THE PRESIDENT'S DAILY BRIEF 21 DECEMBER 1974

• Document Type: FOIA
• Collection: President's Daily Brief 1969-1977
• Document Number (FOIA) /ESDN (CREST): 0006007899
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 11
• Document Creation Date: August 14, 2016
• Document Release Date: August 24, 2016
• Publication Date: December 21, 1974

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The President's Daily Brief
December 21, 1974
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Exempt from general
declassification schedule of E.O. 11652
exemption category 5B( I WM 3 )
declassified only on approval of
the Director of Central Intelligence
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FOR THE PRESIDENT ONLY
December 21, 1974
Table of Contents
Iran: The ?Shah has warned Western governments that
any increase in the official price of gold will
bring a sharp increase in oil prices. (Page 1)
France - Middle East: Prime Minister Chirac arrives
in Iran today in the latest of a series of high-
level French visits to the oil exporters.
(Page 2)
West Germany: Chancellor,Schmidt's modest anti-re-
cessionary program is designed to assure 2 per-
cent real growth next year. (Page 4)
Cyprus: Turkish and Greek Cypriot negotiators have
agreed to proceed with talks on a federal gov-
ernment, beginning January 6. (Page 5)
Notes: Egypt; Libya; Burma; Latin America; Ethiopia
(Pages 6 and 7)
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I RAN
The Shah warned Western governments
Thursday that any increase in the price
of gold would result in a sharp increase
in oil prices. The Shah's comments re-
flect the widespread concern of high-
level officials in oil-exporting coun-
tries about inflation in the West.
The Shah apparently is apprehensive that the
Martinique decision to allow countries to value
official gold holdings at free-market prices would
cause the value of the world's currencies, espe-
cially the dollar, to decline. He believes such
a decline would erode the purchasing power of Iran's
earnings from oil, particularly because the price
of oil is generally expressed in terms of dollars,
and would threaten his ambitious industrialization,
development, and armament programs.
The Shah's concern over the relationship be-
tween the purchasing power of oil earnings and the
price of gold is unwarranted. The purchasing power
of Iran's earnings is determined by the relation-
ship of the dollar to other currencies and the price
of the goods and services Iran imports, not by the
price of gold.
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FRANCE - MIDDLE EAST
Prime Minister Jacques Chirac ar-
rives in Iran today in the latest of a
series of French high-level visits to
the oil-exporting countries.
The French diplomatic and economic offensive
in the Middle East is aimed primarily at securing
contracts and loans to offset the substantial
balance-of-payments deficit Paris expects to incur
this year. France also hopes to reinforce the
image it has carefully nurtured of being the Arabs'
champion in Western Europe and to win support for
the tripartite energy conference proposed by Presi-
dent Giscard and now backed by the EC and the US.
So far, Paris has reason to be pleased with the
results of its bilateral diplomacy.
In Tehran, Chirac is expected to put the fin-
ishing touches on a major industrial cooperation
program initiated last June. It will include up
to five nuclear power stations, a nuclear research
and experimental center, and, possibly, advanced
fast-breeder technology plants and nuclear-pro-
pelled submarines for the Iranian navy. Iran will
deposit $1 billion as an advance payment for de-
velopment projects amounting to $5 billion over
the next ten years. Tehran has already given its
backing to the tripartite energy conference.
Earlier this month, the French Prime Minister
was in Iraq, a visit that was treated by the Iraqis
as one of the major political events of the year.
Chirac received Iraqi endorsement of Giscard's
tripartite conference and substantial economic
sales agreements.
In addition to Chirac's travels, Interior
Minister Michel Poniatowski visited Algeria in
early December to prepare the way for Giscard's
planned visit next March. Algeria did not oppose
the tripartite conference in principle, but
stressed its desire to include other raw materials
on the agenda. Poniatowski conceded that France
might be willing to consider this.
(continued)
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French Secretary of State for Foreign Commerce
Norbert Segard in mid-December led a trade mission
to Qatar, where France was offered a $150-million
loan. The loan--which may be the largest single
Qatari loan ever granted--was offered, at least in
part, as a reward to France for its pro-Arab policy.
Foreign Minister ,Jean Sauvagnargues began a
five-day visit to Cairo on December 19. He is ex-
pected to brief the Egyptians on the recent EC sum-
mit and energy problems. The Arab-EC dialogue--
currently bogged down over the question of PLO rep-
resentation--also will be discussed.
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WEST GERMANY
Chancellor Schmidt's modest anti-
recessionary program is designed to as-
sure 2 percent real growth next year
while keeping inflation at 6 percent or
less.
The main features of the program include:
--A 7.5-percent tax rebate on investments in-
itiated from December 1 through June 30, 1975.
--Rescheduling of a large share of government
investment planned for 1975 into the first
half of the year.
--New public works spending totaling $450 mil-
lion financed by countercyclical funds built
up during earlier booms.
--Subsidy payments totaling $240 million to
increase employment.
--Allocation of $1.4 billion in countercycli-
cal funds to finance budget deficits at the
federal and local level, a measure aimed at
reducing inflation, rather than stimulating
the economy, as the funds were originally in-
tended.
These measures will add at most $1 billion to
the spending stream next year. In addition, along-
scheduled tax reform will boost consumers' dispos-
able income by $6 billion.
The key element of the antirecession program
is the tax rebate, which is designed to revive pri-
vate investment. Schmidt hopes that limiting the
rebate period to seven months will encourage busi-
nessmen to invest now.
Schmidt's concern over rising unemployment and
the economic downturn at home and abroad prompted
him to take these steps. German.unemployment is
expected to exceed one million this winter. The
Chancellor hopes his program will speed the recovery
as well as minimize the economic decline. If suc-
cessful, this would enhance the election chances of
his party in a series of state elections next year.
The program will do little to reduce the large
trade surpluses West Germany is running with the
other EC members.
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CYPRUS
Negotiators for the Greek and Turk-
ish Cypriot communities yesterday agreed
on all but one of the points that have
stood in the way of political negotia-
tions on the Cyprus problem. According
to a source of the US embassy in Nicosia,
the point still in dispute relates to the
question of which governments will guaran-
tee the final settlement.
Turkish Cypriot negotiator Denktash, under
instructions from Ankara, insisted that any agree-
ment on constitutional issues should be endorsed
by a five-party conference consisting of Greece,
Turkey, the UK, and the leaders of the two Cypriot
communities. Greek Cypriot negotiator Clerides
claimed to have no instructions on the matter.
President Makarios has recently indicated a pref-
erence for adding to the number of guarantors,
possibly to include some or all permanent members
of the UN Security Council.
The two negotiators agreed that talks on a
federal government for Cyprus should begin on Jan-
uary 6. The UN representative on Cyprus is optim-
istic that the question of who will guarantee the
settlement can be resolved by then.
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NOTES
Egypt: The Egyptians have been dissatisfied
with their eight Soviet TU-154 civil aircraft--the
only ones held outside the Communist world--since
they were delivered last year, and the Egyptian na-
tional airline has signed a letter of intent to buy
six McDonnell-Douglas DC-9-50s. Three older DC-9s
will be leased until deliveries of the new aircraft
are completed in 1976. Egyptian airline personnel
have complained about high operating costs, tech-
nical problems, and the shortage of spare parts for
the TU-154. At one point, Cairo made an unsuccess-
ful attempt to return them to the Soviet Union.
Libya: An investment council is being organ-
ized to increase Libya's long-term investments
abroad. Libya now accumulates almost all of its
surplus oil earnings as foreign exchange reserves--
now at $3.8 billion--which are placed in short-term
obligations. The new investment council may begin
functioning in March. One of its four directors,
who is head of the rapidly emerging Libyan-Arab
Foreign Bank, is an advocate of long-term invest-
ments abroad.
Burma: Martial law remains in effect, but the
military presence in Rangoon has been reduced and
most normal business activity has resumed. Although
the immediate crisis has passed, tensions are not
far below the surface and renewed disturbances are
possible at any time. The government's decision to
keep in custody several thousand students--some the
children of government officials--and some Buddhist
monks could encourage further discontent. The gov-
ernment has announced that a special session of the
People's Assembly--its rubber-stamp legislature-- '
will be held next month, apparently to deal with
problems resulting from the riots.
(continued)
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Latin America: Several of the most national-
istic governments of Latin America, including Peru
and Venezuela, are concerned about some of the pro-
visions of the Trade Bill passed by Congress yester-
day. To these governments, the troublesome parts
of the bill are those that would deny trade prefer-
ences to members of cartels that raise prices on
vital commodities, and governments nationalizing US
property in violation of international law. A
special committee of the Organization of American
States has presented to the US ambassador at the OAS
a declaration asserting that these articles could
lead to a "de facto inoperativeness" of the new dia-
logue between the US and Latin America.
Ethiopia: There probably will be much debate--
and delay--before the ruling military council decides
how to implement the philosophy of "socialism" it
announced yesterday. This move, intended to iden-
tify Ethiopia with other African states and empha-
size the government's sharp break with the past,
does not appear to presage any sudden shift in for-
eign policy. Senior officials have stressed that
the council wants to maintain close and friendly
relations with the US.
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