NEAR EAST AND SOUTH ASIA REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00289R000301360001-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 91
• Document Creation Date: December 22, 2016
• Document Release Date: August 16, 2011
• Sequence Number: 1
• Publication Date: August 1, 1986
• Content Type: REPORT

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Near East and
South Asia Review
1 August 1986
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NESA NESAR 86-018
1 August 1986
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Articles
Near East and
South Asia Review
1 August 1986
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Israel: Austerity After One Year
The economic stabilization program begun one year ago by Israel's
National Unity government has achieved remarkable results, in
particular cutting inflation, stabilizing the shekel, and slashing the
budget deficit, but prospects for continued effective austerity will be
severely tested in coming months.
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Lebanon: Dim Long-Term Prospects
Lebanon almost certainly will remain a partitioned country at least
for the rest of this decade. The Christian and Druze militias have
already established cantons in the mountains northeast and
southeast of Beirut, and the two major Shia militias are staking out
their claims to the Bekaa Valley, southern Lebanon, and West
Beirut.
Lebanon: Sulayman Franjijah?Syria's Christian Protege
Former Lebanese President Franjiyah continues to be an influential
la er in Lebanese politics in spite of failing health
The Syrians use Franjiyah both as a liaison between
Damascus and East Beirut and as a divisive force when the
Christian community shows signs of uniting against Syria.
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Syria-Iran: Ties That Bind
Damascus is gradually reaching a point of diminishing returns in its
alliance with Tehran, but President Assad does not appear prepared
to end the relationship. Ties to Tehran represent a key bargaining
chip used to keep Syria's Arab neighbors at bay and to prevent them
from coalescing against Damascus or negotiating with Israel.
The US Hostage Takers in Iran: Where Are They Today?
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Many of the leaders of the Islamic militants who seized the US
Embassy in Tehran in November 1979 and held US diplomats
hostage for over a year currently hold high-level positions in the
Iranian Government. A change in their status could be a measure of
the regime's desire for better relations with the United States.
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Iranian Deputy Foreign Minister Larijani: Gaining Influence the
Old-Fashioned Way
Larijani has risen to a position of significance in the Foreign
Ministry by relying on the traditional prerevolutionary
qualifications of a good education, proper family background, and
influential connections and is a strong candidate to become foreign
minister in the future.
Iraq: Press Attacks on the United States
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Baghdad is not entirely comfortable with its relatively new
friendship with the United States and uses press criticism to signal
its uneasiness. Government leaders, however, will exercise sufficient
restraint to avoid endangering relations with Washington.
Can Sudan, One of Africa's Sick Men, Recover?
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Sudan resembles an exposition of whatever can go wrong with a
country: drought, refugees, civil war, and economic collapse, even a
plague of locusts. If the inflow of problems increases, the central
government will appear more irrelevant and the country more
ungovernable from the center than ever before.
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Algerian Gas: Future Economic Prosperity at Risk?
With the sixth-largest natural gas reserves in the world, Algeria will
almost certainly turn to this resource as a primary source of hard
currency beginning in the 1990s. A critical element in this
projection are the current negotiations with Algeria's European
clients, which will establish the price and volume of these exports to
the end of the 1980s.
The Tunisian Economy at an Impasse
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Tunisia's worsening economic situation is severely depressing the
country's living standards and is increasing political tension. At the
same time, fears that new austerity measures will prompt a
repetition of the bloody food riots of January 1984 have prevented
the government from effectively addressing Tunisia's economic
woes.
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India: Amazing Facts or Demographic Estimates, Projections, 49
and Social Characteristics
India is confronted with the prospect of providing for twice as many
persons by the year 2000 as it strove to support in 1965. India's
population, currently the second largest in the world, is likely to pass
the 1 billion mark by the end of this century.
India's Coal Sector: Taking Its Lumps
Indian planners believe higher coal production will be needed to
satisfy energy demands because they anticipate little increase in
domestic oil production over the next five years. Major problems
hamper the Indian coal industry, however, and coal production and
utilization will increase only slightly during the coming decade.
India: Arun Nehru Recovering
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Despite his recent heart attack, Arun Nehru remains well placed to
become the next prime minister of India should Rajiv Gandhi, his
third cousin, be removed from office. Nehru's colleagues respect
him for his intelligence and managerial abilities, but some see him
as a ruthless man who does not let individuals stand in the way of his
goals.
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India-Pakistan: Naval Mine Warfare Capabilities
India's principal advantage over Pakistan in naval mine warfare is
its numerous ports, many of which are beyond the range of the
Pakistani Navy. The Indian Navy also has more mines, delivery
systems, and mine countermeasures ships than Pakistan, as well as a
modest mine warfare modernization program.
Pakistan: Implications of an Aerial Refueling Capability
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Acquisition of tanker aircraft would improve only marginally
Pakistan's ability to defend against Soviet and Afghan air violations.
Pakistan's main goal in acquiring such aircraft is to improve its
capability against targets in southern India.
Pakistan: The Military After Martial Law
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The Pakistani military is pleased to see the end of martial law and to
be relieved of domestic security responsibilities. Although the officer
corps has a low opinion of Pakistani politicians and is skeptical
about how well civilians will do, the Army is willing to give the
fledgling democracy a chance to work.
The Afghan Refugees in Pakistan: Shifting Dynamics
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Although the refugees talk about going back to Afghanistan, some
worry that the war is not going well for the insurgents. The
Pakistanis, for their part, worry about the impact of the refugee
presence and believe that those refugees that have been
economically and politically active in Pakistan will not return.
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Sri Lanka's Muslims: A Growing Force?
The Muslims' concentration in the strategically important Eastern
Province, their prominence in areas of commerce and trade, and
their ties to Islamic states in the Middle East have given them a
growing role in the three-year-old conflict between Sinhalese and
Tamils.
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Israel: Austerity After
One Year
The economic stabilization program begun by Israel's
National Unity government one year ago has achieved
remarkable results, in particular cutting inflation,
stabilizing the shekel, and slashing the budget deficit.
Prospects for continued effective austerity, however,
will be severely tested in coming months by delicate
wage negotiations, the scheduled rotation of the
Prime-Ministry from Labor to Likud, and growing
political pressure to spur growth.
The Stabilization Plan
Following the formation of the Labor-Likud National
Unity government in September 1984, the
government tried to confront a hyperinflationary and
deteriorating economy with a series of package deals
that tied workers and employers to programs freezing
prices and wages. These programs failed, however, in
part because of the continued depreciation of the
shekel and the failure of the government to curb its
spending and large budget deficits. The government
then imposed an austerity program in July 1985 that
consisted of:
? A Price Freeze. After cutting some $750 million in
government subsidies and allowing general prices to
rise 17 percent, the government froze practically all
prices.
? A Stable Exchange Rate. The shekel was devalued
19 percent against the dollar and was then held
stable.
? A Restrictive Wage Policy. After giving partial
compensation for past inflation, the government
froze and deindexed wages, later allowing wages to
rise gradually in line with inflation.
? A Restrictive Fiscal Policy. After cutting annual
expenditures about $1.2 billion, the government also
raised taxes. The budget deficit was cut from
around 14 percent of GNP in FY 1984/85 to about
4 percent in FY 1985/86.
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? A Restrictive Monetary Policy. The central bank
kept interest rates high, pushing real rates as high as
an annualized 100 percent at one time.
Since the government imposed its austerity program
in July 1985, inflation has been cut drastically from a
historic high of 27.5 percent a month to 1.6 percent a
month now. The shekel has remained stable at around
1.5 to the dollar for the last year, the government has
slashed spending and the budget deficit, and foreign
exchange reserves have increased $1 billion to almost
$3.5 billion.
Help From Outside
Two extraneous factors, the unexpectedly steep fall in
the price of oil and the decline of the dollar against
most major currencies have helped the government
exceed its goals. The oil price drop helped hold down
Israeli inflation because part of the benefits of the
decline were allowed to flow through to consumers.
The price decline will also save Israel $550-600
million a year on its oil import bill.
The fall of the dollar enabled Israel to maintain its
competitive position in nondollar trade areas without
the need for a devaluation. The resulting stability of
the shekel against the dollar was an important
psychological prop for the austerity program. It
increased the population's faith in the plan and helped
hold down demand for imported durables and
pressure for increased wages. A devaluation also
would have triggered increases in the popular dollar-
linked savings plan, thus feeding the population's
purchasing power at a time when the government was
trying to stabilize prices. As it turned out, many
people moved money out of dollar accounts into high-
paying, unindexed shekel accounts.
A third important outside factor was the supplemental
aid given by the United States in 1985 and 1986. In
addition to the normal yearly military and economic
aid?which totaled almost $3.2 billion in 1985?the
United States provided an extra $750 million a year
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in economic assistance. The supplemental aid, which
ends this year, was incorporated directly into the
Israeli budget.
Remarkable Results, But. . .
The stabilization program broke the back of
hyperinflation and has brought the Israeli population
back from the unreality of living with price changes
reaching 400 percent a year. The prices of about 55
percent of goods and services are no longer frozen,
suggesting that the underlying inflation rate remains
low. The government will continue this thaw, but the
prices of about 20 to 25 percent of all goods?mostly
traditionally controlled goods such as transportation,
water, and electricity?will continue to be regulated.
Even so, inflation in the last few months has been
running at about 20 percent per year, well above the
single digit inflation experienced by most of Israel's
trading partners and most of its trade competitors.
Even with the wage freeze and gradual compensation
for inflation, real wages are back to where they were a
year ago. If this trend continues or if the recently
begun round of wage negotiations ends in excessive
increases in wages, Israeli manufacturers will soon
find their international competitiveness eroding
further.
Although government spending has been cut and the
deficit reduced, the government has avoided the hard
choices it must make to bring about real change. Most
of the spending cuts were through reductions in
subsidies rather than through cuts in government
spending for goods and services. The deficit was also
reduced by raising taxes of various kinds, increasing
Israel's already burdensome taxation. Tax revenues
equaled half of Israel's GNP in the last fiscal year.
The stabilization program also helped Israel enjoy a
$1.1 billion current account surplus last year
compared to a $1.4 billion deficit in 1984. This
surplus included the massive infusion of US aid,
however, and there was a disturbing deterioration in
the trade balance at the end of the year. Imports this
year have continued to be robust, but there has been
no corresponding increase in demand for Israeli
exports. Unless the drop in oil prices greatly
invigorates nonoil world trade, Israel may experience
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considerable deterioration in its current account this
year. A deficit of over $2 billion is possible despite
supplemental US aid.
Fundamentals Remain Unchanged
Despite its gains, Israel's fundamental economic
situation remains virtually unchanged from a year
ago. The country is burdened with tremendous
defense needs that are unlikely to diminish in the near
future. Approximately 25 percent of the government
budget goes to the military, and the Defense
Ministry's chief economist believes there is no room
for further cuts in defense expenditures.
Israel also remains dependent on outside, primarily
US, aid. Total US aid to Israel in 1985 amounted to
about $3.9 billion. With the end of the US special
supplement, the government will have to increase
taxes or cut expenditures next year by at least $750
million, equal to about 4 percent of the budget.
Excluding defense and debt service?which together
equal two-thirds of the budget?the $750 million
amounts to over 11 percent of Israel's ordinary and
development budgets.
The economy, moreover, remains highly indexed at a
time when most countries have abandoned indexation.
Not only are salaries and savings included, but also
rents and the government budget are also indexed.
This pervasive system of indexation has taken away
the economic, and thus political, sting associated with
hyperinflation and probably postponed needed reform.
Taxes remain unhealthily high, with the government
acting in large part as a transfer agent controlling the
flow of funds throughout the economy. Israel's
maximum marginal tax rate is 60 percent, and this
rises to 70 to 75 percent when national insurance
contributions are taken into account. The government
also dominates and regulates the capital market to the
virtual exclusion of private enterprise.
Government Plans
Israeli Government officials are pleased with the
results of the stabilization program, particularly that
unemployment has not increased appreciably. They
recognize, however, that the gains accomplished so far
are fragile. Their plan is to maintain the stabilization
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program with special emphasis on bringing inflation
down further. The Finance Ministry is preparing a
45-point program for the second year of austerity, but
this plan does not include major new initiatives.
The government budget will have to be pared further,
and government employee salaries are likely to be
held steady in real terms. Cutting government
employment, while probably needed, will prove
difficult politically, although the number of
government workers may be allowed to decline
through attrition.
The government also will attempt to hold down real
wage increases in the private sector. The
manufacturers' association and Histadrut?Israel's
powerful labor organization?recently began a new
round of wage negotiations. The government will try
to influence the outcome of these talks by telling
manufacturers not to expect to be bailed out if they
give in to excessive wage demands not compensated
for by increased productivity. For this reason the
government probably will postpone a devaluation of
the shekel?even though it might be justified?until
after the wage negotiations end. A devaluation now
might be perceived by the manufacturers as a sign
that their trade competitiveness will be maintained
even if they give in to excessive wage demands.
According to the Director General of the Finance
Ministry, no major tax reform is planned in the near
future?even though extensive reform was suggested
by a government commission. Only minor changes in
the tax laws will occur until the gains from austerity
prove durable.
In the capital market, the government plans to loosen
its control gradually, allowing more private issues to
be placed. The government also plans to allow more
tradable securities to be issued to foster a truer
market environment.
Because of recent changes in its bylaws, the Central
Bank will?over the next few years?become
increasingly independent of government control on
interest rate and monetary policy. By 1988 the bank
will no longer be legally required to finance the
government's deficits. This change, along with the
recent appointment of Michael Bruno?a relatively
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independent and highly respected international
economist?as the new Central Bank governor, will
help consolidate the gains of the stabilization
program.
No government official has mentioned deindexation
of the economy as an issue to be tackled soon, even
though such a move would go far in breaking the
wage-price spiral that plagues the Israeli economy.
Likewise, privatization of the economy is not a
primary concern, although many government officials
recognize the potential benefits of such an effort.
Outlook
Although the stabilization program will be
maintained in the coming year, the government will
be tempted to ease up on austerity?without having
made basic changes in Israel's economic structure.
The special US aid supplement is ending, and outside
factors, such as the oil price decline, cannot be
counted on to again help out.
Internal dynamics in Israel are also working against
continued progress. The recently initiated wage
negotiations will probably be lengthy and may lead to
wildcat strikes and excessively large wage hikes. In
addition, the scheduled rotation of the Prime-Ministry
from Labor to Likud will bring in a less economically
attuned and active prime minister and may dampen
the willingness of labor unions to continue to support
austerity.
The government also faces growing political pressures
to promote growth at a time when further budget cuts
would improve prospects for continued economic
success. Unemployment, while relatively good by
world standards at around 7 percent, is historically
high for Israel. Many businesses and agricultural
units also are facing hard times?an unusually large
number have recently declared bankruptcy?and are
demanding government help. Last, the difficulty of
attracting and retaining Jewish immigrants is made
even worse under austerity. These factors will prompt
the government to continue to try to balance the need
for austerity against the requirements to maintain a
relatively high standard of living and to preserve the
current state of Israel's defenses.
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Lebanon: Dim Long-Term
Prospects
Lebanon almost certainly will remain a partitioned
country at least for the rest of this decade. The
Christian and Druze militias have already established
cantons in the mountains northeast and southeast of
Beirut, respectively. The two major Shia Muslim
militias are staking out their claims to Shia-populated
areas in the Bekaa Valley, southern Lebanon, and
West Beirut. The central government, under siege in
East Beirut, has practically no authority anywhere in
the country, and Syrian efforts to unify all
confessional factions under a restructured Lebanese
Government are likely to continue to fail.
This de facto partition is likely to be violently
unstable. Political squabbles, personal rivalries, and
deeply rooted interfactional animosities will
destabilize any partition arrangement and keep the
militias at each other's throats over the next decade.
In particular, the rising discontent and aggressiveness
of the Shia population will guarantee continued
violence and civil war. The growing strength of Shia
extremists threatens to bring Iranian-style Islamic
fundamentalism to power in West Beirut, the Bekaa
Valley, and the south and poses a serious long-term
danger to Syrian, Israeli, and US interests in
Lebanon.
Christian and Druze Ministates
Partition is already a reality for Lebanon's Christian
and Druze minorities. These two sects have steadily
consolidated control over their respective mountain
heartlands, which are now under the sole political and
military domination of their factional militias. The
Christian and Druze militias perform all the functions
of government?such as collecting taxes, providing
public services, maintaining courts, and policing the
streets. Both the Christians and Druze are prepared to
defend fiercely their cantons against challenges by
other confessional groups or the Lebanese
Government as well as Syria and Israel.
The Christian Lebanese Forces militia controls the
area from East Beirut north to Batrun and east to the
Lebanon mountain ridge, which separates the
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Christians from the Muslim and Syrian forces in the
Bekaa Valley. The militia, numbering 4,000 to 5,000
soldiers, will be in a strong position to maintain the
territorial integrity of the Christian canton over the
next decade. The militia derives its income from
foreign remittances and "taxes" paid by the
population of the Christian canton. The militia also
collects revenues and receives supplies through its port
facilities in East Beirut, Juniyah, and smaller harbors.
Lebanese Christians, especially the ethnocentric
Maronites, believe that their culture and values can
be preserved only by sealing the borders of a well-
defined Christian enclave against the Muslim
"hordes" that surround them. After 10 years of civil
war, they seem to recognize that their political
domination of Lebanon is over and that their only
hope for survival lies in zealously defending their
mountain stronghold. The Christian community
comprises about a quarter of all Lebanese; Maronites
account for about two-thirds of that.
The Druze Progressive Socialist Party militia controls
the Shuf mountains and most of the coastal area south
of Beirut to Sidon. The Druze militia is comparable in
size to its Christian rival, and it also relies on a
substantial income from local taxes and foreign
remittances. The Druze have established an
independent port at Khaldah, but they remain partly
dependent on foreign supporters?Syria, Libya, and
the Soviet Union. Nonetheless, the Druze have
succeeded in establishing a largely autonomous
shadow government in the Shuf, centered in the
ancestral Druze capital of Baqlin.
Druze leader Walid Jumblatt is primarily interested
in protecting the Druze community?only 7 percent
of Lebanon's population?which is heavily
concentrated in the Shuf. Although Jumblatt tries to
play a broader role in the country, he almost certainly
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realizes that his militia's top priority for the
foreseeable future must be to consolidate its canton in
the Shuf. The Druze militia has systematically driven
the few remaining Christian and Sunni villagers from
their homes in the Shuf in an effort to homogenize the
population of the Druze canton.
Shia Turf Battles
Lebanon's Shia Muslims, although dispersed among
three geographical areas of the country, comprise over
40 percent of Lebanon's population and are equally
determined to control and govern their own cantons.
The Shias, disillusioned by years of abuse at the
hands of other confessional groups, believe they would
continue to suffer political and economic deprivations
under anyone else's rule. The two major Shia militias,
Amal and Hizballah, are battling for supremacy over
the Shia-populated areas of West Beirut, the Bekaa
Valley, and southern Lebanon. The fundamentalist
Hizballah has emerged victorious over the more
moderate Amal in the Bekaa, and the two are running
neck and neck in the streets of West Beirut and the
villages of the south. The competition between Amal
and Hizballah is likely to escalate over the next year
and may continue for several years.
Regardless of which militia wins the turf battles, it is
clear that at least two large cantons will emerge under
Shia rule. Amal and Hizballah are rapidly
institutionalizing their shadow governments and
developing political and military networks in the Shia
areas.
The Shias, however, face significant problems in
creating their own ministate. The greatest obstacle is
the absence of an independent center of economic
activity: there is no Shia port, nor is there likely to be
one soon. The Bekaa Valley, with its capital in the
Hizballah stronghold of Belabakk, is already a
solidly Shia domain in which Christians can travel
only at great risk. The Bekaa, however, is occupied by
Syrian military forces, and it is not clear how Syrian
influence can be supplanted by Shia-controlled
institutions. Most of Lebanon south of the Awwali
River, with its capital in the Shia town of Nabatiyah,
will also remain in Shia hands but there is substantial
doubt that Tel Aviv will tolerate a Hizballah-style
Shia ministate on its borders.
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Little Hope for Unified Government
The central government will remain irrelevant as long
as the country is divided and ruled by warring
factional militias and foreign armies. The Lebanese
Government and its Army have been reduced to the
role of bystanders in the political and military affairs
of the country. The militias ignore the government
and will not tolerate any interference in their cantons.
Most factional leaders have only contempt for
President Amin Gemayel and the institutions of state.
Neither the Lebanese Cabinet nor the Parliament has
met in well over a year.
Syria remains committed to restructuring the
Lebanese Government?mainly by shuffling the
distribution of key positions and Parliament seats
among the various confessional groups?with the goal
of bringing all factions under the control of a broad-
based, pro-Syrian central government. Syrian efforts
since 1983, however, have failed to resolve the
disagreements between the four major confessional
groups. Events of the past three years illustrate the
limits to Syria's ability to impose a settlement on
Lebanon's recalcitrant factions, even those supported
by Damascus.
There is virtually no middle ground on which a viable
central government could be built in the foreseeable
future. Each confessional group is determined to
maximize its own interests?in terms of power and
security?at the expense of the Lebanese Government
and the national political system. Political loyalties in
Lebanon revolve around family, village, and religious
sect. Most Lebanese feel no allegiance to the
ineffectual and discredited central government. Few
Lebanese of any confessional group are serious about
trying to revive the moribund national political
process.
Partition: Stable or Unstable?
In our judgment, because of this partition, Lebanon
will remain unstable and violent over the next decade.
We see no evidence that the Lebanese factions are
ready to live in peace with each other, even if
segregated into confessional cantons. Bitter political
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and economic disputes continue to fester, and a
decade of civil war has generated often
insurmountable personal animosities between
sectarian leaders. Many younger Lebanese, who have
come of age during the turmoil of war, have no
concept of a Lebanon in which all religious groups live
together cooperatively without fighting. Despite a
genuine sense of war weariness that pervades much of
society, the ethnocentric civil war mentality remains
strong. Hatred alone would generate continued
discord between the cantons.
Political accommodations and military truces between
the confessional enclaves are likely to fall victim to
the uniquely Lebanese propensity for aimless violence.
The country has become a playground for trigger-
happy militiamen for whom fighting has become a
way of life. The violence that plagues Lebanon often
has little rational motive. The daily artillery duels
frequently start by accident. Street warfare regularly
erupts as a result of personal vendettas or careless
incidents at militia checkpoints that spark wider
conflagrations. Beirut is a lawless, heavily contested
war zone where the inevitable daily turf battles tend
to spill over into other parts of the country.
Extremists on all sides will use terrorism to discourage
accommodations between the confessional
communities. Many of the armed militant groups
based in Lebanon have a vested interest in
perpetuating the chaos and instability that permits
them to maintain training camps and operate freely
throughout the country. The return of large numbers
of Palestinian fighters to Lebanon will complicate this
problem and increase frictions between Christians,
Druze, and Muslims?much as it did in the years
leading to the outbreak of the civil war in 1975.
Rising Tide of Shia Radicalism
The growing Islamic fundamentalist movement?led
by Hizballah?poses one of the gravest internal
threats to future stability in Lebanon. These
predominantly Shia radicals advocate the violent
overthrow of the present system and the establishment
of an Iranian-style Islamic republic. Even if the
mainstream confessional groups could find a modus
11
vivendi in a partitioned Lebanon, the increasingly
influential fundamentalists have the determination
and capability to disrupt the peace. The success of
Hizballah's Islamic revolution is predicated on
continued instability in Lebanon.
The Islamic fundamentalist movement has grown
dramatically since 1982 with Iranian support. A
ragtag collection of poorly organized armed cells has
transformed itself into a broad-based popular
movement with an effective, well-armed militia
comparable in size to the Christian and Druze
militias. Although Hizballah may not be stronger
than the other major confessional militias, it is a
dynamic organization that thrives in the anarchic
environment of Lebanon.
Despite the obstacles that Hizballah must overcome
in the path to Islamic revolution?opposition from
moderate Shias, Christians, Druze, and, ultimately,
the Syrians?we believe the potential exists for the
fundamentalist movement to meet some of its goals in
the long run. Hizballah ideology and tactical
successes have proved to be potent forces in the battle
for control of Lebanon's large Shia community. In
addition, the Israeli occupation of a "security zone" in
southern Lebanon continues to radicalize Shia
attitudes.
The Shia fundamentalists almost certainly will
institute some form of Islamic rule at least in parts of
the Shia cantons of the Bekaa Valley and southern
Lebanon. If Hizballah succeeds in replacing Amal as
the dominant Shia militia, it will then turn its
attention to the Christians and probably begin to
challenge the borders of the Christian canton.
Hizballah ideology calls for unremitting aggression
against all "enemies" of Islam, including Christians,
secular Muslims, all Westerners, and, most
important, Israel. At a minimum, Hizballah will
continue to play the role of spoiler and agitator in a
partitioned Lebanon.
Implications for the United States
Partition is all but inevitable in Lebanon. A stable
partition?leading to peaceful coexistence among the
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Christian East Beirut: Views of the War Zone
Street scene in Christian East Beirut showing
damage from small arms and artillery fire.
Wrecked cars piled up to serve as fortifications
near the Green Line.
View from a Christian bunker along the Green
Line, looking across the no man's land into
Muslim West Beirut. The buildings in the
distance are held by the radical Shia Hizballah.
Main crossing between the two sides of the city,
known as the Museum Crossin ?a frequent
location for clashes.
Christian neighborhood close to the Green Lines,
where Christian militiamen have put up a
tarpaulin between two buildings to prevent sniper
fire down the street. The derelict train boxcars on
the right are used to block sniper fire from
Muslim lines.
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confessional groups?would not be contrary to US
interests and may be a worthwhile objective. Efforts
to strengthen the central government, on the other
hand, will remain futile for the foreseeable future.
The self-destructive tendencies of the Lebanese civil
war are likely to cripple initiatives aimed at
reconciling the warring factions in a multiconfessional
political system. The reality of partition must be
accepted before efforts can be made to stabilize it.
Violent instability in Lebanon affects US interests
because of its potential to spill over into regional
politics. Syria remains preoccupied with enforcing a
settlement in Lebanon, and its success or failure
affects its relationship with Iran, Israel, and the
United States?the other states that Syrian leaders
view as participants in Lebanese politics. Israel will
continue to react vigorously to threats to its northern
border by Lebanese Shia radicals or Palestinians, and
an escalating cycle of cross-border violence between
Israel and Lebanon would heighten tension in the
region.
The absence of authority in an unstable, partitioned
Lebanon ensures that the country will remain a
breeding ground for armed militants from every part
of the ideological spectrum. Discord between the
confessional cantons will facilitate the activities of
these groups. US officials working in Beirut will
remain at high risk both from terrorism and from the
random shelling that has become a fact of life in the
city.
The emergence of a radical Islamic government in all
or part of a partitioned Lebanon would directly
threaten US interests in the Middle East. A Hizballah
political triumph in Lebanon would represent the first
radical Shia victory in an Arab country and would
cause great apprehension in moderate Arab capitals
such as Cairo, Amman, Riyadh, and Kuwait. It would
give a powerful boost to underground Shia
fundamentalist movements in Saudi Arabia, Iraq, and
the Gulf states.
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Lebanon:
Sulayman Franjiyah?Syria's
Christian Protege
Former Lebanese President Sulayman Franjiyah
continues to be an influential player in Lebanese
politics in spite of failing health
The Syrians use Franjiyah both as a liaison
between Damascus and East Beirut in negotiations
and as a divisive force when the Christian community
shows signs of banding together against Syrian
policies. Even with Syrian backing, however,
Franjiyah is unlikely to emerge as a strong, unifying
force in Lebanon.
Sulayman Franjiyah has two main political goals: the
removal of President Gemayel and the preservation of
Christian control of the political scene in Lebanon.
Insofar as Syrian policies coincide with these goals,
Franjiyah is a useful tool and interlocutor for
Damascus. Franjiyah has led the charge in
demanding Gemayel's resignation, largely for
personal revenge, but he has not fully supported the
Syrian-sponsored tripartite accord because it
advocates a reduction in Christian control of key state
institutions. Franjiyah strongly believes that the
Lebanese presidency must remain Christian and,
preferably, Maronite.
Franjiyah's Corner?The Zghorta Minicanton
Sulayman Franjiyah is a member of the Lebanese
political old guard and continues to be a key figure in
the Christian community in spite of his old age and
widespread criticism for presiding over the outbreak
of civil war during his presidency (1970-76).
Franjiyah, 75, probably is Syria's first choice to
replace President Amin Gemayel should Damascus
succeed in forcing his resignation. A bitter rivalry
exists between the Franjiyah family and the Gemayel
family, as Franjiyah blames Amin's brother, Bashir,
for the murder of his son Tony in 1978?a loss he has
not yet recovered from.
The Franjiyah family hails from Zghorta in north
Lebanon where their modest power base lies in the
Maronite Catholic community. In view of the
increasing cantonization of Lebanon, Sulayman
15
Franjiyah has been building up his personal militia,
the Marada, over the past year. The Marada is a
small militia of about 800 members equipped
primarily with light and medium weapons and headed
by Robert Franjiyah, the former President's son.
Syrian forces in Lebanon back the Marada, and
Franjiyah relies on the Syrian deterrent value to
increase his militia's credibility.
The Marada faces a challenge from another pro-
Syrian group for control of Zghorta. Clashes between
the Syrian Social Nationalist Party (SSNP), a leftist
group directly linked to Damascus, and Franjiyah's
Marada have occurred periodically over the past
several years.
in mid-May Franjiyah sent an emissary to
Damascus to urge Syrian authorities to remove SSNP
training bases near his stronghold in the Kura district.
Franjiyah claimed that the district was a target for
US and Israeli military retaliation if the terrorist
elements were not removed, although his efforts at
removing the SSNP elements may have arisen more
from fear of another SSNP-Marada clash than a US-
Israeli strike on SSNP facilities.
Franjiyah and the Syrians
Senior Syrian officers regularly visit Zghorta to
underscore Damascus's support for Franjiyah. Recent
high-ranking visitors include Syrian Minister of
Defense Talas and Air Force Intelligence Chief
Khuli. In turn, Robert Franjiyah spends much of his
time in Damascus on his father's behalf meeting with
senior Syrian officials and prominent Lebanese
leaders.
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1 August 1986
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Franjiyah proposed to Syrian authorities in early
March that the term of the Lebanese presidency be
reduced from six to four years,
This proposal, the only
amendment to the tripartite agreement the Syrians
have thus far accepted, is aimed at providing a
legitimate means to oust President Gemayel, who will
have completed four years in office in September
1986. In the unlikely event that this scenario develops,
Franjiyah would be a weak figure, relying almost
totally on Damascus for support.
Franjiyah's Maneuvering
Franjiyah is the last legitimate source of influence
Damascus has in the Lebanese Christian community.
Although he has allowed the Syrians to use his
influence in Lebanon to promote their policies and
goals, Franjiyah continues to maintain his own
conservative and traditional Maronite stance.
Franjiyah uses Syrian backing to promote his political
standing as much as the Syrians use his influence in
the Christian community to promote their aims in
Lebanon.
The US Embassy in Beirut reports that Franjiyah has
stated that, while nothing can be done in Lebanon
without the agreement and backing of Syria, the
tripartite accord should be radically revised.
Franjiyah would like to keep the language on
Lebanon's sovereignty and independence but throw
Secret
away the rest. He maintains the present text cannot
be simply reworked. The Syrian-sponsored tripartite
accord directly confronts Franjiyah's strongly pro-
Maronite stance, as it calls for the
deconfessionalization of Lebanese politics, which
would reduce Maronite power in Lebanon.
Despite his long association with the Syrians and
President Assad, Franjiyah's opposition to most of the
tripartite agreement shows that he shares much in
common on basic constitutional matters with other
Lebanese Christian leaders. For example, in a
meeting between Lebanese leaders and Syrian Vice
President Khaddam in Lausanne in 1984, Franjiyah
surprised the Syrians by flatly opposing constitutional
reforms that would diminish Christian power. At the
same time, however, he has obstructed Christian
attempts to promote a united front?partly, no doubt,
in response to Syrian instructions, but more likely out
of Franjiyah's refusal to deal with other Christian
leaders as long as they accept Gemayel's presidency.
Franjiyah did not participate in and has not supported
the Christian conference held last January in Bkirki,
which was designed to demonstrate unity in the
Christian community and to devise an alternative to
the Syrian tripartite accord. According to US
Embassy reporting, the congress was markedly
diminished in importance by Franjiyah's absence,
widely seen as instigated by the Syrians.
Franjiyah, however, has reacted more favorably to the
Bkirki conference proposals than he did to the Syrian
tripartite accord. In a news conference in late
January, he stated that the Bkirki proposals were a
good basis for negotiations and that he would serve as
a mediator with Damascus, but that Gemayel's
resignation "is the only way to achieve the salvation of
Lebanon." In response, Syrian Vice President
Khaddam told Franjiyah in late May that the Syrians
expected that the agreement between them and
Franjiyah concerning the tripartite accord would be
upheld and that Franjiyah should not be dragged into
joining the so-called Christian project. Franjiyah,
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however, is playing his own game. The former
President continues to demand Gemayel's
resignation?both to appease the Syrians and for his
own revenge?while disassociating himself from both
the Christian plan, refusing to deal with anything
Gemayel might have a hand in, and the tripartite
accord, which offends his pro-Maronite sensibilities.
Franjiyah and the Christians
Recent elections in the Phalange Party suggest a new
dimension in intra-Christian relations. The Phalange
Party elected George Saade, a compromise candidate
between Gemayel and current Lebanese Forces leader
Samir JaJa, as its new president on 16 June.
According to the US Embassy in Beirut, Franjiyah
dispatched two emissaries to congratulate Saade, an
unexpected move given his traditional opposition to
the Phalangists.
Since both Franjiyah and Saade hail from northern
Lebanon and both represent Maronite constituencies
located behind Syrian lines, Franjiyah may believe
that he can exploit their common background. More
important, as Saade was not Gemayel's first choice,
Franjiyah may view his selection as a defeat for
Gemayel. By congratulating Saade, Franjiyah may be
seeking to belittle Gemayel. It is also possible that
Syria, through Franjiyah, may wish to open channels
to non-Gemayel elements in the Phalange Party as a
means of dealing with the Maronites while boycotting
the President.
The US Embassy in Beirut reports from a reliable
source that President Gemayel may have covertly
visited Franjiyah in northern Lebanon on 23 June.
Given the hatred between Franjiyah and Gemayel,
such a meeting is unlikely, but it may help to explain
the unexpected choice of Saade as president of the
Phalange Party, as Saade is acceptable to all factions.
Furthermore, if this meeting took place, it might
constitute an attempt by Franjiyah to play the role of
elder statesman and bring about some kind of
arrangement between Gemayel and Assad, probably
at Assad's request.
Outlook
Given Franjiyah's age and deteriorating health, it is
unlikely that he will once again become a national
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17
leader. Although his position is firm within his own
constituency and he continues to command a certain
degree of prestige due a former head of state, his
influence in the Christian community appears to stem
largely from his propaganda value. Franjiyah is
generally recognized as a Syrian proxy and, as such, is
highly unlikely to attain a legitimate power base of his
own without considerable Syrian backing.
As long as Damascus continues to focus on the
removal of President Gemayel as a keystone to its
policy in Lebanon, the Franjiyah/Assad relationship
is likely to be mutually beneficial. On the other hand,
there is little else on which the Syrians and Franjiyah
have convergent views, and Franjiyah is not likely to
change his pro-Maronite stance in favor of Syria's
proposal for the deconfessionalization of Lebanon.
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Syria-Iran: Ties That Bind
Damascus is gradually reaching a point of
diminishing returns in its alliance with Tehran, but
President Assad does not appear prepared to end the
relationship. The value to Syria of its link to Iran
exceeds the oil and economic ties. Indeed, Arab
opponents of the alliance could easily outbid Iran in
terms of offering Syria economic benefits. For
Damascus, the relationship with Tehran represents a
key bargaining chip used to keep Syria's Arab
neighbors at bay and serves as a threatening
alternative that prevents them from coalescing against
Damascus or negotiating with Israel. Should Iran win
its war with Iraq, we believe Syria would find itself
more beholden to Tehran and even less likely to break
the strategic alliance.
Syria and Iran are on a long-term collision course over
Lebanon and their oil relationship. Nonetheless,
Assad is willing to take considerable political risks to
stave off the day of reckoning. He recognizes that he
cannot get the ironclad guarantees of substantial
economic and political advantages that he wants from
his Arab neighbors in exchange for putting distance
between Syria and Iran. Without those guarantees,
Assad cannot completely sever Syrian links to Tehran,
because he fears that concessions offered by his fellow
Arabs could easily be withdrawn.
At Loggerheads Over Lebanon
Dramatically divergent Syrian and Iranian policies in
Lebanon have sharply increased tensions in the
alliance and led to serious clashes between Syrian
troops and Iranian-backed radical Lebanese Shia
fundamentalists in May and June. Syria's get-tough
policy with the radicals does not presage a change in
Syrian policy toward Iran or Lebanon but reflects
Syrian determination to confront challenges to its
authority. The collapse of Jordan's recent effort to
reconcile Damascus and Baghdad is a further
indication that for the time being Syria is prepared to
tolerate Iranian-backed fundamentalist activity in
Lebanon, apparently in the belief that, when the
crunch comes, Syria will be able to bring the radical
elements under control.
19
To preserve its relationship with Iran, Syria generally
has shown restraint in responding to Hizballah
provocations. Hizballah's freewheeling behavior in the
Bekaa, however, has prompted Damascus to
demonstrate its willingness to use force. Moreover,
Syria's deployment earlier this month of Special
Forces units into West Beirut and the southern
suburbs also increases the prospects for clashes
between Hizballah and the Syrians. Although the
Syrian deployment was aimed primarily at
undermining Palestinian fighters loyal to PLO
chairman Arafat, it also signals Syrian displeasure
with growing ties between Hizballah and Fatah as
well as Hizballah's resistance to the Syrian-backed
security plan.
Tehran is trying to take advantage of Syria's failure
to produce a modus vivendi among Lebanon's warring
factions and is actively supporting Hizballah efforts to
undermine Amal, the mainline Shia organization
backed by Damascus.
Iran is also attempting to expand its relations with the
Muslim Brotherhood in Lebanon, a move clearly
meant to signal Iranian displeasure with Syrian
policies in Lebanon.
Oil Link to Iran
Tensions in the alliance have been increased by the
uncertainty of Iranian oil supplies to Syria and Syria's
failure to pay its debts to Iran. The oil and repayment
issues have become intimately bound up with Syrian
and Iranian differences in Lebanon. Last May's
fighting between Syrian forces and Hizballah
coincided with efforts to renegotiate the annual oil
contract between Syria and Iran. The talks broke
down over a pricing dispute, but, because Damascus is
so far behind in its payments, the disagreement
appeared somewhat artificial. The failure of the
negotiations partly reflected Tehran's displeasure
with Syria's attitude toward its allies in Lebanon.
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Recent meeting between President Assad (r) and
Iranian Deputy Foreign Minister Besharati (1) in
Damascus.
Over the past year, periodic disputes over oil deliveries
and unpaid bills have weakened Syria's relationship
with Iran. Despite Tehran's rescheduling in 1984 of
arrearages and a high volume of free oil for the Syrian
military, we estimate Syria's oil debt to Iran has
ballooned to $1.5-2 billion. Oil deliveries have fallen
well below the contract amount of 120,000 b/d,
especially in 1985 when Iran cut off deliveries
between August and December. Syria has looked
mainly to the spot market to make up the shortfall,
which has practically exhausted its foreign exchange
reserves.
Iranian deliveries were renewed in late December
after Syrian Prime Minister Kasm negotiated an
interim supply agreement.
we estimate 1986 deliveries so far
from Iran of 6.5 million barrels?less than 25 percent
of the contracted amount. Although negotiations on
the annual supply agreement were abandoned in early
May, guarantees from Iranian Deputy Foreign
Minister Besharati on the eve of the planned Syrian-
Iraqi discussions in June probably ensured Iranian
deliveries for the near term.
Despite a new six-month 100,000-b/d contract signed
in early July, the Syrian oil link to Iran will probably
grow increasingly troubled. Syrian debt will continue
to expand?Damascus cannot even afford
downpayments on current shipments?and Tehran
can ill afford to provide de facto grants of oil. As war
with Iraq further saps the Iranian economy and
disrupts Iranian oil exports, pressures will increase for
Secret
Syrian President Assad (1) and Iraqi President
Saddam Husayn (r) meet during ill-fated 1979
reconciliation.
Tehran to divert oil to more creditworthy customers.
Likewise, sporadic deliveries from Iran could provoke
Damascus to look to Iraq for a secure supply
relationship.
Flirting With Baghdad
Syria's Arab neighbors are eager to capitalize on the
growing strains between Damascus and Tehran to
press Syria to patch up relations with Iraq. Moderate
Arabs believe that a breach between Damascus and
Tehran would be crucial in limiting Iran's ability to
pursue the war against Iraq and forestalling its spread
to the Gulf states. Although the Arabs are prepared to
offer substantial economic incentives to Syria for
dropping Tehran, Assad has never altered a major
policy solely because of economic necessity, and he
certainly would anticipate significant political
advantages as well.
Assad
recently responded to criticism from domestic political
leaders concerning the alliance with Tehran by saying
that Damascus would seek to improve ties to Baghdad
but would not withdraw support from Iran in its war
with Iraq. Thus, any move to thaw relations with
Baghdad would be tactical and would not produce a
meaningful Syrian initiative to end the Iran-Iraq war.
Assad believes that Syrian interests are best served by
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Recent meeting between President Assad (r) and
Iranian Deputy Foreign Minister Besharati (1) in
Damascus.
Over the past year, periodic disputes over oil deliveries
and unpaid bills have weakened Syria's relationship
with Iran. Despite Tehran's rescheduling in 1984 of
arrearages and a high volume of free oil for the Syrian
military, we estimate Syria's oil debt to Iran has
ballooned to $1.5-2 billion. Oil deliveries have fallen
well below the contract amount of 120,000 b/d,
especially in 1985 when Iran cut off deliveries
between August and December. Syria has looked
mainly to the spot market to make up the shortfall,
which has practically exhausted its foreign exchange
reserves.
Iranian deliveries were renewed in late December
after Syrian Prime Minister Kasm negotiated an
interim supply agreement.
we estimate 1986 deliveries so far
from Iran of 6.5 million barrels?less than 25 percent
of the contracted amount. Although negotiations on
the annual supply agreement were abandoned in early
May, guarantees from Iranian Deputy Foreign
Minister Besharati on the eve of the planned Syrian-
Iraqi discussions in June probably ensured Iranian
deliveries for the near term.
Despite a new six-month 100,000-b/d contract signed
in early July, the Syrian oil link to Iran will probably
grow increasingly troubled. Syrian debt will continue
to expand?Damascus cannot even afford
downpayments on current shipments?and Tehran
can ill afford to provide de facto grants of oil. As war
with Iraq further saps the Iranian economy and
disrupts Iranian oil exports, pressures will increase for
Secret
Syrian President Assad (1) and Iraqi President
Saddam Husayn (r) meet during ill-fated 1979
reconciliation.
Tehran to divert oil to more creditworthy customers.
Likewise, sporadic deliveries from Iran could provoke
Damascus to look to Iraq for a secure supply
relationship.
Flirting With Baghdad
Syria's Arab neighbors are eager to capitalize on the
growing strains between Damascus and Tehran to
press Syria to patch up relations with Iraq. Moderate
Arabs believe that a breach between Damascus and
Tehran would be crucial in limiting Iran's ability to
pursue the war against Iraq and forestalling its spread
to the Gulf states. Although the Arabs are prepared to
offer substantial economic incentives to Syria for
dropping Tehran, Assad has never altered a major
policy solely because of economic necessity, and he
certainly would anticipate significant political
advantages as well.
Assad
recently responded to criticism from domestic political
leaders concerning the alliance with Tehran by saying
that Damascus would seek to improve ties to Baghdad
but would not withdraw support from Iran in its war
with Iraq. Thus, any move to thaw relations with
Baghdad would be tactical and would not produce a
meaningful Syrian initiative to end the Iran-Iraq war.
Assad believes that Syrian interests are best served by
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Although the economic benefits from the pipeline are
attractive, Syrian demands probably would reduce the
proceeds to Baghdad. Damascus would probably
demand 150,000 to 180,000 b/d for domestic
consumption either gratis or at below-market prices,
sharply curtailing the oil available to Iraq for export.
In addition, Damascus would probably demand $100-
300 million in transit fees, cutting further into Iraqi
foreign exchange earnings. Iraq, meanwhile, probably
would face a reduction in the oil sold on its behalf by
Saudi Arabia and Kuwait should it begin exporting
through Syria.
Marriage of Convenience
Despite Damascus's growing economic problems,
economic gains alone will not wean Damascus from
Tehran. Although Syria and Iraq would both benefit
from renewed cooperation, the economic gains are
likely to be short term and ultimately would be
eclipsed by political and strategic obstacles. Neither
Syria nor Iraq wants the other to grow strong, and
Assad and Saddam probably will look for other
options to improve their situation. Syria does not want
to be dependent on its archrival Iraq for oil supplies?
a shutoff would leave Syria more vulnerable than
ever. Similarly, Baghdad wants to buffer itself against
Syrian leverage and has plans to double its pipeline
export capacity through Saudi Arabia and Turkey by
1989 to about 3 million b/d, making the Syrian route
inconsequential.
Syrian ties to Iran transcend their oil relationship.
Damascus has failed to meet its payment obligations
to Iran from the outset of the supply arrangement in
1982, yet deliveries have continued. Iran probably will
continue to supply some oil to Syria through mid-1987
under the new agreement despite Damascus's
inability to pay and conflicting interests in Lebanon.
Moreover, as the Iraqi pipeline gradually becomes less
important to Baghdad, Syria's political options and
economic leverage over Tehran will diminish.
Assad knows Tehran is the only regional power that
shares fully his deep antipathy for Israel. Only Iran
echoed Syria's demands for harsh retaliation against
Morocco for the Israeli Prime Minister's visit in July.
Syria is unlikely to give up its radical card as long as
Secret
it remains so useful in forcing moderate Arabs to
adhere to S ria's hardline position against Israel.
If Iran Wins the War
There is no safe, practical, or graceful way for Syria
to cool its relationship with Iran. Despite increasing
liabilities, Damascus may be stuck with Tehran until
there is a dramatic turning point in the Iran-Iraq
conflict. It could take an Iranian move to expand the
war to the Gulf before Assad would end the alliance.
Assad hopes that the war will result in the downfall of
the regime in Iraq, and he apparently believes that he
can revise Syrian policy toward Iran once Saddam is
overthrown. The end of the Iraqi regime, however,
could complicate Syrian efforts to put distance
between itself and Tehran. Assad would find it
difficult to dump a winner, even if Iran imposed an
Islamic government on Baghdad. We believe Assad
would seek to accommodate Syria to Iran's victory
and direct any Iranian expansionism toward Syria's
enemies.
An Iranian victory would further isolate Syria within
the Arab world. Other Arab states almost certainly
would regard Syrian support for Iran as having been
critical in fostering the victory of Persian Iran over
Arab Iraq. Syria's blacksheep status among the Arabs
could result in greater Syrian political dependence on
Iran as a means of maintaining Damascus's role in
regional politics. Recognition by other Arab states of
Syria's capacity for promoting subversion against
their regimes, however, would probably mean that
contacts with Damascus would be maintained, and
Saudi aid would probably continue, if only to prevent
increasing Syria's economic dependence on Iran.
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The US Hostage Takers in Iran:
Where Are They Today?
Many of the leaders of the Islamic militants who
seized the US Embassy in Tehran in November 1979
and held US diplomats hostage for over a year
currently hold high-level positions in the Iranian
Government. Several dominate the political affairs
section of the Foreign Ministry, where they nurture
each other's careers and influence all aspects of
Iranian foreign policy. The militants' "spiritual
leader" serves as chief state prosecutor. The militants
are key representatives of Iran's radical factions that
generally support violent export of the Islamic
revolution, continuation of the war with Iraq, and
uncompromising opposition to normalization of
relations with the United States. The relative
influence accorded the militants probably is an
important indicator of the direction of Iran's foreign
and domestic policies. A change in their status could
be a measure of the regime's desire for better relations
with the United States.
Foreign Ministry
Hosein Sheikh-ol-Eslam, one of the instigators of the
takeover and a member of the militants' leadership
council, today serves as Deputy Foreign Minister for
Political Affairs, a position he won as a direct result of
his role in the hostage episode. He is the most
influential of the hostage takers and a powerful
proponent of a radical foreign policy.
Sheikh-ol-Eslam's radical faction is involved in
constant infighting with conservatives in the Foreign
Ministry who oppose the radicals' approach to foreign
policy. Maneuvering between the two groups are
pragmatists, including Foreign Minister Velayati,
willing to do whatever is necessary to further Iran's
interests. The pragmatists sometimes have sided with
conservatives to curb radical excesses. Khomeini has
followed his usual practice of attempting to maintain
a rough balance between the radicals and
conservatives. In a speech in 1984, he curbed the
power of the radicals by declaring that Iran should
have normal diplomatic and political relations with
most countries.
23
The Militants in 1979
The militants, calling themselves the Muslim
Student Followers of the Line of the Imam, were not
an established political or guerrilla group. During the
14 months of the crisis, however, a small leadership
group and a core of 40 to 50 followers maintained
strict discipline among themselves and over the larger
group of politically unsophisticated provincials they
recruited for the occupation. Although the militants
adopted the return of the Shah to Iran as one of their
demands, their primary goal was to force the pace of
the revolution. In particular, they wanted to create a
crisis in US-Iranian relations and thereby discredit
the growing pragmatism of Prime Minister
Bazargan's government toward relations with the
United States.
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The evidence suggests that Khomeini had no prior
knowledge of plans for the takeover. He soon
recognized the usefulness of the crisis, however, in
rallying broad public support for the revolution and
undercutting the influence of secular politicians who
might pose a more serious threat to him if the
revolution faltered. The militants manipulated
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for their own radical interpretations of his views.
They saw the world in black and white. The
dominant element of their thought was to emulate
Khomeini's tactic of refusing to compromise as the
best means of ensuring the success of their goals.
Khomeini's guidelines have allowed the pragmatists to
broaden Iran's international ties, especially to
Western Europe, but Sheikh-ol-Eslam continues to
wield considerable influence, especially over Iran's
relations with Third World countries and with Islamic
fundamentalist movements worldwide.
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he exercises predominant
authority over policy concerning the Middle East but
has lost influence over some policy issues to Javad
Larijani, the Deputy Foreign Minister for Economic
and International Affairs. Larijani provides the
Ministry with a level of professionalism and expertise
on more complex issues that Sheikh-ol-Eslam cannot
match.
Sheikh-ol-Eslam is
closely associated with Iran's terrorist and subversive
activities abroad and continues to hold extreme anti-
Western views. He plays a prominent role in
overseeing Iran's support for the radical Lebanese
Shia organization, Hizballah. He has close links to the
Revolutionary Guard and to intelligence officials.
Recent administrative changes have shown Sheikh-ol-
Eslam's continuing strength.
Sheikh-ol-Eslam has obtained approval
to appoint three deputy directors to each of the 10
political departments that are subordinate to him. The
deputies probably will be selected on the basis of their
revolutionary credentials and personal loyalty to
Sheikh-ol-Eslam.
All but one of the 10 current department chiefs are
Sheikh-ol-Eslam's loyalists who were involved in the
seizure of the US Embassy. Skeikh-ol-Eslam recently
promoted one of these, Ibrahim Rahimpur, from
department chief to Director General for Asian and
Pacific Countries. Rahimpur's predecessor, Ali
Ahani, became Director General for the Americas
and European countries, handling relations both with
the United States and the USSR. Ahani's
predecessor, Mohammad Reza Sadr?also a hostage
taker?assumed a high-level position in the Interior
Ministry.
Several of Sheikh-ol-Eslam's proteges?all hostage
takers?have become ambassadors. Kia Tabatabai,
assigned to the Foreign Ministry's protocol
department soon after the hostages' release, served in
Moscow from 1983 to May 1986. Ayatollah Hadi
Khosrow-Shahi served as Ambassador to the Vatican
until mid-1986 and currently is special adviser to the
Secret
Minister of Islamic Guidance.
In any event, he was an important
figure in Iran's propaganda network.
Mehdi Ahari Mostafavi, identified as a guard during
the Embassy takeover, was appointed a UN delegate
in 1981 and then headed the Foreign Ministry's
Western Europe department before being appointed
in 1985 to his current position as Ambassador to
Austria and Iranian representative to the UN
Industrial Development Organization in Vienna. In
an interview on Austrian television, Mostafavi denied
involvement in the hostage taking.
Ali Reza Salari has had a rapid rise in Iran's
diplomatic service. A radio announcer during the
revolution, he became deputy chief of the Foreign
Ministry department responsible for Western Europe
in 1983, chief two years later, Ambassador to
Belgium in 1985, and this year assumed the
additional positions of Ambassador to the European
Community and to Luxembourg. Western diplomats
describe him as intelligent but prone to using Islamic
rhetoric in conversation. When Belgium earlier this
year closed the Iranian cultural center in Brussels
because of its suspected role in propaganda and
intelligence activities, Salari publicly warned that the
safety of Belgian diplomats in Tehran could not be
guaranteed.
Another hostage taker, Javad Mansuri, has used his
post as Deputy Foreign Minister for Consular and
Cultural Affairs to establish a separate power center
in the Foreign Ministry. Mansuri's influence stems
from contacts within the Revolutionary Guard, which
he once headed, and from his position as a member of
the Central Committee of the Islamic Revolutionary
Party, Iran's only legal party. A religious zealot,
Mansuri oversees many cultural propaganda
programs that actively promote export of the
revolution. He also controls scholarships and exit
permits for students studying abroad, duties that
extend his influence beyond foreign policy.
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Although both Mansuri and Sheikh-ol-Eslam are
radicals and often in conflict with Velayati, they
sometimes compete with each other for influence
within the Foreign Ministry.
Mansuri in 1986 attempted to rein in
Sheikh-ol-Eslam by proposing a reorganization of the
Ministry along geographic rather than functional
lines. The proposal was never adopted.
The Hostage Takers' Guru
Mohammad Asgar Musavi-Khoiniha, a radical
Islamic fundamentalist ideologue, functioned as
spiritual adviser to the hostage takers. After the
hostage crisis ended in 1981, he was elected to the
first postrevolutionary Consultative Assembly
(Majles) and served as one of its deputy speakers. He
then became a personal adviser to Khomeini and
organizer of the annual pilgrimage of Iranians to
Mecca. Khoiniha's ambition was to run for president
in 1985, but Khomeini prevented Khoiniha and other
radicals from running. Khomeini wanted to maintain
the existing balance among regime factions by
keeping in power the more moderate incumbent, Ali
Musavi-Khamenei.
As a consolation prize, Khomeini in July 1985
appointed Khoiniha as Iran's prosecutor general.
Khoiniha has used the post to push his leftist-oriented
policies, waging a campaign to imprison Iranians who
attempt to reclaim property seized by the Islamic
regime after the Shah's overthrow.
Khoiniha has focused on persons who
have returned after fleeing Iran when the clerics took
over. Khoiniha's campaign has angered both more
moderate officials, who support the return of illegally
seized property as one means of encouraging private
entrepreneurship, and other radicals?including
Prime Minister Musavi?who are attempting to
attract back to Iran expatriates possessing critically
needed technical expertise. These tensions are likely
to persist with no clear winner as long as the regime
continues to postpone a decision on the roles of the
rivate sector and the state in the economy.
Reverse Blank
25
Outlook
The hostage takers' successful careers indicate the
continuing influence of their revolutionary ideology
and hardline, anti-US stance. None has shown any
sign of having doubts about his role in the Embassy
seizure. They usually turn aside interviewers'
questions about guilt or apologies by justifying their
actions on grounds that the United States used the
Embassy as an espionage center and engaged in
criminal acts under the Shah.
Iranian radicals, including the hostage takers, are
contending for power with moderate and conservative
groups. The coalitions are fairly evenly matched, with
Khomeini wielding ultimate authority. As of today,
both sides have about an equal chance of emerging as
the dominant force in Iran after Khomeini dies. If the
radicals win, the hostage takers are certain to hold
even higher positions in the government. Even if more
moderate leaders dominate the government, the
hostage takers are likely to continue to occupy key
positions and wield considerable influence in
determining policy.
One way the regime could signal clearly a desire for
better relations with the United States would be to
remove some or all of the hostage takers from
important positions, especially those that involve them
directly in determining policy toward the United
States. The diminution of the hostage takers'
influence over time also would improve the prospects
for better relations.
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Iranian Deputy Foreign
Minister Larijani:
Gaining Influence
the Old-Fashioned Way
Dr. Mohammad Javad Ardeshir Larijani has risen to
a position of significance in the Iranian Foreign
Ministry by relying on the traditional
prerevolutionary qualifications of a good education,
proper family background, and influential
connections. He is Deputy Foreign Minister for
Economics and International Affairs and is the
creator of the Ministry's Institute of Political and
International Affairs. Foreign Minister Velayati relies
on the Institute in makin forei. n sone)/ decisions,
Larijani
differs from most of his peers in the Foreign Ministry,
such as his chief rival Hosein Sheikh-ol-Eslam, who
received their positions because of revolutionary
credentials. Larijani has been as shrewd as the
revolutionaries, however, in exploiting the clerics'
Islamized system to rise to power and is a strong
candidate to become Foreign Minister in the future.
Rising to Power
Larijani rose to his current position by
professionalism, hard work, and shrewd exploitation
of family ties. He is the son of a moderate cleric who
is a member of the Supreme Judicial Council and a
teacher at the seminary in Qom. Born in An Najaf,
Iraq, Larijani may have direct links to Khomeini
developed during Khomeini's exile there from 1963 to
1978. Larijani's brother, a member of the Majles
(Consultative Assembly) from 1980 to 1984, is the
son-in-law of the late Ayatollah Morteza Motahari, a
favorite of Khomeini, who was chief of the
Revolutionary Council before his assassination in
1979. Larijani is married to the daughter of Ayatollah
Mohaqeq-Damad, head of the Justice Ministry's
"Investigative Department."
The Berkeley-educated Larijani began his career as a
university professor in Iran. He has a degree in
mathematical logic and is an expert in "global
strategy." Iranian press reports indicate that in
February 1983 he was appointed by the Supreme
Judicial Council as its first representative to the Voice
27
and Vision of the Islamic Republic of Iran, the
national radio and television organization.
Subsequently, Larijani parlayed a six-month contract
position at the Foreign Ministry as an adviser to
Foreign Minister Velayati into a permanent post. He
broadened his expertise through travel to such
countries as Cuba, Venezuela, Libya, and Algeria as
the special envoy of the President and senior adviser
to the Minister of Foreign Affairs.
Larijani used his influence with Velayati to create the
Institute of Political and International Affairs. The
Institute provides timely and thorough policy-related
analysis directly to Velayati. Under Larijani's
direction, it is recognized as a focal point in the
Iranian foreign policy decisionmaking process,
Larijani's
Institute has given the Foreign Ministry a level of
professionalism in international politics that has not
existed since the revolution. Larijani staffed the
Institute with skilled personnel loyal to himself. He
included career diplomats, clerics, and retired
military officers on his staff, many of whom had been
removed from powerful positions by revolutionaries.
As head of the Institute, Larijani sought informal 25X1
contacts with other governments as an alternative
means for Iran to communicate with the international
community, especially those countries with which
Iran did not enjoy good relations.
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Larijani also has cultivated support in the Majles.
he routinely
has given the Institute's research papers to clerics on
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the Majles staff. In addition, he has used the clerics
on his staff to supply quotations from the Koran to
support the Institute's conclusions. This has
guaranteed that the Institute's analytical pieces were
acceptable on religious grounds to the clerics.
Larijani Versus the Radicals
Larijani's rise has put him at odds with the radicals in
the Foreign Ministry.
Larijani's Institute was created with the
express approval of Foreign Minister Velayati and
over the opposition of Larijani's key rival, the radical
Deputy Minister of Foreign Affairs Sheikh-ol-Eslam.
The Institute competes directly with Sheikh-ol-Eslam
and the revolutionaries on his staff who are not
technically as well qualified as Larijani's employees,
Sheikh-ol-Eslam
had lost influence on international affairs to Larijani
and his Institute. Sheikh-ol-Eslam, however, remains
the dominant influence in determining Iranian foreign
policy objectives for Lebanon, Syria, Libya, South
Yemen, and the Palestine Liberation Organization,
with which he has numerous contacts.
The struggle for dominance within the Foreign
Ministry is not likely to be resolved soon. Larijani is
now considered to be the third most influential
ministry official behind Foreign Minister Velayati
and Senior Counselor Ardakani.
Larijani's influence will be
greatest when issues are complex and demand
sophisticated analysis. Sheikh-ol-Eslam probably will
remain the most influential deputy in deciding policy
toward the Middle East and in other areas where Iran
is attempting to export its revolution. Although
Larijani is often mentioned as an eventual candidate
for the Foreign Ministry portfolio, his future is likely
to be determined by the outcome of the broader
factional struggles within both the Foreign Ministry
and the regime.
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Iraq: Press Attacks on the
United States
Baghdad is not entirely comfortable with its relatively
new friendship with the United States and uses press
criticism to signal its uneasiness. Renewed and
intensified criticism of the United States in
government-controlled journals appears to have been
prompted by Israel's raid on PLO headquarters in
Tunis last October and the Israeli interception of a
Libyan airliner early this year. The Iraqi press will
continue to be critical of the United States, in our
judgment, primarily when US actions or support for
Israel seem to Baghdad to threaten interests or
diminish its "Arab" credentials in the eyes of fellow
Arab states. Government leaders, however, will
exercise sufficient restraint to avoid endangering
relations with Washington.
Background
In the early 1970s Iraqi journalists routinely criticized
the United States. Baghdad adopted the most extreme
positions on the Arab-Israeli conflict, and among the
mainstays of regime rhetoric were attacks on the
United States as Israel's strongest supporter. The
United States was painted as the archvillain of
international politics and the inheritor of Great
Britain's imperialist mantle.
After the war with Iran began in 1980, Baghdad
slowly reduced press attacks on the United States and
practically ended them by 1984. By that time, the
regime had concluded that the United States could
play a role in bringing about an end to the war, a goal
the leaders want badly to achieve. The US promotion
of an embargo on arms to Iran and its help in gaining
financing for Baghdad from the Export-Import Bank
probably strengthened the Iraqis' belief that the
United States would hel them out of their
predicament.
Renewed Press Attacks
Last October press attacks on the United States
resumed after Israel's raid on PLO headquarters in
Tunis, according to US diplomats. Immediately after
the raid, President Saddam Husayn delivered a
29
widely disseminated speech in which he criticized US
support for the operation. Calling for Arab solidarity,
he raised the specter of a widening circle of US-Israeli
attacks on Arab states if they did not close ranks.
Saddam's speech was quickly followed by a torrent of
anti-US articles. The media uniformly took the line
that the United States could not be counted on as an
ally and that its Middle Eastern policy was being
dictated by Israel.
US diplomats in Baghdad believe that Saddam's
speech and the subsequent press criticism were
prompted by a concern that the Israeli action
threatened Iraq's security. Iraqis probably were
reminded of Israel's attack in 1981 on Iraqi nuclear
facilities, and the Tunis raid may have raised the
specter of Israeli attacks on other installations vital to
Baghdad. In any case, the Iraqi criticism was
probably viewed by Baghdad as necessary to maintain
its credentials in Arab circles, lest it be seen as tacitly
approving Israeli attacks on Arabs. The President's
speech, however, did not represent a shift in Iraqi
policy away from the United States.
One unusually vehement anti-US article turned up
after Saddam's speech in Al Thawrah, the official
organ of the ruling Beth Party, and this caused
concern to the US Embassy. The Al Thawrah article
castigated the United States for its "blatant
animosity, both military and political, to Palestine
and the Arab nation" and declared "the alignment
between the United States and Israel is complete." It
charged that the United States was behind attempts
to wipe out the Palestinian resistance, even to the
extent of underwriting the cost of Syrian attacks on
the PLO in Lebanon.
The writer of the Al Thawrah piece further called on
"progressive" forces to stop withholding action in the
hope that Washington would solve the Palestinian
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problem. Rather, he said, they should "adopt an
activist stand." He concluded by saying, "If this
brings on the wrath of the United States, what do the
Palestinians have to lose?"
According to the US Embassy, the article appeared to
be calling for armed action against US interests,
going beyond Saddam's speech urging Arabs to
express their displeasure to Washington over the
raids. At the same time, the impact of the piece was
blunted because it appeared under the byline of an Al
Thawrah columnist, suggesting it may have been one
individual's opinion, not official government policy.'
Press Intensifies Attacks
The furor over the Israeli attack barely had died down
when, in February 1986, Israeli planes intercepted a
Libyan airliner. The Revolutionary Command
Council?Iraq's supreme governing body?
condemned the interception, and once again the
leaders blamed the United States. They claimed that
the US interception of an Egyptian airliner in
November?in an attempt to arrest fleeing
terrorists?had set a precedent for Israel's seizure.
US diplomats regarded the decision of the Council to
speak out as an indication of serious concern on the
government's part. Usuall the Foreign Ministry
handles such matters.
Following the Council's condemnation, anti-US
articles resumed and have been appearing at irregular
intervals. Most of these have been routine and fairly
innocuous, but one article last May caused the US
Embassy to lodge an informal complaint. A journalist
in The Baghdad Observer?the English-language
publication for Iraq's international community?
published a list of prominent Americans whom he
claimed were agents of Mossad. The article probably
was prompted by the Pollard case, involving Israeli
espionage in the United States. The Iraqis believe that
Pollard may have passed secrets about Iraq to the
Israelis and have made several approaches to
Washington to be reassured that this did not happen.
' Al Thawrah prints an unsigned editorial on its frontpage daily,
and this is regarded by Iraqis as havin the authority of a personal
communication from Saddam.
Secret
The US Embassy told the Foreign Ministry that the
United States recognized that Iraq had a right to
criticize Washington on foreign policy issues, but that
"slanderous" articles such as this could damage
bilateral relations. The Foreign Ministry responded
that the article in question was minor and, in effect,
advised the Embassy not to make too much of it. The
Ministry said it had no intention of "gagging" the
press.
Most recent anti-US articles have been published by
Al Iraq, which functions as an escape valve for radical
sentiment in the country and is owned by proregime
Kurds. The regime encourages Al Iraq to open its
columns to leftists and Arab nationalists, many of
whom like to revile the United States. According to
the US Embassy, the government believes the radicals
will be less likely to organize politically if they are
given a media outlet for their opinions. In one article,
a leftist journalist claimed the United States and
Britain have been coordinating their Middle Eastern
policies since 1956 when "Britain decided to give the
lead in imperialism to the United States." The article
maintained that Britain gave copies of all documents
of its "imperialist quest" to the United States, and
that the US State Department, Defense Department,
and CIA have used them to plan a joint Middle
Eastern policy. Another Al Iraq columnist declared
that Islamic fundamentalism is a creation of US
intelligence. The writer opined that US research
centers, cooperating with the Israelis, formulated the
model and exported it to the Middle East to sow
discord and turmoil.
Implications
Iraqi press criticism of the United States, despite
improvements in bilateral relations, reflects
continuing Iraqi suspicion of US motives and goals. In
effect, the Iraqis are telling the United States what
troubles them, on the assumption the United States
will act to relieve their concerns. In particular, the
Iraqis appear worried that Washington's close ties to
Israel threaten Iraq's security as well as Baghdad's
reputation and credentials among fellow Arab states.
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We do not believe that US-Iraqi relations are
imperiled by press criticism. The Iraqis badly need
US support in its war with Iran, particularly to
promote the arms embargo against Iran. They almost
certainly would not allow criticism to escalate to a
level that would jeopardize this support. We believe
that press criticism will continue, but, barring a direct
US affront to the relationship, the Iraqis will continue
to view the press attacks as little more than a minor
irritant and will continue to urge the United States to
do likewise.
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Can Sudan, One of Africa's
Sick Men, Recover?
Analysts of the "Sudanese crisis" have no lack of raw
materials to choose from. Sudan resembles an
exposition of whatever can go wrong with a country:
drought, refugees, civil war, and economic collapse,
even a plague of locusts. As one evaluates the
contemporary record of Sudan, one is inclined to
speak as a moralist as well as an analyst. For a good
part of Sudan's contemporary history, its leaders have
shown biases of traditional, even Ottoman, origin
against the private sector and in favor of government
control. Sudan is now tired, threadbare, and broke.
Foreign aid is down, and the record shows this can, in
any case, only help a country that is already helping
itself.
Will Sudan's new democratic regime follow the
international signposts (Taiwan, South Korea,
Malawi) to prosperity? We cannot yet be encouraged.
On various issues?including our security concerns?
the government record has so far approximated
immobility. Sadiq al-Mahdi has not gotten his show
on the road, and reform in Sudan is not possible
unless its leaders perceive what needs to be done and
communicate better with the people. Only by vigorous
leadership and followthrough can the government
hope to rebuild the infrastructure, stimulate the
economy, purge the bureaucracy, and reverse the
country's decline.
We will hear Khartoum asking for debt relief. Sadiq
al-Mahdi's democratic experiment should face no
serious security or political threat until 1987. US-
Sudanese cooperation on certain bilateral issues may
be less than in the Nimeiri era. Nevertheless, Sudan's
democracy deserves our continuing support. Prospects
are good that, with our present policies and
foreseeable assistance programs, US objectives in
Sudan can be preserved.
The Contemporary Extent of the Problem
The Sadiq al-Mahdi government has taken power at
an important juncture in the 30 years of
33
contemporary Sudan. The problems before the state
have seldom been greater. The limits of external
assistance to Sudan are clearer than ever before.
Sudan faces the lingering effects of drought, the
pressure of refugees, a locust invasion, and an
expanding civil war. These are major issues whose
solution will test the government's leadership,
judgment, and creativity. Underlying these problems
and making them worse is the systemic degeneration
of Sudan's public and private sectors. Sudan's
physical plant and its public institutions are woefully
rundown and decrepit. Nothing works well today, and
the Sudanese have reason to fear that things will get
worse tomorrow. For 20 years Sudan has consumed
beyond its means while neglecting maintenance and
investment in capital and human infrastructure. The
state does not seem to know or care how to promote?
or at least avoid depressing?its GNP.
Entropy is far advanced in the public sector. Public
services are so uncertain that in some sectors they
may tend to retard, not stimulate the economy. In one
recent night the Embassy registered 128 extreme
power fluctuations or outages. A businessman whose
telephone had worked only a few days in the past
three months complained he would have been better
off with none at all; he would at least have been
spared many unproductive hours haggling with the
utility company. A business leader spoke of his office
dialing nonstop for eight hours before it could raise
the international operator. Khartoum's road system
this spring has seen a rash of potholes. "Like desert
flowers," the British Ambassador remarked, "only
longer lasting." Accidents, broken axles, and flat tires
are a constant result. Sudan's infrastructure outside
Khartoum is even worse.
Throughout the government the link between form
and function becomes more tenuous. Budgetary
allotments are made to the railroad, the Cotton
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Board, the university, health services, and the police
force. Increasingly, however, these funds are spent on
what appear to be shadow organizations. That is, the
budgetary support of the organization seems to
become an end in itself. It is not clearly related to the
organization's specific production of goods or services.
Public monies are spent on a class of public officials
whose functions appear less and less distinguishable
from each other. As salaried employees of the state,
teachers do not teach much, state agricultural
managers do not grow much, and railroad workers do
not move much freight. At a generous estimate, the
workday in the Sudanese Government does not exceed
three or four hours. We would have no trouble
believing even lower figures.
In terms of function, most government bureaucrats
are a class of public pensioners, retired on the job.
Function has given way to an organizational
atmosphere that is politicized, protective, and focused
on the short run. The Minister of Finance would like
to begin the government's reconstruction by firing
civil servants en masse. In brief, Sudan's modern
leadership has lacked the understanding and the will
to properly manage a modern state.
What Is To Be Done?
If we look back to the relative high ground of 1983?
the last year when Sudan had an IMF rescheduling
agreement?we see downward economic trends
accelerating. They have not been checked by
government intervention in the form of policy or
administrative reforms. President Nimeiri did not
understand or care about economics. He seemed to
believe that, so long as his policies were politically,
militarily, and strategically agreeable to important
friends, these friends would find ways to float Sudan
over any economic problems that might arise. After
Nimeiri fell, a fundamental overhaul of government
economic policy and management practices was
overdue. The transitional military council, however,
showed no interest in taking up such a long-term,
complicated matter. It probably lacked the
mandate?and the power?to probe deeply.
Accordingly, Sudan's economy and institutions have
continued their path downward. Today they are
weaker and more threadbare than ever.
Secret
Can This State of Affairs Be Turned Around?
Any prescription must keep in mind the momentum
and dynamism that negative trends have by now
acquired. Sudan's generally downward momentum
can be checked and reversed only if the government
adopts some difficult reforms and makes them stick.
Even if peace should come soon to the south, experts
believe it might take five to 10 years for Sudan to
climb back to the "ridge line" of 1979/80. They
wonder if Sadiq al-Mahdi's government has the
economic understanding or the political will to make
such an effort.
This last point seems especially relevant when one
considers that 100 years ago, neighboring Egypt was
undergoing an institutional and economic crisis
similar to that of Sudan today. In his book Bankers
and Pashas, David Landes describes in fascinating
detail how a succession of khedives mortgaged
Egypt's revenues?notably cotton?to fund
government expenditures on prestige projects,
unusable military hardware, and the enrichment of
the ruling class. Then, as now in Sudan, the farmer
was squeezed for all he was worth. Around 1890,
however, all lines of credit expired. The treasury was
empty, and no more foreign government or private
loans were forthcoming. Egypt could not even pay the
burgeoning interest on its debt. A European
consortium assumed responsibility for management of
Egypt's finances. This in turn led to British
management of the sources of much of Egypt's
income: railroads, irrigation, customs, telegraphs. In
time, the British Consul General, Sir Evelyn Baring,
implemented policies that much resemble the wish
lists of today's IMF/IBRD. The civil service was
reduced, farm income went up, debts were paid on
time, and surplus revenue was reinvested, via the
private sector, in agriculture, or (mostly) light
industry. From 1900 to 1910, Egypt prospered as
never before.
What strikes one about the successful Egyptian
experience is that the foreign economic planners of
the time:
? Saw clearly what steps needed to be taken.
? Had the authority and power to persist with painful
long-range policies until they were successful.
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To shift to present-day Sudan, recovery, we are
convinced, is eminently possible. All the more so
because Sudan need only look at the successful
development histories of Taiwan, South Korea, and
maybe even Malawi and Cameroon for an idea of
what might work. We are not certain, however, that
either precondition mentioned above is applicable to
the Sadiq al-Mahdi government.
In the few months that have passed since the military
relinquished power, the government has not shown
that it has either a reform program for Sudan's
economy or a coherent body of economic thought
upon which such a program can be based. During the
electoral campaign, the Umma Party economic
platform was vaguely identified with ideas of social
justice. Our latest information has the Sudanese
Government forming working committees to deal with
the macroeconomic issues before the government.
These studies may be completed "toward the end of
August." Those friends of Sudan who had hoped that
the country's first democratic government in 17 years
might launch an economic blitz are disappointed; even
worse, they are worried. As one speaks to Sadiq al-
Mahdi about the economy, one thinks how much
better his English is than Nimeiri's. But, when one
listens more carefully to what Sadiq says, one discerns
ideas and prejudices that go back at least to the
Nimeiri days.
They may even go much further back than that. It is
probably a mistake to attribute Sudan's problems to
the wrong-headed socialist ideas that pervaded the
Arab world in the 1950s and 1960s. Why did these
ideas do so well in this region? The answer may be
that they were so compatible with the etatist practices
that the Ottomans had established in the Nile Valley
and elsewhere from the 16th century on. The
Ottoman-Egyptian state firms set up in Sudan from
1820 to 1881 sound very much like Nimeiri's Military
Economic Corporation. Post?World War II socialism
may only have provided a convenient, modern basis in
theory for earlier anticapitalist attitudes that were not
dissipated under British rule.
Can we hope the Sudanese Government will become
more open to market forces and a need to streamline
and rationalize the government? Or that it could
make such policies stick long enough for them to yield
35
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their own economic and political justification? What
we are talking about are reforms that would cut the
number of civil servants, disrupt state-run firms,
devalue the Sudanese pound, and generally increase
short-term hardship on Sudan's lower-middle and
lower classes. Because many poor Sudanese make no
more than 150 to 200 pounds a month, there may not
be much more sacrifice left in them. The hundreds of
thousands of (restive) southern blacks, whose
shantytowns surround Khartoum, would object, as
would members of the powerful service unions, such
as the railroads.
Aid Levels Will Remain Depressed
As Sadiq al-Mahdi considers his options, he must
know that aid levels from bilateral donors and
international organizations will remain down. So will
remittances from abroad. Sadiq must also see that no
genie of the lamp?international organizations or
bilateral donors?alone can counterbalance the
downward pull of a declining economy already $9
billion in debt. No one has a rope long enough or
strong enough to haul Sudan back to economic safety.
The strain of economic nationalism and self-respect
we have noted in Sadiq's statements and those of his
Minister of Finance appear to recognize at least that
it is necessary for Sudan to work harder on its own
behalf.
How much further down, one asks, can the country
sink before something really major collapses? As one
looks at the junkshop quality of Sudan's urban life,
one might conclude that the elastic in the system is
about at the end of its stretching point. Nevertheless,
one should not forget that much of the Sudanese
economy (maybe 40 percent) operates outside the
government's purview. In outlying sections of Sudan,
this is especially true. There day-to-day economic life
is much affected by barter, self-sufficiency, and
subsistence. In El Geneina, Khartoum may seem
almost as distant today as it was before Ali Dinar's
rebellion in 1916 against the British. In fact, for
western Sudanese, Bangui, Kufra, and Chad are at
least as close as Khartoum and Port Sudan.
None of this spells good news for the central
government. Sudanese may continue to make their
own living arrangements on the margins of survival.
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They will not, however, be contributing much to an
improvement in Sudan's GNP. Until the
government's own policies and delivery systems
improve, foreign aid given to the Sudanese for reform
and development will probably fail. We already see a
pattern in Sudan whereby foreign aid is most effective
if managed and delivered with minimum reference to
the government. International donors pay lipservice to
the Sudanese bureaucracy but then often create their
own channels to make sure their aid is efficiently
used. Has the "White Man's Burden" in recent years
been quietly shouldered by the IBRD and the IMF
plus multilateral and bilateral donors? Where would
Sudan's agriculture, disaster relief, refugees, and
health service be without foreign management and
inputs?
Uncertain Prospects
The scene before Sadiq al-Mahdi is not enviable. His
government has so far been slow to address the
various crises before it. With continued government
inaction, the economy will continue to decline. At the
same time, should Sadiq al-Mahdi more or less agree
with donors (and his people) on a reform package,
Sudan would have to traverse a prolonged and
dangerous period of retrenchment and refurbishment
before the good effects of reform were felt. There are
even more gloomy scenarios. We have not discussed
what might happen if the civil war worsens or if it
begins to manifest itself, via southern vectors, in the
heartland of Arabized Sudan itself. Such a scenario
also does not take into account additional bad news
that might come to pass?such as a further decline in
US assistance because of continued Sudanese inaction
on our security concerns. The best of these gloomy
scenarios?the reform option, vigorously pursued?
would require a high degree of economic
understanding, plus political abilities to persuade,
communicate, and lead, of a truly exceptional sort.
Does Sadiq al-Mahdi have the needed clarity of
vision? Is he the sort of leader and communicator who
can get Sudan's vast and unwieldy motorcade to
continue to follow him in good order?
The most charitable answer at this point would be,
"Give Sadiq and his government a little more time."
But, as we wait for Sadiq to pronounce himself on
Sudan's future policies, we wonder what Sadiq was
Secret
thinking about during his years of exile and
imprisonment and during his campaign for the prime-
ministership.
What further steps can be taken by Sudan's Western
friends? A Sudanese would answer first, more aid.
We have already noted, however, that the era of
further aid windfalls is probably gone for good. This
may apply to our aid as much as it does to that of any
other donor. Our interest in Sudan remains high. We
naturally wish to support a friendly government and a
nascent democracy. Nevertheless, with resources
more scarce than before, we have to consider that the
political, intelligence, and military content of our
relations with Sudan is not what it was in the days of
Nimeiri. Our aid programs in Sudan might continue
to be the largest in Africa, but decreases from the
1984-85 levels are likely. Sudan would be lucky if
present aid levels were maintained in future years.
What would the government's second wish on the
country's economic crisis be? Most likely, Sudan
would seek alleviation of the burden posed by its
gigantic foreign debt. We should consider how we and
the donor community could respond.
Our Future Position in Sudan
As we look ahead, we see a troubled future for Sudan.
It will not be an easy time for our political interests,
but, by continuing to work with our friends in the
region (Egypt, Saudi Arabia) and our many friends in
Sudan itself, the threat of a radical/Communist
takeover can be forestalled, even obviated. It is here
that Sudan's foreign friends might be of the most
effective assistance. Our security programs and our
liaison with other moderate friends of Sudan should
vigorously continue.
Going beyond this minimal Western goal?the denial
of Sudan to the radical camp?we see the Sudanese
Government as having the principal responsibility in
shaping its own future. The major decisions having to
do with the administration and the economy must be
taken and followed through by Sadiq al-Mahdi and
his team. A Lee Iacocca or a Mario Cuomo, we
believe, would speak of the need for policy reform and
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more breathing space for the private sector. We
believe he would also urge that simple, incremental
efforts toward efficiency and excellence be pursued in
a government administration that is slow moving and
obstructionist, even beyond the norm for Africa or the
Arab world.
In the near term Sudan looks to remain a Third
World country with stronger ties to the United States
and to our friends than to our enemies. Sudan's
democracy should make it into 1987, at least, without
a serious challenge. Thereafter, if Sudan's major
problems?civil war, the economy?do not improve,
the principal challenge might not be so much to the
political system, as the structure of Sudan itself.
Sadiq al-Madhi says that, should his government fail,
he fears a coup less then he does a general breakdown
of order as regions, ethnic groups, and special political
interests vie for power. We sense that the political
center in Sudan is anemic and enfeebled. The
Sudanese ship of state is in a bad way. If the inflow of
problems increases, the central government will
appear more irrelevant and the country more
ungovernable from the center than ever before. One
can imagine a turbulent sort of dystopia where
disorder is spreading and the need for advice,
assistance, and support from the international
community in large measure exceeds that
community's ability to help.
37
Secret
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LNG AND PIPELINE GAS SUPPLIES TO WESTERN EUROPE
LNG
?0---0? PIPELINE GAS.
ZEEBRUGGE
LE HAVRE
MONTOIR
10 Frumcc. GERMANY,
ITALY AND AUS1RIA
YAM BURG
BOLOGNA
LA SPEZIA ?
FOS
BARCELONA
SKIKDA
ARZEW
HASS! R?Mel
MASA Et. BREGA
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Algerian Gas: Future Economic
Prosperity at Risk?
Algeria's declining oil reserves?which could well be
exhausted by the end of the century?are enhancing
the economic importance of the country's large
natural gas resources. With proven reserves estimated
at 3,000 billion cubic meters (bcm)?sixth largest in
the world?and an additional 3,000 bcm in estimated
potential reserves, Algeria almost certainly will turn
to natural gas as a primary source of hard currency
beginning in the 1990s. A critical element in this
projection are the current negotiations with Algeria's
European clients, particularly France. These talks will
establish the price and volume of Algerian gas exports
for at least the next two to three years and, perhaps
more important, could go a long way toward
determining Algeria's ability to be a major
international exporter of natural gas.
The Issues
Traditionally, Algeria has pushed a hard line on
prices with its natural gas customers. During the oil
boom years, for example, Algiers insisted upon parity
between its oil and gas prices by linking its gas prices
to market baskets of officially priced OPEC crudes.
Prices on Algerian-delivered gas, as a result, were as
much as 40 percent higher than the industry average.
Algeria secured these generous terms because its
European customers?France, Italy, Belgium, and
Spain?had few alternatives. The Soviet Union, for
example, stepped up its efforts to aggressively court?
and win?new and expanded West European sales
only in the early 1980s. Another aspect of Algeria's
gas policy was the "100-percent take or pay" supply
provision, which stipulated that customers must pay
for the entire amount of gas specified in the
contract?unlike most other gas exporters who used
an 80-percent take or pay formula?whether that
amount was actually purchased or not. As a
sweetener, Algiers promised significantly increased
trade and investment opportunities.
In its negotiations with European gas customers this
summer, however, Algeria is no longer in the driver's
seat. The shrinking world oil market and European
39
disgruntlement over unfulfilled promises of increased
economic ties are severely limiting Algeria's
maneuvering room. Stiff competition from other gas
suppliers such as the Soviet Union and the
Netherlands has also weakened Algeria's bargaining
position. Most harmful, however, in our opinion, is the
preliminary contract between Norway and several
European buyers, which virtually closes Algeria out of
the rest of the European market for the foreseeable
future. As a result, Algiers has been forced to reduce
prices to maintain its current market share:
? In March, Algiers and Gaz de France agreed to
temporarily link the French gas price to market
prices rather than to artificially high official OPEC
oil prices?dropping the base gas price by nearly 40
percent to $3.18 per million British thermal units
(MBtu)?until full contract price renegotiations set
revised terms this summer.
? In May, press reports indicate Italy, frustrated over
its attempts to get Algiers to agree to reduce its
second-quarter prices below the French quote,
unilaterally decided to pay $2.00 per MBtu for its
gas pending a mutually agreeable base price.
? In June, Embassy reports indicate that Belgium won
a temporary cut in price to $3.18 per MBtu until
April 1987 in exchange for taking 3 bcm of gas per
year rather than the 2.5 bcm it has been importing.
Continuing contract renegotiations will determine
long-term price and volume.
Even Spanish negotiators, whose contract is not due
for renegotiation for another two years, won a 16-
percent price reduction to $3.18 per MBtu for second-
quarter sales based on a contract provision that allows
Spain to demand a price cut whenever world gas
prices fall sharply.
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Algerian Natural Gas Contracts: Description and
Status, June 1986
Importer
Annual Peak
Volume Contracted
(billion cubic meters)
Contract
Terms
(years)
1985 Deliveries
(billion cubic
meters)
Adjusted Prices
(US $ per million
British thermal
units)
France?Gaz de France
9.3
1965-2002
7.5
2.36 as of July 1986
Arzew to Montoir
5.1
1982-2002
NA
Skikda to Fos Sur Mer
3.6
1972-97
NA
Arzew to Le Havre
0.6
1965-90
NA
Italy?SNAM (Trans-
Mediterranean Pipeline)
Hassi R'Mel to Bologna
12.3
1983-2007
8.5
2.00 as of July 1986
Belgium?Distrigas
Arzew to Zeebrugge
5.0
(3.0) b
1982-2002
2.4
2.30 as of June 1986
Spain?Enagas
Skikda to Barcelona
3.8
1979-2004
1.7
2.30 as of June 1986
a On an FOB basis.
b Temporary.
Talks With Paris
These concessions will set the tone for contract talks
with the French this summer. As in the past, whatever
agreement is worked out with the French probably
will determine the framework for succeeding
discussions with other European customers. Paris will
probably demand a revised price formula that pegs
natural gas prices to competing fuel prices to
determine the new base price. We believe such a
formula is likely to set a price at least as low as
France's second-quarter adjusted price of $2.36 per
MBtu. '
In our view, Algiers has little choice but to agree to
the lower price if it intends to keep France as a client.
Paris has already threatened to scrap the entire
accord and take its business elsewhere should Algeria
not agree to an "acceptable" price.
' Although base prices are stipulated in all of Algeria's contracts
with its customers, the actual prices charged are those determined
quarterly based on changing market conditions.
Secret
Although the other European clients will probably use
the new French accord as a basis for their own
agreements, they also have their own agendas:
? Italy, for example, will be insisting on removing the
"take or pay" clause in its contract and the freedom
to renegotiate prices on demand similar to what is
guaranteed under Spain's contract.
? Belgium will not only push to get the lowest price
possible but will also insist on retaining current
volume cuts in a longer term agreement.
? Spain, not now negotiating a new contract, will
nonetheless push to adopt the lowest price possible.
Algeria's more accommodating policy this spring
suggests concessions are likely on most of these points,
including competing fuel-based prices and at least a
softening of the "take or pay" supply provisions.
These changes could cost Algeria $1 billion this year
alone.
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Political Fallout
Algerian President Bendjedid almost certainly sees
these contract negotiations as an important element in
his efforts to reform his country's economy. The
President is in the midst of trying to turn Algeria
from what he sees as a cumbersome and inefficient
Soviet-style economic model toward a Western-
oriented system that relies heavily on private
enterprise. Some liberalization has already taken
place, particularly in agriculture, and is generating
complaints from influential socialist ideologues within
the government. Bendjedid will have to convince his
detractors that his more accommodating negotiating
position allowed Algeria to maintain its market share.
Otherwise, his opponents may cite the projected lower
gas revenues from new contracts as evidence of
Western collusion against Algeria and an indication
that he is not working to further Algeria's best
interests.
The President may already be in the position of
bargaining with the hardliners to preserve his
economic agenda. For example, Algeria has engaged
in a variety of foreign policy activities in recent weeks
that are inconsistent with its professed refusal to
condone international terrorism and its willingness to
act as a bridge between radical and moderate Arab
governments. Examples are rapprochement with
Libya, closer ties to radical Palestinians, and renewed
activity within the "Steadfastness Front" involving
Iran, Syria, Libya, and South Yemen. This apparent
contradiction suggests that Bendjedid may have
agreed to allow hardliners a greater say in foreign
policy matters in exchange for their muting criticism
of Bendjedid's economic policies. Alternatively, the
economic situation may have weakened the
President's position at the expense of his opponents.
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Bendjedid may also try to use his more
accommodating gas policy with the Europeans to
uncork additional bilateral economic aid and new
bank loans from the West. France, for example, one
of Algeria's principal benefactors, has been dragging
its feet on new aid because of Algeria's rapidly
deteriorating finances. Bendjedid may also see a more
moderate negotiating position as a necessary criterion
in efforts to obtain aid from Washington or other
multilateral donors. He may also try to point out to
US officials that Algerian gas prices are considerably
more attractive than before in the event Washington
wants to reenter the international LNG market.
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The Tunisian Economy at an
Impasse
Tunisia's worsening economic situation is severely
depressing the country's living standards and is
adding to an already unprecedented level of political
tension. The appointment of Rachid Sfar, former
Minister of Economy and Finance, to the post of
Prime Minister in July along with other Cabinet
changes indicates growing government awareness of
the urgency of the problem. At the same time,
however, fears that new austerity measures will
prompt a repetition of the bloody January 1984 food
riots have prevented President Bourguiba's
government from effectively addressing Tunisia's
economic woes. These same fears will probably
hamper implementation of the government's
structural adjustment program recently proposed to
facilitate desperately needed foreign aid. Reduced
consumer subsidies, minimal wage increases, and a
hefty currency devaluation?all longstanding issues
with Western donors?are almost certain to generate
popular unrest. Nevertheless, Tunis is looking at a
current account deficit that could exceed $1 billion
this year. Without financial relief, Tunis will
encounter severe problems in meeting even essential
needs.
Economic Stasis
Tunisia, like its North African neighbors, depends on
oil for its economic well-being. Oil is the largest single
source of hard currency, accounting for 40 percent of
export receipts. The oil industry also provides 20
percent of government revenues and 10 percent of
GDP. As is the case with other oil producers, the
prolonged slump has had a decidedly negative impact
on Tunisia's economic performance. GDP per
capita?at $1,100, still among the highest in Africa?
has sunk far below late 1970s oil-boom levels in real
terms for the average Tunisian. In addition, inflation
is running well into double digits, while wages remain
frozen at 1983 levels. Moreover, despite the highest
adult literacy rate in North Africa, the economic
slowdown has caused an increasing number of
Tunisians to be unable to find jobs; unemployment
currently tops 30 percent. Indeed, the ailing economy
43
has been completely unable to keep up with an annual
need for 70,000 new jobs. Some 70 percent of the
populace is under age 26, and the population is
growing at a rate of nearly 4 percent annually.
Unemployment and underemployment together, as a
result, are as high as 50 to 60 percent in urban areas.
Nevertheless, fears that new austerity measures will
prompt a repetition of the bloody January 1984 food
riots have prevented the Bourguiba government from
effectively addressing Tunisia's economic woes. Tunis
had attempted in 1983 to begin to realign the
economy and ease the country's financial bind by
slashing consumer subsidies and imports, restricting
development expenditures, and freezing wages. Local
reaction to these measures was largely muted. In
January 1984, however, the government misjudged
public patience. Tunis removed subsidies on wheat?a
staple of the Tunisian diet?causing bread prices to
double and triggering nationwide riots. The
disturbances were quieted only after the military was
called in and Bourguiba reinstituted the subsidies.
Wary of a further backlash, the government has
instituted few new reforms since and has been
especially careful to avoid implementing any of the
potentially politically disruptive structural reforms?
such as devaluation?necessary to bring spending
more in line with revenues and to broaden Tunisia's
oil-dominated economic base.
Last year, the poor performance in the petroleum
sector was at least partly offset by surprisingly strong
performances in both agriculture and tourism. This
year, however, both sectors are in trouble. Inadequate
rain is curtailing cereals production?producing
sporadic shortages?and threatening sheep and other
animal herds. In addition, Tunisia's tourism industry
is still feeling the negative effects of the Israeli raid on
Tunis in October and continued Libyan terrorist
threats.
Secret
NESA NESAR 86-018
1 August 1986
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From Boom to Bust
The Tunisian economy expanded rapidly during the
1970s?averaging 7.5-percent real economic growth
annually?largely due to steadily rising oil output
and unprecedented expansion in the manufacturing
and tourist sectors. Skyrocketing oil earnings over
the period plus a substantial influx of European
visitors, growing world demand for phosphates, and
bouyant worker remittances built a financial cushion
for Tunisia that averaged nearly $500 million
annually in 1973-79. This cushion allowed the
Bourguiba government to simultaneously improve the
country's standard of living while increasing
development expenditures. Tunisia's strong financial
position and fairly pragmatic fiscal policies earned
the country a solid international credit rating,
permitting the government to easily borrow abroad to
underwrite more elaborate development efforts.
The economy began to slow in the 1980s, however,
when Tunisia's main sources of foreign exchange
were hard hit by the international recession. Oil
output eroded as world demand fell; tourist visits?
hampered by the overvalued dinar?slackened;
phosphate production plummeted as Western
industrial output stagnated; and the number of
expatriate Tunisian laborers dwindled as foreign
employment opportunities contracted in Western
Europe and elsewhere in the Middle East. Real GDP
growth averaged only 4 percent annually in 1980-84
and was barely sufficient to absorb the 3.8-percent
annual increase in the nation's labor force. As the
economy slowed and consumer purchasing power
slipped, Tunis could not control inflation, which
averaged 10 percent per year during 1980-84?twice
the 1970s rate?or rein in unemployment over the
same period, which hit a record 30 percent.
Stagnating income from Tunisia's beleaguered
foreign exchange earners also seriously weakened
Tunis's previously hearty international payments
position. To make ends meet, the government drew
down foreign reserves and borrowed heavily abroad.
By the end of 1984, foreign reserves stood at $400
million?$200 million below the peak 1982 level?
and external debt exceeded $5.5 billion. Fortunately,
because of the country's solid international credit
rating, the government confined its burgeoning debts
to soft loans and medium- to long-term credits,
keeping the debt service ratio to a relatively
manageable 20 to 25 percent.
Only the unusually good harvest and long-awaited
resurgence in tourism?Tunisia's second-largest
foreign exchange earner?allowed the Tunisian
economy to grow about 4 percent last year. Good
weather helped Tunis improve agricultural
performance by roughly 15 percent. Cereals
production, for example, more than doubled 1984
levels, as did production of most fruits and
vegetables. Tourist visits increased largely because
the economic recession eased in Europe-90 percent
of travelers to Tunisia are European.
Other foreign exchange earners performed poorly.
Petroleum continued to experience difficulties due to
falling world prices, rapid growth in domestic
consumption, and continuing production difficulties
in the Ashtart and Tazarka fields. Phosphate sales
remained soft, the result both of production
shortfalls due to spare parts shortages and frequent
labor unrest, and of oversupply in the international
market. The expulsion of roughly 32,000 Tunisian
workers from Libya last summer also cost Tunis
about $140 million in worker remittances, lost trade,
and outlays for unexpected social services.
With foreign exchange earnings continuing to
founder, Tunis could not bring its international
payments position into the black. Because of the
rapid increase in debt and debt servicing costs,
particularly in 1983-84, a worried Bourguiba
government resorted largely to drawing down reserves
to meet payments needs. As a result, by the end of
1985, foreign exchange reserves totaled about $200
million?equal to less than one month's imports.
Moreover, although the government did not borrow
abroad for balance-of-payments needs, Tunis
continued to borrow to fund development
expenditures to the tune of about $300 million. By
the end of 1985, consequently, Tunisia's external
debt topped more than 60 percent of GDP.
Secret
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Chart 1
Tunisian Economic Indicators, 1981-85
Real GDP Growth
percent
10-
s-
1651 1612 Well 1014 mils
Total Debt
billion US
Inflation
percent
15-
10-
s-
1000
600
um win Isis isim tele
Foreign Reserves
million US
11151 1U2 1 11151 1?65
45
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Table 1
Tunisia: Balance of Payments, 1981-85
Million US $
1981
1982
1983
1984
1985 a
Current account balance
?848
?938
?811
?1,044
?825
Trade balance
?1,324
?1,409
?1,257
?1,389
?1,195
Exports (f.o.b.)
2,454
1,979
1,860
1,793
1,665
Hydrocarbons
1,308
910
832
798
655
Agricultural products
238
181
143
178
200
Phosphates and chemicals
365
349
353
319
300
Other
544
539
532
497
510
Imports (c.i.f.)
3,778
3,388
3,116
3,182
2,860
Hydrocarbons
747
377
346
369
380
Industrial goods
2,021
2,082
1,728
1,824
1,635
Food
428
356
434
427
335
Consumer goods
583
573
608
561
510
Net services and transfers
476
471
446
345
370
Of which:
Tourist receipts
590
575
562
449
490
Worker remittances
356
372
352
309
290
Capital account balance
654
735
582
549
525
Long-term capital
634
716
557
521
500
Direct investment
362
402
219
201
190
Medium- and long-term loans
272
314
338
320
310
Official grants
20
19
25
28
25
Basic balance
?194
?203
?229
?495
?300
Short-term capital
78
58
16
150
Other (including errors and omissions)
62
215
174
184
97
Change in reserves
?54
+70
?39
?161
?203
a Estimated.
Other revenue earners also are sluggish. World
demand for raw phosphate remains depressed because
of oversupply and an industry shift toward using
phosphoric acid and other processed derivatives. The
market for Tunisian phosphate rock is particularly
grim, according to industry experts, because of its
poorer quality. Worker remittances also are down, the
result of a declining European market for foreign
workers and Libya's expulsion in August 1985 of
32,000 Tunisian workers.
Secret
Revenue shortfalls have forced Tunisia to nearly
exhaust its foreign reserves. As a result, Tunis is
looking for an immediate $150-200 million bilateral
aid injection until the government can secure funds
from multilateral or commercial sources this fall.
Along with requests to Washington for additional aid
and debt relief, Tunis has approached other donors as
well. Paris has been asked to provide an immediate
50,000-ton grain grant, a $50 million loan to finance
additional grain imports, and another $50 million
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long-term trade credit. Tunisia is also looking to Italy,
Kuwait, and Saudi Arabia for help. At least Paris is
likely to support US efforts to tie any major increase
in aid commitments to an agreement between Tunis
and the IMF.
the effect of
the deteriorating economy and growing joblessness is
being felt most acutely in the south. Government
officials there cite widespread malnutrition and
unprecedented crime levels in claiming that the
economic and social conditions in their region are the
worst they have ever seen. Disgruntlement with
economic conditions, in general, has already led to
several localized demonstrations against the
government. Antigovernment sentiment has
traditionally been strong in the south. Many of these
towns are the same ones involved in the disturbances
in January 1984 that quickly spread north to
impoverished urban areas.
Looking Ahead
The continuing slump in world oil prices along with
poor performances in nearly every other sector of the
economy presage a very difficult remainder of 1986.
Economic growth could well be negative for the
year?by as much as 3 percent?for the first time in
over two decades. Tunis also faces a sixth straight
year of current account deficits. This year's could
surpass 1984's record shortfall of slightly over $1
billion.
After months of ignoring mounting pressure from aid
donors for action, the Bourguiba government is finally
beginning to think seriously about the country's
accelerating economic difficulties. According to
Embassy reporting, Tunisia decided in June to
implement a six-year structural adjustment program
in conformity with reforms long advocated by the
World Bank and other Western donors. The program
will emphasize demand restraint and export
promotion. Adjustments slated for implementation
this year include price increases in basic commodities
such as milk, sugar, corn, soy bean meal, bread, pasta,
and cooking oil; no wage increases except the
minimum wage; about $250 million in budget and
development spending cuts; modifications of price and
import controls; and a free float of the Tunisian dinar
47
Table 2
Tunisia: Balance-of-Payments
Scenarios, 1985-86
Million US $
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1986
$15 per
barrel oil
$10 per
barrel oil
Current account balance
?825
?1,032
?1,060
Trade balance
?1,195
?1,332
?1,360
Exports a b
1,665
1,168
1,078
Hydrocarbons
655
288
198
Agricultural
products
200
100
100
Phosphates and
chemicals
300
270
270
Other
510
510
510
Imports
2,860
2,500
2,438
Hydrocarbons
380
185 .
123c
Industrial goods
1,635
1.575
1,575
Food
335
255
255
Consumer goods
510
485
485
Net services and
transfers
370
300
300
Of which:
Tourist receipts
490
280
280
Worker remittances
290
200
200
Capital account balance
525
390
390
Long-term capital
500
340
340
Direct investment
190
140
140
Medium- and long-
term loans
310
200
200
Official grants
25
50
50
Basic balance
?300
?642
?670
Short-term capital
425
425
Euroloan
175
175
Multilateral
200
200
Bilateral
50
50
Reserve position
203
?14
?42
a Assumes crude oil production of 100,000 b/d and consumption of
51,00 b/d.
b Assumes $20 million in refined product exports.
. Assumes refined product imports of 11.9 million barrels at a cost
of $15.60 per barrel and $10.40 per barrel, respectively.
Secret
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that is expected to result in an 11- to 14-percent
effective devaluation. Government changes
announced in July, which elevated Minister of
Economy and Finance Rachid Sfar to the post of
Prime Minister and promoted Minister of Planning
Khelil, the architect of Tunisia's adjustment plan, to
Minister of Economy, Finance, and Planning
underscore the government's new resolve.
The structural adjustment program as presently
written would significantly ease Tunisia's economic
difficulties over the long run. Reduced government
subsidies on food, development spending cuts, and
continued wage restraints, for example, hit three
major sources of budgetary deficits. Altering the
country's exchange rate should also help Tunisian
nonoil exports be more competitive and keep a lid on
import demand. Moreover, an adjusted dinar along
with reduced import controls and revised tariff and
customs duties will eventually help promote new
exports, broadening Tunisia's economic base and
making the economy less susceptible to the vagaries of
the world oil market.
We believe, however, that many of the proposed
reforms could easily spawn domestic unrest long
before the program produces any benefits. A
particularly explosive element in the government plan
is the hardline stance against a broad increase in
wages while gradually reducing most food subsidies.
The food riots in 1984 underscore the catalytic effect
of tinkering with government subsidies without an
offsetting improvement in wages. The decline in
consumer purchasing power would be even more
sizable if accompanied by a hefty devaluation.
Reduced development expenditures could also touch
off unrest as project cancellations cause layoffs or
firings at a time when unemployment is already at
record levels.
As a result, we believe that a stepping back from this
year's goals or, at the very least, a stretching out of
the reform timetable, is likely. In our opinion, the
1984 riots are seared into the collective memory of the
Bourguiba government, and those memories will
Secret
temper any zeal for reform. At the same time, Tunis
cannot abandon the adjustment package entirely for
fear of losing promised international aid. For
example, Tunis's proposed program probably was
behind the World Bank's recent decision to provide
about $180 million in agricultural and industrial
development loans. The Bank is also considering
smaller loans in the public enterprise and housing
sectors. Embassy sources claim that Tunis may use its
structural adjustment program as collateral to draw
on automatically available IMF funds and other
multilateral aid sources for another $160 million.
These amounts are in addition to a $175 million
Euroloan secured earlier this year.
48
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India: Amazing Facts or
Demographic Estimates,
Projections, and Social
Characteristics
Population Size
India is confronted with the prospect of providing for
twice as many persons by the year 2000 as it strove to
support in 1965. India's population, currently the
second largest in the world, is likely to pass the 1
billion mark by the end of this century. The present
assessment indicates that today's children will see
India's population surpass that of China in their
lifetime. The momentum of India's population growth
is such that these events are expected to occur even as
India reduces its present fertility rates and rate of
population growth.
To place the magnitude of India's population in
perspective:
? Every year India adds as many persons to its
population as is added by the entire African
continent.
? If India's largest state (Uttar Pradesh) were a
country, its population would be the eighth largest
in the world. The rest of India would be the world's
second-largest country.
? There are more persons under age 13 in India than
there are persons of all ages in the United States.
Fertility
By world standards, fertility in India is high. Fertility
declined more rapidly in 1972-77 than in the late
1970s and early 1980s. The stagnation in the fertility
decline in the latter period is believed to reflect the
reaction to the coercive aspects of a population policy
that later resulted in a drop in the use of
contraception. Rejection of this policy also
contributed to Indira Gandhi's election defeat in
1977. Renewed population and family planning
efforts appear to be once again influencing fertility
downward.
49
Nevertheless, the present birth rate of 33 births per
thousand population combined with the total
population size implies that:
? The number of babies born in India in one year
equals the total population of Canada.
? The number of babies born in India in one day
equals the number born in Switzerland in one year.
? While you slept last night, over 23,000 babies were
born in India.
Although fertility is projected to decline in the near
future, India is not expected to achieve its stated goal
of replacement level fertility by the year 2000. By
that time, women are anticipated to be bearing an
average of three children. Furthermore, projected
mortality declines will offset progress in the reduction
of population growth rates. Consequently, the total
population will continue to grow long after
replacement fertility levels are achieved.
Mortality
Historically, India was one of a few countries where
male life expectancy at birth was higher than female
life expectancy. Not until 1980 were females
estimated to live longer than males. Life expectancy
at birth for both sexes in 1980 was estimated at 53
years and is projected to be 62 years by the year 2000.
High infant mortality contributes greatly to the
country's low life expectancy at birth. One of every 10
babies born in India currently dies before reaching its
first birthday. The large number of births, coupled
with the high infant mortality rate, results in
approximately 2.5 million infant deaths per year:
? As many infants will die in India this year as have
died in the United States in the past 30 years.
? More infants die in one week in India than die in the
United States in one year.
Secret
NESA NESAR 86-018
1 August 1986
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India's Population
as a Percent of the World: 1986
Europe,
Soviet Union, /
and Oceania /
16%
INDIA: FCIPULATICN STATISTICS IN BRIEF
1971
1986
2001
Total population (sillier's)
568
784
1,013
Percent under age 15 years
42
38
32
Birth rate
41
32
24
Death rate
18
11
8
Population growth rate, (psrcent)
2.3
2.1
1.5
Total fertility rate
5.9
4.2
2.9
Infant mortality rate
132
99
66
Life expectancy at birth
48
56
62
Characteristics in 1971 and 1981
Religious distribution (percent)
1971
1981
Hindu
83
8.3
Muslim
11
11
Others
6
6
Percent literate, ages 5+
Both sexes
34
41
Kale
44
54
Female
22
28
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Migration
International migration in India remains moderate in
relation to the total population. Nevertheless, recent
years have witnessed a marked increase in the number
of Indians migrating to the oil-producing states in the
Middle East. An increased flow to the United States
also has taken place. In addition, international
immigration to India has grown in the past several
years, particularly from Sri Lanka.
Less than 2 percent of India's population was born in
a foreign country, with 99 percent of those persons
from Asian countries. The principal countries of
origin of the immigrants in India are predictably the
neighboring countries of Bangladesh, Pakistan,
Nepal, and Sri Lanka. Also as expected, border states
absorb the bulk of international immigrants, with over
half of the immigrants during 1961-71 enumerated in
the states of Assam and West Bengal.
Religion
Over 80 percent of India's population is Hindu.
Muslims, although representing less than 12 percent
of the population, number approximately 80 million,
making this group the third-largest concentration of
Muslims in the world, behind Indonesia and Pakistan.
Other major religions in the country are Christians,
Sikhs, Buddhists, and Jains. These groups, each only
2 percent or less of the total population, are often
significant minorities (or even majorities) in particular
states or union territories. Most notable is the Sikh
majority of the population of the state of Punjab.
Significant demographic differences exist between the
Hindu and Muslim populations of the country. For
example:
? Muslim women have an average of one child more
than Hindu women (5.6 versus 4.6 children in 1980).
? Infant mortality for Hindus is higher than for
Muslims (117 versus 100).
? The Muslim population is growing at a much faster
rate than the Hindu population (2.7 versus 2.2
percent average annually, 1971-81).
Hindu and Muslim women marry early, with some
slight differences found in the young age groups in
urban areas. Over half of the women of each religion
are married before reaching age 20.
51
Secret
Education
Literacy in India has shown steady improvement in
the 30 years since 1951. Still, less than half of the
population over age 5 can read and write, and females
continue to lag far behind males.
Variations in the percent of the adult population (over
age 15) that are literate are also found among states
and urban and rural areas. In 1981 urban literacy
rates in the major states varied from 53 to 86 percent,
with the corresponding rural percentages ranging
from 20 to 77 percent. For all India, the adult literacy
rate in urban areas (65 percent) was double the rural
rate (33 percent).
Educational attainment in India also has consistently
improved over the years. This improvement, as for
literacy, has been experienced by each sex and within
both rural and urban areas. The strong influence of
urbanization on education is demonstrated by the fact
that urban females actually have a higher percent of
the population completing primary school and above
than rural males, implying that in India urban
residence has a greater impact than gender on the
educational level of the individual.
Secret
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N
r'
?
S? Padh
.10 sta n
Punjab I,:
Ohrinritgar,;:P.
/
Haryana
NEW DELHI tDelhi
\
Rajasthan i?-,._
Pradesh
Uttar
,-----,,
J.
L.-?? ?f
c.1 JO.A.?/-'1"-z,,x,.. '
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e?-. ' \
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Gujarat '1., -J --
Madhya PA. \-)
?? 4, ,
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Dam.an? Dadra and Nagar Havell ir . I. Orissa
Maharashtra-
r?,
.-,.,
C we r'
-4,
....,--
NANGODAL
v-....,-: 7 I. ,
(
i Andhra ? r
j"...--? , ,.'
r 2- Pradesh - -'rPondicherry, VI i ,p, ,
fi
GOB') Karnataka
....,
Pondicherry,\",?
r- ? .
LAKSHADWEEP
(India)
Lakshadweep
Keralt)Th Tamil
\ ?
Nadu
(.....?,\\ Pondicherry
\Sri Lanka
ktotomal)
-
ANDAMAN /
ISLANDS
(India)
Andaman
and
Nicobar
Islands
it Selected major coalfield
- ? ? ?- State or union territory
boundary
o 400 Kilometers
Boundary representation is
400 Miles not necessarily authoritative.
NICO BAR
ISLANDS
(India)
707306 3-86
Secret
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India's Coal Sector:
Taking Its Lumps
Increased use of coal is vital to India's long-term
energy and economic plans. Indian planners believe
higher coal production will be needed to satisfy energy
demands because they anticipate little increase in
domestic oil production over the next five years.
Major problems hamper the Indian coal industry,
however, and we believe that coal production and
utilization will increase only slightly?if at all?
during the coming decade. We believe that India will
have to increasingly depend on foreign technological
and financial assistance to overcome obstacles.
Nevertheless, the bottlenecks will probably continue
to aggravate India's chronic energy shortage and
hinder economic development.
India's Energy Needs Increase
The 5-percent annual economic growth rate called for
in New Delhi's most recent five-year plan will place
increased demands on India's already strained energy
resources. Presently, oil provides about 48 percent of
India's energy consumption, with coal providing 45
percent and electricity generated by hydroelectric and
nuclear power facilities, 7 percent. The government
plan calls for coal demand to increase by 69 percent
during the five-year plan and electricity demand,
which is mostly generated by coal-fueled thermal
plants, to increase by some 50 percent while oil
demand increases 40 percent. Despite New Delhi's
efforts to meet the country's electrical energy needs, a
10-percent gap still exists between demand for
electricity and supply, according to US Commerce
Department figures.
Government officials also are stressing the use of coal
to avoid becoming increasingly dependent on foreign
oil imports. Although domestic oil production
currently accounts for most of the country's oil
requirements, government planners believe oil
production will grow slowly over the next decade, if at
all. As a result, New Delhi's overall energy strategy
involves meeting additional energy demand through
expanded use of coal as well as shifting some of the
present dependence on oil to coal.
53
Structure of India's Coal Sector
Coal India, Ltd. (CIL) was formed several years after
the nationalization of India's coal mines in 1971. It
was established as an umbrella organization with five
subsidiaries?Bharat Coking Coal, Ltd. (BCCL),
Central Coalfields, Ltd. (CCL), Western Coalfields,
Ltd. (WCL), Eastern Coalfields, Ltd. (ECL), and
Central Mine Planning and Design Institute, Ltd.
(CEMPDIL). The coal mines in Assam and its
neighboring areas, which were under direct control of
CIL, were assigned to an organization called North
Eastern Coalfields (NEC). The NEC is under direct
control of the CIL. The CIL is mainly responsible for
laying down corporate objectives, approving and
monitoring the performance of subsidiary units,
conservation, and research and development. The
subsidiary companies are responsible for all
operational matters, commissioning, and execution of
new and existing projects. The CIL and its
subsidiaries have a combined annual budget of over
$2 billion.
India is the seventh-largest coal producer in the world,
with reserves estimated at 148 billion tons. About 39
billion tons of the country's reserves are proven
reserves-2 billion tons are coking coal, which is used
in steel production, and 37 billion tons are noncoking
coal. Using the government's demand projections,
India's proven reserves of coking coal are expected to
last 74 years, while noncoking reserves are expected to
last 121 years.
Problems Ahead
Before New Delhi can move coal to the forefront of its
energy production and use, it must overcome seven
key problems:
? Develop or acquire surface mining technologies and
equipment suitable for developing large coalfields
with shallow deposits. Increased opencast mining is
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Million Tone
200-
200
150
100
50
0
Confidential Noforn
154.5
189
Coal Production Targets
183
197
212
1984-85
85-88
88-87
87-88
88-09
Coal Price and Cost of Production
Per Ton)
89-90
US Dollar
11111price
1411-cost
15
to
5
0
proleetee
Coofidantial Noforn
1974-75 75-75 78-77 77-78 78-79 78-00 80-81 81-02 62-63 83-84 84-85 85-88 86-87*
COAL SECTOR PERFORMANCE
Million US$
1000 -
-1000
1500
141.9
1.2
-88.7
-eme.s
-615.4
-998.8
OEC1 182.
BCC
Ca_
Coal Companies
magma low
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needed because of the relatively lower cost, higher
safety, and shorter gestation period of such projects.
? Rehabilitate and modernizes deep underground
mines to increase domestic supplies of coking coal
and reduce the need for additional imports. India's
imports of coking coal for 1986 have already
amounted to $200 million.
? Improve the availability of power. Frequent
interruptions in the supply of electrical power have
been a major constraint in achieving past coal
production targets. At the same time, the lack of
sufficient coal supplies has stymied the production
of electricity.
? Install special processing and coal burning
technologies to accommodate India's low-quality
coal. India's coal is low in energy value: either
lignite (often with high moisture content) or
subbituminous coal with a high ash content. These
coals require unique approaches to mining,
transportation, and combustion.
? Expand transportation facilities, especially
railroads. About 75 percent of India's coal is
shipped by rail. Railroads will have to increase their
capacity by roughly 10 percent annually if India
expects to move the additional coal it intends to
produce.
? Implement increased mechanization in the coal
industry, which will cost many workers their jobs.
The coal sector employs over 700,000 workers, of
which the government estimates over 25 percent are
unproductive. The featherbedding is caused
primarily by politicians and party officials who press
industry officials to hire workers to develop voting
blocs for themselves.
? Find the funds to finance the new technologies
needed in the coal industry. The inability of the
domestic coal industry to create sufficient
investment capital will be a major obstacle. Annual
investment would have to increase 60 percent over
the medium term to provide the $7.5 billion
required to successfully fund the planned acquisition
of mining equipment alone.
55
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New Delhi is attempting to overcome the
technological and transportation obstacles, but
progress is slow. The availability of electrical power in
some mines in Bihar and Bengal has been boosted by
the construction of a few captive power facilities, but
New Delhi will have to complete additional units now
under consideration to provide sufficient power just to
enable existing coal mining equipment to function at
capacity. A number of steps are also being
implemented to improve the railroads' performance
including line electrification, building new train
routes that can more effectively move coal, and
financing the construction of high-capacity wagons
for bulk materials like coal. In addition, the
government is urging the use of alternative methods to
move coal, such as road and coastal shipping, and has
implemented a pilot project of transporting coal in
slurry form by pipelines. These improvements,
however, will require years to implement.
The government is also trying to improve the
industry's financial position. Earlier this year, New
Delhi allowed a 14-percent increase in the price of
coal. Because prices have been kept artificially low,
the industry had suffered severe financial losses and
could not meet its operational costs or generate its
own investment capital. As a result, most of its
expenses are met by government budgetary
allocations. We believe that the price of noncoking
coal will have to increase an additional 4 to 5 percent
if the industry hopes to generate a small investment
profit. Although higher coal prices would help
promote more efficient coal usage in addition to
mobilizing resources for investment and encouraging
higher production, popular opposition against higher
prices will probably prevent New Delhi from taking
the step. At the same time, growing government
budget deficits make it unlikely that sufficient funds
will be available to provide the investment necessary
in the coal sector.
Foreign Assistance Needed
We believe that foreign technology, equipment,
training, and financing will play a growing role in the
effort to exploit coal and could become major factors
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affecting the speed and magnitude of Indian coal
development. India has already sought foreign
assistance for importing advanced mining technology
along with equipment for mining coal from open pit
and underground mines. Joint projects with foreign
companies include preparation of mining feasibility
studies, technical assistance during implementation of
projects, training of Indian engineers in foreign
countries, and purchase of mining equipment not
available in India.
The largest foreign participant in India's coal sector is
the Soviet Union. There are presently a washery and
22 coal mining projects operating in cooperation with
the Soviets. In addition, Moscow has agreed to assist
India in establishing facilities to teach modern coal
processing and mine construction techniques. The
Soviets have also issued India two loans totaling
nearly $1.3 billion to finance the foreign exchange
requirements of these projects. India is also receiving
assistance from Poland and East Germany.
Major Western countries involved in assisting India's
coal mining sector include Britain, France, and West
Germany. The assistance from Britain is mainly
confined to the purchase of equipment utilizing a $20
million grant. France is assisting India with 11
projects mainly for exploiting deep underground
seams. West Germany is also providing assistance to
three projects. A credit agreement for $225 million
has been signed with Bonn and is available for
financing these projects. India's insistence on
concessional aid and limited foreign reserves have
made it reluctant to turn to the United States for
equipment and technology.
In addition, New Delhi has also successfully secured
multilateral aid from the World Bank. So far the
World Bank has extended two project loans totaling
$400 million. The projects are expected to boost coal
output by 10.5 million tons per year.
Outlook
Because of its enormous coal reserve base and
dwindling reserves of oil, we believe that India will
continue to emphasize coal in its long-term energy
plans. It will, however, probably not be able to devote
the resources needed in the short to medium term to
overcome the obstacles to attaining its goal.
Secret
We believe the key to what progress the Indians make
will lie in developing state-of-the-art equipment in
coal extraction and in use of energy transfer
technologies, such as large-capacity lignite-fired
boilers, coal-slurry pipelines, and ultrahigh-voltage
electricity transmission systems. The inability of the
Indian manufacturing sector to provide quality
equipment on time will provide foreign companies
with increasing opportunities to provide assistance.
Because of the country's deteriorating balance of
payments and reluctance to engage in commercial
borrowing, foreign firms or countries will more than
likely have to provide concessional financing, accept
?countertrade in place of payment, or engage in joint
ventures before they can penetrate the Indian market.
The failure to expand coal output and use probably
will severely hamper India's economic growth by
widening the gap between supply and demand for
power in the country. In addition, an increase in the
frequency and duration of power shortages during the
late 1980s and 1990s would probably lower the output
of key metallurgical, defense, and, to a lesser extent,
agricultural facilities. Furthermore, many power
plants burning coal as their primary fuel would have
to continue using more fuel oil than planned because
of low-quality coal and coal shortages. This situation
would hamstring Indian efforts to free additional oil
for alternative domestic uses. Last, shortages of
coking coal will continue to be a drag on steel
production, adversely affecting Gandhi's
modernization programs and adding another import
item to India's shopping list.
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India: Arun Nehru Recovering
Despite his recent heart attack, we believe Arun
Nehru remains well placed to become the next prime
minister of India should Rajiv Gandhi, his third
cousin, be removed from office. As Indian Minister of
State for Internal Security, many Indian politicians
regard him as the second most powerful person in
politics. His political career to date has been linked
inextricably to that of Rajiv, and he is a member of
the elite Nehru dynasty. Nehru's colleagues respect
him for his intelligence and managerial abilities, but
some see him as a ruthless man who does not let
individuals stand in the way of his goals.
Nehru's Rise to Power
Arun Nehru formally severed his ties to private
business to enter politics in 1980 when Indira Gandhi
let him contest the traditional Nehru family
parliamentary seat. At Indira Gandhi's direction,
following the death of Sanjay Gandhi in June 1980,
Nehru became Rajiv's chief political adviser. Nehru
helped Rajiv in running the Ninth Asian Games in
New Delhi, in managing Rajiv's first parliamentary
campaign, and in recruiting and revitalizing the youth
wing of the Congress Party.
After Indira Gandhi's assassination, Rajiv named
Nehru to replace him as General Secretary of the
Congress Party. Within weeks Rajiv brought Nehru
into his Cabinet as Minister of State for Power.
Nehru brought about a record 5-percent improvement
in the efficiency of power plants nationwide, pushed
through several gas turbine projects, and initiated a
new procedure for financing power projects. Nehru
demonstrated the results-oriented leadership that
Rajiv Gandhi extols.
In September 1985, Rajiv Gandhi rewarded Nehru
with a new Cabinet post?Minister of State for
Internal Security. With this appointment Gandhi
gave Nehru responsibility for all aspects of domestic
law and order?including Sikh terrorism in Punjab.
Nehru took the lead in upgrading the equipment and
training of the paramilitary and police forces under
57
the Home Ministry, in consultations on political and
security matters in Punjab, in conducting tax and
narcotics raids, and in reorganizing the Intelligence
Bureau and the Central Bureau of Investigation.
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Nehru suffered a mild heart attack on 26 May while
vacationing in Kashmir. The heart attack followed
closely on a period of intense activity in Punjab.
Nehru was responsible in early May for the operation
in which paramilitary forces reentered the Sikhs'
Golden Temple in Amritsar to oust Sikh extremists. 25X1
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options for dealing with dissent in the Haryana state
government. 25X1
The speculation surrounding Nehru's heart attack
includes assertions that Nehru will lose power in New
Delhi. According to the Embassy, Nehru's duties at
the Home Ministry were divided among other officials
following his heart attack. Initially, Home Minister
Buta Singh took over Nehru's responsibilities on
Punjab, while P. Chidambaram was named to fill in
temporarily as Minister of State for Internal Security. 25X1
Shortly before Nehru returned to resume a reduced
schedule at the Home Ministry, Chidambaram was
asked to continue pinch-hitting on all subjects
requiring day-to-day attention. According to US
Embassy reporting, Nehru was discharged from the
hospital on 23 June and resumed partial duties on 8
July. 25X1
Influence and Access
We believe Nehru's influence with Rajiv Gandhi far
exceeds that implied by the formal description of his
several positions. According to the Embassy, Gandhi
relies on a very small inner circle?his wife Sonia,
Arun Nehru, and Minister of State for Defense
Research and Development Arun Singh--for advice
on a wide range of issues.
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The Nehru Family Tree
Motilal Nehru brother
Jawaharlal Nehru
i
I
Vijayalak
sisters
Krishna Flutheesingh shmi Pandit
Indira Gandhi sccond cousins Captain Anand Kumar Nehru
/ sister Shyam Kumari Khan (MLP.)
i
Rajiv/Sanjay third cousins Arun Kumar Nehru
Nand I. al Nehru
Shyam Lal Nehru
wife Uma Nehru (MLP.)
588360 12 82
nbetween Nehru and Singh, who was also
promoted in the Cabinet changes last September,
Nehru received by far the greater relative promotion.
Nehru, who had considerably
less authority and access to Gandhi than Singh before
the Cabinet appointments, has now at least matched
Singh's influence. This change, in our opinion,
suggests that Rajiv is convinced of Nehru's loyalty.
Nehru and Singh's
appointments signaled that the Prime Minister,
himself barely in his forties, wanted a generational
change in his Cabinet.
Unlike most members of the Cabinet and Congress
Party hierarchy, Nehru has his own political
following, independent of his relationship with the
Prime Minister. His support in the Congress Party?
which would elect a prime minister should Gandhi be
removed from the scene?is undisputed and growing.
In our view, Nehru poses no current threat to Rajiv,
but his political ambitions could eventually lead to
problems with Rajiv, particularly if they get out of
hand and the Prime Minister starts to perceive a
threat from him.
Secret
Arun
Singh was given a Ministry of State portfolio to move
him out of the Prime Minister's office. The Prime
Minister may have been influenced by Arun Nehru,
US Embassy contacts
report that the Prime Minister believed Singh was
becoming too powerful in his position as
parliamentary secretary.
Vulnerabilities
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Arun Nehru in the late 1960s.
Since Nehru has been a Cabinet minister under Rajiv,
he has been portrayed in the press as a reformer and
crusader against corruption. His responsibilities for
tax raids on business, narcotics arrests, and curtailing
corruption in the paramilitary and intelligence
services have helped to erase his reputation as a
suspect party financier. The responsibility for party
finances has been shifted to Minister of State for
Parliamentary Affairs Sitaram Kesri.
59
Arun Nehru's intense rivalries with Arun Singh and
Finance Minister V. P. Singh could cost him influence
with Gandhi,
Nonetheless, the rivalry
between Nehru and Singh is real and continuing.
Another intense rivalry exists between Nehru and
Minister of Finance V. P. Singh. The two have
competed for several years for political influence in
their home state of Uttar Pradesh. Now they also
compete in the Cabinet, where their respective areas
of ministerial responsibility overlap. According to
press reports, a delay in the establishment of a special
narcotics control bureau is due, in part, to a dispute
between Nehru and V. P. Singh over who should head
the newly formed organization. V. P. Singh also heads
a tax enforcement office that he has turned into a
headline-grabbing agency for fighting tax evasion.
Nehru, whose duties in home affairs put him in
charge of internal security, sees both areas as ones
that he ought to control.
Outlook
Arun Nehru still is well positioned to take charge if
Rajiv suddenly leaves the political scene. In the near
term he is the only alternative to Rajiv from the
Nehru dynasty. He has an independent political base
in the Congress Party that would support his bid for 25X6
office. As de facto Home Minister, Nehru will occupy
a central role in maintaining law and order in the
event of an assassination of the Prime Minister.
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Nehru's return to part-time work within six to eight
weeks of his heart attack suggests that his recovery is
proceeding smoothly. His moderate weight loss and
willingness to adhere to a reduced workload also
indicate that he has accepted the advice of his doctors.
It is still possible that there will be long-lasting
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Arun Nehru with Rajiv Gandhi and Gandhi's son, October 1985.
physical or psychological effects that will alter his
ambition or capacity for work. It will be necessary to
monitor Nehru's recuperation over the next three to
six months to assess how well he adjusts. It will also
take that long to measure the political consequences of
Nehru's absence from office.
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A>
4)
India-Pakistan: Naval Mine
Warfare Capabilities
India's principal advantage over Pakistan in naval
mine warfare is its numerous ports, many of which are
beyond the range of the Pakistani Navy. The Indian
Navy also has more mines, delivery systems, and mine
countermeasures ships than Pakistan, as well as a
modest mine warfare modernization program. As a
result, India probably can keep its maritime trade
relatively intact, while Pakistan's single major port,
Karachi, is vulnerable to closure by Indian mining.
The Pakistanis, however, have limited their
vulnerability by stockpiling fuel and ammunition
sufficient to fight a war lasting up to one month. In a
future war, we would expect both sides to begin
defensive mining before the outbreak of hostilities.
The overall effect of mine operations would not be
significant unless hostilities were prolonged or either
side scored a major propaganda victory by sinking
several major naval combatants with mines.
India
Mines. We estimate that the Indian Navy has more
than 1,000 operable seamines that can be delivered by
submarine, surface vessel, and aircraft. India
purchased over 1,100 contact moored mines from the
Soviet Union and 1,000 bottom mines from the
United Kingdom. Some of these mines were used in
1971 against Pakistan, and we estimate that half are
still in the Indian inventory.
Italy will be the
principal future supplier of advanced sophisticated
mines to the Indian Navy.
in late May the Indians
purchased 96 Misar MRP mines for $5 million with
an option to buy 50 additional mines. These deep-
water mines have an in-water life of two years and
can be programed to respond to a variety of influences
to defeat countermeasures. Other defense attache
sources indicate the Navy may buy as many as 2,000
multiple influence mines by 1991, some of which may
be British Stonefish mines.
67
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Delivery Systems. The Indian Navy has over 25
Soviet-built warships specifically configured for
minelaying. We estimate that over the next five years
India will add 10 submarines and six more surface
vessels fitted with mine rails to its fleet. The Indian
Navy could also lay mines, albeit less efficiently, with
any of its more than 50 surface warships.
The Navy can also deliver mines by air. Its five
Soviet-built IL-38 May maritime patrol aircraft will
be complemented by eight Soviet Bear antisubmarine
warfare bombers before the end of the decade. We
suspect the Indian Air Force's Canberra bombers and
Jaguar attack aircraft, some of which are assigned a
maritime strike role, also might be used to drop
mines.
Countermeasures. We judge that the Indian Navy can
sweep moored contact mines and has a basic
capability against acoustic and magnetic mines.
India's minesweeping and countermeasures assets
include the nine minesweepers based in Bombay and
six Soviet-built Yevgenya inshore minesweepers
stationed at Cochin. Another six Soviet-built
minesweepers are on order,
The Indian Navy wants modern vessels capable of
neutralizing multiple influence mines, which its
current minesweepers cannot detect.
the Indian Navy wants to
buy two modern West European mine counter-
measures ships and produce under license six others to
complement its current holdings. Open sources say as
many as 10 might be built, probably in Goa. The
Indians have expressed interest in the British Hunt
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Lend-class minehunters.
class, a new Swedish vessel, and the Italian Lerici and
Gaeta classes
Four Italian Lerici-class ships built for Malaysia
visited Bombay this spring, probably as part of a sales
effort.
Pakistan
Pakistan's mine inventory and delivery systems are
more limited than India's. We believe Pakistan has an
unknown number?probably a few hundred?of
Chinese moored and Italian Limpet mines, as well as
some magnetic mines. The Pakistani Navy has 16
Chinese-built patrol boats fitted with mine rails, but
these ships lack the range and capabilities of their
larger Indian counterparts. The Pakistani Navy could
also lay mines from its 25 other surface ships and five
submarines.
The Pakistanis have four maritime reconnaissance
aircraft that could be used for mine warfare, but they
are older and less capable than India's. Islamabad has
asked the United States to sell or lease three modern
P-3 antisubmarine warfare aircraft, which could carry
mines. The Pakistanis might also use attack or cargo
aircraft to sow mines, but, given India's overall
numerical superiority in the air, we judge these
aircraft would be used for more vital missions.
Secret
The Pakistani Navy's minesweeping assets are almost
nonexistent. Its three ex-US Adjutant-class
minesweepers can get under way and have
participated in exercises, but we believe their
minesweeping gear is inoperable. The Pakistani
Navy's two Chinese-made remote-controlled
minesweeping vessels also are inoperable, but three
new Chinese minesweepers may be on order.
Vulnerabilities
Pakistan. Pakistan has only one major port, Karachi,
which it probably cannot keep open under wartime
conditions. It is the only Pakistani port capable of
handling crude and refined petroleum products and is
well within range of Indian minelaying aircraft and
ships. Its channel requires constant dredging to
maintain a depth of 12 meters from April through
September, according to defense attache reports,
making it highly susceptible to shallow-water mines
that could halt dredging operations. In our judgment,
the Pakistanis believe that Indian airstrikes and
warships will keep the port closed for the duration of
any conflict.
Pakistan's most effective mine countermeasures effort
has been to stockpile munitions, fuel, and spare parts
sufficient to fight a 30-day conflict. We believe the
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near impossibility of protecting Karachi has forced
the Pakistanis to prepare for a cutoff of all vital
imports during what they believe will be a relatively
short war. We also judge that, like most Third World
navies, the Pakistani Navy has focused on procuring
more visible and multipurpose surface ships and
submarines rather than highly specialized mine
countermeasures vessels.
Pakistani plans call for building additional ports to
reduce their dependence on Karachi, but these will
take years to implement and will not leave the
Pakistanis substantially better off.
plans call for upgrading the
port of Bin Qasim?east of Karachi at the mouth of
the Indus River?to handle petroleum imports.
Construction of a 2 to 3 km jetty, 10 to 16 km of
pipeline, and tankage facilities is expected to take
seven years. Qasim's 20-km channel also requires
constant dredging, however, and is easier to mine than
Karachi's. The western port of Gwadar is to be
upgraded with a new breakwater, dredging, and
logistic facilities. It is out of range of most Indian
combat aircraft, but it is also far from Pakistan's
main north-south transportation network.
Mine Warfare in 1971
Both countries commenced mining operations before
the outbreak of the 1971 Indo-Pakistani war. The
Indian campaign,
played a minor, but significant, role. The
Indians made extensive use of aircraft from their
carrier, the Vikrant, to lay mines in Pakistani
harbors
Mine clearing operations in Indian and
Bangladesh waters after the war required 19 ship
months by Indian vessels and 44 ship months by
Soviet minesweepers.
been set for construction of the naval base, which
probably will not be complete until the mid-1990s.
India. India's numerous ports, many of which are
located along its southern and eastern coasts, make it
less vulnerable to mine warfare. India has nine ports
other than Bombay with tankering facilities. Most of
these ports are out of range of Pakistani aircraft and
minelaying ships.
Bombay, which handles about one-quarter of India's
port traffic and is the home port for the Indian Navy's
Western fleet, is slightly less vulnerable than Karachi.
Its main channel is fairly deep, but
he immediate area around the docks
requires occasional dredging. If the Pakistanis
successfully mined Bombay, they could disrupt Indian
naval operations, forcing the Indian fleet to operate
out of more austere facilities at Goa and at Cochin
more than 400 kilometers south of Bombay.
Wartime Operations
We believe Indian and Pakistani mining operations
would closely follow the pattern set in 1971. Before
the outbreak of hostilities, we expect both navies
would sow defensive minefields with their surface
vessels near their respective coasts and harbors. These
fields would help to simplify antisubmarine warfare
operations by allowing the Indians and Pakistanis to
concentrate their antisubmarine warfare assets.
Defensive minefields also would limit enemy mining
operations.
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Offensive mining operations would be carried out
principally by submarines, which would attempt to
mine the approaches to Karachi and Bombay and 25X1
other Indian ports as soon as hostilities began. We 25X1
judge that neither country's antisubmarine warfare
capabilities are strong enough to prevent submarine
mining operations from succeeding. We estimate that,
by using only its two larger Agosta-class submarines
and reserving its four smaller Daphne-class boats for 25X1
antishipping operations, the Pakistani Navy could lay
about 80 mines. We speculate that the Pakistanis
The Indian Navy plans to reduce its vulnerability by
building a modern base south of Goa at Karwar. This
port has a deep harbor requiring little dredging and is
well out of range of Pakistani aircraft. No date has
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might attempt to distribute these along the shipping
channels of as many as four to 10 Indian ports. The
Pakistanis might calculate that only a few mines
would be necessary to scare commercial shipping
away from India's eastern ports. Moreover, by
attacking as many ports as possible, the Pakistanis
could force the Indian Navy to adopt a defensive
posture.
India could lay enough mines to close Karachi using
only one of its estimated five operational Foxtrot
submarines, each of which can carry over 40 mines.'
We judge that the Indians might assign a mine
warfare role to a second submarine to cover Gwadar
and Bin Qasim, reserving the rest of its Foxtrots to
antisubmarine and antishipping missions. Indian
requirements for a mine delivery capability on its new
Kilo and West German Type 1500 submarines
indicate they plan to replace the Foxtrots with newer
vessels in the mine warfare role.
Both the Indian and Pakistani Air Forces have
sufficient aircraft allocated to maritime strike
missions to threaten mining operations by surface
vessels close to their principal ports. For this reason
offensive mining by surface vessels would be limited.
The Pakistani Navy might attempt to use its Chinese-
made patrol boats to mine the Gulf of Kutch to cut off
some of India's offshore oilfields. If the Indians
succeeded in reducing the Pakistani antiship threat,
they might risk sending their larger minelaying
frigates and destroyers to mine the approaches to
Karachi, along with smaller mine warfare ships.
Pakistan lacks the means to clear mines from its
harbors. We believe India would attempt to use its
nine ocean minesweepers to remove Pakistani mines
near Bombay. India might also employ its six
Yevgenya coastal minesweepers to help keep Bombay
'Open sources indicate the United States used only 36 mines to
close Haiphong harbor for 300 days during the Vietnam war
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open, but these ships are based in Cochin and rarely
sail to Bombay, suggesting that the Indians ?lan to
use them to keep their southern ports open.
Strategic Significance
In our judgment, Indian and Pakistani mine warfare
plans reflect their overall military strategies.
Closing Karachi effectively prevents Pakistan
from replacing wartime losses of tanks, other armored
vehicles, and sizable quantities of munitions, thereby
limiting Pakistani warfighting capabilities to one to
two months. After this period, India's quantitative
advantages in manpower and equipment, presumably
maintained through continued imports of largely
Soviet-made ground forces equipment, would help it
win a war of attrition.
Pakistan, in contrast, would attempt to raise the costs
of the conflict for India as quickly as possible by
scoring propaganda victories that might cause New
Delhi to negotiate a cease-fire. By mining Bombay,
the Pakistanis could close India's biggest port and
possibly sink or damage several major combatants. By
laying mines elsewhere, the Pakistanis could hope to
force the Indians to defend many ports, preventing
them from massing their naval forces for an
amphibious attack along the Pakistani coast or a
naval surface and air attack on Karachi.
Mine warfare also would play an important role in
setting the economic costs and political dimensions of
a future conflict. Pakistan's, and to a lesser extent
India's, economy would suffer severely from mine
warfare. Mining operations probably would close
Karachi, Bombay, and a handful of Indian ports for
the duration of the war and possibly for months
afterward until minesweeping operations could be
completed. Imports constitute almost one-fifth of
Pakistan's GNP, while exports account for 8 percent.
More important, about 85 percent of Pakistan's crude
oil and petroleum needs are met by imports. India is
far less dependent on foreign trade, with imports and
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exports accounting for less than 8 percent and 5
percent of GNP, respectively. India also imports only
35 ercent of its crude oil and refined petroleum.2
We believe mine warfare, more than air or ground
action, is likely to involve and affect third parties.
During a war, foreign civilian vessels probably would
suffer casualties from Indian and Pakistani mines. On
the basis of the willingness of foreign ship owners to
risk, and foreign governments to tolerate, loss of crews
and vessels to widespread antiship missile attacks in
the Persian Gulf, we doubt losses to mines by ships
plying the less strategic Arabian Sea routes would
play a major role in halting the fighting. After a war,
however, mine-clearing operations by some combina-
tion of Soviet, US, and West European navies would
be required. These operations probably would be part
of international efforts to arrange a cease-fire and a
settlement of the conflict, giving contributing powers
some leverage in negotiations.
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Extent of Afghan-Pakistani Border Most Frequently Violated
100 Kilometers
160 Moes
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? NorthernAreas I
fi
Arandu North-West 1
Frontier"
"----Parac inr
Peshawar
. ,?"*"'" *
N f ISLAMABAD
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tiMe
Miram.
Shah .
Federally L\
Administered
Tribal .)
Areas Pak;;Ita
*Wani
NINIorth-West
, '1 Frontier
/ .
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irA P. Punjab
Sargodha
Airfield
Chaman
Baluchistan
708116 (A05279) 7-86
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'Quetta
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Pakistan: Implications of an
Aerial Refueling Capability
Acquisition of tanker aircraft would improve only
marginally Pakistan's ability to defend against Soviet
and Afghan air violations. The Pakistani Air Force
already can fly continuous patrols along much of the
500-kilometer stretch of the border where most
violations have taken place. We believe Pakistan's
main goal in acquiring such aircraft is to improve its
capability against targets in southern India. US
assistance in helping Pakistan obtain tankers would
undercut Indian Prime Minister Gandhi's attempts to
improve relations with the United States and
Pakistan.
Interest in Tankers
in late 1985 and again this year
for US equipment and training to convert as many as
three Pakistani Boeing 707 commercial aircraft into
aerial tankers. It also wants the US military to train
Pakistani personnel to use the aircraft. We estimate
that the conversion and training would cost less than
$20 million and would take about two years.
Most attacks?as well as most overflights?have not
penetrated more than 9 kilometers, according to the
Foreign Ministry. The deepest attack, 25 kilometers,
occurred in May 1985.
The tankers could rendezvous with fighters up to
1,700 kilometers from their bases and transfer more
than 54,000 kilograms of fuel?enough to refuel at
least 10 of Pakistan's 40 F-16s. They could not refuel
other aircraft in the Pakistani inventory.
that they need
aerial tankers to defend against increased Soviet and
Afghan air violations. According to the Pakistani
Foreign Ministry, aircraft have crossed the border
about 500 times so far this year compared with about
275 incidents in all of 1985 and 100 in 1984. Roughly
one-fourth of the violations were bombing or rocket
attacks, usually lasting less than 15 minutes and
involving four to six aircraft. The others were
probably in search of insurgent camps or overflights
in the wake of bombing runs on the Afghan side of the
border. Most of the violations have occurred along a
500-kilometer stretch of the northwestern border,
according to the Foreign Ministry.
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Impact of Refueling Tankers
An aerial refueling capability would not add
appreciably to Pakistan's capabilities along the part of 25X1
the western border where most Soviet and Afghan air
violations have taken place. The Pakistani Air Force
already can conduct continuous patrols of much of
this portion of the border. Pakistan's F-16s, which
began flying random border patrols last February, can
remain in the air for three hours at a time, and the
Air Force has enough operational F-16s to replace
aircraft returning to their base at Sarghoda for
refueling. Because most violations are usually in
support of Soviet and Afghan troop operations just 25X1
across the border in Afghanistan, we believe Air
Force officers have a good idea of where to direct the
F-16s. Moreover, air violations to date have occurred
only during daylight hours. 25X1
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Tankers could improve Pakistan's defenses in
Baluchistan, along the southern half of the Afghan
border. The Air Force cannot patrol Baluchistan as
easily because of the distances from the F-16 base at
Sarghoda. Nor can it station
According to the Pakistani Foreign
Ministry, however, less than 10 percent of the air
violations occur over Baluchistan.
The Indian Target
In our view, Islamabad's main goal in seeking a
tanker capability is to improve its ability to attack
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Boeing 707 tanker.
Indian targets.
Pakistani political and military leaders believe that a
major Indian attack aimed at dismembering Pakistan
is more likely than a Soviet invasion.
14 of Pakistan's 17 divisions are oriented
toward India and that most of the new US-supplied
military equipment is closer to India than to
Afghanistan.
Pakistan's F-16s can currently attack targets only in
the western half of India?including Bombay and
New Delhi?but tankers would enable Islamabad to
strike important targets in southern India. If tankers
refueled F-16s over the Indian Ocean, the Pakistani
Air Force could attack Indian defense plants at
Bangalore, Hyderabad, Avadi, and Aravanadu that
produce jet fighters, helicopters, patrol boats, and
tanks. The Pakistani Air Force also could strike
targets at a small Indian naval base at Cochin and at
Karwar, where New Delhi plans to build a large naval
base.
Implications
A decision to help Pakistan convert commercial
aircraft to tankers probably would be an obstacle?at
least temporarily?to Washington's efforts to
strengthen Indo-US relations through sales of
military equipment and increased military exchanges.
New Delhi would interpret a sale to Pakistan as a sign
of Washington's insensitivity toward India's security
concerns. Critics of Gandhi's efforts to improve ties to
the United States would cite the sale as an indication
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of a US desire to arm Pakistan against India. We
believe that New Delhi may be particularly
apprehensive about a Pakistani air refueling
capability in light of Israel's success with converted
Boeing tankers in the raid against PLO bases in Tunis
last October.
Improved Indo-Pakistani relations?a key US goal in
the region?would also be harder to achieve in the
wake of a tanker deal. New Delhi would consider the
Pakistani purchase as further proof that Islamabad's
main military goal is to extend its military reach into
India. Indian political and military leaders would
almost certainly link a Pakistani aerial refueling
capability to its nuclear weapons program. Although
the Indian Air Force probably could tolerate a few
sorties by Pakistani aircraft with conventional
weapons, it would have to make significant
redeployments to increase air defense coverage to
protect against nuclear attacks. Because of this
increased threat, we believe Prime Minister Gandhi
would have a harder time overcoming hostility?
particularly within the military?to his efforts to
reduce tensions with Islamabad.
Islamabad places a higher priority on obtaining other
US military items, in our view. Pakistani defense
officials are interested particularly in obtaining the
shoulder-fired surface-to-air Stinger-POST missile
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and the laser-guided Copperhead artillery shell.
Moreover, the Pakistani Army?the country's
premier service?probably would not be upset if the
Air Force did not obtain aerial tankers. Because of
the tankers' capabilities and relatively inexpensive
price, however, we believe that Islamabad will
continue to ask for a refueling capability.
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Pakistan: The Military After
Martial Law
The Pakistani military is pleased to see the end of
martial law and to be relieved of domestic security
responsibilities. Although the officer corp has a low
opinion of Pakistani politicians and is skeptical about
how well the civilians will do, the Army is willing to
stand aside and give the fledgling democracy that
President Zia has crafted a chance to work. If
maintenance of law and order significantly
deteriorates, however, the military probably would
move to reimpose martial law.
Morale in the Pakistani Army has risen considerably
since the end of martial law because Army officers
believe that they can now concentrate on national
defense issues rather than being distracted by
domestic politics, according to US Embassy reporting.
Many within the military believe that the Army's role
in the martial law administration tarnished the
military's reputation for honesty and incorruptibility.
Senior officers tend to view the world through a
relatively narrow prism. The military's foreign policy
perceptions remain dominated by the threat posed by
India, according to US Embassy reporting. We
believe even the situation in Afghanistan is seen
partly in this light. Pakistani military officers believe
that the Afghan situation can be contained unless a
campaign of pressure and subversion coincides with
an Indian attack.
Pakistani officials believe that a major Soviet attack
is unlikely at the present time. The Pakistani Army
believes that it could contain limited Soviet or Afghan
Army raids into the North-West Frontier Province.
Prime Minister
Junejo and President Zia?who also holds the position
of Army Chief of Staff?have clashed over control of
officer retirement, promotion, and assignment. Junejo
has sought to build a following among younger field
grade officers who are disappointed with the slowness
of promotions resulting from the delayed retirement
77
of senior officers who participated in the martial law
administration. We believe that many younger
officers also are cynical about their superiors who
benefited materially as a result of their stint in the
martial law administration. We believe, however,
that, no matter how unhappy these officers are with
the current situation, they will remain loyal to
whoever fills the Army Chief of Staff position.
Benazir's Return
Senior military officers have assumed a wait-and-see
attitude toward Benazir Bhutto's political activity.
Some senior officers fear that Benazir is bent on
revenge for the Army's role in the execution of her
father, Prime Minister Zulfikar Ali Bhutto, in 1979.
Although Zia remains the center of her wrath, high-
ranking Army officers believe that they could also
come in for some of the blame
Senior officers also have been stung
by Benazir's criticism of the military for having lost
the Siachen Glacier to the Indians
Junior officers appear more favorably disposed toward
Benazir
We believe that some of these officers are
interested in more rapid social and economic change
and see her as a potential leader for change.
Military Issues
The Pakistani military has more confidence in its
capabilities?in part because of the modern
equipment received under the current five-year US
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aid package?but doubts that it could defeat the
Indians in a prolonged conventional war. We believe
the Pakistani Army appreciates US security
assistance but is skeptical?based on prior
experience?of US ability or willingness to aid
Pakistan in an emergency.
The senior Pakistani military leadership is now
determining how to apportion the funds to be received
under the newly negotiated US security assistance
package. We believe that modernization of the
Pakistani Army and improvement in air surveillance
capabilities have the first priority, while the Air Force
and Navy equipment modernization programs are less
important. The force structure issues now being
discussed will determine the shape and composition of
the Pakistani Armed Forces well into the 1990s.
The Pakistanis are involved in sporadic gunbattles
with the Indian military along the cease-fire line in
Azad Kashmir and the Punch area opposite
Islamabad, but these are not considered particularly
worrisome by the military. We believe that the
Pakistanis, while willing to hold discussions with the
Indians on the Siachen Glacier dispute, are prepared
for more fighting and are ready to use sophisticated
armaments.
The Soviet-sponsored destabilization effort among
Pakistan's Pushtun border tribes and terrorist
bombings in the North-West Frontier Province and
Baluchistan have escalated in the last year. Soviet and
Afghan violations of Pakistani airspace have been met
on occasion by Pakistani antiaircraft fire, including
surface-to-air missiles, and by F-16 aircraft, but we
believe the Pakistanis have sought to emphasize
restraint in responding to Soviet and Afghan
activities. According to Embassy reporting, Pakistani
officials believe that the Soviets have deliberately
escalated attacks on Pakistani military and civilian
targets along the frontier to increase pressure on the
new civilian government to reach an accommodation
with the Soviets over Afghanistan.
Secret
Outlook
If Pakistan's domestic political situation were to
deteriorate seriously, the Army undoubtedly would
reintervene because it believes it is the ultimate
guarantor of Pakistan's national identity and
sovereignty. Should the Army take action, we believe
that it would not allow President Zia a second chance
at martial law and that the Army would turn to
another senior military officer or group of officers to
run the country.
however, most officers hope that the democratization
process will succeed so that the Army can remain
apolitical and build a more professional organization
concerned with the country's defense from external
forces rather than with administration and internal
security.
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The Afghan Refugees in
Pakistan: Shiftin
Dynamics
Interviews conducted among refugees who fled from
Afghanistan to Pakistan in 1985 revealed the results
of increasingly brutal Soviet military tactics.
Although the refugees talk about going back to
Afghanistan, some worry that the war is not going
well for the insurgents. They follow news of peace
negotiations closely but have only the vaguest notions
on the shape of a settlement. The refugees in the
camps appeared to have little respect for the alliance
of seven insurgent groups. The Pakistanis, for their
part, worry about the impact of the refugee presence.
The Early Refugees
Interviews of Afghan refugees conducted in 1983
suggested the large flow of refugees into Pakistan in
1980-81 was mainly because of panic as a result of the
massive Soviet invasion. Some tribal leaders also
brought their units to Pakistan as a political protest
against the Communist government in Kabul.
Economic problems were another important factor.
Farming was no longer possible in many regions
because of fighting, destruction of irrigation systems,
disrupted distribution of seed and fertilizer, and
manpower shortages.
The refugees during 1980-83 left Afghanistan as
whole villages or tribes in groups of from less than 100
to over 1,000. Travel in the rural areas near the
Pakistani border was relatively easy and safe, making
large-group travel feasible. Many came out by bus or
other vehicles. By late 1983 the migration had slowed
in part because of a lull in the fighting in the eastern
provinces and because those who were in the most
immediate danger had already left.
The Newer Refugees
The refugee flow to Pakistan increased in 1985
compared with 1984?although it remained much less
than in the early 1980s. The increase in 1985 largely
79
reflected increased air attacks and a general upsurge
in the fighting in the border areas, especially in the
plains of Paktia Province and the Konar Valley.
Pakistani officials estimate that about 35,000 people a
month came out in the summer and fall. We believe
the Soviets intentionally drove the people from
Afghanistan so that guerrilla infiltrators could be
more easily spotted and destroyed and so that the
insurgents would not have a populace to feed and
house them and provide them cover for their
operations.
Because movement across the border became more
dangerous and difficult in 1985, refugees had to travel
in small groups and at night to avoid attack. Even so,
many were attacked from the air as they crossed
exposed areas, such as mountain passes or open plains.
The attacks on fleeing unarmed refugees created
further panic among the general population of
Afghanistan.
The refugees in 1985 were more often wounded, hurt,
or in shock from the fighting than the earlier refugees.
Because of food shortages in parts of Afghanistan,
many of the more recent refugees, especially the
children, are suffering from varying degrees of
malnutrition and are in generally poorer health. They
came with little except the shirts on their back,
whereas the earlier refugees often arrived in Pakistan
with more possessions, especially commercial vehicles
or domestic animals that they could use to make a
living.
Many newer refugees attempted to find tribal or kin
members in Pakistan for help. Tribal codes dictate
that tribesmen are obligated to help fellow tribesmen.
But often the conditions for those already in Pakistan
are strained and they can offer little help. Many of
the newly arriving refugees had no tribe or kinship
group to fall back on because they came from areas of
greatest devastation and most members of their tribe
or village had been killed.
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Refugees in Pakistan?A Profile
According to the Pakistani Commissioner of
Refugees, 2.7 million Afghan refugees are registered
in Pakistan, with another 500,000 unregistered.
There are 312 refugee camps in three provinces: 240
in the North-West Frontier, 61 in Baluchistan, and
11 in Punjab.
The refugees in Pakistan are primarily Pushtu, the
ethnic and linguistic group that also dominates the
North-West Frontier Province and the area of
Afghanistan closest to the Pakistani border.
The size of the refugee camps varies greatly. Near
Peshawar, the center for Afghans in exile, the camps
are large, well organized, and generally affluent.
Several "show" camps near Peshawar routinely
entertain foreign visitors and journalists. Farther
from Peshawar, the camps tend to be small and less
well organized, and the quality of life is considerably
poorer.
The Pakistan Refugee Organization
Over 10,000 Pakistani administrators are involved in
managing the refugees under the overall supervision
of SAFRON, the State and Frontier Regions
Division. A Chief Commissioner for Refugees in
Islamabad answers directly to SAFRON and
provincial commissioners for each of the three
provinces. In addition, there are district
administrators, area administrators (each in charge
of five camps), and camp administrators. It is the
stated intent of the Government of Pakistan to let the
refugees settle their own disputes through tribal
jirgas, or councils, and to govern themselves except
where they deal directly with the laws of Pakistan.
The task of the Pakistani administrators is largely to
dole out humanitarian assistance to the refugees.
Registration and Rations
The major tensions of camp life stem from the
related issues of registration and the distribution of
humanitarian assistance. To be eligible to receive
rations, a refugee first must be registered as an
official refugee and then receive a ration card. To
become registered as a refugee, a newly arrived
Afghan must get a letter from one of the seven
insurgent groups and then apply for a card from the
local Pakistani refugee office. This requirement
politicizes the registration process.
L
Refugees encounter several problems in obtaining a
ration card. The refugee must register at one of the
official camps, but the camps in the desirable areas
are full and have long waiting lists, especially the
camps near Peshawar and those near the border. The
refugees do not want to be too far from the border
because many cross back and forth. These people
include the insurgent fighters, but also farmers and
traders who often bring their families out to refuge in
Pakistan and return to farm or trade.
Other reasons prompt Afghan refugees to stay near
the border. The topography there is similar to
Afghanistan?mountainous with high plains. In
addition, the Pakistani people in the border areas are
ethnically and linguistically similar to the Afghans,
whereas the Pakistanis of areas farther inland are
traditional and bitter enemies.
Pakistani Discomfort With Refugees
The Government of Pakistan has firmly supported the
refugees. President Zia has announced many times
that he welcomes the Afghan refugees as Islamic
brothers who need help in a time of need. He usually
adds that he sincerely hopes that they will soon be
able to return to their homeland. The Government of
Pakistan has treated the refugees well, spending about
$1 million a day on them.
Secret
But Pakistan is facing increasing concerns about the
Afghan issue. It is a major topic of conversation
among the Pakistani public and has been the subject
of editorials and public forums. The position of the
citizens of Pakistan as a whole on the refugees is hard
to gauge. Pakistan is a diverse multiethnic and
multilinguistic country.
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In the North-West Frontier Province, where the crush
of Afghan refugees is greatest, the people are the most
hospitable. There are two reasons for this. First, the
code of the Pushtuns, called Pushtunwali, requires
them to help fellow tribesmen when they are in need.
Second, the ex-governor, Fazle Hag, was a supporter
of the Afghan refugees and would personally
intercede when potential conflicts came up between
Afghans and Pakistanis. Fazle was well liked and
respected in the North-West Frontier and set the tone
for public opinion and action.
Opinion in Punjab toward the refugees is more
negative, but not significantly so. Part of the Punjabis'
concern reflects historic ethnic animosities. Punjabis,
especially the educated, see the Afghans as crude and
wild. Tension between the people of Punjab and the
Pathans predates British rule. Some Pakistanis
complain about the refugees who do not stay in the
camps. Peshawar and Quetta are crowded with
Afghans?buses are jammed, the city parks are full.
Penetration of the Afghans into the Pakistani
economy has been tolerated because the Afghans'
labor skills and their commercial vehicles have been
needed. Moreover, many Pakistani workers have
found employment abroad, mostly in the Persian Gulf
states. Afghans serve as shopkeepers, craftsmen,
traders, truck drivers, and general laborers in all parts
of Pakistan. Although the Government of Pakistan
has tried to curb these activities when they compete
with Pakistani businesses, officials have not pursued
this policy aggressively. Ordinances forbidding
Afghans from buying real estate or from engaging in
business in some areas are largely ignored.
To the Government of Pakistan, however, the
Afghans' economic presence is a time bomb. Pakistani
workers are beginning to return from the Gulf states
because of the collapse of oil prices. While it is not
clear that the returnees will directly compete with the
Afghans for jobs, they will nonetheless make the job
market tighter.
The Refugees and the Alliance of Seven
The refugees in the camps in December 1985 and
January 1986 had little good to say about the
insurgent alliance in Peshawar. The fundamentalists
81
in the alliance represent a militant new ideology that
means little to the average Afghan. The so-called
traditionalists in it are too disorganized and
unstructured to be of real consequence. To the
Afghan refugee, the alliance must be taken seriously
only because it controls important resources.
Many refugees see the alliance as a small group of
people enriching itself while they suffer. The refugees
live in tents or mud huts in crowded camps, and they
believe the leaders of the alliance are living in relative
grandeur and are indifferent to the refugees' plight.
The refugees suspect the alliance leaders of being in
league with Pakistani officials to get rich on money
designated for the refugees. Local insurgent
commanders, who have gained power at the expense
of the Peshawar leaders, say they are now faced with
three difficulties: the burden of fighting the war in
Afghanistan, providing for what might be left of their
people in Afghanistan, and taking care of the refugees
in Pakistan.
War Weariness
The interviews detected some war weariness inside
Afghanistan. Villagers assert that insurgent activity
in their areas often makes them a target of aerial
bombardment. Many said they would prefer to be left
alone by both sides.
Although most refugees put little credence in the
recent tribal "Loya Jirga" called by Kabul, they note
that some tribes or parts of tribes are cooperating with
the regime?or at least not cooperating with the
insurgents. Refugees expressed concern that Kabul's
plan to establish village militias to keep out the
insurgent fighters could succeed, although they were
careful to say that they knew of no village that had
yet gone along with the plan.
Will the Refugees Return?
In the camps, the Afghans themselves frequently talk
of returning to Afghanistan. They believe that they
will be going back, although most realize that it will
probably be later than sooner. They closely follow
events in Kabul for any sign that the regime is
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weakening or that a settlement is near. In late 1985
the camps were full of rumors from Afghanistan
regarding a settlement.
Interviews in the camps revealed some realism
regarding the shape of a settlement of the Afghan
hostilities. The Afghans believe that the insurgents
will eventually be victorious, but often say that the
war is not going well and that the Soviets are
becoming more difficult and cunning. When asked
what kind of settlement or government might be
acceptable to all sides, most Afghans have no answer.
Even though King Zahir Shah was ousted 13 years
ago, he is still the leader most mentioned to reunite
Afghanistan.
Pakistani officials suggest that the number of
refugees who return to Afghanistan will depend on
the nature of the settlement, the political stability in
Afghanistan after any settlement, and the degree to
which the refugees have penetrated the Pakistani
economy. Most Pakistanis believe that those refugees
who have been politically active in Pakistan could not
return. The Pakistanis believe that Afghans who have
received asylum abroad will also not return to
Afghanistan after a settlement.
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Sri Lanka's Muslims:
A Growing Force?
Muslims in Sri Lanka are an important factor in the
communal conflict. Their concentration in the
strategically important Eastern Province, their
prominence in areas of commerce and trade, and their
ties to Islamic states in the Middle East have given
them a growing role in the three-year-old conflict
between Sinhalese and Tamils. Fighting in the east
has escalated dramatically in recent months, and we
expect Muslims to become more caught up politically
and militarily in the struggle. Both the government
and the militants are courting Muslim support, and it
is unclear what course the Muslim community will
follow.
Background
Sri Lanka's 1.3 million Muslims are the third-largest
ethnic group in Sri Lanka after the Sinhalese and
Tamils, with about 7.6 percent of the country's total
population. They are concentrated in the urban areas
of the Eastern Province, where they represent 34
percent of the population, and in Colombo. Their
control of Sri Lanka's lucrative gem trade, their
prominent role in a wide range of other commercial
enterprises, and their ties to financially important
Middle Eastern states make them a valuable
economic asset. Almost all Muslims in Sri Lanka are
Tamil speaking, but they constitute a distinct
religious minority and have not identified themselves
with the predominantly Hindu Tamil community.'
Muslim Organizations
Sri Lanka's Muslims do not have their own political
party. They form large voting blocks in the two major
Sinhalese parties?the ruling United National Party
(UNP) and the opposition Sri Lankan Freedom Party
(SLFP). They have also formed several important
Islamic interest groups and lobbying organizations.
The largest and most politically active is the All
83
Ceylon Muslim League, which represents a broad
range of the country's Muslims. Its members include
Foreign Minister Hameed and Minister of Transport
and Muslim Affairs M. H. Mohamed. The Muslim
League has generally supported the UNP
government, largely because President Jayewardene's
economic liberalization policies have benefited the
widespread commercial interests of the Muslim
community.
Faced with escalating fighting between the
government and Tamil insurgents in the Eastern
Province in 1985 Muslims became concerned that
their interests were at risk. In response, they formed
several new Muslim interest groups. The Muslim
Congress was founded in the summer of 1985
specifically to represent the political interests of
Eastern Province Muslims. It is composed of Muslim
representatives from each of the three districts in the
Eastern Province and is governed by a presidium of
five and a secretary general
The Congress's representation in all districts is
probably designed to challenge Tamil plans to isolate
Muslims in one district in the province.
Also in reaction to the violence in 1985, some Muslim
youths organized a radical group that received
support from Libya.
the Federation Association of Muslim Youth of Sri
Lanka (FAMYS) is an umbrella organization for 19
Muslim youth groups and is affiliated with the
organization "Islamic Call" or Da`wa.2 The group's
leader is a former senior state counsel or in the
'Islamic Call is a name applied to several Islamic organizations
including Shia fundamentalist groups in Iran, Iraq, and Bahrain
and a government missionary society in Libya. Shia Da`wa groups
have been responsible for terrorist acts in the Middle East, and the
Libyan organization has been connected with intelligence and
subversive activities since the early 1980s. We believe FAMYS is
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NESA NESAR 86-018
1 August 1986
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Ethnolinguistic Groups and Religions in Sri Lanka
Other
Indian 0.7
Tamils
Ceylon
Moors
Trincomalee
Figures shown are
percentages of the
total population of
Sri Lanka.
Sinhalese
1"73 Ceylon Tamil
Indian Tamil
Ceylon Moor
/SLAM Religion
,.Negombo
CHRISTIANITY
5,0 190
Kilometers
Source: ?_tsliej.i.oat2.?,Ostract ol trtif
poroccranc:Socislistrri.tepuOlio
of Sri Lanka, 1982
800226 1-85
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Attorney General's Department, and
FAMYS represents almost 10 percent of
the Muslim youth in Sri Lanka.
The radical ties of
FAMYS represent, in our view, a potential for
increasingly militant Muslim activity in Sri Lanka,
especially if the security situation continues to
deteriorate.
The Eastern Province: Muslims
Caught in the Middle
Sri Lanka's Muslim community has generally
opposed the Tamil guerrilla movement.
although a significant
number in the Muslim community support increased
Tamil autonomy, they oppose formal linkage or
merger between the Northern and Eastern Provinces
to form a Tamil homeland. Their major concern is the
potential loss of political power that a linkage plan
would represent for their community. Muslims would
comprise only 17 percent of the population in a
unified province, compared with their current 34
percent plurality in the east alone, and would lose
their relative strength in any future elected provincial
government.
The government's counterinsurgency in the Eastern
Province is forcing Sri Lanka's Muslims ever more
directly into the conflict. President Jayewardene has
agreed to double the number of Home Guard units?
a semiofficial militia often given to excesses against
Tamil civilians?from its current 10,000 to 20,000,
This move is likely to
increase the number of Muslims in the Guard units
and may prompt Tamil militants to direct attacks
specifically against the Muslim communities.
85
President Jayewardene has also appealed to Muslim 25X1
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peace package for Sri Lanka's Tamils. Jayewardene
has also used Muslim Foreign Minister Hameed for
negotiations with India to show government concern
for the Muslim community, although Hameed
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The insurgent's overtures have yielded a limited
Tamil-Muslim rapprochement. According to the US
Embassy, a Tamil civic leader from Batticaloa claims
that since his meeting in May with Tamil militant
leaders in Madras, in which he urged militants to find 25X1
a common ground with Muslim community leaders,
there has been a marked improvement in Tamil-
Muslim relations in the Eastern Province. The
possibility of Tamil attacks against Muslims believed 25X1
to be collaborating with the government?either
directly or indirectly, by not supporting the struggle
for a Tamil homeland?remains a significant threat.
harassment 25X1
of Muslims by the most active militant group, the
Tigers, has increased, principally through kidnapings
and motorbike thefts. During the violent Tamil-
Muslim strife in October 1985, Tamil militants
burned Muslim homes in Trincomalee and executed
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several Muslims by chaining them to lamp posts and
shooting them, leaving the bodies as a warning to
other Muslims. The Muslims responded by burning
down several Tamil homes in the region.
Moving Away From Jayewardene
The accelerated pace of the peace talks, together with
the worsening security situation in the east, has
created strains between the Muslim community and
President Jayewardene. Although the two largest
Muslim groups have historically supported the UNP,
we have indications of increasing disenchantment
with Jayewardene's policies.
the Muslims are beginning to see their future
as a minority in Sri Lanka in terms of the Tamil
experience. There is a perception that, although the
Muslims have prospered under Jayewardene's liberal
economic policies, the UNP has done little for the
community except take their votes
senior Muslim leaders believe Jayewardene is
determined to proceed with his peace package with or
without the support of other political parties?
including the Muslims. Muslim leaders object to the
present proposals, believing that, even if the Northern
and Eastern Provinces remain separate, the creation
of provincial councils represents a sacrifice of Muslim
interests in favor of the Tamils.
Jayewardene and his government are also perceived to
be pro-Israeli. Some Muslim leaders are concerned
that the Israeli Interest Section in Colombo will be
elevated to full diplomatic status if Jayawardene is
elected to another term
As Muslim support for the UNP erodes, support for
the opposition SLFP has begun to grow.
although Muslim support for the
SLFP had previously ranged between 10 and 25
percent, almost 60 percent of the Muslims voted
against the UNP in an April byelection in southern
Sri Lanka. He said that, if the UNP continued on its
current course and a national election were held in
1989 as scheduled, the majority of Muslims would
support the SLFP. If true, Muslim support for the
Sinhalese hardliners would probably increase
Secret
communal tensions, and, if substantial numbers of
Muslims change allegiance, the UNP would face an
even stiffer challenge in 1989.
Outlook
The deteriorating security situation in the east and
the fluctuating peace negotiations have prompted the
Muslim community to search for avenues that will
safeguard their interests in Sri Lanka. Several options
are available to them, and it is unclear which they will
follow.
The most likely option is that Muslim leaders will
work to protect their interests through existing
political avenues via one of the two major Sinhalese
political parties. Continued Muslim backing for the
UNP would give additional support to Jayewardene's
efforts to resolve the communal conflict, while support
for the more chauvinist SLFP would probably wreck
the peace process. In either case, we expect Muslims
to step up lobbying efforts and attempt to present a
united front during the next round of negotiations.
Although Muslim leaders differ in their opinions of
Jayewardene's proposals for devolution of power and
among themselves regarding their own counter-
proposals knost leaders
believe Muslims should support the President's efforts
because he is the Sinhalese Buddhist politician most
sympathetic to Muslim interests.
A less likely possibility is that the Muslims will form
their own political party to guarantee their
representation in Parliament and to eliminate reliance
on presidential appointments for Muslims to achieve
positions of influence in the government. The
incentive for forming their own political party is
strong, based on a perception that the government and
the Tamil separatists only curry Muslim favor to
further their own objectives. The head of the All
Ceylon Muslim League told the US Ambassador in
July that "We Muslims must remember that both the
Sinhalese and Tamils are communal minded, and
either could turn on us one day."
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A more remote possibility is the increased
radicalization of Muslim youth and involvement of
extremist Islamic states in Sri Lanka's communal
conflict. The formation of FAMYS last year has
brought the specter of Islamic fundamentalism to Sri
Lanka. Muslims constitute about 15 percent of
Colombo's population, and they could pose a serious
terrorist threat if they turn to militant activities. It is
more likely that militant Muslim activities would be
organized from the Eastern Province--the group that
protested the establishment of the Israeli Interest
Section most strongly in 1984. If violence in the east
is directed specifically against the Muslim community
in the east and in Colombo, whether committed by
Tamil militants or government forces, it could spark a
widespread turn by Muslim youth to radicalism.
we believe that several Tamil
separatist groups have received insurgent training in
Libya, setting a precedent for Tripoli's involvement in
the conflict.
Reverse Blank
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