WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001000070030-7
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 28
• Document Creation Date: December 27, 2016
• Document Release Date: May 10, 2010
• Sequence Number: 30
• Publication Date: November 15, 1974
• Content Type: REPORT

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Weekly Review
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The WEEKLY REVIEW, issued every Friday morning by the
Office of Current Intelligence, reports and analyzes significant
developments of the week through noon on Thursday. It
frequently includes material coordinated with or prepared 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 listed in the
contents.
CONTENTS (Novembrr 15, 1974)
MIDDLE EAST
AFRICA
WESTERN
HEMISPHERE
1 Palestinians at the UN
2 Middle East: Options Narrow; I:xercik
4 Austerity Measures in Israel
6 Greece: First Elections in a Decade
8 Turkey: New Prime Minister Named
8 EC Searches for Energy Policy
10 Spain: New Defense Ties with US
10 Western Europe: Civil Aircraft
12 Italy: Critical Crossroads
13 USSR: Anniversary; Lunar Mission
14 Bulgarian Government Chanqes
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16 Argentina: The Violent Line
17 Whither the OAS?
18 Bolivia: Elections Canceled
EAST ASIA
PACIFIC
SPECIAL
REPORT
19 China-USSR: Peking Proposes
Nonaggression Pact
20 Vietnam: Calling for Talks; Military
22 A Troubled Japan
24 South Korea: Recession 25X1
Detente and the Stirring of
Soviet Dissidence
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 Members of the Palestine Liberation Organization arrive at the UN
Palestinians at the UN
Palestine Liberation Organization chief Yasir
Arafat asked the UN General Assembly on
November 13 to back the Palestinians' right to
return to their homeland, to determine their own
future, and to establish a national authority on
any PalestiniE i territory "from which Israeli
occupatio.i is removed."
These points were drawn from a comprehen-
sive policy statement approved by the PLO's
parliamentary body in Cairo last June. Arafat, in
his address at the UN, did not repeat the more
radical planks of that plat'orm, notably the
standard PLO threats directed at Israel. In June,
Arafat approved a statement that the PLO would
use all means, "fr,,-emost of which is armed
struggle," to liberate Palestinian !and; at the UN,
he asked that there be no more bloodshed.
Arafat did not repeat either the RJlestinians'
usual rejection of UN Security Council Resolu-
tion 242, ,which provides the legal basis for the
Geneva peace talks, or their frequent denuncia-
tions of Jordan's King :-lusay n. These omissions
a;most certainly reflect the PLO leaders' current
inclination to hint at compromises with Israel and
Jordan in the hope of gaining a meaningful role in
peace negotiations and eventually winning control
of a truncated Palestinian state.
Arafat's resort to intangible appeals for
justice for the Palestinians and his tactic of avoid-
ing threats to Israel were designed to gain wide
support for the Palestinians -ind to avoid giving
offense to Israel's backers, particularly the US.
The PLO chief decried US support for Israel,
which he charged is not in the interest of the
"American masses." He appealed to the American
people for friendship and for more fruitful rela-
tions with the Arab world.
Because the Palestinians have no official
stati.,s at the UN, Arafat did not offer a specific
proposal for a resolution on the Palestine ques-
tion. Such a proposal will be introduced later in
the debate, probably by Egypt.
Arab delegates are unanimous in their assess-
ment that the Palestinians would be satisfied with
a modest resolution that demands a Palestinian
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entity but recognizes-at least implicitly-Israel's
right to exist. Such a resolution, they believe,
would achieve two important objectives: win
international recognition for the political rights of
the Palestinians and create a better image for the
PLO. The Arabs expect such a resolution to be
passed by an overwhelming majority. They are
hopeful the US will abstain.
Debate on the Palestine question is expected
to !ast until November 21. In order to ensure that
its views are heard, Israel has reserved the right to
address each session. The Arabs responded by
claiming the same prerogative for Syria, their
spokesman.
In an initial reaction to Arafat's UN speech,
Israeli Prime Minister Rabin said it challenged
Israel's very existence and was made cn the
assumption that Jews have no right to a state.
Rabin emphasized, however, that Israel would
continue the search for peace with the Arabs in
every way-directly or indirectly.
Arab residents in the Israeli-occupied West
Bank staged several demonstrations in :support of
the PLO this week. A general strike called for on
the West Bank by PLO broadcasts to mark
Arafat's UN debut met with only limited success,
however, in the face of intensive Israeli pressure.
The major exception came in Nablus-long a
hotbed of anti-Israeli activity-where the Strike
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The Middle East
Arab and Israeli reaction to Secretary Kis-
singer's visit last week, as reflected in their respec-
tive media, has been muted, and neither side has
struck any notes of optimism on the prospects for
further peace negotiations. The circumspect press
commentary is partly due to the fact that so little
information on the visit has been made public.
Even more, it probably reflects recognition on all
sides that the options for restoring negotiating
momentum have narrowed considerably since the
Arab summit last month.
Both Egypt and Israel still appear to be
focusing on a further disengagement in the Sinai
as the only means of breaking the present dead-
lock. The Israeli press has speculated that Secre-
tary Kissinger may pursue this subject in another
visit to the Middle East next month or else invite
Egyptian and Israeli representatives to begin talks
then in Washington. Israeli Foreign Minister
Allon, however, has stated publicly that "a great
deal of clarification is needed before negotiations
can be revived." The US embassy in Tel Aviv adds
that the Israelis are not optimistic because, as one
leading daily noted, there is an "abysmal gap"
between Israel's demands for a political settle-
ment with Egypt and the more narrow military
agreement Egyptian President Sadat is prepared
to concede.
During the Secretary's visit, Sadat publicly
affirmed his belief that a step-by-step approach
remains viable, and he clearly would prefer to
pursue unilaterally a further disengagement in the
Sinai. Nevertheless, there were indications during
the Arab summit that he was heavily pressured by
other Arab leaders not to proceed before extract-
ing a commitment from the US and Israel that
Syria would also be included in any future phase
of negotiations. Syria thus continues to play the
pivotal role. Prospects for breaking the deadlock
on the Arab side appear to hinge on whether or
not President Asad believes that Sadat is ready to
insist on linking another Israeli withdrawal in the
Sinai with one on th , Golan Heights.
Sadat has continued to hedae his bets on this
subject in public. He has claimed both that the
Arab summit decisions have not impaired Egypt's
freedom to negotiate and that future negotiations
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Despite the persistent Syrian misgivings
about a step-by-step approach and about Egypt's
attitude, it seems most likely that Sadat has had
to give Asad some private assurances that Egypt
will demand simultaneous prog. 'ss in negotiations
and, perhaps, even that Egypt will support Syria
if it is attacked. The crucial question at the
moment appears to be whether or not Syria can
be sufficiently mollified to allow some form of
preliminary Egyptian-Israeli talks to take place
that could be billed as the first step in a "simul-
taneous" negotiating process.
Syria's principal concer is that the opening
of any new Egyptian-Israeli discussions would
reduce its Ievera,e on Israel and give Tel Aviv an
excuse for postponing further any consideration
of concessions on the Golan Heights. Earlier this
month, Pi ime Minister Rabin reiterated that Israel
is ready to resume negotiations with Syria, but
there have been no indications that the Israelis are
preparing to make new proposals. If Israel con-
tinues to balk, Asad could attempt to force the
issue by pressing for reconvening the Geneva con-
ference.
What Syria does about the renewal of the
mandate of the UN observer force on the Golan
ront, which expires at the end of this month, has
been regarded as a key indicator of Asad's
ttitudes and intentions. Speculation continues
hat he may refuse to extend the mandate to
ion with Israel's failure to offer concessions. This
veek there were some signs that military con-
iderations could prevent Asad from playing this
:ard. The Jordanian ambassador H Damascus said
hat he was told that Syria will be forced to agree
o extend the mandate out of fear that cancella-
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tion would provide Israel with a justification fc25X1
attacking Syria. 25X1
Asad's military advisers presumably rec-
ognize thzit hostilities, once begun, could not be
confined io a repetition of the artillery duels and
patrol actions that Syria employed to reinforce its
bargaining points in the disengagement talks last
spring. If Asad should decide that ending the
mandate involves too much risk of a destructive
Israeli attack, he might justify a limited extension
of a few months as necessary to allow time both
tor more vigorous diplcmatic efforts and for the
completion of military training and defense con-
struction programs.
When Asad makes his play on the mandate
issue, it will be based as much on poiitical as on
military factors. He probably believes that the
negotiating options have not yet been completely
exhausted. As usual, however, he has his cards
very close to his chest.
Egyptian military exercises continued at a
high level during the week. Syrian and Israeli
forces also maintained their vigilance, but there
were no indications that either side took any
unusual measures to increase the alert levels of
their forces. 25X1
The exercise probably reflects Egyptian
concern that the Israelis would use their three
landing craft in the Mediterranean to seize Port
Said from the sea as part of a general offensive to
regain control of the Suez Canal. These landing
craft could carry about 1,000 Israeli men for an
amphibious assault. 25X1
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Austerity Measures in Israel
The cabinet announced a number of new
economic measures this week, highlighted by a
43-percent devaluation of the pound. The new
measures are the latest in a series of steps
designed to correct the country's economic ills
caused by the burden Israel's military program
places on the country's resources. Last July the
government implemented a number of measures
aimed at slowing the rate of inflation and
trimming nonessential budget outlays. A third
economic package that will concentrate on wage,
income, and tax reforms has yet to be announced.
The latest measures deal almost exclusively
with slowing Israel's foreign currency drain. In
addition to the devaluation of the pound from
4.2 to 6 per US dollar, the government has moved
to:
? Freeze imports of :ortain luxury goods,
including autos, for six months.
? Raise the foreign travel tax.
? Increase utility taxes and the prices of
petroleum products.
? Reduce subsidies en many basic com-
modities.
? Extend the national wage agreement for
one year.
Finance Ministry officials said the new eco-
nomic program was made imperative by the large
decline in foreign exchange reserves. At the end
of September official reserves stood at $1 billion,
a drop of $800 million since the beginning of the
year. According to Israeli officials, the new
measures will save an estimated $700 million in
foreign exchange.
Israel's current account deficit has soared to
$3.5 billion this year from a deficit of only $1
billion before the war. Arms purchases from
abroad have accelerated and put added pressures
on reserve holdings. Defense imports this year will
probably total $2.4 billion, compared with
$500-600 million a year before the war. Although
the US is covering the bulk of Israel's arms
imports with official aid, Israel apparently has
purchased up to $400 million in arms under
commercial contracts. The sharp rise in w^rld
food prices also has contributed to Israel's i;ade
woes.
The r.;w measures will surely aggravate infla-
tion, which has increased 40 percent since the
war. The reduction in basic foodstuff subsidies
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alone has caused ttie consumer price index to rise
17 percent-some officials are speculating that
prices could rise as much as 50 percent within a
year.
Much will depend on whether the Histadrut
labor federation, whose support is vital to the
program's success, agrees to go along with the
government's desire to hold the line on wages.
Prime Minister Rabin's bargaining position was
strengthened when the Knesset voted 59 to 41 on
November 12 to approie the economic package.
Nevertheless, Rabin wi!: probably have to make
some concessions to .he Histadrut. The govern-
ment has already promised to work with the
union to ameliorate the effects of price increases
on low income groups, large families, poor elderly
people, and welfare recipients.
Although the Israeli public anticipated many
of the government's actions, their severity when
officially unveiled came as a shock and le'l to a
series of demonstrations, brief strikes, and rioting
in parts of Tel Aviv. Arabs in the Israeli-occupied
West Bank-which is closely lini.,ed to the Israeli
economy-also demonstrated against the rise in
price of basic commodities. Violent protests such
as occurred in Tel Aviv were the exception, how-
ever. Press commentary on the new program was
generally favorable, conceding the necessity for
harsh measures, but cautioning the government to
ensure that stributpri
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Bodyguards hold back protesting Israelis as Prime Minister Rabin (seated) looks on
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The conservative New Democracy Party led
by Prime Minister Karamanlis is favored to win
the elections this Sunday. Much is riding on voter
confidence in Karamanlis, who has made his
experience and proven ability to govern one of
the main issues in the campaign. The size of his
victory will determine how flexible he can be on
Cyprus, NATO, and in relations with the United
States. It will also influence Greece's future politi-
cal structures, as the new parliament is em-
powered to revise the constitution.
Should Karamanlis fail to gain an outright
majority in parliament, he will form a coalition
government with the centrist Center Unio - New
Forces led by George Mavros, which is expected
to come in second. Such a coalition would be
much like that which took over this summer
when the military stepped down. Mavros is less
flexible than Karamanlis on Cyprus and NATO
and less favorably disposed toward the US. A
coalition dependent on Center Union support
might therefore prove unwieldy at times, but can
be expected to keep Greece on a basically pro-
Western course and act responsibly on the Cyprus
and Aegean issues.
Issues in the campaign have been over-
shadowed by the leading personalities, most of
whom were active in politics before the 1967
military coup. The parties have been recon-
stituted, however. Karamanlis has dropped con-
servatives who collaborated with the junta and
has tried to broaden the base of his support by
bringing in a large number of new faces. Mavros
has picked up several colorful candidates who had
been associated with resistance to the junta, such
as the would-be assassin of ex-President Papa-
dopoulos. Mavros' leadership and party organiza-
tion is weak, now_ver. More important, as Kara-
manlis' former foreign minister, he has found it
difficult to establish a separate identity for him-
self and his party, which is, in many ways,
ideologically similar to that of Karamanlis.
Popular discontent with the past seven years
of military rule plus anti-American sentiment over
Cyprus provide the left wing with promising ter-
rain ~u exploit, but the left is split between
Andreas Papandreou's Panhellenic Socialist Move-
ment and the United Left. Papandreou has been
exploiting themes of betrayal in Cyprus, hostility
to NATO, neutralism, a vague socialism, and anti-
Americanism to obtain considerable popularity
among intellectuals, radicalized students, and
youth. He is mistrusted by the farmers and the
.middle class, as well as by the establishment,
however. In addition, complicated registration
procedures and the requirement that voters must
cast their ballots in their place of origin may limit
the turnout of student voters. Papandreou is also
running more political unknowns than any other
party and is fielding candidates in only 33 out of
56 electoral districts. He and the Center Union -
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I I
New Forces are expected to split about 40 per-
cent of the vote, with the Center Union getting
the larger share.
The United Left, a grouping of two Commu-
nist parties and a former communist-front group,
is the only major group in the election that has
been ruled a coalition by the Supreme Court. This
means that the United Left must obtain 30 per-
cent of the vote in order to be eligible to partici-
pate in more than the first "distribution" of seats
under Greece's complicated proportional repre-
sentation law. Most observers do not give the
United Left more than 15 percent of the vote.
With perhaps as much as 30 percent of the vote
the leftist groups-the United Left plus Papan-
dreou-could be a vocal factor in the new
parliament.
Except for Papandreou, the parties have
treated the Cyprus issue gingerly. They all sup-
port a solution "safeguarding the rights" of their
ethnic brothers on the island. The Panhellenic
Socialist Movem;ont and the United Left have
urged the return, Archbishop Makarios. The
Center Union t? yes a solution through inter-
communal talks, while Karamanlis has been re-
minding voters that a strong Greek government
with a decisive policy is in the best position to
handle the Turks.
Punishment of those who supported the
junta has been a key issue. Karamanlis has de-
fused it somewhat by exiling the five key mem-
bers of the junta that overthrew the civilian gov-
ernment in 1967 and promising legal action
against them. He has avoided taking harsher
measures in order not to alarm the army and the
extreme right.
Right-wing forces, represented by the Na-
tional Democratic Union led by Petros Garou-
falias, are unlikely to win more than 5 percent of
the vote. They are apprehensive about the legal-
ization of the Communist Party and other mea-
sures they interpret as a leftward drift, but appear
to be willing to give Karamanlis time to work
things out. Although pro-junta forces cannot be
completely discounted as potential perpetrators
of a coup against Kararnanlis, they probably lack
sufficient support in the army to brine Kara-
ENERGY: THE NEUTRALS
Sweden, Austria, and Switzerland have
decided to join the US-backed International
Energy Program but with certain conditions
attached that relate to their neutrality. The
decisions represent an important political
milestone, given the fact that the neutrals
have heretofore consistently avoided align-
ment with any politically committed group.
Joining the program will mean a break with
that tradition, even though it does not por-
tend moves toward closer cooperation with
Western Europe on political and security
matters.
The realities of the oil shortage and the
memory of last winter's oil embargo com-
pelled the three to give serious consideration
to joining. Each is concerned, however, that
its neutral status not be compromised. In or-
der to soften the impact of an affirmative
decision and to justify it domestically, the
three are insisting that a neutrality statement
be attached to final acceptance of member-
ship. The neutrality declaration is not in-
tended to act as an escape mechanism, and
the three have promised to adhere strictly to
the obligations of membership.
The I;iternational Energy Program was
developed by the Energy Coordinating Group
established last February in Washington. Un-
der the er,iergency plan, the US, Canada, Ja-
pan, ar;J all of the EC countries except
France would share oil reserves and reduc'
energy consumption in she event of a future
oil embargo or cutback in production. Eu-
rope's other neutral, Finland, reportedly is
studying the possibility of some sort of affilia-
tion with the IEP, but will have to consider
the likely Soviet reaction before making a
final decision.
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manlis down. Nonetheless, the unofficial cam-
paign slogan of New Democracy-"Karamanlis or
the tanks"-is probably an effective reminder for
the voter of the past seven years of military
dictatorship
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TURKEY: NEW PRIME MINISTER NAMED
With the naming of Sadi Irmak as Prime
Minister-designate, President Koruturk appears to
have found a formula for breaking the eight-week-
old political stalemate. Irmak, a political neutral,
has begun a series of talks with leaders of Tur-
key's major political parties in an effort to put
together a broad coalition that will move the
nation toward early elections next spring or sum-
mer.
The breakthrough apparently came after
President Koruturk threatened to resign unless
the party leaders reached agreement on forming a
government. Democratic Party leader Bozbeyli
then proposed a broad coalition govern . A that
would be headed by an independent ai.. would
exclude the participation of party leaders. Most
of the party chiefs had rejected former Prime
Minister Ecevit's call for early elections as a con-
dition for a new government, but Koruturk re-
portedly has persuaded them to accept that idea
as well.
The 70-year-old Irmak, who was inactive in
politics for 24 years before he was named to the
senate as a presidential appointee this year, will
have difficulty molding this disparate group into a
working government. His primary role will be to
act as caretaker until new elections can be held
that will give one party or another a clear
mandate to govern.
Despite the preliminary approval the party
leaders have given to this formula, Irmak still has
several hurdles to clear. The formal process of
organizing a government requires Irmak to:
? Name a full cabinet, which with presi-
dential approval will become the acting gov-
ernment of Turkey.
? Prepare a government program for sub-
mission to parliament.
? Present this program for debate and a
vote of confidence.
There are a number of pitfalls along the way,
particularly the distriiutiun of cabinet portfolios.
Although the agreement arranged by Koruturk
reportedly calls for the coalition parties to share
the posts on a basis proportional to their repre-
sentation in parliament, disputes could arise over
which parties will get the more prestigious assign-
ments. Irmak could also run into difficuity
persuading parliament to go along with early elec-
tions, inasmuch as many of the deputies will fear
that Ecevit's national popularity-as a result of
Cyprus-will carry his Republicar, People's Party
to victory.
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Except for the right-wing National Salvation
Party, there appears to be general agreement
among Turkey's political leaders on policy toward
Cyprus. Irmak has announced that he plans to
continue the Cyprus policy of former prim
minister Ecevit,
If Irmak
succeeds informing a "national coalition," it
might defuse Cyprus as a political issue by sharing
among all the likely contestants in the next elec-
tion the accolades or blame resulting from any
effort to negotiate a settle the
Greeks.
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EC SEARCHES FOR ENERGY POLICY
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EC deliberations on a common energy policy
are picking up after being stalled for years. There
is concern lest community functions be usurped
by the new International Energy Agency to be
inaugurated November 15 ai. an autonomous body
within the Organization for Economic Coopera-
tion and Development. Movement on an EC
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policy is also seen as a way to induce France to
join the international agency and to assure a role
for the EC as an entity in the conference between
producers, consumers, and developing countries
that France has nroposed.
French President Giscard's bid for a confer-
ence early next year to discuss oil prices caused
embarrassment among Paris' EC partners. They
have not wanted to rebuff a French initiative, and
they share to some extent the French desire to
avoid an atmosphere of "confrontation" with the
Arab producers. Nevertheless, they know that the
French plan would not adequately allow for the
prior development of a consumer position, one of
the principal aims of the US-backed international
agency.
France also wants a common EC policy that
would, among other things, lay down guidelines
for restrictions on consumption and for
developing alternative energy sources. Most of
France's partners may now be taking a friendlier
look at EC Commission proposals along these
lines, not least because agreement on EC
measures-even in a watered down form-could be
hailed a success of the December summit of the
Nine.
French Foreign Minister Sauvagnargues hirn-
self made an attempt at this week's ministerial EC
political cooperation meetinr' to narry Paris' own
earlier proposals with Commission proposals and
to take account of responses to the conference
idea. While calling for agreement by the summit
on elements o:` an inter nal EC policy-deliberately
left vague as to targets and dates in order to
minimize possible opposition----the new proposal is
more positive about the contribution the inter-
national agency could make toward cooperation
among consumer countries. In return, the French
want the EC leaders to "note with satisfaction '
France's proposal for the consumer-prorJuc.- con-
ference and to agree that the EC intends to
participate in it as a single entity.
France's conciliatory suggestions--incl,_~ding
an observer role for the Commission at the inter-
national agency-found initial favor among the
Nine, although the British still appear quite
reserved about the consumer-producer meeting.
By aiming at positive decisions at the December
summit, Paris may be implicitly recognizing its
partners' criticism that a "preparatory meeting"
this month for the consumer-producer conference
would be premature.
Although Paris will continue to press for
such a conference, which would enhance French
pretensions to be an honest broker between con-
sumers and produce;, this week's EC meetings
seem to have reinforced the priority to be given
consumer cooperation within the international
agency, on the one hand, and fo establishing
common EC internal policies, on the other. The
UK may still be an obstacle to early agreement on
internal measures. London would prefer that the
summit give a boost to the Labor government's
hopes for renegotiation of its EC membership
terms rather than concentrate on en:argy matters.
Differences between France and its partners
persist, moreover, over how free a common EC oil
AF vaa?ei err.
Sauvagnargues (r) and Irish Foreign
Minister Fitzgerald (I) at the nneeting
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SPAIN: NEW DEFENSE TIES WITH US
Spanish negotiators formally advised a visit-
ing US delegation Ia?;t week that Madrid intends
to seek a new defense relationship with the US.
For some time the Spanish press has been citing
the inadequacy of the present agreement of
friendship and cooperation that covers US use of
base facilities in Spain. Suggested solutions have
ranged from calls for a mutual defense treaty all
the way to demands the.i: the US get out.
During the initial round of negotiations on
renewing the present agreement that expires next
September, the Spaniards stopped short of asking
for a mutual defense treaty. Nevertheless, by em-
phasizing the desirability of Joint military
planning and coordination of the Spanish defense
role with that of the US and NATO, the Span-
iards made it clear that a treaty is what they
want.
The Spaniards are trying to use the bilateral
Declaration of Principles governing relations be-
tween Spain and the US, which was signed in July
to parallel the NATO declaration, as a lever to get
a firmer defense tie. They argue that the declara-
tion went beyond the provisions in the present
agreement governing the use of defense facilities
in Spain and signaled a stronger US commitment
to gran- the Spaniards the same treatment in the
defense i ld as that accorded the NATO allies.
Consequently they want the new agreement to
incorporate the spirit of the declaration. The
Spaniards argued that they could no longer justify
to their people the increased threat to Spain
brought on by the presence of US bases without
being able to cite closer Spanish defense ties to
the West.
The principal US negotiator has asserted the
willingness of the US to continue and s'.rengthen
defense cooperation, but argued that the US
believes this could be accomplished within the
framework of the current agreement.
The next plenary session will be held early
next month in Washington. The agenda will cover
the nature of the defense relationship and closer
coordination of Spain's defense planning with
Fiat of the West. The chief Spanish negotiator
stated that these two items constituted the mair
concern of his government and would have to bE
agreed upon before Spain would consider twc
other items proposed for future meetings: renego
tiation of terms governing use of facilities pro
vided to the US as well as conditions governinc
their utilisation, and renegotiation of the military
quid pro quo. '
Two additional items were also proposed:
economic, technical, and cultural coopera?
tion-which will be considered by specialized
study groups-and the composition and function-
ing of joint institutions to administer the
agreement.
At the December session the Spanish nego-
tiators can be expected to make a strong pitch for
a treaty in spite of US warnings of the difficulty
of getting congressional ?atificatien. This will re-
flect sentiment expressed with growing frequency
in the Spanish press that Madrid is negotiating
from a position of strength. The installation of a
leftist government in Portugal and the threat to
the eastern flank of NATO created by the Cyprus
crisis may have convinced Madrid that base rights
in Spain are all the more vital tc US interests and
will enable Spain at long last to insist on the
security treaty that many Spanish officials have
long wanted.
Western Europe
CIVIL AIRCRAFT SALES DOWN
Major manufacturers of civil aircraft in
Western Europe-concentrated in France, the UK,
West Germany, and the Netherlands-have been
rocked by new de~relopments in the already
troubled industry.
? Recent financial reports show severe
losses for many international airlines, includ-
ing several in Western Europe.
? Spain's Iberia Air Lines canceled an or-
der for four of Europe's consortium-built
A-300 Airbuses. Ironically, Spain is a member
of the consortium.
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? Hawker-Siddeley decided to halt devel-
opment work on the new four engine HS-146,
a 70-100 passenger short-haul feeder-line
aircraft.
These events are part of the general eco-
nomic uncertainty facing the civil aircraft in-
dustry in Western Europe. Rising fuel costs and
lagging traffic demand are gutting into the opera-
tions of many international airlines, and the car-
riers are reluctant to make commitments for addi-
tional aircraft, either in Europe or elsewhere.
Consequently, Europe's consortium and national
aircraft programs have suffered, and the industry
has kept going only because there are still back-
logs of unfilled orders.
Both of Europe's major consortium air-
craft-- the Anglo-French Concorde and the Air-
bus-are in trouble. Despite technological suc-
cesses, mounting costs for the Concorde are se-
verely limiting sales. French support-which in
the past was unwavering-now appears in doubt.
Some government officials have mentioned that
any aircraft produced after the initial production
run of 16 might cost $90 million. At the current
$45-million price, which is triple the original esti-
mate, only 9 Corcordes have been sold to the
captive markets of Air France (4) and British
Airways (5). Iran, which may bury 2 by the end of
1974, is the only other country expected to pur-
chase the aircraft in the near future.
Orders for the A-300 Airbus-a joint effort
of five European countries-have been poor. Sales
were hurt by delays in early production schedules
in 1969-70, allowing US manufacturers to get at
least a two-year jump on deliveries of the similar
widebodied McDonnell Douglas DC-10 and Lock-
heed L-1011. These delays, coupled with lagging
traffic, have limited sales over the past several
years to 23 aircraft-less than one tenth of the
estimated break-even point of 250. Despite this
slow pace, however, many Europeans remain o, '.i-
mistic about the aircraft's long-term prospects.
The failure of consortium programs has
undermined many of Europe's national civil air-
craft activities. In France, problems have been
compounded by a host of difficulties with new
aircraft, including the 150-passenger Mercure, the
feeder-liner Falcon 30, and the Corvette Exec jet.
In the UK heavy costs involving the Concorde
have undermined development of new com-
mercial aircraft and forced the industry to rely on
existing orders for aircraft currently in produc-
tion. West Germany and the Netherlands have
benefited from lesser involvement in the major
consortiums and met with some success in the
jointly manufactured F-28 and the new VFW
Fokker 614, both shorter range aircraft cf a type
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ITALY: CRITICAL CROSSROADS
The search for a new Italian government
entered a decisive phase this week. Although
there is no hope for reviving the center-left coali-
tion in the immediate futi'--e, Foreign Minister
Moro may secure agreement on a formula for a
caretaker government that would keep the cen-
ter-left alive in principle. His negotiations, how-
ever, have left the dominant Christian Democrats
in a difficult position.
Moro, who leads the Christian Democratic
left, is trying to set up an all-Christian Democratic
cabinet supported in parliament by the other
coalition parties. During the postwar period,
Italian politicians frequently resorted to this
arrangement-the so-called "monocolore" govern-
ment-to let the dust settle after a major political
blowup. Such an administration would preserve a
semblance of partnership among the parties and
could pave the way for a later attempt to resusci-
tate the center-left coalition, still the only work-
able non-Communist government that can be
drawn from the present parliament.
Among the former coalition partners, or,iy
the Social Democrats refuse to support such a
solution. The Social Democrats have maintained
throughout the six-week-old crisis that any gov-
ernment relying on Socialist support would be
"open to the Communists"; they now insist that
the loose structure of a "monocolore" administra-
tion would make it doubly vulnerable to Commu-
nist influence.
The Socialists and the other parties are play-
ing down the Communist issue, and Moro would
like to put the matter on ice for the time being.
He wants to first nail down an agreement on
economic policy; the parties are close to a com-
promise on bread-and-butter issues.
Moro would just as soon dump the Social
Democrats if they remain adamant in the face of
agreement among the other parties on economic
policy. The key question is whether he can
persuade the rest of his party to take such a step.
Although Social Democratic support is not
needed for a majority, the Christian Democrats
have kept them in the cabinet to dilute Socialist
influence.
Dropping the Social Democrats from the
parliamentary majority of a caretaker government
could establish a precedent for excluding them
from the next center left coalition-a move that
woL'ld inevitably strengthen the influence of the
Socialists and give the coalition a more leftist
complexion.
Moro appears to have qualified support from
Christian Democratic boss Fanfani, and this could
tip the balance against the Social Democrats.
There is still resistance to the idea, however, in
the party's key center faction and among right-
wing Christian Democrats.
All of this means that the Christian Dem-
ocrats may have to choose the lesser of two evils.
If they jettison the Social Democrats, they
eventually will have to yield more of the
perquisites of power to the Socialists. If, instead,
they side with the Social Democrats against the
Socialists, they will not be able to muster a
center-left majority. At that point, the only thing
standing between the Christian Democrats and
new elections-in which they would probably lose
votes-would be a right-leaning coalition including
the small, conservative Liberal Party. Although it
is a numerical possibility, such a coalition could
not govern effectively or for long against the
opposition of the Socialists, Communists, and
labor unions.
The Communists are lying low. They have
little to lose no matter what the Christian
Democrats decide. The Communists prefer to
avoid an electoral battle now, but if it came they
would probably do well. On the other hand, if the
Social Democrats end up in the opposition, the
number of anti-Communist voices in the gov-
ernment will een reduced.
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The 57th anniversary of the Bolshevik Rev-
olution last week brought forth the traditional
speeches and ceremonies, and few surprises. For-
eign Minisiar Gromyko-representing the Polit-
buro-delivered the major address on November
6. He concentrated on a routine cataloguing of
Soviet foreign policy accomplishments and posi-
tions, replete with flattering references to Brezh-
nev. His moderate:; optimistic remarks included a
statement that the USSR favors agreement with
the US on halting the quantitative and qualitative
arms races. He said the Soviets will strive to make
the Vladivostok summit a meeting of great impor-
tance to the continued improvement of US-Soviet
relations.
Gromyko called again for an early conclu-
sion to the European Security Conference, imply-
ing that a successful outcome in Geneva is a
prerequisite to progress at the Vienna force reduc-
tion negotiations. He was particularly pleased
with the state of Soviet relations with France,
West Germany, Finland, and India among the
non-Communist nations and exhorted Japan to
match Soviet overtures of good will.
Turning to the Middle East, he reaffirmed
Soviet support for Palestinian statehood and pre-
dicted that Brezhnev's visit to Egypt in January
would be of "tremendous significance."
Gromyko reiterated earlier Soviet accusa-
tions that China's leaders have aligned themselves
with the enemies of detente and against the So-
viet Union and the socialist community. His
tough statement provoked a walkout by the Chi-
nese ambassador, a ritual occurrence in recent
years. Gromyko's speech preceded by four hours
a Chinese broadcast of greetings to the Soviet
government, a message containing an unexpected
proposal for dealing with the Sino-Soviet border
dispute.
On November 7, Defense Minister Grechko
made a brief speech in Red Square prior to the
tradi?ional parade. He acknowledged the reduced
threat of nuclear war, but pledged to defend the
gains of socialism against the "forces of interna-
tional reaction" which, he said, have not laid
down their arms. He expressed satisfaction with
the Soviet armed forces and assured his listeners
that the Soviet party and government are paying
urgent attention to strengthening the country's
defenses.
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The military parade included no new weap-
ons systems. The civilian portion was canceled,
apparently at the last moment, with inclement
weather given as the reason. This unusual step
may have been taken to guard the health of aging
Politburo members, most of whom were review-
ing the proceedings from atop Lenin's tomb.
Early this week the Soviets suffered another
failure in their program for obtaining soil samples
from the moon. The Luna 23 spacecraft-
launched from Tyuratam on October 28-was
damaged nine days later while landing on the
moon in rough terrain, according to a Tass state-
ment. As a result, the drilling device designed to
The Soviets continue to have difficulty land-
ing spacecraft of this sort on the moon. Of the
five soil-sampling spacecraft that have reached the
moon, only two-Luna 16 in September 1970 and
Luna 20 in February 1972-landed intact, col-
lected samples, and returned to earth. Because of
limitations in the method used for returning the
soil sample to earth, the Soviets are restricted to
collecting samples from an area near the lunar
equator.
The government personnel shifts announced
on October 31 reflect Sofia's continued concern
over ideology and the economy. The changes
seem to have been designed to give tha Bulgarian
Council of State new responsibilities in these two
areas.
Two deputy premiers-Ivan Popov and Petur
Tanchev-were transferred to vice presidential
slots on the State Council. Popov, a noted scien-
tist who advocates greater use of Western tech-
nology to modernize the economy, is a trusted
adviser of Zhivkov, who is also the council's chair-
this responsibility.
25X1
Tanchev was deputy premier for agriculture,
and he may retain this responsibility on the coun-
cil. He is also the working head of the Agrarian
Union, the so-called opposition party, and his
transfer may be intended to give substance to the
contention that the council is, in fact, the "cor-
porate head of state" it was designed to be when
created in 1971. 25X1
Among the other changes, Mitko Grigorov,
the party's former ultraconservative ideologue,
was promoted from member to vice president of
the council, and Evgeni Mateev, a talented econo-
mist, was made a member. Neither man has been
among Zhivkov's friends, and their promotions
will probably lead to speculation that the move
was a concession to a faction within the party
leadership. It is more likely, however, that their
assignments were part of the effort to strengthen
the council rather than the result of political
infighting. In any case, none of the changes af-
fects the balance in the top party leadership. 25X1
The new appointments also preserve the
balance of they Council of State's membership,
which from the outset has embraced representa-
tives of all sectors of Bulgarian society. In addi-
tion to its protocol and ceremonial duties, the
council will probably now become more deeply
involved in the day-to-day running of the coun-
try. It may take some of the burden off the
Council of Ministers for supervising locai and
district administrations. Up until now, the Coun-
cil of State and Council of Ministers have shared
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IRAQ-USSR: STRAINED RELATIONS
Important military and civilian leaders con-
tinue to shuttle between Baghdad and Moscow in
an attempt to smooth over problems in Soviet-
Iraqi relations. Although the Soviets are disturbed
by signs that Iraq is seeking better relations with
the West, more recently their concern has cen-
tered on Iraqi demands for increased Soviet sup-
port in the war against the Kurds.
Signs of Iraqi displeasure with Moscow
began to appear last summer, when Baath Party
strong man Tikriti's bid to visit Moscow was
apparently rebuffed. He had hoped to persuade
the Soviets to exert pressure on Tehran to end its
assistance for the Kurds.
25X1
25X1
The Soviets, however, still look upon
Baghdad as their principal ally in the Persian Gulf
and seem to be moving to prevent a further
deterioration of relations. They are still providing
substantial military assistance. Soviet advisers are
providing technical support, and Soviet pilots
may even have flown combat missions. The
Soviets have just signed
Now that winter is diminishing the
prospec or intensified fighting, the Soviets may
feel less reluctant to meet Baohdad's militdrv
The Soviets have never publicly endorsed the
campaign against the Kurds and have privately
called the Iraqi military effort ''a mess." They are
particularly concerned that intensified military
operations could lead to more Iranian help to the
Kurds and greater strains between Moscow and
Tehran. The Soviets cognizant of Iran's growing
oil wealth and regional influence -seem interested
in improving ties with Iran; the Shah is slated to
visit Moscow later this month.
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ARGENTINA: THE VIOLENT LINE
Minister of I? terror Rocarnora announces nat;-11 ae state of -=- -
25X1 25X1
Guerrillas favoring a hard line against the
government have prevailed over a faction that
questioned whether terrorist tactics could in fact
topple Mrs. Peron's government. It is thus highly
probable that further acts of urban and rural
violence will occur soon.
The decision to stick to militant revolu-
tionary tactics was made after a debate among
top leaders of the People's Revolutionary Army-
the country's best organized extremist group.
Although those favoring a more moderate
approach may be resentful, a major split does not
appear imminent. Discipline within the organiza-
tion tends to be strong, and the terrorists may
have concluded that President Peron's declaration
of a state of siege last week shows that their
tactics have succeeded in making the government
appear shaky.
25X1 25X1
violence and make a mockery of cover
tie People's
Revolutionary Army and the Peronist Mon-
toneros are now collaborating despite ideological
differences. The two groups may have cooperated
in the recent assassination of the country's top
police official. Such joint action occurred during
the guerrilla campaign waged against the military
regime prior to Juan Peron's return to power. The
terrorists probably hope that by joining forces
they will be able to engage in more spectacular
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The practical and political consequences of
this week's OAS vote on the proposal to rescind
the sanctions against Cuba, which fell two short
of the needed two-thirds majority, will be a
mixed bag. The final tally--12 for, 3 against, and
6 abstentions provides certain rlomestic satisfac-
tions for all the delegates. The 12, which either
already have diplomatic relations with Havana or
want that option open, now feel that their obliga-
tion to respect the sanctions has been wiped out
by the recorded opposition of a clear majority of
the OAS members. The three voting against the
proposal took home a major and unexpected
diplomatic coup, since it had been widely
assumed that the sanctions would be rescinded.
The six have offended no particular portion of
their constituencies.
secret of their unhappiness with the neutral posi-
tion of the US throughout the Quito conference.
Various delegates left with a particular sense
of defeat or concern. Costa Rica's foreign minis-
ter, one of the sponsors of the aborted resolution,
suffers the special embarrassment of having given
personai assurances that he had the required two-
thirds majority wrapped up. The Ecuadoreans, as
hosts, will be chagrined that "Quito" stands, in
many minds in the hemisphere. for an inter-
American debacle. The Argentines, who are set to
host the next scheduled foreign ministers' mee:l
ing next March, are probably particularly
unnerved. They were given the task of polling the
Latin and Caribbean governments on whether
Cuba should be invited to the Buenos Aires
meeting.
The outcome, however, deals a hard blow to
the OAS, which was already considered by many
a weak and unresponsive organization. It is too
early to measure the damage to the dialogue
established this year between the US and Latin
America, but many governments are making no
Fidel Castro was sitting pretty no matter
what the result of Quito. He could have played a
vote to lift the sanctions as a vindication of Cuba.
But lie is probably even more pleased to have the
sanctions juridically in effect but flouted in
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practice. Several Latin American governments
have announced their intention to establish rela-
tions with Havana, as seven OAS members already
have done. Castro has made dear his preference
that such ties be made in violation of OAS rules.
He remains unalterably opposed to the organiza-
tion and would like to be able to take credit for
its demise.
President Banzer has temporarily strength-
ened his position by using last week's abortive
coup attempt as justification for banning political
activities and canceling the national elections set
for next June. Even before the small insurrection
occurred in an outlying province, however,
Banzer reportedly had the consent of his rr:iiitary
commanders to call off the elections.
Last Thursday, Banzer quickly put down a
rebellion by a few dissident politicians and an
army infantry unit in the provincial capital of
Santa Cruz, located approximately 350 miles
southeast of La Paz. The fact that Banzer per-
sonally commanded reinforcements in restoring
order indicated that he had full confidence in his
senior military advisers who remained in the
capital.
Barizer then announced that elections would
be postponed until at least 1980. In his speech he
sought to emulate other military strong men in
South America by stating that the government
intends to fulfill its mission of national recon-
struction. Although development polic`ds have
consisted largely of empty promises and rhetor-
ical flourishes, this stance makes Banzer look
good when compared with his disorganized and
inept opponents. 25X1
Banzer has taken other measures to stabilize
his government. Official charges of subversion
against two cabinet ministers, who had been in-
volved in previous moves against the President,
have resulted in a minor cabinet reshuffle.
Military support has rallied behind the gov-
ernment for the time being, but Banzer now de-
pends solely upon the good will of his generals for
his political survival. They have previously told
him that he must soon step down in favor of an
acceptable military replacement. The current
front-runner is General Juan Lechin, the second
highest official in the government. If Banzer balks
at stepping down, the members of the high com-
mand will probably abandon their current efforts
at achieving an orderly transfer of power and
The small Soviet naval group that had
been in the Caribbean during the past eight
weeks left Cuba on November 10. The ships-
tw - Kresta-class guided-missile cruisers and an
oiler-are now southeast of Bermuda and will
probably cruise the western Mediterranean for
a short time before returning home to North-
ern Fleet waters.
During the Cuban --tay-the 12th such
visit since 1969-the Soviet: ships made visits
to Havana and Cienfuegos. Unlike other re-
cent visits, there was only a minimum of joint
activity with the Cuban navy, probably
because no Soviet submarines were included
in the latest group. In the past, the surface
ships usually were accompanied by a sub-
marine, which acted as a target for Cuban
patrol boat training. Although two sub-
marines were observed trailing the Krestas
across the Atlantic en route to Cuba, the
Soviets apparently changed sailing orders as
the submarines neared the Caribbean, and the
two units returned to home waters. No fur-
ther information has become available regard-
ing this change in plan.
If the Soviets follow the pattern of the
past two years, another naval task orouo wil
visit Cuba next spring.
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China-USSR
PEKING PROPOSES NONAGGRESSION PACT
Last week Peking surfaced a proposal for
dealing with the Sino-Soviet border dispute. The
proposal, contained in a message to the Soviets on
the occasion of the anniversary of their October
Revolution, called for a pact renouncing aggres-
sion and the use of force, a mutual troop pullback
from disputed border areas, measures to avert
conflicts, and maintenance of the status quo of
the border itself.
The Chinese had made a similar proposal in
private during the early rounds of border talks in
1969, but had never before publicly urged a non-
aggression pact. Peking had greeted earlier and
well-publicized Soviet calls for such a pact with
public silence and private contempt. The Chinese
have consistently argued that any nonaggression
and nonuse-of-force pact would have to be ac-
companied by a withdrawal of Soviet forces from
the frontier, a position that the Soviets have
categorically rejected. 3ecause this linkage re-
mains in the new Chinese proposal, Peking almost
certainly expected that Moscow would find the
package unacceptable.
There were other indications that the pro-
posal was a tactical maneuver. Chinese diplomats
were quick t:: scotch speculation that the package
signaled an upturn in Sino-Soviet relations, point-
ing out to American and Japanese diplomats that
the proposal contained nothing new. The message
still has not been replayed by the New China
News Agency nor has it been broadcast inside
China, something Peking would almost certainly
do in case of a major new development in Sino-
Soviet relations. The substance and tone of
Chinese and Soviet propaganda directed at one
another, moreover, have not changed in any way
since the proposal was made.
Moscow maintained official silence on the
substance of the package and has withheld publi-
cation of Chinese terms for agreement. Soviet
spokesmen have privately claimed that Peking has
not offered anything new and that border talks
can resume whenever Peking presents a fresh
proposal. The Soviets are probably reluctant to
make any authoritative response until they can
determine whether Peking intended anything
I !; r, ti
Soviet border guards along the Ussuri River
more in publicizing its proposal than to gain some
propaganda advantage.
In their message to the Chinese on PRC
National Day, the Soviets included references to
their own proposals for lowering Sino-Soviet ten-
sions. The Chinese, not to be outdone in this
display of flexibility, have replied in kind. In a
clear public relations gesture, moreover, the
Chinese embassy in Moscow took special pains to
distribute the full text of the proposal to foreign
embassies and news services there after the
Soviets had published it only in censored form.
The Chinc;e may hope to enhance their
leverage both with the US and USSR by con-
veying an impression of a more forthcoming
attitude regarding the Sino-Soviet dispute and by
implying that China is less concerned about the
Soviet threat than it was a few years ago. By
appearing accommodating, Peking also probably
hopes to create a favorable impression among
foreign Communist parties and complicate Soviet
efforts to r 'z international o munist
conference. 25X1
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Saigon last week called on the Communists
to resume political and military discussions with-
out preconditions. The South Vietnamese initia-
tive was, in effect, the government's response to a
Viet Cong statement on October 8 that called for
the removal of President Thieu as a precondition
for resuming negotiations and implementing the
Paris Agreement. The Communists quickly re-
jected Saigon's initiative, characteri-inn it as a
"deceptive move" designed to confuse public
opinion. Viet Cong officials in Saigon and Paris
r;peated their demands of October 8 and main-
tained that there would be no new talks as long as
Thieu remains in office. Hanoi's party journals
quickly publicized the Viet Cong rejection.
Political talks between the two sides were
suspended by the South Vietnamese in April fol-
lowing the North Vietnamese capture of a ranger
outpost north of Saigon. At that time, the govern-
ment sharply curtailed the nrivileges of the Viet
Cong and North Vietna nese military delegations
in Saigon, which in turn led to a Communist
walkout from the Saigon military talks. These
discussions were resumed by the two sides in
June, following the government's restoration of
privileges to the Communist delegations, but they
were quickly broken off again by the Com-
munists.
erally moderate to low level of action continues
throughout most of the rest of the country. The
usual Communist midmonth mini-highpoint in
the delta went off, but the action was spotty and
concentrated in several areas. In. ' 'inh Long Prov-
ince--one of the hardest hit areas-at least ten
government outposts were lost .-i16 several roads
interdicted, necessitating the movement of troops
of the 7th Division into the province for the first
time in several months.
Deteriorating weather conditions and heavy
casualties on both sides have somewhat slowed
the ongoing battles for a number of strategic
high-ground positions in the northern provinces.
Several of these rositions have been retaken by
government forces, but thy; South Vietnamese 1st
Division has been unable to make significant
progress against Communist forces dug in just
south of Hue. The regional commander is con-
templating moving in fresh combat units to help
out, because he considers these positions vital to
the defense of the lowlands south of the city.
The current lull in fighting in the central
provinces can best be described as an intermission
for the opposing forces while the monsoon moves
to the coast and the highlands begin to dry out.
The latest S'iuth Vietnamese move meshes
neatly with other recent actions of President
Thieu designed to answer the charges of his polit-
ical opposition. By placing the onus for the pres-
ent lack of movement on negotiations squarely on
Hanoi, Thieu no doubt hopes to undermine the
efforts of Buddhist dissidents to expln?. public
frustration over the continuing host`.:ities and the
ineffectiveness of the Paris Agreement. Neither
Buddhist nor Catholic opposition leaders have as
yet reacted to Saigon's call for the resumption
of negotiations. Opposition act'?,ity continued at
a low level during the week with protests con-
fined to rallies and meetings in pagodas and
churches.
Communist military activity picked up early
in the week in the delta provinces, but the gen-
The South Vietnamese thus far have been
successful in blunting Communist efforts to
establish a commanding high-ground position
overlocKing the North Vietnamese supply route
in the An Lao Valley of Binh Dinh Province.
There has been an increase in Communist
harassment and interdiction of key roads,
especially the lateral routes from the lowlands to
the highlands and north-south Route 1.
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The military scene also remains reasonably
quiet in the provinces around Saigon with the
Communists continuing their terrorist and sapper
attacks. Most of the Communist main-force
combat Units are being refurbished for dry-season
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CHINA: MAO SETS THE TONE
A statement by Chairman Mao Tse-tung-in
a recently issued central directive-that the Cul-
tural Revolution has gone on long enough under-
scores the focus on political unity that typifies
Peking's current propaganda line. Mao adds that
the time is ripe for convening the National
People's Congress, China's rubber-stamp parlia-
ment; in fact, preparations for the congress are
well under way. A corollary to the damping down
of political struggle has been an emphasis on
production, and both themes have been forcefully
expressed in a series of central directives going
back to July. As a whole, these developments
show that moderate elements retain the upper
hand in Peking.
The political and policy trend since last sum-
mer has been displeasing to Mao's left-leaning
wife, Chiang Ching. Arrangements fo, the suc-
cession to the party chairmanship have apparently
been completed. Despite Chiang Chii _a's most
recent attempts to portray herself as Mao's suc-
cessor-expressed in the form of media articles on
an historical empress who ruled China after the
death of her husband-youthful party vice-
chairman Wang Hung-wen appears to be the one
designated. Moreover, two of Chiang Ching's Cul-
tural Revolution opponents seam to have the suc-
cession to the premiership locked up between
them. The madame has riot made much headway
with her ambitions.
she and her ultraleftist supporters appear to have
been outmaneuvered, at least for the present.
The rehabilitation of officials purged during
the Cultural Revolution continues, and a reported
central directive ordering the abolition of revolu-
tionary committees, if carried out, seems sure to
offend leftist sensitivities. Established in 1967,
the committees still symbolize leftist Cultural
Revolution ideals and have been the object of a
political tug of war for some time. An earlier move
to replac" these committees with people's coun-
cils, th;2 pre - Cultural Revolution organs of gov-
ernme it control, was allowed to lapse after the
campaign to criticize Lin and Confucius began in
August 1973.
While the anti-Lin, anti-Confucius campaign
is now apparently being phased out, factional
differences, although they may be muted, will not
disappear. A period of relative calm will probably
ensue and improvements in production and social
order in several provinces may well result, but the
political contestants will keep their hatchets close
at hand. In particular, Chiang Ching and her left-
ist allies will remain vigilant for an opening, and
current succession arrangements, no matter how
clearly defined, will be tested when the time
comes for them to be put into effect.
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mos signi ican as
been Madame Mao's obvious inability to take
advantage of Chou En-lai's serious health prob-
lems. Chiang can still hurl propaganda barbs and
make her weight felt in the cultural sphere, but
Posters criticizing Lin Piao and Confucius
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President Ford will be visiting Japan next
week at a rather turbulent time. A controversy
over the alleged presence of US nuclear weapons
in Japan has generated some opposition to the
President's visit. Moreover, Prime Minister Tanaka
is in the midst of a political crisis stemming from
charges of financial corruption.
These issues, along with continuing high in-
flation, will be the subject of demonstrations and
strikes while thi President is in Japan. But there
are mitigating factors:
? Protest activities will be orderly and will
cause minimum of disruption.
? Most Japanese political groups, the
press, and a large major ity of the public wel-
come the President's vis, .
? Although Tanaka may well resign before
the end of the year, he and his rivals within
the ruling Liberal Democratic Party have de-
clared a truce until the President's visit is
over.
The Current Atmosphere
During November, a more favorable atmo-
sphere for the President's visit has been develop-
ing, and opposition groups have trimmed their
scheduled activities accordingly. Last week, one
opposition party withdrew from further demon-
strations against the President, and others have
yet to agree on a unified c~fort.
The major groups still opposing the visit--the
Communists, Socialists, and the largest labor fed-
eration-are committed to holding demonstra-
tions, but they are emphasiai.ig their nonviL.lent
character. The themes they will stress, mr. reover,
focus more on inflation and Tanaka rather than
on the US and the President's visit.
In an effort to avoid a Sense of confronta-
tion over the trip, the major rallies in Tokyo are
scheduled for days when the President will not be
in the city. Socialist leaders are now saving that
they do not intend to harm good relations be-
tween the US and Japan, but are opposing the
visit solely out of fear that it will lead to a
stronger military alliance between the two coun-
tries. Opinion polls, meanwhile, show a majority
favoring the visit, and Japan's major news dailies
weighed in late last week with supporting editori-
als. In short, a consensus is developing that a
courteous reception is in order, and a massive
security effort by the Japanese police should con-
tain any attempts by radical youth groups to
cause problems.
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rrlme Minister Tanaka flanked by Finance V' .lister Ohira (r) and Trade and Industry Minister Nakasone
A Besieged Tanaka
These more favorable trends have not eased
Prime Minister Tanaka's problems and his politi-
cal liabilities are rapidly becoming acute. Tokyo is
rife with speculation that Tanaka is on his way
out as prime minister beccuse of recently pub-
lished charges of financial corruption. Tanaka has
long been vulnerable on this account; in over 25
years in public office, he has become a very
wealthy man. Early in his political career, he was
indicted in an illegal coal mine transaction, and
during the party's last major money scandal-the
Black Mist of 1966-67-he was forced to retire
temporarily as secretary general. His blatant use
of money in last summer's upper house election
also helped set the stage for the recent charges
against him.
Tanak; is clearly in a tough spot. Additional
details of his financial transactions will apparently
be published soon, and opposition parties are
prepared to press the issue in the Diet session
beginning December 1. Extensive disruption of
legislative business by the affair would complicate
the many problems facing the party and increase
Tanaka's personal liability-perhaps beyond the
point of no return.
At present there is no clear successor to
Tanaka. Despite his many ups and downs and his
sagging popularity, he retains considerable power
in the party, and carrying out an orderly transfer
of such authority can be a difficult and time-
consuming process under the best of circum-
stances.
Late last month, however, Tanaka privately
raised the possibility of a caretaker government
headed by party Vice President Shiina until the
party convention next summer. Under such an
arrangement, Tanaka would give up the prime
ministership but remain party president and re-
tain considerable power.
This proposal was initially shelved, but is
still being discussed and could be adopted if the
party decides an early resignation is in order-a
uecisicn it might reach soon.
Tanaka, meanwhile, is struggling to salvage
his position. In a press conference earlier this
week, he denied wrongdoing, noted that a de-
tailed accounting of his financial transactions was
under way, and indicated that the findings would
be made available at some point. He then reor-
ganized his cabinet to prepare for the new Diet
session. The new lineup, however, remained much
the same in terms of factional balance, indicating
no real change in intraparty alignments since the
previous shuffle last July.
Tanaka and his rivals within the party have
clearly agreed to hold their differences in abey-
ance during President Ford's tour. But thereafter
Tanaka will find it exceedingly difficult to stabi-
lize his position and retain the orim ership
for long. 25X1
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EN
Nevertheless, labor unrest in the cities is growing
as inflation cuts deeper into real income, and
unemployment threatens to increase. In response,
the government is encouraging businesses to re-
duce work hours rather than cut payrolls, and will
back generous pay hikes even at the risk of aggra-
vating inflationary pressures next year. Labor is
pushing for hefty wage increases as pay boosts
this year have generally not kept pace with the
rising cost of living-consumer prices have already
risen 25 percent this year despite subsidized food
prices.
Seoul has also shifted from curbing inflation
to bolstering output and employment. This year's
budget, which showed a surplus through Septem-
ber, is now in deficit, and next year's budget
provides for substantially greater spending on de-
fense, industrial projects, public works, and wel-
fare. Seoul is also e>:tending loans to financially
pressed small- and medium-sized firms to help
avoid a rash of bankruptcies and is offering loans
to hard-hit larger firms in labor-intensive indus-
tries to help them maintain employment levels.
Sluggish export growth and soaring import
costs-the oil import bill has tripled this year to
around $1 billion-has sharply increased the trade
deficit. As a result, the current paymen+s deficit
will reach some $1.5 billion, or five times last
year's deficit. With direct foreign investments
sharply off last year's pace, Korea has stepped up
its foreign borrowing, especially short-term cred-
its. Korea's good international credit rating and
relatively low debt service burden have enabled it
to meet its financing needs.
For next year, Seoul hopes to reduce short-
term borrowing by obtaining more long-term cap-
ital, although this may prove difficult. As a pre-
caution, besides borrowing from its u:-ial lenders,
Seoul is seeking increased credits from the Inter-
naticnal Monetary Fund and Middle East oil pro-
ducers. Seoul has attracted a $20-million loan
from Abu Dhabi thus gar. Direct foreign invest-
ments are likely to pick up next year, however, as
several leading US and Japanese firms are going
ahead with investment nlant invnlv;nn nvor TRnn
million.
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South Korea's economy is in its first pro-
nounced slump in over a decade. Although real
growth in 1974 will amount to 8 to 10 percent,
most of the gain came during the first six months.
The growth will continue slow well into 1975.
Although the long-term outlook remains bright,
near-term prospects have dimmed because of the
continued economic downturn projected for
major Western industrial nations that take the
bulk of Korean exports. In the past, brisk foreign
sales have been the basis of Korea's rapid eco-
nomic growth.
Industrial output through June was more
than 25 percent above last year's average, but has
dropped since then. The downturn has been
limited so far to a few consumer-oriented export
industries. Hardest hit are the labor-intensive
textile, clothing, plywood, and electronics in-
dustries. Heavy industry, in contrast, continues to
do relatively well.
Unemployment, although not yet serious, is
rising. Some 100,000 workers have been laid off
so far this year, a cut of some 6 percent of the
manufacturing work force. The unemployment
burden has thus far been borne mainly by young
women rather than male heads of households.
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OPEC: 1974 OIL RECEIPTS
OPEC countries will earn more than, $105
billion and actually receive about $i4 billion
from oil exports in 1974. The difference results
from an average two-month lag in payments by
oil companies to the producing countries. The
bulk of 1974 OPEC oil receipts will be concen-
trated in the last half of this year-$60 billion,
compared with $34 billion in the first half.
Second half receipts will reflect all of the January
and most of the July price increases and are
inflated by an additional $10 billion in retroactive
payments resulting from nationalization moves.
The bulk of OPEC oil receipts in 1974 will
go to relatively few countries. The two largest
producers, Saudi Arabia and Iran, will receive
about $43 billion, over two thirds in the second
half of the year. Together, the five largest pro-
ducers-Saudi Arabia, Iran, Nigeria, Venezuela,
and Kuwait-will account for over 70 percent of
total OPEC revenue this year.
OPEC oil receipts should decline when the
retroactive payments are completed early next
year. Any further price increases will be partly
offset by decreased demand. If present pro-
duction and prices are maintained, oil payments
in the first quarter of 1975 would total $26.9
billion-almost $4 billion below the level of
receipts in the third and fourth quarters of 1974.
Even if currently anticipated price hikes are in-
stituted, payments will still drop by about $2
billion for the first quarter of 1975.
Estimated OPEC Oil Receipts by Country, 1974
(In million US $)
Algeria
1668
2061
3729
Ecuador
355
197
552
Indonesia
1111
1835
2946
Iran
6963
11196
18159
Iraq
2173
2904
5077
Kuwait
1215
6162
7377
Libya
3459
3226
6685
Nigeria
3063
5563
8626
Qatar
610
915
1525
Saud: Arabia
7446
17159
24605
United Arab Emirates
1829
4720
6549
Venetucla
4207
4263
8470
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