INTERNATIONAL ECONOMIC & ENERGY WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP97-00771R000706890001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 43
• Document Creation Date: December 22, 2016
• Document Release Date: October 21, 2010
• Sequence Number: 1
• Publication Date: March 9, 1984
• Content Type: REPORT

Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706890001-2
Directorate of Seeret-
Intelligence
Weekly
International
Economic & Energy
DI IEEW 84-010
9 March 1984
Copy 687
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Secret
International
Economic & Energy
Weekly
Synopsis
rF erspective-Persian Gulf Oil: The Dependency Issue
Energy
International Finance
Global and Regional Developments
National Developments
15 he Oil Market Outlook Through 1985
25 Kuwait: Reverberations of the Stock Market Crash
29 Pakistan: Economic Downturn Appears Manageable
'33 /International Financial Situation: Private Capital Flows to Asian NICE,
35 Second-Tier LDCs: Potential NICs
Comments and queries retarding this publication are welcome. They may be
directed to Directorate of Intelligence,
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9 March 1984
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International
Economic & Energy
Weekly
Synopsis
I Perspective-Persian Gulf Oil: The Dependency Issue
Despite their varied levels of dependence, all industrialized countries have a
stake in the continued flow of oil from the Persian Gulf. Past supply
disruptions were complicated by a number of factors, including panic reactions
by dependent consumers that prompted a scramble among competing govern-
ments and imposition of price and export controls. Averting panic buying in
the future will require that.market players-including governments and
companies-have reliable information both before and during a crisis.F 25X1
15 The Oil Market Outlook Through 1985
Barring an oil supply disruption because of the Iran-Iraq war, the oil market
probably will remain soft.
The crash of Kuwait's unofficial stock market in August 1982 continues to
have adverse financial, political, and social effects in a country that is trying to
cope with declining oil revenues, the Iran-Iraq war, recent bombings, and an
increasingly restive Shia population.
29 Pakistan: Economic Downturn Appears Manageable
Pakistan's economy is likely to grow more slowly in the fiscal year ending 30
June than in any year since President Zia came to power in 1977. Despite dete-
rioration in the economy's performance, we believe that it is unlikely that the
economy by itself will cause serious political problems for Zia, and he has
already taken steps to demonstrate he is dealing with the situation.
33 International Financial Situation: Private Capital Flows to Asian NICs
This article in our series on the economic and political aspects of the
international financial situation examines the favorable outlook for private
capital flows to Hong Kong, Singapore, South Korea, and Taiwan.
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The emergence of new LDC exporters of manufactured goods over the longer
term is likely to increase competition in several industries and could spark
complaints by industrial-country producers.
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International
Economic & Enemy
Weekly
Perspective Persian Gulf Oil: The Dependency Issue
Increased fighting between Iran and Iraq and threats against oil shipping have
heightened concern about oil flows from the Persian Gulf region. Persian Gulf
countries presently account for about one-fourth of total non-Communist oil
supplies, and about 9 million b/d flows through the Strait of Hormuz.
Although consumption and oil import requirements have been cut back in
recent years, the industrialized countries still rely heavily on Persian Gulf oil
supplies. In the first nine months of 1983, Japan relied on the region for 60
percent of its oil supplies. Although West European countries as a group relied
on the region for only 20 percent of their oil supplies, several countries
including France, Italy, Greece, Portugal, Spain, and Turkey received over 30
percent of their oil from the region. In contrast, US imports from the Persian
Gulf represented only 2 percent of oil needs
Despite their varied levels of dependence, all industrialized countries have a
stake in the continued flow of oil from the Persian Gulf. Most studies indicate
a major oil supply disruption would put upward pressure on world prices and
threaten economic recovery. The relative ease of reallocating oil supplies and
the growing reliance on market forces eventually would cause a more or less
equal sharing of a shortfall. Given these factors and a commitment to the
emergency-oil-sharing agreement under the International Energy Agency,
even the United States could not insulate itself from a major supply cutoff
from the Persian Gulf. During the early stages of such a disruption, however,
countries highly dependent on the region for supplies would probably experi-
ence much more difficulty attempting to replace lost supplies.
Past supply disruptions were complicated by a number of factors, including
panic reactions by dependent consumers that prompted a scramble among
competing governments and imposition of price and export controls. During
the supply disruption in 1979, for example, Japan and other governments
immediately encouraged increased spot market purchases. Entry of companies
from these countries and other speculative traders in the market bid up spot
prices and encouraged producing countries to abrogate contracts for oil sold on
a long-term basis in favor of direct sales to third parties at spot prices. At the
same time, Japan, France, and several other countries made special pricing
arrangements with producing countries to secure government-to-government
oil deals. Several European countries, including Italy, implemented oil product
export controls or controlled the price of oil products that dampened the
market's ability to reallocate the shortfall
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DI 1EEW 84-010
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Uncertainty over the magnitude and duration of an oil supply disruption
frequently encourages speculation and panic among market participants. In
our view, developments in recent years indicate these general reactions are
more likely to be amplified because of a lack of reliable information. Reduced
company access to producing countries-especially in the Iran-Iraq region-
adds to market uncertainty because many companies no longer have personnel
in the field to report on developments. Moreover, as demonstrated in the
current Iran-Iraq war, there are an increasing number of attacks that are
directed against oil facilities, and accurate information on the extent of
damage and its consequences is often not immediately available. In addition,
countries with a high level of dependence on disrupted supplies frequently have
limited access to reliable information and may be forced to act solely on the
basis of rumors. Speculators in search of profits tend to aggravate market
conditions by reacting to similar rumors about damage or attacks. Although
compulsory or government-owned stocks and the IEA oil-sharing scheme could
dampen these pressures, the market may not be convinced either would be
used in a disruption. Commercial oil stocks, which might also be used to help
dependent countries mitigate an oil cutoff, presently are reported to be near
the low end of the normal operating range,
Averting panic buying will require that market players-including govern-
ments and companies-have reliable information both before and during a
crisis. Public access to information about the magnitude of a supply cutoff, the
extent of any damage, and the availability of surplus productive capacity,
energy substitutes, and stockpiles, would help the market react effectively.
Moreover, consultations among producing and consuming countries as well as
oil companies to evaluate and exchange information would help to minimize
panic reaction. A major accomplishment of the International Energy Agency,
for example, has been its role as a source of information during past
disruptions. In addition, recent statements by the United States that it will use
its strategic petroleum reserve in the early stages of a disruption probably will
ease market uncertainties.
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Energy
Developed Countries' The industrialized countries have cut oil consumption and imports particularly
,,Dependence on Persian from the Persian Gulf region. Despite reductions in imports from the region-
Gulf Supplies from nearly 15 million b/d in 1979 to approximately 6 million b/d last year-
L///// several industrialized countries rely on the Persian Gulf for more than one-
third of their oil needs.
Major Developed Countries: Estimated Dependence
on Persian Gulf Oil Imports,
January-September 1983
Iran I
raq
Kuwait Qatar Saudi
Arabia
United
Arab
Emirates
Total
Persian
Gulf
Oil
Total
Developed
Country
Supply a
Persian
Gulf Oil
as a
Share of
Supply
(percent)
Total
1,282 4
07
363
208 2,716
948
5,924
36,627
16
United States
59
10
9
NEGL 252
26
356
15,061
2
Japan
352
12
105
144 1,264
604
2,481
4,160
60
Canada
34
0
5
0 8
0
47
1,893
2
Italy
229 1
11
90
10 227
66
733
1,880
39
United
Kingdom
11
17
13
0 114
22
177
3,060
6
Austria
1
0
0
0 27
0
28
195
14
Belgium/
Luxembourg
8
37
1
3 38
0
87
723
12
Portugal
25
19
0
0
49
7
100
208
48
Spain
163
45
0
22
99
54
383
1,096
35
Switzerland
1
0 .
0
0
10
2
13
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5
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Shipping Markets Iraq's recent air attacks on ships in the Persian Gulf have led to increases in
Respond to Persian both charter rates for tankers loading in the Gulf and war risk insurance
Gulf Tensions premiums for oil tankers and cargoes coming nut of Khark Island Th t
g ese co
Gulf have risen as well, but only by 32 percent. 25X1
following Iraq's acquisition of Super Etendards. Rates out of Arab ports on the
s s
will add as much as 60 cents per barrel to the delivered cost of Iranian crude.
According to the shipping press, charter rates for shipments from Khark to
Western Europe have risen 65 percent since 29 February from 66 cents per
barrel to $1.09 per barrel; this is close to the level reached last October 25X1
war risk premiums on cargoes shipped from the Khark terminal
confirms recent press reports that the Iranians now 25X1
occupy Iraq s agn-oon oilfield north of al Basrah 25X1
Iranian engineering unit building a pontoon bridge across t ie marshy 25X1
area and traveling across the oilfield area in boats. There is no visible damage
to the 28 oil wells. The Majnoon field was under develoment by Petrobras of
Brazil, but work had halted last summer because of the field's proximity to the
war-torn border. Iran may try to retain control and produce oil from Majnoon,
whose potential reserves have been reported as high as 10 billion barrels.
Parliamentary Speaker Rafsanjani claims that revenues as high as $150 billion
would accrue from exploiting Majnoon, and Tehran would use the revenue as
war reparations. Iranian officials expect fierce fighting at Majnoon as Iraq
seeks to regain its territory, according to press reports. Should Iran damage 25X1
the wells, this could become a contributory factor provoking Iraq to attack
Iranian oil facilities. 25X1
D ay in Iraqi-Saudi Negotiations to complete the agreement for construction to connect the Iraqi
rabian Pipeline export pipeline with the Saudi Petroline have stalled
Agreement 0 Late last month, petroleum officials from the two countries discussed
Saudi concerns about the proposed project. The Iraqi Second Deputy Petro-
leum Minister refused after the meeting to comment on the reason for the de-
lay but reaffirmed Iraq's interest in moving ahead.
Riyadh continues to have apprehensions despite having agreed in principle last
year to the Petroline link. With the recent intensification of the war, the
Saudis may fear more visible cooperation with Baghdad would increase the
risk that Iran would attack Saudi oil facilities. The delay in completing the
Iraqi-Saudi agreement also may be caused in part by recent reports that Iraq
and Jordan are near agreement on an Iraqi export pipeline to Al Aqabah-an
alternative that bypasses Saudi territory
I anians Occupy
ragi Oield
have gone up from their October level of 14 cents per barrel to 21 cents per 25X1
barrel. Premiums on tankers themselves have doubled from their 1983 level
last fall of 4 cents per barrel to 8 cents per barrel as of this week. The premium
boost for this coverage, which is payable by the tanker owners, probably will be
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Nigerian Production
Exceeds Quota
n Gas Flaring troleum and Energy, Dr. Tam David-West announced suspension for one year
o
of Nigeria's ban on natural as flaring that was intended to become effective
igeria Rescinds Ban In a recent meeting with oil company executives, Nigeria's new Minister of Pe-
EC Commission. Overall consumption is expected to rise by 1.3 percent in
response to a nearly 2-percent rise in real GNP. Natural gas and nuclear
power are expected to account for most of the rise in energy demand. Nuclear
EC Energy Consumption, 1983-84 Million b/doe
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at the start of 1984. Oil companies have been forced to flare about 30 million
cubic meters of gas a day, worth an estimated $2 billion per year, because Ni-
geria lacks an extensive domestic gas market, gas reinjection plans, or a
commercially viable gas export project. Royal Dutch Shell-Nigeria's largest
oil and gas producer-has argued against the ban, claiming gas reinjection
would cost the firm $1.7 billion annually, 80 percent of which would have to be
paid by Nigeria's national petroleum company)
Projected Rise in EC Energy consumption in the European Economic Community is expected to
Energy Consumption rebound this year after four years of decline, according to a recent study by the
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consumption is expected to increase 11.5 percent as new reactors come on line,
while growth in gas demand is projected at 2 percent. Oil use is expected to re-
main fairly steady at about 8.2 million b/d after falling from 10.8 million b/d
esults of Norway s Norway recently completed its eighth licensing round, which resulted in
Eighth Licensing Round awards for 14 offshore blocks. In a departure from the last three rounds when
only Norwegian oil companies were named as operators, foreign oil companies
were made operators on almost half of the blocks awarded this year. Most of
the interest centered on block 34/7-also known as the Diamond Block-
which is believed to contain up to 2 billion barrels in oil reserves. Saga
Petroleum, a Norwegian company, was named as primary operator on 34/7,
and Esso was named as co-operator and technical assistant. Although the
Norwegian Petroleum Directorate appears satisfied with the industry response
to this latest licensing round, a growing number of oil companies believe that
Norwegian taxes soon will have to be modified for Oslo to continue to attract
foreign oil investors.
United Kingdom In an effort to increase the pace of exploratory drilling on the UK continental
Announces Ninth shelf, the UK Department of Energy has announced that this spring it will of-
/Offshore Licensing fer about 180 offshore blocks for licensing. About 80 of these blocks are
Round expected to be awarded in early 1985. Many new areas are expected to be of-
fered, including blocks in the English Channel, Celtic Sea; West Shetlands
Basin, and far north areas. Most of the block awards will be made on a
discretionary basis, but about 15 blocks in the northern North Sea area will be
auctioned. Energy Department officials have stated that awards for blocks
considered most promising will take into account the willingness of bidders to
take shares in higher risk concessions. Officials reportedly plan to encourage
industry interest in "frontier" areas by including more acreage per block and
allowing additional time to assess seismic data. Given the current positive
climate in the United Kingdom for petroleum investment, we expect a high de-
gree of industry interest.
British Petroleum The British Petroleum Company (BP) has announced the discovery of four
nnounces New Gas gasfields with estimated total recoverable reserves of about 70 billion cubic
And meters. The fields are located in the southern sector of the United Kingdom's
North Sea area and are near existing facilities at BP's West Sole gasfield. The
company estimates development costs of the new finds at $1.9 billion and is
currently negotiating a sales agreement with the British Gas Corporation and
other buyers. According to a spokesman for the firm, production could begin in
1987 and peak in the early 1990s at about 4 billion cubic meters per year. Giv-
en current industry projections of growth in UK gas demand over the balance
of the decade and the expected decline in output from other domestic gasfields,
we expect BP will successfully market the gas in the United Kingdom.
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/Austrian Gas
Consumption
Down
Austrian natural gas consumption is unlikely to grow sufficiently through 1987
to use contracted levels of Soviet gas. Demand for gas has declined nearly 15
percent since 1978 and has caused the Austrian State Oil Company to reduce
domestic production and delay acceptance of the first Soviet deliveries under a
1982 contract until later this year. Under earlier contracts, the USSR is
providing 2.5 billion cubic meters (m 3) annually-almost 60 percent of
Austrian consumption. The 1982 contract calls for delivery this year of an 25X1
additional 500 million m', rising to 1.5 billion m' annually during 1987-2008.
Austria will have to curtail domestic gas production further if it is to fulfill its
Soviet purchases. 25X1
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France and Saudi France and Saudi Arabia recently made new financial commitments to Iraq,
A abia Aid Iraq
possibly as a result of the recent increase in fighting. Press reports state that
the Iraqi First Deputy Prime Minister, during his visit to Paris last week,
secured a promise of about $1 billion in new credits. Last year Iraq failed to
pay all its debts incurred to France, which included about $1 billion in loans
for civilian contracts. As Iraq's largest Western arms supplier, France views its
support of Iraq as essential to prevent an Iranian victory. The French also want
to protect their already sizable financial stake and political influence in Iraq.
The new loan probably is intended to pay for civilian contracts rather than mil-
itary equipment, for which Paris insists on cash payments.
The Saudis, along with
war.
Kuwait, also are selling about 250,000 barrels per day of their oil for Iraq's
benefit. The Saudis probably hope their money will help restrain Iraq from at-
tacking Khark Island or shipping in the Gulf and prevent a widening of the
Saudi Arabia's New The 91-day debt instrument issued by the Saudi Arabian Monetary Agency
39financial Instrument (SAMA) in mid-February is a first attempt to establish monetary tools, but
was met with a mixed reception by local bankers, according to the US
Embassy. SAMA is offering $100 million of the Bank Security Deposit
tion limited to Saudi commercial banks
ri
k
ith th
b
A
t
h
.
p
wee
, w
e su
sc
ccoun
s eac
The first issue was only about 80 percent subscribed, but sales subsequently in-
creased. Bankers have been reluctant to participate because the yield is about
one-half percentage point below the Bahrain Interbank Offer Rate. Moreover,
some bankers probably are uneasy because the new issue violates the Islamic
prohibition against usury; the government has not publicized the interest-
earning securities.
Bankers Signal
Confidence in
Indonesia
Secret
9 March 1984
SAMA's main goal in the new issue is to increase control over the Kingdom's
money supply. The government also intends to use the debt instrument to offer
local investment opportunities and draw riyals out of Bahraini banks. The
SAMA issue follows the sale of $600 million in shares by the Saudi Arabian
Basic Industries Corporation, and we expect other government-controlled
companies also will begin to issue stock. These measures, however, are unlikely
to produce sufficient revenue to ease significantly Riyadh's current budget
squeeze. F__1
International bankers have increased Jakarta's latest syndicated loan from
$600 million to $750 million because of Indonesia's successful implementation
of austerity policies during the past year, according to financial press reports.
Jakarta originally sought a loan of $500 million to further strengthen its
international reserve position and maintain confidence in the rupiah. The
bankers, however, have been attracted by Indonesia's ability to boost official
reserves from about $3 billion in March 1983 to $4.5 billion by yearend
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without incurring serious domestic social problems as a result of austerity.
Jakarta, however, is paying slightly higher spreads this year; about three-
fourths of the new loan will be priced at 0.75 percentage point over LIBOR
and one-fourth at 0.2 percentage point over US prime. Although the increase
in the syndication will push Jakarta's borrowing for its fiscal year ending 31
March above the $2.5 billion Jakarta originally planned, bankers expect the
Indonesians to accept the larger amount.
rgentine Financing Argentina reportedly will open a $40 million line of credit for Nicaragua,
for Nicaragua primarily for the purchase of Argentine foodstuffs, and will donate $5 million
Costa Rica Requests
Paris Club
rescheduling
Ecuadorean Debt
Negotiations at
Impasse
in commodities, probably grains. If Nicaragua makes full use of the credit, it
would represent a substantial boost in Argentine financing; we calculate that
last year Buenos Aires committed only $17 million in funds to the Sandinistas.
Argentina probably hopes to strengthen Nicaragua's ties with the West and
ensure that Argentina's support for political pluralism will get a hearing in
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Faced with the prospect of exhausting its foreign exchange within three weeks,
Costa Rica has announced that it will not pay any of the $100 million falling
due this year on its debt to foreign governments, and has requested a meeting
of the Paris Club to reschedule these obligations. San Jose's attempts to secure
temporary bridge financing from foreign commercial banks until IMF and US
aid disbursements are made later this year are meeting resistance. According
to the US Embassy, one leading US bank believes that such financing would
merely defer the crisis a few months. Although San Jose's failure to devalue
the colon as much as the IMF had recommended last year is largely
responsible for the current crisis, a devaluation now would not cut import
spending significantly before May. The government probably will resist a
further devaluation anyway because of union pressures to ease austerity
measures.
Quito will seek to renegotiate the terms of its recent agreement in principle
with creditor banks to reschedule debt repayments due in first-half 1984,
This decision is motivated by more
favorable terms received by other Latin debtors in recent negotiations with
bankers. Ecuador now would like its debt rescheduled over a 10-year period at
an interest rate of 1.5 percentage points over LIBOR and with a more than
four years' grace period. Currently the terms offered by the banks are eight
years at 2 percentage points over LIBOR with four years' grace. Moreover,
Quito plans to seek $250 million from bankers and an equal amount from'-'
multilateral organizations and Western governments to close its projected
$500 million foreign financing gap for 1984.
creditor banks are refusing to provide new
funds until a new IMF austerity program is in place. This will not occur until
after the next government takes office in August.
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Ivorian Debt Ivory Coast is seeking to alleviate some of its foreign payments strains, but
Reschedulings Awaiting current negotiations with bankers are stalled until Abidjan and the Interna-
IM Agreement tional Monetary Fund agree on a $90 million one-year standby program. A de-
// cision by the IMF is expected next month. Bankers are discussing rescheduling
$300-400 million; another $600 million in government-to-government debt is
under consideration for rescheduling through the Paris Club. Even if all the
reschedulings are approved, Ivory Coast still may seek new loans this year.
Global and Regional Developments
Canada Drops Airbus Ottawa has abandoned its 18-month effort to negotiate Canadian participation
A320 Negotiations in the Airbus A320 consortium because it was unable to secure a "meaning-
ful" amount of production for Canadian companies. In his announcement on
28 February, Industry Minister-Ed Lumley expressed his dissatisfaction with
the package offered by the European Airbus consortium, stating specifically
that it failed to provide Canadian firms with high-technology work. Ottawa
had been seeking a 10-percent share of A320 production, but existing
allocations to the European members precluded that level of Canadian
involvement. Ottawa had hoped that participation in the Airbus consortium
would improve the financial position of Canada's two airframe manufactur-
ers-Canadair and De Havilland-which together lost $1.4 billion in 1982.
Although efforts to involve these two companies in the Airbus project have
been discontinued, Lumley said that other firms would continue to seek
subcontract work on the aircraft. Given European demands for domestic
production, however, Canadian prospects are dim. Ottawa's present pique at
being excluded from the project is likely to send Air Canada's future orders for
narrow-bodied, medium-sized aircraft to Airbus competitors because Ottawa
had stated early in negotiations that purchase of the A320 would hinge on Ca-
nadian participation.
West German The West German Cabinet has decided to provide DM 1.5 billion ($575
Government Moves To million) in loans over the next six years to help fund development of the
Fund A320 German portion of the 150-seat A320 Airbus. The German consortium
partner, Deutsche Airbus, will have a 28-percent share of the $2.4 billion cost
of launching the aircraft, somewhat lower than the 37.9 percent originally
foreseen. Doubts about A320 profitability delayed the Cabinet decision for
nine months, and the commitment was made only after Deutsche Airbus
concessions limited Bonn's exposure to potential losses by reducing the
German share and increasing risk sharing by industry. A decision to support
the FRG aircraft industry probably was the decisive consideration. The main
German firm, Messerschmitt-Boelkow-Blohm (MBB), is financially weakened
because of low demand for the earlier A300 and A3 10 models and needs
another project to maintain its work force. After the losses suffered on earlier
models, the Federal Economics Ministry questioned both the market potential
of the A320 and the wisdom of public support. Ministry qualms apparently
were overcome by industry champion Franz Joseph Strauss, Chairman of
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Honda's
/Plans for US
Investments
Deutsche Airbus and Minister-President of the state of Bavaria, where most
construction will take place. Strauss has pointed to the need to have suitable
aircraft in production to meet expected replacement demand at the end of the
decade and thus prevent a US aircraft monopoly.
Honda Motor Company is considering new investments in the United States
because the firm expects domestic content laws.
the company plans to build a new facility in 1986 to produce both
automobile and motorcycle engines near its Marysville, Ohio, auto assembly
plant. With engines built in the United States, the domestic content of the cars
to be manufactured at the Ohio plant could exceed 80 percent. In addition,
company executives believe the motorcycle engine production will allow Honda
to sell motorcycles without voluntary restraints. Honda also is investigating
new auto production sites
South Korean Plans According to press reports, Daewoo and General Motors are near final
To Expand Auto agreement on a major expansion of their joint-venture facility in South Korea.
Production General Motors reportedly will invest about $100 million to expand by 1986
doing business in Korea
the facility's annual productive capacity to 167,000 units, of which about half
will be sold abroad-primarily in the United States. GM dealers in the United
States will market the automobiles. We believe the expansion project will
strengthen South Korea's auto industry through the acquisition of more
advanced technology and increased economies of scale. In addition, the
agreement probably will improve South Korea's foreign investment image,
which has been tarnished by the withdrawal of several major investors in
recent years. In the early 1980s, disagreements between GM and the Korean
Government were widely publicized and contributed to investor concerns about
National Developments
Developed Countries
Turkey Selling A new law allowing the government to sell inefficient state enterprises to
State Enterprises private firms carries potential political liabilities for Prime Minister Ozal. The
new legislation is consistent with other moves by Ozal to make the economy
more responsive to market forces. It is likely to please organizations, such as
the World Bank, which have long advocated reforming the state-owned firms.
The firms account for nearly half of Turkey's industrial production and are
widely viewed as a major impediment to improved economic performance.
Ozal wants to funnel the proceeds, into development projects he believes
eventually will reduce Turkey's high unemployment.
The law could become the most controversial part of Ozal's economic program
and an issue in the local elections later this month. It is a dramatic departure
from the tradition of heavy state involvement in the economy. Opposition
11 Secret
9 March 1984
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those that are overstaffed and poorly managed.
leaders on the left and the right of the governing Motherland Party have
criticized the measure. Ozal could suffer politically if private investors buy
state firms and then fire workers. Layoffs would anger the labor unions, which
are already asking for large wage increases and will soon be allowed to strike.
Moreover, Ozal may have difficulty selling some of the firms, particularly
Less Developed Countries
Philippine Sugar The dismantling of the government monopoly on sugar trading late last month
IeJorms Inadequate probably will not restore free trade to the domestic or export market any time
soon. Planters must decide by the end of March whether to sign five-year
contracts that allow the National Sugar Trading Corporation (Nasutra)
,
Manila's official trading arm, to continue to represent them in the sale of
sugar in the Philippines and abroad. Planters who do not sign with Nasutra
will lose access to the US market-which took approximately $180 million in
Philippine sugar last year-and to favorable long-term contracts negotiated in
1980 at almost four times the current spot-market price. They also will risk
foreclosure or losing crop financing from sugar czar Roberto Benedicto's .
Republic Planter's Bank-the principal source of crop loans.
roblems Could Cause
abinet Changes
real reform of the sugar industry on hold
Restoring free trade to the sugar industry has long been a demand of sugar
planters and the business community. They charge that President Marcos's
close friends have enriched themselves at their expense through the control of
key domestic and foreign markets. Recently these critics have been joined by
the World Bank, which is calling for abolishing the state agricultural
monopolies as part of a loan package aimed at reforming the agricultural
sector. Under the restructuring conditions imposed by Manila, we believe most
planters have little choice but to sign contracts with Nasutra, thereby placing
Continued unrest since the bread riots in January has prompted President
Bourguiba to consider key cabinet shifts in an effort to placate the populace.
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considering a single symbolic increase of 5 to 10 percent.
The riots unleashed the frustration of workers who are angry with the
government's procrastination in addressing labor demands. Union leaders, who
supported the government during the riots, have begun to lose control of
workers. Over the past three weeks, strikes by bank, postal, and communica-
tions workers as well as teachers and other public employees have disrupted"'
city services. Labor leaders. are unlikely to reassert discipline unless the
government agrees to costly wage increases. Moreover, the US Embassy
reports the government may be backing away from the phased 20-percent
increase in the price of bread it announced after the riots. Instead, it is now
Strikes Continue . Public-sector workers have rejected the government's offer of a 10-percent
in El Salvador
wage increase, and more organizations may join the unions that are on strike.
According to the US Embassy, a general strike could develop, paralyzing the
capital and other urban centers. Waterworkers are among those on strike, and
water is being cut off. in some sections of the capital and in other cities.- To pre-
vent sabotage, Army units are guarding water facilities.
and place utilities under military control.
The insurgents reportedly have been planning to use leftist labor unions to
disrupt the presidential election, and the striking unions are unlikely to accept
any new proposals offered by the government. To maintain public services
during the crucial election period, the government may detain strike leaders
Criticism of Pravda recently published a decree-the first under General Secretary
conomists in USSR Chernenko's leadership-that criticizes the Institute of Economics in Moscow
for superficial analysis of economic problems. The Institute is instructed to
focus its research on current problems and to prepare recommendations for
economic experiments that are acceptable under the Soviet system.
The decree almost certainly is intended as a general criticism of Soviet
economists for not producing politically, ideologically, and bureaucratically
satisfactory proposals. At the plenum of the Central Committee last June,
Chernenko criticized economists for dragging their feet in preparing realistic
solutions. Publication of the decree underscores the leadership's intention to
redirect economic research toward analyses that are politically more practical
and to introduce and evaluate economic experiments before producing the
draft plan for 1986-90.
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Secret
Additional Soviet Loan Moscow has followed its recent successful foray into the Euroloan market with
Syndications additional syndications. A French bank recently managed a $100 million
syndication, which was to have been drawn down by mid-February, and in late
February the Soviet Foreign Trade Bank requested that a Bahraini bank
syndicate a $100 million loan from other Arab banks. An Austrian banker
expects the USSR to seek at least one more Euromarket loan this year.
Although the individual loans are modest in size, the return of the USSR to
the commercial syndicated loan market after a four-year absence is notewor-
thy for the change in Soviet borrowing behavior. Since 1979, the USSR has
limited its commercial borrowing largely to shorter term supplier credits.
Improvement in the USSR's credit standing among bankers-reflecting an
apparent easing of East-West political strains-may have encouraged the
Soviets to test the receptivity of the syndicated loan market
Dpught Hits East
uropean Winter
Grain Crops
Secret
9 March 1984
The continuing drought in several East European states has worsened
prospects for winter grain production, according to reports from US Embas-
sies. The region will need abundant precipitation over the coming weeks to
avert serious losses. Winter grains normally account for almost half of total
grain production in Czechoslovakia, Hungary, Romania, and Bulgaria. Pro-
duction shortfalls would intensify food supply difficulties, particularly in
Romania. Moreover, efforts to improve trade balances in Hungary and
Bulgaria would be hindered by a reduction in grain available for export
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The Oil Market Outlook Through 1985
Despite the recent escalation of the Iran-Iraq war
and Iraqi threats to mount attacks against shipping
in the Khark Island area, the oil market remains
relatively calm. Barring an oil supply disruption
because of the Iran-Iraq war, we expect the oil
market to remain soft. A seasonal decline in de-
mand this spring probably will again test OPEC's
resolve to maintain oil prices, but we believe that
Saudi Arabia will defend the current benchmark
price as long as other producers generally adhere to
their production guidelines. We expect oil market
conditions will remain soft in 1985, and OPEC
countries will be forced to maintain production
controls to prevent a price decline. In addition,
OPEC will face new challenges to crude oil price
stability, including increasing spot transactions and
some members' growing volume of oil product
exports, whose prices are not fixed by the cartel.
The volatile situation in the Middle East, however,
could cause a rapid turnabout
We expect non-Communist oil consumption to re-
bound slightly in 1984 in response to the economic
recovery, lower real oil prices, and a return to more
normal weather patterns. In our base case scenar-
io-which assumes continued growth in the US
economy and sustained economic recovery in West-
ern Europe-we forecast a modest increase to
about 44.8 million b/d, approximately 2 percent
above a year earlier. OECD countries, principally
the United States, are expected to account for
almost all of the 800,000-b/d increase. Under the
base case, we expect consumption during the peak
winter quarters to approximate 46 million b/d,
OECD Oil Consumption Trends, 1979-838
Percent change from year earlierb
-10 1979 1980 1981
a Inland sales.
b By quarter.
compared with low seasonal requirements of 43
million b/d during the spring and summer quarters.
stockbuilding during the second quarter.
mately 2.5 million b/d, followed by little or no
The existence of surplus capacity worldwide and
prospects for continued price weakness will encour-
age companies to attempt to maintain inventories
at minimum levels. Our base case forecast assumes
that total oil stocks decline by about 300,000 b/d in
1984. We assume that most of the excess commer-
cial inventories-about 100-200 million barrels-
will be depleted during first-half 1984. We antici-
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Non-Communist Primary Oil Stocks on Land, End of Period
1978
1979
1980
1981
1982
1983
1st
Qtr
2nd
Qtr
3rd
Qtr
4th
Qtr
3.6
3.7
3.9
3.9
3.5
3.8
4.2
4.3
4.3
4.6
4.8
4.6
4.5
4.6
4.7
4.6
4.3
4.2
4.3
4.3
4.0
4.0
4.1
4.1.
a Estimates include government-owned stocks in Japan, West
Germany, and the United States, which have increased from 62
million barrels in first-quarter 1978 to about 520 million barrels at
the end of fourth-quarter 1983. The increase amounts to about 11
days of forward consumption.
b Estimated.
1st
Qtr
2nd
Qtr
3rd
Qtr
4th
Qtr
74
76
74
70
72
78
81
82
91
99
97
93
102
105
100
96
97
98
97
95
94
94
93
90 b
On the basis of industry assessments and our
analysis, we expect non-OPEC oil supplies, includ-
ing net Communist exports, to approximate 25
million b/d this year, an increase of about 500,000
b/d over a year earlier. We expect most of this
increase to occur in the non-OPEC LDCs, where
production should rise by about 400,000 b/d to 7.6
million b/d. Mexico, Egypt, and Brazil are each
expected to increase production by about 100,000
b/d. OECD oil production is also expected to trend
upward slightly, primarily as a result of significant
additions to British productive capacity late last
year. With Soviet production holding roughly
steady, net Communist exports should remain un-
changed at about 1.5 million b/d
If consumption, inventory, and non-OPEC produc-
tion developments materialize as we expect under
our base case scenario, demand for OPEC oil
should average 19.5 million b/d in 1984, or about 1
million b/d higher than 1983.2 We estimate
2 All references to OPEC oil production include 1 million b/d of
natural gas liquids, unless otherwise noted. OPEC's production
ceiling of 17.5 million b/d includes crude oil only.
Secret
9 March 1984
demand for OPEC oil will average about 19 million
b/d during the first half of 1984 and begin to trend
upward in the third quarter. If the economic recov-
ery in Western Europe takes hold and the US
business expansion remains robust, demand should
reach about 20 million b/d during the fourth
quarter. This forecast is in line with most recent
industry estimates.
Factors Supporting Market Stability
We believe underlying market conditions-includ-
ing increasing oil consumption, a more normal
winter weather pattern, and a lower level of inven-
tories-are working in favor of price stability in
1984. Nevertheless, given projected demand condi-
tions, the key to maintaining prices this year-
assuming a supply disruption is avoided-will be
producer cooperation. Under our base case scenar-
io, we expect OPEC to control production to defend
nominal oil prices, and, in our view, Saudi Arabia
will play the major role in determining oil price
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1983 Non-Communist Oil Supply a
Total
40.9
41.9
44.5
44.8
43.0
OPEC
16.7
17.6
19.8
20.0
18.5
Natural gas liquids
0.8
0.8
0.9
1.0
0.8
OPEC crude
17.5
15.9
16.8
18.9
19.0
17.7
Algeria
0.7
0.7
0.6
0.8
0.8
0.7
Ecuador
0.2
0.2
0.2
0.2
0.2
0.2
Gabon
0.2
0.2
0.2
0.2
0.2
0.2
Indonesia
1.3
1.1
1.4
1.4
1.4
1.3
Iran
2.4
2.6
2.3
2.5
2.4
2.4
1.2
0.8
0.9
1.0
1.0
0.9
1.1
0.8
0.7
1.0
1.0
0.9
1.1
1.3
1.1
1.1
1.2
1.2
Qatar
0.3
0.2
0.3
0.3
0.4
0.3
Saudi Arabia c
5.0
3.9
4.4
5.6
5.9
5.0
UAE
1.1
1.1
1.2
1.2
1.2
1.2
Venezuela
1.7
2.0
1.7
1.7
1.7
1.8
Non-OPEC
24.2
24.3
24.7
24.8
24.5
United States
10.3
10.2
10.2
10.2
10.2
Canada
1.6
1.5
1.7
1.7
1.6
Norway .
0.6
0.7
0.6
0.7
0.7
United Kingdom
2.4
2.3
2.4
2.5
2.4
Other OECD'
0.9
0.9
0.9
0.9
0.9
Non-OPEC LDCs
6.9
7.2
7.2
7.3
7.2
Mexico
2.8
3.0
3.0
3.0
2.9
Egypt
0.7
0.7
0.7
0.7
0.7
Net Communist exports
1.5
1.5
1.5
1.5
1.5
a Excluding refinery gain. Data for Non-OPEC countries include
NGLs.
b Neutral Zone production is shared equally between Saudi Arabia
and Kuwait and is included in each country's production quota.
c Saudi Arabia has no formal quota; it acts as swing producer. to
meet market requirements.
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Non-Communist Oil Supply and Demand a
Consumption
Inventory change
OECD
United States
Canada
United
Kingdom
Norway
Other
Non-OPEC LDCs
Mexico
Net Communist
exports
Implied Demand for
OPEC Oil
I
II
III
IV
Total
45.0
42.9
43.0
45.3
44.0
-4.1
-1.0
1.5
-0.5
-1.0
40.9
41.9
44.5
44.8
43.0
24.2
24.3
24.7
24.8
24.5
15.8
15.6
15.8
16.0
15.8
10.3
10.2
10.2
10.2
10.2
1.6
1.5
1.7
1.7
1.6
2.4
2.3
2.4
2.5
2.4
0.6
0.7
0.6
0.7
0.7
0.9
0.9
0.9
0.9
0.9
6.9
7.2
7.2
7.3
7.2
2.8
3.0
3.0
3.0
2.9
1.5
1.5
1.5
1.5
1.5
16.7
17.6
19.8
20.0
I
II
III
IV
Total
46.5
43.2
43.5
46.0
44.8
-2.4
0.1
1.4
-0.5
-0.3
44.1
43.3
44.9
45.4
44.5
24.9
24.7
25.0
25.3
25.0
16.0
15.7
15.9
16.1
15.9
10.2
10.2
10.2
10.2
10.2
1.6
1.5
1.6
1.7
1.6
2.6
2.4
2.5
2.6
2.5
0.7
0.7
0.7
0.7
0.7
0.9
0.9
0.9
0.9
0.9
7.4
7.5
7.6
7.7
7.6
3.0
3.0
3.1
3.1
3.0
1.5
1.5
1.5
1.5
1.5
45.4
0.2
45.6
25.1
15.8
10.1
1.5
2.6
0.7
0.9
7.9
3.3
1.4
developments from the producer side. Unlike last
year, the Saudis have stated their support for the
current price, and we feel Riyadh views defense of
OPEC's $29-per-barrel marker price as the best
available option. Saudi production has fallen grad-
ually from its September 1983 peak of 6.2 million
b/d to 5.2 million b/d in January. If demand
follows the first-half 1984 pattern as we now
expect, Riyadh probably will be well positioned to
defend prices.
A Saudi decision to allow output to stay at or below
5 million b/d would allow other OPEC producers
to increase their production by 1 million b/d. Based
on current prices, an increase of 300,000 b/d in
Nigerian production to 1.6 million b/d in 1984
would provide Lagos with an additional $3.3 billion
in oil revenues-enough to cover more than 30
percent of the total cost of projected Nigerian
Secret
9 March 1984
imports in 1984. A 200,000-b/d increase in produc-
tion for both Venezuela and Indonesia would pro-
vide each of these countries with an additional $2
billion. Nonetheless, OPEC countries as a group
will register a current account deficit of about $20
billion this year, under our base case scenario.
Although we expect OPEC to cooperate to main-
tain oil prices this year, the absence of a sustained
economic recovery in Western Europe or a drop in
US growth prospects could make the situation very
difficult for OPEC to manage. Demand for OPEC
crude oil could be 1-2 million b/d less than we now
expect if the business cycle weakens or if inventory
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drawdowns are greater than we anticipate. We and Riyadh might abandon attempts to support the
believe OPEC would be hard pressed to accommo- existing price structure.
date such a sharp drop in demand, and several
OPEC countries probably would ignore their pro- It is difficult to predict how far prices would fall if
duction ceilings. Under these conditions, Saudi OPEC becomes unable or unwilling to defend the
output could be forced to unacceptably low levels, current $29-per-barrel benchmark. Because a
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Oil Price Trends, 1982-January 19848
Legend
- Official price
- Spot price
28 - 28
li 1111 l ll 1 1 1 111 l ll ll l ll I I II I II I I III II II I I II III
North Sea Crude
1982 1983
modest cut in oil prices would not increase demand
for OPEC oil significantly in the short term, the
financial situations of OPEC's hardest pressed
members are likely to deteriorate further if prices
decline. We estimate that for every $1 per barrel
annual average decline in nominal prices, OPEC's
current account deficit would increase by $6 bil-
lion.
Even if OPEC members get through 1984 with
stable prices, the outlook for oil consumption in
1985 indicates OPEC will continue to face chal-
lenges to its cohesion. Building on our 1984 base
case demand scenario, we expect only a modest
increase in non-Communist oil consumption of
about 500,000 b/d in 1985.' On the basis of this
' Assumptions underlying this 1985 forecast include OECD real
GNP growth of 2.7 percent, a continued slight decline in the energy-
to-GNP ratio, constant nominal oil prices, and an increase of about 1
million b/doe in nonoil energy demand in OECD countries.
Secret
9 March 1984
consumption estimate and the expectation that
inventory levels and non-OPEC oil supplies will
hold relatively stable, we estimate demand for
OPEC oil will approximate 20-21 million b/d.
Under this demand scenario, we expect supplies
will be ample and OPEC will have to restrain
output with few, if any, countries able to produce at
desired levels. If demand for OPEC oil is below our
baseline scenario and OPEC fails to experience an
upturn in market share, the cartel could have a
difficult time maintaining the price structure. In-
deed, some economists are now predicting an eco-
nomic downturn in 1985 that could depress demand
for OPEC oil.
Iraq and Iran-Increased Production Possible
Constraints imposed by the war will limit the
likelihood of any major increase in production from
Iran and Iraq in 1984. On the basis of recent
initiatives by the Iraqis to expand export outlets;
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Oil Production and Price Trends, 1972-83
Oil Production
Million b/d
Oil Price Trends
US S per barrel
OPEC production
accord a
OPEC available
production capacityb
Benchmark official pricec
Spot priced
T- I I I I I I ! 9 I I 1
1972 73 74 75 76 77 78 79 80 81 82 83
a Benchmark price falls five dollars per barrel.
b Reflects government production ceilings.
c Actual contract sales prices for Arabian Light.
d Annual average.
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however, we believe developments in Iraq and Iran
will play a crucial role in determining market
conditions in 1985. If the war continues and Iraq
and Iran maintain exports at or near current levels,
other OPEC members will be able to share any
increase in oil demand among themselves. Iraq's
current attempts to increase oil export capacity and
revenues, however, could place Baghdad in a posi-
tion to boost production and demand a higher
quota. Should Iran match any increase in Iraqi oil
exports-as Tehran has threatened-an additional
1 million b/d of exports would offset the expected
increase in demand and keep the oil market soft.
Should hostilities end, Iraq could increase its export
capacity by 2 million b/d or more by reinstalling
offshore loading facilities in the Persian Gulf and
building a new pipeline link. If Iran also raises its
exports by nearly 1 million b/d, substantial cuts by
other producers would be needed to maintain price
stability.
In our judgment, OPEC countries such as Nigeria,
Venezuela, and Indonesia probably would be un-
willing to lower output to offset higher production
from Iraq and Iran. Indeed, these countries-
especially Nigeria-are eager to increase produc-
tion and revenues. Even if these and other OPEC
members were to agree to limit output to current
quotas for 1985, an additional 3 million b/d of oil
from Iraq and Iran could only be accommodated by
lowering Saudi production to less than 4 million
b/d. Because of their own internal needs, we
believe such an outcome would give the Saudis
pause and increase the risk of an oil price slide.
We expect several factors to grow in significance
over the next few years, making it even more
difficult for producers to control oil prices. For
example, increasing spot market sales have added
to buyer flexibility and reduced the volume of oil
sold on a traditional contract basis. Some industry
analysts estimate that the spot market now com-
prises 20 to 25 percent of total non-Communist oil
trade, compared with 5 to 10 percent in the 1970s.
Secret
9 March 1984
Another new factor is that oil producers are ex-
panding downstream operations. According to the
International Energy Agency, OPEC will add 2 to
3 million b/d to refining capacity over the next
several years-about half of this in the Persian
Gulf. As a result, product export capacity in OPEC
could approximate 3.5 million b/d in 1985 or 1986,
roughly 20 percent of expected total OPEC oil
exports. Purchases of existing European capacity
by OPEC members-Kuwait and Venezuela-will
also increase OPEC's role in downstream opera-
tions. In recent years these producers have pur-
chased or are partners in about 350,000 b/d of
refining capacity in Western Europe, and, accord-
ing to press reports, purchases by private Saudi
companies total an additional 170,000 b/d.
gy for coping with these problems.
OPEC countries' growing role in product markets
may cause additional problems for the organization
as it struggles to control oil prices and production in
the next few years. Product prices are not included
in the cartel's official price structure, and OPEC
currently has little recourse if producers choose to
discount product prices, despite the fact that such
discounts tend to erode crude oil prices. We believe
increasing OPEC penetration into product markets
may also be cause for increasing tension between
these countries and consuming countries in Europe.
Because of the substantial surplus refining capacity
in Western Europe, these countries have already
made significant reductions to their refining capac-
ity in recent years. These countries may decide to
impose import fees on oil products to protect their
remaining domestic industry and jobs, according to
one industry source. Thus far, OPEC has no strate-
The Iran-Iraq Risk
The Iran-Iraq war could cause a rapid turnabout in
the market. Iraq's deterioriating economic situation
and stepped-up attacks by Iran have prompted
Baghdad to threaten to attack oil shipping' near
Khark Island in an effort to end the conflict. Such
action by Iraq might induce Iran to retaliate by
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attempting to close the Gulf to shipping or striking
out against Iraq's oil facilities or its Persian Gulf
allies.
Under these conditions, the world oil market could
tighten quickly and cause a runup in spot prices
because of uncertainty regarding the extent of
damage to the oil industry in the Gulf and the
length of any supply disruption. Furthermore, only
about 3 million b/d of the current 8-million-b/d
surplus in available productive capacity in non-
Communist countries is outside the Gulf, and
commercial stocks have been drawn down to near
normal levels. As a result, there is little surplus to
offset a disruption; government-held stockpiles
might not be used initially to prevent price runups.
We cannot predict how high prices would rise or
how long such increases might be sustained. We
believe industry and public perceptions and the
magnitude and duration of the supply loss would be
key factors
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Kuwait: Reverberations of the
Stock Market Crash'
F--]
The crash of Kuwait's unofficial stock market in
August 1982 continues to have adverse financial,
political, and social effects in a country that is
trying to cope with declining oil revenues, the Iran-
Iraq war, recent bombings, and an increasingly
restive Shia population. Kuwaitis will probably
continue to blame the government for the collapse,
Although we believe Kuwait will muddle through,
barring further shocks to the economy, the Kuwaiti
leadership's failure to prevent the crash or to deal
fairly and decisively with its aftermath adds to the
instability in an area vital to US interests.
Although Kuwait's enormous oil earnings have
been used by the ruling Sabah family to build a
welfare state at home and an investment portfo-
lio-estimated at $67 billion-abroad, a large
number of local inhabitants also have become
wealthy. Initially, individuals invested abroad, but
the excesses of oil wealth eventually led them to
seek internal investment opportunities. Most invest-
ments have been in financial service enterprises-
banks, insurance companies, and security houses.
Over time two stock markets developed around
these investment ventures. The Kuwait Shares
Market was established in 1977 with governmental
approval and oversight. The Gulf Shares Market,
or Suq al-Manakh, also sprang up in 1977, but it
did not have government approval. This unofficial
market was viewed by many Kuwaitis and expatri-
ates-who make up 60 percent of the country's
population-as a sign that Kuwait had reached a
level of financial sophistication that allowed inves-
tors to diversify their portfolios with both foreign
assets and local stocks.
aires were created on paper.
Fueled by revenues from the second oil price boom,
more individuals entered the stock market, trading
became increasingly active, and speculation intensi-
fied. Local observers estimate that in 1981 the
average value of stocks on the Manakh more than
doubled. According to US Embassy reporting, dur-
ing one week in late 1981 an estimated 400 million-
This hectic pace on Kuwait's unofficial stock mar-
ket was fed by:
? A rapid expansion in domestic liquidity-17 per-
cent in 1979, 25 percent in 1980, and 36 percent
in 1981.
? Development of an unofficial credit-creating sys-
tem in the form of postdated checks incorporating
sizable premiums.
? A belief that the government would not allow a
market collapse.
still more than $20 billion.
The speculative bubble burst in August 1982 when
lower oil earnings finally forced a cutback in
internal credit, and concerns over Middle East
stability caused many investors to withdraw from
the market. Within a period of days, according to
Embassy sources, about $100 billion worth of
stocks were wiped out, and as many as 6,000
investors saw their financial positions crumble.
After sorting out who owed whom, the net debt was
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The Government Response
The initial Kuwaiti Government reaction to the
stock market collapse was swift:
? The Amir suspended dealings in postdated checks
and established an arbitration committee.
? A recording committee was set up to register
postdated checks and to determine the magnitude
of the problem.
? According to Embassy reporting, the government
discreetly began supporting stock prices in the
official market to limit the crisis.
Establishment of the arbitration committee was a
key element in the government's plan for resolving
the financial crisis. From the beginning, however,
the group proved to be a lightning rod. According
to Embassy sources, committee sessions were
marred by threats, violent arguments, and histrion-
ics of the traders who had lost money on the
market.F_~
After these initial moves to calm the situation, the
government implemented the first of several plans
to bail ut investors.
the key ingredients during the first six
months of 1983 included:
? A Ministry of Finance (MOF) injection of $3.1
billion into the commercial banking system in
January 1983 to maintain the banks' liquidity.
? A public law specifying that the interest of small
investors was to be protected by the use of a $1.7
billion rescue fund.
? An MOF disbursement of $6.9 billion in bonds to
small investors in exchange for their worthless
stock certificates.
? Establishment of a special clearinghouse where
commercial banks could redeem MOF bonds
cashed in by individual investors.
We believe these moves were intended by the MOF
to gain time to resolve the financial difficulties
generated by the stock market debacle. The gov-
ernment expected much of the $12 billion injected
through its rescue efforts to find its way into
deposits or loan reductions at commercial banks.
Apparently this did not happen. According to
aggregate banking data, deposits and loan balances
Secret
9 March 1984
in local banks remained essentially unchanged
through mid-1983. Moreover, there seems to have
been a slight decline in deposits during September
and October
Instead, a substantial portion of the government
funds allocated to neutralize the financial disrup-
tion of the stock market collapse has probably left
Kuwait. Kuwaiti
dinars are being sold in Europe at a substantial
discount. It is impossible to gauge the exact level of
capital flight, but Bank of Kuwait officials estimate
the outflow at between $5 billion and $10 billion
worth of dinars.
Strains in the Rescue Program
Failure to solve the stock market problem has
contributed to the economy's decline. According to
Embassy reports, sources of credit for Kuwaiti
companies, both international and domestic, are
drying up. Even firms with strong international ties
are being affected as foreign bankers, unable to
assess anyone's financial condition in Kuwait, are
cutting back their exposure. Local merchants com-
plain that sales have slowed to a trickle. The
situation could get worse. We believe more business
failures, additional credit restrictions, and increas-
ing personal bankruptcies are possible.
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Kuwaitis Moving Money and Treasure Abroad
According to the US Embassy, bankers in Kuwait
believe capital is leaving the country in increasing-
ly large amounts, much of it from Manakh settle-
ments. The Embassy reports an increasing con-
cern-but not yet a sense of panic-among local
bankers about the large outflow of funds. In
addition to fears about political stability and the
Iranian threat, Kuwaitis are uneasy about lower
oil revenues and the effects of the Manakh col-
lapse. Kuwaitis may have moved as much as $10
billion abroad over the past two years.
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We believe the most profound social impact of the
market collapse has been on Kuwait's growing
middle class. The Manakh, because it was open to
all residents, had become Kuwait's economic melt-
ing pot. Despite high expectations and growing
incomes, the new middle class, according to press
reports, often found their economic interests
blocked by the 20 or so traditional Nejdi merchant
families who largely control the banks and the
official stock market and wield extraordinary influ-
ence on Kuwait's rulers. The status that came with
rapid stock market profits made many feel equal to
the established rich. The collapse of the market,
however, and the perceived unwillingness of the
Sabah-controlled government to step in have only
intensified deep-seated tensions between the middle
class and the Nejdi merchant families.
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For expatriates the Manakh offered a chance for
the good life. Having made a major contribution to
Kuwait's growth, they resented the discrimination
that prevented most of them from becoming citi-
zens or sharing equally in Kuwait's prosperity.
After the collapse, many expatriates felt they
would never recoup their losses, which reinforced
the view that Kuwait's ruling elite would forever
block any chance for equal treatment.
In an attempt to prolong the adjustment to the
Manakh collapse, the Government of Kuwait has
laid the foundation for yet another financial crisis.
The Iran-Iraq war, for example, could prompt
foreigners holding dinars, as well as Kuwaiti inves-
tors, to shift to hard currencies. If the estimate on
the size of foreign dinar sales-$5-10 billion-is in
the ballpark, the government would be hard pressed
to meet such a sudden inflow of dinar holdings.
Because of the slowdown of oil earnings-$9.3
billion in 1983 compared with $18.7 billion in
1980-the government only has about $10 billion
in highly liquid short-term accounts. Should a
crunch occur, the Government of Kuwait would
have to devalue the dinar or consider imposing
currency controls to limit the loss of hard currency.
Secret
9 March 1984
The impact of the Manakh collapse and the pros-
pects for continued financial and social spillover
add another element of risk to an already troubled
Persian Gulf region. Financial setbacks are of
major concern to the Kuwaiti Government, whose
foreign policy depends largely on placating poten-
tial adversaries with monetary support. The eco-
nomic downturn has made Kuwait's large expatri-
ate community, particularly the Palestinians, more
restive as they face possible deportation in a dwin-
dling job market. Kuwaitis seeking a return to
fundamentalist Islam may view the crash as further
evidence that a policy of modernization and West-
ernization has failed. Because of these pressures,
Kuwait may be more inclined to appease these
groups and less likely to cooperate with other
moderate Arab states on issues of importance to the
United States.
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Pakistan: Economic Downturn
Appears Manageable
Pakistan's economy is likely to grow more slowly in
the fiscal year ending 30 June than in any year
since President Zia came to power in 1977. A
disastrous cotton crop has already taken its toll,
and higher inflation, mounting budget deficits, and
sluggish remittances are adding to Pakistan's con-
cerns. Despite deterioration in the economy's per-
formance, we believe that it is unlikely that the
economy by itself will cause serious political prob-
lems for Zia, and he has already taken steps to
demonstrate he is dealing with the situation. If
conditions worsen significantly, we believe Zia
quickly would solicit additional financial assistance
from the United States and other donors.
Strong Performance in Zia's First Six Years
The Pakistani economy recorded six consecutive
years of,rapid growth through FY 1983-increas-
ing by almost 6 percent annually, according to
Pakistani statistics and US Embassy estimates. We
believe that last year's civil disobedience campaign
in Sind Province did not elicit broad popular sup-
port, because most Pakistanis have benefited from
economic prosperity:
? Agriculture, the cornerstone of the economy, has
maintained steady growth because of favorable
weather and increases in government procure-
ment prices. Pakistan is self-sufficient in all
major food categories except edible oil.
? Industrial performance has been strong because
of output from new public-sector plants in the
fertilizer and steel sectors. Although industrial
output still represents less than 20 percent of
GNP, industrial growth is critical if Pakistan is to
provide new jobs for a rapidly growing population
and expand exports. F__1
The Zia government's most impressive recent eco-
nomic achievement has been the improvement in its
foreign payments. Last year the current account
deficit was reduced to the lowest level since the
early 1970s, primarily because of growth in worker
remittances, reduced import costs because of lower
oil prices and import substitution, and expanded
exports of manufactured goods. Pakistan doubled
its foreign exchange reserves to a record $2 billion,
the equivalent of about four months of imports. F_
Poor weather and other unfavorable economic de-
velopments have caused increased government con-
cern in recent weeks. In a rare move, President Zia
called a special meeting of the National Economic
Council-Pakistan's highest economic policy mak-
ing body-in early February to discuss the perfor-
mance of the economy. Following this meeting the
government announced GNP projections for FY
1984 of 4.5 to 5 percent compared to the earlier
target of 6.4 percent. We believe that even this
estimate is overly optimistic, and growth may be as
low as 4 percent
The agricultural sector is unlikely to register gains
in output despite growth targets of 4.9 percent:
? Untimely rains and pest infestation reduced this
season's cotton output to 2.9 million bales-down
from a target of 5.2 million bales-according to
official estimates. Embassy sources in the cotton
trade place the size of the crop even lower-2.5
million bales.
? The winter wheat crop is being jeopardized by the
lack of rain since mid-December. The US agri-
cultural attache estimated in early February a
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Pakistan: Economic Indicators, 1980-848
Real GDP Growth
Percent
ment projection. Growth in output of cotton yarn,
Trade Balance
harvest of 12.5 million metric tons, slightly above
last year's record of 12.4 million tons, but contin-
ued drought conditions could reduce output below
last year's level.
Industrial production is expected to expand this
year by about 10 percent, slightly above the govern-
steel products, and cement has been particularly
strong thus far this year.
Inflationary pressures are much greater than last
year. The official consumer price index indicates
prices are increasing at an annual rate of at least 10
percent compared to less than 7 percent last year.
Price increases for sugar, cotton, energy, cement,
fertilizer, onions, and vegetable oil have been con-
0 tributing to public concern. F___-]
Billion US $ Billion US $ The Pakistani Government's budgetary problems
and increases in the money supply are contributing
to inflationary pressures. After several years of
moderate monetary expansion, the money supply
increased by 26 percent last year, largely because
of government spending. The budget deficit this
year is likely to be only slightly less than the $1.9
billion of last year. Sluggish imports are inhibiting
growth in import duties that comprise the bulk of
government revenues. At the same time, the gov-
ernment is facing unexpected expenditures for ed-
-4 0 ible oil and cement subsidies because of higher
Worker Remittances
Billion US $
Current Account Balances
Billion US $
a Data are for fiscal year ending 30 June.
b Projection based on six months reporting and
government plans.
Secret
9 March 1984
world prices for soybean and palm oil and greater
losses by the state cement corporation.
Foreign Payments
Pakistan probably will not add to foreign exchange
reserves this year as the government had hoped.
The current account balance is likely to show some
deterioration from last year. A shortfall in earnings
from raw cotton exports, an expected increase in
prices for imported edible oil, and unanticipated
imports of raw cotton will be only partially offset
by strong performances from other exports0
Slumping worker remittances are now becoming a
concern of the government. Remittance flows
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Pakistan: Agricultural Reform
Wheat
Million metric tons
1980 81 82 83 84a
Rice
Million metric tons
Sugar Cane
Million metric tons
Cotton
Million bales
began to slow in August and registered a decline in
November and December. For the first six months
of the fiscal year, remittances were only up about 3
percent compared to a government projection of 10
percent. The decline may only be temporary:
? Workers may be holding back funds for family
members planning to apply for the pilgrimage to
Mecca.
? The rupee-dollar exchange rate was relatively
high during the last quarter but has since
depreciated.
? Last fall's civil agitation campaign by the Paki-
stani opposition may have prompted some of the
more affluent expatriate workers to hold back
remittances until the outcome was determined.
Although the decline in remittances may be tempo-
rary, there is a possibility that Pakistan is experi-
encing the end of a decade of growth in worker
remittances. Reporting from the Persian Gulf
states indicates that the economic and political
pressure to cut the size of the expatriate work force
is increasing. Many construction workers are being
laid off because of the slowdown in spending for
development projects. Wage rates for those with
jobs are being moderated by increased competition
for jobs. A Pakistani newspaper in early January
reported a net decline in Pakistani workers in the
United Arab Emirates.
We also foresee a reduction in capital inflows in the
current fiscal year. This will result from the termi-
nation of the Extended Fund Facility with the
IMF, some difficulties finalizing World Bank
loans, and a slowdown in receipts of project aid and
refugee assistance from foreign donors. F__]
Implications for Political Stability
The Zia regime has acted to assure the population
that it has the economic situation under control.
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Pakistan: Balance of Payments a
Current account
-991
-1,610
-554
-800 to -1,100
Trade balance
-2,765
-3,450
-2,989
-3,500
Exports (f.o.b.)
2,798
2,319
2,627
3,000
Imports (f.o.b)
5,563
5,769
5,616
6,500
Net services and transfers
1,774
1,840
2,435
2,400 to 2,700
Worker remittances
2,095
2,224
2,886
2,900 to 3,200
Capital account
581
746
1,264
800
.Gross official disbursements
956
1,092
1,301
1,250
Amortization
-516
-492
-389
-450
Others
141
146
352
Other short-term capital d
771
629
401
Change in reserves
361
-235
1,111
a Fiscal year ending 30 June.
b Projected.
c Including private, long- and short-term capital.
d Including errors and omissions.
The government quickly banned cotton exports and
arranged for imports of raw cotton to protect the
domestic textile and yarn industries from the full
effects of the bad crop. Onions were imported to
bring down prices, and the government has shielded
consumers from the full extent of higher costs for
imported cooking oil.
President Zia has displayed his sensitivity to the
inflation issue in other ways as well. During the
National Economic Committee meeting, he or-
dered a continuous review of prices. Local papers
have given prominent attention to this directive,
and regional government administrators are setting
up local monitoring committees. According to
Planning Minister Mahbubul Haq, Zia will inter-
vene in the marketplace to keep a lid on prices by
releasing commodities from government stocks and
importing basic items in short supply, even if these
actions result in greater budget deficits and a loss
We do not believe that agricultural conditions or
remittance payments will deteriorate enough over
the next year to make economic problems a serious
campaign issue in the elections, reportedly planned
for later this year or early next year. Foreign
exchange reserves, near the all-time high, are suffi-
cient to finance imports of essential consumer
goods. If a large drawdown in reserves becomes
necessary, we expect Zia to solicit additional assist-
ance from the United States, as well as other
donors.
of foreign exchange.
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9 March 1984
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International Financial Situation:
Private Capital Flows to Asian NICs
This article is part of our series on the economic
and political aspects of the international financial
situation.
Despite the recession and LDC debt problems, the
Asian newly industrializing countries (NICs) -
Hong Kong, Singapore, South Korea, and
Taiwan-largely have been successful in attracting
private foreign capital. These countries have bene-
fited from international bankers' efforts to direct
their lending to more creditworthy developing
countries. We believe their favorable investment
climate, good-to-excellent international credit rat-
ings, and continued strong growth potential will
encourage future foreign capital inflows. As the
recovery proceeds, the Asian NICs will be the first
choice of many foreign investors and lenders and
will receive far better terms than most other devel-
oping countries. The Asian NICs' success in up-
grading their manufacturing capabilities with these
capital inflows will increase further the gap be-
tween these countries and the financially troubled
LDCs
Recent Developments by Country
Foreign investment in Hong Kong declined in 1983
because of the slump in the world economy and
uncertainty concerning Hong Kong's future. Ac-
cording to US Consulate reporting, the current
OECD economic recovery and calm in the Sino-
British talks on Hong Kong's future status are
reviving investors' interest. Foreign manufacturers
are beginning to add capacity or replace existing
equipment to meet orders for expanding export
markets and to focus their attention on the market
in China. Much of this recent investment is concen-
trated in electronics, electrical appliances, machin-
ery, and textiles-industries that have relatively
short payback periods in Hong Kong. The US
Consulate also reports that a small portion of the
increased foreign investment is coming from China.
Hong Kong's improved market conditions and Chi-
na's efforts to ensure greater confidence in Hong
Kong's future are cited as reasons for the increased
Chinese investment. We believe foreign investment
in Hong Kong will accelerate unless there is serious
short-term political uncertainty
Foreign investment has played an important role in
the capital formation of Singapore's manufacturing
sector. Government statistics indicate that foreign
investment grew at an average annual rate of 16
percent between 1978 and 1982 and currently
accounts for almost three-fourths of Singapore's
total capital inflows. Although actual investment
inflows experienced a moderate decline in 1983,
statistics released by Singapore's Economic Devel-
opment Board indicate that new foreign investment
commitments increased during the first half of
1983 by more than 10 percent over a year earlier.
This suggests a potentially larger inflow of invest-
ment in 1984. Singapore's success in weathering
the effects of the world recession and strong growth
potential enhance its attractiveness to foreign inves-
tors. Consequently, we believe the inflow of foreign
investment probably will regain the pace that it
established prior to 1983F_~
More than 95 percent of South Korea's total capital
inflows come from foreign borrowing. According to
the IMF, over 60 percent of this total is from
private sources. Despite closer scrutiny by the
international financial community, South Korea
has maintained a good credit rating among interna-
tional bankers and has had little difficulty in
arranging recent syndicated loans. South Korea's
record of sound economic and financial manage-
ment as well as the country's diversified export
base are the principal reasons cited by many bank-
ers for this good credit rating. We believe that, over
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the next two to three years, South Korea will need
to borrow about $4 billion in new funds annually
from private sources and maintain ample short-
term trade financing. In our judgment, Seoul has a
good chance of obtaining this financing, although it
probably will have to pay slightly higher spreads on
its loans because of international banks' high expo-
sure in South Korea.
In a bid to attract more investment capital, US
Embassy reporting indicates that South Korea's
National Assembly recently passed legislation, ef-
fective 1 July 1984, to substantially liberalize
foreign investment policy. By streamlining approv-
als and lifting restrictions, Seoul is attempting to
attract foreign capital to develop its electronics,
auto, computer, machinery, and chemical indus-
tries. During the past three years, Seoul has relaxed
several restrictions on foreign investment; yet, ap-
provals have lagged behind planned investments
and have not been comprised of the high-technol-
ogy investments needed to upgrade manufacturing
capabilities. Moreover, according to US Embassy
and press accounts, foreign investors are hesitant to
invest in Korean industry because of the gap
between official policy and actual implementation,
the inadequate protection for patents and trade-
marks, and frequent violation of licensing agree-
ments for manufacturing processes.
Secret
9 March 1984
Foreign lending is critical in Taiwan, providing
roughly three-fourths of the country's total capital
inflows. According to the American Institute in
Taiwan (AIT), Taipei maintains an excellent inter-
national credit rating and will have little difficulty
in obtaining future credit.
several West European commercial banks to com-
pete aggressively for Taipei's Mass Transit project
loans, once they are announced. The reduction in
foreign direct investment since 1980-principally
because of Taiwan's restrictive policies and world
recession-may soon be reversed. According to
AIT reporting, planning officials have indicated
that increased foreign investment is needed to
upgrade high-technology export industries and at-
tract foreign managerial and technical expertise.
Taipei is considering reducing restrictions on for-
eign investment, opening the stock market to for-
eigners, and forming a venture-capital company
with a major Western partner.
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Second-Tier LDCs: Potential NICs
Industrial-country producers of manufactured
goods are concerned that exports from second-tier
LDCs will add to existing competition from the
newly industrializing countries (NICs).' The num-
ber of LDCs exporting more than $100 million
worth of manufactured products (in 1975 prices)
has steadily increased from 18 in 1965 to 22 in
1970 to 47 in 1980. We believe that, as these LDCs
overcome obstacles to growth in manufactures ex-
ports, they will alter market prospects in a number
of industries. In the process, this could spark
political debate in industrial countries.
Identifying Second-Tier LDCs
To identify a second tier of LDC exporters who
may become NICs, we applied two NIC criteria-
the value and rate of growth of manufactures
exports. Manufactures exports of the country had
to:
? Exceed $200 million in value in 1980.
? Grow at a real average annual rate of at least 18
percent during 1976-80. F___]
According to these criteria, we have identified 11
developing countries as second-tier exporters of
manufactured products.' This list includes one low-
income country-Sri Lanka-and 10 middle-
income countries-Chile, Cyprus, Indonesia,
Jordan, Malaysia, Peru, the Philippines, Thailand,
Tunisia, and Uruguay. Of these countries, Malay-
sia, the Philippines, and Thailand account for 60
percent of the second-tier LDCs' total exports of
'The NICs are Brazil, Hong Kong, Mexico, Singapore, South
Korea, and Taiwan.0
' Six developing countries, other than the NICs, that met the
criteria were excluded from the analysis: five countries where oil
dominates the economic structure (Kuwait, Nigeria, Saudi Arabia,
Trinidad and Tobago, and Venezuela) and Lebanon, for lack of
manufactured products. Three countries that are
excluded from this list but considered in the analy-
sis are Argentina, India, and Pakistan. Each has
had lower than NIC-average growth in manufac-
tures exports but nonetheless has substantial ex-
ports of manufactured products and registered
some gains in the growth of these exports during
1976-80.
UN trade data reveal the dynamic nature of these
newcomers' manufactures exports. Between 1975
and 1980, the second-tier LDCs' exports of manu-
factured products grew at an average real rate of
almost 25 percent per year, far outpacing the 6-
percent rate sustained by industrial countries and
the 18-percent rate for the NICs. In spite of this
rapid manufactures export growth, a considerable
gap exists between the second-tier LDCs and the
NICs. The most salient difference is in the size of
their manufactures exports. In 1980, the second-
tier LDCs exported, on average, $800 million of
manufactures, which accounted for 15 percent of
their total exports. This is well below the average
$11.6 billion of manufactures exports and 63-
percent share registered by the NICs.
Like the NICs, the second-tier LDCs have a mix of
economic conditions that facilitate industrial
growth-a skilled labor force, an entrepreneurial
class, low labor costs, and adequate domestic finan-
cial markets, transportation, and communications.
The second-tier LDCs, however, face several obsta-
cles to the rapid growth of their manufactures
exports. Included among these are:
? The partial rather than comprehensive implemen-
tation of export-led growth policies.
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1980 Manufactures Exports
in 1975 Prices
Real Growth of Manufactures Exports,
Average Annual Increase, 1976-80
Less Than World Average
(6.7 Percent)
Between World and NIC
Average (6.7 to 17.8 Percent)
Greater Than NIC Average
(17.8 Percent)
$200 million to $1 billion
Colombia
Egypt
El Salvador
Ivory Coast
Bangladesh
Costa Rica
Guatemala
Kenya
Morocco
Chile
Cyprus
Indonesia
Jordan
Peru
Sri Lanka
Tunisia
Uruguay
Argentina
Pakistan
Malaysia
Philippines
Thailand
Brazil
India.
Hong Kong
Taiwan
a Second-tier LDCs are shown in italics, and newly industrializing
countries are shown in boldface type.
? Foreign financial problems that have required
austerity measures and slowed the implementa-
tion of their outward-looking development
strategies.
? Sluggish global economic growth, protectionist
pressures, and heightened trade competition in
textiles and other labor-intensive industries.
? Country-specific factors, such as political insta-
bility, that limit the growth of manufactures
exports.
Second-Tier LDC Prospects
Given these obstacles, we believe that only Malay-
sia and, to a lesser extent, Thailand have the
potential to vie for a position among the NICs in
the next 10 years. Malaysia has already established
itself as a large exporter of semiconductors and
electronic products. We believe its extensive finan-
cial, communications, and transportation networks,
Secret
9 March 1984
combined with favorable investment incentives and
a good international credit rating, will help attract
foreign investment and will assist Prime Minister
Mahathir in diversifying industry into skill- and
capital-intensive industries. Thailand's abundant
natural resources, its political stability during the
past four years under Prime Minister Prem, its
available supply of technically skilled low-cost
workers, and its access to a large Asian market
make it attractive to foreign investorsF__1
Eventually, contenders for a position among the
NICs are likely to emerge from Latin American
countries rather than Asia. Argentina, Peru, and
Uruguay, in particular, are building a foundation
for strong growth in export-oriented industries.F_
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Secret
Obstacles to Rapid Growth in Manufactures Exports a
Lack of Financial Other Factors
Commitment Constraints
to Outward- Political
Looking Instability
Growth Policies
a The severity of each factor is indicated by an H (High), M
(Medium), or L (Low). If no indicator is given, the factor is not
considered an obstacle to the growth of the country's manufactures
exports.
Implications
Like the NICs in their early stages of export-led
growth, the second-tier LDCs will focus on narrow-
ly defined product lines in which they have a
comparative advantage. These will largely consist
of yarn, fabrics, leather, plywood, cement, assorted
chemicals, and other labor-intensive, standardized,
intermediate goods. F__1
Over the longer term, the focal point of the second-
tier LDCs' competition with industrial-country pro-
ducers probably will spread beyond textiles and
clothing exports as these LDCs attempt to develop
more sophisticated lines of manufactures exports.
Because of recent advances in manufacturing tech-
niques, there are a number of mature, technologi-
cally stable industries that are suitable for these
Insufficient Shortage of Narrow Limited
Infrastructure Skilled Export Natural
Labor Market Resources
LDCs. These include such labor-intensive consum-
er and leisure goods as toys, printed materials, and
small electrical appliances as well as electronic
components. As in the case of textiles and clothing,
their movement into the production and export of
these manufactures will pose an additional chal-
lenge to US and other industrial-country producers
of these goods.
The emergence of the second-tier LDCs will gener-
ate export-market opportunities for industrial coun-
tries, particularly capital equipment and manage-
ment services. Moreover, as second-tier LDC
incomes rise, demand for industrial-country con-
sumer goods will likely rise. Although it is impossi-
ble to prejudge whether market gains in some
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sectors will outweigh losses elsewhere, the emer-
gence of these second-tier LDCs will alter market
prospects in a broad range of industries and proba-
bly will spark political debate in industrial coun-
tries.
As the second-tier LDCs increase their manufac-
tures exports during the 1980s and beyond, we
believe this will lead to a substantial increase in the
competition between the second-tier LDCs and
NICs as they compete to capture a greater share of
a slowly expanding world market for manufactures.
As the second-tier LDCs move into the low- and
medium-technology area, this could force the NICs
to push more aggressively into high-technology
industries. In the process, such developments could
weaken industrial-country control over sales of
high-technology items.F_-]
An upswing in inter-LDC competition could enable
the industrial countries to play off the needs of one
group of LDCs against those of another in future
international negotiations. This tactic could prove
useful in splitting common LDC positions in the
GATT, UNCTAD, and other international eco-
nomic forums as well as in the negotiation of such
trade agreements as the Multifiber Arrangement.
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Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706890001-2
 Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706890001-2
Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706890001-2
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Secret
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Sanitized Copy Approved for Release 2011/03/07: CIA-RDP97-00771 R000706890001-2