INTERNATIONAL ISSUES REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84S00928R000300170002-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 24
• Document Creation Date: December 22, 2016
• Document Release Date: June 20, 2011
• Sequence Number: 2
• Publication Date: October 1, 1983
• Content Type: REPORT

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Directorate of See*e4-
Intelligence
Review
International Issues
GI HR 83-005
October 1983
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Directorate of Secret
International Issues
Review
designated as uncoordinated views.
This publication is produced by the Office of
Global Issues. Some issues contain articles drafted in
other offices. Some articles are preliminary or
speculative in nature, but the contents are formally
coordinated as appropriate with other offices
within CIA. Occasionally an article represents the
views of a single analyst; these items are clearly
Secret
GI HR 83-005
October 1983
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Secret
Contents
Page
Nuclear Proliferation The "Gray Market" in Nuclear Materials:
A Growing Proliferation Danger
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The existing international nonproliferation regime, designed to limit
government-to-government sales of sensitive materials to potential
proliferators, has proved ineffective in curbing the emergence of a
"gray market in nuclear materials." A number of international
brokers have made a lucrative business of helping would-be prolifer-
ators secure equipment and materials otherwise unavailable to them.
From the Warsaw Pact
In an effort to prolong the life of Soviet-supplied military equipment
in Egypt, Cairo has gradually increased its arms purchases from
East European suppliers in recent months. The Egyptians are also
motivated by the desire to avoid developing a dependency on a single
supplier of military equipment.
OGI, Weapons Proliferation Branch
Portugal's arms export industry has concentrated on servicing sales
to Iran and Iraq, and training and sales to former Portugese colonies
in Africa. Lisbon's minor role in the international arms market has
helped support Western interests in Africa and the Middle East, but
Lisbon has also demonstrated a willingness to tie US base agree-
ments to a commitment by Washington to let Portugese firms
service some US equipment.
Military Spare Parts Sales:
Sizing the Problem
We believe that the sales of spare parts and servicing for weapons
systems will become an increasingly important part of the interna-
tional arms market. Because such sales are underreported, efforts
are being made to estimate their magnitude more correctly.
iii Secret
GI IIR 83-005
October 1583
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International Aid The International Refugee Problem
OGI, Geography Division
There are some 11 million people currently seeking refuge outside
their own countries, of which almost 8 million require assistance
from the international community. As their burden has grown, some
countries have expressed reluctance to increase their support for
refugees, which could lead to pressure on the United States to
increase its effort and has amounted to 30 to 40 percent of the
refugee assistance over the past 10 years.
Narcotics Bolivia: Drug Business Booming
ALA
President Siles has not curbed the burgeoning problem of coca
production and trafficking, and he seems unlikely to do so in the
future despite his promises and US pressure for more effective
control.
Comments and queries are welcome. They may be
directed to the authors, whose names are listed
above
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Nuclear Proliferation
The "Gray Market" in Nuclear Materials:
A Growing Proliferation Danger
Summary Several developments in the past decade have facilitated the growth of an
international clandestine market in nuclear materials. Competition for
sales, which increased with the emergence of new suppliers of these
materials, has helped to erode the Western exporters' consensus on the
regulation of trade in nuclear materials. At the same time, some prolifera-
tors-generally working with one of the small number of international
brokers-have become increasingly sophisticated in their efforts to circum-
vent established nonproliferation guidelines. These "gray market" activi-
ties severely strain the global nonproliferation regime that is not now
comprehensive enough to regulate such activity.
Emergence of the Gray Market
Gaps in the coverage and effectiveness of the global
nonproliferation regime have facilitated the develop-
ment of a gray market in nuclear materials.' The
regime prohibits government sales of certain sensitive
nuclear materials and technologies to nonnuclear
weapons states in order to discourage the use of
nuclear technology for nonpeaceful purposes. It oper-
ated reasonably well as long as the suppliers of
nuclear materials were few and they shared a com-
mon view on the types of materials and assistance
requiring regulation. In the past decade, however,
several developments have contributed to the spread
of nuclear technology to many countries, which made
it easier for a clandestine nuclear market to develop
and operate. These changes include the:
? Emergence of new suppliers of nuclear materials.
'The gray market in nuclear materials involves the sub rosa
transfer of nuclear equipment, materials, or technologies. Many
gray market activities are technically legal under national export
laws but violate the spirit of a country's nonproliferation policies
? Erosion of the Western suppliers' consensus on a
"philosophy" of regulation in the face of economic
competition.
Growing sophistication of Third World proliferators
in circumventing established nonproliferation
guidelines.
The nuclear gray market thrives in this environment.
Venturesome entrepreneurs have made large sums of
money in recent years by brokering clandestine nucle-
ar sales. They operate by exploiting ambiguous do-
mestic export control laws and less than comprehen-
sive international regulations.
Motivations
Governments or firms in countries that pose a prolif-
eration threat generally use the gray market to ac-
quire nuclear materials or assistance because it offers
opportunities to conceal or partially conceal nuclear
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transactions, according to US State Department re-
porting
Specifically, buyers turn to the gray market because it
may provide:
? The only source of a nuclear material that is legally
embargoed to a potential proliferator.
? An unregulated source of a nuclear material for a
country that wants to acquire unsafeguarded mate-
rials for its indigenous program.
? A convenient way for a country to disguise its
nuclear intentions and avoid the political and diplo-
matic problems of dealing on a formal government-
to-government level.
From the seller's perspective, clandestine nuclear-
related sales have helped maintain the financial sol-
vency of many West European nuclear firms. Nuclear
firms in West Germany, Italy, Switzerland, and
Belgium increasingly use middlemen to mask sales of
potentially sensitive nuclear products to developing
countries for use in their nuclear programs, according
to Embassy reporting
Some West German firms, for example, have relied
on brokers in Switzerland and the Netherlands to buy
many of their products. The firms thereby avoid strict
export control laws that would apply to direct ship-
ments. Furthermore, the governments in these coun-
tries-subject to substantial commercial pressures to
export-often take a relaxed attitude toward brokers'
activities.
Anatomy of a Gray Market Transaction
A typical gray market nuclear transaction generally
follows a set pattern. First, the government of a
proliferating country either directly or through a
cover firm solicits price quotations for the nuclear
material sought. Governments vary in how they carry
out this first step, according to
US State Department reporting. Pakistan, for
example, frequently deals through dummy firms set
up by its procurement officers who operate under
diplomatic cover out of Pakistani Embassies in West-
ern Europe. India, however, usually does not go to
such elaborate ends to launder its nuclear purchases.
It usually lists legitimate private firms rather than
government facilities as the purchaser. Argentina's
Atomic Energy Commission, on the other hand, nego-
tiates directly with West European firms and brokers.
In the second step, a procurement official may go
directly to a West European nuclear firm or may
commissi n a broker to arrange the nuclear-related
purchase. the more
sensitive the acquisition, the more like y a broker will
be used to disguise the sale. A line of credit at a bank
subsequently is opened in the broker's name, and
delivery of the goods is arranged.
the three most common methods of
making gray market deliveries are:
? Export of nuclear equipment as component parts
where the components alone appear innocuous and
may not require an end-use declaration under na-
tional export laws.
? Falsification of end-use statements if delivery is
made directly to a country of obvious proliferation
concern, such as Pakistan.
? Transshipment of the nuclear-related goods to a
third country with lax national export control laws.
The United Arab Emirates and Turkey often are
used as third-country transshipment points because
of their loose export control scrutiny.
According to Embassy
general pattern of a well-known Dutch broker, for
example, is to set up a line of credit in the Nether-
lands, funded by Pakistan's Engineering Research
Laboratory, to buy nuclear material from West Ger-
man or Swiss firms. This material is then exported to
another West European or Middle Eastern country
for ultimate delivery to Pakistan.
The Brokers
We have been able to identify through
State Department reports three brokers
who have been active in providing nuclear-related
materials to Third World proliferators, particularly
Pakistan and Argentina. They are:
? Heinz Mebus who, working out of West Germany,
has been Pakistan's major clandestine source of
centrifuge enrichment technology,
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because many of the materials he has shipped are on
"trigger" lists of sensitive transfers established by
the London Suppliers Group and whose export to
Pakistan is prohibited. We believe this success is
attributable in significant measure to Mebus's suc-
cessful exploitation of gaps in West German export
laws. Because Mebus's firm is small-a one-person
company, it is exempt
from many of West Germany's strict domestic laws
governing exports that apply to larger firms. Mebus
is aided further by the West German Government's
opposition-shared by other West European govern-
ments-to significant tightening of nuclear export
controls on the grounds that controlling "dual-use"
technologies is impossible and violates precepts of
"free trade."
? Henk Slebos, operating from the Netherlands, has
been instrumental in acquiring additional compo-
nents for Pakistan's secret uranium enrichment
efforts. He also has helped Pakistan to procure
nuclear weapons components. Slebos's procurement
activities for Pakistan follow a pattern similar to
Mebus's. He exploits a combination of loose domes-
tic export scrutiny and governmental resistance to
the spirit of rigorous regulation of nuclear materials,
lest the Dutch nuclear industry be economically
disadvantaged.
? Alfred Hempel, a West German whose company is
located in Switzerland, has brokered sales of heavy
water and enriched uranium from China to Argenti-
na, South Africa, and India, according to Embassy
reporting. In one series of transactions in the fall of
1982, Hempel's West German firm instructed its
Swiss affiliate to ship by air to Argentina 50 tons of
heavy water purchased from China, routing the
delivery through the United Arab Emirates and
London. An internal West German investigation of
this unsafeguarded transaction concluded that no
German export laws were broken because none of
the nuclear material entered West Germany.
Hempel may be brokering a new delivery of
Chinese-origin heavy water to Argentina.
Prospects
We believe sub rosa procurement networks in nuclear
materials is likely to grow, as the financially lucrative
business of brokering nuclear materials trade attracts
more entrepreneurs. As long as domestic commercial
pressures to permit a wide gamut of nuclear exports
remain high, West European suppliers are unlikely to
view the proliferation impact of gray market activities 25X1
as a serious political problem.' Furthermore, the
difficulties all Western governments face in regulat-
ing the transnational dealings of private firms within
their borders also are unlikely to lessen. Even when
illegal activities become known to a government, it is
hard to prosecute because of the transnational nature
of the broker's activities. The lack of effective interna-
tional regulation of their activities facilitates the
business of gray market operations. Confidence in the
nonproliferation regime may be seriously strained as
gray market activities continue because the regime
has few, if any, regulatory mechanisms to stop such
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Secret
Arms Transfers
Egyptian Military Purchases
From the Warsaw Pact F_
Summary Egypt has gradually moved to increase its arms purchases from Soviet and
East European suppliers in recent months, in some instances marking the
first orders negotiated in many years. The new agreements are largely
calculated to prolong the life of Soviet-style equipment in Egyptian
inventories. The accords also reflect Cairo's effort to improve relations with
Moscow and its allies, reduce its. dependency on the United States, and
demonstrate its pursuit of a policy of nonalignment. We believe such
purchases are likely to continue but that they will not be substantial.
Before Sadat's expulsion of Soviet advisers from
Egypt in 1975, Moscow had been Egypt's principal
arms supplier, having provided some $4 billion in
naval vessels, missiles, jet fighters, tanks, and other
equipment since 1955. During the same period
Moscow's East European allies provided an additional
$500 million in military equipment. After 1975, and
until recently, Soviet and East European agreements
and deliveries of military equipment to Egypt had
fallen to almost nothing. Since January of this year,
however, Cairo has negotiated or agreed to buy $190
million in military equipment from the USSR and
some key East European countries:
? Romania has sold at least 200 domestically pro-
duced T-77 tanks as part of its first agreement with
Egypt in more than three years.
? Czechoslovakia is selling spare parts for Soviet
made T54/55 tanks and is overhauling L-29 jet
trainers in the Egyptian inventory.
? Hungary received an order for $2.5 million in
unspecified military equipment, the first Hungar-
ian-Egyptian deal since 1974.
? East Germany will overhaul Soviet-made MIG air-
craft in Egypt as part of its first order from Egypt
since 1970.
? The USSR has been negotiating with Cairo to sell
30 MI-17 helicopters worth $120 million. Egypt has
reportedly agreed to buy the helicopters but has not
yet accepted shipment. Moscow has, however,
secured a small contract with Egypt for vehicle
spare parts.
Sales Impetus
Egypt's primary goal in these arms deals appears to
be the replacement or repair of the large amounts of
Soviet-made equipment in its arsenal that has fallen
into disrepair or become obsolete. Cairo is also moti-
vated by the lower cost of some of the equipment, and
the strongly felt need to avoid developing the same
degree of dependency on US and Western equipment
that it developed on Soviet equipment. Moreover,
Cairo apparently believes that reopening its arms
relationships with Moscow and the East European
capitals may contribute to President Mubarak's ef-
forts to balance Egypt's East-West relations.
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Mubarak has sought to deemphasize Egypt's public
ties with the United States in order to propel Cario
back into the mainstream of the Arab world and
restore Egypt to an active role in the Third World.
Pursuit of these objectives is tempered by Cairo's
reluctance to move too quickly toward the Soviet
Union and jeopardize its access to US military and
economic aid.
The Romanian tank accord and the on-again, off-
again M-17 helicopter deal with Moscow reflect the
tension among these competing objectives. The Egyp-
tian Army's five-year modernization plan calls for the
purchase of 900 US-made M-60 tanks to replace its
aging T-55 tanks. Cairo reportedly felt it could not
afford to underwrite the full purchase of the US
equipment and has found the Romanian tanks a
relatively less expensive alternative because their unit
cost is one-fourth that of the M-60. It is not yet clear
whether Cairo will buy more than 200 of the Roma-
nian T-77s or complete its modernization program
with US-made tanks. The M-17 helicopter that Cairo
has reportedly considered buying for delivery over the
next two years is the civilian version of the MI-8, but
features an upgraded engine and would be new to
Egypt's inventory. The Egyptians already have the
US-made CH-47 Westland Commando, the French-
made Gazelle, and the Soviet MI-6 and MI-8 helicop-
consider any major sale to Egypt of significant politi-
cal value-as a sign of resurgent influence in the
area-and may well offer attractive financial terms.
reliability. The Egyptian military services' mainte-
nance, training, and logistic problems are already
substantial because Egypt has received arms from
such varied sources as China, France, the Soviet
Union, and the United States. Moreover, a significant
part of the current senior officer corps trained in the
USSR and familiar with Soviet systems is more
comfortable with the Soviet military supply system
and not unwilling to do business with the Soviet
Union as well as the United States.
Near-Term Prospects
We believe Cairo will continue to look to the West,
especially the United States, for most of its new
weapons, especially new high-technology systems. The
Egyptians are now training the vast majority of their
up and coming officers in the United States. This
training should have a significantly positive effect in
favor of the United States in the next generation of
top leadership. However, this reliance on the West
will not deter-and may even encourage-Cairo from
considering arms deals with Communist suppliers that
prolong the life of its Soviet equipment and improve
relations with Communist countries. We believe
Egypt will continue to diversify its sources of arms
and try to obtain essential support, including from the
Soviet Union, for its large inventory of Soviet equip-
ment. We doubt, however, that Soviet assistance will
signficantly affect Egypt's basic strategy, which re-
mains centered on a wariness of Soviet ambitions in
the region.
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Logistic factors probably also play an influential role
in promoting Warsaw Pact-Soviet arms sales to
Egypt. According to reporting from US military
sources, Egypt is frustrated at times by the high costs
and long leadtimes in Western delivery programs and
by the US system for spare parts, supplies, and
maintenance. The Eygptians are still accustomed to
the Soviet scheme of a one-for-one duplication of
spare parts for a given weapon system and have yet to
accept the US system of not stocking parts of proven
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Portugal: A Small but Unique Arms Supplier
Summary
Portugal, which exports a limited range of military goods and services,
has sold some $285 million in arms in the past five years. Lisbon has
concentrated its arms sales activities on the exploitation of unique opportu-
nities in the Persian Gulf and in Portuguese-speaking Africa where its
inability to offer the complete line of advanced weapons or the extensive
credit available from Western competitors is less of a disadvantage. We
believe that Portugal wants to expand its military-related exports and
indeed may use the negotiations over US base rights as a lever to obtain
more US equipment servicing contracts. Portugal's arms sales to Middle
East and African nations, where a direct US role is difficult, help extend
Western interests and provide an opportunity to displace Bloc sales and
influence.
The Iran-Iraq War: Ground Forces Equipment
Portugal's principal arms export capability lies in
providing equipment for ground forces. Lisbon has
exported the needs of both parties to the Iran-Iraq
war, and almost 60 percent of Portugal's arms exports
from 1978 to 1982 went to these two countries (table).
According to reports from US defense attaches F-1
Lisbon sold $87 million worth
of 81-mm mortars, 105-mm artillery pieces, grenades,
and mines to Iraq-the largest customer-under an
arms-for-oil contract signed in 1981. According to
attache reports, Iran, Lisbon's second-largest custom-
er, purchased $69 million worth of 106-mm recoilless
rifles and 81-mm mortars of ammunition, artillery,
and small-arms ammunition.
Logistic problems, which have recently created diffi-
culties in Portugal's arms-for-oil trade with Iraq, will
probably provide further impetus to Lisbon's recent
efforts to increase sales to Iran.
quality control problems and a ship
repair yard strike have delayed Portuguese arms
deliveries to Iraq, prompting Baghdad to inform
Lisbon that, unless its concerns are alleviated by high-
level assurances, Iraq will stop buying arms from
Portugal.
Coincident with the problems encountered in the arms
supply relationship with Iraq,
Portugal recently sold an addition-
nition to Iran. In addition,
Portuguese arms firms have been authorized to
receive Iranian military delegations to inspect Portu-
guese arms production, facilities, and equipment and
that Iran may be interested in using Lisbon as an
alternative source of 7.62-mm, 9-mm, and 81-mm
ammunition-all of which Portugal can produce in
large quantities.
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Portuguese Arms Sales, 1978-82 Since 1978, Lisbon has discontinued its sales of
Recipient
Amount
(Nearest
million
US dollars)
Equipment or Service
Total
285
Asia and Pacific
India
1
105-mm ammunition, small-
Pakistan
NA
140 105-mm howitzers,
ammunition
Bolivia
7
Small-arms ammunition,
81-mm mortars
Brazil
16
60-mm ammunition, small-
arms ammunition
Chile
1
Machineguns
Colombia
3
Ammunition, explosives
Guatemala
2
Ammunition
Iran
69
106-mm recoilless rifles and
81-mm mortars with ammuni-
tion, artillery, and small arms
ammunition
Iraq
98
Explosives, 105-mm artillery
pieces, 61-mm mortars, gre-
nades, mines
Lebanon
4
30 Chaimite APCs, ammuni-
tion, grenades
Sub-Saharan Africa
Angola
24
Ammunition, explosives, weap-
ons repair, quartermaster items
Cape Verde
NEGL
Military training assistance
Mozambique
4
Four Noratlas transport air-
craft (used), quartermaster
items, military training, small
arms
Lusophone Africa: Training Services
Portugal's recent efforts in Africa have focused on
developing security ties with Portuguese-speaking Af-
rican states in line with its policy of reasserting
political and military influence in its former colonies.
weapons to South Africa, presumably to avoid censure
for violating the embargo against South Africa and so
as not to antagonize potential African customers.
Attache reports indicate
that Portugal has drawn on combat experience gained
during the African campaigns of the 1960s and 1970s
to promote its training services. Lisbon has offered
training as a separate and growing aspect of its arms
sales effort in the region:
? According to attache reports, technical training has
been provided to Cape Verde.
? Attache reports note that counterinsurgency train-
ing will be provided under a military cooperation
agreement signed with Mozambique in April 1982.
Lisbon has
agreed to train Angolan troops in counterinsurgency
warfare. Angola's recent
expression of dissatisfaction with the ineffectiveness
and demoralizaton of Cuban advisers probably un-
derlies its request for Portuguese training.
naval
the Portuguese Naval Academy.
We believe Lisbon, like all arms suppliers, uses
training opportunities to develop closer relations with
foreign officers and government leaders in an attempt
to influence future purchases of Portuguese military
and commercial goods. Media reports suggest that
Portugal hopes to develop Lusophone Africa into a
major market for Portuguese arms. Attache reports
note that Mozambique has become increasingly dis-
satisfied with the ualit of equipment supplied by the
Soviets. Attache report that
Lisbon, in possib le anticipation o expan ing its arms
supply relationship with Mozambique, extended an
$8.5 million line of credit and appointed a military
attache to Maputo in early 1983.
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The prospect for significant growth in the African
market is limited because of political, economic,
security, and logistic constraints. Lisbon's poor finan-
cial situation limits its ability to offer credit to all but
a few sales.
Lisbon has also denied
requests by Angola and Mozambique for in-country
military training because of the risk to Portuguese
personnel posed by the conflicts in those countries.
Moreover, the market in Angola and Mozambique for
Portuguese equipment is limited because the large
amount of Soviet-style equipment makes the infusion
of incompatible Portuguese arms difficult.
NATO: Servicing and Maintenance
Lisbon would like to develop a capability to service
and maintain NATO equipment and argues that its
membership in NATO, strategic position, and low
wage rates are to its advantage, according to US
Embassy reports. In talks with US officials, Adm.
Souto Cruz, Vice Chief of the Armed Forces General
Staff, has noted that Lisbon would be in a better
position to facilitate NATO airlift and sealift opera-
tions if it were provided with the capability to service
NATO equipment. In addition, Souto Cruz pointed
out that Portugal's position far from the theater of
war would enable NATO to mount a staging opera-
tion there.
Portugal's greatest servicing capability lies in the
aeronautics field. According to attache reports and
trade brochures, Oficinas Gerais de Material Aero-
nautico (OGMA) has excellent aircraft overhaul facil-
ities and holds maintenance contracts with the US Air
Force, US Navy, and West German Air Force.
OGMA is also a service center for Lockheed C-130
Hercules transports and Aerospatiale Alouette III
and Puma helicopters in the Portuguese inventory. In
an effort to expand its maintenance and overhaul
business, OGMA has also promoted its services at the
Paris and Farnborough Air Shows.
Opportunities in the naval and ground forces sector
are more limited. According to attache reports, Portu-
gal has three shipyards-Alfeite, Lisnave, and Sete-
nave-capable of performing quality naval overhaul
work. Lisbon has urged Washington to use Lisnave
for servicing of the US Mediterranean fleet. However,
shipyards in most NATO countries are operating
below capacity and would probably be unwilling to 25X1
send their ships to Portugal for maintenance. Similar-
ly, two Portuguese firms-Sorefame and Bravia-
could rebuild armored vehicles and personnel carriers,
but NATO members also have domestic industries
capable of performing these services.
Prospects 25X1
Portugal's arms sales proposals have only a limited
impact on US interests. On the negative side, one of
the most serious problems is Portugal's effort to use
the negotiations over US base agreements as a lever to
obtain additional US equipment servicing contracts. 25X1
Lisbon has already demonstrated its willingness to tie
base rights to US concessions in other areas. Accord-
ing to US Embassy reports, Lisbon implied during 25X1
negotiations in July 1983 that Portugal would agree
to a 10-year-rather than seven-year--base lease only
if a larger proportion of US economic; aid after 1985
was extended in the form of grants. In addition,
Lisbon, which has often felt that its loyalty to NATO
is unappreciated,' would probably view US willingness
to grant additional servicing contracts to Portugal as
one indication of Washington's commitment to the
strengthening of the Portuguese defense and economic
situations.
The United States benefits marginally from Portu-
guese arms sales because they help extend Western
influence in countries where the United States does
not have a direct arms supply relationship. Lisbon's
arms sales to Iraq help to maintain Baghdad's mili-
tary capability in its war with Iran. Portugal's sales
emphasis on Lusophone Africa also serves Western
interests by undermining Soviet and Cuban influence
in the region.
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Summary
Sizing the Problem
Military Spare Parts Sales:
times as large as recorded sales indicate.
The completion of many military modernization programs and the impact
of the global economic recession on defense budgets suggests that sales of
spare parts for military equipment and weapons systems will become an
increasingly important share of the international arms market in the next
few years. The magnitude of such sales even at present is, however,
difficult to estimate. For example, current accounting and reporting
techniques suggest that spare parts sales accounted for less than 2 percent
of the value of all recorded West European and Third World arms sales.
This is far out of line with the US experience; 26 percent of US arms sales
are for spare parts. On the basis of our new estimates, we believe spare
parts sales by West European and Third World suppliers are four to six
Sales of spare parts for military equipment are likely
to become an increasing share of the international
arms market. Arms sales have stabilized because oil-
wealthy countries have reduced their massive pur-
chases, other countries have completed their military
expansion programs, and the global economic reces-
sion has made most others less willing and able to
purchase new military equipment. As sales of new
equipment level off, the demand for spare parts will
grow as these countries move to keep the equipment
already in their inventories in working order.
Tracking the increase in the sales of spare parts, or
even current levels, is complicated by current report-
ing and accounting procedures. These techniques sug-
gest that sales of spare parts, either as separate items
or included in weapons agreements, account for only
$1.8 billion of all known arms sales by Western and
Third World suppliers between 1954 and 1981. This
amounts to slightly more than 1 percent of the $133
billion in security assistance provided by these coun-
tries during this time period. If agreements for con-
struction, support equipment, training, ammunition,
quartermaster supplies, and other consumables are
excluded, spare parts still account for less than
2 percent of all weapons sales.
We believe that such estimates grossly underestimate
the volume of spare parts sold by these suppliers. Data
from the Defense Security Assistance Agency
(DSAA) show that spare parts for US-supplied mili-
tary equipment accounted for more than $18 billion or
more than 15 percent of all US Foreign Military Sales
between 1950 and 1981.' When ammunition, training,
'The FMS program accounts for about 60 percent of all US arms
sales. Commercial sales make up the next largest component.
Although we do not have complete data, spare parts appear to
account for a higher percentage of commercial sales, perhaps more
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Table 1
Value of US Spares Sales
1954-81
Billion US $
(except where
noted)
Table 2
Value of Western and Third World
Spares Sales, 1954-81
Type of Equipment Percent
Total
Value of
Percent of
Type of
Value
x Estimated = Value
of Total
Value
Spares
Total
Equipment
(billion
Percent of of Spares
Sales
Value
US $)
Spares (billion US $)
Total
95.1
8.0-13.2
Ground forces 11
11.3
3.1
27
Ground forces
22.3
x .09-.14 = 2.0-3.1
vehicles and weapons
Naval
18
1
x
14 = 1
09-
6-2
6
.
.
.
.
.
Naval vessels and 4
4.8
1.8
38
Aircraft
30.5
x .10-15 = 3.1-4.6
weapons
Missiles
14.1
x .05-08 = 0
7-1
1
Aircraft 31
38.7
11.1
29
.
.
Electronics
08.1
x .07-11 = 0
6-0
9
Missiles 11
13.9
2.1
15
.
.
Electronics 3
3.2
.7
22
construction, and other ancillary items are removed
from the total, the value of spare parts sales increases
to 26 percent of all sales.
West European sales, at least by the
major suppliers, are closer to US sales than currently
recorded transactions indicate.
By extrapolating US sales of spare parts and by
making certain assumptions about the behavior of
other suppliers, we have estimated the value of spare
parts sold by these suppliers. A conservative estimate
would be that foreign Western suppliers provide a
minimum of one-third to as much as one-half as many
spare parts as does the United States for comparable
weapons systems. They sometimes sell stripped-down
versions of expensive weapons systems with minimal
spare parts packages at low prices. These "loss
leaders" are compensated for by subsequent sales of
overpriced spare parts. According to press reports,
France has sold many of its Mirage aircraft using this
marketing technique. Recipients, confronted with this
situation or unwilling to employ proper maintenance
procedures, often fail to order adequate spare parts.
Spare parts have also been withheld for political and
economic reasons during crises or for lack of payment.
Breaking down West European and Third World
arms sales by equipment type and multiplying this
figure by both one-third and one-half of US spare
parts percentages for the same type of equipment
produces a value range of $8-13 billion in unreported
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Reported Western and Third World
Arms Sales, 1954-81
Spares of all types
Electronics
Missiles
Support equipment, construction,
training, and consumables
spare parts sales.' This is four to six times the amount
accounted for by reported sales, which make up
9 percent of total arms sales (figure 1).
' Spare parts percentages differ for different weapons types. Mis-
siles, whose propulsion systems are not subject to repeated use,
require the lowest percentage of spare parts. The high percentage of
naval spare parts, according to DSAA officials, is the result of
accounting procedures that often list a ship's navigation, fire-
control, propulsion, and armaments systems as initial spare parts
for a hull even though they are fitted to a ship before it is sold. In
reality, naval spare parts are probably closer to those for air and
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Summary
The International Refugee Problem
large; the United States spent more than $1 billion in 1983.
Most refugees originate in developing countries. They are the unhappy
byproducts of war, civil unrest, and social and economic uncertainty. A
recent estimate of global refugees places the number of people currently in
need of protection by, and care and maintenance from, the international
community at 7. 7 million. This figure excludes those who receive
assistance from national or local rather than international sources and
those who have means of their own. The cost of these refugee movements is
Despite recent success in coping with the problems of some refugees in
Southeast Asia and Africa, we expect the problems of refugee movements
and the need for assistance to continue at near current levels. Central
America remains the most likely area for a rapid increase in refugees. F_
The economic, social, and political costs associated
with the refugee situation are enormous. At least 11
million people are currently seeking refuge outside
their own countries-victims of war or political and
cultural persecution. Of this number, the State De-
partment identifies more than 7. 7 million as requir-
ing protection and assistance from the international
community. As compared with a small number of
European nations after World War II, there are now
33 countries-mostly in the Third World-that are
the principal sources of the world's refugees. By far
the largest is Afghanistan, with 3. 4 to 4. 5 million of
its citizens having fled to Pakistan and Iran.
On an individual level, the toll levied in human misery
can barely be comprehended. Fear, malnutrition,
disease, and death are both the precipitators and
constant companions of refugee flight. Refugee move-
ments can also work hardships at the national level.
The generating countries inevitably lose valuable
human capital when their citizens flee abroad, and for
receiving countries the advent of refugees, especially
those of different ethnic backgrounds, is often an
unexpected and unwelcome event.
Regional Survey
South Asia. The Marxist coup in Afghanistan in 1978
followed by the Soviet invasion and the subsequent
war between USSR/Democratic Republic of Afghan-
istan forces and the Mujahedin freedom fighters have
created the largest current refugee population in the
world. Fleeing from political repression, the threat of
religious persecution, and the ravages of war, an
estimated 3 million Afghans have found sanctuary in
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The 1951 UN Convention Relating to the Status of
Refugees
This convention defines a refugee as a person who,
... owing to well founded fear of being persecuted
for reasons of race, religion, nationality, membership
of a particular social group, or political opinion is
outside the country of his nationality (or habitual
residence) and is unable or, owing to such fear, is
unwilling to avail himself of the protection of that
country. " Despite a 1961 General Assembly resolu-
tion that extends this definition by encouraging the
United Nations High Commissioner for Refugees "to
pursue his activities on behalf of refugees within his
mandate or those for whom he extends his good
offices, " the definition of refugees remains a highly
restrictive one and does not include millions of
internally displaced persons who have fled persecu-
tion or the ravages of war, but have not crossed an
international boundary.
Pakistan and perhaps an additional 1.5 million are in
Iran. The prospects for peace and successful large-
scale repatriation will remain slight unless the Soviets
withdraw and an Islamic government acceptable to
the refugees and the Mujahedin is established in
Kabul. These conditions seem unlikely in the near
future, and the Afghan refugee populations probably
will remain in asylum and continue to increase.
Elsewhere in the region, communal animosities in
Pakistan, India, and Sri Lanka pose a constant threat
to public order. The recent communal riots in Assam
and Sri Lanka underscore the potential of this threat.
Religious, racial, and economic jealousies are likely to
spark renewed violence producing heavy refugee
flows.
Table 1
Number of Refugees Requiring Protection
and Assistance in Principal
Generating Countries a
Ethiopia
833,100
Namibia
74,800
Rwanda
102,000
Uganda
287,000
Zaire
51,400
75,800
49,700
30,000
63,700
41,500
77,000
Iraq
100,000
Palestinians
1,954,000
Western Sahara
50,000
South Asia
a Because of the difficulties associated with defining and enumerat-
ing refugees, these figures represent only one of several estimates
and should be regarded as orders of magnitude.
Source: Country Reports on the World Refugee Situation, Report
to the Congress for Fiscal Year 1984, Department of State.
addition, armed conflict between Vietnam and resist-
East Asia. Since the fall of Saigon in April of 1975, ance forces continues in Kampuchea, presenting a
Vietnam, Laos, and Kampuchea have been the pri- constant threat to large numbers of Kampuchean
mary sources of refugees in East Asia. Under Hanoi's civilians. As a consequence, more than 1.5 million
direction the restructuring of these societies along refugees have fled Indochina since 1975. The flow has
traditional Marxist-Leninist lines has severely re-
stricted individual freedom and systematically perse-
cuted many of those who were associated with former
regimes or with the US effort in Indochina. In
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Table 2
Number of Refugees Requiring Protection
and Assistance in Principal
Asylum Countries a
Angola
96,200
Burundi
58,000
Djibouti
31,500
Rwanda
45,000
Somalia
400,000
9,282
11,500
Philippines
17,180
Thailand
144,700
Vietnam
30,000
45,500
18,000
Algeria
54,000
Iran
560,000-1,500,000
Jordan
759,000
Lebanon
246,500
Syria
225,000
Gaza Strip
381,000
West Bank
345,000
Austria 10,000
Italy 10,000
a Because of the difficulties associated with defining and enumerat-
ing refugees, these figures represent only one of several estimates
and should be regarded as orders of magnitude.
Source: Country Reports on the World Refugee Situation, Report
to the Congress for Fiscal Year 1984, Department of State.
diminished in recent years, but each month several
thousand people manage to escape and seek refuge in
neighboring, non-Communist countries.
The prospects for improved political and economic
conditions in Indochina are not bright. The political
consolidation of South Vietnam continues, as does the
"reeducation" campaign. In Kampuchea the food
situation has improved, but the continuing weakness
of the Kampuchean Government in the face of resist-
ance forces and the growing evidence of an extensive
influx of Vietnamese settlers ensures the continued
presence of Vietnamese forces. This military threat
against Khmer nationals has created an internally
displaced population along the Thai border of more
than 200,000.
Under these conditions the pressure on disaffected
Vietnamese, Khmer, and Lao to seek refuge beyond
the region probably will not diminish. However, the
enforcement of more stringent refugee admission re-
quirements by the traditional resettlement countries
in concert with Thailand's policy of "humane deter-
rence" reduces the hope of successful escape and the
actual number of new arrivals. Nonetheless, the po-
tential for a renewed surge of refugees from Indo-
china remains great should resettlement opportunities
improve, repression intensify, or Hanoi adopt a policy
of generating refugees as it did in 1978-79 when it
forced out ethnic Chinese.
Other Southeast Asian countries also :have the poten-
tial to generate refugee flows. If a military regime
were to come to power in the Philippines, aggressive
measures would probably be taken against the opposi-
tion, and hundreds of thousands of Filipinos could be
displaced. All probably would need assistance from
the international community and could turn to other
countries for asylum or resettlement. Further down
the road, a possible Chinese takeover of all Hong
Kong when the New Territories Lease expires in 1997
could initiate a massive emigration of Chinese reluc-
tant to live under Beijing's jurisdiction.
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Latin America. Of the 225,000 Latin American/Car-
ibbean refugees currently receiving protection and
assistance, more than 80 percent originated in Central
America. The Nicaraguan, Salvadoran, and Guate-
malan conflicts have resulted in an unprecedented
refugee flight from these three countries. The latest
figures indicate that more than 180,000 people are
receiving assistance in foreign countries, principally
Honduras, Mexico, and Costa Rica, but reports vary
and the total number of refugees may be much larger.
One US Government source estimates that there are
only 30,000 to 40,000 refugees in Mexico, while a
paper discussed at a recent symposium suggests that
the number may be as high as 250,000. Throughout
the region an additional 740,000 are internally dis-
placed, and large numbers of additional refugees may
be uncounted.
In addition, it is possible that during the next 12
months there will be increased conflict in Guatemala,
and violence in El Salvador will probably continue at
current levels, if not intensify. These events could
sharply increase the number of refugees in this region
over this period.
Middle East. Palestinians make up the oldest con-
tinuing refugee group in the world today. Most fled
present-day Israel following the 1948 Arab-Israeli
war. Of the estimated 4 million Palestinians in the
Middle East, 2 million are registered as refugees with
the United Nations Relief and Works Agency. The
greatest number of registered Palestinian refugees,
760,000, is in Jordan where they are afforded indefi-
nite residence privileges and the right to seek citizen-
ship. An additional 244,000 refugees are in Lebanon,
225,000 are in Syria, and 726,000 remain in Gaza
and on the West Bank which were occupied by Israel
during the June 1967 war. In the short term, it seems
certain that most Palestinians will continue to live as
frustrated and frequently unwelcome residents of
Israeli-occupied territory and the countries bordering
Israel.
A significant number of Lebanese have also been
displaced by the war in their country. The fighting
between the Druze and the Lebanese Army has forced
150,000 Lebanese to flee into Israeli-occupied south-
ern Lebanon. If the fighting intensifies, so too does
the probability of large-scale refugee flight. Syria and
Israel would be the most likely destination for these
people.
Africa. In most cases refugee problems in Africa have
been caused by the instability associated with the
process of consolidating disparate ethnic, social, and
cultural groups into independent, unitary states. The
1.8 million refugees and 1 million displaced persons
currently adrift on the continent have fled from civil
strife, economic disruption, and political/cultural per-
secution that are endemic in this process. Relatively
few in number by Third World standards, these
refugees do not constitute in many cases serious
domestic political problems for the host countries and
more often than elsewhere in the world are successful-
ly repatriated. An exception, however, is the situation
in the Horn of Africa where the 1974 coup in Ethiopia
and the ongoing struggle for territorial control have
sent more than 400,000 Ethiopians and Eritreans
fleeing to the the Sudan and an equal number of
ethnic Somalis to Somalia.
We believe the probability is low that the causes of
refugee flight in Africa will be corrected in the short
term. Political and economic stability are not likely to
be achieved any time soon. In Ethiopia the Commu-
nist regime is still engaged with strong separatist and
opposition forces, and until these struggles cease they
will continue to have the strong potential for generat-
ing additional refugee flight. A renewed threat exists
in Chad where during the past few years more than
100,000 refugees took flight and were subsequently
repatriated. If the Libyan campaign succeeds in caus-
ing open warfare in the heavily populated southern
regions, huge numbers of refugees may again cross
the borders into Cameroon and Nigeria.
Europe. European refugee flows originate exclusively
in Eastern Europe and, for the most part, are a
response to the oppressiveness of Communist systems.
Closed borders and close control over internal mobil-
ity generally eliminate the possibility of rapid, large-
scale flight. While illegal exit is still possible, most of
those who reach the West do so with permission.
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Thus, the volume of refugee flow will fluctuate with
changes in emigration policy.
Events such as the introduction of martial law in
Poland should be considered an exception; an estimat-
ed 200,000 Poles were out of the country when the
decree was announced. Although many chose to re-
turn to Poland, more than 40,000 applied for tempo-
rary asylum in Austria and more than 10,000 decided
not to return. For most East European refugees,
Austria is the country of first asylum. Five to 10
percent settle there, while others are resettled in third
countries, primarily France, the United States,
Canada, and Australia.
Prospects
In all refugee situations voluntary repatriation is the
preferred solution. Africa is the only major refugee
generating region where voluntary repatriation has
occurred in 1983; more than 50,000 Chadians, Ethio-
pians, and Ugandans were able to return to their
homes. Elsewhere, the numbers of returnees were
much smaller, and there is little reason to believe that
repatriation will become a viable alternative in the
near future.
When repatriation is not possible, resettlement to a
third country may lead to the best outcome for
refugees. This alternative is expensive, however, and,
as admissions programs continue to shrink, so do the
opportunities. If current trends continue, the opportu-
nity for third-country resettlement may be available
to only a very few of the world's refugees.
Failing repatriation or resettlement, the options that
remain open are continued asylum, and perhaps even-
tual assimilation, or forced repatriation. In many
situations assimilation is a real possibility, but for
large populations-such as the Afghans in Pakistan-
or where ethnic or racial tension is strong the pros-
pects are not bright and forced repatriation is a real
threat.
Despite recent successes with resettling Indochinese
refugees and repatriating some of those in Africa,
there is no reason for the international community to
believe that the global problems of refugee movement
and the need for assistance will decrease. In every
region surveyed, there is a strong potential for addi-
tional, rapid, massive, and costly refugee flight. Cen- 25X1
tral America currently presents the most imminent
threat. 25X1
For both political and practical reasons it will contin-
ue to be difficult to plan for future refugee situations:
? By the limits of his mandate, the United Nations
High Commissioner for Refugees can only react to
ongoing refugee situations and only after he is
invited by the host government.
? Although open conflict caused by international ag- 25X1
gression, as in Indochina and Afghanistan, or do-
mestic turmoil, as in Central America, Lebanon,
and much of Africa, almost always generates associ-
ated refugee flows, no one can predict the magni-
tude.
? Making public preparations for expected refugee
flows may actually encourage potential refugees to
flee their present circumstances and thus precipitate
large-scale migrations.
The burden of providing first asylum has also created
international tension as the traditional resettlement
countries steadily reduced their admissions programs
during the past three years. The current host coun-
tries, especially those in Southeast Asia, are con-
cerned that they may inherit large refugee popula-
tions that cannot be resettled out of the region. At a
recent international symposium on refugee movement,
there was some discussion of "compassion fatigue"
beginning to appear among donor/resettlement coun-
tries. If this is indeed the case, the United States,
which over the past 10 years has provided funding for
30 to 40 percent of UN refugee programs, will be
asked to shoulder an even larger share of the burden.
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Summary
Bolivia: Drug Business Booming
and economic obstacles.
The democratic government of President Siles has not curbed the burgeon-
ing problem of coca production and trafficking, despite the public promises
and US pressure for more effective control. We believe several factors
account for this: (1) Siles's reluctance to antagonize the powerful narcotics
traffickers politically and economically; (2) the absence of law enforcement
in the coca-growing regions; (3) rampant corruption; and (4) natural
disasters driving more farmers into coca-growing areas. Washington and
La Paz recently signed a narcotics control agreement, and the new
Minister of the Interior seems willing to cooperate. Nevertheless, we doubt
the government's track record on narcotics control will improve in the face
of the enormous-and growing-size of the problem and current political
Faltering Efforts at Coca Control
Upon assuming the presidency last October, Siles took
a strong public stand against narcotics trafficking, but
his subsequent modest actions have had little effect.
In April he established a national committee to
coordinate the fight against the drug trade and gave it
authority over the narcotics police. In June Siles
initiated-at the insistence of the most powerful
farmer organizations-a research program to investi-
gate the possible "industralization" of coca to in-
crease legitimate demand. In our opinion, neither of
these measures has much potential. The unclear
directive of the national committee weakens its au-
thority, and the likelihood of expanding the legal uses
of coca is small.
The United States has encouraged the Bolivian Gov-
ernment to take concrete steps to reduce coca produc-
tion. In August, the US Embassy persuaded Siles to
sign a narcotics control agreement that includes polit-
ically unpopular provisions on coca reduction and aid
for additional coca control projects. Full implementa-
tion appears unlikely, however, because of Bolivian
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Most Bolivians generally believe that coca leaf pro-
duction and consumption is an untouchable tradition.
Even President Siles regards cocaine trafficking as
essentially a US problem, largely because there is
little problem with domestic narcotics consumption.
Another factor in the rapid expansion of the cocaine
industry over the last year has been the absence of
government control in the major coca-producing ar-
eas. Since late 1982, when a number of narcotics
police were killed by campesinos and local demonstra-
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We believe the President is not likely to risk antago-
nizing the traffickers by forcefully reasserting a police
presence. The largest traffickers have reaped immense
profits, which enable them to hire private armies,
control local politics in their areas of operation,
purchase immunity from enforcement agencies and
the courts, and even buy influence at the national
level. Some are reportedly willing to finance a mili-
tary coup if the Siles administration threatens their
activities. We do not believe that the traffickers alone
are capable of deposing the President, but, in view of
his other problems, Siles probably feels he cannot
afford the added complications that a war on drug
dealers would entail. The most notorious offender has
been Roberto Suarez, whose fortune is estimated by
the government at $400 million. Suarez claims to be a
patriotic rancher and reportedly uses his money to
finance public works in areas over which the govern-
ment no longer has control to cement his influence.
Extensive corruption is the most obvious manifesta-
tion of the traffickers' power.
(civilian and
military officials at all levels are either bought off or
directly involved with the narcotics industry. Al-
though there are no indications that Siles is involved,
the extent of corruption has left too few untainted
officials to carry out rograms for coca reduction.
The Ministry of the Interior-which is nominally
responsible for coca control and therefore has more
access to the industry-is particularly susceptible to
The narcotics problem has been complicated by recent
natural disasters. Campesinos, whose crops and live-
stock have been destroyed by the severe drought this
year, are leaving the Altiplano and settling in the
coca-growing areas. The same is true of farmers from
the eastern lowlands, where crops have been devastat-
ed by floods. Moreover,
the coca cultivation had begun to
expand beyond traditional growing. areas. The combi-
nation of more farmers, increased land under cultiva-
tion, and high returns will almost inevitably lead to
continued growth in coca production.
Outlook
On the positive side, the new US-Bolivian agreement
offers some hope by increasing the level of US aid to
combat the cocaine industry. The appointment of
Interior Minister Ortiz also should improve US-
Bolivian cooperation. On the negative side, however,
the proportions of the problems are overwhelming and
increasing. Siles's attention will continue to be fo-
cused, in our view, on trying to strengthen the political
and economic base of his frail democratic regime.
This effort could easily be threatened by a serious
campaign against the traffickers. The cocaine indus-
try seems likely to thrive under this administration
and to continue to be a major problem under any
government in the future
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