NATIONAL INTELLIGENCE DAILY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88T00091R000500170001-4
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 21
• Document Creation Date: December 27, 2016
• Document Release Date: September 21, 2012
• Sequence Number: 1
• Publication Date: February 2, 1987
• Content Type: REPORT

Declassified in Part - Sanitized Copy Approved for Release 2012/12/04: CIA-RDP88T00091 R000500170001-4
Director of Bret-
Central 25X1
Intelligence
National Intelligence Daily
Thursday
2 April 1987
ILLEGIB
Top SeeFet
CPAS NID 87-076JX
2 April
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Too Secret
Contents
Intentionally Omitted ..................................................................
Italy: President Calls for Confidence Vote .................................. 3
South Africa: Rightwing Election Coalition Fails ........................ 4
South Korea-US: Problems With Technology Agreement .......... 5
Saudi Arabia: Tension Between Religion, Business .................... 7
Dominican Republic-Cuba: Increasing Ties .............................. 7
Central America: Impact of Lower Coffee Prices ........................ 8
Special Analyses
Nicaragua-US: Coping With Economic Sanctions ...................... 10
Mexico: Dissidents Plague Ruling Party ...................................... 11
Brazil: Reprocessing and Nuclear Safeguards ............................ 13
International: Status of Tanker War in Persian Gulf .................. 15
Top Secret
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President Cossiga's decision yesterday to rescind his acceptance of
Prime Minister Craxi's resignation on 3 March is a last-ditch attempt
to force the coalition partners to resolve their differences-as well as
to put the onus on them for a premature dissolution of parliament.
Cossiga referred the Craxi government back to parliament for a vote
of confidence, which will probably take place next week after the
Socialist Party congress ends. Cossiga's action follows the report on
Tuesday by Chamber of Deputies President Jotti that it may still be
possible to form a new five-party coalition government because most
party leaders told her they want to avoid an early election.
Comment: Cossiga takes seriously his constitutional obligation to
ensure that parliament completes its full term and thus probably
wants party leaders to take direct responsibility for an early election.
Cossiga may also hold a slim hope that the Socialist and Christian
Democratic fears of being embarrassed by an open confidence vote
will force them to resolve their differences. In the absence of an
accord, Craxi will almost certainly become the first postwar Prime
Minister to fall by an open vote of confidence, although the Christian
Democrats will risk losing voter support by bringing down the popular
coalition.
Top Secret
Top Secret
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SOUTH AFRICA: Rightwing Election Coalition Fails
Party has one.
The failure of South Africa's rightwing parties to agree to an electoral
coalition probably kills their hopes of gaining enough seats to become
the official opposition in parliament. The Conservative Party and the
ultrari~ht Herstigte National Party nominated separate slates of
candidates Tuesday for the 6 May election. The two parties will now
compete against each other in more than 70 of 166 constituencies.
The Conservatives currently hold 18 seats in parliament; the Herstigte
movement that seeks more rapid reform.
right, now appears more concerned about the new independent
Comment: The,collapse of negotiations probably was due in part
to deep personal animosities between the parties' leaders and to
the Conservatives' insistence on dominating any coalition. The
Conservatives apparently hope to overpower the Herstigte Party at
the polls and emerge from the election as the only viable rightwing
party. Limited cooperation at the local level is still possible, and the
right wing is likely to make small gains in the voting. But the ruling
National Party, which had expected a stronger challenge from the
Top Secret
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SOUTH KOREA-US: Problems With Technology Agreement
South Korea is expressing serious reservations about a US-proposed
memorandum of understanding on technology security, according to
the US Embassy in Seoul. The Foreign Ministry has raised objections
to the proposal because it allows the US to determine which
technologies are to be controlled and, in addition, allows the US to
restrict unilaterally destinations of controlled technologies. The South
Koreans want an informal agreement rather than a formal treaty and a
US commitment to back South Korean membership in COCOM.
Comment: Seoul has delayed concluding an agreement since 1984, in
part because of its concerns that the agreement cuts exports. Even if
Seoul overcomes its reservations and concludes the MOU this spring,
as Foreign Minister Choi implied recently, implementation most likely
will be subject to further negotiations.
Top Secret
5 2 April 1987
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SAUDI ARABIA: Tension Between Religion, Business k 25X1
Islamic strictures against Western banking practices, especially the
payment of interest, have created frictions between religious leaders,
the government, and businessmen in Saudi Arabia. King Fahd
yesterday, in an effort to appease bankers, ordered that disputes over
banking debts will no longer be heard by religious courts but will be
prosecuted by a special committee of the Saudi Monetary Authority,
according to the US Embassy in Riyadh.
Businessmen are
pressing Riyadh to liberalize banking practices and to undertake
decisive measures to spark Saudi Arabia's recession-bent economy.
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Unless officials persuade religious leaders 25X1
that interest on socially useful" loans is vital to the well-being of the
Kingdom and consistent with Islam, lending activity and business
prospects will probably remain moribund, placing a greater burden on 1,r_Y11
the national budget as the primary engine of growthF___-] 25X1
DOMINICAN REPUBLIC-CUBA: Increasing Ties
Dominican President Balaguer probably is resisting Cuban pressure
to renew full diplomatic relations despite the recent flurry of cultural
and commercial contacts. According to the US Embassy in
Santo Domingo, in February the Secretary for Sports made the first
cabinet-level visit to Cuba since President Castro came to power; he
signed a sports exchange pact and accepted a longstanding Cuban
offer to build a technical school. Havana reportedly also requested
landing rights for Cuba's state-run airline. Balaguer recently said
publicly that the Dominican Republic's dependence on the US will
prohibit a restoration of full diplomatic relations with Cuba.
Comment: The recent exchanges probably reflect Balaguer's pique
over large cuts in US economic aid and in the sugar quota, as well as
the perceived lack of US support on Santo Domingo's external debt
problem. He may grant a few new concessions
press Washington for increased assistance
Top Secret
7 2 April 1987
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World Coffee Prices
0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb
1986 1987
Tort
2 April 1987
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CENTRAL AMERICA: Impact of Lower Coffee Prices
Lower coffee prices in Costa Rica, Honduras, El Salvador, and
Guatemala this year will further limit the region's modest economic
growth and increase the political costs of stabilization measures.
Prices are one-half what they were last year and may cost the four
countries $500 million in lost export earn ings,-aee a- -
2
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N
IEl Salvador, which receives 25X1
60 percent of its export revenues from coffee, expects to lose
$200 million, and Honduras 25X1
could lose $80-120 million. Lower tax revenues from coffee exports
are already forcing major budgetary revisionso
. San Salvador's revenue from coffee export taxes may be
slashed 50 percent, causing the 1987 budget deficit to double.
Comment: The gloomy outlook for Central America's most valuable
export will make US economic support even more crucial this year
and generate requests for additional US economic aid or relief from
the cuts in sugar quotas. In any case, growth prospects are dim and
growing budget deficits will increase inflationary pressures. Lower
hard currency earnings will also complicate debt servicing and may
encourage a greater reliance on import and foreign exchange
controls, which will also inhibit growth. The political risks of
implementing needed stabilization policies such as planned exchange
rate reform in Guatemala will also become greater. And lower
revenues probably will result in reduced spending on already
neglected infrastructure and social programs.
Top Secret
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agreement
- Soviet commercial delegation -postponed during US-Kuwaiti
talks on tanker protection-now in Kuwait ... may agree to lease
three tankers to transport Kuwaiti oil . . . will not discuss pi ection
to return C-130 and helicopter defectors flew to Egypt in March ...
- Egypt concerned Libya may hijack Egyptian aircraft to force Cairo
security measures increased ... President
Europe
Surinamese cabinet resigned Monday, as scheduled ...
s e{aeke Head of Government Bouterse likely to enlarge
cabinet, reappoint some ministers, add others from traditional
parties ... cabinet likely to remain moderate, powerless.
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Mubarak not likely to return aircraft soon.
... demobilization expected soon.
dispute unresolved ... Turkish forces now in normal readiness ...
Greek forces in high readiness, but no longer activating reserves
~- Turkey, Greece taking conciliatory measures in Aegean, although
breathing room without appearance of backing down.
strikes, regional protest ... law still links wages to productivity but
relaxes wage constraints for some industries ... gives regime*
~ Yugoslav pa lament has amended wage law that provoked
Japanese-Philippine relations to return to normal ... Tokyo to lift DA -1
travel warnings, may resume aid negotiations soon .. 25X1
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- Libyan-backed dissident group reportedly planning terrorist
actions against French, US personnel in Niger ... Libyans active
with similar groups in past ... local security forces spread thin, but
Top Secret
9 2 April 1987
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Nicaragua: Direct Costs of Sanctions Million US $
1985 a
1986
1987 b
Total Losses
35
43
7
Export Losses
21
27
4
Beef v
5
8
N/A
Sugar
7
4
N/A
Bananas
3
8
N/A
Aeronica
3
3
N/A
Seafood
2
3
N/A
Tobacco
1
1
N/A
Import Losses
14
16
3
Machinery and chemicals
10
12
N/A
Other
4
4
N/A
a Embargo phased in beginning 7 May 1985; costs are estimated net foreign exchange losses.
b Estimated losses through February 1987.
N/A=Not Available.
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2 April 1987
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Special Analysis
NICARAGUA-US: Coping With Economic Sanctions
Trade disruptions and the diversion of financial and managerial
resources to circumvent US economic sanctions are putting
additional pressure on the already staggering Nicaraguan
economy.
In the 23 months sanctions have been in effect, they have cost
Managua directly about $85 million in lower export earnings, more
expensive imports, and new middleman fees,
Nicaragua has not found new customers for much of what it
previously sold to the US, and higher transportation costs have cut
into foreign exchange earnin s for those aoods the Sandinistas have
been able to sell elsewhere Managua pays,
on average, an extra 25 percent to buy sanctioned goods legally
through US subsidiaries in third countries or illegally from the US
market.
Indirect costs have also been heavy, although harder to quantify.
Evasion of US sanctions requires considerable bureaucratic attention,
limiting Managua's ability to respond to other issues.
shortages of US-produced spare parts, machinery, and
agricultural chemicals have hurt production, adding to triple-digit
inflation.
Managua is using increased foreign support to finance these
purchases. The USSR and the East Europeans have increased
economic aid in the last two years and increased some hard currency
assistance designed to help offset the embargo. Most aid, however,
is in the form of trade credits for the purchase of Soviet and East
European goods. As a result, the Sandinistas increasingly have had to
turn to private sympathetic groups and individuals in the West for
additional hard currency funding.
Top Secret
10 2 April 1987
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Special Analysis
MEXICO: Dissidents Plague Ruling Party
The Movement for Democratic Renovation (MRD), a leftist
faction within the ruling Institutional Revolutionary Party (PRI),
continues to defy the party's efforts to stifle its demands for
internal party reform. At the recent party congress, party leaders
firmly rejected the MRD's proposals, but faction members have
vowed to continue their efforts. If the movement gains
momentum, the next Mexican president-in an attempt to co-opt
the group-may adopt some of its less controversial proposals,
possibly giving a more nationalistic tilt to future government
policy.
Faction leaders used the party congress to present their demands
even though the gathering is traditionally a forum for rallying around
the PRI leadership and reaffirming party loyalty. One of the group's
leaders, Cuauhtemoc Cardenas, published his criticisms of party
decisionmaking in an open letter and accused the leadership of
"antidemocratic and intransigent excesses." The leadership firmly
rejected the arguments, and-stopping short of expelling
Cardenas-served notice that he was in exile from the party
The faction has been a thorn in the party's side since it began publicly
demanding party reform late last year and, more specifically, seeking
a greater role in selecting the presidential candidate. The party
leadership reacted by condemning the faction's leaders and
threatening to detain their followers. According to a US Embassy
source, President de la Madrid forced Cardenas and Porfirio Munoz
Ledo, another leader of the movement, into temporary exile.
Moreover, according to press reports, the party fired about
3,000 government employees in Michoacan State who were identified
with Cardenas, presumably to show it was not making idle threats.
Despite the party's initial success in silencing the MRD, the
movement's actions at the party congress demonstrate its resiliency.
Both Cardenas, a former governor of Michoacan State, and the
faction's coleader, Munoz Ledo, a former UN Ambassador, are
nationally known, and their membershi and commitment lend the
movement credibility.
Top Secret
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The faction also appears to be revitalizing its efforts to broaden its
base of su ort.
It is also
stressing proposals likely to be less threatening to the President and
party leaders. For example, it is calling for broader economic
cooperation with the USSR and Eastern Europe
Prospects
The recruitment efforts may increase support for the faction but not
enough to give it much say in choosing the next president, and
candidates supporting the movement at this time would almost
certainly destroy their chances to succeed de la Madrid. Nonetheless,
many party members not now linked to the MRD sympathize with
Cardenas, and some, including younger party members, may support
his cause in the future. Even some conservative elements object to
the leadership's hard line against the dissidents.
PRI officials may find it difficult to take additional steps against the
faction if it avoids another direct assault on the President and if it
becomes identified with such potentially popular nationalistic views as
debt repudiation or more independent foreign policy. After a
successor to de la Madrid is named and the new administration is in
place, some of the losers in the presidential process may see the
faction as a way to regain some power or position. If the MRD begins
to attract this support, the next Mexican administration may reflect
the faction's more nationalistic and potentially anti-US sentiment.
Top Secret
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Special Analysis
BRAZIL: Reprocessing and Nuclear Safeguards
Brazil's announcement in December that it had mastered
laboratory techniques for producing plutonium raises questions
about international safeguards on a US-supplied research
reactor and adds to earlier concerns about Brazilian intentions
to ignore safeguards.
Ithe Brazilian Institute for Energy and Nuclear
RPsParrh is rnncfur:tinn rPSParrh on snPnt-fuel rpnrncPSSinn =
Brazilian officials recently told the US that the separated plutonium
came from heart pacemakers and, in another discussion, claimed that
the press had misquoted its source and also that these tests were
simulated and did not involve irradiated material. The IAEA, however,
told the US last month that Brazil declared irradiation of some nuclear
material in 1985 and 1986 at the IPEN research reactor
Brazil's Reprocessing Capability
Brazil's reprocessing facility consists of two parts, Celeste I and II.
Celeste I is a small research laboratory and, because of its size
probably poses no proliferation threat.
Top Secret
continued
Top Secret
2 April 1987
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Material Available for Reprocessing
declared to the IAEA.
Brazil has three possible sources of irradiated nuclear material for
reprocessing: IPEN-supported fuel-element fabrication projects for
TEAR-1, the Navy, and the Army. Any fuel project materials irradiated
in the TEAR-1 would be subject to both US and IAEA controls. Only
the irradiation of replacement fuel for the TEAR-1 is sanctioned by and
indigenous material irradiated in a US-supplied facility.
both IAEA and US safeguards agreements that require prior
notification and mutual consent to reprocess US-furnished or
Brazil appears to have successfully reprocessed at least some
irradiated material at IPEN from the TEAR-1, which is a violation of
reprocessing more difficult
Aware of its legal obligations, Brasilia, at least in diplomatic channels,
seems to be distancing itself from the reprocessing claim, probably to
discourage increased scrutiny of IAEA-safeguarded facilities and
nuclear materials. Increased surveillance of IAEA-safeguarded
research facilities, notably the TEAR-1, probably would not deter
Brazilian nuclear officials but would make covert irradiation and
INR Comment: INR disagrees that there is enough information at this
time to determine that Brazilian claims of reprocessing success
indicate intentions to ignore IAEA safeguards. It is quite possible that
the Brazilian reprocessing capability achieved early last year was
accomplished usin materials declared to the IAEA and its
rovisions.
Agreement under which the reactor was supplied.
from the "no military use" provision of the US-Brazil Bilateral
At the same time, even if A requirements are met,
the reported irradiation could have implications for the US stemming
Top Secret
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Ship_ Attacks in the Persian Gulf by Quarter
Number of attacks .
Iraqi attacks
0 I II III
1986
I
1987
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Special Analysis
Iranian and Iraqi attacks this year on shipping in the Persian Gulf
have had little effect on oil exports, movements of arms, or other
cargoes in the Gulf.[
with 15 in the peak first quarter of 1986
There have been at least 17 Iraqi airstrikes against merchant vessels
since the beginning of the year, equal to the number in the peak final
quarter of 1986. Most of the ships hit have been shuttle and customer
tankers moving crude oil from Iran's Khark Island terminal. During the
same period, Iran made 10 attacks on shipping-most often using
naval surface vessels against tankers in Kuwaiti trade-as compared
use of salvage and repair services available in the Gulf.
The impact of the 27 attacks on Gulf tanker traffic during the past
quarter is small, affecting less than 3 percent of the 1,000 tankers that
have entered the Gulf during the period. Iraq's attacks lacked the
intensity required to disrupt Iranian oil exports moving on shuttle
tankers from Khark Island. Despite its losses, Iran maintained shuttle
capacity above its needs by taking advantage of low charter rates and
used-ship prices on the depressed tanker market and by judicious
service following Iraqi attacks can be made serviceable again
As of 27 March, Iran's shuttle fleet included at least 10 operational
tankers, well above the number required to move Iranian exports at
their February level of 1.5 million barrels per day. Another 10 tankers,
newly purchased or chartered, were being prepared for service. It is
likely, in addition, that many of the 14 shuttle tankers currently out of
Iran's campaign against tankers in the Kuwaiti trade, under way since
September 1986, has failed both to diminish Kuwait's oil exports and
to discourage Kuwaiti participation in transferring Soviet arms to Iraq.
The cost of transporting and insuring exports of Kuwaiti and other
Arab oil from the Gulf has risen only slightly. The tanker attacks and
Tehran's parallel program of stopping ships to inspect for goods
destined for Iraq have led only to an increase in the activity of Soviet
and NATO warships in the Gulf.
Top Secret
15 2 April 1987
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