NATIONAL INTELLIGENCE DAILY MONDAY 11 JANUARY 1988

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP89T00113R000100080004-9
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 18
• Document Creation Date: December 23, 2016
• Document Release Date: September 30, 2013
• Sequence Number: 4
• Publication Date: January 11, 1988
• Content Type: REPORT

Declassified in Part - Sanitized Copy Approved for Release 2013/12/18: CIA-RDP89T00113R000100080004-9
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National Intelligence Daily
Monday
11 January 1988
?Thp-Seemet-_
CPAS NO 88-008JX
11 January 1988
Declassified in Part - Sanitized Copy Approved for Release 2013/12/18: CIA-RDP89T00113R000100080004-9.
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Contents
Central America: Verification Commission Visits Region
1
USSR-Sweden: Soviet Premier's Visit
2
Haiti: Duvalierist Candidates Disqualified Again
3
Notes
International: IMF Debt Arrears Rising
4
Western Europe: Integrated Command for Persian Gulf
4
China: Controversial Enterprise Law Approved
5
In Brief
6
Special Analyses
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Iran: Economy Rings in Another Lean Year
9
Top Secret
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up OCIeICIL
CENTRAL
AMERICA:
Verification Commission Visits Region
Initial reports suggest the democracies were put as much on the
defensive as Nicaragua was during the International Verification
Commission's visits to the region last week.
The 15-member Commission visited each country in the region to
gather information for its report to the Central American summit
Friday. The group met with the governments, individual opposition
parties, and the National Reconciliation Commissions, which also
have verification functions under the peace accord.
Mexico's member of the Verification Commission, in a move to help
Nicaragua, accused Costa Rica of permitting reconnaissance and
resupply flights by the anti-Sandinista insurgents and their operation
of clandestine radio transmitters
Although rejecting the charges, San Jose is worried about its image
and has opened an investigation.
The Honduran announcement on Friday that it would allow the
inspection of any site on its territory without prior notification or
preconditions startled the Verification Commission
President Azcona told US officials the
announcement was a public relations gesture to strengthen his
position at the summit and that many details remain to be worked out.
He said he might eventually permit some visits but would not allow
inspections of the insurgents' resupply facility on Swan Island.
US Embassy reports indicate the Sandinistas came under sharp
questioning by the UN member during the Verification Commission's
visit to Managua, but Mexico and Peru defended Nicaragua's record.
Managua is attempting to regain the offensive by publicizing the need
for border-monitoring forces and by convoking the legislature today
to ratify the proposal for a regional parliament.
Comment: The democracies gave priority to justifying their
compliance with the peace plan to the Verification Commission rather
than to organizing their four members on it to defend one another and
accuse Nicaragua. The democracies' inaction
suggest the Commission's final report
will not single out Managua for noncompliance.
The about-face by Honduras on inspections vastly improves the
chances for preliminary approval of some border-monitoring scheme
at the summit Friday because the other democracies are unlikely to
press for delaying verification of the end of aid to externally based
insurgents. Despite Azcona's intention to keep Swan Island off limits,
Tegucigalpa undoubtedly will face strong pressure to allow
inspections there.
1
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11 January 1988
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Conflicting Maritime Boundary Claims in the Baltic Sea
Gulf of
Bothnia
th? tti
Sweden \\:`44:ES
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Sea
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claim
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Federal Cs. German
Republic 'ski Democratic
of Germany c
Republic
ect.,
Disputed
waters
Qt_ Bornholm
e,,j(Denmark)
--Swedish
claim
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Soviet Union
Poland
O 50 100 Kilometers
O 50 100 Miles
The Unfree States Government has nom recerirme
the McorporatIon ot Emonle, Latvia. anal Iltromeis
Mur the Soviet Unice. Other boutolary reporeentation
Is not mammy* autheritatMe.
711492 10-07
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USSR-SWEDEN: Soviet Premier's Visit
Soviet Premier Ryzhkov arrives in Sweden today to discuss
bilateral issues amid renewed controversy over violations of
Swedish territorial waters by what are believed to be Soviet
submarines.
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A longstanding Baltic boundary dispute between Sweden and the
USSR is on Ryzhkov's agenda in Stockholm. Negotiations that have
gone on since 1969 have intensified in recent months, and, although
Swedish negotiators returned from Moscow Friday without a
resolution of the issue, both sides will attempt to reach an agreement
in principle during Ryzhkov's visit. 25X1
Meanwhile, in an interview Ryzhkov gave to a Swedish newspaper, he
strongly denied any intrusion of Swedish territorial waters by Soviet
subs, reasserting that the grounding of a Soviet submarine in Swedish
waters in 1981 was caused by navigational error. The submarine
intrusion issue has become topical in Sweden again with the release
of an official military report on the subject last month.
Comment: Despite domestic pressure on the Swedish Government to
take a hard line on the alleged submarine intrusions, both sides
probably will seek to demonstrate that a normalization of relations is
continuing by displaying progress on the border dispute. Ryzhkov
probably will also use the visit to reinforce the Nordic agenda that
General Secretary Gorbachev outlined in his speech at Murmansk in
October, hoping to focus Swedish attention on the potential for
expanded cooperation on economic, security, and environmental
issues.
Lingering domestic opposition in Sweden to giving the USSR even
part of the disputed Baltic zones weighs against the two signing
anything more than an agreement in principle. A full accord along the
lines recently discussed might, for example, restrict Swedish fishing
rights in the richer southern waters and might include long-term
Soviet access to Sweden's share of the zone. Any such concession by
Stockholm would set an unwelcome precedent for settling the
Norwegian-Soviet border dispute in the Barents Sea, and Norwegian
officials have become pessimistic in recent months about resolving
Oslo's dispute with Moscow.
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Top Secret
HAITI: Duvalierist Candidates Disqualified Again
The disqualification of all but one Duvallerist presidential
candidate increases the likelihood of rightist violence in the run
up to next Sunday's election and may encourage President
Namphy to retain power indefinitely.
The new electoral commission, appointed by Namphy following the
aborted election in late November, has barred the candidacies of
eight of the nine Duvalierists who had reentered the race. The
commission is allowing five moderates, five fringe candidates, and
Jean Theagene?a relatively minor Duvalierist figure?to run.
Namphy is considering remaining in office indefinitely
because of the confused political situation.
Meanwhile,
soldiers have occurred in the ast
at least three attacks on
to implement
increased security measures throughout the country, beginning
today.
Comment: The tactical alliance between the ruling council and the
right that developed to derail the November election appears to have
ended because the goals of the two camps have diverged. The
military leadership wants continued political preeminence while the
Duvalierists desire power for themselves. The disqualification of
prominent Duvalierists from the race may well prompt another
attempt by the right to sabotage the election with violence.
Namphy may be hoping the right succeeds in sabotaging the election
because it would facilitate his attempt to stay in power. Other military
leaders, however, almost certainly view the installation of a malleable
civilian president as the best possible outcome for the Army and the
only way to secure the eventual restoration of US economic and
military aid. Should Namphy misstep politically, other senior officers
might move to oust him.
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Overdue Financial Obligations of Developing Countries
to the IMF
Billion US $
2.5
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0.5
0 1982 83
84
85
86
September
87
LDCs Chronically Overdue to the IMF (million US $)
Total Overdue
(as of 30
September)
Total Overdue and
Future
Repayments a
Cambodia
42
62
Guyana
93
152
Liberia
236
420
Peru
466
1,087
Sierra Leone b
27
143
Somalia b
12
211
Sudan
702
1,183
Vietnam
112
216
Zambia
402
1,208
^ Projected on the basis of IMF credit as of ao September.
b Still have access to IMF funds.
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11 January 1988
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INTERNATIONAL: IMF Debt Arrears Rising
Third World arrears to the International Monetary Fund ballooned to
$2.1 billion last year, a rise of 60 percent from yearend 1986 and a
problem that will add to the pressures on IMF members to increase
their contributions. The bulk of overdue obligations stem from nine
debtors?seven remain cut off from additional Fund resources.
Particularly troublesome are Peru, Sudan, and Zambia, which
together account for 75 percent of total arrears and are scheduled to
repay another $1 billion over the next two years. Despite moves by
the Fund to increase its reserves, overdue obligations have jumped
from less than 3 percent of reserves in the early 1980s to more than
118 percent now.
Comment: Several other Third World nations are experiencing
declining reserves and anemic economies and probably will have
increasing difficulties in meeting their repayments to the Fund over
the next two years. The mounting arrears will continue to deplete the
IMF's revolving stock of credit and inhibit its ability to increase
lending to troubled debtors. Declining resources in turn will increase
pressure on IMF member states to approve a quota increase this year
to raise capital. To ease its serious financial condition, the Fund may
consider raising the interest rate it charges debtors, a move sure to
aggravate relations with Third World debtors.
WESTERN EUROPE: Integrated Command for Persian Gulf
Dutch and Belgian naval ships in the Gulf area will soon operate with
the Royal Navy under a single British commandj
Pending London's approval, the military
expects the new plan to take effect early next month. The British
reportedly hope to persuade the Dutch to send a destroyer or frigate
to the Gulf to assist with escort duties. The French, however,
indicated at a Western European Union meeting last week they would
not become involved in closer multilateral cooperation in Gulf
operations, and the Italians would agree to closer cooperation if it did
not require a ministerial-level endorsement.
Comment: The new command will consolidate the already close
operational ties between the three navies?in November 1987 their
mine-clearing forces searched for mines together in the central Gulf.
London probably views the joint command as a way of preventing
unilateral Belgian or Dutch decisions to withdraw their forces.
Formation of a new government in Brussels may yet lead to the
termination of the Belgian deployment, which the Martens
government extended shortly before resigning last month.
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CHINA: Controversial Enterprise Law Approved
China's Politburo on Saturday endorsed the draft of an enterprise law
that will curtail involvement of party officials in factory operations and
clear the way for implementation of bankruptcy regulations applicable
to state factories. According to Chinese media, the law will protect
enterprises from interference by upper-level economic bureaucracies
and spell out the legal rights of factory directors to manage state
enterprises?including appointments of key personnel. Enactment of
the enterprise law has been blocked for more than a year by
conservative officials who control the National People's Congress
Standing Committee, the highest deliberative body in China's
government. This stance has also stalled the bankruptcy regulations
slated to go into effect three months after the enterprise law is passed
by the NPC.
Comment: The Politburo's unusual public endorsement probably is
an effort by General Secretary Zhao Ziyang to break the logjam and
build the momentum for reform leading to the crucial NPC session
scheduled for March. It also will signal recalcitrant officials that the
time has come to move ahead with the enterprise law. Chinese media,
however, report that party officials in some factories have ordered
managers to swap jobs with them, indicating that efforts to relax party
control over economic decision making will continue to face strong
local opposition even after the law is passed. Moreover, Beijing
probably will be unable to reduce bureaucratic interference in factory
operations until it expands labor, capital, and raw materials markets,
thereby allowing managers to procure these inputs without having to
turn to their supervisory bureaus.
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In Brief
Middle East
East Asia
South Asia
? Gulf Cooperation Council sent envoy to Iran yesterday to begin
talks on easing tensions in the region, according to press ...
decision to start dialogue taken at GCC summit last month ...
major change in current policies unlikely.
? South Korea certain North Korea culpable for downing of KAL 858
... now debating tone of public disclosure ... announcement
almost certainly will not be made before next Sunday, deadline for
commitments to attend Olympic games.
? In Pakistan, two killed and 27 injured Saturday in clashes between
Pushtuns and Mohajirs who were celebrating their election
victories ... Islamabad gives Friday as deadline for "unparalleled
crackdown," but low-level violence likely to continue.
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Iran: Export Revenues and Official Assets
Billion US $
25
a
=
Nonoil exports
oil exports
Assets
F
.
.
.
15
W
w
I
II
?
lir
,...,,.?,
10
?
.,....
I
0 1978 79 80
?Estimate.
81 82 83 84 85 86 87. 88
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Special Analysis
IRAN: Economy Rings In Another Lean Year
The Iranian economy will do little more than mark time this year
after making only small gains in 1987. Although oil revenues last
year rose considerably above depressed levels in 1986 and no
doubt buoyed the regime's will to continue the war, they did little
for the economy. The expected soft oil market and the weak
dollar will cut into Iran's purchasing power this year but is
unlikely to deter its war effort.
Oil export earnings provided Tehran more than $11 billion last year
after bottoming out in 1986 at around $7.5 billion. Higher oil prices
last year?spot prices doubled between the summer of 1986 and
early 1987?account for much of the increase. In addition, tensions in
the Persian Gulf last summer increased Iranian oil sales by motivating
buyers to make precautionary purchases against any disruption in
Gulf oil supplies.
Tehran made efforts last year to expand nonoil earnings as well, and
those endeavors also helped improve export revenues. Nonoil
exports?primarily carpets and pistachios?increased 12 percent to
around $1 billion.
Despite better results for the year as a whole, Iran suffered setbacks
in the fourth quarter. Export earnings slipped because of the
softening oil market and the fall of the dollar, particularly against the
West German mark and the yen. Oil sales are usually transacted in
dollars, and about 25 percent of Iran's imports last year were from
West Germany and Japan.
Few Real Benefits
Not much of the increase in earnings reached the average Iranian.
Imports of food and consumer goods grew somewhat, according to
press reporting, but there are few signs of any significant
improvement in the quality of life in Iran. Iranians continued to face
shortages, high inflation, and high unemployment?about 35 percent.
Tehran responded to higher oil revenues in part by reducing domestic
borrowing.
Economic hardship has not posed a threat to the regime
in the past, but Iran's rapidly expanding population?which rose by
about 2 million last year?and the growing costs of neglecting the
continued
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I
civilian economy will become more serious concerns for a
post-Khomeini government.
Iran has maintained its large resource commitment to the war with
Iraq, which continues to hobble the economy. The country's economic
underpinnings?including the oil industry?eroded further last year
as Tehran again held development spending to the bare minimum.
Low imports of raw materials, machinery, and replacement parts kept
Iran's industrial output at about a third of capacity.
Prospects for 1988
Oil revenues and domestic economic performance will remain
adequate to support the war effort this year. The cost will be the
continuation of already austere domestic government spending and
no easing of the tight circumstances facing most Iranians.
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The weaker oil market expected this year probably will push Iranian 25X1
oil revenues down about $1-2 billion below last year's level. Earnings
nonetheless will exceed the $7.5 billion Iran received in 1986. Tehran
probably will avoid having to dig deep into its foreign exchange
reserves or other liquid assets?worth about six months of civilian
and military imports?unless oil prices fall sharply below $15 a barrel
and remain there for several months. 25X1
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