WEEKLY REPORT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001000080009-0
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 22
• Document Creation Date: December 27, 2016
• Document Release Date: May 11, 2010
• Sequence Number: 9
• Publication Date: February 21, 1975
• Content Type: REPORT

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Top Secret
Weekly Review
Top Secret
February 21, 1975
Copy No
650
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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
pul.,iished separately as Special Reports are listed in the
contents.
CONTENTS (February 21, 1975)
MIDDLE EAST
AFRICA
WESTERN
HEMISPHERE
EAST ASIA
PACIFIC
1 Cyprus: Back to the UN; Moscow Reacts
2 Middle East: More Posturing
5 Denmark: Jorgensen Tries Again
13 Central America: Seeking Cooperation
14 Argentina: Anti-guerrilla Campaign
14 Peru: Shifting Gears
16 China's Foreign Trade in 1974
17 Japan: Anti-recession Program
18 Cambodia: Hard Decisions
19 Vietnam: New Attacks Expected
20 Burmese Insurgents Stalled
Comments and queries on the contents of this
publication are welcome. They may be directed to
the editor of the Weekly Revlow,~
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Cyprus
The Cyprus problem moved back ?o the UN
this week in response to a Greek Cypriot request
that the Security Council meet to discuss the
latest crisis brought about by the proclamation
last week of a sepal ate Turkish Cypriot state in
the north of the island. The Security Council held
the first meeting on February 20 and will prob-
ably consider the report of Secretary General
Kurt Waldheim, who had earlier consulted with
Greek and Turkish officials in Athens and
Ankara.
Greek and Greek Cypriot representatives at
the UN are expected to press for a strong con-
demnation of the Turkish Cypriot action and for
the implementation of previous UN resolutions.
They may also seek a more direct UN involve-
ment in efforts to find a solution to the Cyprus
problem, such as the dispatch of a UN Fact-find-
ing mission to the island or a call for the creation
of some type of broad conference including some
or all members of the Security Council. Greek
Defense Minister Averoff recently stated that
despite the opposition of most Western countries
to such an "internationalization" of the Cyprus
issue, Athens novv feels that in light of the latest
Turkish move, an international conference: would
be the least humiliating alternative for Greece.
Neither Greece nor the Greek Cypriots are
particularly optimist;.: about the outcome of the
council's meetings, but they see no other recourse
in view of the Turkish Cypribt declaration and
the lack of progress in the intercommunal talks.
They apparently hope at least to gain a propa-
ganda victory and to keep the issue in the inter-
nation%,I limelight
The council will likely reaffirm its earlier
resolutions and may rebuke the Turkish Cypriots;
it may also call for the continuation of the inter-
communal talks. There have been suggestions that
the talks theriselves be moved to New York,
where they could more directly be carried out
under UN aegis. President Makarios has 1?idicated,
however, that the talks will not be resumed unless
the Turkish Cypriot declaration is revoked, but he
may eventually recant in view of the unlikeliness
of this prospect.
On Cyprus, meanwhile, efforts have already
begun in the Turkish Cypriot sector to set up the
constituent assembly that will serve as the legisla-
tive body of the separate state.
The international community has reacted
coolly to the declaration of autonomy, and Mos-
cow clearly does not like the -love by the Turkish
Cypriots. Since the Cyprus crisis began last sum-
mer, however, the USSR has not been inclined to
allow support for a unified Cyprus to jeopardize
its relations with Turkey, and now the cut-otf of
US military aid to Turkey has brightened the
prospect of getting Ankara to loosen its Western
ties.
The most authoritative Soviet omment ap-
peared in the form of a Tass statement four days
after the Turkish Cypriot announcement. The
statement blamed "certain NATO circles" and the
Turkish Cypriot leadership ' - trying to frustrate
efforts to reach a settlement. Unlike statements
issued last summer, the latest statement was not
officially ascribed to the governui;ent and did not
get front-page billing in Pravda. It predictably
omitted any direct criticism of tie Turks.
Soviet diplomatic maneuvering, meanwhile,
appearc to be aimed at playing upon hopes in
Athens and Nicosia that the USSR can somehow
pull their chestnuts out of the fire. Moscow
would like a direct role in the settlement process,
but the gestures of support it night make are not
likely to satisfy Makarios-and he Irn
appreciates that fact.
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Midd!e East: More Pasturing
In the wake of Secretary Kissinger's explora-
tory visit, both Arabs and Israelis have been act-
ing out roles that have become familiar in the
public scenario of interim peace negotiations. The
Egyptians have projected optimism and self-
confidence, with President Sadat reiterating his
commitment to the step-by-step approach and
Foreign Minister Fahmi declaring that there might
be disengagement by Ju,ie on both the Sinai and
Golan fronts. The Israelis have been more re-
served, talking in terms of seeking only a limited
second-stage agreement with Cairo if the Egyp-
tians fail to provide Tel Aviv with an assurance of
non-belligerency. The Syrians are saying they
were "disappointed," while the Palestinians are
weighing in with denunciations of "divisive" US
strategy. Behind the posturing, there have been
few public indications that the gap between the
Israeli and Egyptian positions is nas rowing, and
tl-a Egyptian press has sounded some apocalyptic
notes to point up h. crucial the Secretary's next
visit to the area will be for "defusing the explo-
sive situation."
Egyptian-Israeli Strategy
Several Cairo papers this week called on the
US to apply more pressure on Israel, and in a
lengthy address to a committee of Egypt's
People's Assembly, Foreign Minister Fahmi
acknowledged that Cairo would inevitably have to
resort to war if current negotiating effos-ts dead-
lock. Fahmi reiterated that any agreement
reach -d with Israel at this stage must be purkiiy
military-a geographic extension of the troop dis-
engagement that has already taken place. Fahmi's
address, however, was largely a paean to Sadat's
foreign policy and was probably aimed primarily
at justifying Sadat's negotiating tactics to both
domestic and other Arab critics.
Sadat himself took a moderate line in a:.
interview early this week with the Washington
Post. His response to questions on Israeli demands
for a guarantee of non-belligerency was to prom-
ise that Egypt would not attack Israel so long as
negotiations continue. He suggested, in effect,
chat the US could serve as guarantor o-i Egypt's
peaceful intentions. Sadat again appeared to be
signaling the Israelis that they will have to con-
tent themselves with some indirect foi m of politi-
cal reassurance if a breakthrough is to be
achieved.
The Israelis continue to emphasize the politi-
cal content of the next disengagement package as
the crucial issue. Shortly after the Secretary's
departure from Israel, Prime Minister Rabin gave
a television interview in which he summed up the
government's approach to negotiations with
Egypt, and again defended the step-by-step ap-
proach to negotiations. A resumption of the
Geneva conference without prior preparation, he
repeated, would lead to a deadlock.
Rabin outlined two basic proposals for an
agreement. The broader one involves an Israeli
pullback of 30 to 50 kilometers in the Sinai and
includes the demilitarization of the Gidi and Mitla
passes and the return of the Abu Rudays oil fields
to Egypt. Under the other, narrower option,
Israel would not give up either the passes or the
oil fields. In either case, Israel would demand
Egyptian political concessions, including-as part
of the brosJer option-Cairo's public and binding
commitment to end the str,te of belligerency with
Israel.
Israel woulL.: not, insist on a formal
declaration of non-belligerency, but would be
satisfied if Cairo stated its intentions to "refrain
trom war rare."
Meanwhile, in a speech on February 18,
Israeli Chief of Staff Gur implied that a political
settlement with E_ypt is more important to Israel
than the retention of the Gidi and Mitla passes.
He said that abandonment of the passes would be
risky, but that Israel has the strength to fight
either offensive or defensive battles and need not
base everthing on one concept. Gur's statement
seems designed to refute charges by a growing
number of Israeli conservative- that any with-
drawal from the two passes without a peace agree-
ment with Egypt would imperil Israel's security.
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Gur, who is Israel's senior military officer, prob-
abiy also intrnded to reassure the Israeli public,
which has I en made somewhat uneasy by the
conservative critics. He is no doubt well aware of
the political ramifications of his statements, and
presumably received prior clearance from the gov-
ernment for his remarks.
Syrian Pessimism and Palestinian Complaints
Overt Syrian reactions to the Secretary's trip
have been critical. An article in one Beirut daily
reported considerable Syrian unhappiness over
the prospect that a Sinai disengagement would
not be accompanied by a simultaneous disengage-
ment on the Golan Heights. The article, written
by a journalist with access to well-placed sources
in the Syrian hierarchy, claimed that Syria may
be on the verge of a major policy reversal if
Egyptian President Sadat continues to negotiate
alone and ignores earlier pledges to keep in step
with Syria. This means, according to the journal-
ist, that both the Syrian government and the PLO
moderates would increase their overtures to Iraq
and the "Rejection Front" in a common effort to
head off a "partial solution" of the Middle East
conflict. The author also predicted that if any
further disengagement occurs in Sinai, Syria
would refuse to attend the next stage of the
Geneva Conference.
The Qatari leader stressed to a US official that the
next move toward a settlement must include
some withdrawal in Syria and on the West Bank,
even if this is only a vague and cosmetic agree-
ment in principle to to implemented at a later
time.
Palestine Liberation Organization officials
and information media are also urging the other
Arabs to resist what they see as the US strategy of
dividing Egypt from Syria and enticing both to
accept a partial Israeli withdrawal that would
leave nothing for the Palestinians. As an alter-
native, high PLO officials are calling for a re-
sumption of the Geneva talks with a Palestinian
delegation in attendence and a clear statement
that the Palestinian problem wily be discussed.
The Secretary's trap evoked ti:rt comment
directly from Soviet party chief Brezhnev, who
criticized "partial measures" by 'certain persons"
hoping to lull and divide the Are hs. Soviet propa-
ganda broadcasts played up the line that the US
step-by-step approach is being implemented in the
interests of Israel.
Sinai disengagement agreement, but that has not
kept them from trying to get the next round of
negotiations into a Geneva forum where the can
Behind the Soviet criticism is Moscow's
ritual complaint that it is being cut out of the
Middle East negotiating game and that, as a con-
sequc.ice, its "natural interests" in the region are
not being given sufficient weight. This was the
approach taken last week by Foreign Minister
Gromyko with the British ambassador in Moscow
and by a Soviet Middle East specialist with
Amba.;sador Stoessel. The Soviets recognize that
they are not in a position to head off another
Play a more direct r
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THE EC PONDERS ENERGY PRICES
The EC Energy Council meeting last week
was as unproductive as its predecessors in setting
specific common policies. The community may
be forced to take a common stand on the US
proposal for a minimum price for energy, how-
ever, if it wishes to participate in the preparations
for a consumer-producer conference.
The energy ministers were meeting to put
some flesh on the bones of a community plan-
adopted last December-for reducing EC depen-
dence on imported oil by 1985. They approved a
directive that prohibits the construction of oil-
fired electric generating plants and the conversion
of existing power stations to oil without prior
approval of the member states. Action on other
major issues-energy conservation, minimum
stock requirements, and a common trade policy
for hydrocarbons-was put off until the next reg-
ular meeting of the Energy Council, possibly in
April.
Discussion of the US proposal to set a floor
price for energy in order to encourage invest-
ments in alternate energy sources highlighted the
problem of the community's relations with the
International Energy Agency-where France is
not represented. Several EC officials have said
recently that this issue must be resolved if the EC
is to have any influence on the agency's work.
Should the Nine fail to agree on an approach to
promoting alternative energy sources, it will con-
firm the fears of EC officials that community
energy policy can only follow the US lead in the
international agency.
France is prepared to discuss the concept of
a floor price, but it will probably insist on a
common EC position as a prerequisite to discus-
sions in a broader forum. Paris wants internal
community agreement in order to encourage EC
decisions on related matters, such as policies gov-
erning energy investments and pricing. The
French, along with the EC Commission, have
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advocated this for some time. Although France's
EC partners are not prepared for these tough
decisions, they are equally reluctant to leave any
floor-price agreement to the broader international
agency because France would then remain un-
committed and thus able to take advantage of
possible lower oil prices.
The EC commissioner for en-argy, Henri
Simonet-who will be in Washington next week to
discuss the energy price floor idea-is spear-
heading an effort to reach agreement among the
Nine before the next meeting of the governing
board of the international agency in early March.
Simonet maintains that there are few differences
between his own ideas and the US proposal. If he
succeeds in uniting the Nine, however, those EC
members that favor a relatively low floor price-
because of their heavy dependence on imported
oil-are likely to insist that they have their way in
the international agency as well as in the
Danish foreign policy will take a back seat as
the new minority Social Democrat government,
sworn in on February 13, prepares to tackle the
county's economic problems. Denmark is experi-
encing an annual inflation rate of 16 percent and
unemployment is at the highest point in 20 years.
Ariker Jorgensen, the new prime minister,
presented his government's program to parliament
on February 20. Jorgensen said reducing unem-
ployment was his chief goal and called on Den-
mark's ten political parties to cooperate in solving
the country's economic problems. Controlling
only 53 of the 179 seats in parliament, Jorgensen
will have to compromise on many of his proposals
in order to win support from the moderate op-
position parties.
In foreign policy, there will be changes in
tone rather than substance. Nordic affairs and
increased sympathy for Israel will receive more
prominent attention. The new government will he
more critical of US policies toward Southeast
Asia and Chile than the Hartling government.
Denmark's commitment to the EC will remain
unaltered, unless the UK referendum in Jur.e
leads to a British pullout. In that event, many
Danes in all parties are in favor of holding their
own referendum. The naming of Orla Moller as
minister of defense augurs well for a continued
strong NATO commitment. Moller is a strong
supporter of close ties with the US and NATO,
and he also favors purchase of the F-16 as a
replacement for the F-104 fighter aircraft.
The future of the new government is not
bright. Jorgensen faces an impossible task in try-
ing to push an effective economic plan through a
parliament that is stacked against him. Neverthe-
less, the growing impatience of most Danes with
the recurring government crises as well as public
pressure to get on with the country's business
may enable the government to last out the year.
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Jorgensen opens recent party meeting.
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USSR-UK: REMOVING THE CHILL
Prime Minister Wi:son's visit to Moscow on
February 13-17 was notable primarily for the
return of General Secretary Brezhnev to the lime-
light, but it alsc did much to remove the chill that
had characterized British-Soviet relations since
the British expeller] 105 Soviet officials on
espionage charges in 1971. The final statement
signed by the two sides spoke of "opening a new
phase" in relations, and Wilson said the r"scu5-
sions had brought about a "new era." - r~zhnev
accepted a British invitation for a returi, visit, but
no time was specified.
At the end of the meetings, Wilson and the
Soviet leaders signed several agreements, some of
which had been prepared before the visit:
? A joint statement calling for the sys-
tematic expansion of relations; it also includes
declarations or various international issues,
such as Cyprus, the Middle East, and the
European security conference.
? A protocol on c:::isultations similar to
those the USSR has with France and Italy.
m A decf'ration on cuck:ar non.-prolifera-
tion that expresses support for the concept
but does not commit the two nations to any
new action.
? Long-term agreements on the develop-
ment of trade and industrial cooperation, and
increased cooperation in science, technology,
and medicine.
British exports to the Soviet Union fell
sharply after the 1971 incident and the trade
agreements, which resemLle recent Soviet-French
Wilson (with pipe) meets Soviet leaders.
accords, give the British a chance to get back in
the running.
In his first official appearance in seven
weeks, Brezhnev went out of his way io demon-
strate before Soviet media and his foreign guests
that he is fit and in good spirits. He reportedly
did almost all the talking for the Soviet side, had
a firm grasp of the details of the matters under
discussion, and showed no sign, of fatigue during
s,?veral lengthy sessions. 25X1
Despite Brezhnev's vigorous performance,
questions about his physical and political health
apparently remain. At least one high Soviet gov-
ernment official, correctly anticipating that
Brezhnev would see Wilson, reportedly told West-
erners in Moscow that Brezhnev, nevertheless, has
a serious illness that will prevent him from ever
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ETHIOPIA: FIGHTING FLARES AGAIN
The independence-seeking Eritrean rebels
showed their muscle again this week with a new
wave of attacks on government military installa-
tions in Asmara, the provincial capital. The ruling
military council in Addis Ababa appears deter-
mined, however, to keep Eritrea a part of Ethi-
opia, wnatever the cost in men and other re-
sources. As the fighting continues with little
prospect for an early negotiated settlement, the
rebels are getting increasing support from the
Arab world.
Rebel attacks in Asmara on February
18-the first major assault on the city in eight
days-resulted in the heaviest exchange of gunfire
since major fighting hegan in Eritrea late last
month. Much of the action took place near the
US consulate and the US Kagnew communica-
tions complex. The Kagnew power plant was
damaged, mostly by fire from defending govern-
ment paratroopers.
During the week, government forces and
rebels clashed again northwest of Asmara and the
Ethiopian air torte attacked suspected rebel con-
centrations a!ong the road from Asmara to the
Red Sea port of Massawa. On February 16, eight
tanker Trucks carrying badly needed fuel got
through to Asmara; the previous day, insurgents
had .mbushed three tankers, destroying one and
forcing the others to turn back. The go%. rnment
continues to face serious supply difficulties, how-
ever, and is currently relying heavily cn a costly
airlift.
Despite the many problems the, face in
combating the insurgency, Ethiopia's military
ruler! reportedly remain confident that govern-
ment forces can win. Last week, a high Ethiopian
official told the US embassy that the government
would fight to preserve the country's unity "te
the last oan and the last drop of blood." In an
effort to mobilize d,mestic support and also to
impress delegates attending a meeting of the
Organization of African Unity in Addis Ababa,
Page 10 WEEKLY REVIEW
the council organized mass demonstrations
against the insurgency. Criticism of Arab support
for the rebels was a majo, theme of the demon-
strators and has also become prominent in the
official press.
Sudanese President Numayri's peace initia-
tive remains stalled. Osman Saleh Sabbe, the
leader of the Popular Liberation Forces, the
snia!ler but more effective of the rebel move-
ment's two factions, reiterated this week his
group's insistence that the government recognize
Eritrea's right to independence before any talks
begin. He ;ejected Numayri's call for an imme-
diate cease-fire, apparently because he believes
the rebels have the upper hand militarily.
Are b countries are continuing to provide
military and other support for the Eritrean rebels.
At this time, most Arab governments are not
solidly behind the rebels' demand for complete
independence, but the continued fighting i, push-
ing them in that direction. Sudan, especially,
would like to avoid having to make a choice
between all-out support for the rebels and main-
taining aoou relations with the ruling council in
Addis Ababa. Saudi Arabia, which gives some aid
to the Popular Forces, still favors federation as a
soluti^ to Lhe Eritrean problem. Even radical
Iraq has not yet taken a strong public stand in
favor of Eritrean independence, probably because
it is aware of the parallels that could be drawn to
its own Kurdish problem. Egypt's response to the
latest outbreak of fighting has also been muted.
Expressions of Arab support for the Eritre-
ans are becoming more vehement, however. Syria
last week issued a strong statement backing Eri-
trean independence and condemning Ethiopian
atrocities. On February 18, Kuwait announced its
total military support for the rebels. The Arab
information ministers meeting in Cairo this week
called for Eritrean independence and character-
ized the Ethio tan arm 's actions as a "war of
annihilation."
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USSR
INDIAN OCEAN NAVAL ACTIVITY
Following a devastating storm that hit the
island of Mauritius in early February, US, French,
and Soviet ships visited the tiny republic and sent
crews ashore to assist in disaster relief. The US
carrier Enterprise and the French carrier Clemen-
ceau were both in the area and able to render
early assistance. As the Enterprise left Mauritius
on February 15 on its way out of the Indian
Ocean, the Soviet cruiser Dimitri Pozharskiy ar-
rived.
A high French offi,:ial announced that the
Clemenceau was going io the island of Madagascar
following reports of serious political strife there.
There was apparently no danger to French citi-
zens or economic interests in the Malagasy
Republic, however, and the Clemenceau was re-
ported in Port Louis, Mauritius, as of February
15. The French continue to keep the largest num-
ber of naval ships in the Indian Ocean. The regu-
lar group of about 16 ships has been augmented
since last spring, most recently by the Clemen-
CHINA
P: .v!
('6inu
ceau's five-ship task force. When this group leaves
next month, it will be replaced by another,
headed by the guided-missile frigate Suffren.
The present Soviet contingent of six surface
warships and one submarine, plus some aux-
iliaries, does not differ significantly from the
force Moscow has maintained in the Indian Ocean
for over a year. One of the principal Soviet objec-
tives apparently is to maintain a fairly regular
patrol of the entrance to the Persian Gulf. Mos-
cow may be motivated by a desire to balance the
three US naval ships at Bahrain.
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Feb 21, 75
MALAYSIA
INGAPOlJ
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CENTRAL AMERICA: SEEKING COOPERATION
For the second time this year, the Cent. al
Arrerican chiefs of state have met-this time in
Nicaragua-and have declared their personal deter-
mination to overcome long-standing obstacles to
solidarity. In fulfilling their pledge to meet at
least once a month, the leaders again focused on
three main objectives: normalization of relations
between El Salvador and Honduras; revitalization
of the Common Market; and regional socio-eco-
nomic integration.
Interest in regional unity has waxed and
waned since the first effort toward political union
failed nearly a century and a half ago. The present
drive for solidarity comes at a time when each of
the republics has been hurt in varying degrees by
worldwide inflation and recession. Thus, the ben-
efits that could result from far-reaching economic
integration seem much more attractive now than
they have during the past six-year period of re-
gional feuds and strident nationalism. Also, the
worldwide trend toward alignments based on
common economic or regional interests has had
an impact on the Central Americans, who have
never had a strong voice even in their own hemi-
sphere, much less in world forums.
Whether the leaders can realize their ambi-
tious goals in the next few years depends largely
on their ability to retain firm control at home. At
present, none of the leaders is seriously threat-
ened, but each is concerned about opposition
groups and growing discontent. In fact, the five
leaders may be hoping that the fanfare sur-
rounding their summit meetings will soften public
criticism at home.
? President Somoza, who inherited control
of Nicaragua a decade ago, is faced with increas-
ing disaffection and an opposition encouraged by
the success of terrorists who seized government
officials last December and bartered their free-
dom for a flight to Cuba.
? Costa Rican President Oduber's popularity
has diminished considerably since he was inaugu-
rated last May with multi-partisan backing. Nearly
all factions are criticizing the President's failure to
understand, much less alleviate, Costa Rica's
worsening economic situ-ifion.
? Guatemalan President Laugerud, who took
office last July, enjoys the support of the army
high command-the final political arbiter in the
country-and government forces are strong
enough to keep the lid on the security situation.
Nevertheless, isolated successes by terrorists--
followed by government reprisals-could create a
period of political instability.
? Last week, Honduran Chief of State Lopez
Arellano finally fulfilled his promise to re-assign
senior military and government officials. The
changes seem to have decreased the dissidence
among the Honduran officers corps, which had
been building for months.
? Like Honduras, El Salvador has had a re-
curring problem with military dissidence. Some
peasant unrest, leftist violence, and student dem-.
onstrations are likely to continue to challenge
Salvadoran President Molina for the remaining
half of his five-year term. Like his Honduran
counterpart, however, Molina came to power
through the military and knows we!l how to
maintain its support. Both leaders have been gen-
ercusly responsive to military demands, including
pay raises, training, and re-assignments.
The Central American leaders see.-n apt to
continue meeting and trumpeting their interest in
"unity. Sharp contrasts in economic achievement
and sociological perspective, however, remain
obstacles to meaninami peration.
F__ 7
25X1 25X1
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Army General Anaya announces start of guerrilla operation.
ARGENTINA: ANTI-GUERRILLA CAMPAIGN
The army has begun a massi' a anti-guerrilla
operation in the northern part of the country, but
the only information on its progress is coming
from communiques issued by military spokesmen.
As usual, these reports consist only of the num-
ber of arms caches destroyed and suspected guer-
rillas detained.
Soma 5,000 army troops and federal police
are combing the jungles and mountains of
Tucuman Province in search of about 4G0 mem-
bers of the Marxist Peoples' Revolutionary Army.
At leapt one skirmish occurred last week when
guerrillas ambushed a patrol. One army officer
and three ;nsurgents reportedly were killed in this
clash.
Army spokesmen are stressing that civilians
in the area are cooperating with the troops by
providing information, and one officer stated that
several "foreigners" had been arrested. There has
been no official announcement on how long the
campaign will la"t, bill one guiteral c( Inrnent( el
that the array worrlcl slay ill the ',tru(trll( is long
as it considered nocnssary " Inlnrior Mini-,tor
Rocarnora staled liv,t wnul< that the r,ounter-in-
surgerlcy operation might raova into other prov-
ince
-Ilse extremist, have reslxrn(Je,(1 to the carn-
paign by stepping up terrorist actions in 13neno',
Aires. Last weekend, at least eight persons were
killed in a new wave of attacks. Also, in a move to
attract international attention and elnbarrirs; the
government, the guerrillas declared a 1,500-
square-arile area of Tucuman Province a "liber-
ated area" and have called for international
protection in accordance with the Geneva Con-
vention.
It is doubtful that the army's operation will
turn up much. Rumors that it was to occur [rave
been circulating for several weeks, so that the
guerrillas have had plenty of time to prepare.
Also, the army has not had a great deal of
counter-insurgency training or experience. Unless
small-unit commando tactics are used, the secu-
rity forces are likely to have little luck in corner-
in any real guerrillas.
The civil distur'ounces in Linea two weeks
ago have not caused President Velasco's military
regime to change direction, but they have
prompted it to shift gears. In a nationwide
address on February 17, the President hinted that
the government would embark on a plan to create
its own mass political movement. The next day, it
was announced that a committee had been
formed to coordinate such an effort. This repre-
sents a new stage in the military's long-standinc.
but unsuccessful, effort to rally popular opinion
in support of its programs.
To date, the government's efforts along
these lines have been disorganized and indecisive.
The recent unrest, however, has poarently
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rho govennnent'', elforls will he corn-
plicated further as a resull of ad floc grout,', that
have sprung up sincO l ehruary 5 to only support
for the regime. The two most publi(.irecl groups,
led by leftist labor leaflets ,utd jotnnali',t',, are
alroac , vying for .iipporrt horn various rrt1ii:ary
leaders. President Vel,u,co apparently recognises
that, if allowed to expand, such groups might
develop independent bases of support and try to
force the regime into following an evert snore
radical course. The new government corninittee
apparently is the result of Velasco's desire to
meld the various group,; ;,nd poi-oalities into
single unit that would be more rn,iri jeable.
In what appears to be another facet of the
government's plan to build support and avert
further massive unrest, regime spoke',rnen Iiave
lambasted the American Popular llevoltitionary
Alliance. President Velasccr irtd other, have
charged that alliance leaders were behind the
recent disutdurs. Although the alliance i', a
perennial target of military criti *,rn, the extent
n'J tenor of rccc t nffftaai i:(i,mmc'iit ugg%st
some action may be taken against the alliance's
leadership. After more than six years of military
rule, the party remains Peril's only rn,rss-based
political organisation and a harsh crackdown
would certainly cause funther class, cislac.tion,
particularly among the rnidclle class and certain
labor groups.
Extremists within the alliance apparently
were involved ... the oti. ....(r Party
radicals reportedly have also been involved in
recent urban bombings. The established leader-
ship of the alliance, under the venerable Victor
born hostility to authoritarian military rule-even
though benevolent-will continue to disrupt the
El Correo newspaper building burns during recent rioting.
illustrated lot overt the in)'.! nearsighted military
lvad(:rs the extent ((I alai -government fooling
among Clio p(,ptll,1I11)1I in genet al. Ili view of this,
it appears that Vel,iS,c() is leaving ,the,ul with l.rl,trr,
to build a fornt,tl, civili,ut-hosed hill ntilil,try-cort-
trollc;cf political orgauintliott. ll(i', will he tto
easy task, chic Io serious (h.")(11eentenls within the
arrrled forces over the ideological heal of the
organization and over the degree to whit h it will
supplant tra(litional pc(lili(.,il parties. Ili addition,
t'iere is the piohl(0nt (il who will or(lani;e x11(1
staff the rnovernel l t.
Raul Naya do la Torre, probably has riot con-
doned such activity. Nonetheless, the party is a
:)clod scapegoat for Velasco, since most top of-
ficers probably favor some action to lessen its
popularity. If nothing else, the alliance has been
an embarrassment to the military, which has been
tnlable to match its widespread ap-roal.
For the time being, the military apparently
is united behind Volasco, but questions have been
raised about his handling of the crisis. Differences
within the armed forces almost certainly will in-
crease in the coming weeks as plans for the pro-
government movement solidify.
Prime Minister Morales Bermudez is likely to
play an important role in developing government
policies to meet civilian unrest and to build a base
of support for the regime. Despite indications
that President Velasco is pleased with Morales
Bermudez' counsel, there are ideological differ-
ences between the two men. These intra-service
cross-currents, coupled with the populace's stub-
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Chinn', 1n1oign ballot boon) fof l victim lc) II1e
Orowilul prollunr, of th(! w')rld econo ny ill 1914.
f olat trncl' ro'o only 27 purcont, to roughly
billion, wall below the 67-par(e)d incre,c',o
of 1')13; n)m,l at Il)o increa'( is the ra.ull of
hi0I1oo price., with litl.lo or no growth ill velum('.
Worldwide iII(laliot) I)lIited ill) ChiO','', impart
hill, whip.) Hit! ocournnic slowdown in the Wcr',I
ctrl dt,mand lot Chino.,(! exports. As it re',ull,
Chin.( 11 ICI the In1015t 11.1(11, (loficit in its hi s!oty
abool ',750 million overall and perhaps $1 billion
with the nett-Colulnculist. world.
China b(olntl III(inq steps to reliavo the fi?
naocial squen/e IwA fall. Contr;icts for agricttltutnl
prndn( I', weld dcletled Of (:,nlceled, and fertilizer
dcliverios wr,te I"'tp1ned. Peking .Itso increased
it', Its(. of shot I- ,u)(I Irw(liurn-terra ctodits'Intl sold
.t portion of its Oold holdings. Chin..t's baton(.( of
paym(mt% is good, however. Reserves are well in
excess of Ihw bode deficit, th'l level of foreign
del)f i', IIIIIge,Ible, Mid Poking's credit rating is
excell(,nt.
China:
Foreign (trade, 1970-74
l1.1de will) IIntl-Comrn1Iii'l (o1 ill (0, po,tml
lh1, Iarge,l Oaily, ncruunlio0 far nln)o5l 135 pcr-
c1111I of Clrir)n'', tut,)I lrnde. Irnpnt I'. (toll) the
developed West. ,hot up lo abotrl 'f.5 billion hunt
'1,:3,4 billion in 1973, In,g('Iy hr'c:.nr,c of ill( waved
III Ichase', of ngri(UlIt it ,ll I)Io(Jnc.t% )niI nine hitwiy.
(:hill,)''. dclicil wills the (Jnvetoped col nth i1,'. was
ronal)ly '62.5 billion,
..)inn?J,Ip.uro'.l (tnde j)tmp0(J 50 pt'tccot, to
over $3 billic)11. China's irnpnrls, Inosled by
',i/,It.)le (lelivelic5 of tnachint;ry ,u)d egtliprrIent,
exceeded expo) Is, by rnur'' Ihnt) ',500 million.
China's export', of 4 mithon toils of rru(lo oil,
worth about $388 r)Iilliou, )note that) offset the
decline tit it . trodilionnl exports to .lnp,u).
China', hnr.le will) the US t 1,tle(i ',922 mil-
lion, .1 ?,rn,Illcr increase than nrtli( tpntld at mid-
year !w(.,)u',e I)ekirl(l canceled cnnb,)(.1s, for US
grain warlh nuaut $300 n)illioll. Wheal, ortl,
O,hell, '.oybenn,, ancJ other agricOIltonl products
crnnpa5('(I about 80 percent of lot it t)S expo) Is
of '{,807 mill;or1. US machinery mid (eluipot(nt
export', rose as delivery bcy,I.) nu ('(IIIiprnenl far
the arnu)nni,i ptnnl, purcnn'eu it) 1913 and the
secnr)d half of Ow $150?Im111,,,I Uoeirirl cotlltnrl
was completed. Growing patch,);es of t Odell
textiles helped boost US imports of Chinese
goods la $115 )Million, up from $64 million in
1973.
Pur(ha',c'. of agricultural produ( l,, rrrachin-
cry, ,Ind Ir,nrsp )It equipme))t were Inrctely Iv%pnn-
siblc for tl)c rJrowtlt of Chinas total irnpnrls.
China cotrttaclt.'d for almost 10 million tons of
train tit 19/4, lout shipping delays ,01(1 contract
c,)nr(;Ilatiorr, dtapped actual deliv,.rr,,,, to just
over I million tons, down from 7.1 trill 11)11 in
1973. Iligher gr.rin price,, however, pushed the
cost up to over $1 billion. 11111)01 k of 5oyb1;an,
Mid (odor) were up sut)slanlially from 1973.
Machinery tit(] equipment import: 1(151 sharply .)s
large-scale deliveric'', began oo the `.3,2.5 billion
worth of whole plants and otht'r o(juiI)rnnt
ordered in 1973.
I ~ _O
1970 1071 1972 1973 1974
(Preliminary)
China's exports rose by roughly $1 billion in
1974; petrolcunl accounted for alrno't half of the
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increase. `)'ale', of crude oil and petroleums prod-
ucl, to lapan, the Philippines, I-long Kong, arid
I hailand anlotintecl to about 4.5 million to,ls
v'worlh "11440 million. Rice exports benefited
from ;sigh prices, but other traditional Chinese
expert',, particularly silk and cotton textiles,
faced declining delrland.
slow further.
fhe outlook for China's trade in 19/5 is for
',louver growth as Poking attempts reduce it!
trade clefic:it. I_::xport growth will be small, reflect-
ing poor sales of traditional products at the 1974
Canton lairs and recession-weakened demand in
the West. An expected doubling of petroleum
export', nlay do little more than off-,et the decline
io other exports. Imports of machinery and
equipment will he substantial as large-scale do-
liverie0. continue on 1973 and 1974 contracts.
the successful 1974 harvest and declining textile
e eport', will permit cutbacks in grain and cotton
imports. Mier less essential imports will be cur-
tailed, and the pace of new plant contracts may
Tokyo moved to shore up its sagging
economy last week, but the anti-recession pro-
grain, while serving as a bit of a cushion, is not
very strong. It includes:
? increasing government fund; for un-
enlploynlerrt compensation;
? easing investiTlent controls on plant con-
..rr ti and .:ipn1 nt;
? fewer restrictions on commercial bank
loads to small industries arid housing;
? spending approxim;,'ely $5 billion on
public works projects during the present
quarter.
The measures were taken in response to the
charm deterioration in the economy in the past
few months. Industrial production in the 'inal
quarter of last year, for example, fell at a 20-per-
cent annual rate. The number of bankruptcies in
October, Novembber, and December broke previ-
pus records. Unemployment at the end of Decem-
ber reached one million for the first time in 20
years, up about 300,000 from November. Since
December, the economic situation has continued
to decline.
Tokyo's new program veil; at best cushion
the downturn. Direct government loans to ir!-
dustry are basically airned at avoiding another'
rash of bankruptcies, especially in politically
powerful industries such as textiles. The public
works spending essentially represents the funds
the government had already allocated for the
January through March period. Largely because
of opposition from Deputy Prime Minister
Fukcrda, Tokyo continues to keep a lid on public
spending. Industry leaders, for example, have
been pressing the government to spend at least
part of the $2 billion in funds previously appro-
priated but not yet spent. 25X1
Easing credit and investment controls is un-
likely to stimulate any significant recovery in
business spending. Demand for investment funds
is already running below credit ceilings, largely
because most industries are operating well below
capacity. Excess capacity is now estimated at
more than 20 percent, a postwar high, with some
firms operating at as low as 50 percent of ca??
pacity. Even if demand picks up, output will
probably respond slowly because of tinge excess
inventories. Both in absolute terms arid as a share
of sales, stocks of unsold goods are roughly dou-
ble the level recorded during previous economic
slowdowns in Japan. During the final quarter of
last year, firms attempted to reduce excess stocks
I>y crittinn nrndnc-tinn hilt failed hecause sales fell
even faster.
The short-term economic outlook remains
gloomy, with further production cuts likely in
corning months despite government efforts. Ex-
ports, a major factor in holdinu up production
last year, are now starting to slow down in re-
sponse to the worldwide economic downturn, and
domestic demand is unlikely to pick up until the
employment situation improves. Tokyo. more-
over, ren,ains concerned about a resurgence of
inflation, and a major expansionary program is
not likely until the conclusion of wage negotia-
tions this spring.
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CAMBODIA: HAD DECISIONS
Tyre rrrilit.auy ~ilturtion rleteriorateol dUrirrq
the past we.r