WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001000060005-6
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 26
• Document Creation Date: December 22, 2016
• Document Release Date: April 28, 2009
• Sequence Number: 5
• Publication Date: May 17, 1974
• Content Type: REPORT

Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
Top Secret 2511
Weekly Review
State Dept. review
completed.
DIA review
completed.
Top Secret 25X1
17 May 1974
Copy
N2 636
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
CONTENTS (May 17,1974)
WEEKLY REVIEW, issued every Friday morning by the
EAST ASIA
ice of Current Intelligence, reports and analyz s significant PACIFIC
elopments of the week through noon on Thursday. It
iuently includes material coordinated with or prepared by Stirrings
Office of Economic Research, the Office of Strategic 4 4 Cambodia: Political
Vietnam SChina:
search, and the Directorate of Science and Technology. 5 Laos s - North
Troops
pies requirini more comprehensive treatment and therefore 7 China: Chou Still in the Saddle
dished separately as Special Reports are listed in the
25X6
1 France: Photo Finish
2 Portugal: Provisional Government
12 Italy: Divorce by a Landslide
13 Iceland: Election Campaign Begins
10 USSR - Eastern Europe:
Cro Pros ects
MIDDLE EAST
AFRICA
ihe editor of the Weekly I.evlew
WESTERN
HEMISPHERE
25X1
16 European Free Trade Confederation
18 Romania-Bulgaria: Leaders Talk
18 Syria-Israel: The Golan Front
20 Soviet Economic Aid to Egypt 25X6
21 Ethiopia: Conservatives Win a Round
21 Cyprus: Growing Tensions
23 Honduras: Student Violence
23 Brazil: Press Censorship Increased
24 Peru: More Arms
Comments and queries on the contents of this
publication are welcome. They may be directed to
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
France: Photo Finish .
The French presidential hopefuls are coming
down to the wire in a dead heat. Giscard and
Mitterrand are both flailing about in search of
new issues, endorsing everything from minimum
wages to indemnification of czarist bonds in a
last-ditch effort to win the crucial floating votes
that will decide the election on May 19.
Some of the most recent polls show voters
split 50-50. Rival polls have put Giscard mar-
ginally ahead, but the race will obviously be a
close one. Should the election be as close as
predicted, the outcome may hang on the 2.6
percent overseas vote, which wil, delay the ver-
dict. in the event of
a "photo finish"-one percent or less-ballots will
be recounted. This procedure could cause a three-
day delay in the publication of the official results.
25X1 The ideolcgical views of the two candidates
differ sharply, but the distinctions between their
platforms have gradually become blurred as both
Giscard and Mitterrand have sought to appeal to
as broad a spectrum of voters as possible. Giscard
has wooed the working class and suggested a
minimum wage of $240 a month, while Mitter-
rand has promised that he has no intenti_ i of
increasing the taxes of middle-level executives or
of fiddling with their private pension schemes.
Both are for "change" and their slogans are al-
most identical: Mitterrand-"A president for all
the French"; Giscard-"The president of all the
French."
The most distinctive features contained in
the "common program" Mitterrand has nego-
tiated with the Communist and other leftist
parties are the nationalization of eight or nine
giant industrial firms and the state control of
private banks and insurance companies. Mitter-
rand has asserted that he would draw the line
there, and that he does not favor wholesale na-
tionalization. By raising the spe +or of even
limited nationalization, however, Mitterrand has
driven many centrist political leaders, including
Jean-Jacques Servan-Schreiber, and their fol-
lowers reluctantly into Giscard's camp.
The televised debate between the candidates
on May 10 was generally conceded a draw, but
during his concluding remarks Giscard struck a
significant blow when he accused Mitterrand of
being a man of the past-a man, by implication,
who not only represents an outdated socialism,
but who also refuses to grapple with the effects of
his "common program" on France's future.
Earlier Giscard had characterized his own first
round victory as the birth of a "great wave of
youth and enthusiasm."
Giscard is considered by many Frenchmen
to have a better grasp of the complexities of
modern society-to have judged more accurately
the pulse of contemporary France, which he sees,
not as a society of classes, but as an industrialized
"national collectivity." Giscard is gambling that
the prevalent French mood is a desire to change
the existing society, not to create a new
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
Portugal
A broadly based coalition government that
includes two communists was sworn in this week
with the avowed aim of guiding Portugal into a
democratic era after nearly 50 years of authori-
tarian rule.
It is a provisional government that will rule
only until elections are held sometime before
April 1975. The military junta, which seized
power last month, will roonitor the government's
activities. Under an interim constitutional decree
issued this week, the armed forces w, be com-
pletely independent from the government. The
armed forces chief of staff General Costa Gomes
will have equal status with the prime minister.
The 15-member cabinet arpears to have rep-
resentatives from all portions of the political spec-
trum, although the absence of political parties in
Portugal for so many years makes it difficult to
pinpoint political affiliations. The foreign, justice,
and information ministries went to members of
the Socialist Party. Alvaro Cunhal, secretary-
general of the Communist Party, was named min-
ister without portfolio, and another Communist
official was appointed minister of labor.
The new prime minister is former bar asso-
ciation president Adelino da Palma Carlos, a
wealthy lawyer and professor who has not been
aligned with any political party. His political phi-
losophy is thought to be right of center.
General Spinola, who assumed the office of
President on May 15, remains the most powerful
man in Portugal. In his inaugural address, he
warned against excesses and bestowed lavish
praise on the Armed Forces Movement. Ile was
especially complimentary to the "younger
cadres" whose "nobility," he said, "rescued the
country from national tragedy."
In contrast to the blandishments Spinola lav-
ished on the younger officers, the junta an-
Page 2
pounced yesterday that 42 senior officers had
been placed on the reserve list, bringing to 66 the
number of high-ranking officers who have been
purged since the coup. Among those purged Eire
several prominent conservatives who do not sup-
port Spinola's notions of self-determination for
the African territories.
These members of the Portuguese provisional government
and their offices are: (L, front to back) Alvaro Cunhal,
Communist, minister without portfolio; Mario Soares, So-
cialist, foreign minister; Avelino Pacheco Goncalves, Com-
munist, minister of labor. (Centex) Raul Rego, Socialist,
information minister. (R, front to back) Adelino da Palma
Carlos, nonaigned, prime minister; Manuel Roclra, non-
aligned, minister of public works; and Francisco Salgado
Zenha, Socialist, minister of justice.
Mz,y 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
In his address, Spinola repeated many of the
promises for a more open society that he made
immediately after the junta seized power. He also
stressed that minorities "whether they be here or
in Africa" should not interfere with the demo-
cratic process. He did not identify the minorities,
but in Africa it cc Id apply both to the white
settlers and the brick insurgents. At home, he
probably was referring to leftists who have moved
to take over local government offices and por-
tions of the business community.
The new provisional government in Lisbon
faces a wide array of problems in the African
territories. The insurgent movements have either
rejected outright Lisbon's offer of a cease-fire, or
they have proposed conditions the Portuguese
may find hard to meet. Some white settlers,
meanwhile, are voicing concern over Lisbon's in?
tentions in the territories, and there have been a
few incidents between blacks and whites.
On May 13, leaders of the insurgent move.
ment in Portuguese Guinea announced that they
were prepared to begin negotiations with Lisbon
"with or without a cease-fire." The rebel offer,
which gives both sides considerable leeway, in-
cluded the condition that Lisbon recognize the
"right of independence" for the "Republic of
Guinea-Bissau," proclaimed by the insurgents last
fall, as well as tor the peoples of Angola and
Mozambique.
The junta termed the offer "constructive."
The newly formed government in Lisbon will give
it careful consideration, but may find it difficult
to accept all the rebel conditions. Lisbon prefers
to deal with the three territories separately, and is
likely to make its response applicable only to
Portuguese Guinea. So far, the Portuguese Gov-
ernment has offered the insurgents an equal
chance with newly emerging political organiza-
tions to determine the future of the territories.
Lisbon has recognized the territories' right of
self-determination, acknowledging the risk of
eventual independence, but it hopes for a close
federation with them, particularly with Angola
and Mozambique.
On the same day the Portuguese Guinea
rebels made their offer, Angolan and Mozambique
insurgent leaders and representatives of black
African governments supporting them, meeting in
Dar es Salaam, called for increased military activ-
ity by the rebels. In Mozambique, the rebels have
recently intensified military action in the central
part of the territory, an area of heavy white
settler concentration, following a brief lull after
the coup last month in Lisbon..
Unrest is high in the area as a result of the
insurgency and an economic decline. A visit last
weekend by armed forces chief of staff General
Costa Gomes was marred by demonstrations by
angry whites protesting inadequate military pro-
tection. On May 12, an angry rock-throwing
crowd of whites broke up a political rally in a
black suburb of Beira. Blacks retaliated by ac-
costing whites who later tried to pass through the
suburb.
Many Mozambicans believe Lisbon is ready
to offer favored treatment to the insurgents. This
belief has probably been reinforced by knowledge
that Lisbon has commissioned several former
political prisoners, all well-known blacks, in-
cluding a brother of an insurgent leader, to pre-
sent its case to the rebels. The ex-prisoners are
expected to arrive in Dar es Salaam, where the
rebels maintain headquarters, within a few days.
In Angola, the level of insurgency has been
low for the past few years, and Lisbon is under no
immediate military pressure to accommodate
rebel groups there. The Portuguese Government,
however, is apparently worried that the insurgents
are preparing for a military push in northern
Angola and is augmenting its military forces there
with troops from other parts of the terri-
tory.
Page 3
May 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875R001000060005-6
CAMBODIA: POLITICAL STIRRINGS
Some familiar political problems upstaged
the military situation this week. Student and
teacher activists in Phnom Penh, who tended to
their academic pursuits for the past month, have
resumed criticism of the government. Students
decorated some schools in the capital with ban-
ners and posters denouncing the government for
its inability to reduce inflation and curb corrup-
tion, and student leaders called for large anti-gov-
ernment demonstrations. Some teachers have
gone back on strike to protest anew their inade-
quate salaries, while others have been pushing for
another national teachers' congre~> on May 17 to
voice their lack of confidence in the government.
Trying to keep the unrest within bounds,
Prime Minister Long Boret announced a few new
measures aimed at easing some of the teachers'
economic problems. Defense Minister Thappana
Nginn, meanwhile, accused the Khmer Commu-
nists of stirring up the students and teachers and
stated that tighter security measures were being
put into effect in Phnom Penh. Cambodian Army
Chief General Fernandez, however, has indicated
that government security forces in the capital will
avoid confrontations with students and teachers
in order to prevent major disorders from oc-
curring.
Lon Nol has used the unsettled situation to
force another "state of danger" declaration from
the legislature, similar to the one that expired in
early April. The new declaration, which is valid
for six months, gives the government special
powers enabling it to suspend such constitutional
rights as freedom of assembly. The President
presumably intends to use the document, if
necessary, as a legal basis for any moves against
antigovernment elements exploiting legitimate
grievances.
Khmer Communist forces well north of
Phnom Penh launched their anticipated attacks
against the provin. ial capital of Kompong Thom.
Sporadic Communist artillery fire caused little
damage, however, and ground assaults against the
city's outlying defenses were repulsed. The at-
tacks did not prevent the airlifting of additional
reinforcements to Kompong Thom.
Page 4
May 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875R001000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
Laos ? North Vietnam - China
THE FOREIGN TROOP ISSUE
One of the most important provisions of the
Lao Accords of 1973 calls for the withdrawal of
all foreign troops and military personnel from
Laos 60 d-ys after the formation of a coalition
government. The North Vietnamese have the
largest number of troops in Laos but have shown
little interest to date in complying fully with the
withdrawal provision.
Page 5 WEEKLY REVIEW May 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
CHINA: CHOU STILL IN THE SADDLE
For years, Premier Chou En-lai has main-
tained a grueling pace while managing China's
affairs, showing remarkable physical and mental
stamina. Recently, however, he cut back on some
aspects of his job. On May 9, he did not attend a
stag banquet given by visiting Senegalese Presi-
dent Senghor. During the visit earlier this week of
Pakistani Prime Minister Bhutto, Chou missed al-
most all of the purely protocol functions and two
substantive discussions as well. The official ex-
planation, and Chou's own, is that he is slightly
unwell because of his old age-he is 76. He has,
nevertheless, kept a fairly active schedule amid a
number of signs that his political health is as
sound as ever.
There has been much speculation outside of
China that the 76 year old Premier is being forced
by his political enemies into a state of semi-retire-
ment. The Chinese have been at pains, however,
to counter speculation about Chou's political
demise. The two vice-premiers who stood in for
Chou at banquets for the high-level visitors com-
mented that they were acting on behalf of the
Premier. One of the vice-premiers, Li Hsien-nien,
is Chou's closest associate in the leadership; the
other, Teng Hsiao-ping, has seemed to work
closely with Chou since the former's political
rehabilitation a year ago. Chinese media noted
repeatedly during the Bhutto visit that the Pakis-
tani Prime Minister was in China at Chou's invita-
tion. Bhutto's complimentary references to the
Premier were duly reported by the official Chi-
nese news agency, and the banquet for Bhutto
was officially described as being given by Chou,
even though he was not present. The joint com-
munique issued at the end of the visit mentioned
Chou four times.
Chou's wife was unusually prominent during this
per o Portions of her speech to a Vietnamese
women's delegatico were even published by the
official news agency. A lesser government official
who is close to Chou has appeared with unusual
frequency-over the years his pattern of appear-
ances has proven to be a reliable gauge of Chou's
political status.
Chou is clearly not incapacitated. Although
he did not meet Bhutto at the airport, he accom-
panied him later that day to a lengthy session
with Mao. Television coverage of that event
showed Chou looking apparently fit. The follow-
ing day, Chou conducted the initial talks with
Bhutto that lasted nearly two hours, but he did
not participate in the follow-up discussions.
It is possible that Chou has been ore-
occupied of late with domestic business, espe-
cially the ongoing anti-Confucius campaign. A
member of the inner circle around Mao and Chou
hinted as much by suggesting that Chou missed
the Senghor banquet because he had "more im-
portant matters" to attend to.
The anti-Confucius campaign has been re-
cently characterized by increasing factional strife
in the provinces that seems to reflect serious
differences at the top over major policy and per-
sonnel issues. Chou has apparently devoted con-
siderable attention to these problems, and with
some success. There has been a steady flow of
official instructions emphasizing the need for
order during the campaign, and the propaganda in
recent weeks has taken on a decidedly "Chouist"
tone. On May 7, for example, a local Peking
newspaper lashed out at the extremists who in-
cited armed conflict during the Cultural Revolu-
tion. Most of them have since been purged, but
their most prominent survivor is Mao's wife,
Chiang Ching, who is Chou's major ar.tagcnist in
the current campaign. Chiang Ching did in fact
urge young people to take up weapons during the
Cultural Revolution.
During the past year, Chou has begun 25X6
share some of his duties in the foreign policy
arena with his deputy premiers. No doubt he wi125X6
continue to do so, especially with domestic poli-
tics demanding so much of his time and energy.
But a good indication that Chou remains firmly in
the saddle is the fact that his lower public profile
over the last week has not sparked a correspond-
ing increase in the activity of his political ene-
Page 7
May 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
Iq
Next 1 Page(s) In Document Denied
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
USSR - EASTERN EUROPE: CROP PROSPECTS
Grain crops are off to a poor start in Com-
munist Europe this year. Bad weather slowed
Soviet sowing operations in April, while rain in
Eastern Europe has brought only marginal relief
to drought-stricken crops there. The season is still
early, however, and much will depend on weather
conditions ovE,- the next two months.
Sowing operations in the western USSR
were hindered by cold, rain, and snow in mid-
April, when the sowing campaign was scheduled
to shift into high gear. Favorable weather during
the first week in May permitted a faster pace, but
by May 6 only about 38 million hectares, 39
percent of the planned area, had been sown to
grain. At the same time in 1972 and 1973, the
areas sown amounted L'o about 41 million and 48
million hectares respectively.
A successful spring sowing campaign is
needed this yi.ar to help offset a higher than
average loss of crops sown last fall. In mid-April,
Deputy Minister of Agriculture Kuznetsov esti-
mated that between 5 and 10 million hectares of
the 35 million sown in the fall would require
resowing this spring, compared with the long-run
average of about 4 million.
While wresiling with these problems, Mos.
cow has taken steps to assure a smooth grain
harvest. For the sixth successive year, the party's
central committee and the government have
issued a joint decree providing specific guidelines
for the harvest. Reducing losses is of regular con-
cern to the leadership.
The Soviet grain harvest starts in July and
continues into October, but is beset by a shortage
of proper machinery, dependable manpower, and
grain drying fac;lities.
This year's decree directs ministries sup-
plying agricultural machinery to speed up de-
liveries, authorizes the state bank to make emer-
gency short-term loans to state and collective
farms, and authorizes the transfer of urban trucks
and urban workers to rural areas to help with the
harvesting.
The slow progress of the spring sowing cam-
paign, coupled with above-average winterkill,
raises doubts that the goal of a 206-million-ton
grain harvest will be met. Above average soii
moisture in the eastern part of the spring grain
belt, where sowing is about to begin, brightens
the outlook in an otherwise cloudy picture.
Eastern Europe
Rain in early May removed crops in Hungary
and Czechoslovakia from the critical list, but
brought only marginal relief to those in other
East European countries. Thus far, accumulated
precipitation has not been enough to restore sub-
soil moisture to normal levels, and more will be
required this month if the yields of winter grain
last year are to be equaled. Soil moisture at the
end of April ranged from 48 percent below nor-
mal in Hungary to 17 percent below normal in
Poland.
Precipitation in the first week of May un-
doubtedly spurred the development of spring-
planted crops--particularly root crops and sun-
flowers-and ensured the germination of corn.
The rains were probably too late, however, to
p.,event a reduction in first cuttings of hay in
several countries.
Unless the drought is broken this month,
Eastern Europe's import requirements for the
year ending June 1975 could approach 10 million
tons, ti.e highest level in several years. The
amount of livestock feed on hand in Eastern
Europe almost certainly will not be large enough
to maintain livestock numbers and roductivity at
last year's level.
Page 10 WEEKLY REVIEW
May 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
The lopsided vote for divorce in the Italian
referendum was a sharp rebuff to the dominant
Christian Democratic Party and the Vatican. It
was an unexpectedly large win for the broad
pro-divorce grouping, which included the Chris-
tian Democrats' three coalition partners and the
Italian Communist Party. There was a 59.1-per-
cent vote to retain the 3-year-old divorce law.
The outcome was a particular shock to
Christian Democratic Party chief Amintore Fan-
fani, who led the campaign to repeal the divorce
law. Fanfani pushed his party into the battle,
against the judgment of many other Christian
Democratic leaders-including Prime Minister
Rumor-who preferred to cancel the referendum
by working out a compromise with the pro-
divorce groups. Fanfani, a major figure in the
party for more than 25 years, has shown a re-
markable ability to land on his feet after previous
setbacks. He will have to do some furious rhetor-
ical backpedaling this time, however, because he
strongly implied during the campaign that a vote
for divorce was a vote for the Communists.
F
YN
The Communists are building on this theme
by taking a conciliatory line and stressing that it
is now time to move on to the solution of "more
important problems." Berlinguer will probably re-
turn soon to his "historic compromise" proposal,
which calls for a rapprochement between the
Communists and Christian Democrats.
The Communists will get the major credit
for the victory, although the pro-divorce front
also included Socialists, Social Democrats, Repub-
licans, and Liberals. Communist leader Enrico
Berlinguer was, from the outset, the most active
campaigner for retention of legalized divorce. The
Socialists, fearful of being overshadowed by the
Communists, also worked hard, but the other
parties in favor of divorce did not mount a major
public effort until the last week of the campaign.
Since the divorce issue cuts across party
lines, the outcome does not necessarily mean that
the Communist vote would increase in a general
election. The Communists are jubilant, however,
because the referendum tally suggests that they
are in tune with the mainstream of Italian opin-
ion, and that the Christian Democrats are not.
This impression will help the Communists make
more credible the claim chat their party-Italy's
second largest-is a respectab:e, legitimate organi-
zation and therefore entitled to a role in the
national government.
All party leaders are now trying to figure out
what the referendum outcome implies for the
future of Italian politics. So far, most politicians
have remained silent, but they are probably im-
pressed by the failure of the anti-communist
theme and the sternest admonitions of the
Church to mobilize enough voters to repeal the
divorce law. Many Italians are already interpreting
the result as a vote for modern versus traditional
values. Shortly alter the results of the referendum
became known, th3 headline in the country's
most prestigious newspaper proclaimed: "Italy is
Now a Modern Country."
Fanfani and family
Not enough votes
Page 12 WEEKLY REVIEW
May 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875R001000060005-6
Though stung by the defeat, the Christian
Democrats will remain the major voice in any
political "clarification" that may result from the
referendum. Both the Christian Democrats and
Socialists-on apposite sides of the divorce issue-
stressed during the campaign their intentions to
continue governmental collaboration. If tensions
over the outcome of the referendum cause the
government to fall, however, the ensuing negotia-
tions on the formation of another center-left coa-
lition may be difficult and protracte.
Although national elections are still almost
six weeks away, statements by the contending
political parties make it clear that Iceland's deteri-
orating economic situation, the controversy over
the Keflavik base, and the fishing limits question
will be the principal issues in the campaign. A
combination of public discontent with the gov-
ernment's handling of the economy and a recent
successful signature campaign in support of the
base appear to have improved the electoral pros-
pects of pro-Western groups, such as the opposi-
tion Independence Party and the Social Democrats.
Prime Minister Johannesson decided to dis-
solve parliament on May 9, after the Liberal Left
Organization withdrew from the center-left coali-
tion because of differences over the government's
anti-inflation program. Freeing wages from ties to
the cost-of-living index and banning wage in-
creases in excess of 20 percent were the two most
controversial proposals in the program. Johannes-
son will continue to head the government on an
interim basis until after the elections on June 30.
Iceland's grave economic situation will re-
quire immediate attention when the new govern-
ment takes office. Johannesson has stated that
until that time he will decree provisional measures
to avert an economic catastrophe. The cost of
imports, especially oil, increased by about one
third in the second half of 1973. The import price
rise has been especially damaging because wages
are linked to the cost-of-living index. Huge wage
increases and a decline in earnings in the vital
fishing industry have also contributed to the
gloomy outlook. The inflation rate may approach
60 percent this year if the wage-price linkage
remains.
The new government must also renegotiate a
defense agreement under which the US has main-
tained forces at the Keflavik air base. Last March,
the Johannesson government tabled proposals
calling for the complete withdrawal of US troops
from Keflavik by 1976. Although a more mod-
erate coalition would probably demand some
modifications of the present arrangement, it
would likely be more flexible than the outgoing
coalition. The new government's attitude toward
the base may be influenced by the outcome of a
pro-base signature campaign in February, indi-
cating that a majority of Icelanders support the
base.
Although the conservative Independence
Party will probably remain the strongest single
party, the outcome of the election is clouded by
internal disputes within the major parties. All
three members of the outgoing coalition-the Pro-
gressive Party, the Liberal Left Organization, and
the Communists-are split internally over the base
issue. The Communists, all but a few of whom are
vocal opponents of the base, may pick up some
support from dissident members of the Progres-
sive Party and the Liberal Left Organization.
If the opposition coalition forms a gov-
ernment after the elections, the chairman of the
Independence Party, Gier Hallgrim,son, would
probably become the new prime minister and
Social Democratic chairman Gylfi Gislason would
take over as foreign minister. In the meantime,
Johannesson, anticipating a government 'ad by
the Independence Party, is trying to steer his
Progressive Party away from the Communists and
along more moderate lines so it will not be frozen
out of the new government.
Page 13 WEEKLY REVIEW
May 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875R001000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
ECONOMIC OUTLOOK FOR 1974
The economic situation of the developed
countries in the first half of 1974 will turn out
somewhat better than forecasters anticipated in
January. Even so, depressed real growth, soaring
inflation, and mounting current account deficits
will dominate the economic outlook for Canada,
Japan, and Western Europe.
The revised projections indicate that real
gross national product in the UK, and possibly in
Japan, is declining in the first half of this year but
is increasing moderately in Canada, France, West
Germany, and Italy. Inflation rates generally ex-
ceed 10 percent, and, except for West Germany
and Canada, the current accounts are in sub-
stantial deficit.
Most forecasts point to a recovery in the
second half of the year, on the assumption that
restrictive economic policies will be relaxed or
stimulative policies introduced in a number of
countries. It is also ant'cipated that investment
will be encouraged by shortages of capacity and
the introduction of energy-conserving processes.
For the year as a whole, real growth of gross
national product in the developed countries will
probably fall to half the rate of 1973. Japan's
growth will be negligible in the first half. In-
creased investment spending and business pressure
for relief from restrictive policies should increase
real growth to nearly 6 percent in the second half.
The UK's gross national product will probably
plummet by 8 percent in the first half bec=.use of
the coal strike, weak consumer demand, and de-
flationary budget and credit policies. 1 -he rsump-
tion of a normal work week and renewed con-
sumer confidence should result in a spurt of 8-9
percent in the second half.
With the threat of recession diminishing,
however, many governments are hesitant to stim-
ulate demand for fear of worsening inflation:
? Tokyo is expected to maintain its re-
strictive monetary and fiscal policies at least
until July; if recovery is then evident, policies
could remain tight until the fall.
? London has adopted a tighter fiscal pol-
icy in view of the prospects of a second half
recovery; the new budget increases taxes by
$1.6 billion.
? Paris has strengthened price controls,
speeded up tax collections, and kept credit
tight.
Thus, better than expected performance in the
first half of the year could, paradoxically, have
the effect of moderating the ro'ecte l second
half recovery.
Page 15 WEEKLY REVIEW
May 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
25X1
West European labor will take a major step
toward organizational unity when European
members of the World Confederation of Labor-
the former Christian international-join the Euro-
pean Trade Union Confederation (ETUC) at its
first Congress in Copenhagen on May 23-25. The
El UC's most sensitive current issue-membership
Page 16 WEEKLY REVIEW
May 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875R001000060005-6
for the Italian Communist-dominated labor con-
federation-will not be on the agenda, but is sure
to be debated vigorously in informal exchanges.
The admission of the World Confederation
affiliates was foreseen when the Europeans of the
Socialist-oriented International Confederation of
Free Trade Unions founded the ETUC in Feb-
ruary 1973. The new European group will now
represent almost all trade unionists in Western
Europe-33 million workers in 16 countries-
except -i.hose in Ccmmunist-dominated union
organizations in Italy and France. To most West
European workers, a unified labor movement ap-
pears to be the way of the future.
The delegates to the Congress will elect a
new president to succeed Vic Feather, former
head of the giant British Trades Union Congress.
Contrary to earlier speculation, it now appears
that West German Heinz Oskar Vetter, chief of
the ETUC's other giant federation, does not want
the job. The leading candidates are Belgian Social-
ist Georges Debunne and Danish trade union
leader Thomas Nielsen. Another Dane, Peer
Carlsen, is scheduled to be elected deputy genera!
secretary, with Belgian Socialist Theo Rasschaert
remaining as general secretary, despite the general
lack of enthusiasm for his past performance.
The ETUC Congress will also adopt an ac-
tion program, giving priority attention to employ-
ment, price stability, more equal income distribu-
tion, formulation of a common energy policy for
Western Europe, a greater voice for labor in indus-
trial management, and aid to developing coun-
tries. The threat of inflation and the power of
multinational corporations will also be prominent
topics. Help for the fledgling Portuguese labor
movement may be discussed as well; thus far, the
ETUC has left the initiative to individual mem-
bers and to the international organizations.
It now appears that the Italian Communist-
led federation will be admitted within the next
several months, possibly as early as July. The
Italians seem to have given sufficient proof that
they are acting sincerely and independently of
Soviet direc-don in participating in labor initia-
tives at the EC level and in Italy. Their principal
champions have been the Italian Christian Demo-
cratic and Socialist unions, with which they hope
to form a united Italian labor front. The British
and Debunne's Belgian Socialists have also been
strong supporters of the Italian Communists,
arguing that all West European labor federations
should eventually join the ETUC. West German
opposition seems to be waning, albeit reluctantly.
There is no impetus for early membership of the
more hard-line pro-Soviet French Communist-
dominated labor federation, although this issue
may also be discussed informally in Copenhagen,
and eventual membership is considered inevitable
by most ETUC members.
Future encounters with !abor organizations
in Eastern Europe are still a subject of c..ncern,
but plans are being made for a meeting next
January similar to the one held at the Inter-
national Labor Organization n Geneva last Jan-
uary. Most ETUC members remain opposed to
Soviet suggestions that pan-European labor co-
operation should be formalized. The British have
tended to support the Soviet view, much to the
chagrin of the other members.
The British role in the ETUC continues to be
ambivalent. The smaller federations fear that the
British and the West Germans might cooperate to
dominate ETUC affairs. This does not appear
likely, however, in view of the differing views of
the two organizations toward the role of the
ETUC. The West Germans favor a strong organiza-
tion, while the British, suspicious of strong West
European institutions in general, prefer a more
loosely organized confederation. The British, for
example, have boycotted all ~:C activities. Never-
theless, the British federation sought and won
election for its chief as the first ETUC president
15 months ago, and it plays a prominent role in
the ETUC executive committee. A continued
"Gaullist" approach on the part of British labor
would doubtlessly dampen ETUC effectiveness.
Page 17 WEEKLY REVIEW
May 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875R001000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875R001000060005-6
I I
Romanian party chief Ceausescu's talks in
Bulgaria on May 11-12 with Todor Zhivkov, his
Bulgarian counterpart, have sparked speculation
about their purpose, mainly because they came
shortly after Zhivkov's whirlwind visit to Moscow
on May 8. The talks were cloaked in unusual
secrecy, but fragmentary information suggests
that the two leaders focused on questions con-
cerning the international communist movement
rather than on economic issues as initially rumored.
The entourages of both leaders consisted al-
most exclusively of party officials responsible for
inter-party and foreign rei4tions. This and the size
of the Bulgarian delegation suggests that the
Soviets may have asked Zhivkov to try to over-
come Romanian resistance to the Soviet-inspired
call for a world conference of communist parties.
The Bulgarians at least probably tried to mod-
erate Ceausescu's strong resistant? to attending a
pan-European conference of communist and
workers' parties, a necessary prelude to a world
conclave.
Zhivkov played a similar role in 1966 when
the Soviets, in preparation for the international
communist conference in Moscow in 1969, called
on him to try to induce the Romanians to attend
a preparatory all-European conference held at
Karlovy Vary, Czechoslovakia, early in 1967.
Zhivkov failed, and the Romanians, along with
the Yugoslavs, boycotted the Karlovy Vary meeting.
Available portions of the apparently bland
communique summarizing last week's talks hint
at disagreements, thereby suggesting another Bul-
garian failure. The independent-minded Ro-
manian leader is :,pparently determined to con-
tinue opposing Moscow's format for multilateral
communist meetings.
Miliiary activity on the Syrian front in-
creased this week after a quiet weekend. Israeli
fighter-bombers flew strikes against fedayeen
positions inside Lebanon and on the slopes of
Mount Hermon. They also struck once at Syrian
positions south of the Israeli-held salient. Air ac-
tivity over Lebai,in was particularly heavy on
Thursday morning when Israeli planes struck
several Palestinian refugee camps in retaliation for
the terrorist incident at Maalot. Artillery, tank,
and mortar exchanges occurred along the front
throug;iout the week, but were noticeably lighter
than in previous days.
The US Embassy in Beirut has learned that
Lebanon has persuaded Syria to remove its sur-
face-to-air missile batteries from Lebanese terri-
tory near Mount Hermon. A reliable source of the
embassy reports that some batteries were with-
drawn on May 7. The source speculated that Syria
had agreed to remove the missiles because it
expects a disengagement agreement to be reached,
and because they provided only minimal protec-
tion against Israeli aircraft flying over Lebanon
toward targets in Syria. The source said Israeli air
strikes against these batteries may have been
another factor in their withdrawal. 25X1
Officials of the Israeli Air Force told the US
defense attache in Tel Aviv on May 9 that the
surface-to-air missile units that were located in
Lebanon had returned to Syria.
Page 18 WEEKLY REVIEW
May 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875R001000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
25X6
25X1
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
SOVIET ECONOMIC AID TO EGYPT
Soviet economic programs in Egypt are con-
tinuing, despite the suspension of military ship-
ments. It is now more than five weeks si;ice the
USSR's last arms delivery to Egypt by sea. On the
economic side, however, the Soviets seem to be
honoring existing commitments. Some 1,500 So-
viet technicians remain at work in Egypt. Never-
theless, both sides remain cautious in assuming
new undertakings.
Moscow's position as Egypt's principal eco-
nomic aid donor ended with the 1967 war, when
other Arab states agreed to underwrite the Egyp-
tian economy with $250 million annually in
grants. Since the October war, even more aid has
been forthcoming from a variety of donors. In
contrast, Moscow has not granted any new eco-
nomic aid to Egypt since early 1971, when some
$195 million in credits was extended. Egypt has
used about 70 percent of the nearly $1.2 billion
in credits extended by the USSR since 1957.
The Soviets were initially anxious to play a
significant role in clearing the Suez Canal and
rehabilitating war-damaged industries in the canal
area. Moscow, however, was stung w;ien Egypt
decided to turn to the US and the UK for aid in
canal clearance. It now appears that the USSR
will play only a minor role, and any view aid that
may be extended will be small.
Underwater mine clearance
US training Egyptians
In April, an Egyptian ccoromic delegation
went to M),cow to discuss the expansion of the
Hulwan iron and sieel complex and the Naja
Hamadi aluminum plant, major ongoing Soviet
aid projects. The Soviets will apparently prepare
feasibility studies. Expansion of the plants will
require additional financing of as much as $250
million; new Soviet aid will depend not only on
the results of the studies but on the political
relationship then prevailing between Cairo and
Moscow.
The first stage expansion of the Hulwan iron
and steel complex, completed late last year, in-
creased Egypt's annual steel capacity from
300,000 tons to nearly 1 million tons. Hulwan's
present capacity can satisfy more than half of
Egypt's current domestic requirements and, if
completed, the second stage expansion would
make Egypt nearly self-sufficient in steel.
The Naja Hamadi aluminum plant will begin
trial operations later this year. By next year, the
plant will have a capacity to produce 100,000
tons of aluminum, three fourths of which will be
exported, mostly to the USSR. Proposed plans
call for the plant's capacity eventually to reach
165,000 tons annually.
Moscow and Cairo are also negotiating a
contract to enlarge the capacity of the Soviet-
built Alexandria shipyard, completed in 1968.
Terms must still be ironed out because of Cairo's
objection to the prices of some items. Egypt is
building some 35 small tankers and cargo ships
for the USSR in repayment for aid i -)r the ship-
yard. Soviet engineers and technical personnel are
directing repair work at the facility on Soviet
merchant marine and naval ships.
Moscow also remains involved in Egypt's
fishing industry, as well as in irrigation, rural
electrification, and other projects. The USSR is to
complete studies this year on improvements to
the Nile River, including plans for construction of
Page 20 WEEKLY REVIEW
May 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
 Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6
ETHIOPIA: CONSER !ATIVES WIN A ROUND
New appointments and shifts of key military
and civilian personnel announced on May 14
represent a victory for conservatives over the mili-
tary moderates, their rivals for power and in-
fluence.
On the whole, the appointments on May 14
appear more an attempt by the conservatives to
regain a measure of political control than an ef-
foi t t j reverse the changes set in motion by the
military revolt in February. Nonetheless, the mili-
tary moderates, 'ready angry over the nobility's
intrigues, will ; yard the appointments as a direct
challenge to their plans for ensuring social and
political change in Ethiopia.
Politically the most significant new appoint-
ments in the armed forces were chief of staff,
commander of the army, and commander of the
Third Infantry Division, which is stationed along
the border with Somalia. All three officers are
believed to be important members of the con-
servative faction. Their appointment will further
strengthen control over the military chain of corn-
mand by General Abiye Abebe, the conservative
minister of defense. Abiye and his close associ-
ates, Prime Minister Endalkatchew and Ras Asrate
Kassa, the president of the Crown Council, have
emerged as the real pillars of the present govern-
ment.
In the past, both Asrate Kassa, an important
nobleman and one of Haile Selassie's closest
advisers, and Abiye have urged reforms on a reluc-
tant Emperor and the more reactionary members
of the aristocracy. As time passed without mean-
ingful reform, their "progressive" reputations be-
came tarnished, and the younger moderates now
consider them part of the discredited conservative
hierarchy. The moderates distrust Asrate Kassa in
particular as they consider him the chief agent of
those conservatives maneuvering behind the
scenes, playing on personal loyalties and tribal
connections, and dispensing money in an effort to
weaken and divide moderate forces.
In addition to changes in the army, the gov-
ernment also announced the appointment of
several new provincial governors general who are
both more capable and more aware of the need
for change than their predecessors but who still
owe their loyalty mainly to the conservative fac-
tion. Several new deputy governor generals were
also appointed from among qualified and
respected provincial officials.
Meanwhile, the resignation last week of
Minassie Haile as foreign minister points to
divisions within the Endalkatchew cabinet that
may lead to further cabinet changes. Several of
the more progressive ministers reportedly are
threatening to quit over policy difference, with
Endalkatchew. Others believe Endalkatchew relies
:oo heavily on advice from Abiye in making
decisions, to the exclusion of the rest of the
cabinet. This issue probably played a part in the
resignation of Minassie.
Minassie, one of the few holdovers from the
previous government, had long been at odds with
the Prime Minister and other cabinet colleagues
who considered him indecisive and lacking in
initiative. His resignation will probably have little
effect on Ethiop;a's foreign relations.
CYPRUS: GROWING TENSIONS
Tensions have increased in Cyprus since the
adjournment on April 2 of the intercommunal
talks that have been going on for six years
between the Greek and Turkish Cypriots. On the
Greek Cypriot side, there have been renewed
clashes between supporters of President Makarios
and the followers of the late General George
Grivas, who advocate the union of Cyprus and
Greece (enosis). These pro-enosis forces enjoy the
support of elements of the Greek-officered
Page 21 WEEKLY REVIEW May 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875RO01000060005-6_js
 riots. They view it as the first step toward parti-
tion of the island. The Greek Cypriots charge that
the Turkish Cypriot side is attempting to modify
the terms of reference for the talks. According to
the Greek Cypriots, the terms of reference, pro-
vided for a "unitary, independent, and sovereign"
Cypriot state.
The Turkish Cypriots claim that neither side
agreed to such terms of reference. They have
played down the Ecevit statement, however, in-
terprc 'Ling it to mean a functional type of feder-
alism rather than geographic separation of the
two communities.
Osorio Tafall, the UN special representative
in Cyprus, is attempting to get the talks resumed
on the basis of a mutually agreed formula. The
Makarios government rejected his first proposal as
too vague, and he is now making a second effort.
Although Makarios probably will permit the talks
to resume eventually, he appears to be in no
hurry. He hopes to extract concessions from the
Turkish Cypriots, who are more anxious to re-
open the talks. Their anxiety has been aroused by
the growth of anti-Turkish sentiment within the
Greek Cypriot community. This has been fueled
by the Ecevit statement and by the Greece-
Turkey dispute over Aegean oil exploration
rights, both of which are being exploited by the
pro-enosis Greek officers of the national guard.
Turkish Cypriots became especially alarmed after
an incident on May 9 in a mixed village when
national guardsmen harassed Turkish Cypriot
residents.
By stalling, Makarios is also protecting him-
self from accusation by national guard officers
and other pro-enosis elements that he is too ac-
commodating with the Turkish Cypriots. Because
tension between the two communities on the
island is usually reflected in relations between
their mainland sponsors, Makarios' abstention
from the talks could stir up trouble between
Athens and Ankara. This would distract the
Greek rulers and strengthen Makarios' hand
against their possible machinations, but it would
also further inflame intercommunal tensions on
Page 22 WEEKLY REVIEW
May 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875R001000060005-6
Approved For Release 2009/04/28: CIA-RDP85T00875R001000060005-6
National Guard on the island. Relations between
the Turkish Cypriot and Greek Cypriot com-
munities have also worsened.
Following General Grivas' death last Janu-
ary, members of EOKA-B, his pro-enosis terrorist
organization, became embroiled in a struggle over
who would succeed him and what strategy to
pursue. On April 22, a hard-line faction severely
beat and injured a group of Makarios sup-
porters-the first instance of EOKA-B violence
since the death of Grivas. Reacting strongly,
Makarios formally outlawed EOKA-B, set a dead-
line of April 27 for the general amnesty extended
to all wanted men in January, and announced his
determination to wipe out those remnants of
EOKA-B who rem,'-ied in hiding. Only a few
turned themselves in before the deadline, thereby
setting the stage for more clashes.
Makarios has also been angered by a series of
arms thefts from national guard stores and by
anti-government incidents involving pro-enosis
elements of the national guard whom he suspects
are in collusion with EOKA-B. The latest incident
involved the theft of light weapons on May 7
from a national guard armory and their probable
transfer to EOKA-C. The theft will probably lead
Makarios to try again to restrict the activities of
the national guard and ultimately replace it with a
full-fledged Greek Cypriot army formed around
his personal military force. Makarios' determina-
tion to break the back of the remnants of EOKA-
B and his attempt to curb the national guard may
well prompt a dispute with the Athens govern-
ment, which views these two elements as indis-
pensable tools for maintaining its influence in
Cyprus.
The intercommunal talks were suspended by
the Greek Cypriots when the Turkish Cypriot
negotiator refused to disavow Turkish Prime Min-
ister Ecevit's statement in late March calling for a
"federal" system of government for Cyprus.
Any system that would preclude majority
Greek Cypriot rule is anathema to Greuk Cyp-
 Approved For Release 2009/04/28: CIA-RDP85T00875R001000060005-6
Amid rumors of a possible coup against
Chief of State Lopez, students last week plunged
the capital city into two days of violence that
nearly brought the army into the streets to con-
trol them. Had the army done so, it might have
gone on to take direct control of the government.
The demonstrations began as a protest
against Guatemala for its harsh treatment of
workers during May Day observances. The
demonstrations degenerated into riots when one
student was killed, allegedly by a policeman.
The rioting continued into the night of May
8 and resumed the next day. Property damage
amcunted to about $200,000, and 43 persons
were injured, some seriously. Police detained 240
persons and are still holding 200 of them.
At the height of the disturbances, police
began running low on tear gas, and students ap-
peared to be gaining the upper hand. The army
was placed on alert, and a number of unit com-
manders wanted to assist the police. General
Lopez, who is also chief of the armed forces,
would not give the order, however. Had the riot-
ing resumed on May 10, the army would probably
have intervened, with or without Lopez' permission.
Lopez' fa;!ure to reinforce the poiice is
another example of his indecisiveness, a quality
that is persuading many military officers and
prominent civilians that he should be replaced.
Lopez has exercised practically no leadership, and
in times of crisis he appears incapable of making
decisions. Consequently, Honduras, already the
least deve'ope 1 country in Central A-,ierica, is
falling farther behind its neighbors.
Rumors about a coup have been circulating
since last fall, but have gained intensity in recent
weeks. Latest indications are that Lopez himself
has been persuaded that his resignation during or
shortly after some disorder would be a face-saving
way to retire.
Even though events move slowly in Hon-
duras, some change seems in the offing. Lopez,
May 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875R001000060005-6
who in the past has been largely responsible for
the slo1V marsh, may no longer be the key person
in the action. More dynamic leaders within the
military argue that the military must exercise
firmer control-and soon.
25X1
BRAZIL: PRESS CENSORSHIP INCREASED
Despite earlier hints that President Geisel
was contemplating some degree of liberalization,
the administration has instituted new, tougher
controls on some press organs.
The government has ordered the publishers
of Veja, a weekly news magazine, to submit all
textual material to Brasilia prior to publication.
Veja had written on topics the government
deemed overly controversial-such as the expira-
tion of certain political restrictions on a number
cf once prominent public figures. The effects of
the new censorship order could so hamper the
magazine's produ. Lion schedule as to put it out of
business.
Censorship has been ren wed at Opiniao, a 25X1
leftist weekly that had recently enjoyed relative
freedom. In addit':on, full-scale censorship con-
tinues at 0 Estado de Sao Paulo, the nation's
most prestigious newspaper, despite a report that
official scrutiny was to be lessened.
Cardinal Arrs of Sao Paulo, commenting on
the new censorship order, noted that he has "Ios+
all hope that the administration would end abuses
in the areas of civil and human rights." The Cardi-
nal, long a critic of the military regimes that have
controlled Brazil for the past ten years, added
that arbitrary arrests and torture are continuing.
The new censorship order comes at a time
when unrest-primarily among students and
workers -is growing, and it may be intended as a
wary ing to all critics of the government. The
PreFident may also be responding to pressure
from conservative members of the military hierar-
ch who oppose any liberalization.
 Approved For Release 2009/04/28: CIA-RDP85T00875R001000060005-6
PERU: MORE ARMS
The Soviet merchant ship that arrived at
Lima's port of Callao on May 9 unloaded tank-
related equipment and probably the second in-
stallment of medium tanks under a contract that
may call for a total delivery of up to 200.
Although this shipment is not likely to have
any immediate effect on relations with Chile, the
presence in Peru of additional tanks will almost
certainly reinforce Chile's determination to
acquire more arms to counter what it sees as an
alarming Peruvian buildup.
Peruvian President Velasco has become in-
creasingly sensitive to charges that his country is
unduly building up its armed forces and thereby
raising tensions among its neighbors. Lima Jso is
concerned atout charges by its neighbors that by
purchas.',ig Soviet weapons Peru is or will become
a base for Soviet and Cuban penetration in Latin
America. Last December, news stories reporting
the tank purchase forced Velasco to admit
publicly that Peru had accepted delivery of Soviet
armaments. Apparently in order to lessen the
impact of his disclosure, Lima quickly proposed
arms limitation talks with its neighbors. It will be
harder this time to divert attention from the new
influx of equipment should the story be made
public.
Another item that is causing sensitivity is
Velasco's recent announcement that the armored
school will be moved from Lima to southern
Peru; some armor may already have been trans-
ferred. If more Soviet tanks in fact arrived last
week, at least some are likely to be stationed in
the south to guard a ainst the ossibility of
hostilities with Chile.
25X1
Lima and Santiago are likely to continue
their current arms procurement drives, irre-
spective of how each views the chances for aggres-
sive moves by the other. Both sides, however, will
probably continue publicly to play down hints of
tension and to stress that any military purchases
are consistent with long-standing plans to re lace
worn-out materiel and obsolete equipment
Page 24 WEEKLY REVIEW
May 17, 74
Approved For Release 2009/04/28: CIA-RDP85T00875R001000060005-6