WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001000080055-9
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 32
• Document Creation Date: December 27, 2016
• Document Release Date: February 23, 2012
• Sequence Number: 55
• Publication Date: December 19, 1975
• Content Type: REPORT

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Weekly Review
Ton Secret
Top Secret
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Copy N2 689
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The WEEKLY REVIEW, issued every Friday morning by the
Office of Current Intelligence, reports and analyzes signifi-
cant developments of the week through noon on Thursday. It
frequently includes material coordinated with or prepared
by the Office of Economic Research, the Office of Strategic
Research, the_ Office of Geographic and Cartographic
Research, and the Directorate of Science and Technology.
CONTENTS (December 19,1975J
MIDDLE EAST
AFRICA
6 Lebanon: Fighting Down
7 Spanish Sahara: Spaniards Departing
9 Italy: Political Maneuvering
10 Portugal: Military Role; Economy
15
16
17
18
19
19
WESTERN
HEMISPHERE
Law of the Sea: The 200-Mile Zone
Europe: Civil Aircraft Market
Yugoslavia-USSR: Minic Visit
USSR-Egypt: Relations Deteriorate
USSR: New Five-Year Plait
Poland: Hedging on the Economy
21 Chile-Bolivia: Inching Forward 25X1
23 Argentina: Impeachment Voted Down
23 Brazil - West Germany: Closer Ties
EAST ASIA
PACIFIC
25 China: .A Voice from the Left
26 North Korea: Komars Move South
26 Australia: Election Aftermath
28 Timor-Indonesia: On to Phase Two
Comments and queries on the contents of this
publication are welcome They may be
directed to the editor of the Weekly Review.
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ANGOLA: ON AND ON
None of the contending parties in the civil
war scored any major military gains during the
past week, although the forces opposing the
Soviet-backed Popular Movement for the Libera-
tion of Angola made some progress in the
west-central sector. Leaders of the two sides are
intensifying their efforts to win political support
among African states prior to the planned special
summit meeting of the Organization of African
Unity. The conference ap gently will not con-
vene before next month.
The Military Situation
Late last week, a strike force including
elements of the National Union for the Total
Independen'-e of Angola and the allied National
Front for the Liberation of Angola pushed the
Popular Movement out of the town of Cela. A
National Union communique issued on
December 15 had the force moving north toward
Quibala, apparently along one of the main routes
leading from the south to Luanda, seat of the
Popular Movement's government. The muscle of
this and other combined National Union -
National Front task groups is provided by un-
known numbers of South African soldiers, white
mercenaries, and black Angolans who fought for
the Portuguese against the Popular Movement
during the insurgency.
ment forces, backed by Cuban-manned artillery,
advanced two weeks ago to within about 50 miles
of Ambriz, the headquarters of the Zairian-sup-
ported National Front. Destruction of bridges
over several rivers and the start of the rainy season
have checked the Movement's drive, at least tem-
porarily.
African Split Widens
African foreign ministers will not meet in Ad-
dis Ababa this weekend, as had been announced
by OAU officials, to set a date and agenda for a
later OAU summit. Governments supporting the
Popular Movement's Agostinho Neto insisted the
two meetings be held back-to-back, but OAU
members have not yet agreed on timing. The
Popular Movement's friends are eager for an early
summit, believing that, under present cir-
cumstances, they can exploit the meeting to the
Movement's advantage. At present the diplomatic
tread in Africa continues to run in favor of the
Movement; with Sudan's formal recognition of
Neto's regime this week, the score among African
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ANGOLA
North of Luanda, the military situation has
remained essentially static since Popular Move-
SOUTH-WF$TAFRICA
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states now is 14 for the Luanda government to
none for the nominal joint regime proclaimed by
his rivals last month.
Countries that want to keep the OAU official-
ly neutral in the Angolan conflict, on the other
hand, are trying to buy time. These. countries and
the National Union's Savimbi apparently hope to
counter the political damage o the Movement's
Angolan adversaries from the highly publicized
aid they are getting from South Africa by develop-
ing a backlash against Soviet and Cuban assistance
to Neto. Support will be sought for a b'anket con-
demnation of all outside involvement in Angola
and for a cease-fire and government of national
unity there.
With the OAU meetings in abeyance, savimbi
flew to Uganda this week for talks with OAU
chairman Idi Amin. The National Union leader is
due in Dakar on December 19 to confer with con-
servative Sengalese President Senghor and
reportedly intends on the same trip to visit
Cameroon and Ivory Coast. In his talks with the
West African leaders, all of whom oppose the
Popular Movement's drive for OAU recognition
as the sole legitimate Angolan nationalist group,
Savimbi presumably will be focusing on concer-
ting tactics for building African support against
the Soviets and Cubans. His principal African
backers-President Mobutu of Zaire and Presi-
dent Kaunda of Zarnbia-are actually working
toward the same goal.
Savimbi and his allies face an uphill struggle
in their effort to neutralize the highly emotional
South African issue, which mainly motivated
Nigeria's and Tanzania's recognition of the Neto
regime and is clearly causing other African
governments to waver in their adherence to
neutrality. The Popular Movement, of course, will
continue to exploit the issue for all it is worth. This
week the Movement stoked the fire by exhibiting,
at a press conference in Luanda, four South
African soldiers captured in the recent fighting at
Cela. Neto's lieutenant then took the four with
him on a visit to Nigeria that began in Lagos on
December 16; they are certain to attract wide
publicity there and wherever else he may visit.
Savimbi, while in Kampala, made an attempt
to disown Pretoria's assistance by claiming that
any South African forces in Ango!, are there on
their own and by calling on African states to help
drive them out. His argument is not likely to be
persuasive in many African capitals.
Soviet Press Admits Support
The Soviet central press, has, for the first time,
indirectly admitted that both Moscow and
Havana are providing military support to the
Popular Movement in Angola.
Earlier this month Pravda, in reporting on a
press conference held by President Nyerere in
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Brussels, cited the Tanzanian President's state-
ment that he was "certain" the USSR was
providing the MPLA with the "necessary arms"
for its struggle against the "interventionists" from
South Africa. In an accompanying commentary,
Pravda stated inter alia that the Soviet Union,
which stands "among the loyal friends" of the
Angolan people and was one of the first to
welcome the birth of an independent regime, "is
providing help and support to Angola during
these difficult days."
Last weekend, moreover, the Soviet news
agency Tass took the unusual step of publicizing
MPLA leader Neto's expression of gratitude for
Moscow's "all-round help" to the Angolan peo-
ple. At the same time, Pravda provided the first
hint seen thus far in the Soviet press that Cuba is
furnishing substantial assistance to the MPLA. The
Communist Party daily said that Cuba "always sup-
ported all national liberation movements in
Africa, including the MPLA-the sole legitimate
representative of the Angolan people."
Mcscow's decision to make public, even in
an unofficial way, its role in Angola coincides with
recent MPLA gains in the military and diplomatic
arena and suggests that the Soviets may want to
get their fair share of the credit for these
successes. The decision also dovetails with recent
revelations in the US press of allegedly substantial
US support for the MPLA's rivals; hence, the
Soviets may now feel less compelled to mask the
dimensions of their own involvement.
Sino-Soviet Rivalry
Peking is still making an effort to capitalize on
Moscow's heavy-handed support for the Popular
Movement. Publicly, the Chinese are maintaining
a position of strict neutrality, and there is no
evidence that any significant new amounts of
Chinese military assistance are reaching the
National Front or National Union.
coast nearly a month ago, indicating that Peking
was making good on an earlier promise to
ship transferred cargo to trawlers off the Angolan
Page 3 WEEKLY REVIEW Dec 19, 75
provide some arms to the National Union. No
similar deliveries have been reported since. In-
direct Chinese deliveries via Zaire also remain at
an undetectable level.
As long as other countries maintain their
current levels of assistance to the National Front
and the National Union, China can be expected
to maintain a low profile with its former _lients,
endorse the Organization of African Unity's call
for neutrality toward Angola, and score
propaganda points at Moscow's expense. Peking
is clearly concerned, however, that it may not be
able to sustain this approach.
Any significant reduction in support for the
National Front and National Union by other
countries, for example, would present the
Chinese with difficult decisions. Mobutu would
almost certainly want to divert to Angola large
amounts of the Chinese assistance to his country
to make up for the loss of other sources, and such
increased Chinese involvement would soon
become public knowledge.
The prospect of a reversal of the Organiza-
tion of African Unity's position on Angola or an
agreement among its members to go their
separate ways on the recognition issue would be
equally unsettling to the Chinese. This would
almost certainly lead to much wider African and
Third World recognition for the Popular Move-
ment and leave Peking on the wrong side of the
fence.
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SYRIA-IRAQ: NO DETENTE
Over the past two months Damascus has
made a number of gestures aimed at taking the
heat out of its quarrel with the rival Baathist
regime in Baghdad. The Iraqis, however, have not
reciprocated, and the two ruling groups seem in
no way close to putting aside their deep-seated
feud, which periodically produces acute tensions
over such issues as the sharing of Euphrates River
water.
Responding in part to prodding from other
Arabs and the Soviets, Syria has curbed propagan-
da attacks on its neighbor, proposed talks to
resolve outstanding differences, and resumed
Syrian airline flights to the Iraqi capital, which had
been halted last spring. Damascus' efforts to
paper over differences with Baghdad were
prompted by the deterioration in Syria's relations
with Egypt following Cairo's signing of the second
Sinai accord with Israel in early September. Presi-
dent Asad apparently hoped that the appearance
of stronger ties !-9tween Syria and Iraq would
strengthen his bargaining position with Israel.
The Iraqis, however, remain uninterested in
improving Asad's position. Iraqi propaganda
against Syria has slackened on occasion but never
stopped. it turned shrill again when Damascus, on
November 30, accepted an extension of the UN
mandate on the Golan Heights. The official Iraqi
government newspaper described the Syrian
decision as "surrendering to Zionist challenges"
and implied that the Syrian action had en-
couraged Israel's air strikes on fedayeen camps
deep inside Lebanon.
In an effort to embarrass Damascus, Baghdad
again offered to join in an "eastern front" against
the Israelis in return for Syria's public rejection of
key UN resolutions that in effect accept the ex-
istence of Israel. Asad is almost certain to con-
tinue to ignore the proposal, knowing that the
Iraqis, in the event of a new war between Syria
and Israel, would probably contribute forces
anyway as they did in 1973. Iraq reportedly also
stipulated that Damascus release its political
prisoners, some of whom are Iraqi citizens.
Baghdad may be Influenced in part by
Damascus' failure to curb some of its activities
that most irritate the Iraqis. For example, the
Syrians have continued to allow a Syrian-based
group of dissident Iraqi Kurds to broadcast attacks
against Iraq's rulers. Baghdad also has been
angered by recent harassment of Iraqis living in
Syria-including Iraqi diplomats-by Syrian
security authorities. Iraq reportedly has respond-
er! by encouraging tribal groups in northern Syria
to press for an autonomous province.
Damascus, moreover, is in no hurry to reach a
settlement with Baghdad on the sharing of
Euphrates River water. Last June, the Syrians, ap-
parently at Moscow's urging, did release water
that it had been withholding fcr three months as a
political lesson to Baghdad. Damascus, however,
still plans to divert more Euphrates water over the
next five years without regard to Iraq's needs.
Despite the continuing tensions between the
two regimes, negotiations are expected to begin
shortly for the renewal of their crude )il transit
agreement under which Iraqi crude is piped to
Syria's refinery at Homs. The current agreement
will expire at the end of this month. The arrange-
ment is particularly valuable to Damascus. In ad-
dition to about $150 million, which it earns from
transit fees, Damascus saves foreign exchange by
being able to buy Iraqi crude at bargain rates.
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Phalangists take aim at snipers during recent fighting in downtown Beirut
LEBANON: FIGHTING DOWN
The fighting in Beirut between Christians and
their Muslim and leftist foes abated somewhat
during the week following the proclamation last
Sunday of yet another cease-fire. The new truce
was negotiated by Prime Minister Karami and
Palestinian leader Yasir Arafat, with the Syrians
playing a key role in smoothing the way.
Damascus has also made a new mediatory move
aimed at getting Lebanon's political leaders talk-
ing again.
Arafat apparently was instrumental in gaining
acceptance of the truce from Ibrahim Qulaylat,
the leader of radical leftist forces that spearhead-
ed the recent battle with Christian Phalangist
militiamen for domination of the city's inter-
national hotel district. The latest peace
arrangements provided for security forces to
replace the army ?i the embattled district. This
was a concession tc leftists who had gained
control over much of the area a..~ had refused to
relinquish their vantage points to the army units
Lebanese politicians-Christian, Muslim, and
leftist-have over the past two weeks traveled to
Damascus for consultations, and Syrian Foreign
Minister Khaddam may soon come to Beirut to
continue the Asad regime's efforts to mediate a
political settlement. At present, the Syrians are
focusing on helping Prime Minister Karami to
form a more representative government.
Expansion of the present narrowly-based
cabinet to include members of all principal
political groups is one of the few remaining op-
tions that might help bring about a basic political
settlement. A broadened government would
strengthen the Muslim Prime Minister's hand in
controlling the terms and pace of a reform
program, thus reassuring moderate Muslim
groups. At the same time, it would give Christians
a better chance, to prevent or at least delay serious
erosion of their dominant position. Such a balan-
cing of interests would not satisfy Lebanon's leftist
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groups, however; they oppose the country's pre-
sent system of power-sharing among religious
groups.
Until recently, Kamal Jumblatt-the principal
spokesman for the leftists-had refused to be
represented in a government that included the
Phalanges Party and h.-.d insisted that his own
reform program be accepted before the forma-
These optimistic signs are qualified by a
general lack of confidence that the current
cease-fire, still not fully implemented, will hold
long enough to permit meaningful political
progress. As of December 18, scattered fighting
was continuing in Beirut, in villages southeast of
the capital, and in the Tripoli-7agharta area of
northern Lebanon. In this uncertain: atmosphere
elements from any quarter could again upset the
truce.
SPANISH SAHARA: SPANIARDS DEPARTING
Morocco's King Hassan is continuing to send
Moroccan security forces into northern Spanish
Sahara to fill the void left by Madrid'; withdrawal
from the territory well ahead of the late February
deadline set in the agreement it signed with Rabat
and Nouakchott last month. Algeria, frustrated by
the failure of its efforts to obtain a clear-cut dis-
avowal of the tripartite agreement by the UN
General Assembly last week, is strengthening its
general military posture and increasing aid to
Polisario Front guerrillas fighting for the in-
dependence of the territory.
Madrid appears to have virtually completed
its evacuation of Spanish forces and civilians.
Spanish press reports indicate the few remaining
troops will leave in early January; a small
diplomatic mission will he maintained in El Aaiun,
the territorial capital. The new Spanish regime is
anxious to avoid any involvement in hostilities
between Morocco and the Polisario Front or its
sponsor, Algeria.
Moroccan army units recently arrived in El25X1
Aaiun to take up security functions. As many as 4,-25X1
006 to 5,000 Moroccan troops reportedly are in
the capital and a similar number in Semara. Some
600 Moroccan police are also stationed in El Aaiun
and a few outlying towns.
Despite the influx of Moroccan forces and
their aggressive pursuit of the guerrillas, Polisario
o-moo Ip
Spanish I`-'
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resistance has spread. Several terrorist incidents
occurred in El Aaiun last week. Polisario forces
reportedly have considerable support among the
local population in the territory, with many
younger Saharans leaving the towns to join up
with the Front.
Last week also brought the first reports of
fighting between Mauritanian and Polisario
forces, with incidents occurring at several widely
separated points along the long border between
Mauritania and the Saharan territory. Nouakchott
has mobilized its 1,500-man army and is inducting
new recruits. President Ould Daddah's govern-
ment is especially concerned about protecting a
vital rail line that runs parallel to the territory's
southern border. In an effort to secure the rail
head, Mauritanian troops, aided by a Moroccan
unit that arrived by air last week, are trying to
wrest control of a raarby town on the Saharan
side that was occupied by Polisario forces last
month. 25X1
In their engagements who the Moroccans
and Mauritanians, the Polisario guerrillas are now
using mortar;, machine guns, and grenade
launchers. Euc`, side has alleged the other is com-
mittin atrocities and both are almost certain)
uilt .
So long as they have Algerian backing, the
guerrillas can keep up terrorist and sabotage at-
tacks. The automated belt conveyor system that
moves prosphate ore some 60 miles from Bu Craa
to El Aaiun is especially vulnerable to guerrilla
operations. 25X1
Algeria, for its part, has increased its troop
strength and added to its supply depots at Bechar
and Tindouf, although the actual extent of the
buildup is unknown. The Algerians have also
ordered tents, medicine, and surgical equipment
from French firms.
Algeria's efforts are probably intended, for now
at least, to exert psychological pressure on
Morocco and to strengthen Aigerian defenses
along the border. Moreover, some of this activity
is probably in direct support of the Polisario
Front. The Algerians are providing arms, training,
and possibly some volunteers to the Front in the
hope that the Moroccans will be bogged down
fighting a long and costly insurgency. Algiers is
undoubtedly concerned over how Rabat will
react to this su ort and wants to be read for an
contingency.
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ITALY: POLITICAL MANEUVERING
Italy's Christian Democratic and Socialist par-
ties are both troubled by serious internal divisions
as they prepare for congresses early next year.
Debate will revolve around the central issue of
how best to compete with the Communists in
local elections this spring and in the next
parliamentary race.
In the six months since the Communists near-
ly outpolled the long-dominant Christian
Democrats in nationwide local elections, the
latter have done little to improve their prospects.
The question of how to deal with the Communists
h's deeply divided the Christian Democrats, with
the result that they were able to agree on little
more than a date for the party congress at their
last strategy session.
The congress will open on March 4, a date
acceptable to both the Christian Democratic
left-led by interim party chief Zaccagnini and
Prime Minister Moro-and the opposing center-
right group that is seeking to gain control of the
party. The latter group, which includes a majority
of the party, wanted the congress h, Id as soon as
possible, since Zaccagnini is scheduled to step
down at the meeting. The center-right maintains
that Zaccagnini's support for an open "dialogue"
with the Communist opposition threatens to edge
the Christian Democrats toward broader
collaboration with them. Zaccagnini was in favor
of delaying the congress until spring or later in
order to consolidate the influence the party left
has been gaining since he took over in July.
Fearing a split that could cripple the party in
the next campaign, some Christian Democrats
have begun to work to bridge the gap between
these two groups. Foreign Minister Rumor and
Treasury Minister Colombo, for example, are part
of an emerging centrist faction that is trying to put
together a broadly based majority that includes
all but the extreme left and extreme right in
the party.
The Christian Democrats' lack of progress so
far, however, has helped convince the Church to
take a more active role in domestic politics than it
has since the 1950s. Alarmed in particular by the
possibility of the Communists' winning the
municipal elections in Rome this spring, the
Church hierarchy-including the Pope-is taking
a harder line on the Communists. TFe strongest
statement came this week, when the Council of
Italian Bishops declared that it is impossible to be
Marxist and Christian at the same time.
For their part, the Socialists have been preoc-
cupied by an internal quarrel over whether to
continue their crucial parliamentary support for
the Moro government. Socialist leader De Mar-
tino has been under strong pressure from
members of his party who believe that continued
support for the government will hurt the Socialists
in the next election.
Last week, De Martino-while sharpening his
criticism of the government-convinced the
Socialist directorate to postpone until the party
congress in February any decision on whether to
end support for Moro. De Martino maintained
that causing a government crisis now would play
into the hands of Christian Democrats and Social
Democrats who are opposing the trend in their
parties toward an accomodation with the
Socialists. He also agreed that a crisis in present
circumstances could precipitate early parliamen-
tary elections, which most political leaders
oppose and for which the Socialists would be
blamed.
De Martino probably also wants to avoid bad
publicity prior to or during his visit to the US in
January. In addition, divisions among Socialists
over what course to follow if Moro falls could
destroy the veneer of unity that De Martino
hopes to maintain through the party congress.
The Communists are also urging the gover-
ning parties to avoid actions that could lead to the
collapse of Moro's government. Communist
leaders fear that dissolution of the government
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now would lead to early parliamentary elections
in which the central issue would be the question
of Communist participation in the government.
The Communists want to avoid a premature con-
frontation and prefer to devote their time to con-
soiidatin th
in June.
PORTUGAL
Portuguese military leaders are proceeding
with a plan to reduce the armed forces' role in
politics. On December 12 the Revolutionary
Council announced a constitutional law forbid-
ding military participation in partisan political ac-
tivities. Recognizing the changing political situa-
tion, the law describes the armed forces as the
"guarantor" of democracy and socialism rather
than as the "driving force of the revolution," the
phrase often heard under former prime minister
Vasco Goncalves. It also lays the groundwork for
ending months of military domination of the
government by relegating the armed forces to a
less grandiose role.
The constitutional law foreshadows changes
in the agreement reached between the military
and the political parties last spring, in which the
civilians agreed that the armed forces would re-
tain their dominant role for the next three to five
years. Since the pro-Communist regime headed
by General Goncalves was overthrown in
September, the political parties have demanded
revisions in the pact, claiming that it no longer ac-
curately represents political realities. Talks began
this week between the parties and a five-man
commission from the Revolutionary Council for
the purpose of making such revisions.
This new attitude of the military reflects the
views of a group of "professional" soldiers-some
of whom are members of the Revolutionary
Council-which seeks to return political power
exclusively to civilians and to let the Portuguese
people decide whether they want a socialist
society. 25X1
The group-which is said to include new
Army Chief of Staff Eanes and commando chief
Jaime Neves-reportedly also disapproves of
Foreign Minister Melo Antunes' leftist ideas. An-
tunes is the intellectual leader of the group of
politically oriented officers who led the challenge
to former prime minister Goncalves and his
pro-Communist cohorts.
Eanes and other more conservative o -
ficers now believe they have sufficient strength to
force Antunes and his followers to choose
between politics and the military. These so-called
"professional" officers are also believed to have
contacts with rightist Portuguese political forces
headed by former president Spinola.
The strength of the "professional" officers'
group is not known with certainty, but its in-
fluence is believed to be growing. It already
appears to have played a major role not only in
putting down last month's leftist rebellion, but
also in bringing about a marked change in the
political direction of the country. An early test of
the group's strength will be the extent to which
the new pact between the civilian political parties
and the military reflects the "professionials" call
for the military to turn power over to the civilians
and return 'o the barracks.
The purge of leftists following the insurreL-
tion on November 25 improves prospects for the
emergency economic program outlined last
month but by no means assures its implementa-
tion. Within a week of the uprising, the govern-
ment was able to shift attention to economic af-
fairs long enough to approve a series of minor
measures. Lisbon still faces fundamental
economic difficulties and has a limited political
capability !o deal with them.
The emergency economic program is a work-
ing document intended to be the basis for discus-
sion and development of specific measures. It
calls for a number of unpopular actions, notably a
10 percent cut in :onsumption to reduce imports
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^ I I GJ/~ I
and free capacity for production of export and in-
vestment goods. Consumption would be curbed
by increased taxes, wage controls, higher prices,
and perhaps rationing.
The balance-of-payments deficit would be
cut by higher tariffs, export subsidies, and other
measures. Employment and output would be rais-
ed by boosting public sector investment and en-
couraging private investors. Civil construction
and export industries would be the priority areas
for investment.
To carry out this program, government of-
ficials of varying political stripe must agree on a
detailed series of laws and regulations. Even un-
der the best of circumstances, the government is
not likely to succeed in reassuring investors
because of its commitment to worker control
over private enterprise.
Lisbon now estimates real gross national
product will decline 10 to 15 percent this year.
Output fell sharply with the nationalizations and
worker seizures that followed the abortive coup
in March. Agricultural production has held up,
but large-scale nationalization and seizure of
land, which began in September, will depress
next year's farm outpur.
The government already controls 60 to 75
percent of the modern economy, but has not yet
begun to operate it in a coordinated manner or to
invest heavily in it. Many of the remaining private
businesses are on the brink of ruin, their chance
of survival sapped by forced wage increases, price
controls, a ban on dismissals, confused and incon-
sistent regulations, and denial of credit by leftist-
dominated committees in the nationalized banks.
Economic activity has been interrupted by fre-
quent political meetings and hampered by
worker insubordination.
Most prerevolutionary managers and owners
have been forced from their positions, leaving a
shortage of critical talents. Many have fled to
Brazil, while others have been jailed on charges of
"economic sabotage." Remaining private
businessmen and farm proprietors have been
subjected to constant harassment. Legal measures
to impose worker control in enterprises still in
private hands are pending.
Unemployment is believed to be ap-
proaching 400,000 persons, or 13 percent of the
labor force. The total has been swelled in recent
months by the influx of Angolan refugees, the dis-
charge of military personnel, a drop in the
number of Portuguese finding jobs in France, and
the deterioration of the economy. Only about
20,000 people seem to be receiving unemploy-
ment benefits.
Consumer prices, which rose about 25 per-
cent in the 12 months prior to the April 1974 coup,
rose at a 20-percent annual rate in the succeeding
16 months, according to official figures. All wage
negotiations have been suspended for the
remainder of the year, pending enactment of an
incomes policy.
The serious drain of foreign exchange
reserves continues, although this year's current
account deficit could be less than the $800 million
of 1974. Reserves dropped $400 million in the first
eight months of 1975, following a nearly $500-
million decline in 1974.
Despite expected government borrowing
from the IMF and private banks, Lisbon will have
to initiate sizable gold sales by the second quarter
of 1976. Foreign aid will neither stop the decline
of reserves in the near term nor correct the
problems underlying the payments imbalance.
So far, the EC has offered more than any
other donor-$175 million in concessionary loans
to finance specific development projects, refugee
assistance consisting of $2.5 million in surplus
powdered milk and butter oil, and a credit for
medicines. Disbursement of the loans cannot
begin for several months, as Lisbon has not come
up with plans for projects in accord with EC re-
quirements. The US and individual West Euro-
pean countries also have offered assistance, but
little aid has been forthcoming from Communist
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SPAIN: THE KING'S MEN
Most of the key political portfolios in the new
Spanish cabinet are held by men who have
publicly supported gradual liberalization of
Spain's political system, closer ties with Europe,
and continued friendly relations with the US.
They are joined by a team of bright technical ex-
perts who now hold all of the important
economic portfolios. The orientation of the
cabinet has thus shifted away from the
authoritarian right, and the few rightists remain-
ing may find it difficult to stand in the way of
gradual change toward a more democratic socie-
ty. The cabinet was sworn in on December 13.
The King's hand is evident in a number of the
appointments and
to head the Interior Ministry-was also in-
strumental in choosing the new cabinet. Prime
Minister Carlos Arias appears to be left with only
one personal follower, the hold-over minister of
public works, Valdes Gonzalez.
Fraga, until recently Spain's ambassador to
London, has achieved the strongest position
within the cabinet. Strong-willed and outspoken,
Fraga has an eye on the prime minister's job. He
heads a powerful rninistry-charged mainly with
internal security-and is one of three deputy
New Spanish Cabinet
Prime Minister ------------------- Carlos Arias Navarroo
Dept. Prime Minister for Defense Affairs.
Minister without Portfolio-- - - - -- - - - - - - LtGen. Santiago Diaz it, Mendivil
Dept. Prime Minister for the Interior.
Minister o f the Interior - - - - - --- - - Manuel Fraga Iribarnec
Dept. Prime Minister for Economic Affairs.
Minister of Finance
- - - - - Juan Miguel Villat Mitt
Agriculture - - - - - -
- - Virgilie Oriole Gilc
Air Force - - - -
- -
LtDen. Carl". Franco Iribarnegarep
'irmy - - - - - - -
- - - - -
LtGen. Felix Abates-Arenas
Lommerce - - - - - - - - - -
- - - - - -
Leopoldo Calvo Set, lot
Education and Science - - - -
- - - - -
Carlos Robles Piquerc
Foreign Affairs - - - -
Jose ffaria it, Areilzac
Housing ------ ---
--- ---
Francisco Lozano Vicentet
Industry - - - -
- - - -
Carlos Perez del Briuol
Information and Tourism - - - - - - - - Adolfo Martin- Gametoc
Justice - - - - - - - - - - - - - - - -- - - - -- - - - Antonio Garrigues V Dian Canabatec
Labor --------------- -------- Jose Solis Ruit* on
National Movement - - - - - - - - - Adolfo Suarez Gonsalesm
Navy ------ - --------------- Adm. Gabriel Pile doVeiga'
Office of the Prime Minister - - - - - - - - - - - Alfonso Dsorio narciac
Public Works - - - - - - - - - - - - - - - - - - - - Antonio Valdes Gonzalez
Syndicate Organization - - - - - - - - - - - - - - Rodollo Martin Villam
/re, Economic Carelopmenl and Plenninp Minuley wit sboliehed.)
'Reamed from lest cabinet. eFavor gradual change: mNationel Movement.
Economic technical experts
prime ministers. A brother-in-law and three close
colleagues occupy the ministries of education and
science, information and tourism, commerce, and
industry, giving Fraga important levers in five ma-
jor ai : ,
The cabinet is generally considered one of
transition. If Fraga succeeds in making his mark,
he may well take over from Arias. Fraga has
publicly favored legalization of political parties,
excluding the Communists and free ariiamen-
tar elections.
The second major personality in the cabinet
is the new foreign minister, Jose Maria de Areilza,
the Count of Motrico, a former ambassador to
Washington and Paris and long-time monarchist.
In 1964, Areilza gave up his post in Paris in order
to distance himself from the Franco regime, and
in recent years he has been outspoken in op-
posing the repressive policies of the government.
He has many contacts among the democratic left.
Widely considered an opporturist, he is political-
ly ambitious and, like Fraga, has, hopes of becom-
ing prime minister.
In all, five of the new ministers are former
ambassadors who servcj in countries vital to
Spain's fcreign relations-the US, the UK, Fran; e,
Morocco, and the Vatican-pointing perhaps to a
determination to improve relations abroad.
The National Movement, still Spain's only
legal political party, has only three representatives
in the new cabinet, and two of them are young
supporters of order'y change. Jose Solis
Ruiz-moved from the ministry of the Movement
to that of labor-is the only stalmnch conservative,
but he is also considered an opportunist and is
not expected to oppose modest political evolu-
tion.
Regime Christian Democrats have two
representatives in the government, including
Alfonso Osorlo, who is well-liked by the King and
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King Juan Carlos presents his new cabinet
replaces Arias' right-hand man, Carro Martinez,
as minister of the prime minister's office.
Although regime Christian Democrats are the
most conservative of the various Christian
Democratic factions in Spain, they favor
evolutionary change and could provide a bridge
to other Christian Democrats in the illegal
democratic opposition.
Prior to the announcement of the cabinet,
there was much speculation that Arias would set
up a defense ministry to coordinate the three
military services. The move was reportedly op-
posed by the old-guard navy minister, Pita da
Veiga-a conservative who presumably held onto
his ministry because of his effectiveness in moder-
nizing the navy. The King and Arias apparently
decided to compromise and appointed Lieuten-
ant General Santiago y Diaz de Mendivil, one of
the less conservative members ;,f the armed
forces hierarchy, . deputy prime minister for
defense and minister without portfolio. Santiago
will apparently be responsible for defense coor-
dination, but it is unclear how much authority he
will have over the three service ministries.
Following the first meeting of the new
cabinet last weekend, the government issued a
forward-looking statement of principles
emphasizing economic and social welfare and
orderly political reforms. Its broad generalities
and lack of a timetable have disappointed the left,
which will continue to try to organize strikes and
protest demonstrations to bring pressure on the
government. Nevertheless, some leaders of the
democratic opposition have voiced approval of
the sweeping cabinet changes. While emphasiz-
ing that the changes do not go far enough, they
have admitted that the new government is a
positive step given the present situation in Spain.
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ICELAND: THE UN APPROACH
Iceland last week requested an urgent
meeting of the UN Security Council following an
incident on December 11 in which an Icelandic
patrol boat was rammed by a British support ship
inside Iceland's 12-mile limit. The British ship ap-
parently was seeking shelter from a storm when
the incident occurred. Iceland called the incident
a "flagrant violation of Iceland's sovereignty, en-
dangering peace and security."
Reykjavik first instructed its UN delegation to
propose a resolution condemning the ramming
incident as a violation of Icelandic sovereignty,
but later agreed to a more subdued approach.
The UK engaged in some quiet diplomacy and
successfully persuaded most of the Security
Council members, as well as the Nordic countries,
io urge Iceland to limit the Security Council ses-
sion to a presentation of views.
Ireland has for several weeks been con-
sidering an approach to the UN as part of an effort
to gain worldwide sympathy and support. Reyk-
javik deferred an approach to the UN General
Assembly on a resolution that would have brand-
ed the UK an aggressor, but reserved the right to
act if other initiatives failed. The ramming inci-
dent provoked the request for an emergency
meeting of the Security Council.
This is the first time in the long history of its
fishing dispute with the UK that Iceland has
appealed to the UN. In the 1972-73 cod war,
Reykjavik considered raising the issue at the UN,
but never followed through. Iceland probably felt
it could make a better case out of the current dis-
pute because of British violation of Iceland's 12-
mile limit, which the UK recognizes.
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I LDA I
Iceland's desire not to antagonize the US
probably influenced the decision to tone down its
approach to the UN. Reykjavik is aware that US
influence on London may be essential to an even-
tual cod war settlement. At the same time, the
Icelandic coalition could not go away emp-
ty-handed-and face the almost certain barrage of
criticism by the opposition parties at home.
The timing of the ramming incident-it oc-
curred during a meeting of NATO foreign
ministers in Brussels on December 11-12-may
have killed any hopes that Iceland will accept
Britain's latest offer on the size of the annual
fishing catch. In an effort to get the stalled
negotiations going again, British Foreign
Secretary Callaghan told Icelandic Foreign
Minister Agustsson during bilateral talks in
Brussels that the UK was prepared to recognize
that fish stocks were dangerously depleted and
were vital to Iceland. On the tough issues, Lon-
don would reduce its annual catch to a figure
somewhere between the 110,000 tons the British
have demanded until now and the 65,000 tons
that Iceland wants. He repeated that Britain
would withdraw its warships from Icelandic
waters if Iceland would stop harassing British
trawlers.
So far, there has been no response from
Reykjavik. Iceland has consistently maintained
that its position on the size of the British catch is
non-negotiable and has rejected London's con-
ditions for removing its frigates. F_
LAW OF THE SEA: THE 200-MILE ZONE
Moves in recent months by Mexico and
Iceland to establish 200-mile zones of control off
their coasts have raised fears that other nations
will take similar actions. If many more countries
do so, efforts to reach an international consensus
at the Law of the Sea Conference may be under-
mined.
During the session of the conference in
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0
Geneva last April and May, most nations agreed in
principle that coastal states should have exclusive
control over petroleum and other seabed mineral
resources, as well as the right to manage coastal
fisheries, out to 200 miles. Several major issues re-
main to be resolved, however, before an inter-
national agreement can be reached:
? The legal status of the economic
zones, and residual rights of states that have
heretofore operated in the zones to
freedom of navigation, marine scientific
research, and control over marine pollution
within the economic zone.
? The right of landlocked states to fish
in the economic zones of neighboring
coastal states.
? The harvesting of coastal fish not
taken by the zonal state.
? The management and conservation
of highly migratory species of fish.
Uncertainty as to whether the Law of the Sea
Conference could resolve these issues was
probably a major factor in the recent declarations
by Mexico and Iceland of 200-mile zones. Other
nations may follow suit, and many will, unless
substantial progress is made in the next session of
the conference, scheduled for March in New
York.
Unilateral declarations are most likely from
countries that desire to conserve offshore fishing
resources. Even Japan, which has long voiced op-
position to unilateral declarations, is under in-
tense domestic pressure to extend its territorial
waters to 12 miles to curb Soviet fishing activity.
Nations such as Canada, whose waters are
heavily fished by foreign fleets, can be expected
to claim the right to manage all living and mineral
resources out to 200 miles. Additional Latin
American countries, concerned about fishing
resources and offshore minerals, may take similar
unilateral actions. Major fishing nations, especial-
ly the USSR, will seek bilateral agreements to
protect their access to their usual fishing grounds.
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YUGOSLAVIA-USSR: MINIC VISIT
Yugoslav Foreign Minister Minic's early
December visit to Moscow produced several
bland statements that suggest a deliberate
attempt to play down the failure to resolve
basic Soviet-Yugoslav differences.
Before the trip, considerable Western
press attention had focused on Belgrade's dis-
agreements with the Soviets over the proposed
European Communist Conference and on
Yugoslav suspicions that Moscow is behind
pro-Soviet subversive activity in Yugoslavia.
Neither side, however, has wanted a serious
deterioration in relations, and the Minic mis-
sion provided a useful opportunity to quiet
speculation about an impending break.
The communique on the visit said the talks
occurred in an atmosphere of "friendliness,
mutual understanding and frankness." There
were no direct references to differences, but
neither were there any hints that the Yugoslavs
accept Soviet denials of involvement with
Stalinist subversives in Yugoslavia.
The communique evidently was drafted
after considerable wrangling, and Yugoslav
observers are privately discounting its
significance. Instead, they are stressing Minic's
toast to Gromyko which, they say, amounted to
a lecture on the principles of non-interference
in Yugoslav internal affairs.
Given the contentious political substance
of the talks, economic relations emerged
center stage in media coverage. A nevi
five-year trade plan calling for $14 billion in
two-way trade was signed by the foreign trade
ministers at the outset of Minic's trip. The
growth in bilateral trade will thus continue
through 1980, but at a somewhat slower rate.
By September of this year, the USSR had
supplanted West Germany as Yugoslavia's
leading trading partner, and bilateral trade in
1975 will probably reach nearly $2 billion. Two
years ago, trade amounted to only $815 million,
but higher prices for Soviet oil and raw ma-
terials have since then rapidly inflated the dol-
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USSR-EGYPT: RELATIONS DETERIORATE
The recent impasse in Soviet-Egyptian debt
negotiations is a further indication of the
deterioration in their relationship. Egypt's finan-
cial options have increased as a result of generous
Arab aid, which has reduced the effectiveness of
Moscow's withholding of arms deliveries and its
hard line on debt rescheduling.
Debt talks reached a stalemate over Cairo's
refusal to accept Soviet conditions for reschedul-
ing Egypt's $2- to 4-billion aid debt. Moscow
refused Sadat's demand for a ten-year
moratorium on all payments and for spreading
repayments over a 30- 40-year period. Despite the
failure to reschedule the debt, a 1976 trade
protocol signed at the recent meeting allows
Egypt to export roughly $140 million more than it
receives. Presumably, some of the excess could be
used for debt repayments.
Until recently Moscow had deferred most of
Egypt's military repayments, although service on
economic debt was maintained. The latter has
been paid as scheduled over 5-12 years at 2.5 to
3.0 percent interest. Payments have amounted to
$60 million to $85 million a year since completion
Net Flow of Soviet Economic
Aid to Egypt
0
1969 1970 1971 1972 1973 1974 1975
of the Aswan Dam in 1970, about aqual to annual
aid receipts from the USSR. In 1975, Egypt paid
back more than it received in new aid.
Moscow's quick replacement of :-,ost of
Cairo's military equipment losses in the 1967 and
1973 wars underlined the extent of the Soviet
commitment to the Middle East. Since the 1973
Arab-Israeli conflict, however, no new
Soviet-Egyptian military agreeme.its have been
signed. Deliveries under old accords continued,
but even these have been reduced to a trickle
since early summer. Deliveries totaled $80 million
in 1974. Three squadrons of fighters, including 26
MIG-23s, and other equipment worth about $155
million were delivered in the first half of 1975,
bringing total Soviet arms shipments to Egypt in
the last two decades to at least $3.5 billion.
Recent Arab financing has decreased Egypt's
dependence on the USSR and allowed it to con-
tract with the UK and France for jet fighters,
helicopters, and air-to-air missiles. Negotiations
now are under way for additional jet fighters, an-
ti-tank missiles, and laser target seekers to
enhance air-to-ground strike capability. Egypt
also is seeking Arab and Western financing to ex-
pand its military aircraft industry. Nevertheless,
the Soviet arms embargo has had a serious impact
1.,, Egyptian military readiness, and substantial
arr,ounts of Western arms are a long way off.
Strains in Soviet-Egyptian political and
military relations have not directly affected ongo-
ing Soviet development assistance to Egypt. Dur-
ing 1975, more than 1,500 Soviet economic
technicians were in Egypt, many working on the
expansion of its only integrated steel mill and on a
Soviet-built aluminum plant. They also were
employed on ship repair work and shipbuilding at
the Alexandria shipyard, and in providing
assistance to Egypt's fishing industry and
large-scale irrigation and rural electrification
programs. Here too, however, Arab financing has
reduced the relative importance of Soviet aid.
Although no new Soviet development aid has 25X1
been extended since 1971, some $400 million of
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credits remain to be drawn on old agreements
that total $1.4 billion. Moscow has been cautious
in undertaking new assistance, however. A $20-
million grant for clearing mines from the Gulf of
Suez was the only emergency-related assistance
provided in the aftermath of the October 1973
war.
Moscow, still anxious to maintain a role in
Egypt, has recently been seeking to revitalize its
economic aid program. It agreed earlier this year
to go ahead with a cement plant at Asyut and to
increase the capacity of the aluminum plant, both
to be financed under existing credits. The USSR
has also offered to underwrite the development
of the Abu Tartur phosphate deposits and related
facilities, for which at least $600 million of new
Soviet credits would be required. Egypt is ap-
USSR: NEW FIVE-YEAR PLAN
On December 13, the Soviets outlined a
five-year plan for 1976-80 that apparently commits
the country to lower, more realistic goals than did
the previous five-year plan. The highest targets
are in the agricultural sector; investment there is
to be further increased and the annual grain
harvest is set close to the record level.
Thrift, efficiency, and quality production are
stressed, and there is little encouragement for the
consumer to expect anything more than a gradual
increase in the standard of living. This was
foreshadowed in the 1976 plan announced earlier
this month.
The new plan calls for the following increases
over the five-year period:
? Agriculture: 14-17 percent versus
37-40 percent originally planned for 1971-75.
The goal for grain is set at between 215 and
220 million metric tons a year; only once has
the harvest been higher than 215 million
tons. The already heavy investment program
in agriculture will be further emphasized,
rising from 131 billion rubles in 1971-75 to
172 billion rubles in 1976-80.
? Industry: 35-39 percent versus 47
percent originally planned for 1971-75;
heavy industry is to grow by 38-42 percent
and light industry by 30-32 percent. The
1976-80 plan thus continues the midterm
reversal of the current plan, which at first
promised to accelerate the production of
consumer goods faster than that of producer
goods.
? National income (roughly com-
parable to the Western concept of gross
national product): 24-28 percent, compared
with 39 percent originally set for 1971-75.
? /ages: 16-18 percent for salaried
wor'.c.,, and 24-27 percent for collective
farmers. The difference is in line with the
current policy of reducing the disparity
between the two groups.
? Foreign trade: 30-35 percent in
volume, roughly comparable to the increase
planned for 1971-75.
The outline of the new five-year plan, while
acknowledging the negative impact on the
economy caused by weather-connected harvest
failures, criticizes production shortfalls and other
shortcomings in the non-agricultural s rs as
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POLAND: HEDGING ON THE ECONOMY
With a cautious eye on the volatile working
class, the Polish party congress ended last Friday
with promises of further economic progress.
Both party leader Gierek and Prime Minister
Jaroszewicz acknowledged that serious economic
problems beset the country-including in-
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OP c
Polish leader Gierek listens to Brezhnev's speech at the party congress
flationary pressures, consumer goods shortages,
and mushrooming repayments on a soaring hard
currency debt. Instead of shifting growth
priorities to alleviate these problems, however,
the leadership outlined a program that would
continue the current economic momentum.
Thus, investment, consumption, and production
targets for 1976-80 are the same as those set for
the last five-year period. Gierek and Jaroszewicz
claimed repeatedly that the projected goals can
be achieved through better management and
worker performance and through increased
productivity based on imported Western
machinery and equipment.
Both leaders hedged on the sensitive issue of
price increases for basic foodstuffs. Gierek, for ex-
ample, justified the need for removing the price
freeze, but added quickly that a final decision will
be made only "after further study and co.r-
sultations with the people." Every Pole knows that
this means the price of food will go up, but the
bureaucratic maneuvering could last until after
Easter. The leadership most certainly recognizes
that any sudden large price increases could lead
to violent worker reaction as they did in 1970.
The few changes in the top leadership an-
nounced at the congress were obviously designed
to strengthen Gierek's control. His pre-congress
team was re-elected virtually in toto.
Two newcomers were elected candidate
members of the Politburo. Jerzy Lukaszewicz,
party secretary for press and propaganda matters,
is regarded by many Poles as a comer. Tadeusz
Wrzaszczyk, who was appointed head of the plan-
ning commission and a deputy premier earlier
this fall, is a strong supporter of Gierek's efforts to
use Western credits and technology to modernize
the economy.
The party secretariat and the central com-
mittee were enlarged, but the changes will not
affect power relations at the top.
More then 70 foreign delegations attended
the congress. Soviet party leader Brezhnev's
speech was short on substance, but-as is his
wont in recent months-bearish on relations with
the West. CSCE was clearly on his mind. He
demanded that no one aspect of the Helsinki
agreements be emphasized over another, and he
criticized the West for its failure to disseminate
the text sufficiently. In addition, he repeated his
earlier references to "ideological penetration."
The unexceptional speeches of the other East
European party leaders were generally refrains of
Brezhnev's themes.
Now that the congress has promised a con-
tinued rise in the standard of living, and with
special supplies of food available for Christmas,
tensions in Poland will remain low for the next
few weeks. Warsaw cannot continue its special
supply efforts indefinitely, however, and signs of
discontent will soon resurface as Poles go back to
their normal business of rumor-mongering in an-
ticipation of price increases and renewed food
shortages.
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CHILE-BOLIVIA: INCHING FORWARD
The Chilean government is apparently still
not agree on just how far to go toward satisfying
3olivia's spiration for a sovereign outlet to the
sea. .The ju,ta reportedly has made a new offer,
however, i i an effort to demonstrate that it is not
stalling in t'ie negotiations that have been under
way for alm \st a year.
Chilean For
to Bolivia's r
that a trade b
strip of land, i
adjacent to th
that Bolivia pa
similar amount
Chilean President Pinochet's military
colleagues have already raised some opposition
to the idea. The avy is on record against the ces-
sion of territory under any circumstances, and
divisions have beep reported within the other ser-
vices over whit i course to take. Pinochet
probably urged tQservices to agree with the pres-
ent proposal, arguing that it was necessary for
Chile to make some gesture to show its good
faith.
gn Ministry has agreed in principle
.quest. for a corridor, but suggests
effected. Chile would give Bolivia a
ncluding a port site and an airstrip,
Peruvian border, on the condition
, for the airstrip and give Chile a
pf Bolivian territory.
A Foreign Ministry spokesman in Santiago
meanwhile has issued a formal opinion that early
resolution of the problem is unlikely, a move
calculated to lower the heat that Banzer has
applied to the issue. Pinochet nevertheless
recognizes that pressures are building on Banzer
for some sign of progress in the talks before
February-the first anniversary of the decision to
resume diplomatic relations and begin bilateral
discussions on the century'?Id problem.
Lima would have serious reservations about
any agreement involving the erstwhile Peruvian
provinces won by Chile in the War of the Pacific
(1879-1883). A 1929 protocol requires Peruvian
consent to any alteration of boundaries. For the
time being, the Peruvians are willing to let Chile
and Bolivia grapple with the issue by themselves,
but the Morales Bermudez government will insist
on a voice in the settlement if it affects areas sub-
ject to irredentist claims.
PERU: PURGING THE LEFT
25X1 25X1
During Army Day speeches on December 9,
both the President and Prime Minister Vargas
warned "counterrevolutionaries" against attemp-
ting to "destabilize" the government. Morales
Bermudez went on to declare that, if necessary,
force would be used to protect the military-led
revolution. In a separate speech the same day, the
commander of the military training center in Lima
reportedly cautioned his all-military audience
that some drastic government ac-
tion-presumably against leftists-was imminent.
The government is in fact facing serious
economic problems, and balance-of-payments
difficulties may be more troublesome than it had
anticipated. The problems have been com-
pounded by labor strife, which continues despite
government efforts to respond to worker
grievances.
A crackdown against leftists would gNe rise
to charges that the President has sold out to the
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right wing and reneged on earlier promises of
more open political debate. Morales Bermudez'
support within the military, however, almost cer-
tainly will not suffer and may even be enhanced
by such a move. A number of high-ranking of-
ficers, particularly in the navy and air force,
reportedly have complained recently that unless
the President breaks sharply with soms of former
president Velasco's more radical policies, Peru
will be unable to obtain needed assistance from
the US and other Western cniirrnc F_
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25X1
ARGENTINA: IMPEA CHMEr1 r VOTED DOWN
The Argentine congress has not yet been able
to translate its grave objections to President
Peron's administration into concrete action.
This week a congressional committee finally
rejected an impeachment motion offered well
ovi.r a month ago by a group of opposition
deputies. The motion, which charged poor
presidential performance on a variety of fronts,
was defeated on grounds that it contained no
concrete charges, only political criticism.
The committee's action is not surprising. In
the first place, the strongest support for impeach-
ment has come from a handful of congressmen
representing a tiny splinter party. Thus far the
larger opposition groups have not followed
through on their threats to push for impeach-
ment. Moreover, members of the governing
coalition have the largest representation on the
chamber's impeachment committee.
Although spared the immediate threat of im-
peachment, the government lost ground in the
chamber as a whole, when, for the first time, it
ceased to command an absolute majority. The set-
back came last week when 27 members of the
coalition officially left it. The 27 then formed their
own group, joining other congressmen trying to
fend off administration efforts to hinder congress'
investigation of high-level corruption.
The split merely formalized the steady ero-
sion of the President's authority. She is the titular
head of the Peronist party, which forms the core
of the coalition. The attack on her leadership
began many months ago and is highlighted by the
passage of a succession law she strongly opposed
and by the ouster of a close associate from the
presidency of the chamber of deputies.
The President's loss of authority does not,
however, mean a corresponding increase in the
power of the forces ranged against her. Indeed,
the latter seem more and more disorganized
despite the generally agreed need to "do
something." Thus, congressional action on the
impeachment and investigation questions faces
protracted wrangling and may not produce con-
BRAZIL - WEST GERMANY: CLOSER TIES
The Brazilians and West Germans are moving
steadily toward closer ties, and officials in both
capitals are already speaking of a "special
relationship." This relationship is especially
meaningful to the Geisel administration since one
of its major foreign policy objectives has been to
reduce Brazil's traditional dependence on the U.S
and to maneuver as independently as possible in
international affairs.
The latest step in the process was a visit to
Brasilia last month by West German Foreign
Minister Genscher. The high points of the visit
were discussions on a number of economic
matters and an exchange of diplomatic notes
amplifying the nuclear cooperation agreement
signed last June. Brazil sees the acquisition of a
full nuclear fuel cycle and the promise of other
economic benefits as furthering its ambition to
become a world power.
West Germany, for its part, seems to see
Brazil as a bridge to Latin America and the third
world. At the same time, Brazil offers profitable
opportunities for investment and has interests in
line with those of the developed world. There is
also a certain cultural ;,ffinity owing to the large
number of Brazil's people that are of German ex-
traction.
Genscher's visit is one of a series by West
German leaders to third world countries. These
visits have led to speculation that Bonn is
broadening its foreign policy from concentration
on Europe and the US to a global orientation. On
this trip, Genscher also visited Venezuela and
Peru to encourage economic cooperation. Brazil,
however, was the main attraction. German in-
vestments there already are close to $1 billion, se-
cond only to West German investment in the US.
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25X1
In Brasilia, Genscher and Brazilian Foreign
Minister Silveira agreed to establish joint venture
companies in the nuclear field before the end of
1975. Nuclebras, the state nuclear enterprise, will
begin next year to place orders with these com-
panies that are expected to amount to $1 bil-
lion over the next few years.
The foreign ministers marked the occasion by
issuing public statements that could be inter-
preted as emphasizing the limited role of inter-
national safeguards in this nuclear agreement.
While Genscher said that the restrictions imposed
by the International Atomic Energy Agency apply
specifically to the West German/Brazilian
program, he pointed out that Brazil will be able to
act freely once it develops its own technology.
Silveira asserted Brazil's right to undertake
nuclear explosions for peaceful purposes.
Genscher chose not to mention that the West
German/Brazilian agreement specifically
prohibits the use of joint projects and technology
to undertake such explosions.
Genscher also pleased the Brazilians by
emphasizing the importance of improving trade
relations between the developed and less
developed nations-a theme that has been
sounded by Silveira in two recent appearances
before the UN.
The future of the "special relationship" will
depend in large measure on how smoothly the
nuclear agreement is implemented. There do not
appear to be any specific points of conflict at this
time, but given the complexity of the several
agreements, there will undoubted) be some dif-
ficulties. 25X1
Foreign Ministers Silveira and Genscher following signing of nuclear cooperation treaty last June
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CHINA: A VOICE FROM THE LEFT
Party leftists have been remarkably silent all
year as many of their pet policies, adopted during
the Cultural Revolution, have been o% erturned by
a moderate ' oalition headed by vice premier
Teng Hsiao-pin~. Early this month, however, they
launched a propaganda counterattack in their last
remaining area of influence-education-and
have attempted to expand this into a general
defense of the Cultural Revolution and the
policies of that period.
Chairman Mao has reportedly endorsed
several changes in educational policy that would
raise the level of academic training in China's u-
niversities. These changes were elaborated on in a
speech made by the minister of education this
fall. On December 4, however, the day the educa-
tion minister returned from a trip abroad, the par-
ty newspaper carried an article on the front page
that attacked each of the educational changes
poin! by point.
The leftist outcry over education has
probably thrown enough of a scare into educators
to prevent them from making any changes in
educational policy. Attempts to expand this attack
into a defense of the Cultural Revolution in order
to regain some lost ground are likely to meet with
less success.
Several articles lauding the Cultural Revolu-
tion appeared recently, calling for a defense of
the "new things," policies that emerged from the
Cultural Revolution. This broader attack is a
response not only to the changes in Cultural
Revolution policies-and to Mao's apparent
abandonment of the left-but also undoubtedly
to the growing power and prestige of the
rehabilitated Teng Hsiao-ping. Teng is a particular
irritant to the party's left wing because, as one of
the most prominent victims of the Cultural
Revolution, he personifies all of the evils that the
leftists wanted to eradicate during that period.
One article, in fact, specifically warns officials
who were purged during the Cultural Revolution
but have now been reinstated to mind their p's
and q's.
Teng Hsiao-ping
Teng's power, greater now than before the
Cultural Revolution, is likely to confine leftists' at-
tacks to propaganda broadsides while limiting
their actual influence over policy. Nevertheless,
these recent articles demonstrate that leftists re-
tain access to the media and are capable of stir-
ring up propaganda debates despite a steady
decline in their political influence. In the past
year, the left has not been able to mount a
sustained attack on current policies. If kept up
over time, such leftist activity could force the
hard-nosed Teng to take firm action against his
antagonists or, in the tradition of Premier Chou
En-lai, to tread more cautiously in overturning the
policies of the Cultural Rev u
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NORTH KOREA: KOMARS MOVE SOUTH
The North Koreans have shifted two of their
Komar guided-missile boats to a base less than ten
miles from the east coast Northern Limit Line. This
move parallels a similar shift on the west coast
earlier this year, giving Pyongyang a stronger
naval presence in areas of possible confrontation
with South Korea.
The two Komars were observed at the
Kosone-un naval base
This is 'the first time Komars have
been seen at Kosong-up; they normally are based
farther to the north.
AUSTRALIA: ELECTION AFTERMATH
The magnitude of the Liberal-Country
coalition's stunning victory in last Saturday's
national election surprised even its most partisan
supporters. Prime Minister Fraser and his govern-
ment enjoy a 54-seat majority in the 127-member
lower house of parliament-the largest majority
in the parliament since it was founded in 1901.
The coalition appears to have also won at least 34
of the 64 Senate seats, although final counting of
the complicated preferential voting system used
in Senate races will not be completed until early
January.
Former prime minister Whitlam conceded
defeat without any public expression of
bitterness, attributing Labor's massive loss to the
effects on Australia of world economic con-
ditions. Labor Party President Hawke was more
candid, characterizing the election outcome as a
"disaster." Particularly disappointing to Labor was
the defection at the polls of many industrial
workers, considered the mainstay of the party.
The constitutional issues raised by Whitlam's
ouster last month-which he hoped would be the
main issue of the campaign-never counted for
much among the electorate. Economic concerns
were overriding, and excepting hard-core Labor
Party voters, Australians across the board made
clear their lack of confidence in Labor's ability to
manage the economy.
The margin of Labor's rebuff at the polls will
probably set off a period of recrimination within
the party, and a drift to the left is likely. Labor's
25X1
LZDAI
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younger and more reasonable members of parlia-
ment were the principal casualties of the election.
The survivors are the older and more doctrinaire
members imbtr.!d with the idea of class struggle.
With Labor's .harp loss in the House, the party's
Senate ranks now become more important in par-
ty councils, and the more left-wing party
members are concentrated in the upper house.
Relieved of the constraints of office, the left may
resurrect some of its pet causes, such as seeking
the removal from Australia of LIS scientific and
military installations. Whitlam had successfully
fended off political attacks on the bases while he
was prime minister, but he will have less clout
now.
Many trade union leaders see Prime Minister
Fraser as an undisguised opponent of organized
labor and may test him with a series of strikes.
Robert Hawke-president of the Australian
Council of Trade Unions in addition to being
Labor Party president-has urged restraint, but he
has little control over the more militant and leftist
union leaders.
Although Laborites of both centrist and leftist
bent rallied around Whitlam through the elec-
toral campaign, there is now a tendency-par-
ticularly among the left--to make him the
scapegoat. Even the center-of-the-road Hawke,
who has generally been loyal to Whitlam, private-
ly stated before the election that Whitlam would
go quickly should the party suffer a huge defeat.
Leftists may challenge Whitlam's leadership at the
party caucus next week, but the party majority
would prefer to avoid a destructive leadership
struggle and probably has the strength to block a
move against Whitlam now. Whitlam is probably
ready to step aside in time and reportedly has
designated Hawke his eventual successor. In an
effort to inherit the mantle, Hawke may feel
obliged to go along with a movement to the left in
the party.
There may be a corresponding move to the
right in the Liberal Party. Prime Minister Fraser's
conservatism will be bolstered by the voters' lop-
sided approval of his party. He is philosophically
closer to leaders of the conservative coalition
partner, the National Country Party, than he is to
many members of his own party.
Prime Minister Fraser
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WEEKLY REVIEW Dec 19, 75
Fraser opposed the federal government's in-
creasing involvement in social services under the
Labor administration and is contemptuous of
what he sees as the labor movement's irrespon-
sibility. His actions will be tempered by political
realities, however. He may make cuts in the social
welfare benefits introduced by Labor, but he will
find it politically inadvisable to dismantle these
popular programs. Fraser also realizes that an ac-
commodation with the trade unions is necessary
to prevent industrial strife that would compound
the economic difficulties facing his government.
His amicable meeting this week with Robert
Hawke suggests that he will work hard to reach a
working relationship with the unions and contain
differences with the DOlitirnl position.
25X1
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TIMOR-INDONESIA: ON TO PHASE TWO
Indonesia completed the first phase of its
military operatior:s in Portuguese Timor last week,
with the capture of the capital at Dili and the ;n-
ternational airport near Baucau. Jakarta is now
moving ahead rapidly with plans for the ser and
phase of its offensive; this will probably involve
widening the beachheads at Dili and Baucau so
that Indonesian forces can sweep toward their
units operating to the west near the Indonesian
border. The Indonesian objectives are to secure
the major points of entry along the coastline, the
roads, and the remaining population centers as
rapidly as possible.
Although the Indonesians have captured
Fretilin strongholds and taken much territory, the
attacks have not ended Fretilin resistance. The
Fretilin organization had moved most of its
supplies and ammunition to mountain bases
several weeks ago and appears determined to
continue fighting.
Shortly before the all-out Indonesian inva-
sion, Fretilin military units, aware of the impen-
ding attack, abandoned their positions in the 25X1
capital and Baucau, leaving only a small number
of troops to harass the Indonesians. From there,
Fretilin probably will attack Indonesian troops as
Although Fretilin guerrilla activities will cause 25X1
political and military problems for Indonesia, they
are unlike) to severely i u esian con-
trol. 25X1
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