NATIONAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A027100010040-6
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 21
• Document Creation Date: December 22, 2016
• Document Release Date: July 5, 2012
• Sequence Number: 40
• Publication Date: November 11, 1974
• Content Type: REPORT

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Top Secret
National Intelligence
Bulletin
Top Secret
N2 654
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National Intelligence Bulletin
November 11, 1974
CONTENTS
ISRAEL: Measures announced to reduce trade deficit and
preserve foreign exchange reserves. (Page 1)
JAPAN: Tanaka continues "resource diplomacy." (Page 4)
JAPAN-USSR: Joint Economic Committee makes modest
progress. (Page 5)
USSR: Construction of second Trans-Siberian railroad
to be accelerated. (Page 9)
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ITALY: Political stalemate heads into its sixth week.
Page 12)
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BOLIVIA: Abortive coup attempt gives Banzer excuse to
ban po itical activity and postpone elections. (Page 15)
PORTUGAL-EC: Lisbon seeks foreign aid. (Page 16)
FOR THE RECORD: (Page 18)
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National Intelligence Bulletin
November 11, 1974
The cabinet yesterday announced a series of eco-
nomic measures highlighted by a 43-percent devaluation
of the pound. The new measures are the latest in a
series of steps designed to reduce the country's stag-
gering trade deficit and preserve foreign exchange re-
serves.
The measures include:
--an immediate devaluation of the pound from 4.2
to 6 per US dollar;
--a six-month prohibition on imports of certain
luxury goods, including autos;
--an increase in the foreign travel tax.
In addition to the trade measures, the cabinet
also announced steps designed to reduce domestic pur-
chasing power, including:
--sharp increases in the prices of petroleum prod-
ucts;
--reduction of subsidies on many basic commodities
which will substantially increase prices of goods
such as sugar and bread;
--a one-year extension of the national wage agree-
ment and exclusion of the effects of the devalua-
tion and tax increases when calculating cost-of-
living allowances to be made under the agreement.
The Finance Ministry estimates that the measures
will cause an immediate increase of 17 percent in the
cost of living, reduce purchasing power by up to $1 bil-
lion, and improve the trade balance by $700 million per
year. Inflation is currently running at annual rate of
nearly 40 percent. Israel's current account deficit for
1974 will be about $3.3 billion. The deficit has depleted
Israel's official reserves to $900 million at the end of
September from about $1.8 billion at the start of the year.
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National Intelligence Bulletin November 11, 1974
Some of the announced measures such as the devalua-
tion will be taken immediately under the cabinet's emer-
gency powers. The government will have to seek agreement
with Histadrut, the national labor union, before imposing
the wage measures, however.
Rioters in a slum section of Tel Aviv protested
the austerity measures yesterday, blocking streets,
looting, and stoning vehicles and policemen. In spite
of such expressions of frustration by the poorest Israelis,
chances are that the general public will accept the pro-
gram with some grumbling. The government had been under
criticism since summer for failure to counter the deteri-
orating economic situation.
The Histadrut may drag its feet before agreeing to
the program, particularly because in effect it calls for
the downward adjustment of cost-of-living allowances.
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National Intelligence Bulletin November 11, 1974
Prime Minister Tanaka returned to Tokyo Friday after
a successful 12-day swing through New Zealand, Australia,
and Burma--his third tour this year aimed at promoting
Japan's "resource diplomacy." The trip will have no
early political impact, but it clearly helped fulfill
some of Tokyo's economic needs.
While in Canberra, Tanaka obtained an Australian
commitment to expand coal production to meet Japanese
requirements, a firm contract for uranium ore, and an
easing of restrictions on foreign investment in Austra-
lian mining enterprises. The Australians were less suc-
cessful in persuading the Japanese to reopen their mar-
kets to Australian wool and beef and to restrain auto-
mobile exports to Australia. The Japanese, however,
did agree to consider the feasibility of a joint uranium-
enrichment facility in Australia.
In Rangoon, Japan's economic importance to the
Burmese was underlined with the announcement of a new
credit agreement. Additional Japanese aid was also
pledged for the construction of an oil refinery and
a pulp plant. In contrast, little was accomplished in
Wellington, largely because of New Zealand's lesser
economic importance for Tokyo.
Tanaka's tour followed a similar resource-oriented
mission to Mexico, Brazil, and Canada in September. The
relative success of both of these trips is undoubtedly
welcome to the Japanese, especially after Tanaka's ill-
fated Southeast Asian tour last January when smoldering
resentment of Japanese business practices erupted into
demonstrations in Bangkok and riots in Jakarta. F
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National Intelligence Bulletin November 11, 1974
JAPAN-US'S R
The Soviet-Japanese Economic Committee meeting in
Moscow, which ended on November 1, made modest progress.
The committee, which had not met for three years,
reviewed the status of various Siberian development proj-
ects and agreed to discuss new proposals.
--The two sides agreed to begin serious negotiations
on expansion, with Japanese assistance, of two pulp
and paper plants in Siberia.
--Tripartite negotiations on the Yakutsk gas project
with El Paso Natural Gas Company were set for
November 12 in Paris. Japan anticipates that a
general agreement on exploration plans will be
reached before the end of the year.
--Negotiations on the Sakhalin gas and oil project--
involving Gulf Oil Company as well--are continuing
in Moscow. Differences over interest rates and
gas prices are holding up signature of an agreement.
--The Japanese again flatly refused to participate
in the Tyumen oil project, citing the uncertainty
of the extent of oil reserves, the Soviets' inclu-
sion of a second Trans-Siberian railroad instead
of a pipeline, and the enormous cost.
--Other potential joint development projects, includ-
ing copper mining, an oil refinery, and atomic
power plants, were again proposed by the Soviets,
but the Japanese continued to show little interest
in them.
Moscow used the meeting to press Tokyo again for
quicker action, particularly on the energy projects.
From Kosygin down, the Soviets warned that other countries
were ready to participate if Japan does not, but the
Japanese were unimpressed, having heard this line before.
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National Intelligence Bulletin November 11, 1974
Limited progress at the meeting notwithstanding,
Soviet-Japanese negotiations on Siberian development
have made steady progress this year. Two basic agreements
were concluded in July, and long-term credits have been
arranged for $1 billion in Japanese assistance in develop-
ing Siberian timber and coal reserves. In return, the
USSR has agreed to provide Japan with long-term deliveries
of coking coal and timber. Japan has also agreed to pro-
vide the USSR with $200 million in credits for the explor-
atory phases of the Yakutsk and Sakhalin gas and oil
projects. These latter two deals, however, remain contin-
gent on US capital and technical participation,
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r-r-.-a Trans-Siberian Railway
Feeder raliway
Proposed route
------ Alternate route
Mongolia
Nd7tr Korea
Japan
TO%YO?
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National Intelligence Bulletin November 11, 1974
Moscow is planning to accelerate construction of the
eastern segment of the Baikal-Amur, the second Trans-
Siberian railroad.
Suslov's statement fits in with recent news of a
$100-million Soviet contract for 700 US crawler tractors
to be used specifically on this project. A lesser So-
viet official has said that Japanese participation would
shorten the construction period by yet another year, but
the Japanese are unlikely to participate.
The 2,000-mile line, widely heralded and romanti-
cized in the Soviet press, was originally scheduled for
completion in 1982. Shortening the date to 1979 or 1980
may presage a larger role for eastern Siberia and the So-
viet Far East in the forthcoming 15-year plan.
Unlike the present Trans-Siberian railroad, the new
route cuts through a zone rich in fuel and mineral re-
sources. After 1980, when proven oil reserves become
insufficient to meet Soviet needs, the USSR will have
to rely more on eastern Siberian energy resources. The
new railroad could be used in conjunction with pipelines
and rail spurs to tap the northern resources of Siberia,
particularly the natural gas deposits around Yakutsk.
It would also play a basic role in overall Siberian de-
velopment.
The continuing concern over the Chinese border prob-
lem is also a consideration--the new route is 100 to
500 miles north of the present railroad which closel
arallels the Soviet-Chinese border.
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National Intelligence Bulletin November 11, 1974
Foreign Minister Aldo Moro is continuing his search
for a new government as the political stalemate heads into
its sixth week. Meanwhile, the investigation into coup
plotting by right-wing elements is generating tension, and
organized labor continues to press for higher wages and
benefits.
During more than a week of bargaining, Moro has
been dogged by the same interparty differences that pre-
vented Christian Democratic Party chief Fanfani from form-
ing a government. Moro now appears ready to settle for
a "monocolore"--all Christian Democratic--caretaker gov-
ernment, supported in parliament by all or most of the
other coalition parties.
The "monocolore" alternative is an established way
of letting the dust settle after a major political blow-up
in Italy, but Moro is even having difficulty securing an
agreement on this formula. The Christian Democrats, So-
cialists, and Republicans are willing to go along, but the
Social Democrats are not.
The Social Democrats are keeping alive a feud be-
tween themselves and the Socialists over relations with
the Communists. The Social Democrats maintain that any
government which relies on Socialist support will be
strongly influenced by the Communists, unless the Social
ists give strict guarantees of their independence from
the Communists. The Socialists have shown some flexibil-
ity on this question, and Moro would like to gloss it
over for the time being. He wants to focus on economic
differences; the parties here are close to an accord.
if the Social Democrats stand pat, the Christian
Democrats will have to choose between them and the So-
cialists in order to set up even a "monocolore" cabinet.
The Christian Democrats are loath to make such a deci-
sion, since it would require a clear choice between left
and right--something the Christian Democrats have always
tried to avoid.
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National Intelligence Bulletin
November 11, 1974
As the leader of the Christian Democratic left,
Moro undoubtedly leans toward the Socialists. The Chris-
tian Democratic right and center would be reluctant to
drop the Social Democrats, even though their votes are
not required for a majority. The Christian Democrats may
be forced to exclude the Social Democrats, however, in
order to form a government and avoid early elections,
which all elements of the Christian Democratic Party op-
pose.
While Moro was holding talks, several more arrest
warrants were issued in connection with the investigation
into coup plotting by right-wing civilian and military
elements. Last week, the former head of the intelligence
service, General Miceli, was arrested for alleged com-
plicity in such schemes.
Unemployment is rising rapidly, meanwhile, and
organized labor expressed its discontent by calling an-
other nationwide general strike yesterday--the second
since the government crisis began. Labor is pressing
management for a costly benefits package and an upward
revision of the cost-of-living allowance.
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National Intelligence Bulletin
BOLIVIA
November 11, 1974
President Banzer is trying to strengthen his posi-
tion by using the abortive coup attempt of last Thursday
as justification for banning political activities and
postponing elections.
The President has also seized the opportunity of
the revolt to take other measures to stabilize his gov-
ernment. Official charges of subversion against two
cabinet ministers who had been involved in previous moves
against the President have resulted in a minor cabinet
reshuffle.
for his political survival.
he now depends solely on the ,good will of his generals
Although military support has rallied behind Banzer
for the time being, the situation remains fluid, since
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National Intelligence Bulletin
November 11, 1974
Lisbon, faced with a deteriorating balance of
payments and a slumping economy, is seeking extensive
financial assistance and trade concessions from many
quarters. Practically all the EC and EFTA members, the
US, and the USSR, have been approached.
Lisbon's search for financial help has obvious
political implications. EC Commission Director General
Wellenstein told US officials recently that during his
visit to Lisbon last month, Foreign Minister Soares told
him Portugal wants economic support from the West in
order to counterbalance "extensive" Communist offers.
In this connection, Alvaro Cunhal, head of the Portuguese
Communist Party and minister without portfolio, gave a
rosy, if very generalized, account of future trade pros-
pects with the USSR following his trip to Moscow earlier
this month.
Cunhal does not, however, appear to have clinched
any specific deals, and Lisbon's NATO representative
claims that, contrary to press reports, Soviet economic
aid had not even been discussed. The joint communique
noted that a bilateral trade agreement is to be concluded
by the end of this year, and referred to plans for scien-
tific and technical cooperation agreements. A second
Portuguese trade delegation is to visit Moscow later
this month.
In recent conversations with representatives of
Western governments, Portuguese officials have stressed
the importance of receiving aid commitments from the
West before the elections next spring so as to enable
the government to demonstrate convincingly to the elec-
torate that Western Europe is prepared to provide mean-
ingful support. An announcement of EC concessions might
also increase the confidence of domestic investors who
have been holding back because of the uncertain political
situation and labor disorders.
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National Intelligence Bulletin November 11, 1974
Although Portugal does not intend to ask for nego-
tiations looking toward an association agreement with
the EC anytime soon, it has now provided the EC Commis-
sion with some detailed proposals for assistance. The
Portuguese have requested EC agreement for:
--access to the European Investment Bank--now
limited to EC members and certain associated
states--in order to get a line of credit at pre-
vailing interest rates to cover the foreign ex-
change costs of investment projects. Wellenstein
estimates that the credit could amount to as much
as $200 million, but doubts that enough sound
projects could be found to utilize a loan of this
size.
--improved working conditions for the approximately
one million Portuguese migrant workers in EC coun-
tries, presumably to include social security bene-
fits and a guarantee to maintain the number of
workers abroad at current levels.
--amendments to the EC-Portuguese trade agreement
to provide for trade concessions for such principal
Portuguese exports as textiles, cork, wine, and
certain food products. Although foreign exchange
reserves still exceed $2 billion, support for the
balance of payments is needed because a deficit of
about $500 million is expected this year and a
turnaround is not yet in sight.
--concessions that will allow retention of protec-
tive tariffs and postponement of reductions in
customs duties.
Although certain of Lisbon's requests present prob-
lems, the Nine are anxious to help the new government
meet its problems and can be expected to make a real ef-
fort to accept Lisbon's proposals wherever possible. The
Commission has already prepared its "positive recommenda-
tions" for consideration at the Council meeting tomorrow.
The EC's counterproposals may then be discussed with the
Portuguese minister of economic affairs during his visit
to Brussels in mid-November and by the EC-Portuguese
Joint Committee during meetings in late November in Lisbon.
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National Intelligence Bulletin November 11, 1974
Minister Without Portfolio Alves, accompanied by
other high-level officials, is currently visiting five
EC capitals--Paris, Rome, Bonn, London, and Brussels--in
an effort to reassure those governments about prospects
for stable political development in Portugal.
As an EFTA member, Portugal is also hoping for con-
siderable aid from that organization. At its minis-
terial meeting in early November, EFTA decided to move
promptly to extend assistance to Portugal i
USSR-Cuba: The two guided-missile light cruisers
that arrived in Cuban waters in late September left
the port of Cienfuegos late Saturday in company with
an armed replenishment oiler. The group has since
moved southeasterly off the coast of Cuba and is prob-
ably bound for the Atlantic and a passage to home
waters. During their deployment the cruisers paid
port visits to Havana and Cienfuegos and conducted op-
erations in the Gulf of Mexico. Before returning to
the Soviet Northern Fleet, the ships may operate
briefly in the Mediterranean.
the US ends its military assistance to South Vietnam.
South Vietnam: The Vietnamese Communists have re-
jected South Vietnam's call to resume negotiations in
Paris. The statement, issued Saturday by the deputy
chief of the Viet Cong's military delegation in Saigon
and replayed by the Communist delegation in Paris,
termed the offer a "deceptive move" to confuse public
opinion. The spokesman repeated earlier Communist con-
ditions, set forth on October 8, that the Paris talks
cannot be resumed until President Thieu is removed and
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