WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001000070017-2
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 28
• Document Creation Date: December 27, 2016
• Document Release Date: May 10, 2010
• Sequence Number: 17
• Publication Date: August 30, 1974
• Content Type: REPORT

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Weekly Review
Tan salmrat
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30 August 1974 2bAl
copy No 636
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 CONTENTS (August 30,1974)
1 Cyprus
U The Middle East
10 Greece: Looking Toward Europe
11 Iceland: A New Government
11 UK: Trade Union Congress
12 Romania: 30th Anniversary Fete 25X1
13 Hungary: Rumors of Trouble
EAST AS I A
PACIFIC
14 Vietnam: Fighting; Propaganda
15 Laos: Surviving Without Souvanna
16 China: Increasing Petroleum Sales
17 Malaysia: A Clean Sweep
MIDDLE EAST
AFRICA
18 Iran-Iraq: Border Trouble Worsens
20 Spanish Sahara: Referendum Set
21 Ethiopia: New Tack in Eritrea
WESTERN
HEMISPHERE
22 Chile-Peru: The Arica Issue
22 Netherlands Antilles:
Independence Problems Loom
24 Brazil: Foreign Trade Concerns
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CYPRUS
Clerides and Denktash (foreground) with UN officials Aga Khan and Waldheim
Diplomatic activity has intensified, but there
has been little progress thus far in resolving the
Cyprus conflict. Greece and the Greek Cypriots
this week accepted a Soviet proposal to bring the
Cyprus crisis before a large international con-
ference under the auspices of the UN Security
Council. The Turks and Turkish Cypriots, how-
ever, rejected Moscow's suggestion, and continued
to advocate a return to the Geneva talks. The
Greek side has resorted to delaying tactics in an
apparent belief that it will gain more international
support as time goes on. The Turkish side, how-
ever, realizes that Greece is winning the propa-
ganda war, and reportedly is moving ahead with
plans to, create an "autonomous Turkish Republic
of Cyprus." Thee military cease-fire on Cyprus is
holding, but Greek Cypriots have threatened guer-
rilla warfare, and tension remains high on the
island.
Diplomatic Maneuvering
Cypriot President Clerides and Greek Prime
Minister Karamanlis.met last weekend in ?Athens
and reportedly- are in agreement concerning
.future .policy toward Cyprus.The two continue
to demand that .Turkey withdraw, its forces to
positions held before the second round of fight-
ing, and they insist that Turkish "concessions"
are not substantial enough to warrant reopening
the Geneva talks. Both Athens and Nicosia later
accepted the Soviet proposal for an international
conference to discuss Cyprus. The vaguely
worded Soviet government statement, issued on
August 22, calls for Athens; Ankara, Nicosia, all
UN Security Council members, and some un-
specified nonaligned states to attend the conclave.
The Greek reply to the Soviet proposal,
however, reportedly expressed "agreement in
principle," suggesting that Athens has some
reservations. UN Secretary General Waldheim,
who met with the leaders of all interested parties
this week, indicated that neither Karamanlis nor
Clerides is really interested in the Soviet proposal.
There are other indications that their acceptance
of Moscow's plan was 'motivated by a desire to
delay negotiations and gain wider international
support for the Greek position. Clerides told
reporters, for instance, that opinion in Europe has
started to swing in favor of the Greek Cypriots.
By accepting the Soviet proposal,. Karaman I is was
also able to make a gesture to the left in Greece,
the direction from which his most serious
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political problems are likely to come. Both
Karamanlis and Clerides realize they will have to
make concessions eventually, but they hope to
postpone doing so until domestic frustrations and
tempers cool.
After consulting with Karamanlis, Clerides
met with Turkish Cypriot leader Denktash and
UN representatives to.discuss humanitarian prob-
lems. Waldheim said that some progress was made
in facilitating the movement of foodstuffs and
reuniting broken families on a case-by-case basis.
The two Cypriot leaders agreed to meet every
Monday, and Waldheim hopes that the two men
will eventually discuss political issues and con-
tribute to a resolution of the crisis. Athens and
Ankara, however, will probably keep the Cypriot
leaders on a short leash. In contrast to the Greeks,
the Turks hope for an early resumption of talks
involving only Athens, Ankara, the two Cypriot
communities, and Great Britain. The Turks view
the Greeks as being much better than themselves
at mobilizing world opinion and are worried that
they will be out maneuvered diplomatically now
that the fighting has ceased. The Turkish side is
adamant that an eventual political settlement
recognize a separate and autonomous Turkish
administration in the northern part of the island.
The Turks have conceded that the exact bound-
aries of the Turkish Cypriot autonomous area are
negotiable. Statements by Denktash about the
possible establishment of an independent Turkish
Cypriot state are, in part, an effort to force the
Greek side to the bargaining table, but the Turk-
ish side reportedly is preparing to create such a
state if the Greeks continue to stall on opening
talks.
UN Activities
The UN Security Council was scheduled to
hold a special session on August 29 to discuss the
Cyprus situation. Clerides requested the meeting
to discuss the refugee problem on Cyprus, but a
strong possibility existed that debate would be.
broadened.
Earlier in the week, Secretary General
Waldheim visited Nicosia, Athens, and Ankara to
sound out the antagonists on possible negotia.
tions and to discuss the role of the UN forces on
Cyprus. Waldheim expressed hope that a common
ground will be found that will permit peace talks
to begin, but acknowledged that 3 wide gap exist,-
between the Greek and Turkish sides. The Secre-
tary General, believes that a first order of uusiness
is to reach agreement on a new mandate for the
UN peace-keeping force. He wants to update the
mandate, which expires in December, to reflect
the new situation on the island.
The Soviet Angle
The Soviet proposal for an international con-
ference represents a continuation of Moscow's
efforts to establish a role for itself in the Cyprus
conflict and to reiterate its support for Cypriot
independence. The move also seems aimed at
exploiting Greek discontent with the Geneva
talks. The Soviet statement was issued only after
the Turks had completed their occupation of
northern Cyprus. This timing, along with the con-
tinued absence of direct Soviet criticism of
Ankara, indicates Moscow does not want the
proposal to be viewed as a slap at the Turks.
Now that the Greeks have accepted-and
Ankara has rejected-the Soviet proposal, Moscow
seems uncertain about how to proceed without
offending the Turks. Ai-Enough Soviet public
comment is somewhat more favorable to Athens,
Moscow has not pushed its proposal energetically
with other countries or at the UN. The Soviets
will probably keep their gambit alive in order to
curry favor with the Greeks, but will probably
not chastize Ankara for rejecting it. Such crit-
icism might compromise Moscow's longer term
interest in maintaining good relations with
Ankara.
Britain, which had been working to win
Greek agreement to reopen the Geneva negotia-
tions, initially gave a chilly reception to the So-
viet plan. London reportedly says, however, that
it will not oppose such a proposal if it is accept-
able to the other interested parties. The US
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mission to the UN believes that the plan is not
likely to win acceptance in the immediate future
unless there are new Turkish provocations on
Cyprus.
On Cyprus
On Cyprus itself, the military cease-fire is
holding, but considerable tension remains. ,The
government, aided by the International Red Cross
and donations by several countries, is attempting
to relieve the plight of an estimated 200,000
refugees, but relief will be slow in coming.
Various Greek Cypriots, including some repre-
senting themselves as members of the right-wing
EOKA-B, have threatened to wage guerrilla war.
President Clerides reportedly will seek to control
the various paramilitary groups on the island, but
admitted last week that he does not have suf-
ficient power to do so at this time. Although the
threats of guerrilla war may not be translated into
deeds for some time, the Turks have begun to
take the threats seriously.
In capturing about 40 percent of Cyprus,
Turkey has gained control of almost ad of the
island's important economic resources. Permanent
partition along present Iii.es would place the
majority Greek population-about 80 percent of
the total-in an economically untenable situation.
Cyprus' key agricultural, mining, manufac-
turing, and tourist centers are all in the Turkish
Northern Boundary of Agricultural Plain
Tourism
i:'i`?
I
Irrigated Are'%
Attica Line
Front
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zone of control. This area has accounted for con-
siderably more than half of the economic activity
on the island. Greek Cypriots have fled to the
mountainous, least productive areas. Still in
Greek Cypriot hands are the Limassol tourist and
commercial area, the port of Larnaca, and the
Troodos highlands where grazing and olive, wine,
and grape production are the chief occupations.
The Turkish-controlled zone includes land
devoted to wheat, barley, vegetables, potatoes,
and citrus fruits. Cyprus, already dependent on
imports for 40 percent of its food supply,
consumes all domestically grown wheat, barley,
and vegetables.
More than half the producing areas for these
foods, accounting for about 65 percent of
Cypriot agricultural output by volume, are under
Turkish control. The Turks occupy almost all the
agricultural areas that are permanently irrigated.
Turkish forces also control large sections of
the copper-producing region surrounding the city
of Xeros. This area, encompassing the Mavrovouni
and Skouriotissa operations of the US-owned
Cyprus Mines Corporation, accounts for two
thirds of Cypriot mineral production and 70 per-
cent of mineral export earnings. The Greeks
retain sorie copper resources, as well as important
iron pyrite deposits, south of the Turkish-
occupied zone.
Turkish troops occupy much of the principal
manufacturing district surrounding Nicosia as well
as the popular Kyrenia and Famagusta tourist
areas. While destruction in these areas has not
been extensive, the massive dislocation of workers
and the absence of tourists have brought eco-
nomic activity to a standstill.
Outside the occupied zone, fires caused by
Turkish bombing have destroyed a large part of
the southwestern timber lands. Resulting water-
shed deforestation will threaten the island's
already scarce water supply.
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Water shortages, normal occurrences before
the war, are now severe. Crops have not been
irrigated in over a month, and livestock is re-
ported to be dying of thirst in large numbers.
The invasion has had a devastating impact on
Greek Cypriots, causing an estimated 100,000 to
200,000 to flee their homes and businesses. Pre-
liminary estimates by Greek Cypriot authorities
put the losses at over $200 million, including:
construction, $125 million; tourism, $36 million;
industry, $18 million; agriculture, $8-10 million;
lost working days, $18 million. Final figures will
probably be much higher.
While Ankara remains flexible, present Turk-
ish plans seem to call for a formalization of the
Attila line. Should there be an extensive exchange
of population between Greek Cypriots leaving
and Turkish Cypriots entering the occupied zone,
the land gained by Turkish Cypriots in the north-
east portion of the island would be much greater
than that abandoned in the southwest.
It is unlikely that the area left to the Greek
Cypriots could support the additional 150,000
refugees who might have to be resettled there.
Since food supplies already are inadequate, heavy
reliance on foreign food aid would be necessary.
Lacking significant manufacturing, agricultural,
mining, and tourist activity, the Greek-held areas
face extensive under-employment and massive
emigration.
Ankara is likely to consolidate its gains in
the northeast by pouring considerable investment
into the mineral, tourist, petroleum refining, and
service industries. The Turkish Cypriot popula-
tion, which formerly enjoyed a per capita income
only half that of Greek Cypriots, would profit
from the realignment.
The military expedition, which has cost
Turkey an estimated $370 million, would be com-
pensated by the creation of a robust Turkish
Cypriot economy and elimination of an annual
$22 million welfare payment made by Ankara to
support the Turkish enclaves.
WEEKLY REVIEW
Aug 30, 74,
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President Sadat's hopes of working out a
coordinated Arab position on the roles to be
played by Jordan and the Palestine Liberation
Organization in the next phase of Middle East
peace negotiations were jarred last week by
Algeria's rejection of any role at all for Jordan. In
an uncompromising public address on August 22,
President Boumediene reiterated his support for
the resolution passed at the Arab summit last
November, which recognized the PLO as the sole
legitimate representative of the Palestinian
people.
Boumediene warned that a leading role for
King Husayn at this time would not facilitate the
search for peace. He also insisted that Arab soli-
darity depended upon an honest agreement with-
out "backstage tricks," an apparent reference to
Egypt's agreement to allow Jordan to negotiate
for the return of the West Bank.
Algeria's tough stand will complicate Sadat's
effort to accommodate both Palestinian and
Jordanian approaches to the negotiations, and it
will strengthen the hands of those Palestinians
who oppose PLO leader Yasir Arafat. In particu-
lar, Boumediene's intransigence appears to rule
out any hope that Algeria will act as a mediator if
the coming meeting of the foreign ministers of
Egypt and Syria with representatives of the PLO
runs into difficulty.
Sadat, nonetheless, appears determined to
press his suit with the PLO and the Jordanians. In
a press conference on August 28, he reiterated his
thesis that Israel may try to exploit the contradic-
tion between the PLO and Jordan. Sadat has
emphasized all along that,- although advancing
Palestinian rights is all-important, neither the
Palestinians nor the Arabs as a whole will gain in
the long run if divisions in Arab ranks enable
Israel to avoid having to face up to negotiations.
In an apparent effort to squash any speculation
that he is becoming discouraged with the pursuit
of negotiations on the Jordan front and might
ievert to the search for a further Egyptian-Israeli
disengagement, Sadat insisted in a speech on
August 25 that "Egypt will not put an end to the
state of war unilaterally."
Sadat also chaired a cabinet meeting this
week that apparently approved preparations for
the Egyptian-Syrian-PLO meeting and favorably
reviewed Foreign Minister Fahmi's recent visit to
the US. The meeting, however, was held against a
background of grumbling within the cabinet over
Sadat's failure to maintain a true balance in
Egypt's relations with the two super powers.
Sadat reportedly has been criticized by a majority
of cabinet members for having "almost blind
faith" that the US will arrange a satisfactory
peace and will provide Egypt with needed eco-
nomic assistance.
Sadat's critics remain personally loyal to
him. Their dissatisfaction is not a reflection of
opposition to the US or of a preference for
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Moscow, but of restiveness over the current lull in
peace negotiations and ungratified expectations
of U.? aid.
. The Egyptian media have begun to show a
more relaxed attitude toward the US since
Fahmi's return from Washington, and this press
reaction probably indicates some easing of the
concern within the cabinet. Nevertheless, govern-
ment officials are said to be worried that domes-
tic pressures on Sadat will mount until more
tangible benefits are apparent from the relation-
ship with Washington and until the deterioration
in relations with Moscow-specifically with regard
to military aid-is arrested. Particularly worrisome
to the cabinet are indications of increasing dis-
satisfaction within the Egyptian military over the
denial of Soviet arms since last April and the
absence of any prospect that Soviet supplies will
be substantially replaced by arms from the West.
In speeches last weekend and in his press
conference this week, Sadat seemed to go out of
his way to mollify his domestic critics. He noted
the necessity of coordinating Arab positions with
Moscow before reconvening. the Geneva Con-
ference, and he expressed a more general desire to
improve relations with the Soviets, stressing that
Egypt's friendship with one super power does not
signify its alignment against the other. This is a
standard position with Sadat but one that he has
nit emphasized publicly since the Soviets
abruptly canceled a scheduled visit by Fahmi to
Moscow in mid-July.
Israel conducted its widely pub;icized
nationwide mobilization exercise this week amid
Arab apprehension that it would be used as a
cover for an Israeli attack.
The exercise began on August 25 and ended
two hours Behead of schedule the next day. The
Israeli chief of staff termed the exercise a success,
with nearly all the recalled reservists reporting for
duty. The public call-up, which was said to have
involved "tens of thousands" of reservists, was a
test of Israel's ability to mobilize quickly in an
emergency. According to an Israeli military
spokesman, this system of recall was last used
operationally in 1967 and in an unannounced
practice call-up "some years ago."
Tel Aviv followed the mobilization exercise
with military maneuvers on Monday night in the
Sinai, but it is not known if any of the mobilized
reservists participated. Israel has held several
large-scale maneuvers during the past month, and
some reservists had been mobilized for them. 25X1
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PORTUGAL: CONTEST FOR POWER.
Friction between President Spinola and the
Armed Forces Movement has subsided, at least
tempararily. There is no indication, however, that
their basic differences have been resolved, al-
though Spinola appears to be gaining a slight
edge.
The latest crisis was triggered by Spinola's
insistence that the Coordinating Committee of
the Armed Forces Movement, which has been
monitoring government decisions, be downgraded
or eliminated entirely. Spinola threatened to
resign over this issue, claiming that the present
arrangement prevented him from carrying out his
policies.
A complete deadlock was prevented when
Spinola and Movement leaders agreed to poll all
military officers.
pino a s support
was particularly st,,,)ng in the army, while the
navy remains less content with the President's
leadership. In any case, Spinola will have more
freedom to implement the Movement's program
as he sees it without the supervision of the com-
mittee, although he will continue to coordinate
his moves with the hierarchical structure of the
armed forces and the government.
The Armed Forces Movement has previously
presented a united front, but the continuing con-
test for power has split it into two factions.
Spinola and his followers, including some young
officers in the Armed Forces Movement, advocate
gradual reform of the political, economic, and
social .;tructure, as well as a slow process of de-
colonization. They believe that the provisional
government must proceed slowly because it does
not have a mandate from the people.
The opposition is led by Prime Minister
Goncalves, who assumed office in .he cabinet
shuffle last month when Spinola ,anal ex - prime
minister Palma Carlos failed to recisive the sup-
port of the entire Movement. Goncalves' fol-
lowers, who lean toward the left, believe that
rapid a..d more radical reforms arF imperative.
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The rift in the Movement appears to be
working to Spinola's advantage. The great ma-
jority of the officers are said to be politically
neutral, but believe that they must side with
Spinola and his chief . of staff, General Costa
Gomes. Moreover, a group of regular officers
appears to resent the maneuverings of political
activists in the armed forces.
a campaign is under way to reassign
politically active members of the Armed Forces
Movement to overseas duty. Sach a move was
rumored recently when junta member Rosa de
Coutinho was sent to head the military junta in
Angola and Minister without Portfolio Melo
Antunes was assigned to Mozambique. The latter
appointment has been postponed, however, and
may be canceled. 25X1 25X1
Althouch Spinola appears to have won
another round in this continuing contest for
power, his position apparently is still not as solid
as he would like. 25X1 25X1
Lisbon this week passed a major milestone in
its withdrawal from Africa as a colonial power. It
signed in Algiers a formal agreement accepting the
int ependence of the Republic of Guinea-Bissau,
which had been proclaimed a year ago by the
rebel movement in Portuguese Guinea. The signa-
tures of Portuguese and rebel representatives weie
hardly dry before Portugal began repatriating its
troops.
The agreement is to take effect on Septem-
ber 10 when formal ceremonies are to be held in
Bissau to mark the territory's independence.
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President Spinola, who led Portugal's military
campaign there for five years, reportedly will be
present for the occasion. The two countries will
then establish diplomatic relations.
As part of the settlement, Lisbon agreed to
remove all Portuguese forces from the territory
by the end of October, although it will leave
behind sizable numbers of technicians, educators,
and medical personnel. There are approximately
20,000 troops from Portugal in the territory.
Nothing was officially announced about the
future of several thousand locally recruited
troops, although the rebels have indicated in the
past that they will take no reprisals against any
who agree to support the independent govern-
ment.
The agreement leaves open the future of the
Cape Verde Islands. A referendum will be held
there at some later date, and representatives from
Guinea-Bissau will be allowed to campaign on
behalf of union with the republic. During the
insurgency, rebel leaders consistently claimed to
represent the islands. The Portuguese wish to
retain them because of their strategic value.
Guinea-Bissau's major problem now is its
backward economy. The territory has no re-
sources to exploit ana is heavily dependent on
imports. Subsistence agriculture is the main way
of Ine, with exports limited to modest quantities
of palm oil, peanuts, and -oot crops. Significant
external economic assistance will be needed.
Although the agreement commits Lisbon to such
aid, Portugal's resources are limited, and domestic
political and economic uncertainties will hamper
its ability to support its former territory.
The settlement in Guinea-Bissau should
boost Lisbon's stock with insurgent leaders in
Mozambique. Portuguese officials apparently are
optimistic about an early settlement there and
will resume talks with rebel leaders on September
5, probably in Lusaka, Zambia.
There is no sign of forward motion in
Angola, however, largely because: rebel leaders
continue to fight among themselves. A congress
of the. Popular Movement for the Liberation of
Angola was called two weeks ago to resolve the
organization's bitter leadership dispute and to
consider joining forces with the Zairian-based
National Front for the Liberation of Angola. This
meeting collapsed recently following the with-
drawal of the organization's president, Agostinho
Neto, in protest over a censure vote against his
leadership. At present, there appears to be no
solution to the disarray in the Angolan liberation
effort. Lisboa is thus left in the awkward position
of being willing to give up the territory but having
no meaningful political organizations with which
to negotiate.
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GREECE: LOOKING TOWARD EUROPE
When the new governor of the Bank of
Greece remarked in an interview with a German
newspaper last week that Greece was "unimagina-
ble as a free state outside the European Com-
munity," he was reflecting the priority the
Karamanlis government places on Greek-EC rela-
tions. One of the new government's early moves
was to make arranger.jents for Foreign Minister
Mavros to see EC Commission President Ortoli in
Brussels, a visit set for early next month, and for
a later trip by the finance minister. Aware of the
long-standing interest of the European Parliament
in the Greek question, Athens played host for a
five-day visit last week of the parliament's Dutch
president. The Greeks have now formally re-
quested renewal of those provisions of the 1961
treaty of association that were suspended by the
EC after the military coup in 1967. Full member-
ship in the EC remains a goal, but whether Athens
presses it in the near future will depend on how
the Greeks read sentiment among the Nine for
such a step.
The Karamanlis government is above all in-
terested in the acceptance and legitimacy it feels
EC ties will confer and presumably has few il-
lusions that restoration of full association ties
with the community will replace the security
links with the West severed by Greece's with-
drawal from NATO's integrated military struc-
ture. Top Greek officials nevertheless clearly see
"Europe" as in some sense a political alternative
to ties with the US. In a recent interview with an
Italian newspaper, Foreign Minister Mavros noted
that Greek policy would be less "regulated by the
Americans" and that Athens had now "at last to
look toward Europe." The campaign to restore
normal relations with the EC has broad support
among Greek politicians, with the possible excep-
tion of returned left-wing leader Papandreou. The
only explicit opposition has come from pro-Mos-
cow Communist elements.
The Nine are generally well disposed to "do
something" for Greece, even though individual
interests may vary somewhat. All the EC mem-
bers agree that they should work to preserve
Greece's Western orientation. They probably
share the dismay expressed by French President
Giscard d'Estaing this week that Europe had been
powerless to prevent hostilities between Greece
and Turkey, both associate members of the
community. The Germans, however, are almost
certainly more anxious than France to encourage
Greece's military reintegration into NATO. Bonn
is also jealous of preserving what it considers its
unique good relations with both Ankara and
Athens. The Italians, and probably some of the
other EC members, remain suspicious of French
ambitions in seeking closer relations with Greece.
All of the Nine can still probably agree on
the desirability of restoring association ties with
Greece. According to German officials, the EC
Council meeting on September 17 is expected to
make d positive decision on this. One effect
would be to unfreeze some $55 million in loans
that had been blocked by the 1967 EC action.
There may be some legal problems over restoring
these funds, however, as well as on such questions
as tending the old association agreement to the
three members of the EC who have joined since
the original pact, and on resuming discussions on
agricultural harmonization. Among other early
issues to be discussed are new financial aid and a
statute covering Greek migrant labor in the EC.
The community vill probably want to move
quickly to answer any Greek requests, but it will
be reluctant to restore ties before full democratic
forms are restored in Greece. Athens would
probably accept this as a condition for renewed
relations, but prolonged haggling over terms could
strain the good will both sides are
showing.
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ICELAND: A NEW GOVERNMENT
After eight weeks of negotiations, the con-
servative Independence Party and the moderate
Progressive Party reached agreement this week on
a coalition government. The new government will
be headed by the chairman of the Independence
Party, Geir Hallgrimsson, who is pro-US and
favors retention of the US-manned NATO base,
probably with some modifications.
The coalition will have 42 seats in the 60-
seat parliament, and each party will have four
ministers in the cabinet. Progressive Einar Agusts-
son retains his post as foreign minister and pro-
vides continuity as chief negotiator on the base
issue. Unlike past base negotiations, when Agusts-
son was buffeted between moderates in his own
party and leftists in the Communist Party, he may
now be able to settle down to useful talks.
The new government may still require a US
response to the stringent demands for a reduction
of US troop levels put forward by the previous
coalition last April. Although Reykjavik probably
will not insist that all its proposals be accepted,
the so called "non-negotiable" demands, first
raised last year, are expected to remain on the
table. These include the hiring of more Icelandic
nationals at the base, on-base housing for all US
military personnel, and separation of civilian and
military facilities at the airport.
Nevertheless, Hallgrimsson expressed con-
fidence that the base issue would be settled
amicably. He told the US ambassador on August
27 that "our problems are over." The ambassador
speculated that negotiations could resume as early
as the latter part of September when Foreign
Minister Agustsson will be in the US for the
opening of the UN General Assembly.
The deepening economic crisis, however,
may occupy much of the government's attention,
at least initially. Last week, the Icelandic Central
Bank restricted foreign currency trading when
foreign reserves dropped dangerously low. The
first priority of the new coalition will be to
devalue the krona-currently valued at about 95
to the dollar-by approximately 15 percent. The
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Geir Hallgrimsson
Einar Agustsson*
Olafur Johannesson?
Matthias Mathiesen
Matthias Bjarnason
Gunnar Thoroddsen
Halldor Sigurdsson*
Vilhjalrnur Hjalmarsson
Prime Minister (IP)
Foreign Minister (PP)
Commerce Minister
Justice Minister (PP)
Finance Minister (IP)
Fisheries Minister
Health & Social
Security Minister (IP)
Industries Minister
Social Affairs Minister (IP)
Agriculture Minister
Communications Minister (PP)
Education and Culture
Minister (PP)
*Served in the previous government.
(IP) Independence Party (PP) Progressive Party
government must also make decisions on wage
and price controls, which were due to expire this
week but have been extended for another
UK: TRADE UNION CONGRESS
Britain's trade union leaders will try to put
on a show of unity at the annual meeting of the
Trades Union Congress that opens on September
2. The congress will provide Labor Party leaders
with an important forum from which to publicize
their position on major issues.
The convention will be held at a time when
all the political parties are preparing to open their
campaigns for the expected-but still unan-
nounced-general election. Prime Minister Wilson
will probably set a date for the new election when
he addresses the opening session of the congress.
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The most important contribution that the
I? ions could make to Labor's campaign is to
reaffirm their pledges to restrain wage demands.
The new general secretary of the congress, Len
Murray, is expected to ask labor to moderate its
wage demands this fall in order to fulfill the
unions' bargain with the Labor government-the
so-called social contract. He probably will also
stress that in this election year, it is more impor-
tant than ever that the unions avoid the damaging
divisiveness of the past and strive for a consensus
on the main issues facing Britain.
With no quick and easy solutions to Britain's
economic problems in sight, the issues facing the
union leaders promise to raise emotional and dif-
ficult questions. There are a host of draft resolu-
tions, ranging from demands for extensive wealth
redistribution and increased nationalization to
simple restatements of support for the leader-
ship's efforts to solve the economic problems. If
the congress follows the lead of the powerful
miners union, however, it will travel a moderate
route.
The congress will also consider several
resolutions dealing with British membership in
the European Community. A majority of the
motions introduced on this issue urge renegotia-
tion of the terms under which Britain joined the
community, to be followed by a referendum in
which the voters could decide whether they ap-
prove the new terms.
Although most congress members are in
favor of maintaining contacts with individual
European labor unions, only the more conserva-
tive unions also support institutional ties with the
EC. The present policy of non-participation is
expected to be endorsed by the congress.F_
ROMANIA: 30th ANNIVERSARY FETE
President Ceausescu used the 30th anniver-
sary of Romania's liberation to make a pointed
reaffirmation of Bucharest's independent cours25X1
in the Communist world.
In his opening remarks to a session of the
Grand National Assembly on August 22-with
Soviet Premier Kosygin and Chinese Deputy
Premier Li Hsien-nien in the audience-Ceausescu
tossed a few rhetorical bouquets to Moscow, but
there was little in which Moscow could take com-
fort. The Soviets could not, for example, miss the
implications of Ceausescu's repeated use of the
word "all" when referring to the absolutely equal
rights of parties and countries. The Romanian
leader reasserted Bucharest's intention of develop-
ing relations with all states "regardless of social
system"-a reference to the West-and he stressed
that international relations should be based on
Bucharest's highly touted principles of "full
equality and...non-recourse to the use or threat of
force." This was a particularly pointed statement
since it came almost six years to the day after the
Soviet invasion of Czechoslovakia.
Ceausescu's remarks on the Romanian
economy, and his ridicule of those who had
earlier advocated that Romania remain an agricul-
tural nation, drew applause even from Kosygin. It
was Khrushchev's promotion of this role for
Romania that initially caused Bucharest to launch
its independent course in the early 1960s.
Moscow's reaction to the anniversary was
correct but perfunctory. Premier Kosygin met
once privately with Ceausescu, and then left the
country on August 24, reportedly in spite of an
invitation to extend his stay a few clays.
By contrast, the Chinese sent an ex-
ceptionally warm and even effusive telegram, 25X1
citing the two countries' common struggle against LAX"I
"imperialism and hegemonism." Deputy Premier
Li had two private sessions with Ceausescu; each
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HUNGARY: RUMORS OF TROUBLE
Rumors circulating in Hungary for two
months suggest that factionalism is at work
within the party hierarchy. Party conservatives,
who are probably taking inspiration from the
Soviets' drive for ideological "vigilance," are ap-
.parently agitating for modifications in Kadar's
relatively moderate ecoromic reforms and his
long-standing policy of c.altural liberalism.
Some of the stories assert that Kadar is
either going to step down or will be forced out by
challenges from a relatively junior party leader
backed by conservatives in the party apparatus.
The conservatives dislike the reforms because
they erode their special influence.
Nonetheless, Kadar has loyal followers in
most of the key jobs in the central party appara-
tus and seems able to weather this sort of chal-
lenge. Moreover, Soviet party chief Brezhnev ap-
parently is on his side. The communique issued
after talks between the two leaders earlier this
month stressed a "complete identity of views."
Kadar does, however, have problems. The
Hungarian party is in the initial stages of pre-
paring for its 11th congress next spring, and
Kadar loyalists may have trouble stage-managing
debates over policy. A warning against a "faction-
alist grouping" appearing in the party daily on
August 4 suggests that the party chief may be
preparing to draw the line between legitimate
debate and "anti-party" activity.
Factional conflict may have been intensified
by the demotion of two key reformers this past
spring. The demotions-the first major personnel
changes since 1966-stirred fears that Kadar's re-
form program clashed with Moscow's interest in
tightening discipline in Eastern Europe. The
regime tried to allay these anxieties by reassuring
the Hungarians that only the pace of the reforms
will be affected. Moreover, Kadar has also taken
pains to avoid altering economic policy. F_
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Military action p',cked up during the week in
the northern provinces and in areas close to Sai-
gon. A number of fresh Communist- attacks in
midweek against government positions on the
high ground south of Hue resulted in the loss of
several outposts. The action appears designed to
challenge control of the southern approaches to
the city. In South Vietnam's Military Region 3,
Communist military action reached its highest
level in fourteen months, with new action erupt-
ing in western Tay Ninh Province and to the
north of Saigon.
These latest Communist initiatives may force
Saigon to rejuggle some of its combat units,
which have been shifted to other threatened
regions of the country. South Vietnamese of-
ficials are showing increasing concern over the
lack of reserve forces in the Saigon area, and
regional commanders are clamoring for more
fighting strength.
though the Communists have not ruled out polit-
ical means of securing Thieu's ouster, Hanoi has
obviously become increasingly disenchanted with
its political prospects in the South and may have
decided to try to push Thieu into negotiations by
force.
North Vietnam may also be addressing the
question of Chinese and Soviet support for its
future strategy in the South. A recent article in its
In keeping with the generally higher level of
military activity, North Vietnamese propaganda
has taken a more militant turn. Hanoi apparently
believes that President Nixon's resignation, to-
gether with Washington's unsolved economic
troubles, have left the US-and, by extension, the
Thieu regime-considerably weakened, opening
up new political and military opportuni;.;es for
the North. A Viet Cong broadcast of August 12,
for example, claimed that the resignation wa;? a
blow to the "Thieu clique" and urged the people
of the South to seize the opportunity "created by
the enemy's crisis" to deal it "grave setbacks."
The new line includes-for the first time
since the signing of the Paris accords-calls for the
overthrow of President Thieu. Earlier, Hanoi had
taken the position that the Thieu government
would be replaced in due course through negotia-
tions involving all the parties in the South. Al-
CAMBOIIA
ei~Hl
DINH
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army newspaper appears to take several swipes at
past counsels of restraint by stressing the histor-
ical necessity of Hanoi's "liberation war," arguing
that "Marxists must inevitably support this war,"
and making a particular effort to counter any
charge that renewed fighting in South Vietnam
would lead to world war.
The article, which was not presented a:; an
authoritative party pronouncement, was unsigned
and has not been broadcast or printed in the
party paper. It was, however, cast in a format
usually reserved for important statements. It may
be intended to register sharp dissatisfaction with
the present level of military aid from Moscow and
Peking-which has declined considerably since the
cease-fire. It could also reflect an internal debate
over the reliability of future support from abroad,
or perhaps merely serve as a warning to Peking
and Moscow that Hanoi intends to prosecute the
war on its own terms.
The shift in Hanoi's propaganda is consistent
with a continuation of the current relatively
heavy military pressure on South Vietnamese
forces. It could also mean that the Communist
high command has decided on a policy of grad-
ually stepped-up attacks that will probe the ef-
fectiveness of Saigon's army and the firmness of
US support.
LAOS: SURVIVING WITHOUT SOUVANNA
Prime Minister Souvanna Phouma left Laos
early this week for several months of convales-
cence in France. The 72-year-old Lao leader has
been making slow but steady progress from the
massive heart attack he suffered seven weeks ago,
but his condition is still considered serious and it
is questionable whether he will ever be able to
resume full political activity.
Prior to his departure from Vientiane,
Souvanna publicly announced that he turning
over the affairs of state to Communist Deputy
Prime Minister Phoumi Vongvichit and to his non-
Communist counterpart, Leuam Insisiengmay.
There were earlier indications that Souvanna had
designated Phoumi as the sole "acting prime min-
ister," but in the end he apparently decided on a
duumvirate arrangement as a means of maintain-
ing the political equilibrium between the two
sides during his absence.
The coalition government has continued to
function without Souvanna's strong hand at the
helm, but both Communist and non-Communist
members are apprehensive about the effect the
Prime Minister's absence will have on the current
political situation. The non-Communists are
worried that the Pathet Lao will try to take
advantage of the leadership vacuum created by
Souvanna's absence. They are especially fearful
that the toLgh and highly talented Phoumi will
attempt to outmaneuver the lackluster Leuam,
even though both deputy prime ministers are sup-
posed to share power equally.
The Pathet L_ao, for their part, are antic-
ipating rightist intransigence on key policy initia-
tives that have been made by the Communists,
and they may be wary of other forms of trouble-
making as well. As a result, they may proceed
cautiously while Souvanna is away rather than
risk disrupting a political trend that has been
evolving in their favor ever since the formation of
the new government.
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The deep-seated distrust and suspicion be-
tween the two sides threatens to make the resolu-
tion of serious problems facing the coalition all
the more difficult. The economy remains in
desperate straits, a wave of labor unrest has hit
Vientiane, and thorny political issues-such as the
dissolution of the National Assembly and the
implementation of Pathet Lao leader Souphan-
ouvong's 18-point national program-remain un-
resolved.
Souvanna has reportedly counseled the coali-
tion's temporary leaders to avoid any contro-
versial or divisive issues that could disrupt the
fragile coalition, and to concentrate instead on
routine government business. This reinforces the
prospect that a period of executive inaction is in
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CHINA: INCREASING PETROLEUM SALES
China will export at least 4 million tons of
crude oil this year, and Peking has suggested that
much larger amounts will be available during the
remainder of the decade. By 1980, crude oil
exports probably will rise to 50 million tons a
year.
Peking's plans to increase oil exports sub-
stantiallyover the next five years are borne out
by the construction of new oil-handling facilities
at ports in north China and the purchase of the
dredging equipment 'needed to make Chinese
ports deep enough for large tankers. China is also
actively engaged. in acquiring tankers of over
50,000 deadweight tons to transport crude oil for
export.
Crude oil production has come largely from
onshore fields, although some offshore exploita-
tion is being carried out in the Pohai Gulf. So far,
activity in the deeper waters of the continental
shelf has been limited to geological surveys. Even
without production from offshore fields, how-
ever, reserves are large enough to meet the goal of
50 million tons of crude exports by 1980. If
production accelerates, or even if it only increases
at the present rate of 22 percent annually, China
could reach its export goal and still provide a
generous increase for domestic use.
If Peking should encounter unexpected dif-
ficulties in achieving its goal, it might change its
attitude toward direct foreign participation in the
development of the petroleum industry. Peking's
present position is against. joint ventures, direct
foreign investment, or product sharing. Neverthe-
less, "cooperative" arrangements-those initiated
by China and presented as a straightforward com-
mercial exchange of technology and equipment
for a specified quantity of production-cannot be
ruled out. Exploitation of the deeper waters off
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the Chinese coast will almost certainly require maintain its somewhat detached but basically
foreign, and particularly US, technology. friendly attitude toward the US.
Over the next few years, rapidly increasing The National Front, a new confederation of
oil supplies will he a major factor in modernizing nine parties that represent all of Malaysia's major
the Chinese economy. Aside from fueling its races, will dominate the 154-seat lower house of
growing defense establishment, extra oil supplies parliament. Parties in the Front have won 121 of
are being used to: develop the petrochemical the 131 seats decided so far. The government is
industry; supply expanding civil air, merchant expected to win an equally large share of the
marine, and truck transportation services; increase remaining seats from the Borneo state of
the supply of fuels for irrigation and farm Sarawak, where returns from remote jungle dis-
machinery; and generate electric power. Even the tricts will not be in for another. week.
consumer has felt direct benefits-kerosene for
home use was removed from the list of rationed
commodities in 1972.
Growing oil exports will also help finance
China's large wheat imports and multi-billion-
dollar industrial plant purchases. In the next few
years, oil exports could provide half a billion
dollars annually. Nevertheless, the markets for
China's oil exports are not unlimited. Japan, the
major market for Chinese crude, follows a policy
of diversifying its sources of oil and will seek to
avoid , becoming dependent upon China. Any
attempt to market large quantities of products,
which could provide higher returns, will face
serious opposition from the Japanese refining
industry. A widening of the Chinese share of the
product market in Hong Kong and Southeast Asia
will face strong competition from the inter-
national oil companies that now dominate these
The election outcome marks the virtual
attainment of Prime Minister Razak's goal of a
government of "national consensus," an all-
embracing coalition with only token opposition.
Despite the multiracial nature of the con-
federation, the main government party-the
United Malays National Organizaton-is pre-
dominant, and Malay political pre-eminence was
enhanced by some redrawing of constituency
boundaries before the election. Approximately 40
percent of the population is Malay, 40 percent
Chinese, 10 percent Indian, and 10 percent tribal
groups who live in the Malaysian part of the
island of Borneo.
The government kept racial tensions in
check during the election by abbreviating the
campaign and forbidding discussion of provoca-
tive topics. It hopes the strength of its showing at
the polls will further reduce the likelihood of
communal rioting such as erupted after the last
election in 1969.
MALAYSIA: A CLEAN SWEEP
The Razak government's thumping victory
in the national election last weekend promises a
continuation of moderate domestic policies aimed
at containing the racial tensions that are never far
below the surface in Malaysia. Kuala Lumpur's
foreign policy will continue to emphasize South-
east Asian regionalism, and the government will
Razak was under no obligation to call elec-
tions for another 18 months, but the government
decided to take advantage of current favorable
factors. The Malaysian economy, for example, is
booming now but could stack off later on. Recent
gains over Communist guerrillas in Sarawak had
also deflected the people's attention from some
expansion of the nagging insurgency in peninsular
Malaysia.
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 a
The increased Iranian military activity is
probably as much a reflection of the Shah's deep
suspicions of the Baathist regime and his wish to
exert pressure on Baghdad as it is of his desire to
support the Kurds. He probably believes that the
increased military pressure will add to Baghdad's
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IRAN-IRAQ: BORDER TROUBLE WORSENS
Iranian and. Iraqi forces clashed along the
border.early this week, reflecting the tension that
has :been growing between Tehran and Baghdad.
The fighting on August 26, which lasted over two
hours, reportedly occurred at three . locations
along, the southern , Iraqi-Iranian border. There
was renewed fighting on Tuesday, in which an
Iranian armored brigade apparently inflicted
heavy losses on Iraqi positions. Similar clashes
also occurred along the central border last March.
The Iranian actions apparently were trig-
gered by a new Iraqi military campaign designed
to isolate rebel Kurdish forces by cutting their
supply lines to Iran. The. Iranians were' probably
tempted to ease pressure on the hard-pressed
Kurds' in northern Iraq by.launching diversionary
attacks along' the southern border: The Iraqis are
likely to .press their campaign, however, and the
Iranians will continue to respond, thus making
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domestic difficulties, thereby enhancing the
chances of a military coup that might bring to
power a government more acceptable to him.
Even so, the Shah is probably not disposed
to push the current incidents beyond border
clashes, although Iran's military superiority prob-
ably ensures an Iranian victory should a full-scale
war develop. Diversionary attacks and increased
Iranian support for the Kurds are likely, however,
during the next several weeks-until weather
changes begin to hamper large-unit Iraqi military
operations.
The Iraqis, for their part, are apparently
facing real domestic difficulties arising from the
Kurdish situation. Although Baghdad seems fully
committed to making significant progress in the
current offensive, military successes have come at
the price of heavy losses.
. Despite the clashes and heightened tension,
talks between Iran and Iraq have been going on in
Istanbul since August 12, pursuant to a UN
resolution. Efforts to work out an agenda for
talks at the foreign minister level apparently have
bogged down. Indeed, there are indications that
the foreign ministers' meeting may be delayed
until after another round of discussions in the
next month or so. Talks 'between the foreign
ministers will depend on the ability of both sides
to keep the fighting from getting out
hand.
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SPANISH SAHARA: REFERENDUM SET
Spain announced last week that a referen-
dum to decide the political future of Spanish
Sahara will be held under UN auspices in the first
half of 1975. The decision to proceed with a vote
on self-determination as recommended by earlier
UN resolutions has irked Morocco's King Hassan,
who has been pressing to have the area turned
over to Morocco through bilateral negotiations.
Madrid's move is also likely to lead to new fric-
tion between Morocco and the two other
parties-Mauritania and Algeria-that are in-
terested in the disposition of the area.
In a speech on August 20-the same day
Madrid notified the UN Secretary General of its
intention to hold a referendum-King Hassan at-
tached tough conditions to Morocco's agreement
to the plan. He insisted that any vote must occur
under international control after Spanish troops
and administration had been withdrawn. He
further indicated that he would oppose holding
the referendum if the principle of independence
were one of the options offered. In the past,
Rabat had implicitly accepted independence as
one option, provided the 20-25,000 Saharan
nomads it claims live in southern Morocco are
allowed to vote.
The King argued again that the best way to
settle the Sahara question is through bilateral
negotL ons between his country and Spain. He
implied he would accept a UN mediator to facili-
tate such talks.
. , Hassan's tough line will make it difficult for
him to compromise on anything less than Moroc-
can control of. all the territory. Although the King
stressed his desire to acquire the territory through
peaceful means, he repeated the threat he made
last month to resort to force if necessary. The
continuing movement of Moroccan troops to the
south is designed to give added meaning to his
words.
Meanwhile, Mauritania has sent a letter to
the UN indicating that, although it will not re-
nounce its own claim to Spanish Sahara, it will
accept international arbitration of the issue under.
UN auspices. The Mauritanians are in fact less
interested in pressing their claim than in
Ould Daddah, Boumediene, Hassan
countering Morocco's. They have quietly solicited
support in Arab and African capitals for the UN
resolutions, which provide for the exercise of
"self-determination and independence" by the
people of the territory, and will strive to.reinforce
them in the UN General Assembly this fall. More-
over, they have privately requested Madrid to
keep its troops in the Sahara through the referen-
dum and for several years thereafter to guarantee
the territorial integrity of the new state.
Algeria has so far avoided taking a public
stand in the dispute, but clearly does not want to
see the territory become part of Morocco. Like
Nouakchott, Algiers is probably counting on a
resolution being passed in the UN General Assem-
bly this fall that w`il support a referendum with
independence as ran option and thereby pre-empt
a bilateral deal between Spain and Morocco. As
president of the General Assembly this fall, Al-
gerian Foreign Minister Bouteflika will be in a
good position to coordinate such an effort. 25X1
The Spaniards have made clear to the Moroc-
cans their determination to go through with the
referendum, but they otherwise seem to be trying
to remain flexible. Madrid has, for example, ex-
pre.,ed interest in consulting further with the
other interested parties.
the Saharan issue is
now widely recognize as a serious liability by the
Spanish government, and any solution short of a
simple transfer of territory to Morocco would be
acceptable to Madrid-including a vote for afili-
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ETHIOPIA: NEW TACK IN ERITR: A
Prime Minister Mikael's government, strug-
gling to survive under the pressures emanating
from the military reformists' Armed Forces
Coordinating Committee, has begun a new effort
to resolve problems in Eritrea Province, which has
been, troubled by an active revolt for a decade.
The committee, meanwhile, has further isolated
Emperor Haile Selassie, and may be preparing to
force his ouster or abdication.
Mikael'announced in parliament last week
that the government would give priority to solv-
ing the Eritrean problem; he blamed the blood-
shed there on maladministration by previous
governments. Defense Miniv' .. Aman, a key link
between the cabinet and Lhe committee, who is
himself from Eritrea, said he would visit the
province in preparation for making new policy
recommendations. The Interior Minister pledged
to appoint in Eritrea only officials who would
implement the new policies; the appointment of
unpopular officials has been one of the main
sources o` discontent. The Interior Minister also
said the government would review the status of
Eritrean prisoners with an eye to granting am-
nesty.
Moving quickly to implement its promises,
the government on August 24 appointed a
popular and 'respected civilian to replace a mili-
tary officer as governor general of Eritrea. Two
days later, Aman arrived in the province to talk
with local leaders and members of the army gar-
riso-,. Aman' apparently did not plan to talk
directly to members of the rebel Eritrean Libera-
tion Front on this visit, although the military is
believed to have had unofficial contacts with the
rebels.
On the day Aman arrived, a spokesman for
the Front in Beirut declared the rebels' willing-
ness to negotiate a peace settlement with the
coordinating committee. He insisted, however,
that the Front first be recognized as the sole
legitimate representative of the.Eritrean people-a
condition , unacceptable to the military and
probably to most Eritreans. The military and the
government are also unwilling to grant full
independence, the Front's avc-:ved goal.
The loosely organized rebel movement. is
divided on the question of negotiations, and the
spokesman's statement is probably not the final
word on the Front's position. The government's
new policies would seem to have at least a chance
of attracting widespread support from the Eri-
trean public and moderate rebel leaders.
Last week the coordinating committee also
took further action to trim back Haile Selassie's
perquisites. It abolished the Ministry of the Im-
perial Court, which administered the Emperor's
household, and nationalized his palaces. The com-
mittee has also placed unspecified restrictions on
the Emperor's travels, although it is not clear
whether this was for his own protection or to
prevent him from meddling in political affairs.
These actions followed two weeks of unprec-
edented open criticism of Haile Selassie,. during
which he was denounced and the monarchy ; s an
institution was denigrated in press articles and'
pamphlets. The committee may have instigated
these moves to undermine the Emperor's prestige
as a prelude to his removal.
Haile Selassie's ouster cowl provoke a
serious reaction among the rural population. The
coordinating committee might try to prevent
serious violence by maintaining the monarchy and
placing the Emperor's grandson, Zara Yacob, on.
the throne.
Meanwhile, a major dispute between Mikael
and the committee over the Prime Minister's ap-
pointment last month of four cabinet members
found objectionable by the military was finally
resolved by a compromise. In a ministerial re-
shuffle announced on August 25, Mikael dropped
three of the four men from the cabinet and de-
moted the fourth to a lesser ministry. One of
those dropped was given an ambassadorship. The
committee, which had wanted to arrest all four,
in the end arrested only one.
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CHILE-PERU: THE ARICA ISSUE
Chilean junta President Pinochet reportedly
has instructed his Foreign Ministry, to begin
implementing plans to convert the former Peru-
vian city of Arica , into a free port. This move
could involve the US in a dispute between Chile
and Peru over interpretation of the 1929 treaty
that settled boundary. issues arising out of the War
of the Pacific 50'years earlier.
Peru is likely to object to any significant
change in,.Ar.ica's,status on the grounds that the
treaty, forbids either Peru or Chile to cede to a
third power. any border area territory in the
absence,. of previous agreement between them.
Chile would. probably contend that making the
city a free port is not equivalent to ceding it to a
third power.
The treaty specifies that iri case of irrecon-
cilable differences over interpretation, "the dis-
pute shall be settled, by the President of the
United. States of America." The US is not a
signatory to, the treaty, but the Harding,
Coolidge, and Hoover administrations mediated
between Peru and Chile, and Washington was
instrumental in bringing the parties together.
The free, port scheme is indicative of Chile's
fear that Peruvian. revanchism could lead to
aggression, especially since Peru's recent ar.rr,s pur-
chases-particularly ,the acquisition of Soviet
tanks-have given it a decided military edge. Chile
apparently hopes that investing Arica with some
kind of international status will, have a deterrent
effect.
. Peru will not take kindly to the Chilean
move,, especially if Brazil establishes a presence in
Arica. This would spur Peruvian fears of Brazilian
expansionism, and. Lima would be likely to ac-
celerate further.its arms procurement program.
Peru already?has, received as many as .120 .
T-55 tanks from the USSR, and more reportedly
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Netherlands Antilles:
INDEPENDENCE PROBLEMS LOOM
During his recent visit to the islands, Dutch
Prime Minister den Uyl was quoted by the press
as stating that the Netherlands Antilles must plan
for independence by 1978. This is earlier than
most Antilleans had expected, and such a time
frame would meet strong opposition, both from
the public and from local officials who fear that
economic problems could lead to political up-
heavals and that Venezuela might try to, take over
in the absence of Dutch defense.
The Netherlands Antilles and Surinam are
the last remnants of what was once one of the
richest overseas empires in the world. The Dutch
government, anxious to rid itself of the social and
economic problems plaguing the islands and
sensitive to the stigma of "colonialism," has been
seeking to promote their independence since the
end of World War II. In 1954, the two former
colonies were granted autonomy in their domestic
affairs, although The Hague retained ultimate
authority over their foreign affairs and defense.
Surinam has decided to announce its in-
dependence in 1975, but the Netherlands Antilles
is still trying to retain its ties to the Netherlands.
Antilleans insist that, even if the present tavel of
Dutch aid were continued, they could not accept
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independence unless The Hague guaranteed their
defense. The Netherlands is unlikely to do so
since it has already announced the withdrawal of
one third of the 600 Marines it has maintained in
the Netherlands Antilles and is contemplating
extensive reductions throughout its defense
establis'r;ment.
The current wave of labor strikes and eco-
nomic dislocations is also reinforcing Antillean
`ears of early independence. The world economic
slovrdown has caused significant reductions in the
Gabor force and a slump in the all-important
tourist industry. One US-owned firm has laid off
over 400 of its 500 employees. Moreover, the
teachers union of the Netherlands Antilles and a
l'bcr union on Aruba are threatening general
strikes, and pilots and othf;r personnel of the local
airline are engaged in a work slowdown.
The lag in tourism on St. Maarten has been
made worse by publicity over violent labor
disputes. Recently, the official residence of the
lieutenant governor was destroyed by fire in what
is believed to have been an attack by arsonists
sympathetic to the labor cause. The chronic
animosity between labor leaders and the political
establishment is not likely to improve, and the
accompanying economic troubles on St. Maarten
could be particularly damaging to the general
economy of the federation.
PUERTO RICO VIRGIN ISLANDS ANEGADA
(U.K.) ~
ITORTOLA
i??Y )OHN
RLA MONA OOESo ~YIE I (U.S.)
ST. CROI , I :.
BERMUDA
IS.
ATLANTIC OCEAN
BANAMA
TURKS & CAICOS rS?
DOMINICAN
M
??r(ti~fly!UBUC An. of'
JAMAICA
CARUBBE IN 'SEA
CURACAO :,BONAIRE /
'VENEZUELA:;
~~..TOBACO . ..
TRINDAD AND TOBAGO
1, ( TRINIDAD
I.
BARBADO
I
~O [f GRENADA
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Netherlands Antilles
Angultb
ST. BARTH Ga1dtloupe)
Saba 14rcBlrbuda
St. Etistatius` St. Chrhtophir
' (St. Kitt. ANTIGUA
~4. R donda'i - Anll[ua
4 MONTSER AT
CUADELppUPE
~. (Fr.)
O_
DOMINICA
ISLA BE
MARGARITA
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BRAZIL: FOREIGN TRADE CONCERNS
Brazilian government and business leaders
reportedly are disappointed with the lack of
expected results from recent visits by Chinese and
Arab delegations.
the
Chi wnose visit was highlighted by the
establishment of diplomatic relations, showed
little interest in buying the finished products that
Brazil wants to export, although sugar purchases
'the Arab delegation seemed more interested
in sightseeing- than in serious negotiations. Some
agreements were reached, however, including the
formation of an Arab-Brazilian investment bank,
but the Brazilians had hoped for still more sub-
stantial developments.
Brazil's leaders are watching to see if these
apparent setbacks develop into a trend. The
Geisel administration has!hen counting heavily
on expanding markets and sources of investment
in o; dei to continue the nation's impressive
growth. Moreover, Brasilia has gone to considera-
ble lengths-recognizing China and modifying its
traditionally pro-Israel Middle East stance-to ac-
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The decision to recognize China reportedly
has upset a number of top military men, who are
said to be disturbed because Geisel acted so
swiftly and consulted with them only in peremp-
tory fashion. Some of the officers were ap-
parently taken by surprise by Geisel's action. The
move points up the President's practice of reach-
ing. decisions rapidly and implementing them with
a minimum of discussion. Nevertheless, while
senior officers are apt to be critical if more dra-
matic, results are not forthcoming from the Mid-
dle East and China policies, serious dissension
within the government is unlilkly.
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UN: TROUBLED WATERS FOR SHIPPING
Developing countries are pushing for ratifica-
tion of a highly controversial shipping agreement
sponsored by the UN Conference for Trade and
Development. The Code of Conduct for Liner
Conferences, if adopted, could shift a substantial
portion of international seaborne liner cargo from
the traditional maritime powers to the developing
countries. Liner cargoes include all seaborne cargo
except bulk goods such as grain, petroleum, and
other raw materials.
In recent years, many developing coun-
tries-anxious to expand their own merchant
fleets-have passed laws giving preference to their
own ships in carrying their own trade: Acceptance
of the code would make such protectionist legisla-
tion unnecessary in the liner field.
Conferences-the associations of liner
operators that set rates and allocate sailings
among member firms on specific routes-have
created much resentment among developing coun-
tries by arbitrary rate increases and by refusing
membership to the national lines of the develop-
ing countries they serve.
The most controversial aspect of the pro-
posed code is a cargo-sharing formula that has
pitted the developing countries against the major
maritime powers. This formula offers each nation
the right to carry 40 percent of its seaborne liner
trade while reserving 20 percent to third country
ships.
Less-developed countries have the mast to
gain from this proposal. The liner fleets of these
countries account for only 15 percent of the
nearly 50 million deadweight tons in the world
liner fleet and carry far less than 40 percent of
their own liner trade. Fleet expansion-at least to
the point where each country can carry 40 per-
cent of this trade-is far in the future, however.
Other provisions of the code that have
aroused contention include a requirement that
rate revisions take place only 15 months or more
after consultation with the governments involved,
and criteria for conference membership that dis-
criminate against third-flag ships.
Before it can be adopted, the code must be
signed by 24 countries operating at least 25 per-
cent of the world's liner tonnage. So far, only the
Philippines has endorsed it. The EC is taking a
hard look at the code since it conflirs with EC
treaty prohibitions against discriminL ;+o' among
community members. Japan, which voted for the
draft code at Geneva, seems the most likely
maritime power to sign, particularly since Tokyo
has budgeted $1 million for drafting new legisla-
tion necessary to adjust domestic laws to the
provision of the code. The US voted against the
code at Geneva, but is currently reviewinc its
position.
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