WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A010700060001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 33
• Document Creation Date: December 21, 2016
• Sequence Number: 1
• Content Type: SUMMARY

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Secret
Weekly Summary
State Dept. review completed
Secret
22 February 1974
No. 0008/74
Copy N?_ 5 8
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~SrI~LrlGfy a^~
""=;~~JT~NTS (February 22, 1974) ~~ '~ 1
~~ ~~~
~~or;e, ar~I ar~aiyzes sgnif-
aro~n r?c,rsrt ore Trk+arSeiav.
tt~~y ~?ffice :~f ~~~atealc
naive to eatment and there-
Israel: A Minority Government
tCorea: Incident at Sea
EAST ASIA
PACIFIC
~
Japan: Economic Slowdown
b
6
Shake-up in Saigon
Cambodia: The Government's Round
7
Laos: Pushing for a Coalition
8
Indonesia: Message in the Stars
9
European Security: Inch
ing Forward
10
Iceland: Wrangling Over
the Base
11
Soviets Play Up Diego G
arcia
12
Ceausescu's Middle East
Gambit
13
Poland: Hierarchical Rep
airs
MIDDLE EAST
AFRICA
].4
Islamic Leaders Meet in
Lahore
15
Iran-Iraq: Military Build
up
15
Jordan: Husayn in Charg
e
15
Oman-Iran: Mutual Secu
rity
WESTERN
HEMISPHERE
17
Cuba: Looking to Mexic
o City
l7
Bolivia: More Cabinet C
hanges
]8
Ecuador: Military Anniv
ersary
SPECIAL
REPORT (Published separately)
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SECREI-
JAPAN: ECONOMIC SLOW[ OWN
~~~ -1~~~
Japan will exp Hence it sharpest economic
slump since the mid-1950s this year, but still is
likely to achieve real Gross National Product
growth of 3 to 5 percent. Energy supplies will not
restrict growth, but the increase in oil import
costs of at least $11-billion will constitute a major
drain on domestic purchasing power at a time
when fiscal and monetary policies are being tight-
ened to slow inflation.
Real GNP grew 14 percent from the first
half of 1972 to the first half of 1973, but growth
slowed in the third quarter because of capacity
constraints, and again in the fourth because
normal oil deliveries were interrupted. On the
demand side, private investment and consumer
spending weakened only slightly during the
Assembling sewing machines in Nagoya
Ample capacity to produce...
fourth uart
Prices began to move upward in 1972 and by
late 1973 were soaring. In January 1974, con-
sumer prices were nearly 25-percent higher than a
year earlier, and wholesale prices were almost 35
percent higher. Supply constraints, higher prices
for imported foodstuffs and raw materials, and
strong demand were the principal factors. Al-
though wage increases for the year approached 20
percent, productivity gains were nearly sufficient
to offset them. The Tanaka government tightened
monetary and fiscal policies progressively during
1973, but the boldest measures came after Takeo
Fukuda's appointment as finance minister in
November. The central bank hiked its discount
rate two percentage points in December to an
all-time high of 9 percent
The trade surplus continued to slip during
the second half of 1973 as domestic demand
remained strong and Japan was buffeted by un-
favorable movements of prices and exchange
rates; as imports surged, domestic demand and
capacity constraints reduced the amount of goods
available for export. The trade surplus was more
than halved in 1973 to $3.7 billion and, at the
sarne time, long-term capital outflows reached a
staggering $9.7 billion.
Prospects for 1974
Real growth will slow sharply in 1974 be-
ca~ase of efforts to dampen demand and the re-
strictive impact of higher oil prices. Depending on
the size and timing of Tokyo's moves to support
demand, real growth will be somewhere between
3 and 5 percent. ~
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P.ana a WFFKI Y ti11MMARV Feb 22. 74
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A basic factor in the economic slowdown
will be a slackening in private investment, which
constitutes about one third of GNP. A sharp drop
in orders for machinery in December and an-
nouncements of cutbacks in major firms' expan-
sion plans presage the downturn. A decline in
inventory investment probably is under way and
is likely to accelerate as demand slips and firms'
cash positions tighten.
Slowing inflation will be difficult this year
because industry will face severe cost pressures.
Recent oil price hikes will directly boost manu-
facturing costs by about 5 percent, and labor
probably will win wa e increases on the order of
20 to 25 ercent.
Higher oil prices will boost the import bill in
1974 by about one third, to an estimated $43
billion, and Japan will need to increase exports
nearly 20 percent to avoid a trade deficit. Achiev-
ing such an increase will be difficult at a time
when other countries' im ort demand is likely to
be weak.
The auto industry,
for example, plans to increase export volume by
one third this year. Exporters almost certainly
will concentrate more on the US market this year.
Sales volume here fell by an estimated 10 percent
in 1973, partly because of currency changes, but
the yen's recent depreciation has reduced the
disadvantage.
Japan probably will have acurrent-account
deficit of about $6 billion this year. To ease the
drain on foreign-exchange reserves, Tokyo is
moving to alter policies that encouraged capital
outflows and restricted inflows. As a result of
such moves, Tokyo expects to reduce net long-
The Mitsui dockyard
...but fewer customers are buying
term capital outflows to $4 billion. Dollar hold-
ings not counted as official reserves also are being
drawn upon to slow the decline in official re-
serves. These non-official holdings now amount to
about $10 billion, almost matchin the 11.5
billion in official reserves. STAT
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The government changes announced this
week reflect a decision by President Thieu to
' upgrade the status of Prime IVlinister Khiem and
to put greater momentum behind economic pol-
icies. The changes do not significantly alter the
government's political make-u p, but Thieu hopes
they will improve the efficiency of the adminis-
tration
,Certain responsibilities have been transferred
from the president's office to that of the prime
' minister, although Thieu will remain the ultimate
' 'authority for all major decisions. The naming of
controversial presidential aide Hoang Duc Nha as
information minister enables Thieu to formalize
Nha's recent authority over information activities
while moving him, at least ostensibly, under
Khiem. The latter has been unhappy over Nha's
extensive influence, but it remains to be seen
whether the change will weaken Nha's clouf~
'?~ iThieu clearly wants to assuage any discon-
tent `on Khiem's part. The President met with the
Prime Minister recently and informed him of the
forthcoming government shake-up which, he said,
would greatly increase Khiem's authority. At the
same time, Thieu said he would run for re-elec-
tion next year but that Khiem could run for
president in 1980 and would surely win.`!
.4 Tl-wo new deputy prime ministers have been
appointed to oversee welfare and development
activities. Pham Quang Dan, a cabinet holdover,
and Tran Van Don, a retired general and Lower
House deputy, are activists, who presumably are
expected to bring stronger direction to the eco-
nomic ministries, which are now headed by able
technicians and bureaucrats. A third deputy
prime minister, Nguyen Luu Vien, retains his post
and apparently will continue iro serve as Saigon's
chief negotiator in Paris.
;The cabinet shuffle offered Thieu an oppor-
t~unity to drop a handful of rriinisters whose per-
formances he considers unsatisfactory. The chief
casualty was Pham Kim Ngoc, who has been re-
placed as commissioner of planning by Nguyen
Tien Hung. Ngoc had been retained last October
when other economic and financial officials were
changed, probably because of his good rapport
with Americans. Thieu's unhappiness with eco-
nomic policy apparently centered on Ngoc, inas-
much as the ministers appointed in October con-
='-' jKhmer Communist military pressure against
Phnom Penh slackened this week as the insurgents
continued to prepare for a heavier offensive
against the capital's defenses. Cambodian Army
units took advantage of the lull by moving out on
several battle fronts around the city. Government
troops scored their biggest success northwest of
Phnom Penh, where infantry and armor units--
supported by artillery and air strikes-forced in-
surgents from an area within four miles of
Pochentong airport. Local government com-
manders reported capturing significant numbers
of weapons, and prisoner reports indicate that the
Communists have taken sizable losses in this sector:;
s ~- 11n the southwest, government troops near
Route 3 mounted a drive to expand their holdings
on the south bank of the Prek Thnaot River. The
Communists are fighting to prevent the envelop-
ment of some of their units, including the artil-
lery that has been shelling Phnom Penh,The only
_, major Communist initiative of the week came in
'''the Mekong River corridor, where insurgent
gunners carried out the heaviest shelling of the
dry season against a resupply convoy
~_ ~ In the countryside, government units from
the isolated provincial capital of Kompong Thom,
some 75 miles north of Phnom Penh, have re-
cently completed several highly successful forays
into Communist territory. Over 22,000 villagers-
resentful of oppressive Communist administra-
tion-have come out with the government troops
to resettle around Kompong Thom. The Commu-
nists have stripped their military forces in the
province as part_of the buildup around Phnom
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~~l;~Kt 1
the entire membership of the new government]
~Souvanna's offer to appoint one incumbent
assembly deputy from each province to the Joint
~S National Political Council, the principle advisory
body to the new coalition cabinet, may also have
enhanced the prospects for compromise. In addi-
tion, recent threats by student activists to make
the assembly a prime target of future large-scale
demonstrations may also have helped reduce
legislative opposition to Souvanna's plans to form
the new government by direct royal investiture.
On February 20 the Sananikone clan, which
dominates the rightist-oriented assembly, publicly
endorsed Souvanna's efforts to form the new
coalition:
~~ ~-Prime Minister Souvanna failed to meet his
self-imposed deadline for forming a new coalition
government by the first anniversary of the Laos
peace agreement on February 21, but he appears
to be on the verge of at least naming its member-
ship:~f He has achieved significant progress in re-
"'~ ~ solving the differing viewpoints of the King, the
~) National Assembly, and the Communists over the
,2 ~ proper procedure for the coalition's investiture-
the last significant sticking point in the protracted
negotiations
yy~~. he Prime Minister has informed the US
am'b ssador that the last major impediment to
establishment of a coalition government has now
disappeared. Souvanna this week convened the
government's Council of Ministers, ahigh-level
policy-making group of senior cabinet officers
that has long been inactive. The council was
tasked with making final selections of government
candidates for positions in the new coalition cabi-
net and the Joint National Political Council.]
Souvanna also met with chief Pathet Lao
~nego iator Phoun Sipraseuth this week to inform
him of the King's new position on investiture,
which is in line with the Communists' view that
the coalition represents a "special" government
~~Uhether this will
requiring only royal approval
.
~~ ~ Souvanna claims that he has the King's ~ be enough to satisfy another important Pathet
/ agreement to formally invest the new government Lao precondition for forming the new govern-
--even if the assembly has taken no legislative ment remains to be seen?
''~ ~
Th
Ki
l
h
i
i
d th
ti
i
d
t
t
ac
on.
ng prev
y
ma
n
a
ne
a
e
ous
a
the constitution required assembly approval of
the new cabinet prior to royal investiture. The
King has indicated to Souvanna that he was
willing to dissolve the assembly pending new
legislative elections:
Cfhe threat of such a move may in part
explain an apparent willingness by the assembly
to soften its earlier insistence that it must approve
~ rThe Communists have steadfastly held that
effective neutralization of Vientiane and Luang
Prabang must precede the new coalition's forma-
tion. While neutralization of the twin capitals is
proceeding smoothly, it will be some weeks
before the process is completed. The Lao Com-
munist leadership in Sam Neua may therefore be
reluctant to send its ministers to the two cities
until their safety is assured.
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StC;F~~ I
~' ?xOne tenet of Indonesian political philosophy
Yo~lds that the fall of a dynasty is foretold by such
signs as divisions within the ruling elite, decline in
public morality, rising social diiscord, and the ap-
pearance of new prophets.
,I President Suharto, who in times of national
stress consults his spiritual teachers more often
than his cabinet, doubtless interpreted the up-
heaval in Jakarta last month as an ill omen in-
deed. His reaction has been to project a new
public image of firmness and authority in order to
restore confidence in his government's durability.
Suharto's new leadership style may also sig-
nify ashift in the power balance within the gov-
ernment. His position among the military elite has
long been characterized as that of primus inter
pares, but he is now behaving like a man who
believes he has supreme autFiority~~He has re-
shuffled security and intelligence personnel, put-
- ting men considered personally loyal to him in
key positions and removing those believed either
too independent-minded or too close to General
Sumitro, Suharto's most powerful subordinate.
-`~' This new presidential firrness is also being
exert:ised with the public at large. Reversing a
long-standing policy that allowed relatively free
expression, the government no~N intends to take a
hard line against critics because Suharto believes
that the former permissiveness contributed to
social and political instability. Under the new
policy, five newspapers and three weekly periodi-
cals have been closed, their publishers banned
from future publications, and their staffs provi-
sionally blacklisted. Officials have promised that
new papers will eventually be permitted, possibly
with government participation. All publications
must now conform to strict government guide-
lines designed to eliminate articles that could
"`foment conflict between races, religions and
social forces" or "discredit national leadership."~
:.This new assertion of presidential authority
may cause some grumbling within the military
Suharto and wife
A new presidential style
establishment. Although the defense department
has an ex officio representative on the newly
established political and security stabilization
council that ratified Suharto's measures, the
council is largely a rubber stamp. Since taking
over in 1966, Suharto has fostered greater central-
ization of authority in the Jakarta bureaucracies.
His latest actions suggest he now wants to go one
step further and absorb all power into the presi-
dential palace, a move that could cause some
complications with his military colleaaues.
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~?-' JCI.KC I
Representatives from the 35 states partici-
~~~`~ p ting in the Conference on Security and Coop-
eration in Europe held their breath as the drama of
} -'Aleksandr Solzhenitsyn was played out last week.
ment on freer movement of people and commu-
nication of ideas between East and West:
When Solzhenitsyn arrived in the West, they
breathed a collective sigh of relief and resumed
their work. Most delegates from the Western and
neutral states believe that, in the long run, the
Solzhenitsyn affair could harden both Eastern
and Western positions. It appears likely, for
example, that the Western representatives will
press the Soviets harder than ever for an agree-
~~__~~?t' jThe Soviet delegates, also relieved that the
L~,~ "dissident author was expelled, reaffirmed the
~~~,~
USSR's interest in detente. Although they have
~~suggested that Moscow might be willing to make
some compromises, the Soviets will continue to
probe the Western side for weaknesses and will
not make concessions until absolutely forced to
do so. Resolution of substantive differences prob-
ably is still several months off. In the meantime,
the conferees will continue the slow process of
drafting the final conference documents:Z
~'~. The problems to be resolved have not
' 'changed. The Soviets hope to obtain multilateral
y recognition of the permanence of Europe's post-
Solzhenitsyn
A collective sigh of relief
of emasculating the specific measures designed to
bring about freer movement
war borders, while the West hopes to gain ac- ,,11 'Discussions of the military aspects of secu-
~t-~ceptance of the possibility of peaceful changes of (~ty~are now focused on a British draft resolution
existing frontiers. Despite some earlier hints that ~ on confidence-building measures-steps designed
they might be flexible on this matter, the Soviet to limit military activity. The British propose that
and their allies last week stubbornly resisted West~~'the participating states accept a non-binding
ern formulas that would permit peaceful changes.
The Western delegates, especially the EC Nine,
have made it clear that they will not compromise
on this issue unless the Soviets make concessions
on the proposals for freer movement between
East and West
2 ~ In discussions of freer movement, however,
~'~e ~oviets and their allies continue to insist that
the Western allies agree to a declaration of prin-
~ ciples that would serve as a preamble to any
~ {specific agreements on humanitarian cooperation.
These principles of sovereignty, non-interference
in the internal affairs of states, and respect for
national laws and customs would have the effect
agreement to give prior notification of major mili-
tary maneuvers and movements in Europe and to
invite other states to send observers to maneuvers.
A Soviet delegate has suggested that Moscow
might be prepared to compromise on some
aspects of the proposal. This hint of flexibility
has intrigued Western delegates-and could cause
some problems for the US, which is opposed to
discussing military movements at the Security
Conference because this would make it harder to
obtain a binding agreement on the subject at the
force reduction talks'
j Another of Moscow's major goals is to
insti utionalize the Soviet voice in European
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developments through the adoption of-some type base issue. The dissidents, the self-styled Military
of post-conference political machinery. Acting at Station's Opponents, then passed a resolution
Moscow's behest, the Czechoslovaks have pro- criticizing the People's Alliance for "favoring a
posed creating a consultative committee that continued NATO presence in Iceland." The Com-
would meet regularly, ostensibly to implement z~~munist leadership faces a dilemma in dealing with
the work of the conference~~~fhe EC Nine recently the base issue. As the architects of the agreement
agreed not to accept this proposal, however, and
will suggest instead that appropriate officials meet
after several years to determine whether the
agreements signed at the conference have been
arried out. The Soviets and their allies will
doubtless oppose this suggestion
=~ i The Soviets continue to insist that the final
~, sttage bf the conference take place early this sum-
mer and at the summit. Party boss Brezhnev made
'these points in recent letters to Chancellor Brandt
and President Pompidou. The Western representa-
tives maintain that the timing and level of the
concluding stage depends on the results of the
`~ `~ Although differences still exist, all three of
Iceland's governing parties, including the Commu-
nist People's Alliance, are publicly backing away
from the coalition's previously expressed aim of
achieving total withdrawal of US forces from the
NATO base at Keflavik during the government's
current term. Youth groups in these parties, how-
ever, are criticizing their leaders and resisting this
shift in policy
~, The government's temporizing attitude to-
vvard the base issue probably is attributable to the
success of a pro-base signai:ure campaign, which
reached the 46,000 marbc earlier this week.
Politicians apparently view the drive's early
success as a good indication that a majority of the
people support the base:j
~. I~Even Communist opposition is flagging.
Warty chairman Ragnar Arnalds was forced to
stop a speech he was giving to a Communist-front
youth organization when tFie audience jeered his
rationalization of the party's new approach to the
among the governing parties that calls for troop
withdrawal, the Communists are under extreme
pressure to uphold that line but, by doing so,
they risk toppling the coalition and being ex-
cluded from the successor governmenf~
'' platform agreement never specified that the
defense force must leave during the present
electoral period
~,; Young members of the Progressive Party, the
c'n~ain component of the coalition, attacked their
leaders for violating the "will of the majority" by
calling for only a reduction in base personnel
rather than for complete troop withdrawal. Their
charge probably resulted from recent remarks by
party chairman and Prime Minister Olafur
~~Johannesson, who claimed that the coalition
i~ The third coalition partner, Hannibal
Val~imarsson's Liberal Left Organization, also is
split over the base issue. The party's Reykjavik
branch rejected Valdimarsson's recent comment
that it would be in Iceland's interest to retain the
base. The "generation gap" also extends to the
opposition Social Democratic Party, which has
generally supported the base. The party's youth
organization takes the position that party leaders
should be striving to rid Iceland of the defense
force, not supporting its retention
~~,k, After postponing the next round of base
negotiations three times, Foreign Minister
Agustsson recently told the US Embassy he has
no specific date in mind but would give seven
days' notice when the government was ready to
reopen the talks. The government, as well as the
political parties, currently is preoccupied with
efforts to avert a general strike and is unlikely to
address the base issue again until a wage settle-
ment is achieved and the strike threat has
passed.
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~~ ~" ~he offshore island disputes received verbal
attention during the past week, but military ac-
(; tion was limited to patrolling in the Spratly Island
waters by warships of some of the countries con-
cerned. South Vietnam, Nationalist China, and
the Philippines all restated their various claims in
public statements but avoided any suggestion that
they were ready for a military confrontation
~~l- Saigon softened its earlier statement, which
had promised to defend claims to both the
Spratlys and the Paracels, by noting that it is
~ b "disposed" to settle territorial disputes by nego-
tiation. A South Vietnamese Foreign Ministry
spokesman declared that Saigon approves "in
principle" a Philippine proposal to discuss the
question of sovereignty over the Spratlys, but he
was careful not to commit South Vietnam to
consider any "pie splitting" arrangement with
Manila, much less with Peking. For its part, in an
apparent gesture toward defusing tension over the
islands, Peking on February 17 released all of the
remaining South Vietnamese prisoners it had
captured last month in the Paracels.
between Soviet support for the idea and the al-
leged bellicosity of the US move at Diego Garcia:j
5 _3 There will be more along these lines. The
Soviets may, for example, revive Brezhnev's 1971
proposal to limit great power naval deployments
far from their own shores. The Soviets never
really followed up on Brezhnev's suggestion, but
they have kept the idea alive in various journals
and alluded to it in the central press last Novem-
ber when the US deployed a carrier task farce
into the Indian Ocean after the Middle East war.
At a minimum, the Soviets will exploit the oppo-
sition of many littoral states to great power naval
rivalry in the Indian Ocean, hoping to increase the
political costs for the US of the decision to make
greater use of Diego Garcia~.~
5 3~fhe USSR may increase its efforts to per-
suade India to grant the Soviet Navy privileged
access to Indian ports, although it is unlikely that
New Delhi will change its present even-handed
policy. The Soviets will probably also make new
attempts to get naval reconnaissance facilities in
the area. They are building an airfield for the
Somalis near Mogadiscio, for example, which
could ultimately support Soviet naval reconnais-
sance aircraft
~ ~ Soviet propaganda has been highlighting the
dan~er to the littoral countries of the Indian
Ocean stemming from the US-UK agreement to
expand the naval base at Diego Garcia. Pravda, for
example, charged on February 10 that the con-
struction of another US base in the area was
proof that the Pentagon plans to intimidate Afri-
can liberation movements and countries striving
for their political and economic independence.?
t ~ Moscow has also warmed up to the Ceylon-
ese proposal that the Indian Ocean be declared a
zone of peace and has pointed to the contrast
~ Moscow is genuinely concerned that the US
deci ion presages a larger US naval presence in the
Indian Ocean. The Soviets are afraid that the US
eventually intends to move at least some of the
naval forces now off Vietnam to a permanent
station in the Indian Ocean, where the would
impinge more directly on Soviet interests
5- .3 `In all likelihood, Moscow will increase the
size Iof its own naval forces in the area. It would
have taken this step no matter what the US did
since the Soviet force in the Indian Ocean is still
not as large as that of the Western navies, but the
recent US announcement probably means that
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Moscow will have to act sooiner than it had ~ ~~ ~ In the other Arab capitals, Ceausescu re-
planned. Any permanent increase in the near ceiv~d more guarded treatment; Romania's diplo-
future will require the USSR to draw down forces ~ matic ties with Israel were clearly the sticking
elsewhere:l point. In every instance, however, communiques
_~ ~1n sum, Moscow's military options are not
attractive. Realization of this could cause the
USSR to give serious attention to the various
Indian- Ocean disarmament schemes rather than
simply trying to exploit them for propaganda
purposes.
CEAUSESCU'S MIDDLE EAST GAMBIT
?1
' 'resident Ceausescu's nine-day whirlwind
tour of Libya, Lebanon, Syria, and Iraq drama-
tized the flexibility of Romanian foreign policy,
but the tour was essentially a triumph of image
over substance. Nevertheless, the result is impor-
tant to Bucharest, which provably recognized
from the outset that Ceausescu'~s talks with some
of the Arab world's more immoderate leaders
would not produce significant results.
'? ~Ceausescu's first stop, in Tripoli, brought the
most hospitable reception of the tour. Anxious to
improve his tarnished international image, Presi-
~tent Qadhafi overlooked Ceausescu's sympathies
?toward Israel and warmly welcomed the Roma-
nian leader as the first East European head of
state to visit Libya. Six bilateral cooperation
agreements were signed, and the establishment of
diplomatic ties was approved in principle.
~~
sumrriarizing the talks managed to paper over
contentious issues and to call for increased eco-
nomic and political cooperation. The sensitive
rr~atter of a threatened Arab boycott of Roma-
nian goods was studiously avoided in public, but
it doubtless came up during private talks.)
Throughout the tour, Ceausescu emphasized
th~~t Romania stood behind the "just cause" of
tl~e Arabs. Without showing any willingness to
a+ter his country's attitude toward Israel, he im-
plied areadiness to use his influence in Tel Aviv
in support of Arab interests
ti`?f ]Romania's capability to influence the Israelis
is evidently quite limited.
~jJ ~Cn balance, the tour underscored Romania's
Bete urination to continue to seek a constructive,
a~~tivist role in Middle East peace efforts. In that
context, the trip may help salve the bruised pride
Rom