INTERNATIONAL ISSUES REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84S00928R000300180005-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 46
• Document Creation Date: December 22, 2016
• Document Release Date: June 21, 2011
• Sequence Number: 5
• Publication Date: December 1, 1983
• Content Type: REPORT

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Directorate of -Seeret,
Intelligence
Review
International Issues
GI IIR 83-006
December 1983
copy 546
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Directorate of Secret
Intelligence
Review
International Issues
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 IIR 83-006
December 1983
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Secret
Communist Activities Soviet Exploitation of the
West German Peace Movement
The Soviets have succeeded in using the local Communist parties to
exploit the peace movement in West Germany because the parties
are disciplined and well-financed organizations working in an
otherwise diverse and splintered movement.
The World Sugar Market: Opportunities
for Soviet Influence
Moscow is well placed to take political advantage of surpluses in the
world sugar market by picking among many suppliers and timing
purchases for maximum impact.
OGI/Geography Division,
Aeroflot is an important element in the Soviet Union's contacts with
the rest of the world. In addition to commercial operations, Aeroflot
has been involved in intelligence and military-related activities.
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Arms Transfers East European Involvement in the
International Gray Arms Market
Much of the arms and munitions sold on the international gray arms
market by East European nations is acquired by belligerent or
embargoed nations and terrorist, insurgent, or criminal groups
throughout the world.
EURA/European Issues Division,[
OGI/Weapons Proliferation Branch,
Spain's Socialist Party has reinvigorated the traditional Spanish
arms export industry and is aggressively seeking both to acquire new
production technology and to develop export markets.
Secret
GI IIR 83-006
December 1983
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Algeria has taken steps toward diversifying its sources of arms
supplies by buying naval equipment from the United Kingdom and
investigating the purchase of some Western aircraft. Moscow,
however, will continue to be Algeria's principal arms supplier.
Narcotics Colombia: Prospects for Drug Control
Several recent actions suggest a change in Colombian attitudes
toward stopping drug trafficking in that country. A set of indicators
is proposed that may help signal further improvements or deteriora-
tion in Colombian attitudes.
Nuclear Proliferation China's Entry Into the IAEA
China's entry into the IAEA has been welcomed by most members,
although some are concerned that Beijing may continue to sell some
nuclear materials to potential proliferators without requiring inter-
national safeguards.
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Secret
Summary
Communist Activities
Soviet Exploitation of the
West German Peace Movement
Moscow has exploited the West German peace movement's opposition to
deployment of US Pershing II and cruise missiles by pressing the West
German and West Berlin Communist parties, with financial assistance
from the East German party, into working with the movement. The parties
have had some success because other organizations in the movement
generally have not been as disciplined or well financed.
The rise of the West German peace movement has
presented political and propaganda opportunities for
Moscow to exploit in its opposition to installation of
new US missiles in Europe. The Soviets perceive the
movement as the best in Europe since the end of
World War II,
They targeted the movement at least three
years ago and have used the West German and West
Berlin Communist parties to influence development
and evolution of the movement. These parties have
committed their resources to collaboration with the
peace movement and have proved quite flexible in
avoiding a split with the movement, following the
policy guidance and tactical advice of the Communist
Party of the Soviet Union (CPSU) and the East
German party.
Although the West German and West Berlin parties
cannot claim primary responsibility for the popular
appeal and anti-INF thrust of the protest campaign,
they have made significant inroads in the peace
movement because as disciplined, well-financed
organizations they have been disproportionately rep-
resented in an otherwise loosely organized movement
composed of Green supporters, church groups, young
socialists, splinter groups, prominent personalities,
and others. The absence until last summer of repre-
sentatives from the Social Democrats and the West
German Trade Union Federation, both of which could
provide serious competition to the Communist parties,
made the parties' efforts easier.
he Communist parties easily
took the lead in the Easter marches, for example,
since the potential opposition in the movement was
uncoordinated. The Communist parties are worried,
however, since the Social Democrats and trade unions
have begun to take a more active interest, that they
might be eased out of influential positions in the peace
movement. More intense controversy about the direc-
tion of the movement can be expected in 1984.F_
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CPSU Policy Guidance
The CPSU Central Committee's International De-
partment, which is responsible for relations with
nonruling Communist parties, has established guide-
lines for the participation of Western Communist
parties in the peace movement,
The current guidelines require the
? Give priority to influencing the peace movement.
? Differentiate between US motives for deploying new
missiles in Europe and the interest of European
NATO countries, pointing out alleged contradic-
tions between them.
? Cooperate with the non-Communist left represented
by several groups within the peace movement and
seek out joint peace actions with individual Social
Democrats and trade unionists. Judging by the
actions of the West German and West Berlin
parties, there is also a guideline for avoiding cooper-
ation, if possible, with the autonomous groups and
other violence-prone elements of the peace move-
ment. In October 1983, Moscow instructed the
parties to use their influence to keep the peace
movement alive after US missile deployments have
begun, One
way to do this, Moscow suggested, is to broaden the
focus of the peace movement to embrace the theme
that US military policy is to blame for Europe's
economic ills.
Tactically, Moscow has advised the parties to asso-
ciate themselves with those aspects of the peace
movement supporting elimination of US missiles and
simply ignore all other aspects critical of the USSR.
However, this approach must be used carefully.
Vadim Zagladin, First Deputy
Chief, International Depart-
ment, Central Committee,
CPSU. F__1
These guidelines are delivered to the parties usually in
face-to-face meetings between party executives and
officials of the International Department. Vadim Y.
Zagladin, first deputy chief of the International De-
partment, is an authoritative spokesman for the Soviet
Communist Party on this subject. D. N. Mochalin or
Viktor Rykin are Zagladin's emissaries to West Ber-
lin and to the Duesseldorf headquarters of the West
German Communist Party,
East German Guidelines
Moscow is prime adviser, but, we believe, the East
Germans provide most of the close, detailed guidance
to the two parties. For example, in early 1982, the
East German party specified which upcoming events
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Secret
Herbert Haeber, Head, West-
ern Affairs Department, East
German Communist Party Cen-
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sponsored by the peace movement had the highest
political importance: the Easter peace marches as well
as antiwar demonstrations on VE day and on Presi-
dent Reagan's visit to West Germany and West
Berlin,
the East Germans also have
instructed the West Berlin party newspaper to give
more coverage to Soviet disarmament initiatives and
to the US peace movement.
Peace Activities of the West German and West Berlin
Communist Parties
To exploit the opportunities offered by the peace
movement, the parties have committed their assets:
ready cadres of workers, financial resources, experi-
ence at handling large-scale demonstrations, and
printing presses. The West German party is small,
stores.
:::::: at 40,000 in 1982, and with an unsuccessful
electoral record. However, the party organization
extends into 300 factory councils, 900 local communi-
ties, and 100 student associations. The party has 200
district offices, 14 publishing houses, and 30 book-
with a membership estimated
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Horst Schmitt, Chairman, Neues Deutschland
West Berlin Communist Party.
The parties have used what they call united action,
alliance politics in working with the peace movement.
This has meant stressing the common interest with
peace groups in opposing US missiles and setting
aside divisive issues, attempting to influence the
direction of the movement, but compromising when
necessary to avoid splitting the movement.
The parties have had an impact on several events
sponsored by the peace movement, according to the
West German Federal Office for the Protection of the
Constitution. The Krefeld Appeal in 1980, sponsored
jointly by prominent Greens, ecologists, and the West
German Communist Party, was a petition to the Bonn
government to revoke the 1979 NATO agreement for
deploying new US missiles.
stration in Bonn, assisting in the logistics and pur-
chasing tickets for people in other cities to go to Bonn.
The West German party overplayed its hand in the
Bonn demonstration of June 1982 against President
Reagan's visit: it drew public criticism for a dispro-
portionate, highly visible role in the demonstration.
Peace activists such as Nobel Prize-winning author
Heinrich Boell denounced the "excessive influence" of
the Communist Party in the October 1983 demonstra-
tions.
the quality of anti-Americanism was good in West
Outlook
The Soviets have a long-term interest in the West
German peace movement. V. M. Falin, formerly with
the CPSU Central Committee and now an Izvestiya
commentator, told the West Berlin party in 1981 that
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Secret
The Soviets will face trouble trying to use the German
Communist parties to manipulate the peace move-
ment in West Germany. The recent leftward swing in
the Social Democratic Party, and its more active
identification with the peace movement, suggest that
it will play a greater organizational role, probably at
the expense of the Communists.
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Secret
Summary
The World Sugar Market: Opportunities
for Soviet Influence
Thailand, India, Argentina, and Peru.
Moscow's continuing demand for sugar, coupled with record worldwide
stocks, provides the USSR the opportunity to use sugar purchases for
maximum political gain. Such purchases allow Moscow to gain influence
among certain LDC suppliers while satisfying domestic sugar requirements
at a relatively low cost. Although Soviet moves to apply the sugar lever are
likely to improve only marginally Soviet influence overall in the Third
World, in individual cases the political gains could be great. Soviet officials
know that the prospect of Soviet purchases looms large to sellers in a
glutted market, particularly for financially strapped LDCs. Moscow's
targets of opportunity may include Nicaragua, Mozambique, Guyana,
Recent trends in Soviet sugar production and con-
sumption have made the USSR an increasingly im-
portant player in the world sugar market. Steady
growth in consumption for more than two decades
reflects the importance of sugar in improving the
palatability of the Soviet diet. Soviet sugar production
in contrast has shown little growth and has fallen
back in some years.
Moscow has responded to low domestic sugar produc-
tion by boosting imports. In 1982 Soviet purchases
reached a record 7.4 million tons, 40 percent higher
than in 1981 and about double the 1976 level. Havana
continues to be the USSR's chief supplier, although
its share of the Soviet import market has fallen from
more than 90 percent in 1976 to less than 60 percent
in 1982. During this period Soviet purchases of sugar
from all other countries increased from an annual
average of more than 450,000 tons in 1975-79 to 2.3
million tons in 1980-82. Purchases from the European
Community and six countries-Thailand, Brazil; the
Philippines, the Dominican Republic, Australia, and
Argentina-accounted for about 95 percent of Soviet
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ing behavior suggests that the USSR has remained a
major sugar importer in 1983.
We estimate that Soviet sugar production will contin-
ue to fall short of needs through the 1980s, resulting
in a continuing demand for imports from both Cuba
and the international market. Even under a scenario
of high domestic production, the Soviets would need
to import large amounts of sugar in the late 1980s.
Non-Cuban imports are likely to range from perhaps
1 million tons to 2 million tons or more annually. F_
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Table 1
USSR: Raw Sugar Imports
Total
3,237
3,760
4,776
3,993
4,080
4,981
5,204
7,363
From Cuba
2,964
3,067
3,652
3,797
3,707
2,647
3,090
4,224
From Free Market
271
529
959
193
315
2,010
2,078
2,954
Of which:
0
0
0
12
0
13
150
127
51
0
0
0
0
0
0
157
Brazil
95
0
24
83
69
466
347
362
Canada
0
0
0
0
0
0
14
22
Colombia
0
0
0
0
0
11
12
36
Dominican Republic
0
0
0
46
0
33
14
194
EC
0
298
249
40
235
856
873
1,263
El Salvador
0
0
0
0
0
26
0
0
Gabon
0
0
0
0
0
19
5
0
Guatemala
0
0
0
12
0
15
0
64
Guyana
20
0
0
0
0
0
0
0
Mozambique
0
0
0
0
0
0
0
25
0
0
0
0
0
13
0
5
Peru
105
0
0
0
0
24
0
0
Philippines
0
224
635
0
0
333
281
216
Swaziland
0
0
0
0
0
10
0
0
Thailand
0
0
0
0
11
140
266
429
United States
0
0
0
0
0
0
40
0
Zimbabwe
0
0
0
0
0
15
0
0
The continuing Soviet requirement for imports of
sugar coincides nicely with a world sugar market that
suffers from chronic oversupply. With the exception
of a handful of years when major crop failures
occurred, world sugar production has consistently
exceeded consumption since World War H. This
imbalance has been especially severe during the last
two years and has led to record world sugar stocks.
These surpluses enable Moscow to cultivate political
good will and influence among certain LDC suppliers
while satisfying domestic sugar requirements at a
relatively low cost.
The Sugar Lever-A Political Perspective
Moscow's attempts to play its sugar card will depend
on the perceived political benefits, Soviet supply and
demand for sugar, relationships with existing suppli-
ers-particularly Cuba-and Soviet ability to pay for
sugar imports either in convertible currency or in
goods acceptable to sugar exporters.
Moscow's ability to move among suppliers in the
sugar market could create political gains from neces-
sary commercial transactions. The fact that it can
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Secret
Although the majority of Soviet sugar deals are
transacted in normal commercial fashion, reflecting
primarily supply and demand factors of the sugar
market, some seem to exhibit astute political timing
or a convergence of political and economic interests.
Over the past eight years, Soviet sugar purchases
from Peru, for example, occurred in only two years-
1975 and 1980. In both of those years, there was a
change in government. Although there is no evidence
as to Moscow's motivation, it seems unlikely that the
timing of the sugar purchases was coincidental with
these major political events. They may have been
linked with earlier Soviet arms sales.
Zimbabwe is another case in point. The only recent
Soviet sugar purchase occurred in 1980, the f irst year
of independence. Moscow, which had backed the
losing faction in the civil war, apparently felt the need
to make a goodwill gesture toward the Mugabe
regime by trying to improve trade relations. Certain-
ly, the small amount of sugar it purchased-15,000
tons-could have been acquired more conveniently
from another supplier, given the deterioration in
Zimbabwe's transport system caused by the war.
simultaneously buy sugar and good will apparently
has not escaped Moscow's attention (see box). Never-
theless, Soviet exercise of economic leverage for politi-
cal purposes has always been cautious-restrained by
a realistic assessment of the limits of such leverage
and by the desire not to risk assets already in hand.
The extent to which the USSR plans to use sugar as a
policy lever is not known. However, for the LDCs the
prospect of large Soviet sugar purchases takes on
increased importance in a glutted market. Even rela-
tively small Soviet purchases are helpful at the mar-
gin for financially strapped LDCs.
In the case of new leftist-leaning regimes, such as
Nicaragua, for example, the ability of the United
States to hurt the Nicaraguan economy by reducing
its sugar import quota from 53,000 tons to only 5,400
tons has been defused by a standing offer from
Moscow to purchase any unsold sugar resulting from
Moscow's gesture apparently had little impact, how-
ever, as Mugabe did not establish diplomatic rela-
tions with the USSR until March 1982 and political
ties remain generally cool.
As for other examples, the only Soviet sugar pur-
chase from Guyana occurred in 1975, the same year
that Moscow's first resident diplomatic mission ar-
rived in that country. The Soviets first purchased
Nicaraguan sugar in 1980, just after the current
leftist regime came to power.
Finally, Moscow's opportunism may also be reflected
in the Soviet response to the imposition of smaller
sugar import quotas by the United States in May
1982. A country-by-country comparison of decreases
in US sugar imports during 1981/82 with increases in
Soviet imports by country in the same period shows a
degree of correlation between the two. While the
timing of the Soviet response may be purely coinci-
dental and related more to Soviet needs for sugar, in
some cases particularly Thailand and Nicaragua-
the virtually identical offsets suggest that politics
may have played a role.
To
the extent that leftist-leaning countries believe a trade
weapon is being used by the United States or its allies,
Moscow can play on that fear. In most. cases the
Soviets can provide, if they desire, a guaranteed
market, underwriting a portion of a country's econo-
my as they have in Mozambique.
In dealing with sugar-surplus countries that also have
serious economic problems, Moscow, by providing a
market for their sugar, could buy some political good
will. Such transactions would be unlikely to change
the basic position of a regime, but they could soften it.
In Guyana, a country where economic prospects are
deteriorating rapidly, a Soviet offer to take a large
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Table 2
Comparison of US and Soviet Sugar
Imports, Selected Countries
Changes in
US Purchases a
Changes in
Soviet Purchases b
1981-82
1981-82
Brazil
-564
+15
Australia
-567
+157
Dominican Republic
-185
+180
Argentina
-284
-23
Philippines
+147
-65
Thailand
-190
+163
Colombia
-128
+24
Guatemala
-58
+64
Swaziland
-107
Panama
-25
Guyana
-35
Malawi
-48
Nicaragua
-4
Costa Rica
-15
-10
-7
+47
Peru
+115
South Africa
+64
Total
-2,008
a Maxim. in imports allowed by 1982 quota compared with actual
1981 imports. Plus sign denotes an increase.
b 1982 imports compared with 1981 imports. Minus sign denotes a
decrease.
quantity of sugar could help improve a relationship
that has been lukewarm. Moscow would be likely to
play up the fact that the United States reduced its
Guyanese sugar purchases by some 35,000 tons when
it imposed a sugar import quota system in May 1982.
The quota system reduced total US imports from an
average of 4 million tons to 2.8 million tons.
Moscow could also use sugar purchases to influence
countries squarely in the US camp. In the case of
Thailand, the US import quota system has come at a
time when Bangkok has undertaken a successful
export diversification program. Thailand's sugar ex-
ports nearly doubled in 1982, making sugar the third-
leading export earner. While the United States re-
duced purchases from Thailand by nearly 200,000
tons, the USSR boosted its Thai sugar purchases by
more than 160,000 tons. A mid-1982 trade agreement
between Bangkok and Moscow, which calls for an
expansion of bilateral trade and the setting of trade
targets, could provide the basis for a long-term Soviet
sugar purchase.
Other targets of opportunity may include such non-
aligned states as India, Argentina, and Peru. While
the sugar lever is not powerful enough by itself to pry
any country off the fence, Moscow could, neverthe-
less, use sugar purchases together with other, incen-
tives to nudge a regime in its direction. Moscow may
find India a particularly attractive target. With re-
cord production the last two crop years and a small
export quota, India finds itself with rapidly mounting
supplies of unsold sugar. New Delhi has said it plans
to petition the International Sugar Organization
(ISO) to raise its export quota by 50 percent, to 1
million tons, as well as to increase its own buffer stock
from 500,000 tons to 1.5 million. Unless India's
domestic production policies are changed, however,
these actions will provide only temporary relief. An
offer by Moscow to take a large quantity of sugar,
perhaps bartering oil in return, might prove difficult
to refuse.
Moscow's strategy in the international sugar market
may indeed be affected by whether it can arrange
barter deals rather than pay for sugar imports with
hard currency.' For example, the Soviets may attempt
to barter various types of machinery which-though
generally inferior by world standards-may be attrac-
tive to sugar-producing LDCs already facing large
international debts and a glutted market for their
primary export. The USSR's own hard currency
position may be much tighter by the late 1980s,
forcing Moscow to stress barter agreements. Such
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Selected Countries': Share of Sugar
Exports to the USSR, 1982
Cuba
Argentina
GC
Canada
Dom. Republic
Thailand
Philippines
Brazil
Columbia
Australia
Nicaragua
L_ - ____I_ - j
0 25 50 75 100
agreements would be consistent with current Soviet
efforts to expand exports, especially to those countries
such as India, Brazil, and Argentina where it is
incurring large trade deficits.
How the USSR will play its hand with the LDCs is
uncertain. Moscow does not hold all the cards. In the
longer term it is somewhat constrained by a shortage
of hard currency and a lack of salable export goods.
Moreover, its course of action will continue to be
influenced by the size of future Cuban sugar crops as
well as its own. Nevertheless, the recent shift in Soviet
sugar import needs, while creating additional foreign
exchange pressures, presents Moscow with an instru-
ment of influence that it certainly will not ignore.
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Secret
Summary
Aeroflot's Growing Worldwide Network
use of Aeroflot personnel resident in foreign countries for espionage.
Aeroflot is an important element in the Soviet Union's contacts with the
rest of the world. In spite of worldwide concern over the recent Korean Air
Lines incident, we believe the USSR will quickly resume its long-term
campaign to expand Aeroflot's international network. The number of
countries Aeroflot services has more than doubled in the last 15 years. This
expansion has occurred primarily for political reasons because most of
Aeroflot's international routes-especially Third World routes-operate at
a hard currency loss. The Soviets, however, have been kept out of some key
regions of concern to Moscow. In particular, they have been unable to
conclude agreements with most of the Latin American countries. While
seeking access to these and other countries, they will be working hard to
expand the number and frequency of Aeroflot flights to countries they
already service. In addition to worldwide commercial operations, Aeroflot
has been involved in intelligence and military-related activities over the
years, including in-flight intelligence collection, troop-lift support, and the
Aeroflot Today
For the Soviets, Aeroflot is an important political and
economic link with the rest of the world. It is the
world's largest airline, accounting for a fourth of all
passenger kilometers flown worldwide. Published
route data show it links more than 3,600 cities and
towns within the USSR and operates international
service to 94 foreign countries (including 82 non-
Communist countries). According to International
Civil Aviation Organization (ICAO) figures, the route
network, which extends more than 1 million kilome-
ters worldwide, carried 108 million passengers in
1982-mostly Russians and East Europeans. Aero-
flot's vast fleet of aircraft and most of its skilled
personnel focus almost exclusively on domestic opera-
tions, which account for some 97 percent of all
passengers carried.
Aeroflot has developed a broad-but thinly served-
international network concentrated primarily in Eu-
rope. The airline also provides regionally comprehen-
sive service to Africa, the Middle East, and Southeast
Asia. Service to Latin America is sparse. Although
domestic flights usually operate at or near capacity,
US Embassy reports indicate that the international
services generally fly with load factors of 50 to 60
percent-comparable with those of Western airlines.
In past years the quality of the Soviets' international
service has been severely criticized, and in the last
decade the Soviets have moved to improve opera-
tions-with new equipment, more skilled pilots, and
the use of Western catering services-and to upgrade
safety to Western standards.
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Aeroflot's Fleet and International Operations
During the past two decades, the Soviet leadership
has emphasized the modernization of Aeroflot's fleet.
We estimate the fleet now has more than 1,800 jets
with a mix of capabilities for short-range to long-haul
operations. The newest additions include the USSR's
first wide body, the 350-passenger IL-86, and the
100-passenger trijet YAK-42-the first Soviet air-
craft built to conform to Western safety standards.
Aeroflot also has some 1,700 turboprops, which usual-
ly are pressed into service only during peak holiday
periods.
Aeroflot was established in 1932 and began to develop
its international route network in the early 1950s. By
the late 1960s Aeroflot was serving Eastern Europe;
most West European capitals; and selected countries
in the Middle East, Africa, and South Asia. Inaugu-
ration in 1968 of transatlantic service to the United
States and Canada was the cornerstone for another
decade of rapid Aeroflot expansion: between 1968 and
1977 the number of countries served increased from
44 to 77. Aeroflot's network has continued at a strong
pace over the past five years, with service extended to
an additional 17 countries. The most important new
routes are in the Central American/Caribbean area,
where flights were inaugurated to Mexico, Nicara-
gua, and Jamaica. Elsewhere, the Soviets added new
services to such varied locations as Djibouti, Ho Chi
Minh City, and Kinshasa.
Despite continuing efforts, Aeroflot has been unable
to move into several key regions-most notably Latin
America and Oceania. Almost all the countries that
have denied access to the Soviets have done so
because of security concerns. In some cases govern-
ment spokesmen have publicly voiced fears that Aero-
flot would be used for intelligence and military
functions:
? When Brazil rebuffed Soviet efforts to open a
Moscow-Rio de Janeiro route in 1977,
the refusal was security.
the overriding reason for
the
Philippines has repeatedly rejected Soviet offers to
conclude an air agreement because of the ties
between Aeroflot and Soviet intelligence.
Colombia turned down a Soviet
offer of Aeroflot service because of the potential
security threat it posed. The Korean Air Lines
(KAL) incident in September 1983 also may have
influenced this decision.
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Aeroflot's Competitiveness
Because the Soviets view Aeroflot principally as a
political bridge between Moscow and the rest of the
world, they have been willing to operate the airline's
international service as a vast but only marginally
profitable route network. Although our data are
sketchy, we believe overall net hard currency earnings
are small at best. The most profitable international
routes are almost certainly those to Western Europe,
which account for about half of Aeroflot's weekly
international flights to non-Communist countries. The
hard currency receipts from Aeroflot's European op-
erations may to some degree offset losses incurred on
other international routes.
Aeroflot service to Third World countries probably
operates at a hard currency loss. We believe that
travel between these countries and the Soviet Union is
minimal. The bulk of the traffic most likely consists of
Soviet official delegations, technical personnel and
military advisers, and Third World passengers travel-
ing to the USSR at Moscow's expense. Some individ-
ual routes-particularly those to South Asia-may
bring in a little hard currency. Routes to African
countries south of the Sahara are probably sizable
financial losers for the Soviet Union, given today's
airline operating costs and what we know of the load
factors on these routes.
Bilateral Civil Aviation Agreements
Aeroflot's international route network is based on
published bilateral civil aviation agreements with
some 100 countries (table).' Most of these agreements
provide overflight rights, landing and service privi-
leges, and, where appropriate, reciprocal rights for the
country's national carrier in the Soviet. Union. Under
normal operating conditions both parties are usually
able to exercise the privileges contained in the agree-
ments. Occasionally, participants have placed restric-
tions on some agreed privileges when the Soviets have
attempted to carry out politically sensitive, risky, and
potentially high-visibility operations. For example,
Turkey, Iran, and Pakistan have been reluctant to
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Eastern Europe
Syria
Ghana
Bulgaria
Turkey
Guinea
Czechoslovakia
Yemen, North
Guinea-Bissau
Germany, East
Yemen, South
Kenya
Germany, West
East and South Asia
Liberia
Hungary
Afghanistan
Libya
Poland
Bangladesh
Malagasy Republic
Romania
Burma
Mali
Yugoslavia
China
Mauritania
Other European
India
Mauritius
Austria
Indonesia a
Morocco
France
Malaysia
Senegal
Greece
Mongolia
Seychelles
Ireland
North Korea
Sierra Leone
Italy
Pakistan
Somalia
Luxembourg
Singapore
Sudan
Spain
Algeria
Zaire
Sweden
Angola
Zambia
Switzerland
Benin
Western Hemisphere
United Kingdom
Burundi
Argentina
Middle East
Cameroon
Canada
Cyprus
Cape Verde Islands
Chile a
Egypt
Central African Republic
Cuba
Iran
Chad
Jamaica
Congo
Mexico
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Secret
grant overflight clearances to Soviet transports during
times of crisis even though Aeroflot designations were
used on military aircraft involved in the airlift activi-
ties.
Historically, when the Soviets have encountered an
outright refusal of overflight clearances, they have
accepted it and sought alternative routes. Moscow's
general respect for the denial of overflight clearances
probably stems from sensitivity about its own air-
space-as reflected in the KAL episode-as well as a
desire not to impede the expansion of legitimate
Intelligence Uses of Aeroflot
Aeroflot also occasionally serves Soviet political and
strategic objectives by:
? Providing cover and logistic support for clandestine
many of the Aeroflot personnel outside
Soviet borders, including resident ground mainte-
nance and flight personnel, have either KGB or
GRU connections.
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Aeroflot operations.
Military Uses of Aeroflot
Although Aeroflot is a commercial airline, it is gener-
ally known to have close and continuing links to the
military. Aeroflot aircraft, personnel, and facilities
around the world have the potential for supporting
limited military airlift operations, as well as selected
deliveries of military spare parts and medical supplies.
Aeroflot's large inventory gives the Soviets a capabili-
ty to augment military transport aviation (VTA);
passenger; and, to a lesser extent, cargo-lift capabili-
ties f of domestic and internatio
sions.
Aeroflot AN-12 medium-cargo transports are sup-
porting Angolan forces. We believe that, in the more
routine operations, scheduled Aeroflot flights may
have delivered small amounts of military-associated
spare parts and other supplies to Nicaragua.
The routine use of Aeroflot markings on military
aircraft has led to considerable press and public
confusion over the Aeroflot role in airlift operations.
In several past airlifts, the Soviets have deliberately
misrepresented Soviet VTA transports as civil air
transports operating as unscheduled Aeroflot flights
by slightly modifying the trip numbers. They invari-
ably paint civil markings on military aircraft used in
international operations.' For example, all AN-22s
and IL-76s assigned to operational VTA units bear
complete Aeroflot markings and paint schemes. Such
practices have led uninformed observers to the errone-
ous conclusion that Aeroflot's cargo capabilities are
much greater than they actually are.
? Performing intelligence gathering, and possibly
communications monitoring and aerial surveying.
Although it is impossible to detail the full extent of
such activities, a few examples serve to illustrate the
range of intelligence collection and military-support
activities associated with the Soviet airline:
? In the last three years Aeroflot representatives have
been publicly expelled from France, Spain, Italy,
and Indonesia for alleged espionage. In France
when the assistant director of Aeroflot, Yuriy Solo-
monov, was arrested for espionage in June 1982, the
press reported he had classified COCOM docu-
ments concerning international lists of embargoed
materials in his possession. The Spanish Govern-
ment reported in February 1980 that the director of
the Aeroflot office in Madrid was expelled for
? Aeroflot may occasionally transport undercover mil-
itary personnel before the outbreak of hostilities.
According to press reports, Aeroflot ferried Soviet
commandos into Kabul before the invasion of Af-
ghanistan in 1979. The commandos reportedly
seized the airport before the arrival of airborne
forces.
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? Aeroflot aircraft have occasionally ignored assigned
flight paths and altitude clearances in the New
York-New England area where several sensitive
installations are located. In November 1981, for
example, a Soviet flight between Washington and
Moscow strayed from its prescribed flight path over
the United States on both inbound and outbound
flights, flying over several Air Force bases and the
Groton shipbuilding facility in New England, possi-
bly to collect photographic or signals intelligence.
Sanctions Stemming From the KAL Incident
Measures taken against Aeroflot in response to the
KAL shootdown were the first major, collective at-
tempt in history to constrain agreed flight and over-
flight privileges among countries not officially at war.
The boycott actions resulted in the cancellation of
more than a fourth of Aeroflot's 223 weekly interna-
tional flights for the two-week period. These actions
also cut about half of the 78 scheduled commercial
flights to the USSR by non-Communist carriers.
The impact of the sanctions, however, was muted by
Moscow's ability to develop alternative routes to its
key transport nodes that avoided flying over nations
directly involved in the boycott. This was possible
because none of Aeroflot's major international transit
hubs-Shannon, Cairo, Bombay, Karachi, Havana,
and Tripoli-was cut, although Ireland limited the
airline to transit/refueling privileges only. We esti-
mate the two-week shutdown probably only cost
Aeroflot about $2-3 million in revenues.
Aeroflot's Future Directions
Moscow will almost certainly continue to push expan-
sion of Aeroflot's route network to complete its world
airlinks. Latin America will remain the focal point of
most of these efforts because of the present paucity of
Aeroflot service and because the Soviets have political
and economic reasons for strengthening their ties to
the region. Moscow is most interested in obtaining a
bilateral air agreement with Brazil, the key economic
and commercial force in South America. Although
rebuffed six years ago, the Soviets expressed interest
this year in reopening negotiations for an airlink
between Moscow and Rio de Janeiro. Elsewhere on
the continent, they have sought agreements with
Venezuela, Panama, Bolivia, and Ecuador, among
others. Although Panama and Colombia have rejected
such agreements within the past year, the Soviets will
probably attempt a return to the bargaining table in
Soviet priorities for the remainder of the world are not
as clear to us. The most likely targets for Aeroflot
service will be countries in southern Africa, island
nations in the Indian Ocean, and countries in the
southwest Pacific. In southern Africa, Zimbabwe
probably holds the most interest for the Soviets, and
proposals for Aeroflot basing could surface in the
course of trade talks. In the Indian Ocean, the
Maldives is the most likely prospect. The Soviets have
long pursued agreements with Australia and New
Zealand and will surely renew their efforts in the near
future.
In addition to lining up new countries, the Soviets
may want to add more frequent service and stops in
countries they already serve, like Nicaragua, where
the need for additional service may increase. The
most likely forms of expansion would include direct
International service from additional Soviet cities,
service to more cities in Western Europe, and im-
proved service to some Third World countries like
Libya, Nigeria, and Morocco. In the last case, such a
move would run counter to current patterns of inter-
national service to most of the Third World, where
capital cities are being developed as local transport
hubs. Overall, the Soviets will demonstrate a flexible
approach, seizing opportunities for further expansion
of Aeroflot as they arise.
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Summary
International Gray Arms Market
East European Involvement in the
market.
We believe that Eastern Europe is a major source of much of the ordnance
available on the international gray arms market. East European state-
controlled, foreign trade organizations sell large quantities of weapons and
munitions to private arms dealers and brokers. Because of the absence of
effective end-user controls, these weapons are frequently acquired by
belligerent or embargoed nations and terrorist, insurgent, or criminal
groups throughout the Third World and Europe. The sale of weapons-
mostly conventional small arms-to gray market brokers enables East
European governments to earn badly needed hard currency while providing
an element of deniability should East European weapons be discovered in
the possession of politically embarrassing recipients. We believe that East
European gray market activity may well increase and that many East
European countries may begin selling more advanced ordnance to gray
market customers to maintain or expand their share of this lucrative
Scope and Magnitude
In contrast to government-to-government and licensed
commercial arms sales, the gray arms market encom-
passes the transfer of weapons and munitions by
legitimate arms suppliers through unofficial-and
sometimes illegal-intermediaries. While the inter-
mediary is often a private individual, corporation, or
group, state-controlled enterprises often facilitate the
movement of weapons onto the international gray
arms market.
We believe that East European nations are major
suppliers of gray market weapons.' Our estimate is
that East European gray arms sales amount to some
$100 million annually. However, because of the secre-
tive nature of the market the actual value may be
several times greater. Although the amount of gray
market arms sales is small compared with the annual
value of East European government-to-government
arms deliveries-which averaged $2 billion annually
over the last five years-gray market sales pose a
danger far greater than their actual monetary value.
In contrast to most official arms transactions-where
at least nominal control is maintained over the final
disposition of the weapons involved-the ultimate
recipient of a gray market weapon is seldom known in
advance. This lack of accountability is further com-
pounded by the longevity of modern small arms,
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Table 1
East European State-Owned Trade
Organizations Engaged in Gray Market
Arms Transactions
National Aeronautical Center (CNA)
Dimex
East Germany Engineering-Technical Foreign Trade
Corporation (ITA)
which are easy to maintain or refurbish. These factors
allow gray market weapons to be bought and sold
many times and preclude tracing them through com-
plete purchase-to-delivery cycles.
Trading Mechanisms
To ensure government control and to provide an
element of cover, East European gray market arms
transactions are conducted by state-owned foreign
trade organizations, which also engage in govern-
ment-to-government military sales or commercial
arms deals with legitimate foreign clients (table 1).
Nominally subordinate to their respective ministries
of foreign trade, most of these organizations have ties
to Bloc military and security services. Given the
special role these services play in implementing the
policies of the East European Communist parties, we
believe that these state-controlled trading firms could
not engage in gray market arms sales without the
approval of the political leadership.
There is little doubt that Moscow is well aware of
East European involvement in the international gray
arms market. We believe the USSR has traditionally
imposed few restrictions on these transactions provid-
ed the ordnance supplied is limited to small arms,
crew-served infantry weapons, and munitions. Recent
press allegations of Bulgarian-and, by implication,
Soviet-involvement in illicit arms transfers may have
caused Moscow to increase its control over East
European gray market activities, however.
Gray Market Weapons: Small Arms
The majority of East European gray market arms
transactions involve conventional small arms and mu-
nitions rather than the more sophisticated weapons
systems sold on a government-to-government basis.
sales include pistols, assault rifles, and machineguns
of proven Soviet design. They also include weapons
produced in Eastern Europe that fire Western caliber
ammunition, which is readily available throughout
Austrian officials, Czechoslovakia also sells its own
version of the Browning pistol and other Western
weapons to gray market arms dealers.
Some East European nations apparently also manu-
facture and sell unmarked or counterfeit firearms.
Bulgaria and Czechoslovakia
pro uce quantities o unmarked weapons that are sold
to terrorists throughout the Middle East. Analysis of
captured terrorist weapons suggests that Hungary
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Table 2
Typical East European Small Arms
Available on Gray Arms Market
Duo
6.35 mm a
Czechoslovakia
M-52
7.62 mm
Czechoslovakia
CZ-70
7.65 mm a
Czechoslovakia
AP-66
7.65 mm a
Hungary
Walam
7.65-mm and 9-mm
Short a
Hungary
CZ-75
9-mm Parabellum a
Czechoslovakia
P-64
9-mm Makarov
Poland
Submachineguns
Skorpian 7.65 mm,a 9-mm Short,aCzechoslovakia
9-mm Parabellum,a and
9-mm Makarov
WZ-63 9-mm Makarov Poland
Assault rifles
Poland, Romania,
East Germany, and
Hungary
also sells counterfeit or unmarked copies of popular
weapons on the international gray arms market
(photos).
Besides selling their own ordnance, East European
nations also purchase large quantities of Western
small arms on the gray arms market. Since these
weapons are incompatible with those in use by East
European military and security services, they are
almost certainly intended for resale to gray market
clients with access to Western ammunition:
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Although stamped "Germany,"
both of these weapons were ac-
tually manufactured in Hunga-
ry and bear Hungarian proof-
marks and serial numbers.
? Defense attache and State Department reporting
indicate that since 1974 Bulgaria has purchased at
least 70,000 small arms from Western manufactur-
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Gray Market Weapons: Advanced Equipment
In addition to small arms, East European nations also
sell more sophisticated ordnance on the gray arms
East European nations also use gray market interme-
diaries to purchase advanced Western military equip-
ment that they would otherwise be unable to obtain.
Weapons acquired in this manner can either be
retained for familiarization or reverse engineering or
Motivations
Economic Incentives. We believe that East European
nations sell arms on the international gray arms
market for many of the same economic reasons
underlying their direct government-to-government
arms transactions. Faced with rising trade deficits,
these countries have increasingly turned to arms
advantages over official transactions.
East European nations almost invariably stipulate
payment in cash-usually in US dollars or West
German marks. This results in an immediate infusion
of convertible currency, precludes complicated, long-
term financial arrangements, and makes tracing such
transactions more difficult. Gray arms market deal-
ings also permit Bloc nations to profitably dispose of
obsolete and surplus weapons, which would otherwise
have to be stored, reconditioned, or given away as
foreign military aid:
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Political Considerations. The use of gray market
intermediaries allows East European governments to
distance themselves from the ultimate end-users of
their weapons and to maintain an element of deniabi-
lity should Bloc weapons be discovered in the posses-
sion of politically embarrassing recipients. Thus, by
dealing through foreign arms dealers or, in some
cases, other governments, East European nations can
sell weapons to a wide range of customers without
being seen as actively selling guns or supplying non-
socialist countries. For example:
? Bulgaria-acting through private West German
and Austrian arms dealers and a Danish shipping
firm-sold nearly $50 million worth of small arms
and ammunition to South Africa during 1976-80,
according to European press reports published after
two Danish sailors exposed the operation.' A Danish
Foreign Ministry official told a US Embassy officer
in 1983 that the Danish Government has known for
some time that Bloc countries have been involved in
arms shipments to South Africa.
We believe that East European nations also use the
international gray arms market to curry favor with
Moscow by acting as a conduit for the supply of arms
and munitions to pro-Communist governments, insur-
gents, and national liberation movements throughout
2 Such sales are presumably an attempt to earn hard currency while
keeping Angola dependent on Moscow during its disputes with
Various Palestinian groups have also
received large quantities of Bloc arms:
? Photographs of weapons captured in 1982 by Israeli
forces in Lebanon show original factory crates of
Polish rifle-grenades consigned to the Popular Front
for the Liberation of Palestine/General Command
(photos).
Although we cannot confirm Italian press allegations
that East European governments supply arms to
European terrorists in order to contribute to Western
political instability, we believe that lax or nonexistent
end-user controls have allowed Bloc weapons pur-
chased by private dealers, radical Arab states, and
Palestinian organizations to be sold or traded to most
major European and Middle Eastern terrorist groups.
East European governments may not know the specif-
ics of such arms transfers; however, we doubt if they
have ever required-or even requested-that their
clients cease such activities. A penitent Italian Red
Brigade terrorist stated, for example, that the
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Polish rifle-grenades captured
in Lebanon in 1982. Address on
crate indicates that these weap-
ons were intended for use by the
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Czechoslovak Semtex-H explosive and Bulgarian PG-7 antitank
grenades captured from Italian Red Brigade terrorists in 1982.
Czechoslovak submachinegun used to assassinate for-
mer Italian Prime Minister Aldo Moro in 1978 had
been given to the Brigades by radical Palestinians.
Palestinian terrorists provid-
ed the Red Brigades with explosives, hand grenades,
and submachineguns-some of which were of Bloc
origin (photos). Three-fourths of these weapons were
reportedly to be retained by the Italian terrorists,
while the remainder was to be stored in Italy for
future Palestinian use.' Press reports indicate that
Polish weapons were used in a number of terrorist
attacks on Israeli and Jewish targets in Europe during
1982. It is possible that some of these attacks may
have been a form of "payment in kind" by West
European terrorist groups for arms supplied in the
past by Palestinian terrorists.
Besides facilitating the sale of arms to customers with
access to Western ammunition, East European acqui-
sition of Western small arms may be an attempt to
ensure that Western weapons turn up in terrorist arms
caches. According to Defense Department reporting,
for example, Argentine 9-mm pistols confiscated from
Turkish terrorists in 1977 were found to have been
originally purchased by Kintex of Bulgaria earlier
that same year. Similarly, Italy suspended arms ex-
ports to Bulgaria in 1978 after Italian 7.65-mm pistols
sold to Kintex were discovered in the possession of
Turkish terrorists. The sale of unmarked or counter-
feit Western arms by Hungary may also be an
attempt by Budapest to distance itself from the
ultimate recipients of these weapons and to conceal its
involvement in the gray arms market.
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Outlook
We believe that Eastern Europe's involvement in the
gray arms market will continue and probably in-
crease-given the growing demand for illicit weapons
throughout the Third World and the large sums of
hard currency to be earned in servicing this market.
Moreover, East European nations may begin selling
more advanced ordnance to gray market clients to
maintain and expand their share of lucrative sales. As
a result, we expect that significant quantities of
silenced weapons, night vision scopes, automatic gre-
nade launchers, and the newest versions of Bloc man-
portable antitank and antiaircraft weapons will soon
become regularly available on the international gray
arms market. Much of this ordnance will be acquired
by nations or groups inimical to the interests of the
United States.
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Secret
Spain: The Socialists and Arms
Summary Spain, traditionally an arms importer, has in recent years moved closer to
self-sufficiency in a range of armaments. Under the Socialist Party
(PSOE), Spain has become an increasingly aggressive exporter of arms to
the Third World. At the same time, Madrid has shown new sophistication
as an arms buyer, and the Socialist government has quickly seized
opportunities to turn military transactions to Spain's commercial or
political benefit. Although specific industrial sectors are likely to gain from
Madrid's astute management of the arms industry and the government
may benefit politically through its arms sales, arms independence-
Madrid's stated policy goal-will prove elusive.
During a parliamentary appearance in February
1983, Spanish Defense Minister Narcis Serra pro-
claimed the new Socialist government's broad aim of
using defense policy to support foreign and economic
policy goals. He further noted the Socialists' specific
intention to assure greater Spanish independence
from foreign weapons suppliers. These two principles
have come to govern Madrid's management of the
domestic arms industry and the process of acquiring
arms from abroad.
The Arms Industry
The arms industry over which the Socialists preside is
closely tied to the military and almost completely
dominated by the government. The Instituto Nacional
de Industria (INI), a state-owned holding company,
accounts for 70 to 80 percent of all defense production
through its control of three subsidiaries: Empresa
Nacional Bazan, (naval construction); Empresa Na-
cional Santa Barbara (tanks, munitions, small arms,
and artillery); and Construcciones Aeronautica., S. A.
(aircraft).
percent of total Spanish exports.
According to attache and embassy reporting, the arms
industry has been a notable bright spot in a weak
Spanish economy. While many manufacturers have
been forced to cut production since 1977, the defense
industry has continued to work around the clock. At a
time when unemployment in Spain is 18 percent, the
defense industry-which is comprised of some 100
firms-employs 65,000 workers, almost 2 percent of
the labor force. Some 60 percent of the product from
this industry is exported, accounting for almost 3
In keeping with the desire to become more self-
sufficient in arms production, Spain has gradually
upgraded the production capacity of its defense indus-
try. Historically, according to the US military atta-
che, the Spanish defense industry has been strongest
in the manufacture of standardized weaponry-small
arms, ammunition, and explosives-for domestic use
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and export to Latin America and the Middle East.
Spain produces a variety of moderately sophisticated
weapons: AMX-30 tanks; Daphne-class submarines;
FFG-7 and FF30 frigates; a family of wheeled fight-
ing vehicles; and transport, training, and combat
Acquiring Foreign Technology
The Spanish historically have not invested heavily in
weapons research and development, relying instead on
imported military technology. As a result, the Spanish
defense industry even now is critically dependent upon
foreign technology, and most moderately sophisticat-
ed Spanish weaponry and equipment is produced
under US or West European license.
In seeking foreign technology, the Socialists have
been quick to turn to their own advantage the
commercial leverage they possess as major arms
purchasers. Throughout 1983, Madrid has stressed
the significance it attaches to provisions for technol-
ogy transfer in negotiating major arms purchases. In
particular, the Socialists wish to ensure that Spanish
outlays for advanced foreign weapons are offset by
contracts which stimulate diversification of Spanish
exports generally, transfer specific technology to the
domestic arms industry, and create additional jobs.
Madrid's interest in coproduction arrangements, joint
ventures, and licensed manufacture of foreign weap-
onry predates the PSOE's accession to power last
year. The Socialist government, however, has pursued
arms purchases with more political sophistication
than its predecessors. For example, during the negoti-
ations for Spain's purchase of the US-built F-18
fighter aircraft last spring, Madrid employed judi-
cious press leaks, discreet diplomatic pressure, and
hard bargaining with contending US and European
aircraft manufacturers. Madrid pressed hard on
prices, commercial offsets, and forgiveness of nonre-
curring research and development costs. By threaten-
ing at the last minute to reconsider the previous
government's decision in favor of the F- 18, the Social-
ists managed to negotiate an agreement favorable for
Spanish industry.
Specific sectors of the Spanish defense industry are
likely to benefit substantially from the Socialist gov-
ernment's continued emphasis on importing foreign
military technology. Madrid hopes, for example, to
improve Spanish production capacity for AMX tanks,
HOT antitank weapons, and Roland antiaircraft mis-
siles through a defense cooperation agreement recent-
ly signed with France. CASA's capabilities in the
aerospace field are slated for improvement through
the terms of the F-18 purchase and possible future
Spanish participation in the development of an Agile
Combat Aircraft (ACA) with British Aerospace, Aeri-
talia, and West Germany's Messerschmitt-Bolkow-
Blohm. Companies of INI's electronics division-
manufacturers of guidance-control systems and other
electronic equipment-already produce much of their
output under foreign license. The largest private-
sector electronics firm in Spain is negotiating with
Hughes Aircraft for the production of two flight
simulators, the first to be built in Spain.
preceding five years (figure 1).
Arms Exports and Sales Practices
As the capacity of the Spanish defense industry has
expanded, Madrid's presence in international markets
as a supplier of arms has grown dramatically. Madrid
sold $1.3 billion worth of military equipment and
services in 1980-82, more than tripling sales of the
The Spanish sales effort has been geared primarily
toward the Third World. The Middle East accounts
for over 70 percent of Spanish arms sales (figure 2).
The sale to Egypt of $500 million worth of weapons
makes Cairo Spain's largest customer. The Latin
American market represents over 20 percent of Span-
ish sales with Mexico being the primary customer.
Patrol boats, amphibious vehicles, and jet trainers
have sold well in the region. Sales to Asia, Africa, and
Europe are small and consist of transport aircraft and
ground forces equipment.
Spanish foreign policy, which is generally favorably
disposed to Third World issues, contributes to Ma-
drid's ability to sell arms. According to attache
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Secret
Average Annual Spanish
Arms Sales
Spanish Arms Sales by Region,
1978-82
Asia and
Europe-1
Sub-Saharan
Africa-4
Latin America-23
reports, Third World customers seeking to preserve
their nonaligned status and avoid dependence on the
major powers, have found Spain an attractive alterna-
tive supplier.
sales efforts to the Middle East have bene-
fited from Madrid's pro-Arab stance on regional
issues.
Political Considerations
Madrid has not usually allowed the politics of poten-
tial customers to interfere with sales. Indeed, Spain is
increasingly directing its sales efforts toward
countries unable to purchase weapons from larger
suppliers because of export restrictions. According to
attache reports, for example, Madrid is marketing the
AMX-30 tank and BO-105 helicopter-produced,
respectively, under French and West German li-
cense-to Chile and other countries embargoed by
Paris and Bonn. In those cases in which the Socialist
government thinks arms sales could be politically
awkward, it has used "gray arms" channels or ignored
US licensing restrictions.
Political concerns weigh more heavily in Madrid's
arms purchases. Embassy, attache, and press
reporting indicates that the Socialist government has
consistently sought to advance Spanish foreign policy
objectives through its selection of weaponry for the
armed forces. For example, Madrid succeeded in
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DEFEX: Spain's Arms Sales Organization
DEFEX is the official Spanish arms sales organiza-
tion. Established in 1972, DEFEX promotes the
products of the major Spanish arms manufacturers
and markets their products through representative
offices in the Arab world, in South America, and in
some African and Asian nations. The firm's governing
board consists of representatives from the major
arms-manufacturing companies as well as from the
ministries of defense, foreign affairs, industry, and
commerce. The president of DEFEX is appointed by
the Minister of Defense.
The DEFEX structure gives Madrid significant
commercial and political advantages in arms transac-
tions. The private-sector DEFEX companies, accord-
ing to the defense attache, acquire new markets with
little or no promotional expense, while competition
based on price is eliminated. The INI-owned firms
gain publicity, sales promotion, and market represen-
tation without the expense of hiring their own staff to
perform those functions. The government benefits
through heightened visibility as an arms supplier,
greater market penetration, and increased sales.
Moreover, Spain can conduct its arms business in
near total secrecy. The executive branch entirely
controls DEFEX and has great influence over the
government board-largely a rubberstamp body-
that must approve all exports.
getting Bonn to offer support for Spanish EC mem-
bership as an inducement for Spanish coproduction of
the Leopard II tank. On a more general level, Madrid
has made no secret of its intent to use arms purchases
to improve ties with West European governments.
and equipment necessary to modernize the armed
forces. Advanced combat aircraft, missiles, and mod-
ern antitank weaponry are all beyond Madrid's tech-
nological reach, and the military will continue to
depend upon foreign suppliers and technology for
those and other weapons. There is, in addition, no
evidence that Madrid is either willing or able to
undertake the major research and development invest-
ment that would be necessary to build an arms
industry to rival those of other West European na-
tions. To do so would, in any case, bring Madrid into
head-to-head competition with established producers
for higher technology arms sales, a market whose
growth is likely to be restricted.`
There is little doubt, however, that Spain, under the
Socialists, will remain a sharp competitor in sales of
lower and moderately sophisticated technology weap-
onry. There has been no change in the secrecy
surrounding most Spanish deals, and under the So-
cialists arms sales probably will continue to be deter-
mined more by commercial considerations than by
political factors. Conversely, in the realm of arms
purchases, given the needs of the defense industry and
the government's priorities, political and economic
stipulations probably will continue to weigh at least as
heavily as purely military considerations. US weapons
makers-in bidding on sales to Madrid-will doubt-
less find the Socialist government highly interested in
commercial offsets and industrial provisions. But they
may find it difficult to compete with foreign firms
whose governments are willing to offer political con-
cessions in return for signed contracts.
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Outlook
To the extent that Madrid is able to improve the
capability of the Spanish arms industry, the Socialists
will advance toward their goal of arming the military
with a greater proportion of domestically produced
weaponry. Yet, we believe arms independence proba-
bly will prove difficult. The Spanish arms industry
lacks the capability to indigenously design and manu-
facture the broad range of sophisticated weaponry
32
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Secret
Summary
Algerian Arms Diversification
Algeria.
Responding to the need to upgrade its navy and air force and to the desire
to balance its East-West ties, Algeria has taken initial steps toward
diversifying its sources of arms supplies. The Algerian Navy has already
purchased some ships from the United Kingdom, and the Algerian Air
Force plans to upgrade with Western transport and training aircraft. The
preponderance of Soviet equipment, particularly in the Army, however,
assures Moscow of a continued role as the principal arms supplier to
During the last year the Algerian military has begun
to take initial steps toward diversifying its sources of
military equipment. The Algerian Navy has been the
most active in its pursuit of Western military hard-
ware. The United Kingdom broke into the Algerian
market with the sale by Brooke Marine of two logistic
ships and six fast patrol craft. The logistic craft can
handle 10 to 11 main battle tanks or 200 troops per
ship and accommodate a Westland Sea King helicop-
ter. Training, spare parts, and repairs will be handled
directly by British commercial firms. When opera-
tional, the new craft will complement Soviet equip-
ment and make it possible to lift approximately a
battalion-size unit. The sale could reflect Algerian
intentions to develop an amphibious- or marine-land-
ing capability. Of the six fast patrol boats sold to
Algeria, two were delivered in September 1982 and
March 1983, and four more are to be built in Algeria.
The British sale is significant since it represents a
breakthrough by London into traditional US, French,
or Soviet arms markets in North Africa. The Algeri-
ans have also been negotiating for British submarines
and for Italian Lerici minehunter ships, according to
the US defense attache in Algiers. The navy has also
diversified its sources of training, with personnel
receiving instructions from Yugoslavia, Italy, West
Germany, and the United Kingdom.
A military source who has frequent contact with
Algerian force personnel indicates that the Algerian
Air Force also plans to upgrade its inventory with
Western equipment but has not yet signed any agree-
ments. Algeria intends to phase Soviet transport
aircraft out of the Algerian military transport fleet
and, by 1985, hopes to have a fleet consisting primari-
ly of US C-130s. The Air Force has shown a strong
interest in the French Alpha Jet, the British Hawk,
and the Spanish C-101 as fighter/trainer aircraft.
The defense attache in Algeria has revealed Algeria is
also seeking contracts with France's Thompson CSF
for an air defense electronics package. It also wants to
acquire advanced fighter bombers and attack helicop-
ters but harbors no illusions about obtaining these
from the United States. The Algerian Air Force is
likely to remain basically Soviet in its fighter compo-
sition. Algeria has not begun any negotiations with
Western countries for combat aircraft.
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Current Dependence on the USSR
Soviet military equipment is the backbone of the
Algerian armed forces. Through mid-1983, the Soviet
Union has provided 75 percent of the value of all
Algerian arms purchases, the bulk of which was
ordered from 1975 to 1980 when $4.6 billion in
Soviet military accords were signed. Soviet equip-
ment currently in Algeria's inventory includes ad-
vanced fighter aircraft, tanks, surface-to-air missiles,
frigates, and other sophisticated weapons. In addition
to weapons, Algeria has received Soviet electronics
equipment that is probably associated with air de-
fense as well as communications equipment, cargo
trucks, POL/water trucks, maintenance equipment,
and large quantities of ordnance. The integration of
all this equipment into military units has significant-
ly improved Algeria's overall combat capability.
possession of a Romeo-class submarine in 1982 and
another in 1983, and the Air Force received several
new MIG-23s.
Algeria has not signed any new military agreements
with Moscow since 1980, but this is probably more a
reflection of Algeria's need to draw down the $3
billion 1980 accord than a sharp turn toward other
suppliers. Over the last year, the Algerians continued
to receive significant quantities of Soviet arms, in-
cluding two to three regiments of SAM-6 antiaircraft
systems as well as a large number of BMP armored
personnel carriers. The Algerian Navy also took
According to defense attache reporting, the Algerian
Army has no plans to change the general thrust of its
ground forces, which are primarily Soviet in terms of
equipment, training, and doctrine. The Algerians have
large quantities of SAM-6s, and their armor is also of
Soviet origin. Army training at all levels continues to
be provided by Soviet advisers in Algeria or undertak-
en in the USSR. According to reporting from the US
military attache, the FRG has been approached by
Algiers on coproduction of military vehicles.
Algeria's cautious move toward arms diversification is
also reflected in the reduced Soviet military advisory
forces in Algeria. During the past year, the number of
advisers has been reduced from 1,200 to 1,500 down
to 760 to 800 personnel
Factors responsible for the drop in Soviet personnel
include frustrations over problems in obtaining spare
parts and warranty maintenance and Algeria's at-
tempt to maintain a nonaligned policy.
Short-Term Prospects
Algeria's purchase of Western naval equipment and
expressed interest in Western transport and training
aircraft are significant because they reflect Algeria's
cautious turn toward the West. Politically, Embassy
reports indicate Algeria has been seeking to reduce its
military reliance on the USSR to improve relations
between Algeria and the West, particularly France,
and to bolster Algeria's efforts to play a leading role
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Secret
Algerian Arms Agreements/Deliveries Million US $
1954-Mid-1983
Total
6,515
5,388
Communist
5,070
4,655
Bulgaria
105
105
China
12
12
Cuba
3
3
Czechoslovakia
1
1
Hungary
3-
3
Poland
NEGL
NEGL
among the countries of the Middle East. Algeria is
also moving to diversify its sources of arms supplies
for military and economic reasons. Algeria's military
establishment perceives Western military equipment
to be superior in some respects to that produced by the
USSR, according to defense attache reporting. The
proficiency the Israeli forces demonstrated in the
destruction of Syrian MIG fighters and SAM-6 bat-
teries in Lebanon promoted the Algerian desire to
shift gradually from the USSR as its principal source
of military supply. From an economic perspective,
Moscow's unwillingness in recent years to provide
preferential financing for arms sales also has encour-
aged Algeria to shop around.
Algeria is, and will remain, dependent on Moscow to
support much of the equipment in its inventory.
Algeria knows that it cannot risk a loss of spare parts
and support for its Soviet equipment, and in any case
a large share of the Algerian military leadership has
been trained on Soviet equipment. Nevertheless, Al-
geria has demonstrated that it is willing to deal with
other suppliers and its actions have undercut, if only
slightly, the Soviets' principal source of influence in
Algeria. Moscow can no longer take it for granted, as
it could only a few years ago, that most future
Algerian purchases will be from the USSR. In search-
ing for new military suppliers, Western Europe is
likely to appear more attractive to Algiers than the
United States for practical and ideological reasons.
Closer ties with Western Europe would be less compli-
cated and have fewer political repercussions than one
with the United States. In Western Europe, Algeria
can deal with nationalized firms similar to its own,
whereas in the United States Algeria must deal with
private firms whose contracts are not guaranteed by
the US Government.
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Secret
Summary
Colombia: Prospects for Drug Control) 25X1
an aerial herbicidal spray campaign-will face an uphill battle.
Several recent actions by Colombian officials may signal a change in
traditional governmental attitudes toward Colombia's drug problem. The
issuance of arrest warrants for several important drug traffickers, investi-
gations into drug-related judicial corruption, and the initiation of a major
campaign against drug abuse highlight a growing concern over the drug
problem in Colombia. Increased bilateral cooperation with the United
States in drug control, however, will continue to be limited by President
Betancur's lack of personal commitment to the problem and by his foreign
policy, which is designed in part to demonstrate his independence from the
United States. We do not believe Betancur will discontinue any existing 25X1
drug-control programs, but, without his support, new programs-especially
Since August 1983, several Colombian officials have
initiated and supported a number of drug-control
measures that suggest a growing recognition of the
need to counter the dangers drug trafficking poses to
Colombian society. The impetus for a tougher anti-
drug stand appears to be an increased awareness of
the growing domestic drug-abuse problem, a reaction
to the public flaunting by some drug traffickers of
their illicitly acquired wealth, and increasing concern
over the blatant efforts of some traffickers to partici-
pate in the Colombian political process.
? Congressional hearings in August on the influence
of drug money in Colombian politics that brought
unexpected national attention to the growing infil-
tration of drug traffickers into the Colombian politi-
cal process.
? Participation of several government ministers in a
drug-abuse awareness conference sponsored by the
United States in September in Bogota. Breaking
with tradition, these ministers acknowledged public-
ly that Colombia has a drug-abuse problem. The US
Embassy in Bogota believes the conference contrib-
uted materially to a more favorable climate for US
drug-control initiatives.
? Announcement at the conference by the Minister of
Health of plans for a national drug-abuse awareness 25X1
and prevention campaign to be headed by the wife
of Colombian President Betancur.
? A speech in September by the mayor of Bogota
outlining a proposed antidrug campaign that would
feature a crackdown on street sales of cocaine-laced
marijuana cigarettes, called bazucas, to juveniles.
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Conditions in Colombia favor large-scale and wide-
spread drug production and trafficking. A troubled
economy, continued domestic violence and crime, and
a nagging terrorist and insurgent threat have made it
difficult for Colombia to concentrate its resources
and energies on its drug problem:
? Colombia is a major producer of marijuana and,
according to the US Embassy in Bogota, supplies
some 55 percent of the US market. We estimate
that 12,000 metric tons of marijuana were pro-
duced in Colombia this year, about the same
annually as during 1979-81 but about 60 percent
over the drought-affected crop of last year.
? Colombian traffickers are the primary processors of
Bolivian and Peruvian coca leaf and paste, control
much of the flow of cocaine into the United States,
and are responsible for Colombia's rapidly becom-
ing a major coca leaf producer in its own right. Our
recent estimates indicate Colombia could produce
as much as 11 metric tons of cocaine hydrochloride
from domestically grown coca in 1983.
? Colombia continues to manufacture and export
methaqualone to the United States-although re-
portedly in a lesser quantity than in 1981 and 1982.
? The creation of a bilateral enforcement working
group with Venezuela, according to the US
Embassy, to foster closer cooperation on drug con-
trol, including intensifying interdiction efforts at
airfields, ports, and other transit points and in-
creased cooperation on drug production and con-
sumption problems.
Constraints
Despite these positive steps, the development of an
effective and coordinated drug-control policy in Co-
lombia is constrained by domestic and foreign policy
considerations. Official Colombian interest in narcot-
ics control has varied from administration to adminis-
tration and with the electoral calendar. From 1978 to
1982, under Betancur's predecessor, Agustin Turbay,
Colombia responded favorably to several US initia-
tives on drug control including accession to the
Vienna Convention on Controlled Substances, signing
an extradition treaty with the United States, assign-
ment of drug-control responsibilities to the Colombian
military, and participation in joint interdiction efforts
with the United States. As Turbay's term drew to a
close, however, he showed an increasing reluctance to
become involved in drug-control efforts. Betancur
avoided drug-control issues during his campaign and
has shown little interest in drug control since taking
office in August of last year. He has, however,
delegated responsibility to members of his administra-
tion, principally Minister of Justice Lara who has
taken his responsibilities seriously. Nevertheless, Be-
tancur's public posture of indifference echoes and
? Bogota's decision to send eight technicians to Mexi-
co and the United States in late September to study
the use of herbicides in controlling marijuana and
coca cultivation.
? Minister of Justice Rodrigo Lara Bonilla's plans,
according to the US Embassy, to publicly identify
trafficking organizations, discredit drug traffickers
through media campaigns, cancel the pilot licenses
of traffickers, disable unauthorized landing strips,
issue arrest warrants for major drug traffickers, and
investigate drug-related judicial corruption.
reinforces the traditional Colombian attitude that
drugs are a US problem.
Betancur's foreign policy may also constrain develop-
ment of a Colombian antinarcotics policy. His His-
panic nationalism has resulted in the implementation
of a new, foreign policy more oriented toward the
Third World and designed to demonstrate both Co-
lombia's independence from the United States and to
propel the country to the forefront of Latin America's
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diplomatic ranks.' This policy has already contributed
to two setbacks for US drug-control efforts in
Colombia:
? The foreign relations committee of the Colombian
House of Representatives-echoing and probably
influenced by President Betancur's views-voted to
postpone indefinitely debate on the US-Colombian
Mutual Legal Assistance Treaty, according to for-
eign press reports, on the grounds that certain
articles are unconstitutional and should be
renegotiated.
Indicators of Possible Change
We share the Embassy's assessment that the recent
moves may signal a change for the better in Colombi-
an attitudes at the Ministerial level toward narcotics
control. Betancur's sensitivity to appearing too yield-
ing to US pressure on this issue could, however, offset
these gains. We have identified a number of indica-
tors that bear watching in months to come that could
reflect further improvement or backsliding in Colom-
bian attitudes toward drug control. The clearest of
these involve decisions that will be made at the
highest level of government:
? The decision by President Betancur on the extradi-
tion to the United States of major Colombian
national narcotics violators, Lucas Gomez van
Gricken and Emiro de Jesus Mejia Farirez.
? Decisions by the Colombian Government on wheth-
er or not to reintroduce the Mutual Legal Assist-
ance Treaty that is designed to facilitate US investi-
gation of illegal drug-related financial transactions
and seizures of drug traffickers' financial assets.F_
cation and interdiction statistics.
A second set of indicators that reflect further changes
in attitudes at the ministerial level include both
domestic and foreign policy actions. On the domestic
scene:
? The extent of the Government of Colombia's multi-
media campaigns and sponsorship of city and de-
partmental drug-abuse conferences.
? Government response to the favorable report by the
Colombian technical team on the use of herbicides
to eradicate coca and marijuana crops such as the
implementation of a test spray program.
? The level of military action against insurgent groups
engaged in drug cultivation and trafficking, espe-
cially in the Cagueta and Vaupes region.
? The extent of Colombian Government enforcement
of drug laws as measured by National Police eradi-
On the foreign policy side:
? Extent and status of Colombian efforts to imple-
ment regional inititatives in drug control, particu-
larly the agreement reached between Venezuela and
Colombia.
? Colombian Government reactions to US legislation
curtailing US foreign aid to drug-source countries
that do not demonstrate verifiable progress in illicit
crop reduction.
? The level of cooperation between Colombian Gov-
ernment personnel and Drug Enforcement Adminis-
tration and State Department narcotics officers.
The second set of indicators is not as likely as the
former to provide an unambiguous signal of the
direction of change in Colombian narcotics policy but
may help predict additional leadership decisions.
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Secret
Nuclear Proliferation
China's Entry Into the IAEA
Summary China's entry into the International Atomic Energy Agency (IAEA) will
place Beijing under greater international pressure to exercise restraint as a
nuclear exporter. Should Beijing continue to export nuclear materials to
potential proliferators without requiring IAEA safeguards, however, confi-
dence in the IAEA nuclear safeguards system would weaken. In addition,
China's demand for a permanent seat on the Agency's Board of Governors,
a request that will require either disrupting the status quo or increasing the
Board's membership, could tip the voting majority in favor of the
developing countries.
China's entry into the International Atomic Energy
Agency (IAEA)-a development which probably will
be formalized in January-is a major political devel-
opment because it signifies Beijing's willingness to
support the organization that administers controls to
discourage the use of nuclear technology for military
purposes. Although there was unanimous approval for
Chinese membership at the annual IAEA General
Conference meeting in Vienna last October, some
members, such as India, are fearful that Chinese
membership might eventually affect their own posi-
tion within the IAEA. Other member states, such as
Japan and the Soviet Union, have expressed concern
to US officials that Chinese membership may still not
signify Beijing's commitment to nonproliferation.
These general concerns reflect the expectation that
there will be problems with:
? The Chinese practice of authorizing nuclear assist-
ance to potential proliferators without international
safeguards.
? Beijing's desire for a permanent seat on the IAEA
Board of Governors.
? China's attitude toward the continuation of IAEA
safeguards inspections of Taiwan's nuclear activi-
China's Nuclear Export Activities
The most important issue connected with Chinese
membership in the IAEA will be whether Beijing
discontinues its practice of exporting unsafeguarded
nuclear materials to potential proliferators. During
the past few years, the Chinese have sold enriched
uranium and heavy water either directly, or indirectly
through middlemen, to Argentina and South Africa
without insisting on IAEA safeguards. Furthermore,
Chinese nuclear
assistance to at least two potential proliferators-
Argentina and Brazil-is continuing. In addition,
there has been widespread speculation about potential
Chinese involvement in the Pakistani nuclear pro-
gram, perhaps to the extent of providing assistance in
the weapons application area. Finally, according to
US Embassy reports, Beijing has only required cus-
tomers to pledge that nuclear materials be used for
peaceful purposes. Without inspection rights, howev-
er, Beijing cannot monitor the use of Chinese-origin
nuclear material and equipment to ensure that the
pledge has been honored.
ties.
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Secret
Members of the Board of Governors,
1983-84
Austria
Hungary,
Brazil
Belgium a
Soviet Union a
Chile
Canada a
Cuba
Iraq
Kenya
Nigeria
Pakistan
Philippines
Syria
These actions have raised questions among other
supplier states about China's willingness to exercise
restraint in its nuclear export activities. Skepticism
regarding China's intentions concerning its future
export activities may be well founded. For example,
Chinese officials in mid-July promised their US coun-
terparts that Beijing would request IAEA safeguards
for all its nuclear exports after becoming an IAEA
member. They were more ambiguous, however, in
their commitment on this point in discussions with
IAEA Director General Blix in Beijing in August.
Furthermore, the head of the Chinese delegation to
the IAEA General Conference did not make an
unqualified commitment that Beijing would insist on
IAEA safeguards in his speech following the member-
ship vote. Although he stated China did not encourage
nuclear proliferation, he criticized the NPT as dis-
criminatory and emphasized Beijing's reservations
about efforts to expand nuclear export controls.
The Chinese could defend unsafeguarded nuclear
exports after becoming an IAEA member on narrow
legal grounds. The IAEA statute does not specifically
require a nuclear supplier state to impose IAEA
safeguards on all its transfers. It merely states that
IAEA safeguards are necessary for any Agency-
related nuclear project or in those cases where the
supplier and customer mutually agree on the desir-
ability of safeguards for a nuclear transfer. The
Chinese are almost certainly aware of this loophole in
the IAEA statute. The ambiguous nature of their
commitment on safeguards suggests that they may
think other nuclear supplier states will not create an
outcry if clandestine unsafeguarded nuclear transac-
tions are uncovered. We believe that such an assump-
tion would be a miscalculation. The reactions of the
United States, the Soviet Union, and other major
nuclear supplier states is likely to be severe in view of
their recent extensive efforts to tighten export controls
and safeguards coverage for sensitive nuclear materi-
als, equipment, and technology. Some of them, in
response, might refuse to assist China in developing a
domestic nuclear power program.
China's Seat on the Board
Beijing's request for a permanent seat on the IAEA
Board of Governors sometime next year is the second
major issue that will cause some problems. Because
there is no vacant seat on the Board, either one
current Board member must relinquish its permanent
seat or the number of Board seats must be increased.'
There are now 34 seats on the Board, of which 12 are
permanent. Nine permanent seats are reserved for
those countries with the most advanced nuclear tech-
nology, and the remaining three, which are allocated
by regions, are held by Australia, Egypt, and Argenti-
na. The Chinese are certain to demand one of the nine
permanent seats reserved for countries with advanced
programs.
None of the permanent Board members is likely to
relinquish its seat for China. Western nations with
permanent seats on the Board can be expected to
' Taiwan was a member of the IAEA until 1971 when it was
expelled in the wake of China's entry into the United Nations.
Taipei never had a permanent seat on the Board of Governors.
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resist strongly any solution that reduces their influ-
ence on the Board. The seat traditionally held by Italy
is the most vulnerable. On the basis of an agreement
earlier this year, this seat will rotate among Italy and
four other West European countries. Belgium is hold-
ing this seat during the 1983-84 period and could
come under pressure to step down in view of its
modest nuclear program. The only other way to
expand the Board's size without a formal amendment
to the IAEA statute is for India to accept a seat
designated for the South Asia region. This would
allow China to have a permanent seat without any of
the current permanent Board members giving up their
seats. However, India is adamantly opposed to any
solution that suggests that it accept a "regional"
permanent seat, because New Delhi does not want to
give the impression that it has lost status in the
organization.
A formal amendment to the IAEA statute to increase
the number of permanent seats on the Board could
take several years because of the difficulties in secur-
ing a two-thirds majority of all IAEA members for
approval. The issue of Board expansion is one of the
most controversial for the IAEA inasmuch as it
stimulates demands for additional seats from Pakistan
and black African states that have long complained
about underrepresentation. According to the US Mis-
sion to the IAEA, the Western industrial nations want
to retain the blocking power they now have on Board
actions requiring a two-thirds majority. One extra
seat for China would still leave the western nations
with enough votes to determine Board decisions. The
addition of two extra seats, however, would force the
Western countries to depend on support from the
Soviet Union and other members of the socialist group
to prevent China and the developing nations from
controlling the decisionmaking process.
Safeguards on Taiwan
Unlike the issues concerning Chinese nuclear exports
and the seat on the Governing Board, future safe-
guards covering Taiwan's nuclear program is the one
problem that required some degree of understanding
between Beijing and Washington before a vote on
China's membership at the General Conference. The
IAEA continues to implement safeguards under the
auspices of a trilateral agreement involving the Agen-
cy, Taiwan, and the United States. Chinese officials
acknowledge that the continuation of international
inspections of nuclear facilities on the island to ensure
their peaceful use is in China's own interest. They
have informed their US counterparts that their coun-
try is not opposed to the continuation of this unusual
arrangement as long as it is in harmony with Beijing's
political position that Taiwan is not a separate state.
IAEA officials, with US support, have given
assurances to the Chinese that the Agency will char-
acterize Taiwanese participation in the trilateral ar-
rangement as "nongovernmental" and will refer to the
island in IAEA publications as "Taiwan, China."
Despite these concessions, we believe there is still
potential for trouble over the Taiwan safeguards issue
because Beijing clearly wants to preserve the right to
define the future nature and scope of the IAEA's
presence in an area that it considers to be a part of
China. Chinese officials have informed IAEA Direc-
tor General Blix that Beijing considers the trilateral
safeguards agreement as only an "interim solution."
The Chinese, following their acceptance into the
IAEA last October, characterized the existing trilat-
eral agreement as "illegal" and called ffr its renegoti-
ation. Blix has expressed the view that such public
statements would be "for the record" and that Beijing
will not press the issue further. We also doubt that the
Chinese will mount an aggressive legal attack on the
Taiwan safeguards arrangements in the near term,
but the Chinese claim could eventually pose political
problems for the IAEA should the existing safeguards
on Taiwan be deemed no longer adequate or should
there be a deterioration in US-Chinese relations.
Outlook
Over the longer run the willingness of the Chinese to
place their future nuclear exports under IAEA safe-
guards will be the principal test of whether their entry
into the IAEA strengthens international efforts to
control nuclear proliferation. We believe that Beijing
cannot continue clandestine unsafeguarded nuclear
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transfers to potential proliferators without being dis-
covered and without triggering controversy in the
IAEA concerning China's behavior as a nuclear ex-
porter. The effectiveness of the IAEA in the safe-
guards area could also be jeopardized if Beijing
decides to support Third World efforts to shift the
Agency's focus toward the promotion of nuclear
assistance programs for developing nations. China
may be willing to further politicize debates over
budgetary matters and perhaps even to side with
Third World efforts to restrict the membership rights
of Israel and South Africa. In short, there is consider-
able potential that Chinese membership could rein-
force negative trends in the IAEA that have posed
serious policy problems for the United States.
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