WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A011400210001-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 23
• Document Creation Date: December 21, 2016
• Document Release Date: February 1, 2008
• Sequence Number: 1
• Publication Date: November 12, 1976
• Content Type: SUMMARY

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Iq
State Dept. review completed
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Secret
Weekly Summary
DOS review completed
Secret
CI WS 76-046
No. 0046/76
November 12, 1976
Copy No 44
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CONTENTS
-v,th or
,: 6:it
'ffice c 2
c any
once ?ind 1
=chnol, v
3 Far East
China-USSR
Namibia; Angola 25X1
25X1
USSR-Yugoslavia; 25X1
USSR-Poland
25X1
9 Europe
Greece-Turkey; Albania
12 China: Economic Policy
14 Japan: Concern Over Recovery
15 French Territory of the Afars and Issas
18 Warsaw Pact: Summit Meeting This Month
Comments and queries on the contents of this
publication are welcome. They may be
directed to the editor of the Weekly
Summary
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LEBANON
Syria took its first steps this week to
carry out the cease-fire provisions en-
dorsed at last month's Arab summit in
Cairo. Syrian army units, in their role as
the principal component of the enlarged
Arab League peacekeeping force, moved
on November 10 into the Christian and
Muslim suburbs of Beirut and took up
positions near the airport and in the hills
overlooking the Christian port of Juniyah.
The Syrian moves secured their control
over the main north and south access
routes to the capital.
The Syrians are expected to enter west
Beirut soon and to begin to fan out from
the capital to open up the Sidon-Beirut
and Beirut-Tripoli roads. Earlier in the
week, Syrian forces gained control over
some key road junctions in the central
mountains, occupying positions near the
leftist stronghold of Alayli on the main
Tripoli
Beirut-Damascus highway and within the
much fought over Christian villages of
Mutayn and Anyturah.
Both Christian and Muslim militias
have complied with orders from their
leaders to pull back in the face of the
Syrian advance, but are stockpiling their
heavy weapons to avoid confiscation.
Palestinian guerrillas and Lebanese lef-
tists are reportedly also stockpiling their
heavy weapons.
None of the combatants is prepared to
give up their weapons voluntarily. They
do not trust each other or the Syrians and
are afraid that they would weaken their
bargaining position by handing over their
weapons before negotiations over
Lebanon's future have even begun.
The Syrians thus face the prospect of
having at some point to disarm these
groups by force or of policing an armed
truce that could deteriorate again and
jeopardize Syrian efforts to restore
political stability. For the present, the
Syrians are likely to move cautiously,
hoping first to limit these groups' access
to outside sources of resupply. In that
way, Damascus probably hopes to disarm
these groups one at a time, eliminating
some of them, thereby leaving the
Lebanese little choice but to seek a
political solution.
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P
President Sadat discusses new cabinet with Prime Minister Salim (c) and Vice President Mubarak
President Sadat and Prime Minister
Salim announced a cabinet shuffle on
November 9 following receipt of
parliamentary election returns giving the
pro-government slate a large majority.
The cabinet reorganization may help to
strengthen the management of Egypt's
shaky economy; no significant port-
folios outside the economic sector were
affected.
Final returns in the parliamentary elec-
tion-held initially on October 28 with a
runoff on November 4-give the
pro-government organization within the
Arab Socialist Union 280 of the 342
elected People's Assembly seats.
Members of the Arab Socialist Union's
leftist organization took only two
seats; candidates of the rightist organ-
ization won 12. Independents running
outside the sponsorship of any Socialist
Union group won 48 seats.
Probably a sizable number of the in-
dependents will take an opposition stance.
No serious challenge to government
policies is expected from the new
Assembly, but it may not be as easy to
manipulate as were its predecessors.
The new cabinet will bring prominent
economist Abdul Munim Qaysuni to the
newly created post of deputy prime
minister for financial and economic af-
fairs-a portfolio that will give him
overall supervision of the large number of
ministries dealing with economic matters.
These have previously reported directly to
Salim, who has no, economic back-
ground and little feel for Egypt's eco-
nomic needs.
Qaysuni-who originally formulated
the economic liberalization policy that
Sadat instituted a few years ago-will re-
tain the chairmanship of two banks and
may thus not have adequate time to watch
over the economy. On the other hand, the
two key economic ministries have gone to
Qaysuni proteges, and this may help
assure more centralized and competent
direction of economic affairs without his
direct oversight.
Qaysuni has a long-standing reputation
as a capable economist and may be able to
attract back into government service
some of the reputable Egyptian
economists who have left over the years.
IRAQ-USSR J Z 16
The Iraqi air force exfects to receive
some MIG-25 Foxbat aircraft from the
USSR, according to the US
interests section in Ba hdad.
decided not to purchase Mirage intercep-
tors from France. A deal for about 50
Mirages had been under discussion for
more than a year
buying high-performance aircraft from a
Western supplier at this time might upset
its relationship with the USSR. Iraq
reportedly is also concerned that France
may prove an unreliable supplier in time
of crisis, such as another Arab-Israeli
war.
The Soviets have not yet exported the
MIG-25, and Egypt is the only country
outside the Warsaw Pact in which Fox-
bats have been based. Several Foxbat
reconnaissance aircraft were temporarily
sent to Egypt in 1970 and again during the
Middle East war in 1973, but they were
flown only by Soviet pilots and remained
under Soviet control.
The USSR has not given Iraq
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everything it wants in types and quantities
of military hardware, but the Soviets have
demonstrated the high priority they place
on relations with Iraq by supplying
military equipment that had not previous-
ly been exported.
Iraq was the first country to receive the
TU-22 medium bomber and the Osa 11
guided-missile boat. Iraq also has more
MIG-23 Floggers than any country out-
side the Warsaw Pact. The Iraqi govern-
ment evidently hopes that, because the re-
cent defection of a Soviet pilot with his
MIG-25 to Japan has given the West
detailed information about the plane's
capabilities, the USSR will now be even
more forthcoming toward Iraq.
If Iraq does receive the MIG-25, it
would be many months before the country
would have sufficient personnel adequate-
ly trained to fly and maintain the aircraft.
We have no reports that such training is
under way. Even after the Iraqis are train-
ed, a Soviet contingent would probably be
necessary to help operate and main-
tain the Foxbats.
CHINA-USSR 36 -5 2"
China marked the 59th anniversary of
the Russian Revolution in a routine
fashion this week with a restrained
message of congratulations-the first
public message to the Soviets since Chair-
man Mao's death-and low-level protocol
appearances at official functions in Pek-
ing, Moscow, and at Soviet embassies
abroad.
The message broke no new ground,
stating the Chinese people's support for
"defending the path" of the October
Revolution and, as in the past, asserting
that differences of principle should not
stand in the way of normal state relations.
IRAQ ~_-, /U
Kurdish guerrilla activity in northern
Iraq appears to be increasing somewhat
as winter sets in-a time when govern-
ment troops are at a disadvantage in the
rough terrain. The rebels' main area of
operations has now expanded from
western Iraq to the mountainous territory
near the Iranian border, scene of the
heaviest fighting during the full-scale Kur-
dish rebellion two years ago.
The present, limited Kurdish insurgen-
cy is not the work of the followers of
Mulla Mustafa Barzani, who fled to Iran
after the collapse of their rebellion in
March 1975 and who are apparently still
held in check by the Shah. The guerrillas
now active are members of leftist Jalal
Talabani's Kurdisian National Union,
which is based in the border area of
northeastern Syria.
The upsurge in activity by the Talabani
Kurds over the past few months suggests
that Syria may have encouraged them in
retaliation for Iraq's military buildup
along the Syrian border last June.
The note did not, however, repeat last
year's call for settling the long-standing
border dispute between the two countries,
a sign that China is in no mood to take up
this complicated question, at least for the
time being.
Peking's top diplomat in Moscow sat
through the Kremlin's annual reception
for the first time in several years, ap-
parently because Politburo member
Kulakov's comments on Sino-Soviet
relations did not contain the sharply
worded criticism of China that had
prompted Chinese walkouts in the past.
Vice Foreign Minister Yu Chan, who
again this year was China's highest rank-
ing guest at the Soviet embassy ceremony
in Peking, reportedly stayed longer than
usual for a "sharp exchange" with Soviet
Ambassador Tolstikov. The Soviet
diplomat told US officials later that Yu
Any strengthening of Kurdish guerrilla
capability will to a great extent depend on
whether the Syrians decide to increase
their support to the estimated 3,500 Iraqi
Kurds based in Syria.
Iraqi strongman Saddam Husayn is
treating the resurgence of rebel activity as
a politically sensitive matter. The
Baghdad press has not acknowledged
either the rash of rebel attacks against
military and police forces since June or
earlier Kurdish-instigated sabotage
operations in Iraqi oil fields.
Baghdad probably recognizes that its
recent policy of resettling Kurds in areas
remote from their tribal homelands has
created recruits for the Kurdish guerrilla
organizations. Tribesmen dispersed to the
south-an estimated 50,000-are
reportedly neither adjusting to the
warmer climate nor being accepted by
their Arab neighbors. Saddam Husayn
implicitly acknowledged the failure of the
resettlement policy by abruptly ending it
last July, but by then large segments of
the Kurdish population had been an-
tagonized.
had reiterated standard Chinese positions
on Sino-Soviet relations and implied that
Moscow does not anticipate any early
change in Peking's policies toward the
Soviet Union.
Soviet commentary on China at an-
niversary celebrations in Moscow was in
keeping with the ostensibly conciliatory
stance the Soviets have adopted since
Mao's death. In his Kremlin speech,
Kulakov reiterated Moscow's desire for
the restoration of good neighborly
relations in line with "the principles of
proletarian internationalism." In his dis-
cussion of Soviet relations with other
communist countries, he gave China a
higher precedence than it has had in re-
cent years. On the anniversary itself,
Defense Minister Ustinov did not mention
China at all; last year Grechko did.
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4
25X1
NAMIBIA 2 5- 2 9
Some sensitive political Tissues that
Prime Minister Vorster has previously
avoided may be brought to a head soon at
the multiracial Namibian constitutional
conference, which began one of its
periodic plenary sessions this week in
Windhoek, the territorial capital.
The session will consider a resolution,
adopted by the conference's constitutional
committee two weeks ago, calling for
creation of a multiracial interim govern-
ment within a few months to manage the
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transfer of functions from the existing
territorial administration to an indepen-
dent Namibian government. A target date
for independence of December 31, 1978,
was proposed by the constitutional com-
mittee last August.
Both the proposal for a target date and
the call for an early interim government
were intended to gloss over disagreements
among the 11 delegations to the con-
ference; the delegations represent the
whites and the 10 nonwhite ethnic groups
inhabiting the territory.
The white group and Pretoria apparent-
ly want Namibian independence under a
loose federal system that would enable the
whites to maintain control of Namibia's
mineral resources even though they com-
pose only 12 percent of the population.
Most of the nonwhite delegations, on the
other hand, want a central government
responsive to the nonwhite majority to
have ultimate control of the territory's
natural resources.
The nonwhite delegates are unlikely to
accept any interim arrangements that
tend to perpetuate the existing ethnic
homelands without making a start toward
setting up a strong central government.
Vorster has said that his government
will consider favorably any draft constitu-
tion or interim recommendation that is
adopted by a plenary session of the con-
ference. He may be so anxious to avert a
collapse of the conference that he will go
further toward accommodating the non-
whites than he previously intended. So
far, however, he has not clearly backed
the lone moderate member of the white
delegation, who has served as mediator
between his hard-line colleagues and the
nonwhite delegates.
ANGOLA 2 g-2
Angolan President Agostinho Neto is
assuming the functions of prime minister,
thereby becoming head of government as
well as chief of state and party leader of
the Popular Movement. This announce-
ment was included in a lengthy statement
President Agostinho Neto and party chief Breznnev exchange
Soviet-Angolan documents following signing in October
issued after a recently concluded central
committee plenary session. No new posi-
tion has been announced for former prime
minister Nascimento.
The statement also sets forth a broad-
ranging program for Angola's political
and economic development that carries a
strong Marxist thrust, calling for goals to
be pursued in the context of "scientific
socialism." This follows Neto's signature
in Moscow last month of a
Soviet-Angolan "friendship treaty" and a
party-to-party agreement.
The new program and Neto's enhanced
status may have constituted a package put
together to accommodate factional
differences within the Popular Movement.
Some elements of the program differ con-
siderably from policies that Neto earlier
espoused.
Heretofore, Neto has been identified
with efforts to broaden Angola's
economic and political ties with the West
and to follow a policy of nonalignment.
The statement includes references to such
policies, but places heavy stress on
Angola's special relations with the USSR
and Cuba.
In the economic sector, the new
program calls for strong state control over
the economy through nationalization and
centralized planning. Provision is made
for a private sector, but it is to be sub-
jected to strict controls. Until now, the
Angolan government has appeared anx-
ious to maintain Angola's access to
Western markets and technology.
The Popular Movement is charged with
a major role in mobilizing popular sup-
port for the regime. It will have direct
authority over all mass organizations and
will assume the functions of the informa-
tion ministry, which is to be abolished. It
is possible that other changes in the struc-
ture of the government may be in the of-
fing. Rumors to this effect have been cir-
culating in Luanda since Neto returned
from Moscow.
The central committee also approved a
five-year plan for reorganizing and up-
grading the country's armed forces. This
will undoubtedly be carried out under
Soviet and Cuban direction.
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USSR-YUGOSLAVIA
Yugoslav President Tito and Soviet
party leader Brezhnev will probably seek
to stabilize further the often mercurial
relationship between their countries when
they meet in Yugoslavia on November 15,
16, and 17.
The task will not be easy, primarily
because of ideological differences and a
deep-seated mutual distrust. The
Yugoslav press, for example, is now
trumpeting Belgrade's independent course
in world affairs and its espousal of
polycentrism in the communist move-
ment. Moscow, on the other hand, wants
the Yugoslavs to help advance the idea of
a "socialist community" by more openly
and consistently supporting Soviet goals.
A Soviet diplomat in Belgrade recently
admitted that one of Brezhnev's tasks will
be to try to get Yugoslavia to mute its
polemics against the USSR. Comments
from members of the local diplomatic
community suggest that the
USSR-Yugoslavia's largest trading
partner-will offer economic incentives
for increased Yugoslav cooperation. Dur-
ing Brezhnev's 1971 visit, he offered a
$540 million development credit, but only
a little of it has so far been used. Belgrade
is not likely to make fundamental changes
in its independent foreign policy, nor do
the Soviets expect any.
Yugoslavs have expressed their concern
that the 84-year-old President has grown
increasingly susceptible to Brezhnev's ca-
jolery. They fear he may grant the Soviets
greater access to Yugoslavia's naval
facilities on the Adriatic.
The last bilateral visit between the two
leaders took place three years ago in Kiev.
Since then, relations were soured by
Yugoslav apprehensions about Soviet
support for Yugoslav subversives.
Although trials of the major pro-Soviet
"Cominformists" ended last July, the
Yugoslavs will press Brezhnev to reaffirm
public Soviet promises of noninterference
in Belgrade's internal affairs. Brezhnev
will make this gesture, but the Yugoslavs,
in light of their past experience, will take
these assurances with a grain of salt.
USSR-POLAND
25X1
N r
Soviet party leader Brezhnev has given
his personal endorsement to visiting
Polish party chief Gierek, who is leading a
party-state delegation on an official
week-long visit to the USSR. Gierek is
seeking a public show of Moscow's
political and economic support at a time
when his regime is being severely tested at
home.
In a Kremlin speech on November 9,
Brezhnev referred to Gierek as the "true
son of People's Poland," an "eminent
statesman" of the international com-
munist movement and a great friend of
the Soviet Union. He endorsed Gierek's
policy of "radical modernization of all
Polish industry" and implied that
Moscow would give some additional help.
Brezhnev expressed confidence that
despite "tricky problems" Warsaw would
successfully implement its programs.
Gierek emphasized Poland's close and
growing cooperation with the USSR and
Poland's contributions to the strength of
the socialist community. The official talks
were concluded on November 10 with the
signing of a joint declaration on coopera-
tion. 25X1
No details have been released yet on
what the Soviets are prepared to do to
ease Poland's current difficulties. A
Polish diplomat had indicated earlier that
"significant" economic agreements would
be signed, and a Soviet diplomat in War-
saw had asserted that the Poles will get 90
percent of what they want. These
agreements were probably hammered out
during a visit to Moscow by Prim'
Minister Jaroszewicz on October 22
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Andean Pact: Chile Withdraws
Chile's withdrawal from the Andean
Pact on October 30 will open new
economic opportunities but at the cost of
losing some privileges it enjoyed under the
pact with Bolivia, Colombia, Ecuador,
Peru, and Venezuela.
Unfettered by Pact restrictions, Chile is
now free to reduce tariffs and to court
direct foreign investment on any terms it
can get. Chile wants foreign capital and
cheaper imports to increase economic
growth and to help reduce inflation. As a
price of withdrawal, Chile forfeits future
exclusive manufacturing rights for supply-
ing the member countries under the Pact's
petrochemical and light engineering
programs.
A joint Andean Pact - Chilean com-
mittee has been established to oversee
Chilean cooperation with the Pact in
production, trade, finance, and
technology. Chile has agreed to imple-
ment the planned Andean road transpor-
tation system and to honor Pact policies
promoting local multinational enter-
prises. Chile's access to loans from the
Andean Development Corporation will
not be affected.
Chile believes its economic and political
interests can better be served by associa-
tion with the River Plate Basin coun-
tries-Argentina, Bolivia, Brazil,
Paraguay, and Uruguay. Over the past
three years, Chile's trade with these
nations has been twice that of its trade
with the Andean Pact countries, excluding
Bolivia, a member of both groups. Chile
has already accepted observer status in
the River Plate Basin Group.
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GREECE-TURKEY
Talks between Greece and Turkey over
control of the Aegean continental shelf
and airspace have so far been moving
smoothly. The negotiators are still skir-
ting the most important aspects of both
controversies, however, and the Greeks,
who feel buoyed by the US election
results, may now be more inclined to stall
on the most important issues.
In the continental shelf talks, which
began in Bern on November 2, the two
sides are moving toward an agreement to
establish a committee of experts to for-
mulate procedures for substantive
negotiations. According to a Greek
Foreign Ministry official, this agreement
will be referred to the Greek and Turkish
foreign ministers for approval, probably
when they meet at the NATO minis-
terial meetings next month. The ex-
perts would commence their work
thereafter.
The airspace talks that are going on
simultaneously in Paris have produced an
agreement to establish a hot line between
the Greek and Turkish air defense centers.
Each side has also agreed to provide the
other with schedules of its military exer-
cises in the Aegean six months in advance.
The negotiators have yet to agree,
however, on terms for the advance
notification of military flights over
the Aegean. This has been the main block
to a settlement in previous consul-
tations.
The Greeks, who only reluctantly
agreed earlier this fall to direct
negotiations on the continental shelf dis-
pute, seem to believe that the new US ad-
ministration will be more responsive to
the Greek position on the Aegean and also
on Cyprus. They may therefore be more
inclined than before to resist Turkish
demands, or at least to stall on the sub-
stantive questions.
ALBANIA
4~ (~, (; y
Hoxha delivered a marathon 14-hour
speech-spaced out over two days-that
vigorously defended his leadership.
Appealing to the strong sense of
nationalism inherent in the Albanians,
Hoxha proudly boasted that Albania's
isolation protected the country from "the
invasion of enslaving credits, tourists and
spies, and decadent culture and
degeneration." These assertions did not
keep him from declaring Albania's inten-
tion to pursue economic and commercial
ties with the West.
Acknowledging the strong role played
by China in assisting Albania's economic
development, Hoxha was nonetheless
somewhat reserved, and his remarks
probably reflected his uncertainty about
recent developments in Peking.
Hoxha's comments on foreign policy
included the predictable denunciation of
everything the USSR stands for and
enthusiastic praise for progress in
Albanian-French relations. His remarks
on the Balkan countries broke no new
ground, and his continuing, adamant con-
demnation of the nonaligned movement
will not sit well with China, which has
been urging Albania to adopt a more ac-
Party leader Enver Hoxha last week set
a firm course of continued isolation and
self-reliance at the Albanian Communist
Party's seventh congress. The country's
serious economic problems, however, ap-
parently dictated several personnel shifts
and a note of cautious pragmatism re-
garding foreign economic contacts.
At the national level, the leadership of
Hoxha and Premier Mehinet Shehu
appears as entrenched as ever, and the size
of the Politburo remains at 12 full
members. The number of candidate
members on the ruling body was expand-
ed to five and includes two new faces.
The new candidate Politburo members
are Lenka Cuko and Simon Stefani. They
typify the sort of young party leaders with
technical backgrounds and proven ad-
ministrative ability on the district level
that Hoxha has advanced in recent years.
Stefani has a strong economic
background. Additions to the Central
Committee include the new
ministers-such as education and
agriculture-who figured prominently in
Hoxha's apparent efforts in recent years
to rejuvenate the Albanian party
hierarchy.
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China's new leaders are pragmatic men, keenly aware of
the importance of foreign trade and technology to the country's
modernization program. Long-standing economic problems,
which had been entangled in political struggles for years, may
now be more susceptible to solution.
The shakeup of China's top policy
makers last month greatly increases the
chance of early moves to solve long-
standing economic problems.
Should Chairman Hua Kuo-feng
relinquish his post as Premier, as is likely,
Vice Premier Li Hsien-nien is the most
logical replacement. Li, a long-time
specialist in economic affairs, is
pragmatic and politically astute much in
the mold of the late Chou En-lai.
The ouster of China's most prominent
leftists leaves moderates like Li with more
China: Economic Policy
power than they have had in over a decade
and removes a major obstacle to solving
economic problems that had become inex-
tricably entangled in the political struggle.
Legacy of 1960s
The wholesale purge of veteran ad-
ministrators during the cultural revolu-
tion from 1966 to 1968 created such
animosity and so fractured the Chinese
leadership that consensus on economic
policy became all but impossible. Peking
has since been faced with a growing list of
unresolved economic problems: structural
imbalances in industry, bottlenecks in
transport, lagging labor productivity, and
slow agricultural growth. Some
problems-notably in agriculture-were
addressed in the fourth five-year plan
(1971-1975), but most were dealt with in a
temporizing fashion.
In early 1975, Chou En-lai-in his last
major address-announced a 25-year
program aimed at the modernization of
agriculture, industry, national defense,
and science and technology. As Chou's
health deteriorated, the task of overseeing
this program fell to Vice Premier Teng
Hsiao-ping, who had just been
rehabilitated after being a victim of the
cultural revolution.
The program ran afoul of leftist attacks
on Teng, however. By April 1976, the lef-
tists had succeeded in banishing Teng
from all positions of authority; Hua
Kuo-feng took over as China's chief ad-
ministrator. Meanwhile, the fragile con-
sensus of early 1975 disintegrated, and
drafting of a new fifth five-year plan
(1976-1980) was postponed.
Apart from firming up the five-year
plan, the two items of immediate concern
to the new Hua regime are the role foreign
trade is to play in China's economic
development and the extent to which
greater material incentives are needed.
There also are decisions on the revitaliza-
tion of scientific and technical education
and research and the degree of centraliza-
tion in planning and management.
S
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New Dynamism
With the moderate faction now domi-
nant, we expect a more dynamic foreign
trade policy, emphasizing imports of
whole plants and high-technology items.
Whether this policy will be pursued as ac-
tively as in the early 1970s remains to be
seen.
Opposition to greater foreign trade has
not come from leftists alone. For exam-
ple, coal shortages have led to complaints
from some ministerial and provincial
authorities that exports of crude oil have
been excessive and responsible in part for
the poor overall showing of the economy
in recent years. Since problems with the
coal industry are expected to persist, the
level of oil exports will continue to be a
point of contention, even within the new
leadership.
Despite this controversy, China will
probably again have to push oil exports.
Foreign Trade Minister Li Chiang, in
mid-October talks with Italian trade of-
ficials, reportedly acknowledged that
"China certainly needs technology"; he
went on to say that, although China's raw
materials will increasingly be required for
domestic industry, "there will also always
be a certain share available for foreign
buyers." While these statements stop
short of a freewheeling trade policy based
on oil exports, they point to a return to
more liberal trade practices.
The next few months should also bring
a greater stress on material incentives, in-
cluding the prospect of a wage increase
for the urban work force. After more than
a decade of stagnating money incomes,
China's urban workers have in recent
years shown a growing dissatisfaction
with wages. Serious discontent surfaced in
1974, when worker absenteeism and slow-
downs were widespread, and has con-
tinued in less dramatic forms in 1975 and
1976 at some cost to economic growth.
Peking's divided leadership initially
promised action on wage reform; later,
under pressure from the leftists, the
leaders backtracked and denounced
material incentives as "bourgeois."
The inability of the leadership to deal
with grievances over eroding living stan-
Posters in Peking rolling stock plant call on workers to
increase production in memory of Mao Tse-tung.
dards has been the source of widespread
worker ill feeling toward the four ousted
leftists. The unprecedented jubilation dis-
played in the mass demonstrations
celebrating Hua's appointment and
denouncing the leftists partly reflects a
belief that the new leadership will address
the economic condition of urban workers.
Whatever wage relief is forthcoming, it
probably will be small. A large general
wage increase would require a bigger
reduction in investment than the
moderates would be willing to accept.
Even a small wage increase, however,
should greatly improve worker morale
and increase productivity.
Other Possible Reforms
The new leadership is keenly aware of
the importance of scientific and technical
work to China's modernization. The
moderates view most policy in education
and research since the cultural revolution
as impeding progress and believe that
more traditional institutions will better
serve China's needs.
The moderates are likely to attempt to
return leadership positions in science and
technology to qualified scientists and
engineers, reducing the party's role to that
of providing general policy guidance. All
leadership factions advocate "self-
reliance," but the moderates assert that
leftist education changes are destroying
the country's ability to develop the human
capital that can make China
technologically independent.
Reforms in planning and management
most likely will deal with inadequate plan-
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ping at the local levels, excessive party in-
volvement in enterprise management, the
decline in labor force discipline and
productivity, and confusion caused by the
sudden proliferation of worker advisory
groups.
The moderates will have to proceed
with care; many of the cultural revolution
innovations are popular. Extending cen-
tral control to local plants would impinge
on the power of local authorities and
would run into opposition. Similarly, a
movement back toward "one-man rule"
and the enforcement of stronger work
rules would encounter worker resistance. 25X1
The moderates will probably first attempt
to curb disruptive excesses; stronger ac-
Japanese leaders are worried about the slowdown in
economic recovery. They seem to be moving toward the adop-
tion of measures to stimulate the economy.
D
Japan probably will soon adopt mildly
stimulative economic measures as con-
cern increases over the slowdown in
economic recovery.
Recent industrial production figures
show output down in September for the
second straight month; the decline almost
certainly continued in October as well.
Consumer spending has been lackluster
in recent months. Business investment has
not rebounded despite measures taken
earlier this year to increase investment by
the electric power industry.
Government spending has slowed
because of serious delays in imple-
menting rate increases for govern-
ment monopolies, as well as delays in
passing legislation that would allow
the government to borrow needed funds.
Consumer prices are rising faster than
the government had anticipated. Prices
were up nearly 10 percent in September
and October over 1975 levels. Upward
pressures will continue because of hikes in
public utility rates and railway fares, as
well as increases in import prices, par-
ticularly for oil. Inflation on an annual
basis probably will continue at roughly 10
Japan: Concern Over Recovery
percent through early 1977; the govern-
ment had hoped to keep it to 8 percent by
next March.
Japan's Ministry of International
Trade and Industry recently proposed a
reflationary package that would provide
loans to increase housing starts by 50,000
units and new funds for business in the
form of low-interest loans from govern-
ment financial institutions.
The ministry also is encouraging the
government to promote capital spending
by the oil and electric power industries, to
lower long-term interest rates, and to
assure a continued boom in whole plant
exports. Because of concern over worsen-
ing inflation, the ministry did not propose
increased public works spending, normal-
ly Japan's most effective pump-priming
tool.
Prospects for Next Year
Without some new stimulative moves,
Japanese economic growth could fall
short of Tokyo's 5.6-percent target for the
year ending in March 1977. Most
economists in and out of the Japanese
government agree, however, that growth
for the 1977 calendar year will be higher
than it was this year.
Corporate profits reportedly increased
30 to 40 percent in the April-
to-September period over the previous
six-month period, making a strong
recovery in investment likely for the next
year. Inventory accumulation and delayed
government spending also should resume
in the next few months.
Over the past several years, Japanese
industrial production has followed US in-
dustrial production trends because of
close trade and financial ties between the
two countries. If Japan views the US
economic slowdown as only temporary,
the council is even more likely to adopt
only cautious reflationary measures.
The general election, which probably
will be scheduled for December 5, adds a
sense of urgency to the economic
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Independence may come to the last European colony in
Africa by the middle of next year. The prospect has already
heightened the conflict in interests and ambitions between
neighboring Ethiopia and Somalia.
French Territory of the Afars and Issas
France is moving ahead with plans to
sponsor next spring a referendum on in-
dependence in the French Territory of the
Afars and Issas. This would be followed
by the drafting of a constitution and the
election of a new government. A transfer
of power could take place as early as
mid-1977.
There is little room for optimism that
the transition will be peaceful or that the
independence of the FTAI can be main-
tained, especially if France decides to
withdraw its military forces from the
territory.
At first glance it appears France has
made some progress in the past few
months in reconciling antagonistic
political forces and ethnic groups in the
FTAI. A widely held sense of nationalism
that would contribute to stability when
the territory becomes independent has not
developed, however. Somalia has not
abandoned its historic goal of annexing
the FTAI, and Ethiopia remains deter-
mined to prevent a Somali takeover.
Somalia and Ethiopia are meddling in
territorial affairs and could upset French
efforts to arrange a peaceful transfer of
power.
France's primary concern is that the
new government of the territory be
recognized and guaranteed by the states in
the region-at least long enough for
France to avoid blame for any conflict
that might arise.
The French government now seems op-
timistic that the situation will be stable
enough to allow it to retain a military
presence of some sort in the territory for a
while after independence. Officials have
told US embassy officers in Paris,
however, that they are not yet certain
what military arrangements they will be
able to make.
Neither the French nor the territory's
new government would be likely to press
for a large military force. The local
government would not want to com-
promise its independence, and the French
are reluctant to commit themselves to its
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Abdallah Mohamed Kamil
defense. They especially want to avoid
any activity that would risk substantial
French casualties.
The French appear to be making plans
against the possibility of losing their naval
base at Djibouti-the most important one
they now have in the Indian Ocean. For
example, they recently transferred a
maintenance and supply ship from their
Atlantic fleet to the Indian Ocean fleet.
The ship would augment facilities at the
French island of La Reunion if the
Djibouti base is closed.
The Territorial Government
Abdallah Mohamed Kamil, who
became head of the government in FTAI
last July with French connivance, is
attempting to rally the territory's conten-
tious political and ethnic groups behind
his regime. Kamil is appealing for support
from both his fellow Afars and their
traditional enemies-the territory's ethnic
Somalis, the bulk of whom are Issas.
Kamil's efforts toward ethnic recon-
ciliation are in accord with an agreement
providing for greater political representa-
tion of ethnic Somalis reached last June
between France and the FTAI's three
major political groups: The African
People's Independence League, the
National Independence Union, and a bloc
of unaffiliated parliamentary deputies
who support the present government.
France sponsored the agreement in the
belief that a government reflecting the ac-
tual composition of the population would
be better able to resist Somalia's efforts to
annex the territory.
Ethnic Somalis constitute a majority of
the population, but restrictive nationality
laws and the rigging of elections have per-
mitted the Afars-the long-time French
surrogates-to dominate local politics.
The agreement called for the creation of a .
national unity government and for en-
franchising additional ethnic Somalis, vir-
tually assuring their dominance after in-
dependence.
Kamil, 39, was a high-level civil servant
before being hand-picked by the French to
lead the government. Kamil's policies
appear to be pro-Western. His political
savvy and ability to balance the contend-
ing forces of the territory's factional
politics have yet to be tested.
Kamil has said little about his inten-
tions. In his public statements, he fre-
quently gives the impression that his
government intends to hold power only
until independence is achieved. On the key
question of whether an independent FTAI
will conclude military agreements with
France, Kamil has said that the decision
will have to be made by the post-
independencegovernment.
In recent public statements, Kamil has
gone out of his way to accuse Ethiopia of
meddling in FTAI affairs. At the same
time, he has tried to assure Addis Ababa
that an independent FTAI will not block
Ethiopian access to the port or railhead at
Djibouti, a vital Ethiopian interest.
The Ethiopians, who supported Ali
Aref, the leader of the National
Independence Union, when he was in of-
fice and had hoped to work in tandem
with France to protect the FTAI's
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territorial integrity against Somalia, have
sharply criticized Paris' recent moves.
They share Aref's belief that French
policy-either deliberately or because of
misguided assumptions-is playing into
the hands of Somalia.
The Ethiopians believe that the Paris
accords, and France's support for the
Kamil government, are at best based on
the false hope that Somalia will support
the FTAI's integrity if the Issas are given
greater political representation.
Ethiopia's suspicions have not been ended
by French assurances that Paris is
attempting to establish a strong govern-
ment that will protect Ethiopia's interest
in the territory.
League Influence
The African People's Independence
League has been the chief beneficiary of
recent political developments in the
FTAI. The broadening of the Issa
franchise will give it even more political
power. The League is better organized
than the other political groups in the
territory; it will probably control the first
independent government.
League leader Hassan Gouled, an Issa,
is thus widely regarded as having the best
chance to head the first post-independence
government. He is personally committed
to independence, but he has moved closer
of late to Somalia and the militant Front
for the Liberation of the Somali Coast, a
Somali-puppet organization.
Gouled says he has sought Somali sup-
port-Somalia has supplied the League
with money-only as a means to secure
the territory's independence, and he
professes to believe the Somali President's
assertion that he will support that in-
dependence.
Somalia Watching
Somali President Siad has apparently
concluded that the recent developments in
the FTAI have enhanced the chances of a
pro-Somali government coming to power
legally. Over the next few months,
Somalia will probably continue to support
the trends now under way in the territory.
It is unlikely to risk initiating terrorism or
guerrilla activity until it has a clearer no-
tion of French intentions.
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Siad has been very successful in draw-
ing the FTAI's political groups closer to
Somalia. With Somali encouragement,
the African People's Independence
League, the Front, and the parliamentary
supporters of the Kamil government have
banded together as the "United Front,"
the purpose of which is to confront France
with a unified position on independence
arrangements. Leaders of the three
groups met in Mogadiscio in late October,
25X1 pledged to intensify the "liberation
struggle," and agreed to meet again in
Djibouti in November to discuss strategy.
own military capabilities. The Somalis
may now have up to 8,000 troops in the
northwest.
Ethiopian Views
Since the ouster of Ali Aref, with whom
Ethiopia closely collaborated, Addis
Ababa has seemed resigned to the
likelihood of conflict with Somalia over
the FTAI. The ruling council has been
trying to prepare the public for this even-
tuality by frequent reminders of
traditional Ethiopian-Somali antipathy.
Ethiopia recently has attempted to im-
prove its military capability in border
areas. It has equipped armored units there
with new M-60 tanks and moved in new
units.
Ethiopia's military, however, has been
weakened by the continuing guerrilla war
in Eritrea and other provinces. Morale
and discipline have declined steadily and
many of the units along the Somali and
FTAI borders are understrength. Ethio-
pian forces in those areas number about
6,000 men.
Ethiopia has sought to enlist Moscow's
aid to restrain Somalia from moving into
the FTAI. The hope for such support is
one reason Ethiopia has attempted to
strengthen ties with Moscow and solicit
Soviet military aid.
The Ethiopians say they have received
some assurances from the Soviets, but
they consider them "less than satisfac-
tory." In fact, the Soviets' overriding in-
terest in protecting their heavy political
and military investment in Somalia allows
them little room for accommodating such
Ethiopian overtures.
Ethiopia rejects the idea, fostered by
France, that key Arab countries can be
relied on to restrain the irredentist policies
of Somalia, an Arab League member.
Ethiopia is aware that most Arab
governments support the Eritrean
separatists. Addis Ababa is not likely to
cooperate even with those Arab countries,
like Egypt and Saudi Arabia, that are
anxious to keep the FTAI out of the
Somali orbit in order to prevent what they
believe would be an inevitable expansion
of Soviet influence in the area.
open a consulate in Djibouti in order to
provide a means for funneling support to
"moderate" groups. Saudi Arabia is
reluctant to commit itself to giving major
financial assistance in the future,
however, because it believes France
should bear the major burden of sup-
porting an independent FTAI.
Saudi Arabia would probably find it
difficult to influence political
developments in the territory. For the
Saudis to wean the major political groups
away from Somalia probably would take
more money than the Saudis are willing to
spend and a greater sophistication about
FTAI politics than the Saudis possess.
It is doubtful that Saudi efforts to
strengthen FTAI nationalists, even if
applied with maximum effectiveness,
would be able significantly to influence
events in the area during the next year or
so. Somalia, because of the subversive and
guerrilla capabilities at its disposal, will
probably be able to manipulate events to
its advantage.
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A Warsaw Pact summit meeting scheduled for late this
month in Romania will give the USSR an opportunity to
reassert the "unity" of its views with those of its East European
allies.
S
Warsaw Pact: Summit Meeting This Month
The Warsaw Pact nations have sched-
uled a political summit meeting in
Bucharest for late November. This will be
the first meeting of the Pact's Political
Consultative Committee-which con-
venes at the party-leader level-since
April 1974 and the first held in Romania
in more than a decade.
Moscow has for some time been
trumpeting the virtues of the Pact's
political arm as an instrument of East
European political unity and cohesion.
'The Soviets have tried to use the Political
Consultative Committee as a mechanism
to secure formal, multilateral endorse-
ment of Soviet foreign policy views. In
effect, the Soviets use the Warsaw Pact to
provide a facade of legitimacy for both
Soviet political and military dominance in
Eastern Europe.
Within the Pact, the Political Con-
sultative Committee is the leading formal
body for political coordination and
overall direction of the alliance. The
irregularity of its infrequent meetings
reveals, however, that it is not the pri-
mary vehicle for political consultation
among the Pact members.
Although the Committee is supposed to
meet semiannually, it has met only 14
times in the 21 years of its existence. The
formal nature of its sessions, the require-
ment for unanimity, and the often conten-
tious nature of the issues under review
have all contributed to the Committee's
reduced role. Meetings of the Pact's
foreign ministers have been convened only
7 times since 1966.
The Soviets have had to resort to other
forums as substitutes for meetings of the
Political Consultative Committee. These
have included bilateral meetings between
party leaders of individual states and ad
hoc meetings outside of the Warsaw
Pact's formal structure to coordinate
foreign policy.
Formal high-level consultation within
the Warsaw Pact has been much less in-
tense than in the period before the Euro-
pean Security Conference last year.
Before Helsinki, the gatherings of foreign
ministers, party first secretaries, and the
Committee itself were devoted largely to
the general subject of the security con-
ference. Specific differences did crop up
during these discussions, but the Soviets
managed to avoid substantial dishar-
mony.
There are signs, however, that in the
aftermath of the European communist
party conference in East Berlin last June,
Moscow wishes to reaffirm its control
over the other members of the Pact. The
USSR gave greater weight last summer
than in former years to the bilateral
meetings usually held in the Crimea
between Soviet General Secretary
Brezhnev and East European leaders.
This year was the first time since 1973
that all the Warsaw Pact party leaders
showed up for separate talks with the
Soviet leader.
Preparing for Belgrade Meeting
With the European security and com-
munist conferences now behind them, the
Soviet leaders are concerned with
preparations for the meeting in Belgrade
next year to discuss implementation of the
security conference principles. The special
emphasis recently given to the role played
by the Political Consultative Committee
in European security matters suggests
that Moscow has obtained broad agree-
ment from the other Pact members to the
guidelines it wants adopted in Bucharest.
Differences exist among the East Euro-
peans on the pace of East European
compliance with some provisions of
the security conference's final document.
All indications suggest, however, that the
East European party chiefs share a com-
mon interest with Moscow in avoiding
recriminations at Belgrade and blunting
Western criticism of their lack of progress
in implementing the conference prin-
ciples.
Committee meetings normally rotate
from capital to capital, and it presumably
is Romania's turn to serve as host.
Nevertheless, the Romanian willingness
to be host at the summit meeting is just
the display of fraternal solidarity the
USSR wishes to foster. The meeting will
enable Soviet leaders to demonstrate to
the West that, despite some differences
between Moscow and Bucharest over the
nature of interparty relations, they can
agree on the broad questions relating to
European security matters.
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Coordinating foreign policy within the
formal political machinery of the Warsaw
Pact has frequently been a vexing chore
for the Soviets. On the meeting in
Yugoslavia next year, however, the in-
terests of the East European Pact
members broadly coincide with those of
the Soviet Union. Party leaders will
probably hammer out a joint statement
defending their claim to have fulfilled the
Helsinki accords.
Romania's willingness to serve as host
for the Political Consultative Committee
meeting fits in with the generally con-
ciliatory attitude that Bucharest has
recently adopted toward the Soviets.
President Ceausescu will probably use this
gesture in an effort to convince the USSR
that he is seriously committed to easing
bilateral tensions.
Bucharest has resisted Moscow's effort
to gain greater Romanian participation in
the Pact. Since the early 1960s Romania
has permitted joint Pact maneuvers on its
soil only once-in 1962-and has taken
only a token role in staff and map exer-
cises, usually within a Balkan context.
Ceausescu probably sought Soviet
assurances that the Political Consultative
Committee agenda would not include con-
troversial topics and that Moscow would
not seek to use this forum to discuss
Romania's limited participation in the
Pact.
Soviet Purposes
Moscow may believe that the Bucharest
meeting will be an appropriate forum in
which to make a conciliatory appeal to
the new Chinese leadership. Soviet leaders
would welcome an opportunity to show
that they can enlist the support of their
European allies under the aegis of the
Warsaw Pact in party matters as well.
There are some signs that the USSR
might try to revive its proposal for
strengthening the Pact's political con-
sultative machinery. Moscow wants to set
up a permanent secretariat-similar to
NATO's political organization-headed
by a Soviet secretary general.
This idea was most recently re-
jected-reportedly because of Romanian
objections-during a meeting of Warsaw
Pact foreign ministers in Moscow in
December 1975. Bucharest has always
been wary of Moscow's effort to establish
a permanent supranational Pact
mechanism that would speak for Pact
members, and it is not likely to alter its
long-standing objections.
Bucharest may now, however, be more
willing to seek a compromise on the issue.
A Romanian party secretary has in-
formed US officials that the summit
meeting will consider earlier Romanian
proposals such as the establishment of a
periodic consultative mechanism at the
foreign minister level. This may be an
attempt to sidestep a broader Soviet
proposal. The Romanian added that the
Political Consultative Committee meeting
fits in with Bucharest's desire to
emphasize the political-rather than
military-aspects of the Pact.
Soviet troops during June 1976 exercise "Sever," the second Soviet exercise
announced in compliance with the Helsinki accords.
5`,~ I/ r) 7 6
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