WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00927A010900130001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 25
• Document Creation Date: December 21, 2016
• Document Release Date: October 16, 2007
• Sequence Number: 1
• Publication Date: October 25, 1974
• Content Type: SUMMARY

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Weekly Summary
State Dept. review completed
Secret
Secret
No. 0043 / 74
25 October 1974
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The WEEKLY SUMMARY, issued every Friday morning by
the Office of Current Intelligence, reports and analyzes signif-
rcant developments of the week through noon on Thursday. It
frequently includes material coordinated with or prepared by
the Office of Economic Research, the Office of Strategic
Research, and the Directorate of Science and Technology.
Topics requiring more comprehensive treatment and therefore
published `separately as Special Reports are listed in the
contents.
CONTENTS (October 25, 1974)
1 Egypt-USSR: Mending Fences
2 Arab League: Crucial Summit
4 Japan: Anti-US Demonstrations
5 Italy: Fanfani's Last Try
6 Western Europe: F-104 Replacement
6 Cyprus: Settlement No Closer
8 France: Troubled Waters
9 Portugal: Electoral Wheels Turn
10 West Germany: Summit
MIDDLE EAST
AFRICA
WESTERN
HEMISPHERE
15 Colombia: Corrective Action
16 Chile: Another Close Call
16 Paraguay: Democratic Dictatorship
17 Cuba: Mixing Oil and Politics
EAST ASIA
PACIFIC
18 Cambodia: Seeking a UN Seat
19 New Zealand: Election Rumors
19 Laos: Aid
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N"r1 JCIrRC I IMWI,
Egypt-USSR: Men inc
Foreign Minister Fahmi's visit to oscow
last week succeeded in taking the chill out of
Soviet-Egyptian relations, but further progress
toward resolving the serious differences between
the two sides is unlikely before President Sadat
and General Secretary Brezhnev meet in January.
Brezhnev's pledge to go to Cairo is being touted
as a political victory by the Egyptians, and it is
clearly a major signal that the Soviets are now in a
more accommodating mood. Nevertheless, the
pledge does not appear to have been accompanied
by any Soviet agreement to respond quickly to
the substantial economic and military shopping
list Fahmi reportedly took with him to Moscow.
The reluctance of both Moscow and Cairo to
make fundamental concessions at this time was
reflected in the omission of the customary final
communique and in the differing interpretations
of the visit appearing in Soviet and Egyptian
public statements. The two sides did issue a state-
ment on the Palestinian question that affirmed
the Palestinians' right to a "national entity" and
endorsed the attendance of the Palestine Libera-
tion Organization at the Geneva conference "in
an independent capacity and on an equal footing"
with other participants. The separate versions of
this statement issued by Moscow and Cairo, how-
ever, differed in that the Soviets attached more
urgency to reconvening the Geneva talks.
Euphoria in Cairo...
The visit and the announcement of the
Brezhnev-Sadat summit have brought forth ef-
fusive praise for Moscow from the Cairo press. It
has heaped gratitude on the Soviets for helping
Fences
Egypt "in some of the gravest moments of its
history." At the same time, however, the Egyp-
tians have lost no opportunity to affirm their
continued intention to maintain foreign and
domestic policies independent of the Soviets.
Whatever unresolved problems remain from the
Fahmi visit, the Egyptians see Soviet acquiescence
in a Cairo summit as a vindication of Sadat's
refusal to bow to Soviet pressures.
The editor of the leading Cairo daily, Al-
Ahram, wrote that Moscow now understands
Egypt has "the right" to deal with the US, agrees
that Cairo must coordinate Arab strategy before
rushing to reconvene the Geneva conference, and
accepts the fact that the Egyptian economic
liberalization program, to which the Soviets have
objected during the past year, is a purely domes-
tic affair. Although the editor may be overstating
Soviet "understanding," he claimed that Mos-
cow's acceptance of the Egyptian viewpoint came
after a "simple calculation": Egypt is indis-
putably the key to the Middle East, and "it is
impossible to go over Egypt's head if any solution
to any problem in the area is desired."
The message that all super power dealings in
the Middle East must go through Egypt undoubt-
edly is intended for US as well as Soviet ears.
Cairo has little fear of US interference in Egyp-
tian affairs but it probably sees the rapproche-
ment with Moscow as helpful in pressing the US
toward further movement both in peace negotia-
tions and in economic assistance for Egypt.
In addition to playing up Soviet agreement
on the summit as a triumph of Egyptian
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SEUHET
diplomacy, Cairo media have waxed euphoric
over the alleged economic results of the Fahmi
visit. The press is claiming that the Soviets agreed
in principle to supply a nuclear reactor, to nego-
tiate a new trade protocol, and to reduce and
reschedule payment of the enormous Egyptian
military debt to the USSR. Prior to the visit, the
Soviets did offer to study some of Egypt's eco-
nomic proposals, and the Egyptian foreign trade
minister announced this week that implementa-
tion of a five-year trade agreement will begin in
1976. He did not say when the agreement will be
signed, and the editor of Al-Ahram has told US
embassy officials in Cairo privately that he knows
of no concrete results on economic or military
subjects emerging from the ministerial discussions
that took place in Moscow.
Earlier this month, the Soviet charge in
Cairo said Moscow would eventually fulfill its
outstanding arms commitments to Egypt, but
that new agreements would have to await an
Egyptian-Soviet summit. Now that such a meeting
is scheduled, it is possible that the Soviets may
pave the way for Brezhnev's visit by accelerating
the pace of the arms deliveries under contracts
concluded prior to the October war.
Like the Egyptians, the Soviets have been
putting the best face on the Fahmi visit and,
although Soviet propaganda continues indirect
criticism of Sadat's policies, Brezhnev's agreement
to go to Cairo affirms Soviet unwillingness to risk
an open break with the Egyptian leader. Until
now, Brezhnev has resisted going because such a
visit might appear to endorse the improved rela-
tions between Egypt and the US. Brezhnev, who
has not visited the Middle East since becoming
party chief, has also been chary of directly
engaging his prestige with Moscow's sometimes
troubled dealings with the Arabs. In a recent
speech, however, he said contacts with Arab
leaders "are especially necessary and useful at this
time," and he has apparently come to believe that
a personal meeting can ease some of the disagree-
ment between Moscow and Cairo.
By setting a date for a Brezhnev visit, the
Soviets may feel they have succeeded in throwing
responsibility for further improvment of the
relationship back on Sadat. Moscow certainly will
be watching carefully for signs that he is willing
to take Soviet interests into account as he moves
through both the Arab summit that starts in
Rabat this weekend and the next round of Middle
East talks with Secretary Kissinger. In his farewell
remarks to Fahmi, Gromyko said pointedly that
Cairo must do its part to make Brezhnev's visit a
success and-in an apparent reference to Secretary
Kissinger-warned that Moscow and Cairo must
not let "any person" create obstacles to an
improvement in their relations.
Arab League: Crucial Summit d~
The Arab summit maa+inn +k,+
October 26 in Rabat will play a critical part in
determining where the Arabs go next in peace
negotiations with Israel. The question of how to
accommodate both Jordan and the Palestine
Liberation Organization in peace talks will
occupy the major portion of the Arab leaders'
attention. The principal participants may also
discuss the relative merits of a step-by-step
approach to a peace settlement versus moving
immediately to a resumption of plenary sessions
of the Geneva conference. On either question, a
hard-line stance by the more radical Arab regimes
could tie the hands of the moderates and seri-
ously hamper further progress toward a settle-
ment.
Egyptian President Sadat, who has been in
the forefront of the attempt to reconcile Jorda-
nian-PLO differences, will take the lead on this
issue at Rabat. What Sadat wants from the sum-
mit is, in essence, Arab recognition of Jordan's
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role as negotiator for the West Bank, as well as a
symbolic elevation of the PLO's status that will
give the organization something approaching
equal status with the front-line states and provide
the Palestinians at least a long-range hope of
obtaining satisfaction from the negotiating
process. The task of winning Arab acceptance of
Jordan's role will be delicate and will probably
involve some maneuvering with words. For
example, although the PLO was satisfied to
obtain a UN resolution designating the organiza-
tion as "representative" of the Palestinian people,
it is doubtful that it would accept a similarly
limited designation from an Arab forum.
The PLO might, however, be satisfied with a
summit resolution that avoided spelling out
explicitly its "representivity." This could be
accomplished by simply referring to last year's
Algiers summit resolution on the PLO, without
specifying that this was the resolution that
initially designated the group as the "sole
legitimate" representative of the Palestinian
people. The PLO and its supporters among the
Arab states could interpret this as reaffirming the
uniqueness of its representative role. At the same
time, Jordan and Egypt would not be en-
cumbered by a commitment to the limiting
adjectives, and Jordan could proceed with an
implicit Arab commitment not to oppose its right
to negotiate.
The danger to Sadat's strategy is less that the
PLO itself will remain rigid in opposing a role for
Jordan than that its supporters-Algeria, Kuwait,
Iraq, and even Syria-will outdo themselves in
seeking to accommodate the Palestinians. If the
PLO is led to believe that the Arabs will not
acquiesce in Amman's negotiating role, it is likely
to push for explicit recognition as "sole represent-
ative," with all this would imply for Jordan's
exclusion from the peace talks.
On the questions of whether to proceed with
negotiations by stages and of what those stages
should be, Egypt will probably try for a vaguely
worded formulation in the summit's resolution or
skirt the issue entirely. Some of the other Arabs,
particularly Syria, may nevertheless be unwilling
to let the issue ride in this manner. President
Sadat will probably be able to handle the ques-
tion of when to reconvene the Geneva conference
by agreeing to a noncommittal pledge to return to
the plenary conference "as soon as possible," but
if Syrian President Asad wants to tie Sadat's
hands on the next stage of phased negotiations,
he could win Arab support for a summit resolu-
tion denying Egypt the right to discuss a second-
stage Sinai withdrawal unless this were tied to
similar discussions on the Golan or West Bank
fronts.
The Arabs' key position in international eco-
nomic affairs and the various political ramifica-
tions of this role will undoubtedly be a chief
topic of discussion at the summit. Resolutions
issued will probably:
? Affirm the Arabs' right to use oil and
money as political weapons when they deem
it necessary.
? Denounce "Zionist propagandists" for
instigating an exaggerated and one-sided
attack on Arab oil producers.
? Attempt to justify present oil policies.
? Emphasize Arab "reasonableness" and
readiness to cooperate in the effort to avoid
international economic chaos.
No decisions are likely, however, on the
substance of oil policies. Oil producers make up
no more than a quarter of the total membership
of the Arab League, and they will not readily
submit the essentials of their policies-pricing, the
specific political uses of oil, or the use of
capital-to discussion by their numerous, less
affluent colleagues.
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Japan: Anti-US Demonstrations
UCLU-
ber 1, protesting the alleged presence of US
nuclear weapons in Japan and President Ford's
visit next month, fell short of the sponsors' goals.
1-he organizers claimed an attendance of 70,000
after forecasting a total of 100,000, but police
estimated that only 26,000 participated. The
rally, sponsored by the Communist, Socialist, and
Komeito parties, adopted various resolutions and
issued a statement to President Ford demanding
that he call off his trip. The gathering in Tokyo
and similar meetings elsewhere in the country
were generally peaceful.
The public controversy in Japan stemming
from allegations of a US nuclear presence has
provided the political left with a more favorable
atmosphere in which to revive its sputtering cam-
paign against the US-Japan Security Treaty and
also to oppose the President's visit. The results on
October 21, however, indicate that no major
groundswell of public indignation, against either
the weapons issue or the presidential visit, has yet
developed. The left, moreover, seems unable to
unite in an all-out effort. While the Communists
are strongly opposed to the visit, the Socialist and
Komeito parties have only recently joined them,
drawn more by the opportunity to focus at-
tention on the nuclear question than by outright
opposition to the presidential visit.
Opposition forces have set November 18, the
day President Ford is scheduled to arrive in
Tokyo, as the next major date in their campaign,
but they will encounter difficulty in maintaining
even their current momentum. The Diet is not in
session, which deprives the opposition of an
Radical students demonstrate
important propaganda forum
The Ja
ane
.
p
se
media, while giving heavy play to the nuclear
weapons question, generally supported the Pres-
ident's trip when it was first announced and have have evinced little interest in an anti-US move-
since avoided critical editorial comment. Rank- ment. The opposition parties, moreover, have so
and-file union members, who must supply bodies far shied away from calling for confrontation
for any massive street campaign, are preoccupied with the authorities when the President arrives.
with the issues of inflation and wa
e ncre-
nd
g
a
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'Lr' v L_ k_# I 1 L_ I N~
Italy: Fanfan i s Last Try 1))
Kristian Democratic party chief Amintore declared themselves open to further talks, they
Fanfani may be on the verge of abandoning his may yet conclude that a temporary opposition
effort to revive the center-left coalition. His party role would be more advantageous politically.
persuaded him this week to make a last attempt
to break the deadlock that has developed between
the Socialists and the other three parties, osten-
sibly over the issue of government policy toward
organized labor.
During more than a week of hard bargaining,
Fanfani has succeeded in narrowing inter-party
differences largely to the labor question.
Although the Socialists did not renounce their
policy of cooperating with the Communists in
certain local governments, they backed away
from their earlier call for formal collaboration
between the national government and the Com-
munists; the Socialists, for example, did not
mention the Communists in a list of ten demands
presented to Fanfani over the weekend.
Fanfani, in turn, has shown flexibility
toward the Socialists' demands for selective
loosening of credit and measures to avoid sub-
stantial unemployment. The Christian Democrats,
moreover, were reportedly ready to yield another
important cabinet post to the Socialists.
Neither side has budged, however, on the
question of how to respond to labor's current
drive for a costly benefits package coupled with
steep increases in wage adjustments that are
automatically linked to the cost-of-living index.
Labor-management talks on these issues are
bogged down, and the Socialists-in their pro-
posals for a new government program-are
backing the unions to the hilt and calling for an
agreement in principle with them on general eco-
nomic policy.
The other parties are convinced that too
many concessions to labor would scuttle Italy's
two-month-old austerity program-the linchpin of
efforts to reduce the country's mounting budget
deficit. The Socialists have often said that they
could not remain in government if it meant
getting out-of-step with their constituents in
organized labor. Although the Socialists yesterday
Page 5
If Fanfani gives up, President Leone could
tap another Christian Democrat as "formateur."
Leone would be more likely, however, to accept
Fanfani's failure as evidence that party positions
are for the moment irreconcilable. In that event,
the immediate prospect is for some kind of weak
caretaker government to prepare the way for
either a later attempt to re-form the center-left
coalition or-as a last resort-parliamentary elec-
tions.
There is practically no enthusiasm for new
elections. So far, only two groups are publicly
advocating this course-the majority faction of
the small Social Democratic Party and one left-
wing faction of the Socialist Party. Those Social
Democrats who support new elections apparently
believe that such a contest would provide a
chance to strengthen centrist elements at the
expense of the left. There is little evidence to
support this belief, however. An attempt to
weaken the left through early elections in 1972
failed, and recent developments suggest that if
elections were held now, the Communists and
Socialists would gain seats.
Everyone else, including the Communists
and the majority of Socialists, has so far argued
that a long campaign would make it even more
difficult to come to grips with Italy's mounting
economic problems. The Communists and most
Socialists are content to await regional elections
this spring in which both parties expect to do
well.
Meanwhile, the political stalemate continues
to have an adverse impact on the economy. Prime
Minister Rumor's resignation on October 3 in-
tensified pressure on the lira. Although this has
eased somewhat, the Bank of Italy was required
to pay out about $30 million a day last week to
support the lira. Should present levels of interven-
tion prevail through the remainder of the year,
Italy's 1974 balance-of-payments deficit will ap-
proach $9 billion.
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or-UrAC I
WESTERN EUROPE: F-104 REPLACEMENT
The competition between Fiance and the 6S
to p ovide Belgium, Norway, the Netherlands,
and Denmark with replacement aircraft for their
aging fleet of Lockheed F-104 Starfighters is
entering the final phase. Defense ministers of the
informal consortium formed by the four NATO
countries last April met in Brussels on October 7
to consider their steering committee's initial eval-
uation. The preliminary report gave the two US
contenders-the Northrup YF-17 and the General
Dynamics YF-16-a significant lead over the
French Dassault-Breguet Mirage F1/M53.
In order to forestall a possible split with the
Belgians-who tend to favor the Mirage and are
under a great deal of pressure from the French-
the defense ministers agreed to meet again after a
final report is ready in December. The report's
conclusions probably will not be acted upon until
January. The delay is significant because January
is when the US air force is scheduled to choose
one of the two American prototypes for its own
inventory. A key factor in the consortium's deci-
sion is the number of aircraft to be purchased by
the nations competing for the order. This will
affect the cost of the airplane and will determine
to a great extent the future availability of spare
parts, as well as the pressing question of whether
there will be, in fact, a standard NATO fighter.
The US Defense Department proposes to
order over 600 of either the YF-16 or the YF-17
and to station some 250 of them in Europe re-
gardless of the consortium's choice. The intention
to locate a significant number of aircraft in
Europe weighs heavily in favor of a decision for
one of the American fighters. The opportunity
for the air forces of the consortium countries to
become tied into the US logistics and main-
tenance system in Europe is an important addi-
tional incentive to buy US planes. By comparison,
Paris' decision to equip the French air force with
only 30-40 of the F1/M53 appears inadequate.
Another aspect of the sales competition is
France's implied willingness to consider asso-
ciation with Eurogroup-the informal caucus of
NATO's European defense ministers--if the
Mirage were chosen. The four NATO countries
are anxious to get France into Eurogroup and
f5~~
such a concession by Paris would have consider-
able impact on the consortium's decision. The
signals from Paris are contradictory, however. Al-
though Defense Minister Soufflet reportedly
broached the subject to the consortium's defense
ministers in September, he later publicly denied
that France was considering membership. Paris
may be working behind the scenes to arrange an
informal "association" with Euronad-the arma-
ments subcommittee of Eurogroup-arguing that
such a course would not constitute membership
in Eurogroup and thus would not compromise
French "independence."
LThe Cyprus oblem rrrbved no closer to
resolution this week, and there is little prospect
that it will until new governments are installed in
Athens and Ankara. Makarios' ultimate role must
be decided before any significant progress can be
made toward reaching a political settlement on
the island. In the meantime, conflicting Greek
and Turkish claims to oil rights in the Aegean are
again threatening to become a live issue as the
Turks have authorized further exploration in the
area.
Greece: Election Campaign Moves Ahead
The campaign for the first Greek elections in
ten years is shifting into high gear. With the
balloting on November 17 slightly more than
three weeks away, re-organized and newly created
parties are beginning to announce slates of candi-
dates and stake out positions on the issues. Leftist
Andreas Papandreou appears to be better or-
ganized than the rest, but he is still expected to
finish no better than a distant third.
Prime Minister Karamanlis has been some-
what slower getting started, but he has finally put
together a slate of candidates. Karamanlis' New
Democracy slate includes 288 candidates, 194 of
whom are making their political debuts. The New
Democracy candidates are drawn from a broad
spectrum of society, but the large number of
political newcomers and unknowns could be a
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drawback. Much will be riding on the prestige and
popularity of Karamanlis.
The arrest and exile on October 23 of ex-
president Papadopoulos and four of his close asso-
ciates in the junta that overthrew the civilian
government in 1967 were designed to satisfy pub-
lic sentiment that justice be done and leading
personalities of the military regimes punished.
Prime Minister Karamanlis had been vulnerable to
criticism from the left that he had not broken
decisively with the past, and it was becoming a
major campaign issue.
Karamanlis may also have been reacting to
earlier indications that Papadopoulos and other
ex-junta leaders were planning to form a political
party or to support the newly formed National
Democratic Union led by Petros Garoufalias. The
right-wing National Democratic Union will draw
votes from Karamanlis' conservative constituency.
Turkey: Moves In The Aegean
The Greek-Turkish dispute over oil rights in
the Aegean could be rekindled as a result of
Ankara's decision to move ahead with oil explora-
tion in the area.
The Turks have signed contracts with Nor-
wegian and Danish companies to conduct seismic
surveys. The exploration is expected to begin by
late November. An official in the Ministry of
Power has informed the US embassy in Ankara
that the Turkish Petroleum Office has also con-
cluded an agreement with an American con-
sortium for seismic research and exploratory drill-
ing. The Turks reportedly want to keep this new
agreement quiet for now.
The official said that Ankara has rejected
Greek protests over Turkish activity in the
Aegean Sea, but that it is willing to negotiate the
problem. The timing of the Turkish announce-
ment of the contracts with the Scandinavian com-
panies, however, comes at an awkward time for
Greek Prime Minister Karamanlis since problems
with Turkey over Cyprus are already a hot cam-
paign issue.
The Turkish actions seem likely to spark
additional Greek protests, but both sides can be
expected to avoid any direct confrontation over
the oil rights issue. The Greeks, in fact, have
expressed some interest in resolving the problem
as part of a package that would include Cyprus,
but there has been no progress in this direction.
Cyprus: Marking Time
Efforts to create an atmosphere conducive
to Archbishop Makarios' early return to the island
continued in Nicosia this week. Vassos Lyssarides,
a leftist political leader and Makarios supporter,
was reportedly among the organizers of a series of
demonstrations that carried an underlying theme
of support for the return of the Archbishop.
On the surface, however, the demonstrations
focused on such issues as US policies, the refugee
problem, and Turkish military forces on Cyprus.
The strongest outcry was against Turkish over-
flights of Greek Cypriot areas. Labeling the flights
a breach of the cease-fire agreement, Acting Pres-
ident Clerides told the US embassy that if they
continued, the national guard might have to fire
on the planes to maintain its credibility in the
Greek Cypriot community. Turkish officials on
the island described the overflights as recon-
naissance missions in response to reports that
Greek Cypriots were receiving reinforcements and
equipment.
Despite these problems, the exchange of
Greek and Turkish Cypriot prisoners was resumed 25X1
on October 18 after a three-week hiatus. Clerides
says that he expects the prisoner transfers to be
completed by early November.
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FRANCE: TROUBLED WATERS
)The election last May of Independent
Republican Valery Giscard d'Estaing--the first
president from a minority party since the found-
ing of the Fifth Republic-has created consider-
able political turmoil in France. The Gaullists,
who ruled the roost for 16 years, are in disarray,
and Giscard's intention to form a "new majority"
has led to a spate of attempts to restructure party
alignments in the fractured center of the French
political spectrum. The Left Alliance-Socialists,
Communists, and Left Radicals is also regroup-
ing.
The Communists have initiated a massive
campaign to broaden the party's base by opening
it to leftists of all political hues. They are also
hoping to make the party politically "respect-
able" by emphasizing its Frenchness, playing
down its ties to Moscow, and diluting its tradi-
tional ideology. Moreover, Secretary General
Marchais is trying hard to convince rank-and-file
party members that cooperation with Socialists
and other forces of the left is no longer a matter
of rhetoric, but a political necessity.
Marchais' efforts have been set back by
recent wrangling with the Socialists. The friction
is caused largely by an unvoiced fear on the part
of the Communists that their dominance of the
left is threatened by the success of their Socialist
allies. This fear stems most immediately from the
results of the legislative by-elections held at the
end of September, in which Socialists made
strong gains and the Communists lost ground in
five of the six contested districts. Investigation of
the voting patterns confirmed Marchais' suspi-
cions that while the Communists had loyally
backed all candidates of the Left Alliance, some
Socialists and Left Radicals had balked at sup-
porting Communist candidates. A bitter exchange
of name-calling followed, and the Socialists
canceled an important Alliance "summit" meet-
ing scheduled for October 15.
The Communists' distrust of their allies has
also been fueled by the recent Socialist emphasis
on nationalization of key industries, worker
management, and pressure tactics against the gov-
ernment. This new Socialist "Plan for Society"
has moved the party to the left of the moderate
position taken by Marchais. The Communists are
apprehensive that the shift will weaken their
party's hold on its traditional labor constituency.
The Socialists have, in fact, strengthened
their labor and radical credentials and are a step
closer to becoming a multi-constituency party
capable of dominating the left. Their resurgence
has strained the Left Alliance, but is unlikely to
break it-at least in the near term. The Commu-
nists' complaints and accusations may be in large
part a tactical move by Marchais to appease hard-
liners in preparation for the party's extraordinary 25X1
congress on October 24-25. This is Socialist Party
leader Mitterrand's interpretation, at any rate,
Parties of the center, meanwhile, have been
reconsidering their political alliances in the light
of Giscard's efforts to diminish his dependence on
the Gaullists. Spurred by Socialist gains in the
by-elections, centrist political leaders have formed
two new political groupings. Both of these alli-
ances are cultivating a "reformist" image that
seems designed to protect Giscard's left flank
against inroads by the Socialists while pushing
most of the Gaullists toward an increasingly un-
popular position to the right of the government.
Although the Gaullists still occupy the
largest bloc of seats in the assembly, they are
leaderless and dispirited. If the Communists are
worried about losing their dominance of the op-
position, the Gaullists live in fear of being unable
to regain control of the majority. Small business-
men and farmers-traditionally staunch Gaul-
lists-have been hardest hit by inflation and in
their bitterness, they are withdrawing crucial sup-
port. Gaullist candidates suffered heavy vote
losses in the by-elections, and Prime Minister
Chirac has warned fellow Gaullists that they will
be lucky to retain 150 of their 184 seats after the
next legislative election. For the moment, Chirac
appears to have succeeded in marshaling Gaullist
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deputies behind the government, but the right
wing is smarting under a prime minister who is
obviously Giscard's man, while the left fringe
speaks openly of deserting a sinking ship.
The cabinet's approvi- la t week a new
electoral law indicates that the Portuguese govern-
ment is still determined to hold elections for a
constituent assembly next March. The assembly's
task will be to draw up a new constitution for a
democratic government to replace the authori-
tarian regime overthrown in April. Recent state-
ments by leading military officers, however, cast
some doubt on the commitment of the Armed
Forces Movement to moving expeditiously
toward restoring civilian rule.
The elaborate draft electoral law, which is
expected to be confirmed without modification
by the Council of State and then promulgated by
President Costa Gomes before November 15,
establishes general requirements for voting for the
constituent assembly and sets qualifications for
candidates in the March elections.
Suffrage is universal, with some exceptions
that tend to favor "progressive" groups, reflecting
the predominantly leftist orientation of the draft-
ing committee. Socialists and Communists suc-
ceeded in obtaining the right to vote for 18-year-
olds, overriding the smaller, more conservative
parties, which preferred a minimum age of 21.
Another controversial issue involved the
voting qualifications for emigrants. The Socialists,
as well as the centrist parties, expected to benefit
from a non-restrictive policy toward citizens
outside metropolitan Portugal. The Communists,
on the other hand, reportedly considered the
emigrant population to be generally conservative
and wanted to bar them completely from the
election. A compromise solution limits the vote
to those emigrants who have left the country in
the last five years.
Public officials and those who had actively
supported the Caetano and Salazar regimes were
also declared ineligible to vote in the constituent
assembly elections. The cabinet, however, has
been unable to agree on just who fits into this
category. To expedite the passage of the new law,
this problem will be tackled in a separate law at a
later date.
The draft law also sets out provisions for the
selection of deputies whose task it will be to draft
the new constitution. Candidates must run as
members of political parties or coalitions, whose
membership will be restricted to avoid chaotic
factionalism. Voters will select party lists and will
be unable to vote a split ticket.
A national electoral commission will be
created to supervise the elections. Parties will be
granted access to broadcasting time on radio and
television on both state and commercial stations.
Campaign expenditures will be limited and care-
fully regulated.
The constituent assembly will be given
ninety days in which to formulate a new constitu-
tion. Once its task is completed, the assembly will
be disbanded and the constitution presumably
will provide for general elections to be called.
The Lisbon regime has been imprecise about
how quickly general elections will follow. Min-
ister without Portfolio Vitor Alves-a leader in
the Armed Forces Movement-said it would be a
long time before a civilian government could
assume responsibility for leading the nation.
Another important figure in the Armed Forces
Movement-Otelo de Carvalho, a leader of the
April coup who is deputy commander of the
Continental Operations Command and military
governor of Lisbon-is also doubtful about a re-
turn to civilian rule, particularly since inflation
and unemployment in the coming months could
aggravate the climate of social unrest.
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btUKt I
SCHMIDT AND BREZHNEV TO MEET
)Economic cooperation will be th para-
mount theme during Chancellor Schmidt's three-
day summit meeting with Soviet leaders that
begins on October 28 in Moscow_ Both sides hope
to wrap up long-stalled negotiations on several
large-scale industrial projects. Lingering disagree-
ments on Berlin issues, however, may dampen the
atmosphere and reinforce Schmidt's reluctance to
grant government-backed credits or loans to the
USSR.
Interest in expanding economic relations is a
prime factor motivating the Soviets, who want
subsidized credits and greater access to West
German technology. Soviet leaders also want to
size up Schmidt first hand, as they regard his visit
as a picking up of the threads of bilateral sum-
mitry that Brandt and Brezhnev were weaving in
their three meetings.
Schmidt meeting Brez
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~7LV1 XL_ I
awl
Iftor
taking more care in defending West Berlin's in-
terests in the dispute with the Soviets over the
Federal Environmental Office and, more recently,
in negotiations with Pankow.
In choosing to disregard these considera-
tions, the Chancellor has shown that he is firmly
committed to detente. Pressure from Schmidt's
party colleagues plays a role, but his motives are
much broader:
? Foremost the summit keeps Bonn in
step with Washington in pursuing detente
with the Soviets.
? Also, the visit will improve the atmos-
phere between Bonn and Moscow. This could
strengthen business confidence in dealing with
the East.
? Lastly, an active Ostpolitik accords with
Schmidt's view of fulfilling West German in-
terests, such as securing energy supplies from
the Soviets, even if it requires Bonn to oper-
ate beyond the scope of a collective Western
approach to the energy problem.
Disagreements over Berlin, however, still
cloud relations. Negotiations on three bilateral
accords on humanitarian and scientific matters
are deadlocked on the ever-controversial question
of West Berlin's inclusion. An inhibiting factor is
the Soviet distrust of Foreign Minister Genscher,
who will speak for the West German side in dis-
cussions of Berlin issues. Soviet Foreign Minister
Gromyko regards him as a "crude" lightweight.
The Soviets prefer to deal with Schmidt, whose
intellectual acumen and grasp of foreign affairs
they reportedly respect. Given the Chancellor's
interest in expanding economic cooperation, they
hope to persuade him not to insist on a settle-
ment of Berlin issues as a precondition for eco-
nomic cooperation.
It is not clear what price Schmidt is willing
to pay to gain greater access to Soviet raw ma-
terials. In the past, he has argued against sat-
isfying Soviet demands for subsidized credits on
the grounds that this would only contribute to
West German inflation. Schmidt, however, is very
eager to gain final approval for a project involving
West German construction in the USSR of a nu-
clear power plant that will, in turn, deliver elec-
trical energy to West Berlin and West Germany.
Bonn's interest in this project is very strong,
and the West Germans have pressed the US and
the UK to support its request to provide the
requisite technology without insisting on Soviet
acceptance of IAEA safeguards.
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EUROPEAN COMMUNISM: PABLUM IN WARSAW
Moscow's willingness to yield on some of its
objectives and to tolerate expressions of inde-
pendence highlighted the preliminary meeting of
European Communist parties in Warsaw last
week. The bland communique summarizing the
three-day gathering cited the participants' "de-
sire" to hold an all-European conference in Berlin
by mid-1975. It said that the agenda would be
confined to Europe and referred neither to China
nor to a world conference-topics of long-
standing importance to the Soviet party.
The Soviets seem willing to put off any
direct attacks on the Maoist leadership and to
allow others to defend the concept of separate
roads to socialism in order to clear the way for
the formal conference next year. Another pre-
paratory session will be held, probably in Decem-
ber or January, but Moscow regards the formal
conference as especially important with the Con-
ference on Security and Cooperation in Europe
approaching its conclusion.
Although the Warsaw participants went no
further than to endorse standard positions in
Soviet foreign policy and to issue a banal call to
fight "against fascism and for freedom, democ-
racy, and independence," Moscow nevertheless
probably rates the meeting a success. The Soviets
did manage to get 28 European parties to attend,
including-for the first time-a Yugoslav dele-
gation. Only the Communist parties of Albania,
Iceland, and the Netherlands did not attend.
(a y
Several participants, particularly delegates
from Italy, Romania, and Yugoslavia, used the
forum to emphasize again their independence of
Moscow. In a veiled reference both to Moscow's
hegemony and to the recent cominformist plot,
Aleksandar Grlickov, the chief Yugoslav delegate,
asserted that it is "necessary to deal with disputes
and all parties on the basis of equality and non-
interference."
The Yugoslav also said that "any all-
embracing documents" adopted at this or any
other meeting "cannot comprise a compulsory
code for settling the main questions." Grlickov
made clear that Yugoslav participation in any
future conference will be contingent on Moscow's
continued good behavior. He also undercut Mos-
cow's complex efforts to arrange a world Commu-
nist conference when he said that conditions for
it "are absent."
Moscow's indulgence of such views suggests
that it will be satisfied merely to have the formal
all-European conference take place next year,
even if it does no more than endorse the general
outline of Soviet policy. Progress toward a repre-
sentative world conference, however, will clearly
require the Soviets to accept continued criticism
from a number of independent-minded parties
and to soft-pedal the China issue.
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PAKISTAN-AFGHANISTAN: STILL HOSTILE
Recent Pakistani army operationst haveC
sharply reduced a 20-month-old tribal insurgency
in Baluchistan Province, lessening the possibility
of an early full-scale confrontation between Paki-
stan and Afghanistan over this issue. Relations
between these two Islamic neighbors remain poor,
however. Their leaders deeply distrust each other
and continue to differ strongly over the status of
Baluchistan and of Pakistan's other border prov-
ince, the North-West Frontier.
The insurgency in Baluchistan appears to
have reached a watershed this month. Prime Min-
ister Bhutto announced on October 15 that, as a
result of recent army sweeps through the troubled
portions of the province, most of the rebels had
either been captured or had accepted his offer of
amnesty. Bhutto did acknowledge that some
remnants of the insurgent movement were still at
large, and he gave these remaining rebels until
December 15 to accept the amnesty.
Bhutto will now probably refrain from
major new offensive operations in Baluchistan for
at least a couple of months. He will want to see if
the rebels' diminished numbers, the onset of
winter weather, and political maneuvering on his
part can eliminate what remains of the threat to
central government control over the province.
Neighboring Afghanistan has long sympa-
thized with the efforts of tribal dissidents in both
of the Pakistani frontier provinces to block Is-
lamabad from establishing fuller control over
their affairs. The Afghans argue that the two
provinces should be transformed into a new
entity, called "Pushtunistan," which would be
either autonomous within Pakistan, independent,
or affiliated with Afghanistan.
Afghan advocacy of the Pushtunistan con-
cept is based on both ethnic and strategic con-
siderations. The Pushtun community, which is
only a small minority in Pakistan as a whole, is
the dominant ethnic group both in Afghanistan
and in Pakistan's North-West Frontier Province.
Baluchistan's ethnic ties to Afghanistan are much
thinner, but the Afghans have been opportun-
istically stressing the Baluchistan issue because it
is there that the Bhutto government has been
faced with an armed-albeit low-level-tribal in-
surgency. Additionally, a "Pushtunistan" that in-
cluded Baluchistan would enjoy access to the
Indian Ocean. Afghan backing for the Baluchi
rebels has consisted of propaganda support and
possibly some training and material aid.
Afghan President Daoud, a long-time strong
advocate of the Pushtunistan concept, sharply
stepped up agitation on the issue after he re-
turned to power in a military coup in July 1973.
Afghan military intervention in the Baluchi
rebels' behalf was never too live a possibility,
given Pakistan's military superiority, and it seems
even less likely now that the rebellion has
quieted. But each country will continue to sus-
pect the other of unfriendly intentions.
The Bhutto government has frequently al-
leged in private that Afghanistan, with Indian and
Soviet support, is working to undermine Paki-
stan's stability and territorial integrity by aiding
Pakistani tribal dissidents and other "subver-
sives." The Daoud regime, for its part, has shrilly
accused Pakistan of a multitude of sins, ranging
from "suppression" of Pushtun and Baluchi rights
to abetting anti-Daoud coup attempts. These
allegations are likely to continue. Baluchistan,
moreover, may eventually become the main focus
of tension once again. Bhutto is apparently de-
termined to destroy the "feudal" tribal system
there, and some tribesmen may resume insurgent
activities, which Afghanistan is likely to support.
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Ift1w vr_vi 1L_ I Nwe
GULUIVItSIA: C:UMHEGTIVE ACTION 7)
President Lopez may s l i politica gears
next)week in an effort to moderate th
l
e unpopu
ar
economic measures he has decreed since mid-
September. The 45-day state of economic
emergency that has enabled him to sidestep con-
gress expires on November 1. Under the constitu-
tion, congress will then review the President's
decree laws, which it can endorse, change, or
nullify. Given the current angry mood of the
legislators, they seem likely to challenge at least
some aspects of Lopez' economic program despite
its basic soundness.
The President has already launched a lobby-
ing campaign to recoup his dramatic loss of public
support. This weekend he will retreat to a small
town with his entire cabinet to take stock of the
situation in preparation for a national address
explaining his economic moves. It is possible that
the weekend meeting will also produce a scape-
goat or two within the cabinet; a likely sacrificial
lamb would be Minister of Finance Rodrigo
Botero.
Not the least of Lopez' problems is the rapid
withering of the Liberal Party unity that won him
the presidency by almost a two-to-one vote last
April and gained Liberal control of both houses
of congress. Prominent Liberals have attacked
Lopez' economic program, and several party
leaders have resigned. Hardships imposed by the
program itself have alienated a large part of the
public, and Lopez' method of imposing the pro-
gram has outraged the majority of congress,
which doubtless would have passed the measures
had they been legislative bills.
If, as is probable, no amount of hard sell
proves able to recapture Lopez' lost support, the
President will face a difficult choice. He can
accept the realities of politics by bargaining with
congress to keep as much as possible of his eco-
nomic program while perhaps saving face and
restoring some party unity. On the other hand, he
can stand by his decrees and hope that early signs
of an economic turnaround will vindicate him. In
the latter option, he would be aided by several
apparent loopholes in the law by which he
assumed emergency authority, making possible
his indefinite postponement of the congressional
review of his decrees.
Lopez has been in office only since August
and may well consider that the three or more
years remaining before his party resumes presi-
dential electioneering can heal any wound. He is
already a lame-duck president, however, as he is
prohibited from succeeding himself, and he may
not rank the fortunes of the Liberal Party first 25X1
among his priorities. In any event, this is likely to
be an active week in Colombian politics as presi-
dent and congress maneuver for primacy.
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CHILE: ANOTHER CLOSE CALF
fhe fragile relationship between the military
government and the Christian Democratic Party
again neared the breaking point last week, and
was saved once more by the fact that neither side
wants an open split.
The incident began on October 7, when the
government announced that Bernardo Leighton, a
self-exiled leader of the party's left wing, would
not be allowed to return to Chile. Leighton's
anti-government statements had been highlighted
by Radio Moscow. A statement approved by the
party leadership and issued by party president
Patricio Aylwin labeled the government move an
"abusive action" and "unjustifiable outrage."
Unfortunately for the party, its statement
coincided with the government's discovery of
documents that reportedly identified several left-
wing Christian Democrats as having been in con-
tact with anti-government extremists of the Move-
ment of the Revolutionary Left.
On October 11, junta President Pinochet
declared that "anti-patriots" and "mistaken pol-
iticians" who seemed to be asking for the "hard
hand" would! get their wish. An ensuing series of
party-government meetings involved conservative
party leaders Osvaldo Olguin and Juan de Dios
Carmona, Interior Minister Benavides, Pinochet,
and two army generals who had previously served
as links between the military and the Christian
Democrats.
On October 15, the Santiago press reported
that Carmona had disassociated the party from
Aylwin's statement. This was a distortion--per-
haps arranged by the government---of the party's
position, since Carmona had disowned Leighton's,
not Aylwin's, views, and the party was sticking to
its guns in opposing the ban on Leighton's return.
The party subsequently offered to issue a clarify-
ing statement disassociating itself from Leighton
and disavowing cooperation with the outlawed
Marxist parties, but the government said this was
unnecessary, and Carmona then told the press
that the entire issue had been clarified and
resolved.
Just how close to the brink the party and
the government came in this latest in the series of
similar incidents since the military take-over is
uncertain, but party leaders Carmona and Olguin
reportedly were fearful that the government was
ready to declare the party illegal and confiscate
its property. Ironically, the order prohibiting
Leighton's return remains ineffective because it
has not yet been published officially. The episode
may strain the party's ability to hold together
under its current policy of neutrality toward the
government, but there could be a silver lining in a 25X1
report that the two generals persuaded Pinochet
to set up a regular channel of party-government
communication.
PARAGUAY: (DEMOCRATIC DICTATORSHIP
Last we~k,~reside~ Stroessner broke prec-
edent by discussing political issues with Gustavo
Riart, leader of the Radical Liberals, the major
opposition party. Although Riart's subsequent
press conference did not refer to any major
concessions by Stroessner, he said the President
told hint that requests for more democratic
electoral procedures and radio time were "worth
noting."
Such meetings may become frequent now.
In the recent anniversary speech commemorating
his 20 years in office, Stroessner proposed a
"democratic national dialogue." Leaders of the
three legal opposition parties have reacted posi-
tively, but the "unrecognized" Christian Demo-
cratic Party has rejected the vague invitation as
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impossible to accept under present conditions.
Party chief Luis Resck augmented his group's
leftist reputation by issuing a formal denunciation
of government abuses including: detention of
political prisoners, repression of agrarian reform
leagues, frequent invocation of state of siege
powers, and the denial of passports to opposition
figures (including Resck himself).
Stroessner has always taken a slow approach
to major decisions and his failure to give any clues
thus far to the importance of dialogue is a typical
exercise of caution. The phrase may be little more
than a rhetorical flourish to mark a historic oc-
casion. On the other hand, official observers have
commented previously that Stroessner is con-
cerned about developing a more positive historical
image, and he may intend to return to an earlier
25X1 policy of allowing limited political liberalization.
In any case, it is unlikely that any concessions
would have much immediate impact.
CIJBA: MIXING OIL AND POLITICS
bru t of Fidel Castro's verbal abuse during his
speech to the 25th meeting of the General
Council of the World Federation of Trade Unions
in Havana last week. Much of the bombast, how-
ever, was used to mask Havana's irritation with
the trend developing in the policies of the oil-
producing countries.
(
l
l
Capitalism, imperialism, a
c US b re
d
e
Although Castro expects to impress Latin
America and the Third World in general with the
aggressive stand he is taking-ostensibly on their
behalf-regarding world inflation and other inter-
national economic problems, his motives fall far
short of genuine altruism. He is apparently
incensed, for example, that the oil producers,
instead of channeling their new-found wealth in
his direction to be used for developmental pur-
poses, are investing in the US in search of addi-
tional financial returns. As a government leader
experienced in expropriating foreign holdings, he
knows well the vulnerability of foreign investors
and, in his address, cautioned the oil producers
that "their investments will become like a hostage
for imperialism."
His criticism was couched in diplomatic
terms, but it obviously reflects a strongly held
conviction that could precipitate considerable
friction with such countries as Mexico and
Venezuela. He has reportedly already rejected a
Mexican offer of oil because Cuba was not
granted a preferential rate below the current
market price, but his insistence on special treat-
ment is likely to get a deaf ear from prospective
suppliers.
Much of his speech was a reiteration of
earlier pro forma criticism of the US. The verbal
blasts, however, were in marked contrast to the
reasonable and restrained attitude he displayed in
the interview shown on CBS television on Octo-
ber 22. This dichotomy stems from his belief that
he must present a vehement hard line when ex-
posed to the international media so that his
cautious steps toward a rapprochement with the
US will not undermine his prestige among Third
World leaders and the rank and file of the revolu-
tionary movements that have been looking to
Cuba for leadership over the past decade.
His adamant defense of the USSR at the
Nonaligned Conference in Algeria in September
1973 seriously compromised his revolutionary
credentials in the eyes of many of the conference
delegates, and he wants no repetition that might
be based on the charge of being "soft on imperi-
alism." His criticism of the US, therefore, often
reflects his efforts to thread his way toward a
rapprochement without falling victim to the more
outspoken members of his own political genre
who have less to gain through detente than he
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L7LV1 \L
CAMBODIA: SEEKING A UN SEAT
Both Khmer sides are co' rtinu ing to lobby
for support in the battle for Cambodia's UN seat,
and it now appears reasonably certain that a vote
on this question will occur no sooner than the
second week in November.
Phnom Penh thus far has successfully
avoided a preliminary challenge by supporters of
Sihanouk's government at the 18th General Con-
ference of UNESCO that opened in Paris last
week. The Lon Nol delegation simply finessed the
issue by not formally submitting its credentials to
the conference. A confrontation could still de-
velop in Paris if the delegation from Sihanouk's
government attempts to present its credentials. It
now appears, however, that Sihanouk's forces still
cannot count on a firm majority vote either in
UNESCO or the General Assembly and, as a re-
sult, are unwilling to force an early showdown in
either body.
Sihanouk's backers hope that the lopsided vote
granting observer status to the Palestinian Libera-
tion Organization at the General Assembly this
year, as well as a coming challenge to the cre-
dentials of the South African government, will
better establish the precedent of voting govern-
ments "in" or "out" of the UN and overcome the
reservations of some undecided states.
The backers of the pro-Sihanouk resolution
are by now well aware of Phnom Penh's strategy.
The Asian Working Group that is supporting the
Lon Nol government hopes to gain priority for a
counter-resolution calling for negotiations be-
tween the two Khmer sides, which would defer
the Khmer credentials issue another year. In a
statement issued in Peking on October 16,
Sihanouk bitterly condemned the governments of
Japan, Indonesia, Thailand, and the Philippines
for their leading role in support of Phnom Penh.
He denounced the counter-resolution as a ploy to
impose an "American peace" in Cambodia. His
supporters in New York, however, have thus far
not had great success in attempting to portray the
resolution as an "American document." The US
delegation is carefully avoiding any visible "arm-
twisting," leaving the front line lobbying effort to
Phnom Penh's Asian allies.
ernment operations to clear the road are now
Although the Khmer Communists may hope
to precede the General Assembly vote with some
attention-grabbing actions in Cambodia, such as a
new round of rocket and artillery attacks against
Phnom Penh, the present military situation
appears to hold out little hope of solid or lasting
Communist gains in the near future. Insurgent
forces have been probing the outer defenses of
several provincial capitals in recent weeks with
little success. Aside from this, insurgent initiatives
are focused on lines of communication and, in
particular, the highway connecting Phnom Penh
with the rice-growing northwestern provinces.
Last week, this road was once again interdicted
by the Communists between the provincial capi-25X1
tats of Pursat and Kompong Chhnang. Gov-
under way.
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~.+.)~%-JI r_1 L_ I
Rowling
NEW ZEALAND: ELECTION RUMORS
Some elements in the L br governmerft are
advocating early elections. National elections are
not scheduled until November 1975, but there is
speculation that Prime Minister Rowling may seek
a new three-year mandate from the voters soon to
take advantage of sympathetic public reaction to
the recent death of popular Prime Minister Kirk.
Rowling may also be concerned that over the
next year, the implementation of the stringent
economic measures the government announced
this week could alienate the electorate.
The government, stung by a series of set-
backs in local contests, may want to move before
its standing slips further. Two weeks ago the
Labor mayor of the capital city of Wellington was
apparently ousted after 18 years in office. Even if
the count of absentee ballots changes the out-
come, the close vote was in sharp contrast with
the mayor's strong majority in the last elections.
Other party defeats-the mayoralty of
Christchurch and bids to capture the top posts in
Dunedin and Auckland-had been predicted. The
wide margin of the opposition's win over a
promising Labor candidate in Auckland neverthe-
less came as a shock.
Despite some disposition to move now, there
is considerable sentiment within the Labor Party
against early elections. A sizable number of the
Labor members of parliament was elected by slim
margins, and they are reluctant to be put to the
test again in view of Labor's recent local election
reverses. In light of its poor showing in these
elections, the Labor Party will probably treat
with reserve a just-released opinion poll con-
ducted last month that shows a sharp rise in the
government's standing.
Many party members argue that the govern-
ment, with its huge parliamentary majority,
should feel no compulsion to go to the polls. The
US embassy believes that the odds are against
early elections and that Rowling's failure to 25X1
scotch rumors is a tactical ploy to keep his
options o en and the opposition off bal-
ance.
rrthe government's fiiistlaid-seeking mission
abr /ad, headed by Communist Economics Minis-
ter Soth Phetrasy, recently spent nearly a month
visiting North Vietnam, Algeria, China, and North
Korea. Except for Hanoi, however, the aid com-
mitments fell far short of the coalition govern-
ment's expectations. A number of additional aid-
seeking missions, to be led by Soth and by non-
Communist Defense Minister Sisouk na
Champassak (to socialist and Western countries,
respectively), are still on the coalition's drawing
board, although original Lao expectations for
massive hand-outs have doubtless been dampened.
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SLL Nh
Chinese roadbuilding
The idea of dispatching economic missions,
composed of Communist and non-Communist of-
ficials, to seek aid from socialist and Western
countries emerged shortly after the new govern-
ment's formation in early April. An economic
crisis in midsummer gave new impetus to the idea.
The crisis, rooted in a perennial budget deficit
and a shortage of foreign exchange, came to a
head in mid-July when the coalition-for political
reasons--refused to accept recommendations by
the International Monetary Fund to devalue and
curb its own internal expenditures. Government
leaders decided instead to institute a highly re-
strictive foreign-exchange control system and to
cast about for massive doses of foreign aid.
The first aid-seeking delegation left for
North Vietnam in mid-September and concluded
a fairly impressive economic assistance pact. If
successfully implemented, it will help reduce
Laos' long-standing commercial dependence on
Thailand. In an effort to give Vientiane an outlet
to the sea other than Bangkok, Hanoi agreed to
reconstruct the Route 7 roadnet from northern
Laos to the port of Vinh in southern North Viet-
nam. Hanoi also agreed to permit Laos to ship up
to 50,000 tons of commodities annually through
Vinh duty-free and to facilitate transportation of
these goods through North Vietnam. In addition,
the North Vietnamese agreed to provide a re-
ported $3 to $4 million in non-reimbursable com-
modity assistance to the coalition government.
The fortunes of Vientiane's aid seekers de-
clined rapidly following the promising start made
in Hanoi. Algeria, the next stop, was a total
fiasco. Instead of offering aid, President Boume-
diene and other Algerian officials lectured the
Lao on the political wisdom of genuine nonalign-
ment. They intimated that any aid depended on
Lao support in the UN General Assembly for
resolutions demanding the removal of US troops
from South Korea and the seating of the Khmer
Communists in place of the currently recognized
Cambodian regime. The delegation fared little
better in Pyongyang.
The windfall in economic and financial
assistance that the delegation had hoped to reap
in Peking also fell considerably short of the mark.
Much to the delegation's consternation, the
Chinese turned aside Lao requests for sizable
grants-in-aid and agreed only to a long-term
interest-free loan of approximately $25 million.
The agreement, if ratified as expected by the
coalition cabinet, will assure continued Chinese
presence and influence in northern Laos at a
token cost to Peking. The lion's share of the
loan-$17.5 million-is to be used to cover the
cost of constructing a road from the Muong Sai
area to the royal capital of Luang Prabang. The
road will be built by Chinese engineers, and, when
completed, will link the existing Chinese roadnet
in northern Laos to the Lao road system in the
south.
Most of the remainder of the loan, some $7
million, is earmarked for the purchase of com-
modities--rice, cement, trucks, textiles, petroleum
products, medical supplies-based on prevailing
world market prices. The Lao are particularly
chagrined that only about one third of their
commodity aid requests were honored by the
Chinese. They are also unhappy over Peking's
unwillingness to pick up the tab for transporting
these commodities to Laos and, in general, they
believe the Chinese loan will only add to Lao
foreign indebtedness.
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Secret
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