WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A007900040001-3
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 48
• Document Creation Date: December 21, 2016
• Sequence Number: 1
• Content Type: SUMMARY

Approved For Release 2008/04/17: CIA-RDP79-00927A007900040001-3
Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Secret
State Dept. review completed
4 7
22 May 1970
No. 0371/70
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SEUKJE"T
Contents
(Information as of noon EDT, 21 May 1970)
Page
Vietnam ambodia, COSVN, Buddhists est ............. 2
Communists ab Much of Cambodia's Northeast ............... 5
Asian Nations Mee Djakarta to Disc usmbodia. ............. 6
Peking Postpones Wars Meeting ...................... 7
Communists Keep up Press e inouth, Hold Off in North Laos ...... 8
Marcos Switches to More Ami`clple Relations With US ............ 9
Peking's Party Building (forts Dragkn ..................... 10
Moscow to 1 ep Presence in Phnom Penh .... ............... 12
t
Eastern rope Cautious in Response to Bonn's Ove ures ......... 13
East Europeans Worry About Relations With US ... ......... 13
icultural Prospects Dim in Eastern Europe ................. 14
Soviets Seeking Warsaw Pact Support Against China ............. 15
SECRET
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bt UKt;1
Franco-British Concorde SST Soon to Fly Mach Two .. J`......... 16
Fi ns Resort to Nonpartisan Government as Stopgap /............ 17
Labor gitation Tests Italian Government .... . .............. 18
POLICIE F THE NEW SPANISH CABINE
MIDDLE EA- AFRICA
THE WEEK IN PER ECTIVE . ....................... 19
Israeli Military Ripostes tter 1abs 20
Moderates Have Ed/e in Ceylon's Parliamentgy Elections ......... 24
WESTERN HEMISPH
THE WEEK I PERSPECTIVE ............. ............ 25
Chilean/residential Campaign Swings Into High Gear .... ,...... 26
Ecua orean Government and Business Battle Over New Taxes .. .. 27
D inican Elections Strengthen President's Control ............. 28
astro Blasts US, Admits Sugar Harvest Defeat .~9
SECRET
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SECRET
The conflict in Indochina widened and deepened this week. Communist
forces in Cambodia solidified their control over most of the ortheastern
provinces as they moved to keep open existing supply routend establish
ne
able help from South Vietnamese forces in the b
ast. This assistance may continue for some
the souf
without its
quickly crop
in looting, ra
awbacks. Traditional animosities betwee
d up with reports that South Vietna
Vietnamese lea
weakened neighbo
ochina. They recently gave J
In South Vietna
attacks, and the eviden
extend through the sum
despite the attacks on the
of their command structu
ability to conduct disruptive
y is receiving
der areas and in
two peoples have
se troops are engaged
and even murder in some are . At
s welcome this opportunity o gain
indicates that
r. The Corn
sanctuarl
farth
ids
least some South
power over their
ave sharply increased harassing
ilar waves of limited attacks will
nists continue to demonstrate that,
and the relocation of major elements
inland in Cambodia, they retain the
mes and places of their choosing.
Communists remain in stren
stronghold at Long Tieng, t
onto the Plaine des Jarr
during the next few w
Vietnamese forces are
around the Bolovens
any time they choo
position on I
Vietnamese
May stressi/g
massive P.
militanc
acs is relatively quiet, and although the
thin striking distance of the Meo tribal
rather
s. I n the
gns they may be content to hold firmly
an conduct further offensive activity
ontinuing to e
nist Chinese have been
rty chief Le Duan, and a stat
the "protracted war" theme we
ing rally in support of Sihanouk. Th'
by canceling this week's session of the Si
n the somewhat brighter side, President Marc
ed that his policy of encouraging anti-US acti
ilippine officials to reduce the irritations arising fro
es to Philippine and regional security. As a result,
cularly after the US ambassador pointed out to
tions that surround US bases and stepped hard on a Fi
arcos has ordered
the lawless con-
ino congressman
who was trying to get a US base commander declal
grata.
SECRET
th, however, Pathet Lao and North
rt pressure on government positions
the provincial capital of Saravane
eadily reiterating their tough
extremely warm welcome to
ent by Mao Tse-tung on 20
repeated the next day at a
Chinese emphasized their
-US talks in Warsaw.
of the Philippines has
y is not paying off,
Page 1 WEEKLY SUMMARY 22 May 70
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SEUKE'f
Vietnam-Cambodia, COSVN,is
Saran le -in.,Cam.bodia
he South Vietnamese are broadening their
military activities in Cambodia, and there are
signs t at the intervention may bee-prolonged.
Both Pre 'dent Thieu and Vice President Ky have
called for tacks against the Cmunists in Cam-
bodia as Ion s those forces t reaten the security
of South Viet The .. acknowledge that ar-
rangements for su erations must be worked
out with Phnom Pe but appear confident that
this can be d wit ut serious difficulty.
Phnom Penh's cceptance the extensive South
Vietnames operations along he main Saigon -
Phnom i enh highway and mo recently in the
southeastern provinces of Cambodia is likely to
bolster this belief.
President Thieu has been trying cautiously
to improve communications with the Lon No]
regime ever since the March coup. Despite long-
standing animosities between the Vietnamese and
Cambodians, progress has been made and the two
countries probably will renew full diplomatic rela-
tions and exchange missions in the very near
future.
If t
are to develd
a common fight
effective wo mg relationship in
inst t Communists, how-
will have to be over-
come. Friction and
South Vietnames
ready have crop
field along th
esentment between
and Camb'an officials al-
red up in Phnom Penh and in the
Top leaders on both sides are trying to
smooth over the problems, but if traditional an-
tagonisms are to be kept in check, Saigon prob-
ably will have to take pains to assure the Cam-
bodians that South Vietnamese objectives in Cam-
bodia are limited. Right now, with Communist
forces threatening on many Cambodian fronts,
the Lon Nol government probably will accept any
assistance Saigon can give, whatever reservations
it may harbor regarding South Vietnam's longer
term intentions.
r its part, Saigon does not have a free
hand to lp Cambodia, in part be ise of wide-
spread hos ' 'ty in South Vie! P& toward the
government i Phnom Pen,` Students, some
Saigon newspap and position politicians
have vigorously criti e he Lon Not regime for
its rough treatment p 'etnamese in Cambodia
and the Thieu governmen r soft pedaling the
issue. Thieu has, in fact, bee lossing over re-
ports of mistfeatment of Vietname in Cambodia
and stressing the need for a joint effort against
the Communists.
T
low-key p
and veterans,
from the county
zations. The two pri
suffering from internal
them, the officially r
now threatening t
SECRET
d only
students
ore trouble
iuddhist organi-
factions are both
reements, and one of
ed Quoc Tu sect, is
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bhub"ET
COSVN Moves Out of the Way
Important elements of the Communists' top
command-COSVN-have been relocating to an
area of Cambodia some 20-25 miles north of
South Vietnam's Tay Ninh Province border. The
assembly of several high-level staffs well away
from the border represents an effort to regroup,
at least temporarily, beyond the 21.7-mile limit
set for US forces.
Captured documents and defectors affirm
that several enemy base camps have been overrun.
One complex, less than five miles north of Tay
Ninh Province, reportedly was evacuated by a
1,000-man staff upon receipt of a seven-hour
advance warning of a B-52 raid. The seizure of a
large quantity of important documents by US
soldiers strongly suggests another important base
had been uncovered.
In South Vietnam, the Communists sharply
increased harassing attacks in the I and IV Corps
regions during the week, but enemy ground forces
continue to operate in small units. Captured
documents indicate that the 25X1
enemy plans to carry out similar waves of limited
attacks throughout the summer.
SECRET
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SECRET
Cambodia: Current Situation
'Phnom Pe6
Falls
, q,ltambang a *~
K R A 71
SECRET
Communist controlled
Contested or under Communist
influence
`~u ;. ~81g4R
V` 1 'E 'IT N
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SECRET
Communists Grab Much of Cambodia's Northeast
The capital of Stung Treng Province fell
before a sharp attack on 15 May as Viet Cong
forces increased pressure on the remaining iso-
lated government outposts in Stung Treng and
Ratanakiri provinces. The Communists now ap-
parently control the Se Kong - Mekong waterway
all the way from the Laos border to the outskirts
of Kompong Cham. Additional attacks against the
remaining government positions in the northeast-
ern provinces are almost a certainty, and it is
probably only a matter of time before the govern-
ment's presence there is eliminated completely.
The Communists' current drive to secure control
of these provinces is designed to ensure the main-
tenance of already existing supply routes from
Laos and to open up other routes farther inland.
Government forces, with South Vietnamese
support, regained control of Kompong Cham city
on 17 May, but they have been unable to move
east across the Mekong in the face of stiff enemy
pressure. A South Vietnamese force swept into
southern Cambodia on 17 May, relieved the
beleagured Cambodian garrisons at Takeo, Kep,
and Kompong Trach, and is moving west toward
the harassed coastal city of Kampot. Communist
control is now confined to a narrow belt of ter-
ritory just north of these operations, but, as in
other border areas, they will almost certainly re-
assert their control if the South Vietnamese pull
back.
SECRET
The Communists are moving ahead to or-
ganize Sihanouk's apparatus in "liberated areas"
of Cambodia. On 18 May Sihanouk's head-
quarters in Peking released copies of two letters
purportedly sent from the "liberated areas" by
Sihanouk's ministers of defense, interior, and
propaganda. The letters report the election of
committees for the National United Front in the
"liberated areas" and great "voluntary contribu-
tions both in manpower and materials" by the
people of the area for the overthrow of the Lon
Nol government.
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5EURE1'
Asian Nations Meet in Djakarta to Discuss Cambodia
Indonesian Foreign Minister Malik's initia-
tive on Cambodia, so clumsily and amateurishly
surfaced a month ago, turned out reasonably well.
The twelve participants in the 16-17 May Dja-
karta conference put on a good show and pro-
duced a statesmanlike communique.
The conference is not likely to have a meas-
urable effect on events in the Indochina area, but
it was never expected to do so. Its chief merit,
acknowledged from the beginning by all partici-
pants, is that Asian nations for the first time have
taken the initiative on an Asian problem and have
followed through to the extent of discussing it
among themselves and specifying future action.
Its principal weakness, which prejudiced its
accomplishments from the outset, was its largely
pro-Western complexion; the three Communist
nations and six of the nonaligned countries
declined to participate. Of the twelve nations
represented, only Indonesia and Singapore were
nonaligned.
The most significant point made in the
communique was the recommendation for a
broader international conference at a later date.
To this end, the communique directed the for-
eign ministers of Japan, Malaysia, and Indonesia
to begin "urgent consultations" toward convening
a conference similar to that already suggested by
the UN Secretary General and others. The three
foreign ministers are to approach the participants
of the 1954 Geneva conference and all other
interested parties. Otherwise, the communique
followed anticipated lines in calling for the
immediate cessation of hostilities in Cambodia,
the withdrawal of all foreign forces, respect for
Cambodia's sovereignty and neutrality, and reac-
tivation of the International Control Commission.
As expected, Indonesia and Japan played
key roles at the conference and were chiefly
responsible for the content of the communique.
Japan's contribution was additionally significant
in that, for the first time since World War II,
Tokyo engaged in a purely political regional con-
ference in contrast with its previous activities in
economic and developmental fields. Other major
participants were Thailand and Australia. Both
Australia and New Zealand were pleased at the
extent of their acceptance at an Asian conference
on an Asian problem.
The good organization and general smooth-
ness of conference procedure seemed to surprise
both participants and observers, particularly con-
sidering Malik's hasty, largely untested initiative
last month and the resultant pique in a number of
Asian capitals. Assistance from Japan and Aus-
tralia as well as Indonesia's traditional capacity
for extraordinary, eleventh-hour activity probably
accounts for the good performance. Moreover,
many of the governments involved are actively
committed to supporting the present Indonesian
Government and, once they had overcome their
surprise and exasperation at Djakarta's tactics,
made an extra effort to see that "Malik's confer-
ence" turned out well.
Malik, who had been censured domestically
for having compromised the nation's nonaligned
foreign policy in nurturing this largely pro-
Western conference, seems to have emerged
undamaged politically and perhaps with his posi-
tion slightly enhanced. He has a key role in fol-
low-up consultations aimed at developing a later
and more broadly based conference and thus has
provided Indonesia with the kind of symbolic
area leadership that Djakarta wants.
SECRET
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SECRET
Peking Postpones Warsaw Meeting
Peking's 'decision to cancel the Sino-US
meeting in Warsaw this week represents a tempo-
rary postponement designed to underscore
China's hard-line public posture against US ac-
tions in Cambodia while keeping open this
important channel of corrimunication with Wash-
ington. Unlike China's last'statement of cancella-
tion in February 1969, itg? announcement this
week was relatively mild i, tone and clearly
implied that a new date for \he next meeting
would soon be arranged through the normal'
diplomatic mechanisms in Warsaw\
The Chinese obviously considbxed that to
meet while US troops were engaged in ground
operations in Cambodia would pro embar-
rassing and would tend to undercut the age of
resolve and militance Peking has ado ted in
response to developments in Indochina. par-
ticular, the Chinese probably belief that igns
they were "dealing with the enem t' on a b si-
ness-as-usual basis would raise questions in Han i
at a moment when China's influence in Nort
The Chinese over the past m. month have con-
sistently emphasized their had-line position on
Indochina in order to encoufage Hanoi to steer
clear of a negotiated settlemfnt, persist in a "pro-
tracted war," and drive they"S out of Southeast
Asia. At the same time, king has also seen a
golden opportunity to cap talize on Moscow's re-
cent equivocation over th f Cambodian issue. Last
week, for example, the inese gave a warm wel-
come to Vietnamese p rty chief Le Duan, in-
cluding a meeting with Chairman Mao and Vice
Chairman Lin Piao. This is the first publicly re-
ported meeting of a North Vietnamese leader
with Mao since 1965. This Chinese demonstration
of support is in sharp contrast with the Viet-
namese leder's earlier rather lukewarm send-off
from Mojcow and was obviously designed further
to encgrage Hanoi's militancy at the expense of
the Soviets. Following up on what Peking clearly
beliq es to be its current advantage, a Chinese
central committee message to the North Viet-
namese on the occasion of Ho Chi Minh's birth-
day again stressed the "protracted war" theme.
Although relations with the Soviets and the
North Vietnamese are almost certainly the con-
trolling factor both in Peking's insistence on a
hard line with regard to Indochina and in its
decision to postpone the meeting in Warsaw, the
Chinese are clearly concerned about develop-
ments in Southeast Asia. Chinese attacks on
President Nixon, for example, have been espe-
cially bitter in the past several weeks, labeling him
a "malicious war criminal" and a "cornered dog."
This concern is still relatively limited, however.
Had Peking expected a sudden, serious worsening
of the situation in Indochina, it might well have
wished to meet in Warsaw to convey a private
expression of concern or warning.
Indeed, despite their strong verbal blasts, the
C ese will probably be ready to resume the
tal.k once US forces have withdrawn from Cam-
bodia, one thing, the Chinese statement
clearly ed the current postponement to the US
present there. More importantly, Peking
definitely *ews the Warsaw sessions as an im-
portant sour of much-needed political leverage
in its dispute th the USSR. The recent upsurge
in Soviet polem vs against China, together with
Moscow's continuN military build-up along the
Sino-Soviet frontier almost certainly provides
sufficient incentive to`-dissuade Peking from any
prolonged suspension of`-the Warsaw talks. 25X1
SECRET
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J L' .}1S JI 1
Communists Keep Up Pressure in South, Hold Off in North Laos
Communist forces during the past week con-
tinued to threaten the provincial capital of Sara-
vane and to exert pressure on government posi-
tions along the eastern rim of the Bolovens Pla-
teau. Unconfirmed reports of three North Viet-
namese battalions on the outskirts of Saravane
have caused most of the civilian population to
leave the town, but so far the Communists have
confined their military action to occasional
rocket fire and brief skirmishes around govern-
ment outposts. The garrison commander, believ-
ing an enemy attempt to seize Saravane is immi-
nent, has closed the town's airstrip to resupply
and evacuation flights. The Communists clearly
have the capacity to take Saravane by force but
may continue to employ largely psychological
tactics, as they did at Attopeu, to persuade gov-
ernment forces to surrender the town.
Page 8
Enemy troops remain in control of Attopeu
and the artillery site overlooking that provincial
capital. This week they also seized an important
guerrilla base about ten miles to the northwest
and told supporters that they would soon attack
the principal guerrilla base on the plateau.
Communist motivations in maintaining a
high level of military activity in this region remain
unclear. They may be seeking to broaden their
logistic routes to the south, but it is possible they
may only be making a show of force in the
panhandle to compensate for their difficulties in
achieving all their objectives in northern Laos.
Although a major push against the Meo
stronghold at Long Tieng cannot be ruled out,
time is running against the Communists. Enemy
forces did succeed in seizing several government
outposts north of Long Tieng this week, which
put the base, once again, within range of 122-mm.
rocket fire. But these actions appeared to be
designed to retard government efforts to expand
the Long Tieng perimeter rather than to gain
ground from which to launch an attack.
On balance, it appears that prospects for a
Communist drive against General Vang Pao's
headquarters before the end of the dry season are
dimming. The evidence suggests that the two
North Vietnamese divisions in the area are shift-
ing to a defensive posture to avoid a repetition of
last year, when, during the rainy season, Meo
irregulars easily took the Plaine des Jarres from
the Communists.
If Vang Pao succeeds in clearing the area
south of the Plaine, he can sit tight around Long
Tieng and give his troops a much needed respite.
This strategy might include an effort to recapture
bases north of the Plaine and some harassment of
the enemy's rear areas, but it would avoid a major
SECRET
WEEKLY SUMMARY 22 May 70
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SECRET
wet season offensive. Such a course could con-
ceivably return the fighting in the north to the
pre-1969 ground rules, when the Plaine was more
or less a Communist sanctuary and the Commu-
nists refrained from driving toward Long Tieng
and the Meo heartland.
This course runs the risk of allowing the
Communists to maintain forward positions on the
Plaine from which they could mount a fresh of-
fensive toward Long Tieng in the fall. An offen-
sive to push the Communists from the Plaine once
again or to interdict Route 7 might set back
Communist plans, but it would probably be more
costly than last year's effort.
Either way, it seems doubtful that the Meo25X1
guerrillas can extricate themselves from the war
of attrition in which they have been locked with
the Communists for the past decade.
ca 'le`ReW56n{`- s_ith- JS
'i' aent"1,--responding- t iress'iire
the US ambassador, appears to have moved
quicklto
relations
around US b
arise from lawless conditions
could be only ten
The promised improvement
ary, however, because na-
tionalistic Filipino po
icians and the Manila
press delight in ballyhooi
Filipinos and US soldiers.
jncidents involving
The general illegal activities of inos
around the bases complicates US military o a-
tions and also poses a threat to US military pe
sonnel and their dependents. Local Philippine
officials have tended to ignore the negotiated
military base rights agreement that allows the US"
to determine when a soldier is on or off duty-and
thus which court, US or Philippine, takes. jurisdic-
tion. In addition, they have dragged out the dis-
position of cases, frequently forcing servicemen
to remain in the Philippines beyond the end of
their tour of duty.
To ease the situation, Marcos has ordered
Philippine authorities to comply with the US-
Philippine agreement. on jurisdiction. He has also
taken steps to diminish politic g ploxt tcn1 t4_remain. strongly committed.in.Asia.\
the-t~lttary presence, particularly by Filipino
SECRET
reduce the irritants in US-Philippine
politicians- who in- a time-honored tactic dra
exaggerated attention to incidents involvin S
servicemen several times each year as a ay to
revalidate their nationalist credenti . On this
tack, Marcos has silenced a congre an who had
been pushing for a congressi resolution that
would have labeled a US b commander persona
non grata. The Preside ,however, has less lever-
age on the politici than he does on government
officials, and the former are unlikely to keep still
for long.
micable tactics no doubt stems
cuing difficulties could impel
the US to lower its militry strength in the Philip-
pines to a level that Man'a ould see as reducing
the effectiveness of the USeurity umbrella.
Marcos had been increasingly worid over what
he saw as an overly quick reductio'in the US25X1
military presence in Asia. He clearly views the US
operations in Cambodia as demonstrating an in-
These actions by Marcos, who has himself
d on anti-US sentiment when he considered
olitical advantage, reflect a re-evaluation
of US bases to the Philippines. His
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SECRET
Peking's Party Building Efforts Drag On
The Chinese Communists' campaign to re-
build their shattered party apparatus is still mov-
ing at a snail's pace even though a full year has
elapsed since the ninth party congress. Current
discussions in domestic propaganda indicate that
the principal obstacles to reconstruction are quar-
rels over staffing new party committees and re-
sistance to the party's resuming its previous lead-
ing role in local administrations. There are also
signs that these problems are being compounded
by intensified factional infighting between various
former Red Guard groups that are vying for domi-
nant positions in the new party organs.
over revolutionary committees-the governing
bodies that were formed at nearly all levels of
administration during the Cultural Revolution.
Theoretically, this transfer of power should pro-
ceed smoothly because the new party organs are
required to draw the majority of their member-
ship from the revolutionary committees. An in-
creasing number of radiobroadcasts devoted to
party leadership problems, however, have been
complaining that elements who are on existing
revolutionary committees and who have been
denied membership in the party are unwilling to
submit to its leadership in local affairs.
Despite Peking's evident desire to speed up
the tempo of reconstruction, the majority of the
new party committees formed since the first of
the year have appeared only at the lowest levels
of administration, i.e., in communes, factories,
and production brigades. To date, less than one
third of the provinces have claimed that one or
more reconstructed party committees have been
formed as high as the county level. Not one has
been announced at the special district or provin-
cial levels, and only a single small city in southern
China has announced that it has formed a munici-
pal party organ.
For many months after the party congress,
party rebuilding was seriously hampered by insuf-
ficient guidance from Peking, but this is no longer
the case. Since last December, Peking has issued
several authoritative statements detailing the man-
ner in which the new party organs are to func-
tion. Nevertheless, the regime's moves in recent
weeks to reaffirm these guidelines attest to con-
siderable opposition to them in many localities.
Peking has stressed repeatedly, for example,
that party committees must exercise leadership
Disgruntled former Red Guard activists have
been particularly virulent in their opposition to
party leadership. Moreover, their discontents ap-
pear to have been heightened by Peking's recent
injunctions that Cultural Revolution activists do
not automatically qualify for party membership
and that all former Red Guard factions in a given
area will not necessarily be awarded equal repre-
sentation on new party committees. Thus, in
many areas, competing factions appear to be en-
gaged in a scramble for the relatively small num-
ber of party posts open to them.
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0r,%_,01< I
ent behavior underscores its preoccupation with co
--.L-
rec
s
teri the challenge from China. Pravda set the tone on 18 May wit he
USS most scathing indictment of Peking since last August. Pravda med
China r the "latest events in Indochina," taking the line that hinese
obstructs ism weakens socialist unity, thus opening the way for i perialist
aggression.
The Russi s continue to wait and see on the matter t support for
Cambodian Princ ihanouk, mostly because they fear th he may be in
Peking's pocket. Me while, Moscow sees clear advantage jfi keeping a hand
in Phnom Penh and his decided for the present not to eak with the Lon
Nol government.
11
The USSR is also agit ing to bring its East Eur can allies more solidly
into line in support of M cow's stand against e `Chines . ThefoSoviets
two
abruptly summoned Roman id` top leaders to sco
days to discuss this and other p ints of differen e. There was not much sign
of give on either side, and there re hints th Moscow's patience may be
wearing thin.
Although Prime Minister Wilson
call for a general election, he was alrnos
A
swing toward Labor in last week's pubs
noted for throwing away money-q
win on 18 June. The election will u
Conservatives' lackluster leaders
s that he decided last month to
certainly influenced by the massive
inion polls. London bookies-not
stablished 2-1 odds for a Labor
bly be hard fought, despite the
my turn out to be one of the
closest since World War 11.
The French CommunistParty (PCF) this w
intellectual Roger Garaudyaraudy, who had alre
olitburo and his local ce 4 for sharp criticism of P
k formally expelled party
y been ousted from the
p
ublic controversy by r Baling that party leaders ha
p
-1-vale Government with a document that could be
policy, touched off a
provided the Czech-
sed against former
succeed in further
Czech party boss Du ek. These actions by the PCF wi
alienating both Fren youth and potential allies of the n
-Communist left.
C. v Jenks of the UK was chosen to succeed David Morse head of
the Int national Labor Organization. The slimness of his ma in may
presag substantial opposition, and he presumably will be too old t run for
re-e4 tion when his term ex ires in 1975.
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Moscow to Keep Presence in Phnom Penh
The Soviets have apparently decided not to
break diplomatic relations with Lon Nol's overn-
ment in Cambodia.
The decision means in e ect tat
Moscow's determination to retain its freedom of
maneuver in Indochina has taken precedence over
other considerations.
The Soviet decision suggests that Moscow is
uncertain about Sihanouk's prospects, and more
importantly, wary of his dependence on the Chi-
nese. In the present situation, the Soviets clearly
believe it unwise to make a premature commit-
ment that would limit their options. If Sihanouk
should leave Peking, Moscow is free to review and
modify its position.
Moscow's present posture, however, leaves it
vulnerable to Chinese charges that the USSR fol-
lows a policy of only "sham support" for the
Communists in Indochina, and at the same time
places further strain on its relations with Hanoi.
The Soviets have already anticipated
Peking's charge, however, and in private con-
versations with diplomats and in propaganda they
are claiming that China is obstructing united
Communist action in Indochina. In the Pravda
article of 18 May (which was Moscow's response
to Peking's Lenin anniversary polemic), Moscow
implicitly accused the Chinese of being re-
sponsible for US actions in Cambodia, a charge
that had already been made explicit in less
authoritative propaganda.
The Russians no doubt are trying to per-
suade Hanoi that, in the end, its best interests
might be served better if Moscow preserves for
the present a degree of flexibility on the question
of the future shape of the Cambodian govern-
ment. The North Vietnamese, however, are dis-
pleased at this current Soviet posture. Le Duan's
failure during his recent stay in the USSR to line
up full backing for North Vietnam's current
policies clearly disappointed Hanoi's leaders and
gave Peking a new issue to exploit against Mos-
cow. Pham Van Dong made clear in a speech on
19 May that North Vietnam's sympathies at the
moment lie more with Peking than with Moscow.
Heretofore, the North Vietnamese had always
been careful to balance the praise given their two
giant allies, but this speech was clearly more
effusive toward the Chinese than the Soviets. The
Soviets have apparently calculated, however, that
so long as they provide strong-if not uncondi-
tional-political backing and the necessary
economic and military aid, they will not jeop-
ardize their over-all position in Hanoi
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Eastern Europe Cautious in Response to Bonn's Overtures
A number ,af Eastern European regimes are
now negotiating of ..,getting ready to talk with
Bonn about improving "relations.
The East Germans last meek prepared for the
second round of political ta`Ilcs with the West
met with General Secretary Brezh
Soviet leaders in Moscow on 1
doubtedly to elicit a demonstration o
solidarity with Pankow and presumably
discuss the implications of Chancellor B
expected proposal for the establishmgnt of com-
missions to carry the negotiationsorther. Pan-
kow recently accelerated its kp"ropaganda in a
final-hour effort to convince Bonn that a con-
tinued inter-German dialogue is dependent upon
West German recognition of East Germany under
international law.
The West Germans, who signed a 1970 trade
protocol" with Poland on 13 May, have announced
that negotiations on a long-term agreement cover-
ing trade and aid will be "intensified." This sug-
gests that both sides now are willing to resume
the discussions that were interrupted last January.
Warsaw has implied that it would like to conclude
the major part of these talks before the fourth
round of political consultations begins on 8 June
in Bonn.
Czecho ,Jo4"alc- - West German trade negotia-
tions am. cheduled to open on 25 May. Prague
h ,a'Iso agreed to a "quiet visit" by a West
' erman Foreign Ministry official, thus renewing
political contact for the first time since the Soviet
invasion in August 1968. No date has been set for
the visit, but a Czechoslovak trade official claims
at Moscow has given Prague the green light for
The ungarians, meanwhile, apparently have
made a ser of maximum and inflexible de-
mands, hoping k at the Brandt government will
grant broad cone ions to expand trade, espe-
cially by lifting restrictions on Hungarian goods.
Like other East Europeans, the Hungarians arn25X1
watching for a breakthrough in Polish - West
German and Soviet - West German talks before
starting serious negotiations.
Eaern Europeans Worry A out Relations with S
Four of the eight Eastern uropean govern-
ments have privately told US offi ' s that they
hope their public opposition to US licy i.
Cambodia will not cause lasting damage to
tions with Washington.
that US-Soviet relations might deteriorate as a
result of Cambodia, thus setting back the pace of
European detente.
While a steady drumfire of anti-US ropa-
ganda on the issue is emanating from all East-
ern Europe, Yugoslav, Romanian, Polish d Hun-
garian spokesmen have pointed out that ey have
other obligations: Romania to defen its inde-
pendent stance vis-a-vis Moscow, Yug lavia to its
nonaligned friends, and the others o Moscow.
There appears to be apprehension a . ng the four
US contacts on the diplomatic level are con-
tin g to proceed normally with the four govern-
ments, though there have been minor surfacc25X1
gestures o disapproval of US actions in Indo-
china. There h been no demonstrations against
US missions, howev ; except for some vandalism
at the USIA installation in Belgrade for which the
Yugoslav Government made amends. f
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Agricultural Prospects Dim in Eastern Europe
For the third consecutive year the outlook is
unfavorable for significant growth in Eastern
Europe's agricultural production. Grain prospects
are currently not as good as a year ago and the
output of livestock products, especially meat,
shows no sign of improvement. As a result, there
will be little change this year in consumer avail-
abilities of quality foods or in foreign exchange
earnings from agricultural exports.
Adverse weather through the end of last
month makes production prospects for the im-
portant winter grains-wheat, rye, and barley-less
favorable than a year ago. Drought last fall was
followed by a long, severe winter and by excessive
moisture this spring. These conditions reduced
the area seeded to winter grain and caused above-
normal damage to these plantings in many coun-
tries. Spring planting also was set back by as
much as four to six weeks. Shortages of seed
potatoes may also reduce acreages of this im-
portant crop in the northern countries. More
favorable growing conditions in the coming weeks
could improve crop prospects, but attainment of
above-average yields is unlikely.
Growth in livestock production will be lim-
ited by the smaller number of productive live-
stock available at the beginning of 1970 and by
fodder shortages. Output and procurement of
livestock products such as pork, eggs, and butter,
which fell in 1969, are not expected to improve
before the last quarter of 1970, if then. The
northern countries have programed increased im-
ports of feedgrains and high-protein supplements
during the year ending 1 July 1970 to prevent a
significant drop in livestock herds and meat pro-
duction. Grain imports may exceed last year's
5.8-million tons by a half million tons. Some 40
percent of total grain imports may come from the
free world.
Increased outlays for such purchases as well
as reduced earnings from exports of food prod-
ucts are likely to occur this year. Czechoslovakia
and East Germany will have to increase hard
currency expenditures for meat, potatoes, and
animal feed. Hungary and Poland anticipate
smaller net gains in foreign exchange earnings
from Western trade in agricultural products.
The population and money incomes will
continue to increase faster than retail supplies of
the quality foods most in demand. Thus, un-
satisfied consumer demand for such foods, par-
ticularly animal products, can be expected
throughout 1970.
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5EUXE1'
Soviets Seeking Warsaw Pact Support Against China
Moscow appears to be making a determined
effort to involve the Warsaw Pact states more
directly in support of its interests outside the
European continent-particularly in the running
dispute with China. The Soviet leaders seem
increasingly disturbed by what they consider a
provincial attitude on the part of some of their
allies and a reluctance to get involved outside of
Europe. Moscow is now talking of remedying this
situation, to the apparent distress of Bucharest,
and perhaps others.
The USSR is placing much stress on the,
reciprocal nature of bilateral treaty obligations
between Moscow and the Warsaw Pact states. This
was most recently manifested in the Soviet-
Czechoslovak friendship treaty of 6 May, which--
like treaties signed with Bulgaria and Hungary in
1967-omitted the limitation of mutual defense;
obligations to Europe. Thus, these three states at
least now would appear formally bound to fight
with the Soviets in an Asian war.
Moreover, there have been recurrent rumors
that the Soviets have already succeeded in
maneuvering some of their allies into establishing
a token military presence in Soviet Asia. At the
turn of the year, there were several reports that
some Polish Air Force units had been transferred
to Soviet Central Asia. w o e
me Czechoslovak Army units were
None of these reports has been confirmed,
and there would be little military advantage to
the Soviets in establishing an East European
presence there. However, the Soviet leaders might
see considerable political advantage in this kind of
tactic as a device to bring reluctant East Euro-
peans more solidly into line in the dispute with
China.
There have also been indications that the
Soviets would like to reorient the Warsaw Pact to
take account of Soviet interests in Asia. They
have begun in recent weeks to speak more and
more frequently of an alleged Pact responsibility
to defend the cause of peace and socialism "any-
where"-in blatant contradiction to the published
text of the Warsaw treaty itself.
The Romanians have been the main obstacle
to these ambitions. Bucharest made its opposition
to any effort to reorient the bases of the Warsaw
alliance dramatically clear in an editorial article in
the party daily Scinteia last week. Presumably in
reaction to recent Soviet tactics, the article
pointedly stressed that the Pact's area of responsi-
bility applies "only" to Europe, and that in giving
orders, national command structures cannot be
bypassed.
Differences on these points may have been
one of the factors that led to the sudden visit of
Romanian leaders to Moscow for talks on 18-19
May. Although these talks undoubtedly reflected
the determination of the Soviet leaders to force
Bucharest into line on these and other issues,
there is still no indication that the Romanians are
of a mind to make significant concessions. These
differences may also affect the course of a meet-
ing of Pact defense ministers in Sofia this
week. 25X1
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Franco-British Concorde SST Soon to Fly Mach Two
he British are installing more powerful
engine on the UK-built prototype Concorde and
plan to b "Skin Mach 2 flight tests this month.
Mach 2
ting-which will help to establish
ibility of the aircraft-will be a
the economic fea
crucial phase of th
have progressed smo
test program. To date, tests
newed optimism to off!
Concorde program. The
scheduled to fly 18 times in
before the new engines were
tish plane had been
e last series of tests
was so good, however, that the
completed in only 6 flights.
stalled. Progress
ious tests were
The French-built prototype Co ordjal-
ready has approached Mach 2 for shortcriods,
but the highest sustained speed achiev o far
has been Mach 1.54. It will begin M4Ch 2 %sts
shortly after the British plane. In ad
two prototypes now flying, two
aircraft are under construction a
maiden flights in the spring of 1,
To date, $975 milli
French and British go
of the Concorde
more will be spe
reached. The
quoted to t
Sud-Aviat
the ma
that
ate
has been spent by the
nments on development
an estimated $800 million
efore the production stage is
it price of the Concorde being
airlines is about $19.5 million, but
and British Aircraft Corporation,
'acturers, are reserving the right to alter
ure when contracts are actually negoti-
So far, 16 airlines, including 7 nn the US,
hold options to purchase 74 Concordes. The US
lines account for 38 of the options. These 16
airlines presently carry 70 percent of the passen-
gers on the world's scheduled airline routes. In
late 1969, pilots from Air France, BOAC, Pan
American, and TWA went to Toulouse to test fly
the Concorde. They reported that the aircraft was
easy to fly, did not impose an excessive workload
on the pilot, and should present no problems in
training airline pilots and engineers in the han-
ing of the aircraft.
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ials associated with the
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?rde~ w~u r,is not 3yjtba ? ,it5?pLQblems, the most intractable being
excessive weight and noise. The weight difficulty is largely a result of unanticipated` {
changes dditions to the structure and equipment-problems nopsxa'fy en-
countered in the yelopment of an aircraft incorporating new-le nology. The
developers of the Conc e continue to wrestle with the ,prem of keeping the
maximum weight at 385,00 unds while incorpor the necessary changes in
the aircraft. One change has bee reduction planned passenger payload from
140 to 120.
On takeoff, the plane r
This noise level is we
including those
aircraft an
nece
ta(e-lem before me plane entersservice .-nnu d,~1P~ for
Finns Resort to Nonpartisan Government as Stopgap
The nonpartisan cabinet named by President
Kekkonen is a stopgap measure aimed at provid-
ing Finland with a government during the Presi-
dent's forthcoming trip to Moscow as well as
during the approaching parliamentary recess.
Negotiations for a new political government are
expected to resume in the fall.
Kekkonen took this step after attempts to
form a majority government reflecting the sharp
swing to the right in the parliamentary elections
of 15-16 March were repeatedly stymied.
The cabinet is expected to play essentially a
"caretaker role," concerning itself with everyday
duties and preliminary work on the next budget.
There will be no vote of confidence, and the
government will exist with the "toleration" of
rather than the active support of parliament.
In line with the officially neutral complex-
ion of the government, the known political loyal-
-tedly can be heats o a distance of some 20 miles.
yond the limits imposed a st international airports,
he US. Noise, however, is endemic }? - ersonic transport
hie compromise in the operation of the Concorde .rt y. ultimately be
ties of the ministers are divided evenly between
the moderate right, the center, and the moderate
left. Named as prime minister is Helsinki Mayor
Teuvo Aura, a member of the Liberal Party; the
deputy prime minister is a conservative, and the
foreign minister a Social Democrat. Both the
Rural Party of the radical right and the Commu-
nists have been left out of the cabinet, as have all
the present members of parliament. 25X1
The n
of high-level
w cabinet consists generall
eaucrats, business
mmon
fa mix
and poli-
ticians whose onl
personal friendship
versial appointment
the President's
ing Finnis
appoint
amon
gap
cteristic is close
konen. The contro-
lly pro-Soviet Social
n ministe
sire to reassure
robably reflects
scow regard-
cooperativeness. Distas
for this
ent and widespread dissatisfaction
e political parties with Kekkonen's stQ--
rangement give added weight to assurances
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Labor Agitation Tests Italian Government
Organized labor is pressing Mariano Rumor's
center-left government, now two months old, for
social and ecoi mic reforms. The disruption
arising from short'Kneral strikes staggered by
region throughout the--country has been inten-
sified by a number of strikes in specific occupa-
tions, particularly in the selce sectors of the
economy.
Union leaders in direct negotiati'b -s w t the
government are demanding curbs on risk prices,
better housing, tax relief, and reforrnj6f N state
The union
,,t'oncern most widely shared by
the general plic is rising prices. According to a
public opj4bn survey earlier this year, one third
of the,3opulation identified this and the fight
agai 9t inflation as the most important of all
rent problems. Prices for the first quarter of
,x1970 rose at an annual rate estimated at six to
seven percent. The second concern identified in
the survey-unemployment and underemploy-
ment-was given top priority by only one fifth of
the population; the widely publicized "danger" of
a rightist or leftist coup d'etat in Italy is, accord-
health service and transportation. Leaders oche ing to the survey, a major concern of only two
three major confederations, botatommunist ai percent, while union concerns of inadequate
non-Communist, are seeking
front, although conflicts -v3i
ment evidently contin
reportedly in favor of
ment that could h
tion party, in re
June. The no
have links to
for a speci
time fra
relevan
imme
to
maintain a united .housing and transportation are not mentioned.
hin the labor move-
The Communists are
rther agitation, a develop-
them, as the chief opposi-
onal and local elections on 7
ommunist labor leaders, who
e government parties, are pressing
c reform program within a definite
The government is trying to identify
measures that can be put into effect
lately as an earnest of its serious attention
wide-ranging reforms that union leaders
'-.,Interest in union-government negotiations is
height ned by the approaching regional, pro-
vincial, id communal elections, which will have
more sign hcance than previous local elections. In
belated comance with the 1948 Constitution,
regional government is being established in much
of Italy for the flit time, providing a measure of
decentralization. EW'l hopes to read en-
dorsement of its poll s and positions in results
of the elections, the o"come of which could
force changes in the nati8 ial government.
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Spurred by Egyptian attacks and harassment, Israel has teen striking hard at
targets along the Suez Canal and the Red Sea, taking a heavy toll of Egyptian
aircraft in the process. Tel Aviv's concern over Soviet and Egyptian intentions in the
canal area has continued to mount. The Arab "confrontation" states have their own
worries that lightning strikes against their own forcesay be in the offing, particu-
larly of e,r last week's Israeli sweep into Lebanon.
The LAN Security Council this week pas. d by an 11-0 vote a resolution
condemning e Israeli incursion into Lebanon oF1 he resolution did not-even implic-
itly-condemn e fedayeen raids. The missi of Gunnar Jarring, Secretary General
Thant's special "Npresentative for the Midd East, will probably not be reactivated
soon.
There have beerumors-nothin more-that a coup may have been attempted
in Baghdad last week. The rumors based on unconfirmed reports of gunfire and
tank movements in theragi capitalon 10 May.
In the Maghreb, Mo
Libya to hold the oft-pos
cco,lgeria, and Tunisia seem ready to go ahead without
ogbd economic ministers' conference. King Hassan and
' will discuss Maghrebian problems and may also take
Premier Boumediene probaN
up their disputed border i
the trial of former econgfnic
last Tuesday. President Vourgu
when they meet next Monday. Meanwhile in Tunis,
hief Ahmed ben Salah and several supporters began
a, whose prestige has been tarnished by the denigra-
ommute the anticipated stiff sentences.
tion of Ben Salah, is e>ected to
Congo (Kinshasa) has public ed the expulsion of four Soviet Embassy person-
nel, described as fluential diplo ts," on charges that the Soviets were pro a an-
dizin amon s udents and o era an e n
he pu icity may e inten e as a s arp
warning agar Kst me ing in ongo ese ?tfairs as Mobutu's official party prepares for
parliamentafy elections in December.
In West Africa, Guinea's radical Presicnt Toure is continuing his efforts, under
way singe March, to patch up his long-stan ng quarrels with Ivory Coast and with
France; In a speech last week he called for "c plete reconciliation" with Houphou-
et-Boil ny's conservative Ivorian regime and e ended the olive branch anew to the
Fren0h. Both Abidjan and Paris are responds positively, and an early meeting
between Toure and Houphouet appears likely.
India's Naxalites, pro-Peking Communist re olutionaries, are continuing to
c, use concern both in New Delhi and in several s lee capitals. Originally peasant
16riented, the Naxalite movement has gradually attrac ed student and limited worker
support with the result that violence has been intro ced into urban areas. Police
action against the Naxalites has been increasing, parti larly in West Bengal-scene
of some of the most widespread violence in recent wee(S-but, with socioeconomic
conditions continuing to deteriorate in that state, the outlook for further growth of
the movement is good.
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Israeli Military Ripostes Batter Arabs
Action Along the Canal
A high level of ground, air, and sea action
took place this week between Egyptian and Israeli
forces.
Egypt used one of its Soviet-built guided
missile patrol boats for the first time since
October 1967 and sank a large Israeli fishing
vessel off the northern coast of the Sinai Penin-
sula on 14 May. The following day an underwater
explosive charge detonated in Eilat harbor killed
one Israeli diver and injured several others; it is
not clear who set the charge.
Cairo paid the price for sinking the Israeli
fishing boat and for its continued harassment of
Israeli troops along the Suez Canal during the
next few days. On 15 and 16 May four Egyptian
MIG-17s and one MIG-21 were downed by the
Israelis, bringing the total of Egyptian fighters
lost to the Israelis since the June 1967 war to
some 97.
Also on 16 May, Israeli aircraft struck far to
the south of the Suez Canal and attacked an
Egyptian naval base along the Red Sea Coast. An
Egyptian destroyer and a guided missile patrol
boat were sunk in the attack, according to press
reports from Tel Aviv
`Itie E
be deterred by
tians, however, will probably not
iodic casualties -ffom further
harassment of Israe
Sinai. The compulsion t
continued occupati
outweighs any
ds apparently
ative effects brow
iiita.,y positions in the
st militarily Israel's
of Arab
losses Cairo's armed forces suffer as a result. As a
demonstration. of this, Egypt carried out an abor-
tive inando raid across-the Suez Canal on 19
Jam.,-.suffering considerable casualties.
Nasir continues to exhibit a willingness to
resolve the Middle East impasse through political
channels. Nevertheless, he probably believes what
he has often said publicly: that only when his
military forces are strong enough to challenge the
Israelis can evacuation of the occupied territories
be realized. The recent reinforcement of his de-
fenses by Soviet units will stiffen his resolve to
wait until this goal can be achieved.
Underlying Tel Aviv's concern with Nasir's
new aggressiveness-a result of the new Soviet-
assisted air defense system in Egypt--is the fear
that the Egyptians and Soviets are considering
actions designed to limit Israeli military actions
still further. The key question agitating the Israeli
Government this week is whether the Soviet air
defense system is about to be extended to the
Canal. There is no evidence of such a move, but
Israeli spokesmen have indicated that it is just a
question of time. They claim that the Soviets
have already attempted to do so but have been
forestalled by heavy Israeli bombings.
The Israeli Government has made it clear in
notes to the Big Powers that it has chosen to fight
to maintain air control over the Canal, i.e., that it
has no plan to pull back under Egyptian and
Soviet pressure. Implicit in such a decision is a
willingness to accept the increased risk of direct
confrontation between Israeli and Soviet pilots.
Israeli leaders have so far operated with great
caution as far as the Soviets in Egypt are con-
cerned. Tel Aviv had hoped the unwritten modus
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vivendi-that Israel would forgo deep penetration
raids in exchange for Soviet forbearance in the
Canal area-would hold. A loss of its air superi-
ority over the Canal-the prime guarantee of halt-
ing any serious Egyptian military thrust into the
lightly held Sinai-would raise for Tel Aviv the
whole question of peace and war, and, in the
Israeli psychology, the question of Israel's ulti-
mate existence. The Israelis want at all costs to
avoid a situation in which Nasir becomes so
emboldened by direct Soviet support that he
deludes himself again into thinking he can win a
war with Israel. If Israel's existence comes under
serious question, Israeli leaders will think of pre-
ventive action against Nasir.
Th Israeli Government at ,,phis point is
puzzled- d troubled-by wh it chooses to
view as falt g US suppo of Israel. Foreign
Minister Eban is i ashi on this week to try to
obtain a US commit t for continuing sales of
aircraft to Israel to ain some indications
of US diplom c support Israel against the
developing .. ation in Egypt an long the Suez
Canal. S ar, the Israeli Governor t has talked
in mil' ry terms and has given no indication of
any isposition for political compromise. The few
v ces in Israel that advocate compromise as the
way to obtain peace have been drowned in the
pub l ~'"over the new situation posed by
Sovie ns ingypt.
Israel's Lebanon Incursion: Aftermath
Israel's armored thrust into Lebanon last
week has heightened Arab fears of Israeli attacks
against their eastern front forces.
The Lebanon Government pitched itself into
a new crisis last week less than 24 hours after the
withdrawal of Israeli forces from the Mount
Hermon area. Almost before the Israelis had left
the area, large numbers of fedayeen had entered
Lebanon from Syria. Stirred by misleading
Lebanese Army accounts, President Hilu and
most of the cabinet charged that Syrian Army
regulars had entered the country without Beirut's
permission. Interior Minister Jumblatt and feda-
yeen officials in Amman, however, refuted the
charge and maintained that the fedayeen were
merely rotational replacements. Seeking to avoid
a diplomatic clash with Syria over the alleged
incursion, Prime Minister Karami led a delegation
of civilian and military officials to Damascus last
weekend, where they apparently were satisfied
with Syria's explanations. By the beginning of
this week Lebanon had quietly dropped its
charges of a Syrian invasion, and the affair
appears to have been resolved.
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Iran Faces Slower Economic Growth
The recent agreement with the Western oil con-
sortium will give Iran an 11-percent increase in oil
revenues this year. These payments will ease Tehran's
expected, balance of payments difficulties and will
slow the cline in the growth of the economy.
Ss
High goviment expenditures, caused largely
by heavy public vestment under Iran's ambitious
development progr , have kept foreign exchange
reserves under pressu since 1967. Annual imports
since the Iranian year inning March 1966 have
risen by 21 percent, while reign exchange earnings
from nonoil exports and oil venues have increased
only about 18 percent per yea To finance the estiy
mated $366-million gap for the ear ending Ma
1970, Iran has been borrowing inc singly on - ort
term at high interest rates. As a r lt, its ftinual
external debt repayment burden incr sed 00ramat-
ically during the past year, totaling an ted $254
million, or 18 percent of total foreign ex~ ge earn-
ings.
Military needs are competi increasingly
development programs for fo ign exchange. La
year the government decided raise current expendi-
tures by some $1.5 billii during the remainder of
the Fourth Plan period,-(1968-73). Over half is to be
for military purpose$ reflecting the Shah's concern
with Iran's militafposture following the scheduled
British withdraw' from the Persian Gulf in 1971.
Largel G because of balance of payments con-
straints, government investment, which grew 14.2
percen in the year ending March 1969, increased
only .7 percent last year and is not expected to
ex nd by more than 5.5 percent for the year ending
t March. As the rate of investment slowed, the
r*growth rate of real gross national product (GNP)
declined from a high of 12 percent in 1968 to 9
percent last year. It is expected to be about 8 percent
this year.
The government-consortium agreement will in-
crease Iran's oil revenues by more than $100 million
over last year, allowing increased imports of develop-
ment goods. The government hopes that by next year
it will have adequate funds to increase investment to
planned levels, thus meeting the targeted 9.4-percent
average annual increases in real GNP during the
Fourth Plan period.
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Moderates Have Edge in Ceylon's Parliamentary Elections
Prime Minister Dudley Senanayake's United Na-
tional Party (UNP) holds a slight lead in the campaign
for crucial parliamentary elections on 27 May, but
the outcome could depend on minor shifts in up to
50 closely contested seats out of a total of 151.
Although the campaign has been free of violence, the
opposition might yet decide to play on latent com-
munal antagonisms between the majority Sinhalese
and the minority Tamils in a last-ditch effort to
achieve victory.
The only significant opposition to the UNP is
the United Front, a leftist coalition headed by Mrs.
Bandaranaike, a former prime minister. The coalition
is composed of her nationalist Sri Lanka Freedom
Party, the Ceylon Communist Party/Moscow, and the
Lanka Sama Samaja Party, a Trotskyite group. The
front's election manifesto calls for the nationalization
of remaining private banks and increased state control
over both imports and the wholesale distribution of
all "essential" commodities. It also promises the es-
tablishment of "people's committees" at various
levels of government to supervise the bureaucracy. In
foreign affairs it endorses recognition of some Com-
munist countries.
The UNP has vigorously criticized the totali-
tarian aspects of this manifesto and has pledged con-
tinued communal harmony and economic growth.
Ceylon's economic outlook is mixed, however, and
the opposition may reap advantage from rising living
costs and urban unemployment. The United Front
scored an initial psychological victory when one of its
candidates was declared an uncontested winner fol-
lowing the disqualification of a progovernment in-
dependent. An apparent opposition ploy to discredit
the UNP, however, by alleging that the armed forces
were preparing to seize power if the UNP loses seems
to have been largely ineffective. The UNP has also
won pledges of support from the Ceylon Workers'
Congress, the country's largest union and one that
controls a crucial swing vote of up to 20 seats.
The UNP and its allies will clash head on with
United Front candidates in only 47 constituencies. A
Sinhalese nationalist party is fielding 5 1 candidates
and may unintentionally aid the UNP by drawing
strength away from the coalition. The presence of
over 80 independents clouds the prospects for both
sides. At present the UNP appears to have over 65
solid seats and is leading in about a dozen other
constituencies, while the United Front probably can
count on slightly over 40 seats. If the UNP and its
allies cannot muster a majority, the Tamil-based
Federal Party could become the decisive factor; al-
though this party left the UNP-led government in
1968, it would probably support the UNP rather than
Mrs. Bandaranaike, whose party has a history of anti-
Tamil bias. ~
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Fidel Castro early Wednesday morning delivered a scathing attack on
e US. He accused Washington of planning and launching exile attacks,
t h r t
ened to
withdraw the Swiss Embassy's privilege enabling ft to represent
US i erests, and indicated that he may take over the former US Embassy
buildin in Havana and so bring to an end the refugee airlift. Castro also
announce that the ten-million-ton sugar harvest goal will not be reached,
admitting t t this is a bitter defeat because "the honor of the revolution is
at stake." In other speech that night he attempted to rationalize the size
of the harvest a said that a goal of nine million torus could be reached.
The Soviet na l force of two warships, =three submarines, and two
auxiliary ships that a Nved in Cienfuegos on 14 May is still in port. The visit
is expected to last two eeks, after which the ships probably will leave Cuba
to carry out operations ir\the Caribbean and possibly in the Gulf of Mexico.
On 15 May, Peru's military government decreed harsh new controls on
foreign exchange. The measur-has dealt a severe blow to business and the
wealthy and will further weaken e economy. Penalties for violations of the
decree are extremely severe. The balthy and middle-class businessmen thus
far have reacted with uncertainty a fear, but the action could solidify the
heretofore fragmented and ineffectiOV opposition to the military govern-
In Barbados, Prime Minister Barrov,has banned the Second Regional
Black Power Conference. scheduled for Ju' , probably because of the ex-
pectation that it would be accompanied y disturbances and violence.
Conference organizers now intend to seek pe ission from Guyana's Prime
A student demonstration in Mexico late last Neek to protest US action
in Cambodia soon turned into an attack on the g ernment and on presi-
dential candidate Luis Echeverria. This is the first major protest against the
government Once the riots on the eve of the 1968 lympics, and it has
encouraged students to plan further political rallies duytng the World Cup
%
soccer matches scheduled for Mexico Cit
in Ju
y
ne
.
Marco Antonio Yon Sosa, the last of the original guAF ilia leaders in
Guatemala, was killed by Mexican authorities on 16 May ne r the border.
Communist terrorists will probably try to avenge his death wit _- some type
of violent retribution. Right-wing counterterrorism, which begs after the
assassination of the West German ambassador in April continues
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Chileaaq Presidential Campaign Swings Into High Gear
With the presidential election ta.n four
months away, the campaign now is procee(
earnest, and some political alliances and sgths
appear to be shifting. From the berting of the
campaign it has been apparent at independent
conservative Jorge Alessandrt ' the front runner.
Socialist Salvador Allende, running with Com-
support, has been considered a strong sec-
ond, and Radomiro Tomic, candidate of President
.'s Christian Democratic Party (PDC), a poor
third ough Alessandri is still in front, some
believe that ay be losing ground to Allende
and Tomic. Tomic1iimself appears to be running
a much stronger campaign than he had earlier.
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Two weeks ago Allende's campaign suffered
a setback when he suddenly became ill. Although
a heart attack w"'~tk rumored, he claims that it was
merely a severe cas f grippe with accompanying
L____i ti rr .?
mild, it seems certain thhis campaigru-M will
Tomic, apparently convi tha-Alessandri
will continue to lead, no eems to be ing to
make as strong a hold second place as po 'ble.
Under the Chilean nstitution, if no candid
wins a majorit _ f the popular vote, Congress
n
chooses betty
the two top contenders: In the
past, Congress has chosen the candidate with the
plurali f'Tomic, however, hopes to reinforce the
PDCotes in Congress by strengthening his own
tie'with other leftist congressmen. Last week he
defused to permit PDC members of parliament to
strike a deal with conservative groups that would
have set up a PDC-Radical leadership in the
Chamber of Deputies. As a result, a new leader-
ship consisting of a leftist Radical, a Communist,
and atl.Socialist was elected. He may believe that
hex thus could count on leftist votes in a contest
.with Alessandri.
Another new factor in, the campaign has
been provided by a recent public statement by
the army commander, General Schneider, that the
armed forces would support the right of Congress
to choose the candidate with the second highest
popular vote. This statement has been attacked as
favoring Tomic's campaign, although it also theo-
retically gives a boost to Allende. It probably was
de in consultation with Defense Minister Ossa
,
a c f dant of President Frei.
Frei
deals with th
opposed Tomic's attempts to make
ftists. The government and party
.
now appear to
ever, preferring pat
niting in his campaign, how- 25X1
with the left to maintain
tion and being out of power
an independent posi-
Ecuadorean Government and Business Battle Over New Taxes
The government may be facing a showdown
with Ecuador's most powerful economic groups
over the emergency taxes imposed last week to
help cover its budget deficit.
Business organizations from both the com-
mercial center of Guayaquil and the capital of
Quito are attempting to have the new revenue-
producing measures struck down by the courts as
unconstitutional. Businessmen have threatened a
general commercial strike to enforce their de-
mands, a threat that is not to be taken lightly
because such strikes have helped to bring down
two governments within the past ten years.
President Velasco is reacting vigorously with
name calling, a publicity campaign stressing the
need to "soak the oligarchy," and threats to
resign if he is defeated on the fiscal issue. There
are no indications that the government is pre-
pared to back off on even part of the fiscal
measures.
An extra session of Congress to upset the
new tax decrees has been called for by economic
interests and by opposition political parties. It
appears unlikely that Congress will convene,
however, as elections for deputies are due next
month and the lower house does not want re-
sponsibility for the problem.
The armed forces, whose recent pay in-
creases would be funded by revenue generated
from the new taxes, are squarely behind President
Velasco. If unrest develops, or if Velasco is faced
with an unfavorable ruling from the Supreme
Court, his principal military and civilian advisers
will increase their pressure on the President to
assume new powers, probably extraconstitutional.
Despite the strong reaction to the taxes, a
compromise is possible. Opposition groups nei-
ther want to push Velasco into a dictatorship nor
to see him replaced, because they see no alterna-
tive candidate who is more attractive
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Dominican Elections Strengthen President's Control
President Balaguer's sweeping re-election
victory on 16 May, buttressed by overwhelming
congressional and municipal majorities, puts him
in a commanding position. Although the admin-
istration will continue to be plagued by signifi-
cant public order problems, Balaguer is unlikely
to face a serious political challenge in the near
future.
Balaguer's 56-percent majority in the five-
man race was a rude disappointment for his
opponents. The two leading opposition candi-
dates have predictably charged the government
with fraud and have threatened retaliation, but
they lack both the political and military muscle
to carry through with their threats at this time.
Moreover, the OAS observers publicly gave the
elections their stamp of approval.
Still-unofficial returns indicate that Bala-
guer's supporters also won control of 26 of the 27
Senate seats and 60 of the 74 seats in the Cham-
ber of Deputies, and captured 75 of 77 mayor-
alties. This showing increases the already formi-
dable majorities at all levels. Only Balaguer's
Reformist Party had the organization and re-
sources necessary for an effective campaign.
The total vote, less than 1.2 million, does
not match the 1966 total of 1.34 million and falls
substantially below the 1.8 million eligible voters.
Juan Bosch's Dominican Revolutionary Party
(PRD), which abstained, will cite these figures as
proof of its continued strength. The low voter
turnout, however, can be partially explained by a
lack of voter interest. The PRD's vote getting
potential is also called into question by the fact
that, despite its support of the popular incumbent
mayor of the capital, he lost to the President's
candidate.
President Balaguer
The PRD nonethe-
less remains the major
opposition, if only by
default, on the basis of
the poor performances
of the other parties. The
party will continue to at-
tract significant popular
support in the cities as
long as it has the mag-
netic Bosch at the helm,
but it is no match for
the President's combined
political and military
strength. Balaguer, as he
has done in the past, will probably bring some
opposition figures into the government, and this
action may further isolate the PRD.
Balaguer, having stepped down temporarily
from the presidency, will probably reassume
office within a few days. His formal inauguration
is scheduled for 16 August. The administration
will face a significant public order problem in
June, when the OAS is scheduled to meet in
Santo Domingo. Bosch has already begun attack-
ing the meeting and may urge demonstrations in
an attempt to embarrass the government. Bala-
guer, however, has been able to use massive mili-
tary patrolling to shut off serious disorders in the
past, and the government will make extensive
security preparations in advance of the con-
clave.
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SLUKL 1'
Castro Blasts US, Admits Sugar Harvest Defeat
Fidel Castro took a particularly aggressive
stance toward the US in a speech delivered early
on 20 May celebrating the return of the fishermen
kidnaped earlier by anti-Castro exiles.
from the Soviet Union and may also represent an
implied threat to Guatemala and Nicaragua,
which he charged with supplying "bases for ag-
gression."
major portion of Castro's address was
devote o lambasting the US. He stressed the
theme tha the "principal party responsible for
these deeds' was the US Governme .-'.fle also
reprimanded th British for allo, the Bahama
islands to be us as sa~nttiies by the exile
groups. Castro said "ritish should demand
that "the US Gove e stop using these islands
as bases from which to at k our country." He
went on to,port to the Cub eople the steps
he had en in order to secure t return of the
fishe en, but he constantly returne o his basic
theme that the exile attacks were being planned,
supported, and launched by the US.
Castro has overreacted to this recent flurry
of exile activity-beginning with the Alpha 66
landing on 17 April. The kidnaping incident has
brought forth his most vociferous protest. Castro
is probably genuinely concerned about the vul-
nerability of his extensive fishing fleet to more
than just harassing attacks by exile groups.
He also probably wants it made quite clear
that his government will not be blackmailed into
making deals and hopes this will put an end to
such tactics. If they continue, he varned, Cuba
will "seek every means to pass from the defensive
to the offensive." Castro also complained that his
air searches were cut short by the "very limited
range" of his MIG-21s and lamented that "un-
fortunately our country does not have long-range
aircraft." These statements may be a prelude to a
possible announcement of new military assistance
On o
former US
He said that
er matters, Castro referred to the
bassy building o
e time was
at it
the building and
as representative
commented t
operated
as the
refugee airli
ugees are processed
ssy. Moreover, he threatens
ough the Swiss
that no other
untry would be permitted to reps
ent the US
Castro used the celebrations to deliver some
bad news about the sugar harvest. He announced
that "we will not reach the ten million (tons)."
He admitted that this was a bitter defeat because
the honor of the revolution had been at stake, but
he added that "true revolutionaries" learn from
failures as well as from victories. Castro praised
the Cuban people for doing as well as they al-
ready have in achieving a record harvest. There
was no attempt to blame the US or anyone else
for Cuba's failure to meet the ten-million-ton
goal. He said that "our goal was too high" and
urged the Cubans to an even greater effort in the
remaining days of the harvest. In another speech
made less than 24 hours later, Castro dwelt exten-
sively on the reasons for the failure to reach his
original sugar harvest goal. He did not resume the
strong anti-US line emphasized in his earlier
speech. According to preliminary reports, Castro
indicated that a new goal of nine million tons
could be achieved.
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Page 29 WEEKLY SUMMARY
22 May 70
eral occasions.
t ripe to take over
buld suffice for Havana
e Swiss Embassy its status
terests in Cuba." He also
would doom the US-
rogram inasmuch
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Secret
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Secret
DIRECTORATE OF
INTELLIGENCE
WEEKLY SUMMARY
Special Report
Policies of the New Spanish Cabinet
Secret
N2 44
22 May 1970
No. 0371/70A
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i7L'Vrir l
POLICIES OF THE NEW SPANISH CABINET
When General Franco announced sweeping changes in his cabinet last
October the move aroused much interest because it is likely that this
government will take Spain into the post-Franco era. Cabinet reshuffling in
Madrid has been infrequent-the last major change took place in July 1965.
In making his choices this time, Franco abandoned his usual policy of
keeping a balanced representation of all the major groups that support him
and gave the largest number of portfolios to businessmen and technical
experts who are either members of or associated with members of the
influential Catholic lay organization Opus Dei. These men, called "tech-
nocrats" because of their economic orientation, believe that the political
evolution of Spain requires stronger socioeconomic foundations. In keeping
with this belief, they propose to give priority to the economic modernization
of the country. Political liberalization, in their view, can wait.
Shortly after formation of the cabinet, a leading member announced
that the government had no intention of giving impetus to the very cautious
political evolution that has been taking place in Spain in recent years and
that it would instead place emphasis on changes in foreign policy, especially
in improving ties with Europe. Ironically, this important goal is unlikely to
be achieved until political liberalization takes place.
Special Report
New Cabinet Appointed October 1969
-11-
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5LUKL I
The outstanding man in the new cabinet is
one of only six survivors of the old one, Laureano
Lopez Rodo, Economic Planning Minister. He has
emerged as chief policy maker and has the sup-
port of Vice Premier Carrero Blanco, the principal
Minister of Economic
Planning
Lopez Rodo
government figure after
Franco. Lopez Rodo's
training, his wide govern-
ment and academic ex-
perience, his economic
and political expertise,
and his membership in
Opus Dei all serve to en-
hance his position and to
make him the leader of a
team that includes sev-
eral of his former sub-
ordinates in economic
planning as well as sev-
eral colleagues in Opus
Dei.
INITIAL POLICY STATEMENT
After its first meeting on 31 October, Vice
Premier Carrero Blanco issued a policy statement
on behalf of the new government. In the domestic
field the statement emphasized general goals such
as better social welfare programs, education re-
forms, equitable distribution of wealth and the
strengthening of local government. There was also
a pious statement of the cabinet's intention to
give full information on its actions in order to
receive the benefit of public reaction.
In international affairs, the statement noted
that Spain belonged to the Western world and
would formulate its foreign policy accordingly. It
further stated that negotiations with the Common
Market would be stressed and friendship with
Portugal reaffirmed. It added that the government
Special Report
would strengthen relations with Latin America
and with the United States. This was followed in
mid-November by an interview given by Lopez
Rodo in which he stated that the new government
would emphasize changes in foreign policy rather
than internal politics. This remark confirmed the
general intention of the new government with
regard to closer ties with the Common Market
and relations with the United States.
ROLE OF FOREIGN MINISTER
LOPEZ BRAVO
The chief spokesman of the new cabinet on
foreign affairs is the new foreign minister,
Gregorio Lopez Bravo, who also is one of the six
holdovers from the previous cabinet, in which he
was minister of industry. A go-getter with an
attractive personality, he immediately started a
flurry of diplomatic activity. In a newspaper in-
terview in December, after little more than a
month in office, he explained his approach to his
job. After noting that, because of social, histori-
cal, and political factors, there were many "con-
stants" in Spanish foreign policy, he declared that
the main changes that a foreign minister could
make were in priorities and methods of operation.
As part of his activist approach, Lopez Bravo
is using personal visits to foreign countries to
make Spain's views better known. Since his ap-
pointment last October he has made eight trips
abroad (see map). He also received German For-
eign Minister Scheel in Madrid on 22-23 April.
Lopez Bravo is also interested in having
Spain play the role of a power with global inter-
ests. He has stated, "Spain must not only have a
foreign policy, it must participate in international
politics." By interjecting himself into interna-
tional matters, he hopes to promote both himself
and Spain.
22 May 1970
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In addition to making more use of travel
than did his predecessor, Lopez Bravo has em-
ployed a more tactful approach to foreign policy
problems. For example, in the dispute with the
Foreign Minister
Lopez Bravo
United Kingdom over
Gibraltar-a perennial
point of friction-Lopez
Bravo has played down
differences and concen-
trated on aspects on
which some progress
might be made. In at-
tempting to reduce ten-
sion with the UK over
Gibraltar, Madrid agreed
last November to sus-
pend further discussion
of the problem in the
United Nations. The
Spanish press moderated
its coverage of the subject and adopted a friend-
lier tone toward the UK. There was no implica-
tion that Spain would give up its claim to Gibral-
tar, but Lopez Bravo stated in an interview that
the Rock would no longer be the magnetic pole
of Spanish foreign policy. Lopez Bravo and the
British ambassador in Madrid have had informal
exchanges this month concerning the sort of co-
operation that might eventually take place be-
tween Spain and Gibraltar once present border
restrictions are removed. The problem remains,
but it has been reduced somewhat as an obstacle
to other Spanish goals.
The new cabinet's real push to identify
Spain with Europe is concentrated on efforts to
reach an agreement with the European Com-
munities (EC). Although Spain wants full mem-
bership or association with the EC, political
opposition to the Franco regime within some of
the six countries has made that impossible. The
Special Report
new cabinet has continued earlier negotiations for
a two-stage preferential trade agreement, and
terms were concluded in March. Final approval by
the EC is expected in June. During the first stage,
to last six years, Spain will reduce tariffs by an
average of 25 percent on most of the manu-
factured goods that it imports from the EC (by
60-70 percent on some items), and the EC will
reduce tariffs by about 60 percent on most im-
ports of Spanish manufactured goods. Both Spain
and the EC will also reduce trade barriers on
selected agricultural products. The character of
the second stage was left undefined, but Spain
hopes that it will lead to eventual association.
In pursuit of these closer ties, Lopez Bravo
has met with the foreign ministers of all six EC
countries. For instance, his trip to Paris in Feb-
ruary promoted closer relations with France,
which in turn could help Spain in its plans to play
a larger role in international affairs. ; The two
foreign ministers in their talks stressed their
similarity of views on international questions.
France agreed to sponsor Spain's return to full
participation in European affairs, including sup-
port of Madrid's effort to establish a relationship
with the EC. Lopez Bravo emphasized to the
French that, in developing closer ties with Paris,
Spain did not wish to detract from cordial
relations with its other allies.
The most notable accomplishment of the
Paris visit was the signing of an agreement under
which Spain contracted to purchase 30 Mirage
aircraft. Under a special provision, almost half of
the aircraft construction will be performed in
Spain. Madrid is also considering the purchase of
French tanks.
During the past several months Spain and
France have also discussed the possibility of
forming a Mediterranean "pact" to ensure the
security of the western Mediterranean. It is not
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clear which side revived this idea, as both De
Gaulle and Franco have espoused it in the past.
The pact, which may be no more than an agree-
ment to consult, would include France, Spain,
Italy, Greece, and certain Maghreb countries, or
some combination of these.
Spain is interested because of its
concern over expansion of Soviet influence in the
area. Madrid may feel that pact consultations
would improve its relations with the Maghreb
countries, but its main reason would be the op-
portunity to enhance its international standing
and improve its chances of eventually getting into
NATO. Lopez Bravo told Secretary Rogers last
month that he had discussed with the French how
such a pact arrangement might be achieved, but
that Spain would act with the full understanding
and support of the United States. The idea is
likely to remain a French-Spanish project, for an
Italian official has already said his country would
not be interested, and participation of the
Maghreb countries at this time is doubtful.
IMPROVED RELATIONS WITH THE USSR
AND EASTERN EUROPE
The cabinet is interested in stepping up rela-
tions with the Soviet Union and the Eastern
European countries. An indication of this goal
was the brief stopover that Lopez Bravo made in
Moscow en route to Manila last December, when
he met with a Soviet Foreign Ministry official at
the airport. Lopez Bravo is influenced by his
long-time support for increasing Soviet-Spanish
trade as well as by the possibility that better
relations would put Madrid in line with the ef-
forts of the EC countries to expand ties with
Eastern Europe.
The main development since Lopez Bravo's
visit was the arrival in Madrid in late March of a
Soviet shipping delegation to set up an office
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under terms of the port facilities agreement
signed in February 1969. This may lead to even-
tual subdiplomatic relations. The Soviets are also
pressing for a TASS office in Spain and the estab-
lishment of Madrid-Moscow flights by Soviet and
Spanish airlines. Madrid is likely to move slowly,
however, on giving the Soviets any significant
presence in Spain. It believes it must balance its
desire for improved trade and relations with its
concern over Soviet expansion in the Mediter-
ranean area.
The present cabinet has continued the policy
of its predecessor in establishing formal consular
relations with Eastern European countries. This
policy began with Romania in 1967 and was
followed with Poland in July 1969 and Hungary
in December. Negotiations for consular relations
have been undertaken with Bulgaria, and a similar
move with Czechoslovakia is expected.
The Spanish Government has accepted in
principle the Warsaw Pact proposal for a confer-
ence on European Security. The Spaniards have
indicated publicly their strong support for this
proposal with the proviso that the United States
and Canada participate and that it have careful
preparation. They are urging that a date for the
conference be set before September, a stand that
goes beyond the more cautious NATO position.
While devoting considerable attention to the
promotion of Spain's ties with Europe, the new
government has not neglected relations with the
United States. In fact, Lopez Bravo immediately
raised the matter of beginning negotiations on a
new relationship to replace the bilateral defense
agreement that expires next September. Spanish
discontent with the amount of grant aid offered
by the United States during negotiations for re-
newal of the agreement in 1968 led Madrid to
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refuse to sign by the deadline and to invoke a
consultation period that finally resulted in a
shorter renewal period than the five years stipu-
lated in the original agreement. In negotiations
now under way, the Spaniards say they have
abandoned the idea of rent for the bases. Instead
they are stressing the need to replace the present
US control over the bases with a "truly shared"
US-Spanish control mechanism. They are also
interested in having the new agreement permit
Spain to participate along with NATO in deci-
sions involving -European defense. Also, Madrid
desires to increase and strengthen commitments
to defend the Spanish security area. But the new
government appears to want to continue its
special tie with the United States and to expand it
by including nonmilitary items such as aid to
education. Although Spain could still make un-
reasonable demands, it seems likely that it will
accept some sort of compromise that can be
presented to the Spanish people as an increase in
international prestige.
One immediate possible irritant in US.-
Spanish relations may arise from the preferential
trade agreement Spain has negotiated with the
European Communities. Because Madrid is de-
sirous that the agreement will lead to eventual
association with the EC, it hopes Washington?
which generally opposes preferential trading
agreements, will leniently interpret the GATT'
provision requiring that such agreements have a
definite time schedule for full association.
Although the cabinet's initial policy state-
ment omitted any reference to Spain's relations
with the Arab countries, Lopez Bravo later ex-
plained that this did not mean any neglect or
change in Madrid's traditional ties with the Arab
states. To reaffirm this, he made an official visit
to Cairo last January and to Rabat in early May.
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He also invited Nasir to visit Madrid. In addition,
agreement has been reached to permit the Arab
League to open an office in Madrid. Concurrently
with the new flexibility, however, Lopez Bravo
also softened Madrid's usual hard line toward
Israel, which it does not recognize, when he
stated in an interview in March that Spain's
friendship with the Arabs does not mean that it is
an enemy of Israel.
Lopez Bravo is also interested in expanding
Spanish relations in Asia. He was able to do this
and also promote Spain's ties with the former
Hispanic nations by going to Manila last Decem-
ber for the inauguration of President Marcos, at
which time he offered a $10-million Spanish
credit to the Filipinos. He also used that occasion
to meet the Mexican foreign minister, and this led
to an understanding that their ambassadors in
Washington would hold talks regarding the estab-
lishment of consular relations.
The new cabinet is following the economic
programs of its predecessor, at least for the im-
mediate future. This was to be expected because
Economic Planning Minister Lopez Rodo, who
held the same position in the outgoing cabinet,
played a leading role in devising those plans.
Inasmuch as a majority of technocrats in the
present cabinet were chosen on his recommenda-
tion, Lopez Rodo should be better able to imple-
ment his plans now.
Essentially economic policy is governed by
the Second Economic and Social Development
Plan, which was adopted in February 1969 to run
through 1971. This plan, as did its predecessor,
attempts to set target performances for each
sector of the economy so that each will know
where the related sectors and the economy as a
whole are headed. The Second Plan seeks a more
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Travels of Foreign Minister Lopez Bravo
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rational allocation of resources in order to achieve
the greatest long-run economic growth and to
increase the competitiveness of the economy with
a view to further integration into the world
economy. The plan stresses improvement in agri-
culture, which has lagged behind other sectors of
the economy, as well as in basic industries, trans-
port, and communications. It emphasizes the
need for more and better education, scientific
research, housing, and urban services. It aims at a
5.5 percent average annual growth of GNP for the
period through 1971 and will attempt to bring
about an increase in investment-especially in
export-oriented industries-relative to total con-
sumption.
When the new cabinet took over, there was
need for prompt action to restrain the growth of
domestic demand and to cool the economy. Al-
though the government has pledged to take the
action necessary to maintain stable growth, it has
appeared to be reluctant to promulgate deflation-
ary measures because these would be politically
unpopular. The new cabinet's primary line has
been to continue the tight monetary policy
initiated by its predecessor for controlling infla-
tion. Thus it has continued for 1970 the 18
percent annual ceiling on new bank credit estab-
lished last September, and has raised the redis-
count rate of the Bank of Spain to 6.5 percent.
The cabinet has also moved to postpone
government spending by ordering an indefinite
delay of 10 percent of planned central govern-
ment expenditure projected in the 1970 budget,
which contained a 12 percent increase over the
1969 budget approved by the old cabinet. The
government also imposed a 20 percent predeposit
requirement on all imports in hopes of cutting
down Spain's enormous trade deficit, which was
responsible for the 1969 balance-of-payments
deficit.
Special Report
On the other hand, the cabinet yielded to
worker demands for better pay by approving a
17.6 percent increase in the general minimum
wage effective on 1 April. This was a. raise from
102 pesetas ($1.45) to 120 ($1.70) a day. Not-
withstanding the government's contention that a
minimum-wage raise is not inflationary because it
affects only a small group of unskilled workers,
most impartial observers believe that this increase
will inevitably have a booster effect upon wages
in general. The government maintains limited con-
trols on wages and prices, which are more guide-
lines than limits to be enforced directly.
The new cabinet reportedly intends to see
how well the present regulations work before
proceeding further. It is also concerned with in-
creasing Spain's exports, and this goal is reflected
in the moves to build closer ties with both
Western and Eastern Europe, and with the USSR.
The new cabinet immediately impressed ob-
servers with its alertness and competence and gave
the impression of working as a team. US officials
who have had contacts with the ministers have
remarked on how well informed they are on
important issues, including those outside the com-
petence of their ministry. This spring, however,
reports are being heard of a lack of coordination
and a rise in frustrations within the cabinet. Al-
though a certain amount of this reporting may be
chalked up to the propensity of informed
Spaniards to gossip about political figures, there
are some problems at the root of it.
Among these is the MATESA scandal. This
involves the misuse of some 10 billion pesetas
(around $143 million) of government export
credits by a fast-expanding company, Maquinaria
Textil del Norte de Espana, SA (MATESA).
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Because government approval was required to get
these credits, and technocrats associated with
Opus Dei were involved in approval of these trans-
actions, opponents of the Catholic organization
have tried to blame Opus Dei ministers. The min-
isters of commerce and finance may have been
dropped in the October cabinet changes in
response to pressure to find those ultimately re-
sponsible, but the official investigation to deter-
mine responsibility and decide who should be
punished has continued. The company president
and several associates this week were given stiff
fines and sentenced to prison terms of up to three
years. Recently the investigation has been moved
to the level of the Supreme Court so that minis-
ters or ex-ministers can be indicted if necessary.
This action implies that Franco himself has de-
cided to let the case run its full course. Although
the most likely result would be the indictment of
the ex-ministers of finance and commerce, it
could involve ministers in the present cabinet.
The two most rumored possibilities are Foreign
Minister Lopez Bravo, formerly the minister of
industry, and Education Minister Villar Palasi,
formerly a legal adviser to MATESA. It would be
contrary to Franco's usual way of operating to let
a case go so far as to involve a member of so
recently chosen a cabinet, however. Con-
sequently, some solution not involving the
present cabinet is likely to be found. However,
the widespread criticism that the case has aroused
makes it difficult to rule out entirely Franco's
letting the chips fall where they may.
Other difficult problems confronting the
cabinet are financing the new education reform
program, replacing old guard officials in the Na-
tional Movement with more moderate officials,
and living with the current budgetary restrictions
on ministerial programs. These restrictions may
have been involved in the recent resignation of
Minister of Public Works Silva Munoz. He men-
tioned family reasons, but some observers see his
departure as a strategic withdrawal to avoid being
identified with a cabinet that may be embarrassed
by the MATESA scandal. As the member of a
rival Catholic Action group, Silva Munoz may
have considered himself outnumbered in the new
cabinet and ready to build up political contacts
outside the government.
Last month after two leading Madrid news-
papers published separate articles about the need
for political liberalization in Spain, the editors of
one of them, ABC, were ordered to print an
article by one Gines de Buitrago, which, it soon
became known, was a pseudonym for Franco and
Carrero Blanco. In an angry rebuttal to critics of
the present system, the authors likened calls for
political democracy after the ills that existed
prior to the present government as comparable to
advising a reformed alcoholic to return to drink.
The article made it evident that the regime does
not intend to permit changes in the present po-
litical setup. Such a warning against democracy
does nothing to help efforts of the technocrats to
lead Spain to reintegration into Western Europe.
But the technocrats are pragmatists and are will-
ing to work toward long-range goals to be
achieved after Franco goes.
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