NATIONAL INTELLIGENCE DAILY FRIDAY 17 JUNE 1983

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01094R000300010087-8
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 20
• Document Creation Date: December 22, 2016
• Document Release Date: July 14, 2010
• Sequence Number: 87
• Publication Date: June 17, 1983
• Content Type: REPORT

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=Et-
Director of Top
Central
Intelligence
National Intelligence Daily
Friday
17 June 1983
mop-see~es-
CRAS
17 June 1983 25X1
285
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Contents
USSR: Supreme Soviet Session
Canada-US: Prospects for Cruise Missile Testing
Japan: Concern Over Trade Surplus
Italy: Election Campaign Heats Up
USSR: Support for Large Carriers
Chile: Strike by Copperworkers
Oman-Saudi Arabia: Border Dispute
10
Kenya: Moi Moves Against Rival
12
Lesotho: Moving to the Left
12
Special Analysis
Central America: Economies in Crisis
13
Top Secret
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Top Secret
USSR: Supreme Soviet Session
General Secretary Andropov gained greatly in prestige as a
national leader but added little to his real power by becoming
President at the session of the Supreme Soviet yesterday, which also
featured Foreign Minister Gromyko's speech containing a diatribe on
US policies.
Gromyko accused the US of pursuing an irresponsible policy
toward the control of nuclear weapons and dismissed Washington's
recent START initiative as a move taken "purely for show" that offers
.,no outlet" for agreement. He did, however, repeatedly assert
Moscow's interest in a more productive dialogue. He claimed that
"sober-minded figures in the US itself" are questioning the
Administration's policies.
Comment: Andropov's power derives from the posts he already
holds as General Secretary and as Chairman of the Defense Council.
As President he mainly oversees the translation into law of national
policies that he and his Politburo colleagues have already outlined.
The new post, however, does strengthen his standing as the national
leader.
Gromyko's statement is partially intended as a propaganda
response to high-level US criticism of Soviet policies. His reference to
"sober-minded" elements in the US echoes a similar comment by
Andropov on Tuesday. This suggests Moscow views US defense and
arms control policies as vulnerable to domestic and international
criticism
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Top Secret
CANADA-US: Prospects for Cruise Missile Testing
Prime Minister Trudeau probably will approve the testing of US
air-launched cruise missiles in Canada at an early date, although
public opposition remains widespread.
On Tuesday, following receipt of the formal US request for
permission to test the missiles, Parliament voted 213 to 34 to reject a
motion by the New Democratic Party to prohibit testing. The
opposition Conservatives combined with the ruling Liberals to defeat
the motion. One Liberal and at least one Tory voted with the New
Democrats, however, and six other Liberals abstained.
The vote was not a true test of sentiment on the issue because
New Democratic leader Broadbent had asked for a free vote on his
party's motion to allow each MP to vote his conscience. Trudeau
refused, however, and instead made the motion a vote of confidence.
The Tories, despite supporting the government on the vote, have
joined the New Democrats in urging the government to allow a
parliamentary debate before agreeing to the tests.
Comment: Trudeau's actions on the vote seem to reflect a
growing sensitivity to public and intraparty opposition. By requiring a
vote of confidence, Trudeau apparently was trying to impose
discipline on a Liberal caucus that has become increasingly unsettled
over the prospect of cruise missile testing.
The Prime Minister evidently intends to delay his government's
decision until Parliament adjourns, which is now scheduled for 30
June. He would then be able to conclude the agreement before the
session resumes in mid-September.
The call by the Tories for a debate probably stems from their
concern about the growing influence of the domestic peace
movement rather than a basic change in party policy. The Tories have
consistently supported the government on testing, and they are likely
only to want to learn details of the proposed agreement. New Tory
leader Mulroney generally has approved Trudeau's view of testing as
part of Canada's contribution to NATO and as an appropriate
response to the USSR's intransigence at Geneva.
Top Secret
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Top Secret
JAPAN: Concern Over Trade Surplus
Japanese officials fear economic relations with the US may sink to
a new low in coming months as Japan's trade and current account
surpluses climb.
After the recent release of data showing that lower oil prices and
recovery in export sales are pushing the trade surplus substantially
higher, Japanese officials have begun to discuss new measures to
keep the surplus from reaching $30 billion this year. The US Embassy
reports the Ministry of International Trade and Industry is studying the
possibility of reducing the commodity tax on certain autos and giving
preferential tax treatment to imported machinery. The Economic
Planning Agency is evaluating the effectiveness of stimulating import
demand by cutting income taxes or interest rates.
Comment: Japanese officials apparently want to show some
initiative on trade in time for the series of bilateral meetings with the
US scheduled for July. The measures under consideration, however,
probably will not keep the trade surplus below the record $26 billion
registered in 1978.
Bureaucratic hurdles rule out rapid implementation of import tax
changes by the Ministry of International Trade and Industry.
studies prepared by the Economic Planning Agency in late May
concluded that a $4 billion nationwide reduction in personal income
taxes would lower the current account surplus only marginally. They
also noted that a 1-percentage-point cut in the discount rate would
add $2 billion to the surplus.
Top Secret
4 17 June 1983
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Top Secret
ITALY: Election Campaign Heats Up
As the national parliamentary election on 26 and 27 June draws
near, more political scandals and a new proposal from Socialist leader
Craxi have injected life into the campaign.
Eight Socialist leaders, including a leading candidate for the
Chamber of Deputies, were arrested on Tuesday in the Liguria region
on charges of criminal conspiracy and corruption in public office. This
follows similar arrests, mainly of Socialists, in Turin in April.
Craxi, meanwhile, has publicly proposed a three-year governing
pact with the Christian Democrats to carry out needed economic
Reports from the US Embassy on recent polls show increasing
voter willingness to choose a party. The polls also indicate voters are
shifting their allegiances. Nevertheless, political observers state that
they still have little sense of the outcome of the election.
Comment: The latest arrests of Socialists are another setback to
the party's efforts to increase its share of the vote. They also will hurt
Craxi's bid to become prime minister.
Craxi's initial campaign strategy had been to refrain from public
commitments to postelection alliances with either the Christian
Democrats or the Communists. In late May he publicly rejected a
Communist alignment. His embrace of the Christian Democrats this
week may be aimed at counteracting the negative repercussions of
the new scandal, or it may be part of a deal to gain the prime-
ministership.
Top Secret
5 17 June 1983
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Top Secret
USSR: Support for Large Carriers
Soviet writers on naval matters are citing the conflict in the
Falklands to stress the importance of US-style aircraft carriers in
modern combat, probably in an attempt to promote such ships for the
Soviet Navy.
Several officers writing in the Navy's professional journal
conclude that, although aircraft carriers were essential to British
success, the force suffered from the lack of early warning aircraft
and long-range fighters. They blame these deficiencies and the
ineffectiveness of shipboard air defenses for British ship losses
One writer points out that carriers not only protect the fleet but
are critical for amphibious and other military operations in distant
places. Such operations require carriers to have ground attack
aircraft.
Comment: The articles evidently are intended to support those
who favor large carriers in a debate within the military establishment
over the need for such expensive ships. The Navy has three small
carriers that are similar to the two used by the British in the Falklands.
These carriers also use short-range, vertical takeoff fighters with a
poor bombing capability, and they lack early warning aircraft.
The Soviets probably are building a large carrier,
Admiral Gorshkov, the 73-year-old
Navy Commander, favors such ships. He is unlikely to be in command
throughout the carrier's development program, however, because of
his advanced age and apparent disagreements on broader strategic
issues.
Admiral Chernavin, who recently became Chief of the Naval Staff,
is a prime candidate to replace Gorshkov. Chernavin has criticized
articles on Soviet naval theory by an associate of Gorshkov. As a
former submarine officer, he might be more receptive to limiting the
construction of carriers or even canceling the program if economic
problems require sacrifices by the military.
Top Secret
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Top Secret
CHILE: Strike by Copperworkers
The copperworkers' strike today protesting the arrest of union
leader Seguel for sponsoring protests on Tuesday probably will
provoke a firm response by the government and bring tensions to a
new high. The union, with 23,000 members, is Chile's largest. The four
other unions that make up the National Workers' Command are
considering whether to make good their threat to strike if any of their
leaders were arrested.
Comment: President Pinochet is likely to arrest the organizers,
fire the strikers-employees at one mine were dismissed for striking
yesterday-and send the armed services to occupy mines. A walkout
by the other unions could spread to professional and political groups
that supported the antigovernment protests on Tuesday. A state of
emergency already is in effect, and, if strikes spread, the government
probably would declare a state of siege. As the opposition grows,
controversy in the government could develop-particularly within the
nationa! police-over handling the unrest and the timing of the
transition to democracy.
Top Secret
7 17 June 1983
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Top Secret
Beijing is trying to limit the impact of Pan American's resumption
of service to Taipei on Sino-US relations. Aside from a routine Foreign
Ministry protest, China's Civil Aviation Administration only terminated
the airline's emergency landing rights in Guangzhou and requested
the US designate another airline to serve China. The Chinese did not
rancpl Pa an's current landing rights in Beijing and Shanghai.
Comment: The Chinese previously warned the US of ''serious
repercussions." Beijing apparently decided, however, that a stronger
response might risk the loss of Chinese landing rights in the US.
China's profitable air service to the US, which is scheduled to expand
this year and next, is a major source of hard currency. In addition,
Beijing probably does not want to jeopardize its prospects of gaining
greater access to US technology.
Top Secret
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Top Secret
Iran
ABU DHABI
Un%ted
People's Democratic
Republic of Yemen \
(S. Yemen) \
Top Secret
17 June 1983
Ad m; .
una
ab
Pt
Jazirat
Ma?irah
Border claimed by Oman
Approximate extent of various
border claims by Saudi Arabia
- Oil pipeline
0 Producing oilfield
Boundary representation s
not necessarily authoritatiive
Musandam
Peninsula
Oman
0 100
Kilometers
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Top Secret
OMAN-SAUDI ARABIA: Border Dispute
The longstanding dispute over the undemarcated border between
Oman and Saudi Arabia has revived. A senior Omani official told the
US Ambassador that King Fahd had complained to Sultan Qaboos
over the lack of progress in the border talks. Fahd asked Oman to
cease oil exploration in an area near Hayma that Oman considers well
within its territory. Unconfirmed reports claim that Oman has moved
military units to positions in the border area and that the Saudis have
moved troops to their frontiers with Oman and South Yemen.
Comment: As in the past, neither Riyadh nor Muscat is likely to
push its case to the extreme. Saudi policy on the border issue has
been inconsistent, reflecting the views of individual senior Saudi
princes, tribal concerns, and national oil interests. Riyadh probably
also is seeking to protect its interest in the Oman-South Yemen
border negotiations, which include discussion of territory claimed by
Saudi Arabia.
Top Secret
10 17 June 1983
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Top Secret
KENYA: Moi Moves Against Rival
Cabinet ministers allied with President Moi this week publicly
charged Constitutional Affairs Minister Njonjo with joining the US and
other Western powers in a plot to overthrow the government. Njonjo's
accusers also questioned the loyalty of Njonjo's fellow Kikuyu-
Kenya's largest and most powerful tribe. Prominent Kikuyu have
rallied to Njonjo's defense.
Comment: The ministers' criticisms of Njonjo are part of an effort
by Moi to remove his longtime challenger from power. Although Moi
probably does not believe the accusations, his political allies may try
to exploit Njonjo's close public identification with the West. The
unusually strong Kikuyu reaction in support of Njonjo, who is an
unpopular figure, presumably stems from their concern over the
implications for the tribe and may cause Moi to hesitate in moving
further against him. If the President does proceed with his campaign
against Njonjo, however, he risks causing the Kikuyu to unite against
LESOTHO: Moving to the Left
The government has taken another step to expand its ties to
radical and Communist states by announcing on Wednesday the
establishment of diplomatic relations with Nicaragua. The move
follows Prime Minister Jonathan's recent tour of six Communist
states, during which diplomatic relations with China also were
established. According to a Foreign Ministry official, the Chinese, the
North Koreans, and the Soviets are expected to open embassies in
Maseru. The influential Roman Catholic Church in Lesotho has
criticized Jonathan's recent actions, and the US Embassy reports
growing dissension in the cabinet and the ruling Basotho National
Party.
Comment: South Africa probably will express its displeasure over
Jonathan's moves by applying economic pressure. This will add to the
popular discontent with Jonathan's leadership. Lesotho's turn to the
left also may lead Pretoria to doubt the utility of its recent agreement
with Maseru, under which each country agreed to stop supporting
Top Secret
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Top Secret
Special Analysis
CENTRAL AMERICA: Economies in Crisis
Production in Central America has plunged approximately 20
percent since 1979 and the onset of major guerrilla activity in the
region. This is in stark contrast to the 13-percent growth attained by
Latin America as a whole during the same period. In the countries
directly affected by insurgencies, destruction caused by the fighting
In Nicaragua, damage and production losses associated with
Somoza's overthrow reached $2 billion, according to World Bank
estimates. The Sandinistas calculate that insurgent activity in 1982
alone caused an additional $58 million in direct losses.
In El Salvador, guerrilla attacks have cost at least $700 million in
direct damage and production losses since 1979. In Guatemala,
damage from sporadic guerrilla attacks probably has totaled about
$20 million in the past two years.
The Spreading Costs of Violence
The region's economic interdependence, which once was an
asset, has spread economic ills even to those areas not directly
affected by fighting. Foreign and domestic investment has
plummeted, and foreign commercial lending has all but dried up.
Regional trade, the outlet for virtually all of the area's
manufactures, has been hamstrung by delays in payment, import
restrictions, and currency convertibility barriers. Harvests have
declined as rural violence has cut into seasonal labor migration
Meanwhile, a substantial rise in oil prices, weakening demand for
agricultural commodities, and skyrocketing interest rates caused the
regional current account deficit to balloon from roughly $750 million
in 1979 to nearly $1.6 billion in 1982. Capital flight-including the
more than $1 billion drained from El Salvador since 1978-has been
a major contributing factor. In response, Central American countries
made deep cuts in imports, drew down foreign exchange reserves by
$1.6 billion, and borrowed about $6 billion during 1979-82, mainly
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Outlook for 1983-84
If insurgent activity continues near current levels, it will take about
$2.3 billion in foreign aid each year just to sustain import volumes,
prop up living standards at present levels, and forestall further drops
in production. Since no such amount of aid is likely, import volume will
decline further and overall economic activity in the region probably
will fall by 3 to 5 percent this year and-at best-will stagnate in
For Honduras and Costa Rica, the picture is a little brighter. Their
governments, however, will have to continue to adhere to economic
policies designed to shore up banker and investor confidence. This is
becoming increasingly difficult because bad weather in Honduras is
hampering its agricultural exports, and in Costa Rica the public is
resisting austerity measures required by the IMF.
If insurgents make strong gains, no foreseeable amount of foreign
aid could promote economic growth. Assistance would be used to
sustain imports and living standards because governments in the
region would be hard pressed to contain investor panic or to channel
aid into productive investments. A surge in the flight of capital and
talent would further cripple these economies.
Not even decisive military victories over the insurgents, or an
unexpectedly rapid global economic recovery, would cause quick
economic improvement. The region's private sector, weakened by
years of political turmoil, capital flight, low investment, and dwindling
inventories, will be a long time recovering even under optimal
conditions of security, foreign investment, and economic aid.
Top Secret
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Top Secret
Top Sicnt
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