NIO WORRY LIST FOR JANUARY

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CIA-RDP83B01027R000300120026-7
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RIPPUB
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S
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15
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December 21, 2016
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August 13, 2008
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26
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Publication Date: 
February 2, 1979
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MEMO
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Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 ? SECRET -0 25X1. State Dept. review completed 2 February 1979 MEMORANDUM FOR: Director of Central Intelligence THROUGH : Director, National Foreign Assessment Cente FROM National Intelligence Officer for Warning._?'- SUBJECT : NIO "Worry List" for January Th,ia memoicandwn .ca dnAwn Jkom the memoranda pre- pa,%ed bon you by the .indiv.Ldu&t NI0.a ajteA diacua.a.i.on with other anatydta o6 the Community. I.t6 puApoa e .us . to ateen t you in aucc i.nc t terms to otenti.ae deveQ.op- menta that, in the N10'.6 view, couy-d .cn ? 1e next bew months become matteA4 of .aetLLoua concern.. It .its not an estimate that these deveLopments are tikeey to occur; na.the,% it .c a an attempt to .s.ingte out the b!.achen c gouda on the rote. gence ob6Lc.en's honi.zon. The most urgent problem. The Vietnam-Cambodia-China-USSR Imbroglio. The chain of events since the last meeting of community analysts in late November has moved to a point where the possibility of Sino-Soviet armed con- flict growing out of these events is now one branch point closer than it was. The Vietnam blitzkrieg overrunning Kampuchea has been followed by both widespread Kampuchean guerrilla resistance and a large-scale Chinese military buildup on the Vietnamese border. The manner of the buildup, its timing and the mix of forces involved have increasingly . 25X1 suggested Chinese offensive intentions. The Soviets have not committed themselves to any particular course of action in response, but might in fact respond to a Chinese move against Vietnam with pressure of some sort on the Sino-Soviet border. SECRET Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 1 40 SUBJECT: NIO "Worry List" for January 25X1. 2. New Concerns I: The Fallout from Iran Iranian Oil. Any consideration of the uncertainties sur- rounding future trends in Iranian oil output clearly raises the specter of global market strin i genc es. It is even conceivable that later this year.the world will face economic hardships and political tensions reminiscent of the 1974 OAPEC/OPEC induced crisis An . annex to this memorandum describes possible trends in the global oil market this and exami a problems th t - a would be created by an oil export short fall. 25X1 The Soviet View. One specific contingency is the eventual emergence of full-scale prolonged Leba t l , non-s y e civil war in Iran which would bring the question of Soviet military assistance to one side into play. In the event of an open split in the Arm d y an emergence of a struggle involving armed civilians, it is conceivable that the Soviets would then covertly funnel supplies and other assistance to some forces on the side they favored whil f , e pro essing nonintervention. It is also possible that under these circumstances the Soviets w ld ou move troops to the adjacent frontier, and that they might caution the US against assistance to one side under Dain of active intervention by Soviet forces to help the other. . ~.. . e xico zs acquiring new clients for its oil -- notably, France, Japan and Israel. While the US will receive a lower percentage of Mexican oil than previously antiFipated, the actual quantity.will be about the same because of increased production. Diversification of Mexico's oil exports is likely to make Mexico more independent in its forthcoming negotiations with the t-~_ ore. ISO, the Nigerian leader-ship is giving more serious consideration to using oil as a political weapon than it has in the recent past. Developments re Iran will be the central element here, in that a shortage of oil worldwide would open opportunities for the Nigerians to press the US on southern Africa in a way they have not previously sought to do. Nigeria now provides a significant percentage of US crude imports, but also is heavily depen- dent on continued sales to finance its own politically important development program. E I 25X1 Mexico. As a direct result of events in Iran M d process of transition to civilian rule is now more likely ninothercominge months than it has been heretof A g Ni eria. Analysts believe that military interve-4r t SECRET 25X1 Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 Crhnrr Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 ? ? SUBJECT: NIO "Worry List" for January o noting that there rtazn degree of contagion in the overthrow of monarchies. 3. New Concerns II. Morocco. A series of disturbing events have increased our concern for the stability of the monarchy: more leftist activity (students and labor); continued poor economic performance; its solitary position on the Western Sahara; and deteriorating morale in the Army, bogged down in the Western Sahara. In light of events in Iran, it is w th Egypt. As in Morocco, there are some dist rbi i u ng s gns about internal stability: the rise in consumer prices; a resurgence of the Muslim Brotherhood; clashes between Copts and Muslims; and the stalled peace negotiations with Israel (which is causin some E tia 9 gyp ns to question Sadat's policy, even though Sadat apparently feels the delay is working to his advantage). In light of events in Iran, Sadat sees himself as the new policeman in the region -- witness his decision to send 200 tanks to Somalia. Sadat is good at balancing problems but he may be getting close to the point when he has too many balls in the air. The regional role heDerceives for himself may blind him to internal develo ments Pakistan. The Supreme Court may return a decision on the Bhutto case this month.' Any decision will increase the likelihood of po- litical instability and civil disorder. If Bhutto is exec t d h' u xpec o see hostilities being renewed as the Christians again try to get rid of the Syrians. Sarkis' weakness during the current lull in fichti g means another wasted opportunity for some sort of solution. Lebanon. Signs in the south are ominous again, and the north is marked by procrastination. With the return of good weather in Marchand April we e t t e, ~s followers may take to the streets; if he is spared, the Army leadership will be reinforced in its unha ss with President Zia and more in- clined to move against him. 25X1 25X1 SECRET Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 Approved For Release 2008/08/13: CIA-RDP83BOl027R000300120026-7 SUBJECT: NIO "Worry List" for January . ? 4. Continuing concerns. 25X1 Poland. The economic dilemma and growing malaise cited in tt,A Agt WAV ninn D.,.,...i. t_..._ ____ _ . 25X1 He suggested that one. 25X1 eventruai ou come could be wi l esca e rioting posibl ldi ,syeang even to Soviet i n tArvon+'i n.r 1.1i.47 .. ~ r~uuc5~y aw, w e recognizing the seriousness of th P i e ol sheconomi position, has concluded that the outlook is far f d rom esperate . Spain. In the face of escalating attacks by th B 1 b y asque and -- appal rent 25X1 y -- other terrorists, the Suarez government has lost ground this month in its str l ugg e to retain the cfidfh onence o te security forces. Ranking military officers have participated in public demon- strations of frustration that have delighted th lt i e u ra-r ght poli ,ce commanders have requested reintegration in the army, and tensions in the ranks are high. We see no respite for the government -- either before or after the !larch elections. . The Basque terrorists. reportedly have the capability to carry out even more disruptive acts of violence. If the victims were prominent enough and the timing right, we.believe the government could find it very hard to control the reaction. Nor in such circumstances do we exclude the possibility of some direc move against the government by elements i ____._____ .._ h e s n t Ital. It is increasingly likely that the Communists will dis- sociate themselves from the Andreotti over t d g nmen an thereby bri it ng down within the next few weeks, throwing Italy into yet another serious political crici s Syria-Iraq Rapprochement. In November 1978 we noted the radical- ization of the Arab moderates as a result of th i k e r wea performant ce a the Baghdad Summit. We continue to be concerned by the additional steps toward rapprochement between Syria and Iraq. There is a possi-bility of effective and lasting Syrian-Iraqi cooperation -- military, economic, and political. President Bakr's trip to Damascus next week should produce something tangible in cooperation between the two countries; additionally, the PLO and Jordan may well be brought in on the latter party of the "summit." The implications of all this involve possible future Israeli (military) reaction. The Israelis might not allow the Iraqis to fill the currently unexplained, division-size a in Syrian defensive ositi p ons on the souther Gl Hiht noanegs -4- Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 25X1 SUBJECT: NIO "Worry List" for January 5. Areas of lessened immediate concern. Romania. The Soviets have not yet found an effective response to Ceausescu's spectacular acts of public defiance. BY publicly airing sensitive questions of Warsaw Pact expenditures and command and control, Ceausescu had gone beyond previously established limits of his challenge to Soviet authority and this time approached more closely the threshold of Soviet tolerance. For the time being, he appears to have gotten away with it, in the sense that we have no evidence that the Soviets have yet decided to risk the costs associ d i a e w th measures drastic enough to bring Ceausescu to heel. 25X1 Nica_ r_ aqua. The present delicate state of the mediation effort led by the United States is at the point that th B e road Front (FAO) opposi- tion is beginning to flake apart, while Somoza appears to- be at least as strongly entrenched as ' ever. Somoza s ability to double the strength of the National Guard seems to have demoralized the FSLN, which is limiting its harrassment of the Somoza Government to localized attacks. A full- scale FSLN assault on the government now appears unlikely.- Meanwhile, other Central American governments are uneasily watching the threats to Somoza The Gov . ernment of El Salvador, already beset by terrorist' Rhodesia. The more direct assistance relationship which we had. anticipated owould develop between'-the Soviets and ZANU has not material- ized as we PYRae+aA to So c ?.". autiNIA, there have been objections and counterarguments by the ZAPU leadership, who at least up to now have been the focus of Sovi t tt e a entions. The Soviet-ZANU relation may yet develop; but the Soviets certainly show no signs of being in a hurry, if in fact they intend to make this part of their game. Regarding Cuban activities, we do not see any specific indications that more Cubans are about to arrive in Africa or that those already there will be shifted about in a major way. The "logic of the situ- ation" in regard to Rhodesia still calls, in our view, for additional Cuban participation in the defense of Zimbabwe guerrilla and host government base areas, but, again, we do not see any fundamentally new development with regard to Cubans in he next three months in either southern Afri a t.L_ c or SECRET Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 Approved For Release 2008/08/13: CIA-RDP83BO1027R000300120026-7 ? ? SUBJECT: NIB "Worry List" for January The Beagle Channel. The danger of Argentine-Chilean hostilities has markedly decreased with the beginning of Papal mediation. South Africa. Concern over the possibility of rene.ved ac4ivit at the Kalahari test faciiit Ile has abated in the last month RICHARD LEI-L%.MAN SECRET Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 Approved For Release 2008/08/13: CIA-RDP83BO1027R000300120026-7 f1FAC f-lo. 0397-79 23 January 1979 Coss of Iranian Oil: So?ra _ Global Im lication- for 1979 -Potential Oil i~lar?ket Problems in 1979 While the glob al - - ' an Iranian oil _ of l market. will Probably b shortfall in the first- quarter a able to co arise soon e thereafter, of 1979, problew Frorn could spri usually rebuilt i u e oil stk n contt ,ras t the drawdwns thatocs are o place during the-first quarter. In addition, by sprin -a1Iy t production facilities, especially those in Saudi strained ake fr a l om monthsfgi1 Arabi ,l o runnin at near full rana-44-.. W1. have been Although the c - -- / - --' -. . urgent uncertainties in Iran make it imp to predict oil market t b rends w ossi l ,e can at least examine thee range Possibilities. Three plausible scenarios can be envisaged of here in order of increasing risk that serious market stri 'ranked will appear between April and the end of thi ~gencfes s production is substantially r spring. Ai though fear f e s o st er-ea it suplh py sortage would ease necessity to rebuild stocks to normal levels would leave the the susceptible to any renewed curtai lme rkefi Saudi) output, nt of Iranian (or deep cuts in (This case assumes that a new government in Teheran believes it needs maximum oil revenues to restore economic activity in Iran and/or desires to continue the modernization effort albeit at a.-somewhat reduced rate.) , albeit SECRET Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 Approved For Release 2008/08/13: ? ? aode_>at Zsk - Under this scenario marketiconditions would ar some three million production remained at current high 1, b/d. ?v tight even if non- prolonged sharp drop in output of velets s. Thus almost any produce a supply crisis. p the other major producers ment abandons much of the (This case assumes that the successoCoud Shah's enough oil to sustai r lgovern- 7Pro n gram btl rodeststardu sels Populace.) and Of living for the for most- 'o- - Iranian oil output remains b? the Period, {This case would stem from oeitherlpon b/d Civil disturbances reflecting continued governmental the installation -of a hit, prolonged deliberately to isolate tae gunt ffundamentalist regime wh cht seks foreign influenc tY as completel es) y as posiblm .se fro under The above depj ction of a range of the most optimistic citthe s gges~ - faces a substanti l rcumstances that, o a , this year. With tight markettCORdi.tionstrsoaencies appearing arket later Slater any important Producer for any reason would cause a Price sharp production cuts by run up.. It m c timing ust be strongly emphasized,- however, that of a market crunch, if there is one, will depend more the behavior of oil consumers and marketers than on on the supply trends O nce th .ese Pleczed to replenish stocks groups believe that they Jwi l? th e , be ey W-111 b ubl nae e more inclined to h worse, build inventorie old s onto or consumption rather than draw them down. cutbacks necessary this would make even dicate. earlier than stockpile levels would in- Da n er Points.and Some Possible 0 ortuni ties t her Prices Combi rted Lzth Steer resumptp i on of Iranian oilc'at~ - Without nearly full that d OPEC oil Prices will rise beyosdbtheseidecided odds are hi h meeting of the or9amZati id d at la e st man on The ,se 'Probabilitiess even with Iranian output under the one million b/d scenario- averaging 3 Million b dclimb from near ario. Any OPEC n ' to almost-certai rty the way by unilaterall price ha k !y y raisin could Those countries Producing mainlyplight crudestcouldfachie la glerd unofficial Prices by hiking the quality differential betwee higher and heavy. crude. Higher prices could also be set officia n light OPEC meeting, and Saudi Arabia -- bece l ly at an at near-capacity -- would have littleauower s already aperaiong to gold the line. p moral suasion, SECRET Approved For Release 2008/08/13: CIA-RDP83BO1027R000300120026-7 Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 A substantial increase in oil prices wouldf urse. de expected economic growth. As Was the case in 19'703 , the United pStates is now attempting a so called "soft landing", would slow somewhat in order to relieve inflationary pressures omy much higher energy prices, the landing could again be hard", With inflation rates remaining uncomfortably high. The economies of~th Western Europe are in the best position since the 1975 recession to accelerate economic expansion. Sharp hikes in oil this opportunity. Japan, already beleaguered by the prices woul difficultidesjp of turning its economy inward and the most dependent on oil imports, may find its economic growth particularly hard hit. In all developed economies, the economic cushion provided b y exports to OPECl woud certainly be less than in 1974 and 3975 Althh OP .ougEC states would once again have vastly -increased spending Powerl f .. ony aew would greatly expand foreign purchases. The troubles among devel d ope countriesld i wounevitably spread to the LDCs. The payments positions of many LOCs, especially pupper tier' ones, are expected t o weaken subttillh sanay tis year and higher oil prices combined with lower exports to the developed world would unquestionably make conditions worse. The poorest countries would be asking for more aid at the very time the developed countries could least afford such outla s If y the oil pri hik .cees come- this - spring, they would affect the tone of both the UNTAD V conference in. May and the Tokyo Summit in Ju ne . The Saudi Arrzbico F t - ac or - The pressures facing the Saudi lead leadership have intensi led th ' as e Kingdom s oil export level has increasingly become the critical This has arbiter of global. economic health. happened at a time he i w n ts latentsi succeson problems are beginning to emerge, its faith in the value of its alliance with the United States is being questio d ne near and its misgivings about sustaining capacity oil production are sharpening. The Saudis will face the dilemma of having to exert more influencehil fli , weeeng more vulnerable. They will be urged, and may be tempted, to use their oil supply leverage to achiev b e o jectives in the Arab-Israeli arena. At the same time, their perceived dependence on their long-time ally, the-United States, will deepen, as the uncertainties in Iran add to their anxieties (felt by the Saudi establishr nt) over the growing Soviet involvement in the region Gi ven these cirt .cumsances, the possibility exists -- at least in principle -- for some trade-off between the future level of Saudi oil output and US security guarantees. If the US extends, and the Saudis agree to, such an arrangement, it might be Possible to convince the Persian Gulf sheikdoms, and the UAE, to participate in such an accord. The accord might ~1incl ude a provision for temporarily lifting self-imposed production ceilings, a move which would add more than one million b/d to global oil supplies. Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 Non-Price Reactions bq M E ortirq States - Some oil producing states may aiso try to advance their perceived political and economic interests other than through higher oil prices. These could range from efforts by a single state (e.g., 1''exico) to link increased oil exports to US trade concessions or US treatment of migrant labor, to efforts by a group of states (e.g., Arab oil pro- ducers) seeking to influence the course of development of a settlement with Israel. The sco f pe o action could range from the most subtle verbal hints to open threats of concrete action, such as a limitation on production.* In most cases, however, their actual leverage will be limited. Oil producers will have to cope with weaknesses such as OPEC members' unwillingness to halt the flow of oil for fear of losing needed foreign exchange. Also, each producer will have to weigh any such action in the context of its. overall foreign relations- Competition Among Inroorting Counl_ es - Competition for oil on the world market coullead to tensions between consumers, especially the United States and its OECD partners. These i ntra- OECD strains, however, may be si nifi a tl l g c n y ess than in 7973-1974. Governments have learned from the earli er experience that a scramble for oil supplies is self-defeating, in that it needlessly drives up prices and leaves the bu er t k i y s uc w th high-priced oil contracts once supply conditions return to normal. In addition,- the Inter- national Energy Agreement, adopted by 18 member countries,' provides at least a framework for allocating availabl l e supp ies of imported oil. It has never been tested under actual condi tions, however and it. is questionable wh th i e er I. could function effectively in the context of severe oil tri s ngencies. A Change in US-Ismali Relations - Israel's sense of insecurity -and isolation has already been heightened by the loss of Iran as an ally and oil supplier. This may stiffen its determination to be self-reliant, making a peace settlement more difficult. At the same time, possible oil market stringencies later this year may-force Tel Aviv to invoke its oil supply agreement with Washington. -A flow of US oil to Israel would come just at the moment when the United States may have to impose domestic restrictions to conserve oil. SECRET Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 Approved For Release 2008/08/13: CIA-RDP83BOl027R000300120026-7 Reaffirm tiio f the PZutoni:~r Ecororm~ - The Iranian oil cut- back will strengthen the convictions of those who favor additional R&D on plutonium-based reactor systems predicated on reprocessing. Rapidly rising oil prices would certainly reinforce their position, further complicating US efforts to stall the development of these Pl utoni urn-based systems. --- i -s- _d_,._.. ; ~,tczcc~ E'zzszs' d finis is a large and camp issue thathould be discussed separately. 'So far the international financial consequences of. Iranian instability have been minimal largely because Teheran has'such a large cushion in the form of foreign. exchange reserves outside of Iran. More serious problems could emerge in the next few months, however. While these could hurt individual banks, the international financi l t i a sys en s able to cope. We do. see one remote possibility with wid ifi er ram cations_ :.. A fundamentalist regime in Iran might decide to abrogate its foreign debts on grounds th , ey were the product of the Shah's "illegalities". Some Western banks with a large Iranian exposure and a weak financial structure could go under. A chain reaction is then -possible if the banks concern d d e are eeply involved in the unregulated euro-dollar market. ._ SECRET 25X1 Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 9 ? NIO "Worry List" Items Nigeria. Analysts believe that military intervention to derail the process of transition to civilian rule is now more likely in the coming months than it was last year. General Obasanjo is trying to keep political agitation and violence within bounds, but his chances are problematic. Nigerian oil production is up, for financial reasons as well as Iran, but the Nigerians may still be tempted at some point to try to find in their oil political leverage over US policies re southern Africa. Rhodesia. We see no change in the pattern of the armed guerrilla struggle, but possibly an increase in the intensity, although we expect Smith will be able to conduct elections in April as per his timetable. Absent some further settlement, we still think that we will see some degree of increased participation by Cubans in the Rhodesian situation, especially in the defense of the Zimbabwe guerrilla base areas outside Rhodesia. An extension of the warfare into Botswana, or even possibly Tanzania, is a continuing threat. Zaire. The longer term threat to Shaba remains serious, despite the current disorganization of the ex-Katangan grouping and the co- operation between Mobutu and Neto in Angola. Danger in Shaba could Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 . . be especially acute after June, if the inter-African force with- draws. The food, medical, and general economic situation in Kinshasa itself is deteriorating, and we cannot predict when or if rioting might occur against Mobutu's security forces there. Exile elements evidently are trying to take advantage of these circumstances. Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 ? ? The Communist Party's break with the Andreotti government shifts the emphasis in Italian politics back toward confrontation, breaking a long trend that saw the Communists inching steadily toward a fuller and more overt role in the governing process. The Communists feel they must take a tougher line toward Andreotti and his fellow Christian Democrats, yet they will not want to jeopardize their hard-won reputation as a responsible and construc- tive political force. The Christian Democrats, troubled as always by their own internal factional problems, seem more willing now than in the past couple of years to confront the Communists. Because no party's options are clear--and also because decisions in each case will be heavily contingent on the actions of others-- all the participants are likely to move very cautiously, and it is unlikely that we will predict in any detail how the crisis will develop. Certain broad trends can be discerned, however. First, it seems likely that relations between the Christian Democrats and Communists will grow more tense in the next few weeks, with increased possibilities for miscalculation by both parties. Second, if this is so, a round of parliamentary elections will be very difficult to avoid. Third, whether or not elections are held, the central fact Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7 in Italian political life is unlikely to change: that it is all but impossible to set up a stable government, much less an effective one, unless Italy's two biggest parties can find a way to cooperate. And fourth, events of the last year have made the Communists much more reluctant to cooperate without some guarantee of an expanded role in the governing process. 25X1 Approved For Release 2008/08/13: CIA-RDP83B01027R000300120026-7