WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001000070025-3
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 27
• Document Creation Date: December 22, 2016
• Document Release Date: March 18, 2010
• Sequence Number: 25
• Publication Date: October 11, 1974
• Content Type: REPORT

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Top Secret
Weekly Review
Top Secret
`-SPY N2 643
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CONTENTS (Ocfobcr 11, 1974)
The WEEKLY REVIEW, issued every Friday morning by the
Office of Current Intelligence, reports and analyzes significant
developments of the week through noon on Thursday. It
frequently includes material coordinated with or I,.epared by
the Office of Economic Research, the Office of Strategic
Research, and the Directorate' of Science and Technology.
Topics requiring more comprehensive treatment and therefore
published separately as Special Reports are :fisted in the
contents.
11 Iran: Reaching Out
12 Ethiopia: Rifts in the Military
13 Kenya: Parliamentary Elections
14 Soviet Indian Ocean Force Change
14 Iraq: Offensive Bogs Down
4 Italy: The Reluctant Front-Runner
5 Portugal: The Left Tightens its Grip
6 Cyprus: Political Delays
8 EC Reviews Farm Policy
10 East Germany: Silver Anniversary
EAST ASIA
PACIFIC
15 South Vietnam: Some Changes-Maybe
15 Cambodia: Sihanouk in the Shadows
16 Thailand: New Government
17 Japan: Nuclear Allegations
18 China: Industrial Shortcomings
WESTERN
HEMISPHERE
20 Argentina: Appealing for Unity
21 Ecuador: R'sources Minister Replaced
22 Uruguay: New Leadership
23 Peru: The Seventh Year Begins
24 Chile: Extremists Lose Leader
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L"M
Middle East: A Year Later
Egyptian and Syrian leaders celebrated the
first anniversary of the O :toper war this week by
extollinc- their military preparedness, calling for
additional territorial concessions by the Israelis,
and admonishing all Arabs tc close ranks and get
on with negotiations. Beneath the rhetoric, how-
ever, there were signs of apprehension about the
future of peace negotiations and domestic eco-
nomic conditions. Israelis, spurred by Prime Min-
ister Rabin, have been hotly debating the terri-
torial concession issue.
In Egypt,thL celebration of the military "vic-
tory" last year vas tempered somewhat by a
candid acknowledgement in the press that the
present situation of "no victory - no defeat" is
basically unacceptable. In discussing Egypt's
present military picture at an armed Forces review
on October 6, Minister of War Ismail Ali did not
dwell cn the possibility of renewing hostilities. He
did, however, say that the Sinai must be restored
to Egypt "by peace or by war."
President Sadat, in an interview with a Bei-
rut newspaper on October 7, called for a closing
Egyptian tanks in victory parade
of Arab ranks and subsequent contacts with the
US acrd the USSR before returning to the Geneva
Talks. Egyptian efforts toward thi end, he said,
have included talks with King Hu,ayn in Alex-
andria in July and the tripartite rieeting of Egyp-
tian, Syrian, and Palestinian officials in Cairo last
month. At the time of the interview, Sadat was
still advocating an early conference of Egypt,
Syria, Jordan, and the Palestine Liberation Organ-
ization to forge a compromise on the negotiating
role to be played by the PLO and Joruan se that
the Arabs "do not go to Geneva and find time
bombs under the table."
Prime Minister Hijazi praised last year's mili-
tary achiev-,ment before a special session of the
People's Assembly on October 6. He devoted
most of his address to a discussion of Egypt's
domestic economic problems, however, in an
obvious attempt to dissipate growing public and
official frustration with the government. 1-Iijazi
said that he has given top priority to lowering the
cost of living and increasing the availability of
basic commodities. The commodity shortages
could eventually further complicate peace nego-
tiations by drawing attention to what Egyptians
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consider unreasonable delays in the implemen,a-
tion of the promised $250 million in economic
assistance from the US. The Egyptians tend to
regard this uid, which they unrealistically imagine
will be a panacea for their economic problems, as
a reward for Cairo's decision to seek a negotiated
settlement.
In Syria, deputy Baath Party leader Yasin
made the keynote speech to a rally celebrating
the anniversary of the war. He stressed that Syria
had continued to fight alone after Egypt accepted
a cease-fire, and that the disengagement agree-
ment should be considered only a step toward a
complete Israeli withdrawal from all occupied
territory. Yasin emphasized that the war had
demonstrated the value of Arab unity, particu-
larl; through the use of the oil weapon.
Syrian leaders are not threatening a return to
military action at this time, but-by continuing to
re-equip and improve their armcu f-rces with
Soviet weapons-are clearly not foreclosing this
option. The Syrians are, if anything, even more
cautious than the Egyptians in their hopes that
Israel will return occupied Arab territory through
negotiations or come to grips with the Palestinian
problem. Nevertheless, Damascus appears willing
to give negotiations a chance to work.
Foreign Minister Khaddam's recent attempts
to sow doubts about Syria's renewing the man-
date of the UN observer force on the Golan
Heights seem designed primarily to prod the US
and Israel on negotiating. In all likelihood, Pres-
ident Asad would accept minimal progress-some
movement in Jordanian-Israel negotiations or the
setting of a date for the resumption of the Geneva
peace conference-as sufficient justificaticn for
renewing the mandate this fall.
In Israel, Prime Mini:cer Rabin has been
making a series r,f public statements advocating
Israeli territorial concessions to the Arabs in
return for their agreement to a "peace by stager."
Rabin began 4he series in a US television in-
terview, broad,:ast on October 1, in which he
offered to trade some West Bank territory for a
deci,ration of "non-belligerency" by Jordan. In
subsequent statements, he has at least implied
that a similar staged approach could be used with
Egypt and Syria.
This major break with Israel's pre-disengage-
ment position--that territory would be sur-
rendered only after the signing of a compre-
hensive peace treaty-has been the subject of
almost daily comment, mostly critical, by Israeli
media. The opposition Likud coalition forced the
convening of a special parliamentary session on
October 9 to air the issue, but full-scale debate
was put off until next week. During Wednesday's
brief session, Rabin stated only that "Israel is
ready for territorial concessions as the price of
peace," but not for a return to the June 1967
lines.
Rabin's tactics, if not his goals, have been
widely questioned, although the usually out-
spoken hard liners within the Prime Minister's
Labor Alignment, such as Shimon Pp--.-; and
Moshe Dayan, have not yet raised their voices.
They can be presumed to oppose a course that is
clearly pointed to the kind of interim territorial
settlement that Israeli leaders have traditionally
shunned. It is generally seen as a surrender of
security without a compensating Arab com-
mitment to peace and recognition of Israel's legal
existence. Rabin has scheduled a cabinet meeting
on Oc.ober 11 to review Israel's negotiating
policy.
Right-wing and orthodox religious elements
in both the Labor Alignment and the Likud bloc
are committed to the goal of retaining all of
biblical Israel-the entire West Bank. The so-called
"youth wing" of the National Religious Party has
similar goals. On October 9, would-be settlers
affiliated with these groups evaded police and
army road-blocks and camped in several areas of
the West Bank in a deliberate campaign to dram-
atize their aims. The police moved in promptly to
evict then.. The attempt drew a stern statement
from Rabin that absolutely no settlements not
authorized by the government would be per-
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ITALY: THE RELUCTANT FRONT-RUNNER
President Leone's consultations with polit-
ical leaders showed Christian Democratic Party
chief Amintore Fanfani to be the favorite to
succeed Prime Minister Rumor, who resigned last
week. Fanfani-Italy's most experienced and con-
troversial politician-is playing hard to get, how-
ever, and, at his insistence, Leone gave an ex-
ploratory mandate to another Christian Dem-
ocrat-Senate President Spagnolli-to take sound-
irigs among the four governing parties to deter-
mine whether there is a real chance of putting the
center-left coalition back together.
Fanfani is suspicious of the consensus that
has developed in his favor. Ever left-wing
Christian Democrats-who this summer tried to
oust him from his party post-are encouraging
him to take the job, saying that his recognized
executive ability and decisiveness are needed at
this crucial juncture.
Fafani knows that the parties are further
apart than usual and probably believes that his
enemies are setting him up for another failure.
Fanfani has already suffered two setbacks this
year; he led the losing side in the divorce referen-
dum last spring, and the Christian Democrats
were stung badly in a regional election in June.
If the Senate president reports that there is
room for compromise among the former coalition
partners, Fanfani will probably accept the task of
forming a new government. He is also likely to
insist that he be allowed to keep his post as
Christian Democratic leader as the price for
accepting such a politically risky assignment.
The four parties, meanwhile, have completed
a round of meetings; their subsequent statements
show that they are still poles apart. The Socialists
did not budge from their demand for changes in
the austerity program, while the Republicans and
Social Democrats remain adamantly opposed to
any revisions. The Christian Democrats, as usual,
are hedging their bets but are inclined to side with
the Social Democrats and Republicans.
While the ruling parties continue their feud,
the Communists are maintaining a low profile.
They arc concentrating their efforts on opposi-
tion to early elections and are insisting that any
new government be more responsive to the
demands of organized labor.
The Communists' emphasis on their support
for labor probably results from the government's
failure to mediate successfully a dispute this week
between the unions and Fiat, the country's largest
private employer.
Apart from the potential for labor unrest,
there is concern that a protracted period of
political uncertainty could have a more gen-
eralized adverse effect on the economy. It could
lead to further capital outflows, worsening the
still shaky balance of payments. Excluding gold
holdings, Italy's foreign exchange resources are
only sufficient for several months of heavy sup-
port of the lira. The central bank would have a
difficult time obtaining additional loans with only
a caretaker government behind it. Private credit
has already largely dried up and official credit
sources will be wary of granting loans as long as
the composition and policies of the government
are unknown. In these circumstances, Italy might
have to let the lira depreciate sharply.
A lengthy government crisis would also
deepen the slump expected in investment and
employment through mid-1975. Private investors,
already squeezed by tight credit, reduced profits,
and a depressed securities market, would be
tempted to cancel the few spending plans still on
the books. With investment dropping off faster
than expected earlier this year, the outlook for
the economy could tip from stagnation to
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PORTUGAL: THE LEFT TIGHTENS ITS GRIP
The left-leaning Armed Forces Movement
appears to have strengthened its hold on the
country this week by initiating important changes
in the government apparatus.
The make-up of the third provisional govern-
ment is almost identical to its predecessor, with
two important exceptions. Prime Minister
Goncalves, an important member of the move-
ment, his assumed the defense portfolio. He is to
be "assisted" by another member, Major Vitor
Alves. The defense post had previously been
manned by a Spinola supporter. Although Presi-
dent Costa Gomes remains armed forces chief of
staff--the most important military position in
Portugal -Goncalves and the movement are now
in a good position to override him on military
matters.
The Ministry of Information has been
reduced to a lesser office, directly responsible to
the prime minister. President Costa Gomes is con-
cerned over Portugal's image abroad and has
indicated that one of his first priorities would be
to discipline the media and to put an end to their
growing left-wing bias. This may be difficult,
given the fact that the media now are contro!;ed
by Goncalves.
To further consolidate its power, the move-
ment named two of its members to fill vacancies
on the ruling seven-member Junta of National
Salvation. In addition, legislation passed earlier
this week by the Council of State made the move-
ment's Coordinating Committee part of the
armed forces General Staff. Two air force officers
will also be selected for the junta; the Council of
State is expected to meet next week to approve
the appointments.
Of the three members of the committee in
the cabinet, Portuguese observers on the center
and right consider only one-Major Melo
Antunes-to be a Communist; Prime Minister
Goncalves and Major Vitor Alves are described as
leftists.
Although the left is clearly strengthening its
position, the underlying conflict among i;ie
various contending political forces has not beer,
resolved. As a result, there is a polarization of
these forces, highlighted by the growing influence
of the more aggressive and better-organized
radical groups at the expense of moderates.
Dissension is reported within the military
over the government's drift to the left and over
th-: movement's control of the armed forces.
Gisgruntlement, however, is confined to the lower
military echelons, who resent the politically
motivated promotions of movement members as
well as increased politicization of the military.
Regular officers have not yei recovered from the
shock of Spinola's resignation, and lac < the
organization to challenge openly the movement.
The Communist Party, too, is concerned
over the impatience of young officer.: iii the
movement for radical change. Party leaders
apparently envision a dangerous situation
emerging when it becomes apparent to the people
that their expectations for economic growth and
social improvement cannot be met. The Com-
munists reportedly favor a slower and more
methodical road to power. They also realize that
they could not win the elections in March by
themselves and favor an electoral coalition with
the Socialists. This strategy could be called into
question, however, at the party congress called
for October 20, because some party activists
reportedly favor a concerted effort to press the
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I I
CYPRUS: POLIT;CAL DELAYS
Diplomatic efforts to move toward a nego-
tiated settlement of the Cyprus problem were
again overshadowed this week by political devel-
opments in Athens, Ankara, and Nicosia. Political
activity in Athens intensified as the caretaker
government of Prime Minister Karamanlis laid the
groundwork for the elections to be held on
November 17. In Ankara, opposition leader
Demirel failed to organize a new coalition,
sending the governmental stalemate into its third
week. In Nicosia, Acting President Clerides with-
drew his threat to resign and resumed the talks he
had been conducting with Turkish Cypriot leader
Denktash. No real progress toward a political
settlemer.c is likely until there are new govern-
ments in Greece and Turkey.
Greece: Government Resigns
In a routine formality designed to let cabinet
ministers campaign, the Greek cabinet resigned
this week to clear the decks for a caretaker gov-
ernment that will conduct the parliamentary elec-
tion on November 17. Prime Minister Karamanlis
and five other ministers, including Foreign Min-
ister Mavros, will remain in the interim cabinet.
the principal parties in the election are
Mavros' Center Union and the New Democracy
Party headed by Karamanlis, who is still riding
the crest of popular support generated by the
recent return to civilian rule. Two moderately
leftist parties--the New Political Forces and the
Democratic Socialist Union-have decided that
they will align themselves with the Center Union
for the election.
The leftist "Democratic Defense," which
was active in resistance efforts against the junta,
has announced its support of Andreas Papan-
dreou. Papandreou has been denouncing the
election as an "electoral coup" deliberately
designed to deprive the left of enough time lo
organize an effective campaign. On the far left,
the two feuding Communist parties and the
former Communist-front United Democratic Left
have rallied their electoral efforts in an uneasy
alliance called the "United Left." The United
Page C. WEEKLY REVIEW
IN-101 M&
Mavros and Karamanlis
Election opponeirls
Democratic Left received 11 percent of the votes
in the last elections in 1964.
On the extreme right, the newly formed
National Democratic Union led by former min-
ister of defense Petros Garoufalias is expected to
appeal to royalists, businessmen, civil servants
appointed by the juntas and some members of the
armed forces. The new party, although allegedly
royalist, has so far avoided taking a stand on a
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defense attache in Athens notes
Karamanlis' recent suspension of officers who
represented the hard core of Major General
loannidis' power base in the army has done much
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I I
to restore the chain of command and make the
army more responsive to the government.
Nevertheless, the army has been involved in
politics too long to be counted out altogether.
Many officers believe that politicians are unable
to give Greece the stability they feel is necessary
to avoid the threat of communism and anarchy.
Should they perceive that Karamanlis is letting
the left get out of hand, the army could be
expected to intervene again. Over the longer term,
however, a stable and effective right-of-center
government under Karamanlis could lessen the
threat of army intervention.
Turkey: Still No Government
Following Justice Part,- leader Demirel's
failure to form a righi-of-center coalition, Presi-
dent Koruturk called political and parliamentary
leaders together this week in an effort to reach
agreement on a nonpartisan government of
"national unity." There was no official announce-
ment of the results of the meeting, but the com-
ments of party leaders indicate that Koruturk's
effort was unsuccessful.
The President may make further efforts to
form a broadly based coalition, but it seems likely
that he will again turn to Prime Minister Ecevit if
agreement cannot be reached on a nonpartisan
government to lead the country into elections. If
given the nod, Ecevit may try again to form a
coalition with the conservative Democratic Party.
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Acting Cypriot President C'_ ides announced
his decision not to resign fol:?:.ring Archbishop
M? karios' public statement last week in which he
reaffirmed his support of Clerides and urged
Greek Cypriots to assist the acting president in his
"difficult and complex task." Makarios also called
for an end to mass rallies by his own supporters
and to speculation about his return to the island.
The Archbishop said lie would decide for himself
the timing of his return after the forthcoming
discussion of the Cyprus issue at the UN.
Cyprus: Talks Resume
views on political Issues. Their next meeting is
planned for October 14 but they may meet as
With his position and authority clarified,
Clerides resumed his talks on October 7 with
Turkish Cypriot leader Denktash on the exchange
of prisoners and related issues. The two men
reportedly resolved the "practical difficulties"
involved in the exchange, which was suspended
on September 26 after 1,946 of 5,298 prisoners
and detainees had been released. The two com-
munity leaders also had a private exchange of
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EC REVIEWS FARM POLICY
The EC pledged last week to undertake an
"inventory" of its common agricultural policy.
Bonn, which had insisted on a new look at the
farm system as a condition for agreeing to an
interim rise in support levels, greeted the decision
with much satisfaction. UK Foreign Secretary
Callaghan claimed that the promised review
showed the flexibility of the EC and was a good
omen for "renegotiating" Britain's Lerms of
membership. Paris was not displeased either,
taking comfort from the fact that the EC Com-
mission was to carry out the stocktaking, since
this would tend to assure that the basic principles
of the policy, which benefit France, would be left
intact.
The US mission Brussels notes that
formidable obstacles remain to early, thorough-
going reform. In the longer run, though, in-
creasing discontent with the present system and
the slowly diminishing weight of the farm vote in
some member states may bring about significant
alterations. The commission's proposals are due
next February, but it is open to question whether
these will go beyond the stocktaking and attempt
to cope with the difficult political choices facing
the Nine. The radical suggestions the commission
made in 1972 got nowhere.
The community's present farm system re-
flects three basic principles: preference for EC
over imported products; common prices and free
movement of goods within the community; and
common responsibility for financing. The pro-
gram is the EC's most integrated, both in theory
and in fact, and its disarra ' in recent years has
aroused concern that the EC's "cement" is be-
coming unstuck. Nevertheless, resistance to any
structural changes in the policy has Seen strong.
The system promotes price stability by
providing subsidies and other inducements, but
these have perpetuated inefficient farming prac-
tices and insulated European farmers from fluctu-
ations of the world market. High internal prices
have enabled governments to subsidize the
farmers by direct transfers from urban consumers
to ru?al producers without the payments having
to show up in national budgets. The transfers not
only constitute a welfare system for poor farmers
but also reward politica;ly important big farmers.
Although the support schemes differ acc,,rding to
product, high prices in the important q. ain and
dairy sectors-at least until recent years when
world market prices have climbed above EC
levels-are maintained by levies on imports and
subsidies to exports.
External complaints about the farm policy
have always pointed to its protection of high-
priced EC products. From an international point
of view, the insulation from external r.iarkets may
be just as objectionable when it serves, as today,
to maintain community prices on significant
products at an artificially low level. This presum-
ably prevents the EC from acting to influence
lower world prices and restrr,ins EC production
that would otherwise be available to meet world
shortages.
The growing internal complaints about the
policy reflect a conviction that it just does not
work. For example:
? Exchange-rate changes have made a
mockery of the common pricing system.
? Prices set for individual products do not
take into sufficient account such inter-rela-
tionships as that between grains avid livestock,
which can make the policy unworkable for a
particular sector.
? Miscalculations lead to unmanageable
surpluses such as the "beef mountain."
? The income of small farmers has not
been maintained at a par with that of in-
dustrial workers, which was a fundamental
aim of the policy.
? Consumers have borne the brunt of the
high prices except for the last two years,
when the system preserved EC prices under
world levels.
? Germany and Britain, the mair, im-
porting countries, claim they carry a dis-
proportionate load.
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French farmers block railroad in price protest
The t;isk before the commission is not an
enviable ona, given the advantage, that some of
than EC member states-and the politically im-
portant groups and vested interests within them-
derive from the present system. Lower support
prices within the existing structure is one possible
revision, but this step would face opposition from
the farmers, who are already caught by the infla-
tionary squeeze. Some earlier commission pro-
posals to streaml;ne the program are still on the
table, but such patchwork wot,.J involve further
administrative complications in an already often
bewildering system.
A different approach ;would be simply to
return many farm problems to the member states
for solution, something that Germany, despite its
recent indignation over "national measures," has
implied it might favor. This, however, would a,-
tack one of the foundations of present policy--
common financing-and would be resisted by the
current beneficiaries--the French, Dutch, Danes,
and Irish. A return to "market principles" would
also be opposed by the major beneficiaries, and
would in addition run agaiiist the deep European
dislike for wide price fluctuations a?d traditional
support for managed economies.
One of the more widely discussed pos-
sibilities fcr fundamental change is a deficiency-
payment scheme, which substitutes direct pay-
ments to farmers for consumer-borne market
prices and is basically the support system used by
the British before 1972. Unfortunately, such a
scheme would entail very high-and visible-
budgetary expenditures if the prices That guided
the deficiency payments were set substantially
above market levels. Basic structural reform that
would alter the pattern of European farming is
viewed by some experts as the only way of sati',-
factorily solving the EC's agi'cultural problems.
The rapid exodus from the farms is already ac-
complishing a sort of structural change, but when
former commissioner Mansholt proposed to en-
cocrage this process by a plan of income supple-
ments to induce inefficient farmers to leave the
and, his ideas ran up against the inertia fostered
by the present system.
The member states hardly seem ready for
radical reform propositions, and at this point the
US missior. feels it is useless to try to predict
what sort of package the commission may come
up with. The trench are probably not being
merely sc;:f-serving when they point out that, in
the final analysis, a thorough review of the corn,-
munity's farm system can only b: part of an
overall program of economic and monetary
measures.
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EAST GERMANY: SILVER ANNIVERSARY
The celebration of East Germany's 25th an-
niversary this week was a well-orchestrated
demonstration of Pankow's close ties to the
Kremlin.
Party chief Erich Honecker and the other
East German leaders missed no opport; pity to
praise Moscow and to reiterate that East Germany
is "forever united with the Soviet Union." In-
deed, statements that Pankow's "spectacular"
achievements would be unimaginable without the
f, sternal alliance with Moscow were the principal
theme of the celebration. East German speakers
went so far as to attribute the international recog-
nition of their country to Soviet sponsorship.
The guests of honor-Brezhnev, Foreign
Minister Gromyko, and Defense Minister
Grechko-were greeted everywhere by massive
crowds shouting "long live Soviet-German friend-
ship." Brezhnev was awarded the order of Karl
Marx-the GDR's highest honor. The inclusion of
Gromyko and Greckho in the Soviet delegation
underscores the military and strategic importance
that Moscow attaches to East Germany-and in-
deed to all the northern tier countries.
The public demonstrations of fealty to Mos-
cow and :he separation from West Germany that
they implied were backed up by the adoption of a
revised constitution. The new law abandons the
concept of a single Germa, r nation and the possi-
bility of eventual reunification, and irstead
emphasizes the country's solidarity with the so-
cialist states, particularly the Soviet Union.
The determination of the East German re-
gime to maintain a strong defense capability was
"mphasir.ed by a massive military parade in East
Berlin featuring some 5,000 goose-siapping
troops, and an impressive display of the country's
latest tank and missile hardware. This show of
force drew a quick protest from the Western allies
for its violation of Berlin's de-militarized status.
In addressing the future, Honecker gave East
German youth a new opportunity to help )n shap-
ing the national uestiny. He revealed ti-rat inem-
bers of the Free Democratic Youth will be sent to
the Soviet Union to meet Pankow's commitment
to construct a 550-kilorneter section of the gas
pipeline that will extend from the Urals to the
western border of the USSR.
Brezhnev's Speech
Although Brezhnev's anniversary speech
emphasized the durability of Soviet support for
Pankow, he also stressed that good relations with
West Germany were an important factor in de-
tente. Brezhnev said he was pleased that West
German Chancellor Schmidt was visiting Moscow
later this month and cited Schmidt's pledge to
continue Brandt's Osipolitik.
On Berlin, Brezhnev appeared to be calling
for diplomatic stability. He emphasized how
important the Quadripartite Berlin Agreement
was to relations between Moscow and Bonn, but
only mildly and indirectly chided West Germany
for its recent establishment of a federal environ-
mental office in West Berlin. The net effect of
Brezhnev's remarks on Germany and Berlin was
to make clear that East German foot-dragging will
not 31ter the direction of Soviet policy toward
Bonn.
On other issues, Brezhnev routinely restated
Moscow's interest in agreements on strategic arms
and European fn;ce limitations, but provided no
specifics. He recited the gamut of other Soviet
arms control offers, including Moscow's propa-
gandistic proposal for the withdrawal of nuclear-
armed ships from the Mediterranean. Brezhnev
also called for progress in the European security
and cooperation talks in Geneva, but he did riot
assign any particular urgency to their conclusion
and gave no hint of Soviet flexibility.
Although Brezhnev chastized China's Maoist
leaders, his remarks were essentially conciliatory.
He stressed Moscow's continued interest in nor-
malizing relations, but did hold out the hope that
the Chinese people "themselves" would even-
tually turn out their Maoist leaders.
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The Shah and Empress
IRAN: REACHING OUT
The Shah, v.,;,ose leadership ambitions ex-
tend well beyond the Persian Gulf region, on
October 4 concluded a two-week trip to five
far-flung Indian Ocean littoral states. He appears
to have succeeded in projecting a strong leader
image by underlining to host governments his
intention to have an important voice in Indian
Ocean affairs and by drawing attention to his
various long-range prc,i,,,sals for the area.
In statements made during visits to Singa-
pore, Indonesia, Australia, New Zealand, and
India, the Shah touched repeatedly on three sub-
jects--big power competition in the Indian Ocean,
area security, and economic cooperation. He
came out strongly for a long-standing proposal by
Sri Lanka to have the Indian Ocean declared a
"zone of peace." The Shah, in turn, received
some pledges of support for his own proposal that
the UN declare the "Middle East" a nuclear-
weapons-free zone.
In addition, the Shah urged greater coopera-
tion in regional security as a necessary first step
toward the elimination of the presence of non-
littoral powers. He also called for the eventual
development of an area economic union, begin-
ning with Iran and its South Asian neighbors. In
discussing his proposals, the Iranian leader
avoided specifics, although he did say that an
economic "understanding" would lead "natu-
rally" to a "political arrangement."
For the most part, host governments
responded much as the Shah h;d hoped. Recep-
tions were warm, trade and cultural agreements
were signed, and general statements of support
for closer economic and security cooperation
were forthcoming. Apparently no credit agree-
ments were signed, although follow-up discussions
on trade and projects could lead to some Iranian
loans.
ore, alumina, and shipping.
In the numerous interviews he gave, the
Shah tried not to become embroiled in the con-
troversy over the presence of US and Soviet naval
f~Y in the Indian Ocean. He made clear, how-
ever, that he differs with those littoral states that
see the expansion of US facilities on Diego Garcia
as provocative and likely to lead to Soviet coun-
termeasures. He reiterated his view that US activ-
ities balance the Soviet presence and are a stabi-
lizing influence. In an effort to soften his differ-
ences with some of his hosts, notably India, the
Shah took the line that area security was the
primary responsibility of littoral states. He spoke
in favor of limiting the great powers' rivalry in the
Indian Ocean and of their eventual withdrawal-a
development he clearly does not expect soon.
Both the Shah and the Indians had good
reasons for not allowing their divergent views on
Diego Garcia to mar the Iranian ruler's sojourn,
which was in return for Prime Minister Gandhi's
visit to Tehran last May. New Delhi's cooperation
is essential to the Shah's scheme for closer
cooperation among Indian Ocean states, and Mrs.
Gandhi's government is anxious to preserve the
favorable terms on which it obtains oil from Iran,
the primary source of India's oil imports.
Discussions during the Shah's stay focused on
economic cooperation, with the final com-
munique noting progress on joint projects in iron
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ETHIOPIA: RIFTS IN THE "VIlLITARY
Early this week, the moderate majority of
the ruling Armed Forces Coordinating Committee
cracked down on its military opponents. The
move followed several weeks of growing factional
strife within the committee .,,at ended the com-
morr front the military had exhibited in public
since it began its revolt iast February.
On October 7, the committee sent oval
troops to arrest radical dissidents in the army
engineer and aviation battalions in Addis Ababa.
A skirmish broke out in which five men were
killed and seven wounded. Addis Ababa radio
later announced that other members of the two
units had been arrested for attempting to "disrupt
the progress of the revolution." Until this in-
cident, the military had managed to avoid inter-
necine conflict despite sharpening differences
within its ranks.
In the coming week, the coordinating com-
mittee reportedly intends to arrest some 50 addi-
tional military and civilian opponents. The chance
of major fighting between military units hinges
mainly on the reaction of a dissident minority in
the First Division in Addis Ababa, the most
potent opposition to the committee, and on the
dissidents' ability to pick up support from other
opponents of the committee. On October 8, the
leaders of the dissidents resigned, and one was
reportedly placed under house arrest.
liances, both within and between the units, makes
the opposing camps difficult to define.
The moderate majority on the committee
favors continuation of military rule. Although
they are interested in far-reaching changes, they
want to move cautiously and to gain broad ci-
vilian support without resorting to coercion. The
moderates apparently have not reached a final
decision on Haile Selassie's fate, but probably
prefer to exile him to the countryside, perhaps
after trying him for corruption.
The radicals on the committee want an
immediate return to civilian rule, and a reshaping
of Ethiopian society along socialist lines, together
with abolition of the monarchy and harsh punish-
ment for Haile Selassie and the imprisoned aristo-
crats. Some of the radicals have called for a
"peoples republic." At a minimum, the radicals
want students, workers, and other civilians to
have ar, important role in the government.
The radicals have been vocal in their de-
mands, and have shown a potential for trouble-
making. By themselves, however, the radicals
would be no match for the moderates in a show-
down. The coordinating committee probably
moved first against the engineering and army avia-
tion battalions as a warning to dissidents in the
First Division and in the air force, which also
contains large numbers of radicals.
The moderates believe that their forces now
outnumber First Division dissidents in the capital
and are strong enough to make a convincing show
of strength. The Addis Ababa - based Fourth
Division, which generally supports the committee,
has been reinforced by troops and artillery from
outlying areas.
The coordinating committee remains divided
over such issues as the future orientation, com-
position, and leadership of the Ethiopian gov-
ernment. Disputes generated by the special
interests of various military units have con-
tributed to the rift A constant shifting of al-
The First Division's split with the committee
apparently stems mainly from its desire to main-
tain its separate identity and special perquisites.
The division, while serving as the imperial body-
guard, received choice assignments, special al-
lowances, and the best equipment. When the
coordinating committee decided to integrate the
division into the regular army, the dissidents
strongly objected to the change. The First Divi-
sion dissidents also favor an immediate return to
civilian government, but they want a cabinet of
technicians closely guided by the military. A
similar arrangement prevailed lust before Hailp
Selassie was deposed,
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KENYA: PARLIAMENTARY ELECTIONS
Kenyans go to the polls on October 14-the
second time since independence in 1963-to elect
their National Assembly. The outcome will prob-
ably not presage any shift in government policies,
but may give some clue as to who will ultimately
succeed President Jomo Kenyatta, who is in his
eighties and is soon to be sworn in for his third
five-year term.
Kenyatta's Kenya African National Union is
the only party on the ballot--opposition parties
were banned five years ago-but the voters will
have a choice: about 750 National Union candi-
dates have been nor:iinated for the 158 elective
assembly seats. Observers predict that as many as
half of the incumbent legislators may lose their
seats as the result of discontent over the failure of
the Kenyatta government to improve living
standards or to deal effectively with charges of
tribal favoritism and corruption.
The indications are that the election on
Monday may dim the future prospects of a
number of politicians from Kenyatta's southern
branch of the Kikuyu tribe---the country's largest.
Several of the southern Kikuyus have gained in-
fluence and wealth as a result of their roles in the
National I Ininn h, if fo, ,, of them
have caught the public
cy. Likely to-fa-fl-by-the political wayside as a
result of the election is Foreign Minister Mungai,
a relative of Kenyatta who has long been con-
sidered a possible successor to the President.
Mungai appears to be losing the contest for his
seat in the legislature; his major opponent is
getting financial support from Mungai's rivals for
the succession. For his part, Mungai is putting the
heat cn foreign diplomats and businessmen for
campaign funds. Attorney General Njonjo, an-
other southern Kikuyu, is also reported to be in
danger of losing his seat.
Politicians from the northern branch of the
Kikuy:i--long distrusted by Kenyatta-may be the
beneficiaries of the election. The northerners are
more likely to be supported by persons from
other tribes than are southern Kikuyus. Members
of the Luo, Kenya's second largest tribe, are
especially apt to vote against southern Kikuyu
incumbents because Kenyatta has prevented Luo
Kenyatta
leader Oginga Odinga, a long-time rival, and other
prominent Luo politicians from running for the
legislature. Odinga led the oppcsition party until
it was banned in 1969. Mwai Kibaki, the minister
of finance and economic planning, is a northern
Kikuyu of national leadership caliber who appears
likely to win re-election despite the disadvantage
of being associated with an unpopular tax pro- 25X6
gram.
Vice President Daniel arap Moi's future may
also be enhanced by the election results. Moi,
from a minor tribe, was put in the post by
Kenyatta in 1967, probably because he offered
no threat to southern Kikuyu dominance. Since
then, Moi's stature has grown and he is campaign-
ing actively. Unopposed for his own legislative
seat, Moi has been acting as spokesman for the
party leadership and campaigning for candidates
likely to support him in the future.
After the election, Kenyatta must again
name a vice president, and Moi's reappointment
appears likely. Moi would then be in a strong
position to replace Kenyatta should the President
die or become incapacitated in officd. Kenya's
constitution provides that the vice president
becomes acting president for 90 days, during
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SOVIET INDIAN OCEAN FORCE CHANGE
The first flag-showing visit in the Indian
Ocean has been scheduled for the helicopter ship
Leningrad. Beginning October 14, the Leningrad,
its escorting destroyer, and a replenishment ship
will put into Port Louis-a commercial port on
the island of Mauritius. Commercial and naval
ships of all nations visit this port frequently, and
US and Soviet naval ships visited here simulta-
neously last December.
The Leningrad group spent a week-from
September 27 to October 4-close to the port of
Berbera in Somalia. The ships did not dock,
probably because of the narrow entrance to the
port, but helicopters from the Leningrad shuttled
back and forth. Before the Berbera layover, the
Leningrad was replenished from Soviet auxiliaries
at an anchorage 20 nautical miles from the port
of Aderi.
Other Soviet ships currently in the Indian
Ocean include a gun-armed destroyer with an
auxiliary ship, which completed a visit to Mom-
basa, Kenya, on October 6, and a guided-missile
destroyer that visited Colombo, Sri Lanka, from
October 3 to 9. The destroyer visiting Colombo is
-a newly commissioned Kresta I I - class unit that is
probably transferring from the Baltic Fleet to the
Pacific Fleet.
The Leningrad group should leave the Indian
Ocean this month, having spent more time away
from home port than ever before. Once the
Leningrad and its escorting destroyer leave, and
the Kresta 11 moves on, it will be the first time in
a year that the Soviet naval force in the Indian
Ocean will be reduced to its basic contingent.
This consists of a gun-armed destroyer, two escori
ships, ;wo fleet minesweepers, a landing ship, and
a diesel torpedo-attack submarine. Ten mine-
sweepers still working in the Strait of Gubal are
not likely to leave before the end of November
IRAQ: OFFENSIVE BOGS DOWN
Baghdad's latest efforts to achieve a military
solution to the Kurdish problem have met only
limited success. Recent Kurdish successes, morale
problems among Iraqi troops, and Iranian support
for the Kurds have denied the Iraqis a quick
military victory. Baghdad nevertheless shows no
signs of changing its war policy, and continues to
be willing to absorb large losses.
In their first successful military operation
since they captured two Kurdish towns in late
August, the Iraqis occupied a strategic mountain
overlooking a Kurdish supply route in north-
eastern Iraq. This drive, a two-pronged advance, is
aimed at cutting Kurdish supply lines and dividing
the rebel forces. Baghdad's forces have suffered
heavy casualties within the past two weeks in
repeated efforts to capture two strategic positions
covering the road to the Kurds' headquarters. The
victory could well be pyrrhic, however, as discon-
tent grows within the army's ranks.
Tehran, for its part, continues to provide
mortars, anti-tank weapons, and ammunition to
the Kurdish forces. In response to the recent
heavy fighting, the Shah has increased this aid and
has ordered an additional artillery battery to the
border for use against Irani force-
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SOUTH V!ETNAM: SOME CHANGES--MAYc3E
The level and intensity of military activity
continued at a generally low rate throughout
South Vietnam during the week. The major
exceptions were the loss of the last outlying gov-
ernment outpost in Kontum Province and a con-
tinuing battle for high-ground positions in a few
of the northern coastal provinces, particularly
south of Hue. Much of Saigon's attention was
focused on its efforts to deal with the current rise
in anti-government political agitation.
Thieu's address to the nation on October 1
has done little to dampen the charges being made
by the Catholic and Buddhist oppositionists who
continue to demonstrate against corruption, the
poor state of the economy, and tight controls on
the press. In fact, some of Thieu's close advisers
are dissatisfied with the way the President
rebutted the opposition charges in his speech.
Specifically, some of his aides think Thieu treated
the corruption issue too lightly and left people
confused with his call for a popular vote of con-
fidence.
Prime Minister Khiem and other members of
Thieu's entourage are now encour,-iging the Presi-
dent to make some changes in his cabinet and
presidential staff as a way of dampening criticism
of the government and improving its perform-
ance, especially in the economic area.
A specific objective of Khiem's proposal
appears to be the removal of Information Minister
Hoang Duc Nha, Thieu's close confidant and rela-
tive. Khiem and others, who have long been
jealous of Nha's easy and independent access to
Thieu, hold Nha responsible for urging unwise
and ill-timed courses of action on the President.
They are charging Nha with mishandling com-
plaints about government censorship and hope to
persuade Thieu that Nha's removal would elim-
inate a major rallying point for opposition ele-
ments.
Talk of cabinet changes crops up about as
regularly as Vietnam's monsoons, much of it
stemming from bureaucratic infighting and
jockeying for presidential favor and influence. In
the past, Thieu has usually taken several weeks to
Nha
A political thorn
decide what, if any, changes he wants. While he
may be perSL._;i-d that something more than a
cosmetic change is now in order for the cabinet,
Thieu will be reluctant to remove or significantly
diminish the influence of Nha. Thieu uses Nha
principally for the reasons that make the aide
unpopular---to inform the President of what other
members of the palace ouard are doing and think-
ing.
CAMBODIA: SIHANOUK IN THE SHADOWS
Sihanouk's influence within the insurgent
movement has diminished greatly during the past
year. Last November, a number of key portfolios
in his Peking-based Royal Government of Na-
tional Union were transferred to the Khmer Com-
munists in Cambodia, and this now appears to
have been a key factor in the Prince's declining
position. Sihanouk tried to put the best face on
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the transfer by claiming that it was done at his
initiative to remove the "exile" stigma from his
government and to improve it's chances for
replacing Phnom Penh's delegation at the 28th
UN General Assembly,
the transfer o portfolios was a maneuver that
backfired on Sihanouk and led to a significant
slippage of his position.
Sihanouk's initial proposal was for the
transfer of key ministers, not just their portfolios,
to the "liberated zone." Many of these ministers
were pro-Sihanouk nationalists, and Sihanouk
hoped that their presence iii Cambodia would
help expand his in-country fo lowing at the Com-
munists' expense. The Khmer Communists
responded, however, by insisting on the transfer
of the portfolios to Communists, and Sihanouk
was unable to resist since this would have exposed
his ulterior motives.
Following this setback, Sihanouk's relations
with the Khmer Communists became cold and
perfunctory. Sihanouk's unilateral call for talks
with the US when he visited Laos in March 1974
strained relations even further. Sihanouk main-
tained a facade of camaraderie during Khieu
Samphan's visits to Peking in April and May, but
there was considerable behind-the-scenes friction.
Sihanouk was particularly incensed when
Samphan refused to allow him to make a visit to
Cambodia in 1974, but then invited North Viet-
namese officials to the "liberated zone."
Sihanouk reportedly is now no longer attending
Politburo meetings in Peking, and statements
issued under the Prince's name are merely for-
warded to him for pro forma approval.
Foreign visitors in Peking in late August
found the Prince tense and depressed. Sihanouk
deprecated his own ability to influence events in
Cambodia and claimed that he had little remain-
ing authority. In discussing negotiations, the
Prince said merely that the Khmer Communists
were committed to a total victory and do not
wish to negotiate.
Commu;iist media coverage of "deputy
prime minister" Khieu Samphan is now greater
than ever, while the coverage of Sihanouk is
largely limited to perfunctory ',tatements issued
on special occasions. Last wrak, for example,
Samphan issued four unprecedetited "appeals" to
elements in Phnom Penh and made the first
authoritative statement from the insurgent side
on the representation battle: in the UN. C immu-
nist radio broadcasts on October 8 belatec:'y car-
ried Sihanouk's comments on the UN situation in
which the Prince himself highlighted Samp ian's
increased stature and ;announced that fog all
practical purposes, Samphan had assumed the ' ole
of "prime minister." It was the first time smite
July that' Communist media had carried a m,ijor
Sihanouk statement or interview.
All this does not mean that the Communists
are preparing to jettison Sihanouk. He gives the
insurgency a legitimacy, both inside and outside
Cambodia, that it would riot have otherwise. Dis-
carding him at this juncture would result in fur-
ther internal divisions that the Communists can-
not afford. It does mean, however, that Sihanouk
is becoming less and less an equal partner with the
Communists. Now more than ever, his political
future appears to rest on the hope of a negotiated
settlement that would give him new vantage
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THAILAND: NEW GOVERNMENT COMING
On October 5, the interim national assembly
by an overwhelming majority approved the draft
constitution that has been in the works for close
to a year. The act clears the way for the establish-
ment of a constitutional government, a slow
process that has been under way since the fall of
the Thanom military regime a year ago.
The King signed the draft constitution
despite his reservations about what he sees as an
excessively political role mapped out for the
monarchy. The document was promulgated on
October 7. Bangkok has remained peaceful,
despite the threat of demonstrations by student
militants unhappy with several provisions of the
constitution. A general election is set for Febru-
ary 1. It will be Thailand's fih::t election in five
years, and the first since 1946 u determine a new
government.
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Allegations that visiting US naval vessels
carry nuclear weapons have created a political
tempest in Tokyo that has embarrassed the Ta-
naka government. The left is using the issue to
revive its sputtering campaign a;ainst the US-
Japan security treaty as well as wo discredit the
government as President Forc' s mid-November
visit approaches.
shadowed by an article in theNew York Times of
October 8 quoting a US defense official to the
effect that:
? It is "no secret" that nuclear-armed US
ships visit Japan.
? The Japanese government is aware of
this.
The uproar stems from testimony before a
US congressional committee last month by a re-
tired US navy admiral who strongly suggested
that nuclear weapons are carried aboard the US
aircraft carrier Midway, which homeports in
Yokosuka, and on other navy vessels that visit
Japan. A subsequent statement by the admiral
denying any specific knowledge was over-
Tokyo quickly and categorically denied the
claims in the Times article, but Prime Minister
Tanaka still faces serious controversy in the Diet
on the nuclear weapons issue, beginning in com-
mittee sessions next week. The opposition parties
allege violations of bilateral understandings
requiring "prior consultation" when nuclear
weapons are brought to Japan, and they will press
the government to categorically deny that such
weapons are present.
Japanese officials are also worried about
increased demonstrations and local pressures
against US bases, particularly at Yokosuka. Sev-
eral prefectural governors have asked Tanaka to
end further port calls by US naval vessels until
satisfactory clarification is received. Tokyo, feel-
ing the pressure, has asked the US for a public
statement that would help the government defend
its position and has also asked the US to shorten
the coming visit of the aircraft carrier Midway.
nose government is unwilling to make a definite
statement, however, the domestic controversy
could deepen and eventually strain political and
security relations between the US and Ja-
Despite the extraordinary press coverage so
far, the media at this point is essentially waiting
for a definitive explanation from the Japanese
and US governments. If Tokyo follows up any US
statement with an unequivocal denial of the
charges, the issue may well subside. If the Japa-
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CHINA: INDUSTRIAL SHORTCOMINGS
The growth rate of China's iron and steel
industry will almost certainly decline sharpiy this
year. Steel production, in fact, may not exceed
the 1973 level of 26 million tons.
Prior to this year, China's steel production
had made impressive gains. Recovery from the
disruptions caused by the Cultural Revolution in
1967-68 accounted for part of the growth, but
much of the advance was due to the completion
of a number of small-capital projects such as basic
oxygen steel furnaces and to the introduction of
automated processes. In addition, Peking stepped
up its program for building small-scale iron and
steel plants; by 1973, these small plants were
producing 15 percent of the -ountry's crude steel.
The rate of advance could not be sustained,
however. The small-scale plant program was over-
stimulated by political zeal, resulting in ineffi-
ciency and poor quality production. Investment
that should have been distributed throughout the
industry was concentrated too heavily in the
development of crude steel capacity. Moreover,
higher grade iron of : deposits have been depleted,
and Peking has failed to allocate sufficient re-
sources to new mining techniques and to facilities
for improving ore quality. The development of
pig iron production capacity has also been neg-
lected.
These basic imbalances within the industry
reportedly have been aggravated by strikes and
slowdowns caused by the anti-Confucius cam-
paign as well as by higher prices for raw materials.
Perhaps more importantly, the steel industry as
well as most other industries, is now facing a
severe shortage of coal, which accounts for 80
percent of all energy used in China. Coal mine
cadres have been told in confidential briefings
that during the first half of this year, coal output
in China either fell short of plan by 8.35 million
tons or decreased by that amount compared with
the same period of 1973-reports from China can
be interpreted either way. In either case, the
shortage is more than can be balanced by savings
campaign, in industry or by further curbs on
home use.
The slowdown in both the coal and iron-and-
steel industries is likely to persist for several
years. While the difficulties caused by the anti-
Confucius campaign will probably be short-lived,
other problems will not be easily solved. There is
little promise of regaining momentum in the steel
industry's small-scale plant program because of
the inherent inefficiencies of this type of plant.
Limited foreign exchange and rising prices will
severely restrict the relief that might be gained by
importing raw materials and finished steel pro-
ducts. Additional injections of capital into the
sectors of the industry that boosted output in
recent years would not provide a solution either,
since what is needed now is a redirection of
investment into the weaker sectors of not only
steel but related industries, including coal.
Despite the unmistakable signs of an ap-
proaching crisis, there have been no visible
indications that additional large investments are
being directed to the coal industry. It is possible
that Peking has stepped up such investment
without public announcement, but it is unlikely
that any major effort would have escaped notice.
In any case, it requires up to seven years to build
an underground mine of the type favored by the
Chinese.
Shortages of coal and steel over the next
sev_ral years will hamper overall industrial
growth. For example, coal shortages are resulting
in a curtailment of textile production, a major
foreign-exchange earner, as well as forcing electric
power plants to convert from coal to oil. Over the
longer term, Peking will have to import
equipment and technology to modernize its steel
and related industries. This will be expensive and
will require considerable time and careful
planning, but it is a course that is in tune with
China's goal of economic self-sufficiency. F
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ARGENTNA: APPEALING FOR UNITY
President Peron made a strong pitch this
week for political unity while promising severe
measures to deal with rampant terrorism. Most
major sectors of Argentine society support her
call to eradicate violence, but opposition leaders
are increasingly skeptical about many government
policies to this end.
Leaders of various political parties have
grown concerned over Mrs. Peroii's failure to keep
them abreast of major decisions and have been
pressing for a private meeting with her. Last
week, they issued a public declaration calling for
a renewal of the dialogue started by the late
president Juan Peron. Their criticism was muted,
however, because Mrs. Peron, in a pre-emptive
move, had already scheduled a broadly based con-
ference with representatives from most parties,
the congress, the church, the military and busi-
ness.
Although those in attendance apparently
agreed to a joint statement rejecting all type..
terrorist activity, the conclave probably did little
to resolve underlying disarlreements. Major points
of dispute center on the government's sanction of
right-wing death squads, the new penal reform
cff civ! sic of the media for tic: Peronists'
own political purposes, and the closing of the
national university. The politicians did not expect
much from the national unity m,;eting. Their at-
titude was reflected by the statement of a Radical
Party member that the invitation extended to
Cardinal Caggiano, the octogenarian prelate of the
Argentine Catholic Church, was ample evidence
that the meeting was a "waste of time."
Meanwhile, opposition leaders have reaf-
firmed their request for a separate parley with the
President, and they apparently intend to judge
her response as a measure of the government's
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willingness to engage in serious talks. Ricardo
Balbin, the key spokesman for the parties, has
raised a subject that is uppermost in the minds of
many of them. During a televised discussion, the
Radical Party leader condemned extremism of the
left and right, but he leveled his strongest crit-
icism to date at the government's failure to curb
the death squads. He was clearly referring to the
notorious Argentine Anti-Communist Alliance,
which reportedly operates with the tacit approval
of high government officials.
Opposition leaders fear that the govern-
ment's h navy-handed actions in the counterter-
rorism field could pose a dangero- threat to
democratic freedoms. The indiscrim late terror
evoked by the quasi-official death squads could
hardly be reassuring to them.
In a move probably calculated to wreck Pres-
ident Peron's efforts to promote a consensus, the
Marxist People's Revolutionary Army had earlier
proposed a truce with the government in return
for legal recognition, a repeal of "repressive"
legislation, and the release of all "political"
prisoners. Some politicians are undoubtedly
sympathetic to these demands, which seem to
indicate that the petition was a well-timed
psychological maneuver to cause further political
dissension between the Peronists and opposition
parties.
In a strongly worded speech at the multi-
party meeting, President Peron stated that her
government will press ahead vigorously with anti-
terrorist measures. Indeed, her promise to use an
"iron hand" against subversion implied a rejection
of the truce proposed by the extremists.
The President concluded by praising the
army effusively, as she has on previous occa-
sions-an obvious bid to assuage the military. In
recent weeks, the army has been the principal
target of terrorism by leftist extremists, who hope
to provoke plotting within the armed forces. A
sense of frustration may be growing, bu: few
officers see any alternative at present to support-
ECUADOR: RESOURCES MINISTER REPLACED
The new minister of natural resources, navy
Captain Luis Salazar Landeta, is expected to fol-
low a more pragmatic approach toward foreign oil
companies and potential foreign investors -uian
did his predecessor, Gustavo Jarrin. While
Ecuador's overall nationalistic stance is likely to
continue, the ministry under Salazar's steward-
ship could pursue petroleum policies more in line
with the attitudes of President Rodriguez and the
conservative elements of the government.
Last week, Jarrin was dismissed from the
ministerial post and named naval attache to
London. He had recently been elected president
of the Organization of Petroleum Exporting
Countries for a term ending in December. It is
uncertain whether Jarrin will be forced to resign
th post, but in any case, Ecuador will probably
,t.din control of the OPEC presidency at least
until December.
Jarrin has long been at odds with President
Rodriguez over Ecuador's radical petroleum
policy. An ultra-nationalist, he has been a major
influence on the government's heavy-handed
treatment of foreign oil concerns in Ecuador. His
demands for higher revenues and early national-
ization of Vie oil companies have discouraged
potential foreign investors. Furthermore, at the
recent special OPEC session in Vienna, Jarrin
emerged as a leading spokesman for higher oil
prices and bitterly denounced the policies of the
oil-consuming nations, particularly the US. His
anti-American statements and his efforts to
appoint radicals to ministry posts have alienated
moderate officials as well as President Rodriguez.
The new minister is not well known, but
apparently he is a political moderate who has the
trust and confidence of the President. At one
time, Salazar served as a special military adviser to
Rodriguez. Although he is not expected to bring
about major changes in Ecuador's petroleum
policy, government officials believe he will take a
less antagonistic approach to foreign oil con-
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URUGUAY: NEW LEADERSHIP
Minister of Economy Alejandro Vegh, who
was appointed by President 3ordaherry or.'y
three months ago, has already given a new direc-
tion to national policy and bolstered the position
of civilians within the government. The measures
introduced thus far ;-eflect a conservative statist
philosophy and are primarily designed to free the
exchange rate, maintain essential imports, and
stimulate domestic investment.
Last month, Vegh and Bordaberry met with
top military leaders to win support for economic
initiatives. Because military officers now play an
important policy role in economic affairs, their
backing is essential to the success of any reform
program. Vegh allegedly obtained a promise of
full support after threatening to resign if his
measures were not adopted.
Vegh
Since then, Vegh has instructed the central
bank to free the financial exchange rate from the
US dollar. This will not niffect the commercial
exchange rate with regarJ to trade, but is in-
tended to retard capital flight and curb black
market operations.
To finance this year's balance-of-payments
deficit, which is expected to increase to $125
million because of oil import costs, Veeh has
decided to use Uruguay's gold reserves rather than
impose im )ort controls that would restrict the
flow of capital goods essential for development.
He has also lowered export taxes on wool and
meat to encourage major exports through official
channels. Vegh plans to stimulate domestic invest-
ment by raising the interest rate for savings and
loans. The government also intends to sell
treasury bonds at market-determined interest
rates.
Military approval of Vegh's policies, which
have received strong backing from Bordaberry,
appear to have given the President new strength as
a national leader. Last month, even before the
economic meeting with the generals, Bordaberry,
flanked by mili+ary leaders and key advisers,
turned down an appeal from prominent citizens
and political leaders for a renewal of party
activities. He has also recently indicated that he
may remain in office after his term officially ends
in 1976.
Although Uruguay continues to suffer from
serious economic stagnation and rampant infla-
tion, Vegh may encourage a return of confidence
if he is able to sustain his reform measures.
Previous efforts to alleviate Uruguay's economic
ills failed because of the inability of its leaders to
formulate and ursue clear) defined stabilization
policies.
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PERU: THE SEVENTH YEAR BEGINS
The military government has begun its sev-
enth year in firm control of the country, but it
faces increased civilian opposition to its revolu-
tionary programs. President Velasco's position
remains strong, but health problems and an
apparent inability or unwillingness to compromise
as in the past may lead to a lessening of his
effeL.`iveness. Velasco is attempting to shift
responsibility for the recent disconte,+: by claim-
ing CIA is behind the problems.
Dissension between moderates and radicals
in the military has increased since Velasco forced
moderate navy minister Vargas to resign last May.
More so than in the past, intra-military disagree-
ments can be expected to weaken somewhat the
overall effectiveness of the regime. In addition,
since the government expropriated the press in
July, some civilian opponents of the regime have
indicated a resolve to contest-possibly vio-
lently-the military's radical programs. Several
bomb blasts in the Lima and Arequipa areas
during the past month may be the start of a
general anti-government terrorist campaign re-
portedly under consideration by middle class dis-
sidents since the press take-over. Dissident navy
officers may also be involved. Thus far, these
activities have not caused serious disruptions, but
this could change if these groups feel that
Velasco's policies threaten to strike at the heart
of their hasic interests.
In his earthquake-delayed anniversary speech
on October 9, Velasco Inked domestic dissidents
to an alleged inter,.,tional campaign against the
revolution that lie said "could well be" the work
of a "sinister subversion and espionage ma-
chinery." Velasco never mentioned the CIA by
name, but made reference to recent revelations
concerning "the activities of foreign agents in
Peru's sister nations." He declared that his coun-
try will "frustrate the dark intentions" of this
"enemy of democracy, justice, and liberty."
Velasco's health problems could force him
to step down next year. In the meantime, he will
try to shore up his own position while strength-
ening the hand of those officers he would like to
see running the country after he leaves office.
Such measures include keeping officers loyal to
him in all important troop commands and en-
suring that radicals continue to enjoy a majority
voice in top levels of government. In so doing,
Velasco will have to be careful not to upset the
time-honored practice of assigning key govern-
ment posts on the basis of military seniority.
Maneuvering along these lines is likely to incrcase
toward the end of the year, when important
retirements and reassignments are effected.
Army Chief of Staff Morales Bermudez, a
moderate, is slated to become prime minister next
year, and his -Issumption of r ffice may exacerbate
moderate-radical tensions. At this time, there is
no clear successor to Velasco, although at one
time the President reportedly expressed a pref-
erence for Army General Graham, a close ally and
a ieading radical. The succession problem will
remain a hot issue among military leaders.
The coming months will witness a contin-
uation of Peru's radically nationalist revolution.
And, although internal dissension is on the
upswing, the country is likely to remain under
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 CHILE: EXTREMISTS LOSE LEADER
Government security forces inflicted a severe
defeat on the extremist Movement of the Revolu-
tionary Left last week. Miguel Enriquez, leader of
the movement and number one on the govern-
ment's most-wanted list, was killed in Santiago on
October 5 during a gun battle between security
forces and the group-which had apparently been
responsible for a daring bank robbery several days
earlier. Nearly half of the hold-up loot was
recovered from the house in which Enriquez di3d,
along with a cache of weapons that included
Soviet-mane rifles and rocket launchers.
It is uncertain whether the bank robbery was
a first step in a new extremist offensive, a prop-
aganda ploy aimed at demonstrating that the
movement was still viable, or an act of despera-
tion on the part of a group constantly hounded
by security forces.
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Last mon:,;i, however, the movement re-
jected government overtures for a secret "truce"
that would have called for the group to turn in its
arms and expose its penetrations of the armed
forces in return for safe conducts out of the
country. The group may have felt compelled to
revalidate its revolutionary credentials wit
In any case, Enriquez' death has deprived
the group of its most capable leader. Leadership
may now devolve on his brother Edgardo, cur-
rently in exile in Paris, or on Andres Pascal
Allende, the late president Allende's nephew, who
reportedly took part in the bank robbery but
escaped during the shootout.
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Strenuous government efforts to destroy the
movement have hurt the organization badly. The
group seems to have a magneti - attraction for
young, violence-prone leftists, however, which is
likely to help it survive and remain capable of at
l
east limited anti-government activity.
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