WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001000080010-8
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 27
• Document Creation Date: December 27, 2016
• Document Release Date: May 11, 2010
• Sequence Number: 10
• Publication Date: February 28, 1975
• Content Type: REPORT

 Declassified in Part - Sanitized Copy Approved for Release 2012/01/09: CIA-RDP85T00875R001000080010-8
? Top Secret
Weekly Review
Top Secret
25X1
February 28, 1973 25X1
COPY No
650
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CONTENTS (February 28, 1975)
The WEEKLY R VIf?:W, issued every 1-riclay morning by the
Office of Currant Ir?tclligar. e, report,; end erelyzes significant
clevelopn enis of the wreck through noon on Thursday. It
frequently includes materiel coot di ieloci with or prepared by
the Office of Economic Research, the Office of iretegie
Research, and the Directorate of Science and Technology.
Topics requiring? morn cornprehensiv'? treatment once therefore
published separately es Special Report; nrn listed in the
corrtOrl 5,
1 Cambodia: No Relief in Sight
3 Palestinians in Disarray
4 South Asia: New Irritants
6 Ethiopia: Fighting Continues
7 Rhodesia: Smith Digs In
Laos: Souvanna Returns
Vietnam: Waiting for the Other Sh.?e
25X1
10 Philippines: Getting Out the Vote
11 USSR-Japan: Peace Treaty Differences
12 Greece: Government Foils Plot
13 Western Europe - Greece - Turkey 25X1
I A Co~+ %AI,, 4 I -I.- k--~'--
2.5XF
17 Portugal: Greater Role for the Military
21 OPEC: Production Capacity; Summit
22 Latin America: New Bootstrap Mentality
23 Argentina: Mounting Problems
24 Venezuela: The Final Phase Starts
25 Soviet Navy on Caribbean Cruise
SPECIAL
REPORT (Published separately)
West German Bundeswehr:
Strong and Grol'?ing Stronger
I Comments and o?rories on the contents of this
publication are w. 'come. They may be directed to
the editor of the v
MIDDLE EAST
AFRICA
EAST ASIA
PACIFIC
WESTERN
HEMISPHERE
25X1
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Cambodia- No Relief in Sight
The Khmer Communists have been on the
attack for two months now, and them is still no
relief in sight for the government. Combat action
around Phnom Penh increased significantly this
week as insurgent units mounted a push against
the city's southwestern defenses, posing an in-
creased threat to the Cambodian army's main
ammunition dump and to Pochentong airport.
Other insurgent forces are keeping steady
pressure on government units northwest of the
city, while Communist gunners are continuing
their daily rocket attacks against downtown
Phnom Penh and the airport. Although a cargo
plane belonging to a domestic airline was de-
stroyed early in the week, airlift operations have
not been interrupted. At week's end, US contract
airlines marle their first de;iveries of rice and fuel
to Pochentong; earlier shipments had consisted
entirely of military equipment.
In the Mekong River corridor southeast of
Phnom Penh, the Communists are closing in on
the government navy base at Neak Luony. The
base has been the target of heavy shellings, and
casualties have mounted among the 30,000 civil-
ian refugees there. Insurgent ground attacks have
also isolated several outposts on the base's perim-
eter. Farther south along the river, Communist
resistance has stymied government operations
near a vital narrows; at midweek, one of two
government beachheads in the area was overrun.
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2bAl
In ine countryside, government units early
in the week pulled out of the town of Oudong on
Route 5 following several weeks of sporadic fight-
ing. Oudong had been reduced to rubble during
heavy fighting last spring and summer, and had no
sizable civilian population. Its loss followed that
of the district town of Muong Russel, farther
north on Route 5.
Tensions Rise in Phnom Penh
As the military situation has deteriorated in
the past two months, there has been a corre-
sponding rise in pessimism and recrimination
among senior government officials and increasing
uneasiness among the general population. During
previous crises, the steadying influence of the US
mission has been enough to ensure a basic polit-
ical stability, and American support for the cur-
rent leadership will continue to discourage any
unilateral action against the government by dis-
gruntled political and military elements. rsut as
pressures build 'r?, Phnom Penh, the chances in-
crease for the eruption of essentially unpredict-
able and uncontrollable political turmoil that
CAMBODIA
Oudongi
Steady Communist prossurd
New Communist push ,'# +
Kompong
Soma
? k\ ? Kampot
Ream Air BaO s'
' Nook
.Wong
SOUTH VIETNAM
On the banks of the Mekong
would make it o fficul , if not impossible, for the
government to continue the war.
The anti-Chinese demonstrations that began
in the northwestern provincial capital of Battam-
bang last week, and sprezd to Phnom Penh this
week, provide hints of how such a situation could
develop. Cambodian resentment of Chinese and
Vietnamese control over commerce has been a
traditional source of friction, but the tightened
supply situation and corresponding rises in the
prices of some basic commodities have aggravated
the racial tensions. Although local authorities
have been able to handle the situation so far,
student agitators are reportedly planning further
demonstrations. With many police units moved
out of Phnom Penh to meet the Communist ' ni'-
tary threat, renewed street demonstrations could
easily get out of hand.
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Feb 28, 75
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Palestinians in Disarray
Leaders of the relatively moderate fedayeen
groups that control the Falestine Liberation Orga-
nization-Fatah, Saiqa, and the Popular Demo-
cratic Front for the Liberativ: i of Palestine-are
increasingly apprehensive that Palestinian inter-
ests are being ignored in the current round of
peace negotiations. As a result, they are again
quarreling among themselves ar.d with their major
Arab supporters.
For several months, PLO chairman and
Fatah leader Yasir Arafat has placed his trust in
Egyptian President Sadat's ability and willingness
to bring the Palestinians into negotiations. On
February 20, however, he denounced Secretary
Kissinger's latest efforts to find a Middle East
settlement, and, by implication, Egypt's involve-
ment in those efforts. Arafat ci,arged that the US
aim is to elicit token territorial concessions from
Israel in Sinai and on the West Bank that would
placate Egypt and Jordan and divide them from
Syria and the Palestinians, who would receive
nothing. Arafat's criticism is intended to ensure
that Egypt and the US do not ignore Palestinian
interests indefinitely. At the same time, he hopes
to deprive his Palestinian opponents of an oppor-
tunity to charge that his cooperation with Sadat
is leading the Palestinians nowhere.
Despite this effort by Arafat, important fig-
ures in Saiqa, the Popular Democratic Front, the
Pales' ine Liberation Army, and in Fatah remain
critic,;) of Arafat and of Egypt. They have re-
cently L-qi, protesting Arafat's policies, both for
their own purposes and at the instigation of Syr-
ian leaders. Damascus is trying in a variety of
ways to stimulate Arab pressures on Cairo so that
some kind of assurances for Syria and the Pal,;s-
tinians will be written into any new Egyp-
tian-Israeli agreement.
In an obvious attempt to assuage Palestinian
sensibilities and bolster Arafat's position, Egypt
last weekend called on the US and the USSR to
invite the PLO to attend the Geneva talks. This
move by Cairo, which previously had held that
the question of Palestinian attendance should be
settled after the Geneva talks resume, will relieve
some of the pressure on Arafat, but it will not
satisfy even his moderate Palestinian challengers.
To keep the heat on Egypt, Syria and the
Palestinians have called for a summit meeting of
Egyptian, Syrian, Jordanian, and Palestinian lead-
ers prior to Secretary Kissinger's next trip to the
Middle East. The Syrians and Palestinians con-
sider that they could use such a meeting to force
their demands on Cairo before Egypt concludes a
new agreement with Israel. Aware of this, the
Egyptians would prefer to delay the quadripartite
meeting even further; originally, it was to have
been held in February at the foreign ministers
level.
In an additional move to call attention to
the Palestinian problem, fedayeen from the Popu-
lar Democratic Front attempted last weekend to
cross from Lebanon into Israel. As the first such
attempt in several wFeks, the incident did not
draw an Israeli reprisa and it seems unlikely to
upset what has now become a de facto truce
among the Lebanese- kraplis :. ayeen.
25X1
Syrian President Asad, in a rare inter-
view, told Newsweek editor Arnaud de Borch-
grave recently that he and other Baath Party
leaders are ready to sign a long-term peace
treaty with Israel. Asad attached the standard
c- nditions: Israel must withdraw to its pre -
June 1967 borders, and it must accept a Pales-
tinian state on the West Bank of the Jordan
River and in the Gaza Strip. President Sadat
has repeatedly said that Egypt is ready to
accept the right of Israel to exist and that
Cairo will sign a peace treaty when the time
comes, but this is the first time, at least pub-
licly, that Asad has been willing to be that
explicit. For the Syrians, this is both a signif-
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Feb 28, 75
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Relations between India and Pakistan, which
have been generally improving over the last few
years, hit another rough spot this week with New
Delhi's announcement of new governing arrange-
ments in the Indian-controlled portion of dis-
puted Kashmir. Indian unhappiness over the
change in US policy that will permit a resumption
of arms sales to Pakistan may also pose a tempo-
rary obstacle to Indo-Pakistani reconciliation.
Pakistan's already poor relations with another
neighbor, Afghanistan, have grown worse as a
result of Islamabad's accusations against Kabul
following the recent murder in Pakistan of an
important political figure. New irritants are also
plaguing the heretofore good relations between
India and Bangladesh.
On February 24, Prime Minister Gandhi
announr2d an agreement restoring Kashmiri
nationalist leader Sheikh Abdullah as head of
government in Indian Kashmir. In return,
Abdullah for the first time formally endorsed
Indian sovereignty in the state. Pakistan, which
has long advocated self-determination for the
predominantly Muslim state, has criticized the
agreement and has called or, Pakistanis through-
out the world to engage in a one-day protest
strike on February 28. The strike, however, seems
intended to be no more than a sop to anti-Indian
sentiment in Pakistan because Islamabad does not
want movement toward Indo-Pakistani reconcilia-
tion halted more than temporarily.
Mrs. Gandhi, for her part, may decide that
the resumption of US arms sales to Pakistan
makes early restoration of Indo-Pakistani diplo-
matic relations-broken during the 1971 war-
politically inadvisable for her government. Other
than Kashmir, the restoration of relations is the
main issue still awaiting resolution under the
Simla agreement of 1972, in which the two sides
agreed to settle their problems through
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negotiation. India has generally been more reluc-
tant than Pakistan to resume diplomatic ti3s.
Mrs. Gandhi and other Indian officials have
criticized the US for lifting the embargo, but
most of their statements so far have been re'a-
tively restrained. Much of their criticism has been
directed at Pakistan for seeking US arms. The
Indians say they do not agree with US and Paki-
stani arguments that a resumption of US arms
sales need not lead to a South Asian arms race or
damaoe prospects for lndo-Pakistani reconcilia-
tion. The embargo, first imposed in 1965, applied
to both countries, but was much more damaging
to Pakisian. India continued to acquire large
quantities of weapons from its own arms factories
and from the Soviet Union.
The lifting of the US embargo coincided
with a visit to New Delhi by Soviet Defense
Minister Grechko for talks about new military aid
to India. Grechko probably renewed Moscow's
long-standing request for use of Indian port facili-
ties and airfields by Soviet warships and aircraft.
The Soviets may believe the Indians will be more
receptive than before because of the lifting of the
US arms embargo. New Delhi, 1-owever, probably
remains reluctant to accede to tyre Soviet request.
The Indians continue to view their own interests
as best served by maintaining some degree of
balance in their relations with both super powers
and by keeping the Indian Ocean free of foreign
bases.
Pakistan-Afghanistan
Islamabad has been claiming that Afghani-
stan-a good friend of both India and the Soviet
Union-was responsible, together with the
Afghan-supported National Awami Party in Paki-
stan, for the bomb explosion on February 8 that
killed Prime Minister Bhutto's chief political lieu-
tenant in the North-West Frontier Province,
which borders on Afghanistan. The Afghans and
the National Awami Party have angrily denied the
charges, but Islamabad has nevertheless outlawed
the party and arrested hundreds of its members.
Despite the resurgence of hostile rhetoric,
both Pakistan and Afghanistan will try to keep
their relations from deteriorating to the point of
war. Afghan President Daoud knows Pakistan's
army is much stronger than his own, and he
presumably realizes he could not count on the
Soviets or Indians to intervene militarily in Af-
ghanista;.'c be +alf. He also well remembers that
friction with rj,'-;stan helped bring about his fall
from power in 1963 and his subsequent ten-year
political eclipse. Bhutto, for his part, knows that
hostilities with Afghanistan would be expensive
and could interrupt the steady progress he has
been making in consolidating his power at home.
Pakistani-Afghan fighting also could seriously dis-
rupt the process of reconciliation with India that
Bhutto continues to espouse.
India-Bangladesh
Bickering between India and Bangladesh is
threatening to sour relations between those two
countries. The most sensitive problem is establish-
ment of a maritime boundary in the Bay or
Bengal, which is believed to contain sizable oil
reserves. Talks held almost monthly since Novem-
ber have failed to bring progress toward an agree-
ment. Both sides are increasingly annoyed and
seem unwilling to back down. Both have already
granted exploration concessions to US companies.
An older dispute involves the sha, rng of
water from the Ganges River. India has built a
dam complex to reduce silting and improve irriga-
tion in its West Bengal State. Dacca fears the dam
will reduce the water supply to agricultural areas
in Bangladesh.
Beyond these imrr;edia- a problems, there are
other seeds of potential discord. India is largely
Hindu, Bangladesh largely Muslim. The economies
of the two countries are essentially competitive,
with both counting heavily on jute exports.
Dacca, moreover, has been unable to stem the
growth of its trade deficit with India. Although
the two governments continue to view each other
as allies, anti-Indian sentiment has increased sub-
stantially among the people of Bangladesh since
they achieved independence with India's help in
1971- 25X1
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Sporadic clashes between Eritrean insurgents
and government forces continued during the past
week. On two separate days, government forces
attacked rebels in an area about three miles north-
west of Asmara, the capital of Eritrea Province.
Heavy fighting also reportedly occurred in the
vicinity of the Red Sea port of Massawa. On
February 26 the rebels attacked Asmara airport.
Heavy firing occurred near the US Kagnew com-
munications facilities during a two-hour skirmish,
but there were no US casualties.
In Addis Ababa, meanwhile, the ruling mili-
tary council has been considering ways of im-
proving the effectiveness of the provisional gov-
ernment. In an attempt to streamline its opera-
tions, the council voted in mid-February to elimi-
nate its subcomriittees in the provinces. The deci-
sion reflects the strong position of Major Men-
gistu Hailemariam, the council's first vice chair-
man, who won out over opposition from other
influential members. The council reportedly is
now discussing the possibility of reducing its
membership, which now exceeds 100, to a much
smaller number-clearly a touchier matter.
A major cabinet reorganization aimed at
breathing new lite into the nearly paralyzed bu-
reaucracy may also be imminent. According to
the US embassy, the change may include the
appointment of a civilian chairman; this post has
been vacant since the killing of General Aman last
November. General Teferi Benti will apparently
remain as chairman of the military council and
Demonstration in Addis Ababa supporting the council
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RHODESIA: SMITH DIGS IN
Rhodesian Prime Minister Ian Smith is
putting up new resistance to South African Prime
Minister Vorster's efforts to move him toward a
settlement with Rhodesia's black nationalists.
Smith's intransigence could jeopardize the fragile
truce in Rhodesia as well as Vorster's major for-
eign policy goal of improving relations between
Pretoria and black Africa.
Smith has never displayed any enthusiasm
for the joint effort that Vorster and four southern
African leaders have been making since last fall to
promote a compromise solution of the Rhodesian
problem. Smith's acceptance of the cease-fire
agreement announced last December was clearly
the result of South African pressure, and the
Rhodesian leader seized on an early opportunity
to suspend the release of black political prisoners
that was called for in the agreement. The African
leaders with whom Vorster ha. been collabo-
rating-Kaunda of Zambia, Nyerere of Tanzania,
Khama of Botswana, and Sarnora Machel of the
Mozambique Liberation Front-belilve Vorster
can make Smith honor the agreement and come
to the conference table.
At a meeting early this month in Lusaka,
Zambia, Rhodesian officials reportedly
announced that Smith would not curb anti-guer-
rilla operations by Rhodesian security forces. Last
month, Vorster had promised Kaunda to obtain
Salisbury's acceptance of such a curb in return for
greater efforts on the Africans' side to make the
truce more effective. Both Vorster and Kaunda
apparently thought Smith had agreed to this.
Vorster is presumably now considering ways
of increasing pressure on Smith. Even before their
meeting, Vorster reportedly had ordered the ap-
proximately 1,100 South African police still in
Rhodesia confined to their barracks. Smith was
told last month that the police would be grad-
ually withdrawn, and the process may nowt be
accelerated even though Vorster is probably con-
cerned about possible domestic pressures in South
Africa -hould the Rhodesian insurgency flare up.
Vorster reportedly is seeking an early meeting
with the four southern African leaders to consider
the situation.
with the cease-fire and wish to resume fighting
Meanwhile, Smith has met twice in Salisbury
this month with black Rhodesian nationalist
leaders. These preliminary talks have bogged
down, however, on the modalities for convening a
constitutional conference. Continued lack of
progress in the talks will strengthen the hand of
hard-line nationalists, who have been unhappy
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LAOS: SOUVANNA RETURNS
After spending much of the past eight
months convalescing abroad and in the royal Lao
capital of Luang Prabang, Prime Minister Sou-
vanna Phouma finally returned to Vientiane early
this week. Although his recovery appears to be
proceeding satisfactorily, Souvanna still tires
easily, and it remains to be seen just how active a
political role he will be able to play.
Souvanna's return comes as a mixed blessing
for the non-Communists. On the positive side,
they are doubtless relieved that he is no longer
exposed to the constant influence of his Commu-
nist half-brother 3nuohanouvong who, as chair-
man of the coalition'_ Joint National Political
Council, maintains permanent residence in Luang
Prabang. They also can ;ook forward to the
prospect of easier and more frequent access to the
Prime Minister now that he is back in Vientiane.
The non-Communists, however, cannot
expect to rely upon Souvanna for the strong
political leadership they so desperately need in
order to compete effectively with the disciplined,
more aggressive, and better organized Commu-
nists. Indeed, according to a reliable source, the
Prime Minister recently turned down just such a
request on the grounds that he had led the non-
Communist side for more than a generation prior
to the present coalition's formation and that it
was time for younger men to take over.
Souvanna also is
flatly opposed to the et r s o,' some rightists o
promote Interior M;nister Phr:ng Phongsavan for
the post of non-Communist deputy prime min-
ister in place of the lackluster and inept Leuam
Insisiengmay. The Prime Minister may fear that
such a move would damage Pheng's strong neu-
tralist credentials by identifying him too closely
with the right. In this regard, Souvanna may have
other plans in mind for Pheng. He recently gave
his approval and encouragement to a proposal
calling for the reorganization and revitalization of
the moritund Lao Neutralist Party, a political
entity he personally foundeu in 1961 during the
country's lust coalition experiment. While Sou-
vanna undoubtedly recognizes the difficulty of
such a task-internal control and discipline in the
party are practically nonexistent-he may view it
25X1 25X1
as the best vehicle for promoting Pheng's candi-
VIETNAM: WAITING FOR THE OTHER SHOE
The first phase of the Communists' 1974-75
dry-season campaign ended following the capture
of Phuoc Long Province early this mcniin. At that
time, a number of signs suggested that another
round of heavy action would open as early as the
Tet holiday period in mid-February, and govern-
ment commanders prepared for the anticipated
new fighting.
The Communists have refrained from
launching any significant attacks during the past
three weeks, however, and the South Vietnamese
are still waiting for the other shoe to drop. This
lack of activity does not necessarily mean that the
Communist timetable has been significantly
revamped, and a number of factors could be con-
tributing to the present battlefield lull.
The North Vietnamese may simply be delay-
ing further action until they get a clearer picture
of the likely congressional decision on further aid
to South Vietnam, reasoning that a new round of
attacks could strengthen the administration's re-
quest. On the other hand, the absence of further
sizable offensive actions may reflect a North Viet-
namese reassessment of their short-term position
in South Vietnam. 25X1
Hanoi, for example, may now feel less con-
fident of its ability to achieve significant military
gains. dements of two main-force divisions were
required to capture poorly defended Phuor Long
Piovince, and the Communists paid a heavy price
for their gains there and in the delta. The recent
withdrawal of several key Communist units from
front line positions reinforces earlier reports of
heavy enemy casualties and equipment losses.
Another factor, although difficult to meas-
ure precisely, are spoiling operations by Saigon's
forces. Those in the northern delta and the north-
ern coastal provinces, particularly, have caused
problems for the Communists. In addition, during
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the next round of fighting, the North Vietnamese
may intend to focus their military effort farther
to the north and may be waiting f',r better
weather conditions t'-,ere, which 'iegin next
month.
Awaiting word
In any case, preparations for combat are
continuing, and another phase of the Communist
winter campaign could begin at any time. Troop
infiltration to central and southern South Viet-
nam has been moderately heavy this winter and
additional manpower is moving south from North
Vietnam. Extensive repositioning, resupply of
units, reconnaissance, and other battlefield-
related activities have been noted in the past
several weeks.
341st-to northern South Vietnam. If the 341st
does indeed make this move, it would confirm
earlier indications that the northern lowlands will
be the scene of heavy fighting when the rains
diminish. Here, the Communists are probably
planning to resume their 1974 dry-season efforts
to expand their control into the populated coastal
areas of the northern provinces. Nevertheless,
major Communist pushes farther south in the
highlands and near Tay Ninh still remain strona
possibilities in the coming weeks.
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Feb 28, 75
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PHILIPPINES: GETTING OUT THE VOTE
President Marcos held another referendum
on martial law on February 27, the third since he
assumed emergency powers in September 1972.
Altl, -)ugh the government has said final results
will not be known for two to three weeks, voters
are expected to reaffirm approval of martial law
and agree to a palace prop sal giving the President
discretionary power to reorganize local govern-
ment. Marcos announced on the eve of the bal-
loting that he did not intend to lift martial law
anytime soor,.
The President campaigned for such a mandate
as if it were an old-time presidential election,
although the results were never seriously in
doubt. The referendum was carefully orchestrated
by the government from beginning to end to
ensure that an overwhelming majority voted yes.
Most Filipinos would probably have approved the
proposals anyway-either because they agree that
martial law is an improvement over the old sys-
tem or because trey see no viable alternative.
Outspoken critics of Marcos under his pre -
martial law regime have had little success in mobi-
lizing opposition to his government. The only
important exception is the Catholic Church,
which has gradually emerged as the focus of dis-
sent. Church liberals publicly attacked the refer-
endum as "mockery of democracy," and held a
well-attended penitential service in Manila on
February 21 as a protest. The majority of church
leaders oppose such overt political a,.tion and
want to avoid direct confrontation with the gov-
ernment. During the past year, however, moder-
ate (and on occasion even conservative) bishops
have joined 'he liberals on specific issues such as
the treatment of political prisoners and have suc-
cessfully pressed Marcos to adjust his policies.
Marcos has a healthy respect for the church's
potential to arouse widespread public opposition
to him, and wh ,n posjible he tries to exploit
ideological divisions within the council of
bishops.
The pL. i-)dic referenda serve several purposes
for Marcos. They enhance the viilaca-level citi-
zens' assemblies created under martial law and
give Filipinos a sense of participation in gover-
Marcos
ment. Marcos cites such referenda as evidence
that his rule is based on direct consultation with
the people, bypassing former-and often cor-
rupt-intermediaries such as governors and con-
gressmen. The village assembly meetings also give
Marcos a carefully controlled forum fo;- identi-
fying potential sources of popular discontent.
In his "campaign" speeches prior to the vot-
ing, Marcos stressed the need for a popular man-
date that would allow him to make important
decisions in the future. He specifically cited prob-
lems arising from the Muslim rebel!icn in the
southern Philippines, but he may also be referring
to other issues such as political trials for regime
opponents and negotiations with China to estab-
lish diplomatic relations.
President Marcos does not really need any
sort of "mandate" in order to take action on
these or other issues, for he has virtually unchal-
lenged authority. But he doubtless believes that
an overwhelming vote of confidence is a useful
trump card that he can play if he should encoun-
ter domestic or foreign criticism for some ftitiirP
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USSR-JAPAN: PEACE TREATY DIFFERENCES
Since mid-January, Soviet officials have been
making clear to Tokyo their opposition to the
conclusion of a Sino-Japanese peace-and-friend-
ship treaty. They have urged the Japanese at least
to balance it by signing a friendship treaty with
the USSR. The Japanese have resisted these ef-
forts and are determined to go ahead with the
China pact. Tokyo calculates that a Sino-Japanese
treaty will not damage relations with the Soviet
Union in any substantial way.
During the visit of Japanese Foreign Minister
Miyazawa to Moscow in mid-January, Soviet
Foreign Minister Gromyko suggested that while
the two countries continue to work on a formal
peace treaty, they conclude a friendship treaty
that would skirt the issue of Tokyo's claim to
islands seized by the Soviets at the end of World
War II. Although the Japanese rejected this
proposal, Ambassador Troyanovsky raised it again
in early February in conversations with members
of the ruling Liberal Democratic party, and on
February 13, Troyanovsky presented Prime Min-
ister Miki with a letter f om Brezhnev renewing
the Soviet offer,
In turning down the Soviet proposals, the
Japanese argue that the Chinese and Soviet situa-
tions are not identical. They say Tokyo will
refuse to sign a friendship treaty until the Soviets
agree to a peace treaty that returns the northern
territories to Japan-which the Soviets are not
willing to do.
At the same time that Moscow has been
pushing for its own friendship treaty, it has been
busy in Tokyo trying to rally latent Japanese
opposition to the treaty with China. The Soviet
actions, however, have weakened rather than
strengthened the resolve of anti-Peking elements
in Japan, and the right wingers are concerned that
they will appear as tools of Moscow if they con-
tinue their opposition to the China treaty.
Moscow almost certainly recognized from
the outset that the Japanese would not agree to a
bilateral friendship treaty and that it would not
be able to impede a Sino-Japanese treaty. The
Soviets may have had some hope that they could
get the Japanese to delete from the treaty the
anti-Soviet wording that was in the Chou-Tanaka
communique of 1972. Although they have suc-
ceeded in making this a public issue in Tokyo, the
Soviets are not likely to achieve their purpose.
The Japanese will fight the good fight with Pe-
king, but in the final analysis they are likely to
give way.
The larger Soviet purpose is to put the Japa-
nese on the defensive. When a Sino-Japanese
treaty is concluded, Moscow will contend that the
Japanese should be more "flexible" regarding the
northern territories and the whole question of a
Soviet-Japanese peace treaty in the interest of
restoring the balance in its relations with China
and the USSR. In the meantime, commercial and
economic relations of the two countries are not
likely to be seriously affected I
differences. 25X1
Miyazawa with Gromyko and Podgorny
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The Karamanlis government this week dealt
decisively with a military conspiracy aimed at its
overthrow. The Greek armed forces and gen-
darmerie were placed on alert on February 24
because of what the government termed conspira-
torial activity by officers linked to the former
junta. At least 37 officers were arrested, and more
are likely to be detained as the investigation pro-
ceeds. Karamanlis hinted that the conspirators'
awareness of his intent to move against additional
junta supporters spurred the plotters to consider
action at this time. Karamanlis pledged to con-
tinue the shake-up of the military to rid it of
those closely associated with the junta, but the
government also sought to emphasize the limited
nature of the conspiracy, suggesting the purge
may not be extensive.
The arrests have seriously weakened the
junta's power base in the army, but they have
probably not destroyed it. The government faces
the dilemma of how to remove remaining disloyal
officers from the army without further damaging
morale and efficiency or stimulating more con-
spiratorial activity. This will prove difficult be-
cause only officers loyal to the junta were chosen
for advancement in the seven years of its rule.
Defense Minister Averoff told the US em-
bassy that he was pleased by the failure of the
malcontents to rally support among the rest of
the military, and that he was determined to resist
the opposition's efforts to force the government
to conduct a general purge. The opposition, how-
ever, is already calling for a more thorough purge
of the armed forces. On February 25, some 5,000
leftist demonstrators in Thessaloniki demanded a
complete overhaul of the army and the dismissal
of the defense minister.
The Problem of Cyprus
The government is also concerned about the
domestic political consequences of the Cyprus
issue, which was discussed by the UN Security
Council this week following the declaration of a
separate Turkish Cypriot state.
Demanding punishment of coup plotters
The Greeks, as well as the Greek Cypriots,
may receive some moral encouragement from the
Security Council debate in which the Turkish
Cypriot declaration was widely criticized. The
council may also give the Greek side a face-saving
way to resume negotiations with the Turks. The
council's deliberations, and private discussions
among its members, suggest that agreement may
be reached on a change of venue for the intercom-
munal talks. They could also be expanded to
include Greek and Turkish representatives, and
possibly other participants. A more direct role for
the Secretary General in the talks is another possi-
bility.
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WESTERN EUROPE: AID TO GREECE-TUr KEY
The European NATO countries are watching
Cyprus developments with growing concern about
the implications fr, their own security, but
neither Greece no, Turkey appears prepared to
accept a role for their allies in moderating the
dispute. The West Europeans, recognizing that
they have little ability to effect a settlement, are
being cautious about aggravating the problem by
seeming to take sides or by further damaging the
US' leverage. At the same time, they are not
averse-for commercial as well as security rea-
sons-to becoming at least a supplementary
source of military aid ;o Athens and Ankara.
The visit of French Foreign Minister Sau-
vagnargues to Athens on February 24-25 is the
latest step in France's efforts to consolidate its
relationship with the new Greek government.
Three days before the visit, a French economic
aid team signed a protocol providing $30 million
credit for Greece. Earlier, the French had agreed
to sell military equipment to the Greeks and to
argue Athens' brief for association with the EC.
In an interview just before his visit, however,
Sauvagnargues reiterated that France and its EC
partners are prepared to assist Greece, Turkey,
and Cyprus to reach a settlement in line with
previous UN resolutions.
Other NATO members have taken an even
more cautious approach, reflecting their sensi-
tivity to the problems the alliance faces because
of the dispute and the cut-off of US military aid
to Turkey. The NATO allies realize that providing
military aid to either Greece or Turkey risks
damaging ties with the other. At the same time,
to the extent that they do not provide such aid,
Greek and Turkish defenses against the USSR will
be weakened, and Athens and Ankara will be
forced to look elsewhere for military hardware.
There has been little discussion in NATO
forums of military aid to Greece and Turkey. The
members are mindful that if the two countries are
forced to look outside NATO for aid, Greece's
military withdrawal from the alliance could be
sealed and Turkey could be pushed in a similar
direction. Some members are no doubt worried,
however, that any equipment sent to the two
countries could be employed in a Greek-Turkish
clash.
In the case of Greece, the attitude of the
allies toward military aid is governed by the desire
to do nothing that might jeopardize Athens'
future relationship with NATO. The basic hope is
that if Athens is not pressed, it might reconsider
its decision to withdraw from NATO's integrated
military command. So far, Greece's announced
withdrawal has gone largely L,-implemented.
NATO's Defense Planning Committee has
met only once to discuss the cut-off of US mili-
tary aid to Turkey. At that meeting, some repre-
sentatives expressed the hope that US aid would
eventually be reinstated. NATO Secretary General
Luns said recently that if this does not happen,
NATO may try to find ways to assist Turkey.
The West Germans-who, except for the US,
have been Turkey's major arms supplier-are in
the best position to meet some of Ankara's needs.
Late last year, Bonn lifted its restrictions on the
commercial sale of military equipment to Greece
and Turkey. Chancellor Schmidt and the Federal
Security Council have also agreed in principle to
lift the embargo on government sales of arms
when official cabinet approval is given. Bonn
may, however, want to make the resumption of
such aid dependent on the preservation of the
central government of Cyprus. West German offi-
cials have emphasized that under no circum-
stances will the Germans provide aid to Ankara
sufficient to compensate for the cut-off of US
aid, and they claim that Bonn will try to maintain
a balance in its aid commitments to the two
nations.
Italy is anxious to avoid any developments
that could encourage Ankara to loosen its ties
with NATO. The Greek withdrawal triggered a
divisive debate in Rome over whether Italy should
accept any more NATO bases if asked to take up
the slack in the alliance. Concern that Ankara
might follow in Athens' path may have been a
factor-along with the profit motive-in the re-
cent Italian decision to sell to Turkey 18 F-104S
aircraft, manufactured in Italy under US licenses.
There is no evidence that the UK has taken
any bilateral initiatives with either Greece or
Turkey to provide economic or military aid since
it failed to gain a mediating position in the
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Cyprus dispute. The Turkish defense minister has
publicly claimed, however , that Anakra has re-
ceived arms sale offers from the UK as well as
EAST-WEST LABOR MEETING
Labor federations from both Western Eu-
rope and the Communist states will be repre-
sented at the second East-West Trade Union Con-
ference that convenes in Geneva from February
28 to March 1. The conference, considered a
"private" meeting, is being held under the aus-
pices of the four European worker representatives
on the governing board of the International Labor
Organization. The sessions will be closed to the
press and public, as was the case during the first
Geneva conference a year ago.
During numerous bilateral discussions with
European labor leaders in recent months, the
Soviets have made a determined effort to broaden
the agenda to include political subjects. British
and West German trade unionists, among others,
have assured US officials that they are adamantly
opposed to allowing the meeting to be trans-
formed into a platform for Soviet politik.?i pur-
poses. Accordingly, the agenda is reportedly
limited to technical labor matters, such as the
"humanization" of the working environment and
the protection of workers from the effects of
toxic substances.
The meetings have an implicit political signif-
icance, however, given the prominence of the
participants, who include leading West European
trade union figures as well as the boss ol' the
Soviet trade union organization. The European
Trade Union Confederation, the World Con-
federation of Labor, and 'ie International Con-
federation of Free Trade Unions will send ob-
servers. It is likely that the Communist labor
international, the World Federation of Trade
Unions, will also be represented.
The Soviets-publicly as well as privately-
view the conference as an important step in their
continuing effort to establish closer ties with
Western labor organizations. During his recent
discussions with Finnish unionists, for example,
Aleksandr Shelepin, the head of the Soviet labor
organization, emphasized that Moscow wants
increased contacts between the trade unions of
East and West in order to develop a "continuous
cooperation and exchange" that could ameliorate
current international economic problems.
25X1 25X1
Another high-ranking Soviet labor func-
tionary told Italian labor leaders last month that
the worsening economic situation in the West
makes it more important than eves for Eastern
labor organizations to establish a dialogue with
Western trade union federations on matters of
mutual concern. As a result, he anticipates more
frequent East-West labor meetings at various
levels.
The Soviets have also been pressing for an
agreement to establish a permanent organizational
framework to accommodate further labor con-
tacts, preferably outside of the International
Labor Organization'. The prospects for reaching
an accord on this matter at Geneva are uncertain,
however, and the European members of the Inter-
national Confcderation of F-ee Trade Unions and
ti e World Confederation of Labor were to meet
yesterday to try to coordinate a position. German
and Norwegian union leaders have told US em-
bassy officials that they are strongly opposed to
such a course. Moreover, at an executive corn-
mittee meeting of the European Trade Union
Confederation early this month, not a single
member expressed support for the proposal.
On the other hand, the British Trades Union
Congress-probably the strongest Western ad-
vocate of the East-West labor dialogue-told US
officials that, while not initiating any demand for
such machinery, it is "flexible" on the question.
In addition, according to the secretary general of
the International Corfederation of Free Trade
Unions, the Norwegians, Finns, and British, in
private talks with him and other West European
trade union officials, are taking a stand in favor of
constituting a permanent standing commi
Page 14 WEEKLY REVIEW
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0 Next
le
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^
Po rtugaI's ship of stale 1)a, Iisl(cj further in
the direction of rnilrtary (orninance. III(! steps set
for ttt lasl week outlining the Arrrtecl I orce. Move-
mcrrl's role ill 11)12 goverunlental process, if unsuc-
cessfully challenged by the country's democratic
forces, (11111(1 harn',trinq any futtrr(: c:iviliae (OVern-
rnent and tend it', poticirts to the military's will,
the seven-point hrograiI) approved by the
Movement'-, 200-member General A,,,.embly
I)ropu,es ,r continuing role for the military ill
guiding f'urtugal's political I ocess, including
prier approval of all prc"sid(:nti,;i c:,nrdidates and
the right to choose both defense and economics
minister.. A ( one til'Iti(rn.d qu ranter of Icgis)ative
and veto powers for the 21-member Council of
State, which will c=ontinue to be dominated by
the military, is also pmoposed.
Under the tarns of the plogr,lm, the re-
cently rele,r,e(t econorni(. arid social plan, widely
viewed as a moderate elucunnlnt, cannot be
altered unless the changes ,1r(C .'more progressive.,'
The 111(1111, ell, further the l:lel.iii111
campaign for the constituent assembly, which has
1),,u until Mao Ii 20, will rr()1 procce(I 25X1
until the polilir,it parlies accept certain conshtu-
lion,ll In(wi',iuly, ',I't (w Ill by the Move.rrrl`nl. 25X1
'f'ill' ,11)1'1111 ,\''!, I'(11.177( 11. 1,\'I'OI.I l:
;ill:;A''I' (:01'1.1) 11,1111,C7I iV'(; I,('l'l'hl:
('II 111 IN ('OI l,'.
I t i-, not known how arnenahle the Move-
ment will be to c=hanges in ik proposals, hill it 1),r,
be orrle ac"I'.Iurnecl to having its own way in
mattol., of national policy and will not be easily
persuaded to make change;. The moderate parties
are in danger of having their opposition equated
with "reaction," which could lead to their srrl,-
pression. Another risk inherent in a contii'ued
confrontation between the moderate partm'', 111(1
the movement is that it might delay elec=tions
indefinitely.
'I here are a1:O other signs of difficult times
ahead for the moderates: extreme leftists dis-
rupted two rallies of the center-left Popular
Democrats and blew up an automobile belonging
to one of the party leaders; it Liston hilly by the
recently r(!vi'.ali'ed Christian I)ernocr,its was
disrupted on l ebrua'y 25 by rock-throwing
leftists. The al,parent unwillingness of the gov-
ernment to ensure security at all party gatherings
casts additional doubt on statements by Por-
tugal's mili'any rulers that they are well disposed
toward the development of it pluralistic dem-
ocratic society.
Page 17 WEEKLY REVIEW
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 I n r :c: a n...-4 c+ :a:_,. J n n a c .- n r 'ea'rn r inn ern nnnocTnno7cnnnnnnnnonnnn o
SPAIN: TIGHTE=NING CONTROLS
t;ontinrling political, labor, alld slhdenl
bluest is (:onllllicntin(1 the Arias (lnvernnlcnt's
efforts to liherali/e Sltahish society. -Those who
oppusc the inhudrlctloll of new lie Iol(IS
however Ino(Ierale idle Spanish soc:Joly iuo using
these displitys of popular (liscrlclIiluturcnl as ex-
antples of the (liut(lers iuvolve(I in pcrlhitting ally
(.hangs It all in Ill" system.
Ill response to critic:isnts front within the
eslithli'i1lillI, Arias Ila,, thre.alened "littler mea-
sures in (l,.tliocl will) public nlahife5L~tiolls of
unrest. Ile itonounce(I that the governittent will
riot yield tarsier the prosstue of politically nloti-
valocl -,hike,. Arrests of sh iker s have increased.
Iiiis week, tl)e police ev(!rl pronrnnrced a fhree-
ntonth ball on meetings of more Ihah 25 women's
groups of their pi.u licipation in it l00(1-
nuukol boycott (luring th:, "(lay of struggle"
sponsurecl by the cl,indestillo Tabor unions oil
I-ebruary 20.
I ollowing student disturbanr:es at tire Oil -
versity of Valladolid, the government closest tile:
campus for the remainder of the sclicol year. This
has sparked a nationwide protest and widespread
denloilsErations, especially on the day of struggle.
I or the time being at least, the demonstrations
have moved the spotlight from labor to the stu-
dents. Although the Valladolid closure served as a
catalyst, there is a fundamental discontent amourg
students and faculty with the government's edu-
cational policy especially the 1974 restrictive ad-
missions law, inadequate student representation
Ill tr;ldr`mlP ltr (Ilr'S, arid iinhlr'lll~ of tenure and
authority of professors. The education minister
an; ouhced the governtnmerit will riot reconsider its
Decision il:Out closing Valladolid, but it ordered
the release k,f the 90 students arrested on the clay
of struggle. Renewed protests this week, however,
have led to additional arrests.
The key point in Arias' liberalization pro-
gram--the development of rudimentary political
organi~alrort: rerelvcrl a setback earlier this
month when Manuel Fraga Iribarne, a prominent
moderate reformer, decided riot to form a politi-
cal association under the new Jaw. Fraga's deci-
siorl to withdraw after it l)ecanre apparent that
rightists ill the rc(lirne's National Movement
opposed his elude- is likely to persuade other
iriodelates that it is futile to try to broaden politi-
cill Iiartlclpaliolr as Arias Ira', tried to ertcoura(le.
Arias, nevertheless, professes cnrnnlltrlmm'llt to
his program. Ili an interview published last week,
he reiterated his intention to carry out long-term
political refolilts, and he held it press conference
tlli:-, week to defend his program. I-le also clis-
ntitised two rightist critics holding important posts
in the National Movement's hews media for fail-
ure to srlpp(,. I his program. The government has
also crrwked down oil critical press reporting of
cornelit unrest.
Meanwhile, it dispute over abor policy
threatens the stability of the cabinet. The labor
rnirrister has submitted his resignation to protest a
proposed law that would allow the dismissal of
striking workers. The minister had been trying to
secure passage of a decree granting a modified
right to strike. Should his resignation be accepted,
other ministers might also resign in sympathy, as
they attempted to do last October when the in-
formation minister was dismissed in a dispute
over press freedom.
The government is also trying to deal with
widespread rrun0rs that some officers are en-
couraging political dis:,.ssions in spite of recent
warnings from the mifitar; ministers to stay out
of politics. The rumors steal from the arrest in
Barcelona last week of two officers who report-
edly tried to organize a protest to the com-
manding general of the Barcelona military district
over the role of the military in maintaining public
order. The government claims the two were given
only -r month's detention for an infraction of
military discipli-ie; the foreign press and the Com-
munist clandestine radio allege that a manifesto
signed by 25 officers in Barcelona is circulating in
the army. If true, this raises the possibility of
more political discontent in the army than has
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25X1
CZECHOSLOVAKIA: ECONOMIC TROUBLE AHEAD
The Czechoslovak economy seems head(,,(!
for serious trouble despite a good performance in
1974 and high hopes for .1975. (lard-currency
deficits are growing, export volume is stagnating,
an(I inventories of industrial goods are motntting.
The same pattern produced the recession of
1961-G3 and contrib'.ited to the political unrest of
the late 1960s.
Last year, the overall growth of the econ-
omy was about 4.8 percent. Industrial production
increased 6.2 percent and agricultural output,
highlighted by a record grain harvest, was 'ip 3
percent. Retail trade grew at a rapid pace for the
third year in a row, as Prague held the line on
prices, but growth in money income and the rate
of accumulation of consumer savings slowed.
Prague hopes to conclude its 1971-75 plan
with a year of stepped-tip growth. The 1975 plan
calls for a 5.6-percent increase in national income
and a 6.4-percent growth in industrial output.
Fulfilling the 1971-75 plan is important to the
image of the leadership, especially since Czecho-
slovakia failed to complete its previous two five-
year plans. Czechoslovak officials bluntly concede
that cosmetic growth figures will be issued to
demonstrate plan fulfillment and to gloss over
any major shortfalls.
Prague's most pressing problem is its bal-
looning hard-currency deficit, which hay resulted
from stagnating export volume and spiraling
import prices. According to a Czechoslovak of-
ficial, import prices of chemicals and raw mate-
rials increased mo,e than 50 percent in the first
five months of 1974. Czechoslovakia must import
almost all of its raw rT el'als, mostly from the
USSR. The recent Soviet m(,ve to increase the
price of most raw materiais in t975-rather than
in 1976 as expected by the East L:uropeuis-will
add roughly $400 million to Prague's i poi I. bill
for 1975. To pay for the imports, Czech('.,ir-akia
will presumably have to divert a large ;mount of
consumer goeJs from hard-currency markets to
the USSR.
Price increases accounted for most of the
20-percent Growth in exports last year. The
raising of export prices to offset higher import
prices cut deeply into Prague's limited Western
market for ntachinury, its major export. Long
oriented to Soviet and Last European inarkets,
Czechoslovakia industry has lost its prewar reputa-
tion for quality and has fallen far behind Western
technology. Even within CEMA, Czechoslovak
machinery no longer ('njoy.s a pronounced tech-
nological advantage. Oil the domestic Side, Stocks
of industrial products are piling up, notably
metal-working machinery and locomotives. Stocks
increased more than 6 percent in 1973, and this
trend reportedly continued into 1974.
'/I/!; SAM/` !i(;ONI)lll(; 1',17"I 'l;/l;\' I'/Z(1
/)f T(;lit) '1'l1li I?li(;liS.51ON Ul 196149(._l,
iINO (;ON'1'R1/1l/'/7iD '/'() UN-
R S'I'IN'I'll/i I,;t'I'll OOS.
Prague has made some attempts to ease its
difficulties. Enterprises that have not taken steps
to control import costs ere losing their independ-
ence in foreign trade matters. In addition, a
c~.istoms tariff was impose(] in January to cut
nonessential imports. Neither m ve, however, will
spur exports, soften the impact of hig;)er import
prices, or reduce inventory costs. The difficulty
facing th?2 leadership is that any economic solu-
tion must be palatable to political hard Diners.
Czechoslovakia wil! probably shift its invest-
ment policy in favor of export industries in order
to come to grips with its trade and inventory
problems. It will piobably want to import more
Western machinery and technology, drawing on
its excellent credit rating, and will go even deeper
in debt. It will then probably put a tighter rein on
wage increases, a moratorium on improvements in
living standards, and cutbacks in imports of
consumer goods from the West.
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Feb 28. 75
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OPEC: PRODUCTION CAPACITY GROWING
Production capacity of the members of the
Organization of PetrolcLm Exporting Countries is
still growing, despite a .cries of production cuts
and a continuing worldwide surplus of crude oil.
By late surnmer, OPEC states will be producing
approximately 25 million barrels a day--about 60
percent of developed capacity.
Oi! production capacity in these states has
now reached a record 38.8 million barrels a day,
up from 36.2 million in May---the peak mm.- th of
production in 1974. Actual production is now
only about 27 million barrels a day, leaving nearly
12 million barrels a day in r .:ss capacity.
If the OPEC states--principally Saudi Arabia,
Iran, and Iraq--maintain their current schedules,
as they seem intent on doing, another 2 million
barrels a day will be added to capacity by late
summer. World demand will prooably decline by
an additional 1 to 3 million barrels a day by that
time, so that unused capacity will then run be.
tween 15 and 17 million barrels a day.
OPEC members generally believe that fur-
ther production cuts may be re wired to sustain
riccs.
TP_
Other OPEC states have also made studies that
indicate a need to cut production substantially by
next summer. At the same time, some Arab pro-
ducers arc already dissatisfied with the large cuts
they have had to absorb. Indeed, Abu Dhabi,
Libya, Iraq, and Algeria arc likely to try to raise
output in the next few weeks. With demand on a
downward trend, such increases will be possible
only if other OPEC members make corresponding
cuts.
Thus far, production cuts by the interna-
tional oil companies and producing governments,
acting alone or in concert, have effectively
reduced total oil supplies of OPEC members to a
level only slightly in excess of demand. In some
cases, however, the companies favored or penal-
ized certain countries because of price differ-
entials. The OPEC Commission, recognizing that
prices were out of line, recently recommended a
new set of price differentials designed to make
the cartel's price system more secure.
When declining demand leads to production
cuts by the companies, it is in the cartel's interest
to spread the reduction among its members, or
perhaps to concentrate it on the states that least
need the money. If the companies focus produc-
tion cuts in a single country, that country may
overcompensate for its disadvantage by lowering
prices. This danger is greatest in countries that
need more export earnings to cover import costs.
This ad h-)c, largely company-managed
method of suppoi ling the cartel price probably
will become increasingly difficult to maintain, in
view of the desire of several OPEC members to
increase production. It thus seems likely that a
formal scheme to prorate production will be put
on the OPEC agenda in tha near future.
The Organization of Petroleum Exporting
Countries is hard at work preparing for its summit
conference, scheduled to begin on March 4 in
Algiers. A preparatory conference of oil ministers
was held this week in Vienna; another meeting-
-of oil, finance, and foreign ministers-is planned
fcr Algiers just before the heads of state convene.
The summit will be the first held by the 13-coun-
try organization in the 15 years of its existence.
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The Algerians-who came up with the idea-
are trying to muster full attendance. They have
sent envoys to several countries to urge the head
of state to attend, but as of February 27 it was
uncertain how many would participate. The Shah
of Iran reportedly plans to come. Libyan Pres-
ident Qadhafi will not attend. King Faysal repo: t-
edly intends to send Prince Fahd, the second
25X1
The Alg,~', summit is expected to issue a
declaration of principles, presumably a guide to
OPEC's stand at a subsequent producer-consumer
the dialogue with consumers could be
in
g
in arcs toward the end of March_ with final
sign-level meeting sometime this summer.
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 rlonl~cciFiorJ ir, D~r+ Q--i+i-, 4 r--.. Arsrsr-,d Fr`r Dol-o 7(117/(11/(1Q ? ('In Dr)DQ T(1(1Q7FD(1(11(1(1(1(1Q(V11(1 0
LATIN AMERICA: NEW BOOTSTRAP MENTALITY
The Latin Americans seem generally dis-
posed to let the inter-American dialogue languish,
believing apparently that any initiative to warm
regional relations with the US is up to Wash-
ington. Indeed, the series of blows to the concept
of a renewed partnership between the US and
Latin /-'%merica has infused new vitality into the
Latins' drive for new Modes of regional coopera-
tion designed to free the area of dependence on
the US.
Intense diplomatic activity among the
Latins, often led by Venezuela, he- broadened
alertness to issues affecting the region. The highly
nationalistic governments-especially Venezuela,
Peru, and Ecuador, joined regularly by Panama-
have become increasingly effective at sweeping up
even reluctant countries onto their bandwagon to
promote the rights of the undeveloped nations
and the obligations of the rich ones. Some govern-
ments are privately critical of the stridency and
assertiveness of this campaign but are loath to
break regional solidarity and hesitant to offend
Venezuela, a new source of petroleum and credit
for the area.
Anti-US rhetoric on a variety of issues has
'.loot diminished since the postponement of the
;titer-American foreign ministers' meeting. The
US Trade Reform Act remains a favorite target
throughout the region. Mexico and Peru continue
to beat heavily, too, on the theme of US espi-
onage and intervention. Further criticism will
inevitably flow from a series of conferences over
the next month or so. On March 10, the Inter-
American Economic and Social Council convenes;
the Andean Pact countries will reconvene on that
same date after a three-week delay to devote
further study to the trade act; the UN Industrial
Development Organization will open in Lima on
the 12th; the Executive Board of the nonaligned
countries will be in Havana on the 17th. Also,
Venezuelan President Perez will carry his third
world call for a "new economic order" to the
OPEC summit at Algiers in early March and will
continue on to Mexico for a five-day visit starting
on i'"e 17th. The following week, he will join the
presidents of Colombia and Costa Rica in Panama
to consult with General Torrijos. Various other
subregional negotiations are also in progress.
All this diplomatic contact is not mere com-
miserating over common grievances. Increasingly,
the small countries aYe becoming sold on the
notion that, working together, they can begin to
achieve the material gains now enjoyed by the
highly industrialized nations. They are talking of
setting up regional enterprises that could compete
with the privately owned multinational corpora-
tions. One idea under active discussion is a Carib-
bean maritime fleet. Another is to glean more
from their traditional resources by emulating
OPEC in setting joint prices for their com-
modities. Schemes that once seemed visionary to
these nations are now being viewed as within their
grasp.
Few if any of the Latins want :o cut off
links with the US, but the broad disappointment
over US preoccupation with other parts of the
world in recent years has left them with the
feeling that Washington is not "reliable." Thus,
they are increasingly attracted to regional
"bootstrap" programs and to alignments with
other less-developed countries, which they believe
will constitute more realistic answers to their
needs. Even Brazil, which is rarely in step with
the smaller Spanish American nations arid is
skeptical of much of what they do, has nct tuned
out the suggestion of a Latin American economic
system excluding the US-a favorite program of
Venezuela and Mexico.
The indefiniteness of when Secretary Kis-
singer wili make his proposed trip to South
America and of the date for the OAS General
Assembly adds to the jaundiced view of the
dialogue. Nevertheless, sever ]l of the governments
have expressed hope that Kissinger's visit will
serve to put US - Latin American relations on a
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Since Juan Peron's death, Peronist leaders
have made no effort to conciliate the left, even
refusing to admit publicly that the left has broken
away from the Peronist movement. The leaders'
pians to exclude other Peronist groups from of-
ficial participation in the Misiones elections,
however, betray a deep-seated concern that the
left-if united-could do well in the balloting and
be encouraged to contest other provincial races as
well as the presidential election in 1977.
The preoccupation with elections and the
political future of Peronism is also reflected in a
growing rivalry within the cabinet. There is evi-
dence of recurring feuds over policy matters
between Lopez Rega and Interior Minister Roca-
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This infighting may eventually bring about
the demise of Peronism as a major political force.
For the present, however, it is less urgent than the
probiams with labor. The absence of effective
political leadership in Argentina will mean that
labor demands cannot be resisted for long, with
or without the economic minister. When higher
wages come, renewed rounds of price rises will
trigger further labor and ccnsumer unrest.)
ARGENTINA: MOUNTING PROBLEMS
Galloping inflation, growing fractiousness
within Peronist ranks, and recurrent cabinet
squabbles are continuing to point up the absence
of strong national leadership. Although a surface
calm now exists, Mrs. Peron faces a challenge
from Peronist labor leaders-her major political
supporters-which could force the government to
abandon efforts to stabilize the economy.
Since November, the cost of living has
incre.sed nearly 40 percent. If the current pace is
maintained, inflation in 1975 coulc' easily match
the back-breaking rate of 60 percent experienced
just before the Peronists returned to power. With
previous salary gains eaten away by this inflation,
labor has called for a renegotiation of all con-
tracts before wage-and-price controls expire in
June. The recent rise of Peronist union chief
Casildo Herreras has infused new dynamism into
the labor movement. Herrera is attempting to
consolidate his position by challenging the gov-
ernment's wage-and-price policies.
Despite official claims that real wages went
up 10 percent or more last year, only the lowest
paid workers appear to have enjoyed such an
improvement. On the other hand, the purchasing
po' ver of higher paid, skilled laborers seems to
have eroded slightly; inflation more than offset
several rounds of wage hikes that added an aver-
age 36 percent to the salaries of higher paid
workers last year. As a result, labor's complaints
that real wages have declineu appear justified.
The higher inflation rate is a direct result of
Economy Minister Gomez Morales' loosening of
price controls last November. The controls were
creating serious financial difficulties for large
businesses. Freer prices have not only saved many
firms from hankruptcy, but have also eased short-
ages of numerous producer and consumer goods
and have led to a sharp drop in black market
activity. The resulting hikes in the cost of living,
however, have created a serious problem for Mrs.
Peron's government in general and for Gomez
Morales in particular. If Gomez '4orales refuses to
yield to demands for accelerated wage boosts,
Mrs. Peron will probably be forced to sack him to
avoid labor violence.
The increase in frustration is not restricted
to the labor movement. The gove r.ment report-
edly has already moved to counter a challenge
from leftist Peronist youth by barring the
recently organized "Partido Descam isado" from
fielding candidates in the provincial election in
northeastern Misiones Province next month. The
decision to move against the Partido Descami-
sado, named after Juan Peron's "shirtless ones,"
was approved by Lopez Rega, who is Mrs. Peron's
chief confidant. Hi-, ire may have been roused
earlier this week when Descamisado leaders
denounced as political opportunism an official
announcement of major social welfare projects
for the province.
Feb 28, 75
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Last week, the government began formal
negotiations with local representatives of the US
companies, which will lead to reversion of their
concessions and facilities. Weekly meetings with
the major oil firms are expected to continue for
the next several months to work out details of the
take-over. Perez had promised to nationalize the
company holdings in 1975, but the effective
transfer cf assets will take some time. At least one
oil company official has commented that the
initial meeting with government negotiators went
well and that he was impressed with the business-
like attitude of the Venezuelan team. One team
member, retired General Rafael Alfonso Ravard,
The talks will focus on the role-if any-that
the companies will be permitted to play in the
nationalized industry. The companies hope to
maintain a marketing role and, in return, to sup-
ply technology to the Venezuelans; compensation
is not expected to be a major stumbling block in
the discussions.
Venezuelan officials are acutely conscious of
their need for continued access to petroleum
technolcgy, supplies, and equipment, which are in
the hands of the industrialized nat,ons and major
multi rational corporations. Technology and
equipment are considered essential for the future
recovery of oil from traditional reservoirs in
Venezuela as well as for the development of
production in new areas such as the Orinoco Tar
Belt, and the Gulf of Venezuela and other off-
shore locations. Little of this equipment is cur-
rently available in Venezuela, although the Presi-
dent has launched a crash overseas training pro-
gram to meet the country's technological needs.
The reversion talks with the oil companies
will run concurrently with congressional debate
on the government's draft expropriation law,
which Perez will send to Congress next week;
another presidential dacree will create a holding
company to replace the present 22 conces-
sionaires. Nationalistic sentiment is running high
in the country as well as in Congress, and Perez'
current dispute with the US over the Trade Re-
form Act could complicate negotiations.
Venezuelan officials nevertheless hope that
current differences with the US can be settled in
an amicable fashion and that future relations will
be cordial. Perez is not above orchestrating public
opinion to justify his petroleum policy, however,
and he appears to relish his assumed role of David
VENEZUELA: THE FINAL PHASE STARTS
The Perez administration has taken a key
step toward nationalizing the petroleum industry,
which is largely foreign-operated and the only
major extractive industry still in private hands.
Petroleum is the major source of the country's
foreign exchange and revenue.
will head the oil industry following nationa:iza-
tion. US petroleum representatives are relieved
that the long-awaited talks have finally begun, but
they readily acknowledge that hard bargaining lies
ahead.
Feb 28, 75
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.'~'A I I LJ/~ I
against the US Goliath. Although the foreign oil
firms are hopeful that a new working relationship
can be reached with Caracas, the course of the
negotiations will be affected by internal political
factors in Venezuela as well as by Perez' problems
with the US over the Trade Reform Act and
Venezuela's petroleum pricing policy as a member
of OPEC. There is no indication that he intends
to back down in any of these disputes, and there
is considerable evidence that he intends to keep
up the pressure to get what he wants. If relations
with Washington continue to deteriorate, the
local oil industry could become directly em-
broiled in the dispute.
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Feb 28, 75
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