NATIONAL INTELLIGENCE DAILY THURSDAY 8 DECEMBER 1983

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01094R000600010027-1
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 19
• Document Creation Date: December 27, 2016
• Document Release Date: December 3, 2013
• Sequence Number: 27
• Publication Date: December 8, 1983
• Content Type: REPORT

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?ficrp-Secret-
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Director of
Central
Intelligence
oLe AZ) /- i?3
---Tep-Seeret-
OPASMD 83-21161X
De comber 1903
285
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Contents
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EC: Summit Fails
3
West Germany-US: Air Defense Agreement
4
East Germany-West Germany: Post-INF Relations
5
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Iraq: Oil Exports To Increase
7
Iran: Attacks on Afghan Refugees
7
Norway: Challenge to Security Policy
8
Romania: Growing Unrest
8
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Eastern Europe: Winter Grain Crops Threatened
9
Special Analyses
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Western Europe: The Unemployment Crisis
12
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8 December 1983
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EC: Summit Fails
The failure of EC leaders to resolve agricultural and budget
problems at their recent summit in Athens deepens the Community's
financial crisis.
A deadlock developed on ways to limit runaway farm spending
and relieve the UK's budget burden. Prime Minister Thatcher, with the
support of West Germany, again threatened to block new revenue
measures until British and West German payments to the Community
are cut. French President Mitterrand, however, rejected new British
budget proposals.
The budget dispute was so intense that the Ten failed for the first
time to issue a final communique. Aides prepared draft statements on
the Middle East, Cyprus, and Central America, but the heads of
government did not have time to address foreign policy issues
Comment: Although the negotiations were heated and
unproductive, Thatcher apparently did not threaten again to withhold
future EC budget payments until her demands are met. The next EC
summit is scheduled for March, but France?which assumes the EC
presidency in January?is likely to push for a special meeting before
then.
The Ten have to agree on how to raise new funds by the middle of
next year if the EC is to avoid bankruptcy. The European Parliament
could apply additional pressure next week by rejecting the EC budget
for 1984. As a result, Community expenditures would continue to be
based on allocations for 1983.
Farm price supports held to the level of this year would irritate
France, Italy, and Ireland. The British budget rebate for 1984 also
might be withheld.
The summit's failure to agree on the future course of its
agricultural policy may complicate the US Cabinet-level meeting
tomorrow with the EC Commission. Although the EC leaders seemed
near consensus on limiting imports of US corn gluten feed, they
apparently remain divided on whether to deal with the US bilaterally
on the issue or to take emergency measures under the GATT.
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3 8 December 1983
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WEST GERMANY-US: Air Defense Agreement
Bonn views the new air defense agreement with the US, which was
signed on Tuesday, as a positive step In bilateral relations and a SiCr/
of Washington's commitment to the two-way street in NATO
armaments procurement.
Under the agreement, the US will give the West Germans 14
Patriot surface-to-air missile fire units-12 operational, one spare,
and one for training?and the West Germans will buy an equal
number. In return, the West Germans will man two US Patriot
battalions and provide and operate 27 French-German Roland
surface-to-air fire units at three US airbases in West Germany.
Comment: Defense Minister Woerner regards the agreement as a
first step in redressing the inadequacies of air defense in West
Germany and in NATO's integrated air defense system. Bonn needed
the agreement in order to meet its NATO commitment to field Patriot
systems and procure Rolands for its own airbases and still keep
within existing budget limits.
West German officials have long been concerned that what they
view as a protectionist US Congress is impeding US procurement of
European-produced weapons and equipment. They view the Patriot-
Roland agreement as an important test of the US commitment to
defense procurement that benefits economies on both sides of the
Atlantic, and this will influence West German attitudes toward future
armaments cooperation programs.
West Germany has urged Belgium and the Netherlands to
improve their NATO air defense systems. Both have followed the
US-West German negotiations closely and now may seek equally
beneficial arrangements.
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4 8 December 1983
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EAST GERMANY-WEST GERMANY: Post-INF Relations
East Berlin is doing business as usual with Bonn despite its earlier
threats to impose an "ice age" in relations after INF deployments.
East German leader Honecker initially criticized the West German
Bundestag's support for deployment as inconsistent with the Basic
Treaty governing bilateral ties. He has reaffirmed East Berlin's
support for the treaty, however, and has pledged to examine carefully
any West German proposals for improving relations.
Since the vote in the Bundestag, East German officials have
continued negotiations to transfer operations of a local transit system
in West Berlin to Western control. On Monday an East German
Politburo member discussed bilateral issues for an hour with a West
German politician. East German media, after an initial tough reaction,
did not repeat the criticism of Bonn voiced in the press conference in
Moscow on Monday and have not contradicted the view of West
German leaders that bilateral relations will continue.
Chancellor Kohl and other West German officials have remained
optimistic, ignoring the ambiguity of Honecker's statement and the
harsher criticism from other East German leaders.
Comment: East Berlin seems to be trying to insulate bilateral
relations from any significant cooling of East-West ties. It also seems
to be indicating to Bonn and to its own citizens that bilateral affairs
could still suffer, particularly if Moscow demands more tangible
political reactions to deployment.
East Germany may try to use INF deployments as an excuse to
resist granting major political concessions. East Berlin is likely to
believe that it can continue getting hard currency payments from
Bonn without making such concessions. It probably calculates that
Bonn needs to show that its policy on INF will not prevent forward
movement in intra-German relations.
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IRAQ: Oil Exports To Increase
Iraq's Oil Minister has announced that Baghdad plans to increase
oil exports through the Iraqi-Turkish pipeline from just under 800,000
barrels per day to 900,000 barrels per day beginning on Saturday and
to 1 million barrels by next April. The increase is being achieved by
the addition of new pumps to the pipeline, now Iraq's sole means of
exporting oil. the Iraqis are determined to
export as much oil as possible, regardless of the outcome of the
current OPEC meeting in Geneva.
Comment: Iraq has to increase oil exports substantially if it is to
ease its financial difficulties. Nevertheless, the $1 billion in additional
annual oil revenue that may be obtained by increasing the capacity of
the pipeline through Turkey would fall short of covering Iraq's needs.
Moreover, Iraq probably will have difficulty sustaining exports at the
new target level because of the soft market for oil that is likely next
year. Earlier this year Baghdad had to cut the pipeline transit fee to
make its oil competitive
IRAN: Attacks on Afghan Refugees
Iranians in the Tehran area attacked Afghan refugees in three
separate incidents last week, according to a statement by the Iranian
Interior Minister on national television. The Minister blamed the
incidents on "Afghan agents of the US and the USSR," whom he said
want to fan communal tensions in Iran and discourage Iranian support
for the Islamic Afghan resistance.
Comment: These incidents reflect the frustration of many
Iranians, especially the poor, who resent the regime's support for the
1.5 million Afghan refugees in Iran. Refugees fill jobs, occupy housing,
and receive welfare benefits that might otherwise go to hard-pressed
Iranians, including the nearly 2 million internal refugees from the war
with Iraq. Few Iranians will believe that the incidents were provoked
by foreign meddling. Although more violence is likely, Tehran almost
certainly will continue to support the refugees.
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7 8 December 1983
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Top Secret
NORWAY: Challenge to Security Policy
The opposition Labor Party is asking the parliament to consider
today a resolution requiring Oslo to support the nuclear freeze
concept in international forums and to endorse a merger of INF and
START negotiations. This latest challenge to government security
policy is prompted by a press article written and signed by two
members of the Christian People's Party in the governing coalition.
They expressed qualified support for a nuclear freeze. Most US
Embassy contacts expect the government to avoid defeat on the
resolution, possibly by deferring it until spring.
Comment: The government has narrowly defeated four previous
challenges to its security policy over the last year, but each time only
by a single vote. With the possible loss of two swing votes, Prime
Minister Willoch may find it difficult to defeat this resolution, because
it supports international arms control efforts and does not directly
oppose NATO policy. The government will not be endangered by such
a vote unless it is made a vote of confidence. A defeat nevertheless
would weaken the coalition and complicate discussions in NATO.
ROMANIA: Growing Unrest
Recent government austerity measures are causing widespread
discontent, Workers have staged brief
strikes in and near Bucharest to protest wage cuts imposed when
their factories failed to meet unrealistic production targets.
there is unhappiness with shortages of food
and of fuel and electric power and that the government is considering
an increase in food rationing after Christmas.
criticism of President Ceausescu has increased and that
dissatisfaction with his policies now extends to upper levels of the
party and the government.
Comment: Public unrest probably will intensify during the winter
as living and working conditions deteriorate. An increase in food
rationing could provoke demonstrations?as the introduction of
rationing did two years ago?and sharpen existing divisions in the
leadership. The continued strong backing of the security forces,
however, puts Ceausescu in a good position to head off serious
challenges to his authority.
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Top Secret
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EASTERN EUROPE: Winter Grain Crops Threatened
Fall drought has damaged winter grain crops in Czechoslovakia,
Romania, and Bulgaria, according to US Embassy reporting. In
Czechoslovakia 25 to 30 percent of the winter grains failed to
germinate and in Romania dry soil prevented completion of sowing
on time.
Comment: Romania and Bulgaria had poor harvests this year,
and financial problems have constrained imports of grain in all three
countries. Consequently, the harvest next year will be particularly
important in determining whether adequate food supplies are
available. Winter grains normally account for more than half of total
grain production in Czechoslovakia and Bulgaria and for 40 percent in
Romania. Low soil moisture is increasing vulnerability to winterkill in
Czechoslovakia and is threatening to reduce yields next spring in all
three countries.
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9 8 December 1983
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Top Secret
Unemployment in Midyear Changes in Size of Population
and Labor Force
Rate
(percent)
Number
Unemployed
(thousands)
Whorls
1960-70
Total
Age groups
15-24
6,9
149
64
Western Europe
10.6
18,306
West Germany
8.9
2,320
03
France
8.5
2,029
25-54
4.0
Italy
9.7
2,258
49
United Kingdom
12.4
2,970
55-64
! 4.0
Austria
3.2
145
7
Belgium
11.9
510
Denmark
10.6
285
Finland
6.8
150
1970-80
Greece
10.0
370
Total
21 0
11 7
Iceland
1.3
1
Age groups
Ireland
14.2
146
15-24
j 8.6
Luxembourg
1.3
2
0.9
Netherlands
17.4
841
25-54
1411
Norway
3.4
61
j 13.4
Portugal
9.0
390
55-64 -2 4
Spain
17.5
2,141
-2.7
Sweden
3.4
135
Switzerland
0.8
52
[ Population
'--I Labor force
Turkey
20.0
3,500
301389 12-83
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8 December 1983
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Special Analysis
WESTERN EUROPE: The Unemployment Crisis
Western Europe is struggling with the highest levels of
unemployment since the reconstruction period after World War II, with
little prospect for improvement before the end of the decade. As of
mid-1983, 18 million workers?more than 10 percent of the labor
force?were jobless, and the rate is expected to climb to 12 percent
by 1990. This persistent trend will be a heavy burden on Western
Europe's political and social institutions and could disrupt economic,
political, and security relations with the US.
Some three-fourths of unemployment in Western Europe is
caused by rapid growth of the labor force, accelerating labor costs,
and an inability to reorganize industry. The recent recession has
aggravated the situation, accounting for the additional one-fourth of
those out of work.
During the 1970s, the total population increased only slightly, but
the prime working-age population?ages 25 to 54?grew two times
faster than in the previous decade. Simultaneously, wages and
nonwage labor costs rocketed, encouraging employers to reduce jobs
through attrition.
Western Europe's inability to shift employees from declining
traditional kinds of work into high growth industries further limited job
creation in the 1970s. Although economic growth in the region during
the 1970s was comparable with that in the US, Western Europe added
only about 5 million new jobs, while US employment grew by more
than 20 million workers.
Western Europe will not be able to solve its structural
unemployment problems quickly, and the number of unemployed will
continue to climb gradually throughout the decade. The baby boom of
the 1960s and more workers in the older working-age brackets will
mean even more people will be in the labor force than during the last
decade. Economic growth is not likely to provide iobs for the
additional members of the labor force.
The one potential mitigating factor would be lower labor costs
that could result from high unemployment and weaker unions. The
additional demand for labor encouraged by more competitive wages,
however, would promote only marginal improvement in employment.
By itself, it is unlikely to reverse the dismal unemployment prospects.
continued
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Rapid Rise of Labor Cost in Big Four
Index: 1970-100
Real labor costs
200
175
150
125
100
1970 75 80
Real wages
175
125
100
1970
75 80
Real nonwage costs
300
200
100 1970
75
? West Germany ?UK
France ? US
Italy
80
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8 December 1983
Western Europe and the US:
Employment Changes, by Sector,
1970-80
Percent
Iota! ernHoyinent
Agriculture
Industry
Services
Western Europe
?Us
: 122
20 2
-In I
301346 12-83
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Current West European economic policies probably are helping to
promote a climate more conducive to growth without rapid inflation,
but the underlying causes of unemployment problems are not being
adequately addressed. For the most part, governments are
concentrating on reducing working hours and providing government
subsidies for hiring the long-term unemployed. Such programs,
however, do little more than redistribute the current unemployment.
Few countries are carrying out their plans to hold down nonwage
labor costs for employers in order to encourage overall employment.
Governments are doing little to reduce public intervention in the
economy, a major factor slowing the restructuring process. Moreover,
they are continuing to prop up outmoded and uncompetitive
industries rather than promote investment in new and more dynamic
industries.
Implications for the US and NATO
The continued high unemployment in Western Europe will lead to
new strains in relations with the US. Trade disagreements are likely to
become more numerous and more hotly contested as trade
opportunities are increasingly equated with job opportunities.
Recent disagreements with the US over trade in steel and
agricultural goods could become the rule, not the exception, and may
affect political and military cooperation. Moreover, the increasing
importance of exports will encourage West European countries to
relax enforcement of trade restrictions on sales to Warsaw Pact
countries.
As trade difficulties mount, protectionist pressures in Western
Europe will grow. New barriers against US products probably will be
limited, but restrictions against imports from Japan and the newly
industrialized countries may increase. This would force those
countries to offset lost sales in Western Europe by trying to sell more
in the US.
Dim employment prospects also will make it more difficult for
West European countries to meet their defense commitments to
NATO. Unemployment already has caused a severe financial drain on
West European governments, and, with budgets likely to remain tight,
demands to curb defense spending will intensify. The Allies almost
certainly will increase pressure on the US to buy West European
military equipment to help maintain employment in their defense
industries.
13
continued
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8 December 1983
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In addition, the unemployment problem will have other political
and economic ramifications that could affect the US. In the next few
years, the inability of incumbent West European leaders to solve the
unemployment problem may usher in more frequent changes
between governments of the left and right. Political extremism may
spread among young people, when much of an entire generation of
youth tries to cope with years of joblessness.
In Spain and Turkey, where unemployment will remain
extraordinarily high and will be coupled with rapid inflation and
foreign debt difficulties, serious political instability could result.
Foreign workers increasingly will become targets of resentment by
the unemployed, leading to social strains both within and among West
European countries.
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