EUROPEAN REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00289R000301170001-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 32
• Document Creation Date: December 27, 2016
• Document Release Date: July 11, 2011
• Sequence Number: 1
• Publication Date: August 29, 1986
• Content Type: REPORT

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Directorate of
Intelligence i ER hIE C
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OPY I ~
GU NO, T IV '1: OUT
BPI IMIARIK 6111-11
I European Review
29 August 1986
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29 August 1986
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European Review) 25X1
Western Europe: Progress on New Fighter AircraftF__-] 1 25X1
Portugal-Italy: NATO Brigade Plans Movement by Train 1 25X1
Iceland-United States: Heavy Weather on Maritime Issu~~2 25X1
Sweden: Moderates Choose New Leader= 3 25X1
,EC-CEMA: More Talks on Closer Ties~ 4 25X1
Articles France: Policy Toward Central America F_~ 5 25X1
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Nicaraguan regime.
In the past six months, Prime Minister Chirac has expressed full
support for US policy in Central America and promised to change.
France's policy toward the region from that followed by the previous
Socialist government. Paris will probably continue to gradually
reduce support of Nicaragua in favor of the Central American
democracies. But this will not necessarily translate into support for
US efforts to apply economic and military pressures against the
Portugal-United States: Problems Ahead in Security Relations
Security ties between the United States and Portugal remain strong,
but frictions are building. Lisbon believes it has contributed more
than it has received from its participation in NATO and is
particularly rankled by recent cuts in US security assistance.F_
Belgium-Zaire: Palpitations in the "Heart of Darkness"
The Belgian Government is voicing growing concern over its eroding
political influence in Zaire. Brussels has sought to rebuild its
standing by promoting Belgo-Zairian military cooperation and
agreeing to plead Kinshasa's case before Zaire's international
creditors.
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EUR ER 86-020
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Poland's revival from its economic crisis of the early 1980s has
stalled, and prospects for sustained recovery appear slim for the rest
of the decade. As a result, the Jaruzelski regime, Western creditors,
and the USSR will find no escape from Poland's fundamental
economic weaknesses.
Some articles are preliminary views of a subject or speculative, but
the contents normally will be coordinated as appropriate with other
offices within CIA. Occasionally an article will represent the views
of a single analyst; these items will be designated as uncoordinated
views. Comments may be directed to the authors,
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European Review I 25X1
Western Europe Progress on New Fighter Aircraft
The Eurofighter-a joint project by Britain, Italy, Spain, and West Germany
previously known as the European Fighter Aircraft-moved a step closer to reality
in early August when a prototype aircraft by British Aerospace flew for the first
time. The flight followed closely the debut of France's advanced experimental
combat aircraft, the Rafale, in July. Both are outgrowths of attempts to develop a
common European fighter to replace the aging Jaguars, F-4 Phantoms, and F-104
Starfighters in West European air forces.
According to press reports, British Aerospace's experimental aircraft is the first
fighter to be assembled entirely in the United Kingdom since 1954 and represents
a $270-million research and development investment. This prototype will test
advanced technologies for the next generation of European fighters, including
digital fly-by-wire control, relaxed static stability, integrated avionics and
electronic cockpit displays, and carbon-fiber composite airframes. Members of the
Eurofighter consortium agree that the primary role of their fighter will be air-to-
air combat but have been unable to settle on which radar or engine to use.
The consortium earlier discouraged major US participation in the project. Failure
to resolve British-West German differences and fears of increasing costs and
delays caused by the introduction of new technologies, however, may lead to US
involvement in electro-optics as well as radar and engines.
Portugal-Italy NATO Brigade Plans Movement by Train
The NATO Brigade of the Portuguese Army in September plans a trial exercise in
moving the unit by train to its assigned operational area in northern Italy,
according to the US defense attache. The brigade will practice loading procedures
for a complement of 350 men, and-if the exercise is successful-train transport
of the trial group will take place sometime in 1987.
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Refusal by Spain to allow transit across its territory had blocked previous plans to
move the brigade by train. Since then, the Portuguese have perceived a change in
Madrid's position and are optimistic they will now be granted permission. The
Portuguese will also have to secure approval for the brigade to travel through
France. Although obtaining French permission will require delicate handling
because of France's reluctance to commit itself to NATO in advance of a war,
Paris probably will permit the train to transit France. The brigade's major
weapons systems and vehicles, however, are still projected to go by sea.F__1
Iceland-United States Heavy Weather on Maritime Issues
The Icelandic Government is under increasing pressure from members both of its
own coalition and the opposition parties to take a tough stand with Washington
over cargo shipping rights to the NATO base at Keflavik. After appearing to
buckle under to US pressure to limit its "scientific" ' whaling and export of whale
products, recent press reports hint that Reykjavik has not ruled out actions that
could affect Keflavik if Icelandic shipping companies are not allowed to compete
with a US cargo company servicing the 3,000 US servicemen at the base. These
two controversies have been compounded by domestic scandals and Iceland's
misunderstanding of US policy on scientific whaling.
A 1904 law requires that preference be given to US ships in transporting supplies
to US military bases overseas. In 1984, in accordance with this law, a US cargo
firm-Rainbow Navigation-took over the transport of supplies to the base from
several Icelandic shipping companies that had the franchise when there were no
US competitors. After the takeover, one of the Icelandic companies, Hafskip, went
bankrupt, and some of its officials were later arrested on charges of embezzlement
and mismanagement. The scandal kept the dispute between Iceland and the
United States over the cargo issue in the public eye.
' IWC rulings permit the take of a limited number of whales for research; commercial whaling,.
restricted by the IWC, refers to the hunt of whales for the sale of whale products.F_~
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The Pelly Amendment to the Fisherman's Protective Act of 1967 requires the
Secretary of Commerce to certify countries whose whaling policies violate
International Whaling Commission (IWC) rules on scientific whaling. Because
Iceland planned to export most of the whale meat to Japan, the United States
judged that Iceland had contravened the IWC rule that whale products only be
consumed locally and planned to certify Iceland on 28 July. Certification does not
automatically lead to a ban on the importation of fishery products from the
certified country. Incorrectly believing it had been threatened with a total cutoff of
its fish exports to the United States ($203 million in 1985), Iceland suspended its
whaling on 28 July. On 7 August, Reykjavik agreed to consume 51 percent of
Icelandic whale products locally and to limit the catch to 120 whales.
Criticism of Prime Minister Hermannsson's compliance with the US
interpretation of the IWC rulings prior to certification has increased the pressure
on his strongly pro-NATO government to take a tough position on the cargo issue.
According to the US Embassy and the Icelandic press, several options are being
considered. Most likely, in our view, would be an Icelandic law to prohibit cargo
services to Iceland under the cover of foreign monopoly law, making the Rainbow
Navigation cargo services between Iceland and the United States illegal.
Reykjavik could also ban the import of meat to the base, limit the movement of US
military personnel, delay contracts with US companies, or start charging the US
Government for what are now rent-free military facilities. The cargo and whaling
issues have stoked Icelandic nationalism and may push the government
increasingly to take tougher measures as the election next April approaches.
Carl Bildt will replace Ulf Adelsohn as Chairman of the Moderate Party, the
largest in Sweden's nonsocialist opposition. Adelsohn announced his resignation in
June after failing to lead the nonsocialists to victory in last year's national election
and watching his party's standing in the polls drop by one-half during the last two
years. A special Moderate Party selection committee voted unanimously to
recommend Bildt to the party congress earlier this month. One of Sweden's
foremost experts on security policy, Bildt was chosen over Ingegerd Troedsson, a
spokesman for the Moderates on welfare issues. Bildt's selection is a victory for
former party leader Gosta Bohman (Bildt's father-in-law) and for the "New
Moderates," a group of bright young conservatives, predominantly from
Stockholm, who favor liberal economic policies and closer alignment of Sweden-
as a neutral-with the West.
Bildt will take the helm at a low point for the party: Social Democratic Prime
Minister Ingvar Carlsson has the highest approval rating of any postwar Swedish
Premier, and Liberal Party Chairman Bengt Westerberg has established himself
as leader of the nonsocialist opposition. Bildt's key tasks will be to challenge Social
Democratic policies and reassert his party's prominence within the opposition, but
he must be careful not to appear confrontational in dealing with Carlsson nor spur
fighting among the nonsocialists during the runup to the 1988 election. F___1
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EC officials have proposed a meeting with CEMA counterparts in September for
exploratory talks on establishing relations between the two organizations,
according to US Embassy sources. The EC's main goal remains bilateral
agreements with individual East European states, and it plans to go slowly in
negotiations with CEMA until at least two East European countries establish
diplomatic relations with the EC. Romania has indicated willingness for bilateral
diplomatic as well as economic agreements, possibly by the end of the year.
Hungary, Czechoslovakia, and Poland have shown interest in commercial
agreements, while Bulgaria East Germany, and the USSR insist on progress in
EC-CEMA relations first.
The talks are unlikely to produce formal EC-CEMA ties soon. Romania is the only
CEMA country close to establishing diplomatic relations with the EC. Some EC
officials place a high priority on a broad agreement with Hungary, but talks
apparently have bogged down over Budapest's longstanding demands for trade
concessions. EC concerns about human rights in Poland may complicate
negotiations with Warsaw. F-~
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France: Policy Toward
Central America
In private conversations with high-ranking US
officials during the last six months, French Prime
Minister Jacques Chirac has expressed full support
for US policy in Central America and promised to
change France's policy toward the region from that
followed by the previous Socialist government. Since
the election in March, Paris has indeed been less
confrontational toward Washington on Central
American issues, but this has been due more to the
political situation created by cohabitation than any
directive for change.
The lack of any strong direction from the top militates
against any major shifts in French Central American
policy in the near future. Following a trend started
when the Socialists controlled the government as well
as the presidency, France will probably continue
gradually reducing support for the Sandinistas in
favor of the Central American democracies.
Disenchantment with the Sandinistas, however, will
not necessarily translate into backing for US policy,
and France is not likely to support active US
measures to apply economic and military pressure
against the Sandinistas.
Policy Under the Socialists
French policy toward Central America during the
early days of Socialist rule was blatantly antagonistic
to the United States. Originally, the Socialists
followed a policy of actively supporting revolutionary
groups in Central America based on a view of global
politics that conveniently combined Socialist ideology
with French national interests. Although France's
economic stake in Central America is not large, the
Socialists saw Central America as a microcosm of
broader trends in the Third World. In their view,
inequality, exploitation, and authoritarianism rather
than East-West competition were responsible for
instability in the Third World. In addition, they
believed the United States and the Soviet Union were
exploiting this unrest in order to reassert their own
faltering hegemony, thereby risking a dangerous
confrontation.
According to the Socialists, socio-economic reform 25X1
would lead to the domestic political stability needed to 25X1
close off opportunities for US-Soviet intervention and
thus restore international stability. France could play
a leading role in this process by supporting
"progressive" (that is, revolutionary) forces.
Optimistic Socialists envisioned a global
transformation bringing peace, independence, and
democracy to the nations of the world. In addition to
these altruistic goals, pragmatic Socialists hoped to
increase French influence with other Latin American
countries and enhance France's prestige as a world
power.
Once in power, the Socialists moved quickly to
implement their goals. Paris issued a joint declaration
with Mexico in August 1981 supporting El Salvador's
guerrilla alliance-the Democratic Revolutionary
Front/Faribundo Marti National Liberation Front
(FDR/FMLN)-and sold arms to Nicaragua in
December 1981. This initial activism, however, was
short lived and French policy toward Central America
was relatively restrained during 1982 and 1983.
Several factors account for this passivity. Negative
US and Latin American reactions to the joint
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Trade. France's interest in Central America is
primarily political, not economic. French trade with
the five countries of Central America (Guatemala, El
Salvador, Honduras, Nicaragua, and Costa Rica)
accounts for less than 1 percent of France's total
foreign trade. Trade with Nicaragua alone accounts
for about one-third of 1 percent of the total and is far
more significant for Nicaragua than for France. In
1985, France accounted for 6.9 percent of
Nicaragua's exports and 5.6 percent of its imports.
Although France's trade with Nicaragua is not
insignificant, it is doubtful that France could
effectively use trade as a lever against Nicaragua.
Direct Aid. Nicaragua also has been the greatest
beneficiary of direct French aid to Central America.
Direct aid has remained fairly steady at $8.5 million
since 1982, roughly double the amount given to the
other Central American countries, and has mostly
been in the form of food and medicine.
While French aid has remained steady, aid from
several other West European countries-notably
Sweden and the Netherlands-has increased. The
new Chirac government has indicated that it intends
to phase out aid to Nicaragua after 1987 in favor of
the other countries in Central America.
Loans and Credits. Since 1982, France has given
Nicaragua approximately $15 million a year in loans
and credits, while extending almost nothing to other
Central American countries. Most of this aid has
been tied to the purchase of French goods, thus
artificially overstating the amount of French-
Nicaraguan trade. Furthermore, the French have
often made access to these credits contingent on
repayment of previous credits.
declaration with Mexico on the FDR/FMLN and the
Nicaraguan arms sale alerted France to the potential
costs of an active policy in the region. Furthermore,
increased repression by the Sandinistas and lack of
popular support for the rebels in El Salvador
gradually persuaded pragmatic Socialists that their
original understanding of these groups had been
flawed. However, the most important factor
explaining French quiescence was the crisis over INF
deployment in West Germany, which dominated
France's foreign policy agenda after the fall of
Helmut Schmidt's government in October 1982.
Faced with the need for NATO solidarity, the French
government became more reluctant to antagonize the
United States on Central American issues.
Toward the end of 1983, France again assumed an
active posture toward Central American affairs.
Successful INF deployment in West Germany
alleviated French security concerns, while the US-led
Grenada invasion heightened French fears of direct
US military intervention in Central America. France
saw US economic and military pressure on Nicaragua
as a dangerous step down this road and took a number
of actions in various international forums to
undermine US policy. By serving as an intermediary
between. Nicaragua and Costa Rica, between the
Sandinistas and the Miskito Indians, and between the
Duarte government and the FDR/FMLN, France
tried to defuse the growing militarization of the
Central American crisis.
While French policy was certainly anti-US during
this period, it became decidedly less pro-Nicaraguan.
At the higher levels of the French Government, fear
of US military intervention in Central America
outweighed sympathy for the Sandinistas, especially
after 1983. Actually, French irritation with the
Sandinistas began as early as 1982. The declaration
of a state of emergency in March and Ortega's visit to
Moscow in May called Nicaraguan claims of political
pluralism and nonalignment into question. Although
disturbed by these actions, French policymakers were
reluctant to publicly criticize the Sandinistas for three
reasons: they did not want to appear to support US
policy in the region; they did not wish to upset Third
Worlders within the Socialist party who remained
strongly sympathetic to the Sandinistas; and they
hoped that the Sandinistas might still be persuaded to
make good on their promises of political pluralism and
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nonalignment. Thus began a pattern of French
officials criticizing the Sandinistas privately while
expect from France will be small, since French aid to
Nicaragua has been only about $15 million a year for
the last four years.
defending them in public.
However, the Socialist government's disenchantment
with Nicaragua reached its zenith after the
Sandinistas expanded the state of emergency in
French probably fell even further in February 1986
when they hosted a conference of anti-imperialist
organizations that called for the independence of
France's Caribbean departments.
Policy Under Cohabitation
Although the tone of French policy has certainly
changed since March, this has more to do with the
vagaries of the political situation created by
cohabitation than anything else. Chirac's proclaimed
support for US policy in Central America is probably
rather thin. Chirac. and his key advisers are not very
knowledgeable about Central American issues, and
Chirac has paid little attention to the region since
coming to power. A dramatic move on Chirac's part
in support of US policy-such as direct contact
between Chirac and Nicaraguan rebel leaders-is
unlikely, especially after the July death of Joel Fieux,
a naturalized Nicaraguan citizen of French birth, in a
Contra ambush.
Chirac has also indicated to US officials that aid to
Nicaragua will be phased out and rerouted to the
Central American democracies. Closer scrutiny
reveals that this really does not represent a radical
departure from previous policy under the Socialists-
the decision to reduce French aid to Nicaragua had
probably already been made in late 1985 by the
previous Socialist government. Furthermore,
diplomatic relations between France and El Salvador
had been gradually improving since 1983,
culminating in the appointment of a permanent
French Ambassador in April 1985. In any case, the
amount of redirected aid these democracies can
Mitterrand, on the other hand, seems less willing to
become involved in Central American issues than he
has in the past. His reaction to the US House of
Representatives approval of Contra aid in July 1986 25X1
was mild compared to his response to the US trade 25X1
embargo against Nicaragua announced in May 1985.
Furthermore, Mitterrand apparently did not try to
influence France's position in the UN Security ..
Council's debate on the International Court of Justice
(ICJ) decision that condemned the mining of 25X1
Nicaraguan ports and the US role in the Nicaraguan
conflict. France abstained on a resolution calling on
the United States to comply with the ICJ's decision.
For the time being, Central America is a banana peel
no one wants to slip on. Both Chirac and Mitterrand
probably worry that supporting either the Sandinistas
or the Contras is potentially embarrassing, and each is
wary of making a mistake his opponent might exploit.
With neither Mitterrand nor Chirac willing to take a
leading role, Foreign Minister Jean-Bernard Raimond
is likely to play a key role in determining the
substance of Central American policy. Raimond, a
compromise choice for Foreign Minister, is a career
diplomat, not a Chirac loyalist.
A Soviet-East European specialist, Raimond does not
have a strong background in Central American
affairs, but he has laid down some principles for
France's future Central American policy that
emphasize continuity over change. Raimond
continues to support the Contadora process and the
EC's policy of granting aid to all the nations in the
region, including Nicaragua. He also stresses that
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France will reject military means to bring about
change in the region and will continue to support the
principle of nonintervention in internal affairs.
Raimond recently observed to US diplomats that,
unlike Cuba, Nicaragua is not yet a member of the
Soviet Bloc-clearly implying that he is unlikely to
support Nicaraguan rebels: Nevertheless, he says
France will not undercut United States policy in the
region, and he is unlikely to seek a confrontation with
As part of his effort to ensure continuity in French
foreign policy, Raimond has left. in place at the
Foreign Ministry several officials responsible for
CentralAmerica appointed under the Socialists,
especially Remy Lahaye, the pro-Sandinista director
for Central America. Furthermore, actions by French
officials in Managua indicate they remain strongly
sympathetic to the Sandinistas. As a result, much of
the information French policymakers receive on
Central American affairs carries a bias against US
policy.
Outlook .
In the short run, the strains of domestic politics will
keep the French from undertaking any major new
initiatives toward Central America. Support for the
Sandinistas is likely to wane gradually. France will
probably oppose military solutions to the region's
problems, as well as policies aimed at isolating
Nicaragua diplomatically or economically; but not in
a way that might provoke a confrontation with the
United States:
However, the balancing act of cohabitation will
probably not last very-long. Legislative elections are
likely to follow France's next presidential election,
which will probably occur in March 1988. A leftwing
president would seek to gain a governing majority,
while a rightwing president would try to capitalize on
his election victory to expand the right's present'
razor-thin majority in the National Assembly. If the
Socialists came back-to power, they would probably
again oppose US economic and military pressure
against Nicaragua. They might also try to placate
hardcore supporters of the. Sandinistas on the party's
left by making a few symbolic gestures toward
Nicaragua. For the most part, however, the Socialists
are likely to be cautious in their dealings with
Nicaragua and would probably be reluctant to extend
any new aid-economic or military-to the .
Sandinistas without concrete political concessions.
If the right should. take the presidency as, well as
maintain-power in the National Assembly, the best
Washington could probably hope for in Central
American policy would be a kind of benign neglect.
Although the right would certainly be less reluctant to
criticize the Sandinistas, this will not .necessarily
translate into support for US policy. Chirac has
indicated such support; but his attachment to this
position (as.to any position) is probably not very deep.
The `French right has traditionally taken less interest
in Latin American affairs than the?left and at present
seems more concerned with using limited French
resources to maintain -France's. traditional ties'to its.
African clients. Furthermore, broad elements of the
center and right worry that US military involvement
might weaken US commitments to Western Europe
and provoke anti-American sentiment in France as it
did during the Vietnam war: On a more negative note,
many old- and new-style Gaullists on the French right
might argue for a more active role in Central
America. Therefore; if fears of US intervention were
to increase, 'a rightwing French government might.
become more critical of US policy. However, for the
most part, the right will probably feel little is to be
gained by provoking Washington over Central ? ,
Future French governments of either the left or the
right could revive a more activist French policy in
Central America. The persistent influence of
Gaullism and the desire to play a world role often lead'
the French to herald prematurely the decline-of US-
Soviet influence as the basis for French opportunity.
In the final analysis, France does not have the power:
to shape events in the region. and can only react to
opportunities as they arise: Furthermore, before
making `any serious effort to exercise its influence in
Central America, `Paris would need to sense that it
can afford to provoke Washington and that something
can be gained by becoming involved in the region's
affairs.
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Portugal-United States: Problems
Ahead in Security Relations
Security ties between the United States and Portugal
remain strong, but friction between the two sides is
building. Lisbon perceives itself as a loyal ally that
has sacrificed and risked much to maintain close ties
to the United States and its NATO partners.
Portuguese officials believe, however, that they have
received little in return and that recent cuts in US
security assistance illustrate Washington's neglect of
its older Iberian ally. A stagnant economy and
military budget cuts have compounded Portugal's
difficulties and resulted in complaints at the highest
levels of government about decreasing US financial
aid. The potential for divisiveness almost certainly
will grow as several related existing and emerging
issues-such as the review of the Lajes Air Base
agreement in early 1988-complicate security
relations between the two nations.
Crux of the Problem: Portuguese Perceptions of
the US Commitment
According to US Embassy reporting, Portuguese
officials believe the facilities and cooperation they
provide to the United States and NATO should be
counterbalanced by substantial amounts of security
assistance, especially from the United States. In light
of cutbacks in Portugal's military budget-brought
on by domestic economic problems-this aid has
become much more important. Indeed, Lisbon's
perception that US aid levels are inadequate stems
directly from domestic economic constraints. The
military budget for 1986 illustrates Portuguese
frustration. According to defense attache reporting,
defense spending, adjusted for inflation, will remain
at virtually the same relatively low level as in 1985
and will probably necessitate cutbacks in training and
weapons modernization programs.
interservice rivalries will intensify as the armed forces
feel the budget squeeze.
General Lemos Ferreira, Chief of the Portuguese
Armed Forces General Staff, has blamed US security
assistance levels for the armed forces' difficulties, and
US diplomats report similar complaints from the
Prime Minister, Foreign Minister, and Defense
Minister. Portuguese officials base their criticism on a
US pledge-made during the 1983 renegotiation of
the Lajes Air Base agreement-that Washington
would make its "best effort" to provide as much aid as
possible to compensate Portugal for "new risks" it was
assuming in providing new facilities and expanded
cooperation with the United States. Washington
maintains that all such promises have been upheld-
despite its own budget constraints and the process of
Congressional approval-and points to assistance
funds it has requested for Portugal for fiscal year
1987 as proof of its good intentions. Portuguese
military and civilian officials remain unconvinced,
however, and argue that US deficits are not a valid
justification for "violations" of security assistance
pledges.
Specific Problem Areas
Current strains in Lisbon's relationship with
Washington over security assistance both complicate
and are complicated by several specific issues,
including construction of a satellite tracking system,
prepositioning of US equipment and supplies, and
procedures for the evacuation of disabled personnel
from US submarines.
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GEODSS. The question of US compensation already
is posing problems for the planned construction of a
US ground-based electro-optical deep space
surveillance system (GEODSS) designed to track
enemy satellites. During the renegotiation of the
Lajes base agreement in 1983, US participants
believed they had received, in return for substantial
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the issue of compensation has halted progress
completely. According to Embassy reporting, Lisbon
has repeatedly contradicted itself as to whether it
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97.386
137.546
158.213
207.500
188.912
233.000
77.386
117.546
108.213
127.500
112.352
153.000
30.1
63.0
60.2
70.0
66.99
75.0
IMET
2.286
2.046
3.013
2.500
2.297
3.000
FMS
45.0
52.5
45.0
55.0
43.065
75.0
Economic (ESF)
20.0
20.0
50.0
80.0
76.56
80.0
a The four types of assistance listed include both grants and loans
and are either military or economic in nature:
1. Military Assistance Program (MAP)-grant aid given for
armaments, force modernization, and other military-related
outlays.
2. International Military Education and Training (IMET)-
training progams established primarily to encourage development
of professionalism in midlevel officer corps and to increase the
ability of Portugal to manage resources, plan, and operate within
NATO.
3. Foreign Military Sales (FMS) Credits-funds lent at
concessional or Treasury rates for the purchase of US-
manufactured military equipment.
believes the United States has paid for the station,
despite US contentions that compensation has been
made through Economic Support Funds provided
under the terms of the base agreement. Other
obstacles include disagreements over taxation, the
question of increased compensation for Portugal's
assumption of "new risks," and the issue of economic
development in the region where the facility is to be
constructed. Recently, Prime Minister Cavaco Silva
appointed a retired Portuguese diplomat to study the
whole GEODSS issue in consultation with the US
Government. By dragging its feet on GEODSS,
however, Lisbon has significantly increased tensions
with Washington.
Maritime Prepositioning of Ships. Another difficult
issue identified by the US Embassy in Lisbon is that
of US Navy ship visits to Portuguese ports. Foreign
Ministry officials have begun complaining that US
vessels involved in NATO's maritime prepositioning
4. Economic Support Funds (ESF)-cash transfer payment
whose purpose is to promote social and economic development and
to build long-term public support for bilateral and NATO defense
cooperation.
b Estimated outlays.
c Congressionally approved levels minus 4.3 percent mandated by
Gramm-Rudman-Hollings deficit reduction law.
d Proposed levels per FY 1987 Congressional Presentation
Document.
program ' visit Portugal too frequently and without
proper notification. Lisbon considers the matter
particularly sensitive because of the possibility that
these ships would be used in non-NATO, out-of-area
operations. Recently, the government has placed
restrictions on, and denied, port visits to underscore its
demand for negotiation of a formal notification
agreement.
Submarine Evacuations. Within this same
notification context, which the Portuguese view as a
question of sovereignty, Lisbon now is placing .
conditions on the medical evacuation of US Navy
personnel through Portuguese ports. Historically,
injured or ill crewmen were evacuated from US
' The Maritime Prepositioning of Ships (MPS) program involves US
naval vessels that operate off the coast of Portugal and contain
contingency supplies for US forces deployed to Europe in wartime.
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submarines in Portuguese waters with minimal
discussion of the vessel's identity. Recently,
Portuguese officials have requested full disclosure of
all pertinent information about the submarine and its
mission, including its nuclear status. For reasons of
security, US officials are unwilling to divulge this
information. Embassy reporting indicates the
Portuguese consider it an insult that the United States
apparently does not trust its ally with such sensitive
information and has made evacuations in Portuguese
waters a question of national pride.
Emerging Problems
A number of other emerging issues almost certainly
will affect the tenor of US-Portuguese security
relations in the future. Chief among them is US
access to Beja Air Base on the Portuguese mainland.
Portuguese officials believe such access is feasible but
that any negotiations would have to be trilateral and
that the increased risks attendant upon US use of
Portuguese mainland facilities would require
compensation through increased security assistance.
A second emerging, and as yet amorphous, issue is
that of Host Nation Support,' which is especially
delicate because it could involve the presence of US
forces on the Portuguese mainland. At this point,
according to Embassy reporting, it is uncertain what
type of support would be provided by Portugal and
what compensation would be offered by the United
States in return. As the issue develops, however,
Portuguese requests for additional aid almost
certainly will be heard.
Defense Industrial Cooperation
Embassy reporting indicates that Lisbon thinks the
United States could compensate for assistance levels
' Host Nation Support (HNS) involves the infrastructure and
support a NATO country, such as Portugal, would provide for US
troops passing through on their way to the front in a European war.
US aid levels remain in question.
the Portuguese believe to be too low by increasing
various forms of defense industrial cooperation,
including:
? Encouragement of US investment in Portugal.
? Joint ventures between US and Portuguese defense
industries.
? Increased US purchases of Portuguese defense-
related items.
? Delivery of US "excess" or "surplus" military
equipment to Portugal.
? Increased US use of Portuguese repair facilities.
? More US employment of Portuguese contractors for
construction at sites used by US forces.
Although US officials do promote such cooperation,
certain requirements must be met, and contracts
cannot simply be handed to Portuguese firms. Lisbon
probably will continue to press Washington for
defense industrial cooperation in the future as long as
Outlook
Despite relatively good relations between the United
States and Portugal, we believe the security assistance
issue will continue to present the potential for
divisiveness. Portugal's persistent economic problems
almost certainly will force further fiscal austerity,
restraints on military spending, and demands for
increased US aid, thus complicating both existing and
emerging problems. These difficulties are virtually
certain to color the proceedings when the United
States and Portugal begin to review the Lajes base
agreement in February 1988. Because US security aid
to Portugal is based primarily on obligations arising
from the Lajes accord, we expect Portuguese officials
to use the occasion of the review to press for more aid
across the board. Given the importance of Lajes to US
and NATO security interests and the dependence of
Portugal on US assistance, the meeting promises to be
difficult.
For the present, even though Portuguese officials
realize that their leverage has slipped significantly in
light of Spain's renewed integration into NATO, they
will continue to vocalize their demands for increased
US aid. As long as Portugal views the relationship as
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one in which, it sacrifices much and receives little,
there will be, an element of tension in relations with
the United States.
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Belgium-Zaire: Palpitations
in the "Heart of Darkness"
Prime Minister Martens's Social Christian-Liberal
government is expressing concern that the latest in a
long series of disputes could erode Belgium's political
influence in Zaire. Foreign Minister Tindemans,
Defense Minister de Donnea, and Trade Minister de
Croo are spearheading a campaign to rehabilitate
relations. Brussels is anxious to defend its preeminent
position against French incursions and has sought to
rebuild its standing by promoting Belgo-Zairian
military cooperation and agreeing to plead Kinshasa's
case before Zaire's international creditors. Despite
Belgium's straited economy, Martens's government is
likely to continue pushing for improved relations with
Zaire even if some additional foreign aid is required.
Brussels probably will continue to seek US assistance
in these efforts, especially it if can ease Belgium's
financial burden.
From Colonial Masters to Influence Seekers
Since King Leopold II exploited Zaire-then known
as Congo-as his private economic preserve in the
19th century, Belgium has played a central part in the
country's development. Belgium ruled Congo as a
colony until granting it independence in 1960. At that
time, the new government severed its formal
diplomatic relations with Belgium. Diplomatic
relations were not restored until 1964 when the
Belgian Foreign Minister made the first move by
offering Kinshasha financial and technical aid. Since
the restoration of bilateral ties, and especially since
President Mobutu seized power in 1965, Brussels has
continued to aggressively court Kinshasa in an
attempt to maintain Beligum's position as a
predominant Western influence' in Zaire.
Belgium's Strategy: Buying Influence
The need to reconcile another Belgo-Zairian spat
provided Martens's government with an opportunity
to strengthen its standing in Kinshasa. Mobutu's most
recent complaint was grounded in pique over the
treatment of Zairian nationals at Belgian airports-
customs officers pay particular attention to Zairian
visitors as potential terrorists and smugglers. Adding
to Mobutu's anger was the impounding of a Zairian
Airlines DC-8 by a Belgian court in April, the result
of a Belgian pilot's suit for back wages against the
airline. These incidents resulted in Kinshasa
suspending landing rights in Zaire for Belgium's
Sabena Airline and offering Sabena's routes to a
French competitor. Materially the dispute was of little
consequence, but, according to US diplomatic
reporting, Kinshasa viewed. Belgium's customs
regulations as racially demeaning and complained
that Brussels was abandoning its longtime "special
relationship" with Zaire.F_~
The disagreement was resolved in a manner becoming
all too familiar to Belgium: Brussels blinked first and
moved at the highest levels to restore amity. In the
midst of a series of derogatory articles about him in,
the Zairian news service AZAP, Foreign Minister
Leo Tindemans visited Zaire in late April, wined,
dined, and flattered Zairian, officials and persuaded
Kinshasa to restore Sabena's landing rights.
Tindemans and Zairian Foreign Minister Mandungu,
in fact, agreed to establish special branches in their . .
respective ministries to handle Belgo-Zairian
problems before they reach the crisis stage.
Tindemans also pledged that Brussels would plead
Zaire's case for special economic treatment before the
IMF's Executive Committee; since his visit, Belgian
officials have urged Washington and Paris to press
the IMF to more strongly support Zaire's case.
While Tindemans offered little new Belgian aid
during his visit, his blandishments nonetheless suggest
that Brussels is intent on preserving its influence in
Zaire and is willing to pay a price to do so. Indeed,
US diplomatic reporting has suggested that Brussels
may have to move beyond formal economic assistance
and seek to exploit the-venality of Zairian officials, a
tactic that the Zairians have also found useful in
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Zaire in Belgian Politics
Since King Leopold II began to exploit Zaire's rubber
and ivory resources in 1876, events in and perceptions
of the country have influenced the course of Belgian
politics. The unvarnished avarice of Leopold and his
associates, as well as their lack of concern for Zaire's
internal development and its people, gradually
generated a public outcry in Belgium and throughout
Europe. In particular, the mistreatment of the
natives-spotlighted for public consumption
fictionally by Joseph Conrad 's Heart of Darkness
and factually by the investigations and testimony of
British civil servant Roger Casement-inflamed
liberal Europe and forced Leopold to cede his private
domain to the Belgian Government in 1908.
Public concern about the lack of respect for human
rights in Zaire continues to influence contemporary
Belgian politics. In recent years, for example, public
and media dissatisfaction with President Mobutu's
authoritarian regime limited Belgium's ability to
increase the aid it provides to Zaire-military
assistance to Kinshasa has been particularly frowned
on by the press and Belgium's Flemish Socialist
Party. Moreover, the issue of aid to Zaire, and
whether to restrict the activities of Zairian dissidents
in Belgium, has caused tensions both between
Kinshasa and Brussels and between the Prime
Minister's Flemish Social Christian Party (CVP) and
Vice Prime Minister Jean Gol's Walloon Liberal
Party (PRL). The CVP's left wing often presses
Martens to curtail aid to Mobutu, and its criticism is
augmented by the criticisms of such aid that are
voiced by the Flemish Socialists and Catholic relief
agencies.
Balancing this pressure on Martens, however, is the
insistence of his PRL partners-led by Vice Prime
Minister Gol and Defense Minister de Donnea-that
Brussels more or less ignore the human rights
situation in Zaire and continue to implement policies
that enhance Belgium's political leverage with
Kinshasa, enrich the 200 Belgian firms doing
business in Zaire, and augment the $756 million in
bilateral trade conducted in 1985. Although tensions
over Zairian aid are unlikely to cause the breakup of
Martens's coalition by themselves, the Zairian issue
remains a potentially disruptive element in the welter
of Belgian coalition politics.
influencing Belgian decisionmaking.' The Belgians'
long historical experience in the country has made
them savvy in extracting value for their money from
the Zairians, but it is likely that Brussels may have to
spend increasing sums to maintain its traditional
influence.
The Zairian Military: A Target for Belgian Policy
While Tindemans set the stage for a bilateral
rapprochement, Defense Minister de Donnea has
been the minister most actively involved in the nuts-
and-bolts of the proceedings. De Donnea has focused
on Belgian military assistance to the Zairian armed
forces, which he has told US officials are especially
weak in operational air and ground transport.
' In 1984, several prominent Belgian politicians-including two
former prime ministers-were investigated for taking bribes from
the Mobutu regime.F____-]
De Donnea also believes that, although the quality of
leadership provided by Zaire's officer corps is
improving, Belgium should play a major role in
upgrading training standards. While asserting to US
counterparts that Belgium's military influence in
Kinshasa protects Western interests and African
stability, de Donnea almost certainly believes that
Zaire's military dependence on Belgium is the surest
means of providing Brussels with enduring and
effective influence in Zaire. Toward this end, Brussels
recently chose as its ambassador in Kinshasa a
diplomat who is also a colonel in the military reserves.
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Secret
Despite budget austerity at home, Martens's coalition
government increased military aid to Zaire from $9.2
million in 1985 to $10.7 million in 1986. Moreover,
Brussels has stationed between 90 and 110 Belgian
military advisers in Zaire to assist in training and
supervising military construction projects; because of
the risk of a domestic outcry, and unlike the advisers
supplied by France, none of the Belgians command
operational units of the Zairian armed forces.
Belgium's military assistance program is now
concentrated on five major projects:
? Staffing an officers training school in Kananga.
? Staffing the Zairian staff college at Kinshasa.
? Staffing a command training center at Kota Koli.
? Supervising the construction of a military hospital
at the Kamina airbase.
? Providing technical assistance to the 21st Brigade in
Lubumbashi.
De Donnea's enthusiasm may have carried him too
far during a visit to Zaire last month when he
promised additional military aid. Tindemans and
Martens later said that for budgetary reasons such aid
probably would not be forthcoming in the near future.
Even with an expanded aid program, Brussels is
worried that it cannot afford to continue supplying
Zaire's military assistance needs. The Belgians,
according to US officials, are also afraid that if they
cannot increase their aid to a level fulfilling Zairian
expectations, Kinshasa may turn to the Soviets or the
French. De Donnea himself seems particularly
concerned that the French-long the chief rival for
Mobutu's favor-are ready and eager to displace the
Belgians if an opportunity presents itself. Because of
these considerations, both de Donnea and Trade
Minister de Croo have urged Washington to give
more aid to Zaire and to cooperate more closely with
Belgium in upgrading the capabilities of the Zairian
military. De Donnea, in fact, has claimed that US
military aid to Zaire is "too dispersed" and has
recommended that Washington concentrate on
helping to improve the equipment and training of the
21st Brigade and to modernize the Kamina airbase.
Both projects, not coincidentally, are top priorities on
Belgium's military aid agenda in Zaire.
De Donnea has also already asked US officials if
Washington would be willing to compensate Belgium
for increased aid to Zaire by reducing the purchase
price of the Patriot air defense system or new military
helicopters. Perhaps the most telling evidence about
the nature of Belgian goals in Zaire is provided by
de Donnea's suggestion that US assistance be
provided discreetly and delivered through Belgian
channels. De Donnea and his Cabinet colleagues
almost certainly are exclusively concerned with
strengthening Belgo-Zairian ties and not on minting a
new triangular relationship that includes Washington.
Outlook
The efforts of Tindemans and de Donnea probably
have steadied Belgo-Zairian relations for the time
being. Nonetheless, several factors militate against
the long-term success of Brussels' efforts to
reinvigorate Belgo-Zairian relations:
? Belgium's large budget deficit makes it unlikely
that Belgian aid can be increased substantially in
the near future.
? Even if funds were available, the Belgian electorate
would balk at greatly increasing assistance-
especially military aid-to Mobutu's authoritarian
regime. In recent years, for example, Martens's
government has been widely criticized by the
Belgian media for not demanding an end to
Kinshasa's human rights abuses in return for
Belgian aid.
? The Zairians themselves, according to US officials,
prefer US assistance to Belgian aid because the US
variety comes with fewer strings attached.
Moreover, aid from Belgium remains odious to
many Zairians because of its status as the country's
former colonial ruler.
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Poland: Dismal Economic
Prospects F-1
Poland's recovery from its economic crisis of the early
1980s has stalled, and prospects for sustained
improvement over last year's disappointing
performance appear slim for the rest of the decade. As
a result, Warsaw, Western creditors, and the USSR
will find no escape from the dilemma posed by
Poland's economic weaknesses:
The dilemma facing Poland, however, is that an
attempt to meet any one of the requirements conflicts
fundamentally with the other objectives. Moreover,
Moscow's demand for elimination of Poland's trade
deficit with the USSR may limit the resources
available to increase consumption, investment, and
hard currency exports.
? Failure to meet consumer demands with increased
supplies will leave the Jaruzelski regime saddled
with a sullen and unproductive labor force.
Although the regime's use of force and intimidation
may maintain a superficial calm, continued
economic problems will erode the more enduring
political stability that the regime is seeking.
? Even under optimistic assumptions about Poland's
hard currency trade performance, Warsaw will
make little progress in meeting its financial
obligations. Western creditors face more years of
debt reschedulings, missed payments, and pleas for
new credits from the Poles.
? The USSR will have to continue providing
substantial assistance if it wants to stave off
economic decline in Poland.
Requirements for Revival
To sustain economic recovery, in our view, Warsaw
must do three things:
? Increase consumption to provide incentives for
improved worker performance and to ease social
tensions.
? Increase investment to expand productive capacity
and to lessen dependence on hard currency imports.
? Improve hard currency export performance to
restore some semblance of creditworthiness
Warsaw's Recovery Program
Poland has given Western creditor governments its
blueprint for dealing with these problems in its
"Program for Improving the State of Poland's
Economy." The program projects annual increases in
GNP of nearly 4 percent during the period 1986-90.
It emphasizes growth in investment and exports but
allows for a modest increase in per capita
consumption as well. The key provisions of this
program-with growth rates scaled back-have been
incorporated into Poland's 1986-90 economic plan.
Our analysis using the POLGNP econometric model Z
indicates that Poland cannot meet the recovery
program targets for both economic growth and
foreign trade balances. In our view, Polish planners
have underestimated popular pressures for large
increases in consumption, the amount of investment
needed to modernize the capital stock, and the
economy's need for energy and high-quality materials.
Poland must overcome all these constraints to achieve
the program's targets, but our model indicates this
would require a much higher level of imports than the
program projects. Whereas the recovery program calls
for hard currency imports to grow only 4.5 percent
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and for soft currency imports to increase by 3.5
percent annually in 1986-90, we project these
requirements at 7.5 and 6.5 percent, respectively.
Unless imports grow at a more rapid rate than
Warsaw projects, Poland will be unable to achieve
simultaneously its basic objectives of moderately
rapid economic growth, restoration of at least
minimum creditworthiness with the West, and
balanced trade with the USSR. Under the recovery
program's growth targets, our model projects that:
? The hard currency trade surplus would increase
from $1.1 billion in 1985 to only $1.8 billion by
1990, short of the Poles' goal of a $2.1-2.7 billion
surplus.
? Poland's soft currency deficit would rise from
approximately 650 million rubles in 1985 to 1.1
billion rubles by 1990 in constant 1984 prices. Thus,
the goal of balanced soft currency trade by 1988
and a surplus by 1990 set in the Polish-Soviet trade
protocol would have to come from improvements in
Poland's terms of trade with the USSR.
Thus, we do not see the recovery program as a
workable approach to Poland's major economic
problems. The Poles will not to able to meet their
growth targets unless Western creditors and the
Soviets temper their demands for net resource flows
from Poland. The unwillingness of the West and the
USSR to finance a large net flow of imports for
Warsaw will hold Polish economic growth well below
the program's goal. Yet foreign creditors also face a
limit on the amount of resources that can be squeezed
out of the Polish economy.
Impact of Slow Growth
Our model's analysis indicates that economic growth
will probably average 1 to 2 percent annually between
now and 1990. This would prevent a deterioration in
the Polish standard of living, but it would not provide
the gains in consumption desired by the Polish people.
At this rate of economic growth, the hard currency
surplus could increase to $3.5 billion by 1990-
sufficient to halt the growth of the debt by covering
interest payments but not enough for debt
repayments. This seems the maximum amount of debt
service payments Western creditors can expect.
Efforts to extract more would slow GNP growth
below 1 percent but would'add little to the trade
surplus because savings on imports would diminish. If
creditors are willing to accept less, Polish growth
could rise above 1 to 2 percent. The hard currency
surplus would contract rapidly, however, because .
import needs would rise much faster than GNP
In contrast to the West, the USSR cannot stem-
much less reverse-the net flow of real resources to
Poland without risking serious damage to the Polish
economy. Furthermore, slow growth could even widen
Warsaw's deficit with the USSR by limiting Poland's
capacity to expand soft currency exports while soft
currency imports needs would continue to rise.- . -
Cutting back deliveries to Poland would not benefit
the USSR because it would depress Polish export
capacity and could risk economic collapse. Even if
Moscow can force the Poles to redirect some exports
from the West to the USSR, the Soviets probably will
continue putting more into Poland than they will get
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Economic News in Brief
Economics Minister Bangermann reported West
German economy grew 3 to 3.5 percent in second
quarter over same period last year ... predicted
growth would accelerate during rest of 1986 and into
1987 and rejected US calls for Bonn to stimulate
domestic demand ... Chancellor Kohl's coalition
hopes strong, noninflationary growth during
remainder of year will vindicate its tight economic
policies before national election in January.
Spanish economy grew at annual rate of 3 percent in
first quarter, almost double the rate a year earlier ...
due primarily to recovery in domestic consumption
and surge in fixed investment ... accelerating wage
costs and rising imports, however, may slow growth
rate by yearend.F-~
France and Iran
have agreed on amounts to be repaid on loans ... Paris
pushing Tehran to secure freedom for all French
hostages before completely settling claims, but likely
to settle for release of some.
Press reports 20 more Italian firms owed money by
Tripoli asking courts to freeze Libyan assets in Italian
banks ... Rome wants to avoid suits ... likely to
increase pressure on Tripoli to make token payments.
More than 700 Hungarian coal miners recently
resigned after government announced pit closures and
longer hours ... represents small share of mining
work force, but protest reflects regime's problems in
restructuring inefficient industries
Secret
EUR ER 86-020
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Looking Ahead
September/November
Western Europe West German Bundestag reconvenes 10 September, opening federal preelection
season ... Green national congress in Nuremberg, 27-28 September ... Christian
Democratic congress in Mainz, 6-8 October ... Social Democratic campaign
platform convention in Offenburg, 25 October ... Christian Social Union kickoff
in Bavaria, 20-21 November ... Free Democratic convention in Mainz, 21-22
November ... state elections in Bavaria on 12 October and Hamburg on 9
November offer additional preludes. F-~
Turkish Foreign Minister Halefoglu is the Motherland Party candidate for the
Ankara seat in parliamentary byelections on 28 September ... Turkish officials
told the press he is canceling his 10-12 September visit to the United States
because of the elections ... Halefoglu could remain as Foreign Minister while
Dutch Prime Minister Lubbers will visit USSR 20-21 November ... repeatedly
has said INF deployment in Netherlands not subject for negotiation ... may still
probe Soviet flexibility on INF, other arms control issues, such as chemical
weapons.
Eastern Europe Warsaw Pact invited United States for first time since 1979 to observe biannual
Druzhba military exercise ... other NATO observers also to attend in
Czechoslovakia next month ... setpiece demonstration likely, not tactical exercise.
Secret
EUR ER 86-020
29 August 1986
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