WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A010800150002-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 26
• Document Creation Date: December 21, 2016
• Document Release Date: March 4, 2008
• Sequence Number: 2
• Publication Date: July 5, 1974
• Content Type: SUMMARY

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Weekly Summary
Nw~ Secret
Secret
State Dept. review completed
No. 0027/74
5 July 1974
Copy x
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teUiaence, reports and analyzes signif-
the week through noon on Thursday. It
aterial coordinated with or prepared by
rch, the Office of Strategic
,orate of Science and Technology.
more comprehensive treatment and therefore
CONTENTS (July 5, 1974)
1 Argentina: An Interim Successor
2 Latin America: The New Dialogue
4 China: A Monkey on Its Back
5 Canada: Minority or Coalition
6 Iceland: A Swing to the Right
7 USSR-China: Back to Peking
9 Eastern Europe: Visit from Sadat
10 OECD Economic Forecasts
10 EC: Dialogue with the Arabs
MIDDLE EAST
AFRICA
12 Portuguese Africa: Growing Unease
13 Cyprus-Greece: Test of Wills
14 Turkey: Poppy Ban Lifted
17 Ethiopia: Arresting the Old Guard
EAST ASIA
PACIFIC
WESTERN
HEMISPHERE
21 Chile: Junta Presidency Strengthened
21 Venezuela: One Hundred Days Plus
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Jtr-t I
Argentina
1 [The death of President Juan Peron has left
the country without an obvious successor. Peron
himself recently remarked that he had no heir
,_apparent, suggesting that he did no expect Mrs.
Peron to last very long in the top job. 1
I tFor the time being at least, it is unlikely that
,there will be any major changes in the administra-
tion. Shortly after announcing her husband's
death and asking for public support, President
Maria Estela de Peron reconfirmed the appoint-
ments of all cabinet ministers and senior military
officers]
I'Mrs. Peron, however, may last only as long
Military leaders prefer an orderly institu-
tional succession, as do major political leaders,
Peronist and non-Peronist alike. With the Peronist
movement likely to undergo a gradual disintegra-
tion, the military will play a key role in estab-
lishing whatever government eventually evolves
One of the major problems may be to per-
sua e Mrs. Peron to stay in the job for the interim
and thus avoid the election that otherwise would
be necessary. In the past, she has expressed a
reluctance to assume the presidency. She is not
popular, and she knows it. She also recognizes her
lack of experience and her inability to contend
with the country's grave problems
(Appeals to patriotism and her husband's
memory will persuade her to stay on for the
immediate future. Jose Lopez Rega, Peron's pri-
vate secretary and confidant, is probably more position of power. He is almost universally feared
interested than anyone else in keeping her in the and detested by political and military leaders,
presidency. He is ambitious, and with Peron gone who probably are already maneuvering for his
he needs Maria Estela if he is to hold on to a ouster and exile.1
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(If Mrs. Peron decides to step down, however,
under the present arrangement her successor will
be Senate President Jose Allende. He must, within
30 days, set a date for elections, according to the
constitution]
I The sudden return of former president
,- Hector Campora to Buenos Aires last week from
his post as ambassador to Mexico increases the
likelihood of the formation of a new leftist coali-
is coalition witti ampora as its titular
leader would create turmoil and division, provid-
ing the military with another reason to try to
postpone an election campaign until a strong can-
didate can be agreed upon.1
i )Even though all political leaders officially
pledged to support Mrs. Peron when she was
installed as temporary chief of state on June 29,
the various Peronist factions can be expected to
25X1
act independently now that Peron is dead. This is
especially true of the leftist youth leaders, who
were all but read out of the movement by Peron
himself for their disruptive demonstrations and
public attacks on his wage and price stabilization
policies.)
Terrorist groups will also take advantage of
the leadership vacuum that now exists. The
up acts of violence, and other guerrilla organiza-
People's Revolutionary Army will probably step
tions on the fringes of the Peronist movement
may expand their operations as confusion grows
A general breakdown in order of a mag-
nitu e that would force military intervention,
however, does not appear likely at this time. The
extremists, although well financed, lack numerical
strength. They also have shown some sensitivity
to public opinion and probably will not overplay
Latin America: The New Dialogue
;Latin American governments have been
actively testing the new dialogue established with
the US during the series of meetings with Secre-
tary Kissinger some months back. The mutual
commitment to a fresh start on hemispheric part-
nership has become the benchmark against which
the Latin Americans measure both the state of
bilateral affairs and US positions at various inter-
national assemblies. While most governments are
showing a positive view of US intentions toward
them, their basic skepticism is reinforced by any
current point of real conflict and by many sup-
posed slights.?
How the latinos weigh the evidence and for-
mulate attitudes about the new dialogue is af-
fected by shifting and sometimes conflicting con-
siderations. A few of the smallest countries -Par-
aguay, the Dominican Republic, Haiti, and Cen-
tral America, for example-hold to an uncom-
plicated pro-US line in most multilateral affairs
and are for the most part satisfied with the bilat-
eral benefits derived from this association. For
most governments, however, traditional ambiv-
alence toward the US has been intensified by the
importance of bloc politics in international rela-
tions, and by aspirations or fears aroused by the
producer-consumer divisions. They are also af-
fected by their uncertain reading of the oppor-
tunities and hazards in such international efforts
as the Law of the Sea conference, a charter of
economic rights and duties, and other proposals
to reconstruct the bases for international conduct
and alliance. Their view of the US and the outside
world as a whole is further distorted by domestic
instability (Argentina, Uruguay), by local rivalries
(Brazil-Argentina, Peru-Chile), and by touchy
bilateral issues (Panama Canal treaty).'
V The Latin Americans remain encouraged by
the frank tone and cordial atmosphere in various
negotiating forums with the US, yet they feel that
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sop,
the new dialogue so far has produced little of
substance. Their frustration is deep in two broad
areas. One is their suspicion that the US is un-
willing to sacrifice traditional interests to help the
poorer countries catch up with the modern world.
The other relates to their feeling that Latin Amer-
ica remains peripheral in the US scope of interna-
tional interests
SEven the most advanced of the Latin Ameri-
can nations are nagged by a sense of "victimiza-
tion," and their search for some hidden signal of
exploitation has been evident at the numerous
recent sessions of inter-American working groups.
The latinos have revealed particular sensitivity to
US actions or proposals on trade problems, the
conduct of transnational corporations, and the
transfer of technology. They claim to detect a
protectionist bias toward US industry, and see no
real commitment by the US to correct the im-
balance between the have and have-not nations.
Brazil has been particularly vocal in expressing
Latin American frustrations over terms and condi-
tions of US proposals, especially the high cost of
technology that drains resources needed for eco-
nomic and social projects. Brazil emphasizes that
the profit motive can no longer rule, and that the
US must display the political will to aid less
fortunate neighbors. The Latins' anger has been
sharpest toward US import restrictions, which
they claim contradict the policy agreed to be-
tween them and he US at the meetings with
Secretary Kiissinger
The Latins have further expressed resent-
men? at continued US attention to the Middle
East, Europe, and the USSR. Even some of the
governments most receptive to Washington have
complained that US inattention to friends, along
with a lack of flexibility in dealing with the small
countries, is costing, the US influence in the UN
and other assemblies
.f Although the Latin Americans continue to
criticize US positions, their complaints are more
often expressed in joint, semi-private sessions
than in the past. The stridency and attack mental-
ity of recent years have given way to a spirit of
frank exchange. Moreover, the latinos have ap-
proached problems in an increasingly constructive
manner, by working together more successfully in
forging considered positions and proposals of
their own
rComing months will see a large number of
international assemblies and inter-American work-
ing groups at which the Latin Americans will
continue to measure and study the US. They will
be concerned about US domestic affairs that
impinge on them, particularly such matters as
congressional action on trade bills. The next inter-
March 1975.
PANAMA: C NAL THE TY TALKS
{0
GThe Torrijos government has taken a
moderate position in the first stage of the
negotiations toward a new canal treaty. In
the talks last week in Panama, Foreign
Minister Tack accepted a proposal that
would give his country a measure of partic-
ipation in the management of the canal,
although the US would retain effective
control for the duration of the treaty. The
Panamanians' willingness to compromise
on this issue derived from their assump-
tion that control of the canal was a pro-
vision the US would require in any new
treaty. Their basic goal was to gain a share
in management that would prepare them
eventually to run the canal.
25X1
25X1
They are likely to take a similarly
reasonable stance toward the defense of
the canal. They assume the US must have
ultimate responsibility for its protection,
but claim they should have a role in its
defense. Panama's bargaining posture is25X1
likely to harden when sensitive issues
come up, such as the jurisdiction over the
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G'#&a: A JLlaHkey On As Back
%Whatever the political effects of the Peking
wall posters, they have created a new celebrity: a
Peking factory worker who signs his posters the
"Golden Monkey." In classical Chinese literature,
the golden monkey used his club to clear the
universe of dust; in a political context, the mon-
key symbol was used by leftists in the Cultural
Revolution to describe the purge of their oppo-
nents, and the present monkey also may be a
leftist. In any case, he has taken aim at the party's
top leadership. In an entertaining series of
posters, he has accused Peking city officials of
attempting to suppress the campaign to criticize
Lin and Confucius, and he has charged that un-
named figures in the party's "upper ranks" are
"traitors" in the Lin Piao/Liu Shao-chi mold. The
monkey's antics have evidently irked local author-
ities: his June 30th poster predicts his own arrest
People's Daily editorial on July 1, the first
?, in three years to commemorate the anniversary of
:the founding of the party, may have been
prompted by the increasing number of posters-
some of which attack party officials by name'
,While admitting that "mistaken ideas" do exist in
the party-a condition the editorial terms "nor-
mal"-and that criticism from the masses must be
"welcomed," it clearly states that the "wrong
ideas" expressed in some criticisms must be cor-
rected by the party. But People's Daily also warns
contending factions, but others are highly per-
sonal complaints of maltreatment by the system
or by the local authorities who run it. The posters
are touching raw nerves among the authorities.]
veral have been torn down, especially those
eat t name names, and some authors have been
arrested and detained. In one instance, Peking
police and firemen turned fire hoses on would-be
poster writersi
11 rThe present level of activity is nowhere near
the violence of the 1966-69 period and, unlike
the Cultural Revolution, today's posters are
aimed at toppling specific individuals, not the
entire party structure
that criticism mus not be used to weaken the ji (eking has tried to put the best face on the
party's leadershiplIjn all, the July 1st editorial current political situation; one national figure
seems to be in line with the efforts of political ) cited the posters as an example of democracy,
moderates to allow intraparty debate while trying and another assured a foreign visitor that "we
to provide direction and to maintain control over 4 know what we are doing." But fear of a continu-
the campaign. ing erosion of authority can be seen in party
propaganda, and a determination to keep the anti-
Lin/anti-Confucius campaign under control has
[Factional divisions within the party have characterized the party line from the beginning.
prevented the central leadership from clearly X Significantly, the July 1st editorial concludes by
identifying which ideas are wrong, and a flurry of 1once again admonishing everyone to "obey orders
contradictory posters and violence has resulted in in all our actions and march in step to win vic-
most provinces. Some criticisms are the work of tory."
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Canada: Minority or Coalition
~T )After eight weeks of hard-hitting campaign-
ing for the national election on July 8, neither the
Liberals nor the Tories have been able to gain a
decisive lead. As a result, Ottawa is likely to have
a minority or coalition government after the elec-
tion'o[nflation has emerged as the main campaign
17 issue. The cost of living rose 9.1 percent in 1973,
and the latest figures show it running at an annual
rate of 13 percent for this year
Lrogressive Conservative leader Robert Stan-
field has proposed an income and price freeze to
be followed by a more permanent program to
combat inflation. Stanfield's proposals, vigorously
attacked by the other parties, have not caught on
with the public. Prime Minister Trudeau has
stressed measures to increase corporate taxes and
protect hard-pressed consumers from the worst
effects of inflation. The New Democrats, the de
facto junior partner in the last government, have
pushed variations of Trudeau's promises and have
added a proposal to establish a two-price system-
domestic and international-for basic commod-
ities produced in Canada]
11,71 (Recent nationwide opinion polls show kept the minority Trudeau administration afloat
Trud'eau's Liberals edging ahead, but the polls are by informally participating in the 9 government-an
misleading because they incorporate the very arrangement that freed them from the principle
heavy majority that Liberals always receive in of collective responsibility, which inhibits public
a Quebec. The electoral overkill in Quebec, there- criticism of government policies by government
fore, is not as important as winning individual members. Recently, however, party leader David
parliamentary contests, which are expected to be Lewis stated that he did not expect elections
close in many areas of the country} again for several years no matter what party
headed a minority government. He may be hint-
here are no available polls, for example, to inn that the New Democr
t
ld b
a
s wou
e prepared to
ow the trend in the key province of Ontario, join a formal coaliti
if th
i
on
e r
ght kind of deal
The Liberals, Tories, and New Democrats each can be made?~
claim that their private polling shows them doing
well in that province. About one third of On- d (Canadian-US relations surfaced on the mar-
tario's 88 parliamentary seats were won by less gins of the campaign recently when the US threat-
than 2,000 votes in 1972, and there will be many" ened to take retaliatory action against Canadian
close three-way battles this year. Party leadersi farm exports to the US unless Ottawa allowed
spent much of this week in Ontario in hopes of"-' resumption of US beef exports. This issue has
tipping the balance in these races been receiving heavy-and sometimes emotional-
media coverage. Trudeau and Agriculture Minister
Whelan have reacted sharply in an obvious at-
he nationalist-minded New Democrats have tempt to head off potential opposition char es of
a good chance of again winning the balance of knuckling under S.
power in parliament. In the last parliament, they
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ICELAND: A SWING TO THE RIGHT
The national elections on June 30 revealed a ;&O Negotiations for the formation of a new
marVed shift to the right that enabled the government will probably take several weeks.
strongly pro-Western Independence Party to Independence Party Chairman Hallgrimsson, as
strengthen significantly its position in parliament. leader of the party that won the largest number
Although still lacking a majority, the Independ- of seats, will be called on first by the President to
ence Party is virtually certain to be the dominant form the next government. Since the Independ-
force in the new government. The party tradi- ence Party failed to gain a majority in the elec-
tionally has been a strong supporter of Iceland's Z2,tion, it will have to enter into a coalition with at
membership in NATO, and prospects are there- least one of the other parties. The largely isola-
fore bright for retaining the US-manned base at tionist and rural-oriented Progressive Party is the
Keflavik in the forthcoming negotiations between only non-Communist political faction that com-
the two countries.I mands enough seats to assure an Independence-
led government a majority in parliament.)
The Independence Party increased its repre-
senttation from 22 to 25 seats in the 60-seat
Althing. It, along with the Social Democrats, had
been in the opposition in the preceding parlia-
ment. The Social Democrats, who lost ground in
municipal and local elections in May, continued
to do poorly in the national contest. The tiny
Liberal Left Organization appealed to non-Com-
munists opposed to the base during the campaign
and lost support in the election. The Progressive
Party, which headed the outgoing coalition,
retained the same number of seats it held pre-
viously. The Communists, who have been the
most vocal opponents of the Keflavik base,
picked up one seat:
I ooperation between the Independence and
4- Progressive parties would be inhibited by several
long-standing problems, including personal antag-
onism between the two party chairmen and the
1 traditional conflict between private industry,
which supports the Independence Party, and
rural-cooperative interests, which are the main-
stay of the Progressives. The Progessive Party was
out of the government for 12 years prior to its
membership in the outgoing center-left coalition,
however, and it is anxious to be included in the
new government . During the campaign, the Pro-
gressives tried to dissociate themselves from the
strong anti-base position of the Communists, one
of their coalition partners, and struggled to pro-
ject a more moderate image. Despite past opposi-
tion, the Progressive Party will probably not find
it difficult to support the Independence Party on
the Keflavik base
I combination of the Independence Party,
the Social Democrats, and the Progressives, al-
though less likely, remains a possibility. The
Social Democrats' labor support would be an
advantage. A sizable number of Social Democrats,
however, are opposed to association with the con-
servative Independence Party and may prefer to
stay out of the government
The most urgent problem facing the new
govJrnment is Iceland's growing economic prob-
lems. The annual inflation rate of 45 percent, the
losses in Iceland's vital fishing industry, the
sizable rise in the cost of imports, and continuing
pressures for large wage increases will require
emergency measuress by the new govern-
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USSR-CHINA: BACK TO PEKING
Moscow's pique aver the helicopter incident
apparently did not prevent the USSR from
making what has become its standard conciliatory
gesture toward the Chinese on the eve of a Soviet-
US summit. Three days after making its fourth
protest to the Chinese over the helicopter in-
cident, the USSR sent its chief negotiator at the
Sino-Soviet border talks, Deputy Foreign Minister
Ilichev, and his deputy back to Peking. Ilichev
had been in Moscow since last July, the deputy
since November.
Moscow's negotiators probably carried with
them new proposals ostensibly aimed at getting
the border talks off dead center. Past Soviet
offers have included detailed suggestions for a
new border agreement, a nuclear non-aggression
pact, a mutual non-use of force agreement, and a
summit-level meeting. The Chinese accepted some
of these proposals in principle, but then insisted
on preconditions that the Soviets found unaccept-
able. This is probably what will happen again.
With Ilichev's return in mind, the Soviets
placed a long article in the leading Polish daily
setting forth Moscow's position on the border
question. The article betrays Moscow's sensitivity
to Peking's charge that China is threatened by the
USSR. It also sheds more light on the positions
taken by both sides at various times during the
course of the talks. According to the article, for
example, China had proposed an interim agree-
ment confirming the status quo along the borders.
Moscow had agreed until China insisted on a
troop withdrawal before the agreement was
signed. Moscow, for its part, reportedly offered to
accept the main navigation channel as the
boundary along the riverine frontier. The offer
probably was conditional on Moscow's maintain-
i ng control of the strategic island opposite
Khabarovsk, and was therefore unacceptable to
the Chinese.
The main point of the article is to dem-
onstrate that it is Peking-not Moscow-that is
responsible for the impasse in the border talks.
SECRET
The use of the Polish stand-in was presumably
intended to make the article less offensive to the
Chinese, but its appearance on the eve of Ilichev's
departure for Peking is contrary to the normal
Soviet practice. It may have been intended to
placate those in the leadership who objected to
any conciliatory gesture in light of Peking's recent
actions against the USSR, or, alternatively, it may
have been designed to set the record straight as
Moscow seeks to develop support for another
world Communist gathering.
The day after Ilichev returned to Peking,
Moscow's frequent unofficial spokesman, Victor
Louis, published an article in a French newspaper
expressing concern about the alleged increase in
Sino-Soviet border tensions and the fate of the
detained helicopter crew. The article was vaguely
threatening in that it alluded to those killed in the
border clashes of 1969 and to Moscow's ability to
match China's output of hostile propaganda. The
oblique message seemed to be that China had
better begin serious negotiations or the situation
might get out of hand.
25X1
There is no reason to believe that Moscow
will find Peking forthcoming on either the border
talks or the helicopter crew.
Peking apparently views the or er dispute as a
political rather than a territorial issue, and as one
that China can still effectively exploit. Peking's
willingness to receive Ilichev for what may turn
out to be another fruitless round of talks clearly
indicates, however, that the Chinese will avoid
being maneuvered into appearing to be the intran-
sigent, nay-saying party, particularly with a world
Communist conference in prospect. With regard
to the helicopter crew, a wide range of pressures
have availed Moscow nothing so far, perhaps due
to Ch' tincertainty as to how to pro-
ceed.
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More basic,
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controlled, and ideologically conscious organiza-
tion within the next 18 months. His plans are
partly a response to Soviet demands for tightened
discipline throughout Eastern Europe, but they
also reflect Gierek's desire to reinvigorate his
party and to increase its ability to handle eco-
nomic problems.?
E In preparation for the next party congress-
scheduled for December 1975-the entire party
membership will be closely scrutinized. Party sec-
?retary Edward Babiuch told the plenum that part
of the process will involve an exchange of party
cards. Babiuch stated that the first stage of the
card exchange-which was unexpectedly an-
nounced last October-has now been completed
and that interviews with party members will begin
this fall. Although Babiuch was careful not to
mention the possibility of large-scale removals, his
emphasis on the need to stabilize party member-
ship at its current level and on bringing in more
workers leaves little doubt that undesirables will
be weeded out. The party's more nationalistic and
pro-Western intellectuals-already wary of moves
to tight n up-may regard themselves as prime
targets. T
V,-he plenum also formalized the downfall of
rranciszek Szlachcic, until recently Gierek's num-
ber two man in the party, by removing him from
the secretariat. Szlachcic had been uncere-
moniously demoted to vice premier and dropped
from the State Council on May 29. He evidently
'fell before the combined pressure of Soviet dis-
pleasure with his nationalistic approach to policy
making and the dissatisfaction of his Politburo
comrades, who may have felt he was gaining too
much power and attention. The number-two slot
now appears to belong to Jan Szydlak, the party's
ideological watchdog and an economic specialist
who represents the interests of the seasoned party
bureaucracy.
_f j \Econom is considerations are increasingly im-
The Central Committee plenum last week . portant in Gierek's planning. While many of the
heard party leader Gierek's program for changing indicators are favorable, the Polish economy faces
the Polish party into a more efficient, centrally some potentially serious problems, including
t t , q
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Stuh tz I -
shortages of certain products in high demand-
particularly meat-and a growing imbalance in
trade with the West. In recent months, Gierek has
brought key economic sectors under closer party
supervision. In contrast to many economic assess-
ments over the last two years, Prime Minister
Jaroszewicz's analysis of economic developments
at the plenum admitted fewer deficiencies and
was less apologetic about them. He may have
been reflecting a decision to take a somewhat
harder line in the face of cirowing dissatisfaction
among the people.
in the Mideast for retaining diplomatic and eco-
nomic ties with Israel. Sadat's willingness to
recognize the existence of Israel and to settle the
Middle East problem through negotiations meshes
with Ceausescu's own even-handed policy in tha
areal 25X1 25X1
i t t h e s h a r p decline in
ovie m i l i t a r y e iveries, the shortage of spare
,,)parts has been causing Cairo problems. Bucharest
"could also help by supplying technological aid for
Egypt's fledgling small-arms industry, although it
It '.
tian President Sadat's visit to Romania
E
gyp
and Bulgaria from June 27 to July 2 focused on
the recent disengagement in the Middle East, the
Palestinian problem, and bilateral relations. This
is the first trip Sadat has made to any of Mos-
cow's Warsaw Pact allies.
42- Sadat's three days in Romania took place
against a backdrop of improving bilateral rela-
tions. In addition to a communique expressing
mutual satisfaction with the visit, presidents
Ceausescu and Sadat signed a "solemn declara-
tion" to the effect that all states are equal in
international relations, and another declaration
establishing a joint committee for future coop-
eration7
25X1 Li 1
Ceausescu was particularly pleased to receive
adat. He saw the visit as an opportunity to undo
some of the bad publicity Romania has received
could not contribute much in the way of sophisti-
cated weaponry-Cairo's area of greatest need.
The Egyptian minister of war production was a
member of Sadat's entourage, adding to specula-
tion that military-related matters were discussed.
ucharest granted Egypt a $100-million loan
for se in industrial and agricultural projects re-
lated to Egypt's reconstruction program. The two
sides also agreed to establish a joint committee
for cooperation, to be headed by their respective
foreign ministers.
Rom nia be misread by the Kremlin, Sadat con-
cluded his Balkan sojourn by meeting with Mos-
cow's most loyal ally, Bulgarian party boss Todor
Zhivkov. Sofia agreed to extend long-term credits
to Egypt, and Sadat joined his Bulgarian host in
pledging to work toward doubling bilateral trade
over the next two years as part of a broad effort
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OECD ECONOMIC FORECASTS
( ,t
1#nflation(t o great et problem facing the
major industrialized countries.
Price increases prob-
ably will exceed percent-at annual rates-in
Western Europe and Japan and 8 percent in
Canada in the second half of this year. In an
effort to ease inflationary pressures, all of the
major developed countries have been pursuing
restrictive monetary and fiscal policies, which are
already facing mounting criticism .1
Member countries have indicated that they
are prepared to accept lower growth rates as they
attempt to control inflation. The forecast for the
major industrial countries as a whole is for a
0.5-percent growth rate this year, compared with
6.5 percent in 1973. As long as these countries
continue to pursue restrictive policies, the fore-
cast of a mild economic recovery during the
second half of this year and acceleration in the
first half of next year appears overly optimistic.
Despite the economic slowdown that is
occurring in all major developed countries, un-
employment has increased sharply only in West
Germany. Unemployment rates in Britain,
Canada, and Italy have actually declined.
Because unemployment has been mild, gov-
ernments have been able to continue tighter
monetary and fiscal policies to deal with inflation
and rising current account deficits. As a result,
workers' real income this year has declined almost
9 percent in Japan and 6 percent in the UK and
has increased by less than 2 percent in France and
West Germany.
These restrictive policies, however, are
already facing mounting criticism because of a
fear that a simultaneous slowdown in developed
countries could lead to a worldwide recession.
The UK, for example, feels that higher oil prices
have already sharply reduced overall demand and
that continuing restrictive programs on the part
of countries with strong balance-of-payments
positions will only increase unemployment and
encourage protectionist trade policies.
Unemployment will almost certainly rise in
coming months because, as the slowdown con-
tinues, firms will be reluctant to retain excess
workers. Although some governments hope to
offset declining consumer expenditures by boost-
ing exports and maintaining a high level of domes-
tic investment, this seems overly optimistic. The
slowdown in world economic growth will dampen
exports, while restictive domestic policies should
depress investment snending
EC: DIALOGUE WITH THE ARABS
4:.! jfhe EC Nine are moving ahead with plans
for wide-ranging cooperation with the Arab
states. The French, who took over the EC pres-
idency from the West Germans on July 1, will be
taking the lead, spurred by optimistic assessments
of Arab interest3
The Nine formally approved the demarche
Idst month after debate in a number of meetings
over the extent to which Washington should be
consulted and kept informed. A three-man delega-
tion visited Cairo on June 18 to present the
Nine's views on the proposed dialogue with the
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25X1
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Now" SI UHL
-Now
[The French expect the Arab states to send a
delegation of foreign ministers to Paris to initiate
the dialogue with the EC presidency. The Paris
meeting could take place in late July.I
I Even the most optimistic observers doubt
that the joint study commissions of the experts
could begin serious work before the end of
Ramadan in late October. In any case, the Nine
have agreed that the Arab embargo against the IRAN-FRANCE: ECONOMIC COOPERATION
Netherlands should be lifted first. The suggested
full-scale meeting of the nine EC foreign ministers
and twenty Arab foreign ministers is unlikely to
take place before 1975.]
25X1
After a recent meeting with the French foreign
minister, for example, Tunisian Foreign Minister
Chatti told the press that "it is not a question for
us of a simple dialogue between petroleum sup-
pliers and factory sellers." The Arabs, he said, will
want Europe to speak clear) on questions that
affect the peace of the world?
The Europeans, in contrast, have been pub-
developing relations with the Arab states,
Last week's Iranian-French economic coop-
eration agreement marks the high point in the
Shah's search for Western help for his ambitious
industrialization drive. The pact identifies $4-5
billion in possible French projects in Iran in-
cluding nuclear power plants, petrochemical com-
plexes, natural gas facilities, tankers, a steel plant25X1
and a subway. Smaller but similar arrangemen-25X1
were concluded earlier with West Germany and
Italy giving the Shah a broad package of projects
from which he can choose/
4k
he Arab League bureaycracv. at least is
showthg considerable interest.
Arab League Secretary General
Riyad has assembled a knowledgeable staff with
broad experience in international organization;
The Arabs have said they would like to dis-
cussEuropean assistance in establishing an indus-
trial base in the Arab world, a flow of European
technology, a "balanced" system of trade ex-
change, and stability in the value of Arab capital
investments to guard against the effects of future
monetary shocks.)
i ,he EC-Arab dialogue will provide an early
test of the US-EC consultation procedures that
were worked out this spring. Once specific areas
for cooperation are chosen, the EC Commission
will be involved in the dialogue, providing an
additional channel for keeping the US informed]
he Arabs are expected to try to take advan-
T
V
tage of the Europeans' eagerness for a dialogue to
cadvance the political interests of the Arab states.
[France emerged with several pluses. Polit-
ically, the deal helps restore relations that cooled
when former president Pompidou failed to attend
Iran's 2,500th anniversary celebration in October
1971. Paris received some assurance on the supply
of oil and will be aided in its balance-of-payments
problems by expanded sales to Iran as well as by
the $1 billion that the Shah agreed to supply over
three years as advance payment for French proj-
- ;" The Shah can easily afford this largesse and
probably welcomes the international exposure
provided by aiding one of Western Europe's
industrial countries. His ambitious goal is to place
Iran on an industrial footing with Western Europe
by the end of the century.
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1 SLUKL I
PORTUGUESE AFRICA: GROWING UNEASE
__ ' ,[General Spinola's provisional government is
encountering increasing difficulty maintaining its
authority in the African territories as progress
toward agreements with the black insurgent
movements remains stalled. Political and military
uneasiness is becoming more pronounced, es-
pecially in Mozambique and Angola, and Lisbon's
problems are becoming more complex as time
passes]
[Labor unrest continues to be a major prob-
lem, particularly in Mozambique. New governors-
general were installed in both of the southern
African territories two weeks ago. If they fail to
take action that seems to offer promise of revers-
ing the serious economic downturns of recent
months, public anxiety-particularly among white
settlers-will increase
/ (The governors must also deal with the situa-
tion-new to both Mozambique and Angola-
created by the precipitate growth of political
organizations that either favor or oppose the in-
surgents. In Mozambique, the political scene has
been marred recently by occasional violence
involving members of competing groups. On June
23, a leading spokesman for the Mozambique
Democrats-an organization of prominent liberal
white lawyers and journalists who support the
rebel Front for the Liberation of Mozambique-
narrowly survived an assassination attempt that
was probably made by whites hostile to the
Front. The Democrats have made clear their sup-
port for the Front's opposition to Spinola's ref-
erendum policy4
tin Angola, such acts of violence have not yet
occurred, although there have been minor clashes
between black and white groups. Political organi-
zations have emerged more slowly in Angola than
in Mozambique, primarily because the insurgents
there are ineffectual and most Angolans do not
know whom to support or oppose. One group
that has emerged, the "Secret Organization of
Angola," is threatening reprisals against whites
who attempt to leave the territory..]
' V n the military sphere, Lisbon's policy
switch since the coup has undercut the Portu-
guese soldier's willingness to continue fighting in
any of the territories. Outright fraternization
between Portuguese troops and rebels has been
taking place in Portuguese Guinea-an outgrowth
of an informal cease-fire that has existed since the
two sides opened political negotiations in May.
Although the talks were suspended last month
and no date for their resumption has been an-
nounced, it seems unlikely that serious fighting
will start up again in the territory
" `. the rebels in Mozambique, on the other
hand, are behaving quite differently. They have
continued to attack transportation routes in the
north near the Malawi border and have main-
tained their southward infiltration into areas with
large white settler populations. These infiltrators
have avoided military clashes, however, and
Portuguese Africa
Cape
Verde
jeiends
Portuguese'
Guinea
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Zaire
Lusaka
T.-;.
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v JEI~RE I N%WW
appear intent on establishing themselves in favor- Makarios is moving at the same time to strengthen
able positions should they feel constrained to his position in other waysl
increase military pressure. Talks between Lisbon
and the insurgent Front for the Liberation of `/ The Cypriot government announced on July
Mozambique are scheduled to get under way in 1 a reduction of the term of service for guards-
earnest on July 15 in Lusaka, Zambia./ 7y men from 2 years to 14 months, a change that
will, when implemented, cut the 12,000-man
In Angola, the level of insurgency has been-71 force about in half.
very ow for more than two years and is not likely
to increase significantly in the near future. One of F
the three rebel groups operating in the territor
has agreed to a cease-fire
future policy.
1t-/lIPresident Makarios is pressing his campaign
against the Greek-officered Cypriot National?
Guard, which provides Athens with an important
instrument of influence on the island. Antici-
pating increasingly tense relations and a possible
major confrontation with Greek leader loanni
-7/ FIthough Makarios professes to believe that
Athens will not try to overthrow him, he is
clearly aware that his moves against the Guard are
,j,Jincreasing loannidis' hostility.
week, in another apparent attempt to strengthen
his position, Makarios' government announced
the dismissal of a substantial number of school
9 teachers. Although no reason was given except
the "public interest," the teachers were ap
?ar
ently considered disloyal to the President.
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JLUMr_
[Prime Minister Ecevit's coalition cabinet
voted on July 1 to rescind the ban on cultivation
of the opium poppy, which had been imposed by
a military-backed government three years ago_
Turkey was formerly the main source of illegal
heroin for the US market.
r Poppy cultivation will now be permitted
again' in the six provinces and a portion of a
seventh that comprise the principal Turkish
poppy growing area. Cultivation licenses will be
limited to a maximum of one and a quarter acres.
In 1971, the value of opium gum in four of these
provinces totaled almost $4 million, about 70
percent of total production for that year
: ( LA government spokesman justified the cabi-
net's decision by citing the economic plight of the
former poppy farmers and the needs of the in-
ternational pharmaceutical industry. He said an
effective control system would be imposed to
prevent illegal trafficking in opium or the culti-
vation of opium poppies in areas other than those
Designated. Experts in both the US and Turkey,
however, doubt that this can be done because of
weaknesses in the Turkish narcotics control
system
~1 n lifting the ban, Ankara disregarded warn-
.
)Prime Minister Ecevit was motivated by
domestic pressures in favor of lifting the ban.
Both parties that form the governing coalition
had promised such action during the election
campaign last October, and since then most other
major party leaders have also come out against
the ban. With new elections a distinct possibility
before long, the support of peasants in the poppy-
growing areas is important in the delicate balance
that presently exists among parties in
Turkey.
Turkish poppy farm
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5tl..KC I
FEDAYEEN: BORDER RAIDS SUSPENDED
6L/ tLeaders of the relatively moderate Fatah of Prime Minister Rabin's statement to the press
organization announced on June 30 their decision on June 28 that the Israelis should prepare for a
to freeze all operations from Lebanon and to long-drawn-out war against Arab guerrillas instead
suspend the infiltration of terrorists into Israel of retaliating for each strike. The government did
from southern Lebanon. They also promised
"closer cooperation" with the Lebanese govern-
ment. The spokesman for the guerrillas stated,
however, that operations within Israel would con-
refrain from specific raids against fedayeen camps
in Lebanon in reprisal for the guerrilla raid on
June 25 on the Israeli coastal resort of Nahariya.1
j [n London, where he attended an inter-
rhe fedayeen spokesman claimed that the national socialist conference, Rabin told the press
t f
t
"
or
ex
move was mto deny Israel any pre
ade
further attacks on Lebanon or occupation of
Lebanese territory." Pressure from Syria and
perhaps Egypt probably was the major factor in
the decision. Beirut very likely appealed to
Damascus and possibly to Cairo to urge the feda-
yeen to halt raids across the Lebanese border. The
Lebanese government has received offers of
troops and military aid from Arab states to
defend against Israel's retaliatory attacks. This has
prompted Israel to warn that it would react
strongly to the introduction into Lebanon of air
defense elements from other Arab states.
>- The image of the guerrillas has deteriorated
in Lebanon following a bloody clash on June 28
between two opposing factions. This probably
also figured in the decision to adopt a more
conciliatory position, although the pledge is
similar to previous promises the guerrillas have
made to the Lebanese government. Because of the
lack of discipline in the movement, such promises
have had little value and were, in fact, completely
ignored by the radical factions of the fedayeen.
1The moderate leadership of the Palestine Libera-
tion Organization does not appear to have any
better control over its extremist elements now
than in the past.
The Israelis, too, have moderated their tough
anti-terrorist reprisal tactics for the time being
and seem to have adopted a wait-and-see attitude.
The strident pronouncements by various Israeli
officials and press commentators during the week
appear to have been primarily for effect, in view
Israelis string barricade
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SECRET r"In
that Israel would concentrate on three ways of
trying to stop the terrorists:
? Sealing off the approximately 60-
mile-long border with Lebanon.
? Finding and stopping the guerrillas be-
fore they reach Israel.
? Pressing Lebanon to crack down on the
fedayeen and prevent them from launching
raids.
' l.srael clearly intends to retain the option of
retaliatory strikes. Last week, Chief of Staff Gur
told reporters that Israel has not abandoned plans
for crossborder operations against the fedayeen.
He warned that Israel has "new" types of opera-
tions that will be used as necessary
\In the wake of the three days of heavy
retaliatory air raids on fedayeen bases in Lebanon
a week ago, Tel Aviv also moved to brighten its
somewhat tarnished image abroad. Deputy Prime
Minister and Foreign Minister Allon recently
briefed ambassadors from Latin American and
European Common Market countries on Israel's
anti-terrorist policy. He explained that the retalia-
tory raids were only a part of the anti-guerrilla
campaign, which also included strengthening the
country's passive security measures and seeking a
dialogue with moderate Palestinians, albeit within
the context of talks with the Jordanian govern-
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JC%..nG
ETHIOPIA: ARRESTING THE OLD GUARD
arresting some of the highest ranking
r y
bers of the nobility this e e
mem
nd
ments of the military that advocate political
social change have reasserted their control over
events and have ended any immediate threat from
their conservative opponents. Those detained in-
associates, but the moderates who led the move
want Haile Sellassie to remain as emperor and are
still rel ctant to assume the burdens of a military
regime
lMilitnrv units in Addis Ababa began the ar-
custody about 15 of the more prominent mem-
bers of Ethiopia's once powerful elite. Many
lower ranking officials are reported to be under
house arrest. Ras Asrate Kassa, perhaps f the
troops in Addis Ababa, who were already angry
over the inactivity of a special inquiry commis-
sion set up to deal with corruption. The troops
also resented government foot-dragging on
demands for back pay by Congo and Korean war
veteran51
The army units on June 28 took control of
Addis Ababa. A coordinating committee repre-
senting all branches of the armed forces and the
police was established to direct activities in the
capital, and a list of those to be arrested was
quickly prepared. The moderates on the commit-
tee managed to keep in check the more radical
military officers and enlisted men who want to
abolish the monarchy and set up a military gov-
ernment?
'E he military continues to proclaim its sup-
ie
Pr
b
Emperor's closest political adviser, was one o e 11
m
y
first to be detained. His submission without resist- port of the present government headed
ante symbolized the apparent realization by most,) --Minister Endalkatchew. In fact, the coordinating
e
of the noblemen that they had lost the ability to--. committee oannounced that it hadse ordered the u they
control eventsi attempting to obstruct the smooth functioning of
~/) \The arrests, which so far have provoked no
strong reaction, have been limited to the capital
area. The military apparently has no plans to
ill
4 detain members of the prncial elite, who st
o wer hasps-.JJ
4L.
i
n
have
e
r ow
p
VThe younger officers and enlisted men who
instigated the military revolt last February have
isto
h
e ar
been concerned for some time that t
crats, led by Ras Asrate, were attempting to
impede or even reverse the changes set in motion
by the revolt. They believed that the conserva-
tives were largely responsible for the cabinet's
slow progress in investigating corrupt officials and
in implementing the promised new policies
designed to create a more modern and democratic
society. The military was especially concerned
over the conservatives' recent success in increasing
their influence at the ex ense of the loosely
organized moderate forces
the cabinet. The military, however, clearly in-
tends to play a more direct role in speeding the
restructuring of Ethiopian institutions. Although
critical of the slow pace of change, the military is
still trying to work through a government that has
been unable to establish its own authority during
four months in office, and the resignation or
reshuffle of some of the ministers might yet be
demanded
"he cabinet has held emergency sessions, but
the
in
t d
g
ur
)r the most part has been impoten
resent crisis. Endalkatchew has appointed a four-
N
man ministerial committee to establish a more
direct line of communication with the troops, and
the committee has already met several times with
military representatives.
'y#1/ JWeaknesses within the military are still ap-
parent. The tenuous unity demonstrated by the
security forces in Addis Ababa may dissolve once
the wave of arrests is over. The coordinating com-
?1 The military was provoked into action when
eight members of parliament attempted on June
26 to bring about the release of 25 former of-
,cq ficials arrested by the army in April on corruption
charges. This demand was the last straw for the
Page 17
mittee, like similar ad hoc committees formed in
the past several months, has had some quick suc-
cesses, but it has yet to prove it can provide
durable, rohesive leadership and long-range
lanninn_ 25X1
p
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CAMBODIA: A GOOD MILITARY SHOWING
1rA FThe Cambodian army continues to fare well
in heavy fighting northwest of Phnom Penh. In
reopening Route 5 this week between the capital
and the recently recaptured town of Kompong
Luong, government troops reportedly inflicted
heavy losses on several Khmer Communist units.
Other government forces at the nearby base at
Lovek repulsed renewed insurgent ground attacks]
(( Ilf the government can maintain its positions
on this front, it will have taken a major step
toward restoring the flow of agricultural goods
down the Tonle Sap River to Phnom Pent.
Government units have also made some
'Grog-ess on the Route 4 front southwest of
Kompong Speu City, where they have relieved a
long-isolated garrison and cut an important Com-
munist supply route running across the highway.
Farther down the highway, however, insurgent
Insurgents within mortar range
Page 19
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5
Successful government def
Lovek
\\ Kompong Luo
Government
garrisons
3-1
Kompong Sella
units are keeping steady pressure on another gov-
ernment garrison and at midweek moved within
mortar range of the air base at Ream. Subsequent
shellings damaged four aircraft, but the airfield
remained open
Communist gunners along the Mekong River
southeast of Phnom Penh scored their biggest
success of the year on June 29 when they sank a
freighter from a Mekong River resupply convoy
en route to the capital from South Vietnam; `the
rest of the 19-ship convoy made it safely to
Phnom Penh. Although the shelling of river con-25X1
voys has increased in the past few weeks, seasonal
flooding will soon begin forcing the insurgents
CAMBODIA
Kompong
Speu
hnom\
Penb-
Ko pong:.
-# m /
Prey
Veng
VofKoy
attacke.
SOUTH ViET,V
0 MILES 25
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CHILE: JUNTA PRESID NCY StRENGTHENED
rA governmental reorganization decree issued
last week stopped short of formally designating
junta president Pinochet as president of the
republic, but it vested broad executive powers in
the junta presidency and named the incumbent
"supreme chief of the nation."
Pinochet's elevation appears to have been
designed primarily to streamline a cumbersome
decision-making system. Issuance of the detailed
"statute of the governing junta" not only reflects
the determination of the armed forces to retain
power until their goals are achieved, but also
shows their concern with establishing a moral and
legal basis for military rule.
Under the statute, the four junta members,
including Pinochet, remain in command of their
respective military or police services. The statute
sets out elaborate formulas for the temporary and
permanent filling of vacancies or the junta and
for the assignment of seniority to new members.
A key provision stipulates that permanent re-
placements---who are to be named by the remain-
ing junta members-become last in line of succes-
sion to the presidency.
The reorganization formalizes Pinochet's
gradual rise to de facto primacy among the junta
members, but does not suddenly bring one-man
rule to Chile. The decree carefully hedges Pino-
chet's new prerogatives. Legislative power, for
example, remains the "exclusive domain" of the
junta, as does the right to act on the budget,
taxes, wages, and other specified matters. The
junta president is to exercise various powers with
the "cooperation," "accord," or "advice" of the
junta, and the junta's decisions must be
unanimous.
How much real power eventually will accrue
to the junta presidency probably will depend in
large part on the personalities of current and
future junta members. Pinochet seems to be
acutely sensitive to the importance of maintaining
armed forces unity, and he will feel out the new
levers of power cautiously. Sudden shifts in the
military aovernment'S olicies or style are thus
unlikely. 25X1
VENEZUELA: ONE HUNDRED DAYS PLUS
After little more than three months in of-
fice, President Carlos Andres Perez is well on the
way to becoming his country's strongest and most
popular leader since Romulo Betancou_rt's admin-
istration ended more than a decade ago]
ii ?Congress, controlled by the President's
Democratic Action Party, has approved a bill
granting Perez sweeping emergency powers to
carry out the broadly populist and nationalistic
economic program that he proposed in an address
to the nation in April. In addition to plans to
nationalize the US-dominated iron ore industry,
of greatest domestic interest was a series of pro-
grams aimed at a more equitable distribution of
the nation's income through such popular meas-
ures as new minimum wage levels, across-the-
board wage increases, unemployment insurance,
prudent management of windfall revenues from
petroleum, remission of farm debts, and revital-
ization of the depressed agricultural sectors. All
of these were major themes in the Democratic
Action Party's election campaign
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StL NL I
JA major economic problem facing the new
administration is spiraling inflation, which has
resulted in recent substantial price increases for
food in spite of price controls, and in severe
shortages of some substitute commodities. In an
effort to control speculators, theadministration is
continuing its policy of closing down briefly
those businesses that are found to be violating
price controls. In a press conference on June 27
in which Perez reaffirmed his intention to con-
tinue his economic program despite opposition
from conservative business leaders, he also prom-
ised that his administration would not yield in its
efforts to guarantee to the lower income groups
assured access to the "necessities of life."
Ithough the conservative business sector
has been critical of Perez' populist economic
measures, there is no evidence that they wish a
confrontation. Representatives of the business-
oriented Federation of Chambers of Commerce
are negotiating with government officials to
modify some of the proposals that impinge on
their business practices. Perez warned them on
June 27, however, that they must take a more
flexible stand to permit a better distribution of
the national wealth or the country could ex-
perience a period of leftist or rightist violence./
I! iWith his bold moves, Perez has solidified his
eadership, won wide popular support, and out-
maneuvered political opponents who had charged
that he was a favorite candidate of business and
the foreign oil companies. Stunned and off
balance, his opponents have hastened to state
publicly that they agree thoroughly with the sub-
stance of the President's proposals. Much of the
pre-electoral opposition is now backing him; the
rest is hopelessly disorganized]
some bocial Christian regional ottices in the
countryside are reportedly either abandoned or
inactive. Others copy the party's central commit-
tee line and back some of the Perez measures
while condemning his call for special decree
powers, but these efforts are dispirited and largely
ignored by the general populace. The Marxist
Movement Toward Socialism and the leftist
Electoral Movement of the People, parties that
were considered possible foci of opposition to the
new administration, have almost disappeared in
areas where, before the election, they seemed
strong
I JAlthough preoccupied primarily with eco-
nomic and social programs, Perez is giving in-
creasing attention to foreign policy initiatives,
carrying forward the momentum begun by his
predecessor, and developing the country's chosen
role as a leader in hemispheric affairs. Perez has
formally proposed that a summit meeting of all
Latin chiefs of state be held next year to consider
matters of common interest including the "com-
plete liberation of the Latin American people."
He has already announced plans to put half the
country's surplus oil revenues into an external
investment fund that will be used to finance proj-
ects in other Latin American countries through
multilateral organizations]
7 l Further, Caracas is now playing host to the
150-nation Law of the Sea Conference, and Perez
himself is expected to play a major role in
winning support for the country's claim to a
200-nautical-mile territorial sea.
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Approved For Release 2008/03/04: CIA-RDP79-00927A010800150002-7
 Approved For Release 2008/03/04: CIA-RDP79-00927A010800150002-7
Approved For Release 2008/03/04: CIA-RDP79-00927A010800150002-7
 Approved For Release 2008/03/04: CIA-RDP79-00927A010800150002-7
Secret
Secret
Approved For Release 2008/03/04: CIA-RDP79-00927A010800150002-7