WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001000070035-2
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 32
• Document Creation Date: December 27, 2016
• Document Release Date: May 10, 2010
• Sequence Number: 35
• Publication Date: December 13, 1974
• Content Type: REPORT

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~eekly Review
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CONTENTS (December 13, 1974)
41 1
fltcr t/[=Eha_l% ftLVITW, issued every Friday morning by the
Office of Current Intelligence., reports and analyzes significant
d,Iv"),at?nr:~nt,, cI the week throucrh noon on i htrrsday. It
frequ n:'; .nclruie_ material ccordinaterl v:itlr or prepared by
the Office of Ecenoryi 1C Research, the Office of Sit
Rt Ntic
u; :;rch, ;nu! Ili: Directorate of Science .nd hruloyy.
logics requi:i rill n-,are cunipreltensivk2 frrefrnent :rn-f therefore
puiiIi;hr_?,1 ; Li, r;rtt:ly as Spei.iaf R?_port cd in sire
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] France-USSR: Another Summit
2 EC Summit: A Qualified Success
4 Cyprus: Marcarios Returns
5 Mexico: A More Radical Outlook
6 Gicece: Parliament Co:wenes
7 Denmark: Election Next Month
8 France: Naval Reorganization
10 USSR-Iraq: Naval Support
11 Czechoslovakia: Reform Rumbles
12 MBFR Talks Deadlocked
13 Germany: Mutual East-West Concessions
14 Ethiopia: Problems in Eritrea 25X1
15 Israel: Slowly Toward a Dialogue
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16 Oman-Iran: Slow-Starting Offensive
17 Rhodesia: Cease-fire Announced
18 Angola: Toward a Round Table
19 OPEC: Investment in the US
20 Japan: Miki's New Government
21 Laos: Souvanna Back in the Arena
22 Vietnam: Dry Season Campaign
23 Malaysia: Into the Streets
24 Unrest in Burma
24 Business Off at Canton Fair
26 Australia: Deepening Troubles
26 The Korean Issue at the UN
27 Venezuela: Taking the First Step
28 Argentina: New Security Apparatus
29 The Meeting at Ayacucho
MIDDLE FAST
AFRICA
EAST ASIA
PACIFIC
WESTERN
HEMISPHERE
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France-USSR: Another Summit
The Soviets always find something to exult
about when party leader Brezhnev has me of his
summit meetings, but in truth Moscow has good
reason to be pleased with Brezhri v's talks last
week with French President Giscard d'Estaing,
The Soviet leader wound up three days in Paris
with a significant economic deal and with what he
probably regards as a gain on a political matter
dear to Moscow's heart.
The portion of the communique issued at
the end of the visit that deals with the European
security conference illustrates the change of style
that characterizes President Giscard's foreign
policy. Reportedly drafted at long, difficult ses-
sions, and partially by the two leaders themselves,
this section notes that progress has been made at
CSCE and adds that both sides are determined to
step up efforts to "concert" on the many issues
that remain unresolved. It states that "good
prerequisites have been created" for concluding
the conference at an early date and at the summit
level. Althou;i the prerequisites apparently have
been identified, there is no indication that they
have been met. The Soviets will emphasize the
statement that supports their view that the con-
ference can move to an early conclusion, while
the French are placing emphasis on the preceding
sentence regarding questions that remain to be
settled.
France has never opposed outright a summit-
level conclusion to the conference, but former
President Pompidou used to emphasize the nega-
tive aspects of the French position, saying that no
decision could be reached until it was clear that
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the results would justify such a meeting. Giscard,
characteristically, has taken the positive angle.
Soviet embassy officials have noted the shift
in the French approach. One expressed the
opinion that the French may have wanted to
"keep up" with the reference to a CSCE summit
in the Vladivostok communique. The Soviets have
also told US embassy officers, however, that there
has been no movement on such particulars as the
French proposal for cultural centers and reading
rooms, which the Soviets firmly oppose.
The fact that almost a week has elapsed
without adverse reaction from France's West
European allies to the communique's references
to CSCE suggests that Paris consulted with them
on this issue prior to the Giscard-BrE.zhnev sum-
mit or that the allies believe their interests have
not been compromised.
On other foreign policy issues, the com-
munique and Soviet press commentaries reveal a
..ear identity of French and Soviet views on the
Middle East and Cyprus. One important differ-
ence remaining between the two countries is over
the force-reduction i:.iks. The absence of this
subject from the communique indicates that the
Soviets failed once again to elicit a French agree-
ment to participate in the negotiations.
Bilateral economic matters were featured
prominently at the summit and several agree-
ments were concluded, notably an accord on
gong-term French credits. This agreement, reached
only aft:2r hard bargaining, calls for France to
provide the USSR with $2.6 billion in long-term
credits in support of Soviet purchases of French
machinery and equipment during 1975-79. The
USSR has been accustomed to paying about 6
percent interest on French credits, and their will-
ingness to accept rates approximating 7.5 percent
on this latest credit line suggests an awareness of
the tight money situation prevailing in the West.
In addition, the leaders signed z pact on
overall trade and economic cooperation during
1975-79, which is largely a restatement of previ-
ous five-year agreements. Centering on the mutual
desire to facilitate and increase trade and cc ached
in generalities, it contains no firm commitments
in conflict with the EC ban on bilateral trade
agreements that goes into effect on January 1.
An agreement was also reached providing for
France to receive 250 million cubic feet a day of
Soviet natural gas in 1976, to be increased to 387
in 1980 and thereafter. This will help France to
diversify its energy sources and will add signif-
icantly to Soviet hard-currency earnings.
Not all of Brezhnev's time was devoted to
matters of state. His meeting with French Com-
munist Party leader Marchais at the Soviet
embassy took place in what was described as an
atmosphere of "friendship, solidarity, and corn-
plete mutual understanding." The French party
endorsed the Soviets' detente policy, but there
was no sign that any agreement was reached on
the more controversial issue of how the French
Communists should manage their alliance with
the non-Communist left.
EC Summit: A Qualified Success
At the Paris summit this week, the EC Nine
reached a compromise on the crucial issue of
Bi itish "renegotiation" demands and may have
made some progress toward a common line on EC
external energy policy. The summit also pre-
sented a realistic assessment of the deteriorating
state of Europe's economy, and the leaders agreed
that the US and Europe could overcome current
problems only by implementing complementary
policies. In view of the pessimistic outlook only a
couple of weeks ago, the summit was a moderate
success both for the community and for President
Giscard personally; however, the real test will be
wlcen the general principles and high rhetoric of
the communique are translated into concrete
actions by the community.
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The French saw the summit as an opportu-
nity to give a badly needed boost to the com-
munity concept through changes in institutional
procedures, especially to advance-however
modestly-the political integration process. The
communique does in fact point toward increasing
convergence of economic and political coopera-
tion. The most'mmediate institutional innovation
will be the replacement of the overly publicized
annual summits by at least three heads-of-govern-
ment meetings a year--the first to convene during
the first quarter of 1975. The agreement to in-
crease the use of majority voting will probably
still leave `she most difficult issues to be bucked
up to the heads-of-government level. Regulariza-
tion of meetings at that level may expedite com-
munity procedures.
The communique further calls for elections
to the European parliament by direct universal
suffrage "any time in or after 1978" and notes
that the parliament's competence should be
extended. The British and Danes formally begged
out of electing their delegates by direct vote, for
the presant at least.
London's demand for a substantial r'duction
in its contribution to the EC budget caused ar
acrimonious exchange-probably intended largely
to impress respective domestic audiences-
between Prime Minister Wilson and Giscard.
Although the communique's language is ex-
traordinarily convoluted, the EC Commission is
instructed, in effect, to meet the UK's request by
devising a "correcting mechanism" that will
reduce Britain's EC budget contribution to a
"fairer share." Wilson, probably with calculated
pessimism, told the press that progress has been
made toward satisfying British "renegotiation"
demands but that there is "a very long way t. go"
and the outcome is still "very much in doubt."
According to a cabinet official, however, Wilson is
pleased by the outcome of the summit discussion
of British "renegotiation."
On the energy problem, France did not
announce an intention to join the US-sponsored
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International Energy Agency and stated it would
not make any policy change until after Giscard's
discussions with President Ford this weekend.
Although the communique is silent on this score,
Giscard claimed in his press statement that
France's partners expressed their interest in Paris'
call for a consumer-producer conference; France,
in return, would go along with preliminary con-
sultations among the industrialized oil users. The
Nine pledged to "work out and implement a
common energy policy in the shortest possible
time," in large part in order to present a more
unified front within any larger cooperative effort.
The Nine will take up a common energy policy in
detail at the council meeting on December 17.
The discussion of economic problems
reflected growing concern over the level of
unemployment, which is expected to exceed four
million by next spring. Giscard has been given a
community mandate to urge President Ford to
stimulate US domestic demand and to maintain a
high level of employment in order to avert a
deepening of the international recession.
Although Chancellor Schmidt prassed for urgent
common action in Europe to deal with recession
and inflation, how much actual coordination will
be achieved remains to be seen. The summit did
recognize that "complementary" measures for
surplus and deficit countries were in order. The
EC economic policy coordination group, which
has been inactive, is 'o be revived.
The agreement to establish a $1.6-billion aid
fund, which will benefit the community's poorest
regions, was announced as expected. The EC
Commission hopes that agreement on project
criterion and fund administration can be reached
by the council early next year. The main
recipients are: Italy-40 percent, UK-28 percent,
France-15 percent, and Ireland-6 percent. The
fund is to be implemented on an "experimental"
three-year basis, most likely in response to Bonn's
demands, since Germany is by far the major
donor, F_
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Cyprus: Makarios Returns
Archbishop Makarios has stressed the need
for unity among Greek Cypriots and for recon-
ciliation with Turkish Cypriots since his trium-
phant return to Cyprus on December 7. The
Turks and the Turkish Cypriots remain wary, but
Makarios' relatively restrained behavior to date
has at least kept alive the prospect for a nego-
tiated solution to the Cyprus problem.
In his homecoming speech, Makarios avoided
inflammatory rhetoric, although he blamed the
island's current predicament on the former Greek
military regime's attempt to overthrow him and
the resulting Turkish invasion. He issued a general
amnesty to all those who participated in the July
coup, but noted that he would not accept a fait
accompli brought on by the Turkish invasion.
Makarios also repeated his opposition to the
forced transfer of populations, which he regards
as tantamount to partition. He struck some con-
ciliatory notes, however, citing the need to
abandon the chauvinistic tendencies of the past
and his desire for negotiations with the Turkish
Cypriots.
At a press conference on December 10,
Makarios declared that he will give former acti:;g
president Clerides written negotiating instructions
in a few days. Makarios predicted that political
talks between Clerides and Turkish Cypriot leader
Denktash would begin within ten days. The in-
structions will provide a more accurate measure
of Makarios' willingness to cooperate than the
rhetoric he has been voicing since his return to
the island. Although the archbishop refused to
discuss retails at the press conference, he did say
the instructions would be in accord with the
common line agreed to at the Athens summit
earlier this month in which Greek Prime Minister
Karamanlis and Clerides also participated.
Makarios' announcement followed a threat
by Clerides to resign his position as negotiator
within 15 days, if the newly reinstated President
did not grant him written approval to pursue the
proposals agreed to in Athens. While denying the
existence of a rift with Clerides, t:he archbishop
favors a tougher negotiating stance than the
former acting president and gave only grudging
approval to the more flexible approach advocated
by Clerides and Karamanlis. Makarios doubtless
also considers Clerides to be a greater threat to his
presidency now than before his exile, given
Clerides' increased visibility over the past five
months, his relative success in governing the
Greek Cypriot community under difficult circum-
stances, his successful negotiation of humanitar-
ian issues with the Turkish Cypriots, and his
aroused ambitions.
Makarios commented at his press conference
that he has become more conscious of the "very
sad reality" on Cyprus, and his remarks to groups
of refugees were noncommittal. I his suggests that
his first-hand view of the situation on the island
has been a sobering experience that could per-
suade him to adhere more closely to the line
worked out in Athens.
Makarios' homecoming speech drew a cool
response from Denktash, who stated that the
Turkish Cypriots want to keep the door to nego-
tiations open provided the Greek Cypriots, and
Makarios in particular, accept the new realities on
the island. Denktash repeated his call for a
bizonal geographic federation and added that the
powers of the regions in relation to the federal
government as well as the size of the Turkish
Cypriot sector were negotiable.
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Mexico: A More Radical Outlook
President Echeverria is increasingly directing
Mexico's traditionally conservative foreign policy
toward a more radical path. Using natural re-
sources, multinational companies, "fascism," and
rich nations as his targets, he is striving to forge
stronger ideological and economic ties with the
nonaligned nations.
The refer?less push to have his Charter of
Economic Rights and Duties of States adopted by
the UN this week, over the objections of the US
and other industrialized nations, is the latest
example of this trend. Others are the abrupt
diplomatic break with Chile, his attacks on
"squandering" nations at the World Food Confer-
ence, and his call for a Latin American economic
organization that would include Cuba and ex-
clude the US.
The debate over the charter, first proposed
by Echeverria in April 1972, produced the latest
in a series of confrontations between the less-
developed and developed countries. The US and
other countries that voted against the charter
objected to its language in articles dealing with
nationalization, producer cartels, and raw mate-
rials prices. Compromise might have been possible
over time, but Mexico insisted on action at the
current session.
The sudden break with Chile two weeks ago
portrayed the Echeverria government as a right-
eous critic of foreign intervention and neo-col-
.onialist intrigue. Chile had become a moral issue
with Echeverria, who has not concealed his dis-
taste for the military government nor denied the
widespread assumption that he broke with the
junta as a protest against "fascism." In this
instance, he seemingly brushed aside Mexico's
long-time foreign policy guide, the Estrada Doc-
trine, which states that a government will neither
formally recognize nor withhold recognition be-
cause of another government's origin or ideology.
At the World Food Conf..ience, Echeverria
castigated the great powers for squandering the
world's resources in arms races and called for the
estabji:hment of a world food bank. Echeverria
also advocates cartels among producers of raw
materials. Although none of Mexico's principal
exports-coffee, sugar, cotton, and semi-manufac-
tured goods-has benefited from such cartels,
Echeverria belie"; that they offer an opportunity
for balancing the economic power of the develop-
ing and industrialized nations. 25X1
Together with Venezuela, the Mexicans are
pushing ahead with plans to form an exclusively
Latin American economic organization. Still in
the early planning stages, the organizatic,n would
focus on mutual economic cooperation.
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In economic matters, Echeverria is trying to
turn Mexico away from its heavy dependence on
the US. His efforts are wide-ranging, but have not
produced many big commercial agreements.
Nevertheless, in the past two months he has dis-
patched cabinet-level delegations to Eastern Eu-
rope, Cuba, and Venezuela for trade talks. Nego-
tiations will soon be opened with the EC for a
cooperation agreement, and officials have been
working at obtaining a similar arrangement with
CEMA. In addition, Mexico hopes to join OPEC
once exports of oil reach higher levels.
It is difficult to see what Echeverria hopes to
gain with his appeals to the nonaligned nations
other than some future trade and investments. He
has a deep and apparently genuine interest in new
economic relations between developed and devel-
oping countries, but his demagoguery runs the
risk of offending some countries. It i; possible
that with only two years left of his six-year term,
he is trying to compensate for his domestic social
and economic troubles with daring foreign policy
ventures. In private, however, Echeverria contin-
Lies to indicate that he wants to maintain a special
relationship with the US, and he cooperates with
Washington reas.
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Karamanlis opening parliament
GREECE: PARLIAMENT CONVENES
The Greek parliament convened this week
for the first time in seven years, one day after a
plebiscite on the monarchy resulted in a resound-
ing -!efeat for exiled King Constantine. Almost 70
percent of the voters cast their bdllots last Sunday
for a republic-a clear mandate that should finally
put to rest an issue that has been bitterly divisive
for more than a century.
An interesting aspect of the referendum,
which all political factions agreed was the most
honest plebiscite ever held in Greece, was that
large segments of the previously royalist rural
population joined urban voters in turning down a
return to the monarchy, suggesting that the socio-
economic gap between urban and rural areas is
closing. The unambiguous rejection of the mon-
archy should placate the republican left, which
did poorly in the recent election, and further
strengthen the position of Prime Minister Kara-
manlis, whose New Democracy Party holds a
commanding majority of 220 seats in the
300-member parliament.
In his first policy speech before the new
parliament, Karamanlis said his government was
reviewing the status of US bases in Greece and
"entering into the technic?l aspects" of Greek
withdrawal from the military side of NATO. The
Greek government has already sent notes to both
NATO and the US government, indicating that it
is ready to begin talking about these issues. The
..ote to the US government on bilateral security
arrangements appears to confine the discussion to
those provisions of the agreements tha4. are under
the NATO umbrella. The Prime Minister, none-
theless, emphasized in his speech Athens' desire
to maintain political, cultural, and other ties to
the West.
The Greek government has repeatedly tied
any reconsideration of its stand on NATO to
progress on Cyprus and to improved relations
with Turkey. The Prime Minister's comments can
be seen in part as pressure on the US and NATO
to urge Turkey to be more conciliatory. The US
embassy in Athens characterizes 1':,irarnanlis as
without doubt a roan of thn West whc harbors no
illusions that Greece could be either nonaligned
or an ally of the East Eureoeans. The embassy
cautions, however, that this c.oes not mean he is
in a position to reverse-or even wishes to do
so-the so far largely rhetorical withdrawal from
NATO that Greece has undertaken. It notes that
even should there be a Cyprus settlement and a
substantial improvement in relations with Turkey,
a reversal of the withdrawal would not be
automatic.
Karamanlis told the parliament, which is
empowered to revise the constitution, that be
would present it with a draft constitution next
week. The constitution is expected to strengthen
the executive, but it is not clear if this strength-
ening will apply to Vie presidency or the prime
ministership. Asked recently if the new republic
would be modeled on that of West Germany-a
popular subject for speculation in the press-
Karamanlis :aid that Greece did not need foreign
models or constitutional experts. He then ces-
tui dd toward his forehead, saying "the future
Greek constitution is here." The parliament has
three months to debate the constitution, but
Karamanlis has asked for rapid approval.
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I I
Karamanlis spoke harshly of Turkey in his
speech, noting Ankara's "aggressiveness" and
"provocative behavior." He said that the serious
disputes between Athens and Ankara involved
other vital interests-a reference to the Aegean
dispute-as well as Cyprus, which the Greek
government "would not leave defenseless." In
reiterating his support for the Greek Cypriots, he
assured them that Athens would not yield to
accomplished facts or accept a dishonorable solu-
tion to the Cyprus problem.
The government can be expected now to
turn its attention to the economic ills afflicting
the country. The three main problems are:
? revitalization cl' the economy, which
this year has stalled at a zero growth rate;
? prevention of a resurgence of the infla-
tion that plagued the economy from the last
quarter of 1972 into the first quarter of 1974;
? perennial balance-of-payments d+ cul-
ties, which were aggravated this year by soar-
ing oi; prices and plummeting tourism earn-
ings and emigrant remittances.
Fortunately, the government's economic
decision-makers are strikingly more qualified than
those who served the junta. In addition, Kara-
manlis' overwhelming victory at the polls should
assure businessmen and potential investors of the
increased probabilities for a stable and sympa-
thetic government for the next four years.
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DENMARK: ELECTION NEXT MONTH
Faced with stiff opposition in parliament to
his ten-point economic package, Prime Minister
Hartling has turned the debate over this issue into
a national referendum by calling for a parlia-
mentary election on January 9.
Hartling's hopes of ramming the emergency
legislation through the 179-seat Folketing faded
when it became clear that he did not have the
support of a majority of members. With his
Moderate Liberals controlling only 22 seats, the
Prime Minister decided to go directly to the
people rather than face a long uphill battle.
The austerity plan, which now awaits the
election results, is designed to reduce the 15-
percent annual inflation rate, the 5-percent un-
employment rate, and the huge trade deficit. The
package calls for a wage and price freeze, sus-
pvnsion of the link between wages and the cost-
of-living index, and strict control of agricultural
prices.
Hartling has weathered some difficult times
in the past over economic measures. On three
occasions since taking office a year ago, ? he has
threatened to resign if parliament did not approve
his proposals. Each time, Hartling has managed to
squeak through after offering last-minute
compromises.
During the past year, Denmark's increasingly
serious economic problems have sparked wide-
spread demonstrations. Some 75,000 leftists
marched on parliament last month to protest the
country's high unemployment and to demand
Hartling's resignation. Last May, following a com-
promise with parliament that led to an across-the-
board tax hike, workers protested the new taxes
by participating in nationwide wildcat strikes.
The Prime Minister is now gambling that
none of the other ten political parties can come
up with convincing solutions to the country's
economic problems. Hartling has already
launched his attack on the other parties by criti-
cizing both the socialist bloc on the left and
Mogens Glistrup's Progressive Party on the right
for opposing "the only plan that could restore
full employment."
Hartling hopes to "win" the election by
strengthening the center, to which his Moderate
Liberals belong, at the expense of both the left,
and the ,fight. Public disillusionment with the
ability .if any of the parties to deal effectively
with tht country's economic problems, coupled
with the proliferrtion of parties, which now num-
ber 11, vill make it difficult for any to register
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As a result of a recently completed review of
changing strategic requirements, the French -.-,/y
is seeking authorization to make major redeploy-
ments in its Atlantic and Mediterranean fleets.
The key aims of the shifts would be to reinforce
the Mediterranean fleet and to increase French
anti-submarine warfare capability in the Atlantic.
A naval high command study reportedly was
undertaken earlier this year to determine the
feasibility of permanently reinforcing the Med-
iterranean squadron. The study apparently was
made in response to a growing French awareness
of the increased importance of the eastern Med-
iterranean, especially after the Suez Canal is
reopened. The French were also said to be
spurred by a desire to "show the flag" in an area
that, in their view, has become the privileged
waters of the great powers.
Preliminary plans reportedly call fog the
transfer of France's two aircraft carriers, a guided-
missile cruiser, and two guided-missile frigates
from their home base at Brest to the Mediter-
ranean Fleet home base at Toulon. In return, the
Atlant?c Fleet would rece;ve five anti-submarine
warfaie ships from Toulon. The strategic ballistic-
missile submarine force would remain in the
Atlantic at lie Longue, near Brest.
The French navy apparently does not believe
that the shifting of the carriers and the guided-
missile boats will seriously affect the ability of
the Atlzntic Fleet to meet its primary require-
ments. The navy sees the Soviet submarine force
as its greatest threat in the Atlantic and probably
views the gain in anti-submarine fighting strength
as adequate compensation for the loss of some
surface and air capability.
According to press sources, President
Giscard will examine the proposal shortly. Previ-
ous statements by Giscard indicate that he will
react favorably. In his October press conference
on the French defense review, Giscard noted that
all recent conflicts in the Mediterranean have
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involved conventional forces, and he hinted that
France would provide more flexible conventional
means for overseas intervention in pursuit of its
national interests.
The Mediterranean Fleet currently has no
offensive air arm, and the proposed transfer of
the two aircraft carriers would provide the fleet
with conventional air and antiaircraft capabilities.
Plans also call for the aircraft carriers to begin
receiving Super Etendarrl attack aircraft in 1977.
These carrier-based fighters reportedly will have a
tactical nuclear-delivery capability, and their
appearance in the Mediterranean would add a
significant new dimension to French military
power in the area.
redeployment could begin early next year if Paris
decides soon to authorize the moves. The shifts
would require about a year to complete. The
French deputy chief of naval operations said in
late November, however, that he anticipates the
government will move more slowly and that
nothing v-ill be done before 1976.
Moves in the Indian and Pacific Oceans
Paris began taking measures earlier this year
to increase its naval presence in the Indian Ocean,
apparently in reaction to what it perceives as a
growing Soviet and US influence in the area. In
April, and again in October, squadrons of ships
have been sent out temporarily to augment the
naval forces permanently assigned there.
The navy is also studying ways to :ncrease its
capability to support its contingents in the Indian
and Pacific oceans. The French maintain small
naval forces ai New Caledonia and Tahiti in the
Pacific. Each year since 1966 they also have sent
a temporary task force to French Polynesia to
support their nuclear test program.
The reduction of foreign bases and the
anticipated loss of others has prompted the navy
SOYi IZ 16 MISSION COMPLETED
The manned Soviet spacecraft Soyuz 16
returned safely to earth on December 8. Dur-
ing its six-day mission, the Soviet crew tested
equipment and procedures for use during the
joint Apollo-Soyuz mission scheduled for
next July. In addition, the crew carried out a
series of scientific and biological experiments.
The flight apparently encountered no
problems serious enough to 'eo ar 'z the
joint mission. 25X1
25X1
to develop a program to facilitate logistic support
to ships while they are under way. Recently, a
repair ship was permanently reassigned to the
Indian Ocean fleet, and the first of five tankers
intended to support high seas naval forces report-
edly is scheduled for commssioning in 19'6.
The reopening of the Suez Canal this spring
will have a significant impact on t ;e Indian Ocean
fleet. In addition to becoming a strategic oil
artery to Europe, the Red Sea route will greatly
shorten the logistic support line to French naval
forces in the Indian and Pacitic oceans.
Long-Range Plans
Longer range plans call for the cr-ation of
two nuclear-attack submarine squadrons in the
early-to-mid 1980s. The recently retired head of
the French navy said last year that the first such
squadron would be rased at the Brest naval base
complex, and that t1',e second would operate out
of Toulon. These modern submarines will prob-
ably replace, rather than augment, existing con-
ventionally powered boats. In order to base
nuclear submarines at Toulon, the French will
first have to construct a nuclear support facility
there. Such a facility, of course, could be used to
support French nuclear ball -
marines as well.
25X1 25X1
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~../ r CASPIAN
sF:., f -~ 25X1
In May 1974, the Soviet navy initiated a
patrol of the Persian Gulf, primarily in the area of
the Strait of Hormuz. The patrol has been main-
tained ever since except for a six-week hiatus in
August and September. Two ships alternate pa-
trols with visits to Iraqi waters. Most frequently
these are the fleet minesweeper;, but occasionally
an intelligence collector has taken up the patrol.
a repair
ship at the Iraqi naval pier in Basrah since April
1974. Iraqi patrol boats apparently are also
serviced by this ship.
While on station far from home waters, So-
viet navy elements rely principally for support on
auxiliaries in international anchorages and foreign
ports. Soviet ships have been serviced by repair
ships in Alexandria, Ta;tus, and Berbera as well as
Basrah. The repair ship can serve a purpose similar
to shop and storage facilities on shore for routine
IRAQ
All
PERSIAN
?AA e.neT
G.h.
Ur,A.
HpID .,..
III MII .IIt
IGH A NISI AN
f, 'I! OP U.MAN
25X1
mainter -ince or minor repair of Soviet naval units.
The repair ship's extended stay in Basrah proba-
bly reflects an arrangement that is beneficial to
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CZECHOSLOVAKIA: REFORM RUMBLES
Long-postponed economic reforms seem to
be in the offing for Czechoslovakia as evidence of
trouble in the 1974 plan mounts.
Since the current leadership took power in
1969, economic problems have been sidetracked
by the more pressing political situation. The
economy has drifted, guided only by an unambi-
tious five-year plan. National income and indus-
trial production have grown a lackluster 5 to 6
percent per year. The consumer, however, has
been placated by more and better goods at stable
prices. A portion of the leadership is now con-
vinced that fundamental political stability has
been achieved and that economic problems have
become severe enough to warrant serious concern.
Industrial production is lagging behind
planned goals. Recent increases in the prices of
raw material imports combined with a slow
growth in export volume probably will result in a
record hard-currency deficit this year of $500
million. A similar pattern of setbacks resulted in
the reform movement in the early 1960s. High-
level Czech planners have noted recently that a
large hard-currency deficit might shock the polit-
ical leadership into instituting reforms in time for
the 1976-80 plan.
Premier Strougal said last month that a more
flexible system of planning may be in the offing
and hinted that some of the middle-level partic-
ipants of the 1968 reforms may be called upon to
help work out needed changes. A resolution at
the recent Central Committee session called for
material incentives to spur better management.
Numerous articles praising the Hungarian eco-
nomic reforms have appeared in Czech economic
journals.
Prague may be planning to increase its pur-
chases of Western machinery and technology,
mostly by drawing on its excellent credit rating.
Speakers at the Central Committee meeting at-
tacked the cost and sluggishness of domestic tech-
nological development. After much debate, the
leadership has become convinced that selected
purchases of machinery and licenses from the
West would help revitalize Czechoslovakia's falter-
ing export industries.
The leadership will be cautious in bringing
about major reforms, keeping in mind the ex-
periences of 1968. Changes will be made without
fanfare, and Moscow will undoubtedly be con-
sulted. Minor changes could occur within the next
few months, possibly including wholesale and
retail price increases and fuel rationing. Major
changes, such as giving enterprises more decision-
making power, could hardly be instituted before
1976, the first year new five-,,-,-
plan. 25X1
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Soviet delegation to MBFR talks (center foreground)
The force reduction talks in Vienna, now in
their second year, ended their fourth round this
week with the sides deadlocked. The Soviets and
their allies apparently are not disturbed by the
impasse and seem content to play a waiting game.
Several of the West European participants are
getting restless, however, and are coming to be-
lieve NATO should reconsider its negotiating
position.
The Soviets have presented two proposals
during this negotiating round. The first, a version
of the "symbolic reduction" proposal raised in
previous rounds, has been rejected by the West
because it:
? calls for equal reduction by both sides;
. ? would codify the existing disparity in
size between NATO and Warsaw Pact forces;
unacceptable, they have had difficulty in formu-
lating a response. Some West Europeans favored
making a counterproposal, but eventually agreed
that Western negotiators could tell the Soviets
that the Allies have some specific objections to
the freeze proposal but are still studying it..
The West Europeans' desire to make a freeze
proposal reflects their changed perceptions of t;ie
force-reduction talks. Partly because of political
and economic pressures on several states to cut
their forces, nearly all the major West European
participants are uneasy about the lack of p. ogress
in the negotiations. The British, Belgians, and
Dutch have all expressed qualms about the Allied
objective of having reductions in two phases.
Recently, there have been indications that the
West Germans are also doing some hard thinking
about phasing, and perhaps about other Western
negotiating goals as well.
? would ectab ish ceilings on the armed
forces of each West European participant.
Nevertheless, the Western Allies have told the
East that they see two positive aspects to this
proposal: the East has differentiated to a limited
degree between the US and USSR, on one hand,
and the other direct participants on the other;
and the East has suggested negotiating two sepa-
rate agreements in sequence.
In late November, the East proposed that
the direct participants agree "not to increase the
numerical strength of their forces in central
Europe for the duration of the negotiations."
Although the Allies agree that the Soviet offer is
With the exception of Belgium, no West
European country has formally proposed that the
NATO approach on the force reduction talks be
revised. They appear to be awaiting an initiative
from the US, perhaps on the so-called Option III,
or "nuclear sweetener." This option would have
the US offer to withdraw nuclear warheads,
nuclear-capable aircraft, and Pershing missiles in
return for the Soviets withdrawing a tank army.
Most of the Allies appear to favor trying Option
III, but all the West Europeans want a full dis-
cussion to take place within NATO before in-
troducing a nuclear offer in Vienna.
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GERMANY: MUTUAL EAST-WEST CONCESSION,
The details of the package deal between East
and West Germany, involving concessions on West
Berlin and economic issues that the two sides
hav,a been negotiating since last summer, were
prematurely revealed this past week by Pankow.
Inter-German relations have been burdened
during the past year by such developments as the
notorious Guillaume espionage case that led to
former chancellor Brandt's downfall and East
German harassment of autobahn traffic in retalia-
tion for Bonn's decision to establish a federal
environmental office in West Berlin. Last week-
end, Pankow confirmed its reputation as the "bad
boy" in the inter-German dialogue by leaking to
the East German press the details of Bonn's con-
cessions in the negotiations.
rency-exchange requirement. Some West Berlin
officials initially complained about not being con-
sulted in advance about the decision to initial the
credit agreement. Now that the East German con-
cessions have been revealed, however, they seem
generally content. Pankow's willingness to facil-
itate inter-German travel and its additional offer
to supply West Berlin with 300 megawatts of
electricity beginning next year have helped dispel
the impression that Bonn offered the credit
simply to gain a concession oo pensioners. West
Berlin Mayor Klaus Schuetz, who repeatedly
urged Chancellor Schmidt to take a harder line in
the negotiations, stated that Pankow's conces-
sions and proposals were the most conciliatory
gestures made by the East German leadership
since he became mayor seven years ago.
The so-called "leak," which appeared in
Neues Deutschland, disclosed that Bonn on
December 6 had initialed an agreement to extend
the interest-free credit arrangement that helps
finance a portion of bilateral trade. Under the
new arrangement, which will run for five years
beginning in January 1976, Bonn will increase the
amount of interest-free credit granted to East
Germany to $340 million.
As their part of the deal, the East Germans
have agreed to exempt old age pensioners residing
in West Berlin from the minimum currency-ex-
change requirement for visits to East Germany
beginning on December 20. In addition, West
Germans will now be allowed to use their per-
sonal cars to visit virtually all parts of East Ger-
many. Pankow also indicated it was prepared to
improve road, rail, and canal links to West Berlin.
Pankow's decision to publicize Bonn's con-
cessions prior to formal announcement of the
agreement embarrassed the Schmidt government,
which had promised West Berlin officials that no
economic concessions would be made until
Pankow exempted the pensioners from the cur-
Both sides will probably now move to sign
the agreement on interest-free credit, perhaps
before Christmas. The negotiations on the East
German proposals to improve road, rail, and canal
links to West Berlin will orobably the holiday
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ETHIOPIA: PROBLEMS IN ERITREA
The prospects for major fighting between
government forces and separatists in Eritrea Prov-
ince have increased. The military government is
sending reinforcements to the province for a pos-
sible resumption of an offensive against the
rebels. Such an offensive may provoke the rebels
themselves to initiate more operations. Since the
military revolt began in Ethiopia last February,
there apparently has been little military contact
between government and rebel forces.
The newly formed brigade of 1,500 men
arriving in Eritrea will join the 7,500 regulars
stationed there. The reinforcements are unlikely
to increase the government's capabilities; they are
poorly trained and unprepared for an anti-guer-
rilla campaign.
According to the US consul general in
Asmara, the rebels have gained considerable sup-
port among Eritreans since the killing last month
of General Aman, an Eritrean who favored a
peaceful solution to the 12-year-long insurgency.
The army may attempt to dislodge the rebels
from villages where they have been given shelter.
As they have in the past, troops may also launch
attacks on villages in reprisal for aiding the rebels.
In addition, the Addis Ababa government
faces increasing disaffection among the 3,000
paramilitary police in the province. The force,
which is under army command, is made up largely
of Eritreans. In November the army was reported
to have been unsuccessful in an attempt to get
some police personnel to turn in their weapons.
The army also removed police from some rural
outposts and transferred them to Asmara.
Addis Ababa was relatively quiet this week
as the military tightened security and rounded up
Eritreans in the aftermath of recent bombing
incidents apparently carried out by the rebels.
The ruling coi.rmittee demonstrated that it was
getting down to the business of running the coun-
try by filling several key vacancies in the cabinet
and the military services.
On December 10, the government an-
nounced the opening of trials for the first of the
170 former officials and officers charged with
corruption and other offenses. The trials are to be
conducted by a five-man military tribunal
empowered to impose the death penalty. News-
men were permitted to attend the abbreviated
opening session, but subsequent sessions will
probably be held in secret. Last week, govern-
ment spokesmen responded coolly to appeals on
behalf of the prisoners by the UN Secretary Gen-
eral and ambassadors of several countries. F_
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ISRAEL: SLOWLY TOWARD A DIALOGUE
Israeli Foreign Minister Allon completed two
days of talks in Washington on December 10,
meeting with President Ford, secretaries Kissinger
and Simon, and members of the Senate Foreign
Relations Committee. Allon indicated that his
visit was intended to clarify prospects for a re-
sumption of the dialogue with the Arabs, but said
that no specifics had yet been agreed upon. The
foreign minister also said more time will be
needed to explore the matter, leaving open the
possibility that he might return to Washington in
early January.
According to an Israeli commentator, Allon
implied that before he returns to Washington Sec-
retary Kissinger will inform Egypt of several alter-
native Israeli withdrawal proposals. Another
Israeli writer, citing "informed sources," claimed
Allon said Israel would consider turning over to
the UN forces the strategic Gidi and Mitla passes
in the Sinai in exchange for Cairo's assurances
that the Egyptian-Israeli front would remain
peaceful for five to six years.
Israeli press reports had earlier said Allon
was bringing to Washington several negotiating
options, including Israeli pullbacks of from 6 to
30 miles, excluding the passes, depending on what
Cairo might offer in return. Prime Minister Rabin
reportedly had in mind agreement by Cairo to
allow Israel two to three years to negotiate with
Syria and Jordan over the Golan Heights and the
West Bank.
A commentator in one of Israel's most pres-
tigious dailies claimed Israel and the US had
agreed that priority is to be given to negotiations
with Egypt, but that Syria must be told the door
to negotiations with Tel Aviv is open and that
talks with Cairo are not necessarily linked to talks
with Damascus. In addition, the US and Israel had
agreed that the visit of Soviet Secretary General
Brezhnev to Cairo in mid-January does not re-
quire the hasty formuiation of negotiation
proposa Is.
The commentator also claimed that the main
point of Allon's presentation in Washington is
that, in Israeli eyes, there is a correlation between
the depth of any second-stage withdrawal in the
Sinai and the length of tirie any agreement is to
last. Tel Aviv, in effect, wants to trade space for
time. This concept reflects the strategy outlined
by Prime Minister Rabin in an interview ten days
ago. He suggested then that in return for a more
durable second-stage agreement on another Israeli
military withdrawal in the Sinai, Israel would not
insist on formal Egyptian commitments, such as a
declaration of non-belligerency. Instead, it would
accept secret Egyptian assurances to the US.
Defending this interview before the Knesset
on December 11, Rabin said his main purpose was
to impede "warmongers" in the Arab world and
to prevent Israel from being accused of un-
dermining the search for a negotiated settlement.
He added his hope that, as a result of Allon's
Washington trip, a cycle of political contacts
would resume, with Egypt, leading to progress
toward peace. The Prime Minister cautioned,
however, that he was not yet sure talks with Cairo
are in the off!ng. Rabin was responding to a call
by the rightist Likt'dd bloc for a full Knesset
debate on the interview, which Likud leader
Begin characterized as unwise, and irresponsible.
Reflecting some of Likud's arguments, sev-
eral commentators had earlier charged that
Rabin's proposal weakened Israel's bargaining
position in the absence of evidence of comparable
Egyptian flexibility. The commentators also
claimed the proposal prejudged Allon's discus-
sions in Washington and would be interpreted by
the Arabs as a sign of Israeli weakness.
A few other Israeli commentaries, however,
approved Rabin's proposal. They noted the
importance of displaying maximum Israeli re-
sponsiveness to the US interest in moving ahead
with negotiations. These commentaries also
pointed out the desirability, from a military point
of view, of buying time and the importance of
leaving open the option for Cairo to en
senarate anrppmon+ with Israel.
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25X1
25X1
OMAN-IRAN: SLOW-STARTING OFFENSIVE
The Iranian-led offensive against rebels in
Oman's Dhofar Province has gotten off to a slow
start. In their initial clash with some 20 rebels on
December 5, the largely untested Iranian troops
suffered a reversal and admit to ten casualties.
The commander of the Sultar's armed forces
attributes the losses to the Ireiiian troops' in-
experience, and he expects the offensive to pick
up soon. The Shah of Iran is committed to aiding
the Omanis, and it is unlikely that he will allow
Although the Omani government had antici-
pated that the rebels would be quickly forced to
withdraw, the Dhofaris apparently intend to
make a strong stand, at least initially. Military
units from South Yemen-a primary source of
rebel support-reportedly have agreed to a rebel
request to take up positions near the Omani -
South Yemeni border in order to free some 150
rebels to fight the Iranians.
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I I
RHODESIA: CEASE-FIRE ANNOUNCED
Prime Minister an Smith's truce agreement
with the Rhodesian insurgents this week is the
most promising step toward a negotiated settle-
ment since the collapse of his constitutional
agreement with the British in early 1972. Initial
reports indicate, however, that the truce merely
glosses over the basic issue of how soon a transi-
tion to majority rule in Rhodesia can be
completed.
Smith announced on December 11 that the
insurgents, who have been conducting terrorist
operations in Rhodesia since late 1962, have
agreed to an immediate cease-fire. In return,
Smith has agreed to release all black nationalists
detained in Rhodesia, some of whom have been
imprisoned for ten years.
Smith also said that a conference for nego-
tiating a constitutional settlement would soon be
convened. He implied that the nationalist leaders
who met in Lusaka last week to formulate a
common bargaining position have agreed to par-
ticipate in the conference.
The Lusaka talks, sponsored by presidents
Kaunda of Zambia, Nyerere of Tanzania, and
Khama of Botswana, were the culmination of
secret efforts to resolve the Rhodesia problem.
The three African presidents and Samora Machel,
head of the Mozambique Liberation Front, have
been collaborating secretly since October with
South African Prime Minister Vorster in an effort
to nudge Smith and the Rhodesian nationalists
toward a settlement.
Late last week, an apparent impasse de-
veloped in the mediation efforts. According to
Smith, his envoys in Lusaka were told that the
Rhodesian nationalists would not acc:-'t a truce
unless he agreed to immediate majority rule.
There are indications, however, that the Rho-
desian nationalists in Lusaka did not actually
make this demand. Instead, Kaunda reportedly
25X1
told his aides, the hard liners among the na-
tionalist leaders were holding out for precon-
ditions to a truce that would guarantee transition
Smith's envoys to the talks left abruptly for
Salisbury without waiting for the blacks' formula
for attaining majority rule to be explained fully.
Smith may have hoped that disclosing an
allegedly extreme demand by th.; black national-
ists would soften Prime Minister Vorster's mount-
ing pressure on Smith to negotiate a compromise
settlement. It now seems more likely that Vorster
has pressed Smith to grant amnesty to the Rho-
desian insurgents in return for a cease-fire. When
Smith announced the truce, Vorster commented
that the South African police who have been
supporting the Rhodesian counterinsurgency cam-
paign will be withdrawn as soon as terrorism
actually ceases.
It will be difficult for all sides to make the
truce agreement stick. The Rhodesian nationalists
who met in Lusaka have issued a unity declara-
tion that -:ieoretically merges three guerrilla
groups and the non-insurgent African National
Council, the only nationalist group that Smith has
allowed to function openly in Rhodesia. Past
unification plans have failed because of the bitter
feuding among the insurgent groups. It is not yet
clear whether the hard liners are genuinely willing
to honor the truce.
If the truce works well enough to bring the
principal insurgent leaders to a constitutional
conference, the principal issue will then be the
transfer of power from the predominantly white
electorate to the black Rhodesians, who out-
number the white settlers by over 20 to 1. A
concrete agreement for a genuine transition to
majority rule will be difficult unless Vorster and
the black African leaders who helped bring about
the truce maintain concerted pressures on Smith
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ANGOLA: TOWARD A ROUND TABLE
Despite some outward signs of progress in
recent weeks, Lisbon is still far from an agree-
ment with nationalist leaders regarding the
decolonization of Angola. The Portuguese are
now trying to convene a round-table conference
with all the nationalist leaders, which they hope
will y?eld positive results.
Late last month, Portuguese Foreign Minis-
ter Soares met privately in Zaire with three
Angolan nationalist leaders: Holden Roberto,
head of the National Front for the Liberation of
Angola; Jonas Savimbi, leader of the National
Union for the Total Independence of Angola; and
Daniel Chipenda, who heads a Zairian-based
faction that is challenging Agostinho Neto for the
leadership of the Popular Movement for the
Liberation of Angola. About the same time,
Portuguese Minister without Portfolio Antunes
met with Neto in Algiers. All the Angolans, with
the possible exception of Chipenda, apparently
agreed to the Portuguese proposal for a round-
table conference.
The rivalry among the liberation groups has
consistently stymied Lisbon's efforts to decol-
onize Angola. Portuguese officials may be overly
optimistic that the conference can be convened
or, if convened, that it will help iron out the
nationalists' long-standing disagrcements.
While decolonization efforts hang fire, the
liberation groups are steadily expanding their
political efforts throughout Angola by establish-
ing local offices and propagandizing in areas
where they have tribal links. So far, these
activities have been peaceful, but they could lead
to clashes if any of the groups try to extend their
efforts into another group's area. The Portuguese
army, which has ceased recruiting local tro,.)ps
and is cutting back duty tours for troops from the
metropole, may find it increasingly difficult to
Foreign Minister S ,ares
In another attempt to attract the nationalists
to join a coalition the Portuguese have
reorganized the governmental structure in Angola.
!n a decree published late last month, Lisbon
dissolved the military junta that has run the ter-
ritory since last summer and appointed Admiral
Rosa Coutinho, the junta president, as high com-
missioner.
The decree also calls for three minister-
without-portfolio posts to be held by representa-
tives of the three insurgent organizations.
Theoretically, the ministers are to participate as
equals and to coordinate a decolonization plan
with the high commissioner. So far, however, the
insurgent leaders, each bent on securing his own
ascendancy in an independent Angola, have
refused to share political authority in a transi-
tional government for the territory.
Lisbon appears to be backing off from its
long-field position that Angola's 500,000 whites
will participate in any transitional government in
the territory. The recent reorganization does not
allow for a minister to represent the white com-
munity. Moreover, Lisbon does not intend to
invite a white representative to the proposed con-
ference. Angolan whites have long feared being
excluded from decolonization arrangements, and
they might react violently if the process showed
signs of moving forward without them. The
insurgent groups are demanding that whites cease
considering themselves a separate power bloc and
join one of the insurgent organizations.
groups resort to violence.
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Investment in the US by the members of the
Organization of Petroleum Exporting Countries
has accelerated since the end of the Arab oil
ombargo and the subsequent growth in oil re-
ceipts. At the end of November, nearly one
quarter of OPEC investment abroad was in the
US. Direct holdings amounted to $16 billion; in
addition, OPEC countries have apparently chan-
neled additional funds through Switzerland and
the Bahamas. Swiss holdings in the US have in-
creased about $5 billion this year, compared with
last year's growth of $500 million.
Investment by OPEC countries in the US
will probably continue to increase both abso-
lutely and as a share of their total foreign invest-
ment. Assuming no substantial change in oil
prices or production, their foreign assets should
increase by $75 billion in 1975. Even if producers
continue to invest only a quarter of their surplus
in the US, direct holdings would reach $35 billion
by the end of 1975.
Concern about security and liquidity is
clearly reflected in the composition of assets in
the US. Short-term bank deposits and government
securities account for nearly 90 percent of the
total. Kuwait, the largest OPEC investor in other
kinds of assets, has substantial holdings in real
estate.
The sharp growth of investment in the US
reflects the inability of the OPEC countries to
find an attractive alternative. Many of the largest
banks in Europe are saturated with the short-term
deposits preferred by OPEC members and are
accepting additional petrodollars only at reduced
interest rates. Small- and medium-sized banks in
Europe would welcome additional short-term
deposits, but the oil producers are only gradually
expanding the number of institutions with which
they do business. The oil producers would prob-
ably like to increase the share of their investment
in the stronger European currencies, but the) are
limited by capital controls and the small size of
OPEC Countries:
stimated Foreign Investments
Total OPEC foreign
investment
OPEC investments in
the United States
Dec
1973
Mar
1.974
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JAPAN: MIKI'S NEW GOVERNMENT
Shortly after his election as prime minister
earlier this week, Takeo Miki announced a new
slate of cabinet and party officers that balances
powerful interests in the ruling Liberal Demo-
cratic Party. While Miki's choices do not signal
any major policy shift, there is a potential for
divisive struggle because of continuing rivalries
within the party.
All major factions of the Liberal Democrats
are represented:
? Takeo Fukuda, aging leader of ''he
party's conservative wing, is deputy prime
minister and director of the `conomic Plan-
ning Agency. Three of his supporters received
cabinet or party posts.
? Masayoshi Ohira, Fukuda's chief rival
for power, remains as finance minister. Three
of Ohira's supporters also received cabinet
posts, including foreign affairs.
? As expected, former party president and
prime minister Kakuei Tanaka did not receive
a post, but four of his supporters are in the
cabinet.
? Yasuhiro Nakasone, who played a key
role in Miki's selection last week, is now secre-
tary general of the party, a job he wanted.
Of particular interest is the balance of influ-
ence between Fukuda and Ohira. The Fukuda
faction has an important voice in both cabinet
and party affairs, while the Ohira faction controls
the most sensitive policy posts. To some extent,
this reflects Miki's relationships with the two; as a
progressive, he is closer to Ohira on most policy
matters, but politically he is indebted to Fu-
kuda-at least at this point.
Miki, a compromise choice for national lead-
ership, improved his inherently weak political
position with the team he put together, but h::
will clearly have to rely more on persuasion and
maneuver than on the factional strength enjoyed
by his predecessors. None of his supporters holds
important party posts and only two are members
of the cabinet. If strong rivalries or policy dis-
putes erupt, Miki would lack the solid base of
support helpful in enforcing restraint or making
command decisions.
Miki, more than his predecessors, will feel
compelled to rely on favorable public opinion to
push his programs through the laborious process
of party and cabinet approval. Miki's image as a
reformer will help him with the public, and it has
been buttressed by the large number of new-and
somewhat younger-faces in his cabinet.
Miki has already spoken out ire favor of
stronger anti-trust provisions and has refused ':i
relax anti-pollution standards, but major domestic
policy shifts do not seem imminent. Ohira con-
tinues to hold the most important economic post,
although he will now be contending with Fukuda,
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who chairs a key economic committee within the
cabinet. Despite their political rivalry, they do
not differ fundamentally on economic philosophy.
The new foreign affairs minister, 55-year-old
Kiichi Miyazawa, is also in the mainstream of
Japanese views on foreign policy. Well disposed
toward the US, experienced in economic negotia-
tions, and fluent in English, Miyazawa will be a
key participan+ in the formulation of Japanese
positions in economic as well a
political issues.
Prim: Minister Souvanna Phouma inter-
rupted his convalescence late last week to partici-
pate in full-dress meetings of the coalition govern-
ment's cabinet, Council of Ministers, and Joint
National Political Council in the royal capital of
Luang Prabang. He survived all of the conclaves in
reasonably good shape and made a special effort
to convince coalition colleagues, the King, and
foreign diplomats that his recuperation was pro-
ceeding satisfactorily.
The cabinet meeting was the first Souvanna
has chaired since his serious heart attack in mid-
summer. Both sides reportedly agreed prior to the
meeting not to raise contentious issues that might
prove detrimental to Souvanna's health. As a re-
sult, the highly controversial question of recog-
nizing the Viet Cong's Provisional Revolutionary
Government and Sihanouk's Cambodian govern-
ment was not addressed.
The non-Communists, who have been appre-
hensive over what they perceive as Souvanna's
growing inclination to tilt politically toward the
left, were apparently pleased by the Prime Minis-
ter's performance. Souvanna supported the non-
Communists' position on a highly charged local
labor dispute and upheld their objections to por-
tions of a bill on democratic freedoms proposed
by the Pathet Lao that would have imposed a
system of censorship on Lao news media.
Souvanna also held up well physically at a
meeting he requested of the Council of Ministers,
presided over by Lao King Savaog, to discuss
procedures for dissolving the dormant, rightist-
dominated National Assembly. The Prime Minis-
ter proposed that the assembly be replaced by the
Joint National Political Council, which would be
ronverted into a legislative body by expanding its
present membership from 42 to 72 delegates fol-
lowing a national referendum on the new'appoin-
tees by provincial governors and district chiefs.
The 30 additional delegates, like the original 42,
would be equally divided between the two sides.
25X1
The King was sympathetic to Souvanna's
plan and reportedly agreed to dissolve the as-
sembly provided constitutional procedures are
followed to his satisfaction. This is easier said
than done as the constitution predates the coali-
tion government and does not take into account
present political realities. Nevertheless, Souvanna
is optimistic that his plan can find its way around
constitutional problems, even though there is
bound to be considerable horse-trading within the
coalition before the plan is finally set in motion.
Neither the cabinet, nor the Council of Min-
isters' meeting, nor Prince Souphanouvong's key-
note speech opening the second plenary session of
the Joint National Political Council provided any
hint of a new or gardened Pathet Lao political
line flowing from the extraordinary two-week
conference of the Lao Communist Central Com-
mittee that recently concluded in Sam Neua. This
suggests that, for the time being at least, the
Communists may be content to follow Sou-
vanna's lead in pressing for conversion of the
political council into a new national assembly.
Indeed, the ceremonial fanfare surrounding the
council's opening session last week appeared care-
fully orchestrated by the Pathet Lao to enhance
the stature of the council and particularly that of
its chairman, Communist leader Souphanouvong.
If, as seems likely, the political council is
converted into a new national assembly, the coa-
lition's legislative machinery will fall under the
effective domination of Souphanouvong. The
Communists will then be in a strong position co
influence the laws of the kingdom.
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DRY SEASON CAMPAIGN UNDER WAY
The flurry of generally small-scale attacks in
the southern half of South Vietnam which began
late last week appears to mark the beginning of
t h.- ambitious military campaign the Communists
have planned for the first half of 1975. The
opening round began in the southern delta with a
number of shellirigs and small ground attacks
against the more remote government outposts,
with strong emphasis on cutting major highways.
By last weekend, the attacks had spread into the
northern delta provinces and into some areas
closer to Saigon. At week's end, several district
towns have been isolated and fighting continues
in many areas.
Most of the attacks are being carried out by
local Viet Cong units against the government's
territorial forces. Some of these attacks are
designed to mask the movement of parts of the
Communist 5th Division into the delta, and the
South Vietnamese regional commander in the
delta has deployed forces to cut off the infiltra-
tion. In the provinces around Saigon, much of the
action is in the farther reaches of Military Region
3, well away from the government's three combat
divisions. Thus far, government commanders have
been able to rely largely on provincial forces and
save regular units for the heavier action expected
later.
During the coming weeks, the Communists
are likely to make greater use of North Viet-
namese main-force units in some of the more
vulnerable areas of military regions 3 and 4. I n
other areas, especially in the western highlands,
government operations and troop deployments
may force the Communists to delay offensive
action. No major Communist initiatives are ex-
pected in the northern coastal areas at this time,
largely because of the rains, although terrorist
incidents and sapper attacks against bridges and
highways are likely to increase.
Communist military action. In many instances,
they appear to have adequate intelligence infor-
matior, on Communist movements and intentions.
Their major concern, however, is the increasing
difficulties imposed by fuel and ammunition con-
straints. In some areas of the delta, for example,
all of the helicopter flying time allocated for the
month of December has already been used and
ammunition is being spent at a greater rate than
programmed.
SOVIETS COPICLUDE AID AGREEMENTS
Moscow this week concluded back-to-back
aid agreements for 1975 with North Vi ,tnam and
the Viet Cong's Provisional Revolutionary Gov-
ernment. The Viet Cong, according to a Tass
announcement on December 10, will receive oil
products, foodstuffs, medicines, trucks, and
agricultural machinery. The Soviets first extended
direct economic aid to the South Vietnamese
Communists in 1973.
In announcing the aid agreement with North
Vietnam on December 8, Moscow-as ii: has since
the Paris agreement was signed in early
1973-carefully avoided any mention of military
assistance. Radio Hanoi, however, said last week
that the agreement would cover "economic and
military aid" and, as if to underscore the point,
publicized the presence of a North Vietnamese
deputy defense minister on the aid-seeking delega-
tion to Moscow.
On December 10, Tass announced that
General Kulikov, chief of the Soviet General
Staff, will be visiting North Vietnam in late
December. Kulikov, who will be making his first
visit to Hanoi since being named chief of staff in
1971, is probably going to take part in cer-
emonies later this month honoring the 30th
anniversary of the North Vietnamese army.
During the course of his visit, he may also review
Most South Vietnamese military officials are
confident that they can cope with the increased
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MALAYSIA: INTO THE STREETS
Malaysia has been relatively untouched by
the student unrest that has recently afflicted
many of its Asian neighbors. Last week, however,
Malay university students found a rallying issue,
and Prime Minister Razak's government is having
difficulty getting them back into the classrooms.
Student agitation began early in the week
with a protest against government neglect of
Malay small-holder rubber farmers in the north-
west, but the demonstrations gradually assumed a
more general anti-government tone. Students
charged the Razak regime with insensitivity to the
needs of rural Malays and demanded greater
responsiveness to the popular will. They also al-
leged widespread government corruption and con-
demned the ostentatious life style of Kuala
Lumpur officialdom. The students were particu-
larly critical of Razak's well-publicized program
of "Malaysia for the Malays," which is designed
to dilute Overseas Chinese dominance of the
economy; they charge that in practice it has be-
come "Malaysia for the Rich Malays" and ignores
the majority who live in the villages.
Razak Lharges that the student activists are
only a small, fringe group, bent on overthrowing
the government. He retuses to compromise on
their demands, and on the morning of December
8 sent riot police onto the campuses to arrest the
protest leaders along with some university lec-
turers accused of inspiring them. The police
action ended the sometimes-violent street pro-
tests, but the students have continued to demon-
strate on the campuses.
The protest activities have engendered a new
esprit among Malay student organizations,
proving to their leaders that secular and Islamic
organizations can unite on broad nonideological
issues. Government action has not dampened the
students' ardor and has given them new rallying
issues-calling for release of the detainees, pro-
testing the invasion of university grounds, and
demanding that examinations be postponed
because students have been unable to study. The
newly born solidarity has reportedly also eY-
tended to non-Malay students, who are now join-
ing the protest. Whatever the final resolution of
the present confrontation, if the students can
retain their present unity they will become a
significant political force for time in
many years. 25X1
Police drive back demonstrating students
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UNREST IN BURMA
Student-initiated protests over the govern-
ment's alleged mishandling of funeral arrange-
ments for former UN Secretary Genera, U Thant
have developed into a serious challenge to the
government's authority and have damaged its
already shaky standing with the public. A violent
confrontation was triggered in Rangoon this week
when the government abandoned its earlier policy
of restraint toward the student protesters and
moved in troops to a, -rest the ringleaders and clear
Rangoon University campus. Demonstrators,
including some non-students, subsequently went
on a rampage through downtown Rangoon.
Troops fired on the mob, reportedly killing at
least I ` -lemonstrators.
Student leaders have indicated that they
hope to bring down the regime, but there is no
apparent civilian alternative to President Ne Win
and his military colleagues. Thus far, there has
been no indication of disloyalty among the
troops, and the government probably will be able
to weafher the immediate crisis as long as the
army remains loyal.
Martial law has been declared in Rangoon
and several thousand students and other demon-
strators have been arrested. Additional troops and
tanks have been moved into the downtown area,
and the city reportedly was quiet by late in the
week. Earlier, authorities had ordered all educa-
tional institutions closed indefinitely.
The trouble started last week when students
intervened in U Thant's funeral ceremonies,
carried his casket to the university, and demanded
that the government provide a "fitting" burial
site. The government at first agreed to set aside a
special plot, but the students, who sought to
continue their campaign against the regime, re-
jected this offer. When the protests began to take
on an increasingly virulent anti-government tone,
troops moved in to clear the campus and U
Thant's body was finally taken to the govern-
ment-provided plot. Ne Win had long been hostile
to U Thant, who was a close associate of exiled
former prime minister U Nu, and the government
had originally rejected the idea of, a special
gravesite.
The government clearly underestimated the
students' determination and the degree of public
support for their stand. U Thant was widely
respected in Burma for the important role he had
played on the world scene, and the government's
attitude stirred public resentment. The students
also received the active backin5 of some Buddhist
monks. Moreover, the regime had already lost
favor among some groups because of the eniin-
try's worsening economy.
25X1
BUSINESS OFF AT CANTON FAIR
Business transacted at the recently con-
cluded Canton Fair was at its lowest level in
years. The value of contracts signed-about $700
million--dropped about 30 percent below the
level of the spring fair and 45 percent below the
fair last fall. Attendance was also down-by about
10 percent-with only Americans, Australians,
Canadians, and Overseas Chinese present in larger
numbers than last spring.
Chinese purchases at the fair declined
sharply. In recent months, Peking has been post-
poning or cutting back its imports of farm pro-
ducts and some industrial materials in the face of
a rising trade deficit anc a temporary shortage of
foreign exchange. China also has been shifting
much of its purchasing outside the Canton fairs.
As at the spring fair, no representatives of
Tech import, the Chinese importer of whole plants
and technology, were present.
Sales of China's traditional exports suffered
from the depressed state of the world economy.
Businessmen arrived in Canton with little interest
in adding to large inventories of Chinese gcods
purchased at high prices at previous fairs. The
Chinese were anxious to sell; importers found
them more willing to meet requests for changes in
styling, packaging, labeling, and shipping arrange-
ments. Although Chinese prices were generally
lower than at the spring fair, they often remained
sufficiently above the level of world prices to
preclude business. Even large price cuts for
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6
iMl]e, '
k rr,.-~ E~m 1929V-Pi
I ;L&
The fair building on opening day
Chinese textiles were not sufficient to overcome
declining world demand.
Chinese sales of minerals and metals were a
bright spot at the fair. Price reductions during the
last week of the fair resulted in the largest sales of
tin, antimony, and tungsten in years. Contracts
for Chinese foodstuffs equaled the level of last
spring; light industrial products showed higher
volume, but probably lower value due to neces-
sary price cuts.
The dismal performance of Chinese sales at
the fall fair will retard Chinese export growth
next year. Increased sales of petroleum will prob-
ably offset the decline in traditional exports, but
the sharp increases in export earnings achieved in
1973 and 1974 are not likely to be sustained.
Peking will probably continue to restrict less
essential imports and may widen the use of
credits in the year ahead.
While total attendance declined, a record
300 US traders visited the fair and signed con-
tracts worth about $40 million. US purchases of
$39 million were double the level of the spring
fair and matched the total of last fall. Sales were
less than $1 million compared with about $2
million at the spring fair, but US firms held dis-
cussions in Canton that could iead to later pur-
chases. The Chinese were more vocal than at
previous fairs about the adverse effects of the lack
of most-favored-nation status for Chinese exports
to the US.
Most other countries reported lower levels of
business at the fair. The Japanese contingent,
traditionally the largest, dropped from 2,300 last
spring to 2,000. The value of Japanese contracts
fell from $200-300 million last spring to only
$150 million. Business transacted by Hong Kong
traders reportedly was down by ch as 50
percent. 25X1
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AUSTRALIA: DEEPENING TROUBLES
The Labor government's continuing slide in
popularity has been punctuated by a serious
defeat in an important state election and by wide-
spread criticism of two political appointments.
Labor's loss of as many as 22 state parlia-
mentary seats in the Queensland election last
weekend was the most dramatic manifestdtion to
date of its declining public support. The outcome
represents a major personal setback for Prime
Minister Whitlam, because he and virtually. his
entire cabinet campaigned extensively throughout
the state. Although there is more resentment in
Queensland than in most other states over the
Whitlam government's policy of increasing federal
authority, the election result nevertheless reflects
growing national disappointment over the govern-
ment's failure to come to grips with Australia's
unemployment problems and financial diffi-
culties.
A public outcry over two official appoint-
merits that are being portrayed as blatant political
favoritism has aggravated the government's
Troubles. The appointment last week of a close
woman friend of Deputy Prime Minister Cairns
and Attorney General Murphy to a highly paid
position as Cairns' private secretary is viewed as
evidence of the hollowness of the administration's
boasts about its high principles. Aside from her
lack of qualifications, the woman and her
husband have been charged with circumventing
government immigration regulations and with
shady business dealings. Murphy rather than
Cairns seems to have been involved in the couple's
misadventures. A spirited debate of the matter in
the senate could lead to Murphy's resignation.
Whitlam himself came under attack this week for
naming his former private secretary to a senior
public service position.
The steady decline in the government's
standing has strengthened speculation in Canberra
that there will be elections in the first half of next
year, and that Labor will be ousted from of-
UN: THE KOREAN ISSUE
South Korea and its supporters this week
turned back a North Korean effort to win UN
endorsement for the removal of US forces from
the peninsula, but the issue will not be resolved
until early next week.
A pro - South Korean resolution, confirming
the authority of the Security Council in maintain-
ing the military armistice on the Korean Penin-
sula, passed in the Political Committee of the
General Assembly by a vote of 61 to 42. Another
resolution, proposed by Communist and Third-
World backers of North Korea, called for an end
to the UN Command and the US military
presence in Korea-with no provision for main-
taining the armistice; it was defeated on a 48-48
tie vote.
The pro-Seoul resolution will be reported to
the plenary session of the General Assembly,
where its passage early next week seems assured.
Supporters of North Korea, however, may seek a
vote on their resolution at the plenary in hope of
diluting the expected South Korean victory.
In any case, the North Koreans can take
some comfort from a provision in Seoul's resolu-
tion that calls on the Security Council "in due
course" to consider the dissolution of the UN
Command. They may also see the close vote as a
bargaining chip, however small, in their con-
tinuing effort to negotiate directly with the US
on the troop removal issue.
The considerable Third-World support for
the North Korean position at the UN reflects
recent changes in the political coloration of the
General Assembly. Third-World votes, added to
those of the Communist states, came close to
forming a winning combination. Korea, however,
was one of the few issues at the current General
Assembly session-Cambodia was another-on
which the "nonaligned" bloc was unable to main-
tain a united front. In addition to most of Latin
America, the South Korean side held the support
of many African and Arab states, while the major-
ity of South and Fast Asian states simply
abstained. 25X1
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VENEZUELA: TAKING THE FIRST STEP
Last week, the Perez administration cleared
the way for the nationalization of the largely
foreign-operated petroleum concessions by mid-
1975; only the timing remains in doubt.
On December 3, the Venezuelan Supreme
Court rejected a petition of seven international oil
companies to declare unconstitutional the 1971
Petroleum Reversion Law, which stipulated that
all properties owned by foreign oil companies in
Venezuela will revert to the state when the con-
cessions begin to expire in 1983. By rejecting the
petition at this time, the court cleared the path
for the accelerated nationalization of the petro-
leum industry announced by President Perez in
April 1974. The oil companies have accepted the
news philosophically. In expectation of such a
ruling, the local US subsidiaries have been meet-
ing with Venezuelan officials in thus far cordial,
low-key sessions regarding the role they will be
permitted to play after nationalization.
In a related move, the special presidential
commission on reversion-appointed last May to
prepare recommendations on how the take-over
of the oil company properties should be imple-
mented-unveiled its draft Petroleum Reversion
Law, which may be presented formally to Presi-
dent Perez this week. Although the bill does not
assign the foreign oil companies any specific role
in the exploration, extraction, refining, or
marketing of Venezuelan oil, government officials
have privately indicated to the companies that the
government wants to retain their services in
management, technology, and overseas marketing.
These officials have been unusually candid in
their negative assessment of the government's
ability to manage the petroleum industry, which
produces the bulk of the country's foreign
exchange and gover;iment revenues. Further
recommendations-that compensation for the
nationalized holdings be calculated on un-
amortized book value and be paid in government
bonds redeemable in no less than ten years, and
the appointment of "watchdogs" to monitor the
foreign oil companies during the transition
period-are expected to get a cool reception from
the local petroleum subsidiaries.
Page 27 WEEKLY REVIEW
President Perez
Ainiouncing nationalization
of iron ore industry
Dec 13, 74
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ARGENTINA: NEW SECURITY APPARATUS
President Maria Estela de Peron has asked
the Argentine Congress for authority to reorgan-
ize the security and intelligence organizations as a
step toward improving the counter-terrorist cam-
paign. The draft laws are likely to engender sharp
debato, but the Peronist majority in both houses
would ensure their passage.
The reorganization would provide an inter-
agency coordinating body for the intelligence
services of the federal police, the armed forces,
and the civilian intelligence agency. Counter-
terrorist operations have frequently suffered
because of a lack of cooperation amor;g these
agencies.
co er1%u -)/- I OF'
President Perez will have the final say on the
contents of the nationalization bill before it is
presented to Congress for debate sometime early
next year. In fact, during the concluding meetings
of the reversion committee, members of the Presi-
dent's own Democratic Action Party withdrew
from the deliberations, reportedly to give the
President a free hand to disagree with and alter
the committee's recommendations.
The government has been deeply dissatisfied
with the performance of the state intelligence
secretariat and the federal police. Before Juan
Peron's death, there were plans for creating a
super-security mechanism with wide powers, but
the idea was pigeonholed because of presidential
adviser Lopez Rega's opposition to the naming of
a military man to heaa it. The security committee
now wider study would be chaired by Mrs.
Peron--a move that sidesteps the powerful min-
ister's objection to an organization independent
of his control.
Although some local US petroleum oper-
ators are confident that they will be well treated
after reversion, they realize there is plenty of hard
bargaining ahead. The Perez administration, at the
peak of its popularity following the nationaliza-
tion last week of the US iron ore concessions, will
be under heavy political pressure to speed up the
pace of nationalization and loosen what many
Venezuelans see as a foreign hold on their natural
resources. Despite differences with the oil com-
panies and the US governr-ent on a number of
issues, Perez has resisted these blandishments thus
far and will probably continue his steady. deter-
mined course on oil nationalization.
Lopez Rega wants to retain a strong voice in
internal security decisions. He already has close
connections with top federal police officials
25X1
The President's decision to press for new
legislation may have been hastened by the killing
last week of another army officer and his young
daughter. The military wants strong antisubver-
sive measures. Some junior officers apparently
have begun to form vigilante s auads to hunt dowr25X1
leftists. 25X1
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THE AYACUCHO MEETING
The four-day meeting of high '_atin Amer-
ican and US officials in Lima provided a forum
for informal discussion of bilateral and -regional
problems. The various speeches and final declara-
tion, however, provide few new insights, and the
familiar themes of regional solidarity, economic
independence, and ideological pluralism were
again highlighted.
Although the overall impact of the meeting
was lessened by the absence of four heads of state
who had been invited to commemorate the battle
of Ayacucho, the conclave was well covered by
the Latin press, and the Peruvian hosts probably
feel that they got as much publicity as they
could. With one exception, the security forces
were able to maintain order.
. As expected, President Velasco of Peru and
President Perez of Venezuela vied for the lime-
light as regional spokesman. In their speeches and
other statements, they stressed similar topics,
such as the need for a new economic and political
relationship between the Latin states and the
developed countries, increased regional coopera-
tion on political and economic matters, and bring-
ing Cuba back into the mainstream of regional
affairs.
In addition to these themes, President
Velasco stressed two current Peruvian policies: a
regional arms moratorium and-indirectly-the
need to prevent conflicts between Latin states.
The notion of regional arms limitations received
general endorsement but, as before, it is not likely
to be implemented soon. Velasco's statement con-
cerning conflict between Latin states was the first
time Peru has gone on record at a regional meet-
ing advocating a multilateral effort to reduce
tensions. Velasco's formulation of this idea,
which was reflected in the final declaration, was
rather vague but is further evidence of Peru's
effort to convince other states that it harbors no
aggressive designs.
Cuban Foreign Minister Raul Roa attended
the meeting and spent a good deal of his time
thanking those states that supported the abortive
OAS move to rescind the political and economic
sanctions against his country. In turn, other Latin
delegations, particularly Peru and Venezuela,
expressed support for increased 'uban participa-
tion in inter-American affairs.
Thinly veiled accusations against the US for
meddling in Latin affairs were made by many of
the representatives, but the level of anti-US invec-
tive remained relatively low. US Assistant Secre-
tary of State Rogers was able to meet informally
with a number of Peruvian leaders including the
President. While the tcne of these meetings re-
portedly was positive, Peruvian officials still
suspect that the US is committed to "destabi-
lizing" their military government. Other Latin
countries, too, apparently remain troubled by re-
cent allegations of US interference in their in-
ternal affairs.
The stage is now set for several potentially
more important Latin summits next year. High on
the regional agenda are the meeting of all Latin
chiefs of state in Caracas and the hemisphere
foreign ministers' meeting to be held in Buenos
Aires next March. Strong sentiment in favor of
inviting Cuba to the latter meeting was voiced at
the Lima conclave. The Cuba issue and concern
that the US is not really committed to a dialog
with Latin America, however, continue to cast a
shadow over the prospects for a productive inter-
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