NATIONAL INTELLIGENCE DAILY (CABLE) 22 MARCH 1982

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84T00301R000200010075-3
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 16
• Document Creation Date: December 22, 2016
• Document Release Date: August 11, 2010
• Sequence Number: 75
• Publication Date: March 22, 1982
• Content Type: REPORT

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Director of
/~a 0
`7 n m` Central
Intelligence
Top Secret
National Intelligence Daily
(Cable)
Top Secret
Copy 402
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Top Secret
Israel: West Bank Demonstrations . . . . . . . . . . . . 2
Poland: Continued Stalemate Predicted . . . . . . . . . . 3
Egypt: Effects of Soft Oil Market . . . . . . . . . . . . 5
Madagascar-US: Request for Assistance . . . . . . . . . . 7
France: Cantonal Election Results . . . . . . . . . . . . 8
OPEC: Oil Output Decision . . . . . . . . . . . . . . . . 8
Special Analysis
Guatemala: Prospects for the Guevara Administration . . . 9
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Violent protests continued over-the, weekend throughout the
Israeli-occupied West Bank.
Strikes and demonstrations on Saturday protesting
the dismissal of a municipal council last week took place
in most major towns. The Israelis moved quickly to calm
the situation, but security services imposed curfews on
three towns where the worst demonstrations occurred and
banned residents there from crossing bridges into Jordan.
Sporadic demonstrations continued yesterday in addition
to incidents in East Jerusalem and Gaza.
Comment: The death of an Arab protester on Saturday
probably will generate more violence. In addition, an
Israeli official told journalists that a Palestinian
whose body was discovered that day had probably been
murdered by Jewish settlers. Once this incident becomes
widely known, it could lead to revenge attacks on settlers,
further aggravating the situation.
The growing violence has increased popular pressure
on other area mayors to resign in sympathy with the ousted
council. Most mayors, however, believe their resignations
now would only serve Israeli interests and are planning
to stay in office.
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POLAND: Continued Stalemate Predicted
//A senior party official believes that there will be liter
significant political activity in the next several months.//
//A Central Committee department head, in a discussion
last week with a US Embassy official, commented that the
government, the Church, and Solidarity are stalling for
time and that little political movement could be expected
until late spring. He said the regime had not yet decided
on whether or how to begin a dialogue with Solidarity
and predicted that Premier Jaruzelski would open talks
only if he were reasonably certain of a favorable out-
come.//
//The official indicated that the Church prefers to
wait and see whether there will be an upsurge of resist-
ance this spring. Government officials who have talked
with Solidarity chief Walesa say that he believes time is
on his side.//
Comment: //The stalemate could last beyond spring,
depending primarily on the level of open resistance in
the coming months. There have been almost no indications
that Solidarity is planning a major confrontation with
the regime in the next few months, although the mossi-
bility of scattered outbursts remains high.//
//If the widely anticipated resistance does not ma-
terialize, the moderates in the government will have a
better chance of maintaining their influence, but they
will not be able to defeat the hardliners totally. An
impasse between moderates and hardliners in the regime
would preclude any far-ranging political or economic
moves that would break the current stalemate.//
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caZZy risky.
Falling oil prices are cutting into government revenues and
increasing foreign payments problems, but Cairo fears such remedies
as reducing imrrorts and limiting government spending would be poZiti-
per barrel, down from a high of $40.50 in early 1981.
to reach $2 billion even if oil prices remain at present
levels. Gulf of Suez blend currently is priced at $31 50
The decline in oil prices during 1981 resulted in
lower earnings than expected, and the current account
deficit jumped from $455 million in 1980 to an estimated
$1.5 billion last year. Egypt's deficit in 1982 is likely
budget deficit could double this year.
Falling oil revenues also are hurting the budget,
which was already in trouble because of subsidy spending
and government pay raises. IMF officials believe the
and limit government spending and imports.
Comment: Cairo will, have difficulty obtaining addi-
tional economic assistance from Western donors but appar-
ently believes that it can secure commercial loans to
cover its foreign payments deficit. Before much longer
Egypt also will have to consider ways to increase exports
long as possible and then. take only minimal action.
military expenditures, but each risks provoking serious
unrest. The government, therefore, is likely to wait a_s
Possible alternatives include raising domestic energy
prices, reducing government subsidies for food and other
consumer items, limiting investment spending, and reducing
and hope for renewed economic aid.
after the Israeli withdrawal from the Sinai in April.
Many Egyptians expect some reconciliation this summer
Egypt's economic difficulties will increase the in-
centive to seek a rapprochement with wealthy Arab states
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MADAGASCAR-US: Request for Assistance
Supported by France, Madagascar is urging the US
to help persuade the IMF to ease its conditions for a
standby agreement. President Ratsiraka fears that accept-
ance of the IMF conditions, especially a 25-percent
devaluation, would provoke an uprising that could topple
him. His fears were heightened by violent protests early
this month in Diego Suarez and other northern towns over
food shortages, which have been aggravated by extensive
cyclone and flood damage.
Comment: Failure of the IMF and Madagascar to reach
an agreement could jeopardize attempts by France and other
Western countries to wean Madagascar away from Soviet in-
fluence. Despite his leftist ideology, Ratsiraka appar-
ently has concluded that additional Western aid--expected
to follow an IMF loan--is crucial to his survival, and he
recently has tried to improve ties with the West. Last
week, he permitted a US admiral to visit the port and air-
field at Diego Suarez in order to emphasize that Soviet
naval ships and aircraft stillare not ome, despite
the USSR's pressure for access.
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//President Mitterrand's Socialists improved their
share of the vote to 35.4 percent in the runoff round of
the cantonal elections yesterday. The Communists' share
of the vote fell to a new low of 13 percent. Consequently,
the left was unable to overcome the built-in advantage for
the center-right, which now will control an even larger
majority of the presidencies of the departmental coun-
cils.//
OPEC: Oil Output Decision
As the result of a lower ceiling and an extra Saudi
output reduction, OPEC oil production will be 1 million
b/d less than we anticipated prior to the Vienna meeting.
Comment: The lower output will not entirely elimi-
nate the surplus of oil on the market. It should tend,
however, to stabilize prices and support the $34 bench-
mark if all members, including Iran, adhere to the
agreement.
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GUATEMALA: Prospects for the Guevara Administration
President-elect Guevara will face tough political and economic
problems when he takes office in July. The expectation that Guevara
will continue some of the corrupt and repressive practices of pre-
ceding military regimes will hinder his ability to attract domestic
and international support. The rapid deterioration of the economy
probably will require cutbacks in social programs, hamper the Army's
counterinsurgency efforts, and facilitate guerrilla recruiting ef-
forts. Over the long term, the prevailing political and economic
conditions favor the leftist insurgents.
Charges of fraud by a short-lived postelection coali-
tion of opposition parties have tarnished Guevara's elec-
toral plurality and subsequent selection as President by
congress. Although Guevara is less rigidly right-wing
than President Lucas, there is no indication that his
government will differ markedly from the military regimes
of past years. Some corrupt officials probably will keep
their posts, and Guevara is not apt to press for signifi-
cant reforms or make policy concessions to center-left
groups like the Christian Democrats.
Guevara apparently intends to name a handful of
opposition leaders to public office to give the impression
that he has achieved national reconciliation. He appears
unlikely, however, to adopt other measures necessary to
avoid increasing political polarization. The government
probably will continue to deal harshly with most leftist
opponents and remain unaccommodating toward political
moderates.
Many Christian Democrats will maintain the role of
a nonviolent political opposition. Others, fearing gov-
ernment reprisals over their challenge of the election
results, may leave the country, participate in the or-
ganization of prominent exiles recently formed in Mexico
City, or join the guerrillas.
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Guatemala's poor international image--reflected in
the recent condemnatory resolution by the UN Commission
on Human Rights--is unlikely to improve. Mexico, Vene-
zuela, and several West European countries are concerned
over the charges of electoral fraud and will await clear
evidence that Guevara's administration is an imp ent
over its predecessor before strengthening ties.
Guevara appears likely to inherit the vexing problem
of Guatemala's longstanding claim to Belize, which appears
no closer to settlement. The departure soon of British
troops and recent Cuban efforts to establish a commercial
presence in Belize make a prompt settlement vital to both
parties. Nevertheless, Belize's reluctance to grant
Guatemala a long-term lease on several offshore cays
almost guarantees that the Guatemalan military will not
permit the government to renounce its territorial claim.
Economic Constraints
Guatemala's short-term economic prospects are bleak.
Regional uncertainties and the growing domestic insurgency
have caused commercial credit to dry up, reduced investor
confidence, and encouraged capital flight. Export revenues
have plummeted because of low world prices for agricultural
products, a sharp drop in tourism, and depressed demand by
the Central American Common Market for Guatemalan manufac-
tures.
Over the past year, foreign loans and investment
have fallen off, and the regime has virtually exhausted
its hard currency reserves in an attempt to maintain im-
ports. Declining government revenues from export taxes
will require severe spending cuts to comply with IMF
guidelines to lower the budget deficit. Income from oil
exports offers no short-term remedy, because production
rose by less than 1 percent last year.
Higher military expenditures will further strain the
budget and probably require cutbacks in social programs.
Rising unemployment and the curtailment of social services,
however, are likely to increase public discontent and
benefit the insurgents.
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The Guerrilla Challenge
//The insurgency has increased substantially since
1979. The guerrillas have expanded operations in several
fronts, relying mostly on terrorist killings and bombinqs
The insurgents' increasing strength is in part due
to successful recruiting among the Indian population.
Portions of the Western Highlands, inhabited primarily
by Indians, are almost wholly controlled by the insurgents.
smuggled mainly through Mexico and Honduras.
which was announced in Cuba in early February, has led to
greater cooperation in Guatemala. As a result, Havana
probably will send the insurgents more weapons, which are
A new agreement among the four major guerrilla groups,
collaborating with the Army.
Recently adopted mobile counterinsurgency tactics
have enabled the Army to sweep through guerrilla territory,
destroy base camps, and dismantle support facilities.
An amnesty program has induced some insurgents to sur-
render, and growing numbers of peasants apparently are
In the capital, authorities last year uncovered more
than 25 safehouses, dealing a severe blow to the urban
infrastructure of the second-largest guerrilla organiza-
tion. More recently, Army roadblocks hindered leftist
efforts to deliver arms and disrupt the election.
Troop mobility remains inadequate, however, and
coordination between air and ground forces is haphazard.
In addition, the Army will continue to have difficulty
in obtaining and paying for spare parts and new equipment.
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Guevara's major accomplishment probably will be con-
tinuing to hold the guerrillas at bay for the next few
years. The controversy surrounding his election, however,
will heighten political tension and contribute to the
country's international isolation.
An economic upturn is highly unlikely. With Guevara
at the helm, the government will be hard pressed to
remedy the problems that will contribute to greater vio-
lence and a stronger insurgency.
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