MONTHLY WARNING REPORTS FOR JULY 1988

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP91B00776R000400110016-9
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 14
• Document Creation Date: December 23, 2016
• Document Release Date: June 13, 2013
• Sequence Number: 16
• Publication Date: August 17, 1988
• Content Type: MEMO

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The Director of Central Intelligence
Washington, D.C. 20505
17 August 1988
National Intelligence Council
MEMORANDUM FOR: See Distribution
FROM: Charles E. Allen
National Intelligence Officer for Warning
SUBJECT: Monthly Warning Reports for July 1988
I. Summary of Key Warning Issues:
USSR
.The decisions of the Soviet leadership on Armenian unrest on 19 July
indicate that Moscow has decided it is time to crack down on the disturbances
and to set clear limits on its willingness to redress the grievances of the
USSR's myriad minority nationalities. The leadership is, however, taking a
prudent middle course. Moscow has rejected demands for the transfer of
Nagorno-Karabakh to Armenia and warned that it will take a firm hand in
quelling local street protests and strikes. On the other hand, Moscow has
criticized past neglect of the concerns of Nagorno-Karabakh's predominantly
Armenian population and promised to enhance minority cultural and economic
rights. The leadership noted that it will grant the region greater political
autonomy.
This decision appears to be a stopgap measure. The growing unrest in the
region forced Moscow to take action before internal deliberations on the
subject were fully resolved. The unrest threatens Gorbachev and the momentum
of his reform program; it also threatens to find resonance among several other
minority nationalities who also have territorial grievances.
This review reflects consideration of inputs generated at warning meetings
conducted by the National Intelligence Officers with Community representatives
from all areas. As such, it represents a Community-wide review, but it is not
a formally coordinated Community product.
CL BY SIGNER
DECL OADR
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The Intelligence Community agrees that the ambiguous wording of the
leadership's promises to give greater autonomy to national minorities
disguises unresolved differences about nationalities policy. Those
differences probably will sharpen as the fall Central Committee plenum on
nationality issues approaches. The ultimate impact of the Nagorno-Karabakh
decision will depend on how effectively Moscow moves to implement its
rhetorical promises of greater autonomy and expanded rights for national
minorities. There is a good chance that Gorbachev's effort to chart a middle
ground course could work if the leadership in fact allows minorities
significantly greater control over local political, economic, and cultural
affairs.
In the opinion of the NIO for Warning, ethnic unrest in the Caucasus
promises to simmer indefinitely, posing a continuing challenge to the
leadership and diverting its attention from other pressing matters. In the
meantime, deep dissatisfaction in the Caucasus again could turn violent with
little warning. Dissident minorities in other regions, especially the Baltic
states, will be watching eagerly the implications of Moscow's handling of the
Armenian crisis for their own aspirations. Reactions to surprise verdicts in
the ongoing trials of Azeris for murders of Armenians during riots earlier
this year could be triggers. The leadership's management of the outbursts has
been collective, insulating Gorbachev from personal responsibility.
Gorbachev's position is not immediately threatened, but the unrest is damaging
to him and could over time be used against him by conservative opponents,
especially if violence again breaks out.
USSR/Eastern Europe
Reports of a possible withdrawal of Soviet troops from Hungary seem to be
on the mark. Although the evidence is not conclusive, Community analysts
believe there is an agreement in principle between Moscow and Budapest for the
phased withdrawal of all Soviet forces from Hungary. Statements by Soviet and
Hungarian officials seem to have ruled out a unilateral or unconditional
withdrawal. From a Soviet perspective, withdrawal of the Southern Group of
Forces from Hungary makes sense. It would:
o Not greatly affect Warsaw Pact war-fighting capability.
o Ease Moscow's economic burden and shift some of it to the Hungarians.
o Send a powerful signal to the West and stimulate public pressure for
reciprocal moves.
In addition, it would give a boost to the new, reform-minded Hungarian
leadership.
Iraq/Iran
Over the next few weeks or months, Iraq and Iran will continue to struggle
over the details and implementation of the ceasefire and U.N. Resolution 598.
Iran's military and political situation deteriorated so much recently that
Iranian leaders had to accept Resolution 598. Economic problems, fears of
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Iraqi chemical attacks, Khomeini's failing health, and increasing anti-war
opposition also pushed Iran to accept the resolution. The Community generally
agrees that war-weariness in Iran will limit the ability of Tehran to use the
ceasefire to rebuild its armed forces, a process that will take two or more
years.
? Defense Intelligence Agency analysts note that Tehran might increase
efforts to export its Islamic revolution--especially to the Gulf states--to
offset Iran's military loss to Iraq. Other analysts judge that Iran would be
reluctant to threaten the Gulf states, who would provide most of the money for
reparations. Central Intelligence Agency analysts believe that radicals are
still "powerful in Iran and note that the ceasefire probably was not reached by
consensus. The radicals might eventually voice strong recriminations against
it. Channeling fervor into fomenting Islamic revolutions abroad might allow
the current leaders in Tehran to deflect the radicals' criticism.
Furthermore, war-related problems and the ceasefire controversy have increased
the possibility of internal instability. When a ceasefire becomes
established, pressure from the radicals will be reduced temporarily and
Iranian Majlis Speaker Rafsanjani will have a better than 50 percent chance of
remaining in power.
With regard to Iran's attitude toward the United States, State/INR
analysts believe that while Khomeini is hostile to the US, other Iranian
leaders are less antagonistic and some recognize the need for US help in
rebuilding Iran. Some CIA analysts, however, believe that Tehran will not
lessen its hostility toward the US and that any Iranian gesture will be
designed to lessen US diplomatic, economic, and military pressure on Iran.
Other CIA analysts opine that US-Iranian relations eventually will improve as
trade increases and the US military presence in the Gulf declines. Community
analysts concur that Iran will use the cease-fire to press the United States
to reduce its forces in the Persian Gulf.
Iraq
suggests that Iraq could have a nuclear weapon as early
as 1991. Previous estimates judged that Iraqj would not have such weapons
before the late 1990s. The estimates suffer from uncertainties because of
wide gaps in data, but the acquisition of special metals, reprocessing
activity, and the addition to the Tuwaitha nuclear
research site suggest disturbing trends. Although Community analysts have no
information on an Iraqi program to design nuclear weapons, the most likely
source of assistance with such a program is
Nicaragua
The Sandinistas are likely to continue low-level operations against the
insurgents and seek to blame the Resistance for any breakdown in the
ceasefire. Insurgent infighting is likely to worsen in the wake of the Santo
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Domingo meeting, threatening anew the cohesion of the Resistance movement at a
time when unity is critical to maintaining the insurgents' viability. The
Sandinistas' decision to declare US Embassy personnel persona non grata and
crack down on dissidents was an effort to preempt the opposition's plans to
foment large-scale and widespread demonstrations. The gambit worked.
Opposition momentum has slowed considerably and the arrests of key
leaders--who remain in detention--have disrupted planning. The regime will
continue to set tight limits on dissent, but will stop short of totally
dismantling the opposition in order to deflect international criticism.
Although the Sandinistas unilaterally have extended the cease-fire through
the end of August, clashes are increasing. There are differences among
analysts over which side has been responsible for the increase; some believe
both sides are at fault, while others argue the Sandinistas have adopted a
more aggressive posture and that the insurgents remain in a defensive mode.
Panama
General Noriega is moving to consolidate his grip on power and will be
able to remain in power for the foreseeable future in the absence of a
reinvigorated opposition. The Washington Community agrees with USSOUTHCOM
analysts that General Noriega can and will remain in power as long as he
wishes and that the has taken steps to institutionalize his position.
Noriega, for example, is preparing to alter the electoral code to bolster his
run for the presidency in May 1989. The opposition, including the
middle-class, seems resigned to this development and appears inclined to
participate in the elections on Noriega's terms. Nonetheless, the
Intelligence Community does not accept SOUTHCOM's notion that the trend toward
consolidation of Noriega's power cannot be reversed. Most analysts believe
that while the economy currently has stabilized, for example, Noriega still is
vulnerable to a sharp downturn and remains widely unpopular. Moreover, a
leftward drift could alarm some in the military and provide the now unfocused
opposition with a rallying point.
The NIO for Warning has additional concerns about Panama. There is a
chance that spontaneous violence--triggered by either Panamanians or
Americans--quickly could escalate the crisis beyond the control of either
government. Outbursts by US citizens could be most explosive. If, for
example, Panamanian troops carry through on now-shelved threats to search the
homes of the 1,130 American employees of the Panama Canal Commission for
"contraband" goods from military exchanges, irate US citizens could respond
with gunfire. SOUTHCOM has plans to protect US citizens which, if carried
out, could lead to an unintended military confrontation. The continuing large
number of US military personnel living off post make terrorist attacks on
Americans easy. Continuing tensions will increase the chances of violence and
make management of the crisis by US officials in Panama more difficult.
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2. Trend Commentary:
Yugoslavia
Labor unrest will continue to escalate but is not likely to engulf the
country as a whole. Strike activity has expanded dramatically, is better
organized, and has increasingly acquired anti-government overtones. We
eventually may see strikes embracing entire economic sectors. For the near
term, however, central authorities have some maneuvering room to defuse labor
unrest by retreating from austerity measures or resorting to coercion. The
Mikulic government will be caught between public pressures for a relaxation of
austerity measures and critics--particularly the Slovene and Croatian
leaderships--calling for a resolute economic strategy. Should Mikulic falter
and central authority erode further, military intervention will become a more
plausible contingency. Direct intervention by the military is very unlikely
in the near term, however; in any case, it would be preceded by clear warnings
to the civilian leadership.
Mexico
A certain amount of time will be needed before either the Mexicans or the
Intelligence Community will be able to assess the full implications of the
election results announced early in July. The final count gave
President-elect Salinas and the ruling Institutional Revolutionary Party (PRI)
50.3 per cent of the tally. The PRI will have only a bare majority in the
Chamber, or lower house; its loss of four of 64 seats in the Senate is
unprecedented. The election marked a turning point from which there is
probably no going back. Salinas' mandate is liquid; if he is skillful, he
will be able to trade on being a courageous reformist who is rescuing a party
and process that was suffering potentially destabilizing fatigue. To be
successful, however, Salinas must clearly be seen to be in charge of the
process of change and in charge of reinvigorating the party. Most believe the
potential for major violence is still limited. The surprising election result
pointed up, however, that there is still considerable margin for
miscalculation in Mexico today. In terms of policy, the most immediate effect
of the election is likely to be on debt negotiations; Salinas will almost
certainly drive a tougher bargain and make a moratorium a more serious
possibility.
Palestine Liberation Organization
State Department analysts note that the "Abu Sharif document"--prepared by
one of Yassir Arafat's chief subordinates and distributed at the Arab Summit
in June--represents a significant contrast with past Palestine Liberation
Organization (PLO) policy by calling for direct talks with Israel and
recognizing Israeli statehood and security needs. The document has sparked
criticism, even condemnation, within the PLO. Thus far, Arafat has neither
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endorsed nor disavowed the document's contents; his official endorsement
probably would cause a severe split in the PLO. The document probably
represents the position Arafat would like the PLO to reach eventually. The
PLO is unlikely to follow up the document with new policies that would meet US
?requirements and lead to progress in the Middle East peace process.
AIDS
Although Soviet objectivity and cooperation on AIDS have improved over the
last year, the echo of earlier disinformation is likely to persist, especially
in the Third World. The nature and extent of potential US-Soviet cooperation
on AIDS will become more clear in October at a regular bilateral meeting in
the United States on health cooperation. The dimensions of the AIDS pandemic
worldwide are not yet known. Regions such as the Caribbean have a strong
prospect of experiencing Human Immunodeficiency Virus (HIV) prevalence on a
scale comparable to that already seen in Africa. The social stigma of
presumed HIV infection as the reason for rejection may discourage qualified
applicants for International Military Exchange Training and other US-based
training and education programs unless confidentiality can be better
protected. Several countries are considering mandatory HIV testing as a
requirement for receiving a visa. Although some reporting has suggested that
countries or groups might consider ways to use AIDS as a biological weapon,
there are no confirmed examples.
South Africa
A South African cross-border attack on black insurgent African National
Congress targets in neighboring states now is slightly more likely than usual
because of recent ANC bombings against soft targets that caused
civilian--including white--casualties. Pretoria may favor a covert operation,
and also will continue to apply pressure on neighbors such as Botswana for
better cooperation on security.
Africa/Libya
Benin's recent moves against Libyan interests--including the expulsion of
the Libyan ambassador--make retaliation by Colonel Qadhafi likely. Possible
moves include the overthrow of President Kerekou by exploiting domestic
discontent with his rule. Qadhafi's recent moderation and diplomatic
initiatives toward other African states have met with success and soon could
lead to restored relations with Senegal.
Terrorism
CIA analysts believe Iran eventually will decide to retaliate for the
accidental downing of IranAir Flight 655, but that Iranian leaders first will
exhaust diplomatic efforts and then act in a way not to endanger initiatives
to improve foreign relations. A decision to retaliate probably would be made
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by consensus of Iran's leaders--including Assembly Speaker Rafsanjani, the
Prime Minister, the Intelligence and Interior Ministers, and the commander of
the Iranian Revolutionary Guard Corps. Another concern is that Hizballah or
Palestinian extremists may act on their own out of a growing sense of
frustration over the IranAir incident, the Gulf military situation, and the
assassination of Abu Jihad. The danger of "freelancing" is increasing and
threats to US interests will continue at a high rate. The more likely
incidents are hijackings or attacks against large numbers of US personnel,
particularly in the Gulf states.
3. The Nb/Warning notes these additional areas of warning concern:
Saudi Arabia/US
The Saudi Government's statement last week that it reserves the right to
buy weapons from anywhere "without restrictions or preconditions" if
Washington does not meet its military needs is another sign that Riyadh
gradually is moving toward a more independent posture and away from the United
States.
Saudi unhappiness with the US--particularly objections to Congressional
restrictions on weapons deliveries--are likely to lead to still more deals
like the Chinese CSS-2 sale and Britain's recent $30 billion long-term
contract for Tornados and other hardware. We expect Riyadh to consider.
purchasing Soviet bloc military equipment--possibly soon; neighboring and
conservative Kuwait long has bought bloc arms and Jordan recently evaluated a
Soviet offer of sophisticated military aircraft. Over time, the Saudis may
respond to Moscow's persistent diplomatic overtures, diversify arms purchases
more, and become less pro-Western in orientation. Even some senior Israeli
officials have expressed concern over the US's declining influence in the Arab
world and have urged their American friends to compromise on restrictions on
the F-18/Maverick missile package for Kuwait recently approved by Congress.
Ecuador
President Rodrigo Borja, who assumed office on 10 August, appears prepared
to distance his country from its present close association with the United
States. He intends to reestablish diplomatic relations with Nicaragua and to
strengthen ties with Cuba, the Soviet Union and Eastern Europe. He is also
likely to inaugurate a major shift away from outgoing President
Febres-Cordero's free market economic policies. Borja may join with other
regional leaders to announce a plan that ties debt repayments to export
earnings.
Despite his swing leftward, Borja has signaled that he is aware of the
fears of the military and business leaders concerning his political and
economic views and has indicated that he will avoid radical policies such as
the nationalization of banks or key industries. Moreover, despite his bias
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against the United States, Borja has expressed a willingness to continue
cooperation on some issues with the United States, particularly the narcotics
area.
Iran/Iraq
An end of the war between Iran and Iraq will bring major changes to the
Gulf region and have significant implications reaching far beyond the Middle
East. The extent of post-war changes remains unclear, but they will have both
positive and negative consequences for US interests.
On the positive side, both regimes are likelt to abandon some of their
more radical positions, adopt more balanced foreign policies, and reintegrate
themselves more fully into the world political order. Ayatollah Khomeini's
retreat from his long-held position of bringing down the Saddam Hussein regime
seems to have been a significant setback for radical elements. Iranian
pragmatists increasingly appear to be in charge--as evidenced by recent
improvements in ties to Britain, France, and Canada--with an accompanying
opportunity for gradually improved US/Iranian relations, despite residual
animosities. The Iraqis may loosen ties with their major arms supplier--the
USSR--and diversify their foreign policy positions; they probably will also
improve their political standing in the world community as the stigma of
Baghdad's use of chemical weapons fades.
Peace will give both sides a chance to rebuild damaged industrial
facilities and infrastructure and to improve the lot of their
peoples--improving overall trade prospects and opportunities for billions of
dollars worth of Western non-military sales; this need for investment also
will incidentally increase opportunities to build political influence as
well. US allies in Western Europe, as well as Japan and South Korea, probably
will have better chances at making inroads than the US, particularly in Iran.
The US may be able to improve further relations with Gulf Arabs who have
been reluctant--despite US convoy efforts--to forge ties too closely to the US
for fear of Iranian retaliation. This possibility will continue to be offset
by the growing perception in the region that the US is an unreliable arms
supplier--and thereby friend--a view strengthened by Saudi Arabia's recent
decision to turn to Britain for $30 billion in military hardware,
construction, and services.
On the negative side, there are a number of potentially serious adverse
implications of "peace" for the US:
o Cessation of combat may allow Iraq, after a period of recuperation, to
direct its battle hardened forces against other targets. Saddam Hussein
may revive Iraqi irredentist claims on Kuwait to secure oil, territory,
and port facilities directly on the Persian Gulf. Israel will be alert
for hostile Iraqi intent and may be even more willing to strike
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preemptively at Iraqi offensive capabilities such as its missiles and
chemical munitions production plants to disrupt a possible joint
Syrian/Iraqi attack--if Damascus and Baghdad can resolve their
differences. The Israelis already are expressing publicly their concern.
President Assad, however, presumably is wary that Iraq may turn on him for
his lengthy support of Iran in the war. Israel is likely to do its best
to foster Syrian/Iraqi discord.
o "Peace" probably will give the Soviets openings to improve ties with
Tehran at US expense. Deputy Foreign Minister Vorontsov has been in the
region recently, including Tehran. Moscow already has offered to mediate
a definitive peace agreement in a Central Asian city. The Soviets also
may use additional economic offers to boost entree to Iran.
o World oil markets probably will be volatile for some time. Traders
will be watching to see whether Iran and Iraq will work more harmoniously
to ensure OPEC production discipline--driving up prices--or whether the
reopening of Iraqi sea lanes and the end to air attacks on production
facilities will encourage greater exports and lead to a price collapse.
Lower prices will increase the strain on oil exporting Third World
countries and the international banking system, while higher prices will
tend, among other things, to refire inflation and cut economic growth in
consuming countries.
o Weapons suppliers who have profited from the war since 1980 will seek
other markets to maintain earnings. North Korea, Brazil, China, and
Eastern Europe all have major hard currency shortages that have been
ameliorated in recent years by munitions sales to both sides. Reduced
earnings would increase economic troubles domestically and payments
problems could negatively affect international banks. A new push by
suppliers would accelerate arms races in the Third World, especially,
increasing the chances of regional conflicts and diverting resources from
domestic programs.
o Iraq will no longer use so much of its chemical weapons production
capacity on its battlefields. It may decide to sell some output to raise
cash or help friends, accelerating the proliferation of chemical weapons.
The Iraqis also, perhaps more likely, might provide technical assistance
to Third World states wanting to develop their own chemical warfare
programs.
o Kurdish rebels in both Iran and Iraq are likely to be punished by both
sides for their actions during the war in support of a Kurdish nation.
The Kurds could suffer heavily and may ask the US for help. Conflict
could spill into southeastern Turkey, exacerbating the difficult situation
there.
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Either or both sides may use the truce or even a peace agreement to rest
and recuperate prior to another round of fighting. Iran--tired and bloodied
but with the larger resource base--has more to gain by a respite. Tehran may
actively plan to resume the war when it is stronger; recognition of this
possibility is a major factor driving Iraq's suspicion of Iran's acceptance of
Resolution 598. Iraqi territorial predations would virtually ensure Iranian
intent to resume the war eventually. Iraqi recognition of this possibility,
however, will continue to preoccupy Baghdad and curtail its adventures
elsewhere.
International
The steady growth of production of toxic wastes in the industrialized
world, combined with steadily diminishing abilities to handle the materials,
is causing Western governments and corporations to look increasingly to the
Third World for disposal sites. Transportation to less developed countries
offers some advantages, but runs the risk of alienating host governments and
reviving memories of colonialism. Western countries almost uniformly have not
addressed the political ramifications of this growing problem of waste
disposal.
Western interest in Third World disposal sites is fueled by the
disappearance of suitable landfill sites, growing regulation borne of
environmental concerns, and the rapidly rising costs of disposal that have
reached $2500 per ton. Already, major US cities like New York and
Philadelphia have sought to export waste with varying degrees of success. The
problem is complicated further when toxic and nuclear wastes are involved. In
such a climate, the vast expanses of uninhabited, largely unregulated areas of,
the Third World--such as the desert of northwest Africa, for
example--increasingly appear attractive as disposal sites.
Disposal in these remote areas, if handled well, could offer significant
advantages:
o The industrialized economies get rid of their wastes.
o Third World countries receive significant earnings--in some cases
hundreds of millions of dollars per year are possible--that can reduce debt
burdens and spur economic development.
o The process of safely handling wastes could create jobs and generate
needs for technical skills that, once owned by Third World personnel, could be
employed elsewhere in their economies.
Many such waste disposal activities to date, however, have been
irresponsible and have generated considerable animosity, particularly in
Africa. Several European firms have been caught dumping untreated toxic
wastes in West Africa and an Italian company improperly disposed of some 3,500
tons of waste in Nigeria, for example. Africans in some cases were bribed to
permit the dumping. The Organization of African Unity in May discussed the
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issue, attesting to its growing concern. Worries include:
o The fact that many of the wastes are very toxic, creating major
environmental risks.
o The appearance that the West, after exploiting the Third World's
minerals, wants to return them as waste, adding insult to the injury of
colonialism. Opponents of the West increasingly may play this propaganda
theme.
o Concern that people who revere the land for cultural and religious
reasons resent pollution for more than the environmental reasons common in the
West.
The United States thus far has largely escaped political recriminations
for dumping hazardous waste--and won some kudos for helping to clean up--but
the potential for unpleasant incidents seems certain to rise as waste problems
mount and the amounts of money involved continue to grow. The issue already
is spreading, as evidenced by a recent Kuwaiti recommendation to Nigeria that
it take legal action against Italy for its dumping, and is likely to continue
to attract attention. Western governments' failure to act quickly could
generate a backlash in Africa that might indefinitely preclude mutually
advantageous waste disposal.
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