INTERNATIONAL ISSUES REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01184R000200690001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 27
• Document Creation Date: December 22, 2016
• Document Release Date: September 13, 2010
• Sequence Number: 1
• Publication Date: February 1, 1984
• Content Type: REPORT

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International Issues
Review
February 1984
~8C-F@~
GI IIR 84-001
February 1984
Cvpy
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International Issues
Review
This publication is produced by the Office of
Global Issues. Some issues contain articles drafted in
other offices. Some articles are preliminary or
speculative in nature, but the contents are formally
coordinated as appropriate with other offices
within CIA. Occasionally an article represents the
views of a single analyst; these items are clearly
designated as noncoordinated views.
Secret
GI IIR 84-001
February 1984
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Contents
Arms Transfers Export Prospects for
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West European naval equipment manufacturers see a strong de-
mand for their products to upgrade older ships in West European
inventories and for components for warships constructed in the
Third World. Shipbuilders, on the other hand, face a saturated
market and growing competition from Third World dockyards.
The international gray arms market lends itself to the perpetration
of a variety of scams. This article provides some keys to identifying
Nuclear Proliferation Implications of Argentina's
Uranium Enrichment Capability
Argentina's public acknowledgment of an indigenous uranium en-
richment capability has increased speculation about military appli-
cations of Argentina's nuclear research efforts. Some officials in
Brazil and Chile have suggested that their own national programs
iii Secret
GI IIR 84-001
February 1984
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Bolivia, and Peru
Drug Traffickers' Relations
With the Media in Colombia,
and willing to use viclence.
Drug traffickers in Colombia, Bolivia, and Peru have developed a
variety of strategies for influencing media portrayal of their activi-
ties. In Colombia and Bolivia they have undertaken extensive,
highly visible efforts, while in Peru they have been more secretive
International The North-South Dialogue:
Organizations Prospects for 1984 ~
In 1984 we expect the countries of the Third World to maintain
their demand for a New International Economic Order (NIEO). The
European Community and Japan will urge the United States to
make minor concessions, while the Soviet Union will claim that the
NIEO should be negotiated only between the capitalist countries
and the Third World.
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Summary
Export Prospects for
West European Naval Industries
combatants.
Prospects for West European naval equipment manufacturers over the next
10 years are excellent although West European shipbuilders face a starkly
different future. Manufacturers of propulsion, weapons, and electronic
systems see a strong demand for upgrades of older ships and for compo-
nents for warships constructed in Third World countries. On the other
hand, shipbuilders, long plagued by a worldwide surplus of commercial
bottoms, now face a saturated warship market, competition from Third
World dockyards, and growing doubts about the viability of large surface
Naval Equipment Manufacturers
Equipment manufacturers see a strong demand for
their expensive products, according to open sources.
Engines, armaments, and electronic systems typically
comprise 70 percent of the value of a frigate and even
a higher percentage of small missile combatants.
Unlike hulls, they are often replaced two, three, or
more times during the life of a warship. Rapidly
evolving technologies for all of these systems virtually
guarantee a high volum., of turnover in the forseeable
future.
Engines
West European propulsion systems make up a dispro-
portionate share of the international market. At least
300 warships in current inventories-over half of the
Western market and roughly a third of the world
export market-use diesel engines manufactured by
Motor Turbine Union (MTU) of West Germany.
Other West European diesel manufacturers include
SEMT-Pielstick (France), Grande Motori Trieste (Ita-
ly), and Rolls Royce (United Kingdom). Rolls Royce is
also the only West European firm to design and
manufacture gas turbine engines, but only a few have
been sold abroad. I~~ost navies do not need the speed
provided by gas turbines, which require more space
and consume more fuel than diesels.
An even more promising area for West European
firms, according to trade journals, is in the develop-
ment of new propulsion systems, which will give
conventional submarines higher speeds and greater
underwater endurance. Conventional submarines are
limited, in comparison to nuclear submarines, by their
less powerful diesel engines, which require the subma-
rine to periodically snorkel for air. MTU has just
marketed a supercharged diesel that will reduce some
of these limitations. MTU and Fiat are also investi-
gating closed gas turbines and closed cycle diesels,
which may eliminate the need to surface for air
altogether. Similarly, Sweden has chosen an "anaero-
bic" engine designed by Stirling for its proposed A-17
class of submarines.
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Table 1
Antiship Missiles
Armaments
Western Europe leads the United States and the
USSR in the export of ship-to-ship missile systems
and probably will continue to do so. Aerospatiale's
Exocet has enjoyed the most success having been
introduced into the inventory of 25 nations (table 1).
Longer range Otomat missiles produced by Oto Me-
lera and Matra (France) have also found a niche in the
market. For example, several Third World nations-
Egypt, Libya, Iraq, Saudi Arabia, and Nigeria-have
chosen the Otomat for their new blue water navies.
More advanced missiles are planned.
Argentina's successful use of Exocet missiles in the
Falklands war has increased interest in naval self-
defense systems, particularly antiaircraft systems
Partially in response to
this demand, West European firms have marketed
four new naval radar-guided "close-in-weapons sys-
tems" (CIWS) (table 2). They boast a caliber heavier
than the 20-mm US Phalanx system and advertise
that they are more effective against antiship cruise
missiles that have armored warheads. No sales have
yet been recorded, but we believe such weapons will
become standard armament on most major surface
combatants.
West European firms also manufacture a variety of
larger caliber naval guns that are the standard arma-
ment for most naval combatants. Italy's Oto Melera
has had the most success selling over 400 76-mm guns
to 34 nations (table 3). Other gun manufacturers-
Bofors (Sweden), Vickers (United Kingdom), and
Creusot-Loire (France)-have been less successful in
marketing both larger and smaller caliber guns. The
continuing need for naval artillery, as demonstrated in
the Falklands war and Lebanon, and the probable
deployment of precision-guided munitions for naval
increase demand for these weapons.
guns in the next few years, will, in our judgment,
Electronics Equipment
Radars, sonars, communications, and fire-control sys-
tems for ships are produced by several West European
firms: Signaal (Netherlands), Thompson-CSF
(France); Decca, Phillips, and Marconi (United King-
dom); and Selenia-Elsag (Italy). Signaal and Thomp-
son-CSF have been the most successful in the naval
electronics sector; Signaal by virtue of its strong
affiliation with British and West German shipbuilders
and Thompson-CSF through its association with
France's overall dynamic export program. Most elec-
tronic equipment firms are involved in modernizing
older ships as well as equipping new ones. Decca, for
example, recently refitted eight Soviet-built Osa-
class missile attack craft with navigation radars for
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Table 2
West European Close-In-Weapons
Systems-Guns
Country
Firm
System
Caliber
(mmJ
Rds/min.
Spain
Bazan
Meroka
20
9,000
Switzerland
Oerlikon
Seaguard
25
3,400
Netherlands
Signaal
Goalkeeper
30
4,200
United Kingdom
Vickers
Sea Dragon
30
4,200
Egypt, according to trade journals.
Shipyards Face Bleak Prospects
Unlike equipment manufacturers, West European
shipyards face a softerinternational naval market
following a decade of success. Almost half of foreign
built warships now in the inventories of maritime
nations or on order come from West European ship-
yards (table 4). These yards have out performed their
Soviet and US counterparts in constructing small
missile attack craft and conventional submarines. The
US Navy has demonstrated only a passing interest in
missile attack craft and has purchased only nuclear-
powered submarines for the last two decades. West
European yards have also sold most of the new major
surface combatants on the world market; almost all
US and Soviet sales involve surplus ships.
Lower prices have aided West European efforts.
According to trade journals, new US frigates cost
considerably more than their European counterparts
(table 5).
below the bid of a US competitor. The lower costs of
less capable electronics and weapons systems, as well
as subsidies to West European shipbuilders, are re-
for examp e, t at Dutch, German, and British esti-
mates for a new command ship for the Indonesian
Navy were between $105-140 million and were far
portedly responsible for this price differential.
Table 3
West European Naval Guns
Manufacturer
Caliber
(mmJ
Number of
Guns In
Service
Number of
Countries
Bofors
57
45
6
120
3
1
Creusot-Loire
100
6
1
Oto Melera
76
400
34
127
23
6
Despite their past success, West European shipbuild-
ers face a troubled future. The increasing foreign
demand for naval ships, which was used to offset the
decline in demand for commercial shipping in the
1970s, appears to be waning. Trade journals estimate
that the market for small missile attack craft is
approaching satura~ion, although corvettes and con-
ventional submarines continue to be in demand. This
demand may be cut, however, by fiscal problems
facing many key purchasers including Iraq, Egypt,
and Argentina.
The desire of many Third World countries to build
their own warships is also cutting into West European
sales. Singapore, Brazil, Argentina, and India have
made substantial investments in dockyards and are
attempting to make the jump from licensed produc-
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Brazil and India, for example, are already building
their first frigates.
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Table 4
Worldwide Export Ship Inventories
Supplier
(type)
Total
Western
Europe
Soviet
Union
United
States
Total
931
419
264
248
Major
Surface
365
133
46
186
Minor
Surface
405
206
175
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Finally, the perceived vulnerability of surface combat-
ants to antiship missiles will give pause to countries
that want to expand or modernize their surface fleets.
We believe ground and air forces competing for scarce
defense funds will be sure to emphasize this vulnera-
bility. Economic problems confronting most LDCs
will tip the balance against Navy proponents who will
point to costly new ship defenses including close-in-
weapons systems, antimissile missiles, decoys, and
Even with this soft demand, we believe that most
West European governments will try to keep their
shipyards open given national security concerns and
the desire to maintain employment.' West European
shipyards and governments have a number of options
in dealing with'. this soft market:
? Direct subsidies. Many dockyards in France, Spain,
and Britain are nationalized and receive direct
subsidies through national defense budgets. Semi-
public yards in Germany and Italy receive funds
through state holding companies. Recently, the
Dutch parliament also authorized compensation for
Wilton-Fijenoord after its decision to prohibit that
firm from making additional submarine sales to
Taiwan.
' The Thatcher government's decision to close two yards in 1982
was a unique event given the gradual contraction of Britain's
traditionally large navy and the large number of yards still in
? Domestic orders. RSV, Wilton-Fijenoord's parent
company, was rescued from bankruptcy by increases
in government spending on Dutch naval shipbuild-
ing, according to Embassy reports. According to a
US attache report, the Netherlands may sell one of
its Van Speijk~lass frigates "to the highest bidder"
in order to allow for continued construction for the
newer Kortenaer class, providing additional work
for Dutch shipyards.
? National marketing consortiums. In these consor-
tiums, shipyards join with naval equipment manu-
facturers to offer foreign customers a wider variety
of designs, equipment options, and financing pack-
ages. Consortiums also reduce competition between
shipbuilders in the same country and provide a more
unified basis for competing in the international
market. Italian shipbuilders joined with naval
equipment manufacturers to form two consortiums
in 1977 and scored their largest sale to Iraq in 1980.
In 1982 three privately owned French firms formed
France Navale, a consortium with design capabili-
ties borrowed from the French naval arsenal
(DCTN). France Navale, however, is not bound by
DCTN's policy of using only French equipment in
the ships it sells.
? Mergers and Divestitures. West European govern-
ments commonly use mergers and divestitures to
increase and decrease their support for shipbuilders.
In Italy many inefficient yards have merged with
Cantieri Navali Riuniti, the Italian shipbuilding
conglomerate. In Britain, however, the Thatcher
government plans to sell off the profitable military
yards to British shipbuilders. Similarly, RSV, the
Dutch conglomerate, was divested of some of its
more efficient yards after it went bankrupt last
year.
? Paring employment. West European work laws gen-
erally make this option difficult to implement. In
France and West Germany, employment has been
allowed to slowly decline by about 25 percent since
the mid-1970s. Britain has also reduced employ-
ment in some yards.
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Table 5
West European Frigates Exports
Recipient
Year
Value
Supplier
Class
Weight
Guns
Missiles
Crew Propulsion
Country
Country
(tons)
Greece
1981
$120m
Nether-
Kortenaer
3,630
2-76/62 OM
8 Harpoon
167 4 Rolls Royce gt
lands
1-40
8 Sea Sparrow
Nigeria
1977
$168m
FRG
MEKO 360
3,630
1-127/54 OM
8 Otomat
200 2 Rolls Royce gt
8-40/70 Breda
8 Aspide
Saudi Arabia 1980
Unknown
France
F-2000
2,610
1-100 CL
4-40-mm Breda
8 Otomat
26 Crotale Navale
179 4 SEMT-Piel-
stick diesels
Egypt
1982
$116m
Spain
F-30
1,450
1-76/62 OM
8 Harpoon/Exocet
116 4 MTU-Bazan
2-40/77 Breda
8 Sea Sparrow
diesels
Still under
$170m
UK
Type 23
4,000
1-4.5 in
Harpoon
150+ 2 Rolls Royce gt
design
estimate
Vickers
Sea Eagle
Seawolf
Iraq
1980
$250m
Italy
Lupo
2,500
1-127/54 OM
8 Otomat
185 2 Fiat gt
4-40/70 Breda
8 Aspide
2 GMT diesels
Abbreviations: OM = Oto Melera
GMT =Grand Motor Trieste
MTU =Motor Turbine Union
gt =gas turbine
CL = Creust-Loire
? Diversification. Spain's Bazan and Britain's Vickers
have traditionally manufactured weapons other
than warships. Other shipyards have diversified into
other defense manufacturing only recently to pro-
tect themselves from market cycles. West Germa-
ny's Thyssen, for instance, has begun producing
tanks.
The elimination of inefficient shipbuilders thus ap-
pears to be an unlikely prospect. Trade journals
suggest that all West European shipbuilders recognize
the problems of the soft naval market, but that each
country is waiting for someone else to make the
sacrifices. Meanwhile shipyards will continue to col-
lect government subsidies and hope that civilian ship-
owners will take advantage of surplus shipyard capac-
ity by ordering new ships at lower prices.
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Gray Market Arms Scams
Summary
The international gray arms market, in addition to facilitating the
purchase and movement of weapons on other than agovernment-to-
government basis, lends itself to the perpetration of a variety of fraudulent
arms deals. Identifying such fraudulent deals is often difficult but is an im-
portant element in monitoring arms transfers. These fraudulent deals-or
scams-frequently involve smalltime or disreputable brokers, operating
under the cover of several front firms. These individuals usually offer
unrealistically high quantities of virtually unobtainable equipment and
seek both large advance downpayments and long delivery schedules. Iran-
at war with Iraq and having few reliable military suppliers-has often been
the mark for many of these gray market arms scams.
Gray Market Arms Scams
Because of its secretive nature, the international gray
arms market is used by recognized governments,
established manufacturers, private dealers, and a
variety of terrorist, insurgent, and criminal groups to
buy and sell large quantities of weapons through
unofficial-and often illegal-channels. The weapons
most commonly traded on the ra market are small
arms, although heavy
machineguns, recoilless rifles, and mortars as well as
a wide variety of artillery munitions, telecommunica-
tions equipment, and spare parts are also available. In
addition to such equipment, however, gray market
dealers have also sought to broker the sale of large
quantities of such advanced weapon systems as Exocet
missiles and Cobra helicopter gunships,
Offers for this kind o exp isne ve
material have traditionally been made to pariah
states-such as Libya and South Africa-or to em-
bargoed nations at war-such as Argentina during
the Falkland crisis. Recently, many such offers have
been made to Iran, which has been one of the most
active buyers on the international gray arms market
since the beginning of the war with Iraq.
Recognizing Scams
Gray market scams frequently exhibit one or more
discernible characteristics. While any offer of large
quantitites of hard-to-obtain ordnance should be
viewed with skepticism, the offer of such equipment
by a small, obscure firm or individual is even more
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Individual arms'brokers offering weapons on behalf of
several firms are also suspicious. Smalltime dealers
probably negotiate on behalf of allegedly different
firms in order to impress clients with the scope of their
contacts or to maintain access to a potential buyer
after an initial deal has fallen through.
delivery schedule-intended, no doubt, to allow the
Similarly, another indication of a possible scam is the
request for a large downpayment coupled with a long
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Similarly, cases of two or more firms operating out of
the same office are suspect. Gray market swindlers
may establish phony intermediaries and front compa-
nies in'order to insulate themselves from a customer
who may seek revenge after realizing that he has been
cheated. Multiple firms at the same address are even
more suspicious-:when the firms claim a forei n
incorporation that cannot easily be verified.
Another good indication that a gray arms negotiation
may be a scam is the request on the part of the
supplier for a large downpayment prior to the delivery
of any goods.
In addition to requesting long delivery schedules, gray
market dealers seeking to set up a scam will frequent-
ly attempt to convince the client of the need to act
quickly either by claiming that his own option to buy
will expire soon or by implying that the equipment
could end up in an opponent's possession
Offers of both hard-to-obtain and readily available
equipment suggest that some dealers may seek to
"bait-and-switch," by seeking a downpayment for
hard-to-acquire, advanced ordnance in the hope of
supplying other, less sophisticated equipment at a
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Iran: A Target for Scams
At the outbreak of the war with Iraq, Iran was not in
a position to acquire all of its military needs on a
government-to- overnment basis,
The revolutionary gov-
ernment a ate practica ly all official arms buy-
ing activity, and established procurement channels
had been abandoned. As a result of the loss of
traditional contacts with the United States and Eu-
rope, an embargoed Iran entered the international
gray arms market, where hundreds of private dealers
and would-be agents offered to broker the sale of all
manner of military equipment for the new regime.
Although arms dealers from Hong Kong to Pakistan
have attempted to sell arms to Iran, most appear to
reside or operate in West European countries such as
Portugal, Spain, West Germany, Austria, and espe-
cially, Switzerland-the latter presumably because of
its prominence as an international banking center and
its favorable incorporation laws. Some offers from
these dealers appear credible and involve relatively
small quantities of small arms, munitions, and oth~,r
expendables which are readily available on the inter-
national gray arms market. Other offers appear to be
frauds, however, with small-time-often disreputa-
ble-dealers proffering unrealistically large quantities
of sophisticated and virtually unobtainable wea on
systems at exorbitant prices.
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Although we do not know how much money Iran has
lost as a result of fraudulent gray market deals, we 25X1
believe that the amount was at least $100 million b
the end of 1982.
While we expect that gray market dealers will contin- 25X1
ue to offer advanced military equipment to Iran, we
believe that Iranian procurement officers are becom- 25X1
ing sufficiently cautious to discriminate between cred-
ible and improbable offers. We expect that gray arms
market brokers will continue supplying conventional
small arms and munitions to Iran as well as to any 25X1
other client with sufficient cash to pay for them. They
are unlikely, however, to find another customer will-
ing and able to advance them large sums of money in
return for the promise of advanced equipment-until
the next international crisis or arms embargo creates
a seller's market for such ordnance.
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Summary
Nuclear Proliferation
Uranium Enrichment Capability
Implications of Argentina's 25X1
al security reasons.
Argentina's sudden public announcement in mid-November of a break-
through in uranium enrichment technology has increased speculation about
the potential military applications of Argentina's nuclear research efforts.
The new regime-which was apparently surprised by the announcement-
probably will not open the enrichment facility to international safeguards
inspections. An unsafeguarded enrichment facility will make it more
difficult to monitor possible Argentine weapons-related activities and could
damage Argentine relations with major nuclear suppliers. Furthermore,
some military officials in Brazil and Chile already have suggested that
their governments intensify nuclear research outside safeguards for nation-
The Announcement
The former head of Argentina's Atomic Energy Com-
mission, Retired Admiral Carlos Castro Madero,
announced last November that his country has suc-
cessfully operated apilot-scale gaseous diffusion ura-
nium enrichment facility. According to Castro Made-
ro, the present facility is the "first module" of a larger
uranium enrichment plant that, when complete, will
be capable of enriching about 500 kilograms of
uranium a year to the 20-percent level. This larger
plant is reportedly in the "advanced stages" of con-
struction and is scheduled to be completed by the end
of 1985. Both facilities are located near Bariloche,
about 1,000 miles southwest of Buenos Aires. The
Argentines showed the pilot-scale enrichment facility
to IAEA Director General Hans Blix on 24 Novem-
ber 1983.
Castro Madero publicly justified the decision to
launch research in uranium enrichment technology as
a legitimate reaction to the 1978 US decision to
terminate the supply of US-origin enriched uranium
for use in Argentina's five small light water research
reactors, a decision prompted by Argentina's refusal
to accept safeguards administered by the Internation-
al Atomic Energy Agency (IAEA) on all Argentine
nuclear activities. The Argentines claim that the
uranium enrichment development program will pro-
vide areliable source of enriched uranium for their
small research reactors. Furthermore, they maintain
it will enable Buenos Aires to be a reliable supplier of
enriched uranium to its own nuclear customers in
Latin America, particularly Peru, which has pur-
chased asmall Argentine research reactor. In his
announcement, Castro Madero also emphasized that
Argentina plans to utilize some low-enriched uranium
(probably at the 1-percent level) in the country's two
operational natural uranium reactors, a move that
would increase fuel efficiency.
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Argentina's Intentions
Castro Madero's sudden announcement of this sensi-
tive and difficult achievement was made without any
previous indication that Buenos Aires was seriously
considering construction of a gaseous diffusion enrich-
ment facility. Buenos Aires has, however, for many
years made clear its intention to obtain a complete
nuclear fuel cycle outside IAEA safeguards. This new
development goes far in achieving this objective by
giving Buenos Aires two options for acquiring fissile
material-enriched uranium or plutonium reproc-
essed from a heavy water nuclear fuel cycle using
The announcement, which apparently took the newly
elected civilian regime by surprise, was made by the
Argentine Foreign Ministry with the approval of the
outgoing military government. We believe that the
timing of Castro Madero's announcement was influ-
enced by the desire of senior Argentine nuclear
officials to influence the new government on the
importance of nuclear research and the need to
maintain awell-funded nuclear energy program. The
new President, Raul Alfonsin, who was inaugurated
in December 1983, had campaigned in opposition to
nuclear weapons research and his advisers have stated
that nuclear energy in the future will be given a lower
priority.
We cannot independently confirm Argentina's capa-
bility to enrich uranium, but their claim to have
enriched -some uranium through the gaseous diffusion
process probably is accurate. The visit by the IAEA
director general confirmed the existence of a pilot-
scale enrichment facility, and it would have served
little purpose for Castro Madero to prematurely un-
veil Argentina's enrichment capability. The projected
completion of the larger facility in 1985 probably is
overly optimistic, however, because of financial and
possible technical constraints.
The Argentine:achievement underscores Buenos
Aires's determination to master both routes-urani-
um enrichment and plutonium separation-to fissile
material production. Most other countries that have
posed a proliferation threat have pursued only one
route to fissile material acquisition. Generally the
plutonium route is chosen because it technically is
easier and less costly to accomplish. India and Israel
are the best examples of countries that have used the
plutonium route to complete the nuclear fuel cycle for
possible military use. Pakistan, which has a strong
desire to acquire a nuclear capability, is the only other
developing country known to have made a serious
effort to build both uranium enrichment and plutoni-
um reprocessing facilities.
The Argentine and Pakistani cases are also similar in
that both countries managed to keep secret their
efforts to acquire enrichment technology for an ex-
tended period of time. In Pakistan's case, centrifuge
enrichment technology was obtained illegally from
Western Europe's uranium enrichment consortium,
URENCO, in the mid-1970s. We do not know how
Argentina developed or acquired gaseous diffusion
technology. The Argentines publicly stated that their
effort was accomplished with 15 percent foreign
participation.
Proliferation Impact
The Argentine breakthrough in this sensitive area of
nuclear science makes the Argentine proliferation
threat substantially more serious than before. A coun-
try that can enrich uranium to the 20-percent level
has substantially overcome the technical obstacles to
the production of weapons-grade fissile material (that
is, uranium enriched to the 80- to 90-percent level).
Uranium enrichment to a weapons-grade level then
becomes a political decision rather than a technical
problem. While we do not doubt the Alfonsin govern-
ment's assurances that it will not
build a nuclear device, the existence of this capability
avails future political leaders of a potentially trouble-
some new technical option.
The Argentine announcement has given a major boost
to those individuals in Brazil and Chile pushing for
indigenous nuclear research, outside IAEA safe-
guards. The Brazilian Government received advance
notification and subsequently issued public congratu-
lations to the Argentines for their achievement.
I
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secret
Like Argentina, neither
Brazil nor Chile has signed the Nuclear Non-Prolifer-
ation Treaty (NPT) and, as a result, has reserved the
legal basis for justifying indigenous nuclear activities
free of international inspection.
Brazilian and Chilean officials also have expressed
publicly their concern that the Argentine nuclear
program might eventually move toward weapons-
related research. In Brazil, a new level of public
concern was sparked when a number of the highest
ranking military officers for the first time felt com-
pelled to publicly state that Brazil will be capable of
producing its own nuclear weapons in the 1990s
Prospects
The civilian Argentine Government of Raul Alfonsin
is finding it difficult to balance its conflicting domes-
tic and foreign policy interests resulting from Castro
Madero's unexpected revelation. The government
quickly established athree-person advisory committee
within the office of the presidency to scrutinize the
nuclear program, place it under civilian control, and
perhaps put it on a tighter budget. Nonetheless, the
military continues to be involved in key aspects of the
nuclear program including construction of a reproc-
essing plant to obtain plutonium and a nuclear subma-
rine project. The Argentine press, furthermore, has
continued to praise the achievement of the country's
scientific elite. According to a number of press re-
ports, the Alfonsin government does not intend to
open the new enrichment facility to IAEA safeguards
inspection. Acceptance of international inspections at
indigenous nuclear facilities would signify a radical
departure from all previous Argentine policy state-
ments on this issue. Thus far, Buenos Aires's position
has been that IAEA safeguards are only acceptable in
cases where there has been an actual transfer of
nuclear materials, equipment, or technology to
Argentina.
Argentine nuclear officials probably will try to
counter foreign criticism by emphasizing that IAEA
safeguards for uranium enrichment facilities are still
in the developmental stage. Furthermore, even if such
safeguards were available today, the Argentines prob-
ably would reject them on the grounds that inspec-
tions would compromise a major commercial secret. 25X1
As long as the new enrichment facility remains
outside safeguards, the ability of the IAEA to provide
any timely warning of weapons-related activities
which may take place in Argentina is seriously
jeopardized.
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Secret
Narcotics
Drug Traffickers' Relations
With the Media in Colombia,
Bolivia, and Peru
Summary Drug traffickers in Colombia, Bolivia, and Peru increasingly recognize the
ability of the media to influence public perceptions about their activities.
Colombian and Bolivian traffickers have undertaken extensive, highly
visible efforts in recent years to enhance their images and activities, to
build on the general public acceptance of the drug trade, and to discredit
government control programs through manipulation of the print and
broadcast media. Peruvian traffickers, on the other hand, have used
violence to discourage journalists from focusing attention on their illegal
activities.
Colombia: Traffickers Take the High Road
Traffickers' exploitation of the media in Colombia has
built upon ambivalent public opinion and the long-
standing belief that controlling drug trafficking and
drug abuse is a "norte americano" problem. The
particular emphasis has been the notion that Latin
American countries have cultivated coca and marijua-
na for traditional uses for centuries and that US
attempts to direct narcotic control programs represent
interference in Colombia's internal affairs. Some ma-
jor Colombian traffickers have used their access to
the press to portray themselves as national heroes or
as public-spirited benefactors interested in promoting
betterment of the population and maintaining nation-
al integrity.
Access to the Press
Cocaine giant Carlos Lehder Rivas has been especial-
ly successful in using the media to his advantage.
Stressing the issue of nationalism, Lehder has fi-
nanced full-page ads in Colombia's major newspapers
and magazines opposing the government's antidrug
efforts, in general, and the US-Colombian Extradition
Treaty, in particular. He has granted interviews
knowing they will command coverage by radio, televi-
sion, and the press. In July 1983 he startled even those
accustomed to his outspokenness by openly admitting
his involvement in narcotics trafficking which he
justified as bringing badly needed dollars into the
Colombian economy.
Lehder has insured regular dissemination of his views
through the Quindio Libre, a weekly newspaper he
purchased in his native Department of Quindio in
1982. The paper serves as a platform for the political
party he founded in 1983-the Latin National Move-
ment-which he has described as a "simple civic
movement representing a small forgotten people."
Lehder's unrelenting attack on the US-Colombian 25X1
Extradition Treaty in his paper and other publications
helped create the unfavorable political climate that
blocked the US request for extradition of two major
Colombian traffickers in late 1983.
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Another major trafficker, Pablo Escobar Gavira,
commands space in the press by paying for it, in the
opinion of some Colombian journalists, or by his
political activities: In early 1983, an article suspected
as Escobar-inspired appeared in the popular magazine
Semana, ranking him not only as one of the wealthiest
men in Colombia, but also as one of the most powerful
men in the world. -:The feature depicted him as a local
hero in his native Department of Antioquia and a
great benefactor and promoter of his city. Quindio
Libre frequently carries unsolicited, favorable articles
on Escobar, praising him as a "critical, independent
thinker." Escobar's local influence and financial con-
tributions have secured him an appointment as an
alternate Liberal Party member of Congress. Embas-
sy reports indicate his desire to exert more direct
political influence, a goal his efforts to publicize a
glorified popular image would support.
Access to the Airwaves
Through the purchase of radio stations, narcotics
traffickers in Colombia have acquired the capacity to
convey their stand on drug-related issues to an even
larger audience. According to US Embassy reports in
late 1983, known cocaine traffickers Gilberto and
Miguel Rodriguez purchased Colombia's fourth-larg-
est radio network,' Grupo Radial Colombiano, which
includes 23 stations that effectively cover the nation.
In addition, the Rodriguez brothers obtained 10 new
broadcasting licenses and have launched a second
network, Radio Rumbos. Broadcast personnel have
told Embassy representatives that these networks
enjoy large operating budgets and employ veteran
radio personalities who were lured away from other
networks by enormous salaries.
Antidrug Media Efforts
Although traffickers have successfully flooded the
media with their message, the antidrug forces in
Colombia have some respected supporters in the
media. Mauricio Gomez, director of Colombia's popu-
lar 24 Horas news program, won the 1983 Simon
Bolivar Prize for Journalism, Colombia's most presti-
gious journalism award in the category of Investiga-
tive Television Reporting for his five-part series The
Cocaine Connection. He produced this documentary
in the United States with US assistance. Although the
Colombian Government is only beginning officially to
acknowledge the problem of domestic drug abuse, the
Colombian media has been attempting to enhance the
public's awareness. For example:
? El Tiempo, Bogota's major daily newspaper, has
urged the state to recognize growing drug abuse
among the young as a serious national problem.
? El Espectador, Colombia's second-largest daily, has
given thorough and balanced coverage to the herbi-
cide issue and has written about the connection
between drug traffickers and insurgents.
Bolivia: Grassroots Approach
.Publicity efforts sponsored by Bolivian drug traffick-
ers are directed at the campesinos who grow and
refine coca, and seek to exploit the view widely held in
Bolivia that the illicit drug industry helps support
large segments of the population. The dominant
themes have been that coca cultivation is an economic
necessity for many hard-pressed farmers and that the
use of herbicides in eradication will poison vast por-
tions of the environment and the population for
generations. Heightened awareness of their stake in
the issue has prompted large numbers of campesinos
to join organizations such as the Coca Congress and
the Chapare Farmers' Federation, which serve as
strong defenders of coca cultivation. According to US
Embassy officials, even though these organizations
are masterminded and largely financed by traffickers,
they provide a rallying point for the individuals most
directly affected by government eradication plans.
Reaching the Masses
Cocaine proponents in Bolivia produced an expensive,
prime-time television show in September 1982, The
Legend o1' Coca. According to the US Embassy, this
was an extremely effective propaganda device in a
country where the literacy rate is substantially lower
than that of Colombia or Peru. According to US
Embassy reports, the film was the brainchild of
journalist Gonzalo Lopez Munoz and financed largely
by narcotics trafficker Jose Paz Hurtado. We concur
with the view of the US Embassy that it was a skillful
blend of a few facts and many distortions, such as
blurring the distinction between coca and cocaine. At
the urging of US officials, Bolivia's Minister of
Information refused to allow a second showing of the
film, fired the director of Bolivian national TV, and
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Secret
Broadcast nationally, the film retold the ancient
Andean legend of how a sympathetic god gave the gift
of coca to the longsufjering Andean people to enable
them to withstand the cold and hunger of the moun-
tains. Since the gift was intended only for the pure of
heart-anticipating current US problems with co-
caine-the televised version of the legend claimed: `;U
the cruel men of the north, the white conquerors .. .
should touch the leaves, they will only find in it
poison for their bodies and madness for their minds,
because their hearts are hardened. "
The Legend of Coca defended coca's biological bene-
fits: increasing respiration, safely alleviating anxiety
and depression, and even serving as a food substitute
with nutritional value superior to other, unspecified
South American foods. Dire warnings about the
biological dangers of the herbicides used in eradica-
tion increased the volume of misinformation that has
created widespread public fears about herbicides. The
film ends with a call to legalize, nationalize, and
industrialize coca, directing it toward the manufac-
ture of concentrated food, anesthetics, and antide-
pressive medication. The film argues that the medici-
nal market rightfully belongs to the coca producing
countries, but through extensive marketing efforts,
foreign transnational corporations have created a
preference for their synthetic drugs which, though
inferior and marred by dangerous side effects, net
billions of dollars. Thus, the film concludes that the
major reason the United States is trying to eradicate
Bolivian coca is to better compete in this lucrative
market.
rebroadcast the USIS documentary, The Continuing
War on Drugs, which had been shown a year earlier.
According to press and Embassy reports the leading
trafficker behind the media that reached a peak in
1982 campaign was Roberto Suarez Gomez-known
in Bolivia as the "king of cocaine." Suarez adopted a
direct personal approach to the press but unlike
Carlos Lehder in Colombia, steadfastly denied any
involvement in the drug trade. He cultivated the
"local boy makes good" image, attributing his wealth
to cattle ranching. In a series of open letters, Suarez
charged President Reagan with forcing coca eradica-
tion in Bolivia to protect purported extensive coca
plantations in California, denying the struggling Bo-
livian farmer both his birthright and livelihood. ~
With a great deal of fanfare, Suarez flew radio and 25X1
newspaper journalists to his ranch in the Beni in July
1983 for a series of interviews during which he
described a sophisticated defense system to protect
himself from possible apprehension by agents of the
US Drug Enforcement Administration who, along
with the US Ambassador, he claims have made
slanderous charges against him. Suarez offered to
surrender to US authorities to prove his innocence of
drug trafficking charges pending against him in the
United States on the condition that the United States
pay the Bolivian foreign debt.
Achieving Results
This spate of antidrug efforts by traffickers in 1982
succeeded in influencing or altering some government
efforts that year. For example, in the spring of 1982
controversy in the press over the use of herbicides
prompted the government of General Torrelio to
renounce further use of herbicides for such purposes,
bringing the US-funded pilot eradication project in
Yapacani to a halt. Similarly, the national broadcast-
ing of The Legend of Coca in September 1982
probably strengthened the inclination of the Torrelio's
successor, General Vildoso-since replaced by Her-
man Siles-to defer action on its five-year coca
control plan.
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Peru: Trafficking and the Media
Trafficker-instigated violence against investigative 25X1
journalists has reached a significant level in Peru.
Journalists attempting to examine the suppliers of
drugs have been the objects of violence or intimidation
on several occasions:
? A dynamite attack in July 1983 destroyed the
automobile of newsman Edgar Puertocarrero, a
correspondent for the Peruvian newspaper La Re-
publica and the BBC, London, who was investigat-
ing drug trafficking in the city of Tarapoto in the
northern Amazon region of Peru. Puertocarrero
reported he had also received threats against his life.
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? Carlos Vegue, director of the weekly Selva, was
severely beaten, and the house of Manueal Areval,
correspondent; for opposition newspaper, El Diario,
was set afire. Both men were publishing articles
critical of drug traffickers.
? Both the radio and newspapers reported the January
1983 arrest of Catalino Escalante Calvo, known as
the drug trafficking czar of Tingo Maria, during a
cocaine seizure. Escalante was also charged with
murdering journalist Orlando Carreras in Septem-
ber 1982.
Articles linking-:reprisals with investigative reporting
on trafficking have been published as warnings to
other journalists. Citing personal experience, authors
have stated that a reporter who attempts such a
project "is taking his life into his hands."
Notwithstanding these attempts at intimidation, the
Peruvian press continues to report drug arrests, sei-
zures, and trials, in a straightforward, objective man-
ner. President Belaunde's strong public statements
against the drug trade receive thorough coverage, as
do the details of government control efforts. The
Peruvian media-also pursue the problem of domestic
drug abuse aggressively, with frequent articles, edito-
rials, and surveys. The press, for example, has high-
lighted aserious increase in the dangerous practice of
smoking coca paste, known as basucas. Using coca in
this semirefined state, the smoker inhales harmful
impurities, including kerosene and cement. The clear-
ly damaging nature of this substance has generated
widespread concern about the effects of drug con-
sumption on users and society.
While there is general agreement in Peru that smok-
ing basucas is harmful, debate over marijuana con-
sumption continues. The press reflects the arguments
in favor of legalization but balances its coverage by
including arguments against legalization as well. For
example, in 198:3 Lima's EI Observador, published
the results of a survey on the attitudes of university
students toward legalization of marijuana. Seventy-
five percent favored legalization for the following
reasons: marijuana is widely used; its dangers are not
documented; and legalization would eliminate one of
its major attractions, that is, that it is forbidden. To
counter student arguments the article quoted a promi-
nent Peruvian psychiatrist who argued that: marijua-
na use can cause genetic damage in the children of
users; users become mentally sluggish; and marijuana
users tend to progress toward stronger, more danger-
ous drugs.
20
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Secret
International
Organizations
North-South Dialogue;
Prospects in 1984
Summary We believe the developing countries will continue to press their demands
for a New International Economic Order (NIEO) this year despite their
inability to make significant progress on it during the past decade. In our
judgment, they will cling to the NIEO because it represents their vision of
an egalitarian world order, unites them by consolidating their economic
demands into one proposal, and places principal blame for their economic
difficulties on external rather than internal factors. The developing
countries will focus on four North-South issues in 1984: ratification of the
Common Fund, the convocation of an international monetary conference,
the launching of Global Negotiations, and the enactment of 39 "immediate
measures" for reform of the specialized agencies in the United Nations,
particularly the IMF.
The Common Fund
The Common Fund obliges participating nations to
make prorated financial contributions to a central
body that would intervene in commodity markets in
an effort to increase the revenue of developing coun-
tries. The Common Fund would embrace as many as
18 nonfuel commodities, five of which are already
covered by price-stabilizing international commodity
organizations. For the Common Fund to become
operative, 90 ratifications and direct capital contribu-
tions of $313 million are needed. As of late 1983, 110
countries, including the United States, had signed the
agreement, but only 68 nations accounting for about
$200 million in contributions had ratified it. The
countries that have ratified probably will meet this
spring to set a deadline by which the agreement must
enter into force or be scrapped. It appears likely that
enough new ratifications will be forthcoming this year
to make the agreement's fate contingent on the
United States, which is slated to make the largest
We expect the other major industrial countries will
press the United States at the June 1984 London
Economic Summit to ratify the Common Fund. In our
judgment, the setting of a deadline in conjunction
with the expected new ratifications will make the
Common Fund ahigh-profile issue around the time of
the summit. Four summit participants-Japan, Great
Britain, France, and Canada-have ratified the
agreement while two others, West Germany and
Italy, have begun ratification procedures. We believe
our summit partners will see the Common Fund as an
opportunity to enhance their image with the Third
World. It has great symbolic value because it would
be the first part of the 1~TIE0 to become operative and
entails only a small direct expense for the other
summit countries ranging from $11 million in direct
capital contributions for Canada to $34 million for
capital contribution, $74 million.
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Japan. We expect Japan to take the lead in lobbying
for the Common Fund at the summit. It played a
similar role at UNCTAD VI in June 1983. According
to US Embassy reporting, Tokyo sees its stand on the
Common Fund as an important element in its rela-
tionship with Malaysia, the Philippines, and Indone-
sia-all supporters. of the agreement.
An International Monetary Conference
At the March 1983 Nonaligned Summit in New
Delhi, the developing countries called for an interna-
tional monetary conference to negotiate the financial
issues contained in the NIEO. The proposed confer-
ence would have universal participation and focus on
"reforming" the IMF. The conference, however,
would not be held under the auspices of the IMF
where the industrial countries have effective control.
At the May 1983 Williamsburg Economic Summit,
the seven major industrial countries, prompted by
France, said that they would invite finance ministers
from unspecified countries and the head of the IMF to
consider the possibility of a high-level monetary con-
ference. Subsequently, India, the chairman of the
Nonaligned Movement, implored the industrial na-
tions to enter into a dialogue with the developing
countries on the organization of a monetary confer-
ence. The developing countries tried unsuccessfully at
UNCTAD VI and the fall 1983 UN General Assem-
bly session to gain the industrial nations' approval for
resolutions that incorporated language on a monetary
conference from both the New Delhi and Williams-
burg communiques
We believe the developing countries will make a
major effort in 1984 to initiate preparations for a
monetary conference. We expect they will try to
formulate a UN resolution that would commit the
industrial nations to the convocation of a conference.
Press reports indicate that they have established a
group of experts to work out the details of their
proposal. The developing countries hope to keep alive
the idea of a conference and to be prepared with their
own proposals should the industrial countries decide
to hold high-level discussions on monetary reform.
Most industrial nations have little interest in a confer-
ence addressing their own monetary problems much
less one focusing on Third World concerns.
Global Negotiations
We believe the so-called Global Negotiations, which
the developing countries first proposed in 1979, will be
a secondary issue in 1984. Global Negotiations would
involve recommendations by the Third World~iomi-
nated UN General Assembly on trade, aid, energy,
commodities, and finance to the UN's specialized
agencies, such as the IMF, the World Bank, and
GATT. The industrial and developing countries have
been unable to agree on a General Assembly resolu-
tion that would launch Global Negotiations. In an
attempt to break the impasse, the developing coun-
tries proposed at the fall 1983 session of the General
Assembly that Global Negotiations be separated into
two stages. This approach would postpone discussion
of the two thorniest issues, energy and finance, so that
negotiation of the less controversial issues could begin.
The developing countries, however, have not yet of-
fered details on how the two-stage approach would
work.
the
developing countries concluded at the March 1983
Nonaligned Summit that Global Negotiations were
unlikely to bring progress on the NIEO in the near
future. Consequently, they formulated 39 "immediate
measures" that they want to pursue in the IMF, the
World Bank, GATT, and other UN specialized agen-
cies. The measures are virtually identical to the NIEO
demands and stress the need for the IMF and World
Bank to transfer funds quickly to the developing
countries. The developing nations say that the imme-
diate measures are meant to supplement, not replace,
Global Negotiations.
We doubt the EC and Japan will urge the United
States to consider the immediate measures. These
proposals require substantial short-term resource
transfers, and we have no evidence that any major
industrial country is prepared to make them. The
We doubt that a Third World proposal for a monetary
conference will win significant support from the EC
and Japan. The major industrial nations have made
clear that discussion of a monetary conference must
start in the IMF's Group of 10, which they dominate.
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Sec"ret
The NIEO presumes that sustained economic growth
in the developing countries can occur only through a
massive North to South transfer of wealth and
dramatically increased Third World power in inter-
national economic institutions. It focuses on changes
in five areas: money, trade, commodities, aid, and
energy.
? The industrial countries should dismantle pro-
tectionist barriers to Third World exports.
? The industrial nations should phase out their
aging industries so that LDCs can expand their
market shares.
? GATT and UNCTAD should engage in more
joint activities and eventually merge.
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? The IMF's system of tying a member's voting
strength to its financial contribution should be
Enactment of the Common Fund.
? Industrial nations should assist the LDCs to
altered so that the LDCs can have voting power
increase their participation in the processing,
commensurate with their numbers.
? The IMF should create large new quantities of
Special Drawing Rights, mostly to be allocated to
marketing, and distribution of their
commodities.
? Prices of commodities the LDCs export to the
the developing countries.
industrialized countries should be linked to the
? The IMF should relax the conditionality it atta-
prices of manufactured goods the LDCs import
ches to its loans so as not to conflict with a
member's
ti
l
i
from the industrialized countries.
~
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na
ona
econom
c program.
? The IMF should use its loans to encourage expan-
Energy:
Sion in domestic production rather than correcting
The World Bank should establish an energy
foreign payments problems.
affiliate to finance Third World energy projects.
? Stable exchange rates should be created through
The industrial nations should transfer energy-
the use of target zones and guidelines supervised by
h
IMF
related technology to the LDCs. ~ 25X1
t
e
.
? The IMF should expand its resources by borrowing
Aid:
from capital markets and linking increases in its
? Industrial nations should donate 0.7 percent of
quotas to growth in world trade and payments.0
their GNP to the LDCs in foreign aid; the aid
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should be assured, continuous, and automatic.
Trade:
~~
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? Industrial countries should increase nonreciprocal
trade preferences for the LDCs.
developing countries pressed for the immediate mea-
sures at UNCTAD VI and the September 1983
IMF/World Bank meetings, but the industrial na-
tions refused to make substantive concessions.
The Soviet Union and the
North-South Dialogue
The Soviet Union has used North-South forums to try
to win Third World sympathy for its positions on
East-West issues. At UNCTAD VI, for example, the
Soviets claimed that the United States was diverting
aid into arms expenditures and that US sanctions on
East-West trade were limiting Soviet access to hard
currency and thus curtailing Moscow's ability to aid
the developing countries. Despite such claims, the US
delegation to the conference reported that the Soviet
Union did not enhance its image with the developing
countries by emphasizing East-West issues.
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The Soviet Union is committed to bilateralism in its
relations with developing countries and steadfastly
refuses to enter into the types of multilateral agree-
ments called for in Third World demands. For exam-
ple, Moscow has:
? Not signed the Common Fund.
? Not established a generalized system of trade pref-
erences for developing countries.
? Declined to join any of the multilateral aid institu-
tions.
The Soviet Union endorses the Third World's call for
the NIEO but avoids participation in North-South
negotiations that involve the transfer of wealth. Mos-
cow uses forums such as UNCTAD and the UN
Economic and Social Council to back the NIEO's
assertion that Third World poverty is largely a result
of colonialism and Western exploitation. It claims
that as a noncolonial, socialist state, it bears no
responsibility for the Third World's plight
In our opinion, the developing countries have dis-
counted the Soviet Union as a factor in the North-
South dialogue. We believe they have done so partly
because the Soviet Union is not a member of the three
international economic institutions they want to
change most-the IMF, the World Bank, and GATT.
Furthermore, the Soviet refusal to engage in multilat-
eral trade and aid negotiations is so firm that we
believe the developing countries doubt they can ever
change Soviet policy. In our judgment, the developing
countries occasionally will criticize the Soviet Union
for not helping them more, as they did at UNCTAD
VI, but will continue to fix virtually all of their
attention on the wealthy industrialized countries
An International Financial Crisis:
The Potential Wildcard
While we believe continued stalemate will mark
North-South discussions this year, a dramatically
different alternative scenario cannot be ruled out. The
whole tenor of North-South relations could shift
markedly in the event of a financial crisis induced
either by the default of a major debtor or by a major
shock to the world economy such as an oil price runup
caused by interruption of Persian Gulf oil supplies.
We believe that some LDCs might think the Third
World as a group has sufficient bargaining power to
coerce the industrialized countries into making real
concessions on the NIEO.
Following the 1973/74 oil price hikes, the LDCs
believed that they could use OPEC's leverage and the
West's concern about oil supply and price stability to
secure the economic and political concessions included
in the NIEO. The tactic failed principally because
OPEC was neither willing nor able to use what
leverage it had to help poorer Third World countries
at the North-South bargaining table. We believe that,
in the event of international financial crisis precipitat-
ed by a debt default or world oil shortage, some LDCs
could try again to link the NIEO with their coopera-
tion in managing the crisis.
Should a global financial crisis occur, some LDCs
would try to convince the industrial countries that
they need the cooperation of Third World debtors to
contain the serious economic and political dislocations
an international financial crisis would cause. Nicara-
gua and Ecuador, which have already proposed uni-
fied action on debt, could again raise that possibility
in an attempt to link Third World debt directly to
economic- and political concessions. Although the ma-
jor Third-World debtors have repeatedly blocked
proposals to create a debtors' cartel, the more radical
Third World states may believe that the industrial
powers would be willing to grant concessions in a
crisis rather than risk even more uncertainty. We
believe, however, the major debtors such as Mexico,
Brazil, and Argentina, with a greater stake in the
financial system, are unlikely to risk their national
financial interests by supporting confrontational
Third World tactics in the midst of a crisis.
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