WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001000070002-8
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 31
• Document Creation Date: December 27, 2016
• Document Release Date: May 6, 2010
• Sequence Number: 2
• Publication Date: June 14, 1974
• Content Type: REPORT

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Weekly Review
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14 June 1974
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The WEEKLY REVIEW, issued every Friday morning by the
Office of Current Intelligence, reports and analyzes significant
developments of the week through noon on Thursday. It
frequently includes material coordinated with or pi ?pared by
the Office of Economic Research, the Office of Strategic
Research, and- the Directorate of Science am', Technology.
Topics requiring more comprehensive treatment and therefore
? published separately as Special Reports are listed in the
contents.
CONTENTS (June 14, 1974)
EUROPE
EAST ASIA
PACIFIC
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MIDDLE EAST
AFRICA
WESTERN
HEMISPHERE
1 Italy: The Crunch
2 Syria-Israel: Disengagement
3 Fedayeen: Undecided on Geneva
4 Law of the Sea: Caracas Meeting
5 Force Reductions Standoff
6 France: Nuclear Tests; African Policy
8 Portugal: Spinola Sets the Course 25X6
10 Soviet Military Developments
13 USSR: Communist Conference; Kama
15 Stir in World Gold Market
16 CEMA Ministerial to Open
17 Australia: A Leftist for Whitlam
17 Vietnam: Talking Again
18 Thailand: Hot Summer Ahead
19 Cambodia: Musical Chairs
19 Burma: Labor Tensions Remain
20 Indonesia: Storm CloJds Gathering
21 Japan - South Korea: New Strains
22 :orea: New Military Equipment
23 Ethiopia: Government Strengthened
24 Jordan: Troops Still Disgruntled
25 North Yemen: New Arab Aid
26 Venezuela: The Cuban Connection
27 Ecuador: The Perils of Petroleum
28 Mexico: Rural Discontent
29 Peru: A Split in the Junta
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ITALY
THE CRUNCH
The collapse of still another center-left gov-
ernment this week has plunged Italy into a serious
political crisis. The main protagonists in the dis-
pute, the Christian Democrats and the Socialists,
appear unwilling to budge from their opposing
positions on fiscal policy. The dispute over eco-
nomic policy comes at a time when Italy cannot
afford to postpone much longer the major deci-
sions that are required to deal with the coun-hy's
critical economic problems.
The Socialists continue to oppose the credit
restraints that the Christian Democrats, Italy's
largest party, feel are necessary to stabilize the
faltering economy. Meanwhile, the labor unions
have made clear that they will press their eco-
nomic demands on any new government, al-
though they have indicated they would support a
program that would equitably dis+ribute austerity
and avoid unemployment.
The consultations between President Leone
and various political leaders that have followed
the submission of Prime Minister Rumor's resigna-
tion on June 10 have not produced a com-
promise. In addition, no political figure seems
anxious to become prime-minister - designate.
If the negotiations are contentious and long,
they will add weight to the argument of the
Communist Party, Italy's second largest, that the
country cannot be governed effectively without
its participation. Communist Party leader Enrico
Berlinguer reiterated this theme in a speech on
June 12 when he said the government should be
"based on the collaboration of all popular
forces." Berlingucr's main objective at this time
appears to be the formalization of the "cloak-
room" consultations that have long taken place
between the Communists and the governing
parties in parliament. The Socialist Party has
endorsed this idea and may make it a bargaining
point in negotiations to form a new government.
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Well-placed US embassy scurces report that
Leone has under consideration the possibility of
submitting the issues that divide the government
to parliament for an open debate and vote. Leone
may float this prospect to bring pressure on the
Socialists--who would not want to bear the full
onus of the break-up of the center-left coalition--
to make concessions.
The Socialists are not likely to yield. They
have been exuding confidence over the Christian
Democrats' defeat in the recent referendum on
divorce, which they interpret as a sign of a basic
shift in Italian attitudes in favor of more rapid
social change. If, as expected, the regional elec-
tion next week in Sardinia results in Christian
Democratic losses and Socialist gains, the So-
cialists will probably become even more in-
transigent.
Rumor's resignation was preceded by an
announcement that the trade deficit in April had
again topped $1 billion, pushing the deficit in the
first four months of the year to over $4 billion.
About half this deficit results from petroleum
imports. Also contributing is a growing demand
for quality food products, which Italy's backward
agricultural system cannot provide. The demand
has resulted from rapidly rising wages in recent
years.
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Italy has been unable to obtain foreign loans
to cover the deficit, except for a $1.2-billion
standby credit from the International Monetary
Fund. The head of the Italian central bank claims
that the country's credit has been exhausted. The
government has resisted devaluation because its
short-term effect would be to aggravate inflation,
which is already running at 25 percent.
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SYRIA-ISRAEL
DISENGAGEMENT PROGRESSES
The disengagement of Syrian and Israeli
forces on the Golan Heights proceeded smoothly
this week. Officers from both armies met almost
daily at a temporary UN command post on the
Damascus - Al Qunaytirah road, talking usually
through UN officers, as they did at Geneva, to
coordinate the mutual withdrawal. The first phase
of the four-stage disengagement will be completed
on June 14, with the Israelis relinquishing one
third of the pocket of territory they captured
during the fighting last October. The last con-
tinaent of the 1,250-man UN force is also ex-
pected to be on the scene by this weekend.
As they withdrew, Israeli forces blew up
military installations and removed captured mili-
tary equipment as they did in the Sinai. The only
potentially serious incident occurred when the
Syrians fired warning shots over the heads of an
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Israeli team attempting to retrieve some damaged
Syrian equipment in the no-man's land between
the two forces.
POWs
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The Israelis and Syrians exchanged charges
this week of alleged maltreatment of returning
prisoners of war. The new Rabin cabinet issued a
strong denunciation of the Syrians, claiming they
had tortured Israeli prisoners and that this may
have resulted in the death of some of them.
Despite the accusations, neither Tel Aviv nor
Damascus is likely to let the issue jeopardize
implementation of the disengagement accord.
Asad Interview
Appearihg on a US television program filmed
in Damascus, President Asad told US newsmen
that, after consulting with other Arab leaders,
Syria would put forth every effort to make the
Geneva peace conference a success. Asad ad-
mitted that he had not received the guarantees he
sought for a total Israeli withdrawal from oc-
cupied Arab lands, but he said that the US had
promised to "continue to make efforts in order to
establish peace in the Middle East."
Turning to US-Syrian relations, Asad said he
believed US policy in the area had become more
even-handed and that consequently Syria would
resume diplomatic relations with Washington. He
did not name a date, but the Syrian government
probably intends to make a formal announcement
durin President k ?n Damascus.
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EnrturlIWb I HIKE AGAIN
Three Israelis and three or four Pales-
tinian guerrillas were killed on June 13 in a
terrorist attack on Shamir, a small Israeli set-
tlement near the Lebanese border. The radical
Popular Front for the Liberation of Palestine -
General Command claimed responsibility for
the raid, and acknowledged that it was de-
signed to upset progress toward a Middle East
srittlement during President Nixon's current
visit to the area.
Israel's reaction to the attack is not
likely to be as forceful as it was in the case of
the incident last month at Maalot. There were
relatively few casualties this time, and Tel
Aviv will be reluctant to have the matter
assume such proportions as to overshadow
other issues being discussed during the Presi-
dent's visit. In their discussions with the Presi-
dent, howeve.., the Israelis almost certainly
will use the attack to reinforce their argument
that any comprehensive Middle East peace
settlement must include Arab commitments
to re7"rict the activities of the terrorist
groups.
FEDAYEEN
UNDECIDED ON GENEVA
The Palestine National Council, the legisla-
tive arm of the Palestine Liberation Organization,
concluded a nine-day meeting in Cairo last week-
end without reaching a decision on the critical
question of participation in the Geneva peace
talks. Unwilling to face a showdown with repre-
sentatives of the radical fedayeen groups that
oppose participation, moderate PLO leaders
agreed to delay making a decision until the organ-
ization is formally invited.
With this concession, PLO Chairman Yasir
Arafat was able to forestall threatened with-
drawals from his organization by the small groups
that are cooperating under the label of the Rejec-
tion Front. Arafat would probably accept their
opposition, and even their withdrawal, if he were
convinced that the PLO will, in fact, be invited to
Geneva on terms acceptable to the Palestinians.
Without this assurance, however, he retreated to a
policy statement sufficiently ambiguous to pre-
serve at least the appearance of Palestinian unity.
The position paper finally approved by the
council was much like that laboriously drafted by
the PLO leadership in a series of meetings that
preceded the Cairo session. It includes the
compromise strategy of creating a Palestinian
"national authority" over any land the Pal-
estinians regain from Israel. It does not, however,
include the blanket authorization to decide future
strategy that the moderates had desired.
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The council expanded the size of the PLO's
powerful executive committee from 9 to 14. This
increase will bring into the group a representative
of the Popular Front for the Liberation of Pales-
tine - General Command, the radical group that
carried out the attack in April on Qiryat She-
mona; an additional "independent" member; and
three Palestinians recently expelled from the Is-
raeli-occupied West Bank. The net effect of these
changes will be to strengthen Arafat's hand; the
new members from the West Bank were admitted
into the larger council at his urging, and most
independents have in the past been Arafat sup-
porters.
In the Cairo debates, Arafat's conciliatory
views were defended by Zuhayr Muhsin,,leader of
the sizable Syrian-controlled Saiqa group, and by
spokesmen for the Marxist-oriented Popular Dem-
ocratic Front for the Liberation of Palestine. This
backing, coupled with that of Egypt and Syria,
gives Arafat the capability to railroad his views
through the PLO and to lead a delegation to the
peace talks at a future time.
For the present, Palestinian leaders appar-
ently intend to continue their hard line, while
pressing Cairo and Damascus to elicit an invita-
tion for them to attend the peace talks. As a
matter of tactics they will continue to insist that
any "acceptable" invitation must acknowledge
the "rights of the Palestinians" and allow them to
negotiate for an Israeli withdrawal from tho nr
cupied West Bank.
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L.CtVV VI U ie OU04
MEETING IN CARACAS
The approximately 150 countries partici-
pating in the third UN Law of the Sea conference,
which opens in Caracas next week, hope to
formulate a new approach to the use and ex-
ploitation of the ocean. The degree of success
they have during the 11-week session will depend
largely on reconciling two opposing concepts?
freedom of the seas and resource control.
For the principal maritime nations?such as
the US, USSR, and Japan?the traditional free-
dom of the high seas remains central to their
commercial and strategic concerns. These nations
control large shipping or fishing fleets as well as
submarines and nuclear-powered vessels and
possess the technology and equipment to exploit
resources on the seabed.
On the other hand, the developing countries,
increasingly concerned about protecting what
they view as their legitimate share of world re-
sources, strongly support applying the concept of
the "common heritage of mank;nd" to what were
previously the uncontested "high seas." Indeed,
the translation of this concept into some sort of
independent international authority for resource
control may be the most significant outcome of
the conference?if also the most difficult to nego-
tiate. Even at this early stage, many countries are
already convinced that a follow-up session will
have to be held next year?probably in Vienna?to
iron out the many areas of conflict between the
principal opposing approaches.
The likelihood of a consensus emerging on
the various specific issues appears remote because
of the profusion, within the main groupings, of
subgroups with unique geographical, ideological,
or commercial problems. There are major areas of
disagreement, for example. between members of
the so-called Group of Five (the US, Japan,
France, UK, and USSR). Fishing is a prime exam-
ple, and is a problem that even divides the EC
Nine. The major archipelago states, meanwhile,
cannot even agree on a common definition t
delineate their claims to a territorial sea.
Only the land-locked states present a solid
front in their demands for access to the resources
of their coastal neighbors and for international
machinery to secure a fair distribution of seabed
resources. But the land-locked group is alone
among the participants in having nothing to offer
in the elaborate trade-offs that will be necessary
at Caracas. Their votes?which, when combined
with those of other geographically disadvantaged
groups, will number about 60?will nevertheless be
sought after. Even so, the land-locked may well
find the support of their fellow developing states
for the "common heritage" concept evaporating
as the latter trade recognition for expanded zones
under national economic control for guarantees
to the major maritime countries of free transit
rights.
The maritime powers' insistence on assuring
free transit and overflight of straits will be a
major factor in bargaining at Caracas. Traditional
navigation rights are imperiled by unilateral ex-
tension of territorial seas?some states claim seas
even beyond 200 miles?since within such areas of
coastal sovereignty only the right of innocent
passage, which can be arbitrarily defined, is recog-
nized. The US and most maritime countries are
prepared co accept a 12-mile territorial sea if they
are assured the right of free transit through the
straits that would be included within a territorial
sea. Provision for free transit?which has impor-
tant strategic and commercial implicrlions?has
thus become a major issue, and many of the
less-developed state:, are now linking free transit
lights to acceptance of some form of "economic
zone."
The area included in this zone, and the sped-
fic responsibilities of the coastal state within it,
have yet to be decided. Positions range from the
extreme claims of hard-line Latin American states
to those of fishing countries?such as Japan?or of
the land-locked states that want as great as possi-
ble a limit on the area of national economic
zones. Most developing countries are adamant on
this score, while most developed countries are
resigned to the probability that some form of
economic zone is necessary. Nevertheless, negotia-
tions are still likely to be prolonged and bitter.
The land-locked countries have already served
notice that their demands for joint participation
in exploiting coastal state resources must be in-
corporated into any treaty, and that regional and
bilateral arrangements will not be sufficient to
assure them their "commnn !-Ieritage."
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FORCE REDUCTIONS STANDOFF
The current round of te East-West force
reduction talks in Vienna is m:iving very slowly as
each side attempts to entice tne other to move in
the direction of its basic po: ition. Neither side has
so far budged.
A spokesman for the Warsaw Pact nations
set the tone last month by declaring that, after a
thorough review of the negotiations, the pact had
concluded that its proposal offered the best basis
for agreement. Subsequently, Eastern representa-
tives have stressed a familiar criticism of the West-
ern proposal: that it seeks unilateral military ad-
vantage that would violate the principle of un-
diminished security. The East continues to em-
phasize the importance of having all direct partici-
pants reduce their forces from the outset. Other-
wise, Eastern spokesmen argue, the West Euro-
peans?and especially the West Germans?could
build up their forces between phases.
In order to answer this criticism, the Allies
have suggested that both sides agree not to in-
crease the overall level of their ground forces after
a first-reduction phase. The Allies have in mind a
limited-time commitment that would apply be-
tween the negotiating phases.
The Soviets, while showing some interest in
the Western idea, have raised two objections:
first, it does not cover armaments, and thus
would allow increases on the NATO side while
Soviet tanks would be reduced and limited during
the first phase; second, the West Europeans would
be under no compulsion to follow through with
second-phase reductions, and when the no-
inc i ease commitment expired they would be free
to increase i:heir forces. The Soviets further ar-
gued that if the West were willing to accept a
no-increase commitment, it should also be willing
to accept "symbolic reductions," obviating the
need for a freeze.
The Soviets introduced the idea of symbolic
reductions during the last negotiating round in an
attempt to win Western agreement to reductions
by all direct participants as a first step. The East
has in mind small reductions, perhaps only in
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ground forces. Eastern representatives have also
assured the West that such reductions should be
considered as separate from the basic Eastern
proposal, arc! that Western acceptance of sym-
bolic reductions would not oblige the Allies to
proceed any further.
Several factors help explain the present
Soviet stubbornness. A Romanian delegate has
said that the Soviets can hardly be expected to
make concessions until they have had a chance to
weigh political uncertainties in the West and until
after the Nixon-Brezhnev summit. Although So-
viet representatives in Vienna have vehemently
denied such motives, and although the summit is
unlikely to deal with reduction negotiations in
any detail, the Soviets may well be marking time
to see what the Nixon-Brezhnev meeting reveals
about the health of detente.
Another factor encouraging Soviet intransi-
gence is the stagnation of the European security
conference in Geneva. It is unlikely that the So-
viets will allow the force reduction talks?begun
on Western initiative?to make significant progress
before the Soviet-inspired sz.rrity conference has
concluded. The Geneva conference has been at a
virtual standstill since last April because of Soviet
unwillingness to compromise on the matter of the
freer movement of people and ideas between East
and West. Even if the Soviets make last-minute
concessions, it will probably be impossible for the
final stage of the conference to be held in July,
which Moscow still claims is its goal.
The Soviets may well be hoping that the
Nixon-Brezhnev summit will break the deadlock.
But that would not smooth the feathers of the
West Europeans, who are becoming steadily more
distressed about the security conference. They are
unhapp with earlier compromises, and they are
in a mood to stand firm against the Soviets. For
the -Lime being, the EC foreign ministers have
decided to persevere at the conference, but the
absence f progress will increase pressure for a
more extreme policy, such as threatening to
adjourn the meeting indefinitely.
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FRANCE
NUCLEAR TESTING IMMINENT
The French nuclear test series for 1974 is
expected to begin around lune 15 in the South
Pacific.Weather reporting exercises and notices of
closure of "danger areas" at the test site as well as
press reports from Paris indicate that the first
detonation is imminent
The primary objectives of the tests this year
are probably further miniaturization and improve-
ment of thermonuclear "triggering" devices.
There are indications that the French also pan to
work on the development of one or two tactical
nuclear warheads.
The French have been testing in the atmos-
phere at their Pacific test site since 1966. The
tests have been accompanied each year by in-
creasingly strong protests from various coun-
tries?especially Australia and New Zealand. Inter-
national protest has been more subdued this year,
however, possibly because of French President
Giscard d'Estaing's recent public announcement
that after this year all French tests wil' be con-
ducted underground. The US embassy in New
Zealand has indicated that the lack of raaction
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there is due both to public apathy and to Welling-
ton's desire not to antagonize France in forth-
coming delicate EC negotiations.
On the other hand, criticism of the testing
has increased at home. Giscarcl's announcement
on June 10 that he was cancet'ng one of the tests
was probably made to placate domestic critics.
The cancellation may also have been intended to
take some of the sting out of charges by dismissed
reform minister Servan-Schreiber that the military
had virtually forced the government to go
through with the tests.
Although Giscard did not specify which test
has been canceled, the several hundred kiloton is
a likely candidate. This device would probably
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r)avl
produce greater fallout in the atmosphere than
the lower yield tests that are planned and would
almost certainly draw widespread criticism. For
the past several years, France has counteied world
criticism of its tests by pointing out that the
hazardous effects were negligible because of the
low yields.
Neither the strategic missile that France
plans to arm with MI RVs nor the nuclear-tipped
stand-off missile system?which includes a new
aircraft?will be available until around 1980. The
testing of the several hundred kiloton device to
develop the warhead for these systems could
probably be delayed a year or so until France can
de:ionate it underground.
AFRICAN TIES
President Giscard is reviewing the special re-
lationship France has had with its 14 former
black African colonies. There are signs that future
French policy toward these areas, and toward
Africa in general, will be influenced to a greater
degree than it has in the past by commercial
considerations and requirement for raw materials.
The President's decision to dissolve the sec-
retariat general for community and Afro-Malagasy
affairs clearly marked the end of an era. Jacques
Foccart, head of the secretariat, which had re-
ported directly to the President, had served as the
prime mover in African policy matters since 1959
and had carried out covert missions for the Gaull-
ists in Africa as well as in France.
Giscard, concerned lest black African leaders
misinterpret his intentions, has acted quickly to
reassure them of France's continued, though re-
focused, interest. The President's new cabinet in-
cludes a Ministry of Cooperation charged with
coordinating relations with the former colonies?
an upgrading of Foccart's former job that was
recommended by African leaders. In his first offi-
cial luncheon?honoring President Senghor of
Senegal?and in post-election letters to African
heads of state, Giscard underlined his personal
interest in African affairs.
The French President further indicated his
desire to smooth relations with African leaders by
pledging publicly to halt arms sales that could be
used to prevent peoples from realizing self-deter-
mination. South Africa is widely believed to be a
principal target of Giscard's remark, but the ex-
tent to which Paris may in fact prove willing to
weaken its ties with Pretoria in order to gain favor
with the black leaders is questionable.
Giscard's specific plans are not yet known,
but he will most likely try to change the form of
French relations with the former black African
colonies to keep in step with the evolving African
sense of independence. At the same time, he will
attempt to preserve as long as possible a special
relationship with those countries in which France
has important economic and cultural interests at
stake. He will also try to increase French influ-
ence in non - French-speaking areas of the c .nti-
nent where the economic potential is greatest or
scarce raw materials are available. France is pri.
manly interested in Nigeria, Ivory Coast, Gabon,
Cameroon, Senegal, Zaire, Kenya, Mozambique,
and Angola, as well as north Africa.
The movement toward re-evaluation of the
Franco-African relationship began in the early
1970s as the French leadership under Pompidou
began to take a less possessive attitude toward the
colonies and to evaluate them more pragmati-
cally, largely in terms of their economic value to
France. Even the most hidebound French officials
have come to realize that African development
has become too costly for France to handle alone.
With France's current economic problems, the
Giscard regime is even less willing to carry the
burden.
During the last two years, African leaders
began to press the French for renegotiation of the
accords that bind their countries to France. Paris
had used the accords to ensure French dominance
of commerce, trade, and finance, and to give
France the decisive voice in cultural, military, and
educational matters. Under Pompidou, Paris had
been willing to revise technicai,aid, anc' cultural
accords, but was less forthcoming on monetary
and defense matters.
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PORTUGAL: SPINOLA SETS THE COURSE
In a series of recent. speeches, President
Spinola has defined the limits on domestic liberal-
ization and has discussed Lisbon's relations with
its overseas territories. During his country-wide
speaking tour, Spinola continued to stress the
need for order and discipline, and served notice
that civil disorder would be put down by force.
His comments on African policy suggest that Por-
tuguese authorities are becoming reconciled to
the prospect that the colonies will ultimately
achieve independence.
Referring to the wildcat strikes that had
only recently been brought under control, Spi-
nola made it ear in several speeches that it
would not be possible to build an open society
'without law and order. The President's speeches
were well received by large crowds, but the Portu-
guese Communist Party?which has a stake in the
success of the provisional government--may have
been as instrumental as Spinola in restoring labor
peace.
Communists in the Labor Ministry and the
syndicates have worked assiduously to put an end
to the 1.ash of wildcat strikes by persuading strik-
ing textile workers, bus and trolley operators, and
bank employees to return to work and accept the
government's new minimum monthly wage. The
Communists are concerned that the strike!: could
lead to economic chaos and provide favorable
conditions for a counter-coup by right-wing ele-
ments. There are no major strikes in progress
now, but if labor feels the minimum wage is too
low and does not bind enough employers, further
labor disorders are likely, particularly in those
firms that do not have effective control of the
workers.
Although the cooperation of the Communist
Party was vital in settling labor disputes, the diffi-
culties encountered in persuading the workers to
accept some of the terms show that the party's
influence among the rank and file is not great,
ever', though it controls many of the top syndicate
posts. The Communist Party is capable of foment-
ing strikes at the plant level?even while con-
demning them publicly?but the US embassy in
Lisbon is convinced that the party is acting in
good faith at the moment.
25X1
The Socialists, on the other hand, have criti-
cized the junta's tactics in maintaining order.
They accused one junta member, General Galvao
de Melo, of treating a few isolated incidents as a
major threat to the government, and criticized
him for having done nothing to check the alarm ist
climate that opponents of the provisional govern-
ment were alleged to be fostering. This criticm is
not likely to affect the junta's position, but it
affords the Socialists a chance to establish a stand
independent from the Communists, who re-
mained silent on the matter. The Socialists are
probably anxious to move out of the shadow of
the Communists, who are their r:hief competition
on the left.
Spinela publicly discussed African policy for
the first time since the coup in a speech at the
sweariNg-in ceremony for the new governors of
Angola and Mozambique this week. The President
said that the possibility of political independence
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was implicit in his announced policy of self-
dei:ermination for the overseas territories. The
reference to political independence represents a
departure from Spinola's pre-coup statements,
which favored a political federation linking Portu-
gal and its overseas possessions. In his latest
speech, Spinola promised that the future of these
territories would depend solely on the wishes of
their inhabitants. He insisted, however, that there
must be cease-fire agreements, fol owed by the
establishment of democratic institut.ons. Tho pro-
pcsals Spirola set forth in his speech will be
tested during the second round of talks with
Portuguese Guinea's insurgents, which opened on
June 13 in Algiers.
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CYPRUSc7,
LEE
ISRAE
Suez
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Per.; Ian
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USSR
OPERATING IN THE INDIAN OCEAN
The recent arrival of a replacement group
provides further evidence that Soviet naval opera-
tions in the Indian Ocean have developed certain
recognizable patterns: the make-up of the force
apparently has stabilized: the warships sent there
operate for about a year; visits to Iraq have in-
creased significantly; and more modern Soviet
ships now visit the area.
The replacement force that arrived in the
Indian Ocean in May is almost identical to the
contingent it replaced. The force consists of a
Kotlin-ciass destroyer, two Petya-I I - class ocean
escorts, two fleet minesweepers, and one F-class
diesel attack submarine. This year the Soviets also
sent an intelligence collection ship. This ship is
operating at the entrance of the Persian Gulf,
probably to gather information on JS and Iranian
ships in the area.
Soviet minesweepers and ocean escorts in
these contingcnts have made a practice of visiting
Iraqi ports at the beginning and end of their
Indian Ocean tours. A Soviet naval repair ship or
a submarine tender has been present during these
visits, suggesting that the Soviets have conducted
repair or maintenance on the ships while they are
in port. Most of these visits apparently have been
to the port of Basrah, where major Iraqi naval
facilities, including maintenance and repair, are
available. One minesweeper of the current force is
now near Basrah.
During the past year, more modern Soviet
ships have been operating in the Indian Ocean.
The force has been augmented twice by visits of
Sverdlov-class cruisers. Two Kresta-I I - class
cruisers?among the most modern Soviet ships?a
C-class nuclear-powered cruise-missile submarine,
and a V-class nuclear-powered torpedo attack sub-
marine have also operated there briefly while
transferring from the Baltic and Northern fleets
to the Pacific Fleet. These ships and submarines
are the first of their class to operate in the Indian
Ocean.
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USSR
WORLD PARTY CONFERENCE ENDORSED
Afier nearly a year of patient behind-the-
scenes efforts, the Soviets used a Pravda article on
June 5 to publicly register their "support" for a
new world Communist conference.
The East Europeans, who had been Mos-
cow's stalking horses in calling for the meeting,
quickly followed Moscow's lead. Czech party
leader Bilak echoed the call for a conference on
June 6, and pledged Prague's support for an all-
European party meeting similar to the gathering
in Karlovy Vary in 1967 that led to the last world
meeting in 1969. Several days later, Polish party
chief Gierik proclaimed that the "great majority"
of Communist parties supported the idea of a
world gathering. The Hungarian press quickly
joined the chorus, but also referred to the opposi-
tion of some parties to the conference.
Indeed, Moscow has a lot more missionary
work to do. Many important Communist parties
in Europe and Asia are less than enthusiastic
about a world meeting. They fear?with much
justification?that Moscow intends to use the oc-
casion to denounce the Chinese and to impose a
new orthodoxy on the international Communist
movement.
Two key East European parties have proved
to be particularly irksome to the Soviets. The
Romanians, who boycotted Karlovy Vary in 1967
and made trouble at the world conference in
Moscow in 1969, have already posed several con-
ditions for their attendance at another world
gathering. Bucharest wants assurances that all
parties will be permitted to attend and that no
party (i.e., China) will be directly criticized. On
the points, the Romanians have the support of
the Yugoslays. Belgrade has noted that "not a
single party has emerged as host" to either a
European or world meeting. The implication is
that, in truth, only the Soviets really want a
gathering of parties at this time.
25X1
The Pravda article will serve to push things
alnng, but a world meeting is at least a year away.
The Soviets will likely try to promote several
regional meetings?particularly in Latin America
and Europe?to try to hammer out a common
approach. An all-European meeting probably
could not take place before early 1975.
LOW GEAR AT KAMA
The USSR's Kama truck plant, showpiece of
the 1971-75 plan, is running two years behind
schedule and will not turn out its first trucks
before the end of 1976 at the earliest. Plant
officials have abandoned hopes of tiuildiny
20,000 Kama trucks in 1975 to symbolize the
success of the Five-Year Plan.
Construction of the giant $4 billion corn-
plex, designed to produce 150,000 heavy diesel
trucks a year, will continue well into the next
five-year period. The plant probably will not
reach full operating capacity before 1978. After
four years of intensive construction activity by a
massive work force of up to 60.000, the basic
structures of five main production plants have
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ryter
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t1.1#4???? ? ? ? tite 0/1 / r.14,+?erv;
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Workers' housing at Kama
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Soviet Purchases of Equipment
for Kama Truck Plant
Country
US
France
West Germany
Other Western Europe
Japan
Total
Value
($ Million)
350
276
196
70
75
966
been erected, but only the tooling and repair
plant is finished and in operation.
The USSR is depending almost entirely on
the US, Western Europe, and Japan for equip-
ment and production technology for the plant.
Initially, the Soviets were prepared .to spend $1
billion for Western equipment and services. Con-
tracts already total $966 million, however, and
large purchases have yet to be made.
Western Europe is well ahead of the US in
selling equipment, with contracts worth $541 mil-
lion. France is supplying the engine plant, West
Germany the transmission plant, and Italy the
conveyor system; heavy presses and stamping
systems are being supplied by Japan. West Euro-
pean firms have had an advantage over the US and
Japan because of their more advantageous loca-
tion, their better price and credit terms, and their
recent experience in building car plants in the
USSR.
Soviet purchases in the US for the plant have
soared since early last year when the US extended
credit through the Export-Import Bank, Chase
Manhattan, and other commercial banks for a
total of $323 million at six percent interest. More
than 20 US firms have contracts ranging in value
25X1
from $1 million to $43 million, and dozens more
have smaller orders. US sales, which now total
$350 million, may reach $500 million if the So-
viets purchase US machine tools for making axles
and crankshafts. In addition, most of the equip-
ment for a $70-million computer system has yet
to be purchased; so far, only $12 million has been
spent on IBM computers for the foundry. Until
credit was offered, the Soviets had restricted their
US purchases to $26 million for foundry tech-
nology and gear machines that were not available
elsewhere.
Difficulties in keeping Kama on schedule
were inevitable because the project was poorly
planned from the beginning. Initially, the USSR
had wanted a large Western truck manufacturer to
help design and build the plant, but the under-
taking proved too large or unattractive for any
single firm. After two years cf negotiations with
numerous Western firms, the Soviets began the
construction of buildings and support facilities,
and parceled out the production engineering to
Western firms.
As expected, Western firms found that fit-
ting their engineering layouts to Soviet blueprints
was costly and time consuming. Soviet reluctance
to allow Western engineers access to the building
site during the construction phase resulted in
further delays. The US firm that designed the
foundry had to renegotiate its $9-million contract
last year to take care of time and cost overruns.
Because Kama is not being finished on time,
the Soviet truck industry will fall about 5-percent
short of meeting its 1975 production goal of
765,000 trucks. In addition, the transportation
industry will be adversely affected. The economy
badly needs the three-axle Kama trucks for short-
d iste,nce hauling, particularly for agricultural
crops and construction materials.
These trucks can carry up to 11 tons of
cargo, and up to 20 tons when used with semi-
trailers. 25X1
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ZOA I
STIR IN WORLD GOLD MARKET
From a peak of nearly $180 an ounce in
early April, gold prices have trended downward to
$157 an ounce in London on June 13. In the last
two weeks, major oscillations have reflected the
market's reaction to US and EC developments:
? May 30?up $6.50 when the US Senate
passed a bill allowing US citizens to own gold.
? May 31?down $5.25 when US Treasury
officials emphatically opposed private owner-
ship.
? June 5?up $7.25 when Secretary Simon
suggested the US may be amenable to a rise in
the official price.
? June 7?down $3.50 when EC finance
ministers faiIed to propose a revaluation in
the official price.
The recent downward trend ;n
price can largely be explained by the
decline in commercial dlmand for
gold, which has been only partially
offset by increased speculative de-
mand. Commercial users have gradu-
ally withdrawn from the market be-
cause of high prices and the world-
wide economic slowdown.
commer-
cial gold purchases are down about
one third from their 1973 peak. At
the same time, ? new gold sales by
South Africa and the Soviet Union are
almost as high as last year.
Sharp fluctuations in price are
likely to continue until gold's future
role is explicitly defined. EC finance
ministers and central bank governors
failed to take a definitive stand on gold at their
recent meetings. The Group of Ten announced on
June 12 that gold could be used as collateral for
loans at a price determined by the lender instead
of the official price of $42.22, but the agreement
does not radically change the status quo. It
represents a joint effort to provide Italy and some
other needy countries with a means of obtaining
additional loans to finance their oil deficits.
Other new arrangements to permit the
financing of payments deficits by using gold at a
higher price?bui: without increasing its future
role in the monetary system?are not likely at this
time. If the agreement of June 12 leads to gold-
backed loans, central banks probably will have a
vested interest in preventing sharp fluctuations in
the price of gold on the free market. Thus, free
market sales, and even intra-bank sales by central
banks, are unlikely.
Dollars per
troy ounce
180
170
180
150
140
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London Free Market Gold Price* 1974
120
Basel on the afternoon fix in London on the
fast lading day in each wort. ?
110 "Gold was fixed at an all time record high of $179,50 on April 3.
100
an pal Mu Apr May Ali lit All Sip 00 Pin On
554Q14 0.14
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CEMA MINISTERIAL TO OPEN
Heads of governments from the USSR and
its eight CEMA partners will gather in Soria from
June 18-20 for the 28th session of the Council of
Mutual Economic Assistance. The session will be
heavy on atmospherics for CEMA's 25th annive..--
sary.
Final approval is expected to be given impor-
tant multilateral projects worked out in recent
months for the development of raw material and
energy resources. These include:
? Construction of a huge steel complex at
Kursk in the USSR.
? Expansion of Soviet natural gas exploita-
tion at Orenburg and construction of a pipe-
line from there to Eastern Europe.
? Construction of a high-voltage power
line connecting the Soviet European grid with
that of Eastern Europe.
The East Europeans are investing heavily in
Soviet raw material resources. Some 30 other
projects involving the development of Soviet re-
sources are under consideration. These invest-
ments continue to bind the East Europeans closer
to the USSR but also assure them of long-term
sources of raw materials.
To balance the emphasis on Soviet resources
development, the session may seek to publicize
exploitation efforts elsewhere. Multilateral devel-
opment of Cuban nickel mines, which has been
under consideration, might be announced.
The participants doubtless will applaud the
progress made during the last year in diversifying
the forms of economic integration. Three more
international economic associations have been
created. These associations coordinate activity at
enterprise rather than governmental level, and
25X1
promise more flexibility than usual in the CEMA
intergovernmental machinery.
There is apt to be little piogress, however,
toward increasing the use of financial and mone-
tary tools in intra-CEMA dealings. The tentative
agreement made last year to revise the exchange
rate of national currencies and the transferable
ruble, CEMA's common currency, seems to have
run into problems. Moscow continues to oppose
necessary monetary reforms?sih as making the
transferable ruble convertiHe?partly because it
would give its CEMA partners greater economic
flexibility in their dealings with the West.
The participants will have to grapple with
any difficulties that have arisen in the current
effort to coordinate national economic plans for
1976-80. The Soviets are insisting on much more
detailed coordination than heretofore. Com-
plicating the coordination effort is the revision of
CEMA foreign trade prices, which is done before
each five-year plan period. The East Europeans
are concerned that large increases in the prices of
Soviet raw materials, particularly oil will unduly
strain their economies.
The government leaders will undoubtedly
consider tactics to be used in CEMA's effort to
establish a dialogue with the EC. The EC has
responded positively to CEMA Secretary General
Fadeyev's proposal last summer to begin negotia-
tions on a formal EC-CEMA relationship. Fadeyev
recently indicated, however, that CEMA is not
yet willing to establish direct contact with the EC
Commission, something the EC considers essential
before opening negotiations.
Bucharest seems prepared to play its usual
maverick role, judging by its recent commentaries
on CEMA, in which it strongly restated its views
on the acceptable limits of economic integration.
It is not clear, however, what specific issues have
upset th:-. komanians.
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e_
AUSTRALIA: A LEFTIST FOR WHITLAM
The left wing of the Australian Labor Party
will have new prominence in party councils as a
result of the elevation this week of its most
famous member, Dr. Jim Cairns, to deputy party
leader. Cairns?an outspoken critic of US policies
and of the US-Australian defensive alliance?also
becomes deputy prime minister.
The Labor Party caucus, composed of mem-
bers of the newly elected House of Representa-
tives and Senate, selected Cairns on June 10 by a
vote of 54-42. Cairns is popular within the party
and came within six votes of beating Whitlam for
party leadership in 1968 when Labor was still in
the opposition.
Cabinet positions in the new government
will be distributed the same as before, with Cairns
retaining his portfolio as minister of overseas
trade. Cairns has indicated that he expects to use
his new position as deputy prime minister to
increase his influence in economic policy gen-
erally. He will probably push for additional gov-
ernment legislation to assure Australian control
over its natural resources and to further restrict
Cairns
25X1
the influence of foreign investment in the domes-
tic economy.
Cairns' selection as deputy prime minister is
due in part to the increased strength of the left
wing of the Labor Party as a result of the recent
national elections, but it also reflects a growing
restiveness within the Labor Party caucus with
Pr!me Minister Whitlam's arrogant style of leader-
ship. Cairns has promised to give the caucus more
say in decision making, whereas Whitlam has
often antagonized party members by presenting
them with a fait accompli. Whitlam had opposed
Cairns' selection and reportedly made a last-
minute effort on behalf of his own candidate,
former deputy prime minister Lance Barnard, but
the Prime Minister obviously did not stake his
own future on thp mfr.
VIETNAM: TALKING AGAIN
2
25X1 5X1
Communist negotiators this week condi-
tionally accepted Saigon's offer to restore their
diplomatic privileges and immunities in exchange
for a resumption of military talks between the
two sides. The Communists returned to the talks
in Saigon on June 11 but continued to boycott
the political discussions in Paris and the Four
Party talks to locate US soldiers missing in action.
Saigon's move was intended in part to help
encourage a favorable atmosphere for aid meas-
ures before the US Congress. Although there was
some apprehension within the government that
the offer might be interpreted by the Communists
as capitulation and weakness, President Thieu was
apparently convinced that many US congressional
leaders were blaming Saigon for the breakdown in
the talks. Thieu may well have believed that any
propaganda advantage the Communists would
gain from the new government concession would
be offset by a positive effect on congress.
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Although South Vietnam still hopes that the
Paris talks will be revived, the outlook is for
further delay. The Communists continue to de-
mand that Saigon first "sc-riously consider" their
six-point peace plan of last March?a rehash of
previous demands that the government implement
the cease-fire and recognize Communist political
and territorial claims in the South.
Saigon steadfastly refuses to discuss the
Communist proposal, arguing that no further
elaboration of the present agreement is needed.
President Thieu re-emphasized his opposition to
any modifications of the existing agreement in a
public speech on June 6. In remarks directed at
Washington, Thieu also displayed apprehension
over the possibility of a new round of US negotia-
tions with the Communists, and expressed con-
cern that continued US assistance to his govern-
ment would be conditioned by Saigon's willing-
ness to agree to such new negotiations. The South
Vietnamese leader claimed
to this.
1 0 I .
THAILAND: HOT SUMMER AHEAD
The new Sanya government, barely in office
two weeks, is already being severely tested by
radical student and labor leaders. Thousands of
textile workers, fearful of massive layoffs, oc-
cupied the Labor Department's premises last
weekend in an attempt to gain government assur-
ances that their jobs would be protected. Al-
though the government reportedly has met this
demand, a handful of student activists and labor
leaders are attempting to keep the situation
stirred up. Their speeches have an anti-govern-
ment and anti-US tone that is sure to alarm the
conservative elite, as will the activists' encourage-
ment of workers' strikes.
the strike movement spreads, it could
threaten the survival of the Sanya government.
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Prime Minister Sanya may be able to per-
suade more moderate student leaders, who still
carry influence among the generally conservative
Bangkok student population, to stay away from
the politically sensitive US base issue. If he can-
not, he may face pressure from Krit either to
clamp down on the radicals or to risk losing the
backing of the military.
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CAMBODIA
MUSICAL CHAIRS .
President Lon Nol and Prime Minister Long
Boret took steps this week to remedy the political
paralysis that has gripped the government as a
result of feuding between the cabinet and the
National Assembly, and the government's
handling of the recent student unrest. Long
Boret's pro forma resignation on June 13 opens
the way for him to put together a new cabinet,
apparently to be composed of members of Lon
Nol's dominant Socio-Republican Party and in-
dependents. The new cabinet will probably con-
tain a number of hold-overs, but some con-
tentious figures are likely to be dropped to make
room for new blood.
In order to maintain the government's coali-
tion nature, a senior member of Sink Matak's
minority Republican Party reportedly will join
Matak on the Executive Council, the country's
top policy-making body. Lon Nol has apparently
decided against a temporary suspension of the
assembly, but at last report he was seeking assur-
ances that the deputies would forgo their disrup-
tive interpellation of cabinet members?a tactic
that had provoked the resignations of several
members of the outgoing government.
25X1
The political maneuvering in Phnom Penh
was conducted against a backdrop of rumors
about terrorist activities and more student
demonstrations. None have developed so far,
however, and state funerals for the two officials
slain last week were held without incident on
June 12. The police have released 73 students
who had been arrested, but the continued deten-
tion of a number of known agitators has added to
the disarray in student ranks.
THE MILITARY SCENE
Action remained light this week on most
battlefronts. There was me sharp fighting north-
west of Phnom Penh around Lovek, however, as
the Communists began a new effort to take that
government base. Lovek's defenders repulsed the
attacks and claim to have inflicted heavy casual-
ties. Northeast of Phnom Penh, government units
began moving toward suspected Communist
rocket-launching sites on the east bank of the
Mekong River just apstream from the capi-
tal. 25X1
BURMA: LA3OR TENSIONS REMAIN
Forceful action by the Burmese army ended
s-rious labor disturbances in Rangoon last week.
The government moved 3,000 troops into the
city, and the workers called off further strikes
after two days of violent confrontation with
authorities. At ;east 22 demonstrators were killed.
The violence has left considerable bitterness
among the workers as well as among students who
had joined the protests. The students may have
been responsible for the increasingly political cast
of the demonstrations just before they ended.
Some protesters had begun calling for an end to
President Ne Win's "one-man rule."
The government has promised to try?and
probably will be able?to meet the demands of
the workers for more rice. Even if the current
emergency is weathered, however, more severe
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rice shortage 5 are expected in the future, and
further labor unrest could occur at any time.
The situation has posed a severe test for Ne
Win's newiy reorganized "constitutional" regime.
The President hs been out of the country on a
goodwill trip, and strains apparently developed
among his subordinates over how to handle the
strikes. I
"communist influence" was
the disturbances, and leftists both within an
outside of th S over II '1 ? ' ? - blamed.
25X1
INDONESIA: STORM CLOUDS GATHERING
25X1
the historic resentment of the Chinese business-
men. Unlike the countryside, the cities have po-
tential leaders who are already speaking out and
trying to exploit popular discontent.
The most active anti-government critics are
the students. Muslim student leaders reportedly
met in early May to discuss demonstrations
against alleged anti-Islamic goi.,...iment policies.
The Muslim students are among those most dis-
gruntled with the Suharto government, zIthough
they were not involved in the anti-Japanese riot-
ing, partly because they were more concerned
with other issues. If the Muslims could get a
general anti-government protest movement unc:.tr
25X1way, secular student groups might well join in.25X1
During the past eight years, the Suharto
regime has alienated or disappointed many of its
former political supporters. There is no specific
event in the near future that would provide an
obvious date for anti-government protests, but a
spontaneous eruption of violence such as oc-
curred in Bandung, West Java, last August cannot
be ruled out. In the present uneasy political situa-
tion, a significant breakdown in public order
could provide the catalyst for a carious challenae
to Suharto./
The anti-Japanese riots in January revealed a
real depth and intensity to the social and eco-
nomic tensions in Indonesia, but government ac?
tions since the riots have concentrated on finding
culprits rather than causes. Many critics of the
regime have been arrested, and press freedom has
been significantly curtailed.
Although government officials are now pay-
ing lip service to the need for changes, it is ques-
tionable whether the Suharto regime can reverse
current trends. In rural areas, particularly on Java
where the bulk of the population lives, the peas-
ants find it increasingly difficult to survive.
Changing patterns of land tenure and labor use
are driving increasing numbers of people off the
land, and some local observers believe that rural
pressures are building to the point wKere anarchy
is a real possibility. The government is being
advised by Western-trained specialists who have
prepared impressive blueprints stressing technol-
ogy and capital, but few officials have the will or
ability to put the plans to use.
I housands of the rural unemployed are moving to
the urban areas, aggravating existing social and
economic problems. The gap between rich and
poor is most obvious in the cities, where it helps
to intensify social and racial hatreds, particularly
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JAPAN - SOUTH KOREA 7 NEW STRAINS
President Pak Chong-hui's continuing cam-
paign to suppress domestic dissent is once again a
target of Japanese media attacks, making it dif-
ficult for Tokyo's leaders to defend a policy of
close cooperation with South Korea.
Seoul's recent decision to bring South Ko-
rean opposition leader Kim Tae-chung to trial has
most offended Tokyo. From Japan's point of
view, the move violates a diplomatic understand-
ing reached last fall after Kim was kidnaped from
Japan by South Korean security agents. The
agreement provided that Kim wou" not be pros-
ecuted for his political activities overseas and
would be free to travel abroad. The Koreans claim
that Kim is being tried for "election law viola-
tions" dating as far back as 1967, a domestic
offense of no concern to the Japanese.
The Kim trial comes on the heels of the
arrest in South Korea oi two Japanese for sub-
versive activities. The arrests triggered intensified
Japanese media attacks on the repressive nature
of the Pak regime as well as indirect criticism of
the Japanese government for being toc soft on
Seoul.
In response to such pressures, Prime Minister
Tanaka has twice recently called on Seoul to
honor its agreement to allow Kim to leave the
country. Foreign Knister Ohira on June 8 com-
plained that the two countries were "considerably
apart" in the interpretation of the diplomatic
understanding and promised a "close watch" on
the handling of the Kim trial.
Seoul, nevertheless, appears determined to
press ahead with the trial. President Pak appar-
ently has two basic purposes in mind: to make
clear to his domestic political opponents thai
criticism of the government will not be tolerated
from any quarter; and to remind Japan, and pos-
sibly the US as well, that outsiders should not
advise the Koreans "how to run their own busi-
ness."
25X1
At least some South Korean officials now
feel that Seoul has been too abrasive in recent
weeks. They fear that Tokyo will retaliate by
recalling its ambassador. Some Japanese press re-
ports have suggested that this action is indeed
being contemplated. Last year, when tensions
generated by the Kim kidnaping were at their
peak, Foreign Minister Ohira did indeed refer to
such a possibility. Seoul has reportedly quietly
sent a special envoy to assess Japanese intentions.
Concerns that the issue may snowball are
shared in the Japanese government. Although
Tokyo values highly its economic and political
links with South Korea, government leaders fear
that the weight of public opinion will make it
increasingly difficult for Tokyo to provide eco-
nomic aid to South Korea or to openly maintain
close political contact. There may also be com-
plications in maintaining continued Japanese co-
sponsorship of the Korean resolution at the UN.
And should Australia and other countries once
close to the South Korean government move
ahead with plans to recognize North Korea, the
current climate of opinion in Tokyo might stimu-
late sentiment for similar movement by Japan.
At this point, Tokyo probably hopes for
some sort of compromise with Seoul that will
help pacify Japanese public opinion. There is
evidence that the Japanee government hopes that
Seoul will deport the two Japanese later this year,
even if?as seems likely?they are convicted this
summer. This might open the way for Tokyo to
acknowledge that the Kim trial is a domestic
Korean matter and to do so with put sparking
another round of charges on softness toward
Seoul. It is doubtful, however, that the Japanese
media and opposition parties would let the gov-
ernment off the hook this easily, especially since
South Korean prosecutors seem ready to intro-
duce more serious charges against Kim Tae-chung
at some point in his trial.
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KOREA: NEW MILITARY EQUIPMENT
For the North
Pyongyang
has received significant new military equipment
from both China and the USSR. At the same
time, the North Koreans are actively pursuing a
naval construction program of their own.
North Korea received ..wo R-class boats
from the Chinese in 1972, but the other two are
apparently recent arrivals from Tsingtao. The Chi-
nese had been preparing them there for export
since last summer, when two R-class units with
pendant numbers outside the series used by the
Chinese navy were first observed. Along with the
four R-class boats, Pyongyang has four W-class
attack submarines received from the USSR in the
early 1960s.
In addition, a KOI, Jr guided-missile boat was
detected under construction at a west coast ship-
yard. This is the first evidence that the North
Koreans have begun production of Komars, al-
though they probably will require either Soviet or
Chinese assistance on the ship's electronics sys-
tem. The burgeoning North Korean shipbuilding
industry has already produced two destroyer es-
corts, in addition to numerous gunboats, torpedo
boats, and amphibious craft.
North Korea currently has ten Komars, all
assigned to the East Coast Fleet. It also has eight
of the larger Osa-class guided-missile boats?four
on each coast.
Pyongyang has been improving its West
Coast Fleet for well over a year, and the addition
of the R-class submarines plus the production of
Komars will hasten this process.
2bAl
25X1
The FROG-7, the latest in t25_ X. .1.0G
series of Soviet tactical surface-to-surface25X1:s,
can deliver a high-explosive, chemical, or nuclear
warhead up to 43 nautical miles. The Soviets
almost certainly would not provide North Korea
with nuclear or chemical warheads. Pyongyang
has had earlier models of the FROG since 1q9.
25X1
...and for the South ?
25X1
For some time, Seoul has had a variety of
anti-ship missile systems on its shopping list, in-
cluding the Norwegian Penguin, the Israeli
Gabriel, r..nd the US Standard, as well as the
Exocet. Efforts to obtain one of these systems
reflect Seoul's concern over the superior naval
firepower of North Korea. The North's supe-
riority stems from its Osa and Komar guided-
missile boats, which carry the Styx missile that
has a range of 20-25 nautical miles.
The South Korean chief of naval operations
was reported to have remarked recently on the
need for developing a naval force capable of effec-
tively counteracting that of North Korea. The
acquisition of the Exocet?with a range equal to
that of the Styx?would be a major step toward
redressing the current naval imbalance he'"'
the two countriec 25X1
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ETMOPIA: GOVERNMENT STRENGTHENED
Military moderates still appear to hold the
balance of political power in Ethiopia, but they
have apparently decided to allow the civilian gov-
ernment some leeway in dealing with the coun-
try's pressing problems. Prime Minister Endal-
katchew, who maintains close contacts with
Emperor Haile Selassie, is taking advantage of this
greater latitude to strengthen his own position
and that of the government's conservative ele-
ments, toward whom he leans.
The military moderates remain an amor-
phous group that makes decisions by consensus
and has no central leadership. The moderates
appear to represent the mainstream of army senti-
ment at all but the highest levels. They are pess-
ing for change toward a more democratic, modern
society, but they want to preserve the monarchy
and do not want to assume the burdens of ruling.
The cabinet appointments that Endal-
katchew announced late last month demonstrate
his increased confidence in dealing with the dom-
inant military elements. In the most significant of
the changes, !nterior Minister Zewde, a leader
among progressive elements, was shifted to the
Foreign Ministry, where he will have less uf a
voice in domestic affairs. Unlike Endalkatchew,
Zewde has the full confidence of the military
moderates; he was thefr initial choice to become
prime minister when they forced a government
change last February.
On the other hand, the military moderates
probably view the new acting interior minister,
Dem issie Teferra, with suspicion. He served in the
discredited former government and is considered
a conservative. Moreover, the change in the
leadership of the ministry places the security serv-
ices more firmly in the hands of Endalkatchew.
Another of the recent appointees, Tekalign
Gedaum, had resigned as minister of planning and
development only a few weeks ago; he has now
been made minister of telecom 11U I ? ?
rns reappointment to the cabinet sug-
gests that the Prime Minister considers his posi-
tion strong enough to withstand added criticism.
2bA"I
The moderates are not pleased with the ex-
tension of conservative influence, but have appar-
ently accepted Endaikatchew's more independent
behavior because they do not believe that it
threatens long-term prospects for significant
changes. The moderates seem willing to ccm-
promise on some issues and to work with the
government in order to avoid violence and to hold
in check traditional rivalries that could threaten
the country's survival.
There are several potential areas of disagree-
ment. A special commission is currently con-
ducting an inquiry into charges of corruption
leveled against former high government officials.
The military moderates would react strongly if
they were not satisfied with the commission's
findings, or if the government failed to take
prompt action against any official criticized by
the commission. They would react similarly to
any attempt by conservatives to domina:e tne
constitutional committee That is to transform
Ethiopia into a limited monarchy in which the
government will be responsible to parliament. The
committee is due to deliver its report in about
three months. The military is also closely watch-
ing the government's progress in carrying out
promised social and economic reforms, particu-
larly regarding the restructuring of Ethiopia's
traditional land-tenure system.
Meanwhile, the government iz trying to
reduce the likelihood of a recurrence of the civil
strife with which it has had to grapple until re-
cently. It has set up two committees under the
direction of Defense Minister Abiye with broad
mandates to handle matters affecting national se-
curity. One committee studies grievances within
the military; the other deals with any problem in
the civilian sector that threatens public order. The
latter group has helped the government regain
some initiative in dealing with civil disorders by
taking an active role in arbitrating problems, such25x6
as labor strife and student unrest, which have
plagued the cabinet since its formation. The cormog y6
mission is currently trying to settle an 11-day old'
truck drivers' strike that has created shotages
throughout the country. 25X1
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The King, Prime Minister Rifai, and high-ranking military officers.
JORDAN: TROOPS STLL DISGRUNTLED
Measures taken by King Husayn after the
mutiny of an army unit last February have failed
to quiet restiveness among the Bedouin soldiers,
who are the bedrock of Husayn's power. The
festering discontent may lead to new trouble in
the army, with the King a more direct target of
criticism than he was in February.
Since the mutiny, Husayn has moved to im-
prove living Londitions for the military, especially
for the army rank and file. In addition to granting
the pay increase demanded by the mutineers, he
has had commissary and medical services up-
graded, assumed the debts of noncommissioned
officers, and ordered army chief of staff Bin Sha-
kir to give top priority to barracks construction.
Inadequate housing apparently has been a major
source of dissatisfaction.
Nevertheless, thcre is a strong residue of
bitterness among buil) officers and enlisted men
over continued corruption among senior officers
and lack of contact with the King. Although
Husayn has recently begun to visit army units
more regularly, he has usually been sealed off
from the troops by Bin Shakir and a wall of aides
so that the Bedouin soldiers continue to he de-
nied the easy access to Husayn that they once
enjoyed.
Moreover, many of Husayn's Bedouin sup-
porters in the army believe the King still does not
understand why the 40th Armored Brigade muti-
nied. They are beginning to criticize Husayn for
lack of leadership and to blame him personally?
rather than his circle of advisers?for the so' ead of
corruption in the army and the government.
There has been some talk of another mutiny.
The discontent, especially among middle
grade officers, is said to have spread recently as a
result of the forced retirement of sevei of Bedouin
army and public security officers and the appoint-
ment of Circassian officers to high-level military
slots. Bedo4tin officers report,dly are especially
resentful that the Circassians?a tiny minority in
Jordan?hold a near Ir:,-.-,7:opo:y on top air force
posts. They are also angry because they believe
the Iraqi-born air force commander has, with
Husayn's approval, resumed secret payments to
several high-ranking Circassian air force officers to
ensure their continued loyalty to the throne.
Prime Minister Rifai, who was the focus of
much of the mutineers' wrath, also continues to
be heavily criticized for being out of touch with
problems on the East Bank and for surrounding
himself with a "pro-Palestinian clique." East
Bankers, and especially the Bedouin, have always
resented the attention Husayn has paid to the
West Bank and to Palestinian problems, believing
Vial he has shown his Palestinian sul),acts too
much favoritism. Some Bedouin officers fear that
Rifai might try to persuade the King to make a
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deal with West Bank Palestinians at the expense
of East Bank Jordanians, presumably to ensure
their support for the King's claim to the Israeli-
occupied West Bank.
NORTH YEMEN: NEW ARAB AID
Yemeni Prime Minister Makki visited Saudi
Arabia and several other Persian Gulf states in
May. In addition to a sympathetic hearing and
assurances of political support for his country's
struggle with South Yemen, Makki netted Sana at
least $125 million in military and economic com-
mitments, with promises of large amounts of ad-
ditional military support.
Since the early 1970s, when the USSR
shifted its attention to Aden and began withhold-
ing delivery of military equipment and spare parts
that had been contracted for, Sana has been pur-
chasing arms from other Arab states as well as
West European countries. With Saudi Arabia's
new financial commitments, Sana should eventu-
25X1
ally be able to realize its goal of completely
Westernizing its armed forces. The new economic
commitments to Sana reiterate the oil-rich states'
continuing preference for bilateral aid, even over
their own proposed multilateral aid institutions25X1
25X1
Of the five countries Makki toured, Saudi
Arabia was by far the most forthcoming. Jidda
will increase its annual budget support to the
lryani regime by some 50 percent, rea:hing $34
million this year. The Saudis also agreed in prin-
ciple to provide at least $30 million for construc-
tion of airports, roads, and other projects as well
as for technical assistance and equipment for
Yemen Airlines. The Saudis reaffirmed their will-
ingness to finance the retraining and re-equipping
of Sana's military forces with Western arms; the
Saudi minister of defense reportedly spoke of an
eventual expenditure of up to $700 million. Dur-
ing the past year. the Saudi government has fi-
ronced over $75 million of Soviet arms purchased
from Egypt for Sana, including jet aircraft and
tanks, and has paid for some $20 million worth of
French, UK, and US equipment. Nevertheless,
even though Jidda has been anxious to reduce
Sana's reliance on Communist arms supphers, the
Saudis have not always followed through on their
promises.
Abu Dhabi is following up its military assist-
ance to S,?.;.a over the last year?during which it
financed purchases of 30 armored cars from Jor-
dan and two transport aircraft from the UK?by
arranging for the purchase of $2.6 million in small
arms from the US. Abu Dhabi also agreed to
provide over $300,000 annually to cover the costs
of Jordanian military advisers currently assigned
to Yemen, and may be willing to pay for Pakis-
tani and Sudanese advisers if Sana can arrange a
deal for their services with Islamabad and Khar-
toum.
Economic pledges from Abu Dhabi, Kuwait,
and Qatar include about $60 million in grants for
education, public works projects, and the pur-
chase of petroleum products. Although Bahrain
pleaded poverty, it agreed?for symbolic pur-
poses?to extend small amounts for educational
and medical aid.
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VENEZUELA: THE CUBAN CONNECTION
The re-establishment of diplomatic relations
with Cuba is regarded as a certainty in Venezuela;
only the timing and a few of the details remain to
be worked out.
Spokesmen for President Carlos Andres
Perr,.: and his Democratic Action Party have made
it clear that the administration intends to follow
the previous government's policy of moving to-
ward the renewal of political and economic ties
with the Castro regime. Even prior to Perez' inau-
guration in early March, officials of the incoming
administration had met privately with Cuban rep-
resentatives in Caracas. Later, Luis Santander, a
special emissary of President Perez, flew to
Havana to discuss the conditions under which
diplomatic relations might be restored.
Carlos Andres Perez
25X1
Since then, there have been statements on
the Cuban question by Foreign Minister Schacht;
by Gonzalo Barrios, secretary general of the gov-
erning Democratic Action Party; and by Perez
Guerevro, a close adviser to President Perez. These
have all fueled speculation in Caracas that an
announcement was imminent, possibly before the
end of June. Even the leader of the small but
influential Cuban exile community in Venezuela
acknowledged to the US ambassador last week
that recognition was inevitable. According to the
Cuban, Perez was insisting that there be no
"hanky panky" in Venezuela on the part of Pre-
mier Castro, and that the Venezuelan embassy in
Cuba be allowed to function without restraints.
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So far, Perez and other party leaders have
consistently avowed that Venezuela would not
make a unilateral move toward Cuba. Instead,
Venezuela is seeking collective action by the
Organization of American States to lift the eco-
nomic and political sanctions imposed on Cuba
largely as a result of a Venezuelan request in the
mid-60s. The Venezuelan initiative to remove the
sanctions has the support of a majority of OAS
members, but not yet the required two thirds.
The Venezuelans may now believe, however, that
the informal consensus of the majority of OAS
members suffices for the "collective action,"
which they earlier r:onsidered necessary before
resuming relations.
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During his three months in office, President
Perez' approach to key policy issues has been
characterized by pragmatism. Theoretical and
ideological considerations have taken a backseat
to a calculated assessment of the advantages and
disadvantages of a particular act. Because Vene-
zuelan government officials and businessmen tend
increasingly to see considerable economic benefit
from re-establishing trade ties with Cuba?particu-
larly from selling the Cubans oil?it seems likely
that the Perez government will move soon in this
direction. Full diplomatic ties can be expected to
follow.
ECUADOR: THE PERILS OF PETROLEUM
The OPEC meeting that begins in Quito on
June 15 will give the Ecuadorean government
what it views as its first and perhaps best chance
to influence international oil policies.
Ecuador has been a petrolaim exporter only
since 1972 and has been an OPEC member for
less than a year. The country now exports
210,000 barrels of petroleum daily, which ranks
it at the bottom of the 12-member OPEC group.
Nevertheless, the military-dominated Rodriguez
administration is eager to be accepted as an equal
among the oil producers and can be expected to
add its voice to the calls for increasing the bene-
fits of oil through higher prices or, more likely,
higher taxes. Moreover, becatise Ecuador's oil re-
serves now appear considerably less extensive
than had been originally projected, the Ecua-
dorean delegation will lobby quietly for conserva-
tion measures.
A vague sense of frustration besets the
makers of Ecuadorean petroleum policy. On the
one hand, they are aware that the need to mod-
erate the extract of their country's oil will
weaken Ecuador's position at future OPEC meet-
ings. On the other, however, they want to capital-
ize on a unique juxtaposition of events that not
25X1
only brings the world's producers of petroeum to
Quito at virtually the same time that Ecuador has
become a significant exporter of oil, but does so
at a rare moment of fiscal prosperity and adminis-
trative stability for Ecuador.
Oil now almost completely dominates the
nation's economy and has become the focus of
support for Rodriguez' rule within the military.
Unprecedented foreign exchange earnings deriving
from oil have also accelerated inflation, which in
turn is bringing consumer pressure to bear on the 25x1
government. Thus, Rodriguez feels that he must 2bAi
steer a cautious course between high petroleum
income and high inflation, between capitalizing
on the world's hunger for energy and using of
Ecuador's less than bountiful petroleilm re-
sources, and between taking maximum political
advantage of the present OPEC meeting and plan-
ning prudently for the country's economic future.
In this atmosphere, Quito's likely policy to-
ward and within OPEC has emerged over the past
several weeks. Because, of all member countries
except Indonesia, Ecuadc' is the poorest and has
proportionately the most to gain from oil, the
Ecuadorean delegation will probably emphasize
the individuality of the members. It will argue
that differing national levels of development,
trade balances, production costs, and recoverable
reserves militate against the establishment of
broad OPEC policies. Instead, Ecuador will take
the position that each member country should
devise its own formula for increasing oil revenue,
restricting windfall company profits, and con-
serving resources.
This is the only tack that Rodriguez can take
politically in view of the country's economic posi-
tion and his own increasing dependence Cii oil.
His next step?assuming that the world energy
situation does not change radically?would be to
increase petroleum taxes and production fees to
increase government oil revenues, placing the
onus of outright price rises on the Texaco-Gulf
consortium, which exploits most of the country's
oil.
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MEXICO: RURAL DISCONTENT
Guerrilla violence and signs of rural discon-
tent are once again plaguing the Echeverria gov-
ernment.
The strange case of the political boss of the
southwestern state of Guerrero, Senator Ruben
Figueroa, kidnaped two weeks ago by guerrilla
leader Luc lo Cabanas, remains unresolved.
Cabanas operates in Guerrero and receives consid-
erable support from the peasants there. Figueroa,
the government's choice for state governor in
elections this December, went to a meeting he
had proposed with Cabanas to offer him amnesty
and wound up Cabanas' prisoner. So far the fed-
eral government has only partially met Cabanas'
demand that army troops be withdrawn from the
area before he will negotiate Figueroa's release.
Authorities are doubtless searching for a way to
free Figueroa unharmed and to capture or kill the
troublesome Cabanas at the same time. The gov-
ernment's stated policy is not to awe in to kid-
napers' demands, but it may have to bend even
more than it already has in this case.
Compounding the Figueroa problem was the
kidnaping last week of a wealthy Mexican busi-
nessman and the murder of a student leader in
Guadalajara. The businessman died while in cap-
tivity, apparently of a heart attack, but his abduc-
tion brought to light what could be a new guer-
rilla group called the Salvador Allende Urban
Command. Authorities are not convinced of this
group's authenticity, however, and speculate that
the kidnaping may actually have been the work of
the 23rd of September Communist League, a
group that has perpetrated numerous acts of ter-
rorism since the spring of 1973 and continues to
be active despite recent arrests of several of its
members. The student's death adds to the tension
in Guadalajara, the scene of many acts of violence
in the past several months.
Publicly, the government still lumps the
guerrillas together with common criminals. The
defense minister has even denied that guerrillas
exist in Guerrero. Privately, authorities admit
25X1
President Echevema
they are a nettlesome problem, but believe the
guerrillas can be controlled by better training and
intelligence work on the part of security forces.
Many in the government also recognize that,
in the end, the grievances of the guerrillas will
only be resolved by correcting social and eco-
nomic inequities. The government is particularly
concerned over the threat to public order that
exists in the impoverished rural areas, where tradi-
tional discontent and distrust of the central gov-
ernment could easily fan minor incidents into
serious and possibly widespread violence. In
April, 32 campesinos and police were killed in
two incidents arising from the use of farm land.
These confrontations do not always end in shoot-
outs?sometimes politicians save the situation
with fresh promises?but bloodshed on the campo
is not uncommon.
The unrest is partly a result of corruptiori
and exploitation, but ignorance, population pres-
sures, a shortage of good land, and the concentra-
tion on industry during the last 30 years also play
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Jun 14, 74
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a part, as do the rising expectations of the peas-
ants. President Echeverria has in some ways
heighi.ened these expectations. He came to office
in 1970 promising to improve the lot of the
peasantry, a commitment he frequently renews
during trips to the countryside. He has already
made more trips to the provinces than his three
predecessors did during their collective 18 years
in office, but the peasants have seen little results
from these journeys.
Probably the chief factor responsible for the
unrest, however, is the government's agrarian
policy, with its system of ejido farms. The ejido, a
variant of the ancient Indian communal lands,
satisfied the urgent political need to give land to
millions of impoverished peasants. But it has
failed to meet the food needs of the country or
the economic needs of the peasants themselves.
The E.cheverria administration intends to ease the
problem of sluggish growth in agricultural produc-
tion in part by collectivizing more ejidos and by
providing them with increased public and private
credit. The small landowner will not be forgot-
ten-1,'; too is included in plans for increased
lending?but the emphasis will be on collectives
and agribusiness.
PERU: A SPLIT IN THE JUNTA
The uproar surrounding the resignation on
May 30 of Vice Admiral Vargas as navy minister
has not only damaged armed forces unity but has
deeply split the navy. The split has caused deep
resentment in that service, and there are reports
that dissident navy officers have been planning to
take military action against President Velasco.
Thus far, however, the dissident officers appar-
ently have been unable to enlist the support of
moderates within the army and air force?who
also disagree with some of the President's policies.
Most army and air force personnel apparently still
back the President, however, and the navy is
incapable of seriously confronting them with
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force. Nevertheless, some disgruntled navy offi-
cers might attempt a move.
Other admirals have resigned during the past
two weeks, either voluntarily to protest Vargas'
forced retirement, or involuntarily because Ve-
lasco viewed them as actual or potential coup
plotters. In addition, a large number of other
navy officers reportedly have submitted their
resignations. Further resignations, if they materi-
alize, will exacerbate the current problem.
Vice Admiral Arce, who replaced Vargas as
navy minister, has in the past been critical of the
President's more leftist policies. He now appears,
however, to be developing into a hatchetman for
Velasco. The new minister reportedly pledged to
rid the navy of "unrevolutionary" and disruptive
officers before he retires next January.
Even though he may remain in office for less
than a year due to health problems, President
Velasco appears determined to crush any opposi-
tion in the navy to his continued leadership. Op-
position, even by the outspoken Vargas, never
cdnstituted a serious threat to the President's
leadership, however, and there have been no re-
ported plans by moderate army generals to nnovP
against him. 25X1
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The moderate army generals can be expected
to keep a close watch on the situation. Of particu-
lar importance will be their assessment of how the
ware radical military leaders, including a few left-
ist admirals, have profited frcm the recent split
between the army and navy. Should the moder-
ates conclude that their position has been seri-
ously weakened and that Velasco intends to press
ahead with more leftist policies, regardless of
their objections, some can be expected to resign.
If the army moderates were to leave the govern-
ment, this would have more serious consequences
for the stability and effectiveness of the regime
than would similar actions by the navy.
At the moment the important army troop
commands remain in the hands of loyal Velasquis-
tas and a concerted military move to replace
Velasco with a more moderate general is not yet
likely. 25X1
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