afore-
mentioned developments could have on OECD relations at a time when such relations
were already tense due to economic competitiveness.
Coupled with the economic argument was a growing political concern about US
global leadership and how it could be affected by the diffusion of power mentioned ear-
lier. Here, the argument was that the growth in LDC assertiveness would reduce US
capacity to deal with. key international problems. The threat implied by such a
development was that on international political issues of major importance, the United
States would find itself isolated and unable to work its will either unilaterally or in the
UN context.6 For some, this argument could be dismissed on the grounds that the UN
(and multilateral diplomacy in general) was not vital to our interests and that we could
effectively "weigh-in" on issues that counted by pursuing our goals bilaterally.' This ap-
proach was tested in 1976 in the UN, the law of the sea negotiation, and the Paris-based
conference in International Economic Cooperation and tended to vindicate the claims of
its proponents. Nonetheless,- there has been a tendency (some would add "growing") for
the tensions and concerns of multilateral diplomacy to spill over and to complicate bilat-
eral relations with some key LDC's. United States relations with Mexico under Echevarria
and Brazil, Nigeria, and Indonesia today are cases in point.
These lines of argument provide a framework for analysis and are useful in pointing
out the key questions to examine. But these arguments frequently tend to treat the
LDC's in the abstract or as a bloc when, in fact, the LDC's differ widely in outlook,
capabilities, and objectives. What needs to be looked at is the behavior of key LDC's in
dealing with concrete problems to determine whether and how the growing assertiveness
and power of some developing countries threaten the advantages that the United States
holds over the Soviet Union in the nonmilitary elements of national power.
PETRODOLLARS AND SECURITY
There is only a handful of LDC's whose power over international political and eco-
nomic relations is clearly rising. Of primary importance are the -petrodollar surplus
countries of Saudi Arabia, Kuwait, Iran,- and the United Arab Emirates (UAE) who have
the potential to affect directly and unilaterally world financial -flows. Their current
reserves, for example, account for a lion's share of OPEC's $160 billion in net foreign
assets, a figure which conjures up for some a growing potential to wreak havoc in the
international economy along the tines of that forecast by fiction writers today.8
The interest of these countries is-first and foremost-to assure the security of their
holdings, however. Their growing links to and dependence on the West for secure out-
lets for investments and for advanced technology and other material assistance deemed
essential to modernization create, in effect, a reverse dependence that will continue to
discourage petrodollar surplus countries from seeking to destabilize the world economy.
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EHER Y DEPENDEN.C ND SECURITY
While. the non-OPEC sources of oil supply are projected to doub"ie by 1985, growing
free world dependence on Middle East oil to balance the market is irreversible over the
next 5-10 years." At the same time most -OPEC states, especially The in the Arabian
peninsula, are becoming concerned about not only the price at which they sell their oil
but also with the rate at which it is produced. Citing the need to hold' up prices in a glut-
ted market and the longer-term significance of conservation now, some major oil
producing states have announced production cutbacks for indefinite periods. Because of
the current oil supply glut and the slow rate at which demand is growing, these actions
pose no immediate problem, i.e., for the next year or so. But, as most recent estimates
suggest, demand will begin to approach supply certainly by the mid-1980's, with the out-
look for substantially increasing OPEC production uncertain (especially if key OPEC
producers continue to cut back their investment in production capacity). At that time,
sharply rising oil prices-especially if the dollar continues to decline--will become not
only feasible but irresistible. Thus, by the mid-1980's, the United States and other
industrialized countries may find themselves burdened with substantially higher energy
costs.t0
Inherent in the conditions sketched above are major threats to United States
prosperity and security. There may be the spectre of oil string'encies due to rising
demand or continued OPEC reluctance to increase production, or the threat on the part
of some oil producers to invoke a supply interruption, in order to pressure the United
States on the Arab-Israeli conflict." While a fully implemented strategic petroleum
reserve would ease the immediate effects of such a supply interruption, it could not
remove a large element of US and OECD vulnerability to the longer-term impacts. But
even without an embargo, looming oil stringencies and their effect .on prices would
severely strain global economic recovery and, no doubt, add to tensions among the
OECD partners, and between them and the developing countries. Energy dependence
and the threat of sharply rising energy costs will thus continue to cast a shadow over the
wider environment of American foreign policy.12
While it is important to guard against a kind of "energy determinism," there are a
number of areas in which energy problems are likely to influence the management of
economic and political-military relations among the OECD countries and throughout the
rest of the world. High energy costs have increased inflation, slowed growth, and aggra-
vated balance-of-payments problems in all countries, and thereby compounded the prob-
lems of trade and monetary relations among them.13 Multilateral cooperation in the
recycling of oil revenues and the extension of assistance to the most seriously affected
nations, like Italy, will be continuing requirements. In`addition, it will-be necessary to
cope with increased pressures for assertively nationalistic and "mercantilist" forms of
economic behavior, as consuming nations attempt to manage energy-related economic
strains and to form special trade and investment relations with producers of oil and other
raw materials. The recent intensification of competition in the export of nuclear facilities
-and the attendant friction in US relations with France and Germany-is perhaps the
most disquieting example of a trend that is also manifest in transfers of conventional
arms and various energy technologies.
Energy costs have also had the effect of aggravating existing disparities in economic
health among OECD nations. Countries already suffering from severe economic prob-
lems are particularly vulnerable to rising energy costs. Given that oil imports account for
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 roved For R e_ 2002/05/07 CIA-RDP81600401 F~25000700i21-8 y
relatively inflexible share of overall imports i ountries Ike France, Ital ,
rte`
' creases can greatly compound existing difficulties.
n
japan, even modest price i
"v'7 bxPerience only a
the United States and Germany)
V- Stronger economies (e.g., ,- iinht in a persistent t:nd self-reinforcing
-
-
-
-
rery dip in grown', w-a,.-.
fl n and depreciating curies . ies. A temporary
io
'.?0f depressed growth, In a
nt in economic performance, leading to increased energy consumption, only
._~ th
c
cle anain.
e
y
dependence r!evruzuitLa a --i-
.-the arena of East-West relations, energy
is of national power of the OECD and the Communist
n
metry in the compone
nd China are relatively self -sufficient in energy.
a
,.since both the Soviet Union
rt earnings are now energy-relati'd, moreover, and
Y" 40-50 ,percent of Soviet expo
s eased hard currency problems for the Soviet Union and has facilitated the
I that could eventually affect the strategic bal-
base of some advanced techno ogy
'A'far, neither of the major Communist powers has gained a significant strategic
ff' nc despite the temporary breakdown in Western
ie
y,
&09-from energy self-su ic
1973 Middle East conflict and The subsequent eco-
Wsolidarity at the time oft e
difficulties of the OECD nations. And, some some predict
Qiir-h ahrlPvtelooment could have
0 be a net exporter 01 u,-1vy ~r ?,~ . - --
ously-significant consequences for Sovet min Europed ilcountries. If ISoviet
a
Ih of its alliance relationships with he as
^^i~i~ find themselves scram-
WU IUIID UP Gaya........ --rri
r r.
ail on the international market, rather than looking to Moscow.
nrnhahly have
Nevertheless, the energy-ICIaLGu ~.,...- - -?____
the non-Communist world.
'greatest impact on the structure of collective security
r hlams competes with allies'
ats n
cc
.p
earlier, the p eo
d St tee (especially in the case of Japan and Southern
a
iii-military links to the Unite
' II erious consequences during crisis situations. In
s
t
ia y
06);.-and this could nave poten
have contributed
tion, the domestic economic constraints to which energy costs
....., +k.,e cvararhate the issue of NATO
ice a growing strain v.? uala"J? an increasingly high German profile in the Eu-
sharing. A likely consequence is
contribution to NATO defense, and a concomitant increase in the prom iocal sta-
merman core of me # ualiU'. ~,,,a?a,..? .. - _
M-.the - .the strength of the left in the Southern European countries, this trend could
4
+;r, cr4 cnntribution to
ie..-Atlantic orientation of the latter ally lu-u- --
defense problematical.
YJRCE DEPENDENCE AND SECURITY
d onths following the 1973-74 OPEC price rises
ll
e m f ,~
n? hel-heady, confrontation-fi
"One two many OPEC s was frequently heard
a: a rab oil embargo, the slogan ,
4.rt ..
:DC7~and UN meetings. Spurred on by the example of OPEC and' undaunted by the
_ _ .__1 _..1? .,F m ranhorent Arab
~ueness-ot oil in the internauonal uwil..-y ?-??- --
developing countries sought greater control over
e
cal=interest within .jr-'-', Esom
(;:terms of trade with industrialized countries. What they were after was a way to
t on imported raw
sform the growing dependence of the industrialize coup r.ie
th t a comprehensive international
t jials into sufficient leverage over the latter so , a
" (IPC)-sub-
lill"ment-what the LDC's call the "Integrated Program on Comoro hies
a$yr 4
s could be negotiated.'
e
alit'-raising and then stabilizing commodity pric
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'
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Efforts on the part-of- LDCsto exert greater control over Comm ty markets are not
new.15 In 1906, Brazil intervened for the first time in the coffee market and during the
1*920's Chile (nitrates), Mexico (sisal), Cuba (sugar), and Britain's Asian colonies (natural
rubber) all attempted what the LDC's, en bloc, are now seeking with the IPC. In the
1930's, international commodity agreements for coffee, sugar, tin, wheat, and tea were
negotiated; after World War 11, such agreements were negotiated for coffee, cotton
textiles, tin, cocoa, and wheat. What is new, however, is the degree to which LOC gov-
ernments now own these industries and view control over them as extensions of national
power, especially in the area of foreign policy.
Of the major commodities required for the industries of a modern economy, the
United States in 1973 already imported more than 50 percent of what is consumed for
many key elements in metalworking and steelmaking industries (bauxite, chromium,
nickel, manganese, tin, colbalt,?'columbium, and fluorspar). By the end of this decade,
zinc and tungsten (both used in the metalworking and chemical industries) will probably
be added to this list. And. some analysts predict that the United States will be virtually
dependent on imports for all its requirements of tin, manganese, chromium, and bauxite
by 1985.18
But as Table 1 suggests, dependence on imported raw materials is not necessarily
synonymous with dependence on LDC's. Australia, Canada, South Africa, and in the
case of chromium and platinum the USSR, are key suppliers. In the case of those
commodities for which LDC's are the major suppliers-Jamaica and Surinam for bauxite,
Malaysia and Indonesia for natural rubber, Brazil for manganese, Malaysia and Thailand
for tin, Mexico for fluorspar, Brazil for columbium, and Zaire for cobalt-there has been
either relatively little interest in cartelization or a shortage of political will to carry it off.
And, for the foreseeable future, the Council on International Economic Policy found that
a potential for "cartel-like action to restrict supplies or raise prices" existed only for
bauxite (the most common mineral on earth) and cobalt (of which the US possesses a
large stockpile and for which nickel can be substituted in many uses).17 Finally, when
considering the portion of the critical imported raw materials listed above actually
required for defense production (an estimated 1,0-20 percent in wartime), the threat such
dependence poses for US security must be judged low.
On balance, then, while efforts on the part of LDC's to form producer cartels may
persist given the rhetoric of the North-South dialogue, they are not likely to generate
"commodity power" a' la OPEC or to create US vulnerabilities in a way that would markedly
affect the strategic balance. It is most unlikely that LDC's acting as a bloc could exercise the
control over the market that the Arab oil exporters achieved in 1973 or that, en bloc, they
could ever agree on joint action in the first place.
Some would argue, however, that dependence on LDC's for imported raw materials
poses more of a problem for our NATO allies and Japan, and accounts for their greater
fear of the spectre of LDC "commodity power." Tables 2 and 3 provide (with the latest
available data) a profile of the major suppliers for imported raw materials of the Western
European countries and Japan. Developed countries still figure prominently as suppliers
as they do in the case of the United States. Japan clearly has a greater reliance on Asian
countries as a sour:e of many more raw materials than either the United States or Eu-
rope, while Europea:t countries have a greater reliance on Black Africa for many more of
their imports than does either Japan or the United States. But what makes these
dependencies significant from a security point of view is not the prospect that events or
T84
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 Table 1
US NET IMPORTS OF SELECTED COMMODITIES
r
Commodity
1973
Millions
Alumina
209
Bauxite
Chromium
143
Platinum group
metals
145
as % 1973
Consumption
a?70
90%
526
Natural Rubber
347
100%
522
Manganese
100
Zinc
303
48%
503
Tin
215
65%
330
"
Titanium
48
29%
75
Cobalt
54
95%
Mercury
12
78%
Tungsten
27
41%
Lead
27
17%
Columbium
NA
63%
NA
Vanadium
NA
25%
NA
Fluorspar
52
83%
66
Copper
143
5%
777
Phosphates .............. US net exporter
'In quantity terms. Calculated by dividing net imports by total consumption. In some cases consumption
includes withdrawals from (or additions to) government and/or private stocks.
"UK sources for raw materials are South Africa. Canada, and USSR.
Australia (50), Jamaica (22),
Surinam (18)
Jamaica (54), Surinam (23),
USSR (32), South Africa (30),
Turkey (18)
UK (39)," USSR (32),
South Africa (12)
Canada (50), Venezuela (31)
Canada (82), Norway (8)
Malaysia (40), Indonesia (39)
Canada (60), Mexico (24)
Malaysia (64), Thailand (27)
Japan (73), USSR (19), UK (8)
Zaire (45), Belgium-
Luxembourg (29)""
Canada (59), Mexico (17)
Canada (61), Peru (9)
Canada (29), Peru (21),
Australia (21), Mexico (17)
Brazil (62), Canada (16)
South Africa (55), Chile (35)
Mexico (77). Spain (12)
Canada (31), Peru (27),
Chile (22)
Jamaica (55), Guinea
Surinam (11), Guyana (10)
USSR (29), Turkey (27),
South Africa (20)
UK (19), South Africa (53),
USSR (20)
Canada (64). Venezuela (15),
Brazil (11)
Canada (67), Norway (11)
Indonesia (45), Malaysia (32)
Gabon (43). Brazil (24)
Canada (71), Honduras (19)
Malaysia (60), Thailand (14)
Canada (24), Bolivia (15)
Canada (33), Honduras (36) ?
Mexico. (50j, Cdv,aJla 14)
Canada (21;, Cn;ie (17);
Papua. New Guinea (20)
 Table 2
WESTERN EUROPEAN RAW MATERIAL IMPORTS -- MAJOR SUPPLIERS, 1976 (SHARE OF TOTAL)
Canada, Latin
United Communist
Australia, Black America AM
Rhodesia a? Countries Yugoslavia
Staates R. Africa, Africa C and aribbean
Aluminum
Hau
or xitelAlumina
ta;, F?i:{v:rl Ore and Conc.
Copper per Ore and Conc.
C
Lead ore and Conc.
La
and Lead Ore Conc.
Manganese Ore and Conc.
Tin Nickel
Nickel Ore and Conc.
Ore Ore and Conc.
Zinc Ore Tungsten
and Conc.
Zinc
Felspar, Fluorspar
Platinum Ore
Platinum Group
Ores and Conc. of Titanium,
Vanadium, Molybdenum,
Tantalum, Zirconium
Natural Rubber
Tungute
Tungsten
Cobalt Oxides and Hydroxides
includes Middle East and Oceania
Data not available
3
3
3
.9
7
.4
.
4.2
.8
1.8
.
0
15
3.0
.0
0
0
.1
36.8
6
3
139.0
9.5
.
.8
31.7
34.0
4 1
.
.
2.0
1
.
13
7
.2
-
'3.9
"
12-1
21.5
.
8
14
47.7
.6
5
20
4.6
.
6
2.1
2.1
0
0
.
.
18
8
29.3
.
1
1
2
2
.2
24.9
2
47
.
2.9
3.6
4
.0
9
4.
2 9
9
2
.
.
.0
7
.
4
20
5.2
32.7
.
7
.
1
.0
3.7
.
8
37
12.1
1.
0
.6
8
14
42.5
28.7
.
.1
1.6
10.7
5.
.0
.
,
.
3
32
1.5
22.6
5
1
.0
17.8
.
1
7
3.4
58.8
.
-
5
1.2
.
3
3
20.5
.
.6
1
16.9
2.5
18.1
20.4
.
1.7
.
5
4
.0
.0
3 6
45.4
2.6
2.0
7.
.
4.6
2.7
1
2
1
.0
.4
.2
7.9
24.9
18.8
29.3
4
.6
4.6
.
2.
.0
3
1
6.5
2.
1
15.5
.5
19.23
.
14 0
.0
.2
.
2
1
.0
.0
3
10.6
.
0
.0
18.2
41.0
.
10
1
.4
84.9
9
.
4
4
.0
.
8.
5.3
.
.
6
.0
16.3
.0
6
6
.4
.2
2
.
2
.0
.
0
.
10.6
.
.0
.0
.
3 7
31.4
.0
 JAPANESE RAW MATERIAL IMPORTS -- MAJOR SUPPLIERS, 1976 (SHARE OF TOTAL)
States
CASAR*
Africa
& Caribbean
Asia
Countries
Aluminum
11.3
14.2
3.9
.0
20.9
20.5
Bauxite/Alumina
1.0
57.8
-
9.9
31.1
.9
Chromium Ore and Conc.
1.0
22.9
13.3
--
55.2
7.5
Copper
3.5
19.3
51.1
22.2
.8
.1
Copper Ore and Conc.
.3
32.6
4.1
9.6
53.4
-
Iron Ore and Conc.
53.9
1.7
27.1
15.4
.8
Lead
1.0
5.7
.0
58.2
31.9
30.1
Lead Ore and Conc.
6.8
52.7
-
30.3
10.2
.0
Manganese Ore and Conc.
-
63.9
11.2
7.0
15.8
2.9
Nickel
5.5
48.6
.3
.0
7.9
20.3
Nickel Ore and Conc.
-
-
-
-
100.0
-
Tin
.0
.0
.0
.0
99.9
.8
Tungsten Ore and Conc.
5.1
19.4
1.1
15.2
56.5
3.6
Zinc Ore and Conc.
49.1
-
40.8
10.1
1.8
Zinc
.2
.0
.1
.8
98.5
98.0
Iron Ore
53.9
1.7
27.1
15.4
.8
Felspar, Fluorspar
32.7
10.5
.0
56.7
28.0
Platinum Group
5.8
39.9
-
.0
.0
38.2
Ores and Conc. of Titanium
Vanadium, Molybdenum,
Tantalum, Zirconium
32.7
6.4
Natural Rubber
.0
99.1
Mercury
49.2
.0
Tungsten
24.5
.0
.0
47.0
Cobalt Oxides and Hydroxides
3.2
2.4
.0
CASAR: Canada, Aug.traiia. South Africa, and Rhodesia
- Data not available
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Yugoslavia
I
 , Approved For Release 2002/05/07 : CIA-RDP81 B00401 R002500070021-8
political crisis in an African or On country would lead to supply s ages, but the po-
litical frictions that could be generated by actions our allies mighta in response to
such a development. As the Council on International Economic Policy (CIEP) pointed
out in its 1974 report,
We have a basis of concern with the supply and price problem of Europe and
Japan. If, for example, their supplies of copper were interrupted because of
some unforeseen production shutdown in Latin America or African countries,
the Japanese would no doubt move into the US market to obtain supplies. The
price US consumers pay would thus be affected. Faced with sudden and heavy
foreign demand for US material, the US would face the option of permitting
market forces to continue operating or implementing special measures to
protect US consumers, e.g., applying export controls.18
While, hypothetically, any supplier of raw material has the capability to cease
supplying it, the important questions in sum are:
-Under what conditions would such an action become a viable foreign policy
option?
-What impact would it have on relations between all countries who are dependent
on imports of the particular commodity about to be embargoed?
Regardless of how costly such an action might prove, some countries might well
determine in a crisis situation that a supply interruption is a viable policy option. But
even the Arab oil embargo-which occurred under conditions unlikely to prevail for any
LDC-supplied commodity, discussed here-was a weapon designed to be used only in
the short run because of cost/benefit considerations.19 While, therefore, the threat from
LDC "commodity power" cannot be dismissed as a contingency (for it can add signifi-
cantly to the intensity of a crisis and to tensions among allies), the ability of importing
countries to cope over the long run should help significantly to ameliorate its impact on
security.
TRADE DEPENDENCE AND SECURITY
Here, the concern centers on the degree to which the United States and other
industrialized countries have become, since the quadrupling of oil prices, increasingly
dependent on trade with the LDC's to assure high rates of growth. The most familiar line
is that argued by the Overseas Development Council:
The developing countries' imports of goods from the industrialized countries in
.general and from the United States in particular, have grown to the extent that
they can have an important and measurable impact on economic conditions in
the industrialized countries.... The extent of these linkages between the
industrial and lower income countries is suggested by recent calculations that a
reduction of 3 percentage points in the annual growth rate of the non-oil
exporting LDC's alone (of the sort many now expect for the rest of the decade)
is likely to reduce the annual growth rate of the OECD economies taken as a
group by one percentage point.20
For such linkage to be transformed into LDC leverage, however, the LOC's would
have to act with cor~5 d,erably more unity on the international economic scene than they
do. Alternatively, th&i :pattern of trade between industrialized and developing countries
 Would. have to be considerably more concentrated than it is. As in the case of raw
materials, the industrialized countries generally do not depend on a few LDC's who
could exercise sufficient control over the market to affect decisiv ly and permanently US
or other industrialized countries' economic strength. Of the top 1') non-OPEC trading
partners, only 3 account for more than 1 percent of the world ma :Ei (see Table 4).
THE NORTH-SOUTH DIALOGUE, MULTILATERAL DIPLOMACY, AND SECURITY
Three weeks before the outbreak of the 1973 Arab-Israeli war, at the Algiers summit
meeting of Non-Alig.ned Nations, the developing countries called !Or a special session of
the UN General Assembly devoted to the problems of development. The result of that
meeting (held in April 1974) was the "adoption" (for no vote was taken) by the UN Gen-
eral Assembly of an "action program" drafted en bloc by the LDC's calling for creation of
a "New International Economic Order." This act marked the beginning of the "North-
South dialogue," a series of complex international negotiations (see appendix) centered
on LDC demands and largely controlled by the developing countries UN caucusing
group, the "G-77."
Of greatest significance has been the tendency of some LD.C's to link their cooper-
ation in negotiations over law of the seas, the quality of the environment, the regulation
of the export of nuclear technology, and international measures combatting terrorism, to
progress on their demands for an NIEO.21 The impact of such linkage tactics was sharply
brought home in 1974 at a host of international conferences where bloc tactics, and es-
pecially the use of symbolic issues to provoke confrontation, stymied nearly every US
initiative and eventually induced a shift in US policy toward certain. key LDC demands
(e.g., the Common Fund and the scope of the CIEC discussions). Consequently, it was
widely believed in Western government circles that progress in multilateral diplomacy in
the UN context, and on such key global issues as energy, the environment, nuclear non-
proliferation, and terrorism, would not be possible without the support and active coop-
eration of the G-77.
The momentum behind the North-South dialogue thus came to depend on the ef-
forts of a small, fluid group of LDC's who derive their influence primarily from their abil-
ity to control institutions of multilateral diplomacy (e.g., the UN General Assembly,
UNCTAD). These activists (e.g., the Philippines, Indonesia, India, Algeria, Nigeria) be-
lieve that there should be a redistribution of both wealth and political power in
international affairs in their favor. To that end, they contribute resources in perpetually
short supply in international organizations-i.e., capable diplomats and technicians who
can devote their full time and energies to running caucus meetings, staffing ad hoc draft-
ing groups, and lobbying. Their influence is enhanced not only because they provide
what many Geneva- and New York-based Third World diplomats lack (expertise, staffing
assistance, budgets for social occasions, and the prestige of occasional Chief of State
endorsements), but also because the latter often operate in the absence of any firm
instructions (other than to avoid jeopardizing LDC bloc unity) from their national
capitals.
Because they are explicitly concerned about power relations, and especially about
increasing their authority in regional and international affairs, the activists tend to evalu-
ate the policies and preferences of industrialized countries in terms of their impact on
national prestige. What matters to the activists seems to be the degree to which US and
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 Table 4
TOP 10 NON-OPEC TRADING PARTNERS OF :'BIG-7," 1977*
Market 1970
Exports Value Share Share
to: (Million US $) (percent) (percent)
South Korea
7,284
Mexico
6,265
-5:690-
Taiwan
4,899
Hong Kong
4,749
Singapore
3,822
India
2,638
Philippines
2,481
Thailand
2,450
Argentina
2,155
1.4 1.0
1.2 1.4
1.1 1.0
.9 .8
.9 .9
.7 .6
.5 .7
.5 .6
.5 .5
.4 .7
'The ,Big-7" are the US, Japan, Canada, Germany, France. Britain, and Italy.
Market 1970
imrts Value Share Share
tom: (Million US $) (percent) (percent)
South Korea
6,794
1.2
.4
Taiwan
6,693
1.2
.6
Brazil
6,594
1.2
1.1
Hong Kong
5,721
1.0
1.0
Mexico
5,682
1.0
1.0
Malaysia
4,188
.8
.7
India
3,202 .
.6
.7
Philippines
2,677
.5
.7
Argentina
2,446
.4
.7
Singapore
2,296
.4
.2
 other industrial country initiatives and preferences reinforlar detract from such imme-
diate objectives-as the consolidation of regional status and influence and the expansion
of authority over international institutions.
The continued North-South polarization of international eco=nomic and political is-
sues will thus complicate the conduct of multilateral diplomacy :Ind could generate
strains in US relations with some of the LDC's who are among the most influential in UN
politics. Aside from the Arab oil producing states, however, the nonindustrial states do
not have the leverage-individually or collectively-to extract any of their basic demands
against the will of the United States. And they clearly wish to avoid any net loss of
support from the industrial countries for their modernization efforts.
Nevertheless, the need to manage the problems of resources, poverty, and nuclear
proliferation effectively on a global scale will require the active cooperation and support
of key LDC's. Some will continue to see the arenas in which solutions to their problems
are discussed in North-South terms, evaluating US diplomatic initiatives in terms of polit-
ical power balances in international organizations. Others, while they may be realistic
about the utility of dealing with'such problems on a global basis, will continue to find
rhetorical support of LDC bloc approaches useful for enhancing their status within the
context of regional rivalries and ambitions. And still other LDC's will continue to insist
that the problems mentioned above can only be handled on a case-by-case basis and in
the context of specific bilateral relationships. Sensitivity to these differences in outlook
among the LDC's and to their preferences for dealing with what are nominally called
"North-South" issues will thus remain a central challenge to US diplomacy for the fore-
seeable future.
It should be noted, finally, that the Soviet Union is viewed by most LDC's also as
part of the North, and that it is perceived as having contributed little to solving some of
the problems at the heart of the North-South dialogue. The frequent criticism of the
Soviet role in most international conferences related to these issues has led to greater
rhetorical attention by Soviet leaders to countering this criticism, but appears to have
had much less impact on Moscow's bilateral relations with some of the most outspoken
LDC's (e.g., Angola, Cuba) than criticism of US intransigence has had on the quality of
our relations with "activist" LDC's and their leaders.
CONCLUSION
The foregoing was intended to examine the degree to which the economic and
diplomatic power of key LDC's could threaten US and Western economic superiority,
and how, in turn, such threats could affect US security. What is most striking from this
review is that despite the explicit and implied limitations to freedom of action inherent in
the changing international economic scene, especially with respect to US-LDC relations,
the United States remains the single most powerful and influential country in the
international arena. Most LDC's remain politically pragmatic as Well as economically
dependent and thus potentially susceptible to US influence and power when the latter
are clearly delineated and forcefully projected.22 Countries with some of the attributes of
wealth and power remain highly dependent in key areas (e.g., the oil-rich countries for
technological development and military security). And while the Soviet Union is a
superpower in strategic military terms, it generally cannot match potential US influence
and freedom of action vis-a-vis global issues when it comes to economic wealth and
power, technological prowess, and alliance and other diplomatic networks.23 The Soviet
191
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 Approved For Release 2002/05/07 : CIA-RDP81B00401 R002500070021-8 4r
Onion can, of course, thr-eateniese capabilities, especially if it suds in gaining po-
litical, diplomatic, and strategic footholds in the Third World. But, again, how suchf
threats would affect overall security will depend as much on what we do in response as
on Moscow's ability to pose them.
At least for the moment, moreover, the challenges to US security posed by the dy-
namics of the economic changes afoot in the Third World and the implications they have
had for diplomacy i'n the North-South context seem overshadowed by a disturbing
development that is not on our agenda. This development is the growing challenge to
central political authorities that appears to be occurring across the developed-developing
country spectrum in the non-Communist world.
In the industrial democracies, challenges to central governments have been
manifested for the most part in declining parliamentary majorities, as in Japan, West
Germany, Italy, Britain, and Israel. Other manifestations are persistent labor and student
unrest, political violence including terrorism, and what might be called "centrifugal poli-
tics," (i.e., separatism in Britain, France, Canada, Spain, Belgium, and Northern Ireland):
The developing countries have also experienced a large amount of domestic turmoil that
challenges the authority of central governments and their ability to mobilize political
support and manage pressing internal problems. In 1977 political violence aimed at cen-
tral political authorities occurred in Ethiopia, Angola, Zaire, Pakistan, the Seychelles, the
Philippines, Indonesia, Argentina, Thailand, El Salvador, Nicaragua, Lebanon, and Benin.
The importance of this pattern of challenges to central political authorities lies in its
implications for the international environment on which US foreign policy initiatives
depend. Domestic instability is significant not only because of its immediate effects on
ruling elites, bilateral and regional political relations, and East-West competition, but also
because of its significance for addressing global issues of increasing salience such as
human rights, responsiveness to LDC economic demands, anti proliferation policies, and
arms transfer restraints. The growth of interdependence seems to have coincided with
'the weakening of central political authorities in many states, making international coop-
eration on global problems much more difficult to achieve. With little domestic political
capital to spare, the compromises so often necessary for longer-term international poli-
cies and mutually beneficial adjustments to economic problems-both essential for col-
lective security in an era of essential equivalence-may prove too costly in the short term
for hard-pressed governments to bear. While the Soviet Union is not immune to these
problems, the ability of the Soviet leadership to act decisively could constitute a major
asymmetry in a vital component of national power-political will-that could prove as
threatening to the strategic balance as any of the challenges now before us.
1. How these trends have affected the Soviet economy will not be examined in detail in
this paper. They will be treated in the other paper prepared for this panel. Where appro-
priate, however, I haves vied to at least speculate on what some of these trends could portend
for Soviet economic mmd military capabilities, drawing on the analysis in John P Hardt's
recent essay "Soviet Economic Capabilities and Defense Resources," in The Soviet Threat,
ed. by Grayson Kirk and Mils H. Wessell (New York: The Academy of Political Science,1978),
pp. 122-134.
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 Approved For Release 2002/05/07 : CIA-RDP81 800401 R002500070021-8
ROUTING AND RECORD SHEET
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DATE STATOTHR
22 October 1979
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L1,~-
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3.
D/Securi.ty--rfi~
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C/AR/NFAC 7G-25 Hqs
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6.
7
29
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8.
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11.
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