NATIONAL INTELLIGENCE DAILY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP88T00091R000500270001-3
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 22
• Document Creation Date: December 27, 2016
• Document Release Date: September 20, 2012
• Sequence Number: 1
• Publication Date: April 14, 1987
• Content Type: REPORT

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Central
Intelligence
National Intelligence Daily
Tuesday ?
14 April 1987
74 April
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Top Secret
Contents
EC-Middle East: Promoting Peace Conference ..........................
USSR-Egypt: Military Debt Agreement ........................................
Israel-West Bank: Escalating Violence ........................................
Israel: Supply-Side Budget Approved ..........................................
South Korea: No Constitutional Revision ....................................
Fiji: Election Upset ........................................................................
Egypt-Ethiopia: Bilateral Relations Improve ................................ 8
Philippines: Tensions Over Muslim Peace Talks ........................ 9
Lebanon: Security Situation Again Deteriorating ........................ 9
Special Analyses
OPEC: Seeking To Regain Market Control .................................. 11
Japan: Implications of Local Elections ........................................ 13
Peru: Civilian-Military Tensions .................................................... 14
Top Secret
14 April 1987
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EC-MIDDLE EAST: Promoting Peace Conference
Belgian Foreign Minister Tindemans, acting in his capacity as EC
President, begins a tour of three Arab capitals today to promote
a Middle East peace conference, but regional divisions and the
waning enthusiasm of some EC partners limit his prospects for
success.
Tindemans will visit Egypt, Jordan, and Saudi Arabia during his four-
day swing. He does not plan to visit Syria, although Belgian officials
have not ruled out future travel there, according to the US Embassy in
Brussels. In addition to his current tour, Tindemans also plans to meet
with Israeli Prime Minister Shamir and Soviet officials later this spring.
Belgian officials acknowledge that Syria remains essentially hostile to
a conference and that this, together with divisions within the Israeli
Government, may scuttle any convening of a conference. According
to diplomatic reports, however, Belgian officials on balance remain
optimistic. They believe that Egypt, Jordan, and Israel are moving
closer to agreement on a conference and that recent Soviet moves to
normalize relations with Israel could improve prospects for a
conference.
Other West Europeans are more pessimistic, according to diplomatic
reports Netherlands and West German
officials believe the EC should narrow differences among the key
parties before moving to convene a conference. The UK, which has
had no relations with Syria since November, opposes high-level EC
contacts with Damascus. The Twelve nonetheless continue to stand
by their call in February for a UN-sponsored Middle East peace
Comment: Tindemans probably underestimates the obstacles to
progress toward holding an international conference, although the
idea appears to have taken hold. He may not appreciate the extent of
opposition within Israel's coalition government, the difficulty of
resolving the question of Palestinian representation, and the extent of
the divergent views among the various parties over the exact role of a
conference. Moreover, many EC members will want solid assurances
of success before committing the Community's prestige to a
conference and are likely to be sensitive to US views.
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USSR-EGYPT: a Military Debt Agreement
~Al
Egypt and the USSR have reportedly determined how Cairo will
repay its military debt, removing the key obstacle to improving
economic relations.
were used, and all past interest on the debt was forgiven.
An official of the Egyptian Economics Ministry who was a member of
Cairo's delegation to Moscow last month has told the US Embassy in
Cairo that the Soviets made two major concessions: the exchange
rate on the outstanding military debt was set at a level substantially
lower than it would have been if the current Egyptian pound-ruble rate
the Egyptians may have
but there is no confirmation of such an agreement.
offered to reopen Soviet Consulates in Alexandria and/or Port Said,
were discussed in Moscow last month.
Comment: Resolution of the military debt issue would open the door
for increased bilateral trade, renewed USSR project assistance, and a
resumption of Soviet military equipment sales to Egypt, all of which
complicate US-Egyptian relations.
For the Soviets, political considerations evidently outweighed
economic factors in reaching this accord. It offsets some of the
embarrassment over the eviction of Soviet advisers from Egypt in the
early 1970s, improves prospects for closer relations with the country
the USSR regards as a strategic prize in the Middle East, and may
have been silent on the cancellation of interest.
Moscow will finally collect on some of its loans after a frustrating,
decadelong hiatus in payments. Forgiving the interest on Egypt's
debt, however, is a sensitive issue to the Soviets, who have recently
been seeking to collect on past military sales to such other regional
clients as Syria and Libya. Unlike the Egyptian press, Soviet media
reentry into the Arab fold.
In repairing economic relations with Moscow, the Egyptians are not
seeking an alternative to Western assistance. President Mubarak
nonetheless will be able to point to a more "nonaligned" stance to
defuse domestic criticisms that he is too subservient to the US. He
also enhances his prestige as a leader who can bargain hard with a
superpower. Improved relations with the USSR may facilitate Egypt's
market for low-quality consumer goods otherwise unsalable
Increased trade with the USSR could provide much needed spare
parts for Soviet-origin Egyptian military equipment, which still
represents the bulk of Egyptian materiel. It could also offer Cairo a
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Escalating Violence on the West Bank
{OTulkarm
Her4fiyyall Sava
'Firebomb attack
Rama bd,n7
H'aShdr n HaIharonF V
WEST BANK
(Israeli occupied-
status to be determined)
32?30'-I
At
Hiyn
0 15 Kilometers
r 1 I I
0 15 Miles
Selected Israeli settlement names do not
necessarily conform to BGN recommendations.
Boundary representation is not necessarily authoritative.
zWon ? closed after student- trellelln
Lod t Bi'r Zayt University
Rehovot Ram Allih confrontations
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Tog) Secret
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ISRAEL- V Escalating Violence
WEST BANK:
Defense Minister Rabin will order tougher security measures on
the occupied West Bank following increased violence against
Jewish settlers; he will, however, reject demands by the settlers
for a major expansion of settlement activity and an
indiscriminate security crackdown.
A firebomb attack against an Israeli civilian vehicle near Qalqilyah on
Saturday evening resulted in the death of one family member and
wounds to the other four. Following that attack, some 200 Israeli
settlers retaliated by setting fire to Arab cars and damaging private
homes before Israeli security forces succeeded, with difficulty, in
enforcing an uneasy curfew. According to Israeli media, Bir Zayt
University north of Jerusalem yesterday was ordered closed for four
months after one Palestinian student was killed and seven were
wounded during confrontations with Israeli troops.
According to the US Embassy in Tel Aviv, Jewish settlers and
rightwing political figures attribute the escalating violence to the
activist pursuit of Arab-Israeli peace talks by Foreign Minister Peres
and to Rabin's allegedly "soft" security policies. The hardliners have
called for retaliatory measures-including establishment of a large
number of new settlements and closure of Palestinian media-and
abandonment of Peres in his advocacy of a Middle East conference.
According to the US Embassy, the Israeli Cabinet devoted most of its
meeting on Sunday to discussing the Qalqilyah incident and later
issued a statement noting that authorized security forces-not
vigilantes-would take the necessary steps to restore order. Israeli
troops have arrested several Palestinian suspects, but the identities
of those responsible for the firebombing remain unknown. The US
Consulate in Jerusalem reports that Israeli authorities expect further
terrorist attacks during Passover, the Palestine National Council
meeting scheduled to convene in Algiers next Monday, and Israel's
independence day on 14 May.
Comment: The Qalqilyah attack-only a few miles from Tel Aviv and
directed at a civilian family-has provoked predictably deep public
outrage, which Israeli hardliners are attempting to exploit to discredit
Peres and Rabin, the two senior Labor Party leaders. In these
circumstances, Rabin probably sees no alternative but to order
tougher security measures, including increased demolition of the
homes of suspected terrorists, more frequent, prolonged curfews,
and more aggressive patrolling of the West Bank by reinforced
security units. By such actions, Rabin and Peres will aim to restore
order while undercutting the hardliners' demands, thereby avoiding a
further escalation of local tensions and a souring of prospects for
early movement in the Arab-Israeli peace process.
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ISRAEL: 17 9 Supply-Side Budget Approved
The Knesset, Israel's parliament, has responded to pressure from
powerful interest groups by approving an overall budget that
calls for a reduction in taxes but increases expenditures to
$25 billion.
Comment: Spending is likely to climb even higher than $25 billion
because politically sensitive budgets for such sectors as health,
education, and defense have not been resolved. Even under the
government's optimistic assumption that a 4-percent economic
growth rate will help to increase revenues, Tel Aviv would face a
budget deficit of at least $875 million for the fiscal year that began
on 1 April.
A large deficit threatens to undermine the package of tax and capital
market reforms included with the budget as well as the progress
Israel has made toward stable growth. Without tax hikes, the coalition
government most likely will have to increase public borrowing, a
prospect that could increase an inflation rate now averaging
20 percent annually. Prices are already under considerable pressure
from increased consumer credit and minimum wage legislation.
With the next election scheduled for November 1988, Labor and
Likud leaders apparently are unwilling to risk voter displeasure by
imposing controversial fiscal restraints.
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k
President Chun's early announcement that he has abandoned
efforts to revise the constitution appears designed to capitalize
on opposition disarray.
Chun's political opponents are blasting the announcement. According
to the US Embassy, Kim Young Sam, coleader of the new party,
believes Chun hopes to stymie the new political organization by
keeping Kim Dae Jung-its other leader-under house arrest and
preventing him from seeing other dissidents. Domestic media have
criticized both the government and the op-position for failing to
compromise on constitutional reform.
Comment: The announcement seemed to surprise both Chun's
supporters and his opponents, who had expected the constitutional
revision process to drag into the summer. Chun may have calculated
that damage to the opposition in the wake of its acrimonious split
would more than offset public criticism of his government for
abandoning constitutional revision.
The President may also judge that uncompromising tactics, such as
keeping the old Constitution, and other tough measures like Kim Dae
Jung's "indefinite" detention will thwart opposition efforts to renew
the challenge. Chun's remarks citing national security needs and the
Olympics as paramount concerns in the period before he steps down
suggest that the government is prepared to keep the lid on political
protest.
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Fiji
Dr. Timoci Bavadra
New Fijian Prime Minister
Age 52 ... native Fijian, former physician and public health
official ... educated in Fiji and New Zealand ... president of
Fiji Public Service Association, one of the country's largest
labor unions, from 1977-1985 ... head of Fiji Labor Party
since its formation in 1985 ... lacks predecessor's imposing
personality and social stature but is known for integrity,
affability, and concern with average voter.
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Election Upset
The victory of Fiji's opposition coalition in the parliamentary 25X1
election last week ends the 17-year rule of pro-Western Prime
Minister Mara; the new government is likely to steer a neutral
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leader, will become prime minister and name his Cabinet in the next
few days. eTfi Alliance Party had been favored to win, but low voter
turnout combined with heavy National Party voting in several key
urban precincts to give the opposition coalition the edge,ecawdr-q
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Comment: Bavadra will almost certainly be less supportive of 619 interests in Fiji and the South Pacific than was Mara. Although
coalition leaders have said they will ban port visits by l &nuclear
vessels and seek membership in the Nonaligned Movement, they 25X1
have added that they will not permit the Soviets to open an embassy
in Suva. The new government is also likely to take a more activist role
in supporting a proindependence movement,'
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The opposition coalition-the Indian-backed National Federation
Party and the multiracial Fiji Labor Party-won 28 of the 52 seats,
according to press reports, defeating Mara's conservative Alliance
Party. Dr. Timoci Bavadra, head of the Fiji Labor Party and coalition
Federation Party
The cohesion of the coalition-composed of disparate racial, social,
and political elements-will be tested, and the Bavadra government
faces the prospect of a formidable opposition headed by Mara. The
coalition will probably stress its multiracial credentials to reassure
native Fijians made uneasy by the victory of the ethnic Indian National
investment.
Fiji's economy has recovered from its slump in 1985, but the new
administration inherits a budget deficit equal to 5 percent of national
output and a persistent trade deficit because of dependence on sugar
and a few other low-priced agricultural commodities as exports. The
new government has assured businessmen it will not nationalize any
enterprise. It will continue to encourage desperately needed foreign
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EGYPT-ETHIOPIA: Bilateral Relations Improve
Discussions between Egyptian President Mubarak and Ethiopian
Chairman Mengistu in Cairo last week improved the political climate
between the two nations but left most substantive issues to a high-
level joint committee. F_ I Ethiopian-Sudanese
relations received high priority. The final communique affirmed the
determination of Cairo and Addis Ababa to work together in
exploiting waters of the Nile, strengthening trade, and increasing
technical cooperation. Mubarak also agreed to visit the Ethiopian
Comment: Mubarak, who has been seeking to improve relations with
Mengistu for several years, is probably satisfied that this first round of
personal diplomacy ended harmoniously. The Nile waters issue is
becoming more pressing as continuing drought threatens Egypt's
water supply.
Mengistu, who agreed to the visit somewhat
reluctantly, may be exploring Egypt's ability to keep Sudan in line and
trying to mitigate his country's political isolation in the Horn of Africa.
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PHILIPPINES: Tensions Over Muslim Peace Talks
Negotiations between Manila and Muslim rebels were suspended last
week after the Muslims blamed the government for armed clashes in
Zamboanga Province and charged that Manila had failed to keep its
promise on full autonomy for all Muslim regions. Although a joint
committee has been formed to investigate the fighting, press reports
indicate tensions are rising as both sides increase their military
readiness. Manila has deployed aircraft to bases around MindanaoF
new local incident could quickly escalate.
Comment: Misuari probably is banking that the threat of new fighting
before the legislative election on 11 May will force the government to
reach a settlement. Although both sides are still talking about
resolving autonomy issues peacefully and neither seems anxious to
resume fighting, the military posturing increases the prospect that a
LEBANON: Security Situation Again Deteriorating
heavy clashes along the Green Line between pro-Syrian Shia Amal
fighters and Christian militiamen.
Two car bomb explosions in Christian East Beirut on may-and the
sporadic recent attacks on Syrian forces in West Beirut have led to
Additional Syrian troop deployments inside Shatla and Burial
Barajinah refugee camps have been postponed because of the
security situation in West Beirut, and negotiations continue over a
Palestinian' withdrawal from positions outside Sidon to the refugee
Palestinians to return to the camps.
further if Syria and Amal seek to increase pressure on the
Comment: The car bombs may have been planted by radical Shia
militiamen to divert Syrian attention from the southern suburbs and
the Palestinian camps, as well as to mark the 12th anniversary of the
start of Lebanon's civil war. Attacks on Syrian forces in West Beirut
by the Palestinians and their radical Hizballah allies are likely to
intensify as the Syrians increase their harassment of Palestinian
fighters inside the camps. The situation in Sidon may deteriorate
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economic reforms, support increased Sinop coo eration.
Premier Zhao, China's acting party chief, in face of increased
conservative influence ... new ministers are advocates of Zhao's
H Appointment of four reformist ministers demonstrates power of
Europe `9- Turkey formally applying for EC membership today, according to
US diplomats in Brussels ... application complicated by
uncompetitive Turkish economy, skepticism of many EC members.
likely resistance of Greece and others among Twelve.
- Two incidents at French nuclear installations over weekend ...
toxic uranium hexafluoride leak injured seven; liquid sodium leak
at new fast breeder reactor may force shutdown ... not expected
to reduce support for nuclear program.
French National Assembly elected former President Giscard to
head prestigious Foreign Affairs Committee ... allows him voice in
foreign policy debates ... raises profile as he eyes presidency of
on renewal of crucial state-of-emergency legislation.
- Rightwing boycott of Salvadoran legislature ended Fr W4 when
one party defected from conservative ranks ... still no agreement
fur er arrests, evidence of direct Libyan involvement.
- Cameroon has arrested 23 pro-Libyan Chadian rebels who?were
apparently preparing terrorist. tage operations against Chad,
investigation likely to lead to
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Special Analysis
Seeking To Regain Market Control
chance of a slide in oil prices this year.
OPEC is likely to maintain an average oil price near $18 per
barrel this year because of increasing consumption, falling
non-OPEC production, and a strong commitment by Saudi Arabia.
The Saudis and the cartel overall still face significant challenges,
however, including accommodating an increase in Iraq's
production, maintaining producer discipline, and warding off
measures by consuming countries-particularly the US-that
work against OPEC interests. A failure by OPEC to handle
producer-related problems would significantly increase the
downward pressure on oil prices.
Market prospects generally are working in OPEC's favor, as demand
for OPEC oil is likely to be some 19 million barrels per day, some
1 million b/d above OPEC's average annual production ceiling. The
cartel's strategy in setting its ceiling well below market demand has
helped raise prices despite widespread cheating by members on
quotas early this year. OPEC is facing a period of low seasonal
demand, however, and must comply more strictly with quotas to avoid
producers generally honor official prices.
Saudi Arabia's commitment to the accord has been the key element
in maintaining prices. Despite Riyadh's denials that it has resumed the
role of swing producer, Saudi production last month averaged
3 million b/d-30 percent below quota-while all other members
except Iran and Ecuador produced at or above their quotas. Saudi
willingness to play this role probably is due to the belief that market
pressures will not be sustained much past next month. In addition,
although Saudi revenues are below budget estimates, the kingdom
believes it has more to gain from price stability, especially while other
were imposed.
The Saudis fear that price volatility could add to domestic economic
woes, increase the chances for unrest in Egypt, and perhaps provoke
a confrontation with Iran. Saudi Arabia also is concerned that lower
prices would add to pressure for a US oil import fee. Riyadh's
opposition to such a fee was underscored this month when Oil
Minister Nazir told several US Cabinet officers and members of
Congress that Saudi Arabia would hope for an exemption if such a fee
continued
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If other producers begin to discount prices to maintain or increase
market share over the next few months, Riyadh probably will reassess
its production policy but might have a difficult time backing out of its
de facto swing role. In this light, continuing Kuwaiti overproduction
and recent reports of minor price discounting may signal a potentially
serious challenge to the accord.
Iraq's increasing production is a delicate, difficult problem for OPEC.
Baghdad is not a party to the quota agreement, and its export
potential will increase by an additional 500,000 b/d this summer.
The Iraqi increase can probably be absorbed without undermining
prices if other OPEC members-including Iran-abide by the
assigned quotas. All members want to increase production, however,
and will be extremely reluctant to cede an increasing share of the
market to Iraq. Moreover, if other members continue to overproduce
during the current seasonally weak period, prices could turn down
well before the cartel's meeting in June.
Saudi Arabia will have the difficult task of forging a compromise
acceptable to all members. Working in favor of compromise is the
mutual interest of all producers in protecting revenue levels, but a
failure to work out some accommodations would increase
significantly the chance of another slide in oil prices.
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Special Analysis
Implications of Local Elections
The political fallout in Japan from the ruling Liberal Democratic
Party's lackluster showing in the local elections held Sunday
further weakens Prime Minister Nakasone.
sales tax issue.
Japanese media paint the election results as a major defeat for
Nakasone. The ruling party's loss of seats in local assemblies
throughout Japan and its failure to recapture important
governorships in Hokkaido and Fukuoka are being blamed on the
the entire budget be made more expansionary.
Nakasone's immediate task is to pass a budget-held hostage by the
sales tax uproar-for the fiscal year that began on 1 April; his goal is
to do so by 20 April, when lack of action will require another
provisional budget. That timing also would permit Nakasone to unveil
a new economic stimulus package before he arrives in Washington on
29 April. His admission before the budget is passed that a stimulus is
required would give opposition parties an opportunity to demand that
tax to vote for the new spending program.
The Prime Minister must make concessions. One possible step,
delaying implementation of tax reform until fiscal 1988, would
effectively uncouple that issue from the current budget. It also would
allow politicians within Nakasone's party who have criticized the sales
Nakasone needs at least one opposition party to accept a
compromise in order to satisfy the dictates of political decorum.
Without opposition participation, a vote to pass the budget would
provoke an outcry and leave Nakasone open to additional criticisms.
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The Prime Minister appears to have enough support within the ruling
party to withstand calls for his early resignation. All three of his would-
be successors-party secretary general Takeshita, Finance Minister
Miyazawa, and party executive board chairman Abe-are personally
responsible for elements of his policy agenda; this makes it difficult
for them to attack him openly over the local election results.
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Special Analysis
PERU: AJ Civilian-Military Tensions
Tensions between Peruvian President Garcia and the military
have eased somewhat following congressional approval of
Garcia's plan for a new defense ministry. Garcia's tactics in
steamrolling the plan through the Peruvian Congress and then
cashiering the Air Force commander for opposing the plan have
nevertheless embittered many officers. Tensions are likely to rise
again if Garcia does not consult the military on the armed forces'
reorganization, particularly the selection of a defense minister.
The President has until late September to fashion the new ministry,
merging autonomous Army, Navy, and Air Force ministries into one.
Garcia's spokesmen have said that he will seek congressional and
military advice on the restructuring, but the legislation passed by the
Congress gives him a free hand in charting the organization.
Garcia wants to establish civilian control over the military, reportedly
believing that his legacy will be the institutionalization of democratic
rule. He has publicly defended the move as necessary to facilitate
cooperation among the three services, to eliminate costly duplication
of effort, and to rationalize procurement
The reorganization effort probably also reflects Garcia's concern that
he must take advantage of his popularity before increasing violence
and economic problems erode his support and restrict his ability to
deal with other issues.
Military Fears
Few military officers dispute the orga izational merits of a unified
defense structure, but many fear Garcia is moving to weaken the
military's power and make it an instrument-through a defense
ministry-of his party's contro
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The naming of a defense minister will be crucial in the short term.
Garcia apparently believes his forceful handling of the defense
ministry issue and his suppression of the Air Force barracks revolt
have shown that he is in control.
heavyhanded treatment of the Air Force, however, has
alienated many officers in every service down to the middle and junior
grades.
The President has shown little inclination to compromise so far. He
has not allowed the Air Force to back down gracefully from its
minirevolt early this month
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Top Secret
Top Secret
Declassified in Part - Sanitized Copy Approved for Release 2012/12/21 : CIA-RDP88T00091 R000500270001-3