WHY DID MOSCOW KILL PREMIER OLOF PALME?

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90-00806R000100640038-9
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 75
• Document Creation Date: December 22, 2016
• Document Release Date: August 5, 2010
• Sequence Number: 38
• Publication Date: December 19, 1986
• Content Type: OPEN SOURCE

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From the Editor
Since this is our last issue before the holidays, the editors of EIR
would like to take this opportunity to thank those of our subscribers
whose large contributions, during 1986, have made it possible to put
the weekly publication and many copies of our Special Reports, in
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has gone wrong with our economy and how to fix it. EIR's unique
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Washington officials who are now in the process of cleaning out the
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1contents
Departments
21 Report from Rio
Brazil 'integrates' Argentina.
51 Vatican
Economic justice theme of Asia
trip.
52 Report from Bonn
An adviser who came in from the
East.
53 Report from Paris
Student demos used against
Chirac.
54 Andean Report
Science & Technology
28 Aerospace production
capability: a shadow of the
1960s
Even the aerospace and defense
industries have not fared well
during the "economic recovery." A
report by Marsha Freeman and
Robert Gallagher.
Investigation
Economics
4 The economic agenda for
1988 surfaces
6 Thatcher leads European
prime ministers in 'war on
AIDS'
8 Soviet economy: NEP,
environmentalism, and
military industry: a
contradiction?
10 Indo-Soviet trade: rubles
and rupees
11 Currency Rates
AIDS conferences held in Lima.
60 Fidel Castro's friend
12 Behind the `stagnant
55 Mother Russia
Vesco aids the Contras
recovery,' a deep
The KGB and the Dzerzhinsky
The financial empire of one of the
economic recession
method.
Sandinistas' top financiers and
threatens
benefactors, narcotics finance king
A survey of the West German
Robert Vesco, sits at the center of
56 Middle East Report
Contra operations. Confusing? Not
economy.
Will Moscow really gain in
if
ou understand the workin
s of
Irangate?
y
g
Dope
Inc
19 U.S. Lines' parent
,
.
company files Ch. 11
57 Dateline Mexico
Mexican 'Big MAC' suggested to
Japan.
63 AIDS outbreak in
Nicaragua, Contras
20 Argentine Church backs
labor's demand
72 Editorial
Time to dump AIFLD.
22 Domestic Credit
'Consensus forecast' on the
Titanic.
23 Agriculture
Food disputes in a world of
hunger.
24 Medicine
New technology for cancer
detection.
25 Banking
The first cracks in securitization.
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Feature
Swedish Prime Minister O1of Palme speaking in
Washington in 1982. This week's feature looks at why
the Soviets decided to kill him.
34 Why did Moscow
assassinate Sweden's
Premier Olof Palme?
Sensational revelations in the
European press about Palme's love
affair with Emma Rothschild
provide the key to unraveling the
mystery. Little wonder, then, that
NBC-TV and the U.S. Justice
Department have launched a new
disinformation attempt, reviving
the discredited line of a
"LaRouche angle" in the murder.
Our Feature presents the findings
of a team of researchers in Europe
and the United States.
36 Bizarre twists in the Palme
investigation
38 The Rothschild factor and
the role of SIPRI
39 A classic Soviet
disinformation job
41 A worldwide media `big
lie' campaign
42 Police furious at Holmer's
cover-up
43 Moscow's favorite Swedish
bankers
International
44 Shultz a disgrace at NATO
foreign ministers' meeting
The communiqu6 issued after the
NATO foreign ministers' meeting
was contrary to the policy of both
the U.S. government and NATO.
The allied governments find
themselves in the dangerous
position of having a foreign
ministers' revolt on their hands.
Documentation: Recent
statements by Defense Secretary
Caspar Weinberger, NATO
Supreme Commander Gen.
Bernard Rogers, and U.S.
Ambassador to West Germany
Richard Burt.
48 Busting up Kissinger's
special U.S.-Israel
relationship
One of the main targets for clean-
up in the Irangate scandal is the
National Security Council's Israel
connection.
50 Kissinger Watch
Scandal shuttle on the northern
route.
58 International Intelligence
National
64 `Irangate' sparks policy
shifts, NSC clean-up
The purging of the Kissinger and
Mossad-contaminated elements is
only the surface of an expected
deeper change, in both the
structure and substantive policy
orientation of the Reagan
administration.
66 LaRouche Democrat sets
mayoral program
Mrs. Sheila Jones, a leading
LaRouche collaborator in the
Midwest, has accepted a mandate
from the "forgotten majority" to
run for mayor of Chicago in the
primary in February 1987.
68 Economic, military crisis
scares Dems
The Democratic Leadership
Council, meeting in Williamsburg,
grappled with the fact that the
country is undergoing one of the
greatest economic and military
crises in its history. Some of the
results are quite surprising.
Correction: As most readers no
doubt determined for themselves,
in the article "EIR's record: how
we called the shots," in last
week's issue (page 38), the first
date should have read, Jan. 8-14,
1980, not 1986.
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IIIEconomics
The economic agenda
for 1988 surfaces
by David Goldman
It might be that the myth of the "Reagan recovery" will
disappear, forgotten and unmourned, along with its principal
architect, White House Chief of Staff Donald Regan. The
same concern for national security that prompted the ongoing
purge of Regan and related elements in the White House and
the departments of government, has emerged in a new, wide-
spread recognition that the United States has entered a period
of economic disaster, and that nothing short of a supreme
national effort will save the nation.
Appropriately, the battle inside General Motors has be-
come symbolic of the reaction against the petty-accounting
attitude of the White House and U.S. corporate leaders, which
has viewed capital-intensive manufacturing as "cost-ineffec-
tive." General Motors officially inaugurated the next ratchet-
collapse in manufacturing two days after the Republicans'
defeat in the November elections, announcing the largest
number of permanent layoffs ever planned by a U.S. corpo-
ration. With GM's car and truck production down 16% rela-
tive to last year's, and the overall U.S. auto industry's output
down 8%, GM's scramble to cut production and inventories,
clumsily timed to maintain the fiction of economic health
through election day, destroyed the last shreds of credibility
of the recovery myth.
In fact, as the Joint Economic Committee of Congress
showed in a report issued Dec. 10, the appearance of recovery
might have persuaded Reagan boosters principally concerned
with their stock portfolios, but not the public at large. The
JEC showed that total employment grew by more than 8
million between 1979 and 1984, but that all of the net growth
occurred in jobs paying less than $14,000 a year, and nearly
60% of the net growth took place in jobs that paid less than
$7,000 a year.
Barry Bluestone of the University of Massachusetts and
Bennett Harrison of Massachusetts Institute of Technology
drew the obvious conclusion: "The continued decline in high
wage manufacturing, combined with the expansion in the
low-wage retail trade and service sectors, have led to the
popular perception that America may be on the verge of
losing its middle class."
Since 1981, construction and manufacturing jobs dropped
by 500,000, while private sector service employment ac-
counted for all the net growth of civilian jobs. Since 1979,
nearly 97% of the net employment gains for white males
were in the low-wage category, that is, below $7,000 a year
measured in 1984 dollars.
A study by E!R, to be published in our end-of-year Quar-
terly Economic Report, shows that the expansion of low-
wage jobs, and contraction of manufacturing employment,
has led to a situation where 32% of all working-age Ameri-
cans and their families fit the profile for recipients of occa-
sional food-basket donations, as noted by private charities
across the nation. The predicament of working Americans
echoes President Franklin D. Roosevelt's second-term inau-
gural warning that "one-third of a nation" had become desti-
tute.
No one but the country-club set (minus real estate oper-
ators, savings bankers, oil men, and so forth) imagined that
the recovery ever was, which explains the Republicans' elec-
toral disaster in November.
Enter: H. Ross Perot
That is the background to H. Ross Perot's celebrated blast
against General Motors management.
Perot warned in a speech at the Detroit Economic Club
on Dec. 8, that America's industrial base has moved "off-
shore." The market share of U.S. manufacturers is eroding,
Perot said, because the U.S. economy is becoming too ser-
vice-oriented. The United States must maintain a strong man-
ufacturing base. You can't have an economy depending on
the service sector, he said.
Perot's speech was attended by a record 7,000 people,
largely because of his recent highly publicized criticism of
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the management of General Motors, the world's largest in-
dustrial corporation, which just paid Perot $700 million to
buy out his share of the company.
Interviewed for ABC-TV's "Business World," program
on Dec. 7, Perot explained, "I just don't want to be part of
an organization that's closing plants, laying people off. I
want to be part of an organization that's growing, dynamic,
creating jobs.
"If you go to war, you feed the troops before you feed the
officers," he said. "You can't look the troops in the eye and
say, `It's been a bad year; we can't do anything for you,' but
then say, 'By the way, we're going to pay ourselves a $1
million bonus."'
Perot, the founder of Electronic Data Systems, is the
product par excellence of the service industry; but he reflects
a view broadly shared in the defense sector, namely, that the
collapse of the U.S. industrial base, let alone the disintegra-
tion of the industrial workforce, will rapidly make America
indefensible.
There are indications that a sort of economic activism has
emerged in the Pentagon itself, starting with Defense Secre-
tary Weinberger.
Military sources report that the January release of the
Defense Department's Soviet Military Power book, will rep-
resent an intervention into U.S. economic policy. The object
will be to clearly demonstrate to everyone including the Pres-
ident that our current economic policy has created a strategic
danger to the United States. Two articles in this month's Air
Force magazine cite examples.
The first article, a review of a speech by DIA official
Dennis Clift, stresses that the Soviets have completed their
strategic military modernization program in tandem with
nearing completion of their Radar-ABM system. A second
article reviews the collapse of the airline industry. The impact
of this, according to the article, is a destruction of our ability
to produce and deploy fighter planes.
Meanwhile, Weinberger wants to rebuild the prostrate
U.S. machine-tool industry, according to the Dec. 8 edition
of Aerospace Daily. Weinberger is expected to sign an "ac-
tion plan" in December to revitalize the industry. Weinberger
will also decide whether DOD will put up $15 million in
matching funds to set up a manufacturing sciences research
center.
Another important signal came from former Deputy CIA
Director Adm. Bobby Inman, in an address to the Forum
Club of Houston Dec. 4. Inman said, "There will be new
products and new industries developed in the future that will
come from our new technology, but the most dramatic impact
will come from their impact on the existing industries [em-
phasis added]. It will help our potential for becoming suc-
cessful on the global marketplace."
Admiral Inman said high-technology developments in
computers, biotechnology, aerospace, and communication
must be put to use in the mining and agricultural industries.
"In this changing world, we will need people who can be
quickly adapted to working in manufacturing, research, and
automated offices or service institutions," he said, predicting
that workers may have to be retrained five or six times during
their careers, because technology will change the jobs.
Perhaps by no coincidence, Inman recently took a seat on
the regional board of the Dallas Federal Reserve Bank.
The oil price issue
For the first time, there appears to be serious political
pressure building in favor of a cure for the worst "free-mar-
ket" disaster brought about by the Donald Regan economic
policy, namely, the collapse of oil prices. This publication's
founder, Lyndon H. LaRouche, Jr., joined earlier this year
with several oil-state governors in demanding a variable tariff
to set a mininum price for oil sold in the United States. Oil at
the current level of $14-$15 per barrel implies a national
security disaster, through the elimination of perhaps one-
third of all domestic oil output; and the massive overstocking
of oil inventories in the industrial world suggests that a much
lower price is in the works.
On Dec. 11, the Interstate Oil Compact Commission,
representing 29 oil and natural gas producing states, ap-
proved a resolution Wednesday seeking a variable import
tariff on foreign oil. The resolution calls on President Reagan
and Congress to declare a national security emergency be-
cause of U.S. reliance on foreign oil.
Gov. Mark White of Texas told the 350 delegates to the
group's convention, that congressional approval is unneces-
sary. "A tariff is the only viable alternative and the President
has the power to do it" by executive order, White said. "It
won't create any burdensome bureaucracy-we already have
a token tariff on imported oil. All we have to do is move the
decimal point."
The White House, preoccupied as it is, has offered no
new response. Nonetheless, even the Adam Smith-cultists of
the Wall Street Journal have warned that the world's stock-
piling capacity for crude oil is overflowing. The International
Energy Agency's latest projections issued Dec. 10 must have
provoked panic in the relevent departments of government.
The IEA projected first-half 1987 oil-consumption growth at
only 1.6%, against a previous figure of 2%. This translates
into 35.2 million barrels per day of oil demand, against 34.65
in the first half of 1986; IEA projects total demand at 34.8
million barrels per day for all of 1986, versus 34.0 in 1985.
The report said that companies had built up stocks by an
average of 600,000 barrels per day for the first nine months
of 1986, against a drawdown of 700,000 during the first nine
months of 1985.
Falling demand and rising stockpiles translate into a fur-
ther oil price-collapse, with devastating implications for the
U.S. banking system. The administration's capacity to ab-
sorb reality on this count will be an early indication of the
extent to which we are rid of Donald Regan.
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Thatcher leads European prime
ministers in `war on AIDS'
Meeting in London on Dec. 5 and 6, the prime ministers of
the 12-nation European Community decided for the first time
to coordinate efforts to combat AIDS. With Britain conclud-
ing its presidency over the EC, British Prime Minister Mar-
garet Thatcher spoke for the nations of Europe, declaring
AIDS to be the "new scourge," similar to the 14th-century
Black Death.
Britain's Independent Radio Network announced on Dec.
6 that Thatcher was "declaring war on AIDS," and had de-
fined the 100% fatal epidemic as "the single most important
challenge facing Europe." According to IRN, her concern is
to launch "combined European efforts to combat the AIDS
menace," particularly by upgrading cooperation on research.
The European Council of prime ministers identified links
between the problems of AIDS, drugs, and terrorism. The
final communique states: "The European Council expressed
its concern about the rising incidence of AIDS ... they noted
the link that existed with the drug problem." Britain pressed
for the establishment of "the first international data bank" to
deal with AIDS, along the lines of that already being estab-
lished to deal with terrorism. This would chart the growth of
AIDS, and keep track of research efforts to combat it.
The communique also underlined "the importance of co-
ordinating the diverse national campaigns, with the aim of
increasing public preoccupation, and preventing propaga-
tion" of the disease. The European leaders also wished to
assure "an effective exchange of information, prevention,
and treatment, together with upgraded cooperation in the
field of investigation."
Impact of EIR report
Throughout Western Europe, serious discussion about
the AIDS threat is being shaped by EIR's 140-page Special
Report, "An Emergency War Plan to Fight AIDS and Other
Pandemics," issued last February. The book has been widely
circulated to public health authorities, scientific laboratories,
and elected officials, in many cases purchased for them by
EIR subscribers who understood how important it was to get
this report out. Last summer, EIR's AIDS report was also
published in a full Italian-language edition.
Back in February, EIR and its scientific collaborators
were virtually alone in describing AIDS as a potential "pan-
demic" and warning that the slow-acting virus could not be
confined to so-called risk groups, which were only the "fast
track" of transmission of the disease. The report mapped out
the economic co-factors which help spread AIDS; described
the scientific research frontiers which must be opened in a
"crash" research program to treat and prevent the disease;
and warned that only the immediate application of the "clas-
sical" public health measures, used for other highly infec-
tious diseases, could keep AIDS from wiping out the human
race before a cure is found.
Over the past month, the actions taken in Europe on AIDS
reflect a belated acknowledgement that EIR was absolutely
correct and that those who opposed it, including the World
Health Organization, were perilously wrong-as WHO di-
rector Halfdan Mahler admitted on Nov. 19, when he said
that AIDS could infect 100 million people within five years.
Great Britain
Following the EC summit, British Secretary of State for
Social Services Norman Fowler went on a "fact-finding mis-
sion" to West Germany and the Netherlands. According to
the Dec. 10 Times of London, this trip is bringing to Fowler's
attention "the grim realities of the AIDS epidemic among
Britain's European neighbors."
Within Britain, the debate on how to combat AIDS is
expanding as the disease spreads. While some ministers and
self-professed health experts are advising measures like free
syringes to addicts and distribution of condoms, others are
looking into scientifically and politically competent means
of dealing with AIDS. The Sunday Times of London reported
on Dec. 7 that the U.K. Ministry of Defense will soon an-
nounce measures to combat the disease in the armed forces.
Service chiefs were meeting the week after the EC prime
ministers, and will be sending their views on the AIDS threat
to the U.K. Cabinet Committee on AIDS, chaired by Lord
Whitelaw, "which is known to be particularly concerned
about the potential threat to Britain's security."
France
The European Labor Party in France (ELP) has released
the draft of a law which would force the French government
and health authorities to take decisive action against the spread
EIR December 19, 1986
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of AIDS. The bill was presented to the press in Paris Dec. 9
by ELP secretary-general Jacques Cheminade and Dr. John
Seale, of the British Royal College of Physicians, one of the
most prominent British backers of a "war on AIDS." Dr.
Seale stated, "No press has reported the truth about AIDS....
AIDS is a virological nightmare, a lentivirus of the retrovirus
family which destroys not only the immune system but the
brain, intestines, and lungs. . . ." Rather than being simply
a sexually transmitted disease, he said, "AIDS is character-
istically a blood-transmitted infection."
The proposed law uses the guidelines of the EIR Special
Report, and would extend existing French health regulations
to the specific threat posed by AIDS. The bill is modeled on
laws that already apply to tuberculosis, hepatitis, polio, and
syphilis. It would provide for every resident of France to be
screened (for free) every six months, and every non-resident
crossing the border into France to show an AIDS-negative
test certificate dating from less then six months before, or be
tested, before he can be admitted into France.
Among other measures, the ELP-proposed law would
also set up an AIDS research and treatment center in every
hospital; create a National Research Institute on AIDS; carry
out mass vaccination as soon as a vaccine is available; and
take measures of relative isolation for full-blown AIDS cases
until an effective vaccine and cure are found.
The draft law called for annual expenditures of about $1.5
billion (100 million French francs), not including vaccina-
tion.
Less far-reaching measures were called for at a press
conference on Dec. 1 at the National Assembly, by National
Front parliamentarian Dr. Bachelot, in the name of his par-
liamentary delegation. "France is not at all prepared to face
this infection.... If nothing is done to fight the contagion,
there will be no more people on the planet in the year
2025. . . . AIDS is not just a medical problem, but a problem
of political responsibility." He added that AIDS is potentially
"worse than nuclear war," and that it might be transmitted by
mosquitos. Dr. Bachelot proposed an "AIDS-atorium" to
isolate AIDS-sick individuals as well as a systematic screen-
ing of the high-risk population. He proposed organizing a
"popular referendum" concerning measures which "would
be transitional" in the waiting period for the discovery of a
vaccine. He also proposed, to finance this plan, launching a
state loan of 15 to 20 billion francs.
Italy
The panic over AIDS has arrived in Italy, but the mea-
sures announced by Health Minister Carlo Donat Cattin and
publicized with great fanfare as a "War on AIDS," are inad-
equate to the point of absurdity. The Italian government's
anti-AIDS plan allocates a mere 50 billion liras (about $50
million), "less than the top prizes in the popular national
betting game, Totocalcio," points out Fiorella Operto, pres-
ident of the Schiller Institute in Italy. The Institute is using
the EIR report to mobilize the population for emergency
measures to stop the spread of AIDS.
Schiller Institute spokesman Marco Fanini noted during
a televised roundtable on AIDS over the major northeastern
Italian regional channel "Tele Alto Veneto" on Dec. 10, that
it costs 300-400 billion liras to build one new hospital alone-
several times the figure allocated by the Health Ministry for
the entire program.
Italy's "experts" are coming closer by the day to the
scientific standpoint of the EIR Special Report on AIDS,
which has saturated the relevant circles in the Italian-lan-
guage edition. Only last May, at a conference on AIDS in
Milan, the same experts were rabidly attacking the Schiller
Institute's "extreme" views. Now, from one end of the pen-
insula to the other, medical professionals are joining Schiller
spokesman in town meetings and television panels, to inform
the public on the reality that AIDS is a far greater threat than
previously stated.
In the cited television roundtable, Fanini was joined by
Prof. Dante Bassetti, infectious diseases specialist at the Uni-
versity of Verona, who stated that besides blood and semen,
saliva is almost certainly a vehicle for the virus, and perhaps
in certain situations, mosquitos. Bassetti also noted that in
Verona he is treating more than 260 AIDS patients with only
25 hospital beds available. When one day these 260 cases
must be hospitalized, where will they be put? Bassetti said
he hoped new hospitals will be built for AIDS patients-like
the new very modern one in Houston, Texas-or at least new
wings devoted to AIDS.
The Schiller Institute and EIR's growing acceptance as
"the" authority on AIDS in Italy, was reaffirmed when the
health commissioner of Lombardy, Italy's most populous
region, Dr. Isacchini, appeared at a press conference on
AIDS in Brescia on Dec. 19, hosted by the Schiller Institute.
At the southern end of Italy, in the town of Alcamo in
Sicily, the editor of the Italian edition of the EIR Special
Report on AIDS, Claudio Rossi, was guest of honor on Nov.
29 at a conference organized by the local Lions Club, "AIDS:
The Greatest Threat to Human Survival," attended by 110
citizens. Alcamo Lions Club head Dr. Francesco Filippi
opened the conference with a brief treatment of the medical
aspects of the disease based on the EIR study. He clarified
that the transmission of the disease is not solely among "risk
groups," where contagion follows a fast track, but that the
entire population is at risk. Claudio Rossi, speaking for the
Schiller Institute, presented EIR's new computerized epide-
miological model for AIDS.
On Nov. 28, in Salerno, an important city south of Na-
ples, the local Red Cross invited the Schiller Institute's Gal-
liano Sped to address a conference on AIDS. The more than
100 citizens who attended included the entire civic leadership
of Salerno and representatives of the local military district.
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Soviet Economy
NEP, environmentalism, and
military industry: a contradiction?
by Luba George
On Oct. 28 the Soviet party newspaper Pravda published an
article marking the 65th anniversary of Lenin's October 1921
speech "On the New Economic Policy." This is only one,of
a number of recent Soviet articles that have referred to the
New Economic Policy, or NEP.
In the past few months, Mikhail Gorbachov has spoken
openly about the relevance of the NEP experience for the
U.S.S.R. today. In his speech in the Soviet Far East city of
Khabarovsk at the end of July, he called for "bold new poli-
cies" to solve the Soviet Union's problems and spoke ap-
provingly of NEP.
The Western press, all aglow with these new signs of
NEP as alleged signs of a "new period of de-Stalinization,"
described Gorbachov as a "reform-minded advocate," who
has brought about Soviet "political pragmatism" and "eco-
nomic liberalization."
Raisa's role
The campaign to popularize the NEP goes hand in hand
with the recent creation of a Soviet "Culture Foundation,"
promoted by Mikhail's wife Raisa Gorbachov, who is on the
10-member executive board of the Foundation. The NEP
resurrection has been spearheaded by the "Culture Founda-
tion's" literary friends of Raisa Gorbachov. Soviet writer
Sergei Zalygin, whom Alexander Solzhenitsyn placed sec-
ond on his list of "true Russian writers," was the first to set
the tone when he wrote: "NEP is not a tactic but a strategy of
socialism." Over the past 10 years, Zalygin has written and,
with some difficulty, published his novel about the advan-
tages of NEP-Posle buri (After the Storm).
Zalygin, a leading founding member of the Soviet Cul-
ture Foundation-to which the old American magnate and
Kremlin friend Armand Hammer generously contributes-
is a top Soviet propagandist for the New Economic Policy
(NEP), under Raisa's benevolent protection and guidance.
His role as a leading Soviet expert on NEP, and the content
of his writings, have been monitored by Radio Liberty. Raisa
herself is not only the wife of Mikhail Gorbachov, and the
real power behind the Culture Foundation, she is the daughter
of the oldest surviving high-ranking official of the New Eco-
nomic Policy (NEP) under Lenin, Maxim Titorenko.
Zalygin is often referred to by the younger Soviet writers
as the father of novoe myshlenie (the new thinking) or the
"New Age," pioneered by the "village prose" movement of
the 1970s, which glorified the Russian countryside as the
repository of raw spiritual values. Out of this "village prose"
movement, came the U.S.S.R.'s present-day "ecology"
movement including authors of the Raisa Gorbachov salon-
like Valentin Rasputin, Sergei Zalygin, Chinghiz Aitmatov,
Grigori Baklanov, et al.-responsible, among other things,
for the "Save Lake Baikal" campaign and other demands that
Mother Russia be protected from the ravages of pollution and
mining. The huge "Project of the Century"-the River Di-
version Project, which would have channeled the water of
the main Siberian rivers into and Muslim Soviet Central
Asia-was sacrificed, thanks to this campaign.
The monthly party theoretical journal Voprosy fflosofii
(No. 4 1986) writes: Zalygin "threatened to shatter precon-
ceptions, to destroy the stereotypes of cliche, ignorant judg-
ments about the most complex period (NEP) in our history,
which has perhaps been least illuminated by science and art.
Zalygin is the first ... Soviet writer to devote attention to
the NEP period . . . seriously, as an interested scholar, his-
torian, sociologist, and artist."
Zalygin was recently appointed the new chief editor of
Novy Mir (New World)-with half a million circulation-
which has, since his appointment on Aug. 10 this year, been
spearheading Gorbachov's "glasnost" (openness) drive-on
such themes as the growing drug problem in the U.S.S.R.,
environmental issues and the NEP theme. In reporting the
appointment Aug. 10, the Yugoslav news agency Tanjug
drew attention to the fact that Zalygin is probably the only
chief editor of a Soviet journal who is not a member of the
Communist Party of the Soviet Union.
The first part of Zalygin's 300-page novel Posle buri,
was completed while Brezhnev was still General Secretary,
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but it got the green light only in May 1982 (in the journal
Druzhba narodov) when the former KGB head Yuri Andro-
pov was effectively already in power. Following its publi-
cation, in March 1983, Literaturnaya Gazeta proclaimed that
Zalygin was singing the praises of the "energy of NEP....
The novel provides a splendid reply: NEP is not simply a
tactic but a strategy of socialism."
The second part of the novel was published in the issue
of Druzhba narodov for July, August, and September 1985,
only after Gorbachov was already in power, and after Gor-
bachov's protege, Alexander Yakovlev, had been appointed
head of the Central Committee's Propaganda Deparment.
Pravda gave the official evaluation of the novel on May 30;
1986: "Sergei Zalygin has taken it upon himself to explore
on a fundamentally new artistic level a phenomenon, the
essence of which, let us not forget, was conceived as a pro-
gram by Lenin. NEP ... was not simply an economic mea-
sure. The experience of NEP also provided special conditions
for the social and spiritual transformation of man.... That's
what Zalygin's novel is about: about man, about his fate at a
critical time.... About how ' a new energy in thinking' must
be discovered in man, without which rational life and the
improvement of life is impossible. The latter, in turn, is the
only means to save the world and oneself."
Zalygin, together with Grigori Baklanov, the editor of
Znamia, is a member of an eight-man special commission
created by the Soviet Writers' Union which is responsible for
stepping up the publication of works along the Gorbachov-
Yakovlev "new thinking" line.
The military-industrial angle
How does this movement representing the "new think-
ing," so often referred to by Gorbachov in his speeches, fit
in with Soviet Marshal Ogarkov's and the "Russian Party" of
the Soviet leadership's drive for world hegemony? The NEP
and the "democracy" that goes with it, as well as the "ecolog-
ical" side of its campaign, in no way hinder the Soviet mili-
tary from doing what it has to in the period ahead to attempt
to achieve absolute military superiority.
Russian Party "environmentalism" is in no way compa-
rable to the Green radical-environmentalist Jacobinist plague
sweeping the West. Raisa Gorbachov's NEP "ecologists" are
not opposed to nuclear power, and never express any oppo-
sition to programs of either the Soviet military or the Russian
military-industrial complex. Furthermore, their campaigns
in the literary world, such as attacking certain big projects,
are fully in tandem with the massive tilt in Soviet investment
policy under Gorbachov. Under the Gorbachov priorities of
modernizing Soviet industry, there has been a vast increase
in investments to modernize existing industry, making it both
more efficient and less polluting; to accelerate the construc-
tion of non-polluting nuclear power plants; increase railway
electrification; and so on down the line.
There is another facet to this investment tilt under Gor-
EIR December 19, 1986
bachov. One must bear in mind that about two-thirds of the
Soviet Union's industrial output comes from the Russian
Republic (as recently stressed at the session of the Russian
Republic's soviet, or parliament). Thus, the bulk of invest-
ments going to modernize existing industry means that in-
vestment policy is focused on the Russian Republic. Similar-
ly, the bulk of the abandoned new big projects-typified by
the Siberian rivers water diversion to non-Russian, Muslim
Central Asia-hit the subject populations of the Russian
empire. The demands of the military high command and the
industrial modernizers, lead to the same results as those of
the Russian Party environmentalists.
The same is true concerning the resurrection of the NEP.
The NEP of Gorbachov envisages employing productively-
in a private sector-strata of the population such as pension-
ers, housewives, or students, who are not engaged in any
labor for the state. Why not set up a mechanism whereby
these groups of the population can help solve critical bottle-
necks in the horribly inept service, repair, and handicraft-
manufacturing sectors of the Soviet economy?
From the first days after the Bolshevik Revolution, Soviet
military and defense doctrine has been guided by the "Frunze
principle" (named after one of the leading Soviet military
theoreticians, Mikhail Frunze, whose writings still influence
Soviet commanders like Marshal Nikolai Ogarkov and Soviet
defense policy) that the economy, particularly industry and
its technological base, takes precedence over even the build-
ing up of the arms arsenal; in this way, the horse leads the
cart. Frunze was noted for having called on industry to be
more responsive to the requirements of the military for R&D
and for faster technological change in all sectors, not just the
arms sector. Thus when defense options are considered, all
Soviet political and military leaders support the continuing
growth of the economy and raising the level of technological
capacities as first priority.
This dual-strategy-prioritizing the development of the
U.S.S.R.'s technological base, while resurrecting NEP-
could be seen at the VI Congress of Writers of the R.S.F.S.R.
(Russian Federation of the U.S.S.R.), where in his keynote
address the president of the union, Sergei Mikhalkov asked:
"Is man morally prepared for the headlong acceleration of
technical progress by leaps and bounds, and is the writer
himself up to date with the current state of the scientific-
technological revolution and its future?"
The U.S.S.R.'s "poet laureate" and one-time "angry
young poet" of the 1950s, Yevgeni Yevtushenko, in his speech
de-coded some of the NEP's hidden Russian chauvinist ele-
ments: "Spiritual progress," said Yevtushenko, means hav-
ing the courage of Lenin, "to attack the new Soviet bureauc-
racy and communist arrogance ... [to] fearlessly put the
country onto the footing of the New Economic Policy." But
it also would mean for "the people . . . to analyze its own
errors and tragedies, "so as to become `spiritually invinci-
ble'. . . . For us, mankind begins with the Motherland."
Economics 9
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From New Delhi
Indo-Soviet trade :
rubles and rupees
by Susan Maitra
The celebrated 1953 Rupee Trade Agreement between Mos-
cow and New Delhi is undergoing stress and strain. Though
the agreement on economic and technical cooperation signed
on the occasion of Mikhail Gorbachov's state visit to New
Delhi Nov. 25-28, 1986 was billed by some as opening a
"new chapter" in Indo-Soviet economic cooperation, it might
be more accurate to say that the Soviet 1.2 billion ruble credit
covering four large projects was sufficiently dramatic to pre-
vent the book from being closed.
The announcement a week later that the Soviet Union had
decided to increase crude oil exports to India in 1987 from
3.5 to 4 million tons, and had a proposal for another.5 million
ton boost under consideration, is more revealing of the actual
state of Indo-Soviet economic relations, which for the last
six years or so have been a battleground. At issue is a large
trade imbalance in India's favor, which reflects the divergent
requirements of the two nations' economies.
In 1979, with an accumulation of Soviet ruble balances
resulting largely from defense supplies, Indian exports to the
Soviet Union began to soar. The Soviet demand for agricul-
tural raw materials such as cashews and mangoes and for
consumer goods-from soap and detergent to textiles and
shoes-appears insatiable, and whole industries sprang up
on the strength of the Soviet market. An Indian trade surplus
with the Soviet Union of nearly $200 million grew to about
$550 million by 1983. While total trade turnover doubled
from 1981-84, by 1986 India's surplus stood at $700 million.
Though in real terms, the Indian surplus represents a kind
of surplus to the Soviet economy, Indian officials have been
in no special hurry to restore balance. In 1983, India began
accepting "technical credit" to cover the imbalances-credits
that jumped from $35 million in 1980 to some $1 billion in
1983. At the same time, India continued to press for increased
imports of Soviet crude oil, fertilizer, and several other items
that would otherwise cost India precious foreign exchange
on the international market.
For their part, the Soviets' anxiety to redress the trade
imbalance has been coupled with a determined reluctance to
part with the crude oil and other products that are dollar
productive for themselves. They have continued to periodi-
cally flex their considerable muscle in the form of arbitrary
denial of orders to Indian producers almost entirely depen-
dent on the Soviet market. The warning shots came in 1983,
when orders for cashew nuts, textiles, and other staples of
the trade plunged. Even today, in spite of a promise to raise
textile imports from India to 500 million meters per year, the
1987 annual trade plan projects imports of just 100 million
meters, down from 220 million meters last year.
Nonetheless, Rajiv Gandhi and Mikhail Gorbachov have
announced a commitment to raise trade turnover by 2.5 times
by the year 1992. A special committee set up on the Indian
side to carry through on this commitment has produced a list
identifying more than $1 billion worth of Soviet products
appropriate for export to India. At the top of the list is crude
oil, steel, diesel locomotives, and chemicals. Also identified
by the Indian side are some 70 areas that offer good potential
for production cooperation, including the automotive and
textile industries. So far, according to first reports, India's
efforts to enter joint-venture projects with the Soviet Union
have been hamstrung by the Soviet demand for a 51 % partic-
ipation in the equity capital of the ventures, implying Soviet
control of the ventures which India cannot accept.
The trade pattern
The backdrop to the difficulties is actually the develop-
ment of India's economy. In the mid- 1950s, when India's
economic relationship with the Soviet Union began, the co-
operation focused on the development of basic industry, and
the bulk of India's imports from the Soviet Union consisted
of equipment and machinery. Since India's economy has
developed a fairly broad industrial base, the requirements for
machinery imports have fallen considerably, and India's main
preoccupation in the Rupee Trade Agreement is to increase
the import of those items which would otherwise cost hard
currency.
In this sense, the large new Soviet project credit an-
nounced during the Gorbachov visit shifts attention from the
real difficulties in the trade relationship, and recalls the best
of the Soviet economic relationship to India. It was, after all,
in the 1950s, when Indian requests for assistance in building
up a steel industry were rejected by the United States, that
the Soviet Union stepped into the breach. Since then, out of
220 public-sector enterprises in India, mostly in heavy in-
dustry, 83 have been built either wholly or partly with Soviet
assistance. Projects constructed with Soviet aid account for
40% of India's iron and steel production, 80% of its metal-
lurgical equipment, about 40% of mining equipment, about
55% of power-generating equipment, and some 10% of elec-
tric power generating capacity, besides a significant share in
the oil and oil products sector.
The latest credits have been extended for the construction
on a turnkey basis of four projects: one, a large, 2,400 me-
EM December 19, 1986
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gawatt hydropower project in the Tehri region, the modern-
ization of the Bokaro steel plant, the setting up of four un-
derground mines to raise annual coke and coal production
capacities by about 8 million tons, and, finally, on-shore oil
exploration in West Bengal. The Soviet credits carry an in-
terest rate of 2.5%, repayable in 17 years in equal install-
ments, due three years after the date of utilization. The Soviet
credits also include the provision for financing of local ex-
penses of the Tehri power project.
Large as it is, the Soviet credit has been criticized in some
quarters for being a lot of "show." The critics point out that,
based on past experience, Soviet credits take years to mater-
ialize, and the economic effect is not as dramatic as it might
seem. On past experience, the credits are actually used only
for the purchase of equipment, something that tends to be the
last phase of the project, and delays have been frequent. The
critics also point out that, for this very reason, there is already
a large amount of Soviet credits that are as yet unused. They
also point out that the turnkey provision of the assistance
leaves relevant Indian industrial capacity out in the cold. In
response, the government has argued that, since its own
ability to proceed with these projects is limited by a lack of
financial resources, the Indian capacity would not in any case
be used, and therefore it is better to take advantage of the
Soviet credits to get these projects going.
So, You
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A text on elementary mathematical economics, by the
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Currency Rates
The dollar in deutschemarks
New York hte afternoon axing
2.30
2.20
2.16
2.<
I.,e
1121 10120 1114 U/11 11/18 11/25 12/2
The dollar in yen
New York late afternoon fixing
12/0
170
170
10121 1012$ 11/4 11/11 11/10 11/25 1212
The dollar in Swiss francs
New York hteanerease bring
11V
z.<
Lf0
1.110
1.70
de
MenfN
400-
10/21 10/2$ 11/4 11/11 11/IS 11/2$ 12/2 1Lf
The British pound in dollars
New York kin anerseoe axhg
1.51
1.40
1.31
1.20
1.10
10/21 10/28 11/4 11/11 11/18 11125 1211 1201
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West German Economic Survey
Behind the `stagnant recovery,'
a deep economic recession threatens
by William Engdahl
For almost two years, the West German Bundesbank, major
economic institutes, and the Bonn coalition government of
Christian Democrat Helmut Kohl, each for their own rea-
sons, have proclaimed an "economic recovery." Continued
adherence to this illusion could have devastating results for
West European economic growth prospects over the coming
decade. We take a detailed review of the actual production
sector of the Federal Republic of Germany, which represents,
with the possible exception of Japan, the most important
industrial-technological base in the world today.
First, as in the United States and most Western OECD
economies, national accounting is based on a built-in fallacy:
"GNP accounting." By this method, the monetary index of
all economic activity-productive as well as non-productive,
it does not differentiate-is totaled. So long as the aggregate
number is growing, one should assume all is well. By GNP
standaras, the West German economy grew in 1985, the year
of the rapid dollar rise and, beginning in September, fell just
as dramatically. Gross National Product totaled 1.847 trillion
D-marks. In 1984, it was DM 1.763 trillion. By conventional
economic wisdom this is a husky 4.8% annual increase in
GNP. This year, though the size of the number has been
slipping each quarter, predictions still call for a respectable
3% growth range in German GNP. In a recent series of
articles in the largest German paper, Bild Zeitung, former
Economics Minister Otto Lambsdorff exulted, "The turna-
round celebrates its fourth birthday." Calling it Germany's
"Second Economic Miracle" of the postwar period, Lambs-
dorff cited such signals of "strength" as the fact the D-mark
has "not been so strong in 10 years."
Few are as euphoric as Count Lambsdorff, but every
leading economic institute and major party in the parliament
agrees that the Kohl government is benefiting from good
economic news in the lead-in to the Jan. 25 federal elections.
The real indicators of what will develop in the finely tuned
German economy in the next 6-18 months are buried slightly
below the surface of the GNP numbers, and they are far more
troubling.
Trouble on the horizon
The 12-nation group known as the European Community
(EC), has a population of 322 million and Gross Domestic
Product of $2.4 trillion in 1985, which make it second only
to the United States as an economic power, and in some areas,
more important. In terms of total world trade, the EC, with
France and West Germany as its weightiest members, is even
more significant than the United States, with a 15% share of
the market, versus the United States' 11 % last year.
The West German economy is the most productive core
of the European Community. It is sustained by three major
industrial areas-automobile production (Europe's largest),
chemicals (Europe's largest), and engineering goods (Eu-
rope's largest). The strategic center and traditional strength
of the West German economy is its engineering sector, which
produces machines, plant and equipment, and generates the
technologies which give other branches of German industry,
such as automobiles and chemicals, their competitive edge.
The German recession of 1981-82 was largely induced
by the combined impact of the 1979 U. S. interest rate policy
and the Iranian "oil price shock," as well as the collapse of
developing-sector export markets such as Brazil, Mexico,
and Argentina. Unlike most of American industry, German
engineering industries responded to the collapse of export-
market share by an intensive effort at technological modern-
ization. The result has been a rapid and impressive improve-
ment in the quality and sophistication of West German nu-
merically controlled machine tools, industrial robots, and
other products which have made the German auto producers
such as Daimler-Benz, VW, and BMW the world standard.
The West German machine tool sector is especially stra-
EIR December 19, 1986
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FIGURE 1
Engineering new orders
Index
135-
125-
115-
105
95
85-
1962 1983 1984 1985 1986
Quarterly averep
Adjusted price index: 1980 sales= 100
tegic, because of its world export importance and its relation
to producing other industrial machines. Without machine
tools, a modern industrial economy soon vanishes. Although
Japanese output of specific types of machine tools has greatly
increased in the last decade, following its reworking process
from 1983 to 1985, today the German industry remains unex-
celled in quality and diversity by any other national sector in
the world. Beginning in the recession year of 1982-83, this
position began to be reflected in the steady increase in new
orders. New orders for machine tools can be taken as one of
the most sensitive indicators of real industrial growth pros-
pects, indicating what the economy will do 12 to 18 months
from now.
In monetary terms, the value of new orders for the ma-
chine tool industry rose from just over DM 8 billion in 1983
to DM 14.4 billion by 1985. The dollar rise against the D-
mark from 1984 through most of 1985 meant that the high-
quality German tools were able to make a serious impact on
the U.S. market. By 1984, the United States had become the
largest importer of German machine tools. West Germany is
today the world's single largest exporter of machine tools,
exporting 26% of the machine tools exported by Western
industrial countries. Fully 62% of the industry output in 1985
went to export markets: principally to France, Italy, U.K.,
and other European Community trading partners, as well as
to the United States.
According to the head of one of Germany's leading ma-
chine tool makers, L.G. Lundkvist of Friedrich Deckel AG,
Munich, the industry is at a relative stasis point. The problem
is a relative lack of skilled labor, combined with trade union
work-week limits on existing personnel. "The 38.5-hour week
and the lack of qualified labor power," Lundkvist stresses,
"have caused us to lose orders to foreign producers." He
estimates this to be as high as 15% per year. The result has
been a deluge of Japanese and, to a lesser extent, Swiss and
Italian machine tools into West Germany, as the German
industry is already running at 94% capacity. Hardly proof of
an impending recession. But let's look closer.
According to the German Machine Tool Association,
VDW, new orders continued to drop for the first nine months
of 1986. The largest drop is in the vital export sector, where
new orders collapsed in nominal terms by 18% through Au-
gust.
The current economic wisdom is that the German "recov-
ery" is being carried by expansion in domestic industry, rath-
er than export. This is being pushed among other things to
resist the wild and erratic pressures from Washington, espe-
cially from the Treasury and Federal Reserve, for the Federal
Republic to "stimulate" its domestic economy by further
lowering interest rates. While one can sympathize with re-
sisting wrong economic policies, whatever the argument, this
"domestic-led recovery" is a dangerous fraud.
It is true that domestic machine tool orders have risen
12% for the nine months through September. But given the
fact that it is an export-directed industry, despite the domestic
increase, there has been an overall order drop of 5% in the
first three quarters this year, compared to 1985.
A look at the engineering sector as a whole reveals a more
worrisome crisis brewing. Superficially, the sector appears
healthy: Gross sales for the January-September period were
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DM 103 billion, a gain of 2% from 1985. Overall industry
capacity utilization, is 88.4%-a veritable "boom" by cur-
rent U.S. engineering industry standards. Employment in the
branch is running 5% higher than last year, at 1,080,000.
Even exports in nominal terms are running up by 6% over
1985, at DM 63 billion through September. This sector in-
cludes, besides machine tools, agricultural equipment, tur-
bines, motors, construction machines, printing equipment,
and textile machines-in short, every significant tool of an
industrial economy.
But behind the positive monetary signs, storm clouds are
gathering for the German engineering industry. If we take a
"stop-action" time photograph of the entire industry as of last
April, it appears to conform to the Bundesbank and Bonn
Economics Ministry predictions of a domestic "upswing" in
the face of export decline. Then, in April-May, domestic
new orders begin a reversal and start to track exports in a
steep fall (Figure 1). This steep decline in new orders contin-
ues through November, according to industry sources. We
can date the onset of the second industrial recession since
1980 for Germany from this April-May downturn in new
orders for engineering goods. The results in the chemicals
sector which follow, will further underscore the down-pull
under way, even though it has yet to severely hit daily pro-
duction levels.
The current president of the Association of German En-
gineering Industry, VDMA, Prof.-Dr. Otto H. Schiele, de-
scribed the recent increase of domestic investment in new
plant and equipment as a long-delayed retooling, which had
been postponed by the uncertain markets since the economic
shocks of the late 1970s, and was finally set into motion in
anticipation of export to the long-awaited international eco-
nomic "recovery," especially of the United States.
But, as Dr. Schiele notes with concern, "for an accumu-
lation of reasons, our export business is weakening." Schiele
cites four interconnected reasons why new orders in German
machinery and equipment exports collapsed 13% in real terms
for the period January-September 1986:
? The collapse of the dollar-35% against the D-mark
since October 1985-which set off a staggering reversal in
competitiveness for German exports not only to United States
but to third markets trading in dollars.
? The drop in oil and gas prices, which has collapsed
industrial exports, especially to OPEC states, and severely
damaged the large petroleum equipment export possibilities.
? The lack of import growth in the traditional developing
markets such as those of Mexico, Brazil, Argentina, Egypt,
and Nigeria.
? The lack of any real increase of demand from the
Soviet market despite the new Soviet Five Year Plan, due to
hard-currency shortages as well the Chernobyl problem.
The traditional export share of West Germany's engi-
neering sector, is even larger than for machine tools. It is
currently fully 65% of total production. Again, it is clear that
German industry internally cannot sustain any long rise in
the industry production levels, despite reassuring statements
from Herr Bangemann's Economics Ministry in Bonn or the
economic institutes.
The United States export market is extremely important
for West Germany in all regards, despite politically motivat-
ed denials by Bundesbank chairman Karl-Otto Poehl in New
York recently. Schiele points out that this market has almost
doubled for the engineering sector since 1983, from DM 6.3
billion to more than DM 10 billion in 1985. "The U.S. has
become the most important market for our industry branch,"
he stressed at the end of October. Because of the wild fluc-
tuations in relative currency prices over the past months, the
West German VDMA head anticipates that export results by
1987 to this crucial market, at present trends, could be neg-
ative. Already, the rate of decline in this market is being
immediately felt in the sharp drop of new orders being placed
for machinery and engineering goods. No major West Ger-
man producer in such uncertain conditions is rushing to make
a big new investment in capacity expansion.
But it is not only one sector, albeit a major one, of indus-
try which is being hit by a sharp fall in new orders. According
to the November report of the West German Association of
Savings and Farm Banks, BVR, the largest regional banking
network, overall new orders for the entire manufacturing
sector, which is far larger than engineering, are down. This
downward trend begins slightly later than for engineering, as
might be expected. But it begins by the end of July, only two
months after the engineering downturn. Domestic new orders
stagnate at 0.0% in August and actually begin a decline of
2% by September over the preceding month. Foreign new
orders are currently falling more sharply, at a rate for the nine
months to the end of September of almost - 4%.
Second Davignon Plan ahead for steel
West Germany today, as traditionally, concentrates
Western Europe's most important steel-producing industry.
Current "wisdom" in Europe, though less advanced in this
direction than in the United States, is that steel is a declining
industry. For five years, West European national sectors have
savagely destroyed capacities, adjusting to financial com-
munity demands to permanently shrink output. The steel
crisis is in reality no steel production crisis. Rather, it is an
induced crisis in response to the 1974 and subsequent 1979
oil-price-rise shocks together with the post-1979 interest rate
policy of the OECD central banks. To destroy capacity for
future production is to ensure a shrinkage of future industrial
base and walk away from an active export-oriented solution
to economic growth stagnation. The Davignon Plan was and
is a bank "rationalization" scheme designed to protect certain
book-values of present.debt at the expense of future national
capacity to produce. To its credit, the West German steel
industry has been one of the more cautious about destroying
such capacities. British steel is at the other extreme, where
blast furnaces were blown up under the infamous "Lazard's
Plan" of investment bankers. The best index of utilization of
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steel is ton-per-capita consumption. By this index, since the
initial 1980 Davignon five-year European steel reduction (eu- TABLE 1
phemistically termed "rationalization"), German consump- The EC and world fleet 1975-85
tion has declined by some 5% per capita.
This said, the West German steel industry today is a
reflection of the overall problems of collapsing international
trade. In 1974, termed by the industry the "beginning of the
crisis of the steel industry," some 250,000 workers were
employed in producing steel in the Federal Republic of Ger-
many. When the Davignon Plan started in 1980, the number
had already dropped to 190,000. By 1986, following the five-
year term of Davignon reductions, it stands at 150,000. To-
day, according to the West German steel producers associa-
tion, Wirtschaftsvereinigung Eisen-und-Stahlindustrie, this
is still not sufficient to control falling prices. They propose
to cut some 20,000 more jobs from German steel beginning
sometime shortly after the January federal elections.
Recent industry assessments have underscored that, de-
spite two years of trend reversal by the highly modern and
efficient West German industry, by all accounts the world's
EC
World
EC as %
f
tat July
No.
mn dwt
No.
mn dwt
o
wol
(dwt)
1975
9,636
154.9
34,934
544.2
28.5
1976
9,621
165.5
35,666
598.4
27.7
1977
9,443
168.5
36.208
637.2
26.4
1978
9,684
177.6
36,880
658.7
27.0
1979
9,539
177.2
37,668
669.0
26.5
1980
9,467
178.2
38.401
677.3
26.3
1981
8,975
179.6
37,959
683.2
26.3
1982
8,508
169.7
38,416
687.2
24.7
1983
7,971
155.5
38,419
678.6
22.9
1984
7,502
141.1
38,103
666.8
21.2
1985
7,265
138.9
38,048
665.8
20.9
quality standard in steel production, the industry is still in Nola: refers to trading ships only and does not Include ships registered in
or some member elates.
difficulties. Domestic production for 1986 will run less m ?jIlion dead-weight aeaad-weid-weighght tons
great millns
than 38 million tons. This is a big drop from the rising output
for 1984-85. By 1985, German steel produced 40.5 million
tons of raw steel. According to industry sources, the main
problem immediately is an indirect effect of the drastic dollar
fall against the D-mark. Import steel is able to be shipped in TABLE 2
from halfway across the world at competitive prices to the Composition of EC and world fleet
domestic German market. at 1st January 1985
In the five years of restructuring, the West German steel
industry has put itself through a major forced change. Raw
steel capacity has been cut by 20 million tons, and rolled
capacity by another 10 million tons. To retain competitive-
ness with especially new Japanese mills, the German steel
industry has invested in the most efficient advanced technol-
ogies to the point that today, more than 80% of production is
mills have
continuously cast steel. Specialized high -quality
-q
been developed. Computerization has been extensive. Some
DM 10 billion have been invested in the process since 1980.
This is the situation as the EC is contemplating removal
of Davignon-term protective barriers which have guarded
German and other European steel producers from a flood of
cheap imports. As early as March 1987, the EC in Brussels
could remove the Davignon protective restraints. In such a
regime, German industry sources predict a bloody and un-
predictable trade war which could devastate the remaining
industry. The biggest demand market for the German steel
industry is the metal-working, engineering, and motor-car
industries. A major drop in production there, of course, will
aggravate the pressures already mentioned. Already 40% of
German steel consumption is imported. Only 25% of this is
from other EC nations. Exports are under major constraint.
The EC-U.S. steel trade agreement became fully operational rational
Y ~
this year and puts a ceiling on Germany's most important
export market for the next four years. By the formula, Ger-
Total EC
World
EC as%
of world
No.
mn dwt
No. mn dwt (dwt)~
General
cargo
3,942
19.8
21,123
108.9
18.2
Cellular
container
245
6.0
956
18.1
33.2
carrimeulk
ca er
1,048
39.5
5,052
188.2
21.0
Combination
carrier
81
10.2
437
46.6
21.9
Passenger
and ferry
386
0.8
1,301
2.4
33.3 .
Other dry
cargo
76
0.5
756
5.6
8.9
Total dry
cargo
5,778
76.8
29,625
369.8
20.8'
Oil
tanker
1,143
58.8
6,620
279.2
21.1
Chemical
tanker
145
0.9
880
6.1
14.8
Liquidifed
gas carrier
163
2.2
776
10.3
21.4
Other tanker
36
0.2
147
0.4
50.0
Total tanker
1,467
62.1
8,423
296.0
21.0
Total all
slllps
7,265
138.9
38,048
6654.8
20.9
EIR December 19, 1986 Economics 15
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man steel exports to the United States fall proportionately as
domestic U. S. demand further weakens, as the present reces-
sion collapse portends there.
But the secondary effect of the universal U.S. import
ceiling on steel means that other steel exporters must compete
for a shrinking market. Price wars and dumping are expected
to escalate in coming weeks, while the high D-mark is already
hurting German export capabilities. Rupert Vondran, man-
aging director of Wirtschaftsvereinigung Eisen-und-Stahlin-
dustrie in Dusseldorf states, "It is important not to confuse a
healthy appearance with well-being." Moreover, "environ-
mental" levies on German steel of DM 100/ton must soon be
imposed, further cutting profit margins. This is on average
four times the rest of EC levies.
The end of Europe's last major shipbuilder
For some years, West Germany has concentrated the
largest and most advanced shipbuilding capacity in the Eu-
ropean Community, with the largest annual tonnage of ships
built in the European Community. In terms of tons of steel
consumed, however, the precipitous decline of this sector is
shocking. Although by no means as drastic as the case of
Sweden-which 10 years ago was the world's second largest
shipbuilder behind Japan, and today is virtually out of the
business-German shipyards are today in the worst crisis in
history and getting worse.
The EC is the world's single largest trading area. Some
95% of its trade with non-EC countries is seaborne as is 30%
of the trade among the EC countries. Fully 45% of world
seaborne trade is carried by the EC as a group. A cardinal
rule for national and regional economic self-defense for a
TABLE 3
Average age of EC and world fleet
1st July 1984 age distribution
EC World
Range Oil Bulk Oil Bulk
(years) tankers carriers Others tankers carriers Others
0- 4
7.12
17.26
19.34
11.27
26.55
17.44
5- 9
39.08
24.94
28.54
41.07
25.71
24.45
10-14
31.39
31.90
23.34
31.71
23.75
26.20
15-19
14.80
19.15
13.22
8.92
17.09
15.06
20-24
4.70
5.57
7.68
3.95
4.67
8.28
25-29
2.25
1.07
4.42
1.88
0.83
4.24
30+
0.66
0.11
3.46
1.20
1.39
4.32
100 100 100 100 100 100
Average
Age (yrs) 11.51 11.22 11.92 10.68 10.28 12.62
trading nation, historically, has been to exercise control over
transportation costs. This dictates a serious alarm over the
EC shipyards, especially the West German yards (See Tables
1-6).
Despite the clear national and EC interest in maintaining
such strategic resources, since the first oil shock hit world
trade in 1975, EC shipyards have cut employment 46%. This
will fall 25% more by summer 1987. The backdrop for this
collapse is not mysterious. Total world trade tonnage has
fallen since the second oil shock and interest rate shock of
1979, from 19 billion ton-miles down 26% to 14 billion ton-
miles (see Figure 2). But select Far East shipyards have
increased output at cut prices, especially Japan and South
Korea, and the Soviet fleet has increased by more than 42%,
according to industry estimates since 1975.
For the case of the German shipbuilding industry, annual
steel supplied to shipyards plummeted from a high of 772,000
tons in 1975 to 238,000 in 1984. Deliveries (Brut Registered
Tons) went from 2.3 million BRT in 1975 to less than 0.44
by 1985. But this year the dam broke, as backlogs of old
orders have been worked up and the soaring D-mark has made
export orders disappear. In July Harmstorf Yards, German-
y's fourth largest yards, declared bankruptcy. According to
a report in the Oct. 1, 1986 Financial Times of London, the
worst drop in new orders for shipbuilding has hit the German
yards. For the first six months of 1986, German yards had 68
new ship orders, in contrast to the same period in 1985, when
the figure was 395. The labor-force has plunged 25% from
1980, from 57,000 to under 45,000 at the beginning of 1985.
Germany's chemical industry:
crown jewel tarnished
Since the technological revolution sparked late in the last
century by circles around the father of modern industrial
chemistry, Justus von Liebig, Germany has been in the fore-
front of the world chemical industry. Names such as Bayer,
Hoechst, BASF are known worldwide. Combining associ-
ated mining and products industries, the total West German
chemical sector in 1985 was responsible for DM 1,304 billion
TABLE 4
Tonnage on order by type at 1st January
1985
For
reglatra- Tankers ca r lk Others Total
tion in No. mn dwt' No. mn dwt No. mn dwt No. mn dwt
EC
62
2.3
74
3.4
196
1.6
332
7.3
World
311
10.8
531
24.9
735
9.9
1,577
45.6
Average age of total fleets: EC: 11.55 World: 11.19.
Note Calculation based on girt, includes non-trading ships.
16 Economics
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of the German industrial product. The direct chemical indus-
try was responsible for DM 149 billion.
Next to the automobile and engineering industries, the
German chemical industry is the most heavily export-depen-
dent branch of German industry. According to the report of
the German Chemical Industry Association, in 1985, West
Germany exported fully 52% of its product. This is the sec-
ond most important export sector of the export-oriented Ger-
man industry. Fertilizers, pesticides, pharmaceuticals, plas-
tics, and industrial chemicals-all are major export items for
the world industry.
The statistics seem to show that this industry is prosper-
ing. Despite setbacks in oil prices and foreign exchange,
company profits continue to be positive. On Nov. 7, Dr. Hans
Albers, president of the German Chemical Industry Associ-
ation, noted that the "domestic" results for 1986 were "good."
But, he cautioned, the overall results for this year of gross
sales for the entire industry will be "some 6% lower." The
reason? The "collapse of the U.S. dollar and the fall of the
price for crude oil," says Albers.
Does this presage a deeper decline in coming months?
To give a comparison, the "recovery" of the total chem-
ical industry in 1985 was coincident with the extraordinary
competitive shift in export terms of trade between the D-
mark and the dollar, which lasted until the last quarter of
1985. The industry began its downward slide along with the
fall of the dollar at that time. But, if we look historically,
even the good year of 1985 only achieved a production level
4% above 1980. And the previous four years before 1985
have all been below the production level of 1980. It was in
1980, of course, that the combined impact of the second "oil
FIGURE 2
Why there is a shipbuilding crisis: seaborne
trade 1960-85
Trillion ton miles
shock" and Paul Volcker's high interest rate policy began to Source: Feamleys and U.N.O.
devastate long-term trade and industry worldwide.
So far in 1986, according to industry sources, production
is down in the major sectors of agricultural chemicals (fertil-
izers, pesticides etc.), industrial chemicals, and pharmaceut-
icals.
Automobiles: the only thing left?
The only major branch of West German industry to record
a rise in actual production levels this year is the automobile
TABLE 5
Tonnage on order for registration in the
EC as at 1st January 1985
EC yards
208
2.9
Non-EC yards
124
4.4
Total
332
7.3
and vehicle branch. For the 10 months through October, the
combined vehicle (cars, truck, special vehicles) production
of West Germany reached 3.83 million units, according to
TABLE 6
EC trade by sea
Total 110'
World
(mn tons)
(mn tons)
EC as %
Loadings
1980
311
3,650
8.5
4
1982
352
3,2
9
10.9
1983
396
3,090
12.8
Unloadings
1980
996
3,650
27.3
1982
879
3,249
27.1
1983
875
3,090
28.3
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the German Automobile Industry Association. This is a re-
spectable 3% above one year earlier, also a strong year. Since
the low year of 1981, each year's output has climbed, inter-
rupted only by an extraordinary strike in 1984. European
industry sources regard the German auto industry as the pre-
mier European, and the technological leader for high-profit
margin luxury autos such as Mercedes, BMW, and Audi.
"Germans today are one or two steps ahead of the Japanese
in introducing new technology," one London industry analyst
notes. One reason is the intensive technological upgrading of
the productive plant over the past decade. Introduction of
assembly robots and computer production technologies in
West Germany is the most advanced of any West European
industry. The largest West German manufacturer of industri-
al robots is VW, also Europe's largest car producer. But VW
consumes virtually its entire production in-house, according
to industry sources.
Beginning in October, even this "bright spot" of the Ger-
man economy began to show disquieting signs. According to
the industry association, the rise in vehicle production stopped
flat in October compared with the previous year. Exports also
stopped flat. More troubling is the fact that despite the 3%
production rise through October, the ten-month export vol-
ume in real unit terms of vehicles was down. The result for
auto exports "is overshadowed by the low level of heavy-
truck exports," a spokesman for the industry emphasized.
Best index of the economy: employment
This dark picture is underscored by the stark fact of enor-
mously high unemployment. Even discounting the political
manipulations of statistics on the "officially" jobless, West
German unemployment remains extraordinarily high. Ac-
cording to a Nov. 13 report of the West German Labor Min-
istry, while 1986 is the "first year since 1979-80 when the
absolute number of unemployed on average will be lower,"
it will still show 2.23 million unemployed compared with
2.30 million in 1985. However much the "improvement"
represents political gimmickery before the national elections
in January, it is clear that there is no actual "recovery."
According to Ulrich Cramer of the German Institute for
Labor Market Research, "persons who are for a short period
unemployed often do not appear in official unemployment
statistics." But another indicator of the depth of the problem
is the official statement in November that the government is
extending the length of unemployment benefits by six more
months. The Labor Minister stated on this occasion, "There
is no royal road back to full employment." Indeed, this year,
a record number, 100,000, has been forced off unemploy-
ment rolls into government public works programs. In 1982,
the number was 30,000. This comes suspiciously close to the
difference between official unemployment levels for 1985
and 1986, suggesting the means by which the Bonn govern-
ment has "reduced unemployment for the first time since
1979."
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Contents
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III. AIDS in Africa: the unfolding of a biological holo-
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N. The biology of AIDS
V. Flow cytometer and other laser technology poten-
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VI. The relevance of optical biophysics for fighting
AIDS: designing a Biological Strategic Defense Ini-
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VII. How Kissinger and Pugwash destroyed America's
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VIII. The Soviet command and control of WHO's AIDS
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IX. Why the Reagan administration has tolerated the
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X. The necessary public health program to fight AIDS
$250.00. Order from: EIR News Service, P.O. Box
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EIR December 19, 1986
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 Approved For Release 2010/08/05: CIA-RDP90-00806R000100640038-9
Shipping
U. S. Lines parent
company files Ch. 11
In late November, the giant American shipping company,
Mclean Industries, Inc., filed for Chapter 11 protection un-
der the federal bankruptcy code in Manhattan, New York.
Cash flow problems, particularly with the operations of the
U.S. Lines division, one of the world's largest and best
container shipping companies, forced the action.
McLean announced the suspension of U.S. Lines' round-
the-world and trans-Atlantic services. A spokesman said that
1,200 employees were laid off-about half the workforce.
The company will lay up all the ships and lay off all person-
nel. According to a Wall Street Journal report, the spokes-
man said that the 12 U. S. Lines superfreighters would deliver
their cargo and sail to U.S. ports; then "the banks will come
after them, and they'll do what they want with them."
McLean's trans-Pacific and South American services will
go on as scheduled. U.S. Lines will continue to operate its
inland U.S. operations, including double-stack train service
from coast to coast.
In 1983, major banks financed the completion of the U. S.
Lines fleet of 12 jumbo container vessels. The company
maintained weekly sailings around the world. However, the
profitability was undermined by depressed world shipping
conditions, and the aversive cut-throat freight rates, aided
and abetted by policies of the State Department and collabo-
rating foreign cartel carriers, run principally from London,
Moscow, and Switzerland.
Company founder, Malcolm P. McLean, has named
Charles I. Hiltzheimer as president and chief executive offi-
cer, to succeed McLean in these positions, to work on putting
the operations back in place.
Malcolm P. McLean is the pioneer of containerization,
the greatest revolution in transportation since the invention
of the steam engine. At 73, McLean is a living symbol of the
pioneers of American industry such as Andrew Carnegie and
Thomas Edison. He was born in North Carolina, where he
left school after third grade, pumped gas, and then went on
to create his own, giant international trucking and shipping
fleet. He founded McLean Trucking and Sea-Land Service,
a division of CSX-the former Chesapeake and Ohio (C&O)
and Baltimore and Ohio (B&O) railways.
In the last 250 years, the U.S. flag shipping industry has
historically ascended following a major war, but, very quick-
ly, has been overtaken by foreign interests, working through
policy channels in Washington. However, Malcolm McLean
went against the tide, and in the 1960s, created an entirely
new transport system, which, for example, improved the
U.S. flag carrying position from 21% of tonnage carried to
55% by the early 1970s, for example, on the strategic North
Atlantic routes.
This did not last long. In 1973, Kissinger's grain deal
with Moscow included a sweetheart arrangement which pro-
ceeded to destroy rates on world routes. Soviet vessels could
enter any U.S. port and charge any rate.
The American industry, led by McLean, fought back with
improved technology and cost structures, and by the early
1980s, had developed the lowest-cost container ships in the
world. U.S. Lines, with its development of mammoth con-
tainer ships, and routes circling the globe, was capable of
providing, on a unit cost basis, transportation at lower cost
than foreign flag lines, and with American seamen.
However, outside the control and commitment of Mc-
Lean and other patriotic shipping industrialists, are the ac-
tions of the cartel commodity companies, who use and run
their own foreign fleets. In addition, the anti-growth policies
of the International Monetary Fund/World Bank have dras-
tically depressed all Western trade flows. All the "free mar-
ket" jargon in Washington is just a smokescreen for the way
in which cartel monopoly shippers avoid Mclean and the few
other U.S.-based, efficient services. Instead, they use flag
preferences of national flag lines, and cargo routings con-
trolled by the commodity cartels on a worldwide basis.
The physical volume of world shipping tonnage has col-
lapsed by an estimated 26% since about 1979. World ship-
ping volume now is running at an annual level of 14 billion
ton-miles.
Under Chapter 11, McLean Industries, Inc. has 120 days
to make a reorganization plan, during which time, creditors
cannot foreclose on its assets. McLean had losses of $92
million in the third quarter of 1986, on revenue of $258
million; losses of $77 million in the second quarter on reve-
nue of $306 million; and losses of $71 million in the first
quarter on revenue of $291 million.
The 12-ship building program was done by Daewoo Ship-
building and Heavy Machinery, Ltd. of South Korea. The
latest ship expansion cost $570 million.
Each ship is 4,200 TEUs (Trailer Equivalent Unit). Each
carries 4,200 trailers. Multiplying 4,200 by 20 feet, the av-
erage trailer length, gives 84,000 feet-more than 16 miles.
Imagine a continuous 16-mile line of trailer trucks. If you've
ever sat at a railroad crossing, the average train in the old
days was about 80 cars-only one-half mile long. So, one
ship's worth would be 35 times bigger than one railroad train
in the old days. That is the efficiency.
For Sea-Land, McLean built the famous 33 knot contain-
er ships-the SL 7 fleet, put in service in 1970, which set
trans-Atlantic speed records. At the time, they were the only
Free World cargo ships that could outrun Soviet nuclear
submarines.
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Argentine Church
backs labor's demand
by Benjamin Castro
On Dec. 3, the president of the Pastoral Commission on
Social Works of the Argentine Catholic Church, Monsignor
Italo Di Stefano, visited the offices of Argentina's powerful
labor federation, the CGT, to offer the Church's public sup-
port to the federation's mobilization in defense of Argentine
economic sovereignty.
During a two-hour meeting with CGT secretary-general
Sadl Ubaldini, Monsignor Di Stefano declared, "Anything
that helps to satisfy social necessities has our greatest sup-
port." Referring specifically to the CGT's economic pro-
gram, which includes a call for moratorium on the nation's
$42 billion foreign debt, Di Stefano said, "We second, en-
dorse, and support these demands, which in turn echo what
the leaders are hearing from their base." Di Stefano also
criticized the Alfonsin government for its failure to "apply
social justice according to humanist and Christian princi-
ples."
The Argentine labor movement, which has been one of
the most aggressive on the continent in denouncing the sub-
ordination of national interests to the blackmail of the Inter-
national Monetary Fund and the international creditor banks,
is viewed as a model for nationalist sentiment across Ibero-
America.
During Di Stefano's visit to the CGT offices, he extended
an invitation to Ubaldini to attend a "working meeting" with
Pope John Paul II when he visits the country next April. The
pontifical visit to Argentina will take place just after the
release of a special papal document addressing the crisis of
the Third World foreign debt, a document which has already
raised tremendous expectation among debtors and creditors
alike.
`Black October' triggers revolt
During early November, not only Argentine labor, but
also industrialists and agricultural producers were shocked
by official figures released on the economy for the preceding
month. "Black October," as it was immediately dubbed, not
only gave testimony to the deep recession in which the coun-
try finds itself, but exposed the intent of the Radical govern-
ment of Radl Alfonsin to thoroughly eradicate what remains
of Argentine national sovereignty.
For example, the retail-wholesale sector, through its as
sociation CAME, announced that general demand for its
products had fallen a full 30% in the month of October, and
that 70% of its installed capacity was idle. Hiring in all
sectors of the economy fell for the fifth consecutive month,
and was to fall another 13.3% more in November. The col-
lapse in hiring, especially noticeable in construction, indus-
try, services, and among professionals and technicians, re-
flects the degree of paralysis of the productive portions of the
economy under the financial strangulation of the central bank
"mafia."
The majority of business organizations in the country
have declared themselves in varying degrees of rebellion
against government policy. The most striking case is that of
the agricultural producer associations, which, in mid-No-
vember, broke relations with the government and stalked out
of an emergency council convoked by President Alfonsin to
hear their demands.
The Alfonsin government has not limited itself to de-
stroying the private sector. On Nov. 28, Alfonsin announced
his decision to launch a "reform" of the state apparatus,
including state sector companies. He proposed at the same
time to begin to eliminate 26,000 state employees' jobs
through a system of "voluntary retirement." Those who re-
fuse to accept such an offer of retirement will be placed for
one year in a "national labor exchange" from which the
"slimmed-down" state apparatus will allegedly pick and
choose new employees. Those not chosen, presumably the
majority, will be tossed onto the unemployment scrapheap.
Alfonsin has also named as director of his State Company
Directorate one Enrique Olivera, a graduate of Harvard Busi-
ness School who cut his teeth working under the direction of
Gianni Agnelli in the 1977 "restructuring" of the FIAT com-
pany in Italy.
Olivera's immediate objective-in addition to "repriva-
tizing" the remaining state companies-is to create the con-
ditions for handing over to foreign investors the 13 companies
which constitute the most important foundation of Argentine
economic sovereignty-oil, railroads, communications,
electricity, etc. Olivera will apply "business administration
criteria" to reduce costs through eliminating jobs and ceding
operations and projects to private investment. Olivera has
already declared his intention to eliminate from state control
any company "related to the market sector" and to generate a
wage system for public employees which is "self-financing."
As has already been made public in Argentina, the main
demand of the international creditors of Argentina, headed
by Citibank, is for 100% "capitalization" of the country's
foreign debt. That is, what the bankers want is that each
dollar of the foreign debt-be it public or private sector
debt-be transformed into a dollar's worth of stocks in the
debtor company. Should this plan succeed, the interest pay-
ments alone that the country shells out each year, to the tune
of $5 billion, will enable the banks to buy up the Argentine
nation piecemeal.
EIR December 19, 1986
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Report from Rio by Lorenzo coo
Brazil `integrates' Argentina
Ford and Volkswagen merge regional operations for cutting
costs, not for genuine development.
The Argentine government of Ratl
Alfonsin and the Brazilian one of Jose
Sarney have signed an "integration"
agreement, and Uruguay's Julio Mar-
ia Sanguinetti has tagged along. The
integration protocols, signed by the
three countries and ratified Dec. 10
while Alfonsfn visited Brazil, permit-
ted the auto giants to integrate their
regional operations.
The deal continues to win ap-
plause from the automotive multina-
tionals and to arouse false hopes among
genuine industrialists in the three
countries, for whom the accord seems
to promise relief from International
Monetary Fund (IMF) austerity poli-
cies. But such economic integration in
the framework of the rotten interna-
tional financial system is nothing less
than a cooperative effort to swim to-
gether in a swamp filled with croco-
diles.
The most recent event is the merg-
er of Volkswagen of Argentina with
Ford Motor Company of Brazil and
Argentina. The new company, bap-
tized Autolatina, will be the world's
eleventh largest assembler, and the
largest by far in Ibero-America, with
the capacity to produce 900,000 ve-
hicles per year in its 15 plants. It could
achieve annual sales of $4 billion,
through exports and its 1,500 dealers
in both countries. Ford and VW now
hold 60% of the Brazilian auto market
and 55% of Argentine truck sales.
Without investing a cent in qew
physical capacity, the companies ex-
pect large profits by using the "com-
parative advantages" of both coun-
tries, especially the miserable wages
paid to Brazilian workers-the secret
of that country's "export miracle." The
Brazilian scale is used to pressure Ar-
gentine workers to reduce their wage
demands.
This is how both countries expect
to recover the $164 million in losses
they sustained during the past year.
Ford and VW created such "losses" by
manipulating their international ac-
counts to mock tax collectors, while
remitting hundreds of millions of dol-
lars out of the region. The "integra-
tion" pact will facilitate such fraudu-
lent practices, broadening the exclu-
sive fiscal paradise they now hold.
Autolatina will be chaired by
Wolfgang Sauer, the current president
of VW Brazil, and managed by Wayne
Booker, the Ford Brazil president.
Sauer's credentials leave much to be
desired. Last year, he was involved in
financial scandals for issuing moun-
tains of commercial paper with no
backing, which led to the bankruptcy
of Brasilinvest investment bank,
owned by the shady Mario Garnero,
an intimate of David Rockefeller.
Along with Sauer on the Brrasilinvest
board were George Shultz, and former
U.S. Treasury. Secretary William Si-
mon, and several Ford executives such
as Mauro Salles and Newton Chapar-
ini.
Before the discovery of the Brasi-
linvest fraud, all those involved in the
Autolatina group had made illicit for-
tunes with Brazil's. "Proalcol" pro-
gram promoted by Mario Garnero.
Brazil's alcohol program is profiting
thanks to the relative advantages of
using the slave labor of millions of
Brazilians who die of hunger in the
sugar-cane fields, and the estimated
$ 10 billion in government subsidies to
promote inefficient alcohol-powered
automobiles.
But the collapse of Brasilinvest last
year hardly touched them, and now
they intend to bring several Brasilin-
vest directors into Autolatina. Auto-
latina's leaders do not hide that the
objective of the operation is to reduce
production costs by using "compara-
tive advantages," which means reduc-
ing wage levels, especially of Argen-
tine workers.
As Sauer put it, "I don't think we
will reduce production in Brazil....
Autolatina will not be a negative fac-
tor on the labor force."
But the Argentine situation is dif-
ferent. Sauer indicated, "Certain mea-
sures will be needed there to rational-
ize work. This rationalization is a dai-
ly task of industry, because its num-
ber-one obligation is to cut costs....
In Argentina, we will coordinate and
rationalize ... to avoid the negative
effects of diminishing the number of
employees." In other words, a good
part of VW's nearly 10,000 Argentine
autoworkers will be fired.
Those responsible for this false in-
tegration are government officials, the
direct heirs of the "developmentism"
hoax which neutralized efforts for full-
fledged integration based on protect-
ing the development of a capital-goods
industry. That's what Juan Domingo
Perlin sought in Argentina and Getulio
Vargas in Brazil. Once they were
overthrown, their successors, Jusce-
lino Kubitschek and Arturo Frondizi
built industry around "import substi-
tution," promoting auto transport and
consumer-goods industries. They fos-
tered the auto giants which today,
again, are encouraged by the "devel-
opmentist" inventors of phony inte-
gration.
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Domestic Credit by David Goldman
`Consensus forecast' on the Titanic
The nation's business economists predict growth, but they
themselves face unemployment.
UPI, Dec. 8: "The consensus fore-
cast among 4,000 of the nation's lead-
ing business economists is for slightly
faster economic growth in 1987, fol-
lowed in the next year or two by reces-
sion, according to a survey released
Monday. A quarterly poll of members
of the National Association of Busi-
ness Economists produced a consen-
sus forecast of 2.5% growth in the
gross national product this year and
2.8% expansion next year."
The following day, the Washing-
ton Post reported that business econ-
omists were usually the first victims
of "staff reductions" among firms fac-
ing urgent "restructuring." Not until
the majority of the members of the
National Association of Business
Economists are unemployed, it ap-
pears, will the association project any-
thing else.
Manufactured goods orders in Oc-
tober were down 3.6%, the worst fall
since May 1980, i.e., the worst of the
1980-81 ratchet-collapse. Much of the
decline was in defense capital goods,
which were down 42%. Otherwise,
orders fell 1.8%, the biggest drop since
last March. Durable manufactured
goods were down 5.1 %. In heavy
manufacturing, transport equipment
was down 9.8%, mostly due to a de-
cline in defense aircraft and parts or-
ders.
The list of firms undertaking ma-
jor restructuring, i.e., shutdowns, has
meanwhile expanded, with a special
vengeance in basic-industry sectors:
On Dec. 4, GM announced anoth-
er 4,500 layoffs to cut inventories. This
includes knocking out one work shift
at the 16-month-old Detroit-Ham-
tramck luxury-car plant, starting Feb.
2, cutting output by 50%. Starting Jan.
5, hourly production will be down al-
most 12% at two other plants at Orion
Township, Michigan, and Wentz-
ville, Missouri. Sales of some of the
cars at these three, plants are down as
much as 60% from 1985. The models
affected are among GM's most prof-
itable cars. The news follows the an-
nouncement of 1,900 layoffs last
week. Overall, GM has a 100-day
supply of cars; a 60-day supply is con-
sidered normal. GM said its policy is
to cut production rather than resort to
incentives. The pared-down Detroit-
Hamtramck facility is one of GM's
newest-and most expensive.
On Dec. 4, MCI announced lay-
offs of 2,500 workers, or about 15%
of its total workforce of 16,000. MCI,
hailed as the rising star of the high-
tech service sector, is suffering badly
in the long-distance marketplace,
where rates have dropped 20% since
the 1984 breakup of AT&T.
In the long-suffering steel sector,
the projected resolution of the USX
strike, the longest in U.S. history, will
apparently bring no relief to the indus-
try . On the contrary,. the USX strike
managed to take sufficient steel off the
market to postpone a collapse of steel
prices, which had otherwise begun last
June.
LTV Steel's bankruptcy will, ac-
cording to analysts, reduce the firm's
pre-tax cost by $85 per ton of crude
steel, bringing its pre-tax costs to more
than $50 per ton below those of its
next-most-efficient competitor. That
sets the stage for an escalation in the
industry price war, and a contest
among steel firms to achieve bank-
ruptcy-reorganization or other forms
of restructuring, on relatively more fa-
vorable terms.
Major steelmakers' incoming or-
ders for the week ended Oct. 25 were
equivalent to 60% of capacity, near
the 62% average order rate during the
preceding five weeks. Analysts attrib-
ute the continued weak order level to
the slow liquidation of large invento-
ries.
That translates into an output level
corresponding, again, to the worst of
the 1980 downturn.
In summary, the most basic of
basic industries, namely steel, has
ratcheted down to a level 25% below
last year's. That is explained by the
fact that commercial construction,
particularly following the passage of
the tax reform bill, is down by roughly
30% over the previous year's level,
and by the auto industry's miserable
situation. GM's current wave of lay-
offs, which amount to 36,000 an-
nounced during the past four weeks,
occurs at a time when American car-
makers' output is already down by 8%
below the 1985 level. However, the
elimination of incentives for auto sales
is likely to turn this into a margin of
decline by at least as much between
1986 and 1987. .
The one positive factor for the
economy, perversely, is the continued
expansion of the trade deficit. Despite
the, administration's predictions of im-
provement, the deficit (on a balance-
of-payments basis) rose to $37.67 bil-
lion during the third quarter, up from
$35.67 billion. Net imports provide a
subsidy for U.S. output; when the
weak dollar finally forces their de-
cline, because they will rise steeply in
price, matters will turn much worse
very quickly.
EIR December 19, 1986
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Agriculture by Marcia Merry
Food disputes in a world of hunger
Trade "experts" like to refer to a decline in "demand growth,"
meaning that nations cannot afford to produce or import food.
One week before the scheduled,
annual trade talks between the United
States and the European Community,
the U.S. Agriculture Department re-
leased world food statistics at its 63rd
annual "Outlook" conference in
Washington, D.C. The rhetoric was
upbeat, but the figures were grim. Said
Richard Goldberg, deputy undersec-
retary for international affairs and
commodity programs, on Dec. 3,
"Agriculture export trade is not going
to be conducted in a world of scarcity,
but in a world of surpluses." He's
lying.
World per capita availability of
cereals, meats, and necessities is de-
creasing markedly, while the most
productive agricultural sectors of the
world-North America and Western
Europe-are engaged in vicious trade
war, and attempts to decrease their
farm output. Whatever the outcome of
the combination of ongoing GATT
(General Agreement on Tariffs and
Trade) meetings, and North Atlantic
food trade talks, the reality of world
food shortages and mass starvation
must be the measuring rod for farm
and food policies in 1987.
The following is a summary of the
statistics made available at the Out-
look conference.
As of year-end, the figures for 1986
world grain production showed a slight
upward trend, from 1.64407 billion
metric tons in 1984, up to an estimated
1.64697 billion metric tons for 1986.
Measured against the nutrition needs
of today's 5 billion people in the world,
this amounts to about half of what is
actually required-3 billion tons for
direct consumption of cereals and for
provisioning the livestock needed to
supply animal protein to the diet. In
addition, another billion tons of cer-
eals-for a total of 4 billion world-
wide-should be produced for car-
ryover stocks, and to make up for loss-
es in storage, shipping, and process-
ing.
A person requires an estimated 24
bushels of grain each year for direct
and indirect consumption. Multiply the
world's 5 billion people times 24
bushels (at about 50 pounds of grain a
bushel), and the minimum world grain
output objective of 3 billion tons is
calculated.
Total world cereals production in
1986, relative to population, works out
to a little over 14 bushels per person.
In addition, according to best esti-
mates, only 1'.61394 billion tons, not
the full harvest, will go for consump-
tion. This brings down the bushels per
person to well under 14. World grain-
stocks are piling up, unused and de-
teriorating, because of the decline in
world food trade. So-called world
ending stocks this year will be .38675
billion metric tons, up from .25585
billion metric tons, in the face of star-
vation.
The trade "experts" like to refer to
this process as a decline in "demand
growth." What they mean is that whole
nations cannot afford either to pro-
duce their food, or to import it-under
the monetary conditions of the Inter-
ational Monetary Fund and related
banks and food cartel companies.
According to these "experts," there
is nothing much to be done about the
starvation, and the response to the sit-
uation should be to drastically reduce
existing levels of food output below
"effective demand"-the imposed in-
ability of peoples to obtain food. Over
the 1986 period, incredible measures
were enacted to reduce food produc-
tion in the world's most highly devel-
oped farm products exporting na-
tions-the United States and the Eu-
ropean Community.
The European Community has en-
acted a milk output quota-with pen-
alties for violation, and a tax on "ex-
cess" grain output, called a "producer
co-responsibility" levy.
The United States has implement-
ed the Dairy Herd Termination pro-
gram, in which whole herds are elim-
inated permanently. Farmers are also
coerced into idling record amounts of
land to gain cashflow from govern-
ment programs.
In addition to these measures to
directly decrease production, unprec-
edented measures have been intro-
duced to give over to food cartel con-
trol huge quantities of valuable food-
stocks, at the expense of the general
public and farmers. For example, in
the United States, the new program
called the Payment-in-Kind generic
crop certificate plan, allows cartels to
get what they want, when they want,
from government stocks at cheap
prices.
In Europe, a similar swindle, un-
der a different name, has allowed car-
tel brokers to send huge quantities of
meat and other foodstuffs to the Soviet
Union, at the cost of the lives of mil-
lions of people in Africa, to whom that
food would have been exported under
a rational international policy.
As of year-end, the line-up of pro-
posed "alternatives" to this mess, to
be introduced into the 100th Congress
and EC deliberations in 1987, is de-
signed to make things worse. It is all
based on the assumption that nothing
can or should be done about the IMF
system.
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Medicine by John Grauerholz, M. D.
New technology for cancer detection
The new NMR technique seems to be on the way to becoming a
reliable test to detect the presence of cancers.
Medical scientists have long sought
a blood test to detect the presence of
cancer. During this time, a number of
different chemicals have been found
to be associated with particular tumors
and have been utilized primarily to
evaluate the treatment and manage-
ment of already diagnosed cancers.
In the Nov. 27, 1986New England
Journal of Medicine, scientists at the
Charles A. Dana Research Institute,
Beth Israel Hospital, and the Harvard
Medical School, report on the detec-
tion of malignant tumors of various
types by use of a technique called
water-suppressed proton nuclear
magnetic resonance (NMR) spectros-
copy of plasma.
Unlike other blood tests, such as
carcinoembryonic antigen, beta-hu-
man chorionic gonadotropin, and al-
pha-fetoprotein which measure the
presence of chemicals produced by
specific tumors, this technique ap-
pears to measure the body's response
to the presence of cancer of any type
and to clearly discriminate between
cancer-bearing and non-cancer-bear-
ing patients.
Proton NMR is a technique for de-
termining the degree of order of cells
or molecules. This is done by polar-
izing hydrogen atoms (protons) in a
strong magnetic field and then mea-
suring the amount of time required for
them to resume their normal posi-
tions. This "relaxation time" is corre-
lated to the degree of organization of
the molecules in question. Highly or-
ganized molecules, and healthy cells,
rapidly return to their resting state,
whereas less ordered molecules, and
diseased cells such as cancer, relax
much more slowly.
The use of NMR to detect cancer
was first proposed in 1971 by Dr. R.
Damadian, who pioneered the devel-
opment of large NMR scanners capa-
ble of scanning an entire body and de-
tecting cancers in a manner analogous
to CAT scanners, but with much better
resolution. This work has been ex-
panded by other workers, such as Dr.
James Frazer in Texas, who have used
variations on this technique to not only
detect, but also treat some cancers.
The high cost, and limited avail-
ability of NMR scanners, have so far
precluded the use of NMR as a screen-
ing test. However the technique de-
veloped at Harvard uses a smaller in-
strument to analyze a sample of blood
plasma, rather than a whole patient.
Researchers had noticed increased
relaxation times in the serum and un-
involved organs of animals with ma-
lignant tumors, as well as small but
statistically significant increases in the
serum of patients with malignant tu-
mors. These differences were small
and did not distinguish between be-
nign and malignant tumors. They were
useless for diagnosis or prognosis.
Since the relaxation time of plas-
ma is a composite of the protons of
water and various other molecules in
the plasma, the researchers decided to
examine NMR spectra of protons oth-
er than water in the plasma of patients
with cancer and in the plasma of con-
trol groups. They did this by utilizing
the capability of modern NMR spec-
trometers to suppress the resonance of
water protons. This leaves mainly the
spectrum of plasma lipoproteins
(combinations of fat and protein) as
well as a number of small molecules
which are present in high concentra-
tions.
Sorting through these different
spectra, they settled on the methyl and
methylene groups of the lipids of the
plasma lipoproteins as the variable of
interest. They looked at these spectra
in 331 patients. These consisted of pa-
tients with untreated cancers, current-
ly or previously undergoing treatment
for cancer, with benign tumors, preg-
nant women, and two control groups.
The results showed that this tech-
nique reliably distinguished patients
with malignant cancers from normal
controls and patients with non-cancer-
ous disease, as well as patients with
benign tumors. However, pregnant
patients and patients with benign pros-
tatic hyperplasia had readings consist-
ent with the presence of malignant tu-
mors. The prostatic hyperplasia cases
may indeed have had undetected can-
cers, not that uncommon in such pa-
tients and often detected at autopsy
after the patient has died from some
other cause.
The reactions in the pregnant
women are interesting. They indicate
that what is being detected is a reac-
tion on the part of the host to the growth
and not a tumor product.
These preliminary results indicate
that water-suppressed proton NMR
spectroscopy of plasma may indeed
provide us with a highly accurate test
to detect many different cancers. What
is more significant are the potential
breakthroughs in our understanding of
the general phenomena of cancer as a
disease process. It is in the area of the
spectral analysis of living systems and
not in the linear reductionist approach
of molecular biology that we will make
the fundamental breakthroughs nec-
essary to conquer cancer, AIDS, and
aging.
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Banking by David Goldman
The first cracks in securitization
The $17 billion floating-rate note market could light. the fuse for
$3 trillion in off-balance-sheet liabilities.
Trading was suspended on almost
$17 billion of floating-rate notes
(FRNs) in London on Dec. 4. One
among many forms of "creative secu-
rities" which have proliferated during
the past several years, the affected area
involves so-called "Perpetual FRNs,"
a device through which the major
banks have increased their capital.
Faced with a trillion dollars of bad
Third World debt, and hundreds of
billions of dollars of bad oil, commod-
ity, shipping, real estate, and related
loans, the major banks issued capital
notes whose interest rate changes with
the market, but whose capital will
never be repaid-hence, "perpetual"
notes.
The run against this offshore bank
paper known as FRNs has not yet af-
fected the banks' deposits. However,
big international money, reportedly led
by the Japanese banks, has unloaded
paper issued by some of the world's
top international institutions, fearing
that "it may never be paid back," the
London Financial Times warned Dec.
London sources call the market
collapse the worst-ever crisis of con-
fidence in the 20-year-old Eurobond
market, the $200-billion-a-year off-
shore pool which turns international
hot money into "legitimate" invest-
ments. Bankers warn that the suspen-
sion of trading of bankers' capital notes
could damage the liquidity of major
British-based banks.
"Perpetual FRNs are a bit of a con-
fidence game," a financial insider said.
"They are an evasion of Bank of Eng-
land rules" that allows banks to use
the instruments as primary capital.
"The first hint you can't sell, and peo-
ple rush to get out." The present col-
lapse of confidence, according to re-
ports, was triggered by selling from
nervous Japanese banks.
The collapse of the FRN market
represents a crack in a $3 trillion dam.
It may seem astounding that banks
raised billions of dollars in new capi-
tal, by issuing notes which pay a frac-
tion less than the daily quoted rate for
offshore deposits in London.
Since the banks themselves are the
major buyers of such paper, the bank-
ing system appears to have dealt with
a threat to its solvency by taking in its
own laundry.
However, the FRN "confidence
game," as insiders call it, constitutes
a mere fraction of a $3 trillion inter-
national bubble created by the major
banks. The commercial banks issued
$3 billion worth of guarantees for all
kinds of securities, agreeing to bear
the risk of default, interest-rate
changes, or currency shifts. Virtually
all the issuance of securities in the past
three years has depended upon such
guarantees.
International lending collapsed
between 1982 and 1985, from over
$100 billion per year to barely $10
billion last year. It collapsed because
the banks' existing international loans,
to Third World borrowers and others,
became worthless.
The banks could not earn suffi-
cient income to pay interest on their
existing deposits, much less show a
profit, because a large proportion of
their existing loan-portfolios died.
What they could not earn in inter-
est from dead loans, the banks took in
by issuing loan guarantees and similar
commitments, in return for up-front
fees. The volume of loan guarantees
in the United States has grown from
almost nothing, to $500 billion in
1985, as a result.
In effect, the banks expanded their
liabilities in return for one-shot cur-
rent income, which is the most dan-
gerous and irresponsible thing banks
can do. For a bank, a loan guarantee
is no less a liability than a loan; if the
borrower fails, the bank will have to
pay off the loan.
One particularly nasty feature of
the "off-balance-sheet operations" is
that they have permitted banks to sell
off their best-performing loans in the
form of securities, raising money in
the short-term, while leaving a higher
proportion of bad loans in their port-
folios.
In particular, the New York banks
have sold off their most dependable
loans. According to London financial
community sources, there is growing
alarm over the process of "securitiza-
tion" and growth of "off-balance-
sheet" lending through which, in-
creasingly since the outbreak of the
debt crisis in 1982, major money-cen-
ter banks have technically improved
book profits to conceal loan losses.
The banks, hurting badly for cur-
rent income, accepted an up-front fee,
in exchange for such guarantees.
At the same time, they loaded up
their portfolios with securities issued
on the strength of guarantees provided
by other commercial banks, like the
"perpetual FRNs" whose market sank
into the ground.
The banks' own portfolios are now
vulnerable to a collapse of the paper
pyramid they built themselves.
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Business Briefs
Reagan, cabinet
meet with Mobutu
President Mobutu Sese Sekou of Zaire made
an urgent trip to Washington in early De-
cember to seek economic relief. He met with
President Reagan and most leaders of Rea-
gan's cabinet.
President Mobutu's main target was the
IMF and World Bank, whose austerity pol-
icies are destroying his country. The IMF,
which has been "supervising" the Zaire
economy for the last four years, is now ex-
tracting 54% of the nation's entire budget
for the payment of foreign debt.
Mobutu comes with a mandate from his
Central Committee, which earlier this year
recommended that Zaire adopt the "Peruvi-
an solution"-limiting debt payments to a
fixed percentage of export income.
U.S. senior officials told Mobutu that
under Gramm-Rudman constraints, the
United States has no new foreign assistance
to offer Zaire.
War on Drugs
`Operation Condor'
begins in Peru
Augustin Mantilla, Peru's vice minister of
the interior, announced on Dec. 9 the begin-
ning of "Operation Condor 5," the latest
phase in Peru's war on drugs that began in
1985.
In the first 24 hours of assault on the
cocaine paste producing center of Uchiza,
730 kilos of basic paste were seized and
three enormous decanting pits were de-
stroyed. Mantilla said, "The operation be-
gan Monday [Dec. 8] in the midst of the
jungle, especially in Uchiza, and it is ex-
pected it will end in the third week of De-
cember. I am confident this new attack on
narcotics traffic will be successful."
He said that 130 kilos were found on a
plane shot down and its two crew members
killed. In another raid, 300 kilos of refined
cocaine were seized.
On Dec. 4, Mantilla had announced that,
in 1987, Peru will run joint operations with
its neighbors to erradicate drug trafficking
along their common borders. "We have be-
gun a historic battle process along with Col-
ombia and Ecuador, a country which has no
experience but is getting prepared. We hope
that next year could bring unity with Brazil
and Colombia for joint actions, because we
already have preliminary agreements."
Mantilla said the U.S. government con-
tinues to give economic support for the
struggle against.drugs and the England, is
committed to repairing one plane and do-
nating another. During the first quarter, air-
craft and valuable logistical equipment will
arrive from Canada and Germany.
Austerity
Zambian President
cancels price increase
Zambian President Kenneth Kaunda can-
celed on Dec. 11 the increases in prices for
high-grade corn meal, following four days
of riots in the northern copperbelt in which
at least 11 people died.
According to the London Times, "The
... price rises were dictated, in effect, not
by the Zambian government, but by the In-
ternational Monetary Fund as a condition for
extending further loans."
In a televised speech, Kaunda said the
price would revert to its previous level im-
mediately, and declared corn milling a stra-
tegic industry in which only the government
and cooperatives can participate.
He said that the reintroduction of gov-
ernment subsidies on corn meal-the staple
diet of Zambia's population-would divert
money that Zambia should spend on devel-
opment of public services. "It means the
economy will remain static."
According to the London Financial
Times on Dec. 12, Kaunda's reversal "calls
into question the future of the country's re-
lations with the International Monetary Fund,
which has been backing an economic aus-
terity program."
President Kaunda said that the extent of
the riot damage is not yet known, but one
company, the National Imports and Exports
Corp., lost two employees, 21 shops, and
property worth $6.5 million. He appealed to
law-abiding Zambians to assist security
forces as they track down looters and rioters.
Development
Peru's Garcia
appeals' to industrialists
President Alan Garcia announced on Dec. 3
a plan for coordinating industrial invest-
ments to maximize development in his
country.
"We have begun a harmonizing process
with business so that profits made with the
reactivation of 1986 are invested in the areas
of interest to national development. For ex-
ample, food, textiles and in the provinces."
Garcia has held weekly meetings with
industrial leaders to work out investment
policies. Next year, those of each sector will
decide where increased capacity is needed.
Income invested in those areas will be tax-
free, if some fresh capital equal to 30% of
the project is also invested.
Earlier, on Nov. 16, Garcia had told a
business convention, "An industrialist is not
a speculator.... An industrialist is some-
one who takes risks for himself and for Peru."
Agriculture
`Free Europe
needs free farmers'
Two hundred farmers and leaders of farm-
ers' association from Europe, the United
States, and Ibero-America gathered in Ob-
ernburg, West Germany, for a Schiller In-
stitute Agricultural Commission meeting on
Dec. 6and7.
The title of the conference, "Free Eu-
rope Needs Free Farmers," suggested the
direction of the solution: to return to the
tradition of independent farmers, and stop
the process leading to medieval conditions
EIR December 19, 1986
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Briefly
whereby farmers become serfs of banks or
cartels.
Uwe Friesecke and Rosa Tennenbaum
of the Schiller Institute in Germany showed
that the situation of the German farmer is as
bad as his American counterpart's * 'They
concentrated on demonstrating that the world
agricultural crisis is a crisis of underprod-
uction.
Fortunato Tirelli, general secretary of
the Italian Cattle Breeders Association in
Rome, showed that the EC, by forcing farm-
ers to destroy products or kill cattle if they
exceed "quotas," has created malnutrition
in Italy.
From France, Marc Gaulandeau, broth-
er of the president of the French Agricultural
Association, addressed the conference on
how Moscow profits from the bankruptcies
that EC quotas have caused in France, thanks
also to "red billionaire" Doumeng, a friend
of Gorbachov and the French Communists,
and France's biggest meat distributor, who
sells the Soviets butter and meat at dumping
prices.
Juan Rebaza, chairman of Peru's state
fishing company Pesca Peru and a founder
of the Schiller Institute Trade-Union Com-
mission, told of his country's fight against
terrorism and drugs.
Egyptian President puts
nation before debt
"The political stability of Egypt is more im-
portant than the pretensions of the IMF,"
Egyptian President Hosni Mubarak declared
in an interview with the French daily news-
paper Le Monde in mid-December.
"What do they want?" he asked. "To
provoke riots? Their policy was implement-
ed in Morocco; it provoked riots. The same
in Tunisia."
Mubarak also blasted the United States,
first on economic policy: "I get furious at
those who are aggravating the conditions of
my people. If you give me $800 million of
economic aid and take from me $600 million
to pay the interest on the military debt, what
does that really mean?"
EIR December 19, 1986
The Egyptian President stressed that in
the last 12 months, the most important dis-
agreement had been "the confrontation be-
tween Egypt and the United States over the
Achille Lauro affair." On Iran: "I could not
believe it when I heard it. This initiative has
destroyed the credibility of the U.S., if not
worldwide, at least in the Arab world. I have
sent messages to Washington to express my
views, but obviously in Washington, they
have other problems."
European Economy
Economist sees
great depression coming
"We are facing the second big crisis. Today
in Europe an average unemployment exists
similar to that in '29. The European average
.is 11%. In the 'S0s and '60s in these same
countries, the unemployment average was
2%. In Italy it was 5%," according to econ-
omist Franco Modigliani of MIT, speaking
at a conference in La Sapienza University of
Rome in mid-December. Modigliani enjoys
the dubious distinction of having won the
Nobel Prize for economics in 1985.
He pointed out the serious consequences
that such rates of unemployment have on a
nation: "We must consider how much in-
come is jeopardized. An unemployment rate
of 10% causes in a country an annual loss of
15-20% of the national income. And it de-
creases the tax-revenues creating damage to
the State. . . . Now in Italy the situation is
disastrous: One-third of the people under 25
are unemployed.... If the economic
growth-rate remains 2.5-3% . . . till 1990
Europe will have to live with 11% unem-
ployment. Only for a short period is such a
percentage tolerable."
Modigliani blamed the situation on the
United States: "The big fault is that of Pres-
ident Reagan who pushed up the U.S. defi-
cit." Modigliani proposed a moderation of
economic requests from workers and em-
ployees, concluding with a jab at the trade
unions: "To ask, as the Italian trade unions
are doing, a 7% wage increase, is not ac-
ceptable, and is unjust toward those who
have no work."
? WEST GERMANY will resolve
outstanding debt problems with Peru
in February, its ambassador in Lima
stated on Dec. 7. He said the debt "is
not critical and we are trying to
achieve some remedy for this situa-
tion; I am proud that this is the spirit
in which the case is being handled."
The ambassador said, "We seek to
give all possible help in fighting ter-
rorism and drugs."
? BOLIVIA appealed for $300
million from the World Bank to per-
suade some 70,000 families growing
123,500 acres of coca-leaf to switch
to cocoa and coffee, its planning min-
ister Gonzalo Sanchez Lozada told a
news conference in Paris on Dec. 4.
He estimated Bolivian income from
cocaine exports at $1.8 to $2.5 billion
annually.
? MEXICO has 50 to 100 times the
perviously reported number of AIDS
cases, Health Minister Guillermo
Soberon admitted on Dec. 4. Until
the press conference, he had insisted
that there are only 249 cases of AIDS
in Mexico. Now he admits that for
every one of those 249 reported cases
there are "between 50 and 100 other
people infected."
? NIGERIAN oil minister Rilwanu
Lukman, OPEC's president, told
OPEC's ongoing meeting that "some
individuals jubilating at the prospects
of prolonged low oil prices and of the
collapse of OPEC, are suddenly sup-
porting the idea of an oil import fee
to protect the United States oil indus-
try, conveniently ignoring the fact that
such a development would be against
free trade and the free market which
America champions."
? CHASE MANHATTAN and
Merrill Lynch are both having finan-
cial troubles. Chase Manhattan, the
bank of the Trilateral Commission's
David Rockefeller and Henry Kissin-
ger, is undergoing a "world-wide re-
structuring and cost reduction ef-
fort," according to the Wall St. Jour-
nal-Europe of Dec. 10. Chase has
closed 50 New York City branches.
Economics 27
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? Science & Technology
Aerospace production:
a shadow of the 1960s
As one industry source told EIR's Marsha Freeman and Robert
Gallagher, if current trends prevail, the industry has "five years to
go before it's through."
It will come as a surprise to most readers, that even aerospace
and defense industries have not fared well during the Reagan
administration "economic recovery." The American aircraft
industry has undergone a collapse over the past decade that
seriously weakens our ability to provide for an adequate
defense, and undermines much of the infrastructure and re-
search-and-development capability relevant to a program for
the colonization of the Moon and Mars.
The condition of aircraft production is a general barom-
eter for the state of the nation's aerospace-defense industry.
Aerospace-defense has been the science driver for the Amer-
ican economy since World War II. Every sector of the do-
mestic economy has been improved by research and devel-
opment carried out by the industry and sponsored by the
National Aeronautics and Space Administration (NASA) and
the military services.
The capability to carry out the Strategic Defense Initia-
tive, build an aerospace plane, orbit a space station, return to
the Moon, and colonize Mars, rests entirely with aerospace-
defense. For example, Rockwell International has used the
same facility in California to assemble both Space Shuttle
orbiters and B-1 B ,bombers.
Since 1968 the production of civilian transports used by
commercial airlines, has fallen 60% from 702 in that year to
278 in 1985 (see Figure 1). The production of military air-
craft is down 48% since 1975, from 1,779 aircraft in that
year, to 930 in 1984 (see Figure 2). Since 1980, production
of helicopters for nonmilitary uses has fallen 72%, from
1,366 to 376 in 1984. Worker productivity has stagnated in
some areas of production, and collapsed in others, in the
28 Science & Technology
same period.
The state of the production of civilian transports, military
aircraft, and helicopters indicates the preparedness of the
aerospace industry to meet a national emergency or mobilize
for an ambitious space program. Civilian transport produc-
tion represents the nation's military airlift capability in re-
serve, as the merchant marine before World War II repre-
sented our sealift capability at that time. Today, however,
there are only two companies left in civilian transport pro-
duction, Boeing and McDonnell Douglas.
FIGURE 1
Civilian transport production
Units
700
600
500
400
1959 57 56 50 63 N 70 73 75 77 80 92 83 M
Production of civilian air transports for use by airliners has
collapsed about 60% since 1968. The fleet of civilian transports is
the basis of our military airlift capability in reserve.
EIR December 19, 1986
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A technician at United Technologies' Hamilton Standard division inspects work on a propeller component. United Technologies has
announced plans to lay off 11,000 of its 188,000 workforce by the end of 1987, as part of a "corporate restructuring program."
Civilian helicopters are produced largely by the same
companies that produce the military helicopters key to the
defense of Europe: Bell, Hughes, and Sikorsky.
A conservative estimate based on a comparison of U.S.
and Soviet military forces shows that America has a deficit
in military aircraft of at least 5,500 craft. Although Russia
has only about 1,900 more aircraft than the United States,
62% of their fleet has been built since 1975, whereas for the
United States only 27% is that new (see Table 1 and Table
FIGURE 2
U.S. production of militarily significant
aircraft
Number of planes
10,000-1
The production of militarily significant aircraft has fallen by
one-half since 1975. These aircraft include military aircraft
proper, civilian air transports, and helicopters for civilian uses.
2). To rejuvenate America's military aircraft fleet to at least
the level of Russia requires 5,500 new craft.
Overall, since 1975, total U.S. aircraft production has
collapsed 77% from 17,030 aircraft to 3,929 in 1984 (see
Figure 3). Much of this fall-off was due to the collapse of
production of general aviation aircraft, small recreational and
executive airplanes, such as the Piper Cub or Cessna. The
plant and equipment used in production of these craft, is not
relevant to our mobilization capability.
The deployment of military aircraft is especially required
by the Strategic Defense Initiative. One arm of the SDI pro-
gram known now as the Aerospace Defense Initiative, in-
volves the development of high-altitude aircraft armed with
directed-energy weapons or relay optics, to attack lower-
altitude enemy bombers, fighters, helicopters, cruise mis-
siles, and short-range ballistic missiles in their boost phase.
Other SDI aircraft will be equipped with laser radar and other
sensing equipment.
From 1958 to 1968, aircraft industry productivity mea-
sured in aircraft per production worker per year, generally
rose at an exponential rate (see Figure 4). Since then produc-
tivity in civil transport production has fluctuated between
about 30 and 55 planes per 10,000 employees (see Figure
5a-b).
Productivity in civilian and military helicopter produc-
tion has collapsed 60% from 57 per 1,000 employees in 1975
to 20 in 1984 (see Figure 6). In the' same decade, military
production fell faster than civilian: 60% versus 56%.
Overall, industry productivity fell 78% over that same
period, from 63 aircraft produced per thousand production
workers in 1975 to 14 in 1984 (see Figure 4). Most of this
Science & Technology 29
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TABLE 1
Soviet and U.S. military aircraft newer than
10 years old, deployed 1975-84
Heavy and medium bombers
148
0
148
Interceptors
575
36
539
Strategic surveillance
5
0
25
Total land-based tactical
5,070
2,041
3,029
Fighter/attack
3,955
1,362
2,593
Theater bombers
0
0
0
Reconnaissance/surveillance
285
37
248
Helicopter gunships
830
642
188
Total Naval
455
390
65
ASW
200
99
101
Carrier-based
(50)
(99)
Shore-based
(150)
(0)
Other carrier-based
60
291
-231
Other shore-based
195
0
195
Military airlift
Strategic
240
259
-19
Tactical
140
80
60
Helicopters
2,300
572
1,728
8,933
3,408
5,525
62
27
Source: John M. Collins, U.S.-Soviet Military Balance 1980-1985, Pergamon
Brassey's, Washington, 1985
FIGURE 3
Total aircraft production
Number of planes
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
Production of aircraft of all kinds has fallen about 80% since
1975. Most of this decline is in the production of small aircraft
used for recreational or other personal reasons. The production of
general aviation aircraft does not represent defense mobilization
capability, although the manpower used in its production includes
aerospace machinists.
30 Science & Technology
TABLE 2
Total U.S. and Soviet military aircraft forces,
1984
Heavy and medium bombers
303
297
6
Interceptors
1,210
282
928
Strategic surveillance
14
45
-31
Total land-based tactical
7,418
4,787
2,631
Fighter/attack
5,460
2,900
2,560
Theater bombers
423
198
225
Reconnaissance/surveillance
585
292
293
Helicopter gunships
950
1,397
-447
Total naval aircraft
1,085
1,295
-210
ASW
480
508
-208
Carrier-based
170
296
-126
Shore-based
310
212
98
Other carrier-based
60
787
-727
Other shore-based
545
0
545
Military airlift
Strategic
305
329
- 24
Tactical
525
520
5
Helicopters
3,650
5,098
-1,448
Source: John M. Collins, U.S.-Soviet Military Balance 1980-1985, Pergamon
Brassey's, Washington, 1985
FIGURE 4
Total aircraft per 1,000 production workers
90 -
801
70 -~
60-
1953 58 63 68 70 73 75 77 80 84
Aircraft produced per production worker increased at an
exponential rate as shown in this logarithmic graph from 1958
until 1968. Following that, an instability was introduced into the
aircraft industry by McNamara's policy of mutually assured
destruction. Aircraft production shifted in proportion to aircraft
for consumer or personal uses, and away from military uses or
relevant civilian uses, such as the production of civilian air
transports.
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fall in units of aircraft produced per production worker, ex-
presses the complete collapse in production of general avia-
tion craft from 17,000 in 1979 to 2,400 in 1984. Figure 7
shows the decline in aircraft industry employment over the
past 30 years.
One industry source told EIR that if existing trends pre-
vail, aerospace-defense has "five years to go before it's
through."
Figure 3 shows that there has been a regressive structural
change imposed on the aircraft industry since 1968. In the
late sixties, the U.S. physical economy began to collapse,
machine-tool production reached its peak in 1967, the Apollo
program peak funding and employment passed in 1968, and
the United States began its pullout from Vietnam. The ensu-
ing collapse in aircraft production into 1970, produced a shift
into consumer-oriented production of propellor-driven gen-
eral aviation aircraft. By contrast, the total production of
militarily significant aircraft-transports, helicopters, and
military craft per se-has fallen continuously since 1968 (see
Table 1).
This shift -in the market served by aircraft manufacturers
comes in the midst of an across-the-board "shake-out" in the
industry. Between 1960 and 1976, in production of each type
of significant aircraft, one-half of the companies involved,
pulled out. For example, in 1960, five firms built airliners;
by 1976, only three were. left in that important area, and
today only two.
The death knell for the industry had actually begun to
sound in 1963, when Robert McNamara, with increased power
following the assassination of President Kennedy, began to
cancel programs right and left, and drove up costs throughout
the industry in his campaign for "cost-effectiveness." The
Air Force, for example, was barred from developing new
long-range bombers. But McNamara's expansion of the Viet-
nam War, kept demand for military aircraft high relative to
the 1970s. The 1960s consumer boom drove commercial
airliner production to its peak.
Several events occurred between 1968 and 1970 to col-
lapse the industry.
1) With the winding down of the Vietnam War, a large
deficit in modern military aircraft existed due to the war-
imposed policy of marginally extending the life of a craft
beyond normal military practice. But the war had temporarily
destroyed support for military production, and the new na-
tional security adviser, Henry Kissinger, used the opportu-
nity to implement his policy that a weaker United States
meant a safer world. Military spending as a percentage of the
national budget, declined dramatically in the Kissinger years
of 1969-77.
2) A wave of monetary crises hit the Western economies
in the 1968-71 period, culminating in President Nixon's re-
moval of the dollar from the gold standard. The consumer
boom temporarily collapsed.
The fall in production of military aircraft, civilian trans-
FIGURE 5A
Civil transports per 10,000 employees
(year + 1 year)
1968 70 73 75 77 80 84
FIGURE 5B
Civil transports per 10,000 employees
(year/year)
Worker productivity in the production of civilian transports
has fluctuated between about 30 and 50 transports produced per
10,000 employees per year since 1968. Up until that time,
productivity in the industry was increasing exponentially. This
stagnation in productivity is shown in two different calculations.
On the average, it takes 18 months to produce a civil air transport.
On this basis, it seems reasonable to calculate productivity using a
lag of at least one year between the shipment of the aircraft and
the employment used to calculate the productivity in its
production. So in Figure 5a, we show productivity measured in
terms of the shipment of the number of civil transports divided by
the number of employees in the industry of the previous year. in
Figure Sb, we show the productivity in civilian transport
production calculated without a lag. By either calculation,
productivity has stagnated since 1968.
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FIGURE 6
Helicopters per 1,000 employees
1968 70 73 75 77 80 84
Productivity in helicopter production has fallen 80% since
1970. The number of helicopters, either military or civilian,
produced per 1,000 employees is the measure used in Figure 6.
ports, and civilian helicopters has restricted funding for re-
search and development and tool modernization in the major
aerospace companies. According to an industry source, de-
fense contracting is unprofitable today; as a result, the source
reports, only the profits from commercial business are keep-
ing these companies above water.
Nonetheless, today, aircraft production accounts for 55 %
of total aerospace industry employment, and even now, the
collapsed aircraft industry has 10 times the number of ma-
chine tools as that portion of the aerospace industry that
produces rockets, satellites, and the Space Shuttle. It has four
times the number of machine tools as the ordnance industry.
Plant and equipment aging
Since the 1960s the physical plant and equipment in the
aircraft industry has shrunk in total size, and efforts to mod-
ernize the stock of equipment have slowed. According to the
Amlricdn Machinist Inventories of Metal Working Equip-
ment, the industry had 30% fewer machine tools in 1983 than
in 1977, a drop from 139,200 metal-cutting and metal-form-
ing machine tools to 97,708 (see Figure 7). Fully 65% of the
1983 inventory of tools, are considered "obsolete" by the
standards of the machine-tool industry which regards equip-
ment that is 10 years old, beyond its useful life. Prior to 1977,
the percentage of aircraft-industry machine tools that were
numerically controlled, that is, automated in some fashion,
was growing exponentially. This modernization has since
leveled off.
The number of machine tools per production worker in a
32 Science & Technology
FIGURE 7
Aircraft production workers
(Thousands)
1953 50 63 N 70 73 76 77 80 82&i4
The number of production workers in the aircraft industry has
fallen steadily since World War!!. Industry employment of
production workers is now about half what it was in 1953.
metal-working industry gives a rough indication of its capi-
tal-intensity, that is, the ability of the production worker to
transform nature. This ratio increased exponentially from the
early 1950s until Defense Secretary Robert McNamara intro-
duced the doctrine of Mutually Assured Destruction (MAD)
in 1963 (see Figure 8). (The exponential growth appears'in
the logarithmic plot of Figure 8 as a straight line.) As James
Schlesinger argued in his Political Economy of National Se-
curity, a MAD policy based on a sufficiently large fleet of
ICBMs would make basic capital-goods industries unneces-
sary for national defense. Since the adoption of MAD, the
number of aircraft industry machine tools per production
worker has dropped 42%.
Some might argue that this drop is not important, citing
the fact that newer numerical control machine tools can do
the work of more than one of yesterday's tools. Actually,
more modern tools have not been introduced in a significant
way. This is recorded in the continual increase in age of
aircraft industry machine tools since World War H. Even the
rate of introduction of numerical control tools has slowed in
recent years.
The argument that more modem tools mean that fewer
total tools are required, is based on false, zero-growth prem-
ises. In a robust economy, the opposite is true: Capital-inten-
sity will always increase, and in fact, will increase faster as
man's increasing mastery over nature requires more ad-
vanced forms of technology.
The number of numerically controlled (NC) machine tools
per production worker in metal-working industries, gives a
rough indication of the potential average energy flux density
available to increase productivity.
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FIGURE 8
Capital intensity: machine tools per
100 production workers
I
1953 58 63 6 r5 68 1 170 73 r 71578T 810 83
The number of machine tools per production worker measures
the capital intensity of a metal-working industry, such as aircraft.
Figure 8 shows that this capital-intensity increased at an
exponential rate as shown in the logarithmic graph from 1953
until 1963, when Robert McNamara introduced the policy of
mutually assured destruction. Since 1963, the number of tools per
production worker, shown here as the number of tools per 100
production workers, has stagnated.
In metal-working industries, energy flux density mea-
sures the concentration and rate of flow of energy through a
surface being worked with, for example, a cutting tool. The
instantaneous energy flux density of a tool, at its cutting edge,
is very high. However, without numerical control, a machine
is cutting only a small percentage of available machine time
due to time wasted in setting up the piece of metal to be
worked, in changing tool bits, and in a series of other time-
consuming steps. As a result, the average energy flux density
is low. The instantaneous energy flux determines what you
can do; the average measures how often, in fact, you do it.
Numerical control automates some of the time-consum-
ing manual work, preparatory to actual tool use. NC machine
tools are capable of a much greater throughput than non-
automated equipment; with numerical control, a cutting tool
is spending more time cutting than otherwise, increasing the
average effective energy flux density. The number of NC
machine tools per production worker grew exponentially from
1963 to 1977 and then leveled off (see Figure 9).
There has been a steady decline in the percentage of
aircraft industry machine tools less than 10 years old since
World War II. At the end of the war, fully 98% of the indus-
try-tool inventory was less than 10 years old. Until 1958, at
least half of all tools fell into this category. By 1977, how-
ever, 77% of industry tools met the machine-tool industry
definition of obsolete. The decline in this percentage since
then, is only the result of the massive retirement of older
equipment that occurred as the production of general aviation
aircraft collapsed.
This pattern of increasing obsolescence has also occurred
in the ordnance industry and in that portion of the aerospace
FIGURE 9
Capital intensity: numerical-control machine
tools per 100 production workers
1968 75 78 85
The number of numerically controlled, that is, automated
machine tools per 100 production workers has leveled off in
growth since 1977. Numerically controlled machine tools enable
the production worker to organize a higher throughput of work in
the aircraft industry shop. Numerical control saves time that is
unfortunately wasted in the use of manually controlled machine
tools: Time to set up the metal that the machine is to cut or
otherwise work on, time to change tool bits, and other operations.
As a result, the number of numerically controlled machine tools
per production worker gives you an indication of the relative
energy flux density available to the individual worker. A higher
proportion of numerically controlled machine tools means that the
cutting tool is in use a larger percentage of time, and therefore,
the average energy flux density is higher.
industry devoted to the production of rockets and space ve-
hicles. In fact, in the latter, fully 84% of all machine tools
are over 10 years old. Although the sudden occurrence of six
launch failures in the West since August 1985-two Titan
34Ds, two Arians, the Space Shuttle Challenger, and the
Delta-strongly suggest sabotage, the increasing obsolesc-
ence in the industry's equipment leaves open the possibility
of another cause for the failures. Supporting the view that
industry rocket-production equipment is obsolete, is
congressional testimony by Martin Marietta and General Dy-
namics officials, that investment in new tools will be required
to gear up Titan and Atlas rocket production.
Science & Technology 33
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Mg7D
Feature
Why did Moscow
assassinate
Premier Olof Palme?
by the Editors
NBC-TV's recent fabrication of a report of new developments in the investigation
of the assassination of Swedish Prime Minister Olof Palme, has placed the network
under the strongest suspicion of collusion with the Soviet intelligence services.
Also implicated are officials of the U.S. Justice Department and the Anti-Defa-
mation League of B'nai B'rith (ADL).
On Dec. 4, NBC alleged that Swedish police were investigating links between
the Feb. 28 assassination of Palme and U.S. Democratic presidential candidate
Lyndon LaRouche. The broadcast reported that U.S. government authorities had
turned over to Swedish police notebooks belonging to associates of LaRouche,
which had been seized during the Oct. 6 raid of LaRouche-associated companies.
The notebooks allegedly contained references to the Palme assassination.
The National Democratic Policy Committee, a political action committee
which supports LaRouche's programs, issued a statement on Dec. 5, denouncing
the role of federal officials in fueling NBC's defamatory campaign. "It is obvious
that federal authorities are deliberately leaking false and misleading information
to the press," the statement said, "for the purpose of creating a prejudicial and
inflammatory climate around their ongoing investigations of associates of Lyndon
LaRouche. Yesterday's leaks in fact continue an 18-year pattern of Cointelpro-
type dirty tricks by the FBI and Justice Department against LaRouche and his
friends.
"NBC News has been a principal recipient of these illegal leaks. In return,
NBC reporters are known to be feeding information to federal prosecutors. At this
point, NBC and the FBI are virtually indistinguishable.
"The leaking of grand jury material-in violation of federal laws governing
grand jury secrecy-has been ongoing and systematic.... The only conclusion
that can be drawn is that the policy of leaking has the approval of, and is sanctioned
by, high-level officials in the Department of Justice itself. . . ."
Working with NBC and the FBI on the case is Irwin Suall, director of the Fact-
Finding Division of the ADL, who played a prominent role in the weeks immedi-
ately following the Palme assassination, in attempting to pin the murder on La-
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Rouche associates. Suall recently told reporters that he has
attempted to help Swedish authorities locate two former
members of the European Labor Party (ELP), LaRouche's
co-thinkers in Sweden.
Swedish police emphasize that they are not pursuing any
"LaRouche angle" in the Palme investigation.
The effort to link LaRouche to the Palme assassination,
was originally launched as a concerted disinformation oper-
ation at the highest levels of Soviet intelligence, immediately
after the assassination. The details of this extraordinary effort
are the subject of a new 102-page EIR Special Report, "A
Classical KGB Disinformation Campaign: Who Killed Olof
Palme?" from which we have drawn much of this Feature
presentation.
A key role in the disinformation operation is played by
Georgii Arbatov, the Central Committee official who heads
Moscow's U.S.A.-Canada Institute. Just hours after Palme's
death, Arbatov had the line ready to throw investigators off
the track: "I do not know who killed Palme, but I know all
too well who hated him . . . fascist hooligans . . . reaction."
What was close Soviet friend Olof Palme doing, which
would cause Moscow to order his murder? The complex
issues are analyzed in depth in our Special Report. Here we
can just point to a startling "signal" piece which appeared in
January 1986 in the Soviet journal International Affairs. Au-
thor Yuri Denisov decried the uproar in Sweden over incur-
sion by Soviet submarines in Sweden's territorial waters,
adding the following clear message: "Troubles in Soviet-
Swedish relations also made themselves felt after the Palme
government came into office in 1982. . . . Although the gov-
Moscow's Georgii Arbatov (right) gave the signal for an interna-
tional disinformation campaign, which sought to blame the Palme
assassination on associates of Lyndon LaRouche. The Swedish
daily Aftonbladet purported to show suspect Viktor Gunnarsson
demonstrating against Palme; in fact, the man pictured at the
lower right, his face covered with black square, was a Social Dem-
ocrat attempting to tear down a poster critical of Palme-as the
paper admitted in a tiny note the day after!
ernment's program statement did refer to its intention to
improve relations with the Soviet Union, it failed to take
consistent and decisive practical steps in this direction." Den-
isov demanded that Sweden "reaffirm its policy of neutrality
(despite the fact that in that country itself and across the
Atlantic there are some forces that would push it off that
track)."
The key to unraveling the mystery of the Palme assassi-
nation is Emma Rothschild, Palme's alleged mistress, the
daughter of Britain's Lord Victor Rothschild. Just as NBC
was seeking to re-open the "LaRouche angle" on the Palme
murder, Europe was being rocked by press revelations of the
Rothschild-Palme link-and by accusations that Lord Roth-
schild himself was the "fifth man" in the Soviet spy-ring of
Kim Philby et al.
Emma Rothschild is a member of the governing board of
a Soviet intelligence front, the Stockholm International Peace
Research Institute (SIPRI). She is also an official of the Palme
Commission on disarmament and security issues, rubbing
elbows with Georgii Arbatov.
Arbatov's assistant Vitali Zhurkin, deputy director of the
U.S.A.-Canada Institute and a member of the scientific coun-
cil of SIPRI, has glowing praise for Emma Rothschild: "She
is a wonderful woman. Her work is respected not only in the
Soviet Union, but all over the world."
Swedish authorities do not suspect Emma of plotting
Palme's assassination. But what she knows, especially con-
fidences between her and Palme which might have been of
great interest to Soviet eavesdroppers, is of the greatest im-
portance for the investigation.
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Bizarre twists in the
Palme investigation
by William Engdahl
Since the assassination of Swedish Prime Minister Olof Palme
on Feb. 28, 1986, the official police investigation has become
the target for worldwide ridicule. Stockholm Police Chief
Hans Holmdr has come under growing attack for the incom-
petence of his investigation, his obsessive effort to "prove"
that the European Labor Party-friends of Lyndon H. La-
Rouche, Jr. in Sweden-was somehow behind the murder
of the prime minister. In recent weeks, demands for Holmdr's
resignation increased from across Sweden's political spec-
trum. Twelve Stockholm law enforcement officers have re-
portedly resigned, in disgust at the police chief's handling of
the investigation.
Then on Dec. 10, the lid was suddenly slammed down
again. Following a meeting with Prime Minister Ingvar
Carlsson, the leaders of all parliamentary parties issued a
joint statement declaring "confidence" that the investigation
of the Palme assassination was in good hands. The exact
circumstances surrounding this spectacular shift are not yet
known.
Plainly, the stakes on Holmdr's cover-up are very high.
Despite the repeated discrediting of "the LaRouche angle,"
an effort to resurrect it was launched by NBC-TV, in a sen-
sational broadcast on Dec. 4. NBC said that it had obtained
information that FBI officials had shipped to Swedish inves-
tigators the contents of notebooks seized in an Oct. 6 raid of
LaRouche-associated companies in Leesburg, Virginia. Those
notebooks, NBC claimed, showed links between LaRouche
and Viktor Gunnarsson, a 33-year-old Swede interrogated on
March 17 and released for lack of evidence linking him to the
Palme murder.
The Stockholm tabloid Aftonbladet, owned by the trade
union organization of Palme's Social Democracy, lost no
time in going with the NBC story. On Dec. 5, in an "Extra"
with a front-page banner headline, "Raid on Right-Wing
Group: USA Police Find Palme Document," Aftonbladet ran
a three-page story based on the NBC account, noting that
"according to NBC, Swedish authorities renewed their inter-
est in the 33-year-old who earlier was suspected in the Palme
investigation. . . . The 33-year old was a member of La-
Rouche's organization in Sweden." (This, despite the fact
that only two months before, on Sept. 7, the same newspaper
had run a tiny correction to its own previous defamatory
coverage, under the title "No Member of the ELP." Gun-
narsson is quoted, "I have not been a member and I do not
sympathize with them, although there are certain things about
which they are right.")
Swedish police emphatically denied the NBC story (see
box).
The Rothschild connection
Behind Holmdr's bungling of the investigation lies a cov-
er-up of strategic significance, reaching far beyond the con-
fines of the Stockholm police headquarters. On Dec. 5, the
Malmo daily Kvallsposten cryptically noted that in Great
Britain, journalists seem preoccupied, not with Gunnarsson
and the ELP, but with the love affair between Palme and
Emma Rothschild, daughter of Victor Lord Rothschild, for-
mer crony of KGB spy Kim Philby.
Although this was the first the Swedish public had heard
of the Rothschild connection, it was nothing new to angry
police investigators aware of Holmdr's cover-up role. On
Dec. 3, one day before the NBC story, 12 top detectives
involved in the Palme case resigned in protest. The resigna-
tions were prompted, according to the London Daily Mail of
Dec. 4, "because they have been thwarted by political pres-
sure from conducting a proper criminal inquiry into Palme's
murder. . . . The Swedish government, they claim, is terri-
fied of the international consequences should the officers pin
down the murderer and then reveal the forces behind him.
Other officers in Stockholm CID [criminal police-ed.] claim
they have uncovered sensational details of the Prime Minis-
ter's sensational love life. But they too on government orders
had to close their files."
The German daily Bild Zeitung on Dec. 5 revealed that
the mistress in question was indeed Emma Rothschild, and
attributed the resignation of the 12 detectives to Holmdr's
blockage of this line of investigation.
Mounting pressure
Since March, Holmdr has come under increasing attack.
By Dec. 9, Stockholm's largest morning daily, Dagens Ny-
heter, ran a page-one headline, "Hans Holmdr Should Be
Removed." A leading member of Parliament and chairman
of the Judiciary Committee, Karin Ahrland, issued a public
call for Holmdr to resign; this was followed a few days later
by similar statements by National Justice Chancellor Bengt
Hamdal and National Prosecutor Magnus Sjoberg.
The battered Holmdr went on television to try to repair
his reputation. Comparing his position to that of Homer's
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Odysseus, guiding his ship, "alone, under pressure," Holm6r
cited one of his favorite maxims from Voltaire, "There is
nothing so uncomfortable as being hanged in silence." Dag-
ens Nyheter quipped on Dec. 10, "Holm6r does not have to
worry. If he is hanged, it certainly won't be in silence."
The same day, Claes Zeime, chief government prosecu-
tor in the Palme case, was asked by a reporter whether re-
peated statements by Holm6r that he is "on the verge" of
naming the murderer, the motive, or something, could be
called "disinformation." Zeime replied that his office was
aware of no major new element in Holm6r's investigation,
and that "the police statements indicating differently, were
'disinformation' if you want to call it that."
Now, the number-two man in the Swedish foreign min-
istry appears to have jumped into the fray in Holm6r's de-
fense, Cabinet Secretary Pierre Schori, an intimate of Henry
Kissinger. Kissinger made an unpublicized 12-hour trip to
Stockholm from London on Dec. 1. Schori was in Washing-
ton meeting with the U.S. State Department's John White-
head, among others, during the week of Dec. 5, when the
NBC piece ran.
Impact of EIR's report
There are several elements which make the situation in-
side Sweden far different in December, when NBC tried to
set off a new witchhunt against LaRouche, than in March,
when Holm6r led a campaign, with full international press
play, to try to pin the Palme murder on the ELP.
One major difference is the circulation internationally of
a 102-page EIR Special Report, "A Classical KGB Disinfor-
mation Campaign: Who Killed Olof Palme?" The report was
released at press conferences in London, Washington, Oslo,
Copenhagen, and other capitals. It outlines the most detailed
documentation of Soviet intelligence operations in a Western
country ever presented in the non-classified domain. The
report has become the most discussed back-room item in
Sweden, according to Swedish journalists and businessmen.
It is known to be circulating in "bootleg" xerox copy through
the Parliament, military, and business circles.
The Malmo-based Sydsvenska Dagbladet on Dec. 6 ran
an article on E!R's Palme dossier, under the title, "Right-
Wing Extremist Document: KGB Orders Murder of Palme."
While the tone of the article is obligatory Swedish media
sarcasm, several important items leak out, perhaps as signals
in an escalating factional warfare inside Sweden. According
to the paper, "The report charges that Palme was murdered
on orders from the Soviet spy organization, KGB, in collab-
oration with international big banks, the so-called Trust and
international Jewish organizations.... The biggest Swed-
ish villain in this scenario is Pierre Schori, cabinet secretary
in the Foreign Ministry. . . . The document is, however,
notable in other and more serious ways. It cannot have been
compiled and published without help of a well built-up net-
A LaRouche angle?
`Oh no, not again !'
The following wire was issued by UP! from Stockholm
on Dec. 5:
Police said today a man cited in a news report as the
possible link between Lyndon LaRouche's political
group and the murder of Prime Minister Olof Palme is
no longer a suspect.
Police spokesman Leif Hallberg refused to confirm
or deny an NBC news report Thursday that Swedish
police investigating the Feb. 28 assassination of Palme
were given notebooks seized in October from La-
Rouche's headquarters in Leesburg, Va. But he said
the LaRouche loyalist was dropped as a suspect in
March.
"There is a disproportionately great interest among
journalists in the United States in one of the leads we
have followed up during the investigation," Hallberg
said.
"Every time NBC or some other agency from the
United States calls us about this [LaRouche angle] we
look at each other at police headquarters and say, 'Oh
no, not again, "' he said.
work of informers and lots of money."
Other events too have changed the correlation of forces
from that of March. One is the widening criminal investiga-
tions by the U. S. government into the "insider trading" abus-
es of Wall Street's Ivan Boesky. One very prominent Swed-
ish financier group is "up to their eyeballs" in the Boesky
affair, according to an informed European source. The group
was detailed in the E!R dossier, two months before the Boes-
ky scandal broke.
The "Irangate" developments in Washington are another
new element. Was Pierre Schori meeting with Kissinger and
Whitehead to find out how far the Iran purges might go?
And potentially most explosive, are the revelations in
Britain around charges that the father of Palme's alleged
mistress, Lord Rothschild, is a Soviet agent. According to
Swedish sources, Emma, who reportedly had a townhouse
paid for by Palme near his Stockholm house, came to Stock-
holm during the first week in December, accompanied by six
bodyguards, one of whom destroyed the camera of a British
television journalist, when asked about her father's intelli-
gence connections. She is reported in hiding at present.
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The Rothschild factor
and the role of SIPRI
by Mark Burdman
Observers in Europe had a sense of deja vu, when a reporter
for Britain's Independent Television was assaulted, his cam-
era smashed, by bodyguards accompanying Emma Roth-
schild, daughter of Lord Victor Rothschild, as she was leav-
ing her home in Stockholm over the Dec. 6-7 weekend. Just
a few days earlier, on Nov. 27, outside the offices of N.M.
Rothschilds in London, a reporter for the Daily Mail chain
had been assaulted by goons, when he tried to ask questions
of Lord Rothschild as he was leaving the family's merchant
bank.
Why such raw nerves among the Rothschild clan these
days?
Lord Rothschild had the political scare of his life, when
suspicions began to be raised-evolving out of the current
British government legal effort in an Australian court, to
suppress publication of a new book by Peter Wright, a former
counterespionage agent for Britain's foreign intelligence ser-
vice MI-5-that Lord Rothschild, was the "Fifth Man," a
Soviet spy who had infiltrated British intelligence. On Dec.
4, Prime Minister Margaret Thatcher refused to exonerate
him from such suspicions, in statements made in the House
of Commons. One day later, Mrs. Thatcher made a half-
hearted turnabout, saying there was "no evidence" that Roth-
schild was a Soviet agent, but failing to add the usual homilies
about his service to the nation.
As the cloud of suspicion hung over Lord Rothschild's
head, a new problem of Soviet connections erupted for him
via his daughter Emma. Beginning on Dec. 4, revelations
began to be published in the press of Scandinavia (although
not, initially, in Sweden), West Germany, and Great Britain,
that Emma had been in a love affair with the late Swedish
Prime Minister Olof Palme, up to the point of Palme's Feb.
28, 1986 assassination.
The stories revealed that the Swedish police team running
the investigation of the Palme assassination, headed by police
chief Hans Holm&r, had refused to even question Emma after
Palme was killed, despite the report that she was regularly
aware of Palme's movements about town, and that a tap on
her phone would have allowed Palme's assassins to know his
whereabouts on the night of the assassination.
Looking at the "Emma angle" would force investigators
to examine the Soviet factor in the Palme assassination. Even
if one could agree that Lord Rothschild is not a Soviet agent,
with 38-year-old daughter Emma, it's a different story. Her
entire career is hard-wired into Soviet agent-of-influence cir-
cles.
SIPRI and the Trust
Up until 1980, Emma Rothschild was a figure of some
secondary importance among radical-liberal networks. In
1973, she wrote a book which gave her some fame within the
zero-growth-oriented left wing; it was titled Paradise Lost:
The Decline of the Auto-Industrial Age, and was published
by Random House.
But as the Swedish family magazine Aret Runt pointed
out in a 1985 article on the Palme-Emma relationship written
months before the assassination of the prime minister, she
was a relative unknown until 1980, when, with the sponsor-
ship of Palme, her career skyrocketed.
Having been well-traveled in the Cambridge, Massachu-
setts, Chicago, and Oxford, England affiliates of Lord Ber-
trand Russell's East-West "Pugwash Conference" through-
out her academic career, she was introduced into Palme's
circle, ca. 1980, and was brought by Palme into a research-
secretarial position on the Independent Commission on Dis-
armament and Security Issues ("Palme Commission"). This
brought her into contact with Soviet officials, notably Com-
mission members Gen. Mikhail Milshtein and Georgii Ar-
batov, head of the Moscow U.S.A.-Canada Institute. The
Palme Commission also incorporates leading Western ap-
peasers, including former U.S. Secretary of State Cyrus
Vance, British Social Democratic Party leader David Owen,
and West German Social Democratic Party ideologue Egon
Bahr, a friend of Henry Kissinger.
Sometime between 1980 and 1984, Emma was brought
onto the staff of the Stockholm International Peace Research
Institute (SIPRI), and was, in 1984, at the age of 36, made
the representative of Great Britain on SIPRI's exclusive gov-
erning board.
Here, the Soviet intelligence connections would blos-
som.
SIPRI is an important front for the East-West back-chan-
nel grouping best characterized as "the Trust." Operating
under the cover of a neutral-academic "peace research" group,
it was set up in 1966, at the initiative of Palme's predecessor,
Swedish Social Democratic leader Tage Erlander. It soon
became a pet project of the "Trust's" husband-and-wife team
Alva and Gunnar Myrdal.
Its 28-member Scientific Council has been a prime center
of Trust operations. From 1966-79, Britain's Lord Mount-
batten was a member of the Council, and it was on the occa-
sion of accepting an award on behalf of SIPRI, in 1979, three
months before his assassination in August, that Mountbatten
made a famous speech on behalf of the European "peace
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movement." From 1966-69, Henry Kissinger, formerly an
insider on the Pugwash circuit, served on SIPRI's Scientific
Council, and went from there to his post as U.S. national
security adviser in 1969. Contacts between SIPRI and Kis-
singer are reportedly close to the present day. As of most
recent available listings, the SIPRI Scientific Council in-
cludes two Soviets, Academician Fokin of the U.S.S.R.
Academy of Sciences and Vitaly Zhurkin, Arbatov's deputy
director at the U.S.A.-Canada Institute. There are also a
number of Western "Trust" agents, including former Austri-
an Chancellor Bruno Kreisky.
At least twice to EIR's knowledge, SIPRI has been under
suspicion of being an espionage front. In August 1981, the
office of a British-born SIPRI "peace researcher," Owen
Wilkes, was sealed by the Swedish security police SAPO,
when he was found to possess sensitive documents on Swed-
ish air defenses and on U.S. army installations, including
nuclear bases, in Europe; earlier that year, Wilkes had been
given a suspended sentence by a Norwegian court, after hav-
ing been convicted of publishing details of U.S. military-
electronic communications equipment on Norwegian soil.
Then, on Sept. 8, 1981, the Swedish liberal daily Dagens
Nyheter published reports of close connections between a
Czech-emigre SIPRI consultant, Theodor Nemec, and the
Soviet military attache in Stockholm, Stanislav Makarov,
who had been earlier expelled from Denmark and Norway,
on suspicion of spying, and who, according to Dagens Ny-
heter, was rumored to be a military-intelligence (GRU) agent.
The paper reported that, in the spring of 1981, Nemec had
caused the purge from SIPRI of a researcher who had tried to
study Soviet military installations in the Baltic.
Will the cover-up last?
The outlines of the Emma-SIPRI-Soviet connection are
beginning to make their way into the press. The British Sun-
day tabloid The People published an article on Dec. 7, "Why
Spy-Catchers Checked Emma Rothschild: KGB Links
Feared," reporting, "Swedish security chiefs feared that a
peace organization in which she was a leading figure could
have been infiltrated by Russia."
Contacted during the week of Dec. 8, a SIPRI spokesman
arrogantly told a caller: "The Swedish police will never let
the Emma Rothschild story out."
But the clampdown on the Rothschild story is becoming
a central factor in Swedish detectives' and politicians' anger
at the way Holm6r's team is conducting the investigation.
And that anger extends outside Sweden. As one British source
told this correspondent Dec. 10: "Our people here are aston-
ished by the lack of progress in the investigation over there.
Our people feel that their opposite numbers in Sweden have
a good idea who was responsible, but political interference
is holding things back. The Swedes are terrified of finding
the evidence of Russian involvement in the killing of Palme,
which everyone knows exists."
EM December 19, 1986
A classic Soviet
disinformation job
A few hours after Olof Palme was assassinated, EIR identi-
fied the initial elements of what was soon to develop into one
of the most massive deployments of a Soviet disinformation
campaign ever seen. Our daily monitoring of Soviet state-
ments identified an unusual rashness in the Soviet propagan-
da response to the murder.
Just hours after the assassination, on March 1, Georgii
Arbatov, the chief of the U.S.A.-Canada Institute, a Central
Committee member, and co-founder of the Palme Commis-
sion on disarmament issues, proclaimed: "I do not know who
killed Palme, but I know all too well who hated him.... I
saw demonstrations against him by fascist hooligans, inflam-
matory articles, and provocations. Reaction loathed Palme."
In the weeks that followed, Arbatov's formulation was
picked up by Soviet-linked media and political conduits in-
ternationally, becoming, by March 18, a world-wide barrage
of slanders and lies aimed at blaming the assassination on the
Swedish European Labor Party (ELP) and Lyndon La-
Rouche.
As the Stockholm police investigation unfolded, and the
surge of press coverage in the Swedish and international
media began to take shape, EIR analyzed the activities of
known Soviet disinformation specialists. These were coor-
dinated with Western networks previously identified as work-
ing for, or manipulated by, the KGB. The names of two high-
level Soviet officials surfaced increasingly: Ambassador to
Sweden Boris Pankin and Sergei Losev, director general of
the Soviet news agency TASS.
KGB dirty tricks: Pankin's network
According to Soviet intelligence defectors, the KGB's
Department D (Disinformation) was restructured in January
1959 by then KGB chief Aleksandr Shelepin, to coordinate
with the Central Committee of the Communist Party, the
Committee of Information of GRU military intelligence, and
the KGB's departments responsible for intelligence and
counterintelligence.
In 1968, one year after taking over control of the KGB,
Yuri Andropov revamped Department D, renaming it De-
partment A, and soon thereafter upgraded its status within
the KGB organizational structure. Along with a newly recon-
stituted Department V (responsible for assassinations, sabo-
tage, and dirty tricks), it was placed directly under the KGB's
First Chief Directorate.
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Sitting atop the KGB's disinformation apparatus is KGB
Lt.-Gen. Boris Pankin, who headed Department A before
arriving in Stockholm as ambassador in October 1982. Pan-
kin coordinates a group of KGB and GRU officers who could
be best described as the "LaRouche watchers" within Soviet
intelligence.
One of Pankin's closest collaborators is TASS director
Losev, who, according to Soviet sources, has been "central-
izing all the information around the Palme investigation from
his office in Moscow." Around the axis of Pankin and Losev,
a group of Soviet journalists and authors rotates, all of whom
are high-ranking figures in the KGB or GRU. Attacks against
LaRouche and the CIA originate with this group. It includes
"journalist" Vitalii Petrusenko, a nest of operatives at the
KGB "cultural" organ Literaturnaya Gazeta-Fyodor Bur-
latskii, Julian Semyonov, Iona Andronov, and Aleksandr
Sabov-as well as leading lights of the Soviet Culture Fund
and the dean of Soviet "anti-fascist" researchers, Ernst Hen-
ry.
Consider just one example of how this group's disinfor-
mation has operated against LaRouche. After Pope John Paul
II was shot in May 1981, the KGB assigned Iona Andronov
to counteract Western exposes of the Bulgarian and Russian
intelligence services' involvement in the assassination at-
tempt-exposes in which EIR had particular competence and
credibility. In a July 6, 1983 article in Literaturnaya Gazeta,
Andronov wrote:
Wiesbaden. Dotzheimer Strasse No. 164. The West
German branch of an American subversive institution
under the mask Neue Solidaritl t [the weekly founded
by Helga Zepp-LaRouche-ed.]. The specialty of the
Wiesbaden center is to infiltrate the ranks of the peace
movement supporters and left-leaning youth organi-
zations, shadowing them and disorganizing them from
inside. The basic method of their diversionist intrigues
is an intensive anti-Soviet propaganda.
Here, Andronov was using a standard KGB disinfor-
mation tactic. First, he portrayed LaRouche and affiliated
organizations as a "subversive" CIA operation-printing
EIR's address in Wiesbaden for the benefit of leftist terror-
ists. Second, he falsified a statement of an EIR correspond-
ent, allegedly attacking the CIA as responsible for the as-
sassination attempt against the Pope. This was intended to
convince Western specialists that EIR was working with the
KGB in trying to blame the CIA for the attempted murder.
In order to trace the roots of the Soviet disinformation
campaign against LaRouche and the Swedish ELP, which
reached its peak in the aftermath of the murder of Palme,
one has to go back to the mid-1970s. Vitalii Petrusenko, a
close collaborator of TASS director Sergei Losev, wrote a
book in 1976, A Dangerous Game: CIA and the Mass Media.
He devoted six pages to attacks on LaRouche, the newspaper
New Solidarity, and the philosophical associations which
LaRouche initiated, the National Caucus of Labor Com-
mittees (NCLC) and the European Labor Committees (ELC).
Petrusenko wrote:
In the autumn of 1975, public attention was drawn
to a statement by Per Fagerstrom, press secretary of
the prime minister of Sweden, in which he said that
the NCLC representatives "are energetically compil-
ing everything they can find out about leading Social
Democrats...."
The Swedish newspaper Aftonbladet wrote that the
"ELC is operating as a pro-Communist group [sic],
but in reality is a North American anti-Communist
organization which in Sweden and other countries is
suspected of having committed various acts of espi-
onage and sabotage."
A number of papers, including the West German
Die Tat, reported that former CIA Director William
Colby and former CIA Deputy Director Ray Cline had
admitted that the CIA annually provided New Soli-
darity with $90,000 and that about 80 percent of its
staff were CIA and FBI people.
From such lies, it was a small step to the disinformation
line against LaRouche which Arbatov, Losev, and Pankin
put out following the Palme assassination.
How to obtain EIR's
dossier on Palme's murder
The 102-page Special
Report upon which this
Feature was based,
"A Classical KGB Dis-
information Campaign:
Who Killed Olof
Palme?" was released in
October 1986 and was
written by William Eng-
dahl, Gbran Haglund,
William Jones, and
Paolo Serri.
It is available for $100 from EIR News Service;
P.O. Box 17390; Washington, D.C. 20041-0390 (or
in Europe: EIR Nachrichtenagentur GmbH; Dotzhei-
mer Str. 166; D-6200 Wiesbaden, Federal Republic of
Germany).
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A worldwide media.
`big lie' campaign
The following are highlights of the Soviet-orchestrated dis-
information campaign against the European Labor Party
(ELP) and Lyndon LaRouche, which began immediately after
the Feb. 28, 1986 assassination of Olof Palme.
March 1: Soviet Central Committee member Georgii
Arbatov attributes the assassination to "fascist hooligans
.. reaction."
March 2: The Soviet newspaper Pravda blames "right-
wing circles,"
March 3: The Danish paper Ekstra Bladet claims that
"sources in the police leadership reveal they are looking
intensely at right-wing extremist groups, such as the Swedish
neo-nazis and the so-called 'European Labor Party,' which
also has a branch in Denmark."' Tageszeitung, the West
Berlin pro-terrorist paper, runs the same line.
Match 6: Literaturnaya Gazeta, the Soviet KGB's "cul-
tural" journal, runs an article by foreign ministry spokesman
Vladimir Lomeiko, asserting that Palme's support for "a
nuclear-free civilization," disarmament, etc., made him "a
target of the ideological adherents of violence.... At this
moment we do not know the names of his assassins, but we
know the handwriting of political assassination."
March 14: The Danish paperBerlingske Tidende reports
that a man was detained on March 12 by Swedish police,
who "has been a sympathizer of the EUP (sic) and has worked
on a freelance basis for the party, among other things by
authoring articles for party journals." In fact, suspect Viktor
Gunnarsson never worked for the ELP, never wrote for ELP
publications, and never attended any ELP event. He signed
up for membership in 1984, and was removed from member-
ship in 1985.
March 16: The Observer of London runs an article by
Christopher Mosey, saying that police are investigating "a
possible link between the killing and an extreme right-wing
political group known as the European Workers Party." The
paper claims that Gunnarsson "is understood to have been a
supporter of the party and to have held political meetings
with up to 30 people crowded into his one-room flat In a
suburb south of Stockholm."
March 18: The storm breaks loose: A wave of slanders
appears throughout the Swedish and international press. Af-
tonb/adet, newspaper of Sweden's Social Democratic trade
unions, runs 10 pages on the ELP's alleged role in the Palme
murder. Half of the' front page is a picture of the Social
Democrats' 1976 election rally, showing an anti-Palme plac-
EIR December 19, 1986
and held by two men, one of whom is alleged to be suspect
Gunnarsson. In reality, the man in the picture is a Social
Democrat attempting to tear down the ELP's poster (as the
paper admitted in a small correction published six months
later, on Sept. 6). The Aftonbladet story and picture are
picked up widely around the world, including by the Reuter
wire service. NBC-TV broadcasts a "Nightly News" item by
Brian Ross, alleging a connection of suspect Gunnarsson to
LaRouche, who is identified as the head of a neo-Nazi cult.
The Anti-Defamation League's Fact-Finding Division head
Irwin Suall is interviewed, saying it is conceivable that a
person affiliated with LaRouche could commit an assassina-
tion.
March 19: Radio Moscow plays back Western media
reports that the suspect was a member of "the fascist Euro-
pean Labor Party."Krasnaya Zvezda, the daily of the Soviet
armed forces, runs a TASS release citing the Swedish paper
Svenska Dagbladet, that the suspect is linked to the ELP, "a
'political sect' with strict discipline, which carries out per-
secutions of its political opponents. Some years ago the party
started a 'Save Sweden' campaign. Such a 'rescue' would be
carried out by Sweden's entry into NATO. " Aftonbladet runs
fourpages on the ELP, including a two-page spread featuring
pictures of West German neo-Nazi Karl-Heinz Hoffmann,
with paramilitary uniformed troops, dogs, and skull-and-
cross-bones symbols. The headline reads, "The Neo-Nazi
Training Camp-Here Six Swedes Were Trained." The ar-
ticle claims that Swedish ELP members received weapons
training at Hoffmann's training ground. The Norwegian daily
Dagbladet runs a large picture of a hooded Ku Klux Klans-
man, claiming that it is Lyndon LaRouche. L'UnlW, the
newspaper of the Italian Communist Party, runs the headline,
"Is Palme's Killer a Hard-Core Neo-Fascist? He Was an ELP
Activist." The Washington Post runs a story in its first edi-
tion, "Suspect in Palme Case Had LaRouche Party Tie,"
which is pulled from later editions.
March 20: After suspect Gunnarsson's sudden release
on the afternoon of March 19, for lack of evidence against
him, much of the media campaign grinds to a halt.
March 21: The Soviet television program Vremya airs
an attack on the ELP, regretting that Gunnarsoon was being
released for lack of evidence and insisting on his connection
to the ELP, "an international pro-fascist organization ... in
favor of Sweden joining NATO and of arming the Swedish
Army with neutron weapons. The party headquarters is in the
United States. It is headed by a U. S. millionaire, LaRouche."
March 23: The Soviet government daily Izvestia laments
the police "blunder" which led to the release of the suspect.
Sept. 9: Radio Moscow reports that the Swedish police
are still looking into "the American reactionary organization,
New Solidarity. Their hatred for him was characteristic of
the organization's Swedish branch, the Swedish Workers'
Party. .,
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Police furious at
Holmer's cover-up
The following documentation of discontent among the Stock-
holm police at Police Chief Hans Holmir's conduct of the
Palme investigation, is excerpted from an article published
in Expressen on May 9.
"The investigation into the Palme murder is not run the way
a murder investigation ought to be run. Holm6r has organized
the investigative task force into cells where everything con-
verges upon him and the leadership group," one police source
said.
Several of the most seasoned police officials accuse Hol
m6r of directing the work like a dictator, saying that he is
paralyzing initiatives because of his manner of leading the
work and that he is more, of a liability than an asset to the
investigation. "With some officials in the Security Police
(SAPO), there is a complete communications breakdown.
They think that it is no longer possible to have a reasonable
conversation with Holm&r," one source said.
One SAPO official stated: "I cannot cooperate with an
amateur. Therefore, there is no longer any reason for me to
talk to the police chief." Some of the silent criticism concerns
The track Holm&
refused to take
Among several possible instruments for carrying out the
murder of Olof Palme, the international terrorist organi-
zation of the Kurdish Workers' Party (PKK) represents a
main track in any serious investigation. The PKK had a
stated motive for killing Palme and had already carried
out political assassinations in Sweden and elsewhere; it
operates out of secret headquarters in Damascus, Syria, a
center of Soviet-run irregular warfare against the West.
Although Swedish Security Police (SAPO) pointed to
the PKK right away as possible suspects for the murder,
Police Chief Hans Holm& took no interest in the lead.
When a group was finally formed to investigate the PKK,
the previously arrested 33-year-old man [suspect Viktor Gun-
narsson, released on March 19 for lack of evidence-ed.].
Among the police officers participating in that part of the
investigation dealing with the 33-year-old, an increasing
number have abandoned their previous view of the man's
involvement in the murder and now regard him as a sidetrack
in the investigation.
'The more we dig into the case of the 33-year-old, the
more our suspicions seem unfounded," one investigator said.
"But Holmer clings to the 33-year-old like a shipwrecked
man to a life raft," another police source said....
In the evening of March 12, when Chief Prosecutor K.G.
Svensson took charge of the investigation regarding the 33-
year-old, he detained him for complicity in the Palme mur-
der. Later the prosecutor went to court and pressed charges
against him for murder. But one day before the court hearing,
Chief Prosecutor K.G. Svensson surprisingly withdrew his
charges.
Hans Holm6r was furious with the Chief Prosecutor.
"K.G. Svensson is one of Sweden's most experienced
prosecutors. But Holm& has refused to accept his view," one
source said.
What was it that made K.G. Svensson take the drastic
measure of opposing the police leadership and the prevalent
notion that the arrested man was the murderer?
"Svensson had simply examined the evidence which Hol-
m6r claimed tied the 33-year-old to the crime," one well-
informed source said.
Chief Prosecutor K.G. Svensson found the evidence con-
cerning the 33-year-old's involvement to be ... weak....
it was drawn from police forces other than SAPO, disre-
garding the experience accumulated during years of SAPO
surveillance of the PKK.
One day after the Palme murder, the Swedish daily
Expressen received a phone call from a man who said,
"Long Live PKK! Long Live Kurdistan! We have mur-
dered Palme! Long Live Kurdistan!" Among the material
seized during police raids of PKK homes and offices after
the murder, a note was found mentioning a "wedding" and
Palme's name. "Wedding" is considered a code word for
"murder."
The PKK has been subject to SAPO surveillance since
at least the early 1980s, when the group was planning to
set up its headquarters in Sweden. In a secret memoran-
dum to the government in September 1984, the SAPO
warned of planned "reprisals against Sweden and first of
all against Prime Minister Olof Palme. In PKK circles,
Sweden is considered to be on a fascist leash, and there-
fore is an enemy of the organization."
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Moscow's favorite
Swedish bankers
Lyndon H. LaRouche, Jr. in a March 4, 1986 research mem-
orandum on the Palme assassination titled "Operation Edgar
Allan Poe," described the "bankers' faction" in the West as
"an integral part of the present-day equivalent of the 1920s
Soviet 'Trust' organization," the organization within which
Palme's political activities have been situated. "The killing
of Palme by such circles, or by aid of such circles, would be,
therefore, an `inside job,"' LaRouche wrote.
What motive could this group have had for killing one of
their own? Was it to use Palme's "martyrdom" to reestablish
Socialist International control over Sweden? Was it a Mos-
cow-ordered assassination, in the same way that Moscow left
the destabilization of the Philippines to the Western "bank-
ers' faction"? We cannot say for sure. But certainly the Trust
must be included among the list of general suspects.
The Wallenberg-Gyllenhammar group
The investigation into the Palme assassination leads to a
mysterious nest of banking and corporate interests, dating
back to World War I, notably the Wallenberg-Gyllenhammar
group in Sweden. During the war and into the 1920s, one of
the most influential private banking families in Scandinavia
was that of the brothers Knut and Marcus Wallenberg. They
dominated financing of the most important mining and elec-
trical industries in Sweden and Norway at the turn of the
century, aided by ties with the London Hambros Bank.
The Wallenberg family bank, Stockholm's Enskilda Bank,
was deeply involved in financial support for the Bolshevik
coup d'6tat. The bank made huge profits from covertly break-
ing the Western economic blockade of the Bolshevik regime
after 1917. Then, in the 1920s, the Wallenbergs redeployed
to support Nazi leader Hjalmar Schacht (later Hitler's eco-
nomics minister) and the creation of the Third Reich; in the
1930s, they became involved in the secret rearmament of
Nazi Germany through their control of Swedish iron ore,
armaments, and ball bearing manufacture. The flow of stra-
tegic materials to the Nazi economy continued from Sweden
without interruption until the last days of World War H.
With their rich experience in financing both Bolshevik
Russia and Nazi Germany, it is not surprising, that following
the death of Stalin in 1953, when Moscow reopened negoti-
ations with Western financial elites, the Wallenbergs and a
select network of Swedish businessmen were in the middle
of these operations.
Western intelligence sources have charged, that incidents
of technology espionage and smuggling to the Soviet Union
by several Wallenberg companies in the late 1970s, were no
aberration of lower-level employees, as charged. The alle-
gation being investigated is that the Wallenberg group func-
tions on behalf of the modern-day version of the Trust as one
of the most important Western bases of industrial espionage.
Further, the families behind this corporate empire, since at
least the 1966 creation of the Stockholm International Peace
Research Institute (SIPRI) as a key East-West channel, have
been committed to the project for a "New Yalta" agreement
with the Soviet Union.
One of those most active in the East-West back-channel
negotiations is Volvo head Pehr Gyllenhammar, a partner of
Kissinger Associates, Inc., a board member of the Aspen
Institute for Humanistic Studies, as well as a fellow of the
Wallenberg group. Beginning in 1972, Gyllenhammar has
had ongoing personal contact with top Soviet KGB operative
Dzhermen Gvishiani, a co-founder of the Club of Rome and
the International Institute of Applied Systems Analysis (HA-
SA), and an interlocutor of Henry Kissinger and McGeorge
Bundy.
The group's international ties
The international financial network which interlocks with
the Gyllenhammar-Wallenberg group is one of the most sig-
nificant in modern finance. Through their major holding in
the highly secretive Swiss-Belgian financial holding compa-
ny Pargesa Holding SA, Geneva, the Gyllenhammar group
links directly with the U.S. "junk bond" financial mafia of
the New York brokerage firm Drexel, Burnham, Lambert.
Drexel, Burnham has gained notoriety recently for its role in
a vast illegal international "insider trading" conspiracy, in-
volving senior Drexel, Burnham executive David Levine and
indicted takeover artist Ivan Boesky.
Gyllenhammar partner Anders Wall sits on the board of
Pargesa as well as on the board of Drexel, Burnham, Lam-
bert. In 1985, Drexel, Burnham reported doing $47 billion
worth of business, primarily derived by financing an insider
group of financial operators reported to be the old Meyer
Lansky business empire, notably such names as Steven Wynn
of Las Vegas' Golden Nugget Casino; Carl Lindner, the
chairman of Dope, Inc.'s United Brands; Carl Icahn, who
last year took over TWA airlines, and has more recently
endeavored to take over USX, the shell of the U.S. Steel
Company; Vic Posner, the mooted successor of the mob's
Lansky; and Wall Street's Ivan Boesky.
Pargesa is the holding company which runs the secretive
empire connected with Belgium's Albert Fr0e and G6rard
Eskenazi, and Baron L6on Lambert of the Groupe Bruxelles
Lambert-to name just a few of the international financial
connections which are elaborated in EIR's Special Report.
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I International
Shultz a disgrace at NATO
foreign ministers' meeting
by Criton Zoakos
The Dec. 10 NATO foreign ministers' meeting in Brussels
was a disgrace, and the cause for it was U.S. Secretary of
State George Shultz. It could have been worse-a fully trea-
sonous affair if Shultz's European fellow decouplers, such
as Germany's Hans Dietrich Genscher and Italy's Giulio
Andreotti, had their way.
As it turned out, the final communique which was issued
after two days, was described by the ministers as "not an
official policy statement," but, merely, a listing of the partic-
ipants' different views on the subject of the infamous-and
now largely inoperative-"Reykjavik proposals." These
proposals, it will be recalled, were pushed on President Rea-
gan by three persons, George Shultz, John Poindexter, and
Donald Regan, and amounted to a straightforward decou-
pling of the defenses of Europe and the United States. Essen-
tially, the proposals boiled down to two elements: first, elim-
ination of all strategic nuclear weapons in ten years; second,
elimination of all intermediate-range U.S. nuclear missiles
stationed in Europe. The resulting logic of the proposals, as
they were meant to be understood by the Soviet command,
was: When all Euromissiles are removed from Europe, there
will be nothing to defend Western Europe from the combined
threat of overwhelming Soviet superiority in both conven-
tional and short-range nuclear weapons-because the United
States, having eliminated its long-range strategic nuclear ar-
senal, would have no "nuclear umbrella" to extend over Eu-
rope.
This treachery was pointed out, immediately after Reyk-
javik, first by NATO Generals Bernard Rogers and Hans
Joachim Mack and by U.S. Defense Secretary Caspar Wein-
berger, and later by all the NATO Defense Ministers togeth-
er. Shultz, at the time, took the lead in the effort to deflect
these very valid criticisms. His approach against what the
alliance's entire military establishment has to say, was pre-
sented in a key speech at the University of Chicago, on Nov.
17. The final communique which issued out of the early
December foreign ministers' meeting is an exact replica of
Shultz's basic argument of Nov. 17 in Chicago. That argu-
ment was: 1) Reykjavik was a turning point in history, 2)
Euromissiles must be eliminated, 3) a residue of strategic
nuclear weapons, "for insurance," can be kept after the over-
all agreement to eliminate them-so as to deflect the defense
concerns of the Europeans.
Shultz, specifically, argued: "In years to come, we may
look back at their [Reykjavik] discussions as a turning point
in our strategy for deterring war and preserving peace....
For INF nuclear missiles, we reached the basis for agreement
on even more drastic reductions, down from a current Soviet
total of over 1,400 warheads to only 100 on longer range INF
missiles worldwide for each side...." And finally, the most
controversial element, designed simply to lull the critics who
charged that the underlying intent of the Reykjavik proposals
was to decouple Europe from the U. S.: "Even as we eliminate
all ballistic missiles, we will need insurance policies to hedge
against cheating or other contingencies. We don't know what
form this will take. An agreed upon retention of a small
nuclear ballistic missile force could be part of that insur-
ance...."
The NATO foreign ministers' final communique en-
dorsed fully the proposal for the removal of all United States
intermediate-range nuclear missiles in Europe, the essential
ingedient of the decoupling strategy. Western Europe's lead-
ing decoupler, Bonn's Foreign Minister Hans Dietrich
Genscher, said, after the meeting, "This means that the alli-
EIR December 19, 1986
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ance has now clearly made its point on the zero option, and
nobody should call it into question from now on. It's part of
our credibility."
However, the final communique also included Shultz's
"insurance policy," in the form of endorsing only a 50%
reduction in strategic missiles (on U.S. soil). The "complete
elimination," proposed at Reykjavik, would not have per-
mitted the foreign ministers to credibly pretend that they are
not selling out to Moscow, after they had voted for the "zero
option" on Euromissiles.
Further similar ambiguities from the defense ministers
meeting were designed to permit diplomatic "ways out" in
their anticipated confrontations with the alliance's military
establishment. George Shultz himself, made two points on
this matter. First, he characterized the final communique as
not a policy but rather an itemization of various positions
held by various participants. "People have different views
about it. Some people are intrigued, some people are enthu-
siastic, some are reserved, some don't think it's a good idea
and that's the fact of the matter," he said.
He also told the press that the idea of retaining for "insur-
ance policy" a certain part of the ballistic missile force, was
his own and not the U.S. government's. Before a puzzled
and intrigued press conference in Brussels, Shultz said, "It's
not a government idea. It is my idea. I talked it over with the
President and he had no objection to my mentioning it in my
speech," referring to his University of Chicago speech.
The disclaimer was factually true-but only half-true.
The speech was made Nov. 17, while Shultz was in Chicago
and Prime Minister Thatcher was at Camp David with Pres-
ident Reagan. On the following day, the White House issued
a statement which, reflecting the British Prime Minister's
concerns, distanced the United States from the Reykjavik
proposals, and defined U.S. policy to be against the decou-
pling implications of those proposals. On that day also, both
the defense department and the White House in separate
statements renounced Shultz's Chicago speech, especially its
duplicitous "insurance policy" clause. It fact, the Joint Chiefs
of Staff, took the opportunity to criticize the grammar, as
well as the substance, of the offensive passage.
Subsequently, the Dec. 4 NATO defense ministers'
meeting took and announced a series of decisions which
removed the alliance from the dangerous path of Reykjavik,
and reiterated U.S. government policies as were clarified by
Defense Secretary Weinberger at the Gleneagles, Scotland
Nuclear Planning Group meeting of NATO, and by the White
House after Margaret Thatcher's visit to Washington.
A state of insurrection
In short, not only is the NATO foreign ministers' and
Shultz's policy "not a government idea. It is my idea," but it
is also contrary to both U.S. government and to NATO pol-
icy.
Both NATO and the United States find themselves in the
embarrassing and dangerous position of having a foreign
ministers' revolt on their hands. This matter of a foreign
ministers' state of insurrection is much more serious than
appears to the general public. It is one which must be reme-
died in short order, and no better remedial course can be
recommended than the dismissal of George Shultz from his
present job.
The seriousness of the matter lies in the following: As all
of NATO's military commanders know, and as Caspar Wein-
berger has frequently emphasized, the Soviet Union's current
principal objective, both diplomatic and military, is to de-
couple Europe from the U.S.A. What these military leaders
are not at liberty to say, is that this current Soviet objective
is also the cornerstone of Marshal Ogarkov's warplan for a
war between the U.S.A. and the U.S.S.R. Ogarkov has ar-
gued and enforced in the Soviet leadership the idea that the
only strategic war that Moscow should ever contemplate
fighting is one in which Moscow's adversary should be the
continental United States alone, without any allies and with-
out any overseas military assets. As far as Ogarkov is con-
cerned, if Shultz's and the other NATO foreign ministers'
proposals were to be implemented, then the Soviet Union
would be placed in a position "to shoot."
A U.S. decoupling from Europe, as implied in Shultz's
Chicago speech-and in the foreign ministers' commu-
nique-would not only transform all of Europe into a captive
of Soviet arms, and thus a mere Soviet satrapy, it would also
enormously increase the Soviet Union's military blackmail
power over the U.S.A. Under those conditions, few con-
strains would be there to prevent Ogarkov from launching
war, should the United States refuse to give in to that black-
mail.
Defense Secretary Weinberger, since the Dec. 4 defense
ministers' meeting, has made numerous public statements
warning clearly about the Soviet leadership's present inten-
tions and policies. These official warnings do not square with
the policies of the Secretary of State, nor with the assump-
tions underlying the NATO foreign ministers' policies. Nei-
ther the Western Alliance, nor the United States, can afford
to meet the Soviet challenge while the councils of state are
contaminated by the treacherous policies of the foreign min-
istries.
The clean-up in the Western Alliance must begin with a
general change of guard in the foreign ministries. The place
to begin is the State Department, and George Shultz in par-
ticular. Alone among his NATO colleagues, George Shultz
is not an elected official; his appointment in office is not
associated with electoral deals and constituency representa-
tion, as is, for instance, the case with Hans Dietrich Gensch-
er. His only constituency is the President of the United States,
at whose pleasure he serves. If the Secretary of State goes
around saying that his policies "are not a government idea,"
and if he does so to the detriment of the vital national security
interests of the United States, then he must go. With him
gone, his fellow traitors in the European capitals will not be
long to follow.
EIR December 19, 1986
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Documentation
`No pull-out, no
zero option, no SALT'
In clear and unambiguous statements on Dec. 6, U.S. De-
fense Secretary Caspar Weinberger and NATO Supreme
Commander-Europe Gen. Bernard Rogers declared that there
will be no "deeoupling" of the United States from Europe,
through a nuclear missile "zero option" or American troop
pull-out. Europe is a matter of vital U.S. security interest.
No sooner was this said than U.S. ambassador to Germany
Richard Burt contradicted their statements to the effect that
a "zero option" was still the goal of arms control. We excerpt
first Defense Secretary Weinberger's Dec. 11 remarks before
the American Legislative Exchange Council in Washington,
in which he proclaimed the SALT II treaty absolutely dead.
Weinberger: SALT is dead
From the Defense Secretary's remarks before the Amer-
ican Legislative Exchange Council Dec. 11.
Every time I read in the newspaper that the United States has
"violated the unratified SALT II treaty," a very unusual word
keeps coming to mind. It is one of those words you expect to
get in a Trivial Pursuit game or wish you could get in a
scrabble match. That word is "oxymoron." It means a figure
of speech that is a self-contradiction, like "Soviet journal-
ist"....
To characterize the President's decision to end observ-
ance of SALT U as "violating" a treaty is really Orwellian.
The treaty was never ratified. If it had been ratified, it would
have expired in December 1985. And, the Soviets have re-
peatedly and flagrantly failed to uphold the major provisions
of the treaty. Under international law, actions of the type
undertaken by the Kremlin are more than sufficient to release
the United States from any obligation to observe the treaty-
even if it had been ratified.
America cannot allow a double standard of compliance
to develop. The President's decision concerning SALT His
intended to get this vital message across to the Soviets. This
is especially important in light of the agreements involving
very substantial reductions we are attempting to negotiate at
this time.
Yet, this decision has been subjected to truly bizarre
criticism. We frequently hear that we must accept Soviet
violations because they have "open production" lines, and
that SALT II is the only thing standing between us and a
"massive" Soviet build-up. While it is touching to hear such
concern expressed about the Soviet build-up from many of
those who regularly sneer at our warnings of existing Soviet
military power, this concern does not seem to hold sway at
budget time, when these same critics seek to slash our needed
defense spending, and to close our production lines.
In any event, this "production-line" argument is com-
pletely fallacious. It ignores the fact that the number of Soviet
warheads on strategic weapons has nearly doubled since the
SALT II treaty was signed in 1979. Indeed, Soviet strategic
forces will be almost completely modernized over the next
decade-with or without SALT constraints. And when Mos-
cow found that the SALT II agreement did curb its force
modernization, it simply ignored the treaty and cheated.
Nevertheless, the House of Representatives attempted to
mandate U.S. compliance with the so-called "MIRVed sub-
limits" of the SALT II treaty, "as long as the Soviet Union
did not violate them." For the first time in history, a legisla-
tive body of a democracy attempted to mandate compliance
with an unratified treaty that was never honored by the other
party to that agreement....
The military threat posed by the Soviet SALT violations
has been aggravated by its violation of the 1972 Anti-Ballistic
Missile Treaty, and the increasing concern generated by So-
viet ABM-related activities. The Soviets have clearly violat-
ed that treaty by the construction of a large phased-array
missile tracking radar deep in the interior of their nation. This
radar is part of a network of radars that could support a missile
defense system. Moreover, our concern over Moscow's ad-
herence to this treaty is intensified by the recent discovery of
three new Soviet large phased-array radars of this type-a
50 percent increase in the number of such radars. These
radars are essential components of any large ABM deploy-
ment. One of these radars, the one located near Krasnoyarsk,
is a clear violation of the ABM treaty. But the deployment of
such a large number of radars, and the pattern of their de-
ployment, together with other Soviet ABM-related activities,
suggest that the Soviet Union may be preparing a nationwide
ABM defense in violation of the ABM treaty. Such a devel-
opment would have the gravest implications on the U.S.-
Soviet strategic balance. Nothing could be more dangerous
to the security of the West and global stability than a unilat-
eral Soviet deployment of a nationwide anti-ballistic missile
system combined with its massive offensive missile capabil-
ities, while we stand by observing the ABM treaty, but im-
periling our future.
President Reagan has given the Soviet Union every op-
portunity to correct its violations. Compliance issues have
been discussed for years in the proper forums and through
senior diplomatic channels. On two occasions, the President
personally raised these issues with General Secretary Gor-
bachev. As early as June 1985, President Reagan warned the
Soviets that their noncompliance must cease or the U.S;
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would take appropriate action. At that time President Reagan
indicated that while Soviet violations were a grave concern,
he would go the extra mile to give the Soviet Union more
time to halt its cheating. In the following year, the Soviets
leaders did not stop cheating, but rather continued and indeed
increased it.
Every time I read in the newspaper
that the United States has "violated
the unratified SALT 11 treaty," a very
unusual word keeps coming to
mind. That word is "oxymoron." It
means a figure of speech that is a
self-contradiction, like "Soviet
journalist."
Therefore, the President's SALT II decision is neither
new nor unexpected and despite the alarms raised by some of
the President's critics and by the Soviet Union, it has not
banned the cause of arms control.
Since the President announced his decision last May, all
arms control negotiations have continued.... With regard
to the ongoing negotiations to reduce strategic offensive arms,
it was after the President's decision that the Soviets suggested
significant reductions.
In Iceland, the Soviets tried to condition all agreements
on arms reduction on our effectively killing the Strategic
Defense Initiative. Of course, do not forget that the Soviets
have been working on defensive technology for 25 years. In
fact, it has the world's only operational anti-ballistic missile
system. It circles Moscow, and is continually updated.
... Clearly, those who have argued that the Soviets
would never accept the concept of deep reductions have been
proven wrong. Those who have argued that we had to accept
or rationalize Soviet SALT violations to improve the climate
for arms control have also been proven wrong.
The United States intends to press for the realization of
our serious and deep arms reduction proposals. We cannot
promise that this will be a speedy or easy process. Things of
real value are not obtained easily. But we will never accept a
bad agreement or Soviet noncompliance....
Weinberger: No pull-out
The following is taken from the Defense Secretary's Dec.
6 interview with Die Welt of Germany.
We are resolved never to withdraw American troops or lessen
our engagement in Europe. Naturally, we can't speak for
another administration, but this President will never lessen
our presence in Europe.
Concerning Soviet demands that the United States abandon
the SDI.
President Reagan is not prepared to do that. That's solid.
Concering the "zero-option" President Reagan apparently
was prepared to agree to at Reykjavik.
The proposals made by President Reagan ... occurred
under the consideration of nuclear deterrence remaining in
place.
Rogers: U.S. troops will stay
From the general's Dec. 6 interview in Germany's
Rheinischer Merkur, under the headline, "Nuclear Weapons
Remain Our Trump Card."
As long as the United States keeps 350,000 soldiers in Eu-
rope, they will have to protect them. . . . Avoid anything
that could incite the U.S. to pull out these troops....
The decisive factor in our deterrence is the nuclear one,
and here, specifically, the option of a first-use of nuclear
weapons. Maybe the Soviets doubt that we would ever use
these weapons first, but they can't be sure about that....
I don't trust the Russians-history proves my skepticism.
Never forget this.... The only thing the Russians do respect
is strength.
The following is taken from Ambassador Richard Burt's es-
say in Die Welt Dec. 6, "Building on the Results of Reykja-
vik."
At Reykjavik, the United States and the Soviet Union moved
principally toward agreement on a decisive reduction of nu-
clear weapons. In 1981, President Reagan, in the name of
the alliance and on the basis of European proposals, first put
forward the "zero solution" for middle-range rockets and
proposed the total elimination of this whole weapon catego-
ry.
In 1982, President Reagan also proposed a decisive re-
duction of strategic weapons. Both proposals were originally
rejected by the Soviets in principle as well as in particular.
These proposals also encountered criticism in the West from
some of the leading institutions that form public opinion;
they were categorized as being to ambitious. In Reykjavik,
General Secretary Gorbachov, however, agreed with Presi-
dent Reagan that decisive reduction of strategic as well as
mid-range missiles is desirable, as is ultimately the removal
of all SS-20, Pershing, and land-based cruise missiles in
Europe. That was an important step forward.
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Busting up Kissinger's special
U S. -Israel relationship
by Paul Goldstein
In the spring of 1982, Admiral Bobby Ray Inman, then dep-
uty director of the Central Intelligence Agency, resigned
from office, ostensibly for personal reasons. However, at
that time, EIR pinpointed the actual reason: Inman opposed
the special relationship with Israel defined by Henry Kissin-
ger and his British allies. The significance of this event is that
it represents one of the underlying intelligence warfare battles
which has been ongoing inside U.S. intelligence since the
Johnson administration. It is, in fact, the real story of Iran-
gate.
EIR's assertion is that one of the main targets for clean-
up is the National Security Council's Israel connnection, a
clean-up which, under the direction of ex-CIA deputy direc-
tor Frank Carlucci, will occur almost immediately. Our anal-
ysis is based upon not only highly authoritative sources, but
on an understanding of the strategic setting in which this
"special relationship" was forged.
It is also our aim, by exposing this relationship, to recast
U.S.-Israeli intelligence cooperation from the strategic
standpoint of establishing a "Mideast Marshall Plan" in which
Israel can become an economic superpower for development
of the region. This implies a complete break with British
intelligence's Bernard Lewis Plan.
The NSC connection
According to highly placed U. S. intelligence sources, the
process of transforming U.S.-Israeli intelligence cooperation
began in the latter years of the Johnson administration. Be-
fore that time, the CIA's counterintelligence chief, James
Angelton, had forged a unique but nonetheless authorized
intelligence exchange and cooperation. The problem began
when the powerful financial interests associated with the
"friends of Israel," including the gangster Meyer Lansky,
sought to replace the regular intelligence cooperation with a
new operation. This new operation would include a "New
Yalta" deal with the Russia and would enhance the power of
those Eastern Liberal Establishment financial interests of
Boston and New York, and their European allies in London,
Geneva, and Hamburg, at the expense of U. S. national inter-
ests. The cartelization of world finance, featuring corporate
takeover scams like those of Ivan Boesky, were part of the
scheme.
However, the bankers' coup d'dtat would not have been
as successful without one key player, Henry Kissinger.
Kissinger's gameplan, from the moment he became Nix-
on's National Security Adviser, was to reduce U.S. strategic
power to that of a third-rate power in a Soviet-dominated
world-the "New Yalta." In this connection, he negotiated
a series of deals with Soviet Russia, each damaging to the
position of the United States and its allies. Traditional allies
and friends were to be thrown to the wolves, and so-called
new friends such as China were to come to the fore.
In this "Metternichian" system, the state of Israel would
be transformed into a "new Venice." Its economy would be
based on arms-sales and dirty-money laundering. Its intelli-
gence services would no longer serve Israeli national inter-
ests, but would become the "indispensable ally" to whom the
weakened United States would have to turn, because the
intelligence capabilities of Israel would supercede what the
United States could muster.
The National Security Council took over the function of
covert operations, emasculating the CIA. With the Vietnam
War tying up many of the capabilities of the Agency, Kissin-
ger's Israelis filled the gap in the Middle East, North Africa,
and the Persian Gulf. With the onset of Watergate and the
internal and complex warfare that led to Nixon's ouster,
nearly 1,000 covert operatives of the CIA were purged by
Kissinger's ally, James Schlesinger, with aid of the Church
and Pike Committees' subsequent revelations concerning CIA
covert operations.
Kissinger's method was to promote the bureacratic ca-
reers of opportunistic intelligence and military officials whose
loyalties would thereby be to him. These officials were put
in touch with Israeli intelligence, furthering Israeli penetra-
tion of U.S. intelligence.
Key was the removal of James Jesus Angelton, the CIA
counterintelligence chief who ran both the Israel and Vatican
desks. Angelton's view of the United States' proper Israeli
connection was shaped by his experience in World War II in
Italy, when members of the Hagannah worked with him. He
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knew that certain forces inside Israel and Britain, such as
Lord Victor Rothschild-now the subject of an intense fac-
tional warfare in Britain-were members of the Soviet-run
"Trust." As a few insiders of the intelligence community
knew, Angelton had a file on Kissinger's role as a "Trust"
agent.
Unauthorized private financing
Kissinger's NSC operation was financed independently
of officially authorized budgetary requirements by the
"Banker's Faction of CIA." According to one source, the
private financing reached into the $600-800 billion range,
underwritten by banks, multinational oil corporations, and
the international drug trade.
Kissinger's allies inside the intelligence community in-
cluded CIA directors William Colby and Adm. Stansfield
Turner. Colby's apparatus included a network of covert war-
riors, including Theodore G. Shackley, and his close asso-
ciate, Gen. Richard Secord, who became one of Kissinger's
most loyal paid operatives.
Secord, who is front and center in the entire Iranian and
Contra affair, received his brigadier-general's star directly
from Kissinger. Secord's relationship to Israeli intelligence
operations in the Persian Gulf stems from the period he head-
ed the U.S. military assistance program in Iran under the
Shah during the 1975-78 period. It was during this period
period that the Israeli connection inside U.S. policy-making
and intelligence operations was consolidated. What began as
a game of influence for Israel, became a deadly game for
total control. With the advent of the Carter adminstration,
through into the Reagan administration, the Mossad tentacles
came to reach into the highest power centers of the U.S.
government.
Mossad-U.S.A.
During the Carter administration, an additional 800 cov-
ert operatives were summarily dumped from the CIA's pay-
roll. According to high intelligence officials, the infamous
Turner-Mondale-Brzezinski purge of 1977-78 was carried
out by Ted Shackley, who targeted those U.S. intelligence
elements involved in Vietnam and known to be opposed to
Israeli interference in U.S. affairs.
The operation was consolidated in the secret Camp David
accords. The Israelis were given near total access to U.S.
military equipment. Moreover, Israeli intelligence was given
five major U.S. port facilities: Galveston, Texas; Newark,
New Jersey; Miami, Florida; Los Angeles, California; and
Baltimore, Maryland. When the Carter administration and
Congress imposed an embargo on U. S. arms exports to Ibero-
America on the pretext of "human rights violations," the
National Security Council provided the Israelis the opening
they needed into that region to sell U.S. and Israeli equip-
ment.
Under this arrangement, Israeli intelligence expanded its
operational base in the U.S. intelligence community, recruit-
ing former CIA officials whose loyalty was no greater than
the paycheck they drew. Protection not only involved the
NSC, but the Justice Department, to the point that the DOJ
and certain forces within the FBI cooperated with Israeli
intelligence to destroy some deep-cover CIA operations not
under NSC or Israeli intelligence control.
This is the real significance of the blowing of the Wilson-
Terpil affair and the subsequent arrest of ex-CIA operative
Edwin Wilson.
The NSC deployed Michael Ledeen to work with a Justice
Department prosecutor, Lawrence Barcella, instructing him
how to set up Wilson while protecting other players in Wil-
son's apparatus, such as General Secord. According to these
sources, Ledeen worked with Assistant U.S. Attorney Ted
Greenberg of the Eastern District of Virginia in Alexandria,
whom these sources consider a Mossad asset. Ledeen himself
is one of the top operatives in the Iran-Contra arms ship-
ments, along with the former number-two man at the Mossad,
David Kimche, who was instrumental in setting up the secret
Camp David accords.
The Iran/Islamic card
The political base for these covert operations is provided
by the "neo-conservative," Washington-based think tanks,
the Heritage Foundation, the American Enterprise Institute,
Georgetown's Center for Strategic and International Studies,
and the Unification Church-the Moonies. Many of the
strongest proponents of a Venetian version of Israel are po-
litically defined as right-wing social democrats tied to the
"Our Crowd," New York investment banks and their London
cousins, centered around the Rothschilds.
This apparatus became one of the dominant forces inside
the Reagan administration. The NSC apparatus not only re-
mained intact, but extended its operational capabilities into
the State Department when Richard Allen and Alexander
Haig were National Security Adviser and Secretary of State,
respectively.
The 1982 Reagan Mideast Peace Plan and King Fahd's
complementary Fez Plan were sabotaged by this network,
which resulted in the President, and his new National Secu-
rity Advisers Clark and McFarlane, adopting the Iran/Islamic
Card policy. With the Israeli invasion of Lebanon after Haig's
green light to Ariel Sharon, the United States became locked
into a no-win Middle East situation. It was simply,the policy
of 1969, run by the Kissinger apparatus of 1969.
Irangate provides the opportunity for patriotic forces in
the United States, forces that desire U. S. survival as a super-
power and a Marshall Plan for the Middle East, to destroy
this policy-making capability and to retake covert U.S. intel-
ligence capabilities from the hands of the "Trust." The only
question remaining will be whether forces inside Israel, who
no longer desire to play Kissinger's game, have the moral
courage and political will to change.
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Kissinger Watch by M.T. Upharsin
Scandal shuttle on
the northern route
In early December, Henry Kissinger
has been well traveled on what might
be called the "northern scandal route."
Sometime around the night of Dec. 1
or the morning of Dec. 2, Henry left
Great Britain, where he was being
sponsored by Mirror newspaper chain
magnate Robert Maxwell, and made a
mysterious 12-hour trip to Sweden.
Then, he returned to Britain, and was
monitored by the high-society set,
speaking at a dinner in his honor at the
exclusive Claridge's, given by the
American Robert O. Anderson, head
of the Atlantic Richfield (ARCO) oil
multinational.
As usual, it was quite an inces-
tuous affair. Anderson is one of the
four founding directors of the Kissin-
ger Associates consulting firm, with
Henry himself, Swedish magnate Pehr
Gyllenhammer, and NATO General-
Secretary Lord Carrington.
It was an interesting time to-shuttle
back and forth between Britain and
Sweden. On the one side, Kissinger's
old collaborator, Lord Victor Roth-
schild, was hit by charges of being a
Soviet spy, and only exonerated by
Prime Minister Thatcher on Dec. 5;
Kissinger and Lord Victor would have
been in a tight relationship during the
1971-74 period, when Kissinger was
building his parallel government in the
U.S. National Security Council, and
Rothschild was made the chief coor-
dinator of a new, U.S. NSC-modeled
Cabinet Office Policy Review think
tank, established by Kissinger inti-
mate Edward Heath, prime minister at
the time.
In Sweden, Victor's daughter
Emma was in the spotlight for her role
in the circumstances leading to Olof
Palme's Feb. 28 assassination.
Kissinger's Dec. 1-3 "scandal
shuttle" came just before NBC-TV's
concocted story on Dec. 4, trying to
implicate Kissinger's chief nemesis,
Lyndon LaRouche, in the Palme case.
Kissinger's Swedish alter ego, Pierre
Schori of the Swedish Foreign Minis-
try, was just returning from a trip to
the United States.
Robert O. Anderson's longest-
standing business and political partner
is Thornton Bradshaw, chairman of
the board of RCA, NBC-TV's holding
company.
Lonrho, Libya,
Dr. K, Rothschild
Anderson sold the British weekly, the
Observer, in the early 1980s, to "Tiny"
Rowland, of the Lonrho (London-
Rhodesia Ltd.) multinational. Seated
in the dinner-audience at the Clar-
idge's affair were three top directors
of Lonrho, including Lonrho Chair-
man, Edward duCann, a Tory mem-
ber of the British Parliament. There
are unconfirmed reports that Rowland
himself made an appearance.
A recent feature article in the Brit-
ish magazine Business documented
that Rowland was "hard-wired" into
business deals with Libya's Colonel
Qaddafi, through the mediation of Said
Qaddafadam, a cousin of Qaddafi.
Rowland, so Business and other re-
ports indicate, has been in Libya in
past weeks, and is negotiating to take
over the operations of the American
oil companies which left Libya after
President Reagan declared a boycott
last spring.
The deeper story, now emerging,
is that Rowland was already moving
into the inside in Libya, in 1971. Qad-
dafi was then anathema in Britain, be-
cause of his funding for the terrorist
Irish Republican Army. Yet, Row-
land arranged for $38 million in deals
between his business concerns and
Qaddafi, essentially providing the
amount that was being demanded by
Qaddafi from Britain.
Rumor has it that the Heath gov-
ernment in Britain approved that deal.
As Heath's chief "NSC-like" adviser,
Lord Victor Rothschild would likely
have had some role in the affair, es-
pecially given his history of insider
operations as an intelligence coordi-
nator at Shell-UK and Royal Dutch
Shell in the 1960s.
The full story of Henry Kissinger
and Muammar Qaddafi has never been
told, although. many relevant leaks
have come out. The Rowland tale will
make it easier to pull together.
Rowland is a "Palace" production,
and his Libya projects, today, may re-
flect Buckingham Palace's anger at
Maggie Thatcher's support for the
April 1986 U.S. raid on Libya, an is-
sue that surfaced in the summer "Pa-
lacegate" scandal. Rowland was a no-
body until he was picked up in the
early 1960s by then Lonrho chieftain,
Angus Ogilvy, who has since become
a member of the Royal Family via his
marriage to Princess Alexandra. Ogil-
vy turned Lonrho, then not a power-
house company, over to Rowland, who
made it a multi-billionaire conglom-
erate, with vast operations in Africa.
Ogilvy told Business that the Brit-
ish politician he admires most, is for-
mer Foreign Minister David Owen.
Owen, a member of the Trilateral
Commission and the Soviet-linked
"Palme Commission," has held pri-
vate meetings with Prince Charles, to
exchange strategies on "constitutional
reform" in Britain. In private, he is
also praised by Soviet journalists in
London, who bill him as the U.K. pol-
itician of the future .
Of course, both Owen and Heath
were at the bash thrown for Kissinger
at Claridge's by Robert O. Anderson.
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Vatican by Augustinus
Economic justice theme of Asia trip
The pope "costs more than the Queen," for good reason-and
the rulers in the Kremlin are in a quandary.
On Nov. 18, John Paul II under-
took the longest of his pastoral trips,
taking him to six countries: Bangla-
desh, Singapore, Fiji Islands, New
Zealand, Australia, and Seychelles. In
his first important engagement after
the Oct. 27 peace encounter in Assisi,
and consistent with the ecumenical
purpose of that event, the Pope went
to countries with non-Catholic major-
ities.
At Dacca, capital of Bangladesh,
he stressed once again the injunction
of Genesis and its consequences for
economic policy: "Man's task on this
Earth therefore, is to make his own
life more human and to subdue the
entire earth to this end. In this sense
man is the master of all material real-
ity" and "priest of the cosmos." For
this "dignity not to be ruined by pov-
erty, hunger, and disease, by the lack
of dignified conditions of life and the
chance of getting an education and
finding a job, the conscience of the
world must be put on alert to defend
the image of God in man."
On Nov. 20 in Singapore, the city-
state at the southern tip of the Malay
peninsula, the Pope stressed: "Where
there is not justice. there cannot be
peace. Peace is possible only where a
just order guarantees everyone's
rights. World peace is possible only
when the international order is just."
In Australia, John Paul H spoke to
cultural leaders on the mission of sci-
ence: "By its very nature, science is
theocentric in the last analysis and as
such renders a great service to human-
ity.
"Science, together with the truth it
brings in itself, does not abandon the
persons who suffer from scorn for hu-
man life, and from violence. The great
nobility of the human mind is based
above all on the capacity to know God
and to probe ever more deeply into the
mystery of God's life and to discover
man there, too."
He also went to the island south of
Australia, Tasmania, which was set-
tled by European convicts, and met
with unemployed in the old capital city
of Hobart. He told them: "The Church
is confronting the problem of unem-
ployment as a human problem, a prob-
lem which influences the life and dig-
nity of man, a problem with a deci-
sively ethical and moral character.
-. "Man's eternal destiny is tightly
linked to all the elements that influ-
ence human freedom, human rights,
and human progress. Work-or lack
of work-is one of these elements, a
very important element.
"Unemployment is the privation
of all the values that work represents
because it contributes to the support
of individuals, families, and society.
. "When one speaks of moral obli-
gation of work, it is understood that
everyone has the right?to contribute in
a real way to the great task of 'human-
izing' the universe, that is, to make
the world a more hospitable place and
a better instrument of personal and so-
cial development."
In the plane returning to Rome, the
Pope was questioned by journalists
who asked if his trips did not cost too
much. John Paul H replied: "I think
the expenses should not be counted,
when we were paid for at an inestim-
able price" (referring to Christian re-
demption, at the cost of the Christ's
crucifixion). When someone raised the
trip by Queen Elizabeth II to Austral-
ia, which had cost much less, he said,
"I cost more than the Queen, thank
God. Yes, because the message I carry
has its value, a transcendant value."
It has become usual for the Pope
to use these exchanges with journal-
ists during his travels to bypass the
filter imposed by the Vatican Secre-
tariat of State on information about the
Holy See's policy. This is how the
Pope's statements released on the plane
to Bangladesh, about a possible trip to
Moscow, should be read. John Paul
clarified the issue with a simple reply:
"I am not talking of a trip to Moscow;
for me a trip to Lithuania would be in
the line of my duty." He said this to
respond to the journalists' insistence,
who quoted the Metropolitan Filaret
of Kiev. The Pope ruled out a spiritual
voyage because there are no Catholics
in Moscow, only Orthodox, and ruled
out a political trip, thus sweeping aside
the Secretariat of State's dreams of a
papal mediation between the U.S.A.
and the U.S.S.R.
Two years ago, Moscow refused
to let the Pope visit the Lithuanian
Catholics for the Fifth Centenary of
St. Casimir. Also, the Pope has a crit-
ical'attitude toward the Yalta accords.
It is not accidental that in the pontifical
yearbook, Lithuania is listed as an au-
tonomous state, together with the re-
publics of Lettonia and Estonia.
Sources attribute the indefinite
postponement of Soviet leader Gor-
bachov's trip to Italy, to Pope Wojty-
la's statements. Faced with the Pope's
explicit request to visit Lithuania or
the Ukraine, not Moscow, the Krem-
lin leaders have not yet found an an-
swer.
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Report from Bonn by Rainer Apel
An adviser who came in from, the East
A profile of Wolfgang Sei, fen begins to answer the question:
Who is behind the pro-Soviet conservatives in West Germany?
An aspect of the West German po-
litical landscape which is coming to
the fore is the existence of a "Moscow
Faction" among the Christian Demo-
crats of Chancellor Helmut Kohl.
These are politicians who foresee a
military disengagement of the United
States from Germany, and propose a
"historic deal" between Bonn and
Moscow. Meeting the Soviet need for
Western high-technology, they.claim,
would allow a settlement on mutual
security between Moscow and Bonn
at a "lower level of armaments."
These arguments originate mainly
in the community of ex-advisers of the
East German regime, who moved to
West Germany in the past 10 years.
The most prominent of these "advisers
who came in from the East" is Prof.
Wolfgang Seiffert, an economics ex-
pert working with Kohl's Christian
Democrats. Sciffert was one of the
chief economic experts its East Ger-
many for some 20 years between 1958
and 1978. Specializing in Warsaw Pact
economic affairs, he also prepared nu-
merous "joint ventures" between the
two Germanys, allowing a transfer of
high-technology from the West.
In February 1978, Seiffert moved
west to settle as a professor of inter-
national law at the University of Kiel.
Since then, he has published detailed
plans for broadened economic coop-
eration between East and West in nu-
merous essays and books-proposals
which have been discussed a lot among
conservatives in West Germany.
In his latest book, The Whole Ger-
many, published in November, Seif-
fert writes that Gorbachov's planned
reform of the Soviet eaanomy will run
into bottlenecks under conditions of a
new arms race with the United States.
If Gorbachov can't stop-as Reykja-
vik showed- Reagan's SDI project,
he will have to make sure that the pow-
erful West German economy does not
work for America's strategic defense,
writes Seiffert.
Gorbachov would have to make an
"irresistible offer" to Bonn to drive a
wedge into the German-American al-
liance. This offer would be the reuni-
fication of Germany. The price to the
West Germans would have to be in-
tense cooperation between the reuni-
fied German economy and Gorba-
chov's "new economic policy." Such
an, arrangement would also please
Bonn's security interests under con-
ditions of U.S. disengagement from
Europe, insinuates Seiffert, adding that
such.a deal could promote a "profound
historic friendship between the Ger-
man and the Soviet peoples."
This sounds like Gorbachov's talk
about "our common home, Europe,";
which he claims defines bommon po-
litical, economic and cultural interests
of "all Europeans from the Atlantic to
the Urals. "No doubt: Wolfgang Seif-
fert is a co-thinker of Gorbachov's
"new economic policy" team.
A look into the political career of
Wolfgang Seiffert tells the story. Re-
cruited to the German Army in 1944,
he was taken prisoner of war by the
Soviets in early 1945, and underwent
re-education in the Red Army's POW
camps. From. the exclusive camp at
Gorky, where he got to know many
who played a leading role in the East
German regime later, Seiffert re-
turned to Germany as an "anti-fas-
cist," assigned to help build a Ger-
many under Soviet control. Seiffert's
special task from 1949 on was to re-
cruit youth in the western parts of Ger-
many for the FDJ (Freie Deutsche Ju-
gend), a communist-run youth front
then headed by Erich Honecker-to-
day's ruler of the German Democratic
Republic (GDR). The manifesto of the
FDJ stated: "The real fatherland of the
German youth is the G.D.R."
In 1950, Seiffert was editor-in-
chief of Junges Deutschland, the of-
ficial magazine of the FDJ published
in Frankfurt, West Germany.
Since the FDJ was, op orders from
the East, inciting riots against West
Germany's rearmament and its inte-
gration into NATO, the youth group
was banned as anti-constitutional in
1952. A year later, Seiffert was ar-
rested by West German police, tried,
and sentenced to four years in jail in
1955. In early 1956, Seiffert escaped
and made his way to the G.D.R.,
where his prior contact with Erich Ho-
necker helped him to make a career in
the pro-Soviet regime. In 1956 also,
the West German Communist Party
(KPD) was banned by the Bonn gov-
ernment.
When in 1968, the KPD was re-
founded under the new name DKP,
Seiffert worked for his own legaliza-
tion, to "return to the West." The 1955-
56 arrest warrant against Seiffert was
dropped by West German President
Gustav Heinemann (a Social Demo-
crat) in September 1969. But it took
another five years for Seiffert to move
west-a period he used to build his
image as an "East German dissident."
It is this image which many in West
Germany doubt: It is rather believed
that he was sent west on another "spe-
cial assigment," as in 1949.
EIR December 19,, 1986
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Report from Pars by Yves Messer
Student demos used against Chirac
Trilaterals, Trotskyists, and Socialists all have their hands in the
movement being manipulated against the government.
On Dec. 4, more than a half million
students, 1 million according to the
organizers, demonstrated in France
against a bill on the universities, known
as the Devaquet bill.
The demonstration grew out of an
ongoing mobilization that started two
weeks before. By Nov. 27 some
400,000 demonstrated all over France
against the Devaquet bill, on the day
it was to be debated in the National
Assembly. As a result, Universities
Minister Devaquet was forced to step
down, and his bill was withdrawn.
Another result is that politicians are
ganging up on the RPR government,
from "left" to "extreme right," includ-
ing Raymond Barre of the Union of
French Democracy, Chirac's main
political rival in the government ma-
jority coalition.
This was the first time since May
1968 that a mass student movement
has been created in France. Then, it
was aimed against President Charles
de Gaulle and led to his fall; today it
opposes the Gaullist government of
the RPR's Jacques Chirac. The move-
ment is controlled by the Socialists
through a tactical alliance with the
Trotskyists of the PCI (International-
ist Communist Party).
The purpose of organizing that
kind of mass movement is 1) to pre-
pare the ground for the Socialist Party
in the 1988, or maybe earlier, presi-
dential elections, 2) to block the anti-
drug, anti-AIDS, and anti-terrorist
policy initiated by Chirac's govern-
ment since last spring-a policy the
Socialists call the "new moral order."
More broadly, the aim is to keep
Chirac so busy with internal affairs
that he will be distracted from the in-
ternational scene. In this regard, it is
the continuation of the De Borchgrave
affair which tried to sabotage Chirac's
foreign policy a few weeks ago, when
Washington Times editor Arnaud de
Borchgrave leaked quotes from an off-
the-record interview on Mideast poli-
cy with the French premier.
The student uproar started Nov.
17 with a strike at Villetaneuse Uni-
versity and then on Nov. 22 at the
Sorbonne, well-known in France and
elsewhere as a counterculture haven.
The student union UNEF-ID, con-
trolled by PCI Trotskyists who tacti-
cally merged with the Socialists in
April this year, called for spreading
the strike to all the universities.
The next day, 200,000 rallied in
the Paris streets, organized by the
teachers' union, the Federation of Na-
tional Education, controlled by the
Socialists and Trotskyists, a powerful
network of interests within the nation-
al education system, with millions of
members and billions of French francs.
The movement peaked at the Dec. 4
demonstration, when provocateurs
from both "extreme-left" and "right"
ran riots against the police with mol-
otov cocktails, steel bars, and paving
stones. One provocateur was even seen
aiming a pistol, a method reminiscent
of the Red Army Faction-Greenies in
West Germany.
Hundreds were hurt, and one was
killed. The Socialist Party then ap-
pealed unofficially through its media
to change the orientation of the move-
ment from anti-Devaquet to anti-Pas-
EIR December 19, 1986
qua (the interior minister) and anti-
Chirac. On Dec. 10, a demonstration
was organized to protest the "repres-
sive methods" of the government's
police forces.
So, the movement was conscious-
ly degraded to enrage the students and
shift them toward a Green-like or
"rainbow coalition-like" movement,
since the overtly anti-technology, anti-
nuclear, or pacifist movements as such,
don't get much positive response from
French youth.
The Devaquet bill, which suggest-
ed a narrower selection of students (a
practice which already exists), had
awakened the fear of the future, of not
having a job. The general themes of
mobilization were "equality" and
"fraternity," as people are fed up with
the sterile partisan left-right debate.
Hence, unlike May 1968 this is a
movement based on so-called moral
values such as "justice and equality."
The Trotskyists are trying to shift it
toward a movement radically opposed
to the anti-terrorism, anti-AIDS, anti-
drugs, allegedly authoritarian moral
order of the Gaullists.
This manipulation of student opin-
ion started earlier, when the theme of
"fraternity" mobilized thousands of
people of North African origin born in
France. Their movement, SOS-Rac-
ism, is also controlled by Trotskyists.
Not surprisingly, the people organiz-
ing the student movement are mem-
bers or sympathizers of this SOS-Rac-
ism.
Two figures are emerging out of
this social upheaval: President Fran-
gois Mitterrand, the "monarch,"
"above the melee," defending the "op-
pressed minorities" and giving points
to the government as an arbiter; and
Trilateral member Raymond Barre,
who has played the role, since he be-
gan running for President, of the man
"outside the parties," "neither left nor
right." Indeed: "Trilateral."
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Andean Report by Mark Sonnenblick
AIDS conferences held in Lima
Peru's battle against the IMF gives it moral authority to propose
solutions for AIDS in the tropics.
Peruvian doctors responded with
alacrity to learning of the links be-
tween poverty and the spread of AIDS
into non-homosexual populations. At
a medical conference in Lima, Dec.
9, it was conclusively shown that the
conditions of misery caused by the In-
ternational Monetary Fund, make the
tropics into the best possible culture
for AIDS.
The conference, "AIDS, the Black
Death of the 21st Century," was co-
sponsored by the Schiller Institute and
the Peruvian Medical Federation. The
evidence was systematically pre-
sented by Dr. Debra Freeman, a Bal-
timore-based public health adviser to
the National Democratic Policy Com-
mittee, and by Dr. Bertha Farfgn, a
Mexican physician whose organizing
has just forced the Mexican Health
Ministry to classify AIDS as a conta-
gious disease which must be centrally
reported.
Interviews with Drs. Freeman and
Farfdn published in the press and on
the radio shortly before the conference
brought many of the 300 attendees.
The coverage focused on the sup-
pressed evidence of mosquito trans-
mission of AIDS and on the interac-
tion between poverty and disease. El
Popular of Dec. 9, for example, quot-
ed Debra Freeman: "The austerity im-
posed by the International Monetary
Fund on debtor countries has created
the unhealthy, filthy, and impover-
ished conditions in which AIDS prop-
agates with greatest virulence.... In
Africa, 50% of those infected are chil-
dren. Political leaders have tried to
keep this silent so as not to reverse the
genocidal economic policy imposed
on the Third World."
This thrust brought a consensus of
Peru's medical and military leaders
that they should lead an international
offensive against AIDS.
The president of the Peruvian
Medical Federation, Dr. Hugo Diaz
Lozano, told the conference, "Peru has
the moral stature to claim leadership
in a campaign of this type, because its
own President is the main bulwark of
defense of his population by having
retained funds which previously served
to pay debt and [using them] to im-
prove living conditions to counteract
the possibilities for the spread of this
disease." He concluded, "In Latin
America, the medical federations met
a few months ago and we have formed
the Medical Confederation of Latin
America and the Caribbean. I have
promised the Schiller Institute to bring
whatever is proposed here to the next
meeting of that body. Let us hope that
we can make this movement [against
AIDS] that of America and the Car-
ibbean."
Dr. Diaz observed, "the Medical
Federation would not have been able
to carry out this event without the de-
cisive participation of the Schiller In-
stitute."
Medics from Peru's army, navy,
air force, and police hospitals com-
prised one-third of the audience. One
medic reported that the Peruvian army
already has AIDS on its list of deadly
contagious diseases. During this pub-
lic seminar and another the next day
at the military hospital, attended by
150 officers from all services, ques-
tioners kept honing in on potential
mosquito transmission of AIDS and
how IMF loan conditions cause vital
social services such as health and san-
itation to be written out of national
budgets.
One officer confided that the mil-
itary considers AIDS a national secu-
rity matter, because two-thirds of the
country's area is jungle, where every-
one is bitten by mosquitos and other
insects many times daily.
Peru's leading AIDS specialist,
Dr. Raul Patrucco, Immunology Chief
of the Alexander von Humboldt Insti-
tute of Tropical and High Altitude
Medicine at Cayetano Heredia Uni-
versity, noted that in every country,
officials are shocked when AIDS first
appears, but "the epidemiological
chain of infection and transmission"
soon makes it irrelevant how it first
got into the country.
Before organizing began for this
conference, AIDS was not taken seri-
ously by the Peruvian Health Minis-
try, which took its cues from the World
Health Organization. As Peruvian
medical professionals became briefed
on the generally suppressed findings
that mosquitos and other blood-suck-
ing insects are likely vectors for AIDS
under conditions of intense poverty,
things got hot. At first the health min-
istry ordered doctors at key AIDS
treatment centers to shut up. But after
Drs. Diaz and Patrucco had a fire-fight
in the press with Health Minister Dav-
id Tejada, things changed.
Patrucco told the conference that
Tejada had promised to take AIDS se-
riously. One of the piquant moments
during the question period at the end
of the conference came when public
health bureaucrats, protesting that they
couldn't do anything about it, were
severely reprimanded by one of the
physicians in the audience and told to
start testing blood donors and map-
ping the disease nationally.
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Mother Russia by Luba George
The KGB and the Dzerzhinsky method
Moscow is now going beyond the ritual praise of the Cheka, the
predecessor to the KGB.
e Was a Chekist" was the head-
line of the Dec. 3 Soviet military dai-
ly, Krasnaya Zvezda, honoring the
100th anniversary of the birth of Ya-
kob Kh. Peters, co-founder with Felix
E. Dzerzhinsky of the Bolshevik in-
telligence agency, the Cheka. The
Cheka, forerunner of the KGB, is the
acronym for the All-Russian Extraor-
dinary Commission for Combating
Counterrevolution and Sabotage,
founded on Dec. 20, 1917. The article
praised the work of Peters and Dzer-
zhinsky in their "merciless" fight
against "counterrevolutionary ele-
ments." The same week a similar ar-
ticle in praise of Peters and the Cheka
appeared in the official daily Izvestia.
The Cheka, together with Lenin's
Foreign Ministry, was at the center of
arranging economic, political, and
strategic dealings with pro-Soviet
Western oligarchic circles, which were
given the appellation, the Trust. Pe-
ters, a Latvian Bolshevik, was instru-
mental with Lenin's first foreign min-
ister, Georgi Chicherin, in emphasiz-
ing collaboration with the Swedish
component of the Western "Trust"
networks. Resurrecting the memory
of Peters is thus a Soviet signal in the
aftermath of the Palme murder to
Scandinavia to work out a new "Trust"
arrangement.
Dzerzhinsky's counterpart in di-
plomacy, Georgi Chicherin, too, is
now getting big praise in the Soviet
press.
Gorbachov's predecessor, Yuri
Andropov, for 16 years the KGB chief,
often cited and modeled his work and
thinking on two leading Bolsheviks:
Maxim Gorky, the cultist-satanist
founder of the "Capri School" of Na-
tional Bolshevism, and Cheka's first
head, Felix Edmundovich Dzerzhin-
sky. Acccording to well-informed
sources, Andropov was the key figure
in the KGB to vigorously campaign to
revive the image and methods of "Iron
Felix" Dzerzhinsky. On one wall of
Andropov's office, in the Dzerzhin-
sky Square complex which headquar-
tered the KGB, hung Dzerzhinsky's
portrait.
Shortly after being appointed KGB
chairman, Andropov in an address to
staff members (Dec. 20, 1967) paid
extravagant tribute to Dzerzhinsky,
recalling that V.I. Lenin had instruct-
ed the Cheka to exercise "merciless
and immediate repression." On Sept.
9, 1977 Andropov, in a commmemor-
ative address for the 100th anniversa-
ry of Dzerzhinsky, eulogized "Old Fe-
lix" to near-sanctification. In the
speech entitled "Communist Sense of
Conviction Is a Great Force of the
Builders of the New World," Andro-
pov recalled that Dzerzhinsky had act-
ed within the framework of "socialist
legality" and "in accordance with rev-
olutionary law" in conducting mass
murders and planting political disin-
formation and assassination forces.
Despite many changes since then, An-
dropov concluded, the "basic function
and method" of today's KGB "re-
mains unchanged."
Felix Dzerzhinsky, an ascetic,
aristocratic-born Pole, speaking to the
press in June 1918, minced no words
to describe the "method": "We stand
for organized terror.... Terror is an
absolute necessity during times like
these.... The Cheka is obliged to
defend the revolution and conquer the
enemy even if its sword does by chance
sometimes fall upon the heads of the
innocent." Later he wrote: "My think-
ing compels me to be merciless, and I
have the firm determination to follow
my thinking to the ultimate.... We
show no mercy. We terrorize the ene-
mies of the Soviet government in or-
der to stop crime at its inception." By
1921, by conservative estimate, more
than 50,000 businessmen, intellec-
tuals, prosperous farmers and peas-
ants, officers, had been randomly ex-
terminated.
One of the Western Trust's lead-
ing figures in this century, the late W.
Averell Harriman, U.S. ambassador
to Moscow during World War II, said
in a New York Times commentary ti-
tled "Let's Negotiate with Andropov"
(Jan. 2, 1983) that the new leadership
in the U.S.S.R. was "pragmatic as well
as determined." Similar labels are
being applied today to Andropov's
heir, Mikhail Gorbachov.
Andropov's role in reorganizing
the KGB by Dzerzhinsky's "merciless
method" is key to understanding the
Gorbachov era. The Gorbachov-Li-
gachov leadership today was groomed
under the tutelage of Andropov.
Gorbachov's propaganda chief and
the Soviets' leading U.S.-Canada ex-
pert, Alexander Yakovlev, is one of
the prime architects of the Kremlin's
"new thinking," which embodies ideas
articulated by a group of KGB-trained
intellectuals brought to the fore by the
"reform-minded" Andropov, and fur-
ther promoted by Gorbachov. Yakov-
lev was deployed to the United States
in the late 1950s, where he made his
first contact with Henry Kissinger and
Zbigniew Brzezinski.
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Middle East Report by Thierry Lalevee
Will Moscow really gain in Irangate?
The Soviets have their own dirty secrets in the Gulf war, and a
crisis looming with their closest ally in the region, Syria.
At first, Moscow and especially its
Middle East troubleshooters were
overwhelmed by the revelations com-
ing out of Irangate. After a few days,
the Russian propaganda machine was
set into motion to demagogically blast
Washington's "double-talk." On sec-
ond thought, Moscow became more
cautious, not only because President
Reagan had shown some ability to deal
with the scandal, but because a scan-
dal in the West can affect the East,
too.
A mid-November article in the
Sunday Times detailing how Moscow
had been doing exactly the same as
Washington, received much publicity
in the Middle East. The article only
scratched the surface of Soviet du-
bious dealing in the Gulf war. No one
has yet really looked into the Soviet-
Vietnamese connection to the Ameri-
can-Iranian deal. It is a mere matter of
time.
Pending the December arrival in
New York of a Soviet delegation from
the IMEMO think-tank, which will
meet with the Council of Foreign Re-
lations to analyze the consequences of
Irangate, Moscow has decided to crank
up its propaganda and diplomatic ac-
tivities in the region.
The first signs were given on Nov.
26 by a long political analysis of the
Gulf war in the weekly Literaturnaya
Gazeta by Mideast expert Igor P. Be-
lyayev, a long-time crony of IMEMO
director Yevgeny Primakov. Titled the
"Iranian gambit," the analysis at-
tacked American-Iranian dealings, and
warned that Washington wanted to
reintegrate Teheran into an Ankara-
Islamabad axis.
There was vague mention that
Washington's game-plan is the "dis-
mantling of Iraq," but the focus of the
article was its conclusion: "America is
asking for trouble." This probably
means the Soviets have decided to
reactivate their "right to intervene" into
Iran, in accord with the 1923 treaty.
The article fit several purposes. It
portrayed Moscow as the old friend of
the "anti-imperialist" Arabs-Iraq and
its allies; and it helped fuel Iran's in-
ternal faction fight in favor of the arch-
fundamentalists around Montazeri,
who could now argue that the deals
with Washington were exposing Iran
to a most serious threat at its borders.
Meanwhile, Moscow gave a green
light for upgrading Soviet-Iranian
economic ties. On Dec. 9, Konstantin
Katushev, chairman of the Soviet State
Commission for Foreign Economic
Relations, arrived in Teheran to chair
the Soviet-Iran grand economic com-
mission, the first such meeting in six
years. Deputy Foreign Minister Yuli
Vorontsov started a round of meetings
with the Iranian ambassador in Mos-
cow, Naser Nobari, on Nov. 19, and
exchanged letters with Foreign Min-
ister Ali Akbar Valayati, who will go
to Moscow in early January.
The Soviets have been making
similar gestures to Iraq. In mid-No-
vember, they delivered new Badger
long-range bombers which were cru-
cial to the Iraqi bombardment of Larak
Island. On Dec. 9, Foreign Minister
Shevardnadze talked of upgrading
military and diplomatic ties with the
Iraqi ambassador, Saad al-Faisal.
Also meant for Baghdad to appre-
ciate was the arrival in Jordan on Dec.
2 of General Chesnokov, the Com-
mander in Chief of the Soviet Air De-
fense Forces, whose visit will lead to
comprehensive military deals for the
kind of weapons that Washington has
been refusing to the kingdom. A
stronger Jordan is a major help to Iraq.
The same goes for Egypt, which just
received Victor Dementsev of the So-
viet State Bank to renegotiate some $3
billion in debt from Nasser's era. Ru-
mors abound that Moscow may grant
Cairo a debt moratorium.
However, Moscow's real dilem-
ma in the region concerns its closest
ally, Syria. On Dec. 7, a Pravda edi-
torial accused the United States of
planning a "Grenada-type" military
action against Damascus. It ended by
warning that Moscow would stand by
Syria. The real meaning of the edito-
rial is elsewhere. Moscow knows that
Syria is expected to face a serious cri-
sis by the end of the year, and preemp-
tively wants to blame it on Washing-
ton.
Damascus faces three problems.
Though limited, the sanctions im-
posed by Britain and the European
Community against Syria for running
terrorism have a grave economic and
psychological impact. Syria is facing
its worst economic crisis ever. This
was admitted on Dec. 2 during a spe-
cial meeting of the People's Assem-
bly, which reviewed the food short-
ages find the paralysis of industrial
production. Syria's isolation has
sparked a new round of faction fights
in the top ranks of the leadership. De-
fense Minister Mustafa Tlas has seized
the opportunity to urge the removal of
Hafez al-Assad's confidant, Gen. Mo-
hammed al-Khouli. Moscow has to
ponder what it can do to save Assad's
neck without creating a crisis which
will simply help President Reagan to
divert attention from Irahgate.
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Dateline Mexico by Josefina Menendez
Mexican `Big MAC' suggested to Japan
Felix Rohatyn, the wizard who "saved" New York City, has a
plan for Mexico-and the narcobankers love it.
rarely-seen fusion between
government and national private en-
terprise, not seen for many years," was
observed by Mexican commentators
during President Miguel de la Ma-
drid's Nov. 29-Dec. 3 visit to Japan.
Felix Rohatyn, director of New York's
Municipal Assistance Corporation
(MAC) and partner in the Lazard
Freres investment bank, took the oc-
casion to propose preventing "the vir-
tual destruction of the Mexican econ-
omy and the resulting political crisis,"
using, of course, Japanese capital to
do so.
The article Rohatyn placed in the
Wall Street Journal is not far from the
truth. He says that Mexico's political
and social cohesion is at stake, that
political disintegration has already be-
gun, that the ruling PRI party is be-
coming totally factionalized, and that
the result could be a civil war which
could provide opportunities for the
Soviet Union. All this flows from the
deep economic crisis overwhelming
Mexico.
Very far from the truth are the re-
sponses he suggests to avoid such a
disaster. Rohatyn proposes a "Big
MAC" like the one he set up to "res-
cue" New York. The bottom line is
that private businessmen would take
the nation's finances in hand and force
the state to support them. In the Mex-
ican version, the proposal calls for pri-
vate U.S. and Mexican interests to
form a "temporary" development au-
thority, which would buy up to $20
billion of Mexican debt paper from
U.S. banks, issuing bonds in return.
In a second phase, it would reorganize
and finance industrial operations in
Mexico, mostly the export-oriented
sweat shops called maquiladoras.
Rohatyn suggests that to finance
these projects, the World Bank should
form a 50-50 partnership with Japan.
Japan would be strong-armed into put-
ting up some $50 billion of its "surplus
dollars," on the argument that the U.S.
provided Japan with security for the
past 40 years, so "Japan should be
willing to make such an investment."
The proposals made by the busi-
nessmen in de la Madrid's entourage
seem inspired by the MAC concept,
while reflecting the monetarist sec-
tors's grip on the Mexican govern-
ment. Claudio X. Gonzalez, president
of the Business Coordination Council,
defended the economic policies the de
la Madrid administration has held onto
doggedly against wind and tide. He
praised the opening to foreign trade,
cutting down of the public sector, au-
diting of finances, the progressive
abandonment of subsidy systems and
internal price controls, and the elimi-
nation of the overvaluation of the peso.
It was shocking that the chief of
the Business Coordination Council-
and not, for example, the minister of
industry and trade-was the one who
announced that the public sector is
rapidly being trimmed. He said it is
getting rid of state sector companies
which have no reason for existence.
There are only 744 left; but the projec-
tion is to reduce them to 502 before
the end of 1988. Gonzalez announced
that Mexico would eliminate its hold-
ings in secondary petrochemicals,
chemicals, pharmaceuticals, machin-
ery and tools, textiles, and cellulose
and derivatives. The public sector
would also partially withdraw from
areas such as steel, metalworking, au-
tomotive vehicles, and sugar. It is also
reclassifying 36 petrochemical prod-
ucts from primary (which will contin-
ue in the hands of Pemex) to second-
ary, which can be privatized.
The 70 Mexican businessmen on
the trip who were so exhilarated by
Gonzalez's speech came largely from
the states just south of the U.S. bor-
der, which are the cradle of the Na-
tional Action Party (PAN) insurrec-
tion. Many of them were the "narco-
bankers" whose banks were expropri-
ated by ex-President Jose L6pez Por-
tillo in 1982, because they were kill-
ing the nation with dirty-money laun-
dering and flight capital.
They have been financing the PAN
electoral campaigns in the north of
Mexico to create a political base for
cross-border maquiladoras and dope
traffic-easy money to pay the debt.
De la Madrid has adopted their "eco-
nomic liberalization program." That
explains why the monetarist business
clique used the Japan trip to proclaim
their new-found adherence to the re-
gime.
To attract the Japanese into Ro-
hatyn's "save Mexico" trap, de la Ma-
drid announced the great flexibility of
the foreign investment law which
would open up opportunities for the
Japanese. For the first time, foreign
investors will be able to own 100% of
the shares in "medium and small"
businesses.
What remains to be seen is wheth-
er Japanese investors, who tradition-
ally prefer truly productive invest-
ments, especially great development
projects, will accept participation in
an investment scheme which, in the
end, will only help to save the Wall
Street bankers.
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III~IIS~OASi III~~C
Hayden says Pacific
needs United States
Australia's Foreign Minister Bill Hayden
said today that Australia places prime im-
portance on its security relationship with the
United States, and New Zealand cannot ex-
pect Australia to be a substitute security
partner.
Hayden, in New Zealand for a four-day
official visit, told journalists on his arrival
that Australia completely disagrees with New
Zealand's ban on port and air access for
nuclear-capable weapon systems and ap-
pealed to New Zealand to restore normal
access. Hayden is scheduled to meet Prime
Minister David Lange and will discuss the
bilateral Closer Economic Relations (CER)
agreement and mutual strategic interests in
the South Pacific.
Hayden said New Zealand had benefit-
ted from the CER agreement through in-
creased exports and a larger market. How-
ever, he said a significant number of Austra-
lian manufacturers was hostile to the 1983
agreement and the relationship needed to be
handled with care.
Greece rejects secret
EC terror protocol
European Community interior ministers
meeting in London adopted a secret paper
Dec. 10 identifying and analyzing the threat
posed to the EC by terrorism, but Greece
refused to associate itself with the docu-
ment.
British Home Secretary Douglas Hurd
said the document marked a new departure
for the EC in that it named the main areas
from which the terrorist threat originated
and the central organizations involved. "It's
a big move forward from exchanging bits of
intelligence to an analysis of the main sources
of terrorist threats to Europe," he told a news
conference. "It is a very specific and hard-
headed document."
In November, Greece had refused to join
EC actions against Syria, and refused again
in April respecting measures against Libya.
The communique said the EC II would
present the document to foreign ministers so
they could take "more informed, effective,
and concerted action at the political level to
stop terrorist activities."
Hurd said the. paper would also be given
to the United States as part of better coordi-
nating efforts.
Chinese marry
foreigners, leave
More than 22,000 foreigners have married
Chinese since 1984, a sharp increase over
previous years, the New China News Agen-
cy said Dec. 10. It gave no detailed figures,
but attributed the rise to the "open-door pol-
icy" which began in 1979 and "the increase
of communications between China and the
rest of the world."
A government survey this year showed
that many Chinese women married foreign-
ers to get out of the country, and they ad-
mitted that love was often a secondary fac-
tor.
The survey said more than 95% of
Chinese marrying foreigners were women
and up to 99% left to live abroad. One
Chinese, a writer, said he married an Amer-
ican student in a remote city in northeast
China, where officials were less strict in in-
specting the necessary documents than in
Peking.
Washington Post, CFR
deny Russian threat
The Soviet Union is poor and backward and
no military threat at all, claims an Eastern
Establishment spokesman linked to the
Washington Post and the New York Council
on Foreign Relations.
"Gorbachov has given us a new oppor-
tunity to redraw our image of the East-West
confrontation," says Robert Kaiser, assis-
tant managing editor of the Washington Post.
"As he implicitly acknowledges, we are not
dealing with two equivalent giants." Kaiser
was writing in the New York CFR's journal,
Foreign Affairs, under the title, "The Soviet
Pretense."
"Even if Gorbachov's domestic initia-
tives succeed far beyond any present expec-
tations, the Soviet Union will remain poor
and backward. The Soviet Union is not com-
petitive with the advanced Western econo
mies, and shows no signs of becoming com-
petitive in this century or beyond."
He continues: "By speaking with some
candor about the facts of Soviet society,
Gorbachov may help all of us see how we
ought to revise our image of his country."
The problem with Gorbachov's candor,
Kaiser says, is that it may "dispirit the So-
viet public, reinforcing the cynicism that is
already strong in Soviet life."
Philippines' Ver
comes under U. S. probe
The U.S. Marshals Service said Dec. 10 it
is investigating the whereabouts of Gen. Fa-
bian Ver, after a judge issued an arrest war-
rant for the Philippines Army chief of staff
under the deposed Ferdinand Marcos.
The warrant was apparently issued after
Ver failed to appear in early December be-
fore a grand jury in Alexandria, Virginia,
probing possible corruption in U.S. arms
deals with the Philippines. William Demp-
sey, a Marshals Service spokesman, said
Ver was cited for contempt of court. Others
who have been subpoenaed include the
youngest daughter and son-in-law of Mar-
cos; Imelda Marcos's brother; a wealthy
Marcos business associate; and a former
Philippine ambassador to the United States.
General Ver allegedly took part in a plan
to keep U.S. officials from learning that U.S.
weapons being sent to the Philippines by
Israel were then being transshipped to Iran,
according to the San Francisco Examiner.
The paper quoted a Justice Department
source saying Ver signed false "end user
certificates" in late 1985 and early 1986 in-
dicating that the arms were being delivered
to the Philippines. The false certificates were
presented by Israeli officials to the depart-
ments of State and Defense to hide the true
destination of the weapons.
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The plan was known only to a few senior
White House officials and was devised to
keep Secretary of State George Shultz and
Secretary of Defense Caspar Weinberger
from knowing about the shipments.
Pope's peace message
stresses economic issue
In his 1987 peace message, released Dec.
11, Pope John Paul II attacked development
programs which he said forced recipients to
accept contraception programs and abortion
as the price of economic growth. The 20-
page message will be delivered to heads of
state around the world.
In it, the Pope also said that powerful
divisions had appeared between the "tech-
nological haves and have-nots." He called
for greater sharing of technological ad-
vances and a refusal to make Third World
countries "the testing area for doubtful ex-
periments or dumping ground for question-
able products." He also said, "Disarmament
and development are vital for peace."
The Pope begged terrorists to give up
violence, even if their cause was just, saying
that terrorism "undermined the very fabric
of society."
Kremlin olive branches
to Yugoslavia, Albania
Mikhail Gorbachov, in what are described
as conciliatory remarks to Yugoslavia's
Communist Party chief Milanko Renovica
in Moscow Dec. 10, said that the Soviet
Union observed Yugoslavia's development
without prejudice and believed that all com-
munist parties must respect each other's ex-
perience, the Soviet party paper Pravda said
Dec. 11.
Gorbachov quoted Lenin predicting that
the world would see many different attempts
to build new societies on Marxist lines and
a definition of socialism should include all
of them.
"It is hard to overestimate the funda-
mental political importance of this thought
of Lenin's for the process of establishing
and developing the world socialist system.
It follows from the recognition of the diver-
sity of the revolutionary process that no par-
ty has a certificate to the absolute truth."
Renovica was the first Yugoslav party
leader to visit Moscow since the late Josip
Broz Tito in 1979. Renovica used his dinner
speech to speak of the need to observe "the
inalienable right of every party to determine
policy independently."
In the Nov. 29 issue of Pravda an olive
branch was extended to another alienated
communist nation, Albania. ""The Soviet
Union now resolutely advocates respect for
the autonomy of parties and the indepen-
dence and equality of states. It is against the
practice of extending ideological differ-
ences to the sphere of interstate rela-
tions.... The Soviet Union resolutely ad-
vocates the elimination of obstacles hinder-
ing the normalization of relations and a joint
quest to restore relations."
Hashemi links Montazeri
to arms running, murder
Mehdi Hashemi, a relative of Khomeini's
hand-picked sucessor, supposedly con-
fessed on Dec. 9 to murder, hoarding weap-
ons, and collaborating with the Shah's se-
cret police, according to official Teheran
radio. Hashemi said the base for his activi-
ties was the office of Hussein Ali Montazeri ,
the Ayatollah Khomeini's probably succes-
sor.
The interview with Hashemi, aired by
Radio Teheran Dec. 9, quoted him as saying
he is guilty of "gross deviations," including
"standing up against the Iman of the Islamic
nation."
Hashemi, described as former head of
Iran's Global Islamic Movement, responsi-
ble for exporting the Islamic revolution, was
arrested in late October and charged with
murder, kidnapping, illegal possession of
firearms and explosives, forgery, and en-
gaging in unspecified "underground opera-
tions." The Information Ministry says all
charges against Hashemi have been proven.
The Ayatollah Montazeri said Dec. 10
that Hashemi "was in no way involved in
my office."
? SEN. EDWARD KENNEDY
will not be permitted to visit Poland
as planned, said Polish government
spokesman Jerzy Urban. "The sena-
tor's visit to Poland, no matter what
his intentions are, is not possible be-
cause of the overloaded schedule of
previously planned political events,"
Urban told reporters.
? IGOR LATYSHEV, a senior
member of the Soviet Academy of
Sciences, said on Dec. 2 that the 1960
revision of the Japan-U.S. Security
Treaty invalidated a 1956 Soviet
promise to return the Hobomai and
Shikotan Islands to Japan Dec. 2. The
Soviet promise, part of the Joint Dec-
laration restoring diplomatic rela-
tions between Japan and the U.S.S.R,
after World War II, was abrogated
when Japan renewed its security treaty
with the United States in 1960.
? JAPANESE PREMIER Yasu-
hiro Nakasone has been invited to visit
Yugoslavia. Nenad Bucin, head of
the Socialist Alliance of Working
People of Yugoslavia, visiting in To-
kyo, delivered the invitation.
? WALLIS SIMPSON, the late
Dutchess of Windsor, left Britain in
fear of her life, writes Nancy Dug-
dale, whose husband Thomas was
Prime Minister Baldwin's private
secretary during the abdication crisis
of 1936. One entry, from Dec. 3,
1936, reads: "Mrs. Simpson left the
country today by car, because she had
become really frightened for her own
skin. She had been informed that the
police could no longer guarantee her
personal safety if she stayed in this
country." No further details given.
? LEV RYABEV was appointed
Soviet minister of medium machine-
building, Moscow's "warhead" min-
istry, by the Supreme Soviet Presid-
ium Nov. 22. Ryabev has served as
deputy chief engineer, deputy direc-
tor, and director of the Scientific Re-
search Institute of the Ministry of
Medium Machine-Building. From
1978 until 1984, he was head of the
Communist Party Central Committee
science-engineering "R-Sector."
Internationar 59
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lnvestigation
Fidel Castro's friend
Vesco aids the Contras
by Gretchen Small
"If [Nicaraguan chief] Daniel Ortega had no Contras, he
would have to invent them," Costa Rican President Oscar
Arias told Washington reporters on Dec. 5, during a two-day
visit to the U.S. capital. Arias urged the Reagan administra-
tion to take more interest in the countries of Central America,
particularly their economic problems, if the region is to be
protected. Not only have the Contras not weakened the Ni-
caraguan threat, but they have provided the Sandinistas "a
very good excuse to make Nicaragua a more dictatorial re-
gime," he argued.
Investigations into the Contras' logistical support appa-
ratus exposed in the ongoing Iran-Contras scandal, prove,
however, that Daniel Ortega's international friends did in-
vent the Contras. In fact, with the identification of the Swiss-
based "financial consulting" outfit, Compagnie de Services
Fiduciaires, S.A., as a center of Contra supply networks, it
is proven that the financial empire of one of the Sandinistas'
top financiers and benefactors, narcotics finance king Robert
Vesco, sits at the center of Contra operations.
The implications of the Iran-Contras scandal go much
deeper than a case of "ripping off the ayatollah" to finance
Nicaraguan "freedom fighters," further even than violations
of the law banning U.S. officials from arming the Contras
during 1983-85. What E!R has reported since 1981, when
U.S. intelligence first set-up the Contras, has been confirmed
in spades: The Contra operation was cooked up, not by Pres-
ident Reagan, but by the friends and assets of Moscow in the
West, centered around the international narcotics trade.
A Trilateral Commission policy
From the beginning, the Contras policy was designed to
provide a "conservative" cover for the sell-out of Central
America to Soviet-run narco-terrorists struck with the Soviet
Union by Jimmy Carter's Trilateral Commission govern-
ment. Carter administration officials spoke of perpetual war-
fare in Central America, and argued that the United States
could not allow any faction-"left" or "right"-to win. Cen-
tral America's militaries were cut off from U.S. assistance,
and control handed over to Israeli arms- and drug-running
networks under the Carter administration policies contin-
ued under the Reagan presidency by means of the Contras
policy.
Even the most ardent Contra supporters do not argue that
the Contra irregulars are a military threat to a Sandinista
regime kept well armed by Moscow. Neither is the argument
that the Contras will force the Sandinistas to the negotiating
table credible. Ab Costa Rican President Arias emphasized,
the Contras only provide the Nicaraguan regime with the
"foreign threat" they need to quiet rebellion against their
uneasy rule. What is its purpose, then?
The Contras policy is designed to keep the United States
from adopting a strategy that could stabilize Central America
permanently, plain and simple. The basic principles of such
a policy require that the United States:
1) Build up the countries in the region, both militarily
and economically. Here, debt relief and construction of infra-
structure are the required pillars of an economic strategy
designed to defeat the narcoterrorists.
2) Lead a military assault on the narcotics trade which
provides the infrastructure for all terrorist insurgencies in the
region. Here, the United States can provide the militaries of
allied countries in Central America the logistical, technolog-
ical, and intelligence support necessary to crush the drug
networks.
3) Let the Contadora countries, supported by the reacti-
60 Investigation
EIR December 19, 1986
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vated Central American Regional Defense Council (Conde-
ca), provide the larger regional framework required for long-
term economic and political development.
This is the policy against which Assistant Secretary of
State Elliot Abrams has been the most outspoken. Abrams
argues against a policy of cony 'fining Nicaragua "through a
combination of economic, political, and military support for
its neighbors, and a diplomatic and economic quarantine of
Nicaragua itself," the Baltimore Sun reported on Dec. 5,
because, he says, the United States does not have the "staying
power" to win.
In June, Abrams stated outright that his policy is to limit
the military capabilities of Ibero-American nations, even un-
der the current conditions of escalating narcoterrorist warfare
across the continent, a message he delivered in a speech to
the Inter-American Defense Board. The "enlargement of mil-
itary forces" in Ibero-America "threatens civilian institu-
tions," he stated, a doctrine straight out the heyday of Cart-
erdom and quite to Daniel Ortega's liking.
Under EIR's strategy, the United States wins allies in the
process of kicking the Russians and the mob out of the region.
Under the Carter-Trilateral-Contras policy, the crisis wors-
ens, until the point that the United States must send its own
troops in, in battle against populations which view our nation
as a leading cause of their misery.
The creators of the perpetual-war strategy now speak of
"reforming" the Contras, to save the policy behind it. The
Contras must now be prepared for "long-term guerrilla war-
fare. The model is El Salvador's leftist guerrillas," the Chris-
tian Science Monitor reported Dec. 10, as the consensus
developing among the administration's Central American
"analysts"!
The unraveling of the truth of who runs the Contras as
Irangate proceeds, provides the United States an opportunity
to dump the liberals' policy of bleeding Central America on
behalf of a strategic deal with the Soviet Union, whose uli-
mate aim was to see U.S. troops leave Europe to fight per-
petual, no-win wars in Central America.
Vesco's mob and the Contras
Accusations that the Contras traffic in narcotics have been
raised periodically. On Nov. 27, Honduran police caught the
main army of the Contras, the Nicaraguan Democratic Forces
(known as the FDN), red-handed in the business. When po-
lice raided a marijuana farm set up near an FDN camp at
Capire, three Nicaraguan Contras were found and arrested
for running the farm, along with two Hondurans. One of
those arrested, Pastor Rivera, confessed that he was a military
intelligence operative of the FDN, the largest Contra military
group, which, until this, had claimed any drug connections
were limited to other factions in the Contras, centered in
Costa Rica.
Each time the narcotics accusations have come up, U.S.
officials associated with the Contras have stated that, if any
drug connections exist, the problem is limited to a few bad
apples in the Contra barrel. Robert Vesco, the fugitive Amer-
ican financier running Carlos Lehder's cocaine trade today
from the comfort of Havana, Cuba, has laughed at that one-
all the way to the bank.
Take the case of the Compagnie de Services Fiduciaires,
S.A. (CFS), a Swiss "consulting firm" on fiscal and financial
matters. Located at No. 3 Thury in Geneva, CFS shows up
repeatedly in the Iran-Contras scandal. Identified as the. shell
company used to transfer the profits from sales of U.S. arms
to Iran to bank accounts used by the Contras, CFS was then
identified as the company running financing for several cov-
ert operations of the "208 Committee." The plane used by
former National Security Adviser Robert McFarlane in his
secret goodwill visit to Iran, was owned by New York Re-
public Corporation Transport Services, S.A., a company
itself owned jointly by CFS and Edmund Safra's Republic
National Bank in New York (where CFS maintains some
accounts).
A CFS subsidiary, CFS Investments in Bermuda, pur-
chased planes for the Contras. Located at the same address
as CFS in Geneva, is an office of Stanford Technologies
International Trading Group, a company run by Iranian-
American arms dealer Albert Hakim and retired U.S. Air
Force Maj.-Gen. Richard Secord. Stanford Technologies
handled many of the Contras international operations, with
Secord identified as Lt.-Col. Oliver North's "executive agent"
on Contra resupply operations from El Salvador (the route
exposed when the Sandinistas downed a plane carrying weap-
ons to the Contras on Oct. 5, and captured Eugene Hasenfus),
which was run by a team from Stanford Technologies, in-
cluding retired Air Force Col. Robert Dutton.
The Zucker connection
Who runs CFS? Swiss lawyer Jean de Senarclens is pres-
ident, with the company's general director, Willard Zucker,
playing a leading role (including directing CFS' subsidiary
in Bermuda). It is Zucker who leads the operation straight
back to Robert Vesco.
In the late 1960s, Zucker joined Bernie Cornfeld's Inves-
tors Overseas Services, running the legal department of IOS
and, for a time, serving as an IOS director. Zucker came from
the New York law firm, Willkie, Farr & Gallagher, where he
had been a partner, and soon proved to be part of an advance
team for Robert Vesco's 1971 takeover of IOS. Willkie, Farr
& Gallagher, in fact, ran Vesco's raid, and subsequent loot-
ing of IOS, under the direction of the firm's leading partner,
Kenneth Bialkin. As EIR documents in its bestseller, Dope,
Inc., Bialkin and Wilkie, Farr & Gallagher introduced Vesco
to top Israeli mobster Meshulam Riklis, who provided Ves-
co the stock he used to take over IOS, from which, in turn,
Vesco made the initial capital off which he built his Carib-
bean narcotics and dirty money empire.
Zucker left Investors Overseas Services to found CFS,
shortly before Vesco's looting collapsed its global financial
pyramid. Some say CFS is in fact the continuation of IOS's
EIR December 19, 1986
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operations, under new cover.
CFS is only one track of the Vesco-Bialkin mob control
over the Contras. Gen. John Singlaub, the Contra's leading
private fundraiser, works closely with Bialkin's Anti-Defa-
mation League. Bialkin chaired the ADL for years, until he
stepped aside earlier this year when the publicity around his
dope-connections threatened to sink the ADL entirely. Ac-
cording to his own account, Singlaub brought in the ADL to
"clean out" the World Anti-Communist League when he
took over as chairman. Singlaub turned over WACL mem-
bership lists to the life-time socialist who heads the ADL's
Fact-Finding Division, Irwin Suall, for Suall to decide which
groups to purge from WACL!
Vesco and the ADL, in turn, are part of the mafia that
includes Israeli cabinet minister Ariel Sharon, another prin-
cipal in the formation of the Contras. EIR's March 1, 1986
Special Report, "Moscow's Secret Weapon:, Ariel Sharon
and the Israeli Mafia," details the Soviet ties of this extensive
international dope and arms network. (In that report, EIR
reports the connections of Elliot Abrams, assistant secretary
of state for Inter-American affairs, to this Israeli mob. Abrams,
who likes to brag that he runs the Contras, is a member of the
so-called covert operations "208 Committee," and chairs the
Interagency Group on Central America, of which Lt.-Col.
Oliver North was also a part. So much for Abrams's talk of
"reforming" the Contras.)
As is now public knowledge, as secretary of state, Alex-
ander Haig gave principal responsibility for the arming,
training, and financing of the Contras to Sharon's Israeli
mob, an arrangement sealed in a secret accord signed by Haig
and Sharon in 1981, when Sharon was defense minister of
Israel. Under those agreements, Israeli arms traffickers began
shipping weapons and supplies to the Contras, through cor-
rupted elements of the Honduran armed forces. In his Decem-
ber 1982 visit to Honduras, Sharon established direct rela-
tions with the chief Honduran running this network, then
Defense Minister Gen. Gustavo Alvarez. Alvarez was later
dumped from the Honduran military, on charges of corrup-
tion which included his association with Honduras's military
attache in Chile, Gen. Jost Bueso-Rojas, who had been im-
plicated in a cocaine-trafficking ring! Today, both Alvarez
and Bueso-Rojas are "private" advisers to the Honduran-
based Contras.
Soviet connection to be investigated
Soviet assistance to the Contras was first revealed last
summer when the Danish ship, the Pia Vesta, carrying 250
tons of Soviet-made weapons, was stopped in Panama's
waters. The weapons had been sold by the East German state
trading company, and loaded in Rostock, East Germany at
the end of April 1986. The Pia Vesta carried two manifests
aboard, one showing the weapons' destination as the Peru-
vian Navy, the other, El Salvador's military. Speculation
began that the weapons were destined for the Contras, shipped
"through" El Salvador's military, as Israeli weapons passed
"through" the Honduran military.
The Pia Vesta anchored off Peru's shore in June, but
never contacted port, before heading back to the Panama
Canal. Spokesmen for the Danish company handling the
shipment, the Copenhagen Shipping Co., APS, stated that
El Salvador was the final destination. Soon thereafter, from
Miami, a reputed CIA-linked arms dealer, David Duncan,
announced that he had bought the weapons from the East
German state trading company. Panamanian investigators
then confirmed that the weapons were to be shipped from El
Salvador to the Contras, using the route later exposed as that
run by Secord's Stanford Technologies.
Perhaps most telling was that 250 tons of Soviet weapons
had been found in the Western Hemisphere, and the U.S.
press and intelligence kept silent! A July 18 Wall Street
Journal article on Oliver North's work with the Contras hint-
ed at the reason why. "North's work had risks. It is full of
secrets which are very dangerous to reveal; for example, the
identity of the people who are providing East bloc arms to
the Contras," the Journal wrote.
Maybe North argued here, too, that he was dealing with
"moderates" within East Germany. As for East Germany,
government officials admitted the money for the arms came
from Switzerland, but dismissed the matter as "a commercial
transaction." (U.S. officials told AFP that "not much worry
existed over a shipment of arms which went from one banana
republic to another.")
New files opened by the CFS and related investigations
demonstrate that Soviet bloc involvement in the Contra op-
eration was not limited to the Pia Vesta case. Secord and
Hakim themselves come out of a Soviet-contaminated net-
work within U. S. intelligence. Hakim and Secord were long-
term associates of Edwin Wilson, as were several other
agents directing field operations of the Contras. When Wil-
son was tried and convicted of selling weapons to Libya in
1983, Secord testified on Wilson's behalf at the trial. Wilson,
with his now-fugitive partner, Frank Terpil, were report-
edly both employees of Stanford Technologies at one time.
In the early 1970s, Albert Hakim had been implicated in
smuggling computer technology to Warsaw Pact countries,
when both he and another associate, David Shortt, were,
respectively, the Iranian and Austrian representatives of
Hewlett Packard. Following U.S. government investigation
for illegally shipping HP computer systems to Czechoslova-
kia, Shortt formed an Iranian-based firm with Albert Hakim,
dedicated to selling advanced technology to Russia.
The Dec. 3 issue of Tribune de Genive revealed another
track to be followed. The CFS-connected New York Repub-
lican Corporation Transport Service, cited above, bought its
planes from another Geneva-based company, named Aero-
leasing, which includes Swiss industrialist Peter Notz as a
top director. Notz is a close associate of Syrian intelligence,
and works with the Nazi terrorist controller Francois Genoud,
whose controlling role in protecting Soviet-directed Arab
terrorism has been documented by EIR.
62 Investigation
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AIDS outbreak in
Nicaragua, Contras
The Sandinista government faces a terrible outbreak of AIDS
in Nicaragua, informed sources in Washington, D.C. report-
ed in early November. According to the reports, recently
published in New Solidarity newspaper, Sandinista officials
are attempting to determine how far the killer disease has
spread through their ranks, without letting the news leak to
the general public.
Promiscuous sexual practices were inculcated in Sandi-
nista ranks as proof of commitment to "revolutionary free-
dom," even before the guerrilla group seized power in 1979
with the help of the Carter administration.
"Intellectual" controllers of the Sandinistas, such as Jes-
uit Father Fernando Cardenal, promoted "eroticism" as a
central part of Sandinista ideological training, while Carden-
al's brother, the Trappist monk Ernesto, is famous for having
organized orgies at the Sandinista training center on the Isle
of Solentine in the 1970s.
Once in power, the Sandinistas have relished their new
role as the little brown darlings of the "radical chic" interna-
tional jet-set. Bianca Jagger, ex-wife of Rolling Stones star
Mick, cavorts with the Sandinista leadership and with the
wife of Nicaraguan President Daniel Ortega. Ortega made
quite a scene during his visit to New York last fall, attending
a party of the Peter, Paul, and Mary "folk-singing" group,
and spending $3,000 on designer glasses!
The Sandinista Armed Forces magazine plays up the sex-
ual life of the troops, reporting the adventures of their soldiers
as following in the footsteps of their founder, Augusto San-
dino, a member of the theosophy cult who vaunted his sexual
exploits.
Sandinista promiscuity, combined with economic dev-
astation in Nicaragua, created ideal conditions for transmis-
sion of the AIDS virus. News of the epidemic could spark a
revolt among Nicaraguans, already angry at Sandinista at-
tacks on Pope John Paul II and the Catholic Church in the
name of "theology of liberation." Simmering anger at the
dictatorship has been limited by fear of the "Contras," seen
as foreign-controlled guerrilla bandits differing little from
the Sandinista rulers.
U.S. soldiers infected?
Worrying Washington, however, is the danger that the
ranks of the U.S.-sponsored Contra fighters may be decimat-
EER December 19, 1986
ed by a similar AIDS outbreak. Washington officials are said
to be examining the possibility that Cuban exiles advising the
Contras brought in the disease.
The major Contra base of operations is located in Hon-
duras, like Nicaragua an extremely impoverished country.
Thousands of U.S. soldiers have been rotated through Hon-
duras in the past three years, building up military operations
to back the Contras. Honduran papers have repeatedly com-
plained of widespread promiscuity among American sol-
diers.
Leading the foreign mercenaries brought in to advise
Contra military operations are Cuban exiles, many from the
old Brigade 2506 made famous in the CIA's attempted Bay
of Pigs invasion in 1960. While Brigade 2506 includes Cuban
patriots, others in it were recruited from the drug-running
gangsters who ran Batista's Cuba and were disgruntled at
losing the franchise over the "pleasure haven" that was Cuba
under Batista. This wing of the Cuban exile movement, which
used its proclaimed "anti-communism" as a cover to infiltrate
U.S. security operations, is so penetrated and counter-pene-
trated by Castro's Cuban intelligence, the DGI, that it is an
open question where their loyalities lie.
Castro's DGI and the old Batista crew meet in the South
American-U.S. drug trade, where the "Cuban mafia" has
held a longtime franchise. DGI penetration of this Cuban
exile mafia was upgraded in 1981, when some 120,000 Cu-
ban "exiles" were dumped into the United States by Fidel
Castro, through the Mariel boatlift. Thousands of criminals,
homosexuals, drug-users, and social misfits entered the United
States at that time, as Castro emptied Cuba's prisons onto
U.S. shores, under the cover of letting "dissidents" leave.
U.S. law enforcement agencies have recognized the Mar-
iel operation as a cover for infiltrating into the United States
hundreds of Cuban intelligence agents specializing in espio-
nage and sabotage activities. Once in the United States, many
of the DGI agents took up command posts in the South Amer-
ican-U.S. narcotics trade, joining some of the Cuban exiles
now involved in drug-trafficking.
Unnoticed before was the danger of AIDS, which was
then only beginning to come to public attention, as the slow-
incubation virus struck down its first victims. Since then,
medical investigators have established that the thousands of
Cuban homosexuals sent in the Martel boatlift-including
homosexual Cuban soldiers discharged from service in An-
gola, where the epidemic is raging-brought the killer dis-
ease with them to the United States.
The concentrations of the AIDS virus developing around
the Nicaragua crisis, could create a holocaust of the scope of
that now sweeping Africa. Immunological resistance in the
area is already low. Other epidemics are spreading from
camps of refugees and displaced persons throughout Central
America. Central American health and nutritional levels,
historically low, have plummeted to danger levels in the past
decade, as the combination of civil war and International
Monetary Fund austerity has collapsed food supplies.
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National
`Irangate' sparks policy
shifts, NSC clean-up
by Jeffrey Steinberg
While the congressional "Irangate" hearings were grabbing
headlines, informed sources in Washington, D.C. ascribed
far greater import to the quiet housecleaning begun by Pres-
ident Reagan's new national security adviser, Frank Carluc-
ci. An experienced administrator with close ties to the CIA
and Defense Secretary Caspar Weinberger, Carlucci lost no
time in making personnel changes at the Old Executive Office
Building, bringing in a three-star general who had served as
the senior military assistant to Secretary Weinberger, and
announcing the likely appointment of another top Pentagon
aide, Grant Green, to a post in his new office.
Press reports say that Carlucci will thoroughly clean up
the NSC, replacing acting national security adviser Alton
Keel, longtime Kissinger asset Peter Rodman, congressional
liaison Ronald Sable, and Howard Teicher, the immediate
boss of Lt. -Col. Oliver North and the author of the disastrous
Jan. 17, 1986 "intelligence finding" that argued for the exis-
tence of a "moderate" faction within the Khomeini regime.
Teicher is widely viewed as part of an informal Mossad
circle, linked to a faction of the Israeli intelligence service-
a circle which has been misguiding strategic estimates and
policy deliberations at the White House, State Department,
Defense Department, and Department of Justice for years.
Carlucci's new chief deputy is Lt. Gen. Colin L. Powell,
the commander of the U.S. Army 5th Corp., headquartered
in Frankfurt, West Germany. One of the highest ranking
black officers in the U.S. armed forces, Powell is an Army
Ranger, paratrooper, and a highly decorated veteran of the
Vietnam war.
While the personnel shakeup is significant, the purging
of the Kissinger and Mossad-contaminated elements is only
the surface reading on an expected deeper change, in both
the structure and substantive policy orientation of the Reagan
administration. This "deeper" housecleaning was the subject
of a nationally syndicated column by Richard Reeves, pub-
lished in the Houston Post on Dec. 8. Reeves traced the
origins of the NSC's rogue elephant role to the tenure of
Henry A. Kissinger as national security adviser, stating:
the Congress has to get tough and demolish or
rebuild the little secret house of the NSC. It really isn't a
Reagan house. The principal architect was Richard Nixon's
national security adviser Henry Kissinger. What Kissinger
did was to construct a hidden back door to the White House.
Colonels no one ever heard of, beginning with Alexander
Haig, slipped through that door to appear suddenly in the
corridors of civilian power. Agents of all sorts slipped out on
secret missions that may have been known only to the colo-
nels. A secret cell within the government often playing the
White House off against the State Department and Depart-
ment of Defense. Henry Kissinger's backdoor led to Lt. -Col.
Oliver North's rat hole. Agents, weapons, and money began
slipping through chinks to Tel Aviv, Beirut, Teheran, Te-
gucigalpa, Managua, and who knows where else.... What
does all this have to do with the American System on the
200th anniversary of our Constitution?"
While the Kissinger-instigated emergence of the NSC as
a power center has been associated with the idea of an "Im-
perial Presidency," exactly the opposite was true. Cut off
from more competent policy input and more experienced
clandestine capabilities at the Pentagon and the CIA, a
succession of Presidents has become increasingly enslaved
to an NSC staffed by Kissinger and Zbigniew Brzezinski
clones and wedded to policies that would have the U.S.
concede Eurasian hegemony to Moscow's New Yalta "db-
tente" and foster the spread of an inherently anti-Western
Islamic fundamentalism. Through this process as well, the
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NSC became a prime point of influence of the Kissinger-
linked Israeli circles of Ariel Sharon.
Carlucci will now, according to a range of Washington,
D.C. sources interviewed in the preparation of this article,
preside over the downgrading of the NSC to its originally
conceived role of facilitating broader policy input from ex-
ecutive departments charged with national security respon-
sibilities. In this long overdue reform-complemented by
the Joint Chiefs of Staff's comeback as a strategic planning
body, particularly with respect to low intensity-unconven-
tional warfare-some of the deepest pockets of Mossad pen-
etration of our national security establishment are expected
to be revealed.
Anticipating the deeper implications of the NSC shakeup
and the appointment of Carlucci, syndicated columnists Ev-
ans and Novak wrote on Dec. 5 that Carlucci's first big test
will center around breaking the policy-estimates impasse on
the recently discovered massive Soviet radar installation on
the Polish border. With the discovery of the newly operation-
al installation on Nov. 10, it is clear that Moscow is on the
verge of deploying a nationwide three-tiered missile defense
system-its own SDI. State Department and Arms Control
and Disarmament Agency analysts have tried to downplay
this discovery, a flagrant violation of the 1972 ABM treaty,
while DoD and CIA have argued that this poses a major threat
of a Soviet thermonuclear-war breakout.
Less than a week after the Evans and Novak column
appeared, Secretary Weinberger, speaking before the Amer-
ican Legislative Exchange Council in Washington, D.C.
blasted Soviet violations of SALT II and ABM, breaking the
administration's public silence on the Soviet radar break-out.
Other trees are falling
Two other elements of the unfolding exposures have stood
out in recent days.
The first is the continuing, now clearly bipartisan move-
ment to dump White House chief of staff Donald T. Regan.
During his open testimony before the House Foreign Affairs
Committee on Dec. 8, Robert C. McFarlane, former national
security adviser, pointed a finger at Regan as the "higher
authority" at the White House who approved the diversion of
Iran arms profits to the Contras while keeping the President
uninformed.
However, the Don Regan issue has moved far. beyond
"Irangate" to a broad attack on the former Merrill Lynch
CEO's management of the presidential office. Such terms as
"incompetent," "egomanic," and "vindictive" were tagged
onto Regan. A parade of visitors descended upon the presi-
dential living quarters at the White House to urge Mr. Reagan
to fire his chief of staff. Among the callers were Senators
Paul Laxalt (R-Nev.) and Howard Baker (R-Tenn.), former
Secretary of State William P. Rogers, and ex-Democratic
National Committee chairman Robert S. Strauss. Strauss has
recently joined the board of the Austin, Texas based West-
EIR December 19, 1986
mark Corp., a new defense corporation chaired by Admiral
Bobby Ray Inman, and including Donald Rumsfeld and Drew
Lewis on its board.
Special relationship finished
The second element emerging is the termination of the
perverse "special relationship" between Washington and Tel
Aviv, which is fundamental to the more profound policy
changes than even the Regan question. Architected by Henry
A. Kissinger and certified with the secret clauses of the 1979
Camp David agreements, this "special relationship," instead
of drawing on the best of the common, technology-proud and
progress-oriented heritage of the United States and Israel, is
based on a geopolitical notion of Israel as a "New Venice"
conducting its diplomacy via arms smuggling, and within a
"New NATO" featuring a nuclear-armed Israel led by a dan-
gerous lunatic, Ariel Sharon. It is no coincidence that this
"New NATO" plan was hatched by the same Kissinger-Brze-
zinski faction that began the Islamic fundamentalist "arc of
crisis" game by installing Ruhollah Khomeini in power in
Iran in 1978. This "special relationship" has begun coming
apart at the seams as the result of a series of high-profile
media exposures in the United States. Many key features of
those revelations were the subject of an EIR news briefing in
Washington, D.C. in early December.
? On Thursday night, Dec. 11, ABC-TV's 20/20 news
magazine aired exclusive interviews by Barbara Walters with
Saudi businessman Adnan Khashoggi and Iranian arms mer-
chant and "Irangate" middleman Manucher Ghorbanifar. Both
men provided damning evidence against Israeli intelligence
and known U.S. Mossad assets for pushing the false notion
that a pro-Western "moderate" faction of the Khomeini re-
gime was prepared to deal with Washington. Both confirmed
that the Reagan administration relied predominantly on Is-
raeli arms merchants Al Schwimmer and Jacob Nimrodi to
provide the "bona fides" on Ghorbanifar, and that an Amer-
ican with known, deep ties to the Sharon faction of the Mos-
sad, Michael Ledeen, had been the initial "U.S. government
official" detailed to Tel Aviv to get Israel's approval of the
Iranian shyster.
? The very next day, the Washington Post devoted front-
page coverage to the fact that the Israelis had been the primary
sources drawn upon by CIA director William Casey in certi-
fying a CIA intelligence estimate prepared by Middle East
specialist Graham Fuller in early 1985. Apparently, Fuller's
early report suggesting the "moderate mullahs" gambit was
based on contact between Khashoggi, Ghorbanifar, and a
former top CIA official, Theodore G. Shackley in Hamburg,
West Germany in late 1984 and early 1985. Shackley's meet-
ings were reportedly known to Michael Ledeen before the
former aide to Alexander Haig traveled to Tel Aviv to see
Schwimmer, Nimrodi, and David Kimche; Kimche is a for-
mer European station chief of the Mossad and director gen-
eral of the Israeli Foreign Ministry.
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Chicago
LaRouche Democrat
sets mayoral program
Every Illinois voter who witnessed "the shot heard around
the world" caused by the March 18 Democratic primary vic-
tory of LaRouche Democrats Janice Hart for secretary of
state, and Mark Fairchild for lieutenant governor, knows that
the "Irregular Democratic Party" got caught with its pants
down. This includes former senator Adlai Stevenson, Ald-
erman Ed Vrdolyak, Mayor Harold Washington, and the
Chicago Sun-Times and Chicago Tribune.
Now, Lyndon LaRouche's Midwest collaborator, Mrs.
Sheila Jones, has accepted a mandate from the "forgotten
majority" to run for mayor of Chicago in the primary in
February 1987. Mrs. Jones, a life-long Democrat, ran for
mayor here in 1983, and was subjected to the most unprece-
dented violations of civil and human rights by the "Irregular
Democratic Party," the Chicago media, and the League of
Women Voters. Political observers in Chicago admit that had
she been allowed her rights in that election, Chicago might
have had its first black woman mayor then.
A well-known civil rights leader, a former trade-union
organizer for the Milwaukee Teacher's Association in Wis-
consin, and a former educator, Mrs. Jones was the political
strategist for the Hart-Fairchild campaign, and over 100 other
Illinois candidates. Through that campaign, the controls put
on Illinois Democratic voters were shattered. Whether the
"Irregular Democrats" can suppress her campaign this time-
under growing national crisis conditions-is a very big ques-
tion.
Creating productive jobs
The main agenda of the Jones for Mayor campaign is to
create productive jobs. Mrs. Jones stated:
"We are a city of tremendous potential wealth. This is
not the wealth of real estate speculators, who are forever
building office buildings, and condominiums, which the av-
erage citizen can't even afford, since he is out of work, due
to the shutdown of U.S. Steel, vital crucible steel factories,
machine tool shops, brick kilns, and construction firms."
She added, "We have extremely talented, skilled and
66 National
semi-skilled workers standing in long soup lines ... because
they are being killed by the mayor's greater concern for Wall
Street bankers and Gold Coast liberals who are more con-
cerned about 'gay rights' than moral families."
In her 1983 bid for mayor, Mrs. Jones and her science
adviser, Dr. Robert Moon, professor emeritus from the Uni-
versity of Chicago and a physicist who worked on the Man-
hattan Project in the 1940s, wrote a proposal to reindustrialize
the City of Chicago. This plan, which she hand-delivered to
the Chicago City Council, included:
1) Reopening Navy Pier as an industrial site, for the
purpose of encouraging trade deals with other nations around
the world in need of basic infrastructural goods, that Chicago
had become so famous for producing, from the time of Frank-
lin Delano Roosevelt's war mobilization;
2) Extension of the 63rd 'El' train Delano Roosevelt's
war mobilization;
2) Extension of the 63rd 'El' train line to Stony Island,
to 95th Street, on the South Side, while simultaneously con-
verting this to a high-speed; magnetic-levitation train, to
facilitate the movement of people and goods;
3) Reopening and reinvestment in the remaining crucible
steel plants around Chicago, for such enterprises as above,
as well as the emergency crash program to build the Cross-
town Expressway, which would open the entire state up to
over-the-road trucking and trade throughout the area;
4) Urgent completion of the 'Deep Tunnel' project, a
clean water system for the City of Chicago, which would
involve thousands of re=employed skilled and semi-skilled
workers, taking into account the related infrastructural goods
needed for such an enterprise;
5) Re-establishment of apprenticeship programs for high
school students throughout the city in basic industry, ma-
chine tools, electrical engineering, construction, mechanical
engineering, etc., to give fruitful and useful employment to
our "dying" youth;
6) Establishment of a pro-scientific task force to review
the city hospitals, to deal with the re-emergence of a tuber-
culosis epidemic, to reopen hospitals which have been closed
down to offer maintenance care and containment of such
diseases, as well as establishing highly skilled and equipped
research centers in such hospitals;
7) A war on drugs, including the confiscation of 100% of
all property and profits of drug money launderers and politi-
cians and law-enforcement agents who cover up, and are
involved in, the proliferation of drugs in the city.
How to fund it
Mrs. Jones is running on that platform, and has added
several new planks for the 1987 mayoral race:
? Instead of taxing Illinois's hard-working families and
the poor, a tax on the Chicago Board of Trade; for every
transaction, there would be levied a tax of 0.2%. This would
bring a minimum of $6 billion a year into Chicago for rein-
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vesting in neighborhoods and wards.
? Emergency housing for the homeless-not flophous-
es-to be funded by confiscating drug profits and the Board
of Trade tax.
? A "Protocol for Life," to establish research centers for
AIDS, to be set up with the assistance of pro-life, pro-science
medical professionals being contacted nationally by Mrs.
Jones. She sharply criticizes Mayor Harold Washington's
policy of allowing AIDS-infected children to attend public
school and propagating the delusion that "condoms and clean
needles" are sufficient to avoid contagion.
? Implementation of the anti-austerity policy of Peru's
President Alan Garcia, of a debt moratorium for the City of
Chicago.
A Zaire-Chicago industrial connection
In a statement released on Nov. 27, Sheila Jones an-
nounced her support for Zairean President Mobutu's decla-
ration Oct. 30, that Zaire will no longer abide by International
Monetary Fund (IMF) conditionalities. She pledged to do all
in her power to build support for Zaire, a country in the
African AIDS belt, which has joined Peru in deciding to
allocate only 10% of its export earnings to debt payment.
Mrs. Jones commented that not only are President Mo-
butu and the central committee of Zaire correct that the IMF
is trying to recolonize Zaire economically, but that this is the
IMF's plan for the world, as can be seen in the Davignon
Plan for radically reducing steel production capacity in West-
ern Europe and the United States. One of the clearest exam-
ples is the once-great industrialized center, the City of Chi-
cago.
Mrs. Jones has proposed that Chicago and Kinshasa,
Zaire become sister cities, and exchange representatives to
discuss proposed projects, for trade and infrastructural trans-
fer deals, dialogue and negotiations between the City of Chi-
cago and Zaire.
Following the lead of Peru and Zaire, Mrs. Jones prom-
ised that her first act as mayor will be to declare a debt
moratorium for the City of Chicago, in order to begin the
replacement and build-up of vital industry, which will be
placed at the disposal of Zaire.
Then, Jones would establish a City Development Bank,
modeled on the one proposed by Abraham Lincoln in his
Program of Internal Improvements, for the purpose of under-
writing loans, to give credit to Third World nations, starting
with Zaire, for the infrastructural projects they need. The
Chicago City Development Bank would also underwrite loans
for Illinois agriculture, to facilitate food trade between Illi-
nois farmers and Zaire.
Great projects are essential
Since Chicago has lost 75% of its steel, 90% of its rail
car production, 75% of its machine tool production, and 20%
of its auto production, Sheila Jones seeks to set up a Hamil-
tonian, two-tier system of taxing, which will encourage re-
investment into machine tools, the steel manufacturing, and
manufacture of vitally needed capital goods for trade with
Zaire.
As mayor, Jones would offer to purchase Zaire's copper
products at parity price. The copper is needed, among other
things, for Chicago's electricity grid. Mrs. Jones would or-
ganize the Chicago City Council to encourage franchises for
Chicago entrepreneurs to develop a hydrogen-based econo-
my, to run cars and heat homes and factories. One of Chica-
go's greatest resources is its access to fresh water. This tech-
nology would be made available to Zaire as well.
The building of a new harbor at Chicago's Navy Pier,
which was already part of the Jones mayoral platform in
1983, will be critical to facilitate trade shipments from the
Midwest to Zaire. This is planned to be a deep water port
facility, to be used for ocean-going vessels.
Jones says she aims to make Chicago the public transpor-
tation showcase of the world, by building 300 miles of un-
derground, magnetically levitated train systems. This tech-
nology could serve as a model for Zaire, while revitalizing
Chicago's devastated building industry. She has pledged to
make available to Zaire the breakthroughs achieved by the
medical research team she is assembling under the rubric of
"Protocols for Life."
Need for economic justice
In her statement of solidarity to Zaire's President Mobu-
tu, Sheila Jones praised Reverend Dibala Mpolesha, a Zai-
rean minister who has taken a leading role with the Schiller
Institute in fighting for a New International Economic Order.
"St. Augustine condemned the spirit of exploitation of man
which motivates the merchants of false witness. Therefore, I
concur with Reverend Mpolesha in asserting that there must
be justice in competition and economic exchange with de-
veloped and industrialized nations, toward human develop-
ment and the betterment of relations between persons and
societies. Instead of exploitation, we must think in terms of
sharing, because man is a traveler on this Earth, and must put
whatever he has to the benefit to others, who are likewise
created in the image of God."
Mrs. Jones continued, "I, too, would like to see the
underdeveloped countries fix the price of their products them-
selves, and freely do business with the clients of their choice,
without intermediaries or constraints, and above all, receive
the full share of the revenues to which they are entitled, for
their internal development, which give so much to all inhab-
itants of this dear planet of ours. The themes of equity,
sovereign equality, interdependence, and common interest
must be the basis of North-South economic cooperation."
Mrs. Jones, addressing President Mobutu of Zaire, asks
him to "accept the heartfelt intent of my offer, as the next
mayor of the City of Chicago, the future Workshop of the
World!99
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Economic, military
crisis scares Dems
by Leo Scanlon
The Dec. 11-12 gathering of the Democratic Leadership
Council (DLC), held in Williamsburg, the reconstructed cap-
ital city of the colony of Virginia, offered the first chance for
the "moderate" Democrats to float the issues and strategies
they will take into the 1988 election. The two days of discus-
sions and panel presentations revealed that this group of
Democratic elected officials is beginning to react to some-
thing the LaRouche Democrats brought to the fore in the
1986 elections: This country is facing the greatest economic
and military crisis in living memory, and any political move-
ment which doesn't recognize this will have no access to the
American electorate.
Organized and chaired by Charles Robb, ex-governor of
Virginia, the DLC is the think tank backing a group of pres-
idential hopefuls including Richard Gephardt, Sam Nunn,
and Joe Biden. It characterizes itself as the moderate wing of
the Democratic Party. Unfortunately for the Democrats, the
principal military strategy document presented to the confer-
ence, authored by Senators Sam Nunn (Ga.), Albert Gore
(Tenn.), and Les Aspin (Wisc.), is a prescription for capitu-
lation to Soviet superiority.
"Defending America, Building a New Foundation for
National Strength" is the ambitious title of the document
which re-hashes the worst features of the Packard Commis-
sion reforms, and echoes the structural proposals, most as-
sociated with Gary Hart, which would make the U.S. military
incapable of representing a threat to the Soviet forces arrayed
against our European allies.
Sam Nunn argued that the problem with U.S. negotiating
policy at the MBFR talks, is that the discussion has ignored
the threat posed by the Soviet main battle tank, which Nunn
asserts is just as deadly as an ICBM. So, Nunn proposed that
we insist that the Soviets reduce their tank forces to a level at
which they no longer pose a threat of invasion in Western
Europe! Unaffected by reality, Nunn went on to assert that
he has discovered that the Europeans are advocates of nuclear
weapons, as shown by their reluctance to undertake a buildup
of conventional forces to offset the Soviets.
"We have problems of cooperation with the Europeans,"
he raved. "For example, we negotiated an arrangement where
we would build a number of aircraft which would be stationed
in Europe, and the allies were to build the shelters. Well, we
built and deployed the planes, and two years later there has
not been one shelter built. Furthermore, we maintain a 60-
day supply of ammunition in Europe, and the allies only have
two weeks. So if a battle starts, we will be left holding the
bag while the flanks collapse at the end of two weeks, and in
the meantime we bear the expense of maintaining all that
extra ammunition. . . ." His so-called solution: Simply re-
duce the rate of production of military goods, and "pray for
an arms control breakthrough."
Senator Gore, whose wife heads the Soviet-sponsored
"Peace Links" organization, recommended that the nation
reconsider SDI if the Soviets stop violating the ABM and
SALT treaties, and agree to reductions in offensive systems.
Neither Gore nor Aspin had anything other than a shocked
silence when asked to comment on the explosive revelations
of Soviet ABM break-out made by Defense Secretary Caspar
Weinberger just hours before their panel in Williamsburg.
But other Democrats present stressed that defense is a top
priority with the voters. Governor Hunt of North Carolina
noted that he had always thought that "jobs was the issue we
would rise or fall on, until the last election, when I saw the
effect that a 30% difference between us and the Republicans
on defense had . . . it killed us." To these desperate elected
officials, Sam Nunn appears, for the moment, to be "pro-
defense."
Wright: back to colonial America?
Texas Congressman Jim Wright, the new Speaker of the
House of Representatives, offered a legislative agenda which
is motivated by his recognition of the industrial calamity
which is the U.S. economy. His proposal centers on a call
for a bipartisan mobilization to rebuild the nation's industrial
capacity. "It is my great hope that the current shock of falling
so suddenly and steeply behind in world markets will do for
all of us what Sputnik did in the 1950s and Pearl Harbor did
in the 1940s, and we will use our inherent strengths of mind
and will to respond to the challenge."
"We are losing our industrial base," he warned. "The
American factory system and our system of renewing our
productive capacity through machine tools has been declin-
ing. American agriculture ... is declining ... for the first
time since we were an infant nation stretched along the East-
ern seaboard, we are beginning to export raw products into
other countries who make them into finished goods and sell
them back to us. That's not our destiny, that's the destiny of
a declining nation. I'm not ready to consign us to an ash-heap
of has-beens!
"We now owe $200 billion of debt to other countries.
More important, we are selling raw products to be processed
and refined and manufactured into finished goods and re-
turned and sold on our markets. That's the classic definition
of an undeveloped country, the definition of a colonial pos-
session, and we certainly do not need to come to Williams-
burg to allow ourselves to be accepted as a colonial posses-
sion!"
E1R December 19, 1986
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Documentation
`We are losing our
industrial base'
Excerpts from a speech by Rep. Jim Wright (D-Tex.), Speak-
er of the House, at the Democratic Leadership Conference
in Williamsburg, Va., on Dec. 11-12.
The first imperative in the 100th Congress will be to come to
grips with our American trade deficit and the steady decline
in American competitiveness. This may be the dominant
economic issue for the remaining years of the 20th century.
The trade deficit-an estimated $170 billion in 1986-is
the prime symptom of that failure, a failure which has trans-
f rmed this nation in four short years from the world's largest
creditor nation to the world's largest debtor. We now are
$200 billion in debt to other countries. And it certainly is no
accident that the rise in our trade deficit has coincided with
our poor performance in economic growth.
It has something to do, most certainly, with the decline
in real wages. It is linked indirectly to the fact that the average
30 year old couple has a harder time today buying a home-
or even an automobile-than their parents had.
Failure to deal with this crisis-to idle away precious
time expecting it to correct itself-could doom future gen-
erations of Americans to a steadily declining standard of
living and eventual status as poor inhabitants of a once rich
land.
We are losing our industrial base, the American factory
system and our system of renewing our productive capacity
through machine tools has been declining. American agri-
culture... is declining.... For the first time since we were
an infant nation stretched along the eastern seabord, we are
beginning to export raw products into other countries who
make them into finished goods and sell them back to us.
That's not our destiny, that's the destiny of a declining na-
tion....
... I for one am not prepared to participate in the indus-
trial and economic decline of this nation, nor to concede that
our legacy must be confined to that of a service economy
which produces little... .
I am prepared to recognize ...that our nation is in trou-
ble, and am prepared to participate in actions necessary to
confront this issue and solve it....
We will welcome the participation of the administration
EIR December 19, 1986
and Secretary Baker in this effort. All of us-the Congress,
the administration, and the forces you represent-must join
together if we are to be effective....
To this end, some of us already have had earnest conver-
sations with key officials in the Reagan administration, urg-
ing them to take a close look at the gruesome statistics and to
reconsider their formerly intractable opposition to any and
all trade legislation...
Our intent, our goal, is to make America competitive in
a world no longer composed of independent national econo-
mies. The flow of capital is international and uncontrolled
today-perhaps even uncontrollable.. .
... We need to ease export controls, invest in an edu-
cational renaissance in which math, science and foreign lan-
guage instruction flourishes at all levels.... Only some
54,000 young [students] graduated from American colleges
and universities with degrees in scientific, mathematics, and
engineering disciplines. Japan, with half our population, was
graduating 77,000, half again more. Russia was graduating
300,000 people it calls engineers; while the nomenclature is
not anywhere near comparable, the fact is that they graduated
300,000 young Soviet citizens with some degree of techno-
logical competence. We were graduating 54,000, and a great
many of those were exchange students from other countries,
they were not American students.
Another example might be the fact that Japan has in the
United States today, and I don't see where this is a problem-
I'm somewhat envious of them in this respect I suppose-
Japan has in the United States today some 10,000 business
representatives of Japanese firms, selling Japanese goods.
All of them speak excellent English, while by contrast the
United States has in Japan only some 500 representatives of
American business firms, and only a tiny handful can speak
any Japanese at all. What does that tell us? It tells us that we
ignore education at our peril, and we're foolish in the extreme
if, ignoring education, we then wonder why we are falling
behind in world trade... .
As you no doubt have observed, I believe that the federal
government has a vital role to play in the battle to restore
America's productive capacity and America's competitive
advantage. But please do not assume that I think government
must play the only role or even the dominant role. Govern-
ment's function is to create a climate conducive to suc-
cess....
The status quo is unsustainable. Time is much too pre-
cious to waste. Should we go into a recession, God forbid,
the pressures on the Third World and the major debtor nations
could be immensely and perhaps even irreparably destruc-
tive.
It is my great hope that the current shock of falling so
suddenly and steeply behind in world markets will do for all
of us what Sputnik did in the 1950s and Pearl Harbor did in
the '40s, and we will use our inherent strengths of mind and
will to respond to the challenge....
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National News
Robertson won't take
any position on AIDs
After warning that AIDS could infect 46
million Americans, presidential hopeful Pat
Robertson refused to commit himself to any
specific steps to curb the disease's spread-
except for endorsing Surgeon-General C.
Everett Koop's recent report, and making
vague noises about protecting the U.S. blood
supply.
Robertson indicated that, basically, he
didn't want to be caught taking a position
that might cause some to vote against him.
Questioned by EIR about his position on
AIDS, Robertson delivered a a tough-
sounding speech in which he declared that
the AIDS virus "doesn't have civil rights."
But then, he lamented that "the public" isn't
yet ready to take the steps needed to stop
AIDS.
When EIR pressed him on what precise
steps he proposes, Robertson answered:
"Well, I'd rather not say, because then I'd
be labeled as someone who was advocating
them."
`Experts' say AIDS
cases will `explode'
An "explosion" in the number of AIDS cas-
es is expected by 1991, says the Dec. 8 Los
Angeles Times in a front-page lead article
entitled "AIDS Shock Wave on U.S. Hori-
zon." The article quotes experts saying that
"within five years, as the number of AIDS
cases explodes, many Americans who have
been insulated from the burgeoning epidem-
ic somehow will be touched by the disease."
It predicts that by 1991, AIDS could
become the seventh leading cause of death.
It quotes numerous opponents of Proposi-
tion 64 public health measures, who now
admit-after the defeat of the referendum
in the November election-that this means
the death rate will soar.
Rep. Henry Waxman, a Proposition 64
opponent, said that AIDS will "deeply
change America in the next few years, cre-
ating dislocation unlike any event other than
war." It also quotes Dr. Mervyn Silverman,
who engaged in diatribes against Proposi-
tion 64 and its most celebrated backer, Lyn-
don LaRouche. He said that heterosexual
transmission is now "a fact of life," contrary
to his position prior to the Prop. 64 vote.
Meanwhile, the Roman Catholic Arch-
diocese of Los Angeles, another outspoken
opponent of containment of AIDS through
testing and quarantine of AIDS victims, was
forced to withdraw its support for an AIDS
education program, after it was disclosed
that the program espoused the use of con-
doms. The archdiocese-which is headed
by Archbishop Mahony, one of the rin-
gleaders of the anti-Prop. 64 crusade-is-
sued a statement asserting that, "Contrary to
recent reports ... the Roman Catholic
church does not approve the use of con-
doms."
U.S. v. LaRouche
trial date set
A trial date of April 6 has been set in the
case of U.S. v. The LaRouche Campaign et
al. At a hearing in Boston on Dec. 9, Federal
Judge Robert Keeton also set a Jan. 15 date
for defense motions to be filed, which will
include motions to suppress evidence, and
dismiss the indictments on behalf of various
of 10 indicted individuals and 5 organiza-
tions.
The case stems from a giant Oct. 6-7
raid by 400 armed federal, state, and local
police on the offices of associates of La-
Rouche in Leesburg. It was the largest po-
lice raid in American history.
Judge Keeton set June 1 as a "back-up"
date for the trial to begin, in the event that
both sides cannot be ready by April 6.
Defense attorney Odin Anderson said
that he believed that a June trial date was
more realistic, considering that the govern-
ment seized well over 400 cartons of mate-
rial in the raid, and considering the fact that
the government has indicated that additional
indictments are expected to be handed down
on Monday, Dec. 15. Anderson also said
that the court should reconsider the deten-
tion of three of the accused who are still in
custody.
Defense attorney William Moffitt also
brought to the court's attention the issue of
ongoing leaks to the press from the govern-
ment, contending that this was effecting the
ability of his clients to get a fair trial. Judge
Keeton responded that it was not his practice
to "jawbone," but rather to enter orders and
enforce them, and that he would not say
more on this issue without a formal motion
and a hearing.
Speaking for the government, Assistant
U.S. Attorney John Markham said that the
prosecution's case would take between six
weeks and two months to put in. "We've got
witnesses coming from overseas," Mark-
ham added. Observers expect the entire trial
to last at least three or four months.
Mayors demand drug,
AIDS policy changes
A 28-point proposal was drafted by the U.S.
mayors attending the League of Cities con-
ference in San Antonio, Texas.
The proposals calls for a new national
urban policy, use of the military to halt il-
legal drug-smuggling, and more federal
money for research into the cause, treat-
ment, and prevention of AIDS.
The mayors urged Congress to renew
funding for highways, public transporta-
tion, clean water, and housing. It also asked
federal help for cities in dealing with drug-
abuse, homelessness, joblessness, and hun-
ger.
Reagan welfare cuts
increase poverty
The decline of government programs is ap-
parently responsible for a significant in-
crease in poverty among families with chil-
dren and does little to ease poverty, says a
report released by the Center on Budget and
Policy Priorities in early December.
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Briefly
The report found that in 1979, nearly
one of every five families with children who
would otherwise have been poor was able to
escape poverty with benefits from Social Se-
curity, unemployment insurance, or public
assistance. However, in 1985, only one of
every nine families with children was lifted
out of poverty by those programs.
"Based on hard data from recent Census
reports, the analysis demonstrates that the
failure of most states to keep benefits up
with inflation and the budget reductions made
during the Reagan administration have been
a major factor in the increase in poverty
since 1979," Center Director Robert Green-
stein said on Dec. 7.
According to Greenstein, approximate-
ly 458,000 fewer families would have been
poor in 1985, had support continued. In
1979, the poverty rate was 11.7% and 26.1
million people were poor. In 1985, the pov-
erty rate was 14% and 33.1 million people
were in poverty.
The report stated: "The decline in the
anti-poverty impact of government benefits
programs is even sharper when non-cash
programs are included, primarily because
the non-cash programs were among the pro-
grams that were cut significantly."
National Academy report
angers the President
The National Academy of Sciences, in a
report published Dec. 10, called for in-
creased access to contraception as the "sur-
est strategy" for reducing the country's high
level of teen pregnancies. After a two-year
study by a blue ribbon panel organized by
the Academy's National Research Council,
headed by Harvard Medical School's Prof.
Daniel Federman, the panel recommended
the contraceptive pill for women as the "saf-
est and most effective means of birth control
for sexually active teens." It also proposed
widespread distribution of condoms "in
places where teenagers congregate" (e.g.,
youth centers, gyms, and video arcades).
The report called school-based clinics
that provide contraceptive services "a prom-
ising intervention" against unwanted and
early pregnancies. It also said that teens
should not require parental consent before
receiving an abortion. Sex information pro-
grams should "include information on meth-
ods of contraception, how to use them, and
how to obtain them."
The entire set of recommendations made
the White House angry. President Reagan
"strongly disapproves of giving contracep-
tives to teenagers," White House spokes-
man Larry Speakes said.
Secretary of Education William Bennett
severely criticized the panel's encourage-
ment of school-based birth control clinics,
saying: "This is not the first time a presti-
gious-sounding group has advocated a dumb
policy-school-based birth control clinics
that will damage our schools and our chil-
dren."
The director of the National Forum
Foundation in Washington, D.C., James
Denton, said he was troubled by "the whole
valueless treatment of teenage promiscuity
and abortion."
Nunn readies remake
of Armed Services
Senator Sam Nunn (D-Ga.), the Trilateral
Commission's pick to be next President of
the United States, is preparing to overhaul
the Senate Armed Services Committee when
he becomes chairman in January.
Chief among the changes Nunn is plan-
ning is the creation of a tactical warfare sub-
committee, to deal with conventional war-
fare issues. Sen. Carl Levin (D-Mich. ), who
consistently toes the KGB line on defense
issues, especially the SDI, is in line to be-
come the new subcommittee's chairman.
Nunn is also expected to give the sea-
power subcommittee to Sen. Ted Kennedy
(D-Mass. ), in apparent tribute to Kennedy's
navigational talents.
The orientation of the powerful Armed
Services Committee is expected to be fur-
ther influenced in Moscow's direction by
new member Sen. Albert Gore (D-Tenn.),
whose father sits on the board of Armand
Hammer's Occidental Petroleum.
? REP. STEPHEN SOLARZ has
been caught lying. Four Manhattan
properties that Solarz insisted belong
to former Philippines President Fer-
dinand Marcos-indicating that
Marcos had "looted" the Philip-
pines-appear instead to be the prop-
erty of Saudi munitions dealer Adnan
Khashoggi, according to documents
introduced in court proceedings be-
gun by the Aquino government.
? JESSE JACKSON, lashing out
at Japan for "insensitivity toward mi-
norities," threatened Dec. 9 to call for
boycotts against Japanese companies
in the United States, unless they move
to withdraw from South Africa. He
warned Japan to end its "de facto in-
volvement" with the South African
government. Jackson spoke in To-
kyo, at the invitation of a Japanese
minority group, the Burakumin, an
"untouchable" caste in the feudal era.
? DR. MATHILDE KRIM, who
opposed California's Proposition 64
public health initiative on AIDS, has
called for distributing clean needles
to drug addicts.
? CORRECTION: Author Anton
Chaitkin believes that Washington
Post publisher Philip Graham was
murdered, and that his widow Ka-
tharine benefited from the murder, but
has not charged Mrs. Graham with
the murder, as erroneously reported
in this column last week.
? PAUL GALLAGHER, execu-
tive director of the Fusion Energy
Foundation (FEF), announced Dec.
4 that New York Attorney-General
Robert Abrams has dropped all claims
that the tax-exempt status of the Fu-
sion Energy Foundation is now or had
been revoked. Abrams thereby
"amended" his complaint against the
FEF, a complaint that is part of his
legal witchhunt against organizations
associated with Democratic presi-
dential candidate Lyndon LaRouche.
The allegation first surfaced in a Sept.
12 Associated Press wire story by
Abrams's co-conspirator William
Welch.
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Editorial
Time to dump MELD
On Dec. 12, the Colombian Supreme Court annulled
the treaty of extradition of drug traffickers to the United
States, the centerpiece of Colombia's war on drugs.
The court ruled unanimously that the law authorizing
the treaty was unconstitutional, on the technicality that
it had been signed by the acting President while the
President was out of the country.
Did the government of the United States itself give
the go-ahead for this catastrophic setback to the joint
U.S.-Colombian war on drugs?
It is a fact that the U.S. Embassy in Bogota, and the
American Institute for Free Labor Development
(AIFLD), an institution officially funded by the U.S.
State Department, are the ones who bankroll the activ-
ities of Colombia's pro-drug trade unionists, who have
been working to wreck that treaty.
These are the very same U.S. circles which are
under scrutiny in the "Irangate" scandal, for trafficking
arms to the Iranian terrorists and using the money to
finance the Contras.
Since 1984, when the body of murdered Colombian
Justice Minister Rodrigo Lara Bonilla was not yet cold
in its grave, these pro-drug trade unionists, led by such
individuals as Tulio Cuevas, Victor Acosta, and Alfon-
so Vargas, put out a proclamation against the treaty.
From that moment on, they have not missed a chance
to condemn it. These same pro-drug trade unionists
have traveled to various countries to intercede on behalf
of imprisoned Colombian drug traffickers, as when Al-
fonso Vargas, Tulio Cuevas, and Manuel Felipe Hur-
tado went to Spain to beg for mercy for the gangster
Gilberto Rodriguez Orejuela. These same pro-drug
unionists became involved in sordid banking deals
backed by the AIFLD, such as that of the Workers Bank
of Colombia, to help "launder" money from narcotics
trafficking.
Throughout these activities, these characters have
enjoyed the financial backing of the U.S. embassy in
Bogota and AIFLD. It goes even further: Only a few
days before the Supreme Court of Colombia took its
decision on the extradition treaty, the U.S. embassy
and AIFLD generously underwrote the "convention"
of what remains of the Colombian Workers Union
(UTC)-now that a new, anti-mafia mass labor orga-
nization has been formed in its place.
At this "convention," Victor Acosta ended up as
president of the UTC, and Mario Valderrama as vice
president. Valderrama had gone to Miami to defend the
jailed drug trafficker Hernan Botero, who hid many of
his illicit activities behind the facade of a soccer pro-
moter. Valderrama himself was until a short time ago
the second-in-command of the Medellin Independent
football team, which Justice Minister Rodrigo Lara
Bonilla, shortly before he was assassinated by the ma-
fia, mentioned among the sporting enterprises linked to
drugs. Now, after the violent death of the team's pres-
ident, Valderrama has taken his place. In many political
circles it is rumored that Valderrama is the link between
Victor Acosta and the drug trafficker Pablo Escobar.
Solidaridad Iberoamericana, a newspaper which
has consistently exposed these facts, has been receiving
telephone threats. Its editor, Maximiliano Londono
Penilla, who is also vice-president of the National Anti-
Drug Coalition of Colombia, has earned the hatred of
the mafia, which is defended by the pro-drug unionists
the U.S. embassy and AIFLD are so happy to fund. It
is obvious that if anything untoward happens to the
editors of Solidaridad Iberoamericana, it will be the
responsibility of the people who are thus spending U.S.
taxpayers' money.
What will President Ronald Reagan do? Clearly one
part of his government-the same implicated in the
"Irangate" scandal-financed the activities of individ-
uals who defend the drug mafia and fight against the
collaboration of the nations of the Americas against
drug trafficking.
Will Ronald Reagan make good on his pledges of a
war on drugs? Or will he look the other way, as he did
in the case of the mobster Ramon Mata Ballesteros,
who, although he is considered the mastermind of the
murder of U.S. Drug Enforcement Administration agent
Enrique Camarena, today walks around free in Hon-
duras, with the protection of elements of that country's
government?
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M)(
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