NATIONAL INTELLIGENCE DAILY SATURDAY 28 FEBRUARY 1987

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88T00091R000400140001-8
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 23
• Document Creation Date: December 27, 2016
• Document Release Date: September 4, 2012
• Sequence Number: 1
• Publication Date: February 28, 1987
• Content Type: REPORT

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National Intelligence Daily
Saturday
28 February 1987
opsecrue
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Central
Intelligence
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Contents
Top Secret
Kuwait-USSR: Looking for Protection ........................................ 3
Argentina: Alfonsin Under Fire .................................................... 4
Iran-Iraq: End of Offensive at Al Basrah ...................................... 6
Nicaragua: Concerns About Rebel Politics .................................. 6
Afghanistan-Pakistan: More Air Attacks .................................... 7
Chile: Debt Negotiations Completed .......................................... 7
Italy: Seeking Greater Role in Economic Decisions .................... 8
Czechoslovakia: "Openness" Emboldens Dissidents ................ 8
Special Analyses
Israel: Controversy Over Peace Talks .......................................... 10
International-Brazil: Reaction to Debt Moratorium .................... 12
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Ten Secret
KUWAIT-USSR: Looking for Protection
Kuwait hopes to work out agreements with the USSR to purchase
military equipment and to protect its exports of crude oil against
Iranian attacks in the Persian Gulf
A high-level Kuwaiti delegation will travel to Moscow early next month
to discuss military sales in a continuing effort to improve military
cooperation with the USSR and balance weapons procurement as
well. The Kuwaitis will seek additional spare parts for the SA-8
missiles they bought in 1984 and may explore the possibility of buying
armored vehicles and T-72 tanks, according to the US Embassy in
Moscow.
Comment: Kuwait will probably sign an agreement for additional
SA-8 training and spare parts but will hesitate to commit itself to a
sizable purchase of armored vehicles or tanks. Kuwait has
deliberately diversified its military purchases from Western and
Eastern Bloc suppliers, but its concerns about Soviet intentions would
probably stall any agreement that required large numbers of Soviet
military advisers.
Top Secret
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Top Secret
Argentina's New Anti-Inflation Program
The new economic program is designed to halt inflation and spur
growth. It includes:
- A price and wage freeze with wages adjusted first for past
inflation.
- A 7-percent devaluation of the austral.
- A reduction by one-half of monthly minimum official interest
rates.
- A hike in gasoline prices and public utility rates.
Top. Secret
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Ton Secret
President Alfonsin is facing widespread criticism for his recently
announced economic austerity measures, and he continues to
grapple with the military over officers being tried for human
rights issues.
Domestic reaction to the economic program-especially wage and
price freezes-has been overwhelmingly negative. Moderate political
spokesmen as well as leftist and labor leaders have criticized the plan.
Agricultural and industrial leaders claim the measures will distort
markets and damage profits, and key members of Alfonsin's own
party have been conspicuous in their failure to defend the measures.
Alfonsin remains at odds with the military,over the human rights trials.
This week, 15 Navy officers, including active-duty personnel, were
arrested after refusing to testify in civilian courts.
that junior and midlevel Navy officers are increasingly
dissatisfied with the lack of support from the Navy Chief of Staff and
may call for his resignation.
The Navy's plight has spurred unrest in the Army, according to the US
Embassy. Some Army personnel are slated to testify in March, and
many officers are reportedly advocating noncooperation with the
Comment: The announcement of the wage and price freezes at the
height of tension over the human rights trials could seriously erode
the political standing of Alfonsin and his party in the national election
in October. Recent price increases have undermined the popularity of
the economic reforms begun in 1985, and the public has little faith
that the new measures will have more than a temporary effect.
Labor will almost certainly increase strike activity, and the opposition
parties may attempt to provoke public demonstrations over the next
few months. If the economic plan unravels and Alfonsin is unable to
resolve the human rights issue, he may turn to more radical action on
the debt to improve his party's election prospects
Top Secret
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Ton Secret
Iran's claim that its offensive near Al Basrah has ended probably
signals at least a temporary lull in the ground war, but Iranian forces
have the capability to resume attacks at any time. Tehran says the
offensive concluded successfully with the establishment of a
defensive line west of the Jasim River between Fish Lake and the
Shatt al Arab waterwa
Comment: The announcement suggests that Iran's immediate oals
in the seven-week operation have been achieved.
Although a pause in the
ground is likely, Iran has massive numbers of men and enough
supplies to launch new attacks anywhere on the southern front.
Tehran will continue-to push the propaganda value of the offensive
by touting it as a major victory that has further weakened the Iraqi
regime
NICARAGUA: Concerns About Rebel Politics
The Sandinistas apparently are concerned that proposals by the
Unified Nicaraguan Opposition to establish a more visible presence
in Central America and to restructure its political leadership could
increase foreign support for the rebels. T J y in Managua
reports that the regime last week protested Costa Rica's,
au orization of the recent UNO Assembly meeting in San Jose and
warned Costa Rica not to permit the UNO headquarters to relocate
there. In statements to the press, Sandinista officials have
characterized the UNO reorganization currently under way as
irrelevant and labeled the rebels' attempts to improve their political
image as merely cosmetic.
Comment: Managua probably is worried that a more, prominent UNO
presence in the region could increase the movement's legitimacy as
a viable political alternative to the regime. The Sandinistas almost
certainly relish the UNO infighting, but they probably are concerned
that a more representative organization could improve the insurgents'
international image
Top Secret
6 28 February 1987
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Top Secret
AFGHANISTAN-PAKISTA : More Air Attacks
Afghan aircraft ygalexL* struck Pakistan for the third time in three
days, and Islamabad responded with orders to shoot down an
intruding aircraft
according to the press, a Saudi-funded
and -staffed hospital south of Parachinar was also hit. The latest two
raids may have killed more than 100. Islamabad has issued a strong
protest. Foreign Minister Yaqub Khan, in Geneva for the indirect talks
on Afghanistan, said after the attack Thursday that the Afghan
actions threaten the continuation of that conference
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Comment:) (Friday's attack suggest 25X1
that it was preplanned, not an inadvertent incursion. The attack
probably was intended to press Pakistani negotiators to make
concessions at Geneva. As in the past, however, it is more likely to
stiffen Islamabad's resolve, and, if the attacks continue, Pakistan may
call for a recess in the negotiations. The Pakistani military probably
will increase the number of antiaircraft gun and missile positions
along the border and renew combat air patrols. Pakistan's chances of
downing an intruding aircraft remain small, however, because of early
warning deficiencies and the short time Afghan aircraft remain over
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CHILE: Debt Negotiations Completed
Chile and its creditor banks concluded a debt relief plan Tuesday
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that will help it cover a $450 million shortfall on interest payments
on commercial debt over the next two years. According to press
reporting, the plan does not involve new lending, but Santiago will
save money by making interest payments in 1988 and 1989 once
instead of twice a year and by rescheduling at lower interest spreads
$10.6 billion in debt that matures between 1988 and 1991. US
Embassy reporting suggests Chile will seek a rescheduling by the
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Comment: The agreement was concluded after the US and a majority
in a committee of commercial banks rejected a series of alternative
plans proposed by a major US bank. The drawn-out negotiations
delayed the agreement, driving the bulk of Chile's debt relief into next
year. Chile will probably still need a bridge loan of $225 million from
the Bank of International Settlement
Top Secret
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Top Secret
ITALY: Seeking Greater Role in Economic Decisions
K
Italy's strong reaction to the "Group of Five" meeting on monetary
policy in Paris last weekend demonstrates its increased determination
to secure a greater role in international economic decision making.
Rome boycotted a subsequent "Group of Seven" meeting, according
to US diplomatic reporting, because it believed that the principal
decisions had already been taken by the G-5 in disregard of the
Tokyo summit agreement to include Italy and Canada in important
decisionmaking. Statements from Prime Minister Craxi's office and by
Foreign Minister Andreotti indicate that the Italians may continue to
press for a written clarification of the role of the G-7 before the group
meets in Washington in April.
Comment: Italian leaders believe Rome has a right to play an
international economic role equal to London's because Italy's strong
industrial growth has put the Italian economy roughly on a par with
that of the UK. The growing possibility of an early national election will
incline all Italian party leaders to push the government to seek a
formal guarantee of the primacy of the G-7, and Italy may make this
a major issue at the Venice economic summit if it is not resolved
beforehand.
CZECHOSLOVAKIA: "Openness" Emboldens Dissidents
Members of Czechoslovakia's Charter 77 dissident group have
launched hunger strikes in several cities to protest the recent arrest of
a fellow member on charges of antiregime activity, according to press
reports. The regime has scheduled for March the trial of the seven
leaders of the outlawed Jazz Section dissident group on charges of
participating in an illegal enterprise
Comment: Soviet leader Gorbachev's widening of the bounds of
permissible criticism in the USSR is evidently causing problems in
Czechoslovakia. Charter 77 has always been critical of the regime's
human rights abuses but has seldom resorted to demonstrations. The
Prague leadership probably wants to send a message to dissidents
that Gorbachev's policy of openness will not be emulated in
Czechoslovakia.
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Top Secret
Americas Nicaraguan rebel commander claims to have shot d n
ow
Sandinista helicopter in central Zelaya yeste ay ... unclear
whether troop transport or gunship ... last verified shootdown
was 14 months ago.
Europe
- Verdict in Paris trial of Lebanese terrorist Abdallah expected
today, according to press ... French prosecutor has urged that
sentence not exceed 10 years ... government trying to guide
result, avoid retaliation
- Spanish Socialists, Basque Nationalist Party to form minority
regional government in Basque country ... Nationalists retain
presidency, Socialists get main economic posts ... disagreement
over separatist terrorism may undermine coalition.
East Asia - Hungary and China have; res ore interparty ties,
. Chinese party leader Zhao will visit
Budapest in June ... China hoping to encourage greater East
European independence of USSR.
Top Secret
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Views in the Knesset About an Early Election
If Labor quits the government, the coalition would not necessarily fall,
because the remaining coalition partners would constitute a minority
government. Only a majority vote in the Knesset would bring about an
early election. If Labor were to try to cause an early election, the
parties would probably vote as follows:
Probably For
Labor
40
Small left-of-center parties
Mapam
6
Citizens' Rights Movement
4
Shinui
3
Rakah (Communist Party)
4
Progressive List for Peace
2
Total
59
Probably Against
Likud
41
Ometz
1
Tehiya
5
Religious parties
National Religious Party
5
Agudat Yisrael
2
Morasha
1
Tami
1
Total
56
Uncertain
SHAS - Sephardi Torah Guardians
4
Kakh (Meir Kahane)
1
Total
5
Tog) Secret
28 February 1987
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Special Analysis
ISRAEL: Controversy Over Peace Talks
The just-concluded trip of Israeli Foreign Minister Peres to
Egypt indicates that he is redoubling his efforts to negotiate a
framework for Middle East peace talks at the same time that
Prime Minister Shamir is resisting international participation in
such talks because of pressure from hardliners in the Likud bloc.
Even so, Israel's Labor-Likud coalition is not likely to collapse in
the next several weeks unless Peres makes dramatic progress on
the peace process.
Peres was relatively inactive for several months after he swapped jobs
with Shamir last October,
His discussions with President Mubarak
and other Egyptian leaders focused on the contentious issues of
Palestinian and Soviet representation in a Middle East peace
conference, according to Israeli and Egyptian press reports. Peres
and Mubarak apparently achieved no breakthroughs but agreed to
continue their efforts, particularly in the search for an acceptable
Palestinian representation.
Shamir: Stiffening Resistance
Since becoming Prime Minister, Shamir has waffled in his public
comments about international involvement in Arab-Israeli
negotiations. The recent decision by Shamir's Herut Party, the
dominant faction in the Likud bloc, to hold its national convention
next month, however, forced Shamir to declare that he is
unequivocally opposed to an international conference, according to
US Embassy reporting.
Neither Peres nor Shamir is anxious to force an early national election
because neither is convinced that his party would win a clear victory.
Labor is ahead in public opinion polls, but similar polls preceding past
elections have consistently overvalued Labor's strength. Several
Labor Party leaders warned Peres this week not to seek an early
election, arguing that the public would punish the party responsible
for scuttling the government of national unity, which remains widely
popular
continued
Top Secret
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Peres would risk an early vote only in the unlikely event that Jordan,
Egypt, and PLO-approved Palestinians agreed on a negotiating
framework for peace talks that was acceptable to Labor. which could
then bill an election as a referendum on peace.
Peres and Shamir will probably hold a vigorous debate on the need
for an international conference at the weekly Cabinet meeting
tomorrow. With no specific proposals for a conference on the table,
however, they are unlikely to make any decisions that would split the
government
Nonetheless, Peres's renewed activism on the peace process makes
it likely that future relations between Labor and Likud will be more
strained than they were during the first two years of the unity
government. The pragmatic working relationship that Peres and
Shamir had established has been damaged by their disagreement
over peace talks
Top Secret
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Top Secret
Early Debtor Reactions
Although Peruvian President Garcia and Cuban President Castro
openly lauded Brasilia's move, most initial reactions have been
low-key.
many debtors are studying Brazil's action to see if it will eventually
work to their advantage:
- Mexico gave public assurances that it will continue to service
Argentina's Treasury Secretary immediately issued a press
statement that Buenos Aires would halt interest payments if
Western banks were unresponsive to its financial needs. The
statement was a high-risk gambit to gain approval of
Argentina's $2 billion loan request, but the Argentines
subsequently calmed fears by denying they would join Brazil
and by implementing a new stabilization program.
- Philippine Finance Minister Ongpin believes the Brazilian
decision has strengthened Manila's bargaining position with
its creditors Manila
probably will be content to prolong negotiation with the banks
in the hope of eventually extracting better terms.
- Ecuador has been slow to react publicly, but it plans to defer
its ongoing financial negotiations until it has assessed creditor
responses to Brazil's action, according to the US Embassy.
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Tan Secret
Special Analysis
INTERNATIONAL- Reaction to Debt Moratorium
BRAZIL:
Debtor governments are assessing Brazil's decision to suspend
interest payments but probably will not follow suit, especially if
new financial aackaaes from commercial bankers appear likely.
Debtor LDCs are expressing solidarity with Brazil's interest
suspension and probably believe the action strengthened their own
bargaining positions. Moreover, their leaders will note that domestic
support for President Sarney's government increased following his
announcement. Whether other debtors imitate Brazil's actions will
depend on the scope for economic growth allowed under new money
packages
Difficult Negotiations Ahead
Brasilia has expressed interest in beginning negotiations with
commercial banks around mid-March. Nonetheless, the reluctance
of creditors to make precedent-setting concessions and Brazil's
recalcitrance about giving in to creditor demands have decreased
the likelihood that an agreement will be reached soon.
Brazil believes it had little choice but to reduce its debt service
payments. Cash reserves have been drawn down rapidly in recent
months and are currently estimated at only about $2 billion-less
than two months' worth of imports. The economy also is in bad shape,
with interest rates and inflation both heading toward quadruple digits.
Politically, Sarney has gained time to rebuild a consensus behind
his leadership and to consider additional measures to shore up the
economy. Moreover, Brasilia almost certainly believes it has gained
the upper hand in coming negotiations by announcing a suspension
International bankers are uncertain about the steps Brazil will
propose in future negotiations. They are especially concerned about
Brazil's lack of a credible domestic economic program and its
apparent refusal to agree to IMF supervision
rA few-,banks-wittidr+ew a-portion-of-Br>azil's--$45Z -halliAn,ashof -term
trade and interbank lines. In response, Brasilia on Tuesda old
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Brazilian banks overseas they sho-ua,d>>no:t pay international banks
trying to withdraw-these cre it lines but to deposit the money in an
acc.oun1 with-ara-zw `Cen raiTank,
continued
Top Secret
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Tee Spg--rpt
Swing Factors
Unanticipated events could lead debtors to rethink their initial
moderate response. At worst, the breakdown of financial cooperation
could trigger a chain of successive debt payment suspensions.
The most important of these events would be the banks' increasing
resistance to further compromise. Long delays in reaching
agreements for new money and rescheduling probably would
precipitate renewed financial crises in at least several countries and
might persuade debtor governments to abandon their moderate
policy courses.
Rapidly evolving internal politics could quickly change the complexion
of Third World debt policies. Ecuador's President Febres-Cordero, for
example, has swung from one of the most financially responsible
leaders in Latin America into technical default largely because his
domestic political standing has slipped. A breakdown in financial
negotiations that undermines public confidence could lead to shifts in
economic teams and adoption of more radical debt actions.
Top Secret
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Top Secret
The resolve of debtor governments has strengthened; in particular,
they are more willing to act in the face of perceived creditor
inflexibility. Creditor banks, too, may feel compelled to draw the line.
They are moving quickly to settle outstanding issues with other
debtors in order to isolate Brazil and to deter other countries from
following suit. Over the long run, however, Brazil's actions could
harden attitudes toward future concessions and new money for all
debtors.
Top Secret
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