NATIONAL INTELLIGENCE DAILY FRIDAY 18 SEPTEMBER 1987

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88T01079R000300160003-8
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 20
• Document Creation Date: December 27, 2016
• Document Release Date: November 5, 2012
• Sequence Number: 3
• Publication Date: September 18, 1987
• Content Type: REPORT

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Central
Intelligence
National Intelligence Daily
Friday
18 September 1987
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Top Secret
Contents
Kuwait-Iran: More Iranians Expelled .......................................... 4
USSR-Eastern Europe: Midyear Trade Results .......................... 6
Yugoslavia: Strategy for Debt Talks ............................................ 6
Afghanistan-Pakistan: Resistance Leader Survives Bomb ........ 7
Pakistan: Administration Uneasy ................................................ 7
North Korea: Debt Rescheduling ................................................ 8
Peru: Inflation Provoking Labor Unrest ........................................ 9
Greece: Hints of New Economic Policy ........................................ 10
Special Analyses
USSR-Cuba-Chile: Support to Chilean Opposition .................... 12
Israel: Strengthening Army of South Lebanon ............................ 14
Toa Secret
18 September 1987
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KUWAIT-IRAN: More Iranians Expelled
Kuwait has ordered 27 of 30 nondiplomatic Iranian Embassy
personnel to leave the country in addition to the five Iranian diplomats
it expelled last week. The Iranian Charge has accused Kuwait of
"destroying relations with Iran." Meanwhile, the US Embassy reports
Kuwaiti Government officials are concerned about the internal
security situation and believe that fires at several Kuwaiti schools
earlier this month may have been set by Iranian-sponsored terrorists.
Comment: Short of breaking relations, Kuwait has been looking for
ways to retaliate for Iran's seizure of Kuwait's Embassy in Tehran last
month and the recent Silkworm missile attacks. Kuwait probably also
hopes its action will seriously undermine Iran's ability to collect
intelligence and sponsor subversive activity in Kuwait. Nevertheless,
Kuwait's tough stance probably will further provoke Iran to increase
its pressure on Kuwait in the coming weeks by sponsoring additional
terrorism, sabotage, and even missile attacks
Ton Secret
4 18 September 1987
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Soviet-East European Trade, First Half 1987 (Million rubles)
Soviet Percentage Soviet Percentage Balance
?fxports Change Imports Change
Bulgaria 3,050 - 5.4 3,317 10.1 -266.
Czechoslovakia 3,375 0.2 3,480 5.2 -104
East Germany 3,704 - 3.2 3,488 0.0 216
Hungary 2,205 - 4.6 2,469 5.1 -264
Poland 3,042 -10.9 2,894 5.2 148
Romania 1,212 -10.6 1,157 - 6.8 54
16,588 - 5.2 16,805 4.1 -217
Top Secret
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USSR-EASTERN EUROPE: Midyear Trade Results
Between January and June, the Soviets ran up a 200-million-ruble
deficit in trade with Eastern Europe, the first midyear trade gap with
the region since the early 1970s, according to recently released
Soviet trade statistics. Lower CEMA oil prices-reflecting last year's
sharp decline in world oil prices-helped cut the value of Soviet
exports more than 5 percent, as compared with the first half of 1986.
East European exports to the USSR expanded 4 percent, marking an
improvement over the sluggish pace in the comparable period last
year. In contrast with the regional upswing, Romania's exports
dropped sharply, and exports by East Germany were level.
Comment: Moscow may have planned to run small deficits with East
European countries over the next few years because they must
repay trade debts by shipping more goods to the USSR. Since the
mid-1970s, Eastern Europe has accumulated a debt of about 17
billion rubles-about $26 billion-as Moscow extended trade credits
to help the region adjust to higher oil prices. Soviet deficits may grow
larger, however, because the value of exports to Eastern Europe is
likely to remain depressed despite Moscow's efforts to offset lower oil
prices by increasing deliveries of machinery~and manufactured goods.
To avoid larger deficits, Moscow may have to accept slower growth in
imports, threatening plans for increased East European contributions
to Soviet economic modernization.
YUGOSLAVIA: Strategy for Debt T
In major new debt talks with Weste
probably will try to reschedule not
also-for the first time-some inte
calls for reducing the amount of an
n
for economic growth. Meanwhile, B
new domestic policies that may incl
price freeze,
rn creditors next month, Belgrade
only all maturing principal but
rest payments. The proposed plan
ual debt service to free resources
elgrade will introduce unspecified
ude both economic reforms and a
~-r~f~er#
Comment: The proposal, which probably will be adopted by the
Federal Assembly, follows a halt in principal payments to commercial
banks and underscores the seriousness of Yugoslavia's financial
problems. It increases the chances of lengthy disagreements during
the forthcoming talks and of extended suspensions of both interest
and principal payments. Most creditors will resist rescheduling
interest payments, preferring instead to see further lending by the
IMF as part of a new standby program. Belgrade probably hopes its
domestic program will deflect creditor demands for a standby,
although any economic reforms are likely to be limited.
ToD Secret
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Tnn Cor~cf
The regime in Kabul is apparently continuing its efforts to eliminate
prominent Afghan resistance leaders. Insurgent leader Gulbuddin-
was slightly wounded in a car bomb explosion in Peshawar o~
~~ C~,,~~~b~; ~1~, .Pakistani police suspect
IPA' " I that KHAD, the Afghan security service, was responsible. The attack
was well planned. The car bomb was put in place only minutes before
Gulbuddin's car was to pass and missed killing him by a few seconds.
It did kill at least 12 people and injured more than 45. Police believe
the timing and type of bomb used indicate the device was intended to
kill a particular target rather than cause mass casualties. Three other
resistance leaders have narrowly escaped similar bombings in
Pakistan this year
Comment: Although Gulbuddin has many enemies among the other
resistance parties, the precision with which the attack was carried out
suggests a KHAD operation. Because many of those killed or
wounded were Pakistani, public reaction to the bombing is likely to be
strong and may add to rowin tensions between Pakistanis and the
Afghan refugees
PAKISTAN: Administration Uneasy
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Prime Minister Junejo is worried that an aggravation of chronic law-
and-order problems in Sind Province may provoke President Zia to
impose emergency rule. J~une'o believes this would discredit his
Pakistan Muslim League The US 25X1
Embassy reports that party leaders are hesitant to set a date for the
nationwide municipal elections Junejo has promised will occur this
fall; they are concerned that the o osition Pakistan People's Party
might make a strong showing. 25X1
Comment: Speculation about emergency rule in Sind reflects friction
but not a rift between Zia and Junejo. Emergency rule is unlikely to be
imposed-barring a total breakdown of provincial security-because
it would be interpreted as a lack of confidence in the Prime Minister
by Zia. The Pakistan Muslim League is beset with organizational
problems, but Junejo is unlikely to cancel the elections because this
would be an acknowledgment of his party's weakness. He will delay
setting the date and format of the elections as long as possible in an
effort to minimize the ability of opposition parties to organize their
campaigns.
Top Secret
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NORTH KOREA: Debt Rescheduling
Western banks-which recently declared North Korea in default on
$790 million in debts-have suspended legal action to seize the
North's assets, according to press reports. The move follows
P'yongyang's agreement in principle to the banks' proposal for
rescheduling. The North has demanded changes in the terms,
however, namely afour- rather than aone-year grace period and a
smaller initial payment. The two lead banks reportedly have accepted
the changes but must secure approval of all 140 banks involved in the
loans. North Korea must sign the agreement and make a $32 million
downpayment by 2 October to forestall further legal action
Comment: The North probably agreed to reschedule because it
recognized it had no more bargaining room, but there is good reason
for bankers to be skeptical about whether it will go through with the
deal. Since North Korea took out the loans in the early 1970s, it has
made few payments-and none since 1984-in spite of three
previous reschedulings. Moreover, North Korea is also in serious
arrears on the $1 billion owed on other commercial bank loans and on
government and government-backed credits from Western Europe
and Japan.
Top Secret
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PERU: Inflation Provoking Labor Unrest
Some 600,000 Peruvian state workers shut down government
services this week during a 48-hour strike for a substantial wage hike.
The Marxist-controlled public workers' confederation threatens to
walk out next week for an indefinite period if Lima does not grant a
raise, according to impress reporting. The radical
teachers' union reportedly plans to use similar tactics next month in
support of demands for higher wages and educational reform 25X1
Comment: Rising inflation
1.O~r~is fueling labor discontent. Although President Garcia
included a 25-percent wage increase for government employees in
the economic measures he announced in July, the raises are proving
insufficient to head off militant labor activity. The latest unrest is
already the most serious in Peru since a 24-hour general strike in
May, and union agitation is likely to accelerate because Marxist labor
leaders apparently believe Garcia is more politically vulnerable
following, successful protests against his recent bank nationalization
initiative.
Toy Secret
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GREECE: Hints of New Economic Policy
In his annual economic address earlier this month, Greek Prime
Minister Papandreou played down his commitment to make the
economy more socialist and promised that wage controls-the
keystone of his two=year austerity program-would be eased.
Attributing the considerable improvement in Greek balance-of-
payments accounts to his stabilization policies, Papandreou
announced that he would continue to improve Greek competitiveness
and that there was a need to stimulate private investment and reduce
government intervention in the economy.
Comment: Papandreou's moderation contrasts markedly with the
socialist rhetoric of his first term. The speech was short on specifics
and was intended to appease leftists by easing austerity and
moderates and businessmen by emphasizing a smaller government
role in the economy. Papandreou also left open the possibility that he
may implement expansionary economic measures before the national
election due by 1989. Doing so would be risky, however, because the
current-account deficit is still large and its improvement since 1985 is
mainly the result of lower oil prices and increased EC aid.
Top Secret
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Ton Secret
Europe
- Brigadier General who heads Israel's West Bank Civil
Administration resigning, according to press ...leading proponent
of greater self-rule for West Bank Palestinians ...departure will
snag efforts to grant them more local authority.
incident occurred in Angola
- Four South African military personnel killed by antitank weapon
Sunday, according to press ...location not specified, but report
implies Namibia ...ambiguity, type of weapon involved suggest
- UK cautioning Kuwait against reregistering more ships under
British flag ...London concerned about overcommitment in Gulf,
Defense Secretary Ileto on military issues
deputy, was channel between Aquino and Chief of Staff Ramos,
- Philippine President Aquino's new Executive Secretary, Catalino
Macaraig, is competent, apolitical technocrat ... as Joker Arroyo's
Top Secret
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Top Secret
Special Analysis
USSR-CUBA- Support to Chilean Opposition
CHILE:
Increasing opposition in Chile to the regime of President
Pinochet has encouraged the USSR and Cuba to prepare their
allies in Chile for the possibility of violent revolution. The
formation of democratic governments in several key South
American countries has helped to focus regional antipathy on
Pinochet and reduced Moscow's concerns about a regional
reaction to its support for Chile's leftist opposition.
Nevertheless, the public outcry in Chile and the region after the
discovery last year of a 70-ton Cuban-supplied arms cache and a
subsequent attempt on Pinochet's life appears to have induced
Moscow, at least, to proceed more cautiously in supporting the
use of violent tactics.
Both the USSR and Cuba consider the Chilean Communist Party-for
many years the Latin American party closest to Moscow-to be the
most important of the leftist opposition parties in Chile. They have
been attempting to put the party in a position to emerge as the
dominant group within any successor government to the Pinochet
regime and have given it guidance, funding, training, and other
assistance. To maximize resistance to Pinochet, they-together or
individually-have also given such support to the Manuel Rodriguez
Patriotic Front, the Movement of the Revolutionary Left (MIR), and the
Almeyda faction of the Chilean Socialist Party.
In recent years, the Soviets and their allies have increased this
assistance. In 1985 Moscow provided $5 million for Latin American
leftist groups, much of which went to the Chileans
a Chilean committee in Havana supports various
Chilean leftist political parties, including the Communist party and the
MIR, with a yearly stipend of $500,000 provided through the Bloc
embassies in Havana
Since 1984 approximately 1,500 Chilean leftists have reportedly
received military and political training in Communist and revolutionary
Havana has apparently taken the lead in supplying increasing
amounts of arms, as evidenced by the large quantity of weapons-
enough to arm 4,000 fighters-discovered in northern Chile last year.
Moscow, Havana, and East Berlin have also provided safehaven to
many Chilean exiles
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Differing Views in Moscow and Havana
Too Secret
Moscow's prime objective is to position the Chilean party to govern
Chile someday-as the immediate successor to Pinochet if possible.
The Soviets are prepared to support violence and terrorist activities
to achieve this goal, but it is increasingly evident they do not want to
jeopardize the party's long-term prospects with a premature or
ill-conceived attempt to overthrow Pinochet
For now, the Soviets are urging the party to work with other leftist
groups, although they are careful to avoid giving these groups enough
support to challenge Communist leadership of the leftist opposition.
Moscow has, in fact, withheld support for the Cuban-backed MIR,
believing that the MIR's radical policies undermined President
Allende in the early 1970s
Havana, in contrast, is intent on driving Pinochet out of office and
seems less concerned than Moscow about which rou leads the
revolution Fidel 25X1
Castro is prepared to back almost any group in support of this goal.
The Cubans probably assume the Chilean Communist Party will
ultimately emerge as the dominant group in a successor government
and are more inclined to support potential rivals such as the MIR in
order to bring to bear as much pressure as possible on Pinochet.
Havana's support for the MIR-the oldest and historically most
violent leftist group in Chile-makes clear Cuba's continued
Moscow may be advising the Chilean Communist Party to proceed
cautiously, at least for the time being.
the party is trying to exercise more control over the Manuel Rodriguez
Front and has reduced funding for the Front's terrorist activities.
Castro, on the other hand, appears undeterred by the discovery of
Cuban involvement with the caching of weapons. He has pledged to
replace the weapons confiscated by the Chilean security forces and,
has continued to train Chileans
to ferry supplies clandestinely into Chile.
Despite tactical differences, the Cubans are likely to follow the
Soviets' lead in supporting the Chilean opposition if Moscow forces
the issue. If Pinochet leaves office by 1989 and a civilian government
with broad popular support is established, Moscow will probably urge
the party to return to nonviolent tactics and focus its immediate
attention on obtaining legal status. If, however, an intransigent
Pinochet retains the presidency after his term ends in 1989, Moscow
probably will encourage the Communists to turn increasingly to
violence in the hope of promoting an all-out insurrection against the
government.
Top Secret
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Ten Secret
~L~BEIRUT .
Mediterranean
Sea
Palestinian guerrillas,
~S September
~/i'~^ Line I y(`
`~' ~h
~~ `'~ Arlat ~ .;
_, Go-lan Heights
Israel
Boundary representation is
not necessarily euthoritetive.
18 September 1987
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Special Analysis
ISRAEL: Strengthening Army of South Lebanon
Recently increased Israeli support for General Antoine Lahad's
Army of South Lebanon has markedly improved the militia's
combat effectiveness and morale. Nevertheless, radical Shia and
Palestinian forces in fhe region are also growing stronger and
are likely to stage more frequent and lethal attacks akin to the
ambush on Tuesday of an Israeli patrol by pro-Syrian Lebanese
and Palestinian guerrillas.
Top Secret
Israel has made
substantial progress in training ASL members and has provided more
direct military support in the security zone, including artillery fire to
repulse attacks. Despite almost daily hit-and-run attacks against its
units, the ASL is demonstrating greater confidence in its military
strength and an increased willingness and capability to engage Shia
forces.
More Support for Lahad
After the major Hizballah offensive in late May, in which several ASL
positions were attacked and two briefly captured, Tel Aviv intensified
its military cooperation with Lahad. It has since fortified the militia's
defensive positions, improved weapons training, and provided rapid
and heavier Israeli artillery support,
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Israel also has increased financial support to help ASL recruiting
efforts among the southern Shia community in hopes of countering
Hizballah, which receives considerable funding from Iran. Earlier this
year Tel Aviv began paying Lahad's militiamen in U
allows their relatives to work in Israel, according to 25X1
reporting. Moreover, Israel funds medical facilities in 25X1.1
Marjiyun-headquarters for the Army of South Lebanon. 25X1
ASL recruited nearly 300 new members in the first
half of the year, apparently in part because of the Israeli support.[
current militia strength is 2,400 with a
goal of 3,000.
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Lebanon's dismal economy has also contributed to Lahad's
recruitment success. he ASL is now 25X1
attracting Druze and Shias as well as Christians from Beirut. The Chief
of Staff of the Christian Lebanese Forces recently told the US defense
attache in Beirut that he had lost 300 members to the lure of ASL
dollars.) 25X1
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Ton Secret
The clash Tuesday that killed three Israeli soldiers was the most lethal
for Tel Aviv in more than two years and underscores the additional
threat from leftist Lebanese and Palestinian factions. The evident
difficulty in capturing the guerrillas was made more so by the rugged,
virtually inaccessible terrain of Mount Hermon, an ideal hiding place.
Despite its recent gains, the Army of South Lebanon will continue to
rely on Israel for support against its increasingly effective enemies.
Hizballah, leftist Lebanese, and radical Palestinian groups retain the
initiative and have the trainin and wea ons to mount large assaults
on vulnerable ASL positions
Israel's recent efforts to strengthen the ASL underscores its
commitment to the security zone as the only viable near-term method
of ensuring security for Israel's northern settlements against Hizballah
attacks and Palestinian infiltration attempts. Strengthening Lahad's
units reduces the need for Israel to reinforce its relatively limited
presence in the security zone-about 1,500 men-and is consistent
with Tel Aviv's policy of increasing its forces only for infrequent,
limited ground attacks within and, if necessary, north of the zone.
Top Secret
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a vN v~a.~ ca
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