NATIONAL INTELLIGENCE DAILY SATURDAY 13 AUGUST 1983

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T01094R000400010047-1
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 17
• Document Creation Date: December 27, 2016
• Document Release Date: July 20, 2010
• Sequence Number: 47
• Publication Date: August 13, 1983
• Content Type: REPORT

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Director of
Central
Intelligence
p CPAS/CiG
CY 2#
Top Seertt'
National Intelligence Daily
Saturday
13 August 1983
Top Seere!
CPAS NID
13 August 1983
Copy 285
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Contents
West Germany: Reactions to "Dual-Key" Proposal .............. 2
USSR-Eastern Europe: Andropov's Position on Economics 5
Ell Salvador: Arms Interdiction Effort ....................................... 6
Argentina-UK: Incidents in South Atlantic .............................. 6
Chile: Crackdown Produces Violence .................................... 7
Nigeria: Gubernatorial Elections ............................................ 7
West Africa-Israel: Interest in Diplomatic Relations ..............
USSR: Criticism of the Police .................................................. 9
Special Analysis
Egypt: Potential Financial Crisis .............................................. 10
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13 August 1983
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WEST GERMANY: Reactions to "Dual-Key" Proposal
Bonn is unlikely to raise the issue of dual control for US INF
missiles, despite recent media attention to an interview by Christian
Social Union leader Strauss advocating such a system.
Following press reports of Strauss's statement, a Defense
Ministry spokesman has emphasized that no such proposal is being
considered. Chancellor Kohl has rejected suggestions of a West
German right to veto the use of US nuclear missiles. The US Embassy
in Bonn reports that Strauss's remarks came in response to a leading
question by the interviewer and is not a trial balloon by the governing
coalition.
Comment: The Kohl government regards existing consultation
arrangements with the US as entirely adequate and would prefer to
avoid a political debate on the sensitive topic. While some opposition
leaders may attempt to exploit the interview to embarrass the
government, the Social Democrats would find it difficult to endorse
proposals for dual control of INF. Most prominent political leaders in
West Germany, including Social Democratic Party leader Vogel, have
opposed any arrangements that would appear to give Bonn even
partial control over nuclear weapons
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2 13 August 1983
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USSR-EASTERN EUROPE: Andropov's Position on Economics
A Soviet diplomat in Eastern Europe reports that General
Secretary Andropov has expressed concern about some Polish and
Hungarian reform proposals.
The diplomat reports that Andropov was displeased with a
proposal by some Polish leaders to expand their private economic
sector. He also expressed misgivings over proposals to expand
factory autonomy made by Hungarian leader Kadar during his recent
visit to Moscow. The diplomat claims that the Hungarians had
approached the limits of what is permissible on economic reform and
that Moscow is increasingly concerned with Budapest's Western
economic orientation.
The Soviet official insists, however, that Andropov recognizes the
need to permit differences among "socialist" states and claims that
the Soviet leader favored evolutionary change to revitalize
"socialism." The US Embassy in Budapest says that the Hungarians
remain confident that Andropov still supports the main thrust of their
reform program.
Comment: Some of Andropov's colleagues may be urging him to
restrain East European reform moves. The diplomat's comments,
however, do not suggest that Moscow intends to reverse existing
reforms.
The Soviets have been critical of the role of the private sector in
Poland, and Andropov is likely to resist greater concessions to it by
Warsaw. He has, been a strong supporter of Hungarian economic
reform, but he may now feel that managerial autonomy there has
gone as far as it can without undermining the "socialist" system.
Budapest appears committed to further price and wage reform,
the breakup of large enterprises, and increased economic ties to the
West. It sees these as essential to solving the country's economic
problems. Kadar may, however, back off from more far-reaching
proposals to satisfy his critics in Moscow.
Andropov's reported views suggest he realizes that East
European experience will provide no quick fixes and that he will be
wary of relying on market mechanisms to revitalize the Soviet
economy.
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5 13 August 1983
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The Salvadoran Army intercepted a large insurgent supply
column in San Vicente Department earlier this month and captured
several prisoners. It believes the 300-man guerrilla force was en route
from supply depots in southeastern Usulutan Department to its
stronghold on the Guazapa Volcano.
Comment: Large shipments of arms and munitions apparently
are continuing to reach the southeast for subsequent distribution
overland to the various guerrilla fronts. The operation also verifies the
insurgents' continued dependence on external sources for weapons
and supplies, despite their past successes in capturing materiel from
the armed forces.
Several recent incidents initiated by Argentina near the Falklands
are designed to focus international attention on the issue again, in
anticipation of new debates at the UN. The Argentine Navy reportedly
has encouraged fishing vessels to sail into the British Protection zone
surrounding the islands,
(London has
publicly warned Buenos Aires of the possibility of military retaliation.
Comment: Argentina also is trying to build support-especially in
the US Government-to stop British plans to construct an airbase on
the islands and to persuade the UK to open rich fishing beds in the
protection zone to Argentine ships. London probably will not retaliate
unless the incursions become more serious. The British warning is
intended to portray Buenos Aires as an aggressor and to help justify
the decision to build the base.
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6 13 August 1983
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The violence following President Pinochet's decision to crack
down on participants in the nationwide protests on Thursday
probably will increase pressure from elements within his government
to accelerate political concessions. Government spokesmen report 17
deaths, as
troops and police used tear gas, clubs, and automatic weapons
against the demonstrators. A prominent civilian conservative favoring
a political opening and the return of exiles was sworn in on
Wednesday to replace an Army general as Interior Minister.
Comment: The demonstrations were the most extensive and
violent so far, and the funerals for those killed could prompt more
violence. The security forces' lack of discipline[
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will offset any positive
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effects of the recent cabinet changes. Pinochet faces increasing
concern in the military over the lack of order and a bolder and
more unified opposition. Unless significant progress is made soon
toward civilian rule, ,a political crisis is likely to develop.
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Voters are to elect governors for Nigeria's 19 states today in the
second of five weekly rounds of elections. In the elections in 1979,
President Shagari's ruling National Party captured governorships in
only seven states. Opposition party reaction to President Shagari's
reelection last weekend has been muted, although several of the
defeated candidates are protesting the results in court.
Comment: The opposition is making a concerted attempt to
weaken Shagari's National Party at the state level, where governors
control the political process. If the opposition parties succeed in
retaining a majority of the governorships, they probably, will carry the
National Assembly elections later this month. Such an outcome would
force Shagari to negotiate an alliance with one or more of the
opposition parties in order to pass legislation.
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7 13 August 1983
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WEST AFRICA-ISRAEL: Interest in Diplomatic Relations
Recent reports from US Embassies indicate that sentiment may
be building among moderate West African governments to renew
diplomatic ties with Israel. Although Liberia has vacillated for years,
Head of State Doe plans to announce the restoration of relations
soon-perhaps today-and to visit Israel later this month. Ivory
Coast President Houphouet-Boigny has urged Israel to delay Liberia's
move while he attempts to persuade "five or six" other unnamed
African countries to follow suit. Malawi, Lesotho, Swaziland, and Zaire
are the onl black African countries that now maintain diplomatic ties
with Israel.
Comment: Reestablishing relations with black African
countries-most of which severed ties after the 1973 Middle East
war-has been a major objective of Israeli foreign policy. West
Africa's renewed interest in relations with Israel stems in part from
displeasure with Libya's latest intervention in Chad. In addition to
rebuking Tripoli, the countries also seek security and economic
assistance to help defend themselves against Libyan subversion.
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8 13 August 1983
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Pravda on Wednesday carried an article by Minister of Interior
Fedorchuk berating the police for their inability to combat theft of
state property. Fedorchuk also drew attention to the role of
drunkenness in criminal activity, and called for stricter punishment of
drunkards. In addition, he indicated a purge of the Ministry was under
way.
Fedorchuk won a reputation as a strict disciplinarian who was
ruthless in stamping out dissidence when he headed the Ukrainian
KGB and during his brief tenure last year as KGB chief. He became
the Minister of Interior in December,
weeks ago the Politburo decided to designate political officers in
the Ministry to improve party control and heighten discipline.
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9 13 August 1983
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Special Analysis
EGYPT: Potential Financial Crisis
Looming financial difficulties could force the Egyptian
Government to make politically difficult economic austerity decisions
and perhaps strain relations with the US. Cairo already is having some
problems servicing its foreign debts, and lower oil earnings will cause
foreign exchange difficulties to become worse in the months ahead. If
Egypt fails to adjust to lower oil earnings, it could be faced with a debt
crisis late this year or in 1984. After several years of increases in
production and income, the ti htenin g foreign financial situation is
slowing economic growth.
Egypt has weathered the soft oil market and the global recession
better than most developing countries. Its generally good
performance to date stems from a fortuitous decline in the prices of
key agricultural imports and from the limited policy adjustments
carried out by the government.
The government reduced oil prices five times in 1982 to ensure
sales, and it pushed oil production to a record high of 700,000 barrels
per day in the fourth quarter. It also has used direct controls to
restrict imports and has tightened domestic credit ceilings. Moreover,
falling world prices for food grains and sugar, which comprise nearly
one-fourth of Egypt's imports, have helped compensate for reduced
oil earnings.
Nevertheless, overall economic growth in 1982 is estimated to
have slowed to around 6 percent because of the tighter foreign
exchange situation. Although this was a favorable performance when
compared with that of most developing countries, it was lower than
the 8- to 9-percent increases of recent years.
Inflation rose to 13.3 percent in 1982, as compared with 10.2
percent in 1981. Price increases were encouraged by rapid monetary
expansion, which in turn was caused by government deficits
equivalent to 20 percent of gross domestic product.
Problems Increasing
The government has been especially concerned about declining
world oil prices. To respond to market pressures and to try to
maintain sales, it cut oil prices in each of the first three months of
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1983 by a total of $4.50 a barrel. As the oil market became somewhat
more steady in the spring, however, Egypt raised prices by 25 cents a
barrel in May and again in June and 50 cents a barrel at the beginning
of July.
Foreign exchange difficulties persisted in the first half of 1983 and
will become worse in the months ahead, when the effect of lower oil
earnings is felt. Barring new setbacks, the government should be able
to muddle through the next few months, but financing an estimated
current account deficit of $3 billion will not be easy.
The most recent data indicate that Egypt had only $750 million in
foreign exchange reserves at the end of March, enough to pay for only
one month of imports. Foreign aid receipts are not likely to increase
much over 1982. Most US and other Western banks, although willing
to maintain credit lines, are increasingly wary of providing new
balance-of-payments loans to Egypt
Possible Foreign Debt Crisis
Foreign bankers and the IMF will be watching Egypt's financial
situation closely. Cash flow problems, similar to those that caused
recent late payments to the US for credits under the Foreign Military
Sales program, are likely to recur.
There are several other possible developments that could cause
Egypt's debt problems to intensify rapidly:
- Any additional reductions in the price of oil would be
costly because Egypt loses about $125 million annually for
each $1-per-barrel decline in prices. .
- Increased agricultural import prices would push up the
cost of essential food imports that are used for
government-subsidized food distribution programs.
- A foreign lender crisis, stemming either from Egyptian or
other Third World debt problems, could reduce Cairo's
ability to refinance short-term credits and would create
major liquidity problems.
The likelihood of these events occurring is small. Any one of them,
however, would be a major setback.
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11 13 August 1983
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Cairo has taken several small corrective steps, but additional and
more far-reaching measures almost certainly will be necessary to
avoid a crisis or to cope with one after it occurs. There is no
consensus, however, on what actions are necessary. The government
is likely to delay reforms because of its fears about the political
repercussions of austerity.
Implications of a Debt Crisis
A foreign debt crisis would have serious domestic and foreign
repercussions. Past foreign financial crises are associated in Egypt
with traumatic political events, such as the bread price riots of
January 1977 that shook the Sadat regime.
In recent months there has been increased grumbling about rising
prices, failing public services, and other economic hardships. A
foreign debt crisis and the specter of foreigners dictating Egyptian
economic policies would give opposition groups potent issues to use
against President Mubarak.
A debt crisis also would complicate relations with the US, Egypt's
largest creditor. Cairo already has tentatively explored the possibility
of relief from payments due on US Foreign Military Sales credits. If
Egypt could not service its debts to the US, the strict procedures used
by Washington to deal with such problems would, in Cairo's view,
directly contradict the special political relationship Egypt believes it
A debt crisis would prompt Egypt to intensify efforts to achieve
aid parity with Israel. It would, for example, seek cash transfers of
economic aid and greater forgivenesss of military assistance loans.
Mubarak and other Egyptians claim that such aid parity was promised
to the late President Sadat, and the need for more generous US help
would increase as Egypt's problems worsened.
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12 13 August 1983
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