THE PRESIDENT'S DAILY BRIEF 26 SEPTEMBER 1974

• Document Type: FOIA
• Collection: President's Daily Brief 1969-1977
• Document Number (FOIA) /ESDN (CREST): 0006007826
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 15
• Document Creation Date: August 14, 2016
• Document Release Date: August 24, 2016
• Publication Date: September 26, 1974

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The President's Daily Brief
September 26, 1974
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Exempt from general
declassification sehedule of E.O. 11652
exemption category 5B(1),(2),(3)
deolassiEed only on approval of
the Director of Central Intelligence
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USSR:
September 26, 1974
Table of Contents
(Page 1)
Lebanon: The Prime Minister has stepped down and it
may take several weeks to organize a new govern-
ment. (Page 4)
West Germany: A package deal with East Germany show-
ing further progress toward regularizing rela-
tions is in the offing. (Page 5)
CEMA-EC: The Soviets have invited EC Commission Pres-
ident Ortoli to Moscow. (Page 6)
Australia - New Zealand: Both countries have devalued
their currencies in the face of foreign exchange
deficits. (Page 7)
Notes: Egypt; Ethiopia; Zaire-Portugal-Angola; Brazil
(Page 8)
At Annex we discuss the situation in Chile as the
military junta moves into its second year.
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USSR
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LEBANON
Prime Minister Sun stepped down yes-
terday after 14 months in office when sev-
eral cabinet ministers critical of the
government's handling of internal security
and economic problems threatened to with-
draw.
President Franjiyah could ask Sulh to add some
new faces and simply reorganize the cabinet, but the
President appears more likely to designate another
political leader to assemble anew group. In either
case it could take several weeks to come up with a
slate acceptable to the powerful confessional and
political blocs represented in parliament. Franjiyah,
a Christian, will follow Lebanese convention and
appoint a Sunni Muslim prime minister.
The President may believe that Lebanon's prob-
lems demand a more assertive leader than the lack-
luster Sulh, but any candidate would hold to the same
basically moderate policies espoused by Sulh. A group
of powerful members of parliament agreed on Tuesday to
a program calling for the appointment of a "strong"
prime minister capable of instituting widespread re-
forms. They also want a clear-cut defense policy.
Palestinian leaders have played no direct role
in the present situation. Regular violations of
security restrictions by fedayeen forces, however,
have led to periodic Israeli violations of Lebanese
territory, demonstrated the government's inability
to protect residents of southern Lebanon, and stim-
ulated criticism of the central government by resi-
dents of the south.
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WEST GERMANY
Chancellor Schmidt hopes to announce
soon a package deal with East Germany that
would show further progress toward regu-
larizing relations. Schmidt probably hopes
that the deal can be announced in time to
assist the coalition parties in two impor-
tant state elections late next month. The
East Germans' apparent readiness to make
some concessions shows that they are not
averse to helping Schmidt in this way.
There have been several well-publicized meetings
this month between East and West German officials,
but the package deal has been negotiated in secret.
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CEMA -EC
The Soviets have invited EC Commis-
sion President Ortoli to Moscow in a new
move toward establishing relations between
the EC and the Soviet-dominated Council
for Mutual Economic Assistance. CEMA
Executive Secretary Fade yev said his or-
ganization is interested in scientific,
technical, and economic cooperation with
the EC.
The invitation follows a number of informal
?soundings on official contacts between the EC and
the East European group during the past two and one-
half years. Brezhnev first acknowledged the "real-
ity" of the EC in March 1972.
It is likely the Soviets want the EC to recog-
nize CEMA as a supranational entity. This would en-
hance the status of CEMA and give Moscow firmer con-
trol over the economies of its East European allies,
particularly in the sensitive area of their rela-
tions with the West.
The EC is reluctant to concede that CEMA is in
any real sense an analogous organization or that the
CEMA Secretariat has any of the independent authority
possessed by the EC Commission, The Commission has
an interest in gaining jurisdiction over the economic
dealings of EC countries with the CEMA countries,
but it would prefer to deal with individual CEMA
countries. The Commission, nevertheless, eventually
may have to agree to some kind of intermediary role
for CEMA.
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AUSTRALIA - NEW ZEALAND
Canberra and Wellington have devalued
their currencies in the face of foreign ex-
change deficits.
Australia's 12-percent devaluation is aimed at
holding down imports and avoiding further increases
in unemployment. In the fiscal year ending in June,
the country's balance of payments shifted from a
massive surplus to a $1-billion deficit, the first
in 7 years and the largest in 22 years.
The reversal occurred in part because of the
rapid growth of imports; this in turn resulted from
higher commodity prices as well as from a deliberate
policy of liberalizing imports. Because of labor
complaints about rising unemployment, Canberra al-
ready is considering placing quantitative restric-
tions on auto imports and increasing controls over
textile purchases.
Australia's international financial position
remains relatively strong, however. The trade defi-
cit is still fairly moderate. Foreign exchange re-
serves, although 20 percent below last year's peak,
amount to some $5.5 billion. In addition to the
fast growth of imports, the deficit reflects falling
world market prices for some key Australian exports,
especially beef and wool.
New Zealand, which devalued its currency 9 per-
cent, has mor b pressing trade and payments problems.
While its imports are rising rapidly, foreign demand
for its wool, meat, and other primary products is ex-
tremely weak. Official foreign exchange reserves at
the end of August dropped to $675 million, about
half the level of a year ago. To help avoid a seri-
ous financial bind, Wellington is seeking large over-
seas loans, including loans from oil-exporting coun-
tries. Government officials, for example, are nego-
tiating for a $140-million loan from Iran.
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NOTES
Egypt: President Sadat formally relinquished
the post of prime minister to Muhammad Hijazi yes-
terday. Hijazi, formerly the first deputy prime
minister, has been serving as prime minister in all
but name for some months.
Ethiopia: High unemployment and threats by
the military to have strikers fired apparently in-
timidated the workers, and the general strike called
yesterday fizzled. The military still holds the
three labor leaders whose arrest precipitated the
strike call. In another development, the official
government newspaper has attacked Crown Prince Asfa
Wossen, who recently indicated he is considering
the military's invitation for him to return to Ethi-
opia as a figurehead monarch. Such attacks, appear-
ing with the obvious approval of the military, sug-
gest that the military does not favor his return to
Ethiopia, even as a figurehead, and may be prepar-
ing to declare a republic.
Zaire-Portugal-Angola:
Brazil: In his speech at the UN, Foreign
Minister Silveira repeated Brazil's call for Is-
raeli withdrawal from occupied territories, and
for a settlement "attending to the rights" of the
Palestinian people. Silveira thus underscored
Brazilian determination to improve relations with
Arab oil suppliers, but avoided going so far as to
call for establishment of a separate Palestinian
state. Just last week there were hints that he was
planning to take that step as well. Those Brazil-
ian government and military officials who distrust
Silveira and who think his recent overtures to the
Arabs have been too effusive may have been at least
partially responsible for restraining him.
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CHILE
The military junta has moved into its
second year with its reservoir of popular
goodwill basically intact. It remains de-
termined to depoliticize the country's in-
stitutions before returning them to civil-
ian hands. The prospect is for at least
several more years of military government.
Junta President Pinochet appears to have
assumed a mediating role between hard-Zine
conservatives and moderate advocates of a
populist-style government.
There have been some limited moves toward less
austere economic policies and less iron-fisted atti-
tudes. In a speech on September 11 marking the an-
niversary of the military take-over, Pinochet an-
nounced that the government was moving to arrest the
decline in real wages that has brought hardship to
workers.
A new policy calls for automatic quarterly wage
readjustments to keep pace with the cost of living.
This effort to ease the economic squeeze on wage and
salary earners appears to be a victory for moderate
officers who have been urging that political factors
be given more weight in economic policy-making.
There recently has been some progress in the
fight against inflation. The inflation rate in July
and August was somewhat below the monthly average
for the first half of 1974. If this lower rate is
maintained, inflation for the year will total about
350 percent, compared with the 710 percent registered
in 1973.
The overall economic outlook, however, is clouded
by falling world copper prices. Production will in-
crease next year, but if prices remain low export
earnings will drop. Meanwhile, storm damage and de-
layed plantings this June will mean a continued need
for a million tons of imported wheat, and the price
of imported fuel is likely to remain high.
Human Rights
Pinochet's anniversary speech brought a major
announcement on human rights. He declared that the
government was ready to release many political pris-
oners and challenged Cuba and the Soviet Union to do
likewise. Not expecting a response from those coun-
tries, Chile already is moving to free some prisoners.
Al
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Appreciation of the negative impact the govern-
ment's repressive image has had, especially on its
ability to purchase arms from traditional suppliers,
has been a key factor in prompting the junta to take
steps to curb abuses of human rights.
Some Chileans remain implacably opposed to the
military government. The major leftist groups, which
suffered most from the downfall of Allende, are try-
ing to reorganize, but divisions similar to those
that impeded united leftist action during the Allende
years complicate an already difficult underground ex-
istence.
Most leftists inside Chile believe that armed
violence would be counterproductive, but extremists
do not accept this view and weapons remain available.
Any plans for action probably have been set back,
however, by government successes in its continuing
campaign against potential terrorists.
The second year of military rule could bring
further movement toward a more humanistic military
rule. The trend in this direction is at best waver-
ing, however, and it could be turned around by a
variety of possible events:
--economic reverses and an erosion in popular
support;
--leftist violence;
--death or incapacity of Pinochet and succession
(under the statute of the junta) of Admiral
Merino, ora struggle over the junta presidency;
--a confrontation with Peru.
Foreign Affairs
Peru's military buildup and desire to recover
territory it lost to Chile in the War of the Pacific
(1879-1883) remain the junta's number one foreign
policy problem. There is much suspicion between the
two countries, despite their public protestations
that relations have never been better. Chile's main
concern is its inability to match Peru's recent arms
acquisitions--especially Soviet tanks--with modern
arms of its own.
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The junta realizes it can ill afford a serious
deterioration in relations with the US, and two of
the three copper expropriation cases left over from
the Allende years already have been amicably settled,
while direct negotiations are in progress on the
third. Nevertheless, Chile's effort to avoid inter-
national isolation may lead it in some instances to
side with the nonaligned nations against the "super-
powers," especially on economic issues.
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