WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001000070024-4
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 32
• Document Creation Date: December 27, 2016
• Document Release Date: May 10, 2010
• Sequence Number: 24
• Publication Date: October 4, 1974
• Content Type: REPORT

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meekly Review
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The WEEKLY REVIEW, issued every Friday morn:;ig by the
Office of Current Intelligence, reports and analyzes significant
developments of the week though noon on Thursday. It
frequently includes material coordinated with or prepared by
the Office of Economic Research, tie Office of Strategic
Research, and the Directorate of Science and Technology.
Topics requiring more comprehensive treatment and therefore
published separately as Special Reports are listed In the
contents.
EAST ASIA
PACIFIC
1 UK: Elections a Week Away
2 China: Agreeing to Disagree
3 Argentina: Anti-subversion Laws
4 crab States - Fedayeen:
Toward an Accommodation
Portugal: Leftists Win Upper Hand
Cyprus Settlement Overshadowed
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11 Eurocurrency Recycling May Decline
12 EC: An Ascendant Bonn
13 Italy: Rough Week Ahead
14 Hungary-USSR: A Vote of Confidence
15 USSR - Eastern Europe: Grain Prosnects
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10 France: An Indian Ocean Power 25X1
18 Israeli Boats Sail for Red Sea
19 Egypt: Peacetime Cabinet
20 N;,)sria: Military To Stay
21 Australia: More Taxes on Mining
21 Cambodia: Breathing Easier
22 Thailand: A Bad C of Nerves
23 Laos: Trouble Ahead
24 China-Philippines: Improving Relations
24 The Korean Question at the UN
26 Castro Speaks on Foreign Policy
27 Dominican Republic: The Kidnaping
28 Venezuela: Riding the Crest
29 Bolivia: Pre-election Maneuv-,:
CONTENTS (October 4, 1974)
MIDDLE EAST
AFRICA
WESTERN
HEMISPHERE
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UK: Elections a Week Away
As the e!ection campaign enters is last
week, the Labor Party appears to have success-
fully weathered several potentially damaging
developments and now believes that it will make
solid gains in the voting on October 10. All of the
latest opinion polls give Labor a margin of about
10 percent over the Conservatives. In the election
last February, British opinion polls differed
markedly and none turned out to be accurate. If
the current polls prove more reliable, Prime Min-
ister Wilson could win a clear parliamentary
majority.
The wildcat strike by workers at the Ford
Motor Company, which broke out last morth,
evidently is not a decisive issue. On September
30, moreover, workers in one plant near Liver-
pool voted to return to work. The work stoppage
appeared to hit at the very heart of the Labor
Party's key domestic plank-the so-called "social
contract"-under which the trade unions agreed
with the Lahor government to exercise voluntary
restraint on wage demands. The opposition
parties have tried to capitalize-apparently with-
out much success-on Labor's failure to secure
the full cooperation of blue collar workers in the
fight against inflation.
Early this week, moderate union leaders
narrowly averted another strike by coal miners,
who threatened to walk off their jobs if a Na-
tional Coal Board proposal providing wage in-
centives to increase production was accepted by
the union. Union leaders finally agreed to post-
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pone voting on the proposal until after the
.;lection and to work for an acceptable agreement
with the coal board.
Wiison's troubles have not been limited to
restive workers. Cabinet members have been
disagreeing publicly over the question of Britain's
continued membership in the EC. During a press
conference on September 25, Consumer Pro-
tection Secretary Shirley Williams stated that she
would quit her post if Britain cpted out of the
Community. The following day, Home Secretary
Roy Jenkins agreed that he would also resign if
the result of the proposed referendum on British
membership is nc-.ative. Despite the publicity
given to dissension over the EC issue, the average
citizen remains far more interested in such Issues
as wages and inflation.
The Conservatives acrd Liberals have largely
reacted to the Labor Party, rather than offering
dynamic alternatives, and they look like anything
but front-runners. Tory leader Heath, for ex-
ample, has run a low-key, uninspiring campaign.
He has tried to play down the threat of class war
that he raised in the election campaign last Feb-
ruary by calling for national unity and offering
vague palliatives for the country's problems. Like
the Liberals, the Conservatives have focused their
efforts on picking apart the Labor program. For
the past week, the opposition has haggled with
the government about the actual rate of inflation.
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The small regional parties are expected to
make strong showings in their respective con-
stituencies. In Ulster, the loyalist hard liners
should win most of the 12 Northern Irish seats as
th' y did last February. The Scottish Nationalists
could double their representation and net 14 seats
in the House of Commons. Even local pundits,
however, are unwilling to predict which of the 25X1
two major parties will be harder hit by Nationalist
gains.
China: Agreeing to Disagree
As the People's Republic celebrated its 25th
year, China's leaders were looking backwa -d as
well as forward. Mu'h of the media debate of the
current political campaign has been conducted
using historical analogy, particularly the failure of
progressive forces to hold sway after the deaL'h of
the first Chin emperor. The current pre-
occupation is, of course, over the succession to
the Mao "dynasty," and this ccncern was clearly
evident in National Day events, which attempted
to project an image of unity and stability.
All active Poiitburo members except Mao
made public zppearances, and Premier Chou left
the hospital briefly to make a ringing address to
over 4,000 cheering celebrants. The enthusiastic
reception accorded Chou highlights the sense of
relief obviously felt by most Chinese as a result of
the apparent improvement in the Premier's
health. But even the rehabilitation of a number of
government bureaucrats, military men, and pro-
vincial leaders could not dispel the underlying
sense of unease, as if the final act of a drama was
being played out with the audience still in doubt
as to the ending. A joint editorial, broadcast on
the eve of National Day, set the tone. While
promising that the campaign to criticize Con-
fucius would continue "for a long time," the
emphasis was on study rather than criticism, and
the message was unity.
The appearance list was unusually long and
complete. All government ministers appeared
except the public security boss-who may well be
dead-and the Central Committee list included
several provincial military leaders who had been
under heavy attack. Party vice chairman Li Te-
sheng showed up in his provincial home, although
it was not possible to determine if he retains all
his jobs since leaders there were not identified by
title. Even the first secretary of Shansi, who
seemed politically dead after a play written in his
province was branded a "poisonous weed," was
on hand. The continued survival of so many
leaders makes it difficult to identify any high-
ranking officials who have fallen as a result of the
anti-Lin, anti-Confucius campaign-now more
than a year old-and raises the possibility that any
purge now will be limited in the face of leadership
uncertainties precipitated by Chou's illness.
It is possible that the spirt` of compromise
extends to the long-delayed meeting of the Na-
tional People's Congress, which may be in train
again after a number of false starts. The congress
would approve a new state constitution and a
slate of government ministers, and could provide
a foruh! to announce appointments to several
vacant military leadership posts. The joint edi-
torial failed to mention the NPC, however, which
is probably a negative sign.
But behind the facarln of unity, the maneu-
ver;ng for position goes on. In the weeks just
before National Day, Madame Mao was in the
spotlight. A series of poems praising an ancient
empress who ruled China for over 20 years after
her husband died thrust Chiang Ching's succession
ambitions clearly to the fore. Typically, this
initiative did not go unanswered, and after the
noise from the fireworks dies away and the
clean-up crews finish their tasks, China's modern
mandarins will resume their efforts to shape the
new dynastic leadership.
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Argentina: Anti-subversion Laws
President Peron was able to push a sweeping
anti-subversion bill through the congress after a
bitter debate last week, but it aroused suspicion
among opposition legislators, who charged that its
vaguely worded provisions could be used to stifle
democratic freedoms.
The bill gives the government broad new
powers, including the right to imprison accom-
plices of guerrillas, recalcitrant strikers, and news-
men who report subversive activities. Foreign cor-
respondents could be vulnerable. In the past,
selected newsmen have been invited to secret
press conferences held by leaders of extremist
groups. The government has condemned this
practice, claiming that it supports the terrorists'
psychological efforts to undermine government
authority. Although the interior minister testified
before congress that the new law would not result
in any infringement on the news media, the gov-
ernment is unlikely to back away from its ap-
parent plan to impose a news blackout on guer-
rilla and terrorist activities.
The killing spree went on unabated this
week, claiming the lives of former Chilean army
commander General Carlos Prats and his wife.
Prats had been living quietly in Buenos Aires since
lie resigned from the Allende government last
y~.,: r, and the identity of his killers has not been
established.
Meanwhile, a string of terrorist attacks on
Argentine army officers heightened frustration
among the military, which is still committed to
operate within the constitutional framework. The
People's Revolutionary Army recently swore to
make "indiscriminate reprisals" against the army
for the "execution" of 14 nuerrillas captured last
as the first step in the destruction of political
institutions, thus hastening the leftist revolution
they maintain is their prime goal.
The army has been generally reluctant to
become tutally involved in counterterrorism,
partly out of a desire to shed the unpopular image
it acquired during the period of military rule from
1966 to 1973, and partly from an awareness of
the likely negative political reaction if harsh secu-
rity measures are taken. Nevertheless, the military
may find itself with little option except to move
more forcefully against the widening terrorist of-
fensive.
There is some chance that US military and
diplomatic personnel will be targets of the
extremists. At a recent clandestine press confer-
ence, guerrilla !eader Roberto Santucho, head of
the People's Revolutionary Army, singled out
agents of CIA, DIA, and the US Drug Enforce-
ment Agency as major "foreign enemies." The
controversy over the US role in Chile is getting
heated play in the Argentine press and congress,
and extremists may decide that the climate is ripe
for attacks on US officials.
The growing wave of violence is also being
fostered by right-wing death squads, which are
stepping up action against leftist politicians,
entertainers, and academicians. The self-styled
Argentine Anticommunist Alliance-which re-
portedly operates with official sanction-has
taken credit for the killing of at least six persons
and is adding new victims daily to its "death list."
Many of those targeted have gone into hiding or
have left the country.
month, and this may eiicit tougher action from Some senior arm) officers have privately
the military. Army commander General Anaya, welcomed the death squads and the new antisub-
for example, has vowed that the army would use versive legislation as useful weapons in the fight
"all its power" to destroy the terrorists. The against leftist terrorism. Those who have been
military is aware that an underlying objective of killed or threatened by the alliance, however,
the terrorist campaign against the army is to have been public figures and relatively easy
provoke it into violent reaction, possibly a targets. No leaders of the major leftist terr
i
t
or
s
coup--the traditional Argentine military solution organizations responsible for most of the anti-
to deteriorating political situations since 1930. government violence have hPPn attacked.
The Marxist extremists would view such a move
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Arab States-Fedayeen: Toward an Accommodation
Egypt and Syria this week redoubled their
efforts to reconcile the positions of Jordan and
the Pale~:tirie Liberation Organization on Middle
Easi peace negotiations. Meanwhile, there are
some indications that both King Husayn and PLO
leader Yasir Arafat are in a more compromising
mood.
Cairo and Damascus have tried to soothe
Jordanian anger over the communique of the re-
cent Egypt-Syria-PLO meeting in Cairo in which
the PLO was recognized as the "only" legitimate
representative of Palestinian interests. Both Egypt
and Syria have attempted to reassure the Jorda-
nians that Amman still has a role to play in tha
negotiations.
Egyptian government officials' also have taken
pains to explain away some of the critical
Egyptian press commentary on the Jordanian re-
action. US Ambassador Eilt_ in Cairo confirms
that the Egyptian government appears to have
turned off the anti-Jordanian press campaign.
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Despite Jordan's claim that it would freeze
its participation in strategy talks with other
Arabs, Amman now may be prepared to move
toward some accommodation with the PLO.
Husayn reportedly plans to attend the Arab
s.immit meeting in Rabat scheduled for late
October, and the King's chief foreign affairs
adviser, Abd al-Munirn Rifai, is pressing Husayn
to offer to work out an agreement with the PLO
on the disposition of the Israrli-occupied West
Bank after its liberation. Although the King, ac-
cording to Rifai, cannot agree to hand over the
West Bank to the PLO immediately, he would be
willing to recognize that the PLO has a role to
play and to reach an agreement with the PLO on
The withdrawal from the PLO of the radical
Popular Front for the Liberation of Palestine may
make it easier for PLO moderates to forge a
stronger consensus for peaceful settlement prior
to the Arab summit in Rabat
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PORTUGAL: LEFTISTS WIN UPPER HAND
Lefiist forces emerged on top this week in a
power struggle that culminated in the replace-
ment of President Spinola by the armed forces
chief of staff, General Costa Gomes. In an impres-
sive display of strength and cohesiveness, the left
won a clear tactical victory over rightist elements.
Political tensions remain high, however, and pros-
pects for an orderly cam;-,:'i, n leading to elec-
tions next March are -onsider,.,,ly reduced.
The struggle was initiated on September 28
when the Armed Forces Movement-dominated
by young, left-leaning officers-forced President
Spinola to cancel a political rally that had been
billed as a pro-Spinola demonstration by Portu-
gal's "silent majority."
The movement and virtually all left-of-center
forces regarded the rally as the first step by the
political right to regain the upper hand. For
several months, Spinola had been engaged in a
contest for power with the Armed Forces Move-
ment, though their differences were seldom made
public. It was clear, however, that the movement
was impatient with Spinola's generally moderate
approach to dornestic problems and with the
gradual pace of decolonization that he advocated.
The final break between Spinola and the left
came after a truce was announced on September
29. Young officers in the Armed Forces Move-
ment then proceeded to press for the iesignatiorrs
c,f theee conservative supporters of Spinola on the
Junta of National Salvation, the seven-man mili-
tary ruling body over which the President pre-
sides. After yielding to the ouster of his sup-
porters, the President was more isolated than ever
and was compelled to resign. In his resignation
speech, lie bitterly denounced "the emergence of
a generalized climate of anarchy."
With Spinola gone, the locus of power in
Portugal now lies with the Armed Forces Move-
ment, although it probably represents only a
small percentage of the officer corps. The exact
composition of the movement is uncertaO, b1,i it
appears to include some Communists. In any case,
the events of the weekend reflected a close coor-
dination between the movement and the Portu-
guese Communist Party. Between them, their con-
trol of the situation was so complete that for all
practical purposes the country was, and is, in
their hands. I t,a movement's decisions will be
implemented by an administration headed by
Prime Minister Goncalves.
The new president, General Costa Gomes, is
a long-time ally of Spinola and is of the same
ideological cast, but he is more patient about
opposing points of view and more amenable to
compromise. The presidency may be shorn of
many of its powers, however, and the occupant of
the office is in danger of becoming a figurehead.
T sere is some doubt that Costa Gomes can keep
the upper hand.
With power now almost exclusively in the
hands of the left, both the armed forces and the
gover, iment are taking gains to disprove Spinola's
assertion that Portugal is heading toward anarchy.
The righti=ts are lying low for the present, handi-
capped by a lack of organization.
To assuage the concerns of the US, President
Costa Gomes has reaffirmed Portugal's NATO
ties, its wish for close relations with the US, and
its desire for closer association between Portugal
and the EC. Prospects for Portugal's continuing
close relations with the US may be less promising,
however, if Prime Minister Goncalves and the
movement achieve unchallenged power.
Portugal's future political orientation
depends in large part on the armed forces.
Whether the armed forces swing behind one side
or develop conflicting loyalties will be a critical
factor in deciding if there will be a relatively
orderly implementation of decolonization and
democracy, a predominantly rightist or leftist
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CYPRUS: SETTLEMENT OVERSHADOWED
Diplomatic efforts to move toward a nego-
tiated settlement of the Cyprus problem were
overshadowed this week by political develop-
ments in Athens, Ankara, and Nicosia. The
Karamanlis government in Greece continued to
mr,ve toward the holding of elections, despite
some faint rumblings in the military. In Ankara,
the task of forming a new government was given
to opposition leader Demirel after Prime Minister
Ecevit failed twice to organize a new coalition. In
Nicosia, Acting Cypriot President Clerides' threat
to resign has at least temporarily stalled the talks
he had been conducting wiih Turkish Cypriot
leader Danktash.
Greek political parties have stepped up their
activities in anticipation of parliamentary elec-
tions. These are now scheduled to be held on
November 17 and will be followed within 45 da-'s
by a referendum on the future of the monarchy.
The present government will resign next week and
will be replaced by a caretaker government under
Prime Minister Karamanlis.
Military officers appear concerned primarily
by recent disciplinary actions that Karamanlis has
taken against the army and possible further moves
he might take. They are also critical of the Prime
Minister because he has not prevented frequent
press attacks on the army and individual officers.
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A military move against Karamanlis at this
time would probably be unsuccessful, largely
because the army is not united. Moreover, many
rightists, including army officers, realize that they
stand to gain if elections are held before the left
has been able to organize an effective opposition.
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The feuding Communists have managed to
pull together a limited program of electoral co-
operation. The Moscow-backed Gree'c Communist
Party and the United Democrat,c Left have
agreed to coordinate activity, but for the election
only: a dissident Communist Party faction has
also worked out a loose arrangement with the
United Democratic Left.
The US embassy reports that Andreas
Papandreou's Pan-Hellenic Socialist Movement
has gotten off to a slow start. He is reportedly not
getting the backing of the liberals of thr "'enter
Union, but drawing support only from u an
youth and students.
Several new political groups have emerged. A
group of prominent political personalities, all rela-
tively young and nearly all associated with resist-
ance to the former junta, have announced the
formation of a left-of-center movement called
"New Political Forces." Minister of Industry
Proiopapas has formed a group called the Social-
ist Democratic Union. On the right, former min-
ister of defense Petros Garoufalias, who has been
linked to military coup-plotting, has announced
that he and nine other former dep:aties will form
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Prime Minister Kararnarilis is apparently
having problems getting his New Democracy
Party off the ground. He is trying to attract new
personalities, particularly liberals and uncom-
mitted youth. To do this, he will have to drop
from his candidates list at least 50 former key
party supporters of his old National Radical
Union.
Acting Cypriot President Clerides' threat to
resign reportedly reflects his concern that Athens'
ambiguous position toward him-along with
Makarios' machinations and announced intention
to return to the island-had seriously impaired his
ability Lo negotiate with the Turkish Cypriots.
Moreover, he felt that the situation was making it
increasingly difficult for him to govern the Greek
Cypriot community, which is divided along pro-
and anti-Makarios lines. Clerides' move was appar-
ently prompted by the acceleration of the cam-
paign to brine hack Makarios, which is led mainly
by leftist ' ices but is also favored by other
groups. M,..,arios supporters staged a mass rally in
Limassol on September 29.
Cleridas' well-orchestrated threat to resign
seemed to be designed to force a clarification of
his position and to recoup his waning support. If
so, it certainly worked, as his move gained both
private and public assurances of backing from
Greek Prime Minister Karamanlis and from
Makarios. Moreover, it reportedly sparked a rise
of pro-Clerides sentiment on the island, at the
same time as the campaign to bring back Makarios
appeared to be losing some of its earlier momen-
tum. Should Clerides succeed in securing pledges
of support from a substantial segment of the
Greek Cypriot factions, along with a stronger
,:',blic statement of support from the Arch-
bisP op-he apparently considers Makarios' initial
statement inadequate-he would probably con-
sent to remain in his position.
Despite his misgivings, Clerides continued his
discussions with Turkish Cypriot leader Denktash
on September 30. The two agreed to resume the
exchange of prisoners, which was suspended last
week because of a delay in the return to Cyprus
of Greeks held prisoner in Turkey. Moreover, the
Turks had been reluctant to free the increasing
number of Greek Cypriot prisoners who wanted
to return to their villages in the Turkish-occupied
sector of the island. The two men reaffirmed in
their talks that prisoners would be released where
they wished. Arrangements were also made for
the return of Greek Cypriots held in Turkey. At
Clerides' request, however, a date for another
meeting was not set, apparently because Clerides
was considering resigning.
Prime Minister Ecevit of Turkey was the
political leader who benefited most from the
fighting on Cyprus, but he seems to have over-
played his hand in resigning and trying to force
new elections. Because Ecevit's party is the only
one that stands to gain considerably from early
elections, the other parties have balked at giving
him the necessary support in parliament on this
issue.
The Democratic Party refused to join a coali-
tion with Ecevit's Republican People's Party be-
cause the offer was conditioned on an agreement
to hold elections before the end of the year.
Ecevit then offered to defer the elections until
next spring, but he was again rebuffed by the
Democrats. As a result, President Koruturk
turned to Justice Party leader Demirel to try to
form a new government.
Demirel will attempt to form a right-of-
center coalition that will include the Democrats
and Ecevit's former coalition partner, the Na-
tional Salvation P,'; ty. Such a coalition will be
extremely difficult to put together, however, in
view of the deep personal animosities between
Demirel and the Democratic Party leaders. The
Democratic Party was formed in 1970 by dis-
sident Justice Party members whom Demirel had
broken with and had expelled from the party.
Ecevit believes that Demirel will fail to
organize a new government and that the President
will then give him another chance. In this case,
Ecevit hopes that the Democratic Party will be
more amenable to joining him in a coalition since
it will be clear that a rightist coalition cannot be
formed.
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Arias
SPAIN: RIGHTISTS SPEAKING OUT
Controversy over Prime Minister Arias'
modest liberalization program is likely to require
Franco's intervention. At the same time, the
moderate governmental image that Arias wants to
project is further threatened by the government's
decision to let a military court try eight Basques
charged with a terrorist bombing in Madrid.
An editorial on September 26 in a prom-
inent ultra-rightist weekly magazine warned Arias
that the kind of democracy he has advocated
could lead to a "field of corpses." The writer
asserted that rightists wanted nothing to do with
Arias' policies and could not cooperate with him
"even in the opposition."
The warning follows an interview with Arias
published on September 11 in which the Prime
Minister stated that he intends to work for
democratization of the regime as he promised last
February. Arias said he hoped that a government
bill on a key provision--establishment of political
associations-would be ready before the end of
the year. Rightists oppose this move because they
fear the associations will become political parties.
Arias denied that ;ightist resistance was holding
back liberalization moves
Political observers assumed at the time of
publication that Arias' interview had advance ap-
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proval from Franco, who had resumed his duties
rai ico has made no move to disassociate himself
from Arias' position. Following the right-wing
attack, moreover, two prominent Madrid dailies
strongly defended the Prime Minister's policy.
Arias is evidently prepared to face rightist disap-
proval of his progr,]m, but Franco's attitude
would cause him to reconsider. The noisy
demonstrations by rightists in May 1973 p. otest-
ing the leniency of the acthorities toward ter-
rorist groups may have beer a facior in the cab-
inet reshuffle the followir,.7 month when some
ministers favoring liberalizafic,r, were dropped.
The government is concerned about security
following the terror-bombing in Madrid on
September 13 in which 11 people were killed and
scores wounded. The bombing was apparently
aimed at killing security police who frequent the
area but hit innocent bystanders instead. The
government's decision to have a military court try
the eight Basques charged with the bombing may
create problems for Madrid, if it turns into a
replay of the trial of 16 Basque terrorists in
Burgos in 1970. That trial created strains among
Spanish moderates and conservatives as to
whether the convicted terrorists should be
granted leniency, as well as considerable foreign
criticism of a military court's trying civiiians.
Franco eventually eased the earlier con-
troversy by permitting the death penalty to be
invoked but then commuting the sentences. In
the latest incident, the Spanish press is giving
heavy coverage to the police investigation and to
the quick arrest of the eight suspects. They have
been linked to the Basque Fatherland and Lioerty
group better known as ETA, and to the Spanish
Communist Party.
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FRANCE: AN INDIAN OCEAN POWER
The wrench navy is sending another squad-
ron of shi ,s to the Indian Ocean this month. The
aircraft carrier Clemenceau, carrying helicopters
and Etendard fighter planes, will lead a flotilla
that includes an anti-submarine frigate, a de-
stroyer escort, and two oil tankers. A detachment
of marines, trained in quick intervention tactics,
reportedly will also be included in the force.
In April, a squadron of three ships led by the
guided-missile frigate Duquesne, was sent to the
Indian Ocean for a cruise of about six months.
The recently formed, carrier-led squadron ap-
parently will replace the one now on patrol,
suggesting that Paris intends to maintain a larger
naval presence in the Indian Ocean. French naval
forces normally stationed there include the
command ship La Charente, three destroyer es-
corts, five patrol boats, eleven landing craft, and
some maritime reconnaissance aircraft. By con-
trast, the normal Soviet naval presence in the
Indian Ocean consists of a Kotlin-class dest oyer,
two Petya-II - class escort ships, two fleet mine-
sweepers, a landing ship, an F-class submarine,
and se rcral support ships. The Soviets have
augme; ted this torce from time to time, most
recently by three large warships, which now are
leaving the area.
The most recent move probably reflects a
growing French concern that the Indian Ocean
not be left in the sole control of the US and the
USSR. In addition to sharinn a common concern
with its Western allies about the security of the
oil-supply route around Africa from the Persian
Gulf, Paris also has a primary interest in main-
taining its territoria' presence and continuing its
limited political influence in the Indian Ocean
area. France still administers the Territory of the
Afars and the Issas in east Africa, and has a
number of smaller possessions in the Indian
Ocean.
The French nay'' is the chief means by
:^ bath Paris can show support for its interests in
J]~~~~SOCOTRA
(Yen,en (Aden))
SOMALIA
AMSTERDAM I
ST. PAUL l
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I I
the Indian Ocean. France has established a mari-
time zone under a unified command that covers
the Indian and Antarctic Oceans. The head-
quarters for this command is exercised from
aboard the Charente, a converted tanker. A com-
munications relay station has been established on
Reunion Island to facilitate the commar. r and
control of forces dispersed throughout the mari-
time zone. Limited support facilities are also
under construction at Reunion, and tl o repair
ship Garonne-which sailed for the Indian Ocean
in April as part of the three-ship task force-is
expected to be permanently based at Reunion.
The French have been forced to use floating
command and support facilities following the loss
last year of their base and communications fa-
cility at Diego Suarez on Madagascar. The French
navy can still top at Diego Suarez for supplies
and repairs, but these port privileges are subject
to annual renewal, and French reliance on them
will probably lessen because of the uncertain
relationship with the Malagasy Republic.
Although the French maintain small military
contingents on Reunion and the Comoro Islands,
the only major French base remaining in the
Inctr,,n Ocean area is at Djibouti. The military
forces stationed there, which include some 4,000
French ground troops and an F-100 fighter-
bomber squadron, are intended to defend the
territory from land attack. The permanent naval
contingent in Djibouti is small-usually two or
three patrol boats, a half-dozen landing craft, and
some maritime patrol aircraft.
Paris reportedly decided this past summer to
strengthen its forces in Djibouti by bringing in
some 155-mm. artillery pieces and three armored
platoons equipped with AMX-tanks and armored
vehicles. The move was made to demonstrate
France's determination to remain in the Indian
Ocean despite giving up its bases on Madagascar.
Although the French have given no indications
thus far that they intend to expand their limited
naval facilities at Djibouti, the strategic impor-
tance of the base will increase once the Suez
Canal is reopened, then Paris maydecide u expand
the port facilities io facilitate support of French
EUROCURRENCY RECYCLING MAY DECLINE
The Eurocurrency market has so far been
the dominant vehicle for recycling surplus oil
revenues, but this may soon change. Several fac-
tors are working to induce oil producers in-
creasingly to bypass the Eurocurrency market
either in favor of New York or of more direct
loans to other major oil-consuming countries.
The pressures on the Eurocurrency iarket
are already reflected in the fact that the oil ex-
porters are paid less than market rates for their
short-term deposits and that the borrowing coun-
tries have had to pay increasingly higher rates for
loans. These forces should intensify in the next
few months because oil producers will have more
funds to place, as their net foreign exchange
receipts in the second half of 1974 will be nearly
double those of the first half. Moreover, many
borrowers are reaching the limits of their credit
lines and will be forced to pay even higher rates
or not be given credit at all.
The increasing problem of matching the
supply of oil producers' funds with oil consumers'
demands for loans will force Lath sides to seek
new places to recycle oil money. Iran is re-
portedly now considering making more extensive
use of the New York market and sharply limiting
its operations in London. Borrowers, such as
Italy, have had to bypass London recently be
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EC7 AN ASCENDANT BONN
Bonn's farm policy veto on September 25 icy. Bonn is still ready to support a common farm
jolted the EC even though the veto itself was policy but wants one that would be less expensive
rescinded within the week. The episode under- and would discourage the accumulation of lame
lined Germany's increasing weight in EC councils. farm surpluses.
EC leaders had expected Bonn to give auto an o For Britain, the farm policy dispute provides
matic approval to the compromise reached at an allel to then close tB nen Pa is working arrangement
EC agricultural ministers' council on September of recent months. The new plan helps meet the
20 for an exceptional midyear increase in farm standing UK demand for a basic review of the
support prices. Such approval of council decisions EC's high-cost agricultural policy. a principal
has been routine over the past ten years. German point in the British effort to renogotiate its EC
cabinet opposition to the agreement, fueled by membership terms. At the same time, the imme-
reports that France was planning new national diate benefits for British farmers of the earlier
measures to help its farmers, apparently per- compromise are retained, an aspect of the past
suaded Chancellor Schmidt to seize this oppor- week's events which the Wilson government has
tunity to make Bonn's weight felt. already trumpeted in its election campaign.
In France, although the farm bloc will be 25X6
urssatisfied, President Giscard may privately wel-
come the EC agreement as a help to him in
dealing with demands that the French farmers are
making. A common farm policy is essential to
France, but Giscard favors greater austerity and is
no doubt pleased that Germany has dropped the
insistence on high prices which entered into its
original conception of the common agricultural
policy.
Even if a compromise has now been ac-
The abrupt German action shocked the cepted without bitter exchanges, the contretemps
other EC members, all of whom also face farm underlines Bonn's increasing weight in EC coun-
bloc pressures. Bonn, after considerable behind- cils deriving from Chancellor Schniidt's willing-
the-scenes maneuvering, agreed at a new council ness, if not indeed eagerness, to trade on West
meeting of farm and foreign ministers on October Germany's financial ',trength. As French com-
2 to reinstate the agreement on a 5-percent in- menta.or Raymond Aron noted last week,
crease in support prices, with the proviso that the Schmidt is the first of West Germany's postwar
increase must be taken into account in the next chancellors who is not inhibited in pushing his
annual calculation due in February. countyYs interests b feelings of
by guilt for the
Hitler past.
Finally and most important, Bonn won In the longer run, the German veto of 1974
agreement for the fundamental review of the may be seen as marking the reversal of Paris'
common agricultural policy that it has long preponderance that was dramatized by the
wanted. Schmidt has been talking for months French boycott of 1965. Whether this will lead to
about the need for "a new Stresa," referring to a true balance in the community r
the EC meeting in I t a l y i n 1S.58which set the seen. 9 X1
guidelines f,,r the EC's common ayi icultural pol- 25X1
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Italian political leaders kept public debate
on the back burner while President Leone was in
he US last week on a state visit. Less than two
day:. after Leone's return to Rome, Prime Minis-
ter Rumor appeared to be on the verge of resig-
nation as the smallest of the three parties in his
cabinet--the Social Democrats-threatened to
withdraw from the coalition over differences with
the Socialist Party.
Social Democratic leader Mario Tanassi
charged that Socialist insistence on changes in the
government's austerity program. together with
their proposals for closer relations with the Com-
munists, had made it impossible for the coalition
parties to continue to cooperate effectively.
Tanassi said that the only solution was for Presi-
dent Leone to call new elections since parlia-
mentary arithmetic does not now permit a work-
able non-Communist majority without the
Socialists.
The Social Democrats said they would
decide at a central committee meeting on October
8 whether to follow through with their threat.
There were signs, however, that the Social Demo-
crats would be overtaken by events. The Socialists
responded harshly to Tanassi's blast, and Prime
Minister Rumor reportedly saw little chance of
reconciling the differences within the coalition.
Even if the Social Democrats do bring down
the government, they are unlikely to persuade
President Leone to call new parliamentary elec-
tions. Sentiment is running against this alter-
native, not only because it failed to solve any
problems when last tried in 1972, but also be-
cause the Socialists and Communists stand the
best chance of scoring gaifls if elections are held
now. Most political leaders would prefer to study
the outcome of the regional elections set for this
spring before risking a national contest.
The main reason why the Socialists have
drawn so much fire from the other coalition
parties is their own threat to drop out of the
coalition unless it approves the Socialist-proposed
changes in the government's economic program.
The Socialists-backed by their allies in organized
labor--want additional spending on social pro-
grams and public works, more credit for small-
and medium-sized businesses, and other measures
to avoid the increased unemployment that is
expected to develop as the austerity program
takes hold.
The Socialists can also be expected to lobby
within the coalition for several other demands
recently advanced by the labor federation that
represents most of Italy's major unions. These
include:
? Increases in wage adjustments that are
automatically linked to price increases.
? Retroactive application of the increases
in price-related wage adjustments that would
provide a small lL'mp sum payment to each
worker.
? Linkage of some pension payments to
wage developments.
? Additional public investment in the
south and in the construction industry.
? Rollbacks of recent increases in elec-
tricity and urban transportation rates.
Implementation of many of the steps pro-
posed by the Socialists and labor Would scuttle
the government's austerity program and doom
prospects for a permanent improvement in the
balance of payments. Th'. wage proposals alone
would add over $1 billion to the country's annual
wage bill, reducing by at least a fifth the income
the government had hoped to drain from house-
holds through its fiscal measures.
While tension increases within the governing
coalition, the Italian Communists are keeping up
the pressure for a direct voice in national deci-
sion-making. Negotiations on labor's demands
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may provide another opportunity for the Com-
munists to reinforce their claim that the country's
problems cannot be solved without Communist
assistance. The Communists exert strong influ-
ence within the labor movement, and they will
take much of the credit if talks among labor,
management, and government officials produce a
settlement acceptable to all sides.
At the same time, the Communists are trying
to draw the Christian Democrats into collabora-
tion at the local government level. In their boldest
move so far, the Communist mayor of Bologna-
the political capital of the Communists' so-called
"Red Belt" in north-central Italy-invited the
Christian Democrats to join his administration
and suggested that they reciprocate in localities
power.
HUNGARY-USSR: A VOTE OF CONFIDENCE
Hungarian party boss Kadar's six-day visit to
the USSR ended with strong indications that he
hdd bought Moscow's endorsement at the cost of
greater orthodoxy and closer coordination of
Hungarian policies with the Kremlin.
Throughout the visit, Soviet and Hungarian
media--especially the latter-stressed the close
relationship between Kadar and Brezhnev. The
effusive Soviet endorsements leave little room for
any domestic forces to challenge Kadar on the
grounds that Moscow lacks confidence in him.
The price for this reaffirmation of Brezh-
nev's support appears to have been high. Kadar, in
signing the party and state communique, com-
mitted Budapest to deeper involvement in eco-
nomic integration, more joint economic planning,
and increased "joint work" on ideolog;'-al
matters. Ther: is also to be more extensive coor-
dination of foreign policies, both bilaterally and
within the Warsaw Pact. In addition, Brezhnev
made it plain in several speeches that he expects
to have more influence than in the past in prep-
arations for the Hungarians' 11th party congress
25X1
Kadar's public statements were almost corn-
pletely void of reference to Hungary's special
interests. Instead, he drummed constantly on the
themes of increasing cooperation with Moscow
and the dangers of "deviationists" in the Commu-
nist movement. Kadar also took the lead in ad-
vancing yet another call for a consultative meet-
ing of European Communist parties, now set for
October 16-18 in Warsaw.
Kadar will certainly try to see to it that his
regime fulfills whatever commitments lie made.
Subservience to Moscow's foreign policy is old
hat in Budapest. He will, however, face severe
difficulties if the Soviets decide to take a direct
hand in such delicate matters as Hungarian eco-
nomic problems or try to meddle in the sophisti-
cated give-and-take that Kadar maintains with
Hungarian intellectuals.
The Hungarian delegation-minus Kadar and
his wife, who stayed on in Moscow for a vaca-
tion-returned home to a full turnout of the lead-
ership. Such public displays of unity may become
commonplace, but the behind-the-scene struggles
will continue between liberals, who are now at
bay, and conservatives, who silil look to the party
congress as a good opportunity to undermine
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The USSR and Eastern Europe are expected
to have good but not record grail crops this year.
The harvest in both areas should largely cover
dome:.t;c needs, so major imports from the West
e/ill not be necessary.
USSR-The 1974 Soviet grain crop will probably
be about 198 million ton--short of the official
goal of 206 million tons but still the second
largest grain crop in Soviet history. At the end of
June, it appeared likely that the goal would be
achieved, but the weather took a turn for the
worse in July. In the west, heavy rains flattened
the plants and hindered the harvest, while hot and
dry weather destroyed some 8 million tons of
grain-prirna;-ily wheat.
The USSR will need 200 to 210 million tons
of grain to cover domestic requirements and
normal export commitments in fiscal 1975. Since
20 to 30 million tons, were carried over from the
record harvest of last year, a crop of 198 million
tons should be sufficient to make large-scale grain
imports unnecessary. The sharp drop in grain
purchases and a return to the normal level of
Dri ing wheat near Krasnodar, USSR
grain exports will re-establish the Soviets as net
exporters of grain.
So far this year, the Soviets have bought
only small quantities of grain. Most of the 1
million tons of curn and wheat scheduled for
delivery in fiscal :1975 are leftovers from old
contracts with the US. A small amount of corn
was recently purchased from Argentina. The
Soviets can use the imports to offset shortages in
certain kinds of grain. The corn will help feed the
growing livestock herds, while the imported
wheat may be used for bread if the milling quality
Estimate
1972
1973
1974
USSR
168.0
222.5
198.0
E=astern Europe
73.2
73.4
71.1
Northern cutniliic;"
37.6
40.2
39.2
Southern countnus'"
35.6
33.2
31.9
*C (cch,sh) ?rrkia, /,,'as[ Gerntam, and Poland
""Bulgaria, /lungum mid Romania
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of both the wheat crop this year and the grain in
storage is poor.
Eastern Europe.-The 1974 East European
grain crop will probe fly amount to 71 million
tons--2.5 million tons below the record set last
year. Although record crops were harvested in
East Germany and 1:zechoslovakia, Poland's
crop---normally about 0 percent of the East
European total--flirted v ith disaster throughout
the growing season. No 'ertheless, Poland still
managed to harvest about 20.5 million tons of
grain, only 6 percent bc'ow the record set last
year. Crop results were also w~ixnrl ;n the southern
countries. Hungary had a bumper harvest, but
Bulgaria failed to improve over the past two
years, and Romania had its second poor harvest in
a row.
East European grain imports in fiscal 1975
will probably reach 9 million tons, a million more
than the previous year. The USSR will probably
supply 4.5 million tons, mostly wheat. Based on
past trading patterns, the East Europeans will
look to the US for 2 to 2.5 million tons of grain,
mostly corn, while seeking the balance from other
Western sources.
The northern countries will account for
almost all of the imports. East German and Czech
requ.iirements are likely to be about 3.5 and 1.5
million tons, respectively. Poland will probably
buy slightly more than 3 million tons. Each of
these countries could reduce grain imports by
purchasing other feeds, such as oilcake and meal,
or by cutting livestock goals.
Romania has already received $31 million
from the Commodity Credit Corporation to pur-
chase US grain in fiscal 1975 and asked for an
additional $50 million this week. Nevertheless,
Bucharest. will be able to export some 600,000
tons of grain, mostly wheat, slightly less than in
fiscal 1974. Bulgaria is likely to export 300,000
tons of wi -at; Hungarian grain exports may go as
high as 2 million ton
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Polish party boss Edward Gierek starts a
week-long official visit to the US on October 8
that will mark a high point in postwar US-Polish
relations. He will be the first Communist party
leader to consult with President Ford and the first
Polish leader since World War I I to pay an official
visit to the US.
Gierek will lead a political and economic
delegation and will br,Mg along a flock of media
representatives. The group will spend two days in
Washington before Gierek addresses the UN Gen-
eral Assembly in New York. He then will make a
short tour of the US, including visits to coal
mines in Pittsburgh and oil refineries in Houston.
Although no major agreements are expected
to be signed, Gierek views the visit as a milestone
in his efforts to expand relations with the West.
He would like to see a sharp expansion of the
bilateral economic, commercial, and scientific
projects initiated when former president Nixon
stopped in Warsaw in 1972 on his return from
Moscow. Gierek recognizes that most Poles have
friendly feelings toward the US. He hopes that
the visit-already the subject of considerable pub-
licity in Poland-will increase his stature at home
and will also enhance Poland's international pres-
tige. One prominent Polish editor recently told a
US diplomat in Warsaw that there would be so
much favorable coverage that the US would look
like "one of our socialist brothers."
While in the US, Gierek will serve not only
as a spokesman for specific Polish interests, but
will also convey his country's stand on inter-
national issues, especially European security. In
doing so, he can be expected to stay close to the
Soviet line. Soviet Foreign Minister Gromyko
stopped in Warsaw earlier this week on his way
home from the US and undoubtedly brought
Giere?.k up to date on Moscow's views on major
East-West issues.
Gierek comes to Washington with a valid
base of achievements in domestic policies and
with his own leadership position unchallenged.
Since becoming party chief, he has worked hard
to improve the country's econo.aic situation. He
has sought to streamline an inefficient economic
bureaucracy and to modernize Polish industry. At
the same time, he has tried to meet rising con-
sumer demands. Wages, pensions, and social
benefits for workers and peasants have risen sig-
nificantly during the last four years. The Polish
economy still faces some potentially serious prob-
lems, including inflationary pressures and the
need to repay Western credits that will soon begin
to fall due. At least in the short run, however, the
Gierek regime seems capable of meeting these
challenges.
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CYPnI.I _/ _,_? ~'"
SYRIA
LI_DANQN~
EGYPT
Red
SUDAN Sea
ETHIOPIA
Cnsplnn
Sc,,,
ISRAELI BOATS AIL FOR RED SEA
Tel Aviv has sent two more guided-missile
patrol boats to the Red Sea to augment its long-
range naval capabilities in the area. The boats are
expected to make port calls in ',oath Arica this
corning week and will probably coniple'e their
voyage by mid-October. They will join two simi-
lar guided-missile patrol boats that were sent to
the Red Sea earlier this year.
The boats are the third and fourth of a total
of six Reshef-class patrol boats to be built in
Israel. The first of these boats was launched in
February 1973, and the last two are scheduled for
launching in the last half of this year. Tel Aviv
originally planned to station all six boats in the
Red Sea, but reportedly is considering assigning
two to the Mediterranean.
The Reshefs are designed along the lines of
France's Saar-class guided-missile boats, but are
larger and are capable of longer operations at sea.
Although they can carry up to eight Gabriel anti-
ship missiles, the two boats on route to the Red
Sea are outfitted with only four. 1he Israelis are
producing at least one version of the Gabriel
with a range of 11 nautical miles; a longer range
missile, with twice the range, has been under
development for several years and could now be
in production.
Israel has long been concerned about Egypt's
capability to close the Red Sea to ships carrying
Israeli cargos. During the war last October, the
Israelis were unable to challenge the Egyptian
navy's blockade of the Bab el Mandeb at the
southern end of the Red Sea. The Reshef boats
were specifically designed to operate in the Red
Sea, and from their home port at Sharm ash
Shaykh, they could operate in the Bab el Mandeb
area although they would be beyond the rar:ge of
continuous Israeli air cover. 25X1
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EGYPT: PEACETIME CABINET
President Sadat last week took the long-
awaited step of rr-!inquishing his wartime post of
prime minister, a move meant as a further af-
firmation of Egypt's intention to proceed with
postwar reconstruction. Sadat formally gave way
to First Deputy Prinrc Minister Abd al-Aziz
Hijazi, who has been performing the duties of
prime minister for some months.
Hijazi's elevation conies at a time of in-
creasng domestic criticism of economic mis-
management by the government, and toe new
Prime Minister moved swiftly to reorganize the
cabinet to signal a new effort to alleviate problem
areas in the economy. Hijazi created two new
cabinet posts, both concerned with economic
planning, and replaced four ministers whose per-
formance had recently come under fire. The other
31 cabinet members are holdovers.
The new post of minister of state for eco-
nomic cooperation gives cabinet rank to the
former Agency for Arab and International Eco-
nomic Cooperation, which was created earlier this
year to coordinate foreign investment in Egypt.
Another new minister of state, handling ''coordi-
nation and control," will apparently attempt to
centralize and streamline the implementation of
economic planning now wallowing in a welter of
overlapping and uncoordinated government
organizations.
Hijazi named new men to head the ministries
of health, agriculture, industry, and supply, in an
apparent effort to speed economic development
or at least to acknowledge consumer complaints
in these areas. Industrial revitalization is a key
element of the government's plan, as is an im-
provement in the clogged internal distribution
system. The recent rise in consumer discontent
over commodity shortages has been attributable
in large measure to the inadequacy of the dis-
tribution system.
Hijazi and Sadat have been attempting to cut
through the red tape that has long slowed the
working of the government. The overstaffcra
bureaucracy is as promrnen._ and immovable a
Hijazi
feature of the Egyptian scene as the pyramids,
and neither Sadat nor his ministers have been able
to vitalize the system or overcome its vested resis-
tance to streamlining and liberalizing the
economy.
Sadat reaffirmed his commitment to eco-
nomic changes in his Nasir Day address last week-
end to a joint session of the Egyptian parliament
and the Arab Socialist Union-Egypt's only polit-
ical party. In a bow to toe government's de-
tractors, he acknowledged the right of party
members to criticize the actions of government
officials, including himself. Sadat made it clear,
however, that he was determined to remain in
charge and that the scope for criticism was
limited.
Sadat's speech also included an effusive
reference to the Palestine Liberation Organization
as the "living embodiment" of the Palestine
people. He stressed that a solution to the
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Palestinian question is more important than either
the recovery of the Sinai or the Golan Heights.
In addition, replying for the first time in
public to the new US criticism of the oil pro-
ducers, Sadat said that "those who invented the
law of supply and demand have no right to com-
plain when the law works against their interest."
Sadat probably calculated that anything less than
a spirited defense of the Arab oil producers on
the price issue would only invite another round of
attacks on him by Arab militants and risk jeop-
ardizing support from the Arab conservatives for
his efforts to spur further movement-6n. peace
NIGERIA: MILITARY TO STAY
General Gowon marked Nigeria's 14th
independence anniversary this week with a speech
in which he reneged on his earlier promise to
restore civilian rule by 1976 and continued the
eight-year-old ban on political activities. His an-
nor_uncement confirms the resolve of the country's
military leaders to control the pace and direction
of domestic political evolution for as long as they
deem necessary.
Gowon did not rule out an eventual transfer
of power to civilians, but maintained it could
come only when there is no threat to stability and
after a "self-sustaining system" to ensure stability
has been worked out. Gowon's statement in
effect acknowledged that the military has made
little headway in implementing the nine-point
program to prepare Nigeria for civil rule, which he
had announced four years ago. The decision also
reflects the military leaders' concern over the
recent resurfacing of Nigeria's deep-seated tribal
and regional animosities because of controversy
over the provisional results of the census last year.
Intensified infighting among old guard poli',icians
and their supporters in anticipation of an early
lifting of the ban on politics was another factor.
In an effort to neutralize anticipated criti-
cism of the deferral of civilian rule, Gowon said
lie would establish representative advisory
councils at both the federal and state levels. He
also claimed progress was being made toward
preparing a new constitution as well as a new
formula for allocating n,'tional revenues, and he
promised a stronger effort to combat corruption,
implying thereby the military's continuing
commitmer ; to the nine-point program.
25X1
More concrete gestures were reserved for
two of the more important interest groups.
Gowon announced that, early next year, lie plans
to replace present cabinet heads and state military
governors with other army and police officers and
some civilians, a move that will open slots for
grumbling middle-grade military officers and
presumably also weed out a few of the officials
tainted with corruption. To restless workers,
Gowon held out the prospect of a general pay
raise at the end of the year.
On two key points, Gowon \.as notably
vague. He delayed a final decision on what to do
about the controversial census figures-essential
to implementing other parts of the nine-point
program-until the end of the year. He said that
the creation of additional states remained a pri-
ority, but offered no further detcils on this tick-
lish subject.
The reaction to the military's backtracking
on civilian rule is likely to be mixed. Some Ni-
gerians will welcome the decision as the best way
to avoid a return to the divisive tribal politics that
led to two coups in 1966 and civil war a year
later. Gowon's announcement will not sit well
with others, notably intellectuals, students, and
former politicians. Over the short term, however,
the army can probably contain any unrest that
might develop.
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AUSTRALIA: MORE TAXES ON MINING
Canberra has moved to slow the exploitation
of its huge mineral deposits further through
tougher tax laws affecting the mining industry.
The proposed budget for fis..ai 1975 contains
several measures that will reduce incentives for
development of the extractive industries, in-
cluding:
petroleum and minerals authority is already on
the books and, once in effect, the government
will be able to engage directly in the exploration,
production, transportation, and processing of all
25X1 25X1
? An end to the rapid depreciation of new
capital investment by mining and oil com-
panies.
? Cutting off the exemptFon on 20 percent
of income derived from production of spec-
ified minerals, notably copper, bauxite, and
nickel.
? Preventing mining and oil firms from
deducting expenses related to going into
business and raising capital.
The policy toward the mining companies
was previewed last spring in a report by the Min-
istry for Minerals and Energy that indicated the
industry had received more in tax concessions,
subsidies, and other benefits than it had paid in
taxes and royalties. P 'though the tax increase
now before parliament probably amounts to no
more than $50 million annually, the state govern-
ments are also trying to increase their t,ke from
the industry. The Queensland government, for
instance, has already raised royalties on minerals
to an average 10 percent of the value of output,
and other state governments may follow suit.
Since taking office in 1972, the Labor Party
has been working to achieve the highest possible
return from the country's mineral wealth. In addi-
tion to increasing taxes, Canberra is using its
power to control exports as a means of securing
higher prices. Recently, for example, the govern-
ment intervened in iron ore negotiations with
Japanese steel firms when it felt the Australian
companies had agreed to an unacceptably low
price. Canberra plans to continue taking a more
active role in controlling mineral resources. It has
moved already to limit fore,yn equity in new
mineral projects to 50 percent. Legislation for a
Phnom Penh's tensions eased this week as
government employees and military personnel
received the increased pay provided by the eco-
nomic reform package introduced last month. But
relief for the government may be short lived. Pay
envelopes this week were particularly fat because
they contained a lump-sum salary adjustment
retroactive to September 1. By mid-month, con-
sumers will face the impact of sharply increased
prices allowed by the reforms.
Meanwhile, the government has attempted
to forestall any backlash from its recent dissolu-
tion of the teachers' asr ciation by announcing
the formation of a new teachers' organization
under government sponsorship. Leftist teachers
are continuing their anti-governmen+ activities,
however, and have issued statements scoring the
police raid on their headquarters and the sub-
sequent arrest of two teachers. Student activists
are keeping uncharacteristically quiet, but they
presumably are still planning anti-government
demonstrations.
The activities of Lon Non, President Lon
Nol's younger brother, have led-as anticipated-
to a new bout of political jitters within the gov-
ernment. Lon Non's plans to visit military com-
manders in the provincial capitals have fed rumors
that lie will try to obtain a top military position.
These rumors hwe led army commander Sosthene
Fernandez to seek assurances of support from
other senior officers, and they reportedly played
a part in his cancellation of a planned trip abroad.
The grandiose political plans Lon Non has
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outlined to journalists, and his agitation for
change in the Socio-Rer,,.jblican Party, apparently
aimed at securing the party leadership for himself,
are also contributing to tensions.
A Preliminary Bout
Although preparations for the credentials
battle at the UN General Assembly are still top
priority on the diplomatic front, Phom Penh and
its international bac.cers are marshaling forces for
an anticipated challenge at the 18th UNESCO
General Conference scheduled to open in Paris on
October 17. A defeat for Phnom Penh at the
conference could produce a bandwagon effect for
the pro-Sihanouk resolution inscribed on the UN
General Assembly agenda.
Government officials will stake the defense
of their UNESCO seat on the argument that the
question of Khmer representation in such bodies
is basically a political question and should be
dealt with first in the General Assembly. Phnom
Penh used this strategy last year and survived a
credentials challenge by a 12-vote margin, but
since then Sihanouk's side has picked up addi-
THAILAND: A BAD CASE OF NERVES 25X1
On October 5, the Thai National Assembly
votes on the third and final reading of the draft
constitution. It is an essential first step in Thai-
land's effort to create a constitutional govern-
ment, an undertaking triggered by the collapse of
the Thanom military regime last October.
The odds overwhelmingly favor passage of
the draft despite vocal opposition from leftist
groups and student activists. The Thai police are
bracing themselves for the possibility of student-
instigated violence in an attempt to mar the
proceedings. Such opposition, however, is at
strong variance with the mood of the country,
which if anything looks upon the promulgation of
a liberal, democratic constitution as a means of
solving Thailand's political, social, and economic
problems.
Bangkok's outward appearance of calm on
th ve of the assembly's vote belies an undercur-
rent of tension that could make for an unstable
political situation. According to press reports,
Prime Minister Sanya, citing his poor health, has
temporarily turned ovar the duties of his office to
deputy prime minister Prakop. While the 67-year-
old professor's health is indeed shaky, there is
evidence that the timing of his decision to take
leave from office was prompted more by political
considerations. During the past week Sanya has
been buffeted by strong criticism from all quar-
ters, including his own cabinet, for his inability to
get tough with student radicals who have man-
aged to keep the political situation stirred un
The prospect of student demonstrations du25X1
r-
ing the assembly deliberations on October 5 could
also complicate the political situation. While
moderate university students have decided not to
stage violent protests against the draft constitu-
tion, their more militant leadership is attempting
to get enough students into the streets to spark a
confrontation with the police. While it seems
doubtful that the militants will attract much stu-
dent support-two key university groups have an-
nounced they will refrain from any protests at
this time-the fact that the police and army seem
to be looking for the slightest excuse to crack
down on student demonstrators raises the goten-
25X1
Whether or not the students go on the
rampage, the erosion of Sanya's popularity in
recent weeks suggests that he may continue to
stay on the sidelines until the draft constitution is
promulgated, possibly on October 8. At that
time, he may choose to resign citing the comple-
tion of the task set before him when he took
office one year ago-the drafting of a new con-
stitution-and turn over his responsibilities for-
mally to his deputy Prakop. Since general elec-
tions are scheduled for February 1, it is presum-
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LAOS: TROUBLES AHEAD
Prime Minister Souvanna Phouina is making
a good recovery from the serious heart attack he
suffered in rnid-July, but his conval'scence
abroad may be extended to the end of this
month. When he finally does return t; Laos,
Souvanna will discover that the honeymoon
period that has generally characterized relations
between opposing sides of the coalition during his
illness is all but over. Stresses and strains between
the Communist and non-Communist Lamps have
re-emerged in recent weeks over a variety of polit-
ical and economic issues.
King's Council disapproving a cabinet recom-
mendation for dissolution of the dormant
National Assembly. They are now planning a
move that is certain to draw heavy fire from
Communist members of the coalition, who have
never recognized the assembly's legitimacy and
who have spearheaded the drive for its abolition.
The assembly's standing committee has decided
to send a delegation of deputes to the Inter-
national Parliamentary Union confe,-ence that
convenes this week in Tok o.
Communist Deputy Prime Minister Phoumi
Vongvichit's speech last week before the UN Gen-
eral Assembly outraged non-Communise members
of the coalition cabinet. In his speech, which
departed from a more moderate vei sion that had
been approved by the cabinet, Phoumi deplored
"imperil list aggression, colonialism, and neo-
colonialism" everywhere and engaged in polemics
on Cambodia and South Vietnam. Phoumi
claimed that he cleared his speech with Souvanna
during a stopover in France en route to New
York, but this has not mollified the non-
Communists.
Another confrontation appears to be shaping
up between the coalition's Joint National Political
Council and the cabinet over Lao Communist
leader P ince Souphanouvong's proposed 18-point
national political program. There are reports that
the Communist-dominated council has decided +o
reject suggested revisions in the program offered
by both the cabinet an,; Souvanna on ti'e grounds
that the council has already unanimousi en-
dorsed the document. The renewed controversy
surrounding the 18 points, a comprehensive set of
guidelines for the conduct of Lao foreign and
domestic policy, threatens to rekindle bitter and
divisive debaie within the coalition over the
proper role of the council vis-a-vis the cabinet.
For their part, the non-Communists have
been encouraged by the recent decision of the
25X1 25X1
Non-Communist politicians nave also at-
tempted to throw a monkey wrench into portions
of the economic assistance agreement that Com-
munist Economics Minister Soth Phetrasy re-
cently negotiated with Hanoi. They have taken
advantage of the absence from Laos of several key
Communist cabinet officials to block formal
cabinet ratification of the agreement until these
officials, as rvell as convalescing Prime Minister
Souvanna, return home. This maneuver by the
non-Communists will almost certainly antagonize
the Pathet Lao, who have high hopes for the
success of the coalition's first aid-seeking mission
to Asian Cor.imunist countries, and who are
particularly anxious not to offend their North
Vietnamese patrons.
Non-Communists' reservations about the aid
package are well founded. The non-Communists
are particularly concerned that Hanoi's will-
ingness to reconstruct the Route 7 roadnet in
northern Laos may be intended to legitimize
North Vietnam's continuing military presence
there for an indefinite period. They are also
apprehensive that North Vietn, mese construction
crews will attempt to plunder Lao natural re-
sources, sucl- as timber and mineral ore. The
non-Communists are insisting that the coalition
form a special joint commission to monitor and
regulate the construction activities of
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CHINA-PHILIPPINES: IMPROVING RELATIONS
The extraordinary reception accorded to
Philippines first lady Imelda Marcos during her
September 20-29 visit to China arpears to have
set the stage for improved relations Letween the
two cor ;ntries. Mrs. Marcos, was favored with
separate meetings with Chairman Mao Tse-tung
and with hospitalized Premier Chou En-lat. Ex-
cluding earlier sessions with US officials, Mao's
meeting with Mrs. Marcos marks the only time in
recent years that the Chairman has seen an emis-
sary of a government with which Peking ha no
official ties.
By their extraordinary treatment of Mrs.
Marcos, the Chinese have shown that they will
keep the pressure on for early diplomatic rela-
tions. Manila has apparently already begun ex-
ploring some of the issues that could come up
during such negotiations. For example, the Philip-
pines sent a representative to Taipei earlier this
year to &-vise the Nationalists that Manila was
considering ways of improving its relations with
Peking. Manila undoubtedly will seek to dct^r-
mine the status of Malaysia's relations with Tai-
wan following its recognition of Peking earlier in
the year.
There were signs, however, that President
!Marcos, despite his oven statements that eventual
diplomatic recognitior? was inevitable, was not
fully pleased with pre:s speculation that Mrs.
Marcos' trip implied immediate recognition of
Peking. At a meeting with advisers on September
25, Marcos said he wanted to imps ove trade ties
with China, but only if it did not imply imme-
diate diplomatic :cognition. The joint trade
agreement announced during Mrs. Marcos' visit
reportedly provides for the sale of an unspecified
amount of Chinese petroleum to the Philippines.
Manila agreed to sell sugar, wood products, and
other items to the Chinese. Details of the agree-
ment are to be worked out when a Philippine
trade delegation visits China later this year.
Although Peking clearly would like to see
early recognition, Manila's close relationship with
Taiwan is only one of the problems that the
Philippines must deal with first. The overseas Chi-
nese community in the Philippines, although
much smaller than in Malaysia, has a great deal of
economic influence and is-at least on the sur-
face-largely pro-Taipei. In addition, the Philip-
pines has from time it, time publicly accused
Peking of supporting the communist insurgency
in northern Luzon. Also, President Marcos has
often said that he would recognize the Soviet
Union and China simultaneously, and there has
been little progress in Soviet-Philippines relations
in recent months.
None of these issues, however, presents in-
surmountable problems in Manila. Marcos sig-
naled how lie will probably deal with one of them
in a speech on September 20 when he said that a
"distinction" must be made between commi,nist
insurgency at home and the Communist g;,"!c;n-
ments that are trying to make a contribution to
"cooperation among nations," an apparent at-
tempt to play down Manila's charge that China
was supporting the insurgents. President Marcos
has probably concluded that, despite his inclina-
tion for a measured approach to problems of this
magr;itude, the tir.re has come to accelerate the
pace of developing Sino-Philippines relations
'i HE KOREAN QUESTION AT THE UN
The annual maneuvering at the UN on the
Korean question, for many years one of the most
contentious issues before that forum, is under
way again. With detente increasing over the past
several years, all of the major powers have acted
with a common interest to preserve stability on
the Korean Peninsula. This year, although events
are not entirely in the hands of the major powers,
the UN's handling of the problem will provide
another measure of how well cletrnte is working.
Pyongyang's backers, consisting of the major
Communist states and a growing number of Third
World nations, have introduced a resolution that
is-compared with earlier years-relatively mild.
Its call for the withdrawal of all foreign troops in
South Korea "under the flag of the United Na-
tions" appears to leave open the possibility that
US forces might remain under some bilateral ar-
rangement. Recent statements from North
Korean President Kim II-sung also suggest that
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Pyongyang's major objective this year is to end
the UN role in Korea and that the question of US
troops might be taken up later. The Pyongyang
side probably took Much of the harsh invective
out of its latest resolution in an effort to win
broader support, a tactic that appears to be hav-
ing only limited success so far.
The main thrust of a counterproposal-
sponsored by the US, Japan, and other supporters
of Seoul-is a call for a renewal of meaningful
dialogue between North and So.rth Korea. The
proposal maintains that any changes in security
arrangements affecting the peninsula must be de-
cided by the Security Council, which originally
committed the UN to a role in Korea, and the
two Korean sides. This would have the effect of
removing the question from the General Assem-
bly, where pro-Pyongyang forces have consid-
erable strength.
Acrimonious debate and a vote on a more
strongly worded resolution attacking the US and
UN roles in South Korea was averted last year
after intensive behind-the-scenes negotiations in-
volving the major powers. A compromise was
achieved under which Pyongyang's backers
dropped their demands that US forces withdraw
and Seoul's supporters dropped their proposal
that both Koreas join the UN; Seoul had pressed
for the two-Koreas concept, but Pyongyang
strongly opposed it. Additionally, the UN politi-
cal apparatus in Korea was quietly phased out and
the assembly adopted a consensus urging Seoul
and Pyongyang to resume the halting dialogue
that seemed so promising in 1971-72.
Even if a hostile resolution recommending
the withdrawal of foreign troops from South
Korea were passed this year, US forces would be
under no legal injunction to withdraw. The dam-
age would be political and psychological. Bu'
unless Pyongyang's Third World backers gain uii-
expected momentum, this see,-ns unlikely to
happen. While sharp debate in the General Assem-
bly in November and the passage of a hostile
Korean resolution cannot be ruled out, it appears
now that the pro-Seoul resolution has a better
chance of success and, even more likely, that
another comprorri5e will be worked out.
Indonesia's Foreign Minister Malik, for ex-
ample, last week proposed that the UN military
command in Korea be dropped quietly-much as
the political apparatus was a year ago-but that
some kind of armistice machinery be preserved,
and he exhorted the two sides to get down to
serious bilateral talks. Any new compromise will
depend importantly on the attitudes taken by the
major Communist powers, particularly Peking.
The Chinese are concerned-as they were last
year-that a divisive UN debate on the Korean
question WOUIJ not be to their advantage. Peking
appears to be wary of any formula that might
lead to a confrontation between the two Koreas
or that could create a military vacuum in South
Korea that could be filled by the Soviet Union or
a rearmed Japan. Although Peking has maintained
its firm public support of the North Korean posi-
tion at the UN, there are indications that China's
chief objective is to assure continued stability on
the Korean Peninsula.
The Chinese propaganda position is influ-
enced both by the need to show "principled sup-
port" for its allies and by a desire to deny the
Soviets the opportunity to pose as Pyongyang's
only reliable supporter.
Chinese U N Ambassador Huang Hua's
speech at the UN on September 19 reflects these
concerns. Huang said it was "imperative" that US
"interference" be ended and that US troops
"under the UN flag" withdraw. As with previous
official statements on the question, Huang's re-
marks display Chinese support and sympathy for
Pyongyar;g's position while clearly emphasizing
termination of the UN role, rather than complete
and rapid US military withdrawal.
The Soviets would probably also be satisfied
with a compromise solution. They have given
unenthusiastic backing to Pyongyang's cause in
the current General Assembly session and have
not appeared anxious to press North Korea's case
against US troops in the South lest this introduce
another thorny question into the Washington-
Moscow dialo ue.
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CASTRO SPEAKS ON FOREIGN POLICY
With Senators Javits and Pell and a large US
press delegation in Havana at the time Fidel
Castro deliv'red one of his most comprehensive
foreign policy addresses in over a year at a rally
on September 28. Speaking from what appeared
to be a carefully prepared text, Castro was
broadly critical of the US, but he refrained from
the sweeping denunciations and personal attacks
on LIS leaders that were common in his speeches
until a year or so ago. His principal focus was on
Latin America, and once again he called for the
creation of a new regional organization-without
I IS participation-to replace the OAS.
Castro strongly criticized covert US efforts
in support of Chilean groups that opposed former
president Allende. He denounced this "blatant
interference in Chile's -lomestic affairs" as the
latest on the "long list of acts of aggression" by
the US against Latin America. He did not accuse
the US of complicity in the Chilean coup, how-
ever, merely stating that the CIA clearly played
a decisive role in the creation of the conditions
and preparation of the groundwork" that led to
it. Though many Latin American leftists have
loudly accused the US of engineering the coup,
Castro has adhered to his own interpretation of
events since September 1973 when he first dis-
cussed Allende's fall.
Castro reserved his strongest criticism for the
OAS. Indignantly, lie denounced that body for
ignoring US "intervention" in the hemisphere
while upholding for ten years the economic and
political sanctions that were imposed on his gov-
ernment because it had engaged in subversion.
Mindful that OAS members are schedule. to vote
on the continuation of the sanctions next month
in Ecuador, he endeavored to portray his regime
as the aggrieved victim of aggression and to place
the US on the docket instead. Without naming
them, Castro condemned that minority of Latin
American governments that he cony iders "ac-
complices" of "US aggression," seeming to blame
them more than the US for perpetuating inter-
American problems and divisions. Once again, he
implicitly ruled out the possibility that Cuba
would rejoin the OAS or restore ties with certain
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governments, even though he probably is confi-
dent that the sanctions will soon be lifted and
that a number of countries will seek to renew
relations with Cuba.
Castro spoke at length about international
energy issues. He supported Venezuela and
Ecuador-the two Latin American members of
OPEC-and criticized recent US policy statements
on the pricing of petroleum. He blamed the US
for aggravating inflation and monetary problems
around the world, and proclaimed the right of
less-developed countries to form cartels. He bal-
anced these remarks, however, with a plea to
oil-producing countries to "adopt the struggle of
the underdeveloped world." His effusive praise of
the government of Venezuela and its nationalistic
resources policies probably reflects his hopes of
gaining access to Venezuelan oil, credits, and in-
vestments once relations are restored. He men-
tioned the USSR only once.
Throughout the 50-minute speech, Castro
eschewed the strident language and emotional
tone that characterized many of his foreign policy
addresses in previous years. His critiques of CIA
activities in Chile and of US energy policy were
no stronger than those by numerous other Latin
American leaders. The Cuban Premier restated his
willingness to begin discussions on normalizing
relations with the US once the "economic block-
DOMINICAN REPUBLIC: THE KIDNAPING
Terrorists who kidnaped a US embassy offi-
cial on September 27 in Santo Domingo ten..
expectedly ran into a stone wall in trying to
exchange her and several other hostages for a
$1-million ransom, the release of 37 political
prisoners, and safe conduct out of the country.
President Balaguer gave in to terrorist de-
mands in 1970 when kidnapers crabbed a US
military attache and went into hiding. They won
the release of 40 political prisoners in exchange
for the attache's life. This time, however, Bala-
guer is in a stronger position, since the terrorists'
decision to hole up in the Venezuelan consulate
allowed Dominican security forces to surround
the building. Balaguer offered the six terrorists
only their lives in return for the hostages' free
dom. Convinced that lie was not negotiating wi`..
a suicide squad, Balaguer gambled that no harm
would come to the hostages and that lie would
win out in the end.
At first, Balaguer allowed food and drink to
be delivered regularly to the consulate but after a
week of waiting, his patience appeared to be
wearing thin and lie moved to hasten an end to
the kidnaping by restricting deliveries.
Meanwhile, the terrorists suffered an addi-
tional setback on the political front when leftists,
from moderates to extremists, publicly dis-
sociated themselves from the kidnaping. They pri-
vately expressed the fear that the ahrluction by
the leftist-extremist 12th of January Liberation
Movement had exposed the entire left to possib!a
government retaliation just wher, 13; lague; ap-
peared ready to lift a ban outlawing the more
moderate leftist groups. To repudiate the kid-
naping; the moderates urged their members who
were in jail not to accept freedom should the
government give in to the terrorists. Eleven well-
known prisoners later turned their backs on any
release offer.
Police close in on kidnap site 25X1 25X1
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VENEZUELA: RIDING THE CREST
After six months as president, Carlos Andres
Perez remains the unchallenged master of the
local political scene and is emerging as a hemi-
sphere and world figure.
Swept into office with a massive popular
vote and with his Democratic Action Party in
control of bosh houses of congress, Perez im-
mediately began to reshape the country's econ?
omy. Through tactical skill and manipulation of
public opinion, Perez obtained from congress
extraordinary powers to rule by decree, for one
year beginning last May, with respect to almost all
important economic and financial matters.
Since then, Perez has concentrated on im-
plementing his economic policies and generating
sufficient public understanding and support to
silence conservative business critics who claimed
he was moving too fast and too soon. At the same
time, as a sop to the left. Perez has pressed his
intention to take over the US iron-ore concessions
before the end of the year and to nationalize US
and other foreign petroleum concessions in 1975.
During these months, Venezuela has emerged as a
financial power to be reckoned with. By the end
of 1974. for example, its oil revenues alone will
total almost $10 billion. Venezuela is now at-
tempting to expand its leadership role in Latin
America by such means as establishing a Vene-
zuelan Investment Fund to channel some of its oil
wealth into overseas projects.
Perez' popularity with the Venezuelan
people his been solidified by his aggressive de-
fense of 'fenezuela's right to set its own petro-
leum pricing policy regardless of sharp criticism
from the US. Although Perez reportedly hopes
that current differences with the U can be
settled in an amicable fashion and that relations
will continue to be cordial, he is not above
orchestrating public opinion to justify or defend
his administration's present and future petroleum
policy.
At home, Perez' policies have largely suc-
ceeded in nullifying domestic opposition from
left and right. With the economy growing and
money pouring into the national treasury faster
than it can be spent, the politically negligible
right is more concerned with conserving and even
increasing its stake in the economy. The largest
opposition political organization in the country,
the Social Christian Party of former president
Caldera, is still in shock from its disastrous elec-
tion defeat last December, although attempting
slowly and painfully to pull itself together. It is
attacking Perez and hi;, party for the govern-
ment's handling of the economy, especially the
rising cost of living and in inflationary rate that
this year may exceed 15-20 percent. The buoyant
economy and such populist measures as a work
stability law, across-the-board wage increases, and
price freezes have mutes' the effectiveness of
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much of this criticism by the Social Christian and
ott.:r political parties.
The Venezuelan military, the traditional
locus of political power, seems generally content
with Perez, although there is some unhappiness
with his reported failure to keep politics out of
promotion and assignment policies. In any event,
Perez has moved rapidly since his inauguration to
edge out holdovers from the previous admi'iistra-
tion and to ensure that major commands are
staffed by men personally loyal to him.
While Perez' power and popularity remain
very high, there are several political and economic
problems that could cause trouble in the coming
months if they are not soon remedied. Among
these is the great popular expectation that his
economic policies have caused. If his administra-
tion is unable to deliver on its prom-,;es, Perez will
surely face a serious ebbing of popular support.
There is also an increasing demand that the gov-
ernment spend more of its oil revenues on
domestic projects, a move that would only fuel
the inflationary spiral that the government is at-
tempting to curb.
Notwithstanding the fact that Perez is ri,:ing
high, and his party is sharing in the reflected
glory, there is evidence of some dissension and
unhappiness within the Democratic Action Party
over Perez' style of governing. Many of the party
regulars feel ignored, shunted aside, and disdained
by the President and his small clique of advisers.
Attempts to get Perez to remove some of the
more objectionable members of this coterie have
been unavailing and perhaps have even further
isolatod Perez from party leaders. Nevertheless,
they are in no position to challenge the President.
Several party leaders already are jockeying for
position for the party's presidential nomination in
1978, and support from Perez will be a valuable
asset. At this time, none of the potential nom-
inees appears willing to sacrifice that advantage
by staging an open revolt against his pol-
BOLIVIA: PRE-ELECTION MANEUVERS
President Banzer is equivocating on his dici-
sion not to seek another term. He also appears
intent on obstructing preparations by the opposi-
tion for the national elections he has called for
next year.
In July, following an attempt by junior mili-
tary officers to oust him, Banzer promised to
hold elections in 1975 and appointed a commis-
sion to study electoral reforms. Although the
commission has done nothing noteworthy thus
far, pressure from political and military leaders
has induced Banzer to move the election date
forward from October to June.
Initially, Banzer had said that he would not
be a candidate, but last week, when the leader of
a peasant group pledged his support, Banzer an-
r unced that he had changed his mind. The Presi-
dent's announcement, which came after all major
political leaders had expressed their wish to see
Banzer leave office, sparked public objections and
reportedly antagonized a group of military of-
ficers led by the retired army chief of staff Ge:-,-
oral Eladio Sanchez. The President has since
ti gown Sanchez out of the country, claiming that
he was preparing to overthrow the government.
25X1 25X1
Banzer is also trying to keep Bolivia's major
political party, the National Revolutionary Move-
ment, in a weakened state by ensuring the elec-
tion of Ruben Julio, an undistinguished party
hack, as the movement's chieftain.
Because Banzer has lost most of his former
supporters, it is unlikely that he could obtain the
backing necessary to win another term. If he fails
in his efforts to forestall elections, he may ulti-
mately be forced to step aside in favor of a25X1
military figure who has the approval of most
army leaders.
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