WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001000080028-9
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 31
• Document Creation Date: December 27, 2016
• Document Release Date: May 11, 2010
• Sequence Number: 28
• Publication Date: June 13, 1975
• Content Type: REPORT

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~el~lly Review
Top Secret
Top Secret
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CONTENTS (June 13, 1975)
,J:_ J :very Friday morning by ;hc
;~.i..,'IIt I tic lip ( .::.-., -,,,orr : and analyzes signiiic ant EUROPE
f; v
,)i th 'a
c or.iah noon on Thursday. It it=
ii_r:nt~~ i,t 't;~;r n ~~n : din_;ted with or prepared by tho
th.? Office of St
raic:ciic
H?: ?_xtrch, i:: Otiirc: G ~>:~_-jraphir and Cartographic
of Science and Technology.
i c:PiCS !;ui,-inq more
comer pensive treatment 7,id
,_is Special Reports no lictch 25X1
u, th c??r ...
MIDDLE EAST
AFRICA
WESTERN
HEMISPHERE
EAST ASIA
F'?.CIFIC
1 Portugal: Facing Tough Problems
2 Angola: On the 3rink
4 Consortium Defends D,3c:;ion
6 Cyprus: Inconclusive Talks
6 UK: Closer r "es to Europe
8 Italy: Election Campdign Windup
9 Finland: Government Resigns
9 France: Nuclear Testing Resumes
14 Iran: Air Power and Air Defense
15 Ethiopia: Another Insurgency
16 Libya-Egypt: Undermining Sadat
17 Argentina: Safeguards; Labor
18 Guatemala: Grounds for Divorce
19 Colombia: Declining Public Order
20 Dominican Republic: Crackdown
20 Peru: New Economic Measures
22 Cambodia-Vietnam: Territorial
Disputes; Cholera
23 Burma: Renewed Protests
24 Australia: Cabinet Changes
24 Laos: Consolidating Control
China-Philippines: Diplomatic Ties
28 China: Trade Retrenchment
Comments and queries on the contents of
this publication are welcome. They may he
direciad to the editor of the WPekh, eview,
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Portugal: Facing TouVaah Problems
^
An incipient rebellion in the Azores added
to Portugal's troubles this past week when
separatists turned a farmers' protest demonstra-
tion into a ral:y for independence from the
mainland. The demonstrators forced the resigna-
tion of the civil governor of Sao Miguel Island,
thus dramatically focusing Lisbon's attention on
the growing independence sentiment in the
Azores.
Lisbon's response was twofold: it promised
a sympathetic hearing to the Azoreans' legit-
imate economic grievances, while at the same
time clamping tight restrictions on separatist
activities. On June 10, Portuguese authorities
arrested 29 suspected leaders of the movement
in Sao M'auel. The leftist-controlled media in
Portugal are criticizing military and police of-
ficials in the Azores for their handlii,g of the
demonstration, and a purge of Portuguese
representatives in he Azores known to h., in
sympathy with the separatists seems likely to
follow.
Unlike Portugal's African colonies, the
Azores are regarded as an integral part of the
mainland. Lisbon will probably yield to many of
the economic demands of the Azoreans, but has
mad-2 known its strong opposition to the
nascent independence movement.
Although the separatists have demon-
strated that they have the necessary following to
create public disturbances, they have also shown
themselves to be badly organized and extremely
vulnerable. Further demonstrations by the
separatists have been proscribes; by the Portu-
guese authorities, and the movement is expected
to go underground for a wIiile.
Meanwhile, Lisbon is faced with serious
problems in Angola where the military situaticn
continues to worsen. Hostilities between the
Popular Movement for the Liberation of Angola
and the National Front are pushing the territory
to the brink of civil war. Additional Portuguese
troops were airlifted to Angola last weekend,
but leading Portuguese military authorities are
in general agreement that there is little they can
do to control the fighting there. Continuing
strife in Angola will lead to a further exodus of
refugees to Portugal and a further rise in un-
employment there. Even more important, the
Angolan developments will cast a pall over the
Armed Forces Movement's most significant
achievement to date-decolonization.
On the home front, the festering dispute
between the Movement and the Socialist Party
over press freedom abated somewhat after the
Socialists agreed to remain in the coalition gov-
ernment in exchange for the reopening of the
party newspaper, Republica. The critical issue in
the Republica dispute-whether the Communist
printers or the Socialists' editorial board would
exercise control of the paper-was resolved by
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the government in favor of the Socialists. The
printers are still demanding a voice in editorial
policy, however, and the agreement could come
unglued at any time.
A potentially explosive conflict with Por-
tug-il's Catholic Church is also gathering momen-
tum. Lisbon's Cardinal Ribeiro told US embassy
officials that Communist seizure of the radio
station operated by the Church and government
interference in parochial schools are rapidly
leading to a church-state confrontation. De.iun-
elation of Movement policies from the country's
pulpits could deal a crippling blow to the ru!ing
military's already waning popularity.
Portugal's leaders are not faring any better
in their efforts to solve the nation's zconomic
headaches. When EC Council President Garrett
FitzGerald visited Lisbon last week, government
officials pleaded for EC assistance to shoYP up
the sagging economy. FitzGerald noted that EC
loans could be made only for specific projects
and not solely to reduce balance-of-payments
pit:,sures. As has happened repeatedly in the
past, the Poi iuguese were unable to come up
with specific proposals. FitzGerald emphasized
the need for Portugal's political development
along democratic lines and a reduction of corn-
munist influence
FitzGerald himself is prepared to argue
within the EC for early aid. EC foreign ministers
may agree in principle to be forthcoming with
assistance to Portugal when they meet later this
month, but implementation of more generous
terms for renewing the trade agreement will be
tied to the further course of events in Portugal.
The US embassy in Lisbon has reported
growing popular disenchantment over the direc-
tion of Movement policies and its seeming
inability to cope with the country's urgent prob-
lems. While the embassy believes Portugal's
experiment with consensus government could
still continue for a time, it also believes that
there is a possibility of one-man rile if the
government does not soon begin to deal more
Ango'a: On the Brink
The rival armies of the two main nation-
alist groups in Angola's transitional government
again engaged in heavy fighting in Luanda dur-
ing the past week. Coming on top of recent
clashes between the same groups throughout a
wide area north and east of the capital and in
tt,: exclave of Cabinda, the latest round of fight-
ing appears to have edged the troubled territory
closer to all-out civil war.
Most of the fighting over the past three
weeks was touched off by the Soviet-backed
Pcpular Movement for the Liberation of Ango!a,
which has become militarily stronger than it was
last winter when the National Front for the
Liberation of Angola appeared to have a decided
edge in troops and guns. At present, neither the
Popular Movement nor the National Front has
the supplies or mobility to force a military
showdown. Both groups appear to be preparing
for such an eventuality, however.
Outside Luanda, each croup has now
largely secured the areas in which its ethnic
support is strongest, clearing them of the troops
of the rival organization. This development has
undermined a key provision of the independ-
ence accord that all three nationalist groups
signed with the Portuguese Dist January. I t had
assured each group the right tr engage freely in
political activity throughout the territory.
In the capital, where three rounds of fight-
ing have occurred since March, neither group is
clearly dominant at this time. The initiative
seems to rest with the Popular Movemc.-it, which
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also appears to be in a good position to disrupt
the National Front's supply routes to the city
from northern Angola. Portuguese forces in-
tervened in the latest Luanda fighting more
forcefully than in the past, losing at least three
dead. After the fighting ended, the Portuguese
raided arms depots in the city, a move that
could throw the Popular Movement and the
National Front off balance for the time being.
In Cabinda, representatives of the three
nationalist groups reportedly signed a cease-fire
that calls for each group to maintain only, a
token military force in the largest city. During
the fighting, the Popular Movement, which has
been active in Cabinda much longer than its
rivals, apparently succeeded in driving forces of
the National Front from the city and the adjoin-
ing countryside.
Further serious fighting seems un.'kely,
pending the outcome of a meeting of the leaders
of the three groups that is scheduled to begin in
Nakuru, Kenya, on Sunday. The meeting was
promoted by Jonas Savimbi, head of the Na-
tional Union for the Total Independence of
Angola, smallest of the three nationalist groups.
Savimbi has emerged as a conciliator in recent
months. His group has tried to stay neutral, but
was drawn into the recent fighting in Luanda.
At "the Nakuru meeting, Savirnbi, Popular
Move:,R,~nt leader Agostinho Neto and National
F.-ont president Holden Roberto, as a means of
easing competition among them, may discuss
postponing cor:stituent assembly elections until
after Angola receives independence in Novem-
ber. They may also try to reach agreement on a
candidate to ;iez 3 a post-independence govern-
ment., It seems clear that any bargains struck at
the meeting will only serve to postpone a final
r".ckoning between Roberto and Neto, who
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Consorflu
fend
nisi?n
After more than a year of intensive nego-
tiations, the four-nation consortium composed
of Belgium, Denmark, the Netherlands, and
Norway has agreed to buy the US-made F-16
fighter as a replacement for the obsolete F-104
aircraft. Some of the governments, however,
face sharp domestic criticism as a result of their
decision, which is regarded as a blow to hopes of
developing a European aircraft industry. The
opposition parties as well as the left wings of the
governing parties in these countries may revive
the issue if defense spending and unemployment
become contentious questions in the future.
France spearheaded the campaign to "buy
European," and vigorously promoted its Mirage
F-1E. Francophones in the bilingual Belgia.i gov-
ernment favored the Mirage, and Prime Minister
Tindemans may be in political difficulty as a
result of the decision. There wee veiled hints
that Paris might consider cooperating in Euro-
pean defense matters if the consortium chose
the Mirage. Sweden, with its entry, the Viggen,
tried to exert pressure o:' Denmark by stressing
"Scandinavian solidarity" and, like France, of-
fered a substantial eleventh-hour price reduc-
tion. All three planes fulfill NATO require-
ments, but the greater production run for the
F-16-which was also selected by the US Air
Force--made the American entry the best eco-
nomic choice. Additionally, some countries may
get sub-contracts for F-16 components that will
exceed their expenditures for the planes.
Last month, Denmark, the Netherlands,
and Norway agreed to purchase the F-16 pro-
vided Belgium followed suit. The decision was
most difficult for Brussels because of its strong
cultural ties to Frame and the extensive French
business interests in 3elgium. Two of the three
parties in Prime Minister Tindemans' coalition
government have French-speaking wings, and
the other is entirely French-speaking. Neverthe-
less, the government won a narrow vote of con-
fidence in parliament yesterday following a chal-
lenge by a French-speaking opposition party
that favored the Mirage.
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The minority Social Democratic govern-
ment in Denmark also has been criticized for its
choice of the F-16, but easily won pro forma
parliamentary approval on Wednesday despite a
Communist-inspired demonstration in Copen-
hagen earlier this week. Nevertheless, Stock-
holm's last-minute offer to Copenhagen of a
25-percent reduction in the price of the Viggen
may yet cause Prime Minister Jorgensen prob-
lems in Denmark, where there are few sup-
porters of large outlays for defense.
The Dutch government also encountered
opposition, especially from leftists in parliament
who oppose the purchase of any plane to re-
place the F-104. Prime Minister den Uyl, how-
ever, has the backing of the coalition parties for
his decision, which was predicated on a unani-
mous choice by the consortium, and does not
require parliamentary approval. Nevertheless,
one of the small parties in the five-party coali-
tier has called for an investigation to determine
whether the aircraft companies may have tried
to influence The Hague's selection. Although
the debate over the government's decision will
probably subside gradually, developments at the
recent Dutch Labor Party congress are indicative
of growing anti-Americanism in Dutch political
life that Dutch leasers will have to deal with
before the elections ir, 1977.
Only the Norwegian government can ex-
pect little challenge over its choice. A strong
supporter of NATO and the Atlantic com-
munity, Norway attaches great importance to
Western defense cooperation. In additinn, Osio's
oil wealth will enable it to maintain a relatively
effective defense contribution to NATO, while
at the same time underwriting the extensive and
expensive domestic social welfare programs that
Norwegian voters demand.
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Another inconclusive round of inter-
communal talks was held in Vienna last week
under the auspices of UN Secretary General
Waldheim. Greek Cypriot negotiator Clerides
and Turkish Cypriot negotiator Denktash could
not come to grips with major issues because the
constitutional committee commissioned at the
first Vienna round last month failed to make
any headway on the powers of the central gov-
ernment in the proposed federation. The nego-
tiators, apparently under pressure from Athens
and Ankara, went through the motions in order
to maintain the cordial atmosphere created at
the meeting of the Greek and Turkish prime
ministers in Brussels. last month.
On June 13, the UN Security Council will
hear Waldheim's noncontroversial report on the
status of a negotiated Cyprus settlement. It
notes the lack of progress, but calls for the
continuation of negotiations between the two
parties. Waldheim, reported to be displeased
with the slow pace of the negotiations, is aware
of the need to preserve the present negotiatin
UK: CLOSER TIES TO EUROPE
The negotiators did have some heated ex-
changes. Denktash refused to set forth concrete
positions or, the territorial and refugee questions
as promised in the earlier round, citing as justifi-
cation the lack of progress in delimiting the
structure of the proposed federation. He pre-
sented some tentative views on the powers and
functi-ns of the central government and also
propo d that a joint transitional central govern-
ment be established, pending a final settlement.
Clerides did not respond to the proposals
on the central government because Denktash
had refused to discuss the territorial and refugee
issues. Clerides did give conditional acceptance
to the proposal for an interim government, and
both men agreed to examine the idea in detail
after the talks. It is doubtful they can agree to
an interim authority with jusrisdictioo o~-~r
significant political matters.
The talks adjourned on June 7-two days
ahead of time-because of the constitutional ref-
erendum for the Turkish Cypriot zone on June
8. Denktash reiterated that the corstitution-
which was approved by an. overwhelming mar-
gin-is subject to revision when an overall settle-
ment is reached. The negotiators agreed to meet
in Vienna between July 24-27, but this will
depend on further developments in their in-
formal consultations in Cyprus, the progress
made by the institutional committee, and the
state of relations between Athens and Ankara.
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The substantial margin by which British
voters approved continued participation in the
Comr,'on Market signals changes in both domes-
tic political alignments and in Britain's relation-
ships with the EC.
Prime Minister Wilson's cabinet reshuffle
may have eased post-referendum tensions in
Britain, but the EC states may respond coolly to
at least one of the change. by shifting anti-EC
leader Anthony Benn from industry minister to
secretary of state for energy, Wilson has mini-
mized the adverse domestic reaction that would
have res,ilted from demoting him to a i .ss pres-
tigious post. Nevertheless, some questions will
be raised about the wisdom of placing Benn in
the sensitive energy cost. Britain has not been
enthusiastic about supporting a common EC
energy policy, and Benn's appointment may be
taken by the EC as a signal that the UK intends
to continue its independent line on energy
matters. Benn's debut on June 26 in the EC
Council debate on new energy proposals should
provide some indication of whether his appoint-
ment portends continued British reservations in
this arei of EC cooperation.
The pledges of support to the government
by all seven anti-EC ministers immediately after
the referendum and Wilson's careful changes in
the cabinet appear to have restored Labor Party
unity for the time being. The cabinet reshuffle
has been accepted with a minimum of grumbling
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rrune Minister Wilson announces that the British people voted overwhelmingly to stay in in the EC
by the British public, and Wilson hp . avoided
the necessity of forming a coalition government,
as Conservative Party leader Margaret Thatcher
had suggested.
The Conservative Party leadership may
eventually be affected by the outcome of the
referendum. Thatcher lost considerable prestige
by the low profile she maintained in the cam-
paign, in contrast to the extremely favorable
pt. 'lic response to the vigorous pro-EC cam-
poign waged by her principal rival, former prime
minister Edward Heath.
Britain's partners, although they had as-
sumed the referendum would be positive, never-
theless were relieved that the uncertainty over
UK membership had been removed. Typical of
the public reaction in Western Europe was Ger
man Chancellor Schmidt's comment that he
greeted the outcome with "sz.tisfaction and
joy," and Commission President Ortoli's remark
that the vote marked a "new point of de-
parture" for the EC. Danish politicians, mean-
while, were particularly glad that the results in
Britain obviated the need for a referendum in
Denmark.
Community diplomats are aw;re, howevor,
that the referendum only establishes the mini-
mum condition for development of the EC and
does not assure it. They will be disappointed if
London does not soon bee i to show a more
positive attitude toward the ,.ommunity, at least
by the next EC summit in mid-July.
Now that the British voters have reaffirmed
support for continued membership in the EC,
the Labor Party will soon end its long boycott
of the European Parliament by choosing its
representatives to that organization. The British
trade unions have also announced their inten-
tion to join various EC committees.
Although these actions would have a defi-
nite invigorating effect on the community, a
more important indication of British attitudes
will be London's recommendations for the re-
port on the next steps toward European Union
being prepared by Belgian Prime Minister Tinde-
mans. Britain, along with Denmark, has not yet
committed itself to direct elections to the Euro-
pean Parliament by 1978. However positive
London's attitude toward getting the Com-
munity moving again, concern persists that
Britain's economic problems may lead to various
calls for special treatment that would again test
EC solidarity. The EC Commission has quietly
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The campaign for regional and local elec-
tions on June 15-16 ends today, with the
dominant Christian Democrats still hoping to
keep their losses to the left within the 2-3 per-
cent range by attracting increased support from
moderate and conservative voters.
running on joint slates with the Communists in
more localities this year than ever before. The
Socialists, caught off guard, merely reiterated
their demand for a "free hand" at the local
level.
The harsh d-bate between the Christian
Democrats and the Socialists continued to
dominate the campaign in its final week. Atten-
tion was distracted from regional and local
issues throughout the campaign by discussion of
what vote would mean for national po!itics.
The entire Socialist campaign has been an
elaboration on two of their most widely broad-
cast electoral slogans: one advising voters that
"Italy is changing, but the Christian Democrats
are not," and the other asserting that a vote for
the Socialists is the only vote for the left that
will "really bother the Christian Democrats."
They charge that the Christian Democrats, after
nearly 30 years as Italy's dominant party, are
too corrupt and conservative to respond to the
problems that have accompanied rapid social
and economic change in Italy. Concerned that
voters inclined to switch to the left might turn
to the Communists, the Socialists have insisted
that theirs is the only party-by virtue of its
acce--s to the government-that cen actually use
leftist votes as leverage against the Christian
Democrats.
The Christian Democrats, while claiming
credit for Italy's postwar transformation to an
industrialized sot.iilty, have hit hard at the
Socialists' failure to advance specific proposals.
Christian Democrat leader Fanfani, meanwhile,
has continued to dramatize the need for tough
law enforcement and to attack the Socialists for
their equivocal attitude toward anti-crime meas-
ures re'.ently passed by parliament.
Fanfani also stepped up his attack this
week on the distinctior: the Socialists make
Among the reasons the Socialists insist on
this point is the fact that they may have an
opportunity after the elections to join the Com-
munists in administering two more regions; they
already share power with the Communists in the
latter's north-central strongholds of Emilia-
Romagna, Tuscany, and Umbria. The two
parties now stand a chance of gaining slim
majorities in the neighboring regions of Marche
and Liguria.
Foreign policy issues continued to hinder
the Communists in their efforts to campaign on
the claim of running efficient administrations at
the regional and local levels. Communist chief
Berlinguer has complained, for example, about
the preoccupation of the press with such issues
as Portugal and relations with Moscow. The
Communists, nevertheless, have mounted a
vigorous and well-organized campaign and are
likely to continue their postwar trend of steady
gains at the polls.
As the campaign drew to a close, party
leaders began to think out loud about the future
of Prime Minister Moro's Christian Democratic -
Republican coalition, still widely regarded as a
stop-gap measure to get the country through
the elections. Most comments were cautious,
howaver, and no party leader is yet demanding
Moro's resignation right after the elections. The
Socialists would probably trigger a crisis if they
scored dramatic gains-upwards of 3 percent for
example-but even they seem more inclined to
leave Moro in place through the summer. That
would give both the Socialists and the Christian
Democrats time to firm up bargaining positions
on the tErms for a new government and to have
between
themselves and th? Communists.
He them approv
ed by
their respective party
con-
produced
elaborate statistics, for example,
to gresses, tent
atively
set for the fall.
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support
his argument that the Socialists
are
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FINLAND: GOVERNMENT RESIGNS FRANCE: NUCLEAR TESTING RESUMES
The deeply divided four-party cralition
broke up after failure of repeated attempts to
resolve persistent disagreements. The dispute be-
tween the two major coalition partners-the So-
cial Democrats and Kekkonen's Center Party-
started in April when the Center Party an-
nounced it would not support the government's
regional development package. Despite Kek-
konen's intervention and intermittent efforts at
cooperation, neither major coalition partner was
willing to compromise.
54.6 percent of the electorate, compared with
Opinion polls indicate that both the Social
Democrats and the Center Party would
strengthen their parliamentary representation in
a new election. A Gallup poll published last
month indicated that in an election the Social
Democrats would garner 27 percent of the votes
and the Center Party could count on 18.7 per-
cent. The same poll indicated that the four
parties represented in the present coalition-the
Social Democrats, Center Party, Liberals, and
the Swedish Peoples Party- -are supported by
ourges said in a communique that the test was
a complete success both from the technical v,id
safety points of view.
Paris' decision to resume underground nu-
clear testing follows several years of protest
against French atmospheric tests in the Pacific
by Australia, New Zealand, Japan, and several
west coast Latin American countries. Bourges'
mention of the safety factor probably was in-
tended to head off another round of protests.
International reaction to the detonation has
been muted. Australian Prime Minister Whitlam
noted that France was refraining from con-
ducting atmospheric tests in the Pacific; how-
ever, both he and New Zealand Prime Minister
Rowling reaffirmed their countries' opposition
to any type of nuclear explosions-whether
atmospheric or underground.
President Kekkonen has scheduled parlia-
mentary elections for September 21-22 follow-
ing the resignation of Prime Minister Sorsa's
center-left coalition government last week. Kek-
konen will probably wait until next week to
dissolve parliament; work should have been com-
pleted by then on several important bills.
The President is expected to appoint either
a non-political government of civil servants or a
"presidential" caretaker government that would
remain in office until a new cabinet is formed. A
"presidential" government would consist of na-
tionally known political figures serving at the
request of the president and with the permissioi'.
of their respective parties. Kekkonen may opt
for the latter solution because the conclusion of
the European security conference will probably
take place in Helsinki this summer or fall, and
the President wishes 'a have a group of dis-
tinguishr d national figures representing Finland
as the host government.
The French conducted their first nuclear
test of 1975 on June 5 of the Fagataufa Atoll in
the South Pacific. The underground explosion
was France's first since underground testing was
terminated in 1965 in Algeria's Sahara desert.
Thr French conducted a series of underground
tests there through the mid-1960s.
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USSR: SEEKING AVIATION TECHNOLOGY
The Soviets want a modern civil air fleet
with safety, quality, and maintenance up to
Western standards, and an aircraft of Soviet
design that would be competitive in the inter-
national air transport market.
Recent agreements between the USSR and
the UK are the latest in a series of attempts to
acquire the much-needed technology.
? A science and technology agreement
signed in March set the stage for more spe-
cific ones between Soviet enterprises and
UK industries.
? A protocol signed with Rolls Royce in
April took the USSR a long step toward
acquiring the technology to modernize its
civil air fleet, and in particular toward pro-
ducing a wide-bodied transport.
The science and technology agreement is
similar to those signed earlier with the US. Six
of the 19 specific fields covered by the agree-
ment with the UK pertain directly to the air-
craft industry. Of the six, one calls for contacts
and cooperation between British industries and
Soviet enterprises on gas turbine engines, auto-
matic engine controls, and engine component
fabrication.
The Soviets may thus be able to secure
technical details of a high-performance engine
comparable to those manufactured by General
Electric and Pratt and Whitney. The acquisition
of such technology is, in fact, the chief Soviet
purpose in negotiating the protocol with Rolls
Royce. Since March, Soviet delegations have
met at least twice with teams from Rolls Royce
to discuss the purchase of an improved engine.
craft, such as the IL-86. The joint L,velopment
of improved versions is also envisaged. Such
engines are essential to efficient, long-range
operation of large transport aircraft.
Co-productic , of engines will result in the
actual transfer of manufacturing technology, as
well as operational and maintenance methods
and processes. With this highly reliable and ef-
ficient turbofan engine technology the USSR
would overcome the principal barrier to its
development of transport aircraft that would be
competitive internationally.
Soviet Deficiencies
At present, the Soviets have two serious
deficiencies in commercial aviation tech-
nology-jet engines z,id internationally ac-
ceptable avionics equipment. Technical main-
tenance services will also have to be brought up
to world standards. The TU-1E4s sold to Egypt
were a case in point; most became inoperative
because spare parts and maintenance were un-
available. Cairo eventually returned them.
The Soviets are from two to eight years
behind the US in design and production tech-
nology for transport aircraft engines. They
started to develop turbofan engines later than
the West did, and then generally concentrated
on less sophisticated, less efficient models.
Furthermore, the Soviets have been unwilling to
introduce the required complex production
technology and have been unable to match some
of the more advanced Western technology used
in producing engines with greater thrust for less
fuel.
The protocol with Rolls Royce opens the
door for contracts to purchase Rolls Royce
engines already in production, as well as for the
cooperative manufacture of these high-thrust,
turbofan engines. Acquisition of such an engine
would make possible the production of signifi-
cantly improved versions of wide-bodied air-
By Western standards, the Soviets also have
serious deficiencies in avionic subsystems, es-
pecii,lly in inertial navigation and flight-control.
They have had difficulty in achieving high ac-
curacy and reliability in components. Their
computers are bulky and slow, although they
have acquired some suitable US computer equip-
ment throu,.h third countries.
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During the past decade, the USSR has
maintained a high priority effort to acquire
Western aircraft technology through both overt
and covert programs aimed primarily at France,
West Germany, the UK, and the US. Soviet
officials have used the atmosphere or detente to
intensify overt collection efforts.
Intensive technical discussions have been
held with officials of each of the three US
manufacturers of wide-bodied aircraft: Lock-
heed, McDonnell-Douglas, and Boeing. In addi-
tion to Rolls Royce, Soviet delegationss have
visited various engine manufacturers, such as
General Electric and Pratt and Whitney. The
Soviets have studied Western business and
management methods, including marketing
analysis.
Some 30 US companies, including Boeing
and Lockheed, have signed Article 4 of the
US-USSR science and technology agreement.
This article, intended to promote contacts be-
tween Soviet officials and private L'S firms, has
greatly increased opportunities for Soviet engi-
neering and management personnel to hold di-
rect technical discussions and to observe aero-
space manufacturing equipment in operation.
No specific aircraft project is in the final
stages of negotiation, but whatever evolves will
be subject to US government approval. Never-
theless, a considerable amount of US technology
has already been revealed through preliminary
negotiations, proposals, ;,nd exchange visits.
How well the Soviets have been able to use this
technology is not yet clear.
One of the Soviet tactics in negotiations
with the US was to offer to buy wide-bodied
aircraft as an inducement for the construction
of a complete aircraft manufacturing complex in
the Soviet Union by US firms under contract.
The US has refused permission for the saie of
such a complex, and this hzs been a major factor
in Moscow's decision to move ahead with the
production of its own adv,nced transpe.t air-
engines.
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25X1
IRAN: AIR POWER AND AIR DEFENSE
The Shah is taking steps to make more
effective use of the advanced aircraft and
sophisticated air defense missiles he is acquiring
from the US. His air force, already the dominant
local air power in the Persian Gulf, by the 1980s
will be able to extend its influence to the
Arabian Sea. The Shah's plans also call for most
of Iran's military installations and key industrial
facilities to be protected by H;,wk missile sites
within the next five years.
Iraq
GULF OF OMAN
Northrop F-5E Tiger and F-5F trainer
The air force is rapidly phasing out its
older model US-built F-5 Freedom Fighters.
Some 20 of the F-5s were sent to Jordan earlier
this year and another 12 may be sent this fall.
An additional 20 are to be returned to the US.
These aircraft are being replaced with improved
F-5E "Tiger II" interceptors. The Shah has
ordered 141 of these new F-5s, plus 28 trainer
models-some 75 have been delivered.
The Shah is intent on obtaining the newest
and best aircraft. In addition to the F-5 Tiger
Ils, he has some 135 F-4 Phantoms, with an
additional 70 to be delivered. Iran also has con-
tracted for at least 80 US F-14s equipped with
advanced Phoenix air-to-air missiles. The first of
the F-14s are scheduled for delivery before the
end of the year. The Shah has expressed an
interest in acquiring the F-16 lightweight jet
fighter as well.
To project his air power into the Arabian
Sea, the Shah is planning to base F-4s at two
forward airfields. Bandar Abbas will be the
home base for two squadrons of F-4s, and an-
other airfield is being built on the coast at Chah
Bahar, where two fighter squadrons will be sta-
tioned in the late 1970s. From these bases,
Iranian aircraft could dominate the nearby ship-
ping lanes and reach as far as Bombay, India.
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The Shah has re-evaluated the priorities for
loca'Ling the Hawk surface-to-air missiles. Hawks
will continue to be placed first at key military
installations, but more emphasis is to be di-
rected at protecting important industrial and
petroleum sites. The capital area, nor example,
still is to receive the largest number of missiles,
but it will not get them until the Isfahan steel
works and the Kharg Island petroleum facility
near Bushehr are protected.
May was unable to reach an accommodation
with him.
Soon after the fighting began, Ali Mirah
fled to the nearby French Territory of Afars and
Issas and plans to go to Saudi Arabia and direct
his Muslim tribesmen from there. He will prob-
ably seek additional aid from Arab countries
and al:,o try to promote cooperation between
his forces and the Eritrean rebels.
The overall air defense plan for the country
is steadily falling behind schedule, however.
Some 25 Hawk launchers have been delivered
under the purchase agreement with the US, but
none is yet operational. The first site at the
Vahdati air base will probably not be ready until
late this summer-several months behind sched-
ule. The new plans call for missiles to be err-
placed in eight locations by 1980, two more
than originally planned. The two additional
units will be assigned to the industrial center at
Ahvaz and the port area at Bandar Abbas.
Ethiopia's military rulers, already beset by
rebellion i;i Eritrea and rural unrest in ot'ier
provinces, found themselves embroiled in still
another conflict on June 1 when heavy fighting
broke out between Afar tribesmen and govern-
ment security forces in eastern Ethiopia. The
clashes subsided this week, but the Afars will
probably continue guerrilla operations in an
attempt to fend off control by the military
council in Addis Ababa.
Suntan Ali Mirah, the Afar leader, opposes
the council's socialist policies, especially its land
reform program. He was one of the few major
tribal figures to remain free during the council's
roundup of traditional leaders last year, but he
felt the council would eventually move against
him as part of its campaign to destroy Ethiopia's
old ruling class. He refused repeated council
requests to come to Addis Ababa, and a council
delegation that traveled to Afar territory in late
The Afars are a threat to both the main
highway linking Addis Ababa with the Red Sea
port of Assab-site of Ethiopia's only oil refin-
ery-and the railway to the port of Djibouti in
the French Territory. During the fighting last
week, the Afars blew up a bridge on the high-
way, setting off panic buying of gasoline in the
capital.
Government forces will probably be able to
control the main towns in the area, but will not
be able to completely subdue the Afars. The
army is already stretched thin. The Afars num- 25X1
ber about 200,000 and almost all the men are
armed. Although most of their weapons are old,
some are recently acquired Soviet automatic ri-
fles and modern Western arms, bought, report-
edly, with the aid of some Arab coun-
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President Q.idhufi is putting pr cssur c on,
Arab and Islamic leaders to denounce Egyptian
President Sadat's recent statements concerning
recognition of Israel and the possibility that
Israeli cargoes will be permitted to move
through the Suez Canal. Qadhafi's latest ani:i-
Sadat offensive may complicate Egypt's efforts
to put together a joint Arab negotiating pc'.cy.
According to the Libyan press, Qadhafi nas
received messages from Syria, Tunisia, Algeria,
North Yemen, and Bahrain disapproving of
Sadat's remarks. President Asad is quoted as
stating, "Syria has not and will not consider
recognition of the Zionist enemy, which is not
the right of any chief of state."
Qadhafi hopes that a general Arab con-
demnation of E~Iypt's recent moves will isolate
Sadat and undercut Egypt's credibility as
spokesman for the Arabs during the next round
of negotiations with Israel. Libya probably also
wants to harden Arab negotiating positions
before the Arab summit later this summer
Qadhafi has met with several fedayeen
leaders in Tripoli to consider other v,'ays to
block Sadat. He has talked with George Hab:'ash
and Ahmad Jabril-two of the most radical ter-
rorist leaders-arid with Nayif Hawatmah and
Faruq Qaddumi, members of the n ore moderate
Palestine Liberation Organlzctiun. All four
Palestinians denounced Sadat's geasiurc ; toward
Israel, declaring that the Palestinians would not
accept !sraeli use of the Suez Canal.
The Libyan media have stepped up their
denunciation of Sadat; some attacks contain
scarcely veiled calls for the Egyptian leader's
assassination. Last weekend, the Libyans staged
the largest anti-Sadat demonstrations since the
1973 "people's march" on Cairo. Nearly
].0,000-including many Egyptian workers-
participated in a rally in Tripoli.
These actions are bound to draw a sharp
reaction from Cairo. They may once again bring
Libyan-Egyptian relations, which have been sour
for mar.v month- to the breaking point. F_
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Not mollified by a 65-percent increase in
the minimum wage, Argentine workers have re-
acted strongly against price hikes announced by
Economy Minister Celestino Rodrigo who (nly
last week was named to replace an outspoken
foe of continuing concessions to them. Sharp
increases in utility rates and the prices of
gasoline, basic foods, transport, and services
have provoked strikes by taxi drivers and mari-
time and port workers. Nine persons were
wounded when police broke up an angry crowd
of steelworkers protesting rising prices.
Less than a week after taking office,
Rodrigo also announced the devaluation of the
peso to one third its February value and
endorsed previously approved measures to cur-
tail imports. Argentina has been experiencing
mounting inflation-it now exceeds a
100-percent annual rate-and a deteriorating
balance of payments. In addition, the adminis-
tration has reiterated the urgent need to increase
productivity, probably in reference to the seri-
ous problem of w,, ker absenteeism.
The government undoubtedly is in for even
greater problems with labor. More than a week
after the announced deadline for completion of
wage negotiations with industrial unions, the
Peronist labor confederation announced suspen-
sion rf the talks until such time as the full
effects of the devaluation and price increases are
known.
The halt may really be due to dissension in
labor's ranks and to diminishing support for the
workers' own negotiators. Indeed, the heads of
two top labor groupings are rumored ready to
resign their posts. In the meantime, both sides
are clearly seeking to play down their differ-
ences, in public at least. Labor leaders, perhaps
in an effort to buy time, have assured workers
that the eventual agreement will be retroactive
to June 1, when the old accord expired. In the
final analysis, however, union leaders may be
obliged to press the government hard if they are
25X1 25X1
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Argentina reportedly has transferred spent
fuel elements containing about 50 kilograms of
plutonium from the Atucha power reactor to a
storage facility without notifying the Interna-
tional Atomic Energy Agency. Buenos Aires is
obligated to make such notification under the
terms of the IAEA safeguard provisions covering
the Atucha reactor. Although an IAEA safe-
guard inspector's report of the transfer was for-
warded to the energy agency in March 1975, its
existence has apparently been concealed by an
Argentine citizen working at IAEA headquarters
and has not been recorded in the IAEA's
Department of Safeguards and Inspection.
The failure to provide notification could be
an inadvertent omission, but it could be an
attempt by Buenos Aires to circumvent the safe-
guards system as a test of its effectiveness.
Intentional or not, this failure of the reporting
and recording procedures demonstrates the
vulnerability of the system to a planned diver-
sion of plutonium by a country wishing to
circumvent the system.
Argentina is undoubtedly concerned about
the impending West German sale to Brazil of a
complete nuclear fuel industry. The Argentines
will not b e facilities for the separation of
plutonium from irradiated reactor fuel in large
quantities for at least two years, but should they
then complete the necessary weapons research
and development work, they could construct a
nuclear explosive device which would keep them
ahea.. of Brazil.
Even after a change of economy ministers
the government is still encountering consider-
able difficulty in its efforts to deal with the
country's severe economic problems without
alienating organized labor.
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25X1
Guatemalan President Laugerud appears to
be embarked on a plan to cast off the extrer.ie
right-wing member )f the two-party governing
coalition and eventually form a new political
alliance to govern the country. The alliance he
apparently h;,s in mind would not significantly
change the coi,servative cast of the government.
Current maneuvering by Laugerud centers
on the election of a president of Congress on
June 15. This post, a much-sought-after political
plum, had been held for several years by the
senior partner in the coalition, the rightist
National Liberation Movement, led by Vice
President Sandoval. The Movement lost it last
year to a small party outside, but closely aligned
with, the coalition and wants it back. Laugerud,
who has been trying for some tome to ease the
party and the power-hungry vice president out
of the political limelight, is supporting a candi-
date of the Democratic Institutional Party, th^
other member of the coalition. This party, less
strident in its conservatism, is regarded by
Laugerud as better suited to his style and polit-
ical philosophy.
The two opposition parties, the centrist
Revolutionary Party and the leftist Christian
Democratic Party, have thrown their support to
the Laugerud candidate, making him the
Favorite to win. These parties are only too will-
ing to support Laugerud on this issue, having
resented the :ron-handed and arrogant way the
Sandoval party has run Congress in the past.
Moreover, they have been going along with the
President on other issues in hopes of being in-
cluded in any new coalition excluding the Na-
tional Liberation Moverr:ent. Laugerud report-
edly has been thinking of an alliance among the
Democratic Institutional Party, the Revolu-
tionary Party, and a smaller party of followers
of former president Arana.
Faced with the possibility of being bumped
from the coalition, National Liberation
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Movement members are becoming worried. One
has charged that Sandoval's inability to swing
the election to their candidate is leading the
party to ruin. Others claim that a weakening of
the coalition .iuld weaken the government
itself.
Sandoval is remaining publicly silent for
now. Although it is his nature to threaten and
intimidate in order to show opponents the
power of his party, he is also shrewd enough to
know that he would not succeed in any con-
frontation with Laugerud. Laugerud has the
backing of the army, which, in the end, is the
chief political arbiter in the country. After a
final try at persuading Laugerud to pick another
candidate. Sandoval is likely to go along with
the President's choice.
For the National Liberation Movement and
Sandoval, losing the congressional leadership
will not necessarily lead to an immediate split in
the partnership, but it does indicate, along with
previous disputes, that bitterness has grown to a
COLOMBIA: DECL INING PUBLIC ORDER
Pressure on President Alfonso Lopez
Michelsen to declare a state of siege continues to
mount. Public order is deteriorating, with
student protests in several cities now added to
existing country-wide demonstrations against
economic hardships. Army units have helped the
national police maintain order, but the army
high command has made clear its distaste for
such use of troops except when legalized by a
state of siege. Last week, following the letter of
constitutional law, the council of state auth-
orized the President to declare a state of siege.
Although Lopez remains extremely reluctant to
abridge civil liberties with such a declaration, it
seems only a matter of time until he is obliged
to do so.
Student unrest has been focused on the
rectorship of the National university and a con-
troversy over medical students' management of
their own clinical training. In an attempt to
forestall existing and anticipated student prob-
lems, President Lopez appointed a Marxist to
the rectorship following his inauguration ten
months ago. In the midst of this month's out-
break of student demonstrations, Lopez fired
the Marxist rector for failing to provide a useful
channel of communication between the student
body and the government. This has only further
aggravated the students, who have intensified
their support of residents and interns seeking to
control one of Bogota's largest hospitals and
have carried the violence-charged issue to other
universities and other major cities.
I he key argument in favor of a state of
siege r lay well be the politically explosive issue
'if urban transpor.::tion fares. Colombia began
to ;:"Port oil last year, erasing a tradition of Fx'
abundant domestic oil with subsidized low 25X1
prices at the gasoline pump. Lopez' efforts to
maintain the price level have led to an increasing
drain of treasury funds into fuel subsidies. In
late May, Lopez moved to suspend or minimize
gasoline imports and ration local consumption.
This will postpone but not eliminate an eventual
price rise and a resultant increase in transporta-
tion fares. In the past, even minor fare hikes
have provoked violent protests by lower income
riders. Lopez would probably be forced to use
the army to control such demonstrations, and
he would almost surely declare a state of siege
first.
Lopez may he tempted to act now in
response to the student unrest and then permit
gasoline prices and transport fares to rise with
the army already in control of public order.
With a mid-term election coming next April, the
President may prefer to confront sooner rather
than later what could be the most serious polit-
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The government has undertaken a sweeping
crackdown on opponents in the wake of its
claim that three Dominican terrorists secretly
entered the country from Cuba on June 1.
During the past week, security forces have
carried out searches, set up roadblocks, and ar-
rested several hundred people in what they
claim is an effort to apprehend three Dominican
extremists who have been living in Cuba. The
authorities maintain that the trio was brought to
the Dominican Republic by three Puerto Ricans
who were arrested on suspicion of narcotics
smuggling on June 2. Military and police forces
were dispatched to the area where the landing is
alleged to have taken place, but apparently did
not find their quarry.
General Nivar, the chief of the National
Police, has linked the widespread arrests to the
guerrilla landing and to "subversive plots."
Opposition party leaders, students, labor union
officials, and journalists seem to have been the
main target of the roundup. Many of the de-
tainees have been released after interrogation,
but others remain in custody. Fifteen, including
three important Communist labor leaders, have
been formally charged with conspiring to over-
throw the government.
Considerable skepticism has been reflected
in the press and in public and private statements
by many opposition politicians and some mili-
tary officers concerning the alleged arrival of the
three terrorists. There is a suspicion that the
incident was fabricated by General Nivar to
bolster his reputation with President Balaguer
and to steal a march on Nivar's arch-riva! Gen-
eral Perez y Perez, the secretary of the interior
and police.
Now that the authorities have publicly
claimed that the three terrorists have returned.
they will be under increasing pressure to appre-
hend them, otherwise protests against the deten-
tions are almost certain to increase. It will be
very difficult for the government to continue to
maintain that the arrested people actually pre-
sent any security threat. General Nivar has been
making nearly all the ?.,ublic pronouncements on
the episode, and will probably have to bear the
main responsibility if the government cannot
25X1 25X1
President Velasco made one of his i -.fre-
quent public appearances this past week pre-
siding over the traditional pledge-to-the-flag
ceremonies in Lima on June 7. The economic
and political spotlight, however, is increasingly
on his probable successor, Prime Minister Mo-
rales Bermudez.
Last week, Morales Bermudez announced
plans for new errn-nic measures to combat
spiraling inflation grcw;ng budgetary defi-
cit. The plans c -er'. ction-and in some
cases abandonment-of a,sive government sub-
sidies on essential agricultural and petroleum
products. The measures amount to a significant
departure from President Velasco's almost sacro-
sanct policy of keeping the potentially volatile
urban dwellers quiescent through massive sub-
sidies. To offset the anticipated reaction, Mo-
rales Bermudez is urging the government to
adopt a general price freeze and an increase in
minimum daily wage and salary levels.
For some time, international lending agen-
cies and technical-level officials within the Peru-
vian government have been recommending
tough new measures to ward off what they see
as a serious economic problem. The present
system of direct and indirect subsidies ac-
coured for approximately half of the
1973-1974 biennial budget deficit. Further ag-
gravating the economic situation is the apparent
inability to deal with excessive wage demands.
Inflation, earlier estimated at 25 percent or
more this year, now appears to be heading even
higher.
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The economic plight of the government has
also sparked rumors of devaluation. Although
these rumors are being given some credence in
local business circles, there is no evidence that
the government is planning any such politically
unpalatable move in the immediate future. Fur-
ther, President Velasco has in the past been very
firm in stating that his government will not
preside over devaluation. Morales Bermudez'
views are not known, although he is generally
regarded as more flexible on financial policy
than Velasco. While it is true that he is gradually
assuming a greater role in the decision-making
process, particularly in economic affairs, he is
probably not ready to take such a major step.
In fact, morales Bermudez will have his
hands full in trying to avoid being the political
victim of his controversial subsidy policy with-
out becoming the focus of opposition on an
even more controversial issue. As the subsidies
are gradually reduced in the months ahead,
prices will inevitably rise and labor dissatisfac-
tion, already high, will increase. There are indi-
cations that the strong communist trade union
confederation is feeling increasing internal pres-
sure to refuse or withdraw its support of the
government. Implementation of the new eco-
nomic measures will do little to assuage such
pressures. Perhaps symbolic of this new strained
relationship was the relatively minor role that
the confederation played in the Flag Day cere-
monies, and the absence of its representatives in
a "march" of enthusiastic civilians who followed
Velasco back to the presidential palace.
Public reaction to the economic measures
so far has been slight, but it may pick up in late
July when the government is expected to raise
the price of petroleum products, a move that
will almost immediately be felt in the vital trans-
portation sector.
For Morales Bermudez, much is at stake.
Successful implementation of the new policy
and an improvement in the economic situation
would further strengthen his position within the
government and solidify his hold on the succes-
sion. On the other hand, a major slip now would
probably leave the field to other ambitious and
less moderate aenerals-
Prime Minister Morales Bermudez(I) welcoming Australian Prime Minister Whitlam
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25X1 25X1
CAMBODIA-VIETNAM
Smoldering territorial disputes beiween the
new Cambodian and Vietnamese re imes have
erupted into armed clashes.
CHOLERA EPIDEMIC IN CAMBOJiA
Unconfirmed press reports indicate
that a Cambodian delegation had arrived in
Hanoi the same day for "important talks" with
Vietnamese leaders.
On the mainland, long-standing disputes
over territorial rights along Cambodia's ill-
Until recently, the leadership on both sides
had encouraged the resolution of territorial dis-
putes through low-level mediation. Inasmuch as
these talks have been unsuccessful, efforts to
defuse the situation may now have moved to a
higher plane.
The new leaders in Phnom Penh face an-
other and perhaps more serious problem within
Cambodia-a widespread outbreak of cho era of
epidemic proportions. 25X1
Cholera is endemic to the country, and
conditions in refugee-packed Phnom Penh were
ideal for an outbreak this year. The deteri-
orating military situation in March and April
prevented any meaningful monitoring of the
health situation, but it now appears that Phnom
Penh had a serious cholera problem by the time
the communists took over on April 17. A West-
ern journalist who was among those deported
from the country last month reported that at
least 80 cases of cholera were under treatment
when the insurgents occupied the capital's
hospitals. 25X1
I n their exodus into th ~ countryside,
Phnom Penh's two million inhabitants were
provided with neither food nor water, and con-
tamination was inevitable as successive waves of
marchers passed through the same areas. Al-
though the exact toll that cholera took during
the march itself will probably never be known,
there is little doubt but that it was considerable.
Individuals who were evacuated and who sub-
sequently escaped the country report that
doctors confirmed a number of cholera deaths
during the initial days of the evacuation. Less
knowledgeable sources reported that many of
the young, old, and weak were felled by
"dehydration and exhaustion." Some of these
may also have been cholera victims.
Whatever the tcl! en route, the diseas3 has
now spread in the countryside.
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Medical personnel and facilities have
always been wanting in Cambodia and the vast
upheaval resulting from the communist take-
Communist personnel at a checkpoint
some 20 miles north of Phnom Perih did inocu-
late some marchers with vaccine taken from
hospitals in the capital, but medical supplies are
in short supply. It seems unlikely that more
than a fraction of the urban population was
immunized.
The Chinese-who had their last massive
outbreak of cholera in 1962-wo aid be the most
likely source of toreign assistance. Peking, in
fa:t, probably already knows the scope of the
problem in Cambodia. Chinese representatives
have been in Phnom Penh since late April, and
Chinese technical advisers have been travelin
throughout the country,
Under normal conditions, international ef-
forts could quickly control and isolate out-
breaks of cholera such as have occurred in Cam-
bodia. The new leaders in Phnom Penh, how-
ever, have shown themselves to be fiercely inde-
pendent and xenophobic, and they may be
reluctant to accept the type of international
assistance required to bring the cholera under
Small-scale protests against the Burmese
government by students and workers, largely
over poor economic conditions, began last
month in Rangoon. The unrest escalated last
week, as the protesting groups commemorated
the anniversary of the violent labor disorders
last year, during which troops killed more than
20 demonstrators.
Last weekend the protests took on a more
virulent antigovernment tone as several thou-
sand students marched through the streets of
Rangoon. A considerable number of workers in
the Rangoon area joined in, and what had
originally been work slowdowns became strikes,
resulting in the closure of several factories.
Students in Mandalay also staged a demonstra-
tion.
demands of the workers would be met and send-
ing high-ranking officials tc meet with both
worker and student groups. The meetings with
students were called off, however, because the
sessions aroused considerable hostility among
the students.
25X1
25X1
This week, the government used troops to
arrest more than 200 students in Rangoon, after
ordering the universities closed. The universities
had reopened only last month, after being shut
down in December as a result of student-
initiated disorders over the funeral of former
UN secretary general U Thant. 7 roops were used
only after authorities first tried a conciliatory
policy, announcing that some of the economic 25X1
charge.
The government's tough measures will
probably bring an end to the protests, although
they may lead to further bitterness against the
regime. Senior officials reportedly believe that
with the arrests, they have broken the back of
the militant student leadership, and that the
workers are likely to go back to their jobs. The
government is publicly blaming the Burmese
communists for inciting the disturbances, but
there is no evidence to support this 25X1
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AUSTRALIA: CABINET CHANGES
The most prominent casualty of the cabi-
net shuffle announced last week by Prime Minis-
ter Whitlam was Deputy Prime Minister Cairns.
Cairns was removed as federal treasurer and
assigned to the considerably less prestigious post
of minister of env;ronment. William Hayden, a
young comer who ha.; been social security min-
ister, repiaces Cairns as treasurer.
Cairns' transfer, after less than six months
as treasurer, reflects adversely on his ability to
ease Australia's economic difficulties. His repu-
tation has also been tainted by the influence
e;,erted by his private secretary-and mistress.
Cairns hds charged that he was the victim of
misrepresentations made about his dealings with
a Melbourne financier, but in fact his demotion
is symptomatic of a more basic fall from politi-
cal grace. Once considered Whitlam's heir appar-
ent, Cairns is now almost certainly out of the
running.
CONSOLIDATING CONTROLS
The Pathet Lao .are moving quickly to con-
solidate political and military control. They still
pay lip service to the coalition concept, but it is
clear the coalition is now nothing more than a
convenient facade for a complete communist
take-over of Laos.
Cairns with secretary
William Morrison, a left-winger and some-
time critic of the US, has moved from the
science ministry to the defense ministry post
vacated by the moderate Lance Barnard, who
resigned to take an ambassadorship. With the
downgrading of Cairns, Whitlam probably used
the appointment of Morrison to maintain +h^
relative strength between leftists and moderates
in the cabinet.
Whitlam r,obably hopes the changes will
give the Labr,.r government an image of vigo-
that will help offset its weak position in parlia-
ment. The Liberal-Country opposition no do':bt
sees the cabinet shakeup as a further sign of
Labor weakness and feels that its own electoral
chances have been enhanced. It will probably
not push for an early contest, however. It real-
izes that it must first sharpen its os?i programs
before challenging- the government at the
time e 14-month history of the coali ion
government, communist Deputy Prime Minister
Phoumi Vongvichit controlled the proceedings
at last week's cabinet meeting. In the past,
Phoumi presided only in the absence of Prime
Minister Souvanna Phouma, but Souvanna was
present at the June 4 meeting and offered no
opposition to the actions of his deputy.
Boutsabong The communist deputy finance minister,
BSouvannavong, appears to be emerg-
ing as the number-two communist in the cabi-
net. Boutsabong has been serving as the
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I I
25X1
25X1
coalition's chief finance officer in the absence of will also be retained in "food production units"
a replacement for ousted rightist Ngon to assist the economy.
The Pathet Lao are also continuing efforts
to neutralize the non-communist Royal Lao
Army as an effective fighting force. Having al-
ready succeeded in driving most of the army's
competent commanders into exile, the commu-
nists are now busy conducting "thought re-
form" indoctrination seminars for non-commu-
nist officers who have not yet been purged. One
such sr.'.iinar-an 11-day exercise involving 67
senior Royal Lao Army officers-was recently
completed at the army's headquarters command
center in Vientiane.
the principal
Pat et Lao "IectWers" at the seminar were
"acting" Defense Minister Khamouane Boupha,
Deputy Prime Minister Phoumi Vongvichit, and
chief agitprop sp,acialist Sanan Soutichak. The
tone of their presentations was strongly anti-US
and strongly pro - North Vietnamese.
Polemics aside, the speakers discussed at
length Pathet Lao plans to reorganize and
streamline the Royal Lao Army. Khamouane
Boupha will be in overall charge of the army,
and Pathet Lao officers will share authority
t h e Royal Lao Army will be
significantly reduced from its present strength
of approximately 46,000 to eventually form an
integrated army with the Pathet Lao of some
30,000 men. To do this, entire non-communist
units-including all former irregular forces-will
be demobilized.
The remaining 30,000-man combined army
will be led by Pathet Lao officers and will re-
portedly be employed as a labor force in food
production campaigns. All demobilized troops
mouane Boupha was said ti be actively studying
a plan for an integrated army of some 28,000
men, including 12,000 troops from the Royal
Lao Army, 10,000 Pathet Lao, 4,000 pro-com-
munist neutralists, and 2,000 non-communist
neutralists. 25X1
There are tenuous indications that a Lao
Communist Party Central Committee meeting
may be under way in Sam Neua. Phoumi Vong-
vichit and Sanan Soutichak traveled from Vien-
tiane to Sam Neua tor unexplained reasons last
weekend. Moreover, Prince Souphanouvong-the
nominal leader of the Lao communists-has in-
explicably delayed his scheduled return from
Sam Neua to Luang Prabang for the opening 25X1
session of the coalition's Joint National Political
Council, which the Prince chairs. Souphanou-
vong has been at communist headquarters for
the past two months. 25X1
If such a conclave has been called, the
Pathet Lao leadership will almost certainly want
to assess-among other things-the major suc-
cesses achieved over the past six weeks and to
determine the pace at which a complete take-
over of Laos should proceed.
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CHINA-PHILIPP!PaES, DIPLOMATIC TIES
Peking's campaign: for improved official
relajions with non-communist Southeast Asian
countries took an important step forward this
week with the announcement that China and
the Philippines had established diplomatic rela-
tions on June 9. A trade agreement was signed
on the same day, but no details were provided.
President Marcos sees relations with Peking as a
vital part of his more general effort to create an
independent foreign policy and end his nation's
inter nz-tional image as a US client state.
Peking now has official ties with two mem-
ber countries of the Association of Southeast
Asian Nations. Relations with Malaysia were
opened last year and, according to recent re-
ports, Thailand is prepared to follow suit with
an announcement that could come as early as
next month. That would leave Singapore and
Indonesia as the only remaining ASEAN coun-
tries having no active diplomatic relations with
Peking.
The Chinese used the occasion of Marcos'
visit to Peking to warn against attempts by the
USSR to expand its influence in Asia and to
express Peking's sensitivity about charges of Chi-
nese interference in the internal affairs of other
countries.
Chinese fears that the Soviets are attempt-
ing to take advantage of recent communist vic-
tories in Indochina to improve their position in
the area were evident in the joint communique
announcing the establishment of relations, as
well as in Vice Premier Teng Hsiao-ping's speech
at the banquet welcoming Marcos. The commu-
nique included a provision condemning any
country that attemots to "establish hegemony
or spheres of influence in any part of the
world," a now standard ingredient in Peking's
anti-Soviet fare.
In addition, Teng complimented Manila, for
its opposition to "hegemonism" it recent years
and pointed out that Southeast Asian countries
had broad international support for the plan to
create a zone of peace and neutrality in South-
east Asia, a scheme that Peking apparently be-
lieves will help foresta" any increase in Soviet
influence in the region. Teng confidently de-
clared that Asian countries would quickly see
through any Sov' t "wiles and schemes" in the
region.
On the subject of interference internal
affairs, the communique stated that both coun-
tries condemn foreign aggression and subversion,
as well as all attempts by any country to contro,
another country or to interfere in its internal
affairs. In addition, Teng said in his speech that
China would never "bully" another country and
acknowledged that a country's social system can
be decided "only by its own people." This
formulation goes slightly further than that used
at the time of Malaysian recognition and appears
to be another indication that China expects to
play down support for Asian insurgencies in the
aftermath of Indochina.
On the Taiwan issue, the Philippines stated
in the communique that it "fully understands
and respects" Peking's claim to the island-a
standard formulation. The communique also in-
cluded notice of Manila's decision to withdraw
all official representatives from Taiwan within
one month. There is a good chance, however,
that the Philippines will maintain a significant
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number of commercial and other non-official
contacts with the Nationalists on Taiwan.
In the communique, both sides agreed that
citizens of one country who acquire citizenship
in the other automatically forfeit their original
citizenship, a formula for dealing with the sensi-
tive question of overseas Chine, e residents in the
Philippines. The provision does not take into
account Peking's responsibilities toward those
ethnic Chinese who retain Chinese citizenship,
although Peking has for several years consis-
tently urged overseas Chinese to adopt the Liti-
zenship of the country in which than reside.
CHINA: TRADE RETRENCHMENT
Worldwide inflation and recession defused
China's foreign trade boom in 1974 and is lead-
ing to a retrenchment in 1975.
Soaring prices boosted China's import bill
in 1974 to $7.4 billion, while the economic
slowdown in the West dampened th? demand
for Chinese goods. Total exports rose to only
$6.3 billion, resulting in a record $1.1-billion
trade deficit. China's current account balance
with non-communist countries plunged $1.3 bil-
lion into the red, and, despite a greater use of
supplier credits and short-term borrowing, Pe-
king had to draw down its reserves by $300
million to finance the gap.
Sales at the Canton Trade Fairs, a major
indicator of Chirese exports, point to lagging
exports this year. Althcugh the Chinese tried to
boost sales by cutting prices at the fall 1974 and
spring 1975 fairs, commercially both were
dismal events. Attendance at the spring fair may
have fallen to 15,000, compared with the
25,000 figure Peking reported last fall, and the
volume of business was probably less than the
$700-million fall fair level-the lowest in years.
tural products will fall from the record $1.9
billion in 1974 to about $1.3 billion this year.
China will purchase only 4.4 million tons of
grain-down from 7 million tons last year-at a
cost of $675 million. Cotton purchases also are
down sharply; soybean imports have been
phased out.
Machinery and equipment imports, which
more than doubled in 1974 to $1.7 billion, will
grow more slowly this year. Much equipment is
in the pipeline under contracts signed in the past
few years, but Peking has restricted new pur-
chases to badly needed replacements and high-25X1
priority machinery such as oil drilling and
mining equipment. New orders for whol.
plants-$1.2 billion in 1973 and $900 million in
1974-will probably decline sharply this year. In
the irst four months, Peking only concluded
contracts for bearings plants worth $20 mil-
lion-a radical scale-down of the $100-million
facility originally sought.
Barring a rapid turnaround in the world
economy, Chinese exports this year will prob-
ably grow little over last year's level. Partia
trade returns for 1975 indicate that exports are
up about 10 percent over the same period last
year. If the trend continues, they would total
about $6.9 billion this year. With imports likely
to be about the same as in 1974, the trade
deficit would be reduced to about $500 million,
resulting in an improvement in China's hard-
currency balance of payments.
Despite the deficit in 1974, China's balance
of payments is not in crisis. Although repay-
ments of short-term credits and progress pay-
ments for whole plants will total more than $1
billion this year, reserves are adequate and Pe-
king's credit rating is excellent. Credits for grain,
whole plant equipment, and Japanese steel and
fertilizer will finance much of the reduced trade
deficit in 1975. With continued large remit-
tances from overseas Chinese and some bank
borrowing, however, China will probably be able
In an attempt to redress its trade deficit,
Peking will trim its imports during the year.
Based on existing contracts, imports of agricul-
Lo avoid drawing down its reserves of gold and
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