WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001000070008-2
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 30
• Document Creation Date: December 27, 2016
• Document Release Date: May 6, 2010
• Sequence Number: 8
• Publication Date: July 19, 1974
• Content Type: REPORT

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Wee 7 Review
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19 July 1974
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The WEEKLY REVIEW, Issued every Friday morning by the
Office of Current Intelligence, reports arid analyzes significant
Ntlev6lopments of the week through noon on Thursday. It
frequently, includes material coordinated with or preoared by
the Office of Econocnic Research, the Office of Strategic
Research; and the Direct rate of Science and Technology.
Topics requiring more comprehensive treatment and therefore
p!iblished separately as S ecial Reports are listed In the
contents, I,
CONTENTS (Jul)' 19, 1974)
EURCi:,E
MIDDLE EAST
AFRICA
WESTERN
HEMISPHERE
EAST ASIA
F-ACIFIC
INTERNATIONAL
1 Cyprus: After the C3up
4 Portugal: New Cabinet Africa
6 France: Giscard's For.i,qn Policy
7 Dutch Equivocate on Defense Policy
7 Spain: Franco's Health
8 Western Europe: Labor Ulity
8 luiland: Coalition Prospects
9 Balkan Mavericks Meet
9 Bulgaria: Leadership Changes
10 USSR: Defense Spending Rises
11 USSR-Somalia: Friendship Treaty?
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12 Egypt-USSR: Fahmi Visit;
Mine-clearing
14 Egypt: Maneuvering Among the Arabs
15 Israel: The Palestine Question
15 Spanish Sahara: Controversy Rekindled
17 New Look in Arab Investments
17 Pakistan: Neighbor Troubles
19 Argentina: Struggle on the Right
20 Chile: A Revamped Team
21 Uruguay: Institutional Solutions?
21 Mexico: The Figueroa Case
22 OAS: Loose Lid on the Cuba Issue
23 Japan: Challenging Tanaka
24 South Vietnam: Ballots and Bullets
25 Laos: A New Crisis
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29 Developed Countries: High Hopes
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AFTER THE COUP
The ouster of Archbishop Makarios by the
Greek-led Cypriot National Guard on June 15 has
touched off intensive diplomatic consultations
and raised the real possibility of Turkish military
intervention in the island state. The Turkish gov-
ernment publicly professes to believe that the
Greek junta instigated the coup to bring about
enosis, the union of Cyprus with Greece, and
finds the new government of Nicos Sampson
totally unacceptable. The Soviet Union also
strongly opposes the take-over, and it is likely to
press for the return of Makarios to power.
Makarios' escape from the presidential
palace complicated the task of conso:idating the
new government, despite the fact that the Na-
tional Guard has succeeded in establishing control
of the island. Makarios, who got out of Cyprus
with British assistance, wants to bring his case
before the UN in an effort to gain broad interna-
tional support for his position as the legitimate
leader of Cyprus. Before traveling to New York,
Makarios held talks in London with British
leaders, who reportedly agreed to the Arch-
bishop's request that London refuse to recognize
the Sampson government.
London was also the scene this week of talks
between Prime Minister Wilson and Turkish Prime
Minister Ecevit. Ecevit is apparently explr, all
possibi!ities for either a peaceul resolution or for
joint action with the British to restore the status
quo on Cyprus. Under a 1960 treaty, Britain,
Turkey, and Greece are guarantors of the in-
dependence of Cyprus. Prior to the prime minis-
ters' meeting, some Turkish diplomats had in-
dicated their belief that London was inclined to
accept the situation as it was evolving. If so,
under the terms of the treaty Turkey would be
free to act unilaterally; there are indications that
they are resolved to do so, and that they are
preparing militarily. Parliament was called into
session on July 18 and was asked to give blanket
approval for Ecevit's policies.
While the Prime Minister has been consulting
and waiting for the situation on Cyprus to clarify,
Turkish armed forces have been preparing for a
possible air and sea assault across the 50 miles of
ocean between the southern coast of Turkey and
Cyprus. Ground forces have been moved to the
southern port of Mersin, and ships that could be
used to transport them to Cyprus are in the area.
On July 18, there were reports that a regiment-
sized unit was boarding amphibious ships at a
staging area west of Mersin. In addition, air force
units at four Turkish airfields are on alert. The US
defense attache in Ankara reports that fighter
aircr:Ift at two airfields west of Ankara?Eskisehir
and Baliskesir?have been armed with general-
purpose bombs, air-to-air missiles, and air-to-
ground missiles. A fighter bomber squadron,
which was moved to Incirlik the day after the
coup, is also armed with bombs and missiles.
Although the armed forces of both Greece
and Turkey have been in a general state of
readiness as a result of the recent dispute over the
Aegean seabed, there is no evidence of unusual
activity or war preparations by the Greeks. The
Greek army is, however, going ahead with a
scheduled "rotation" of part of its 950-man force
on Cyprus. Although Athens has denied the
charge, the Turks have accused the Greeks of
using the rotation as a cover to strengthen their
forces on the island. In spite of the overwhelming
? majority of Greek Cypriots over Turkish Cypri-
ots, and the presence of the 10,000-man Greek-
led National Guard, the close proximity of the
Turkish mainland would give the Turks the
advantage in the event of hostilities.
On Cyprus itself, the new Sampson govern-
ment is trying to convey the feeling that it is in
complete control. It has lifted the daylight curfew
imposed when it first took over, although the
nighttime restrictions remain in force. The new
government is also seeking to reassure the Turkish
Cypriot leadership. In a conversation on July 17
with newly installed Foreign Minister Dimitriou, a
US official was told that the Sampson govern-
ment wiil not attempt to achieve enosis and will
welcome the continued existence of British bases
on the island. Despite this seemingly moderate
approach, Sampson is widely remembered as a
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guerrilla assassin of both British subjects and
Turkish Cypriots in the period prior to independ-
ence, and has since then been a right-wing cham-
pion of enosis. As such, he remains totally unac-
ceptable to both Turkish Cypriots and Ankara.
If Sampson is unable to consolidate his
position?and there is growing talk of a possible
compromise replacement because of the strorg
international reaction to the coup?it could
seriously weaken the position of the Greek str r
man, General loannidis.
Isponsoring the
action on Cyprus was a gamble with the fate of
his own government. Because of this, he report-
edly kept his intentions from all but a handful of
supporters, and carefully watched his own mili-
tary units during the action. For the moment,
loannidis seems to have won his gamble, but
complications?particularly a Turkish invasion?
could reverse this.
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LEBANON
ISRAEL
SOVIET REACTION
On July 17, Moscow issued an official state-
ment which reiterated support for Cyprus' in-
dependence, called for international support for
Archbishop Makarios, and condemned Greek
interference. The statement, however, was mod-
erate in tone, avoiding threats or any assertions
that the USSR sees its secur"y affected by devel-
opments on the island.
The statement does not commit the Soviet
Union to active assistance for any movement to
return Makarios to vwer, although Moscow's
initial comment on the coup had suggested that
the USSR was holding such a course open.
It seems unlikely, however, that the Soviets have
made a firm commitment of military backing to
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DEVELOPMENTS AT THE UN
The Security Council took up the Cyprus
issue on July 16. Secretary General Waldheim
presented a brief report on the situation and
explained his actions in granting Makarios "UN
protection." He added that the mandate of the
UN force on Cyprus did not allow it to intervene
until continued violence ran the risk of involving
the Turkish community. Despite the demands of
the Cypriot. representative for a resolution calling
for a cease-fire and for withdrawal of all Greek
National Guard officers from the island, the
Council meeting ended inconclusively and no
resolutions were tabled.
While awaiting the arrival of Makarios to
address the Security Council?perhaps on July
19?UN activity has centered on informal discus-
sions of draft resolutions. Makarios has already
declared that the final resolution must provide for
recognition of himself as the legitimate head of
government, withdrawal of all Greek National
Guard officers, and a pledge by Athens not to
recognize the Sampson government. The British
are eh zulating a compromise resolution that pro-
vides for the withdrawal of the Greek officers but
only obliquely recognizes Makarios' legitimacy.
The legal and political consequences of rec-
ognizing Makarios as the legitimate head of state,
meanwhile, continue to cause concern. The non-
aligned members of the Council originally took
the lead in drawing up a proposal that pointedly
avoided the question of Makarios' legitimacy and
called only for largely noncontroversial actions by
the concerned states, but there were later indica-
tions that they intend to take a more active role
in supporting Cyprus, one of the original
members of the nonaligned movement.
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Soviet tactics and Chinese intentions remain
largely unclear. The Soviets supported the
Cypriot demands at the Security Council meeting
on July 16 and urged the council to take decisive
steps to end the armed interference in Cyprus.
The Chinese did not speak at the meeting and
appear to have remained in the background in the
discussions regarding the proposed resolutions.
THE ATTITUDE OF THE WESTERN ALLIES
In Western Europe, virtually all reaction to
the coup stressed the strategic importance of the
island. Condemnation of Greece was almost
universal and popular feeling generally favored a
res',oration of Makarios. At the same time, there
is hale taste for military intervention and a pref-
eren-:e for solutions being worked out through
NATO and the UN.
Britain, with its special responsibilities for
Cyprus, is playing a major role in efforts to find a
solution. After providing Makarios with refuge at
one of the British bases in Cyprus, the British
transported him to Malta and London and have
repeatedly referred to him as the legitimate leader
of Cyprus. Both Prime Minister Wilson and For-
eign Secretary Callaghan have met with the Arch-
bishop and have assured him of their support.
Faced with a crisis between two of its NATO
allies, who?like Britain?are also guarantors of
Cyprus' independence, London has decided to
take a hard line toward Athens. The Wilson gov-
ernment, with strong parliamentary support, has
sen , a demarche to Athens calling on it to replace
the Greek officers serving in Cyprus.
The NATO allies have held three special ses-
sions to consider possible steps to ease the crisis.
Most members were highly critical of Greece and
endorsed London's suggestion to replace the
Greek officers now with the Cypriot National
Guard and expressed support for the regime of
Archbishop Makarios. The allies also called on
Greece to consult fully both in the council and
under the 1960. Cyprus aareements.
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PORTUGAL
A NEW CABINET
The installation on July 19 of a new cabinet
headed by Colonel Vasco Goncalves as Prime
Minister has ended the political crisis that erupted
ten days asio following the resignation of prime
minister Palma Carlos and four other centrists and
the subsequent dismissal of the rest of his cabinet.
The most striking characteristic of the new cabi-
net is the increased prominence of the organizers
of the April coup. Although clearly in control
since then, they have preferred to avoid the lime-
light. The political coloration of several ministers
is not yet known. The changes, however, appear
to have been made to ensure that the major aims
of the Arm ed Forces Movement?to restore
democracy and end the wars in Africa?are carried
out.
Although the new cabinet contains a ma-
jority of civilians drawn from the parties repre-
sented in its predecessor, the military make up
the largest unified group. The seven officers in the
cabinet, including the Prime Minister, are drawn
mostly from the Armed Forces Movement, which
engineered the coup. In addition to getting two
To inisters without portfolio, the military took
over the key ministries of interior, information,
and labor. They retained the Defense Ministry,
which will continue to be occupied by Colonel
Mario Miguel, who was President Spinola's origi-
nal choice for prime minister.
The Communists do not seem to have been
especially favored in the cabinet reshuffle. Unless
they gained some of the three ministries filled by
appointees whose political coloration is not yet
known, the Communists may have suffered a real
loss. They did not retain the Labor Ministry, nor
did they gain the interior and information minis-
tries, as they would have liked. Their leader,
Alvaro Cunhal, did retain his position as a minis-
ter without portfolio.
The Socialists have the jreatest number of
holdovers. Mario Soares, the ::Icialist Party secre-
tary general, stayed on as foreign minister, and
party loyalists held on to the justice and inter-
territorial-relations portfolios. The centrists have
only one carry-over, Joaquin Magalhaes Mota,
who moved from interior to minister without
portfolio. Two centrist economists will head the
separate ministries of finance and economy.
Perhaps as a result of the outgoing cabinet's
difficulties in controlling labor unrest, President
Spinola and his military advisers have taken addi-
tional steps to maintain control. A decree issued
last week stablished a Continental Operations
Command empowered to intervene directly in the
maintenance and re-establishment of order when
normal police forces are inadequate. Although the
command will be directed by General Francisco
da Costa Gomes, chief of the armed forces
General Staff and a close supporter of General
Spinola, the Armed Forces Movement will be able
to keep close tabs on the new command through
Otelo de Carvalho, one of the leaders of the
Movement who was appointed deputy chief of
the new group and also made commander of the
Lisbon Military District.
Now that members of the Armed Forces
Movement are assuming more prominent roles in
the government, their political orientation will be-
Premier Vasco Goncalves
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come clearer. From the time the group was organ-
ized several years ago as the "captains' move-
ment," a minority of these officers has been
reported to have leftist leanings. The main orien-
tation of the Movement, however, is considered
to have been reformist and nationalist, and these
ideas likely still predominate, although it is possi-
ble that leftists may be making some inroads.
THE AFRICAN TERRITORIES
Spinola's political problems had !lttle impact
on the African territories, as the new government
will reiterate Lisbon's commitment to self-deter-
m nationi for the territories. In Portuguese
Guinea, a final agreement between Portugal and
the rebels is apparently at hand. An upsurge in
rebel activity in Mozambique and racial disturb-
ances in Angola, however, have provided Lisbon
with new reminders that its authority in those
territories is eroding.
Despite the month-long suspension of talks
between Lisbon and the rebels in Portuguese
Guinea, as well as other outward signs of an im-
passe in negotiations, evidence is accumulating
that Lisbon secretly offered major concessions to
the irsurgents before Spinola dismissed his cabi-
net last week. Portuguese officials, including
Foreign Minister Soares and the governor of the
territory, apparently were confident that the
rebels would accept the concessions and that an
agreement could be announced in the near future.
Changes in the Portuguese government are not
likely to affect adversely any pending agreement,
although formal announcement could be delayed.
An agreement probably would be based on Lis-
bon's recognition of the rebels' "Republic of
Guinea-Bissau" in exchange for the rebels' agree-
ment that the Cape Verde Islands be treated as a
separate issue. The rebels have long claimed to
represent the islands, while Lisbon wants to retain
them because of their strategic value.
In Mozambique, the cease-fire negotiations
were stalled before the cabinet crisis. Soares
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claimed that secret talks were taking place, but
this seems unlikely in view of a sudden increase in
guerrilla activity during the past week, clearly de-
signed to press Lisbon at a time of political un-
certainty. Last week, the rebels opened a new
front in Zambezia District in central Mozambique
near the Malawi border, an area where they have
not been active since the late 1960s. The rebels
also increased their attacks on transportation lines
to the Cabora Bassa hydroelectric project, a major
rebel target for several years.
In Angola, Lisbon faces more problems from
the local population than it does from the insur-
gents, who remain as divided as ever. The murder
of a white taxi driver in Luanda last week sparked
a number of racial clashes and demonstrations.
Authorities eventually restored order but not
fore some 30 persons had been killed. Scattered
incidents of looting and vandalism continued to
be reported at week's end. A special mission has
arrived from Lisbon to investigate the disturb-
ances.
The clashes were instigated by vengef:11
white taxi drivers, who are well-armed, quick on
the trigger, and notoriously anti-black. Some local
officials suspect that black counter-
demonstrations were spurred by agitators sup-
porting the insurgent Popular Movement for the
Liberation of Angola.
Angolans, both black and white, seem more
uncertain about their future relationship with
Lisbon than do people in Portuguese Guinea and
Mozambique, where it is widely assumed that ac-
commodation with insurgents and subsequent in-
dependence is only a matter of time. The absence
of talks with the Angolan insurgents, together
with Lisbon's failure to show support for in-
creased local autonomy is enough to make many
Angolans fear?unrealistically--that Lisbon has no
intention of loosening its grip on the territory.
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FRANCE: GISCARD'S FOREIGN POLICY
Foreign policy, overshadowed until recently
by pressing domestic problems, may receive more
attention now that France has assumed the EC
presidency for the next six months. President
Giscard emphasizes that us foreign policy will
not differ markedly from that of his Gaullist
predecessors. There has already been a lessening
of tensions in Atlantic relations, however, and
this has led Atlanticists and Europeanists alike to
look to Paris for increased flexibility.
Giscard has made it clear that relations with
the EC will take precedence in French foreign
policy. France has reaffirmed the objective of
European union by 1980, and Prime Minister
Ch irac has already promised an early French
initiative to achieve this goal. Some of the meas-
ures possibly under consideration by the Quai
are:
? Strengthening the EC parliament, with
the possibility of direct elections.
? Establishment of an EC political secre-
tariat, presumably in Paris.
? Creation of an embryonic "European
executive" through periodic, institutionalized
EC summits.
Giscard hopes to convene an EC summit later
this year, by which time France and Italy are
expected to have stabilized their economies and
the UK will have held its anticipated election.
Relations with Germany will be a key factor
in G iscard's European equation. Giscard and
Chancellor Schmidt have already met twice since
taking over their respective governments. Their
meetings have concentrated largely on economic
issues, and they have reportedly pledged to de-
velop "parallel" policies to promote economic
stahility within the EC.
Energy policy remains of paramount impor-
tance to Giscard. There are signs that France
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wants to participate in the follow-up activities to
the Washington Energy Confe(ence, and that it
would like this to i.ake place in the framework of
the Organizatinn of Economic Cooperation and
Development.
Giscard and 'other French officials have indi-
cated that they will try to improve relations with
the US. Although the atmosphere has warmed
perceptibly, Foreign Minister Sauvagnargues has
p, ivately urger' the US to avoid public statements
concerning improvements in French-US relations,
which could alienate the Gaullists upon whom
Giscard depends for his parliamentary majority.
The US embassy in Paris, though optimistic about
e possibility of better relations, warns that
major differences will remain. As reasons, the em-
bassy cites French opposition to links between
the US and the EC, as well as French suspicion of
US-Soviet detente and their insistence on in-
dependence of action in dealing with the Arabs.
Relations with NATO seem likely to im-
prove. The French ambassador to NATO report-
edly believes that Giscard favors Atlantic coop-
eration and will follow a policy of slow improve-
ment in relations with NATO. The ambassador
pointed out, however, that Chirac will do every-
thing in his power to ensure that the rapproche-
ment is a very gradual one that will not damage
his aspirations to become leader of the Gaullists.
French relations with the USSR will con-
tinue on a reasonably steady course, but the
"special" nature of French-Soviet political
contacts has lost its luster. The emphasis will in-
creasingly be on economic exchanges and indus-
trial cooperation. Numerous sources of friction
remain, however, and in mid-July the French min-
ister of economics and finance warned Moscow
that its recent price hike on raw materials may
block development of trade between the twc
countries. Another sour note has been sounded
by reports that Michel Poniatowski, Giscard's out-
spokenly anti-Communist minister of the interior,
wants to reduce the Soviet diplomatic presence in
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DUTCH EQUIVOCATE ON DEFENSE POLICY
The Dutch government is attempting to ap-
pease domestic critics who are demanding a re-
duction in the :jefense budget by hinting that it is
prepared to re-examine The Hague's commitment
to its Western allies to retain current troop levels
if the MBFR negotiations break down. In recent
interviews, both Prime Minister den Uyl and
Defense Minister Vredeling have made it clear
that the Dutch will feel free to cut their troop
levels if the force reduction talks collapse.
In response to queries from their NATO
allies, however, the Dutch have been more equiv-
ocal and have tried to avoid being pinned down
on the course of action they intend to pursue if
the MBFR talks fail. The original Dutch defense
white paper, submitted to NATO for consultation
on May 21, simply outlined projected force
reductions. The draft ten-year plan would sig-
nificantly decrease the number of active bat-
talions in the Dutch army and reduce air force
and naval strength. The plan also calls for the
replacement of 102 F-104s.
The reaction of the Netherlands' NATO
partners to the original white paper was quick and
sharp. Their major objection centered on the pro-
posed reductions in the armed forces. The Belgian
representative, describing the plan as "His-
astrous," said that it would increase the defense
burdens of the other allies, violate Dutch defense
commitments to NATO, and could lead to similar
actions by other members.
In response to this strong criticism, Dutch
NATO Representative Hartogh gave assurances
that the Netherlands intended to link the reduc-
tions to a successful conclusion of the MBFR
talks. He further clarified the Dutch position in a
statement on June 24, in which he told the al-
liance's Defense Planning Committee that the
ready strength of the Dutch army would not be
reduced as long as the negotiations were still
going on and had not achieved "desirable results."
Den Uyl and Vredeling, both political prag-
matists, have been forced to walk a narrow path
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between the three leftist parties in the coalition,
who are pledged to reduce defense spending, and
the two pro-NATO coalition parties, who have
threatened to leave ,he government if a defense
pian satisfactory to NATO cannot be worked
out.
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SPAIN: FRANCO'S HEALTH
General Franco apparently has re-
sponded favorably to treatment for phlebitis
and will probably leave the hospital within a
few days. There is no evidence that he was
hospitalized for other reasons, although phle-
bitis frequently indicates the existence of a
more serious health problem. Even if there is
one, however, it would not necessarily mean
that Franco's ability to govern would be im-
mediately affected.
The sw.urity alert that went into effect
Vtii" .:11 Franco entered the hospital on July 9
was lifted after only three days, providing
further confirmation that the government has
not considered Franco's recovery to be in
question. Throughout his confinern,..mt,
Franco has received a steady stream cl high-
ranking visitors, leaving no questich that he
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Juan Carlos assumed some formal duties
of the head of state, however, by standing in
for Franco at ceremonies on July 18 marking
the 23th anniversar of th start
war.
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WESTERN EUROPE: LABOR UNITY
The European Trade Union Confederation
decided last week to admit the Communist-
dominated Italian federation to membership. The
move breaks a 25-year-old ban on Communist
participation in West European regional trade
union affails. It also means that virtually all major
factions of organized labor in Western Europe are
now represented in a single confederation.
A favorable decision on the Italian applica-
tion had been building for some months. It
received a decisive boost when the Italians moved
away from total adherence to the pro-Soviet
World Federation of Trade Unions, claiming to
hold only "associate" memberchip.
Separate consideration of the Communist-
dominated federation of France also helped the
Italians. In early 1973, members of the European
Confederation felt that admitting Italy would
commit them to accepting the French also, a
move they were reluctant to take. The French
federation is less acceptable because it has histori-
cally been more responsive to Soviet direction
and takes a less favorable stand on the EC. In
addition, the relative unity of the Italian labor
movement contrasts sharply with the cli...isions on
the French labor scene.
The 17-month-old confederation has de-
voted much of its time to organizational ques-
tions and has been relatively ineffective as a pres-
sure group. Now that the key membership issues
have been decided, however, active programs may
be in prospect. Proponents of a regional labor
organization of Western Europe have had their
eye on a number of possibilities, including coordi-
nated efforts to win concessions from multi-
national corporations, and lobbying for labor in-
terests in the EC, especially on social policy.
Concern for the protection of migrant
workers, who are being threatened as a number of
governments take steps to safeguard the employ-
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ment of their nationals, has also been evident
among those fostering the regional labor grop-
ing. Organized labor in countries where migrants
are numerous, however, may be reluctant to press
for effective action I
25X1
ICELAND: COALITION PROSPECTS
25X1
The conservative Independence Party seems
to be having difficulty putting together a coali-
tion, despite the relatively strong mandate the
party received in the election last month. Party
chairman Gier Hallerimsson, named formateur on
July 5, was expected to take seveial weeks to
form a new government, presumably with the
Progressives, the main partner of the outgoing
three-party, center-le coalition. Developments
have been slow, howevPr, and recent reports sng-
gest that the conservatives are less optimistic now
than they were immediately following the elec-
tion.
The Progressives, the second largest party in
parliament, probably would be asked to form a
government if Hallgrimsson fails. -h a move
would have an adverse effect on nr tiations to
retain the US-manned NATO base at Keflavik.
Nevertheless, Hallgrimsson's position re-
mains basically strong, and he apparently intends
to continue to try to form a government despite
the handicaps he faces. His party won more seats
in the last election than at any time since World
War II. Furthermore, the stand taken by the
Independence Party in favor of retaining the US-
manned NATO base in pretty much its present
form was approved by more than 50,000 citizens
who signed a pro-base petition earlier this year.
Hallgrimsson has recently tried to shift public
attention away from the defense issue, however,
and he is now concentrating on Iceland's pressing
economic problems. He blames the Plat' er
government for the soaring inflation which is
running at an annual rate of about 45 nprrpnt
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Ceausescu and Tito meet in 1972
BALKAN MAVERICKS MEET
President Tito's visit to Romania from July
8 to 11 refurbished the image of good relations
between Belgrade and Bucharest and allowed the
two leaders to narrow some areas of disagree-
ment.
At the time of the Arab-Israeli war last
Octobrr, for example, Yugoslavia backed the
Arab cause without reservation, while Romania
maintairlad full diplomatic and economic ties
with both Israel and the principal Arab antag-
onists. In the communique, Tito and Ceausescu
called for Israel's withdrawal from all occupied
Arab territory, but also urged that the sovereignty
and integrity of all states in the region be pro-
tected.
The communique toned down Yugoslav irri-
tation over Romania's efforts to play a greater
role in the Third World. In addition, the two
leaders praised nonalignment as "an important
factor in the struggle against imperialism and
hegemonism." They also smoothed over their
differences about Balkan cocperation by
returning to their earlier position that the coun-
tries in the region should conduct their relations
without outside interference, particularly by the
great powers. The two leaders devoted particular
attention to the sensitive problem of minorities.
Ceausescu, in effect, lined up on the side o;: Tito
in Yugoslavia's feud with Bulgaria over the
Macedonian probiem.
The communique expressed satisfaction with
the development of bilateral party relations based
on the principles of 'independence, equality,
noninterference, and responsibility of each party
to its working class." The two sides pledged to
work for greater unity among all parties?
presumably including the Chinese?on the basis of
these principles. The only .'..ate-to-state agreement
signed, however, was a long-range economic,
technical, and scientific accord. All the same, the
12th meeting between Tito and Ceausescu in nine
years appears to have gone !latter than ex-
pected. 25X1
BULGARIA: LEADERSHIP CHANGES
Recent personnel shifts in the party and
state fiierarchy are designed to strengtF.in the
hand of hard liners who fear detente and to
improve the performance of the economy.
The party changes, announced at a Central
Committee plenum on July 3, include the promo-
tion of two members of the Secretariat to concur-
rent full membership on the Politburo and the
naming of four new candidate Politburo mem-
hers. Three candidate members were removed.
The chief gainers are Aleksandur Lilov, the
party's ideological watchdog, and Georgi
an expert economist and planner.
Lilov's prumotion confirms his status as a
very promising comer. He also was the spokesman
for Bulgaria's stringent ideolog.cal guidelines for
detente.
The most important of the new candidate-
members are Minister of Defense Dzhurov, and
38-year-old Foreign Minister Mladenoy, who is
the youngest member of the leadership. he other
new candidate-members are the party first sec-
retaries in Varna and Plovdiv.
The major loser in the party is 44-year-old
Ivan Abadzhiev, who had risen rapidly in recent
years to become the third-ranking m3n in the
party hierarchy. Abadzhiev may have been the
target of Lilov's accusation in February that there
was ideological weakness in the party itself and
that some people "even in high positions" did not
unde..stanci what dete ? about.
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USSR: DEFENSE SPENDING RISES
Soviet defense spending grew by more than
5 percent in 1973, following a period of little
change between 1970 and 1972.
Based on projections of future Soviet forces,
an increase of roughly the same size should occur
in both 1974 and 1975. Such growth is substan-
tially above the long-run annual rate of increase,
which has averaged less than 3 percent since
1960.
Soviet defense expenditures (not including
"civilian" space programs) are estimated at about
25.5 billion rubles for 1974. The estimated equiv-
alent dollar cost of th; 1974 Soviet defense
effort?what it would cost to purchase and oper-
atl Soviet military forces in the US?is approxi-
mately $93 billion.
The increase in spending from 23.1 billion
rubles in 1972 to 26,8 billion rubles in 1975 is
due primarily to the extensive modernization of
the Strategic Rocket Forces. The Soviets are
replacing a large portion of the SS-11 force. In
25X1
addition, over the next several years the Soviets
are expected to begin replacing the SS s. the rest
of the SS-11s, and the SS-13s with new ICBMs.
These programs will triple expenditures for
new weapons for the Strategic Rorket Forces in
1974 over those of 1972, and spending on these
forces probably will remain high throughout the
decade.
Although the present growth in spending is
striking, the general pattern since 1970 is consis-
tent with past cycles of Soviet defense outlays.
For example, Soviet defense expenditures grew
rapidly in the second half of the 1960s when the
SS-9 and SS-11 systems were being fielded. Total
defense spending then stabilized in 1970-72 with
the completion of these programs, despite a rapid
expansion in research and development for the
follow-on missile systems.
Total expenditures are expected to level off
again in 1976 at about 7 percent higher than at
present. For the 1970s as a whole, estimated
defense expenditures are expected to
&lout the long-run historical average.
15
10
Estimated Soviet
Defense Expenditures
(Billions of 1970 Rubles)
0
Os-okre'sk
elf ?PI 41) CPt,
eft
S.11'1 '?-tr
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USSR-SOMALIA: FRIENDSHIP TREATY?
Soviet President Podgorny's visit to Somalia
last week was capped by the signing of a treaty of
friendship and cooperation on July 11, but some
last-minute snags suggest 1.h. the two countries
still have important differences.
A Soviet official in Mogadiscio said that the
accord will not be palblished until "after ratifica-
tion." This is not the usual Soviet practice; similar
treaties with Egypt, Iraq, and India were pub-
lished immediately after they were signed.
It is possible that the Somalis, who have
been resisting Soviet pressure for a treaty for
several years, objected to certain rovisions t
Soviets were ur
Since the communique issued at the end of
the visit failed to mention military aid or defense
cooperation, the problem in the treaty negotia-
tions may have involved Somali demands for a
stronger Soviet commitment in these fields. The
Somalis may have been upset by Moscow's refusal
to provide even ..ndirect support for Somali irre-
dentist claims to Ethiopian territory.
25X1
The Soviets must be chagrined that Somali
President Siad praised China at the treaty-signing
ceremony. Siad's gesture of independence may
have been aimed at placating not only tribal
leaders but those members of the Supreme Revo-
lutionary Council who have been disturbed by the
extent of Somalia's dependence on the USSR.
The Somalis apparently decided that their
heavy dependence on Soviet military and eco-
nomic aid makes closer ties with Moscow neces-
sary. Strong ties to Moscow also complement
Siad's internal policy of "scientific socialism,"
emphasizing increased state control of the
economy. 25X1
25X1
The treaty does represent a substantial net
gain for the Soviets, even if Moscow does not
obtain any sgnificant new military concessions. It
places bilateral relations on a more formal footing
and brings Somalia into the circ'e of countries
bound in some fashion to the USSR.
The Soviets tried to reassure Mogadiscio's
neighbors?particularly Ethiopia?about its role in
the Middle East - Indian Ocean region, by saying
that the treaty was not aimed at third parties. The
Ethiopians are nevertheless sure to see the accord
as portending a more aggressive Somalia, and
other nations in the area will
growin Soviet
S. I .
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EGYPT-USSR
FAHMI VISIT OFF
Moscow's last-minute postponement of the
visit of Egyptian Foreign Minister Fahmi appears
to be a deliberate Soviet rebuff to President Sadat
and an attempt to increase the pressure on him to
adopt policies more favorable to Moscow.
Only days before Fahmi's scheduled arrival
in Moscow on July 15, Brezhnev abruptly asked
that the visit be put off to October. In an urgent
letter to Sadat, the party boss claimed that "cir-
cumstances" prevented adequate preparations.
The Soviets cancelled several other foreign
visits originally set for mid-July, with the excuse
that Brezhnev and the other leaders had a
crowded schedule. Brezhnev, however, did find
time to receive the French foreign minister during
his July 11-13 visit. Moreover, the Brezhnev letter
that called off the Fahmi trip suggested that he
come to Moscow in October; clearly the Soviets
are not completely booked up for over two
months.
During the month or so before the post-
ponement, Soviet-Egyptian relations had warmed
somewhat. Both sides had apparently been
viewing the Fahmi visit as an opportunity to
discuss military aid and a Soviet-Egyptian
summit.
The last-minute postponement may have
been triggered by Soviet unwillingness to make
hard decisions on resuming mili,tary aid?which
has been suspended for more than three months?
and on the venue of a Brezhnev-Sadat meeting. It
seems more likely, however, that Moscow re-
cently decided to play tougher with Cairo in the
expectation that Sadat will be weakened domesti-
cally when it becomes clear that Egyptian mili-
tary forces have no alternative to the USSR for
equipment. If this is the case, then the question
arises whether the Soviets are now committed to
an unyielding anti-Sadat policy.
The Soviet rebuff has caused some constern-
ation in Cairo, both for its implications for the
status of Egyptian-Soviet relations and for its
effects on Sadat's standing among other Arabs.
THE POSTPONEMENT HAS CAUSED
SOME CONSTERNATION IN CAIRO, BOTH
FOR ITS IMPLICATIONS FOR THE STA-
TUS OF EGYPTIAN-SOVIET RELATIONS
AND FOR ITS EFFECTS ON SADAT'S
STANDING AMONG OTHER ARABS,
25X1
The Egyptians have made no secret of their sur-
prise over the Soviet move
They interpret
tne postponement as a deliberate effort to dis-
cipline Cao publicly and to create problems for
it in the Arab world.
2
25X1 5X1
Sadat is undoubtedly puzzled by the Soviet
move. He still considers himself the aggrieved
party in the Cairo-Moscow argument that began
early this year with public Soviet criticism of
Egypt's closer ties with the US and ended in
April?after Sadat's own counterattacks?with
Moscow's si.spension of arms deliveries. Since
April, Sadat has made a conscious effort to re-
store a degree of amicability to the relationship.
Although lacking the warmth that hat: char-
acterized Egyptian comments on the US, Cairo's
statements on the Soviets have been polite and
friendly, set in a tone designed to reassure Mos-
cow that close relations with the U3 do not
signify a severance of relations with the USSR.
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The Egyptians genuinely desire 3t least a
semblance of balance in their relations with the
two super powers. Sadat and his advisers, who are
often more pragmatic and less impulsive than
Sadat himself, undoubtedly see some danger in
continued estrangement from the Soviets. Not
only does this reduce Egypt's maneuverability
among the other Arabs, but an Egypt solely in the
US camp could appear to Israel as too tame to
warrant further serious moves toward peace nego-
tiations. More fundamentally, Sadat is un-
doubtedly beginning to feel the pressure from
Egypt's military establishment; although by no
means happy with past Soviet tutelage, the mili-
tary is nevertheless dependent for its continued
effective operation on a flow of spare parts.
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The Egyptians have not yet decided how to
handle the Soviet rebuff. In private, Egyptian
officials speak angrily of a strong response, hint-
ing that Sadat may use his Revolution Day speech
on July 23 to lash out again at Moscow and may
even terminate Soviet use of Egyptian naval facili-
ties. For the present, however, Cairo's public re-
action is unruffled. Sadat and Foreign Minister
Fahmi recently told Danish newsmen that the
postponement does not indicate a conflict be-
tween the two countries, and that the Egyptians
would do "everything we can" to prevent a crisis
in relations.
MINE-CLEARING TO BEGIN
The group of eleven Soviet mine-clearing
ships entered Hurghada on July 14. The group
will remain a few days at the Egyptian pc rt pre-
paring for operations in the Strait of Gubal and
the southern Gulf of Suez. The Soviets have
stated that the work will be completed by August
15; there should be no trouble meeting the
schedule.
Two fields of moored acoustic mines, manu-
factured by the Soviets and laid by the Egyptians,
are to be cleared. Egyptian minesweepers have
already opened a channel and are escorting ships
through. A heavy lifting ship with the group and
two floating cranes?apparently waiting out bad
weather in Colombo, Sri Lanka?will give the
group a salvage capability, although the Soviets
are not now expected to do such work. 25X1
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EGYPT: MANEUVERING AMONG THE ARABS
Egypt has again begun to fear that it is
becoming isolated from other Arab states. Presi-
dent Sadat is engaged in a concerted attempt to
mend fences and to forestall efforts by radicals to
undermine peace negotiations. At the same time,
he is continuing to try to promote a rapproche-
ment between Jordan and the Palestinians, whose
conflicting positions pose the greatest hindrance
to further negotiating progress.
Induced partially by Cairo's new difficulties
with the USSR, which Sadat views as a deliberate
effort by Moscow to embarrass him before the
other Arabs, the Egyptian fears are also the result
simply of the lull in negotiations. With no
momentum at present, Sadat is concerned that his
Arab opponents will use the lull, as they did some
months ago when progress toward a Syrian-Israeli
disengagement was stalled, L., accuse him of being
willing to move too far ahead of the other Arabs.
The charge ignores Sadat's efforts to coordinate
the Arab position before proceeding with further
peace talks, but the past example of Egypt's
roadiness to move unilaterally in talks with Israel
remains in the minds of other Ara5s. Moreover,
the very effort to reconcile inharmonious Arab
positions is an inevitable cause for additional
sniping at Sadat from one source or another.
In an attempt to explain his position, Sadat
has sent his adviser, Ashraf Marwan, to several
Arab states. Marwan is also seeking selected Arab
support for a postponement of the Arab summit,
now scheduled for early September, until after
the Geneva conference recor venes. Previously,
Sadat had favored holding the summit before
Geneva but after a pmliminary four-way meeting
with Jordan, Syria, and the Palestinians to work
out a single stand for those Arabs most directly
concerned with the Israeli struggle. Sadat still sees
the four-way meeting as the necessary first step,
but he now apparently believes the original
summit schedule would give radical Arabs a better
opportunity to push their position and to under-
mine whatever progress might be made by the
confrontation states toward harmonizing their
views.
This first step will be difficult enough, and it
is not clear that Sadat himself has yet reached a
firm conclusion on how to handle the Jordanian-
Palestinian conflict. King Husayn visited Sadat in
Alexandria this week to discuss the problem, and
the Cairo press has reported that Yasir Arafat will
follow the King for talks with Sadat on the same
matter.
Reports conflict as to what line Sadat will
pursue with the two leaders. He is still publicly
pressing the view that they must coordinate
before Geneva. The Jordanians are under the
impression that Sadat favors their position that
the Palestine Liberation Organization not inter-
fere with Jordan's right to negotiate for a return
of the West Bank. At the same time, however, the
Egyptians have revived their public references?
which they had muted for some time?to the PLO
as the "sole legitimate" representative of the
Palestinians.
25
Sadat reportedly will also press Husayn 25X1
to
accept the concept of a separate Palestinian state,
but it is not clear whether this is envisioned as a
step to be conceded after Israeli withdrawal from
the West Bank?wnich Husayn might stomach?or
before the talks re,:onvene?which neither Husayn
nor Israel would tolerate. Sadat sees the dilemma
in his position, and much of his concern about his
status with other Arab leaders centers on the fear
that he could lose no matter which way hp
leans.
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ISRAEL: THE PALESTINIAN QUESTION
The Israelis this week continued to debate
the desirability of modifying the government's
rigid stand in refusing to negotiate with the Pales-
tinians. Prime Minister Rabin, in an apparent ef-
fort to reassure conservative elements in his own
party and in the oppocition National Religious
Party, publicly reaffirmed Tel Aviv's traditional
position. He failed, however, to stem speculation
that his government may in fact be considering a
more conciliatory approach that Foreign Minister
AlIon could present to US officials during his visit
to Washington later this month.
The government is hearing calls from a va-
riety of quarters to take a more positive tack in
dealing with the Palestinians, a step that would
involve backing away from former prime minister
Meir's refusal even to acknowledge that they exist
"as a people." For example, one of the governing
Labor Party's coalition partners, the small Inde-
pendent Liberal Party, last week adopted a resolu-
tion urging the government to begin negotiations
with Jordan and "other Palestinian entities." In
addition, several Labor deputi_s and the mayor of
Tel Aviv, a member of the opposition Likud bloc,
signed a manifesto calling on the government to
work "realistically and speedily" toward solving
problems between Israelis and Palestinians. A
number of political commentators for Israeli
newspapers have also urged the government to
rethink its position, some suggesting that Israel
might have to negotiate directly with the Pales-
tine Pjberation Organization.
Official spokesmen have reacted in different
ways to these urgings, further fueling speculation
that a policy change may be in the offing. Late
last week, Information Minister Yariv told re-
porters that the government is prepared to enter.
into some form of negotiations if the PLO pub-
licly acknowledges the existence of the Jewish
state of Israel and stops terrorist attacks by the
fedayeen. Noting that the PLO is extremely un-
likely?and, he might have said, unable?to take
these steps, Rabin told journalists that he could
not envision representatives of the organization
participating in the Geneva peace talks. He
claimed also that Israel is not prepared to attend
25)(1
the Geneva talks if other than the original four
parties?Jordan, Egypt, Syria, and Israel?attend.
He did not make clear whether Israel would reject
PLO reprasentation in a Jordanian delegation.
25X1 25X1
On July 13, in his first major speech to
members of his Labor Party since becoming Prime
Minister, Rabin said the key to solving the Pales-
tinian problem lies in talks with the Jordanians.
According to Tel Aviv newspapers, the Israeli
cabinet will meot this weekend to discuss a pro-
posai that Tel Aviv initiate nesoti
Amman.
I
Spanish Sahara:
CONTROVERSY REKINDLED
A plan by Madrid to grant increased auton-
omy to its overseas province of Spanish Sahara
has rekindled a controversy over the future of the
territory that has embroiled Spain with rival
North African claimants since the late 1950s.
Morocco, which has been the most active claim-
ant, reacted sharply to the Spanish plan and may
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be moving toward employing limited force to
back up its case.
The new policy that Spain is preparing to
implement provides for the replacement of the
present territorial legislature, whose members
were appointed by Madrid in 1967, with a new
assembly. Two thirds of the new body is to be
elected, and it will have substantially greater
power than its predecessor. A new executive
council, drawn from the assembly, will be author-
ized to decide if and when the territory should
opt for self-determination. Ultimately, the policy
envisages a referendum in the territory to decide
its international status. 25X1
wou ea to a deterioration in
relations. The King followed up with a speech on
July 8 recalling the history of Morocco's efforts
to regain its "seized territory." He emphasized
that he could not permit the establishment of a
?
PORTUGAL SPAIN
Madrid
,Rabat
(MOROCCO
/BOUNDARY
...fin' oisuure
Cannry Islands (.?)
(1.U? )
SPANISH
SAH.ARA
INouakchott
El AAiun
MAI IRITAMA
MALI
55.6218 7-74 ?
puppet state in the Sahara, which Rabat suspects
is Madrid's objective, and implied that if discus-
sions failed then other means would be pursued.
Attempting to demonstrate Moroccan flexibility,
Hassan said he had offered Spain both base rights
to protect the Canary Islands and an agreement
for joint exploitation of the Saharan territory's
rich phosphate deposits in return for recognition
of Moroccan sovereignty there.
Hassan probably hopes that new efforts to
reclaim Spanish Sahara will help rally support at
home and distract attention from his country's
political and economic problems. A number of
diplomatic observers in Rabat believe Morocco's
next move will be to send Saharan guerrillas
across the border to provoke clashes and attract
international attention in order to increase pres-
sure on Spain for a settlement favorable to Mo-
rocco.
25X1 25X1
Moroccan cor...ern about Spanish Sahara has
increased considerably in the past few months.
Rabat believes the recent developments in Portu-
gal and its overseas possessions will inevitably
accelerate the pace of decolonization in the Sa-
hara, and the government is working hard to
secure foreign support for its position. Thus far,
however, it has elicited only a few statements that
praise its efforts to liberate the area from Spanish
control, and these have avoided explicit support
for Morocco's irredentist aspirations.
Meanwhile, Mauritania has called for consul-
tations in Nouakchott on July 20 with the Alge-
rian and Moroccan foreign ministers to discuss the
status of Spanish Sahara, Morocco may reject the
offer. Tripartite talks between these countries
have been held infrequently since 1970, but Mo-
rocco's and Mauritania's claim to the territory
and Algeria's insistence on a role as an interested
party have prevented any agreement on practical
steps to hasten decolonization of the Sahara.
Neither Algeria nor Mauritania wishes to see Mo-
roccan sovereignty expanded, and Algeria would
oppose any strong unilateral action by Morocco
lo force the iccnpi '
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NEW LOOK IN ARAB INVESTMENTS
Foreign assets of the major Arab oil pro-
ducers have increased sharply this year, rising
from $13 billion last December to $22.5 biilion in
June. The composition of the holdings has
remained relatively stable, but some new trends in
investment patterns are emerging.
Saudi Arabia, unable to keep pace with its
foreign asset accumulation, continues to rely
heavily on bank deposits, particularly in London.
Jidda apparently has decided to shift some of its
future investment from London to New York.
This will satisfy the Saudi desire for security,
retention of control of the funds, and a
reasonable?if somewhat lower?rate of return.
Kuwait, the most sophisticated investor, is
purchasing large amounts of real estate. When oil
payments retroactive to January 1 are received,
Kiwait's bank balances will increase markedly,
especially in sterling. Libya is purchasing more US
treasury securities and is gradually increasing its
dollar holdings.
The Arabs generally continue to rely on the
Eurodollar market because it has satisfied their in-
vestment objectives. Up to now, deposits have
been relatively free from economic and political
risks; and the rate of return has been sufficient to
maintain the real value of their holdings.
This heavy reliance on the Eurodollar
market creates problems that will become more
acute over time. The massive flow of Arab funds
increases the potential for market instability and
is depressing interest rates on Arab deposits.
Growing concern over the Eurodollar market's
ability to assimilate the oil producers' revenue is
already becoming evident, even though the in-
creased flow of Arab funds only began in April,
when the first quarterly oil payments reflecting
higher prices were received.
The Arabs will increasingly direct their
deposits toward the major national capital mar-
ZOA I
kets, particularly in the US. These markets are,
however, no better suited at present to recycle
funds to consuming countries than is the Furn-
dol I ar market.
25X1
PAKISTAN: NEIGHBOR TROUBLES
25X1
Pakistan's relations with India and Afghan-
istan, rarely better than cool, have deteriorated
during recent weeks. Pakistani charges of menac-
ing troop movements by both its neighbors ap-
pear to have been prompted by political consid-
erations, including concern that the Indians may
be making new arrangements for the disputed
territory of Kashmir. Kabul and New Delhi have
responded with complaints that Pakistan is en-
gaged in its own threatening moves.
Reports from India reveal no military ac-
tivity above that which is normal for this time of
yeur. Both India and Pakistan normally maintain
a heavy concentration of forces either along or
close to their common border and occasional ex-
changes of fire have occurred, as usually happens
during periods of tension. No menacing military
movements have been noted in Afghanistan,
either, although there has been some unusual ac-
tivity, probably associated with preparations for
Afghanistan's national day on July 17.
The current political deterioration began
about the time of India's successful test of a
nuclear device on May 18. Prime Minister Bhutto,
normally apprehensive about New Delhi's in-
tentions, apparently concluded that the main ob-
jective of the test was to intimidate Pakistan into
accepting Indian hegemony over the sub-
continent. Bhutto has long feared that India and
Afghanistan would coordinate their efforts
against his country. He is also apprehensive that
the two are backed by the Soviet Union and are
allied to his domestic political opposition.
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Bhutto is probably also anxious at this time
to focus public attention in Pakistan away from
some of the domestic problems that have recently
beset the country: rioting over religious issues,
continuing instability in the provinces of Baluchi-
stan and the North West Frontier, and frequent
bitter exchanges between the government and
leaders of the principa: opposition parties.
The situation in Kashmir, hovvo.ter, pre-
sumably does cause real concern in Islamabad.
There are indications that New Delhi and
Kashm iri Muslim leader Sheikh Abdullah are
moving toward an agreement that would return
the sheikh to power after a 20-year hiatus and
would also give Kashmir more autonomy within
the Indian union. New Delhi apparently hopes to
conclude the arrangement with Abdullah so that
it can claim with some authority that the 27-year-
old Kashmir issue has finally been resolved.
Islamabad would strongly oppose any agree-
rrvzInt by Abdullah that precluded an eventual
plebiscite to determine the future of all of
Kashmir, which has a Muslim majority. This has
China
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been the Pakistani demand for a quarter century.
Some Pakistani leaders have privately admitted
that a poll in Indian-held Kashmir is no longer a
realistic possibility, but in public they continue to
insist on an eventual vote by the Kashmiris. Any
Pakistani politician accepting less would endanar
his political standing?and possibly even his life.
Additionally, the Pa::istanis may fear the
effect on Azad Kashmir, a portion of the former
princely state maintained by Islamabad as an
"independent" entity, of any change of status
across the cease-fire line. Islamabad's denuncia-
tions of both the Kashmiri leader and New Delhi
are likely to grow increasingly virulent if agree-
ment appears imminent.
Tension is likely to continue between India
and Pakistan at least as long as reports of possible
changes in Kashmir continue to circulate. On the
other hand, Bhutto may wish to swing relations
back from the open hostility of recent days. On
July 15, he spoke publicly of the need to resume
bilateral talks with New Delhi?no date speci-
fied?in order to restore communications, trans-
portation, and other bilateral ties severed in the
1971 war.
Relations botween Pakistan and Afghanistan,
meanwhile, continue very strained. Bhutto has
shifted to a more aggressive stance after having
been largely on the defensive in his dispute with
the Daoud regime during the past year, parrying
charges that his government is suppressing its
Push tun and Baluchi minorities. In a recent
speech, he suggested that the Afghans concern
themselves instead with the condition of the
Uzbeks, Tadjiks, and Turkmens living in Afghan-
istan.
The squabble betwvn Islamabad and Kabul
will probably continue and may worsen. Con-
ceivably, the !Afghans might close the border, as
they did for several months in the early 1960s.
Occasional clashes on the border have occurred in
the past and may again, but the Pakistanis have an
overwhelming military superiority over the Af-
ghans, and Kabul will have to keep this in mind in
decidins on its f -gy.
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The Struggle on the Right...
Recent elections in the Peronist-controlled
General Confederation of Labor have resulted in a
rightward shift that will strengthen the hand of
presidential adviser Lopez Rega.
The powerful labor organization has pro-
vided the bulk of Peron's political strength, and
its future course will have a strong influence on
Mrs. Peron's government. The confederation was
already conservatively oriented, and when it
voted out several moderates in favor of right-wing
challengers, it tilted the balance even further in
favor of leaders considered allies of Lopez Rega.
Moderate labor forces received another set-
back with the sudden death of Adelino Romero,
the secretary general of the confederation, who
suffered a heart attack shortly after being re-
elected. His deputy has assumed the post, but real
power rests with Lorenzo Miguel, the strong man
of the key metalworkers union. Miguel, who
reportedly i:, easily influenced, has received the
solid backing of Lopez Rega.
The changes in the trade union field seem
sure to spell difficulties for Economy Minister
Gelbard, a rival of Lopez Rega and the architect
of the price-wage freeze that has formed the
cornerstone of the Peronist economic program.
Although the recent labor congress pledged to
support this policy, the congress also warned that
the unions would not abide by restrictions that
serve "anti-national interests" or provide a
"smokescreen for speculators to get rich."
One wage increse has already been granted,
and worker demands are expected to mount,
making it more difficu!t for Gelbard to contain
inflation and halt economic deterioration. If the
current accord on wage and price controls crum-
bles, Gelbard's position will be jeopardized and
Mrs. Peron's ability to devise new solutions will
receive its first test.
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Lopez Rego
...and on the Left
Meanwhile, the assassination of a former
Argentine interior minister has signaled a resump-
tion of terrorist activity following the halt after
Peron's death. Arturo Mor Roig, who served in
the military administration of General Lanusse,
was gunned down in Buenos Aires by an unidenti-
fied group of terrorists?probably members of the
People's Revolutionary Army.
Although Mor Roig had not bebn active
politically for some time, his close identification
with the former military gove-nment and his key
role in laying the groundwork for the elections
that brought the Peronists to power probably
explain why he was marked as a target. In addi-
tion, Mor Roig was minister at the time of the
so-called "Trelew massacre," an abortive prison
escape attempt during which the terrorists claim a
number of their colleagues were murdered by the
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security forces. The People's Revolutionary Army
has vowed to eliminate those otficials considered
responsible for Trelew.
Following the Mor Roig killing, terrorists
fired on a column of army trucks on the outskirts
of Buenos Aires?a pattern that a ain su ests the
work of Marxist extremists
The terrorists obviously hope to take
a vantage of what they view as a political power
vacuum caused by the struggle between the badly
divided followers of Juan Peron for con rot of
movement.
CHILE: A REVAMPED TEAM
Cabinet changes made last week reflect the
trend toward army primacy in the military gov-
ernment and indicate that the armed forces' de-
termination to reconstruct Chile in their own way
is as strong as ever after ten months of rule. Army
representation in the cabinet jumped from three
to five, while that of the navy dropped from four
to three. The air force and carabineros retained
three ministries apLc, and civilian representation
increased from two to three.
The cabinet changes followed on tie heels of
a governmental reorganization that vested broad
executive powers in the junta presidency and
named junta President Pinochet "Supreme chief
of the nation." But Pinochet's reported failure to
secure a free hand in naming the new cabinet
confirms that his prerogatives remain hedged by
requirements that the junta agree unanimously on
many important matters. The military men who
lost their cabinet jobs were mainly those, such as
Admiral Huerta at the Foreign Ministry, whose
performance had been disappointing, but the
replacements seem to have been chosen as all,ch
25X1
for their personal ties to the junta members as for
their experience. No significant policy shifts are
likely to result.
Civilian Economy Minister Leniz retained his
post, while chief economic adviser, civilian Raul
Sdez, was given cabinet rank as Chile's first minis-
ter for economic coordination. A civilian was
dropped as minister of justice, but Jorge Cauas
replaced a military rran as mi,iister of finance.
The economy-related appointments underscore
the government's continued commitment to the
civilian technecrats austere, free enterprise -
oriented recovery program.
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Some civilians probably will be r amed to
key sub-ministerial positions, but the limited civil-
ian influence on the government outside the eco-
nom .c sphere i:: unlikely to increase substantially
as a result. During the ceremony installing the
new cabinet, Pinochet aoain emphasized the
armed forces' determination not to serve as a
mere conduit for the transfer of power to politi-
cal groups that the military holds partly respon-
sible for the disastrous conditions that brought on
the military intervention. He then underscored
the armed forces' desire to make permanent re-
forms by announcing a government decentraliza-
tion statute and a new foreign investment code.
25X1
Pinochet's caustic references to politicians
probably were aimed primarily at the Christian
Democratic Party. The new finance minister is a
nominal member of that party, but the already
strained relations between the Christian Demo-
crats and the government are deteriorating further
because of a dispute over censorship of the
party's radio station. Army Genera; Bonilla's shift
from the Interior Ministry to defense indicates
that there will be no early softening of the polit-
ical "recess" that has hamstrung the Christian
Democrats. Bonilla is thought by some of his
colleagues to be overly sympathetic toward the
party, and they would probably have preferred to
see him leave the cabinet altogether. Eonilla is the
a7my's second-ranking officer and is a close friend
of Pinochet.
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URUGUAY: INSTITUTIONAL SOLUTIONS?
President Bordaberry has begun to reorga-
nize the executive branch by naming military
leaders to economic planning posts and by cen-
tralizing responsibility for commercial policy
within the Ministry of Economy and Finance. In
a recent nationwide address, Bordaberry also
announced that an Economic and Advisory Coun-
cil would be set up to facilitate decision making.
This scheme greatly increases the military's
formal role in the government. The council will
include the military commanders in chief alory
with the ministers of national defense, economy
and finance, and the director of planning and
budget. Military officers will also be appointed to
the Ministry of Economy and Fin ince, which will
oversee the Office of Planning and Budget.
President Bordaberry, who will chair the
new council, continues to disagree with his com-
manders on some economic issues, and friction
between them will probably increase. In late May,
the generals pushed through price reductions on
kerosene and beef, two major consumer items,
despite Bordaberry's efforts to protect the pro-
ducers' interests. More recently, the army chiefs
reportedly voiced disappointment over a 16-
percent wage increase that Bordaberry had
granted the private sector, telling him that they
would have preferred a boost of 25 to 30 percent.
If, under the new arrangement, the military
leaders force the adoption of such populist meas-
ures, inflation will increase and economic deterio-
ration will rapidly become ma ? serious.
In recent years, Uruguay's efforts to alleviate
its socio-economic problems have been hampered,
in part, by the absence of a clear line of authority
within its sprawling bureaucracy. Both civilian
and military officials have shiec' away from ag-
gressive sponsorship of economic reform meas-
ures, thereby avoiding the burden of failure.
Since the power struggle last May, when
several officers forced Bordaberry tc dismiss the
army's top commander, the generals appear to
have shelved their personal rivalries and have in-
creased their participation in government. The
inclusion of the high command in the new council
is in line with this willingness to assume respon-
sibility for present policy. There still is no sign of
agreement on any new economic program, how-
ever, either within the armed forces or between
them and civilian officials.
The transformation of economic and politi-
cal inst:+utions will not in itself turn around a
nation that has stagnated for more than 20 years.
The country is still sadly lacking in adequate
financial resources, funding, technolo y, and
managerial and entreprcnporial talent.
MEXICO: THE FIGUEROA CASE
25X1 25X1
The all-out hunt for guerrilla leader Lucio
Cabanas has turned up nothing after three weeks.
The search, involving about 2,000 army troops as
well as units from the other two military services,
was launched in an effort to kill Cabanas and
rescue Senator Ruben Figueroa, the gubernatorial
candidate kidnaped by abanas on May 30.
The government mounted the operation,
concentrated in the high sierra northwest of
Acapulco in Guerrero State, after receiving ran-
som demands from, Cabanas that it termed
"impaisibie" o meet. Government officials have
expressed little hope the army will find Figueroa
alive. Some army officials believe that Cabanas
may have left the area during the nearly four-
week period before troops were sent in. Also, an
operation on this scale has never been tried before
and the !ack of adequate long-range communica-
tions is apparent. Bad weather and rugged terrain
have further complicated the search. President
Echeverria reportedly is considering posting the
military units involved to Guerrero on a perma-
nent basis, but financial constraints may not
allow it.
Pressed by the F:gueroa case to comment
publicly on the country's guerrilla problem,
Echeverria and other government spokesmen have
fallun back on answers clouded by long-estab-
lished Mexican "revolutionary" traditions and
myths. Guerrillas are not working for revolu-
tionary interests, Echeverria says, but are trying
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to provoke regressive tendencies. He claims that
guerrilla terrorism "appears to be more the work
of the right than of the left." Government at-
tempts to denigrate or conceal the aims of the
guerrillas reflect a nearly blind adherence to the
tenet that there can be no one more "revolu-
tionary" than the government and the party.
The government's inclination to dismiss a
problem with slogans will not ease the situation,
and sporadic violence is likely to continue for
some time. For the immediate period, guerrillas
may try to embarrass Echeverria while he is on his
South American trip this month. This may have
been the motive behind the bombings this week
at both art and militar head uarters in
lajara.
. .
OAS: LOOSE LID ON THE CUBA ISSUE
Despite the agreement to disagree until Sec-
retary Kissinger's meeting with Latin American
and Caribbean foreign ministers next March, the
OAS may be forced to face up to the Cuba issue
before the year is out.
The question of what to do about the OAS
sanctions against the Castro regime was in effect
evaded at the inter-American conferences three
months ago. Participants at those meetings arrived
at a gentlemen's agreement to delay raising the
issue formally so that the new cooperative spirit
between the US and Latin America would have a
chance to grow. In addition to this idealistic goal,
the practical matter of the vote line-up was a
factor. Those favoring an end to the sanctions are
gaining in number, but still fall short of the two-
thirds majority required to undo the resolutions
of the 1960s.
Latin American diplomatic circles recently
floated the possibility that a five-nation bloc
would soon recognize Cuba without waiting for
the OAS to free members from their commit-
ments to Castro's exclusion from the inter-
/:\merican system. Six OAS member governments
already have diplomatic ties with Havana, as do
Canada and Guyana.
25X1
Conflicting reports on where several ke.3
countries stand on the issue suggest some in
decision. The reports also hint at a campaign ti
prove to the US that the sanctions policy is fas.
crumbling. The Costa Rican foreign minister
contacting several governments to drum up sup
port for a foreign ministers' meeting under thE
auspices ot the Rio Treaty, possibly in 0-Aober
He claims to be trying to head off further uni
lateral reconciliation with Cuba, which he say!
will destroy the Rio Treaty and damage the OAS
The Costa Rican believes he has Mexican suppori
for such a meeting, and he hopes that Presideni
Ecneverria will push it on his current swinc
through South America.
25X1
Only seven countries, including the US, seem
firmly opposed to lifting the sanctions. Eight
votes are needed for the blocking one third
necessary to maintain the status quo. Among the
four swing votes, Uruguay seems the most ame-
nable to persuasion on holding to the sanctions.
The Dominican Republic would join a strong
majority either way. Guatemala is of a mind to
abstain, but might be responsive to Costa Rica's
urgings that it is time for a change. El Salvador is
hesitant to accommodate Cuba for fear of losing
its sugar market.
Castro seems willing to grease the slide to-
ward reconciliation. He has announced Cuba's
willingness to attend the foreion ministers' meet-
ing set for Buenos Aires in March. At his anni-
versary celebration on July 26, Castro may throw
some bone to those Latin Americans who want to
hear him renounce the exportation of ,evolution
before they make up their minds.
The winning of even one more convert to
the OAS majority pushing for a review of the
sanctions could pull the fence-sitters onto the
bandwagon, if only "to get it over with." While
most of the governments attach political signifi-
cance to the Cuba issue, they view other?and
harder?problems relating to economic inter-
dependence as more consequential and would pre-
fer to have the inter-American dialogue concen-
trate on these
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Toshio Kimura
JAPAN!: CHALLENGING TANAKA
Finance Minister Fukuda's resignation on
July 16 sets the stage for a prolonged contest
between pro- and onti-Tanaka factions for leader-
ship of the ruling Liberal Democratic Party and of
the government.
In resigning, Fukuda is gambling that Ta-
naka?weakened by the party's lackluster per-
formance in upper house elections last week?is
ulnerable to a concerted effort to force his resig-
nation or, at least, to engineer his downfall at the
party's convention next summer.
Fukuda's resignation follows that of Deputy
Prime Minister Miki, who quit to protest both
Tanaka's high-handed campaign tactics and what
he sees as an excessive linkage of Liberal Demo-
cratic Party fortunes with Japan's big business
interests. One Fukuda supporter in the cabinet,
Director Hon i of the Administrative Management
Agency, also resigned; two more of Fukuda's
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_
Takeo Fukuda
supporters in the cabinet have indicated, however,
that they will not resign in the near future.
Tanaka is trying to limit the damage to avoid
having to dissolve the cabinet, a move that was
widely predicted in Japan. Foreign Minister
Ohira, perhaps Tanaka; firmest ally in the crisis,
has been named to replace Fukuda as finance
minister. Toshio Kimura, an experienced party
stalwart, has been named foreign minister.
Kimura recently worked closely with Ohira to
improve Japanese relations with Peking, and there
is little reason to expect any major change in
Japanese foreign policy. Kimura held the im-
portant post of chit f cabinet secretary under
former prime minister Sato and was later head of
the Economi... Planning Agency. No one has yet
been picked to replace deputy prime minister
Miki, but the office is essentially honorary and
could remain vacant indefinitely.
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Fukuda and Miki held a well-publicized
meeting on July 18, at which they pledged to
cooperate in efforts to reform ;.he party and,
presumably, oust Tanaka, Leaders of four small
neutral factions of the ruling party agreed to meet
next week to coordinate views, apparently hoping
to strengthen their leverage in the leadership
struggle. Tanaka, for his part, wil! muster his
backers in an effort to isolate Fukuda's partisans.
He will try to hang on until the party convention,
at which he probably hopes to benefit politically
from an improved economic situation.
Trade Minister Nakasone may play a pivotal
role in the coming struggle. Ambitious and oppor-
tunistic, Nakasone is for the moment sticking
with Tanaka, perhaps in the hope that he might
secure Tanaka's blessing for the top job when
Tanaka finally does step down. His continued
support cannot be guaranteed, however, if he sees
the Prime Minister's strength ebbing further.
25X1
In his maneuvering against Tanaka, Fukuda
will focus on the Prime Minister's "mismanage-
ment" of the upper house election campaign. But
economic policy may also be a major issue. Ta-
naka has been urging a cautious relaxation of
Fukuda's policy of tight limits on Japanese eco-
nomic expansion. A decision expected later this
month on the level of rice support prices could
also turn into a political football, especially if
Tanaka tries to build rural support by granting
farmers a higher price than current anti-inflation
guidelines would dictate.
Despite speculation that Miki and Fukuda
are ready to go so far as to split the Liberal
Democrats in the effort to bring Tanaka down, it
is doubtful that Fukuda wants to move toward
any such drastic measure, even if it were feasible.
The "zaikai"?the big business interests that have
a strong voice in the ruling party?would strongly
oppose splintering the party for fear of strength-
ening the leftist challenge to conservative rule in
Japan. Along with Miki, Fukuda is much more
likely to push for reform within the party, partic-
ularly in the method of selecting the party ores-
20A1
ident and limiting his control of party affairs and
finances.
25X1
SOUTH VIETNAM: BALLOTS AND BULLETS
The Communists launched a new round of
military activity on July 14 when they attempted
to disrupt the elections of provincial and city
councils, which serve primarily as advisory bodies
to local officials. Election day was marked by a
fairly well-coordinated surge of harassi% attacks,
but these did not prevent a heavy voter turnout.
Although final tallies are not yet available, it is
clear that candidates from the government-backed
Democracy Party obtained a wide majority. 25X1
The most significant new action took place
in the northernmost provinces of Quang Tri and
Thua Thien. A series of sharp attacks against
several Marine positions north of Hue probably
signals the start of a Communist campaign to
seize territory and test government resolve while
favorable weather conditions prevail.
Communist shellings and ground actions also
increased in the western highlands, where the key
road to the coast was blocked for brief periods.
Elsewhere, Communist shellings picked up in the
provinces ringing Saigon, particularly on the Binh
Duong battle front north of the ...apital where a
standoff between op ?sin. .round f
tin us.
OS
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LAOS: A NEW CRISIS
The stability and viability of the new coali-
tion government was suddr ly called into ques-
tion late last week when Prime Minister Souvanna
Phouma was felled by a serious heart attack. At
midweek, the 72-year-old Lao leader's condition
was stabilizing, but he was still gravely ill. Even if
Souvanna does pull through, it will be several
months before he can assume full political ac-
tivity.
Souvanna's illness came as a severe shock to
all involved in the coalition, most of whom have
long been accustomed to his pivotal role in Lao
politics. His abrupt removal from the political
arena is certain to increase tension and uncer-
tainty in the country.
For the present, however, Vientiane remains
calm. There have been no signs of panic or of any
pre-emptive move by either the Pathet Lao or the
non-Communists. In a bid to help keep things
under control, Souvanna issued orders from his
sickbed to deputy prime ministers Leuam Insisi-
enrimay?a non-Communist?and Phoumi Vong-
vic iit?a Communist?telling them to make cer-
tain that no incidents occur in Vientiane between
Lao army and Pathet Lao troops.
The most immediate problem raised by Sou-
vanna's illness is who will govern in his stead. As a
temporary measure, Souvanna h.'s indicated that
he wants Leuam and Phoumi to make only rou-
tine day-to-day decisions in directing cabinet ac-
tivities.
25X1
25X1
Leuam ap-
parently has agreed to inform Phoumi that the
Vientiane side will agree either to have both
deputies act as a duumvirate or to have the King
appoint a third person outside the government as
acting prime minister.
Without Souvanna working as a full-time
referee between the Pathet Lao and the non-Com-
munists, the coalition structure could well be-
come paralyzed. The non-Communists would
probably welcome a period of inactivity, how-
ever, because it would give them more time to
find a leader and to try to get better organized
politically.
If Souvanna should die or is unable to con-
tinue in office, the succession is iikely to be
confused and complicated. The Lao protocol does
not provide for a replacement for Souvanna. Ac-
cording to the constitution, however, the King
can choose a provisional prime minister from
among the cabinet ministers in the event of the
incumbent's death. The King can also take charge
of the government himself.
Another option is for the King to designate a
new government, after convoking a joint session
of the National Assembly and the King's Council.
This approach would be complicated by Sou-
vanna's recent ruling that the dormant, rightis125X1
controlled assembly must be dissolved. Despite
his illness, he has indicated that his decision still
stands.
The four most likely contenders for Sou-
vanna's mantle are Leuam, Phoumi, m'Jtralist In-
terior Minister Pheng Phongsavan, and Lao Com-
munist leader Prince Souphanouvong, the chair-
man uf the advisory political council. Because
neither the Communists nor the non-Communists
would be likely to approve a candidate from the
other side, Pheng?who has had long experience in
dealing with both sides?could have the inside
track. It is always possible, however, that a dark
horse might win the race. In any event, the final
choice may be dictated by Souvanna himself?
should it prove necessary for him to name a
successor.
Souvanna Phouma
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DEVELOPED COUNTRIES: HIGH HOPES
Representatives of four developed countries,
at a recent meeting of the Organization for Eco-
nomic Cooperation and Development, indicated
they expect to reduce their current account
deficits substantially during the next 12 months.
Some also felt they would have little difficulty
financing deficits.
The Italians hope that their new austerity
program, combined with an import-deposit
scheme introduced earlier, will reduce their cur-
rent account deficit to $5 billion over the next 12
months compared with the present $8 billion
level. Rome also expects these measures to limit
capital movements abroad and to improve the
country's ability to borrow in private capital
markets. The French hope to reduce their current
account deficit by $4.5 billion in 1975 from a
projected $6.5 billion this year. They anticipate
no problems financing the remaining deficit
2bAl
through a combination of private and public
borrowing. The British expect a $5 billion current
account deficit in 1975, compared with $10 bil-
lion this year. They feel they can easily finance
this deficit and, in fact, may have to take action
to prevent excessive movements of capital from
abroad. The Japanese are privately optimistic that
they can reduce their deficit by $3-4 billion over
the next year.
These projections, representing an aggregate
improvement of over $15 billion in one year, are
clearly overly optimistic. Other nations with oil-
induced payments problems will also be seeking
to reduce their deficits and will be unwilling to
accept the added burden implied by these
estimates. Efforts of the four to realize these
projections could lead their trading partners to
retaliate with trade restrictions
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