WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A007400060001-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 32
• Document Creation Date: December 21, 2016
• Document Release Date: June 11, 2008
• Sequence Number: 1
• Publication Date: November 14, 1969
• Content Type: SUMMARY

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Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Secret
43
14 November 1969
No. 0396/69
State Dept. review completed
J .2
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(Information as of noon EST, 13 November 1969)
VIETNAM
President Nixon's Vietnam speech was greeted warmly
by many South Vietnamese but some doubts still linger
regarding US intentions and the long-range effects
of US troop withdrawals. This year's winter-spring
campaign was launched early to coincide with the
President's speech and to take advantage of antiwar
demonstrations in the US. Most enemy main-force
units remain in remote base areas, however.
SINO-SOVIET TALKS MAKE NO HEADWAY
The Sino-Soviet negotiations in Peking have entered
their fourth week with no indication of even prelim-
inary agreement. Both sides are making serious ef-
forts to continue the talks, however.
Page
1
Europe
THE WEEK IN PERSPECTIVE 7
SOVIETS ESTABLISH NEW MILITARY DISTRICT ON CHINA BORDER 9
The new district almost certainly is related to the
continuing military build-up in the Sinkiang border
area.
ECONOMIC PROBLEMS BESET SOVIET LEADERS
With the approach of deadlines for the next annual
and five-year plans, Soviet leaders may feel hard
pressed to agree on some politically difficult solu-
tions to economic problems.
WARSAW PACT PRESSES INITIATIVE ON EUROPEAN SECURITY
The Soviets, who are masterminding the push for a
European security conference, are pressing hard in
behalf of the recent Prague initiative of the Warsaw
Pact.
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EAST GERMANY MAKING MAXIMUM DEMANDS ON BONN
East German officials again insist that normalization
of relations between the two Germanys is dependent
upon Bonn's recognition of East Germany, but Pankow
apparently is carefully leaving itself room to maneu-
ver.
FREE-MARKET GOLD PRICES DECLINE SHARPLY
The continuing decline in free-market gold prices
could result in pressures on the US and South Africa
to review the two-tier gold market system.
NATO CONSIDERS SECURITY AND ENVIRONMENTAL PROBLEMS
NATO's deputy foreign ministers' meeting took a dim
view of the Warsaw Pact proposal for an East-West
summit, but endorsed the Alliance's effort to work
for eventual negotiations and to examine common en-
vironmental problems.
HUNGARY PROCEEDING CAUTIOUSLY WITH ECONOMIC REFORMS
Budapest, ever alert to Soviet scrutiny of the polit-
ical impact of its economic reforms, is moving ahead
slowly and without fanfare.
ITALY TO WORK FOR NEW CENTER-LEFT GOVERNMENT
Premier Rumor's one-party minority cabinet will con-
tinue to serve while protracted negotiations take
place.
Middle East - Africa
NASIR SPEAKS PESSIMISTICALLY OF MIDDLE EAST SITUATION
The Egyptian President, claiming to see no hope for
a peaceful Middle East settlement, took a harshly
militant attitude toward Israel in a recent speech.
OUTLOOK GLOOMY FOR TROUBLED PAKISTAN
Although a major confrontation has thus far been
avoided, civil unrest continues, particularly in
East Pakistan. President Yahya Khan may soon an-
nounce a specific timetable for returning the coun-
try to civilian rule.
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DAHOMEY AGAIN THREATENED BY DIVIDED MILITARY
Growing evidence of unrest and division among mili-
tary officers focuses mainly on the unpopular army
chief of staff; civilian discontent remains subdued
but potentially explosive.
Western Hemisphere
MILITARY DISSENSION INCREASING IN BOLIVIA
Maneuvering for position within the government by
contending factions will probably become more in-
tense as the time approaches for military promotions
and reassignments to be made at the end of the year.
ECONOMIC NATIONALISM GROWING IN BAHAMAS
Growing economic nationalism, which has already un-
settled the predominantly US-owned investment com-
munity, is likely to become a permanent facet of
the Bahamian political scene.
COLOMBIA FAILS TO CHOOSE PRESIDENTIAL CANDIDATE
A political imbroglio has been touched off by the
failure of last week's party conventions to choose
a National Front candidate for next year's presi-
dential elections.
HONDURAS - EL SALVADOR SITUATION REMAINS TENSE
Domestic pressures may lead both governments to
adopt potentially harmful expedients despite the
improved climate for fruitful exchange that re-
sulted from a conference of Central American for-
eign ministers last weekend.
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The Communists launched their winter-spring campaign in South Viet-
nam somewhat earlier than anticipated. Their seeming intent was to try to
demonstrate that they maintained the military initiative at the time of
President Nixon's speech and to take advantage of antiwar demonstrations in
the US. Most enemy main-force units remain in remote base areas, however,
and Communist actions continue to be characterized by standoff shellings
and limited ground probes.
President Nixon's Vietnam policy speech was warmly greeted by many
South Vietnamese, but many retain lingering doubts about US intentions
and the long-range effects of US troop withdrawals.. The undercurrent of
anti-Thieu sentiment has remained fairly constant, and his political foes have
most recently attacked him because of the high-handed manner in which he
instituted the new austerity taxes.
It would appear to be only a matter of time before the Communists in
north Laos launch their annual dry-season offensive. It is not likely to get
under way, however, until they overcome the problems caused by intensive
bombing and government guerrilla harassment of their supply lines. In south
Laos, the Communists have had some success in blunting government opera-
tions near the infiltration corridor. In recent days, government commanders
have been forced to pull back troops operating near Muong Phine, thus
foreclosing new attempts by the government to threaten the western flank of
the Communists' supply lines into South Vietnam.
Two chiefs of government in Southeast Asia won personal victories this,
week. Still incomplete but decisive returns show that President Marcos has
won his bid to become the first Philippine president to be elected to a..
second terns. His vice president also appears to have won in his separate race.
Australia's Prime Minister Gorton scored a personal triumph when the
Liberal Party caucus voted to continue him as the head of government.
Gorton demoted one of his challengers in order to make his new cabinet
more responsive to his leadership, but opponents both within and outside his
party are expected to continue trying to bring him down. The Liberal-
Country coalition government has already been weakened by its loss of 13
legislative seats in the recent national elections.
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VIETNAM
President Nixon's address
on 3 November was viewed with
widespread approval and relief
by many South Vietnamese. Hard
liners were particularly pleased
by the President's warning of
strong countermeasures if the
Communists should escalate the
fighting. At the same time,
doubts still linger regarding US
intentions and the long-range ef-
fects of US troop withdrawals.
Some South Vietnamese are con-
cerned over indications in the
speech that the US and South
Vietnam have a secret timetable
for future troop withdrawals;
others believe that the Presi-
dent's formulations on the ques-
tion of Communist participation
in free elections may represent
another concession.
For the first time in a year,
coup rumors have again been cir-
culating in Saigon, this time
against the background of dis-
satisfaction with the rapidly
rising cost of living, specula-
tion about the ambiguous pro-
posals of well-known opposition
leaders for an alternative to
the present government, and the
uncertainties and strains of
Vietnamization.
Page 2
Retail prices in Saigon have
dropped from their highs of last
week and appear to be stabiliz-
ing at a level about 10 percent
above that in effect before the
imposition of austerity taxes on
various imported goods. Imported
items such as gasoline and kero-
sene, which were subjected to
heavy new taxes, led the upsurge
in prices along with domestically
produced staples such as rice,
sugar, and condensed milk, which
are not covered by the new taxes.
Saigon merchants used the new
taxes as an excuse to raise the
prices on all goods.
The government appears to
have quieted some of the sharp
criticism by the National As-
sembly about the method and tim-
ing of the taxes. Government rep-
resentatives took advantage of a
nationally televised, three-day
interpellation of the prime min-
ister and his economic minister
by the Upper House to explain
both to the legislators and the
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public the need for increasing
revenues as a measure to combat
inflation. The ministers also
expressed a willingness to recon-
sider, with the advice of the Na-
tional Assembly, the new tax rates
on certain of the commodities,
such as kerosene, which the sen-
ators believed placed an undue
hardship on the average Vietnam-
ese.
Military Developments
This year's winter-spring
campaign was launched on 3 and 4
November with scattered shellings
and limited ground attacks. En-
emy action has been spotty, how-
ever, displaying characteristics
quite different from past full-
scale seasonal offensives. There
is some evidence to suggest that
the Communist campaign was launched
early to coincide with President
Nixon's policy speech on Viet-
nam. This has apparently aggra-
vated their problems of inade-
quate reconnaissance and short-
ages of supplies and ammunition.
The campaign has tapered off this
week, but numerous signs point to
further enemy actions in the near
future.
A shift in the enem is time-
table was also re orted
the Central Office
for out Vietnam (COSVN)--the
supreme command authority for
Communist forces in the South--
had directed. that the winter-
spring campaign begin in early
November, ahead of its original
schedule. The purpose of the
change purportedly was to take
advantage of antiwar demonstra-
tions in the US. According to
Sp Jo
MILES
that, wi increased pressure on
allied military forces and re-
sultant higher American casual-
ties, the US will eventually
force the South Vietnamese Govern-
ment to make concessions in Paris.
Meanwhile, evidence of an
imminent step-up in hostilities
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Page 3
CORPS
Capita! Special Zone
SOUTH VIETNAM
the Communists believe
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to coincide with peace demonstra-
tions in the US on 15 November
continues to accumulate. A cap-
tured enemy document dated 27 Oc-
tober called for intensive at-
tacks to support the antiwar pro-
test in Washington. The direc-
tive urged the enemy forces to
step up the killing of South Viet-
namese officials in hamlets and
villages in order gradually to
break Saigon's administrative
grip. Prisoners, defectors, and
captured documents continue to
reveal plans for stepped-up at-
tacks, including sapper actions
against Saigon, during November
and December.
Although it is too early to
ascertain the over-all direction
and objectives of the enemy's cur-
rent campaign, the Communists ap-
pear to be testing the Vietnami-
zation program in several areas,
especially in the Mekong Delta
and in the central highlands. In
recent days, they have directed
their attacks in the delta against
South Vietnamese local and secu-
rity forces involved in pacifica-
tion efforts as well as against
regular government military in-
stallations and forces,, Thus
far, the enemy current offensive
thrust in the southern highlands
has been in areas defended pri-
marily by South Vietnamese ground
troops.
In addition to the challenge
to the South Vietnamese armed
forces, the Communists may also
hope to force a redeployment by
US units to bolster threatened
South Vietnamese forces in re-
mote sectors of the country. Re-
cently captured, high-level docu-
ments--including COSVN's Resolu-
tion 9 and a set of notes taken
by a North Vietnamese general
during interviews with Ho Chi
Minh and other top brass in
Hanoi last April--indicate that
this will be one objective of
Communist activit over the next
few months.
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SING-SOVIET TALKS MAKE NO HEADWAY
The Sino-Soviet negotiations
in Peking have entered their
fourth week with no indication
of even preliminary agreement.
The Chinese, concerned over the
Soviet military build-up on the
border, appear to be pressing
hard for a firm preliminary agree-
ment on military disengagement
in disputed areas in order to
avert further conflicts. Such
an accord would satisfy most of
Peking's objectives in advance
of the talks by demonstrating
China's "reasonableness" and re-
ducing the threat of Soviet mili-
tary action--all without jeopardy
to China's long-standing politi-
cal and territorial claims against
the USSR.
The Soviets apparently in-
tend to press for a comprehensive
settlement that would help remove
the border issue from the list of
fundamental Sino-Soviet differ-
ences. Moscow is fully aware of
its present political and mili-
tary advantage over China, and
may be withholding agreement on
a tactical military disengagement
until a broader agreement on spe-
cific territorial issues is
reached. The Soviets apparently
also want to link any agreement
on border problems with steps
leading to some normalization of
state relations.
Although the Soviets ini-
tially maintained an optimistic
Page 5
public attitude regarding the
talks, several Russian political
journalists indicated last week
to US officials that the Soviets
were finding the going difficult
in Peking. They speculated that
the Chinese were using the talks
to "gain time" and to lull the
USSR with false hopes of nor-
malized relations. A Soviet of-
ficial has also sug-
gested that pessimism exists in 25X1
some Soviet diplomatic circles,
primarily over the belief that
the Chinese may insist on bring-
ing in the "unequal treaties is-
sue." Meanwhile, the Chinese
have taken steps to publicize
their version of the impasse.
A Hong Kong Communist newspaper
on 6 November attributed the lack
of progress in Peking to Moscow's
desire to negotiate from a posi-
tion of strength and strongly
reiterated the Chinese contention
that an agreement to calm the
frontier must precede negotia-
tions on substantive issues.
Despite the initial dead-
lock, neither side has shown any
desire to break off the talks and
both are making serious efforts
to continue negotiations. Ac-
cording to diplomatic sources in
Peking, the top two members of
each delegation are meeting pri-
vately in an effort to break the
current deadlock. Moreover, each
side continues to mute propaganda
attacks against the other, and
some limited progress has been
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made toward establishing more
cordial diplomatic relations.
Soviet President Podgorny, speak-
ing last week at a meeting cele-
brating the 52nd anniversary of
the Russian revolution, expressed
the hope that the talks would help
to normalize relations between the
two countries. The Chinese sent
unusually warm anniversary greet-
ings to the Soviets this year,
and high-ranking Chinese officials,
including the head of the Chinese
delegation to the Peking talks,
attended the Soviet Embassy an-
niversary reception in Peking for
the first time since the start
of the Cultural Revolution.
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President Podgorny's speech on the 52nd anniversary of the Russian
revolution last week was a fair summary of the topics now commanding
Moscow's attention. The extensive coverage devoted to the subject mirrors
the leadership's general chagrin with the slow rate of progress of the Soviet
economy. Podgorny saw hope in the opening of the strategic arms limitation
talks for the advance of US-Soviet relations, but sought to discount any idea
that Moscow would be dealing from weakness. He especially commended
relations with France and alleged European interest in the Soviet-proposed
European security conference. He made only brief, hopeful comments on
the future of Sino-Soviet relations.
The Husak leadership in Czechoslovakia has accelerated its crackdown
on the alienated intelligentsia and youth. The mass media are now engaging
in self-criticism, and the leadership has further isolated recalcitrant writers
and artists by expelling them from the Communist Party and withdrawing
financial support. The authorities have issued stern warnings and alerted
some security units to discourage disturbances by students, who have dem-
onstrated nationally in November during the last two years.
In Bonn, the Bundestag debated the nuclear nonproliferation treaty,
the cabinet will meet on the question on 20 November, and signature of the
treaty is likely shortly thereafter.
The European Communities (EC) took an important step toward a
common commercial policy when the Council of Ministers authorized the
Commission to begin exploratory talks with Japan on a possible EC-Japan
trade agreement. Prospects for accession negotiations between Britain and
the EC have brightened somewhat as preparations proceed for the EC
summit conference on 1 and 2 December. France still insists on prior
settlement of the agricultural financing issue, but working-level agreement
has been reached on some of the more important conditions Britain would
have to satisfy.
In the UN there is increasing uncertainty that this session of the
General Assembly will endorse the US-Soviet draft seabeds treaty. Criticism
will probably focus on the treaty's verification procedures, which many
nations feel will allow the superpowers to exploit resources on the con-
tinental shelves of other nations under the guise of verification activities. The
General Assembly this week again voted to reject seating Peking and ex-
pelling Taiwan from the UN. The only significant voting switch was the
abstention of Chile. Chile and Cuba are the only Latin American countries
not supporting Taiwan.
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Soviets Establish New Military District On Chinese Border
Probable area:
of Centr I Asi n
Turkestan - Mil t r ? fhtr, t
AFGHANISTAN
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Belo I
Russian
?Mos
Moscow
North'
Caucasus
Siberian TrAttSbaykal
MONGOLIA
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SOVIETS ESTABLISH NEW F11LITARY DISTRICT ON CHINA BORDER
The Soviets have taken an-
other step to improve the control
of forces facing China with the
recent establishment of a new mil-
itary district in Central Asia.
The district is opposite
China's Sinkiang Province. It
probably was formed from the east-
ern half of the Turkestan Military
District and most likely has its
headquarters at Alma Ata. Civil
radio and press reports from Alma
Ata last week contained the first
reference to the "Central Asian
Military District" and identified
the commander as General of the
Army N. G. Lyashchenko. Lya-
shchenko previously was commander
of the Turkestan Military District.
The Soviets had a Central
Asian Military District opposite
Sinkiang up until 1945, but it is
not known if the new district
covers the same area. The Sin-
kiang border area was the scene
of several clashes this summer.
The Soviets have been strengthen-
ing their forces along the entire
Sino-Soviet border and in Mongolia
over the past four years. The new
district almost certainly is re-
lated to the continuing military
build-up in the Sinkiang area of
the border.
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ECONOMIC PROBLEMS BESET SOVIET LEADERS
President Nikolay Podgorny's
sober survey of Soviet economic
conditions set forth in his speech
on the anniversary of the Revolu-
tion makes clear that economic
problems are a growing concern to
Soviet leaders. As the deadlines
for the next annual and five-year
plans approach, they may feel hard
pressed to decide on some politi-
cally difficult solutions.
Although Podgorny tried to
emphasize the indices of success,
his remarks touched several eco-
nomic sore points. He admitted
that living standards are not ris-
ing "as fast as all of us would
like." Linking the problem to the
level of labor productivity, he
said, "We cannot but be worried"
by the failure of productivity to
increase as fast as expected.
Podgorny drew attention to
the effect of poor weather on the
harvest and said that this year's
results "in general are not bad."
His remark that society expects
better results from the agricul-
ture sector, however, betrayed
some impatience with the slow pay-
off from agricultural investments.
He also noted "serious shortcom-
ings" in the construction indus-
try. Again he suggested that, in
the light of recent party and gov-
ernment decrees on the subject,
the burden for improvement rests
with the construction workers.
During the past six months
other leaders have referred to
economic problems and the demands
on economic resources. Party
chief Brezhnev, at the Interna-
tional Communist Conference in
Moscow in June, and politburo mem-
ber Shelepin, at the WFTU Congress
in Prague in October, noted that
the housing problem "remains acute"
and that consumer demand has not
been fully met. The reason, they
said, was the need to allocate re-
sources to meet defense demands.
A measure of the economic
slowdown is the probability that
the growth rate of industrial pro-
duction this year will be the low-
est since World War II. Podgorny
made no claims of success for the
economic reform now nearing com-
pletion and said it needed further
improvement. As the time for es-
tablishing the next annual and
five-year plans draws near, Soviet
leaders may feel more urgency
about finding new means of main-
taining or accelerating the rates
of growth achieved during 1965-68.
The leadership, however, is likely
to be divided over adopting basic
solutions.
Some officials, for example,
probably see the answer in a more
traditional concentration on in-
vestment at the expense of con-
sumption. Last month a Gosplan
official argued that the workers'
share of the gains from increased
productivity should be cut and the
share going to investment enlarged
in order to hasten economic growth.
An "austerity" program, however,
would mark a break with the re-
gime's more recent policy favor-
ing worker welfare. Decisions
genuinely to reform aspects of
the economic system, such as plan-
ning, pricing, and administration,
would be even harder to achieve.
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WARSAW PACT PRESSES INITIATIVE ON EUROPEAN SECURITY
Moscow, which is mastermind-
ing the push for a European secu-
rity conference, is pressing hard
in behalf of the Warsaw Pact's
recent initiative at Prague. An
Embassy Prague source believes
that the Warsaw Pact countries
will schedule a summit meeting
for December to consider NATO's
position on the matter. Moscow
looks upon the conference as
the most feasible approach for
attaining tranquility on its
western flank at a time when
its eastern flank is troubled.
Although Moscow regards the con-
ference principally as a contri-
bution to its objectives of a
permanently divided Germany and
pliant East European allies, the
East European governments see
benefits for themselves in any
progress toward detente.
Commenting on the NATO dep-
uty foreign ministers' meeting
of 5-6 November, Pravda claimed
success for the Warsaw Pact in
moving the Atlantic community to
accept a security conference in
principle. At the same time,
it accused NATO of deliberate
procrastination by not accepting
the Pact's proposal to hold a
conference next year.
To impress on the West that
the invasion of Czechoslovakia is
a dead issue, Moscow is giving
the Czechoslovaks a prominent role
in delivering to some European
countries additional documents
from the Prague meeting elabora-
ting on the two agenda items pro-
posed for the conference.
While the Soviets no doubt
are trying to take the limelight
away from NATO at every opportu-
nity, their deeper strategy is
to win support for the conference
from Western Europe. If the NATO
ministerial meeting next month
charges that the Warsaw Pact's
agenda proposals avoid meaning-
ful issues, the Soviets are likely
to say that this is mere subter-
fuge and contrary to what is mean-
ingful for Europe's, as distinct
from NATO's, interests. The So-
viets probably judge--too optimis-
tically--that a conference that
would concede the status quo has
some appeal in Western Europe.
Most of the East European
governments are genuinely in
favor of the call for a Euro-
pean security conference. They
believe their security would be
enhanced by formal Western recog-
nition of the status quo in Eu-
rope, and that implicit interna-
tional recognition of East Ger-
many would reduce dangerous ten-
sion. Each of them regards the
Prague declaration differently,
however, and each will exploit
the potential opening to the West
in terms of its own national in-
terests.
Poland and Romania both in-
terpret Moscow's go-ahead for in-
dividual initiatives on European
security as.a green light to pur-
sue their own contacts with the
West. The Poles will use the
Prague declaration as an umbrella
under which they can pursue their
dialogue with Bonn.
Romania intends to use the
Pact's endorsement of bilateral
East-West contacts to justify its
evasion of coordination by the
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Pact of the policies of East Eu-
ropean countries toward the West
Even Bulgaria, Moscow's Balkan
patron, is using the occasion
to promote its Balkan "good
neighbor policy" and to make a
pitch for better relations with
Yugoslavia and Albania.
Czechoslovakia, the reluc-
tant host for the Pact's meeting
on European security, is in no po-
sition to exploit the declaration
or to take unilateral initiatives.
Prague, however, looks forward to
improved commercial ties with
Western Europe, especially with
West Germany. Similarly, Hungary,
in an exposed position as the most
liberal Pact country, will not go
beyond carefully exploiting new
contacts with the West should the
situation prove favorable.
Apprehension over the con-
ference has been noted in Pankow.
East German Foreign Minister Otto
Winzer voiced approval for the
Prague proposals, but subsequent
statements from East Germany
clearly reveal fear that its in-
terests could suffer.
EAST GERMANY dAKING MAXIMUM DEMANDS ON BONN
East German officials have
reiterated that normalization of
relations between the two German
states is dependent upon Bonn's
recognition of East Germany's
sovereignty, but Pankow appar-
ently is leaving itself room to
maneuver.
On 12 November, Premier Willi
Stoph stated that Pankow is pre-
pared to negotiate as an equal
with Bonn concerning the "estab-
lishment of internationally valid
relations." He stressed that
"normal" relations are possible
only if Bonn recognizes East Ger-
many. As have other East German
officials, Stoph refrained from
insisting that Bonn's recognition
of Pankow is a precondition for
discussion of other topics. Us-
ing the now-standard East German
line, he noted approvingly that
Brandt's statement concerning the
existence of two Germanies was a
step in the right direction, but
added that Pankow will judge the
Bonn government by its deeds.
Stoph, moreover, seemed to be in-
viting an initiative from the West
Germans for negotiations, and his
remark that Bonn must show a will-
ingness to "respect," rather than
"recognize," existing frontiers
suggests that Pankow might be wil-
ling to compromise on this partic-
ular issue.
Other commentaries, includ'-
ing an editorial in the authori-
tative Neues Deutschland on 9 No-
vember, have also carried the de-
mand for recognition, but have
noted that the "political land-
scape" in West Germany has changed
for the better. Neues Deutschland
found that Brandt's policy ad-
dress on 28 October contained
some "new accents," and welcomed
his remarks concerning the non-
proliferation treaty, a European
security conference, and the
existence of two German states.
The East German statements
on recognition represent Pankow's
maximum demands. The careful
manner in which the East Germans
have commented on the new govern-
ment indicates that Pankow has
yet to make its final public state-
ment on East-West German relations.
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The East Germans, however,
have conducted private, informal
talks with West German officials
about a future meeting of top
government leaders. It is not
yet clear, however, whether the
East Germans intend to go through
with such talks; their public
posture obviously allows them to
back out. One major concern of
Pankow appears to be the impact
such negotiations might have on
the East German populace.
Chancellor Brandt and For-
eign Minister Scheel stand ready
FREE-l'.1ARKET GOLD PRICES DECLINE
The continuing decline in
free-market gold prices could re-
sult in pressure on the US and
South Africa to agree on a for-
mula under which some of Pretoria's
gold production could be sold
overtly to the official tier of
the US-backed two-tier gold mar-
ket system. Under this system,
gold is traded among monetary au-
thorities at $35 per ounce, while
private transactions take place
at fluctuating prices set by sup-
ply and demand.
Western Europe may apply pres-
sure if the decline appears to
place the $35-per-ounce value of
monetary gold in jeopardy. At
the same time, South Africa will
find it less objectionable to
come to an agreement now that its
potential for profitable free-mar-
ket sales in high volume is seri-
ously reduced.
The deterioration in the
balance of payments position of
South Africa, the world's largest
to open discussions with the East
Germans, but, it is clear that
Bonn is not ready to extend dip-
lomatic recognition to East Ger-
many. Government aides are care-
ful to point out that Bonn first
desires progress in inter-German
affairs before it will relax its
opposition to third country recog-
nition of Pankow. Government op-
ponents, however, say that by con-
ceding the existence of a second
German state, Brandt has virtually
invited such recognition.
SHARPLY
gold producer, has resulted in
substantial free-market sales
since early March, causing the
initial ebb in price from its
peak at that time. Much of the
impetus for the present decline,
however, came after the Swiss
Credit Bank decided that gold was
overpriced at the $42-to-$44 level,
and sold all its gold on the Lon-
don market. This impetus was re-
inforced by substantial East Eu-
ropean and private West German
sales.
Potential gold purchasers
are holding back because of the
new-found stability in interna-
tional money markets following
the recent West German revalua-
tion. Demand for gold also is
limited by the present generally
conservative purchasing policy
of bullion dealers, and the high
interest rates obtainable on al-25X1
ternative investments in Euro-
dollars and other financial as-
sets .
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NATO CONSIDERS SECURITY
The North Atlantic Council
has turned a cold shoulder to the
Warsaw Pact's bid for an early
European security conference but
may respond in December with al-
ternative proposals for East-West
negotiations.
Last week's long-planned spe-
cial council session of the NATO
deputy foreign ministers was the
result of a suggestion made last
April by President Nixon for im-
proved consultations within the
Alliance. As a prelude to next
month's meeting of the NATO for-
eign ministers, the chief topics
were Allied progress in develop-
ing a list of issues for eventual
negotiation with the East and
plans for NATO's newly chartered
Committee on the Challenges of
Modern Society.
AND ENVIRONMENTAL PROBLEMS
not afford to ignore the Communist
offer. Differing viewpoints were
expressed about the kind of re-
sponse the Allies should make, but
a consensus seemed to emerge that
NATO should attempt to seize the
initiative by including a counter-
proposal for talks on concrete is-
sues in its ministerial communi-
que in December.
The emphasis of these discus-
sions fell more on East-West is-
sues, however, as a result of the
Warsaw Pact call for a security
conference in Helsinki during the
first half of 1970. Although the
Brussels meeting issued no com-
munique, the deputy ministers gen-
erally agreed that the appeal was
designed to blur the memory of So-
viet intervention in Czechoslova-
kia, to gain recognition of East
Germany at the conference table,
and to solidify the status quo in
Europe. Most saw it as a thinly
veiled propaganda ploy that failed
to include either substantive is-
sues for negotiation or the par-
ticipation of the North American
Allies.
Nearly all the ministers
agreed, however, that NATO could
The intent would be to demon-
strate the earnest desire of the
West to settle major security
problems, the careful preparation
NATO has already made for East-
West negotiations, and the unsub-
stantial nature of the Warsaw
Pact proposals. At the conclusion
of the meetings last week it ap-
peared that a proposal to discuss
a balanced reduction of opposing
conventional forces in Europe was
the most likely subject to be in-
cluded in the prospective NATO re-
joinder to the East.
The decision to create the
Committee on the Challenges of
Modern Society (CCMS) was ratified
by the deputy ministers, most of
whom made unexpectedly enthusias-
tic statements of support for the
new NATO project. Many admitted
the initial skepticism within their
governments about the propriety
of the Alliance's involvement with
environmental problems, but said
this has now turned to whole-
hearted endorsement. Secretary
General Brosio called on all mem-
bers to submit their proposals
for CCMS projects in preparation
for the first committee meeting
on B December.
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HUNGARY PROCEEDING CAUTIOUSLY WITH ECONOMIC REFORMS
Party chief Kadar's recent
trip to the provinces, where at-
titudes toward the economic re-
form program are at best lukewarm,
probably was an attempt to bolster
implementation of the program.
The Hungarian government, in
view of Czechoslovakia's recent
experience, will continue to carry
out its reforms discreetly and
with minimal publicity to avoid
antagonizing the USSR. Soviet
and Hungarian experts meet period-
ically for "consultations" on the
program.
The reform measures adopted
during 1969 were not expected to
solve all basic economic problems
immediately. This year, in fact,
the rate of increase in industrial
production has slowed, labor pro-
ductivity has declined, and the de-
mand for investments continues to
outrun construction capacity. In
addition, the government believes
that enterprises have been slow
to implement reforms in prices and
in labor practices.
On the other hand, added in-
centives such as tax rebates seem
to have partially encouraged the
32-percent increase in exports to
Western countries achieved in the
first nine months of 1969. The
government has indicated that it
will continue to take international
market factors into account in
planning investments.
The direction to be taken
by the economic reform program
may be clearer following the ses-
sions of the party central com-
mittee and of the Parliament sched-
uled for December. At that time
regime leaders probably will have
to speak out on reforms. In gen-
eral, Kadar appears to support
Reszo Neyers, the major architect
of the reform, and his group. Al-
though some politburo members,
including Antal Apro, Hungary's
representative to CEMA, have mis-
givings, no major personnel or
policy shifts that would enhance
the position of reform opponents
appear imminent.
In order to overcome these
problems, changes in the reform
program soon will be introduced.
These include a modification of
the bonus system, a reduction of
state subsidies, and the introduc-
tion of a more rational use of
manpower.
Hungary's economic reform
program, the most progressive
among CEMA countries, is expected
to continue, but modifications in
response to either Hungarian do-
mestic requirements or Soviet
pressures will be introduced as
necessary.
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ITALY TO WORK FOR NEW CENTER-LEFT GOVERNMENT
The election of Arnaldo For-
as party secretary by an al-
most unanimous vote of the Chris-
tian Democratic National Council
has demonstrated the party's de-
sire to reconstitute a four-party,
center-left government and to con-
tinue Premier Rumor's one-party
minority cabinet while the ex-
pected lengthy negotiations take
place.
Rumor told the US ambassador
that he and Forlani would shortly
start the long and difficult pro-
cess of negotiations with the
Socialists (PSI), the Unitary So-
cialists (PSU), and the Republi-
He said that he and a ma-
cans
.
jority of his party will put their
entire effort into rebuilding a
four-party center left. He will
not consider what to do in case
of failure until that bridge has
to be crossed.
Rumor indicated that there
is still disagreement as to whether
the center-left government should
be reconstituted prior to admin-
istrative elections next spring
or be delayed until afterwards,
but he personall favors rior
action.
Meanwhile, the Rumor govern-
ment has moved to intervene in
labor-management negotiations,
which are stalled in major in-
dustrial sectors. Labor Minis-
ter Donat-Cattin has stepped in
as mediator in the pace-setting
metal working industry. To be
effective, the government's in-
tervention must involve new ap-
proaches to the basic problems
that have stalled negotiations
and brought on strikes and demon-
strations.
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MIDDLE EAST - AFRICA
India's Prime Minister Gandhi received an overwhelming vote of confi-
dence from the Congress Party's parliamentary representatives after being
"expelled" from the party by her opponents in congress' elite working
committee. Although she will need help from independents and opposition
parties, she is expected to be reaffirmed as prime minister when Parliament
convenes next Monday. The party's old guard shows no sign of backing
down, but Mrs. Gandhi has enough support to inherit control of the larger of
the two apparently imminent Congress Party factions. Stability in India has
been built around one-party rule, however, and Mrs. Gandhi's need to
accommodate the special interests of her new supporters would make it
more difficult to maintain a political equilibrium in the future.
Action along the Arab-Israeli cease-fire lines increased somewhat during
the past week. Egypt lost three fighter aircraft in an air engagement over the
Suez Canal on 11 November. A few days earlier, an Egyptian naval force
shelled Israeli positions in the Sinai but caused little damage. If Egypt
continues to step up its naval activity, however, Israel is likely to retaliate
strongly.
In Nigeria, the Biafrans have carried out more air attacks on federal
targets. One of these was aimed at a Gulf Oil installation, but caused no
damage. The secessionists have received two T-6 aircraft that have a longer
range than the Swedish trainers they have been using and could strike as far
as Lagos. No significant developments occurred in the ground war.
Congo (Brazzaville) security forces thwarted a coup plot late last week,
arresting some 30 plotters and confiscating a large cache of "NATO arms."
President Ngouabi publicly accused neighboring Congo (Kinshasa) of having
armed and financed the plotters. He has also announced sweeping adminis-
trative and military changes, which, if effected, will probably only further
weaken his already beleaguered regime.
Turkey's President Sunay arrived in Moscow on 12 November for what
has been termed a protocol visit; he is the first Turkish chief of state to visit
the USSR. Before leaving Turkey, he signed the controversial amnesty bill
that affects some 500 former political prisoners, but the bill may yet be
challenged in court. Meanwhile, the new Demirel government received the
necessary ostelection vote of confidence.
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NASIR SPEAKS PESSIMISTICALLY OF MIDDLE EAST SITUATION
President Nasir's speech on
6 November to the opening session
of the National Assembly was prob-
ably his most hawkish since the
June 1967 war. Adhering almost
solely to the theme of the battle
with Israel, he repeated his dec-
laration that "what has been taken
by force can only be regained by
force." Nasir then called upon
all Arabs to forgo fighting among
themselves in order to concentrate
on the struggle with Israel, and
sounded anew his call for an Arab
summit meeting.
The Egyptian leader spoke in
the past tense of the chances for
a political settlement of the Mid-
dle East impasse, and his address
clearly indicated that he sees
little hope for a peaceful solu-
tion to the problem. Egypt's pub-
lic line, therefore, will continue
to be harsh, both as an indication
of genuine pessimism and as a
means of putting pressure on Tel
Aviv. Cairo, however, will prob-
ably continue to cooperate with
the efforts of the big powers and
the UN to find the basis for a po-
litical settlement.
Nasir' s remarks named the
USSR as a friend of the Arabs and
the US as their enemy. In a brief
attack against the US for its
support of Israel, he echoed
charges prevalent in the Middle
East that US military personnel
are fighting with Israeli forces.
Nasir's pronouncements set
the stage for the Joint Arab De-
fense Council meetings that were
held in Cairo last weekend. The
public announcements by the coun-
cil repeated many of Nasir's re-
marks and responded to his call
for an Arab summit by scheduling
one for mid-December in Morocco.
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OUTLOOK GLOOMY FOR TROUBLED PAKISTAN
Although a major confronta-
tion has thus far been avoided,
civil unrest continues, parti-
cularly in East Pakistan. Presi-
dent Yahya Khan may soon try to
resolve the political impasse and
to quiet dissent by announcing
a specific timetable for return-
ing the country to civilian rule.
The sporadic disturbances
of the past few months have dam-
aged the government's image some-
what. Martial law officials, who
want to strike a balance between
permissiveness and authoritarian-
ism, have been divided on how to
handle challenges to their author-
ity.
The East Pakistani student
disorders of late summer and early
autumn, which provided the first
real test for the regime, have
diminished recently. The lull
probably results from infighting
among rival student groups and a
series of holidays that have
kept the schools closed for a
number of weeks. Turmoil can be
expected again when classes re-
sume next year.
Labor difficulties have
picked up, however, with jute
and textile mills hardest hit by
strikes and lockouts. In East
Pakistan, a breakdown in one set
of labor-management negotiations
eventually forced martial law of-
ficials to step in and refer the
Page 19
dispute to the courts. Enterprises
in West Pakistan are also being
affected by increasing unrest.
Businessmen throughout the coun-
try report a drop in productivity
and predict a further deteriora-
tion of the situation unless the
regime intervenes forcefully.
Meanwhile, government at-
tempts to prepare voter rolls in
East Pakistan have sparked com-
munal violence between Urdu-speak-
ing refugees and native Bengalis.
The handling of the clash has
exacerbated regional tensions by
producing a confrontation between
the military--largely from West
Pakistan--and East Pakistani ci-
vilian officials. Order has been
restored, but the potential for
further disturbances remains high.
A regime proposal for solving
the country's continuing political
stalemate may be revealed this
month. President Yahya reportedly
plans to call for election of a
constituent assembly when electoral
rolls are completed, hopefully in
July 1970. This assembly would have
three months to formulate a con-
stitution, after which parlia-
mentary elections would be held.
The martial law government would
then relinquish control to ci-
vilians, but not before September
1970. What would happen if the as-
sembly failed to produce a con- 25X1
stitution has not been projected,
but Yahya might try to impose one
of his own.
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DAHOMEY AGAIN THREATENED BY DIVIDED 1'IILITARY
Evidence of growing unrest
and division in the military under-
scores the fragile nature of the
government of President Emile
Zinsou, which remains heavily de-
pendent upon the army that in-
stalled it 16 months ago.
Much of the unrest focuses
on Lt. Col. Kouandete, the widely
hated army chief of staff, who has
survived three bumbling assassina-
tion attempts in the past four
months. Kouandete, with some
help from Zinsou, has maintained
his key position largely by un-
doing the career of former presi-
dent Alley, who was also Kouan-
dete's predecessor as army com-
mander. Alley's indecisive re-
sponse to Kouandete's maneuver-
ing has cost him much of the sup-
port he had in the army, but die-
hard backers of the former army
commander remain incensed over
the ten-year jail sentence he re-
ceived in October for allegedly
plotting to murder Kouandete last
July.
Dissatisfaction is also in-
creasing among the troops over
corruption in the government and
the lack of professionalism in
the armed forces.
Civilian discontent has been
subdued during recent months, but
little has been done to amelio -
rate the causes of student and
labor strikes that nearly toppled
the government last spring.
Kouandete is widely considred re-
sponsible for the harsh repres-
sion of those strikes, and both
students and workers remain po-
tentially explosive forces that
could be exploited by disaffected
military elements.
There is also growing evi-
dence of a split between Kouan-
dete and President Zinsou. An
advocate of stern measures against
government critics, Kouandete
periodically becomes angered at
the President's failure to take
decisive action against dissenters.
The army commander also blames
Zinsou for the relatively light
sentences given to those convicted
of plotting with Alley last July,
Zinsou, whose preference is
for political action over mili-
tary force, is probably aware of
the problems that Kouandete is
creating, but he cannot move
against the ambitious army com-
mander without seriously endanger-
ing his own position. Even so,
it seems certain that there will
be further assassination attempts
on Kouandete, who is now probably
the most unpopular man in Dahomey.
Should one of them succeed, Zinsou
himself could be swept from office
in a subsequent struggle among
competing army factions
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Soviet Defense Minister Andrei Grechko along with a high-level delega-
tion has arrived in Cuba on an official visit. The purpose of the trip has not
been announced, but it appears intended to strengthen the already warm
relations between the two countries. The visit, which is expected to last
about a week, may include discussions of military assistance.
Leftist groups in Peru have embarked on a campaign against the
government's proposed contract with the US-owned Southern Peru Copper
Company. President Velasco announced two weeks ago that agreement on an
investment contract had been reached with the company, but so far opposi-
tion from leftists in his cabinet has prevented signing of the contract.
Velasco appears to be working hard to obtain cabinet unanimity on the
matter. Signing of the contract would go far toward restoring investor
confidence in Peru.
In Paraguay, the Catholic Church's determination to involve itself more
fully in social welfare and justice programs is causing a growing conflict
between the church hierarchy and the Stroessner government. A melee last
month between the police and student demonstrators aided by sympathetic
priests resulted in the expulsion of a Spanish Jesuit and the excom-
munication of several overnment officials. Recriminations from both sides
are continuing.
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MILITARY DISSENSION
INCREASING IN BOLIVIA
Military opposition to the
Ovando government appears to be
increasing among those who be-
lieve that nationalism and the
trend toward the left have gone
too far and those who believe
that President Ovando is too
timid to carry out the "revolu-
tion" successfully. Maneuvering
for position within the govern-
ment by the contending factions
will probably become more in-
tense as the time approaches for
the annual military promotions
and reassignments to be made at
the end of the year. Meanwhile,
reports of possible cabinet
changes are beginning to make
the rounds.
The government, meanwhile,
is continuing its efforts to
find something to do with the oil
it nationalized. In what Minister
of Mines Quiroga termed a "gesture
of revolutionary solidarity," the
Peruvians offered to transport
Bolivian crude oil "anywhere in~~
the world that Bolivia chooses."
This offer was given wide cover-
age in the Bolivian press, but
as yet Bolivia has no customers
for the oil from Gulf's holdings.
Various teams have been sent
abroad to search for other mar-
kets, but there have been no re-
ports of success.
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Minister of Labor Mario Rolon
Anaya, who has taken it upon himself
to act as the government's channel
of contact with the US Embassy, ap-
parently believes that these efforts
are destined for failure. He re-
cently told the US charge that if
Bolivia was unable to reach a rea-
sonable settlement with the Gulf
Oil Company, the government would
"collapse into chaos" within three
months. Indicating that the Presi-
dent agreed with his statements,
Rolon said that any agreement with
ECONOMIC NATIONALISM GROWING IN BAHAMAS
Gulf would have to include Bolivian
crude as the means of payment of
compensation, but that Gulf was in
a good position to name its price.
He also stated that the government
was interested in restoring confi-
dence among private investors and
that there would be no further na-
tionalizations of US companies.
It is probable that Rolon Anaya
would like to play a major role in
bringing some stability to Bolivia,
but it is highly questionable that
he can deliver on any of his prom-
ises.
Growing economic nationalism,
which has already unsettled the pre-
dominantly US-owned investment com-
munity, is likely to become a per-
manent facet of the Bahamian politi-
cal scene.
In a recent policy statement
Prime Minister Pindling said that
"foreign interests" must live up to
their agreements with the government
and share their wealth. Over the
past few months government spokes-
men have increasingly voiced the
theme of "Bahama for the Bahamians,"
and have stated that the important
Freeport business community, which
is largely US- and British-owned,
has abused the privileges granted
them by failing to employ and train
Bahamians. In an effort to force
greater compliance with these agree-
ments Deputy Prime Minister Arthur
Hanna has rigidly restricted the is-
suance of work permits and sharply
reduced the flow of skilled immi-
grant labor that is vital to Free-
port businesses.
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Also acting as a stimulant for
increasing nationalism is the grow-
ing concern among Bahamians over the
large expatriate community. More
than 72,000 of the 250,000 estimated
population are foreigners. This
plays on Bahamian fears that na-
tives may soon become a minority
in their own country.
The prime minister is appar-
ently not ready to embark on any
radical course of action. He will
probably insist on greater govern-
ment participation in the affairs
of Freeport. Although Pindling has
stated many times that he will not
"kill the goose that lays the golden
eggs" (the Freeport community con-
tributes about 25 percent of total
government revenue), he does feel
entitled to a greater share of the
profits.
Pindling visited the US this
week in an effort to bolster flag-
ging investor confidence, but an
early improvement in the situation
appears dim.
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COLOMBIA FAILS TO CHOOSE
The failure of last week's
party conventions to choose a Na-
tional Front candidate for next
year's presidential elections has
touched off a political imbroglio.
Factionalism, bickering, and a
proliferation of candidates resulted
in a complete stalemate between
President Lleras' hand-picked suc-
cessor Misael Pastrana and dark-
horse candidate Evaristo Sourdis.
Both polled 278 votes at the-Con-
servative Party convention. Under
the 12-year-old National Front
agreement, it is the Conservatives'
turn to name a successor to Lleras,
a Liberal. Belisario Betancur, a
maverick Conservative candidate
chosen by a "popular" convention,
has further split the party's ranks.
The deadlock resulted from a
breakdown of the frail union between
the leaders of the two main Conserv-
ative factions. The leader of the
smaller successfully blocked Pas-
trana by joining several pre-candi-
dates under Sourdis' banner. This
move has challenged the predominance
of forriier president Ospina, leader
of-the larger faction, and his fam-
ily as Conservative leaders in the
future.
The Liberals, who are also suf-
fering from splits within their
ranks, refused a request that they
PRESIDENTIAL CANDIDATE
choose the Conservative who would
be the National Front candidate.
They insisted on first consulting
with Conservative leaders, and the
choice of candidates now is wide
open
Pastrana, although beaten down
and apparently rejected, is not
necessarily finished. His failure
to prevent a proliferation of can-
didates or at least to neutralize
or win them over before the conven-
tion brings his political astute-
ness into question, however. Other
possible nominees include Betancur
and former president Valencia, who,
despite his mediocre record during
his term from 1962 to 1966, has the
probable virtue of being acceptable
to factions of both parties. For-
mer president Ospina, now 78 years
old, claims not to be interested
in the presidency, but he cannot
be dismissed altogether.
Although the parties probably
will ultimately settle on a mu-
tually satisfactory candidate, two
weeks or a month of intense polit-
ical activity can be expected.
Most politicians agree that if
they do not get together, the na-
tional front system of government,
which terminates in 1974 unless re-
newed, may come to a premature end
r
and could result in further
disintegration.
HONDURAS - EL SALVADOR SITUATION REMAINS TENSE
An improved climate for an
eventual constructive bilateral ex-
change between Honduras and El Sal-
vador evolved from a cordial confer-
ence of the five Central American
Page 2 4
foreign ministers last weekend. The
pace of diplomatic progress, how-
ever, is too slow to offset domes-
tic pressures that may lead both
governments to adopt potentially
harmful expedients.
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WEEKLY SUMMARY 14 Nov 6 9
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The productiveness of the min-
isterial meeting apparently was re-
lated exclusively to common market
problems. Pacification of the area
was only vaguely addressed. Neither
belligerent would discuss the topic
most pressing to the other and each
continues to find the concessions
necessary for peace politically in-
feasible. Honduras needs a commit-
ment from El Salvador that it will
move toward defining the disputed
boundary, and El Salvador needs the
reopening of the Pan-American high-
way, which Honduras has blocked to
Salvadoran goods.
The Sanchez administration in
El Salvador continues to suffer a
hawk-dove division that restricts
its freedom to be forthcoming in the
negotiating councils. The arms
build-up has not yet satisfied the
appetite of the hawks, and further
arms purchases are likely. There
is also pressure from the armed
forces for the ouster of Minister
of Defense Torres, whom they con-
sider a dove.
Domestic problems were further
complicated last week when a reform-
ist bloc of legislators unexpectedly
Salvadoran Refugees Leaving Honduras
ousted the assembly leadership. The
new assembly coalition plans to pass
a series of controversial laws that
are unpalatable to the Salvadoran
oligarchy and therefore bound to
set off destabilizing political
maneuvers. Although the legisla-
tive coup was divorced from the
conflict with Honduras, the govern-
ment is sensitive to the appearance
of a divided administration and
finds itself even less able than
before to make apparent concessions
to Honduras.
In Honduras, the public has
been unnerved by widespread rumors
of an impending Salvadoran inva-
sion, and the government reportedly
"has information" that an armed at-
tack might come this weekend. The
Honduran Army has moved troops
toward the border and has taken
other precautions for defense read-
iness. Public outrage against the
OAS and the United States is still
growing, and may soon be directed25X1
against US investment. An orches-
trated anti-US press campaign is
already well under way
Meanwhile, the problem of dis-
placed persons and refugees con-
tinues to grow. Salvadorans and
their families are moving from Hon-
duras to El Salvador at the rate
of 300 daily, with the total to
date estimated at 65,000. El Sal-
vador is now asking for OAS assist-
ance for a rehabilitation program
for the repatriates. Honduran
cities also are beginning to feel
the effects of an influx of per-
sons fleeing the border areas, and
are experiencing a rise in crime
and other public safety difficul-
ties.
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 25X1 Approved For Release 2008/06/11: CIA-RDP79-00927AO07400060001-6
Approved For Release 2008/06/11: CIA-RDP79-00927AO07400060001-6
 Approved For Release 2008/06/11: CIA-RDP79-00927AO07400060001-6
Secret
Secret
Approved For Release 2008/06/11: CIA-RDP79-00927AO07400060001-6